[Federal Register Volume 84, Number 95 (Thursday, May 16, 2019)]
[Notices]
[Pages 22190-22192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10119]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85840; File No. SR-CboeBZX-2019-041]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Amending Its Fee Schedule Assessed on Members To Establish a Monthly 
Trading Rights Fee

May 10, 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 May 2, 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.\3\ 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.
    \3\ The Commission notes that the Exchange initially filed the 
proposed rule change on April 29, 2019 (SR-CboeBZX-2019-036). On May 
2, 2019, the Exchange withdrew that filing and submitted this 
filing.
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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 Equities'') 
proposes to amend its fee schedule assessed on Members to establish a 
monthly Trading Rights Fee. 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/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 purpose of the proposed rule change is to establish a monthly 
Trading Rights Fee under the ``Membership Fees'' section of the fee 
schedule. The Trading Rights Fee will be assessed on Members that trade 
more than a specified volume in U.S. equities, and will assist in 
covering the cost of regulating the Exchange and its Members. 
Specifically, the Exchange proposes to charge Member firms a monthly 
Trading Rights Fee of $500 per month for the ability to trade on the 
Exchange. So as to continue to encourage active participation on the 
Exchange by smaller Members, the Trading Rights Fee would not be 
charged to Members with a monthly ADV \4\ of less than 100,000 shares. 
Similarly, to continue to support individual investor order flow on the 
Exchange, the Trading Rights Fee would not be charged to Members in 
which at least 90% of their orders submitted to the Exchange per month 
are retail orders.
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    \4\ ``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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    Additionally, the Exchange recognizes that new Members are new and 
important sources of liquidity. As such, the Exchange proposes that new 
Exchange Members will not be charged the proposed Trading Rights Fee 
for their first three months of Membership. Moreover, for any month in 
which a firm is approved for Membership with the Exchange, the monthly 
Trading Rights Fee will be pro-rated in accordance with the date on 
which Membership is approved. For example, if a firm's Membership is 
approved on May 15, 2019, then, as proposed, it would not be charged 
for its first three months of Membership. The month of August would 
then be pro-rated and the Trading Rights Fee would be assessed from 
August 15, 2019 through the end of the month. During any month in which 
a firm terminates Membership with the Exchange, the monthly Trading 
Rights Fee will not be pro-rated.
    As proposed, the Exchange believes the Trading Rights Fee assessed 
aligns with the benefit provided by allowing Members to trade on an 
efficient and well-regulated market. The proposed Trading Rights Fee 
will fund a portion of the cost of regulating and maintaining the 
Exchange's equities market. Lastly, the Exchange believes the cost of 
Exchange Membership, including the proposed Trading Rights Fees, is 
significantly lower than the cost of membership in a number of other 
SROs.\5\
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    \5\ See NASDAQ Stock Market Equity Rules, Equity 7, Sec. 10(a) 
(assessing a trading rights fee of $1,250 per month per each 
member); New York Stock Exchange Price List 2019, ``Trading 
Licenses'' (assessing an annual fee $50,000 for the first trading 
license held by a member, to which the Exchange notes that the 
Exchange assesses a $2,500 annual fee for membership, and that this 
annual fee coupled with 12 months of the proposed Trading Rights 
Fees remains substantially lower than NYSE's annual trading license 
fee).
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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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes that the proposed Trading 
Right Fee is reasonable because the fee will assist in funding the 
overall regulation and maintenance of the Exchange. Additionally, the 
Exchange believes the fee is reasonable because the cost of this 
membership fee is generally less than the analogous membership fees of 
other markets. For example, the Exchange's proposed Trading Rights Fee 
at $500 a month is substantially lower than the NASDAQ Stock Market's 
(``Nasdaq'') analogous fee, which assesses a monthly Trading Rights Fee 
of $1,250 per member.
    In addition to this, the Exchange believes that not charging a 
Trading Rights Fee for Members that trade less than a monthly ADV of 
100,000 shares is reasonable because it ensures that smaller Members 
who do not trade significant volume on BZX Equities can continue to 
trade on the Exchange at a lower cost. The Exchange believes that not 
charging a fee for such Members is reasonable because smaller Members 
with lower volumes executed on the Exchange consume fewer regulatory 
resources. The Exchange also believes that not charging a Trading 
Rights Fee for Members that submit 90% or more of their orders per 
month as retail orders

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is reasonable because it ensures retail broker Members can continue to 
submit orders for individual investors at a lower cost, thereby 
continuing to encourage retail investor participation on the Exchange. 
Furthermore, continuing to allow smaller Members and retail broker 
Members to trade on the Exchange without incurring a Trading Rights Fee 
may encourage additional participation from such Members and thereby 
contribute to a more diverse and competitive market for equity 
securities traded on the Exchange.
    Additionally, the Exchange believes that not charging its new 
Members the proposed Trading Rights Fee for their first three months of 
Membership is reasonable because it provides an incentive for firms and 
other participants that are not currently Members of the Exchange to 
apply for Membership and bring additional liquidity to the market to 
the benefit of all market participants. The Exchange believes that not 
charging a Trading Rights Fee for new Members will incentivize firms to 
become Members of the Exchange. The Exchange believes creating 
incentives for new Exchange Members protects investors and the public 
interest by increasing the competition and liquidity across the 
Exchange.
    The Exchange believes that the proposed Trading Rights Fee is 
equitable and is not unfairly discriminatory because it will apply 
equally to all Members with an ADV of 100,000 shares or more traded per 
month and all Members in which less than 90% of their orders are 
submitted as retail orders per month.\8\ The Exchange believes that not 
charging the Trading Rights Fee for Members that do not meet these 
thresholds in a month is not unfairly discriminatory as it is designed 
to reduce the costs of smaller Members and retail-based Members that 
transact on the Exchange. Furthermore, the Exchange believes that not 
charging a Trading Rights Fee for a new Member for the first three 
months of Membership is equitable and not unfairly discriminatory 
because the proposed waiver will be offered to all market participants 
that wish to become Members of the Exchange. As stated, the proposed 
waiver intends to incentivize new Membership which will bring increased 
liquidity and competition to the benefit of all market participants. In 
addition to this, the Exchange notes that the proposed fee is equitable 
and not unfairly discriminatory because it will contribute revenue to a 
portion of the costs incurred by the Exchange in providing its Members 
with an efficient and well-regulated market, which benefits all 
Members.
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    \8\ A Member will not be charged if it meets either one (or 
both) of the exceptions. To illustrate, if a Member submits 5% of 
its orders as retail orders but only has an ADV of 90,000 shares 
traded, that Member will not be charged the proposed Trading Rights 
Fee.
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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 does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary in furtherance of the 
purposes of the Act because the proposed rule change will apply equally 
to all Members that reach an ADV of 100,000 shares traded or greater, 
and those that submit less than 90% of their orders as retail orders 
per month. Although smaller Members would be excluded from the Trading 
Rights Fee, the Exchange believes that this may increase competition by 
encouraging additional order flow from such smaller Members thereby 
contributing to a more diverse, vibrant, and competitive market. 
Additionally, while the proposed three month waiver of the Trading 
Rights Fee only applies to new Members, new Members can be an important 
source of liquidity and facilitate competition within the market, which 
uniformly benefits all market participants.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
Exchange operates in a highly competitive environment in which market 
participants can readily favor competing exchanges and marketplaces if 
they deem fee levels at a particular exchange or other venue to be 
excessive. If the proposed fee increase is unattractive to members, it 
is likely that the Exchange will lose membership and market share as a 
result. As a result, the Exchange carefully considers any increases to 
its fees, balancing the utility in remaining competitive with other 
exchanges and with alternative trading systems exempted from compliance 
with the statutory standards applicable to exchanges, and in covering 
costs associated with maintaining its equities market and its 
regulatory programs to ensure that the Exchange remains an efficient 
and well-regulated marketplace. The Exchange notes that competitors are 
free to modify their own fees in response to its proposal, and because 
Members are not compelled to be Members of the Exchange and may trade 
on numerous other exchanges and other alternative venues, the Exchange 
believes that the proposed fee change will not impose a burden on 
intermarket competition.

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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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-2019-041 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-CboeBZX-2019-041. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your

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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-2019-041 and should be submitted on or before June 6, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-10119 Filed 5-15-19; 8:45 am]
 BILLING CODE 8011-01-P


