[Federal Register Volume 86, Number 20 (Tuesday, February 2, 2021)]
[Notices]
[Pages 7907-7909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02116]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90997; File No. SR-CboeBZX-2021-010]


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

January 27, 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 13, 2021, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend the fee schedule applicable to Members and non-
Members of the Exchange pursuant to BZX Rules 15.1(a) and (c). Changes 
to the fee schedule pursuant to this proposal are effective upon 
filing. 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 self-regulatory organization 
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 those 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 parts 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'') by eliminating certain 
routing fee codes.\3\
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    \3\ The Exchange initially filed the proposed fee changes 
January 4, 2021 (SR-CboeBZX-2021-001). On January 13, 2021, the 
Exchange withdrew that filing and submitted this proposal.
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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 16 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 16% of the market share. Thus, in such 
a low-concentrated and highly competitive market, no single equities 
exchange possesses significant pricing power in the execution of order 
flow. The Exchange believes that the ever-shifting market share among 
the exchanges from month to month demonstrates that market participants 
can shift order flow or discontinue to reduce use of certain categories 
of products, in response to fee changes. Accordingly, competitive 
forces constrain the Exchange's transaction fees, and market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (December 29, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange assesses fees in connection with orders routed away to 
various exchanges. As a result of minimal use in the last months, the 
Exchange proposes to eliminate the following routing fee codes 
currently under the Fee Codes and Associated Fees section of the Fee 
Schedule:
     Fee code 8, which is appended to Members' orders routed to 
NYSE American that adds liquidity and assesses a charge of $0.00020 per 
contract; and
     Fee code MX, which is appended to Members' orders routed 
to NYSE American using the TRIM or SLIM \5\ routing strategy and 
assesses a charge of $0.00020 per contract.
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    \5\ The TRIM and SLIM routing strategies are routing strategies 
in which an order checks the System for available shares if so 
instructed by the entering User and then is sent to destinations on 
the applicable System routing table. See Rule 11.13(b)(3)(G); see 
also Cboe Routing Strategies, FIX/BOE Routing Tags and Instructions, 
available at: https://cdn.cboe.com/resources/features/Cboe_USE_RoutingStrategies.pdf.
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    The Exchange has observed a minimal amount of volume in recent 
months in orders yielding fee codes 8 or MX. In particular, over the 
last six months the Exchange observed that orders yielding fee code MX 
accounted for

[[Page 7908]]

approximately only 0.11% of all routed order volume and orders yielding 
fee code 8 accounted for approximately only 0.02% of all routed order 
volume. The Exchange believes that, because so few Users elect to route 
their orders with specifications to which fee codes 8 or MX, the 
current demand does not warrant the infrastructure and ongoing Systems 
maintenance required to support these separate fee codes. Therefore, 
the Exchange now proposes to delete fee codes 8 and MX in the Fee 
Schedule.
    In light of the proposed fee code deletions, the Exchange also 
proposes to update the description to which fee code X is applicable. 
Currently, the description for orders yielding fee code X applies to 
Members' orders routed to a displayed market to remove liquidity using 
Parallel D, Parallel 2D, ROUT, ROUX or Post to Away routing strategy. 
Fee code X assesses a charge of $0.0030 per contract. Essentially, fee 
code X is designed to apply, and currently applies, to all other routed 
orders that are not otherwise specified under other fee codes in the 
Fee Schedule. However, as currently written, the description of orders 
that yield fee code X would not encompass those orders that currently 
yield fee codes 8 and MX. Therefore, the proposed rule change updates 
the description of orders that yield fee code X to ``Routed.'' The 
Exchange notes that the corresponding fee will remain unchanged and is 
the standard rate routing fee assessed pursuant to the Standard Rates 
section of the Fee Schedule. As a result of the proposed description, 
Members will continue to be able to choose to route their orders with 
the same specifications to which fee codes 8 and MX currently apply--
such orders will simply be assessed the fee currently in place for 
orders yielding fee code X (i.e., routed orders not otherwise specified 
under other fee codes in the Fee Schedule). The Exchange notes that the 
proposed description for fee code X does not alter any of the routed 
orders to which fee code X currently applies. The Exchange also notes 
that the proposed description for fee code X is consistent with the 
description associated with corresponding fee code X on the Exchange's 
affiliated equities exchanges, Cboe EDGX Exchange, Inc. (``EDGX'') and 
Cboe EDGA Exchange Inc. (``EDGA'').
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\6\ in general, and 
furthers the objectives of Section 6(b)(4),\7\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \8\ 
requirements that the rules of an exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed rule changes are reasonable, 
equitable and not unfairly discriminatory. The Exchange first notes 
that routing through the Exchange is optional. The Exchange believes 
the proposed rule change to remove fee codes 8 and MX is reasonable as 
the Exchange has observed a minimal amount of volume in orders yielding 
these fee codes and, therefore, the continuation of these fee codes 
does not warrant the infrastructure and ongoing Systems maintenance 
required to support separate fee codes for specific routed orders. As 
such, the Exchange also believes that is reasonable and equitable to 
assess routed orders which meet the specifications to which fee codes 8 
and MX are currently applicable the slightly higher standard routing 
fee currently in place for all other routed orders that are not 
otherwise specified under other fee codes in the Fee Schedule--via fee 
code X, as amended. The Exchange believes it is reasonable to update 
the description for orders that yield fee code X in a manner that 
reflects the intent of fee code X, which is to apply to routed orders 
not otherwise specified under other fees codes in the Fee Schedule, and 
will thus apply to routed orders that currently yield fee codes 8 and 
MX. The Exchange believes that the proposed updated description is 
reasonable because it does not alter any of the routed orders to which 
fee code X currently applies and will allow Members to continue to be 
able to choose to route their orders with the same specifications to 
which fee codes 8 and MX currently apply. The Exchange again notes that 
the proposed description for fee code X is consistent with the 
description associated with corresponding fee code X on the Exchange's 
affiliated equities exchanges.
    The Exchange believes that the proposed rule change is equitable 
and not unfairly discriminatory because Members will continue to have 
the option to elect to route their orders in the same manner (i.e., 
routed to NYSE American that add liquidity and routed to NYSE American 
using the TRIM or SLIM routing strategy), which will be automatically 
and uniformly be assessed the applicable standard rates in place for 
generally all other routed orders under fee code X. Further, if members 
do not favor the Exchange's pricing for routed orders, they can send 
their routable orders directly to away markets instead of using routing 
functionality provided by the Exchange. Routing through the Exchange is 
optional, and the Exchange operates in a competitive environment where 
market participants can readily direct order flow to competing venues 
or providers of routing services if they deem fee levels to be 
excessive. The Exchange believes that the updated description for 
orders that yield fee code X is equitable and not unfairly 
discriminatory because it does not impact the routed orders that 
currently yield fee code X; the same orders will continue to yield fee 
code X and will continue to be automatically and uniformly assessed the 
corresponding fee.

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. The Exchange does not 
believe the proposed rule change will impose any burden on intramarket 
competition because all Members orders that would yield current fee 
codes 8 or MX, will automatically and uniformly be assessed the fees 
already in place for all other routed orders generally under fee code 
X. Fee code X, as amended, will continue to apply to the same routed 
orders as it currently does, which will continue to be automatically 
and uniformly assessed the corresponding fee. Ultimately, all routed 
orders will generally be assessed the same fee.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

[[Page 7909]]

The Exchange again notes that orders that meet the specifications to 
which fee codes 8 or MX would currently apply, will yield the same fee 
codes and be assessed the same corresponding rates that are already in 
place in the Fee Schedule for routed orders generally, as previously 
filed with the Commission. Also, as previously discussed, the Exchange 
operates in a highly competitive market. Members have numerous 
alternative venues that they may participate on and director their 
order flow, including 15 other options exchanges and off-exchange 
venues. Additionally, the Exchange represents a small percentage of the 
overall market. Based on publicly available information, no single 
options exchange has more than 16% of the market share.\9\ Therefore, 
no exchange possesses significant pricing power in the execution of 
option 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.'' \10\ 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'. . . .''.\11\ 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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    \9\ See supra note 4.
    \10\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \11\ 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 is effective upon filing pursuant to 
Section 19(b)(3)(A) of the Act \12\ and subparagraph (f)(2) of Rule 
19b-4 thereunder,\13\ because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2021-010 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-2021-010. 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-2021-010, and should be 
submitted on or before February 23, 2021.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02116 Filed 2-1-21; 8:45 am]
BILLING CODE 8011-01-P


