[Federal Register Volume 89, Number 138 (Thursday, July 18, 2024)]
[Notices]
[Pages 58457-58460]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15774]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100525; File No. SR-CboeBZX-2024-062]


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

July 12, 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 July 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, 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.

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 introducing a new Non-
Displayed Add Volume Tier. The Exchange proposes to implement this 
change effective July 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 
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.\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 (June 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 four Non-
Displayed Add Volume Tiers that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes HB,\6\ HV,\7\ or HY,\8\ 
where a Member reaches certain volume-based criteria offered in each 
tier. The Exchange now proposes to introduce a new Non-Displayed Add 
Volume Tier 5. The proposed criteria for Non-Displayed Add Volume Tier 
5 is as follows:
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    \6\ Fee code HB is appended to non-displayed orders that add 
liquidity to BZX in Tape B securities.
    \7\ Fee code HV is appended to non-displayed orders that add 
liquidity to BZX in Tape A securities.
    \8\ 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 5 provides a rebate of 
$0.0027 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 a Step-Up ADV \9\ from

[[Page 58458]]

May 2024 >= 0.10% of the TCV \10\ as Midpoint Peg, Non-Displayed orders 
that yield fee codes HB, HI,\11\ HV or HY.
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    \9\ Step-Up ADV means ADV in the relevant baseline month 
subtracted from current day ADV. ADV means average daily volume 
calculated as the number of shares added or removed, combined, per 
day and 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\ Fee code HI is appended to non-displayed orders that add 
liquidity to BZX and receive price improvement.
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    Additionally, the Exchange notes that proposed Non-Displayed Add 
Volume Tier 5 will expire no later than November 30, 2024, which the 
Exchange will indicate on the Exchange's fee schedule.
    The proposed Non-Displayed Add Volume Tier 5, like other Add/Remove 
Volume Tiers and Step-Up Tiers,\12\ is intended 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. 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.
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    \12\ See BZX Equities Fee Schedule, Footnote 2, Step-Up Tiers.
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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 introduce Non-Displayed Add Volume Tier 5 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 Non-
Displayed Add Volume Tier 5 is not a significant departure from 
existing criteria, is reasonably correlated to the enhanced rebate 
offered by the Exchange and other competing exchanges,\17\ 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,\18\ including the 
Exchange,\19\ 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 Nasdaq Price List, Add and Remove Rates, Rebate to Add 
Other Non-Displayed Liquidity, 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/.
    \18\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \19\ 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 Non-
Displayed Add Volume Tier 5 is reasonable because the proposed tier 
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 Non-Displayed Add Volume Tier 5 will 
provide a reasonable means to encourage liquidity adding non-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 Non-Displayed 
Add Volume Tier 5 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 Non-Displayed Add Volume Tier 5 and have the opportunity to 
meet the tier's 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 Non-Displayed Add Volume Tier 5. 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 Non-Displayed Add Volume Tier 5. 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 58459]]

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 Non-Displayed Add Volume Tier 5 will apply to all 
Members equally in that all Members are eligible for the new tier, 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 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.\20\ 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.'' \21\ 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' . . . .''.\22\ 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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    \20\ Supra note 3.
    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \22\ 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 \23\ and paragraph (f) of Rule 19b-4 \24\ 
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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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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-2024-062 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-2024-062. 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

[[Page 58460]]

subject to copyright protection. All submissions should refer to file 
number SR-CboeBZX-2024-062 and should be submitted on or before August 
8, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15774 Filed 7-17-24; 8:45 am]
BILLING CODE 8011-01-P