[Federal Register Volume 85, Number 189 (Tuesday, September 29, 2020)]
[Notices]
[Pages 61071-61077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21410]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89974; File No. SR-CboeBZX-2020-071]


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

September 23, 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 September 11, 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. 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'') 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: (1) Amend certain 
standard rates; (2) update the Add Volume Tiers; (3) update the 
Supplemental Incentive Program Tiers; (4) include a Remove Volume Tier; 
and (5) include additional Lead Market Maker (``LMM'') Add Volume 
Tiers.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
September 1, 2020 (SR-CboeBZX-2020-069). On September 11, 2020, the 
Exchange withdrew that filing and submitted this filing.
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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,\4\ no single registered 
equities exchange has more than 18% 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. The Exchange in particular operates a

[[Page 61072]]

``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. Currently, 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. For orders priced below $1.00, the Exchange does 
not assess a fee for orders that add liquidity and assesses a fee of 
0.30% of total dollar value for orders that remove liquidity. 
Additionally, 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.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (August 24, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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Proposed Amendment to Standard Rates
    As stated above, the Exchange currently assesses a standard rebate 
of $0.0025 per share for orders that add liquidity in securities priced 
at $1.00 or more. Also, for orders in securities below $1.00, it does 
not assess a standard fee for orders that add liquidity and assesses a 
fee of .30% of total dollar value per share for orders that remove 
liquidity. The Exchange proposes to amend the standard rate for orders 
that add liquidity in securities priced at $1.00 or more from a 
standard rebate of $0.0025 per share to $0.0020 per share and reflects 
this change in the Fee Codes and Associated Fee where applicable (i.e., 
corresponding to fee codes B, V, and Y). The Exchange also proposes to 
amend the standard rates for orders in securities priced under $1.00 
that add liquidity by providing for a standard rebate of $0.00009 per 
share, and reflects this change in footnote 7 which is appended to 
corresponding fee codes that add liquidity (i.e., B, V and Y). The 
Exchange notes that these standard rates are in line with, yet also 
competitive with, rates assessed by other equities exchanges on orders 
in securities priced at $1.00 or more \5\ and in securities priced 
below $1.00.\6\ The Exchange notes, too, that its affiliated exchange, 
Cboe EDGX Exchange, Inc. (``EDGX Equities''), is simultaneously 
submitting a fee change to amend its same current standard rates for 
orders in securities under $1.00 that add liquidity in the same manner.
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    \5\ See NYSE Price List 2020, ``Transactions in stocks with a 
per share stock price of $1.00 or more'', which assesses a fee of 
ranging from no charge to $0.0018 for various orders in securities 
priced at $1.00 or more; and Nasdaq Pricing 7, Section 118(a)(1), 
which assesses a charge ranging from no charge to $0.0035 or a 
credit ranging from $0.00005 to $0.00325 for various orders in 
securities priced at $1.00 or more.
    \6\ See NYSE Price List 2020, ``Transactions in stocks with a 
per share stock price less than $1.00'', which either does not 
assess a charge or assesses a charge of 0.3% for various orders in 
securities priced below $1.00; and Nasdaq Price List, ``Rebates and 
Fees, Shares Executed Below $1.00'', available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2, which 
assesses no charge for orders to add liquidity in securities priced 
below $1.00 and assesses a charge of 0.30% of total dollar volume 
for orders to remove liquidity in securities priced below $1.00. See 
also Securities Exchange Release No. 89607 (August 18, 2020), 85 FR 
52179 (August 24, 2020) (SR-NYSEArca-2020-75), which recently 
amended in its fee schedule the base rate for adding and removing 
liquidity in Round Lots and Odd Lots in Tapes A, B and C securities 
with a per share price below $1.00.
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Proposed Updates to the Add Volume Tiers
    The Exchange currently offers five Add Volume Tiers under footnote 
1 of the Fee Schedule. The Add Volume Tiers provide Members with 
opportunities to receive incrementally increasing enhanced rebates for 
their liquidity adding orders that yield fee codes ``B'' \7\, ``V'' 
\8\, and ``Y'' \9\, upon reaching incrementally more difficult criteria 
under each tier. Specifically, the Add Volume Tiers currently offer the 
following:
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    \7\ Appended to displayed orders that adds liquidity to BZX 
(Tape B) and is assessed a standard rebate of $0.0025.
    \8\ Appended to displayed orders that adds liquidity to BZX 
(Tape A) and is assessed a standard rebate of $0.0025.
    \9\ Appended to displayed orders that adds liquidity to BZX 
(Tape C) and is assessed a standard rebate of $0.0025.
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     Tier 1 offers an enhanced rebate of $0.0028 for qualifying 
orders (i.e., yielding fee codes B, V or Y) where a Member has an ADAV 
\10\ as a percentage of TCV \11\ greater than or equal to 0.20%;
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    \10\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \11\ ``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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     Tier 2 offers an enhanced rebate of $0.0029 for qualifying 
orders where a Member has an ADAV as a percentage of TCV greater than 
or equal to 0.30%;
     Tier 3 offers an enhanced rebate of $0.0030 for qualifying 
orders where a Member has an ADAV as a percentage of TCV greater than 
or equal to 0.50%;
     Tier 4 offers an enhanced rebate of $0.0031 for qualifying 
orders where a Member has an ADAV as a percentage of TCV greater than 
or equal to 1.00%; and
     Tier 5 offers an enhanced rebate of $0.0032 for qualifying 
orders where a Member has an ADAV as a percentage of TCV greater than 
or equal to 1.25%.
    The Exchange proposes to amend the rebates offered and the criteria 
under each Add Volume Tier, as well as proposes an additional Tier 6, 
as follows:
     Proposed Tier 1 offers an enhanced rebate of $0.0025 for 
qualifying orders where a Member has an ADAV greater than or equal to 
1,000,000;
     Proposed Tier 2 offers an enhanced rebate of $0.0027 for 
qualifying orders where a Member has an ADAV as a percentage of TCV 
greater than or equal to 0.10%;
     Proposed Tier 3 offers an enhanced rebate of $0.0028 for 
qualifying orders where a Member has an ADAV as a percentage of TCV 
greater than or equal to 0.20%;
     Proposed Tier 4 offers an enhanced rebate of $0.0029 for 
qualifying orders where a Member has an ADAV as a percentage of TCV 
greater than or equal to 0.25%;
     Proposed Tier 5 offers an enhanced rebate of $0.0030 for 
qualifying orders where a Member has an ADAV as a percentage of TCV 
greater than or equal to 0.40%; and
     Proposed new Tier 6 offers an enhanced rebate of $0.0031 
for qualifying orders where a Member has an ADAV as a percentage of TCV 
greater than or equal to 0.85%.
    The proposed rule change to Tiers 1 through 5 eases the difficulty 
in reaching the tiers' criteria while amending the enhanced rebates to 
correspond with the ease in criteria and proposed Tier 6 offers Members 
an additional opportunity to receive a rebate on their qualifying 
orders. The proposed restructuring of the current Add Volume Tiers and 
the new criteria and reduced fee offered in proposed Tier 6 are 
designed to provide Members with increased incentives to receive 
enhanced rebates on their liquidity adding displayed orders by 
increasing their add volume order flow in order to achieve the proposed 
eased and/or additional criteria.
Proposed Updates to the Supplemental Incentive Program Tiers
    The Exchange currently offers three different Supplemental 
Incentive Program Tiers under footnote 1 of the Fee Schedule, wherein a 
Member may receive an additional rebate for qualifying orders where a 
Member adds

[[Page 61073]]

a certain Tape ADV \12\ as a percentage of that Tape's TCV. 
Specifically, the Supplemental Incentive Program Tiers offered are as 
follows:
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    \12\ ``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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     Supplemental Incentive Program--Tape A Tier offers an 
additional rebate of $0.0001 for orders yielding fee code V \13\ where 
a Member adds a Tape A ADV greater than or equal to 0.50% of the Tape A 
TCV;
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    \13\ See supra note 8.
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     Supplemental Incentive Program--Tape B Tier offers an 
additional rebate of $0.0001 for orders yielding fee code B \14\ where 
a Member adds a Tape B ADV greater than or equal to 0.50% of the Tape B 
TCV; and
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    \14\ See supra note 7.
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     Supplemental Incentive Program--Tape C Tier offers an 
additional rebate of $0.0001 for orders yielding fee code Y \15\ where 
a Member adds a Tape C ADV greater than or equal to 0.50% of the Tape C 
TCV;
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    \15\ See supra note 9.
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    The proposed rule change amends each of the tiers' criteria by 
reducing the percentage of Tape ADV over Tape TCV from 0.50% to 0.30%. 
The proposed rule change also updates the language in each Tier to 
state ``where a Member has a Tape A/B/C ADAV'', which essentially 
states the same requirement as ``adds an ADV,'' but is more 
appropriately aligned with the defined terms in the Fee Schedule.\16\ 
The proposed rule change to the Supplemental Incentive Program Tiers 
does not alter any of the additional rebate amounts currently offered. 
As such, the reduction in percentage of Tape ADAV over TCV, thus easing 
the tiers' criteria, is designed to further incentivize Members to 
submit displayed order flow to Tapes A, B and C to receive the current 
additional rebates provided under the Supplemental Incentive Program 
Tiers.
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    \16\ See supra notes 10 and 12.
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Proposed Remove Volume Tier
    The Exchange proposes to add a new Remove Volume Tier under 
footnote 1 of the Fee Schedule.\17\ The proposed Remove Volume Tier 
offers a reduced fee of $0.0029 for orders in securities at or above 
$1.00 and 0.28% of total dollar value for orders in securities below 
$1.00 \18\ yielding fee code ``N'',\19\ ``W'' \20\ and ``BB'' \21\ 
where a Member has an ADAV greater than or equal to 0.20% TCV with 
displayed orders that yield fee codes B, V or Y. The proposed Remove 
Volume Tier is designed to incentivize Members to increase their orders 
that add displayed volume on the Exchange in order to receive a reduced 
fee on their qualifying, liquidity removing orders.
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    \17\ As a result of the new Remove Volume Tier, it also updates 
the title of footnote 1 to ``Add/Remove Volume Tiers''.
    \18\ As a result, the Exchange proposes to update the statement 
under General Notes in the Fee Schedule to state that ``unless 
otherwise indicated, variable rates provided by tiers apply only to 
executions in securities priced at or above $1.00.
    \19\ Appended to orders that remove liquidity from BZX (Tape C) 
and is assessed a standard fee of $0.00300.
    \20\ Appended to orders that remove liquidity from BZX (Tape A) 
and is assessed a standard fee of $0.00300.
    \21\ Appended to orders that remove liquidity from BZX (Tape B) 
and is assessed a standard fee of $0.00300.
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Proposed Updates to the LMM Add Volume Tiers
    Under the Exchange's LMM Program, the Exchange offers daily 
incentives for LMMs in securities listed on the Exchange for which the 
LMM meets certain Minimum Performance Standards.\22\ Such daily 
incentives are determined based on the number of Cboe-listed securities 
for which the LMM meets such Minimum Performance Standards and the 
average auction volume across such securities. Generally, the more LMM 
Securities \23\ for which the LMM meets the Minimum Performance 
Standards and the higher the auction volume across those securities, 
the greater the total daily payment to the LMM. Currently, the Exchange 
offers an LMM Add Volume Tier under footnote 14 of the Fee Schedule, 
which provides an additional rebate of $0.0001 for LMM orders yielding 
B, V and Y \24\ where an LMM 1) adds an ADV \25\ greater than or equal 
to 0.20% of the TCV, 2) has an Average Aggregate Daily Auction Volume 
in LMM Securities greater than or equal to 500,000, and 3) is enrolled 
in at least 75 LMM Securities.
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    \22\ As defined in Rule 11.8(e)(1)(E), the term ``Minimum 
Performance Standards'' means a set of standards applicable to an 
LMM that may be determined from time to time by the Exchange. Such 
standards will vary between LMM Securities depending on the price, 
liquidity, and volatility of the LMM Security in which the LMM is 
registered. The performance measurements will include: (A) Percent 
of time at the NBBO; (B) percent of executions better than the NBBO; 
(C) average displayed size; and (D) average quoted spread. For 
additional detail, see Original LMM Filing.
    \23\ As defined in Rule 11.8(e)(1)(D), the term ``LMM Security'' 
means a Listed Security that has an LMM. As defined in Rule 
11.8(e)(1)(B), the term ``Listed Security'' means any ETP or any 
Primary Equity Security or Closed-End Fund listed on the Exchange 
pursuant to Rule 14.8 or 14.9.
    \24\ See supra notes 7, 8 and 9.
    \25\ Like the proposed clarification in the Supplement Incentive 
Tiers, the proposed rule change also updates the language in LMM Add 
Volume Tier 1 to state ``where a Member has a Tape A/B/C ADAV'', 
which essentially states the same requirement as ``adds an ADV'', 
but is more appropriately aligned with the defined terms in the Fee 
Schedule. See supra note 15.
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    The Exchange proposes to include three additional LMM Add Volume 
Tiers as follows:\26\
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    \26\ As a result of the proposed additional LMM Add Volume 
Tiers, the Exchange updates the current LMM Add Volume Tier to be 
LMM Add Volume Tier 1.
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     Proposed LMM Add Volume Tier 2 provides an additional 
rebate of $0.0006 for orders yielding fee codes V \27\ and ``HV'' \28\ 
where an LMM 1) is enrolled is enrolled in at least 50 LMM Securities, 
and 2) has a Tape A ADAV greater than or equal to 0.10% of the Tape A 
TCV;
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    \27\ See supra note 8.
    \28\ Appended to non-displayed orders that add liquidity (Tape 
A) and are assessed a standard rebate of $0.0015.
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     Proposed LMM Add Volume Tier 3 provides an additional 
rebate of $0.0003 for orders yielding fee codes B \29\ and ``HB'' \30\ 
where an LMM 1) is enrolled is enrolled in at least 50 LMM Securities, 
and 2) has a Tape B ADAV greater than or equal to 0.20% of the Tape B 
TCV;
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    \29\ See supra note 7.
    \30\ Appended to non-displayed orders that add liquidity (Tape 
B) and are assessed a standard rebate of $0.0015.
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     LMM Add Volume Tier 4 provides an additional rebate of 
$0.0006 for orders yielding fee codes Y \31\ and ``HY'' \32\ where an 
LMM (1) is enrolled in at least 50 LMM Securities, and (2) has a Tape C 
ADAV greater than or equal to 0.10% of the Tape C TCV.
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    \31\ See supra note 9.
    \32\ Appended to non-displayed orders that add liquidity (Tape 
C) and are assessed a standard rebate of $0.0015.
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    The proposed additional tiers also explicitly include that the 
proposed additional rebates apply to orders in securities priced below 
$1.00 and makes clear in the general heading language that both 
displayed and non-displayed orders will count toward meeting the tiers' 
criteria. The proposed additional LMM Add Volume tiers are designed to 
provide LMM Members with opportunities to receive additional rebates 
for both their displayed and non-displayed orders, thus further 
incentivizing Members to enroll and participate in the LMM Program, as 
well LMM Members to continue to add volume to Tape A, B and C.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\33\

[[Page 61074]]

in general, and furthers the objectives of Section 6(b)(4),\34\ 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. The Exchange notes that relative volume-
based incentives and discounts have been widely adopted by exchanges, 
including the Exchange, and are reasonable, equitable and non-
discriminatory because they are open to all members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to (i) the value to an exchange's market quality and (ii) 
associated higher levels of market activity, such as higher levels of 
liquidity provision and/or growth patterns. Additionally, as noted 
above, the Exchange operates in highly competitive market. 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. It is also only one of several maker-taker exchanges. 
Competing equity exchanges offer similar tiered pricing structures, 
including schedules of rebates and fees that apply based upon members 
achieving certain volume and/or growth thresholds, as well as assess 
similar fees or rebates for similar types of orders, to that of the 
Exchange. These competing pricing schedules, moreover, are presently 
comparable to those that the Exchange provides, including the pricing 
of comparable criteria and/or fees and rebates.
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    \33\ 15 U.S.C. 78f.
    \34\ 15 U.S.C. 78f(b)(4).
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    Regarding the proposed change to the standard rates, the Exchange 
believes that amending the standard rates for orders that add volume in 
securities prices at $1.00 or more and in securities priced below $1.00 
is reasonable because, as stated above, in order to operate in the 
highly competitive equities markets, the Exchange and its competing 
exchanges seek to offer similar pricing structures, including assessing 
comparable standard rates for orders in securities priced at or above, 
as well as priced below, $1.00.\35\ Thus, the Exchange believes the 
proposed standard rate changes are reasonable as they are generally 
aligned with and competitive with the amounts assessed for the orders 
in securities above/below $1.00 on other equities exchanges. The 
Exchange also believes that amending the standard rate amounts 
represents an equitable allocation of fees and is not unfairly 
discriminatory because they will continue to automatically and 
uniformly apply to all Members' orders that add liquidity in securities 
at $1.00 or more and in securities less than $1.00.
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    \35\ See supra notes 5 and 6.
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    Regarding the proposed updates and additions to the Add Volume, 
Supplemental Incentive and LMM Add Volume Tiers, as well as the new 
Remove Volume Tier, the Exchange believes that the proposed tiers are 
reasonable because they each provide an additional opportunity (either 
by amending existing tiers or adding new tiers) for Members to receive 
a discounted rate or enhanced rebates by means of liquidity adding 
orders. The Exchange notes the proposed tiers are available to all 
Members and are competitively achievable for all Members that submit 
the requisite order flow, in that, all firms are eligible for the 
proposed tiers and those that submit the requisite order flow could 
compete to meet the proposed tiers. Each Member will uniformly receive 
the respective proposed enhanced rebates, additional rebates or reduced 
fee if the corresponding tier criteria is met. The Exchange also 
believes that the proposed tiers are reasonable, equitable and not 
unfairly discriminatory because, as noted above, competing equity 
exchanges offer similar tiered pricing structures to that of the 
proposed Add Volume,\36\ Supplemental Incentive,\37\ Remove Volume,\38\ 
and LMM Add Volume Tiers,\39\ including as amended, which are presently 
comparable in pricing and criteria to the proposed tiers.
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    \36\ See EDGA Equities Fee Schedule, footnote 7, ``Add/Remove 
Volume Tiers''; BYX Equities Fee Schedule, footnote 1, ``Add/Remove 
Volume Tiers''; and EDGX Equities Fee Schedule, footnote 1, ``Add 
Volume Tiers'', each of which provide for similar add volume 
criteria for which members may receive comparable reduced fees on 
their orders (EDGA/BYX) or enhanced rebates ranging from $0.0023 to 
$0.0028 (EDGX) for meeting such thresholds.
    \37\ See NYSE Price List, ``Credit Applicable to Supplemental 
Liquidity Providers (``SLPs'')'', which provides additional credits 
up to $0.0005 for various types of Tape liquidity; and Nasdaq Equity 
7, Section 118(a)(1), which provides supplemental credit of $0.00005 
for various types of Tape liquidity.
    \38\ See EDGA Equities Fee Schedule, footnote 7, ``Add/Remove 
Volume Tiers'', of which the Remove Volume Tiers offers an enhanced 
rebate of $0.0022 or $0.0028 for reaching a certain threshold of ADV 
over TCV; and BYX Equities Fee Schedule, footnote 1, ``Add/Remove 
Volume Tiers'', of which the Remove Volume Tiers offer enhanced 
rebates between $0.0015 and $0.0018 for various criteria (Step-Up 
volume, ADAV of a set number of shares, ADV as a percentage of TCV, 
etc.).
    \39\ See Nasdaq Phlx Equity 7 Pricing Schedule, Section 3(c), 
which provides up to an additional credit of $0.0003 for various 
order and quoting volume thresholds for the exchange's qualified 
market makers (``QMMs''); and NYSE Price List, ``Fees and Credits 
applicable to Designated Market Makers (``DMMs'')'', which provides, 
among various credits for orders in securities at or above $1.00, 
additional credit of $0.0004 for DMMs adding liquidity in securities 
under $1.00. See also Securities Exchange Release No. 89607 (August 
18, 2020), 85 FR 52179 (August 24, 2020) (SR-NYSEArca-2020-75), 
which recently adopted in its fee schedule a step up tier for ETP 
Holders adding liquidity in Round Lots and Odd Lots in Tapes A, B 
and C securities with a per share price below $1.00 and amended the 
base rate for adding and removing liquidity in Round Lots and Odd 
Lots in Tapes A, B and C securities with a per share price below 
$1.00.
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    In particular, the Exchange believes the proposed Add Volume Tiers 
are reasonable because they amend existing opportunities by easing the 
level of difficulty in each of the existing five tiers, thus 
maintaining the current structure of step-up in difficulty in achieving 
each ascending tier, and provide an additional, also incrementally more 
challenging, opportunity in proposed Tier 6. The proposed ease in 
criteria and additional tier will incentivize Members to increase add 
volume order flow in order to receive the corresponding enhanced 
rebates for Members' qualifying orders. The Exchange further believes 
that the proposed rule changes to the Add Volume Tiers are reasonable 
as they represent proportional decreases in difficulty per adjacent 
tiers. In line with easing the relative level of difficulty in each of 
the Add Volume Tiers, the Exchange believes that providing a reduced 
enhanced rebate per tier is reasonable as it is commensurate with the 
proposed criteria. That is, the reduction in enhanced rebates 
reasonably reflects the scaled difficulty in achieving the add volume 
criteria over a baseline of 1,000,000 in proposed Tier 1, up through 
the incrementally increasing ADAV threshold as a percentage of TCV in 
Tiers 2 through 6. Also, the proposed reduced enhanced rebates (and 
proposed additional enhanced rebate in Tier 6) corresponding to the 
proposed criteria in the Add Volume Tiers do not represent a 
significant departure from the enhanced rebates currently offered under 
the tiers, and merely incrementally shifts the range of enhanced 
rebates offered to most appropriately align with the

[[Page 61075]]

corresponding shift in criteria difficulty per each tier.
    Similarly, the Exchange believes the proposed amendments to the 
Supplemental Incentive Tiers are reasonable because they, too, amend 
existing opportunities by uniformly easing the level of difficulty in 
each of the three existing Supplemental Incentive Tiers, which 
currently provide for the same criteria thresholds per Tape. Therefore, 
by uniformly easing the criteria per each tier, while maintaining the 
existing additional rebate amounts, the proposed rule change to the 
Supplemental Tiers is reasonably designed to incentivize Members to 
increase their add volume order flow per each Tape.
    The Exchange believes the Remove Volume Tier is a reasonable means 
to incentivize Members to continue to provide liquidity adding, 
displayed volume to the Exchange by offering them a different, 
additional opportunity than that of the Add Volume Tiers--to receive a 
reduced fee on their liquidity removing orders by meeting the proposed 
criteria in submitting additional add volume order flow. In addition to 
this, the Exchange has recently observed that trading in subdollar 
names has grown significantly; nearly tripling since the beginning of 
2020, and that competing equities exchanges have begun offering pricing 
incentives for subdollar orders.\40\ Therefore, the Exchange believes 
that it is reasonable and equitable to provide the proposed reduced fee 
under the new Remove Volume Tier for qualifying subdollar orders. Also, 
as indicated above, the Exchange's affiliated equities exchanges 
already have similar Remove Volume in place, which offer similar 
rebates for achieving comparable criteria, in addition to their Add 
Volume Tiers.\41\
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    \40\ See NYSE Price List, ``Fees and Credits applicable to 
Designated Market Makers (``DMMs'')'', which provides, among various 
credits for orders in securities at or above $1.00, additional 
credit of $0.0004 for DMMs adding liquidity in securities under 
$1.00; see also Securities Exchange Release No. 89607 (August 18, 
2020), 85 FR 52179 (August 24, 2020) (SR-NYSEArca-2020-75), which 
recently adopted in its fee schedule a step up tier for ETP Holders 
adding liquidity in Round Lots and Odd Lots in Tapes A, B and C 
securities with a per share price below $1.00 and amended the base 
rate for adding and removing liquidity in Round Lots and Odd Lots in 
Tapes A, B and C securities with a per share price below $1.00.
    \41\ See supra note 38.
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    The Exchange believes the proposed additional LMM Add Volume Tiers 
are reasonable in that they offer LMM Members on the Exchange an 
additional opportunity to receive an added rebate for their provision 
of liquidity, both displayed and non-displayed, per Tape. As with the 
proposed Remove Volume Tier, the Exchange believes that it is 
reasonable and equitable to provide the proposed additional rebates 
under the new LMM Add Volume Tiers for qualifying subdollar orders as a 
result of the recent expansive growth in the subdollar market segment, 
as well as competitive pricing offered by other equities exchanges for 
subdollar orders.\42\ The Exchange believes the proposed additional 
rebates for both liquidity adding displayed and non-displayed orders to 
the Tapes will incentivize increased overall order flow to the Book and 
price-improvement opportunities. The Exchange also notes that the 
proposed LMM Add Volume Tiers 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 
further believes that the proposed criteria and corresponding 
additional rebates per tier are reasonable and equitable. Generally, 
Tape B experiences less variability in terms of broader market share, 
whereas Tape A and C tend to experience more volatility. As a result, 
the Exchange has observed that LMM Members generally submit less Tape 
volume in connection with Tape A and Tape C. For example, the average 
Tape ADAV as a percentage of Tape TCV in Tape A and Tape C from LMM 
Members in the last month was approximately ten basis points lower than 
their average Tape ADAV over Tape TCV in Tape B. As a result, the 
Exchange believes Members are more easily able to meet a volume 
requirement for Tape B, and therefore, it is equitable to provide for a 
slightly higher ADAV Tape B threshold of Tape B TCV than that for Tape 
A and C, that corresponds to a slightly lower additional rebate than 
that which corresponds to Tape A and C.
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    \42\ See supra note 40.
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    Overall, the Exchange believes that easing the current tiers' 
criteria and adding new tier criteria, each based on a Member's 
liquidity adding orders, will benefit all market participants by 
incentivizing continuous liquidity and thus, deeper more liquid markets 
as well as increased execution opportunities. Particularly, the 
majority of the proposed tiers are designed to incentivize continuous 
displayed liquidity, which signals other market participants to take 
the additional execution opportunities provided by such liquidity, 
while the proposed incentives to provide non-displayed liquidity will 
further contribute to a deeper, more liquid market and provide even 
more execution opportunities for active market participants at improved 
prices. This overall increase in activity deepens the Exchange's 
liquidity pool, offers additional cost savings, supports the quality of 
price discovery, promotes market transparency and improves market 
quality, for all investors.
    In addition to this, the Exchange believes that the proposal 
represents an equitable allocation of rebates and is not unfairly 
discriminatory because all Members will continue to be eligible for the 
Add Volume and Supplemental Incentive Tiers, as amended, and in the 
same way will be eligible for the proposed Remove Volume Tier and 
additional Add Volume and LMM Add Volume Tiers. Without having a view 
of activity on other markets and off-exchange venues, the Exchange has 
no way of knowing whether this proposed rule change would definitely 
result in any Members qualifying for the proposed tiers. While the 
Exchange has no way of predicting with certainty how the proposed tiers 
will impact Member activity, the Exchange anticipates that for the 
proposed Add Volume Tiers approximately between seven and thirteen 
Members will be able to compete for and achieve the proposed criteria 
across proposed Add Volume Tiers 1 and 2; at least three Members will 
be able to compete for and achieve the amended criteria in each Add 
Volume Tier 3 and 4; and at least six Members will be able to compete 
for and achieve the amended/new criteria across Add Volume Tiers 5 and 
6. The Exchange anticipates that for the proposed Supplemental 
Incentive Tiers at least three Members will be able to compete for and 
achieve the proposed criteria in each of the three additional tiers. 
The Exchange anticipates that for the proposed Remove Volume Tier at 
least ten Members will be able to compete for and achieve the proposed 
criteria. Finally, the Exchange anticipates that for the proposed Add 
Volume LMM Tiers at least two LMM Members will be able to compete for 
and achieve the proposed criteria in each of the three additional 
tiers. The Exchange anticipates that the tiers will include various 
liquidity providing Member types, such as traditional Market Makers, 
and wholesale or consolidator firms that mainly make markets for retail 
orders, each providing distinct types of order flow to the Exchange to 
the benefit of all market participants. The Exchange also notes that 
the proposed tiers will not

[[Page 61076]]

adversely impact any Member's pricing or their ability to qualify for 
other rebate tiers. Rather, should a Member not meet the proposed 
criteria for a tier, the Member will merely not receive the 
corresponding additional rebate.

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 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 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.'' \43\
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    \43\ 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 
changes apply to all Members equally in that all Members are eligible 
for the proposed Add Volume Tiers, Supplemental Incentive Tiers, Remove 
Volume Tier and LMM Add Volume Tiers (and have the same opportunity to 
become an LMM Member), have a reasonable opportunity to meet the tiers' 
criteria and will all receive the corresponding proposed enhanced 
rebates, additional rebates and reduced fee if such criteria are met. 
Additionally, the proposed tier changes are designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
updated tier criteria and the additional tier criteria would 
incentivize market participants to direct liquidity adding order flow 
to the Exchange, bringing with it additional execution opportunities 
for market participants and improved price transparency. Greater 
overall order flow, trading opportunities, and pricing transparency 
benefits all market participants on the Exchange by enhancing market 
quality and continuing to encourage Members to send orders, thereby 
contributing towards a robust and well-balanced market ecosystem. In 
addition to this, the Exchange notes that the proposed amendments to 
the standard rebates for orders in securities above/below $1.00 will 
continue to apply automatically to all such Members' orders uniformly.
    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 12 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 18% of the market share.\44\ 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 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.'' \45\ 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'. . . .''.\46\ 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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    \44\ See supra note 4.
    \45\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \46\ 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 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 \47\ and paragraph (f) of Rule 19b-4 \48\ 
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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    \47\ 15 U.S.C. 78s(b)(3)(A).
    \48\ 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-2020-071 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-2020-071. 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

[[Page 61077]]

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-2020-071 and should be submitted on or before October 20, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
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    \49\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21410 Filed 9-28-20; 8:45 am]
BILLING CODE 8011-01-P


