[Federal Register Volume 89, Number 182 (Thursday, September 19, 2024)]
[Notices]
[Pages 76902-76905]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21286]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101022; File No. SR-CboeBYX-2024-033]


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

September 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 September 3, 2024, Cboe BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') 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/BYX/), 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 (``BYX Equities'') by modifying the criteria 
of Add Volume Tiers 1 and 2 and the rate associated with Add Volume 
Tier 1. The Exchange proposes to implement these changes effective 
September 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 
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 ``Taker-Maker'' model whereby it pays credits to 
members that remove liquidity and assesses fees to those that add 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that remove and provide 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00200 per 
share for orders that remove liquidity and assesses a fee of $0.00200 
per share for orders that add liquidity.\4\ For orders in securities 
priced below $1.00, the Exchange does not assess any fees for orders 
that add liquidity, and provides a rebate in the amount of 0.10% 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

[[Page 76903]]

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 (August 22, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
    \4\ See BYX Equities Fee Schedule, Standard Rates.
    \5\ Id.
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Add/Remove Volume Tiers
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
five Add Volume Tiers that each provide a reduced fee for Members' 
qualifying orders yielding fee codes B,\6\ V,\7\ Y,\8\ and AD \9\ where 
a Member reaches certain add volume-based criteria. The Exchange now 
proposes to amend the criteria of Add Volume Tiers 1 and 2. The 
Exchange also proposes to lower the reduced fee associated with Add 
Volume Tier 1. The current criteria for Add Volume Tiers 1 and 2 is as 
follows:
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    \6\ Fee code B is appended to displayed orders that add 
liquidity to BYX in Tape B securities.
    \7\ Fee code V is appended to displayed orders that add 
liquidity to BYX in Tape A securities.
    \8\ Fee code Y is appended to displayed orders that add 
liquidity to BYX in Tape C securities.
    \9\ Fee code AD is appended to displayed orders that execute in 
a Periodic Auction.
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     Add Volume Tier 1 provides a reduced fee of $0.0017 per 
share in securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes B, V, Y, or AD) where Member has a 
combined Auction ADV \10\ and ADAV \11\ >= 0.20% of the TCV.\12\
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    \10\ ``Auction ADV'' means average daily auction volume 
calculated as the number of shares executed in an auction per day.
    \11\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \12\ ``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.
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     Add Volume Tier 2 provides a reduced fee of $0.0014 per 
share in securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes B, V, Y, or AD) where Member has a 
combined Auction ADV and ADAV >= 0.25% of the TCV.
    The proposed criteria for Add Volume Tiers 1 and 2 is as follows:
     Proposed Add Volume Tier 1 provides a reduced fee of 
$0.0016 per share in securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes B, V, Y, or AD) where Member 
has a combined Auction ADV and ADAV >= 0.10% of the TCV or has a 
combined Auction ADV and ADAV >= 11,000,000.
     Proposed Add Volume Tier 2 provides a reduced fee of 
$0.0014 per share in securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes B, V, Y, or AD) where Member 
has a combined Auction ADV and ADAV >= 0.15% of the TCV or has a 
combined Auction ADV and ADAV >= 16,000,000.
    The Exchange believes that the proposed modifications to current 
Add Volume Tiers 1 and 2 will continue to incentivize Members to add 
displayed liquidity to the Exchange, thereby contributing to a deeper 
and more liquid market, which benefits all market participants and 
provides greater execution opportunities on the Exchange. While the 
proposed criteria in Add Volume Tiers 1 and 2 is less difficult to 
achieve than the current criteria, the revised criteria continue to 
remain commensurate with the lower fees (including the proposed lower 
fee of Add Volume Tier 1) that will be assessed to a Member satisfying 
the proposed criteria.
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 modify the criteria of Add Volume Tiers 1 and 2 
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. 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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    \17\ See e.g., EDGA Equities Fee Schedule, Footnote 7, Add/
Remove Volume Tiers.
    \18\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes its proposal to modify the 
criteria of Add Volume Tiers 1 and 2 is reasonable because the tiers 
will be available to all Members and provide all Members with an 
opportunity to receive a lower fee. The Exchange further believes that 
proposed Add Volume Tiers 1 and 2 will provide a reasonable means to 
encourage adding displayed orders in Members' order flow to the 
Exchange and to incentivize Members to continue to provide volume to 
the Exchange by offering them an opportunity to receive a lower 
assessed fee on qualifying orders. An overall increase in activity 
would deepen the Exchange's liquidity pool, offers additional cost 
savings, support the quality of price discovery, promote market 
transparency and improve market quality, for all investors.
    The Exchange believes proposed Add Volume Tiers 1 and 2 are 
reasonable as they do not represent a significant departure from the 
criteria currently offered in the Fee Schedule and the proposed lower 
fee associated with Add Volume Tier 1 is commensurate with the proposed 
lower volume thresholds. The Exchange also believes that the proposal 
represents an equitable allocation of fees and rebates and is not 
unfairly discriminatory because all

[[Page 76904]]

Members will be eligible for the tiers and have the opportunity to meet 
the tiers' criteria and receive the corresponding reduced fee if such 
criteria are met. Without having a view of activity on other markets 
and off-exchange venues, the Exchange has no way of knowing whether 
these proposed rule changes would definitely result in any Members 
qualifying for the new proposed tiers. 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 no Member will be able to satisfy proposed Add Volume Tier 1 and 
at least one Member will be able to satisfy proposed Add Volume Tier 2. 
The Exchange also notes that the proposed changes will not adversely 
impact any Member's ability to qualify for reduced fees or 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 change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, proposed Add 
Volume Tiers 1 and 2 will apply to all Members equally in that all 
Members are eligible for the tiers and reduced fees, 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 change burdens competition, but 
rather, enhances competition as it is intended to increase the 
competitiveness of BYX 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.\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-CboeBYX-2024-033 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 76905]]

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CboeBYX-2024-033. 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-CboeBYX-2024-033 and should 
be submitted on or before October 10, 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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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21286 Filed 9-18-24; 8:45 am]
BILLING CODE 8011-01-P