
[Federal Register Volume 84, Number 34 (Wednesday, February 20, 2019)]
[Notices]
[Pages 5126-5129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02741]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85123; File No. SR-CboeBZX-2019-006]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the BZX Fee Schedule as It Relates to Pricing for the Use of Certain 
Routing Strategies

February 13, 2019.
    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 February 1, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the fee schedule applicable to the BZX 
equities trading platform (``BZX Equities'') as it relates to pricing 
for the use of certain routing strategies. The text of the proposed 
rule change is attached [sic] as 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.

[[Page 5127]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the BZX 
Equities fee schedule to change the pricing applicable to orders routed 
using the SLIM routing strategy in connection with planned changes to 
the System routing table.\3\ SLIM is a routing strategy offered by the 
Exchange that is used to target certain low cost protected market 
centers by routing to those venues after accessing available liquidity 
on the BZX Book, and prior to routing to other trading centers included 
in the System routing table. The Exchange periodically changes the low 
cost venues targeted by the SLIM routing strategy to ensure that the 
venues prioritized for routing can be accessed at a low cost. 
Currently, four exchanges are included in the System routing table as 
low cost protected market centers: Cboe BYX Exchange, Inc. (``BYX''), 
Cboe EDGA Exchange, Inc. (``EDGA''), Nasdaq BX, Inc. (``BX''), and New 
York Stock Exchange LLC (``NYSE''). Pursuant to Rule 11.13(b)(3), the 
Exchange has determined to modify System routing table such that NYSE 
would no longer be listed as a low cost protected market center where 
orders are first routed after seeking available liquidity on the BZX 
Book. In addition, the Exchange has decided to add NYSE American LLC 
(``NYSE American'') and NYSE National, Inc. (``NYSE National'') as low 
cost protected market centers. These changes to the System routing 
table are scheduled to be introduced on February 1, 2019.
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    \3\ The term ``System routing table'' refers to the proprietary 
process for determining the specific trading venues to which the 
System routes orders and the order in which it routes them. See Rule 
11.13(b)(3). The Exchange reserves the right to maintain a different 
System routing table for different routing options and to modify the 
System routing table at any time without notice. Id.
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    Currently, orders routed using the SLIM routing strategy are 
charged a fee of $0.00260 per share, except when routed to BYX or 
NYSE.\4\ Orders routed to BYX using the SLIM routing strategy are 
provided a rebate of $0.00150 per share,\5\ and orders routed to NYSE 
using this routing strategy are charged a fee of $0.00280 per share.\6\ 
The Exchange proposes a number of changes to these fees in connection 
with the changes to the routing table for SLIM.
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    \4\ See Cboe BZX U.S. Equities Exchange Fee Schedule, fee code 
``SX.''
    \5\ See Cboe BZX U.S. Equities Exchange Fee Schedule, fee code 
``BY.''
    \6\ See Cboe BZX U.S. Equities Exchange Fee Schedule, fee code 
``D.''
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    First, in recognition of the fact that EDGA and BX can be accessed 
at a low cost today, the Exchange proposes to provide a rebate to 
orders routed to these exchanges using the SLIM routing strategy. As 
proposed, the rebate would be $0.00240 per share for orders routed to 
EDGA, and $0.00100 for orders routed to BX. The rebates are consistent 
with rebates currently offered for orders routed to EDGA and BX using 
the TRIM or TRIM2 routing strategies, which yield fee codes ``BJ'' and 
``TV,'' respectively. To effect the proposed change, the Exchange would 
therefore add SLIM to the list of routing strategies that yield fee 
code BJ and TV when routed to EDGA or BX. In addition, the fee schedule 
currently provides that the rebates offered pursuant to fee codes BJ 
and TV are applicable to eligible orders in all securities. EDGA and 
BX, however, do not provide rebates to orders that remove liquidity in 
securities priced below $1.00.\7\ As such, the Exchange proposes to 
amend the pricing for orders routed to these exchanges pursuant to fee 
codes BJ and TV, such that no charge or rebate would be provided in 
securities priced below $1.00.
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    \7\ Orders that remove liquidity on EDGA for Tapes A, B, and C 
are neither charged a fee nor provided a rebate in securities priced 
below $1.00. See Cboe EDGA U.S. Equities Exchange Fee Schedule, fee 
codes ``BB,'' ``N,'' ``W.'' Orders that remove liquidity on Nasdaq 
BX in such securities are charged a fee equal to 0.10% of the total 
transaction cost. See Nasdaq BX Rulebook, Equity 7, Section 118(b).
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    Second, the Exchange proposes to add two new fee codes, MX and NX, 
that relate to orders routed to NYSE American and NYSE National, 
respectively, using the SLIM routing strategy. Orders routed using the 
SLIM routing strategy would be charged a fee of $0.00020 per share if 
executed on NYSE American. If executed on NYSE National, those orders 
would be provided a rebate of $0.00200 per share in securities priced 
at or above $1.00, and no charge or rebate would be applied for 
securities priced below $1.00. The proposed fees and rebates chosen for 
routing to these venues generally reflect the current transaction fees 
and rebates available for accessing liquidity on those markets.\8\
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    \8\ NYSE American currently charges a fee for removing liquidity 
that is $0.00020 per share in securities priced at or above $1.00, 
and 0.25% of the total dollar value of the transaction in securities 
priced below $1.00. See NYSE American Equities Price List, I. 
Transaction Fees.
    NYSE National currently provides a rebate of $0.00200 per share 
in securities priced at or above $1.00 for members that achieve 
their taking tier. See NYSE National Schedule of Fees and Rebates, 
I. Transaction Fees, B. Tiered Rates. Orders that remove liquidity 
in securities below $1.00 are executed without charge or rebate. See 
NYSE National, Schedule of Fees and Rebates, I. Transaction Fees, A. 
General Rates.
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    Third, since the Exchange would now charge a low fee or pay a 
rebate for routing to all low cost protected market centers using the 
SLIM routing strategy, the Exchange proposes to increase the default 
fee charged to orders routed using the SLIM routing strategy to 
$0.00290 per share. This routing fee, designated under fee code SX, 
would apply to all orders routed using the SLIM routing strategy, 
except when routed to BX, BYX, EDGA, NYSE American, or NYSE National. 
Since NYSE would no longer be included as a low cost protected market 
center, the Exchange proposes to eliminate special pricing for orders 
routed to NYSE using the SLIM routing strategy under fee code D. Such 
orders would now pay the default routing fee for orders routed using 
this routing strategy, as described above.
    Finally, the Exchange proposes to charge no fee and provide no 
rebate in securities priced below $1.00 for liquidity providing orders 
routed to The Nasdaq Stock Market LLC (``Nasdaq'') using the ROOC 
routing strategy. Currently, these orders would be eligible for a 
$0.00150 rebate pursuant to fee code ``RN.'' \9\ The Exchange is 
proposing to provide free executions instead as Nasdaq charges a fee 
instead of providing a rebate for securities priced below $1.00.\10\
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    \9\ See Cboe BZX U.S. Equities Exchange Fee Schedule, fee code 
``RN.''
    \10\ Nasdaq's standard fee is equal to 0.3% of the total 
transaction cost for orders in securities priced at less than $1.00. 
See Nasdaq Rulebook, Equity 7, Section 118(b).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act,\11\ in general, and furthers the 
requirements of Section 6(b)(4),\12\ in particular, 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. 
The Exchange believes the proposed routing fee changes are appropriate 
as they reflect changes to the System routing table used to determine 
the order in which venues are accessed using the SLIM routing strategy. 
SLIM specifically targets certain equities exchanges that provide cheap 
executions or rebates to liquidity removing orders, and routes to those 
venues after trading with the BZX Book, and prior to accessing 
liquidity

[[Page 5128]]

that may be available on other venues on the System routing table. The 
Exchange believes that the proposed changes reflect the intent of 
members when they submit routable order flow to the Exchange using the 
SLIM routing strategy.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable and equitable to begin 
rebating orders routed to EDGA and BX using the SLIM routing strategy. 
Although the Exchange does not offer special pricing when routing to 
those markets using the SLIM routing strategy today, the Exchange does 
offer such incentives when routing to those markets using certain other 
routing strategies, including TRIM or TRIM2. As is the case for orders 
routed to EDGA and BX using those routing strategies, the proposed 
rebates applicable to the SLIM routing strategy are designed to reflect 
incentives offered to liquidity taking orders on these two venues, 
which operating using taker/maker pricing models that offer rebates to 
remove liquidity.
    The Exchange also believes that it is reasonable and equitable to 
provide free executions, rather than rebates, for orders routed to EDGA 
and BX using the TRIM, TRIM2, or SLIM routing strategies in securities 
priced below $1.00. Although EDGA and BX both generally provide rebates 
to orders that remove liquidity, as described above, those rebates are 
limited to securities priced at or above $1.00.\13\ For orders that 
remove liquidity in securities priced below $1.00, EDGA charges no fee 
and provides no rebate, while BX instead charges a fee.\14\ With the 
proposed changes to the routing fees, the Exchange would recoup some, 
but not all, of the cost associated with routing orders in lower priced 
securities to these markets on behalf of members that use the TRIM, 
TRIM2, or SLIM routing strategies.
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    \13\ See supra note 7.
    \14\ Id.
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    Similarly, the Exchange believes that it is reasonable and 
equitable to provide special pricing for orders routed to NYSE American 
and NYSE National using the SLIM routing strategy. As mentioned 
previously, the Exchange is adding these two exchanges to its list of 
low cost protected market centers, and wishes to provide the benefit of 
the rebate or lower fee provided by those markets to BZX members using 
the SLIM routing strategy. The Exchange believes that these changes may 
increase interest in the Exchange's SLIM routing strategy, in 
particular, by passing on better pricing to BZX members that choose to 
enter such orders on the Exchange, thereby encouraging additional order 
flow to be entered to the BZX Book.
    The rebates provided to orders routed to NYSE National using the 
SLIM routing strategy would be limited to order price at or above $1.00 
in light of the fact that NYSE National does not provide rebates to 
liquidity removing orders in securities priced below $1.00. For 
securities priced below $1.00, the Exchange would charge no fee and 
provide no rebate, which is equivalent to pricing on NYSE National.\15\ 
Without limiting the proposed rebate for NYSE National to securities 
priced at or above $1.00, the Exchange would pay a significant rebate 
that would not be recouped via a rebate provided by the execution 
venue. The Exchange believes that is reasonable and equitable to limit 
routing rebates to circumstances where the Exchange would actually earn 
a rebate from the away venue in order to properly recoup the costs of 
accessing liquidity on such markets.
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    \15\ See supra note 8.
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    Given the proposed changes to the fees charged or rebates provided 
when routing low cost protected market centers, the Exchange also 
believes that it is reasonable and equitable to increase the fee 
charged when routing to other equities markets. Specifically, the 
Exchange charges a default routing fee for orders routed using the SLIM 
routing strategy that is, in effect, a blended fee designed to 
compensate the Exchange for routing to one of the venues not otherwise 
subject to special pricing. Since the Exchange is introducing special 
pricing for orders routed to low cost protected market centers, the 
venues subject to this pricing, would, on average, charge a higher 
execution fee for liquidity removing orders. Indeed, a number of the 
trading centers that are accessible using the SLIM routing strategy, 
including, for example, The Nasdaq Stock Market LLC (``Nasdaq'') and 
Cboe EDGX Exchange, Inc. (``EDGX''), charge a taker fee of $0.00300 per 
share.\16\ The Exchange believes that the proposed increased routing 
fee for these orders reflects an appropriate blended rate for accessing 
liquidity on those markets, and would appropriately compensate the 
Exchange for the costs associated with routing to such venues. 
Furthermore, the Exchange believes that the changes to the System 
routing table would reduce the chance that an order is routed to a high 
cost venue since routing to low cost protected market centers is 
prioritized.
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    \16\ See Nasdaq, Equity Rules, Pricing Schedule; EDGX U.S. 
Equities Exchange Fee Schedule, Fee Codes and Associated Fees.
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    In addition, the Exchange believes that it is reasonable and 
equitable to provide free executions, rather than rebates, for 
liquidity providing orders routed to Nasdaq using the ROOC routing 
strategy in securities priced below $1.00. While Nasdaq typically 
provides a rebate to orders that add liquidity in securities priced at 
or above $1.00, it instead charges a fee for orders in securities 
priced below $1.00. Similar to other proposed changes described in this 
proposed rule change for securities priced below $1.00, this proposed 
change would ensure that rebates for routed orders are limited to 
securities that are rebate eligible on the execution venue.
    Finally, the Exchange believes that the proposed changes are 
equitable and not unfairly discriminatory as the proposed fees and 
rebates would apply equally to all members that use the Exchange to 
route orders using the associated routing strategy. The proposed fees 
are designed to reflect the fees charged and rebates offered by certain 
away trading centers that are accessed by Exchange routing strategies, 
and are being made in conjunction with changes to the System routing 
table designed to provide members with low cost executions for their 
routable order flow. Furthermore, if members do not favor the proposed 
pricing, they can send their routable orders directly to away markets 
instead of using routing functionality provided by the Exchange. 
Routing through the Exchange is voluntary, and the Exchange operates in 
a competitive environment where market participants can readily direct 
order flow to competing venues or providers of routing services if they 
deem fee levels to be excessive.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
proposed routing fee changes are designed to reflect changes being made 
to the System routing table used to determine where to send certain 
routable orders, and generally provide better pricing to members for 
orders routed to low cost protected market centers using the Exchange's 
routing strategies. The Exchange operates in a highly competitive 
market in which market participants can readily direct their order flow 
to competing venues. In such an environment, the Exchange must 
continually review, and consider

[[Page 5129]]

adjusting, its fees and rebates to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed fee changes reflect this competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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 rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2019-006 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-2019-006. 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 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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeBZX-2019-006 and should be submitted 
on or before March 13, 2019.

    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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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02741 Filed 2-19-19; 8:45 am]
BILLING CODE 8011-01-P


