[Federal Register Volume 89, Number 103 (Tuesday, May 28, 2024)]
[Notices]
[Pages 46214-46218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11568]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100193; File No. SR-CboeBZX-2024-039]


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

May 21, 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 May 13, 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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[[Page 46215]]

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 certain Add/
Remove Volume Tiers. The Exchange proposes to implement these changes 
effective May 13, 2024.\3\
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    \3\ The Exchange initially filed the proposed fee change on May 
1, 2024 (SR-CboeBZX-2024-033). On May 9, 2024, the Exchange withdrew 
that filing and submitted SR-CboeBZX-2024-036. On May 13, 2024, the 
Exchange withdrew that filing and submitted this proposal.
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    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,\4\ 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.\5\ For orders in securities 
priced below $1.00, the Exchange does not provide a rebate for orders 
that add liquidity and assesses a fee of 0.30% of the total dollar 
value for orders that remove liquidity.\6\ 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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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (April 23, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See BZX Equities Fee Schedule, Standard Rates.
    \6\ 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 eight Add 
Volume Tiers that provide enhanced rebates for orders yielding fee 
codes B,\7\ V \8\ and Y \9\ where a Member reaches certain add volume-
based criteria. The Exchange now proposes to modify Add Volume Tier 8 
by lowering the requirement in the first prong of criteria. The current 
criteria for Add Volume Tier 8 is as follows:
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    \7\ Fee code B is appended to displayed orders that add 
liquidity to BZX in Tape B securities.
    \8\ Fee code V is appended to displayed orders that add 
liquidity to BZX in Tape A securities.
    \9\ 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 
\10\ as a percentage of TCV \11\ >=0.50%; and (2) Member has a Tape B 
ADV \12\ >=1.50% of the Tape B TCV; and (3) Member has a Remove ADV 
>=0.30% of the TCV.
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    \10\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV 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\ ``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 criteria for Add Volume Tier 8 is as follows:
     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 
as a percentage of TCV >=0.42%; and (2) Member has a Tape B ADV >=1.50% 
of the Tape B TCV; and (3) Member has a Remove ADV >=0.30% of the TCV.
    In addition to the Add/Remove Volume Tiers offered under footnote 
1, the Exchange also offers four Non-Displayed Add Volume Tiers that 
each provide an enhanced rebate for Members' qualifying orders yielding 
fee codes HB,\13\ HV,\14\ or HY,\15\ where a Member reaches certain 
volume-based criteria offered in each tier. The Exchange now proposes 
to modify Non-Displayed Add Volume Tier 1. The current criteria for 
Non-Displayed Add Volume Tier 1 is as follows:
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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 HV is appended to non-displayed orders that add 
liquidity to BZX in Tape A securities.
    \15\ Fee code HY is appended to non-displayed orders that add 
liquidity to BZX in Tape C securities.
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     Non-Displayed Add Volume Tier 1 provides a rebate of 
$0.0018 per share in securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes HB, HV, or HY) where a Member 
adds an ADV >=0.05% of the TCV as Non-Displayed orders that yield fee 
codes HB, HI,\16\ HV or HY.
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    \16\ Fee code HI is appended to non-displayed orders that add 
liquidity to BZX and receive price improvement.
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    The proposed criteria for Non-Displayed Add Volume Tier 1 is as 
follows:
     Non-Displayed Add Volume Tier 1 provides a rebate of 
$0.0018 per share in securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes HB, HV, or HY) where a Member 
adds an ADV >=0.06% of the TCV as Non-Displayed orders that yield fee 
codes HB, HI, HV or HY.

[[Page 46216]]

    The proposed, modified Add Volume Tier 8 and Non-Displayed Add 
Volume Tier 1 are intended to continue to provide an additional 
opportunity to incentivize Members to earn an enhanced rebate by 
increasing their order flow to the Exchange, which further contributes 
to a deeper, more liquid market and provides even more execution 
opportunities for active market participants. While the proposed 
criteria for Add Volume Tier 8 is slightly less difficult than existing 
criteria and the proposed criteria for Non-Displayed Add Volume Tier 1 
is slightly more difficult than existing criteria, the Exchange 
believes that both tiers continue to offer an enhanced rebate that is 
commensurate with the proposed criteria. Incentivizing an increase in 
liquidity adding volume through enhanced rebate opportunities 
encourages liquidity-adding Members on the Exchange to increase 
transactions and take execution opportunities provided by such 
increased liquidity, 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 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 modify Add Volume Tier 8 and Non-Displayed Add Volume 
Tier 1 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. Specifically, the Exchange's proposal to introduce 
slightly different criteria to Add Volume Tier 8 and Non-Displayed Add 
Volume Tier 1 is not a significant departure from existing criteria, is 
reasonably correlated to the enhanced rebate offered by the Exchange 
and other competing exchanges,\21\ and will continue to incentivize 
Members to submit order flow to the Exchange. Additionally, the 
Exchange notes that relative volume-based incentives and discounts have 
been widely adopted by exchanges,\22\ including the Exchange,\23\ 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 Nasdaq Price List, Add and Remove Rates, Rebate to Add 
Displayed Liquidity, Shares Executed at or Above $1.00, available at 
https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2; see also 
MEMX Equities Fee Schedule, Non-Display Add Tiers, available at 
https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/.
    \22\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \23\ 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 Tier 8 and Non-Displayed Add Volume Tier 1 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 modify Add Volume Tier 8 and Non-
Displayed Add Volume Tier 1 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 modify Add Volume Tier 8 
and Non-Displayed Add Volume Tier 1 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 the proposed Add Volume Tier 8 and Non-Displayed Add 
Volume Tier 1 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 Non-Displayed Add Volume Tier 1. 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 and at least three Members will be 
able to satisfy proposed Non-Displayed Add Volume Tier 1. 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

[[Page 46217]]

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 modify Add Volume Tier 8 and Non-Displayed Add Volume Tier 
1 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 16% of the market share.\24\ 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.'' \25\ 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'. . . .''.\26\ 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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    \24\ Supra note 4.
    \25\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \26\ 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 \27\ and paragraph (f) of Rule 19b-4 \28\ 
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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    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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-2024-039 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-2024-039. 
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

[[Page 46218]]

submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-CboeBZX-2024-039 and 
should be submitted on or before June 18, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11568 Filed 5-24-24; 8:45 am]
BILLING CODE 8011-01-P