[Federal Register Volume 89, Number 77 (Friday, April 19, 2024)]
[Notices]
[Pages 28820-28823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08359]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99962; File No. SR-CboeBZX-2024-025]


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

April 15, 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 and II below, which Items 
have been prepared by the self-regulatory organization. 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'') to increase its monthly 
fee assessed on Members' MPIDs. 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 
15% 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 further 
notes that broker-dealers are not compelled to be Members of the 
Exchange, and a significant proportion of broker-dealers that trade 
U.S. equity securities have, in fact, chosen not to apply for 
membership on the Exchange.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (March 20, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
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    By way of background, an MPID is a four-character unique identifier 
that is approved by the Exchange and assigned to a Member for use on 
the Exchange to identify the Member firm on the orders sent to the 
Exchange and resulting executions. Members may choose to request more 
than one MPID as a unique identifier(s) for their transactions on the 
Exchange. The Exchange notes that a Member may have multiple MPIDs for 
use by separate business units and trading desks or to support 
Sponsored Participant access.\4\ Certain members currently leverage 
multiple MPIDs to obtain benefits from and added value in

[[Page 28821]]

their participation on the Exchange. Multiple MPIDs provide unique 
benefits to and efficiencies for Members by allowing: (1) Members to 
manage their trading activity more efficiently by assigning different 
MPIDs to different trading desks and/or strategies within the firm; and 
(2) Sponsoring Members \5\ to segregate Sponsored Participants by MPID 
to allow for detailed client-level reporting, billing, and 
administration, and to market the ability to use separate MPIDs to 
Sponsored Participants, which, in turn, may serve as a potential 
incentive for increased order flow traded through the Sponsoring 
Member.
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    \4\ A Sponsored Participant is a person which has entered into a 
sponsorship arrangement with a Sponsoring Member pursuant to Rule 
11.3, which permits a Sponsored Participant to obtain authorized 
access to the System only if such access is authorized in advance by 
one or more Sponsoring Members. See Rules 1.5(z) and 11.3.
    \5\ A Sponsoring Member is a Member that is a registered broker-
dealer and that has been designated by a Sponsored Participant to 
execute, clear and settle transactions resulting from the System. 
The Sponsoring Member shall be either (i) a clearing firm with 
membership in a clearing agency registered with the Commission that 
maintains facilities through which transactions may be cleared or 
(ii) a correspondent firm with a clearing arrangement with any such 
clearing firm. See Rule 1.5(aa).
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    The Exchange currently assesses a fee applicable to Members that 
use multiple MPIDs to facilitate their trading on the Exchange. 
Specifically, the Exchange assesses a monthly MPID Fee of $350 per MPID 
per Member, with a Member's first MPID provided free of charge. The 
MPID Fee is assessed on a pro-rated basis for new MPIDs by charging a 
Member based on the trading day in the month during which an additional 
MPID becomes effective for use. If a Member cancels an additional MPID 
on or after the first business day of the month, the Member will be 
required to pay the entire MPID Fee for that month.
    The Exchange now proposes to increase the monthly MPID Fee from 
$350 per MPID per Member to $450 per MPID per Member. The Exchange 
believes the proposed increase continues to align with the additional 
value and benefits provided to Members that choose to utilize more than 
one MPID to facilitate their trading on the Exchange. The Exchange also 
believes that continuing to assess a fee on additional MPIDs will be 
beneficial because such fee will promote efficiency in MPID use.
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.\6\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \7\ 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) \8\ 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) \9\ 
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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
    \9\ 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 the proposed MPID Fee is consistent with 
the Act in that it is reasonable, equitable, and not unfairly 
discriminatory. In particular, the Exchange believes that the proposed 
fee is reasonable because it is reasonably aligned with the benefits 
provided to Members that choose to utilize multiple MPIDs to facilitate 
their trading on the Exchange. While each Member must have an MPID to 
participate on the Exchange, additional MPIDs are optional and will be 
assessed the fee, as amended. Additional MPIDs currently allow for 
Members to realize certain benefits from and added value to their 
participation on the Exchange but also require the Exchange to allocate 
additional administrative resources to manage each MPID that a Member 
chooses to use for its trading activity. Therefore, the Exchange 
believes that it is reasonable to assess a modest fee on any additional 
MPIDs that Members choose to use to facilitate their trading. The 
Exchange again notes that it is optional for a Member to request and 
employ additional MPIDs, and a large portion (approximately 69%) of the 
Exchange's Members currently utilize just the one MPID necessary to 
participate on the Exchange.
    The Exchange also believes that assessing a fee on additional MPIDs 
continues to be reasonably designed to promote efficiency in MPID use. 
When the Exchange first implemented the current MPID Fee,\10\ it 
observed as a result that Members were incentivized to more effectively 
administer their MPIDs and reduce the number of under-used or 
superfluous MPIDs, or MPIDs that did not contribute additional value to 
a Member's participation on the Exchange. Reduction of such MPIDs, in 
turn, reduces Exchange resources allocated to administration and 
maintenance of those MPIDs. In particular, the Exchange observed that 
within the first few months of introducing the previous MPID Fee, the 
number of MPIDs on the Exchange decreased by approximately 17%, 
demonstrating that Members may choose to be more efficient in their use 
of MPIDs in response to an MPID Fee, such as that proposed in this fee 
change.\11\
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    \10\ See Securities and Exchange Release No. 90944 (January 19, 
2021), 86 FR 7127 (January 26, 2021) (SR-CboeBZX-2021-011).
    \11\ The reduction in MPIDs may also demonstrate that Members 
are free to cancel MPIDs on the Exchange and choose, instead, to 
utilize unique identifiers associated with participation on other 
exchanges.
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    The Exchange further believes the proposed MPID Fee change is 
reasonable because the amount assessed continues to be less than the 
analogous fees charged by at least one other market; namely, Nasdaq 
Stock Market LLC (``Nasdaq'').\12\ The Exchange's proposed MPID Fee 
increase to $450 a month per MPID, with no charge associated with a 
Members' first MPID, continues to be lower than Nasdaq's MPID fee of 
$550 per MPID, which is charged for all MPIDs used by a Nasdaq member, 
including a member's first MPIDs.
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    \12\ See Nasdaq Price List, MPID Fees, available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    The Exchange believes that the proposed MPID Fee change is 
equitable and not unfairly discriminatory because it will apply equally 
to all Members that choose to employ two or more MPIDs based on the 
number of additional MPIDs that they use to facilitate their trading on 
the Exchange. As stated, additional MPIDs beyond a Member's first MPID 
are optional, and Members may choose to trade using such additional 
MPIDs to achieve additional benefits and added value to support their 
individual business needs. Moreover, the Exchange believes the proposed 
fee is equitable and not unfairly discriminatory because it is 
proportional to the potential value or benefit received by Members with 
a greater number of MPIDs. That is, those

[[Page 28822]]

Members that choose to employ a greater number of additional MPIDs have 
the opportunity to more effectively manage firm-wide trading activity 
and client-level administration, as well as potentially appeal to 
customers through the use of separate MPIDs, which may result in 
increased order flow through a Sponsoring Member. A Member may request 
at any time that the Exchange terminate an MPID, including MPIDs that 
may be under-used or superfluous, or that do not contribute additional 
value to a Member's participation on the Exchange.

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 intramarket competition that is not necessary in 
furtherance of the purposes of the Act because the proposed change will 
apply equally to all Members that choose to employ additional MPIDs and 
equally to each additional MPID. As stated, additional MPIDs are 
optional and Members may choose to utilize additional MPIDs, or not, 
based on their view of the additional benefits and added value provided 
by utilizing the single MPID necessary to participate on the Exchange. 
The Exchange believes the proposed fee will be assessed proportionately 
to the potential value or benefit received by Members with a greater 
number of MPIDs and notes that a Member may continue to request at any 
time that the Exchange terminate any MPID, including those that may be 
under-used or superfluous, or that do not contribute additional value 
to a Member's participation on the Exchange.
    Next, the Exchange believes the proposed rule change 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, 
including competition for exchange memberships. Members have numerous 
alternative venues that they may participate on, including 15 other 
equities exchanges, as well as off-exchange venues, including 
alternative trading systems, where competitive products are available 
for trading. Indeed, participants can readily choose to submit their 
order flow to other exchange and off-exchange venues if they deem fee 
levels at those other venues to be more favorable. In addition to this 
the Exchange notes that at least one other exchange currently has 
higher MPID fees in place, which have been previously filed with the 
Commission. 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.'' \13\ 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'. . . .''.\14\ 
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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    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \14\ 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 \15\ and paragraph (f) of Rule 19b-4 \16\ 
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.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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-2024-025 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-2024-025. 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-2024-025 and should 
be submitted on or before May 10, 2024.


[[Page 28823]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-08359 Filed 4-18-24; 8:45 am]
BILLING CODE 8011-01-P