[Federal Register Volume 84, Number 134 (Friday, July 12, 2019)]
[Notices]
[Pages 33310-33311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14810]



[[Page 33310]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86324; File No. SR-CboeBZX-2019-060]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fee Schedule Applicable to the BZX Equities Trading Platform as It 
Relates to Pricing for Orders Routed To Cboe EDGX Exchange, Inc.

    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 June 25, 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. (``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 orders routed to Cboe EDGX Exchange, Inc. (``EDGX''). 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.

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 BZX Equities fee schedule to 
change the pricing applicable to orders routed to EDGX that add 
liquidity, as result of a recent pricing change by EDGX. The Exchange 
proposes to implement the proposed change to its fee schedule on July 
1, 2019. Currently, the Exchange provides a rebate of $0.0020 per share 
for orders routed to EDGX that add liquidity (yielding fee code P), 
which was a pass-through of the standard rebate EDGX had previously 
provided to orders that added liquidity. On May 1, 2019, EDGX reduced 
its standard rebate per share for orders that add liquidity in 
securities priced at or above $1.00 from $0.0020 to $0.0017.\3\ As 
such, the Exchange proposes to similarly reduce the per share rebate 
for orders routed to EDGX (yielding fee code P) from $0.0020 to $0.0017 
in order to reflect the recent reduction in the rebate available for 
orders adding liquidity on EDGX.
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    \3\ See Securities Exchange Act Release No. 85852 (May 14, 
2019), 84 FR 22919 (May 20, 2019) (SR-CboeEDGX-2019-030). EDGX also 
currently provides for a rebate of $0.00003 per share for orders 
that add liquidity in securities priced below $1.00.
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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. Specifically, the Exchange 
believes the proposed rule change is consistent with Section 6(b)(4) of 
the Act, 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 and does not unfairly 
discriminate between customers, issuers, brokers or dealers. The 
Exchange 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.
    In particular, the Exchange believes that the proposed change is 
reasonable because it reflects a pass-through of the recent pricing 
change by EDGX for liquidity adding orders, as described above. The 
Exchange believes that the proposed change is reasonable because it 
will maintain proportionality with the standard corresponding rebate 
offered by EDGX while also maintaining Member interest in routing 
orders through the Exchange by passing on better pricing to Members 
that choose to enter such orders on the Exchange, thereby encouraging 
additional order flow to be entered on the BZX Book. The Exchange 
believes that additional order flow through the BZX Book will result in 
greater liquidity to the benefit of all market participants on the 
Exchange by providing more trading opportunities.
    The Exchange also believes that the proposed change constitutes an 
equitable allocation of reasonable fees that is not unfairly 
discriminatory because the proposed rebate is designed to continue to 
reflect the rebate offered (and recently updated) by EDGX to orders 
that add liquidity and would apply equally to all Members that choose 
to use the Exchange to route liquidity adding orders to EDGX. 
Furthermore, the Exchange notes that routing through the Exchange is 
voluntary, and, because the Exchange operates in a highly competitive 
environment as discussed below, Members that do not favor the proposed 
pricing can readily direct order flow directly to EDGX or through 
competing venues or providers of routing services.

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 
Exchange believes the proposed routing fee change will not impose an 
undue burden on competition because the proposed rebate is merely 
intended to maintain consistency between the Exchange's rebates for 
orders routed to EDGX with the rebates currently offered by EDGX for 
liquidity adding orders.
    The Exchange does not believe the proposed rebate will impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. As stated, the Exchange will 
uniformly assess the proposed routing fee on all Members who choose to 
route orders through the Exchange to EDGX. As noted above, the proposed 
rebate intends to maintain Member interest in routing orders through 
the Exchange, thereby, adding order flow and greater liquidity to the 
BZX Book which will result in more trading opportunities to the benefit 
of all market participants on the Exchange.

[[Page 33311]]

    The Exchange does not believe 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. As noted above, 
the Exchange operates in a highly competitive market and routing 
through the Exchange is voluntary. Therefore, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives, 
including 12 other equities exchanges and 32 alternative trading 
systems, offer them better value or if they disfavor the proposed 
change. Additionally, the Exchange represents a small percentage of the 
overall market. Based on publicly available information, no single 
equities exchange has more than 18% of the market share.\4\ Therefore, 
no exchange possesses significant pricing power in the execution of 
equity order flow. Moreover, the Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
Specifically, in Regulation NMS, the Commission highlighted the 
importance of market forces in determining prices and SRO revenues and, 
also, recognized that current regulation of the market system ``has 
been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' The fact that this market is competitive has also long 
been recognized by the courts. In NetCoalition v. Securities and 
Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .''.\5\ Regardless, the Exchange notes that the proposed 
change to the EDGX-related routing fee is merely meant to pass through 
the rebate associated with executing orders on that market, and is 
therefore not designed to have any significant impact on competition. 
Accordingly, the Exchange does not believe its proposed fee change 
imposes any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
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    \4\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(June 14, 2019), available at http://markets.cboe.com/us/equities/market_share/.
    \5\ NetCoalition v. Securities and Exchange Commission, 615 F.3d 
525 (D.C. Cir. 2010).
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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 \6\ and paragraph (f) of Rule 19b-4 \7\ 
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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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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-2019-060 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-2019-060. 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-2019-060 and should be submitted 
on or before August 2, 2019.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-14810 Filed 7-11-19; 8:45 am]
 BILLING CODE 8011-01-P


