[Federal Register Volume 85, Number 32 (Tuesday, February 18, 2020)]
[Notices]
[Pages 8953-8956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03089]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88159; File No. SR-CboeBZX-2020-013]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule

February 11, 2020.
    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 January 31, 2020, 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 Equities Exchange (the ``Exchange'' or ``BZX Equities'') 
is filing with the Securities and Exchange Commission (``Commission'') 
a proposed rule change to amend its Fee Schedule. 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,

[[Page 8954]]

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 its Fee Schedule to amend the rate 
for liquidity adding orders that yield fee codes ``V'' \3\ and 
``Y''.\4\ Additionally, the Exchange proposes to eliminate existing Add 
Volume Tier 1, Step-Up Tier 2, and Cross-Asset Add Volume Tiers 1 
through 4. The Exchange also proposes to make corresponding changes to 
the numbering of the Add Volume Tiers and Step-Up Tiers.
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    \3\ ``V'' is appended to displayed orders that add liquidity to 
BZX Equities (Tape A).
    \4\ ``Y'' is appended to displayed orders that add liquidity to 
BZX Equities (Tape C).
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    The Exchange first 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. More specifically, the 
Exchange is only one of 13 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, to which market participants may direct their order flow. 
Based on publicly available information,\5\ no single registered 
equities exchange has more than approximately 16% of the market share. 
Thus, in such a low-concentrated and highly competitive market, no 
single equities exchange possesses significant pricing power in the 
execution of order flow.
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    \5\ See Cboe Global Markets, U.S. Equities Market Volume Summary 
(January 29, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange in particular operates a ``Maker-Taker'' model whereby 
it pays credits to Members that provide liquidity and assesses fees to 
those that remove liquidity. The Exchange's Fee Schedule sets forth the 
standard rebates and rates applied per share for orders that provide 
and remove liquidity, respectively. Particularly, for orders priced at 
or above $1.00, the Exchange provides a standard rebate of $0.0020 \6\ 
to $0.0025 \7\ per share for orders that add liquidity and assesses a 
fee of $0.0030 per share for orders that remove liquidity. The Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow, or discontinue to reduce use of certain categories of products, 
in response to fee changes. Accordingly, competitive forces constrain 
the Exchange's transaction fees, and market participants can readily 
trade on competing venues if they deem pricing levels at those other 
venues to be more favorable.
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    \6\ Displayed orders which add liquidity in Tape B securities 
receive a standard rebate of $0.0025 per share.
    \7\ Displayed orders which add liquidity in Tape A and C 
securities receive a standard rebate of $0.0020 per share.
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Proposed Change To Amend Standard Rebate for Liquidity Adding Orders in 
Securities at or Above $1.00
    The Exchange currently provides rebates for liquidity adding orders 
that yield fee codes ``V'' or ``Y'' of $0.0020 in securities priced at 
or above $1.00 in Tape A or C securities. Liquidity adding orders 
yielding fee code ``B'' \8\ are provided a rebate of $0.0025 in 
securities priced at or above $1.00 in Tape B securities. The Exchange 
now proposes to increase the current rebate of $0.0020 per share to 
$0.0025 per share for orders yielding fee codes ``V'' and ``Y'' in 
securities priced at or above $1.00 in Tape A and Tape C securities. As 
the proposed rebate for orders yielding fee code ``V'' or ``Y'' is 
higher than the current rebate for such orders, the Exchange believes 
the proposed amendment will encourage Members to increase their 
liquidity on the Exchange.
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    \8\ ``B'' is appended to displayed orders that add liquidity to 
BZX Equities (Tape B).
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Proposed Change To Eliminate Tier 1 of the Add Volume Tiers
    In response to the competitive environment, the Exchange offers 
tiered pricing which provides Members opportunities to qualify for 
higher rebates or reduced fees where certain volume criteria and 
thresholds are met. Tiered pricing provides incremental incentives for 
Members to strive for higher or different tier levels by offering 
increasingly higher discounts or enhanced benefits for satisfying 
increasingly more stringent criteria or different criteria. For 
example, pursuant to footnote 1 of the Fee Schedule, the Exchange 
currently offers Tier 1 of the Add Volume Tiers which provides Members 
with a higher rebate of $0.0025 per share for liquidity adding orders 
yielding fee codes ``B'', ``V'', or ``Y'' when the Member has an ADAV 
\9\ as a percentage of TCV \10\ greater than or equal to 0.10%. 
Currently, orders yielding fee codes ``V'' and ``Y'' provide a standard 
rebate of $0.0020; however, the proposed amendment to fee codes ``V'' 
and ``Y'' would increase the standard rebate from $0.0020 to $0.0025. 
As a result, the rebate provided under Tier 1 would be equal to the 
proposed standard rebate of $0.0025 applicable to orders yielding fee 
codes ``V'' or ``Y'' and the existing standard rebate of $0.0025 
applicable to orders yielding fee code ``B''. Therefore, the Exchange 
proposes to eliminate Tier 1 of the Add Volume Tiers and renumber the 
remaining tiers accordingly.
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    \9\ ADAV means average daily volume calculated as the number of 
shares added per day. ADAV is calculated on a monthly basis.
    \10\ 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.
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Proposed Change To Eliminate Cross-Asset Add Volume Tiers 1 Through 4 
of the Add Volume Tiers
    Footnote 1 of the Fee Schedule currently provides for the Cross-
Asset Add Volume Tiers 1 through 4, which provide enhanced rebates 
ranging from $0.0028 to $0.0030 per share to Members meeting (1) a 
certain ADV \11\ percentage as compared to the TCV on BZX Equities, and 
(2) certain liquidity adding option volume on the Cboe BZX Options 
Exchange (``BZX Options'') as compared to the OCV.\12\ The Exchange 
adopted the Cross-Asset Add Volume Tiers to encourage Members to add 
liquidity on both BZX Equities and BZX Options. The Exchange now 
proposes to eliminate the four Cross-Asset Add Volume Tiers. 
Particularly, no Member has reached any of these tiers in several 
months and the Exchange therefore no

[[Page 8955]]

longer wishes to, nor is it required to, maintain such tiers.
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    \11\ ADV means average daily volume.
    \12\ OCC Customer Volume or ``OCV'' means the total equity and 
ETF options volume that clears in the Customer range at the Options 
Clearing Corporation (``OCC'') for the month for which the fees 
apply, excluding volume on any day that the Exchange experiences an 
Exchange System Disruption and on any day with a scheduled early 
market close, using the definition of Customer as provided under the 
Exchange's Fee Schedule for BZX Options.
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Proposed Change To Eliminate Tier 2 of the Step-Up Tiers
    Footnote 2 of the Fee Schedule currently provides for Tier 2 of the 
Step-Up Tiers, which provides an enhanced rebate of $0.0030 per share 
for Members with Step-Up Add TCV \13\ from April 2016 equal to or 
greater than 0.15% and an ADAV as a percentage of TCV equal to or 
greater than 0.20%. The Exchange adopted Tier 2 of the Step-Up Tiers to 
encourage Members to grow their ADAV on the Exchange on a monthly basis 
from an April 2016 baseline. The Exchange now proposes to eliminate the 
Tier 2 of the Step-Up Tiers. Particularly, no Member has reached Tier 2 
of the Step-Up Tiers in several months and the Exchange therefore no 
longer wishes to, nor is it required to, maintain such tier. The 
Exchange no longer believes Tier 2 is necessary and notes the Exchange 
is not required to maintain such an incentive program. Additionally, 
the Exchange proposes to re-number Step-Up Tiers 4 and 5 to reflect the 
elimination of Step-Up Tier 2.
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    \13\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in 
the relevant baseline month subtracted from current ADAV as a 
percentage of TCV.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(4),\15\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers 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 change reflects a competitive pricing structure designed 
to incentivize market participants to direct their order flow to the 
Exchange, which the Exchange believes would enhance market quality to 
the benefit of all Members.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
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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 proposed rule changes reflect a 
competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
Members.
    In particular, the Exchange believes the proposed amendment to 
increase the rebate for orders yielding fee codes ``V'' and ``Y'' from 
$0.0020 to $0.0025 is reasonable because it would uniformly provide a 
rebate of $0.0025 per share across Tape A, Tape B, and Tape C 
securities priced at or above $1.00. Further, the Exchange believes the 
proposed increased rebate will encourage additional order flow on the 
Exchange, which may result in greater liquidity to the benefit of all 
market participants on the Exchange by providing more trading 
opportunities. The Exchange also believes the proposed amendment to 
remove existing Tier 1 of the Add Volume Tiers is reasonable because 
the tier offers the same rebate as the proposed standard rebate for 
orders yielding fee codes ``V'' and ``Y'' and the existing standard 
rebate for orders yielding fee code ``B''. Therefore, existing Tier 1 
of the Add Volume Tiers would provide no further incentive for Members 
to achieve an ADAV greater than or equal to 0.10% as a percentage of 
TCV. The Exchange believes the proposed changes are equitable and not 
unfairly discriminatory because they apply equally to all Members.
    The Exchange believes eliminating the Cross-Asset Add Volume Tiers 
1 through 4 and Step-Up Tier 2 is reasonable because the Exchange is 
not required to maintain these tiers and Members still have a number of 
other opportunities and a variety of ways to receive enhanced rebates, 
including the proposed enhanced standard rebate to orders yielding fee 
code ``V'' or ``Y''. Moreover, as noted above, no Member has achieved 
these tiers in several months. The Exchange believes the proposal to 
eliminate these tiers is also equitable and not unfairly discriminatory 
because it applies to all Members.

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 or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. 
Rather, as discussed above, the Exchange believes that the proposed 
change would encourage the submission of additional displayed order 
flow to a public exchange, thereby promoting market depth, execution 
incentives and enhanced execution opportunities, as well as price 
discovery and transparency for all Members. As a result, the Exchange 
believes that the proposed change furthers the Commission's goal in 
adopting Regulation NMS of fostering competition among orders, which 
promotes ``more efficient pricing of individual stocks for all types of 
orders, large and small.'' \16\
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    \16\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange believes the proposed rule change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
change applies to all Members equally in that all Members are eligible 
to receive the enhanced standard rebate for orders yielding fee code 
``V'' or ``Y''. Additionally the proposed change is designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
modified standard rebate for orders yielding fee code ``V'' or ``Y'' 
would incentivize market participants to direct displayed liquidity 
and, as a result, executable order flow and improved price 
transparency, to the Exchange. Greater overall order flow and pricing 
transparency benefits all market participants on the Exchange by 
providing more trading opportunities, enhancing market quality, and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem, which benefits all 
market participants. Next, the Exchange believes the proposed rule 
change does not impose any burden on intermarket competition 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. Members have numerous alternative venues that they may 
participate on and direct their order flow, including other equities 
exchanges and off-exchange venues and alternative trading systems. 
Additionally, the Exchange represents a small percentage of the overall 
market. Based on publicly available information, no single equities 
exchange has more than approximately 16% of the market share.\17\ 
Therefore, no exchange possesses significant pricing power in the 
execution of order flow. Indeed, participants can readily choose to 
send their orders to other exchange and off-exchange venues if they 
deem fee levels at those other venues to be more

[[Page 8956]]

favorable. 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.'' \18\ 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'. . . .''.\19\ 
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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    \17\ See supra note 5.
    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \19\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

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) \20\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \21\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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) \22\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \22\ 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-2020-013 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-2020-013. 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 No. SR-CboeBZX-2020-013, and should be submitted 
on or before March 10, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-03089 Filed 2-14-20; 8:45 am]
 BILLING CODE 8011-01-P


