[Federal Register Volume 84, Number 223 (Tuesday, November 19, 2019)]
[Notices]
[Pages 63927-63929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24981]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87521; File No. SR-CboeBZX-2019-094]


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 EDGA Exchange, Inc. Using 
the ALLB, TRIM, or SLIM Routing Strategy

November 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 November 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 and II 
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 EDGA Exchange, Inc. (``EDGA'') using the 
ALLB, TRIM, or SLIM routing strategy. 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 Exchange proposes to amend the BZX Equities fee schedule to 
change the pricing applicable to orders routed to EDGA using the ALLB, 
TRIM, or SLIM routing strategy, as a result of a recent pricing change 
by EDGA effective on November 1, 2019. The Exchange proposes to 
implement the proposed change to its fee schedule on November 1, 2019. 
Currently, the Exchange provides a rebate of $0.0024 per share for 
orders routed to EDGA using the ALLB, TRIM, or SLIM routing strategy 
(yielding fee codes AA and BJ), which was a pass-through of the 
standard rebate EDGA had previously provided to orders that removed 
liquidity from EDGA. Effective November 1, 2019, EDGA reduced its 
standard rebate per share for orders that remove liquidity in 
securities priced at or above $1.00 from $0.0024 to $0.0018. As such, 
the Exchange proposes to similarly reduce the per share rebate for 
orders routed to EDGA (yielding fee codes AA and BJ) from $0.0024 to 
$0.0018 in order to reflect the reduction in the rebate available for 
orders removing liquidity on EDGA.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act.\3\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\4\ 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.
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    \3\ 15 U.S.C. Sec.  78f(b).
    \4\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes that the proposed change is 
reasonable because it reflects a pass-through of a recent pricing 
change by EDGA for liquidity removing 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 EDGA 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.

[[Page 63928]]

    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 EDGA to orders 
that remove liquidity and would apply equally to all Members that 
choose to use the Exchange to route liquidity removing orders to EDGA. 
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 EDGA 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 EDGA with the rebates currently offered by EDGA for 
liquidity removing 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 EDGA. As noted above, the proposed 
rebate intends pass through the same rebates for liquidity removing 
orders from EDGA on to Members, thereby, adding order flow to the BZX 
Book which will result in more trading opportunities to the benefit of 
all market participants on the Exchange.
    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 17% of the market share.\5\ 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 National Market System (``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.'' \6\ 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'. . . .''.\7\ Regardless, the Exchange 
notes that the proposed change to the EDGA-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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    \5\ See Cboe Global Markets U.S. Equities Market Volume Summary 
(October 28, 2019), available at http://markets.cboe.com/us/equities/market_share/.
    \6\ See Securities Exchange Act Release No. 51808 (June 29, 
2015) 70 FR 37495 (August 29, 2015).
    \7\ 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 is effective upon filing pursuant to 
Section 19(b)(3)(A) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge 
imposed by the Exchange.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 shall institute proceedings under 
Section 19(b)(2)(B) \10\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \10\ 15 U.S.C. 78s(b)(2)(B).
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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 No. SR-CboeBZX-2019-094 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 No. SR-CboeBZX-2019-094. 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

[[Page 63929]]

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 No. SR-
CboeBZX-2019-094, and should be submitted on or before December 10, 
2019.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24981 Filed 11-18-19; 8:45 am]
 BILLING CODE 8011-01-P


