[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Notices]
[Pages 26980-26983]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07964]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99932; File No. SR-CboeBYX-2024-010]


Self-Regulatory Organizations; Cboe BYX 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 BYX Exchange, Inc. (``Exchange'' or ``BYX'') 
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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') 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/BYX/), 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

[[Page 26981]]

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 (``BYX Equities'') by modifying the criteria 
of Remove Volume Tier 6. 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 ``Taker-Maker'' model whereby it pays credits to 
members that remove liquidity and assesses fees to those that add 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that remove and provide 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00200 per 
share for orders that remove liquidity and assesses a fee of $0.00200 
per share for orders that add liquidity.\4\ For orders in securities 
priced below $1.00, the Exchange does not assess any fees for orders 
that add liquidity, and provides a rebate in the amount of 0.10% 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 (March 22, 2024), available at https://www.cboe.com/us/equities/_statistics/.
    \4\ See BYX Equities Fee Schedule, Standard Rates.
    \5\ Id.
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Remove Volume Tiers
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers two 
Remove Volume Tiers that each provide an enhanced rebate for Members' 
qualifying orders yielding fee codes BB,\6\ N \7\ and W \8\ where a 
Member reaches certain add volume-based criteria. The Exchange now 
proposes to amend Remove Volume Tier 6 by lowering the share amount 
required in the second prong of criteria. The current criteria for 
Remove Volume Tier 6 is as follows:
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    \6\ Fee code BB is appended to orders that remove liquidity from 
BYX in Tape B securities.
    \7\ Fee code N is appended to orders that remove liquidity from 
BYX in Tape C securities.
    \8\ Fee code W is appended to orders that remove liquidity from 
BYX in Tape A securities.
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     Remove Volume Tier 6 provides a rebate of $0.0013 per 
share in securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a 
combined Auction ADV \9\ and ADV \10\ >= 0.08% of the TCV; \11\ and (2) 
Member has a combined Auction ADV and ADAV \12\ >= 5,000,000 shares.
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    \9\ ``Auction ADV'' means average daily auction volume 
calculated as the number of shares executed in an auction per day.
    \10\ ``ADV'' means average daily volume calculated as the number 
of shares added ore removed, combined, per day. ADV is calculated on 
a monthly basis.
    \11\ ``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.
    \12\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
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    The proposed criteria for Remove Volume Tier 6 is as follows:
     Remove Volume Tier 6 provides a rebate of $0.0013 per 
share in securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a 
combined Auction ADV and ADV >= 0.08% of the TCV; and (2) Member has a 
combined Auction ADV and ADAV >= 3,500,000 shares.
    The Exchange believes that the proposed modification to current 
Remove Volume Tier 6 will continue to incentivize Members to add 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. While the proposed criteria in 
Remove Volume Tier 6 is less difficult to achieve than the current 
criteria, the revised criteria continue to remain commensurate with the 
rebate that will be received upon a Member satisfying the proposed 
criteria.
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.\13\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \14\ 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) \15\ 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) \16\ 
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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
    \16\ 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 the criteria of Remove Volume Tier 6 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

[[Page 26982]]

exchanges,\17\ including the Exchange,\18\ 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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    \17\ See e.g., EDGA Equities Fee Schedule, Footnote 7, Add/
Remove Volume Tiers.
    \18\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes its proposal to modify the 
criteria of Remove Volume Tier 6 is reasonable because the tier will be 
available to all Members and provide all Members with an opportunity to 
receive a higher enhanced rebate. The Exchange further believes that 
proposed Remove Volume Tier 6 will provide a reasonable means to 
encourage adding displayed orders in Members' order flow to the 
Exchange and to incentivize Members to continue to provide volume to 
the Exchange by offering them an opportunity to receive a higher 
enhanced rebate on qualifying orders. An overall increase in activity 
would deepen the Exchange's liquidity pool, offers additional cost 
savings, support the quality of price discovery, promote market 
transparency and improve market quality, for all investors.
    The Exchange believes proposed Remove Volume Tier 6 is reasonable 
as it does 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 will be eligible for 
the tier and have the opportunity to meet the tier's criteria and 
receive the corresponding enhanced rebate if such criteria are met. 
Without having a view of activity on other markets and off-exchange 
venues, the Exchange has no way of knowing whether these proposed rule 
changes would definitely result in any Members qualifying for the new 
proposed tiers. While the Exchange has no way of predicting with 
certainty how the proposed changes will impact Member activity, based 
on the prior months volume, the Exchange anticipates that at least one 
Member will be able to satisfy proposed Remove Volume Tier 6. The 
Exchange also notes that the proposed changes will not adversely impact 
any Member's ability to qualify for reduced fees or 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 change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, proposed 
Remove Volume Tier 6 will apply to all Members equally in that all 
Members are eligible for the tier and enhanced rebate, have a 
reasonable opportunity to meet the proposed tier's criteria and will 
receive the enhanced rebate on their qualifying orders if such criteria 
is met. The Exchange does not believe the proposed change burdens 
competition, but rather, enhances competition as it is intended to 
increase the competitiveness of BYX 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.\19\ 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.'' \20\ 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'. . . .''.\21\ 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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    \19\ Supra note 3.
    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \21\ 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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[[Page 26983]]

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 \22\ and paragraph (f) of Rule 19b-4 \23\ 
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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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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-CboeBYX-2024-010 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-CboeBYX-2024-010. 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-CboeBYX-2024-010 and should 
be submitted on or before May 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07964 Filed 4-15-24; 8:45 am]
BILLING CODE 8011-01-P