[Federal Register Volume 84, Number 162 (Wednesday, August 21, 2019)]
[Notices]
[Pages 43633-43637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17984]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86686; File No. SR-CboeBZX-2019-072]


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

August 15, 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 August 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. (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 a well-regulated and maintained Exchange. Self-
regulation, with oversight by the Commission, is a basic premise of the 
Exchange Act.\3\ For example, Congress recognized the regulatory role 
of national securities exchanges in section 6 of the Exchange Act, 
requiring all existing securities exchanges to register with the 
Commission and to function as self-regulatory organizations.\4\ The 
Exchange remains committed to its regulatory responsibilities under the 
Exchange Act, and has devoted significant resources to providing a 
fair, orderly, and well-regulated market for its members. The proposed 
Trading Rights Fees will help fund a small portion of the Exchange's 
regulatory efforts, and therefore facilitate effective regulation of 
the U.S. equities markets, consistent with the goals of Congress and 
the Commission.
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    \3\ See Securities Exchange Act Release No. 58092 (July 3, 
2008), 73 FR 40143 (July 11, 2008).
    \4\ Id.
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    The proposed Trading Rights Fee represents a modest charge to firms 
that have chosen to become members of the Exchange, and that therefore 
both consume more regulatory resources, and benefit from the Exchange's 
regulatory efforts by having access to a well-regulated market. 
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 \5\ 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 order volume on the Exchange per month is 
retail order volume. In addition to this, the proposed fee will not be 
charged to new Exchange Members for their first three months of 
Membership. The Exchange intends to implement the proposed fee on 
August 1, 2019. The proposed fee and waivers are described in detail 
below.
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    \5\ ``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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Membership Fee per Month
    As stated, the Exchange will apply a $500 Trading Rights charge to 
Members per month. The Exchange believes the proposed 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 costs incurred by the Exchange in 
regulating and maintaining its equities market. These costs incurred by 
the Exchange are necessary to maintain an efficient equities exchange, 
as a well-regulated exchange is inherent in the nature of all self-
regulatory organizations (``SROs''). Due to the importance of effective 
regulation of the securities markets, an efficient regulatory division 
must be appropriately funded at all times. In particular, in order to 
successfully carry out the purposes of the Act and maintain fair, 
orderly, and efficient markets, and the protection of investors, SROs 
must invest in robust programs,

[[Page 43634]]

policies, and procedures to enforce member compliance with both the 
rules of the exchange and federal securities laws.\6\ In order to 
achieve this objective, the Exchange continuously invests in 
compliance, surveillance, technology, resources, and staff necessary to 
build and maintain such programs, policies, and procedures, some of 
which must be implemented in order to carry out industry-wide plans 
adopted by the Commission. For example, the Exchange's Regulatory 
Service Agreement (``RSA'') costs alone, which include funding for 
regulatory services in connection with market and financial 
surveillance, examinations, investigations, and disciplinary procedure, 
have increased 12.2% from 2016 to 2019. In addition to this, the 
Exchange's overall regulatory costs have grown 64% from 2016 to 2019. 
These costs have been incurred as a result of the allocation of 
increased regulatory resources and capabilities to implement and 
conduct regular surveillance for initiatives and programs such as 
regulatory software and infrastructure, alerts for various rules and 
initiatives, new and continued product listings, improvements to 
investigative processes, and so on. Therefore, the Exchange believes 
the proposed fee is appropriate to cover a portion of costs for the 
surveillance, technology, and vast resources necessary to ensure that 
the Exchange is effectively organized and has the capacity to be able 
to carry out the purposes of the Act.
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    \6\ See 15 U.S.C. 78f(b).
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    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. The Exchange represents a small 
percentage of the overall market, and broker-dealers routinely choose 
among a number of different venues to execute their equity order flow. 
These venues include thirteen registered equities exchanges, as well as 
a number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Exchange Act. Broker-dealers are not compelled to be Members of the 
Exchange, and a significant proportion of broker-dealers that trade 
U.S. equity securities have, in fact, chosen not to apply for 
membership on the Exchange. The Exchange currently has 158 registered 
members. By contrast, the Nasdaq Stock Market LLC (``Nasdaq'') has 
approximately 337 current members,\7\ which is more than twice as many 
as BZX. Indeed, broker-dealers even choose between affiliated exchanges 
in deciding where to become a member. Of the Exchange's affiliated 
exchanges, Cboe EDGX Exchange, Inc. (``EDGX'') currently has 135 
members, Cboe EDGA Exchange, Inc. (``EDGA'') 116 members, and Cboe BYX 
Exchange, Inc. (``BYX'') 124 members. None of the Exchange's Members or 
members of any of the affiliated exchanges are required to hold 
memberships across the affiliated exchanges. The same is true for 
participation on the Exchange itself; Membership is not a requirement 
to participate on the Exchange. Indeed, a number of firms, including 
larger firms with significant daily trading volume, currently 
participate on the Exchange though sponsored access arrangements rather 
than by becoming a member.
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    \7\ See NasdaqTrader.com Symbol Lookup (July 31, 2019), 
available at http://www.nasdaqtrader.com/trader.aspx?id=symbollookup.
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    The cost of membership on the Exchange, including the proposed 
Trading Rights Fees, is significantly lower than the cost of membership 
in a number of other SROs.\8\ For example, the Exchange's proposed 
Trading Rights Fee at $500 a month is substantially lower than Nasdaq's 
analogous fee, which assesses a monthly Trading Rights Fee of $1,250 
per member. In sum, the Exchange believes the fee is priced 
appropriately as it is competitive with other exchanges that offer 
membership to their exchanges while also helping to pay for the 
increased cost of regulation.
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    \8\ 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); see also Securities Exchange Act Release No. 81133 (July 12, 
2017), 82 FR 32904 (July 18, 2017) (The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
To Increase the Trading Rights Fee) (SR-NASDAQ-2017-065). The 
Exchange notes that this Nasdaq filing supports its implemented 
Trading Rights Fee without explanation as to why an increase in 
funding was necessary or as to specific items covered under the 
broad umbrella of a well-regulated market.
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New Member Waiver
    As stated above, the proposed fee would not apply to new Members 
for their first three months of Exchange Membership. The Exchange 
recognizes that new Members provide 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. The Exchange believes that the proposed 
waiver will allow new firms the flexibility in resources needed to 
initially adjust to the Exchange's market-model and functionality. The 
Exchange notes that 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 August 15, 2019, 
then, as proposed, it would not be charged for its first three months 
of Membership. The month of November would then be pro-rated and the 
Trading Rights Fee would be assessed from November 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.
ADV Threshold Waiver
    As stated above, the Exchange would also waive the monthly Trading 
Rights fee for Members with a monthly ADV \9\ of less than 100,000 
shares. The proposed waiver is designed to reduce the costs of smaller 
Members that transact on the Exchange. Smaller Members execute low 
volumes on the Exchange, and, as a result, consume few regulatory 
resources. In addition, allowing smaller Members to trade on the 
Exchange without incurring a Trading Rights Fee may encourage 
participation from such Members as they grow their business, and 
thereby contribute to a more diverse and competitive market for equity 
securities traded on the Exchange. The median ADV per firm per month on 
the Exchange is 475,591. Therefore, the Exchange believes that ADV of 
100,000 serves as an appropriate threshold to capture firms that are 
truly smaller volume firm outliers as compared to the overall ADV 
across all firms.
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    \9\ ``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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Retail Order Threshold Waiver
    Similar to that of the ADV threshold waiver, the Exchange would 
waive the monthly Trading Rights fee for Members if at least 90% of 
their order volume on the Exchange per month is Retail Order volume. 
The Exchange believes that this will serve to support individual 
investor order flow on the Exchange by ensuring that retail broker 
Members can continue to submit orders for individual investors

[[Page 43635]]

at a lower cost, thereby continuing to encourage retail investor 
participation on the Exchange. Like the small Member waiver, the 
Exchange believes this will contribute to a more diverse and 
competitive market for equity securities traded on the Exchange. 
Furthermore, the Exchange notes that continued liquidity in retail 
orders may incentivize other Members to send order flow to the Exchange 
to trade with such retail orders. Also, retail participation is more 
likely to reflect long-term investment intentions, and may therefore 
positively impact market quality. Retail order flow is highly 
competitive across trading venues, particularly as it relates to 
exchange versus off-exchange venues as many retail brokers route the 
majority of their retail orders to off-exchange venues. Accordingly, 
competitive forces compel the Exchange to use incentives to compete for 
retail order flow. The Exchange believes that the proposed 90% retail 
order volume threshold will capture broker-dealers that are primarily 
in the business of handling orders on behalf of retail investors rather 
than larger broker-dealers that may route retail orders on behalf of 
other broker-dealers but are also engaged in significant other activity 
that is not related to servicing retail investors. As such, the 
Exchange believes that the 90% retail order volume threshold will 
function to best capture those firms whose overall business and trading 
model focuses on the handling and execution of orders for retail 
clients.
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.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\11\ 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. The Exchange 
also believes that the proposed rule change is consistent with the 
objectives of Section 6(b)(5) 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, 
and, particularly, is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes that the proposed Trading 
Rights Fee is reasonable because the fee will assist in funding the 
overall regulation and maintenance of the Exchange. Effective 
regulation is central to the proper functioning of the securities 
markets. Recognizing the importance of such efforts, Congress decided 
to require national securities exchanges to register with the 
Commission as self-regulatory organizations to carry out the purposes 
of the Exchange Act. The Exchange therefore believes that it is 
critical to ensure that regulation is appropriately funded. While the 
proposed Trading Rights Fees are set at a modest level, and will fund 
only a relatively small portion of the Exchange's total regulatory 
costs, the Exchange believes that such fees will contribute 
appropriately to ensuring that adequate resources are devoted to 
regulation, as contemplated by Congress.
    The proposed Trading Rights Fee is reasonable because it represents 
a modest charge to firms that have chosen to become members of the 
Exchange, and that therefore both consume more regulatory resources, 
and benefit from the Exchange's regulatory efforts by having access to 
a well-regulated market. As stated, the Exchange will apply a $500 
Trading Rights charge to Members per month. Allocating the proposed 
Trading Rights Fee to fund a portion of the cost incurred by the 
Exchange in regulating and maintaining its equities market is 
reasonable because the costs incurred are necessary to maintain an 
efficient and well-regulated equities exchange. In order to 
successfully carry out the purposes of the Act and maintain fair, 
orderly, and efficient markets, and the protection of investors, the 
Exchange, like all SROs, continuously invests in robust programs, 
policies, and procedures to enforce member compliance with both the 
rules of the exchange and federal securities laws.\12\ As discussed 
above, from 2016 to 2019, the Exchange's RSA costs alone, which cover 
regulatory services in connection with market and financial 
surveillance, examinations, investigations, and disciplinary procedure, 
have increased 12.2%, while the Exchange's overall regulatory costs 
have grown 64%. Such regulatory costs have been incurred as a result of 
the allocation of increased regulatory resources and capabilities to 
implement and conduct regular surveillance for initiatives and programs 
such as regulatory software and infrastructure, alerts for various 
rules and initiatives, new and continued product listings, improvements 
to investigative processes, and so on. It is reasonable to apply the 
proposed fee to contribute to a small portion of such costs that will 
help to fund surveillance, technology, and vast resources necessary to 
ensure that the Exchange is so organized and has the capacity to be 
able to carry out the purposes of the Act
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    \12\ See 15 U.S.C. 78f(b).
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    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. As indicated above, the Exchange's 
proposed Trading Rights Fee at $500 a month is substantially lower than 
Nasdaq's analogous fee, which assesses a monthly Trading Rights Fee of 
$1,250 per member. Trading Rights Fees, like those proposed here, are 
not new in the equities markets. A number of national securities 
exchanges currently charge such fees to assist in funding their 
regulatory efforts. The Exchange believes that it is appropriate to 
institute a similar fee to fund its increasing regulatory costs.
    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, thus 
greater trading opportunities, to the benefit of all market 
participants. The proposed waiver is also reasonable because it will 
allow new firms the flexibility in resources needed to initially adjust 
to the Exchange's market-model and functionality. The Exchange believes 
that not charging a Trading Rights Fee for new Members will incentivize 
firms to become Members of the Exchange. Furthermore, creating 
incentives for new Exchange Members protects investors and the public 
interest by increasing the competition and liquidity across the 
Exchange.
    Similarly, 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 the Exchange can continue to trade on the 
Exchange at a lower cost. Because

[[Page 43636]]

smaller Members with lower volumes executed on the Exchange consume 
fewer regulatory resources the Exchange believes it is reasonable to 
apply a waiver to Members on the lower side of the ADV scale for all 
firms. Moreover, the Exchange believes that the proposed threshold is 
reasonable because the median ADV per firm per month on the Exchange is 
475,591, therefore, an ADV threshold of 100,000 will serve as an 
appropriate threshold to capture firms which are true, smaller volume 
firm outliers as compared to the overall ADV across all firms.
    The Exchange also believes that not charging a Trading Rights Fee 
for Members whose retail order volume comprises 90% or more of their 
order volume per month 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, encouraging continued 
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. Furthermore, the Exchange 
notes that continued liquidity in retail orders would incentivize other 
Members to send order flow to the Exchange to trade with such retail 
orders; such increased liquidity provides more trading opportunities to 
the benefit of all market participants. In addition to this, retail 
participation is more likely to reflect long-term investment 
intentions, and may therefore positively impact market quality, also to 
the benefit of all market participants. In addition to this, the 
Exchange believes that the 90% or more retail order volume threshold is 
reasonable because it will serve to capture broker-dealers that are 
primarily in the business of handling orders on behalf of retail 
investors rather than larger broker-dealers that may route retail 
orders on behalf of other broker-dealers but are also engaged in 
significant other activity that is not related to servicing retail 
investors. Therefore, the 90% retail order volume threshold reasonably 
ensures that those firms whose overall business and trading model 
focuses on the handling and execution of orders for retail clients, are 
identified for the waiver to appropriately apply.
    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, all Members in which less than 90% of their order volume is 
comprised of retail order volume per month,\13\ and all Members that 
are not within their first three months of new Membership on the 
Exchange. As proposed, all members that do not qualify for a waiver 
would be charged the same, modest fee for their membership. The 
proposed fee is therefore charged on an equal and non-discriminatory 
basis for all such members. At the same time, the Exchange believes 
that it is important to continue to encourage participation from firms 
that represent ordinary investors, that have more limited trading 
activity, or that are new members.
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    \13\ A Member will not be charged if it meets either one (or 
both) of the exceptions. To illustrate, if a Member executes 5% of 
its total order volume as retail order volume 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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    Specifically, the Exchange believes that not charging the Trading 
Rights Fee for Members that do not meet the ADV threshold in a month is 
equitable and not unfairly discriminatory because it will apply equally 
to all such firms that meet this criteria and it considers the fact 
that smaller firms with significantly lower volume than most firms 
consume less regulatory resources, therefore, it ensures that disparate 
treatment does not exist for firms that are much smaller than the 
average firm on the Exchange. The Exchange believes that not charging 
the Trading Rights Fee for Members that do not meet the 90% retail 
order volume threshold is equitable and not unfairly discriminatory 
because it will apply equally to all such firms that meet this 
criteria. The waiver is equitable as it will encourage continued retail 
participation and liquidity on the Exchange which is more likely to 
reflect long-term investment intentions, and may therefore positively 
impact market quality, as well as incentivize other Members to send 
order flow to the Exchange to trade with such retail orders, which 
benefits all market participants by providing more trading 
opportunities. Finally, 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 and is equitable because it will allow 
new firms the flexibility in resources needed to initially adjust to 
the Exchange's market-model and functionality. In addition to this, the 
proposed waiver intends to incentivize new Membership which will bring 
increased liquidity and competition to the benefit of all market 
participants.
    The Exchange also notes that the proposed fee is equitable and not 
unfairly discriminatory because it will contribute 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. As 
stated, as an SRO, it is necessary for the Exchange to continuously 
invest in robust programs, policies, and procedures to ensure its 
markets are well-regulated in order to successfully carry out the 
purposes of the Act and maintain fair, orderly, and efficient markets, 
and the protection of investors.

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 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, those in which less than 90% of their order volume 
is retail order volume per month, and those that are not within their 
first three months of new Membership on the Exchange. Although smaller 
Members would be excluded from the proposed 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. In addition to this, though true 
retail firms would be excluded from the proposed fee, the Exchange 
believes that encouraging retail order flow to the Exchange will 
benefit all market participants by providing more trading opportunities 
and encouraging other Members to send orders which will contribute to 
more robust levels of liquidity. While the proposed tier is only 
available for Retail Orders, the Exchange notes it is attempting to 
increase retail participation and that, as noted above, retail 
participation is more likely to reflect long-term investment 
intentions, and may therefore positively impact market quality. 
Finally, while the proposed three month waiver of the Trading Rights 
Fee only applies to new Members, this incentivizes new Members which 
can be an important source of liquidity and facilitate competition 
within the market.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition

[[Page 43637]]

that is not necessary or appropriate in furtherance of the purposes of 
the Act. As previously discussed, the Exchange operates in a highly 
competitive market, including competition for exchange memberships. 
Members have numerous alternative venues that they may participate on, 
including 12 other equities exchanges, as well as off-exchange venues, 
including over 50 alternative trading systems.\14\ The Exchange 
represents a small percentage of the overall market. Based on publicly 
available information, no single equities exchange has more than 20% 
market share, and no exchange group has more than 22% market share.\15\ 
Indeed, while trade through and best execution obligations may require 
a firm to access the Exchange, no firm is compelled to be a Member of 
the Exchange in order to participate in the Exchange and may freely 
choose to participate on the Exchange without holding a Membership. If 
the proposed fee 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 in 
concert, balancing the utility in remaining competitive with other 
exchanges and with alternative trading systems exempted from compliance 
with the statutory standards applicable to exchanges, including the 
requirement to regulate their members, and in covering costs described 
in the filing that are associated with maintaining its equities market 
and its regulatory programs to ensure that the Exchange remains an 
efficient and well-regulated marketplace. In addition to this the 
Exchange notes that other exchanges currently have trading rights fees 
in place,\16\ which have been previously filed with the Commission.
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    \14\ See U.S. Securities and Exchange Commission Alternative 
Trading Systems (``ATS'') List (June 30, 2019), available at https://www.sec.gov/foia/docs/atslist.htm.
    \15\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(July 31, 2019), available at https://markets.cboe.com/us/equities/market_share.
    \16\ See supra note 5.
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    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'. . . .''. 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.

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 \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-2019-072 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-2019-072. 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-2019-072 and should be submitted 
on or before September 11, 2019.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17984 Filed 8-20-19; 8:45 am]
 BILLING CODE 8011-01-P


