
[Federal Register Volume 84, Number 54 (Wednesday, March 20, 2019)]
[Notices]
[Pages 10361-10363]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05219]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85320; File No. SR-CboeBZX-2019-014]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend the Fee Schedule Applicable to Members and Non-Members of the 
Exchange Pursuant to BZX Rules 15.1(a) and (c)

 March 14, 2019.
    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 March 1, 2019, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend the fee schedule applicable to Members and non-
Members \3\ of the Exchange pursuant to BZX Rules 15.1(a) and (c). The 
text of the proposed rule change is attached as Exhibit 5 [sic].
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    \3\ A Member is defined as ``any registered broker or dealer 
that has been admitted to membership in the Exchange.'' See Exchange 
Rule 1.5(n).
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    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.

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 the fee schedule applicable to its 
equities trading platform (``BZX Equities'') to (1) add a fourth Step-
Up Tier under footnote 2, and (2) amend the second Single MPID Investor 
Tier under footnote 4.
Step-Up Tier 4
    The Exchange currently offers three Step-Up Tiers that provide 
Members with additional ways to qualify for an enhanced rebate where 
they increase their relative liquidity each month over a predetermined 
baseline. Under the current Step-Up Tiers, a Member receives a rebate 
of $0.0030 (Tier 1) or $0.0031 (Tier 2 and Tier 3) per share for 
qualifying orders which yield fee codes B,\4\ V,\5\ or Y \6\ if the 
corresponding required criteria per tier is met.
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    \4\ Fee code B is appended to displayed orders which add 
liquidity to Tape B and is provided a rebate of $0.0025 per share.
    \5\ Fee code V is appended to displayed orders which add 
liquidity to Tape A and is provided a rebate of $0.0020 per share.
    \6\ Fee code Y is appended to displayed orders which add 
liquidity to Tape C and is provided a rebate of $0.0020 per share.
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    The Exchange now proposes to amend footnote 2 to add a fourth Step-
Up Tier. Under the proposed Step-Up Tier 4, a Member would receive a 
rebate of $0.0032 per share for their qualifying orders which yield fee 
codes B, V, or Y where the Member has a Step-Up Add TCV from December 
2018 greater or equal to 0.50%. As currently defined in the BZX 
Equities fee schedule, Step-Up Add TCV means ADAV \7\ as a percentage 
of TCV \8\ in the relevant baseline month subtracted from current ADAV 
as a percentage of TCV.\9\ Members that achieve the proposed Step-Up 
Tier 4 must therefore increase the amount of liquidity that they 
provide on BZX by .50% relative to their ADAV as a percentage of TCV in 
December 2018, thereby contributing to a deeper and more liquid market.
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    \7\ ``ADAV'' means average daily volume calculated as the number 
of shares added per day. ADAV is calculated on a monthly basis.
    \8\ ``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.
    \9\ The following demonstrates how Step-Up Add TCV is 
calculated: In December 2018, Member A had an ADAV of 12,947,242 
shares and average daily TCV was 9,248,029,751, resulting in an ADAV 
as a percentage of TCV of 0.14%; In February 2019, Member A had an 
ADAV of 46,826,572 and average daily TCV was 7,093,306,325, 
resulting in an ADAV as a percentage of TCV of 0.66%. Member A's 
Step-Up Add TCV from December 2018 was therefore 0.52% which makes 
Member A eligible for the Tier 3 rebate. (i.e., 0.66% (Feb 2019) - 
0.14% (Dec 2018), which is greater than 0.50% as required by Tier 
3).
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Single MPID Investor Tier 2
    The Exchange currently offers two Single MPID Investor Tier under 
Footnote 4 of the fee schedule that provides Members with an additional 
way to qualify for an enhanced rebate for orders yielding fee codes 
B,\10\ V,\11\ or Y.\12\ The distinction between the Single MPID 
Investor Tiers and other tiers offered by the Exchange, is that the 
volume measured to determine whether a Member qualifies is performed on 
a Member Participant Identifier (``MPID'') basis. Currently, a Member 
receives a $0.0031 (Tier 1) or $0.0036 (Tier 2) per share rebate for 
qualifying orders per MPID which yield the applicable fee codes if the 
corresponding required criteria per tier is met. Specifically, the 
current Tier 2 provides Members an opportunity to receive an enhanced 
rebate of $0.0036 per share where the Member's MPID has an ADAV \13\ as 
a percentage of TCV \14\ greater than or equal to 2.25% on orders 
yielding the applicable fee codes.
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    \10\ See supra note 5.
    \11\ See supra note 6.
    \12\ See supra note 7.
    \13\ See supra note 8.
    \14\ See supra note 9.
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    The Exchange now proposes to amend Tier 2 of the Single MPID 
Investor Tiers so that a Member would receive a rebate of $0.0032 per 
share for qualifying orders on an MPID basis which yield fee codes B, 
V, or Y where the MPID has an ADAV as a percentage of TCV greater or 
equal to .75% on orders yielding the applicable fee codes, and where 
the MPID has an ADAV as a percentage of ADV \15\ greater than or equal 
to 80% on

[[Page 10362]]

orders yielding the applicable fee codes. The proposed change intends 
to ease Tier 2's current criteria and encourage entry of additional 
orders to the Exchange.
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    \15\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day. ADV is calculated on 
a monthly basis.
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2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ 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 also 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. The proposed 
rule changes reflect a competitive pricing structure designed to 
incentivize market participants to direct their order flow to the 
Exchange.
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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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    The Exchange notes that rebates such as those proposed herein have 
been widely adopted by exchanges,\18\ including the Exchange,\19\ and 
are equitable 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. The Exchange believes that 
the proposed fourth Step-Up Tier and the proposed amendments to the 
second Single MPID Investor Tier are a reasonable, fair and equitable, 
and not unfairly discriminatory allocation of fees and rebates because 
the proposed changes will continue to provide Members with an incentive 
to reach certain thresholds on the Exchange.
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    \18\ See e.g., NYSE Arca Equities, Fees and Charges, Step Up 
Tiers; NASDAQ Rule 7018(a) & Rule 7014(j).
    \19\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote 
2, Step-Up Tiers 1-3 & Footnote 4, Single MPID Investor Tiers 1-2.
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    In particular, the Exchange believes the proposed Step-Up Tier 4 is 
a reasonable means to encourage Members to increase their liquidity on 
the Exchange based on increasing their relative volume above a 
predetermined baseline. The proposed fourth tier creates an additional 
opportunity for Members to receive an enhanced rebate for contributing 
increased liquidity as compared to the end of the previous year (2018). 
Increased liquidity benefits all investors by deepening the Exchange's 
liquidity pool, offering additional flexibility for all investors to 
enjoy cost savings, supporting the quality of price discovery, 
promoting market transparency and improving investor protection. The 
Exchange also believes that proposed rebate is reasonable based on the 
difficulty of satisfying the tier's criteria, using December 2018 as 
the predetermined baseline. Furthermore, the Exchange believes that the 
proposed Step-Up Tier 4 is not unfairly discriminatory as it applies to 
all Members that meet the required criteria.
    Similarly, the Exchange believes the proposed modification 
decreasing the ADAV as a percentage of TCV criteria while implementing 
a percentage of ADV criteria that a Member must meet per MPID to 
receive the rebate under the second Single MPID Investor Tier is a 
reasonable means to further incentive Members to send a higher level of 
orders to the Exchange. The Exchange believes that decreasing the 
tier's criteria, although modestly, will encourage those Members who 
could not achieve the tier previously to increase their order flow as a 
means to receive the tier's enhanced rebate on an MPID basis. The 
Exchange also believes that the proposed lesser rebate than offered 
before is reasonable as it is commensurate with the proposed decreased 
criteria. In addition to this, the Exchange believes that the proposed 
supplementary ADAV as a percentage of ADV criteria to achieve Tier 2 is 
reasonable because it is related to the current criteria in Tier 1 and 
proposed criteria (as described above) in Tier 2, and reasonably 
reflects the scaled difficulty from achieving Tier 1 to achieving Tier 
2. As a result, the Exchange believes that the proposed Tier 2 
modifications and the additional criteria are reasonable and equitable 
because they will provide Members who viewed the current criteria as 
too high and did not previously attempt to achieve the tier's criteria 
with an incentive (albeit a lesser rebate than before) to add order 
flow to reach the new lower threshold, while ensuring that the Tier 2 
threshold appropriately reflects a scaled difficulty from that of 
achieving Tier 1. Furthermore, the Exchange believes that the proposed 
criteria to Tier 2 is non-discriminatory because it applies and is 
available to 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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
the proposed change burdens competition, but rather, enhances 
competition as it is intended to increase the competitiveness of BZX by 
adopting an additional pricing incentives and modifying existing 
pricing incentives in order to attract order flow and incentivize 
participants to increase their participation on the Exchange. The 
Exchange 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 structures to be unreasonable or excessive. 
Accordingly, the Exchange does not believe that the proposed change 
will impair the ability of Members or competing venues to maintain 
their competitive standing in the financial markets. The Exchange also 
notes that the proposed change is intended to enhance the rebate for 
liquidity added to the Exchange, which is intended to draw additional 
liquidity to the Exchange to the benefit of all market participants. 
The Exchange does not believe the proposed amendment would burden 
intramarket competition as it would be available to all Members 
uniformly.

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 \20\ and paragraph (f) of Rule 19b-4 \21\ 
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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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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,

[[Page 10363]]

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-2019-014 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-2019-014. 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-2019-014 and should be submitted 
on or before April 10, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05219 Filed 3-19-19; 8:45 am]
BILLING CODE 8011-01-P


