[Federal Register Volume 89, Number 160 (Monday, August 19, 2024)]
[Notices]
[Pages 67127-67130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18470]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100716; File No. SR-CboeBZX-2024-072]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Replace 
the Regulatory Transaction Fee With a Sales Value Fee

August 13, 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 July 30, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'') 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'') proposes to 
amend its Fees 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

[[Page 67128]]

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 Fees Schedule to add language 
concerning the application and collection of the Sales Value Fee, as 
described below.
    By way of background, Section 31 of the Securities Exchange Act of 
1934 (the ``Act'') \3\ requires each self-regulatory organization 
(``SRO'') to pay the Securities and Exchange Commission (``SEC'' or 
``Commission'') twice annually a fee based on the aggregate dollar 
amount of certain sales of securities (i.e., ``covered sales''). A 
covered sale is a ``sale of a security, other than an exempt sale or a 
sale of a security future, occurring on a national securities exchange 
or by or through any member of a national securities association 
otherwise than on a national securities exchange.'' \4\ Assessing a 
sales fee to defray the cost of these fees is common practice among the 
national securities exchanges and associations, including the 
Exchange's affiliate options exchanges.\5\ In fact, the Exchange 
currently assesses a fee on its Members \6\ for covered sales on the 
Exchange to recoup these amounts, which is described in Exchange Rule 
15.1(b) (Regulatory Transaction Fee) but is not currently described on 
the Exchange's Fee Schedule. The Exchange now proposes to amend its Fee 
Schedule to include information regarding this fee, including an 
explanation and description of the fee and how it is collected. In 
conjunction with the proposed addition to the Fee Schedule, the 
exchange also proposes to delete the applicable rule text found in 
Exchange Rule 15.1(b) and proposes to rename Rule 15.1(b) as 
``Reserved.''
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    \3\ 17 CFR 240.31.
    \4\ 17 CFR 240.31(a)(6).
    \5\ See, e.g. Cboe C2 Options Fee Schedule, Sales Value Fee; 
NASDAQ Equities Price List, Sales Fees to Fund Section 31 
Obligations; and NYSE Arca Rule 2.18 (Activity Assessment Fees).
    \6\ See Rule 1.5(n). The term ``Member'' shall mean any 
registered broker or dealer that has been admitted to membership in 
the Exchange. A Member will have the status of a ``member'' of the 
Exchange as that term is defined in Section 3(a)(3) of the Act. 
Membership may be granted to a sole proprietor, partnership, 
corporation, limited liability company or other organization which 
is a registered broker or dealer pursuant to Section 15 of the Act, 
and which has been approved by the Exchange.
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    Specifically, the Exchange proposes to add a section to the Fee 
Schedule labeled ``Sales Value Fee''. The proposed new section defines 
the Sales Value Fee (``Fee'') as the fee assessed by the Exchange to 
each Member for sales in securities when a sale in an equity security 
occurs with respect to which the Exchange is obligated to pay a fee to 
the SEC under Section 31 of the Exchange Act or when a sell order in an 
equity security is routed for execution at a market other than the 
Exchange, resulting in a covered sale on that market and an obligation 
of the routing broker providing routing services for the Exchange, as 
described in Exchange Rules 2.11 and 2.12, to pay the related sales fee 
of that market. The proposed section provides that to the extent the 
Exchange may collect more from Members under the section than is due 
from the Exchange to the Commission under Section 31 of the Act, for 
example due to rounding differences, the excess monies collected may be 
used by the Exchange to fund its general operating expenses. The 
Exchange may reimburse its routing broker for all Section 31-related 
fees incurred by the routing broker in connection with the routing 
services it provides.
    The proposed section explains that the transactions to which the 
Fee applies are sales of equities. The Fee is collected indirectly from 
Members through their clearing firms by the Depository Trust & Clearing 
Corporation (``DTCC'') on behalf of the Exchange with respect to sales 
in equity securities.\7\ For Members who do not have a DTCC account, 
the Exchange invoices these Members directly.
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    \7\ See https://cdn.cboe.com/resources/membership/Direct_Debit_Opt-In_Form.pdf.
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    The proposed section also sets forth the formula for calculating 
the Fee. Specifically, the Fee with respect to sales in equity 
securities is equal to (i) the Section 31 fee rate \8\ multiplied by 
(ii) the Member's aggregate dollar amount of covered sales resulting 
from equities transactions that have a charge date in that month.\9\ 
The Fee is calculated and invoiced by the Exchange on a monthly basis, 
but is not paid to the Commission until the end of the applicable 
billing period.\10\ The billing period for Section 31-related fees is 
separated into two periods: (i) January 1 through August 31; and (ii) 
September 1 through December 31.\11\ The Exchange notes that if the 
SEC's Section 31 fee rate changes in the middle of a month, the 
Exchange will perform a separate calculation with respect to covered 
sales under the new fee rate for the remaining portion of the month.
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    \8\ The Section 31 fee rate is the fee rate applicable to 
covered sales under section 31(b) of the Act. See 15 U.S.C. 78ee(b). 
The current rate applicable to equities securities transactions is 
$27.80 per million dollars. See also https://cdn.cboe.com/resources/fee_schedule/2024/Regulatory-Transaction-Fee-Adjustment-per-SEC-Section-31-Rate-Change-Effective-May-22-2024.pdf.
    \9\ 17 CFR 240.31(c).
    \10\ 17 CFR 240.31(c)(1).
    \11\ 17 CFR 240.31(a)(2).
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    In addition to the Exchange's proposal to add the Fee to its Fee 
Schedule, the Exchange simultaneously proposes to delete the rule text 
found in Exchange Rule 15.1(b). Exchange Rule 15.1(b) currently 
provides a description of the Fee within the Exchange rulebook, which 
would be duplicative as the Fee will be set forth and more fully 
described in the Fee Schedule. The Exchange notes that the Fee, as 
described in Exchange Rule 15.1(b), is described only at a high-level 
and does not contain specific details about how the Exchange currently 
calculates and collects the Fee. Specifically, Exchange Rule 15.1(b) 
merely states that the Exchange assesses a Regulatory Transaction Fee 
to its Members in order to help fund the Exchange's obligations to the 
Commission under Section 31. While Exchange Rule 15.1(b) does state how 
the Fee is calculated (which is identical to the proposed calculation 
described on the Fee Schedule), there is no description of the types of 
transactions that trigger the Fee or how the fee is collected by the 
Exchange. The Exchange proposes to more fully describe its current 
practice of calculating and collecting the Fee by providing additional 
details on the Fee Schedule. In conjunction with removing the rule text 
in Exchange Rule 15.1(b), the Exchange proposes to rename Exchange Rule 
15.1(b) as ``Reserved.''
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.\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

[[Page 67129]]

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) \14\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Exchange also believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\15\ 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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    \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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    The Exchange believes that the proposed rule change is consistent 
with these requirements because the proposed amended Fee Schedule text 
provides Members with detail regarding the circumstances under which 
the Exchange assesses a Sales Value Fee, and the current process by 
which the Fee is collected. The Exchange's current codification of the 
Fee in Exchange Rule 15.1(b) does not accurately depict the Exchange's 
current practice of calculating and collecting the Fee. The Exchange 
believes that amending the description of the Fee and placing this 
description on its Fee Schedule rather than in the Exchange rulebook 
will provide additional guidance to its Members about which 
transactions are subject to the Fee, how the Fee is calculated, and how 
the Fee is collected. As such, the proposed changes will increase 
transparency, help avoid Member confusion and foster better 
understanding of the application of the Fee, which the Exchange 
believes promotes just and equitable principles of trade, removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system, and protects investors and the public 
interest. Further, the Exchange believes the proposed change is 
reasonable as the Exchange is proposing to assess the same Fee to its 
Members that the Exchange must pay to the Commission twice 
annually..[sic]
    The Exchange believes the proposed change represents an equitable 
allocation of fees and is not unfairly discriminatory because it 
applies uniformly to all Members in that all Members submitting covered 
orders to the Exchange are assessed the Fee, which is equal to the fee 
that the Exchange is required to pay to the Commission. Furthermore, by 
moving the description of the Fee from Exchange Rule 15.1(b) to the Fee 
Schedule, all Members will have additional information about the types 
of orders subject to the Fee and how the Exchange collects the Fee from 
its Members, which do not currently appear in Exchange Rule 15.1(b). 
While Exchange Rule 15.1(b) describes at a high-level the Exchange's 
ability to assess a fee in order to help fund the Exchange's 
obligations under Section 31, it does not accurately depict the 
Exchange's current practice in regard to calculating and collecting the 
Fee from its Members. The proposed movement of the description of the 
Fee from Exchange Rule 15.1(b) to the Fee Schedule will not change how 
the Exchange calculates or collects the Fee from its Members, but 
rather will provide a more complete and accurate description of the Fee 
to all Members. All Members will be able to access a detailed 
description of the Fee on the Fee Schedule and as such, the description 
of the Fee found in Exchange Rule 15.1(b) that does not accurately 
describe the Exchange's current practice in calculating or collecting 
the Fee is no longer necessary.

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. The Exchange does not 
believe the proposed changes will impose any burden on intramarket 
competition. Particularly, the proposed change applies uniformly to all 
Members, in that the Sales Value Fee is applied uniformly to all 
Members' applicable covered orders. Similarly, the proposal to delete 
Rule 15.1(b) from the Exchange rulebook will not impose any burden on 
competition because the change applies to all Members uniformly, in 
that all Members will instead be able to access the description of the 
Sales Value Fee and how the Fee is calculated on the Fee Schedule.
    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. As noted above, 
assessing a sales fee to defray the cost of fees assessed under Section 
31 of the Act is common practice among the national securities 
exchanges and associations.\16\
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    \16\ Supra note 5.
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBZX-2024-072 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-2024-072. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent

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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-2024-072 and should be submitted on or before September 9, 
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18470 Filed 8-16-24; 8:45 am]
BILLING CODE 8011-01-P