[Federal Register Volume 89, Number 229 (Wednesday, November 27, 2024)]
[Notices]
[Pages 93683-93685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27765]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101700; File No. SR-CboeBYX-2024-042]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule Relating to Routing Codes
November 21, 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 14, 2024, Cboe BYX Exchange, Inc. (``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
Effective November 1, 2024, the Exchange proposes to amend its BYX
Fee Schedule applicable to its equities trading platform.\3\ By
implementing a remove fee (as opposed to a rebate) for fee code, AA,
removing fee code, BJ, and adding EDGA to the list of venues to which
orders appended with fee code, PL, are routed.
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\3\ The Exchange initially filed the proposed fee change on
November 1, 2024 (SR-CboeBYX-2024-040). On November 14, 2024, the
Exchange withdrew that filing and submitted this filing.
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Fee Codes
The Exchange proposes to implement a remove fee for fee code, AA.
The proposed changes are as follows:
For securities priced above $1.00,\4\ fee code AA is
appended to orders that are routed to EDGA using the ALLB \5\ routing
strategy. Currently, orders appended with fee code AA receive a rebate
of $0.0018.
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\4\ The Exchange notes for securities priced below $1.00, there
is no fee or rebate for removing liquidity from EDGA using the ALLB
routing strategy.
\5\ ALLB is a routing option under which an order checks the
System for available shares and is then sent to Cboe BZX Exchange,
Inc., Cboe EDGA Exchange, Inc., and/or Cboe EDGX Exchange, Inc. in
accordance with the System routing table. If shares remain
unexecuted after routing, they are posted on the BYX Book, unless
otherwise instructed by the User. See Rule 11.13(b)(3)(M).
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The Exchange now proposes to amend fee code, AA, as follows:
For securities priced above $1.00, fee code AA will
continue to be appended to orders that are routed to EDGA using the
ALLB routing strategy. However, orders appended with fee code AA will
now pay a fee of $0.0030. The Exchange does not propose to add a fee or
rebate for removing liquidity for securities priced below $1.00.
The Exchange also proposes to remove fee code, BJ. For securities
priced above $1.00,\6\ fee code BJ is currently appended to orders that
are routed to EDGA using the TRIM \7\ or SLIM \8\ routing strategies
and receive a rebate of $0.0018. However, effective November 1,
2024,\9\ EDGA transitioned from an inverted fee model \10\ to a maker-
taker fee model.\11\
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\6\ There is no charge or rebate for securities priced below
$1.00.
\7\ TRIM is a routing strategy under which an order checks EDGA
for available shares if so instructed by the entering User, and then
is sent to destinations on the applicable System routing table. See
generally Rule 11.13(b)(3)(G)(iv).
\8\ SLIM is a routing strategy under which an order checks EDGA
for available shares if so instructed by the entering User, and then
is sent to destinations on the applicable System routing table. See
generally Rule 11.13(b)(3)(G)(v).
\9\ See SR-CboeEDGA-2024-042; see also, SR-CboeEDGA-2024-045.
\10\ The inverted As such, orders that remove liquidity from
EDGA will pay a remove fee, rather than receive a rebate. Because
Members typically utilize routing options TRIM and SLIM, and fee
code BJ, to seek low-cost executions, it does not make sense to
maintain fee code, BJ, as Members would not expect to pay a fee for
removing liquidity from EDGA. Therefore, the Exchange proposes to
discontinue this fee code, as it is no longer necessary, and BYX
does not desire to charge such orders a fee for removing liquidity
from EDGA.fee model is a pricing structure in which a market, such
as an exchange, charges its participants a fee to provide liquidity
in securities, and provides a rebate to participants that remove
liquidity in securities. See SEC Market Structure Advisory
Committee, Memorandum on ``Maker-Taker Fees on Equities Exchanges,''
October 20, 2015, available at: https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf.
\11\ The maker-taker fee model is a pricing structure in which a
market, such as an exchange, generally pays its members a per share
rebate to provide (i.e., ``make'') liquidity in securities and
assesses on them a fee to remove (i.e., ``take'') liquidity. Id.
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The Exchange also proposes to edit the description of fee code, PL.
The BYX Fee Schedule currently describes PL, as a fee code appended to
orders that are ``[r]outed to BZX, EDGX, NYSE, NYSE Arca or Nasdaq
using RMPL routing strategy.'' The Exchange now proposes to move EDGA
to the list of high-cost destinations for the RMPL routing
[[Page 93684]]
strategy that are assigned the PL fee code, by amending the description
in the Fee Schedule to read as follow: ``Routed to BZX, EDGX, EDGA,
NYSE, NYSE Arca or Nasdaq using RMPL routing strategy.'' Previously,
orders appended with fee code, PX, utilized routing option, RMPL, which
is a midpoint liquidity seeking strategy that first targets low-cost
executions at certain lower-cost venues, including EDGA. However,
because EDGA is now transitioning to a maker-taker fee model, EDGA will
now be assessing a full remove fee of $0.0030 for orders that remove
liquidity from EDGA.\12\ As such, the Exchange believes that current
fee code, PL--which charges a $0.0030 for routing orders to other
exchanges--is now the more appropriate fee code to be appended to
midpoint liquidity seeking orders that are routed to other major
exchanges. Similar to EDGA, the other exchanges targeted by RMPL--NYSE,
NYSE Arca, and Nasdaq--also charge a high remove fee to liquidity
removing orders.\13\
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\12\ See SR-CboeEDGA-2024-045.
\13\ NYSE Arca charges a removal fee of $0.0030. See Section
III--Standard Rates--Transactions (applicable when Tier Rates do not
apply), Removing Liquidity, pg. 3, available at: https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf; NYSE charges a removal fee of
$0.0030 for orders that remove midpoint liquidity. See NYSE Stock
Exchange Price List, ``Equity per Share Charge--per transaction--MPL
orders that remove liquidity from the NYSE (Adding Tier Credits do
not apply) and with no Retail Modifier, as defined in Rule 13
(``Retail Modifier'')), pg. 5, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; Nasdaq charges a
removal fee of $0.0030. See Fees to Remove Liquidity, Shares
Executed at or above $1.00, available at: https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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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.\14\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \15\ 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) \16\ 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) \17\
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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
\17\ 15 U.S.C. 78f(b)(4).
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Adjusting fee code AA and removing fee code, BJ, is necessary to
reflect the transition of EDGA to a maker-taker fee model, effective
November 1, 2024. Prior to the November 1, 2024, orders entered onto
BYX, that were appended with fee code, AA, and were routed to EDGA
using routing option ALLB, received a rebate of $0.0018 for removing
liquidity from the EDGA Book for securities priced at or above $1.00.
However, given EDGA's transition to a maker-taker fee model, orders
that remove liquidity will now need to pay a liquidity removal fee,
rather than receive a rebate. Accordingly, removal of the current
$0.00180 rebate associated with fee code, AA, and implementation of a
$0.0030 remove fee is appropriate and consistent with the economics of
a maker-taker model, as well as the expectations of Members that remove
liquidity from EDGA (i.e., Members would expect to pay a fee to remove
liquidity). Moreover, the proposed fee is not unfairly discriminatory
because it applies to all Members equally, in that all Members will pay
the same fee for orders routed to EDGA using the ALLB routing strategy,
and appended with fee code, AA.
The Exchange also believes that its removal of fee code, BJ, is
reasonable, equitable, and not unfairly discriminatory as it does not
change the fees or rebates assessed by the Exchange, but rather updates
the BYX Fee Schedule to remove a fee code that the Exchange no longer
desires to, nor is required to, offer to its Members. Therefore, the
proposed rule change is reasonably designed to update the Fee Schedule
to accurately reflect the Exchange's current product offerings and is
designed to reduce any potential confusion regarding the routing of
orders with fee code, BJ, from BYX to EDGA. Furthermore, as noted
above, orders appended with fee code, BJ, entered onto BYX and routed
to EDGA using the routing option TRIM or SLIM, previously received a
rebate of $0.0018 for removing liquidity from the EDGA Book. However,
effective November 1, 2024, EDGA transitioned from an inverted fee
model to a maker-taker fee model. As such, orders that remove liquidity
from EDGA will pay a remove fee, rather than receive a rebate. Because
Members typically utilize routing options TRIM and SLIM, and fee code
BJ, to seek low-cost executions, it does not make sense to maintain the
BJ fee code, as Members utilizing this fee code would not expect to pay
a fee for removing liquidity from EDGA. Therefore, the Exchange
proposes to discontinue this fee code, as it is no longer necessary,
and BYX does not desire to charge such orders a fee for removing
liquidity from EDGA.
Finally, the Exchange believes that moving EDGA to the list of
high-cost destinations for the RMPL routing strategy that are assigned
the PL fee code, and assessing such orders a fee of $0.0030, is
necessary and appropriate. Members appending their orders with the PL
fee code already expect to pay a remove fee for removing liquidity from
exchanges accessed by RMPL, rather than receive a rebate for removing
liquidity as they do with liquidity removing orders appended with the
PX fee code. Additionally, the remove fee of $0.0030 per share
represents an equitable allocation of reasonable dues, fees, and other
charges. The proposed change would enable the Exchange to charge a rate
reasonably related to the rate that Cboe Trading, Inc. (``Cboe
Trading''), the Exchange's affiliated routing broker-dealer, would be
charged for routing orders to destinations described in fee codes PL.
As a result, when Cboe Trading is charged a fee when it routes an order
which removes liquidity from a destination described in fee codes PL,
Cboe Trading will pass through these rates to the Exchange and the
Exchange, in turn, will charge the rate under fee codes PL. The
proposed fee under fee code, PL, for orders routed pursuant to the RMPL
routing strategy would enable the Exchange to equitably allocate its
costs among all Members.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Given EDGA's transition to a
maker-taker fee model, orders that remove liquidity will now need to
pay a liquidity removal fee, rather than receive a rebate. Accordingly,
removing the current $0.0018 rebate associated with fee code, AA, and
implementing a $0.0030 remove fee is appropriate and consistent
[[Page 93685]]
with the economics of a maker-taker model, as well as the expectations
of Members that remove liquidity from EDGA (i.e., Members would expect
to pay a fee to remove liquidity).
Moreover, moving EDGA to the list of high-cost destinations for the
RMPL routing strategy that are assigned the PL fee code simply reflects
the fact that orders routed to EDGA that remove liquidity will now--
just as they do on other exchanges accessed with the PL fee code--pay a
remove fee instead of receiving a rebate. In addition, the BJ fee code
was typically appended to orders utilizing the TRIM or SLIM strategies,
which are designed to seek low-cost executions. Given EDGA's transition
to a maker-taker fee model, though, removers of liquidity will now pay
a remove fee. As such, it is appropriate to remove the BJ fee code as
Member's utilizing this fee code would expect to receive a rebate and
not expect to pay a fee. Accordingly, these proposed changes are
necessary and appropriate in order to align Members' expectations with
the economics of EDGA's new maker-taker fee model and will not have any
impact on competition.
Additionally, moving EDGA from fee code, PX, to fee code is PL,
will not have any impact on competition. Rather, it is necessary and
appropriate given EDGA's transition to a maker-taker fee model. Users
of the PL fee code already expect to pay fees for removing liquidity
from exchanges, whereas users of the PX fee code would expect lower-
cost executions for removing liquidity from exchanges, including EDGA.
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 \18\ and paragraph (f) of Rule 19b-4 \19\
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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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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-2024-042 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-2024-042. 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-2024-042 and should
be submitted on or before December 18, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27765 Filed 11-26-24; 8:45 am]
BILLING CODE 8011-01-P