[Federal Register Volume 89, Number 119 (Thursday, June 20, 2024)]
[Notices]
[Pages 51923-51926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13417]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100326; File No. SR-CboeBZX-2024-046]


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

June 13, 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 June 3, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

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

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

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

[[Page 51924]]

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``BZX Equities'') by modifying the Add 
Volume Tier. The Exchange proposes to implement these changes effective 
June 3, 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 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 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.\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 (May 21, 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 eight 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 8. The proposed criteria for the new, proposed 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\ >=0.40%; and (2) Member has a Tape C 
ADV \11\ >=1.20% of the Tape C TCV; and (3) Member has a Remove ADV 
>=0.40% 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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    In conjunction with the new, proposed Add Volume Tier 8, the 
Exchange proposes to renumber the current Add Volume Tier 8 as Add 
Volume Tier 9. Additionally, the Exchange proposes to amend the third 
prong of criteria associated with proposed Add Volume Tier 9 (current 
Add Volume Tier 8) and increase the rebate associated with the tier 
from $0.0031 per share in securities priced at or above $1.00 to 
$0.0032 per share. The current criteria for proposed Add Volume Tier 9 
(current Add Volume Tier 8) is as follows:
     Proposed Add Volume Tier 9 (current 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.
    The proposed criteria for proposed Add Volume Tier 9 is as follows:
     Proposed Add Volume Tier 9 provides a rebate of $0.0032 
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 92) Member has a Tape B ADV 
>=1.50% of the Tape B TCV; and (3) Member has a Remove ADV >=0.20% of 
the TCV.
    The proposed, new Add Volume Tier 8 and the proposed Add Volume 
Tier 9 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. The Exchange believes that the proposed, new Add 
Volume Tier 8 and proposed Add Volume Tier 9 continue to offer an 
enhanced rebate that is commensurate with the proposed criteria, which 
is not significantly more difficult nor significantly easier than the 
current criteria found in the Add Volume Tiers. 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.\12\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \13\ 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

[[Page 51925]]

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) \14\ 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) \15\ 
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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
    \15\ 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 Add Volume Tiers 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 proposed, new Add Volume Tier 8 and proposed Add Volume Tier 
9 are not a significant departure from existing criteria, are 
reasonably correlated to the enhanced rebate offered by the Exchange 
and other competing exchanges,\16\ 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,\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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    \16\ 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.
    \17\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \18\ 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 a 
new Add Volume Tier 8 and renumber current Add Volume Tier 8 as 
proposed Add Volume Tier 9 with amended criteria is reasonable because 
the proposed 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 a new Add Volume Tier 8 and 
renumber current Add Volume Tier 8 as proposed Add Volume Tier 9 with 
amended criteria 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 a new Add 
Volume Tier 8 and renumber current Add Volume Tier 8 as proposed Add 
Volume Tier 9 with amended criteria is reasonable as the proposed 
criteria 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 proposed a new Add Volume Tier 8 and proposed Add Volume Tier 9 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 proposed Add Volume Tier 9. 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 one Member will be able to satisfy proposed Add 
Volume Tier 9. 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 new Add Volume Tier 8 and renumber current Add 
Volume Tier 8 as proposed Add Volume Tier 9 with amended criteria will 
apply to all Members equally in that all Members are eligible for the 
proposed 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

[[Page 51926]]

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 15% 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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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-CboeBZX-2024-046 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-2024-046. 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-2024-046 and should 
be submitted on or before July 11, 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. 2024-13417 Filed 6-18-24; 8:45 am]
BILLING CODE 8011-01-P