[Federal Register Volume 89, Number 223 (Tuesday, November 19, 2024)]
[Notices]
[Pages 91465-91468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26867]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101614; File No. SR-CboeBYX-2024-041]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt
Fees for Its New Offering of Market Data Reports
November 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 November 1, 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
adopt fees for its new offering of market data reports. 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 (https://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 to adopt fees for
Cboe Timestamping Service reports, effective November 1, 2024. The
Exchange recently adopted a new data product known as the Cboe
Timestamping Service.\3\ The Cboe Timestamping Service provides
timestamp information for orders and cancels for market participants.
More specifically, the Cboe Timestamping Service reports provide
various timestamps relating to the message lifecycle throughout the
exchange system. The first report--the Missed Liquidity Report--covers
order messages of the Member only and the second report--Cancels
Report--covers cancel messages of the Member only. The reports are
optional products that are available to all Members and Members may opt
to choose both reports, one report, or neither report.
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\3\ See Securities Exchange Act Release No. 100798 (August 27,
2024), 89 FR 68660 (August 21, 2024) (SR-CboeBYX-2024-030).
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The Cancels Report provides response time details for orders that
rest on the book where the Member attempted to cancel that resting
order or any other resting order but was unable to do so as the resting
order was executed before the system processed the cancel message. The
Cancels Report assists the Member in determining by how much time that
order missed being canceled instead of executing.
The Missed Liquidity Report provides time details for executions of
orders that rest on the book where the Member attempted to execute
against that resting order within an Exchange-determined amount of time
(not to exceed 1 millisecond) after receipt of the first attempt to
execute against the resting order and within an Exchange-determined
amount of time (not to exceed 100 microseconds) before receipt of the
first attempt to execute against the resting order.
Both the Missed Liquidity Report and Cancels Report include the
following data elements for orders \4\ and cancel messages,\5\
respectively: (1) Member
[[Page 91466]]
Firm ID; (2) Symbol; (3) Execution ID; \6\ (3) Exchange System
Timestamps for orders and cancels; \7\ (4) Matching Unit number; \8\
(5) Queued; \9\ (6) Port Type; \10\ and (7) Aggressor Order Type.\11\
No specific information about resting orders on the Exchange book are
provided.
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\4\ The Missed Liquidity Report only includes trade events which
are triggered by an order that removed liquidity on entry and will
exclude trade events resulting from: elected stop orders, orders
routed and executed at away venues, and peg order movements, and
auctions.
\5\ Includes individual order cancellations, mass cancels, and
purge orders messages that are sent via Financial Information
Exchange (``FIX'') protocol or Binary Order Entry (BOE) protocol by
a subscriber.
\6\ The Execution ID is a unique reference number assigned by
the Exchange for each trade.
\7\ Includes Network Discovery Time (which is a network hardware
switch timestamp taken at the network capture point); Order Handler
NIC Timestamp (which is a hardware timestamp that represents when a
BOE order handler server NIC observed the message); Order Handler
Received Timestamp (which is software timestamp that represents when
the FIX or BOE order handler has begun processing the order after
the socket read); Order Handler Send Timestamp (which represents
when the FIX or BOE order handler has finished processing the order
and begun sending to the matching engine); Matching Engine NIC
Timestamp (which is a hardware timestamp that represents when the
target matching engine server NIC observed the message); and
Matching Engine Transaction Timestamp (which is a software timestamp
that represents when the matching engine has started processing an
event).
\8\ Represents the matching unit number.
\9\ Flag to indicate whether a message was delayed due to
message in flight limits (i.e., a limit on the total number of
messages in flight between an order handler and a matching engine).
\10\ Refers to the port type used by the session to send the
applicable message.
\11\ Indicates whether the order type of the response order that
executed against the resting order was a new order or modify
message.
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These reports are in response to requests from Members for
additional data concerning the timeliness of their incoming orders,
cancel messages and executions against resting orders. The Exchange
believes these reports will increase transparency by providing Members
with an opportunity to learn more about better opportunities to access
liquidity and receive better execution rates and improve order cancel
success.
The Exchange notes that the data included in the reports are based
only on the data of the market participant that opts to subscribe to
the reports (``Recipient Member'') and do not include information
related to any Member other than the Recipient Member. Additionally,
neither report includes real-time market data. Rather, the reports
contain historical data from the prior trading day and are available
after the end of the trading day, generally on a T+1 basis.
The Exchange now proposes to assess the following monthly fees for
Members that wish to purchase the Cancels Report and/or the Missed
Liquidity Report. The Exchange proposes a monthly flat fee of $1,000
for the Cancels Report for a subscribing Member. The Exchange also
proposes a progressive monthly fee structure for the Missed Liquidity
Report based on the Member's subscribing logical (FIX or BOE) order
entry ports (the ``Ports'') \12\ with the following tiers: $1,500 for
1-10 Ports, $2,000 for 11-20 Ports and $2,500 for 21 and more
Ports.\13\ For a mid-month subscription, the monthly fee(s)shall be
prorated based on the initial date of the subscription.\14\
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\12\ Based on a Members' unique needs, Members may choose which
Ports (if any) it would like to subscribe to the Missed Liquidity
Report. For example, a Member that has 20 Ports, but is only
interested in receiving data on 10 of their Ports would then be
charged the $1,500 tier fee for its subscribing Ports.
\13\ The Exchange proposes to make clear in the Fees Schedule
that the proposed fees are not progressive (i.e., if a Member
requests the Missed Liquidity Report for 20 Ports, it will be
assessed $2,000 per month).
\14\ Fees will be assessed on a look-back basis based on the
maximum number of subscribing Ports a Member had in the prior
calendar month. For example, if a Member had 10 Ports that were
subscribed to the Missed Liquidity Report from September 1st-
September 26th and the Member added an additional Port to the Missed
Liquidity Report on September 27th (for a total of 11 subscribing
Ports), the Member would then be assessed a fee of $2,000 for the
month of September for the Missed Liquidity Report. Additionally,
the Exchange proposes to make clear in its fee schedule that new
subscribers will be charged a prorated fee for a mid-month
subscription based on the initial date of the subscription.
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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.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \16\ 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) \17\ 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,\18\ 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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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ Id.
\18\ 15 U.S.C 78f(b)(4).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker dealers increased authority and
flexibility to offer new and unique market data to consumers of such
data. It was believed that this authority would expand the amount of
data available to users and consumers of such data and also spur
innovation and competition for the provision of market data. The
Exchange believes that the proposed reports are the sort of market data
product that the Commission envisioned when it adopted Regulation NMS.
The Commission concluded that Regulation NMS--by deregulating the
market in proprietary data--would itself further the Act's goals of
facilitating efficiency and competition: ``[E]fficiency is promoted
when broker-dealers who do not need the data beyond the prices, sizes,
market center identifications of the NBBO and consolidated last sale
information are not required to receive (and pay for) such data. The
Commission also believes that efficiency is promoted when broker-
dealers may choose to receive (and pay for) additional market data
based on their own internal analysis of the need for such data.'' \19\
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\19\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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By removing ``unnecessary regulatory restrictions'' on the ability
of exchanges to sell their own data, Regulation NMS advanced the goals
of the Act and the principles reflected in its legislative history. The
Cboe Timestamping Service (i.e., the Missed Liquidity and Cancels
Reports) provides investors with new options for receiving market data,
which was a primary goal of the market data amendments adopted by
Regulation NMS.\20\
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\20\ See Regulation NMS Adopting Release, supra, at 37503.
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The reports are designed for Members that are interested in gaining
insight into latency in connection with their respective (1) orders
that failed to execute against an order resting on the Exchange order
book and/or (2) cancel messages that failed to cancel resting orders.
The Exchange believes that providing this optional data to interested
Members for a fee is consistent with facilitating transactions in
securities, removing impediments to and perfecting the mechanism of a
free
[[Page 91467]]
and open market and a national market system, and, in general,
protecting investors and the public interest because it provides
Members with an opportunity to receive additional information and
insight into their trading activity on the Exchange.
The Exchange believes the fee proposals for both the Missed
Liquidity Report and Cancels Report are reasonable as the Exchange is
offering any Member access to subscribe to one or both report(s) in the
Member's sole discretion based on their unique business needs. The
reports are optional for Members to subscribe to if they believe it to
be helpful and are not required for Members to purchase in order to
access the Exchange. Additionally, Members may cancel their usage of
this report at any time.
The Exchange believes that the fee structure for the Missing
Liquidity Report reflects an equitable allocation and will not be
unfairly discriminatory as it is a voluntary product designed to ensure
that the amount of the charge is tailored to the specific port usage
patterns of the Recipient Member. The range of fee options further
ensures that Recipient Members are not charged a fee that is
inequitably disproportionate to the use that they make of the product.
Additionally, Recipient Members aren't required to pay the set
threshold for all Ports it has in a given month, instead, Members are
able to select which Ports (if any) they would like to subscribe to the
Missing Liquidity Report for a given month in order to study its orders
in the market to be better informed market participants. Members are
under no obligation to subscribe to the Missing Liquidity Report if it
does not desire to do so.
The fee structure for the Missing Liquidity Report closely aligns
to the fee structure of the previously offered Missed Opportunity--
Latency report as part of its NASDAQ Trader Insights offering.\21\
However, the NASDAQ Missed Opportunity--Latency report included an
additional tier with a higher price than the Exchange's proposed fee
structure.\22\ The NASDAQ structure included an additional tier level
that imposes a monthly fee of $3,500 for subscribers that have over 25
ports \23\ while the Exchange fee structure would provide its similar
report for a fee of $2,500 for a Recipient Member that has 25 ports.
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\21\ See Securities Exchange Act Release No. 78886 (September
20, 2016), 81 FR 66113 (September 26, 2016) (SR-NASDAQ-2016-101)
(Order Granting Approval of Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2, To Add NASDAQ Rule 7046 (Nasdaq Trading
Insights).
\22\ See Securities Exchange Act Release No. 79035 (October 11,
2016), 81 FR 70207 (October 4, 2016) (SR-NASDAQ-2016-124).
\23\ Id.
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The Exchange believes its proposed fee for the Cancels Report is
reasonable as it's a modest, flat fee of $1,000/month. As the Exchange
offers mass cancels through Purge Ports in addition to standard cancels
through the Ports, and since cancels may occur through a variety of
port types as opposed to just the Ports, the Exchange found a modest,
flat fee to be more appropriate for the Cancels Report.
The proposed fees are also reasonable as they are lower than the
fees assessed for similar reports offered by other exchanges. For
example, the MIAX Emerald Liquidity Taker Event Report is substantially
similar to the Missed Liquidity Report and Cancels Report \24\ and has
a monthly fee of $4,000 or an annual fee of $24,000.\25\ A Member is
able to receive both the Cancels Report and the Missed Liquidity Report
for a monthly fee no greater than $3,500 a month--making the Cboe
Timestamping Reports less than the MIAX Emerald report. With the
Exchange's approach of (i) bifurcating the orders and cancels to two
separate and distinct offerings (Missing Liquidity Report and Cancels
Report) and (ii) allowing Members to select its subscribing Ports for
the Missed Liquidity Report, it allows Members to further curb costs if
they choose to subscribe to one or both of these reports. As such, the
Exchange believes that the proposed fees for the both the Missed
Liquidity Report and Cancels Report are fair and reasonable as they are
set at a level either similar to or lower than other exchanges that
offer similar reports.
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\24\ See e.g., MIAX Emerald Rule 531. See also Securities
Exchange Act Release No. 91356 (March 18, 2021), 86 FR 15759 (March
24, 2021) (SR-EMERALD-2021-09). Although not clearly defined, the
Exchange believes that MIAX Emerald's Liquidity Taker Event Report
also provides information relating to cancel messages. Particularly,
MIAX Emerald Liquidity Taker Event Report provides, among other
things, data relating to the ``type of each response submitted by
the Recipient Member.'' See MIAX Emerald Rule 5.31(a)(iii)(C). MIAX
Emerald's technical specifications outline the various types of
available liquidity messages including, Simple Mass Quote Cancel
Request and Mass Liquidity Cancel Request See MIAX Express Interface
for Quoting and Trading Options, MEI Interface Specification,
Section 4.1 (Liquidity Messages), available at:
MIAX_Express_Interface_MEI_v2.2a.pdf (miaxglobal.com).
\25\ See MIAX Emerald Fee Schedule, Section 7, Reports.
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The proposal would also not permit unfair discrimination as both
the Cancels Report and Missed Liquidity Report will be available to all
Members, who may opt to subscribe to one, both, or neither, and will
help to protect a free and open market by continuing to provide
additional non-core data (offered on an optional basis for a fee) to
the marketplace and by providing investors with greater choices.\26\ As
such, the Exchange believes that the proposed fees are reasonable and
set at a level to compete with other exchanges that may choose to offer
similar reports. Moreover, if a market participant views another
exchange's potential report as more attractive, then such market
participant can merely choose not to purchase the Exchange's reports
and instead purchase another exchange's similar data product(s), which
may offer similar data points, albeit based on that other market's
trading activity.
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\26\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision
Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding
the existence of vigorous competition with respect to non-core
market data). See also the decision of the United States Court of
Appeals for the District of Columbia Circuit in NetCoalition v. SEC,
615 F.3d 525 (D.C. Cir. 2010) (``NetCoalition I'') (upholding the
Commission's reliance upon competitive markets to set reasonable and
equitably allocated fees for market data).
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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 believes the
reports will contribute to robust competition among national securities
exchanges. The Missed Liquidity Report and Late Cancels Report further
enhances competition between exchanges by allowing the Exchange to
expand its product offerings to include reports similar to reports that
are currently offered by other exchanges.\27\
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\27\ See e.g., MIAX Emerald Rule 531.
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The Exchange also does not believe the proposed fees would cause
any unnecessary or inappropriate burden on intermarket competition as
other exchanges are free to introduce their own comparable reports with
lower prices to better compete with the Exchange's offerings. The
Exchange operates in a highly competitive environment, and its ability
to price the reports is constrained by competition among exchanges who
choose to adopt similar products. The Exchange must consider this in
its pricing discipline in order to compete for subscribers of the
Exchange's market data via the reports. For example, proposing fees
that are excessively higher than fees for potentially similar data
products would simply serve to reduce demand for the Exchange's
reports, which as discussed, Members are under no obligation to
[[Page 91468]]
utilize. In this competitive environment, potential purchasers are free
to choose which, if any, similar product to purchase to satisfy their
need for market information. As a result, the Exchange believes this
proposed rule change permits fair competition among national securities
exchanges.
The Exchange does not believe the proposed rule change would cause
any unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposed fees apply uniformly to any purchaser in
that the Exchange does not differentiate between the different Members
that may purchase the reports. While the Exchange does propose to
implement tiered pricing for its Missed Liquidity Report (similar to
the pricing used for NASDAQ Trader Insight offering),\28\ the tiered
pricing shall apply to all Members that wish to purchase the Missed
Liquidity Report and this proposed pricing structure is reflective of
the specific port usage patterns of the Recipient Member. The proposed
fees are set at a modest level that would allow any interested Member
to purchase such data based on their business needs.
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\28\ See Securities Exchange Act Release No. 79035 (October 11,
2016), 81 FR 70207 (October 4, 2016) (SR-NASDAQ-2016-124).
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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 \29\ and paragraph (f) of Rule 19b-4 \30\
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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\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 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-2024-041 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-CboeBYX-2024-041. 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-2024-041 and should
be submitted on or before December 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26867 Filed 11-18-24; 8:45 am]
BILLING CODE 8011-01-P