[Federal Register Volume 85, Number 170 (Tuesday, September 1, 2020)]
[Notices]
[Pages 54468-54471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19190]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89673; File No. SR-CboeBZX-2020-066]


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

August 26, 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 August 12, 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, 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 Exchange initially filed the proposed fee changes on 
August 3, 2020 (SR-CboeBZX-2020-064). On August 12, 2020, the 
Exchange withdrew that filing and submitted this proposal.

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[[Page 54469]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend the 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, 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 applicable to its 
equities trading platform (``BZX Equities'') to remove certain Step-Up 
Tiers and update Tape B Volume and Quoting Tiers.
Proposal to Eliminate Step-Up Tiers 2 and 4
    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 several equity venues to which market 
participants may direct their order flow, and it represents a small 
percentage of the overall market. 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 $0.0025 per share for orders 
that add liquidity and assesses a fee of $0.0030 per share for orders 
that remove liquidity. In response to the competitive environment, the 
Exchange also 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 
an incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria.
    One of the tiered pricing models is set forth in Footnote 2 of the 
fee schedule (Step-Up Tiers), which provides Members an opportunity to 
qualify for an enhanced rebate on their orders that add liquidity where 
they increase their relative liquidity each month over a predetermined 
baseline. Tier 2 of the Step-Up Tiers provides an enhanced rebate of 
$0.0031 per share for Members with Step-Up Add TCV \4\ from December 
2018 equal to or greater than 0.20%, or has a Step-Up Add TCV \5\ from 
April 2020 equal to or greater than 0.15%. Similarly, Tier 4 of the 
Step-Up Tiers provides an enhanced rebate of $0.0032 per share for 
Members with Step-Up Add TCV from December 2018 equal to or greater 
than 0.50%. The Exchange adopted Tiers 2 and 4 of the Step-Up Tiers to 
encourage Members to grow their ADAV on the Exchange on a monthly basis 
from a December 2018 or April 2020 baseline. The Exchange now proposes 
to eliminate the Tiers 2 and 4 of the Step-Up Tiers. Particularly, no 
Member has reached Tiers 2 or 4 of the Step-Up Tiers in several months 
and the Exchange therefore no longer wishes to, nor is it required to, 
maintain such tiers. The Exchange no longer believes Tiers 2 and 4 are 
necessary and notes the Exchange is not required to maintain such an 
incentive program. Additionally, the Exchange proposes to re-number 
Step-Up Tiers 3 and 5 to reflect the elimination of Step-Up Tiers 2 and 
4.
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    \4\ ``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.
    \5\ ``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. ``ADAV'' means average daily added volume calculated as the 
number of shares added per day.
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Proposal To Amend Tape B Volume and Quoting Tiers
    The Exchange notes that its listing business operates in a highly-
competitive market in which market participants, which includes issuers 
of securities, Lead Market Makers (``LMMs''), and other liquidity 
providers, can readily transfer their listings, opt not to participate, 
or direct order flow to competing venues if they deem fee levels, 
liquidity provision incentive programs, or any other factor at a 
particular venue to be insufficient or excessive. The proposed rule 
changes reflect a competitive pricing structure designed to incentivize 
market participants to enroll in LMP Securities,\6\ which the Exchange 
believes will enhance market quality in all securities listed on the 
Exchange and encourage issuers to list new products and transfer 
existing products to the Exchange.
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    \6\ ``LMP Securities'' means a list of securities included in 
the Liquidity Management Program, the universe of which will be 
determined by the Exchange and published in a circular distributed 
to Members and on the Exchange's website. Such LMP Securities will 
include all Cboe-listed ETPs and certain non-Cboe-listed ETPs for 
which the Exchange wants to incentivize Members to provide enhanced 
market quality. All Cboe-listed securities will be LMP Securities 
immediately upon listing on the Exchange. The Exchange will not 
remove a security from the list of LMP Securities without 30 days 
prior notice. See Cboe BZX U.S. Equities Exchange Fee Schedule.
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    The Exchange currently offers two Tape B Volume and Quoting Tiers 
under Footnote 13, which provide an additional rebate of $0.0001 (Tier 
1) and $0.0002 (Tier 2) per share for orders that meet certain 
criteria. Specifically, Tier 1 provides an additional rebate if (i) the 
Member is enrolled in at least 50 BZX-listed LMP Securities, for which 
it meets the following criteria for at least 50% of the trading days in 
the applicable month: (1) The Member has a NBBO Time \7\ of equal to or 
greater than 15% or a NBBO Size Time \8\ of equal to or greater than 
25%; and (2) the Member has a Displayed Size Time \9\ of equal to or 
greater than 90%; and (ii) the

[[Page 54470]]

Member adds a Tape B ADV \10\ of equal to or greater than 0.15% of the 
TCV. Alternatively, Tier 2 provides an additional rebate if (i) the 
Member is enrolled in at least 100 BZX-listed LMP Securities for which 
it meets the following criteria for at least 50% of the trading days in 
the applicable month: (1) The Member has a NBBO Time of equal to or 
greater than 15% or a NBBO Size Time of equal to or greater than 25%; 
and (2) the Member has a Displayed Size Time of equal to or greater 
than 90%; and (ii) the Member adds a Tape B ADV of equal to or greater 
than 0.30% of the TCV. All Members are eligible to enroll in LMP 
Securities and are eligible for the current Tape B Volume and Quoting 
Tier. Such rebates are applicable to orders that add liquidity which 
are appended with fee code B.\11\
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    \7\ ``NBBO Time'' means the average of the percentage of time 
during regular trading hours during which the Member maintains at 
least 100 shares at each of the NBB and NBO.
    \8\ ``NBBO Size Time'' means the percentage of time during 
regular trading hours during which there are size-setting quotes at 
the NBBO on the Exchange.
    \9\ ``Displayed Size Time'' means the percentage of time during 
regular trading hours during which the Member maintains at least 
2,500 displayed shares on the bid and separately maintains at least 
2,500 displayed shares on the offer that are priced no more than 2% 
away from the NBB and NBO, respectively.
    \10\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day.
    \11\ Fee code B represents a displayed order that adds liquidity 
to BZX (Tape B).
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    LMP incentives are designed to apply to Tape B trades as BZX-listed 
securities are Tape B securities. The Exchange has observed that Tape B 
volume can vary as a percentage of TCV. Thus, a Member may be trading 
heavily in Tape B securities but may not qualify for the Tape B Volume 
and Quoting Tiers because of the low Tape B volume as a percentage of 
TCV. Given this, the Exchange now proposes to make changes to the 
second (ii) criteria of both Tape B Volume and Quoting Tiers noted 
above. Specifically, for Tier 1 the Exchange proposes to amend criteria 
two (ii) to provide that a Member must add Tape B ADV equal than or 
greater than 0.50% of Tape B TCV. Similarly, the Exchange proposes to 
amend criteria two (ii) of Tier 2 to provide that a Member must add 
Tape B ADV equal than or greater than 1.50% of Tape B TCV. The proposed 
changes are designed to allow Members who meet the Tape B volume 
criteria to meet the Volume and Quoting Tiers even if Tape B volume is 
a low percentage of TCV.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members, issuers and other persons 
using its facilities. 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.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes the proposed amendment to 
remove existing Tiers 2 and 4 of the Step-Up Tiers 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 ``B'' ``V'' \14\ or 
``Y''.\15\ 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.
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    \14\ Fee code V represents a displayed order that adds liquidity 
to BZX (Tape A).
    \15\ Fee code Y represents a displayed order that adds liquidity 
to BZX (Tape C).
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    The Exchange also notes that its listing business operates in a 
highly-competitive market in which market participants, which includes 
issuers of securities, LMMs, and other liquidity providers, can readily 
transfer their listings, opt not to participate, or direct order flow 
to competing venues if they deem fee levels, liquidity provision 
incentive programs, or any other factor at a particular venue to be 
insufficient or excessive. The proposed rule changes reflect a 
competitive pricing structure designed to incentivize market 
participants to enroll in LMP Securities, which the Exchange believes 
will enhance market quality in all securities listed on the Exchange 
and encourage issuers to list new products and transfer existing 
products to the Exchange.
    The Exchange believes that the proposed changes to the Tape B 
Volume and Quoting Tiers are consistent with the Act and represent a 
reasonable, equitable, and not unfairly discriminatory means to 
incentivize liquidity provision in Exchange-Traded Products (``ETPs'') 
listed on the Exchange. The marketplace for listings is extremely 
competitive and there are several other national securities exchanges 
that offer ETP listings. Transfers between listing venues occur 
frequently for numerous reasons, including market quality. This 
proposal is intended to help the Exchange compete as an ETP listing 
venue. LMP incentives are designed to apply to Tape B trades as BZX-
listed securities are Tape B securities. The Exchange has observed that 
Tape B volume can vary as a percentage of TCV. Thus, a Member may be 
trading heavily in Tape B securities but may not qualify for the Tape B 
Volume and Quoting Tiers because of the low Tape B volume as a 
percentage of TCV. The proposed changes are designed to allow Members 
who meet the Tape B volume criteria to meet the Volume and Quoting 
Tiers even if Tape B volume is a low percentage of TCV.
    The Exchange believes that the proposals to amend Tape B Volume and 
Quoting Tiers represents an equitable allocation of fees and other 
charges because the Tape B Volume and Quoting Tiers are available 
equally to all Members and all Members are eligible to enroll in LMP 
Securities. The Exchange anticipates at least four Members will meet 
the amended Tape B Volume and Quoting Tiers 1 and 2. Further, the 
Exchange believes that the proposal represents an equitable allocation 
of fees and other charges and is not unreasonably discriminatory 
because enrolling in LMP Securities is open to all Members and any 
Member that wishes to receive the Tape B Volume and Quoting Tiers must 
meet the proposed quoting and execution standards in order to receive 
the additional rebates, as outlined above. Where a Member does not meet 
the requirements, they will not receive the additional rebates. Further 
and as noted throughout, the Tape B Volume and Quoting Tiers are 
designed to enhance market quality in BZX-listed securities and to make 
the Exchange more competitive as an ETP listing venue.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
the proposed change burdens competition, but rather, enhances 
competition as it is intended to increase the competitiveness of BZX 
both among Members by incentivizing Members to enroll in LMP Securities 
and as a listing venue by enhancing market quality in BZX-listed 
securities. The marketplace for listings is extremely competitive and 
there are several other national securities exchanges that offer 
listings. Transfers between listing venues occur frequently for 
numerous reasons, including market

[[Page 54471]]

quality. This proposal is intended to help the Exchange compete as a 
listing venue. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of issuers, LMMs, other 
Members, or competing listing venues to maintain their competitive 
standing. The Exchange also notes that the proposed change is intended 
to enhance market quality in BZX-listed securities and other listed 
securities, to the benefit of all investors in such BZX-listed 
securities. The Exchange does not believe the proposed amendment would 
burden intramarket competition as it would be available to all Members 
uniformly.

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 \16\ and paragraph (f) of Rule 19b-4 \17\ 
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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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-2020-066 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-2020-066. 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-2020-066 and should be submitted 
on or before September 22, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-19190 Filed 8-31-20; 8:45 am]
BILLING CODE 8011-01-P


