[Federal Register Volume 89, Number 128 (Wednesday, July 3, 2024)]
[Notices]
[Pages 55296-55299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14595]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100442; File No. SR-CboeBZX-2024-058]


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

June 27, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 13, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``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'' or ``BZX 
Options'') is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change 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

[[Page 55297]]

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 Fees Schedule to clarify its 
fees for Certification Logical Port fees.\3\
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    \3\ The Exchange initially filed this proposed rule change on 
May 31, 2024 for June 3, 2024 effectiveness (SR-CboeBZX-2024-045). 
On June 13, 2024, the Exchange withdrew that filing and submitted 
this filing.
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    By way of background, the Exchange offers a variety of logical 
ports, which provide users with the ability within the Exchange's 
System to accomplish a specific function through a connection, such as 
order entry, data receipt or access to information. Specifically, the 
Exchange offers Logical Ports,\4\ Purge Ports,\5\ Multicast PITCH GRP 
Ports and Multicast PITCH Spin Server Ports.\6\ For each type of the 
aforementioned logical ports that is used in the production 
environment, the Exchange also offers corresponding ports which provide 
Members and non-Members access to the Exchange's certification 
environment to test proprietary systems and applications (i.e., 
``Certification Logical Ports''). The certification environment 
facilitates testing using replicas of the Exchange's production 
environment process configurations which provide for a robust and 
realistic testing experience. For example, the certification 
environment allows unlimited firm-level testing of order types, order 
entry, order management, order throughput, acknowledgements, risk 
settings, mass cancelations, and purge requests. The Exchange currently 
provides free of charge one Certification Logical Port per port type 
offered in the production environment (i.e., Logical Ports, Purge, 
Multicast PITCH GRP, and Multicast PITCH Spin Server Ports) and a 
monthly fee of $250 per Certification Logical Port for any additional 
Certification Logical Ports.\7\
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    \4\ Logical Ports include FIX and BOE ports (used for order 
entry), drop logical port (which grants users the ability to receive 
and/or send drop copies) and ports that are used for receipt of 
certain market data feeds.
    \5\ Purge Ports are dedicated ports that permit a user to 
simultaneously cancel all or a subset of its orders in one or more 
symbols across multiple logical ports by requesting the Exchange to 
effect such cancellation.
    \6\ Spin Ports and GRP Ports are used to request and receive a 
retransmission of data from the Exchange's Multicast PITCH data 
feeds.
    \7\ For example, if a Member maintains 3 FIX Certification 
Logical Ports, 1 Purge Certification Logical Port, and 1 set of 
Multicast PITCH Spin Server Certification Logical Port, the Member 
will be assessed $500 per month for Certification Logical Port Fees 
(i.e., 1 FIX, 1 Purge and 1 set of Multicast PITCH Spin Server 
Certification Logical Ports x $0 and 2 FIX Certification Logical 
Ports x $250).
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    The Exchange proposes to make clear in the notes section under the 
Logical Port Fees section of the Fees Schedule that the Certification 
Logical Port fees only apply if the corresponding logical port type is 
also in the production environment.\8\ For example, if the Exchange 
intends to adopt a new port type that has not yet been launched in the 
live production environment, any certification port for that port type 
will be free until such time that the proposed new port is in the 
production environment. Once any new logical port type is in the live 
production environment, Members and Non-Members will only be entitled 
to one free certification logical port for that port type, and any 
additional certifications ports of that type will be assessed the 
regular monthly $250 per port charge.
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    \8\ The Exchange also proposes to add the word ``receive'' in 
the notes section under the Logical Port section of the Fees 
Schedule as it was inadvertently omitted in the original filing that 
adopted the Certification Logical Port language.
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    The Exchange notes that purchasing additional Certification Logical 
Ports continues to be voluntary and not required in order to 
participate in the production environment, including live production 
trading on the Exchange. Additionally, Members and non-Members are not 
required to purchase any particular production logical port in order to 
receive a corresponding Certification Logical Port free of charge.\9\ 
Further, the Exchange also notes that other exchanges similarly assess 
fees related to their respective testing environments.\10\
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    \9\ For example, a Member may obtain a Certification Purge Port 
free of charge, even if that Member has not otherwise purchased a 
Purge Port for the live production environment. Certification 
Logical Ports are not automatically enabled, but rather must be 
proactively requested by Members or Non-Members.
    \10\ See e.g., Nasdaq Stock Market LLC, Equity 7, Pricing 
Schedule, Section 130. See also MIAX Options Exchange Fee Schedule, 
Section 4, Testing and Certification Fees.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ 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 
Section 6(b)(4) of the Act,\13\ which requires that Exchange rules 
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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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78f(b)(4).
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    As noted above, the Exchange's certification environment provides a 
robust and realistic testing experience using a replica of the 
Exchange's production environment process configurations. This 
environment enables market participants to manage risk more effectively 
through testing software development changes in certification prior to 
implementing them in the live trading environment, thereby reducing the 
likelihood of a potentially disruptive system failure in the live 
trading environment, which has the potential to affect all market 
participants. The Exchange believes this is especially true when 
testing a new port type that has not yet launched in the production 
environment. As such, the Exchange believes it's reasonable to only 
assess the Certification Logical Port fee to ports that are also 
available in the production environment as to not discourage the 
testing of new ports ahead of any respective launch date. The Exchange 
also believes applying the Certification Logical Port fee is reasonable 
once such ports are available in the production environment because 
while such ports will no longer be completely free, Members and non-
Members will continue to be entitled to receive free of charge one 
Certification Logical Port for such port. The Exchange continues to 
believe one Certification Logical Port per logical port type will be 
sufficient for most Members or Non-Members and indeed anticipates that 
the majority of users will not purchase additional Certification 
Logical Ports. For those who wish to obtain additional Certification 
Logical Ports based on

[[Page 55298]]

their respective business needs, such as those wishing to test across 
various diverse systems within their own infrastructure, they are able 
to do so for a modest fee. Indeed, the decision to purchase additional 
ports is optional and no market participant is required or under any 
regulatory obligation to purchase excess Certification Logical Ports in 
order to access the Exchange's certification environment.\14\ Further, 
the Exchange has observed that market participants that do choose to 
purchase additional Certification Logical Ports maintain significantly 
fewer Certification Logical Ports as compared to the corresponding 
logical ports they use in the production in environment.
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    \14\ Although many Members and Non-Members use Certification 
Logical Ports on a daily basis, the Exchange notes frequency of use 
of Certification Logical Ports varies by user and depends on their 
respective business needs. To the extent a Member or Non-Member 
purchases additional Certification Logical Ports and their needs 
later change, or they determines they no longer wish to maintain 
excess Certification Logical Ports, the Member or Non-Member is free 
to cancel such ports for the following month(s).
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    The Exchange believes the proposal to make clear that the 
Certification Logical Port fee applies only to logical ports that are 
in the production environment is equitable and not unfairly 
discriminatory because it applies uniformly to all market participants 
that choose to obtain additional Certification Logical Ports and all 
market participants will have further clarity as to which certification 
ports are subject to the current fee. The Exchange also believes the 
proposed change is reasonable, equitable and not unfairly 
discriminatory because it is designed to encourage market participants 
to avail themselves of Certification Logical Ports for new port types 
before they launch to become acclimated with the new connectivity 
offering ahead of going live in the trading environment. The Exchange 
believes the proposal to add this language to the notes section in the 
Fees Schedule also provides clarity in the rules as to when the 
Certification Logical Port fee applies and reduces potential confusion.

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 or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
Exchange does not believe that the proposed rule change will impose any 
burden on intramarket competition because as the proposed change 
applies uniformly to all market participants. Additionally, the 
Exchange does not believe that the proposed fee creates an undue burden 
on competition because the Exchange will continue to offer free of 
charge one Certification Logical Port per each logical port type once 
offered in the production environment. Also as discussed, the purchase 
of additional ports is optional and based on the business needs of each 
market participant. Moreover, such market participants will continue to 
benefit from access to the certification environment, which the 
Exchange believes provides a robust and realistic testing experience 
via a replica of the production environment, which may be especially 
critical during the time leading up to the launch of a new port type in 
the production environment.
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Particularly, 
the proposed change applies only to the Exchange's certification 
environment. Additionally, the Exchange notes that it operates in a 
highly competitive market. Members have numerous alternative venues 
that they may participate on and direct their order flow, including 16 
other options exchanges, as well as a number of alternative trading 
systems and other off-exchange venues, where competitive products are 
available for trading. Indeed, participants can readily choose to send 
their orders to other exchanges, and, additionally off-exchange venues, 
if they deem overall 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.'' \15\ 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'. . . .''.\16\ 
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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    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ 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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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-2024-058 on the subject line.

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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-2024-058. 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-2024-058 and should 
be submitted on or before July 24, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-14595 Filed 7-2-24; 8:45 am]
BILLING CODE 8011-01-P