[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Notices]
[Pages 26977-26980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07963]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99931; File No. SR-CboeBZX-2024-024]


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

April 10, 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 April 1, 2024, Cboe BZX Exchange, Inc. (``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: (1) introducing a new 
Add Volume Tier; and (2) modifying the Single MPID Investor Tiers. The 
Exchange proposes to implement these changes effective April 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 
17% 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.

[[Page 26978]]

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 (March 22, 2024), available at https://www.cboe.com/us/equities/market_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 introduce a new Add Volume 
Tier. The proposed criteria for Add Volume Tier 8 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 8 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: (1) has an ADAV 
\9\ as a percentage of TCV \10\ >= 0.50%; and (2) Member has a Tape B 
ADV \11\ >= 1.50% of the Tape B TCV; and (3) Member has a Remove ADV >= 
0.30% of the TCV.
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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.
    \11\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day, calculated on a 
monthly basis.
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    The proposed Add Volume Tier 8 is intended to provide an additional 
opportunity to incentivize Members to add displayed liquidity on the 
Exchange. Like other Add Volume Tiers on the Exchange, Add Volume Tier 
8 is designed to give members an additional opportunity to receive an 
enhanced rebate for orders meeting the applicable criteria. The 
Exchange believes the addition of Add Volume Tier 8 will encourage 
Members to grow their volume on the Exchange, thereby contributing to a 
deeper and more liquid market, which benefits all market participants 
and provides greater execution opportunities on the Exchange.
Single MPID Investor Tiers
    Under footnote 4 of the Fee Schedule, the Exchange offers Single 
MPID Investor Tiers. In particular, the Exchange offers one Single MPID 
Investor Tier that provides enhanced rebates for orders yielding fee 
codes B, V and Y where an MPID reaches certain add volume-based 
criteria. Now, the Exchange proposes to modify the criteria of Single 
MPID Investor Tier 1 and introduce a new Single MPID Investor Tier. The 
current criteria of Single MPID Investor Tier 1 is as follows:
     Single MPID Investor Tier 1 provides an enhanced rebate of 
$0.0032 per share in Tape B securities priced at or above $1.00 and an 
enhanced rebate of $0.0033 per share in Tapes A and C securities priced 
at or above $1.00 to qualifying orders (i.e., orders yielding fee codes 
B, V, or Y) where: (1) MPID has a Step-Up ADV \12\ as a percentage of 
TCV >= 0.10% from May 2021; or MPID has a Step-Up ADV >= 10,000,000 
from May 2021; and (2) MPID has an ADAV as a percentage of TCV >= 
0.50%; or MPID has an ADAV >= 45,000,000.
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    \12\ ``Step-Up ADV'' means ADV in the relevant baseline month 
subtracted from current day ADV.
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    The proposed criteria of Single MPID Investor Tier 1 is as follows:
     Single MPID Investor Tier 1 provides an enhanced rebate of 
$0.0032 per share in Tape B securities priced at or above $1.00 and an 
enhanced rebate of $0.0033 per share in Tapes A and C securities priced 
at or above $1.00 to qualifying orders (i.e., orders yielding fee codes 
B, V, or Y) where: (1) MPID has an ADAV as a percentage of TCV >= 0.45% 
or MPID has an ADAV >= 45,000,000; and (2) MPID has an ADAV >= 0.05% of 
the TCV as Non-Displayed orders that yield fee codes HB,\13\ HI,\14\ HV 
\15\ or HY.\16\
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    \13\ Fee code HB is appended to non-displayed orders that add 
liquidity to BZX in Tape B securities.
    \14\ Fee code HI is appended to non-displayed orders that 
receive price improvement while adding liquidity to BZX.
    \15\ Fee code HV is appended to non-displayed orders that add 
liquidity to BZX in Tape A securities.
    \16\ Fee code HY is appended to non-displayed orders that add 
liquidity to BZX in Tape C securities.
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    The Exchange also proposes to introduce Single MPID Investor Tier 
2. The proposed criteria for proposed Single MPID Investor Tier 2 is as 
follows:
     Proposed Single MPID Investor Tier 2 provides an enhanced 
rebate of $0.0032 per share in Tape B securities priced at or above 
$1.00 and an enhanced rebate of $0.0033 per share in Tapes A and C 
securities priced at or above $1.00 to qualifying orders (i.e., orders 
yielding fee codes B, V, or Y) where: (1) MPID removes an ADV >= 0.60% 
of the TCV; and (2) MPID has an ADAV >= 0.05% of the TCV as Non-
Displayed orders that yield fee codes HB, HI, HV or HY.
    The Exchange believes that the proposed modification to Single MPID 
Investor Tier 1 and the introduction of proposed Single MPID Investor 
Tier 2 will incentivize Members to increase their overall order flow, 
both add and remove volume, to the Exchange, thereby contributing to a 
deeper and more liquid market, which benefits all market participants 
and provides greater execution opportunities on the Exchange. 
Incentivizing an increase in both liquidity adding volume and liquidity 
removing volume, through both revised and new criteria and enhanced 
rebate opportunities, encourages liquidity adding Members on the 
Exchange to contribute to a deeper, more liquid market and encourages 
liquidity removing Members on the Exchange to increase transactions and 
take execution opportunities provided by such activity, together 
providing for overall enhanced price discovery and price improvement 
opportunities on the Exchange. As such, increased overall order flow 
benefits all Members by contributing towards a robust and well-balanced 
market ecosystem.
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.\17\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \18\ 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) \19\ 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) \20\ 
as it is designed to provide for the equitable

[[Page 26979]]

allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
    \20\ 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 introduce Add Volume Tier 8, modify Single MPID 
Investor Tier 1, and introduce Single MPID Investor Tier 2 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,\21\ 
including the Exchange,\22\ 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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    \21\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \22\ 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 introduce Add 
Volume Tier 8, modify Single MPID Investor Tier 1, and introduce Single 
MPID Investor Tier 2 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 its proposal 
to introduce Add Volume Tier 8, modify Single MPID Investor Tier 1, and 
introduce Single MPID Investor Tier 2 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 and liquidity removing 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 its proposal to introduce Add Volume 
Tier 8, modify Single MPID Investor Tier 1, and introduce Single MPID 
Investor Tier 2 is reasonable as the proposed criteria 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 allocation of fees and rebates and is not unfairly 
discriminatory because all Members continue to be eligible for proposed 
Add Volume Tier 8 and the Single MPID Investor Tiers 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 Tier 8 and the 
Single MPID Investor Tiers. 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 one Member will be able to satisfy proposed Add Volume Tier 8, at 
least three Members will be able to satisfy proposed Single MPID 
Investor Tier 1, and at least two Members will be able to satisfy 
proposed Single MPID Investor Tier 2. 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 Exchange's 
proposal to introduce Add Volume Tier 8, modify Single MPID Investor 
Tier 1, and introduce Single MPID Investor Tier 2 will apply to all 
Members equally in that all Members are eligible for the new and 
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 17% of the market share.\23\ 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

[[Page 26980]]

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.'' \24\ 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'. . . .''.\25\ 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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    \23\ Supra note 3.
    \24\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \25\ 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 \26\ and paragraph (f) of Rule 19b-4 \27\ 
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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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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. 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-2024-024 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-2024-024. 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-2024-024 and should 
be submitted on or before May 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07963 Filed 4-15-24; 8:45 am]
BILLING CODE 8011-01-P