[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Notices]
[Pages 6710-6715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01279]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90919; File No. SR-CboeBZX-2021-002]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fees Applicable to the BZX Top Feed

January 14, 2021
    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 4, 2021, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the

[[Page 6711]]

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. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the fees applicable to the BZX Top Feed. 
The text of the proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the fees 
applicable to the BZX Top Feed, which is an uncompressed data feed that 
offers both top-of-book quotations and execution information based on 
equity orders entered into the System.\3\ Specifically, the Exchange 
proposes to: (1) Increase the fee for internal distribution of the BZX 
Top Feed; and (2) introduce Professional User fees for internal 
Professional Users of the BZX Top Feed. The current fees for external 
distribution of the BZX Top Feed will continue to apply, without 
change, including various incentive programs that the Exchange has 
adopted to facilitate the provision of lower-cost market data to retail 
and other investors.\4\
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    \3\ See BZX Rule 11.22(d).
    \4\ See e.g., BZX Schedule of Fees, Financial Product 
Distribution Program. The Financial Product Distribution Program 
lowers the cost of distributing Derived Data based upon the 
Exchange's top-of-book offerings, including Derived Data that is 
often used by retail investors.
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Market Background
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. 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.'' \5\ As the Commission 
itself recognized, the market for trading services in NMS stocks has 
become ``more fragmented and competitive.'' \6\
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    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS Adopting Release'').
    \6\ See Securities Exchange Act Release No. 51808, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
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    Equity trading is currently dispersed across sixteen exchanges, 
including three new U.S. equities exchanges that launched trading in 
2020, 32 alternative trading systems,\7\ and numerous broker-dealer 
internalizers and wholesalers, all competing fiercely for order flow. 
Based on publicly-available information, no single U.S. equities 
exchange has more than 20% market share.\8\ In turn, the market for 
top-of-book data is highly competitive as national securities exchanges 
compete both with each other and with the securities information 
processors (``SIPs'') to provide efficient, reliable, and low-cost data 
to a wide range of investors and market participants. In fact, 
Regulation NMS requires all U.S. equities exchanges to provide their 
best bids and offers, and executed transactions, to the two registered 
SIPs for dissemination to the public.\9\ Top-of-book data is therefore 
widely available to investors today at a relatively modest cost. 
National securities exchanges may also disseminate their own top-of-
book data, but no rule or regulation of the Commission requires market 
participants to purchase top-of-book data from an exchange.\10\ The BZX 
Top Feed therefore competes with the SIP and with similar products 
offered by other national securities exchanges that offer their own 
competing market data products. In fact, there are twelve competing 
products offered by other national securities exchanges today,\11\ not 
counting products offered by the Exchange's affiliates, and each of the 
Exchange's affiliated U.S. equities exchanges also offers similar top-
of-book data.
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    \7\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \8\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
    \9\ See Rule 602 of Regulation NMS.
    \10\ By contrast, Rule 603(c) of Regulation NMS (the ``Vendor 
Display Rule'') effectively requires that SIP data or some other 
consolidated display be utilized in any context in which a trading 
or order-routing decision can be implemented.
    \11\ Competing top of book products include, Nasdaq Basic, BX 
Basic, PSX Basic, NYSE BQT, NYSE BBO/Trades, NYSE BQT, NYSE Arca 
BBO/Trades, NYSE American BBO/Trades, NYSE Chicago BBO/Trades, IEX 
TOPS, MIAX PEARL Equities Top of Market Feed, and MEMX MEMOIR Top.
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Fees for Internal Distribution of the BZX Top Feed
    Currently, the Exchange charges a modest fee of $500 per month for 
internal distribution of BZX Top Feed data,\12\ i.e., distribution 
within the distributor's own firm,\13\ and does not charge any 
additional fees for internal distribution based on the number of 
Professional or Non-Professional Users that receive access to this 
information. These internal distribution fees have been in place, 
without change, since July 2013 when the Exchange first began charging 
for access to the BZX Top Feed, which had previously been available 
free of charge.\14\ In the time since, the Exchange has made a number 
of significant enhancements to its platform, including, among other 
things, a significant expansion of its listing program for exchange-
traded products,\15\ that have resulted in improved trading 
opportunities for investors and, consequently, more valuable market 
data.
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    \12\ See BZX Schedule of Fees, BZX Top, Internal Distribution.
    \13\ The Exchange's fee schedule defines an Internal Distributor 
of an Exchange Market Data product as a Distributor that receives 
the Exchange Market Data product and then distributes that data to 
one or more Users within the Distributor's own entity. See BZX 
Schedule of Fees, Market Data Fees, Definitions.
    \14\ See Securities Exchange Act Release No. 69936 (July 3, 
2013), 78 FR 41483 (July 10, 2013) (SR-BATS-2013-39).
    \15\ See https://markets.cboe.com/services/listings/.
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    As discussed, the Exchange now proposes to increase certain fees 
applicable to firms that consume this

[[Page 6712]]

data as internal distributors, i.e., firms that use BZX Top Feed data 
for internal purposes as opposed to firms that distribute such data 
externally to its customers. As proposed, the Exchange would increase 
the monthly charge for internal distribution of BZX Top Feed data to 
$750 per month, which would continue to be significantly cheaper than 
similar products offered by the Exchange's main competitors, including 
both other national securities exchanges that offer top-of-book data 
products to their customers as well as the SIPs that provide similar 
``core data'' to vendors and subscribers pursuant to Regulation NMS. In 
addition, the Exchange would introduce Professional User fees for 
internal Professional Users of the BZX Top Feed. Those Professional 
User fees will be the same as the modest fee currently charged for 
external distribution of the BZX Top Feed, i.e., $4 per month for each 
Professional User. There would continue to be no charge associated with 
internal distribution to Non-Professional Users. Further, as discussed, 
the current fees for external distribution of the BZX Top Feed would 
continue to apply, without change, including various incentive programs 
that the Exchange has adopted to facilitate the provision of lower-cost 
market data to retail and other investors. As a result, the Exchange 
believes that the proposed fee changes would allow it to be 
appropriately compensated for the value of its market data, 
particularly from professional financial services firms that use that 
data for internal purposes, while simultaneously ensuring that its data 
would continue to be available to a wide range of market participants 
at a cost that facilitates widespread availability of such data.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data. In addition, the Exchange believes that the proposed 
rule change is consistent with Section 11(A) of the Act as it supports 
(i) fair competition among brokers and dealers, among exchange markets, 
and between exchange markets and markets other than exchange markets, 
and (ii) the availability to brokers, dealers, and investors of 
information with respect to quotations for and transactions in 
securities.\18\ Finally, the proposed rule change is also consistent 
with Rule 603 of Regulation NMS,\19\ which provides that any national 
securities exchange that distributes information with respect to 
quotations for or transactions in an NMS stock do so on terms that are 
not unreasonably discriminatory.
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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
    \18\ 15 U.S.C. 78k-1.
    \19\ See 17 CFR 242.603.
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    The Exchange operates in a highly competitive environment. Indeed, 
with the launch of three new national securities exchanges that trade 
U.S. equity securities last September, there are now sixteen registered 
U.S equities exchanges, and with the exception of Long-Term Stock 
Exchange, Inc. (``LTSE''), which has determined to not offer any 
proprietary market data feeds, each of these exchanges offer associated 
market data products to their customers, either with or without a fee. 
The national securities exchanges also compete with the SIPs for market 
data customers, as much of the information offered to market 
participants and investors through the BZX Top Feed is similarly made 
available to market participants and investors through the SIPs, 
consolidated with data from each of the other fifteen exchanges. It is 
in this robust and competitive market in which the Exchange is 
proposing to modestly increase its fees.
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Further, with respect 
to market data, the decision of the United States Court of Appeals for 
the District of Columbia Circuit in NetCoalition v. SEC upheld the 
Commission's reliance on the existence of competitive market mechanisms 
to evaluate the reasonableness and fairness of fees for proprietary 
market data: ``In fact, the legislative history indicates that the 
Congress intended that the market system `evolve through the interplay 
of competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.' '' \20\ 
The court agreed with the Commission's conclusion that ``Congress 
intended that `competitive forces should dictate the services and 
practices that constitute the U.S. national market system for trading 
equity securities.' '' \21\ As discussed in this filing, significant 
competitive forces constrain the ability of the Exchange to charge 
supra-competitive fees.
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    \20\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010) 
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 323).
    \21\ Id. at 535.
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i. The BZX Top Feed Is an Optional Market Data Product, and the 
Exchange is Constrained in Its Pricing by Significant Competitive 
Forces
    Subscribing to the BZX Top Feed is entirely optional. The Exchange 
is not required to make the BZX Top Feed available to any customers, 
nor is any customer required to purchase the BZX Top Feed. Unlike 
certain other data products that firms may be required to purchase in 
order to fulfill regulatory obligations,\22\ e.g., the consolidated 
quotation and last-sale information feeds offered by the SIPs, a 
customer's decision as to whether to purchase the BZX Top Feed is 
entirely discretionary, and is based on that firms individual business 
needs. Generally, firms that choose to subscribe to the BZX Top Feed do 
so because they believe that it is a cost-effective alternative to core 
data offered by the SIPs that provides valuable information about the 
market for securities traded on the Exchange, particularly in cases 
where a consolidated display is not required pursuant to the Vendor 
Display Rule. Such firms are able to determine for themselves whether 
the BZX Top Feed helps them to achieve their business goals, and if so, 
whether or not it is attractively priced compared to other similar 
products.
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    \22\ The Exchange notes that broker-dealers are not required to 
purchase proprietary market data to comply with their best execution 
obligations. See In the Matter of the Application of Securities 
Industry and Financial Markets Association for Review of Actions 
Taken by Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-
15350; AP-3-15351 (May 16, 2014). Similarly, there is no requirement 
in Regulation NMS or any other rule that proprietary data be 
utilized for order routing decisions, and some broker-dealers and 
ATSs have chosen not to do so.
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    Indeed, if the BZX Top Feed does not provide sufficient value to 
firms based on the uses those firms may have for it, such firms may 
simply choose to conduct their business operations in ways that do not 
use the BZX Top Feed. In fact, comparing the number of internal 
distributors that currently subscribe to the BZX Top Feed, based on 
data compiled by the Exchange as of November 2020, to the total number 
of internal distributors that subscribe to core data offered by the CTA 
and UTP SIPs, as published on plan websites for Q3 2020,\23\ less than 
9.5% of internal

[[Page 6713]]

distributors that purchase U.S. equities data choose to subscribe to 
the BZX Top Feed. The BZX Top Feed therefore represents an 
insignificant proportion of the relevant market for such market data, 
and significantly more internal distributors choose not to purchase 
this product than those that do. Given the insignificant percentage of 
internal distributors that consume the BZX Top Feed, it is clear that 
such firms can and do exercise their right to choose to purchase, or 
not purchase, this particular market data product.
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    \23\ See CTA Quarterly Population Metrics (Q3 2020), available 
at https://www.ctaplan.com/publicdocs/ctaplan/CTAPLAN_Population_Metrics_3Q2020.pdf; UTP Quarterly Population 
Metrics (Q3 2020), available at https://www.utpplan.com/DOC/UTP_2020_Q3_Stats_with_Processor_Stats.pdf.
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    Although the Exchange is not required to make any data, including 
top-of-book data, available through its proprietary market data 
platform, the Exchange believes that making such data available 
increases investor choice, and contributes to a fair and competitive 
market. Specifically, making such data publicly available through 
proprietary data feeds allows investors to choose alternative, 
potentially less costly, market data based on their business needs. 
While some market participants that desire a consolidated display often 
choose the SIP to satisfy their top-of-book data needs, and in some 
cases are effectively required to do so under the Vendor Display Rule, 
others may prefer to purchase data directly from one or more national 
securities exchanges. For example, a buy-side investor or fintech firm 
may choose to purchase the BZX Top Feed, or a similar product from 
another exchange, in order to perform investment analysis, or to 
provide general information about the market for U.S. equity 
securities, respectively. In either case the choice to purchase the BZX 
Top Feed would be based on the firm's determination of the value of the 
data offered by their chosen product compared to the cost of acquiring 
this data instead of receiving similar data from other sources. The BZX 
Top Feed serves as a valuable reference for investors that do not 
require a consolidated display that contains quotations for all sixteen 
U.S. equities exchanges. Making alternative products available to 
market participants ultimately ensures competition in the marketplace, 
and constrains the ability of exchanges to charge supra-competitive 
fees.
    Further, in the event that a market data customer views one 
exchange's top-of-book data product and/or fees as more or less 
attractive than a competitor's offerings they can and often do switch 
between competing products. As discussed, much of the top-of-book 
quotation information and last-sale information offered within the BZX 
Top Feed is also available on the SIP feeds, and for firms that do not 
require a consolidated display, as is typically the case for the 
subscribers to the BZX Top Feed, similar top-of-book information is 
available from a number of competing U.S. equities exchanges.\24\ This 
include a number of large established exchanges that charge for access 
to such top-of-book data, as well as certain smaller or new exchange 
entrants that provide similar data without charge, in many cases as a 
way of attracting customers to their exchange while they seek to grow 
market share. In this way, the BZX Top Feed, SIP data products, and 
other top-of-book products offered by a number of U.S. equities 
exchanges, are all substitutes. The availability of these substitute 
products constrains the Exchange's ability to charge supra-competitive 
prices as market participants can easily obtain similar data from one 
of the Exchange's many competitors. In fact, the impact of competition 
on the market in which the BZX Top Feed is offered to market 
participants and investors is showcased by the Exchange's other recent 
fee changes related to this product, which involved the reduction of 
fees to facilitate the Exchange's ability to compete for customers.\25\ 
Distributors can discontinue use of the BZX Top Feed at any time and 
for any reason, including due to an assessment of the reasonableness of 
fees charged.
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    \24\ Although the Exchange does not have access to the customer 
lists for other competing products, it understands based on 
conversations with subscribers to the BZX Top Feed that they 
typically view exchange top-of-book products as substitutes and do 
not generally look to purchase such data from more than one national 
securities exchange.
    \25\ See supra note 4. The Exchange also notes that while this 
proposed fee change involves an increase in fees, it is 
simultaneously filing another proposed fee change to expand its 
Financial Products Distribution Program and further reduce certain 
fees. See SR-CboeBZX-2021-003 (pending publication).
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    In setting the proposed fees for the BZX Top Feed, the Exchange 
considered the competitiveness of the market for proprietary data and 
all of the implications of that competition. The Exchange believes that 
it has considered all relevant factors and has not considered 
irrelevant factors in order to establish reasonable fees. Indeed, the 
Exchange has no market power and is not in a position to charge 
unreasonable fees for its top-of-book data as there are a number of 
competing products in the market, including products that are currently 
offered free of charge by certain other exchanges that have determined 
not to charge for their market data. The existence of alternatives to 
the BZX Top Feed ensures that the Exchange cannot set unreasonable fees 
when vendors and subscribers can freely elect these alternatives or 
choose not to purchase a specific proprietary data product if the 
attendant fees are not justified by the returns that any particular 
vendor or data recipient would achieve through the purchase.
ii. The Proposed Fees Are Reasonable Given the Value of the Data 
Provided to Customers, and When Compared to Competing Market Data 
Products
    The proposed fees are also reasonable as they represent a modest 
increase for top-of-book data that has proven valuable for investors, 
particularly as the Exchange grows market share due to its innovative 
market model that has been successful in attracting retail limit 
orders, increasing the Exchange's market share to over 7% consolidated 
U.S. equities volume.\26\ Specifically, the BZX Top Feed offers 
competitively-priced alternative to top-of-book data disseminated by 
SIPs, i.e., core data, for firms that do not need or desire a 
consolidated display covering all sixteen U.S. equities exchanges, or 
similar data disseminated by other national securities exchanges. It is 
purchased by a wide variety of market participants and vendors, 
including data platforms, websites, fintech firms, buy-side investors, 
retail brokers, regional banks, and securities firms inside and outside 
of the U.S. that desire low cost, high quality, real-time U.S. equity 
market data. By providing lower cost access to U.S. equity market data, 
the BZX Top Feed benefits a wide range of investors that participate in 
the national market system. As discussed, the decision to purchase a 
particular market data product from a particular exchange is largely 
based on two factors: (1) The quality of the data, and (2) the price 
charged for access to that data. The Exchange believes that the BZX Top 
Feed is competitive on both of these factors.
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    \26\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
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    First, the BZX Top Feed would remain competitively priced compared 
to similar products offered by other comparable U.S. equities exchanges 
and core data offered by the SIPs. Although the BZX Top Feed is not 
offered free of charge like certain other competitor offerings, 
particularly those offered by newer U.S. equities exchanges that are 
seeking to grow market share, it is made available at a price that is 
significantly

[[Page 6714]]

lower than the prices charged by the Exchange's main competitors--i.e., 
those with comparable market shares and data quality. Notably, even 
with the proposed fee increase, the BZX Top Feed would remain 
significantly cheaper than similar products offered by New York Stock 
Exchange LLC (``NYSE''), NYSE Arca, Inc. (``Arca''), and The Nasdaq 
Stock Market LLC (``Nasdaq'') both in terms of the fees charged for 
internal distribution and the fees charge for each Professional User 
that is provided access to the feed. For example, NYSE charges a total 
of $3,000 per month for internal distribution of their equivalent 
products, i.e., $1,500 per month for applicable top-of-book quotation 
information,\27\ and an additional $1,500 per month for transaction 
information,\28\ both of which are included in the BZX Top Feed for a 
single fee.\29\ Arca, which has a similar pricing model to NYSE, also 
charges a higher rate of $1,500 per month for internal distribution of 
its equivalent products, separated into a $750 per month charge for 
top-of-book quotation information and an additional $750 per month 
charge for transaction information.\30\ Finally, Nasdaq charges its 
internal distributors a fee of $1,500 per month for Nasdaq Basic, which 
includes both top-of-book quotation information and transaction 
information for the same fee, similar to the Exchange's pricing model, 
but again at a higher cost.\31\ In each case, the internal distribution 
charges associated with obtaining comparable U.S. equities market data 
from NYSE, Arca, and Nasdaq runs at least double and up to four times 
as much as the proposed fee to be charged by the Exchange, meaning that 
the Exchange would continue to be offering its data at a price that is 
attractive compared to the prices charged by its competitors. 
Similarly, each of these exchanges charges a fee for each Professional 
User that is higher than that proposed by the Exchange--i.e., $26 per 
month for Nasdaq,\32\ and $8 per month total for both NYSE and 
Arca.\33\ Finally, the BZX Top Feed also remains competitively priced 
compared to core data provided by the SIPs for firms, e.g., buy-side 
investors or fintech firms, that do not need or desire a consolidated 
display covering all sixteen U.S. equities exchanges.\34\
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    \27\ See NYSE PDP Market Data Pricing, Section 1.3, NYSE BBO.
    \28\ See NYSE PDP Market Data Pricing, Section 1.4, NYSE Trades.
    \29\ See supra note 3 and accompanying text. The Exchange also 
offers a separate market data product, i.e., BZX Last Sale, that 
exclusively provides last sale information. See BZX Rule 13.8(d). 
However, all of the information contained in the BZX Last Sale Feed 
is also made available in the BZX Top Feed at no additional charge.
    \30\ See NYSE PDP Market Data Pricing, Section 3.3, NYSE Arca 
BBO; NYSE PDP Market Data Pricing, Section 3.4, NYSE Arca Trades.
    \31\ See Nasdaq Equity Rules, Equity 7, Pricing Schedule, 
Section 147(c)(1). In addition, Nasdaq also charges distributors a 
$100 monthly administrative fee. See Nasdaq Equity Rules, Equity 7, 
Pricing Schedule, Section 135.
    \32\ Nasdaq's Professional User fee is divided into Nasdaq 
issues ($13), NYSE issues ($6.50), and other issues ($6.50) for a 
total of $26 per month for each Professional User. See Nasdaq Equity 
Rules, Equity 7, Pricing Schedule, Section 147(b)(1).
    \33\ NYSE and Arca's fees are both broken down into $4 per month 
for BBO information and an additional $4 per month for Trades 
information. See supra notes 27, 28, and 30.
    \34\ See CTA Schedule of Market Data Charges, available at 
https://www.ctaplan.com/pricing; UTP Fee Schedule, available at 
https://utpplan.com/DOC/Datapolicies.pdf.
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    Second, the proposed fees are reasonable given the value of the 
data provided in the BZX Top Feed and used by data recipients in their 
profit-generating activities. The BZX Top Feed provides top-of-book 
quotations and transactions executed on the Exchange, and provides a 
valuable window into the market for securities traded on a market that 
accounts for about 4.5% of U.S. equity market volume today.\35\ As 
discussed, the Exchange offers the BZX Top Feed in a competitive 
environment where firms may freely choose which market data products 
best suit their business needs. Invariably, firms that choose to 
purchase the BZX Top Feed instead of receiving one of the many free 
products offered by other exchanges,\36\ including free products 
offered by an affiliate of the Exchange,\37\ have decided that the 
value of the BZX Top Feed is greater than that offered by those other 
products. Indeed, by incentivizing market quality improvements through 
its Lead Market Maker (``LMM'') and other programs designed to enhance 
the quality of its market, the Exchange is able to offer higher quality 
market data products to customers. In turn, investors may choose to 
rely on those products instead of other competitor offerings based on 
the value they provide in relation to any additional cost associated 
with obtaining that market data from the Exchange. The Exchange 
therefore believes that its proposal is consistent with the principles 
enshrined in Regulation NMS to ``promote the wide availability of 
market data and to allocate revenues to SROs that produce the most 
useful data for investors.'' \38\
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    \35\ See https://markets.cboe.com/us/equities/market_share/.
    \36\ See e.g., Investors Exchange Fee Schedule, Market Data 
fees.
    \37\ See e.g., Cboe EDGA Exchange, Inc., Fee Schedule, EDGA Top.
    \38\ See Regulation NMS Adopting Release, supra note 5, at 
37503.
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iii. The Proposed Fees Are Equitable and Not Unfairly Discriminatory as 
Internal Distributors Will Be Subject to Uniform Pricing Based on Their 
Usage of the Data
    The Exchange believes the proposed fees for internal distribution 
of the BZX Top Feed will continue to be allocated fairly and equitably 
among subscribers, and are not unfairly discriminatory, as the proposed 
fees will apply equally to all data recipients that choose to subscribe 
to the BZX Top Feed and distribute that data to internal subscribers. 
As proposed, all internal distributors of the BZX Top Feed will be 
subject to the same internal distribution fee, regardless of the type 
of business that they operate, or the use they plan to make of the data 
feed. Thus, all internal distributors would have access to the BZX Top 
Feed on the same equitable and non-discriminatory terms. Similarly, 
with the introduction of Professional User fees, internal distributors 
of the BZX Top Feed will be subject to the same modest fees based 
solely on the number of Professional Users that each internal 
distributor has chosen to permission for access to this information. 
The Exchange does not believe that it is inequitable, or unfairly 
discriminatory, to charge a fee based on the number of Professional 
Users within a firm that have access to the BZX Top Feed as this 
ensures that firms with the highest usage pay their equitable share for 
the data.
    The Exchange also believes that it is fair and equitable, and not 
unfairly discriminatory, to continue not to charge a fee for internal 
distribution to Non-Professional Users. The Exchange's fee structure is 
generally designed to facilitate lower cost access to its market data 
by retail investors, either through substantially lower User fees for 
Non-Professional Users, or other incentive programs, such as the Small 
Retail Broker Distribution Program, which was recently implemented to 
lower the cost of the Exchange's market data to small broker-dealers 
that serve retail investors. The Exchange does not anticipate any 
significant number of Non-Professional Users to receive BZX Top Feed 
Data through internal, i.e., within the distributor's firm, as opposed 
to external distribution, and in the event that certain firms may 
distribute data internally to Users that qualify as Non-Professional, 
providing such Users access without any User fees would

[[Page 6715]]

facilitate the Exchange's overall goals of facilitating access to its 
data by retail investors, which the Commission has continually found to 
be consistent with the Exchange Act.

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

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive environment, and its ability to price 
these data products is constrained by: (i) Competition among exchanges 
that offer similar data products to their customers; and (ii) the 
existence of inexpensive real-time consolidated data disseminated by 
the SIPs. Top-of-book data is broadly disseminated by both the SIPs and 
the sixteen U.S. equities exchanges. There are therefore a number of 
alternative products available to market participants and investors, 
including products offered by certain competing U.S. equities exchanges 
without charge. In this competitive environment potential subscribers 
are free to choose which competing product to purchase to satisfy their 
need for market information. Often, the choice comes down to price, as 
market data customers look to purchase cheaper top-of-book data 
products, and quality, as market participants seek to purchase data 
that represents significant market liquidity.
    Intramarket Competition. The Exchange believes that the proposed 
fees do not put any market participants at a relative disadvantage 
compared to other market participants. As discussed, the proposed fees 
would apply to all internal distributors of the BZX Top Feed on an 
equal and non-discriminatory basis. The Exchange therefore believes 
that the proposed fees neither favor nor penalize one or more 
categories of market participants in a manner that would impose an 
undue burden on competition. To the extent that particular fees would 
apply to only a subset of subscribers, e.g., Professional versus Non-
Professional Users, those distinctions are not unfairly discriminatory 
and do not unfairly burden one set of customers over another.
    Intermarket Competition. The Exchange believes that the proposed 
fees do not impose a burden on competition or on other SROs that is not 
necessary or appropriate in furtherance of the purposes of the Act. In 
setting the proposed fees, the Exchange is constrained by the 
availability of numerous substitute products offered by other national 
securities exchanges as well as core data offered by the SIPs. Because 
market data customers can find suitable substitute feeds, an exchange 
that overprices its market data products stands a high risk that users 
may substitute another product. These competitive pressures ensure that 
no one exchange's market data fees can impose an undue burden on 
competition, and the Exchange's proposed fees do not do so here.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \39\ and paragraph (f) of Rule 19b-4 \40\ 
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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    \39\ 15 U.S.C. 78s(b)(3)(A).
    \40\ 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-2021-002 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-2021-002. 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-2021-002 and should be submitted 
on or before February 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01279 Filed 1-21-21; 8:45 am]
BILLING CODE 8011-01-P


