[Federal Register Volume 89, Number 53 (Monday, March 18, 2024)]
[Notices]
[Pages 19367-19370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05635]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99723; File No. SR-CboeBZX-2024-020]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule Regarding Add Volume Tiers

March 12, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 1, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to 
amend its Fee Schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/BZX/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``BZX Equities'') by modifying the criteria 
of certain Add Volume Tiers. The Exchange proposes to implement these 
changes effective March 1, 2024.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\3\ no single registered equities exchange has more than 
16% of the market share. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. The Exchange in 
particular operates a ``Maker-Taker'' model whereby it pays rebates to 
members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that provide and remove 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00160 per 
share for orders that add liquidity and assesses a fee of $0.0030 per 
share for orders that remove liquidity.\4\ For orders in securities 
priced below $1.00, the Exchange provides a standard rebate of $0.00009 
per share for orders that add liquidity and assesses a fee of 0.30% of 
the total dollar value for orders that remove liquidity.\5\ 
Additionally, in response to the competitive environment, the Exchange 
also offers tiered pricing which provides Members opportunities to 
qualify for higher rebates or reduced fees where certain volume 
criteria and thresholds are met. Tiered pricing provides an incremental 
incentive for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (February 23, 2024), available at https://www.cboe.com/us/equities/_statistics/.
    \4\ See BZX Equities Fee Schedule, Standard Rates.
    \5\ Id.
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Add/Remove Volume Tiers
    Under footnote 1 of the Fee Schedule, the Exchange offers various 
Add/Remove Volume Tiers. In particular, the Exchange offers seven Add 
Volume Tiers that provide enhanced rebates for orders yielding fee 
codes B,\6\ V \7\ and Y \8\ where a Member reaches certain add volume-
based criteria. The Exchange now proposes to modify the criteria of Add 
Volume Tiers 1-3 and Add Volume Tiers 5-7 by revising the share amount 
in the second prong of criteria. The current criteria for Add Volume 
Tiers 1-3 and Add Volume Tiers 5-7 is as follows:
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    \6\ Fee code B is appended to displayed orders that add 
liquidity to BZX in Tape B securities.
    \7\ Fee code V is appended to displayed orders that add 
liquidity to BZX in Tape A securities.
    \8\ Fee code Y is appended to displayed orders that add 
liquidity to BZX in Tape C securities.
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     Add Volume Tier 1 provides a rebate of $0.0020 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV \9\ as 
a percentage of TCV \10\ >=0.05% or Member has an ADAV >=5,000,000.
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    \9\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \10\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
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     Add Volume Tier 2 provides a rebate of $0.0023 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B,

[[Page 19368]]

V, or Y) where a Member has an ADAV as a percentage of TCV >=0.20% or 
Member has an ADAV >=20,000,000.
     Add Volume Tier 3 provides a rebate of $0.0027 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.30% or Member has an ADAV >=30,000,000.
     Add Volume Tier 5 provides a rebate of $0.0029 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.35% or Member has an ADAV >=35,000,000.
     Add Volume Tier 6 provides a rebate of $0.0030 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.60% or Member has an ADAV >=60,000,000.
     Add Volume Tier 7 provides a rebate of $0.0031 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=1.00% or Member has an ADAV >=100,000,000.
    The proposed criteria for Add Volume Tiers 1-3 and Add Volume Tiers 
5-7 is as follows:
     Add Volume Tier 1 provides a rebate of $0.0020 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.05% or Member has an ADAV >=6,000,000.
     Add Volume Tier 2 provides a rebate of $0.0023 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.20% or Member has an ADAV >=23,000,000.
     Add Volume Tier 3 provides a rebate of $0.0027 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.30% or Member has an ADAV >=35,000,000.
     Add Volume Tier 5 provides a rebate of $0.0029 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.35% or Member has an ADAV >=40,000,000.
     Add Volume Tier 6 provides a rebate of $0.0030 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=0.60% or Member has an ADAV >=70,000,000.
     Add Volume Tier 7 provides a rebate of $0.0031 per share 
in securities priced at or above $1.00 to qualifying orders (i.e., 
orders yielding fee codes B, V, or Y) where a Member has an ADAV as a 
percentage of TCV >=1.00% or Member has an ADAV >=115,000,000.
    The proposed modifications to Add Volume Tiers 1-3 and Add Volume 
Tiers 5-7 represents a modest increase in difficulty of one prong of 
criteria to achieve the applicable tier threshold while maintaining an 
existing prong of criteria and the existing rebates. The Exchange 
believes that the proposed criteria continues to be commensurate with 
the rebate received for each tier and will encourage Members to grow 
their volume on the Exchange. Increased volume on the Exchange 
contributes to a deeper and more liquid market, which benefits all 
market participants and provides greater execution opportunities on the 
Exchange.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\11\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \12\ requirements that the rules 
of an exchange be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \13\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \14\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
    \14\ 15 U.S.C. 78f(b)(4).
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    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes that 
its proposal to modify Add Volume Tiers 1-3 and Add Volume Tiers 5-7 
reflects a competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
Members. Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\15\ 
including the Exchange,\16\ and are reasonable, equitable and non-
discriminatory because they are open to all Members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to (i) the value to an exchange's market quality and (ii) 
associated higher levels of market activity, such as higher levels of 
liquidity provision and/or growth patterns. Competing equity exchanges 
offer similar tiered pricing structures, including schedules or rebates 
and fees that apply based upon members achieving certain volume and/or 
growth thresholds, as well as assess similar fees or rebates for 
similar types of orders, to that of the Exchange.
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    \15\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \16\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes its proposal to modify Add 
Volume Tiers 1-3 and Add Volume Tiers 5-7 is reasonable because the 
revised tiers will be available to all Members and provide all Members 
with an opportunity to receive an enhanced rebate. The Exchange further 
believes the proposed modification to Add Volume Tiers 1-3 and Add 
Volume Tiers 5-7 will provide a reasonable means to encourage liquidity 
adding displayed orders in Members' order flow to the Exchange and to 
incentivize Members to continue to provide liquidity adding volume to 
the Exchange by offering them an opportunity to receive an enhanced 
rebate on qualifying orders. An overall increase in activity would 
deepen the Exchange's liquidity pool, offer additional cost savings, 
support the quality of price discovery, promote market transparency and 
improve market quality, for all investors.
    The Exchange believes that the proposed changes to Add Volume Tiers 
1-3 and Add Volume Tiers 5-7 are reasonable as they do not represent a 
significant departure from the criteria currently offered in the Fee 
Schedule. The Exchange also believes that the proposal represents an 
equitable

[[Page 19369]]

allocation of fees and rebates and is not unfairly discriminatory 
because all Members continue to be eligible for the proposed Add Volume 
Tiers 1-3 and Add Volume Tiers 5-7 and have the opportunity to meet the 
tiers' criteria and receive the corresponding enhanced rebate if such 
criteria is met. Without having a view of activity on other markets and 
off-exchange venues, the Exchange has no way of knowing whether this 
proposed rule change would definitely result in any Members qualifying 
for proposed Add Volume Tiers 1-3 and Add Volume Tiers 5-7. While the 
Exchange has no way of predicting with certainty how the proposed 
changes will impact Member activity, based on the prior month's volume, 
the Exchange anticipates that at least two Members will be able to 
satisfy proposed Add Volume Tier 1, at least two Members will be able 
to satisfy proposed Add Volume Tier 2, no Members will be able to 
satisfy proposed Add Volume Tier 3, at least three Members will be able 
to satisfy proposed Add Volume Tier 5, at least one Member will be able 
to satisfy proposed Add Volume Tier 6, and no Members will be able to 
satisfy proposed Add Volume Tier 7. The Exchange also notes that 
proposed changes will not adversely impact any Member's ability to 
qualify for enhanced rebates offered under other tiers. Should a Member 
not meet the proposed new criteria, the Member will merely not receive 
that corresponding enhanced rebate.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed change would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.''
    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
modifications to Add Volume Tiers 1-3 and Add Volume Tiers 5-7 will 
apply to all Members equally in that all Members are eligible for the 
modified tiers, have a reasonable opportunity to meet the proposed 
tiers' criteria and will receive the enhanced rebate on their 
qualifying orders if such criteria is met. The Exchange does not 
believe the proposed changes burden competition, but rather, enhance 
competition as they are intended to increase the competitiveness of BZX 
by amending existing pricing incentives in order to attract order flow 
and incentivize participants to increase their participation on the 
Exchange, providing for additional execution opportunities for market 
participants and improved price transparency. Greater overall order 
flow, trading opportunities, and pricing transparency benefits all 
market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.
    Next, the Exchange believes the proposed rule changes does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single equities exchange has more 
than 16% of the market share.\17\ Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send their orders to other exchange 
and off-exchange venues if they deem fee levels at those other venues 
to be more favorable. Moreover, the Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
Specifically, in Regulation NMS, the Commission highlighted the 
importance of market forces in determining prices and SRO revenues and, 
also, recognized that current regulation of the market system ``has 
been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \18\ The fact that this market is competitive has also 
long been recognized by the courts. In NetCoalition v. Securities and 
Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .''.\19\ Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \17\ Supra note 3.
    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \19\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \20\ and paragraph (f) of Rule 19b-4 \21\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 19370]]

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBZX-2024-020 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CboeBZX-2024-020. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CboeBZX-2024-020 and should 
be submitted on or before April 8, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05635 Filed 3-15-24; 8:45 am]
BILLING CODE 8011-01-P