[Federal Register Volume 86, Number 156 (Tuesday, August 17, 2021)]
[Notices]
[Pages 46028-46033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17538]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92635; File No. SR-CboeBZX-2021-055]


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

August 11, 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 August 2, 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, 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'') proposes to 
amend its Fee Schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/) [sic], at the Exchange's Office of the Secretary, 
and at the Commission's Public Reference Room.

[[Page 46029]]

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 for its equity 
options platform (``BZX Options'') in connection with its Customer 
Penny Add Volume Tiers, Market Maker, Away Market Maker, and 
Professional Penny Take Volume Tiers, and Customer Non-Penny Add Volume 
Tiers, effective August 2, 2021.
    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 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 16% of the market share and 
currently the Exchange represents only approximately 8% of the market 
share.\3\ Thus, in such a low-concentrated and highly competitive 
market, no single options exchange, including the Exchange, possesses 
significant pricing power in the execution of option 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. The Exchange's Fee Schedule sets 
forth standard rebates and rates applied per contract, which varies 
depending on the Member's capacity (Customer, Firm, Market Maker, 
etc.), whether the order adds or removes liquidity, and whether the 
order is in Penny or Non-Penny Program Securities.
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    \3\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (July 23, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
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    Additionally, in response to the competitive environment, the 
Exchange also offers tiered pricing which provides Members with 
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. Among other volume tiers, the 
Exchange currently offers Customer Penny Add Volume Tiers, Market 
Maker, Away Market Maker, and Professional Penny Take Volume Tiers, and 
Customer Non-Penny Add Volume Tiers, to which it proposes to make the 
following changes.
Customer Penny Add Volume Tiers
    The Exchange currently offers seven Customer Penny Add Volume Tiers 
under footnote 1 of the Fee Schedule that provide enhanced rebates 
between $0.35 and $0.53 per contract for qualifying Customer orders 
(i.e., that yield fee code PY or XY) \4\ where a Member meets certain 
liquidity thresholds. The Exchange proposes to update Tier 6, which 
currently offers an enhanced rebate of $0.53 per contract for 
qualifying orders (i.e., that yield fee code PY or XY) where a Member 
has an ADAV \5\ in Customer orders greater than or equal to 1.70% of 
average OCV.\6\ Specifically, the proposed rule change updates the 
percentage of Customer orders over average OCV from 1.70% to 2.00% and 
adds an additional prong of criteria that a Member must achieve in 
order to receive the current enhanced rebate. The proposed second prong 
of criteria requires a Member, in addition to meeting the existing 
criteria (as updated), to reach an ADAV in Customer Non-Penny orders 
greater than or equal to 0.50% of average OCV. The proposed rule change 
does not alter the existing enhanced rebate amount offered in Tier 6.
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    \4\ Orders yielding fee code PY are Customer orders that add 
liquidity in Penny Program Securities and are offered a rebate of 
$0.25, and orders yielding fee code XY are Customer orders in XSP 
options that add liquidity and are offered a rebate of $0.25.
    \5\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added. ADAV is calculated on a monthly basis.
    \6\ ``OCC Customer Volume'' or ``OCV'' means the total equity 
and ETF options volume that clears in the Customer range at the 
Options Clearing Corporation (``OCC'') for the month for which the 
fees apply, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption and on any day with a 
scheduled early market close.
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    The proposed rule change also eliminates Tier 5 \7\ and Tier 7. 
Tier 5 currently offers an enhanced rebate of $0.53 per contract for 
qualifying orders where a Member has (1) an ADAV in Customer orders 
greater than or equal to 0.80% of average OCV, (2) an ADAV in Market 
Maker orders greater than or equal to 0.35% of average OCV, and (3) on 
BZX Equities an ADAV greater than or equal to 0.30% of average TCV. 
Tier 7 currently offers the same enhanced rebate ($0.53) per contract 
for qualifying orders where a Member has (1) an ADAV in Customer orders 
greater than or equal to 0.50% of average OCV, (2) an ADAV in Market 
Maker orders greater than or equal to 2.75% of average OCV, and (3) an 
ADAV in Firm Non-Penny orders greater than or equal to 0.05% of average 
OCV.
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    \7\ As a result of eliminating Tier 5, the proposed rule change 
also amends current Tier 6 to be Tier 5.
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    The Exchange proposes to eliminate Tiers 5 and 7 as no Members are 
currently satisfying the criteria under these tiers, nor have recently 
satisfied such criteria. The Exchange no longer wishes to, nor is it 
required to, maintain such tiers. More specifically, the proposed rule 
change removes these tiers as the Exchange would like to provide more 
consolidated, streamlined Customer Penny Add Volume Tiers by offering a 
single tier that provides an enhanced rebate of $0.53 (current Tier 6/
new Tier 5) and would also rather redirect future resources and funding 
into other programs and tiers intended to incentivize increased order 
flow. The Exchange believes that the proposed updated criteria in 
current Tier 6 (new Tier 5) is designed to provide a different 
opportunity for Members to achieve the tier to receive the same 
enhanced rebate.
Market Maker, Away Market Maker, and Professional Penny Take Volume 
Tiers
    The Exchange currently offers three Market Maker, Away Market 
Maker, and Professional Take Volume Tiers under footnote 3 of the Fee 
Schedule that provide a reduced fee between $0.45 and $0.47 per 
contract for qualifying orders (i.e., that yield fee code PP) \8\ where 
a Member meets certain liquidity thresholds. The Exchange proposes to 
update each of the three Market Maker, Away Market Maker, and 
Professional

[[Page 46030]]

Take Volume Tiers. The three tiers currently offer the following:
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    \8\ Orders yielding fee code PP are Market Maker, Away Market 
Maker, or Professional orders that remove liquidity in Penny Program 
Securities and are assessed a fee of $0.50.
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     Tier 1 currently offers a reduced fee of $0.45 per 
contract for qualifying orders (i.e., that yield fee code PP) where a 
Member has (1) an ADAV in Customer orders greater than or equal to 
0.80% of average OCV, (2) an ADAV in Market Maker orders greater than 
or equal to 0.35% of average OCV, (3) on BZX Equities an ADAV greater 
than or equal to 1.00% of average TCV, and (4) an ADAV in Customer Non-
Penny orders greater than or equal to 0.10% of average OCV.
     Tier 2 currently offers a reduced fee of $0.47 per 
contract for qualifying orders where a Member has an ADAV in Customer 
orders greater than or equal to 1.30% of average OCV.
     Tier 3 currently offers a reduced fee of $0.45 per 
contract for qualifying orders where a Member has (1) an ADAV in 
Customer orders greater than or equal to 2.00% of average OCV, and (2) 
an ADAV in Customer Non-Penny orders greater than or equal to 0.40% of 
average OCV.
    The proposed rule change updates the three tiers to offer the 
following:
     As proposed, Tier 1 offers a new reduced fee of $0.49 per 
contract for qualifying orders where a Member has (1) an ADAV in 
Customer orders greater than or equal to 1.00% of average OCV, and (2) 
Member has an ADRV \9\ in Market Maker/Away Market Maker orders greater 
than or equal to 1.00% of average OCV. The proposed rule change 
eliminates the criteria in current prong 3 and 4.
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    \9\ ``ADRV'' means average daily removed volume calculated as 
the number of contracts removed. ADRV is calculated on a monthly 
basis.
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     As proposed, Tier 2 offers a new reduced fee of $0.48 per 
contract for qualifying orders where a Member achieves the existing 
criteria plus proposed additional criteria in new prong two--a Member 
also has an ADRV in Market Maker/Away Market Maker orders greater than 
or equal to 1.00% of average OCV.
     As proposed, Tier 3 offers a new reduced fee of $0.47 per 
contract for qualifying orders where a Member achieves the existing 
criteria plus proposed additional criteria in new prong three--a Member 
also has an ADRV in Market Maker/Away Market Maker orders greater than 
or equal to 2.00% of average OCV.
    The Exchange believes that the proposed updates to the Market 
Maker, Away Market Maker, and Professional Penny Take Volume Tiers will 
provide different and additional opportunities for such Members to 
achieve the corresponding reduced fees, encouraging these liquidity 
providing market participants to increase their overall order flow, 
both add (ADAV) and remove (ADRV) volume, to the Exchange. This, in 
turn, may facilitate tighter spreads and more price improvement 
opportunities, signaling increased activity from other market 
participants, and thus may ultimately contribute to deeper and more 
liquid markets and a more robust and well-balanced market ecosystem on 
the Exchange, to the benefit of all market participants.
Customer Non-Penny Add Volume Tiers
    The Exchange currently offers five Customer Non-Penny Add Volume 
Tiers \10\ under footnote 12 of the Fee Schedule, which provide 
enhanced rebates between $0.92 and $1.06 per contract for qualifying 
Customer orders (i.e., that yield fee code NY) \11\ where a Member 
meets certain liquidity thresholds. The Exchange proposes to update 
Tier 1, Tier 4 and Tier 5. These tiers currently offer the following:
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    \10\ The proposed rule change also makes a nonsubstantive edit 
by making ``Customer Non-Penny Add Volume Tier'' plural.
    \11\ Orders yielding fee code NY are Customer orders that add 
liquidity in Non-Penny Program Securities and are offered a rebate 
of $0.85.
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     Tier 1 currently offers an enhanced rebate of $0.92 per 
contract for qualifying orders (i.e., that yield fee code NY) where a 
Member has (1) ADAV in Customer orders greater than or equal to 0.50% 
of average OCV, and (2) an ADAV in Market Maker orders greater than or 
equal to 2.75% of average OCV.
     Tier 4 currently offers an enhanced rebate of $1.05 per 
contract for qualifying orders where a Member has an ADAV in Customer 
orders greater than or equal to 2.10% of average OCV.
     Tier 5 currently offers an enhanced rebate of $1.06 per 
contract for qualifying orders where a Member has (1) an ADAV in 
Customer orders greater than or equal to 2.00% of average OCV, and (2) 
an ADAV in Customer Non-Penny orders greater than or equal to 1.00% of 
average OCV.
    The proposed rule change updates Tier 1, Tier 4 and Tier 5 as 
follows:
     As proposed, Tier 1 offers a new enhanced rebate of $0.90 
per contract for qualifying orders where a Member has an ADAV in 
Customer Non-Penny orders greater than or equal to 0.25% of average 
OCV. The proposed rule change eliminates the second prong of criteria.
     As proposed, Tier 4 offers a new enhanced rebate of $1.01 
per contract for qualifying orders where a Member has an ADAV in 
Customer orders greater than or equal to 0.85% of average OCV plus 
proposed additional criteria in new prong two--where a Member also has 
an ADAV in Customer Non-Penny orders greater than or equal to 0.25% of 
average OCV.
     As proposed, Tier 5 offers a new enhanced rebate of $1.02 
per contract for qualifying orders where a Member has (1) an ADAV in 
Customer orders greater than or equal to 0.90% of average OCV, and (2) 
an ADAV in Customer Non-Penny orders greater than or equal to 0.40% of 
average OCV.
    The proposed rule change also adopts new Tier 2,\12\ new Tier 6, 
new Tier 7 and new Tier 8, which, as proposed, offer the following:
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    \12\ As a result of new Tier 2, the proposed rule change also 
amends current Tier 2 to be Tier 3.
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     As proposed, Tier 2 offers an enhanced rebate of $0.95 per 
contract for qualifying orders where a Member has (1) an ADAV in 
Customer orders greater than or equal to 0.50% of average OCV, and (2) 
an ADAV in Customer Non-Penny orders greater than or equal to 0.25% of 
average OCV.
     As proposed, Tier 6 offers an enhanced rebate of $1.03 per 
contract for qualifying orders where a Member has (1) has an ADAV in 
Customer orders greater than or equal to 1.00% of average OCV, and (2) 
an ADAV in Customer Non-Penny orders greater than or equal to 0.45% of 
average OCV.
     As proposed, Tier 7 offers an enhanced rebate of $1.04 per 
contract for qualifying orders where a Member has (1) an ADAV in 
Customer orders greater than or equal to 1.30% of average OCV, and (2) 
an ADAV in Customer Non-Penny orders greater than or equal to 0.50% of 
average OCV.
     As proposed, Tier 8 offers an enhanced rebate of $1.05 per 
contract for qualifying orders where a Member has (1) an ADAV in 
Customer orders greater than or equal to 1.30% of average OCV, and (2) 
an ADAV in Customer Non-Penny orders greater than or equal to 0.60% of 
average OCV.
    Finally, the proposed rule change eliminates Tier 3, which 
currently offers an enhanced rebate of $1.02 per contract for 
qualifying orders where a Member has (1) an ADAV in Customer orders 
greater than or equal to 0.50% of average OCV, (2) an ADAV in Market 
Maker orders greater than or equal to 2.75% of average OCV, and (3) an 
ADAV in Firm Non-Penny orders greater than or equal to 0.05% of average 
OCV.
    The proposed updates to and addition of tiers under the Customer 
Non-Penny Add Volume Tiers are designed to encourage increased Customer 
order

[[Page 46031]]

flow by providing different and additional opportunities to receive an 
enhanced rebate. The Exchange believes that an increase in Customer 
order flow may attract an additional corresponding increase in order 
flow from other market participants, also contributing overall towards 
a robust and well-balanced market ecosystem, to the benefit of all 
market participants. Also, like the proposed elimination of certain 
Customer Penny Add Volume Tiers above, the Exchange proposes to 
eliminate Customer Non-Penny Add Volume Tier 3 as no Members are 
currently satisfying the criteria under this tier, nor have recently 
satisfied such criteria. The Exchange no longer wishes to, nor is it 
required to, maintain this tier, and would rather redirect future 
resources and funding into other programs and tiers intended to 
incentivize increased order flow.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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) \15\ 
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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 15 U.S.C. 78f.(b)(5).
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    As described above, 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 change 
reflects a competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
Members. The Exchange notes that volume-based incentives and discounts 
have been widely adopted by exchanges,\16\ including the Exchange,\17\ 
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 a 
highly competitive market. The Exchange is only one of several options 
venues to which market participants may direct their order flow, and it 
represents a small percentage of the overall market. Competing options 
exchanges offer similar tiered pricing structures to that of the 
Exchange, including schedules of rebates and fees that apply based upon 
Members achieving certain volume and/or growth thresholds.
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    \16\ See, e.g., NYSE Arca Options Fee Schedule, Trade-Related 
charges for Standard Options, which similarly provide various ranges 
of credits and discounts for volume-based tiers geared toward 
different market participants in penny or non-penny classes, such as 
Customer Penny Posting Credit Tiers, Firm and Broker-Dealer Penny 
Posting Tiers, and Customer Posting Credit Tiers in Non-Penny 
Issues; and Cboe EDGX U.S. Options Exchange Fee Schedule, Footnotes, 
which provide for similar Customer Volume Tiers and Market Maker 
Volume Tiers.
    \17\ See generally BZX Options Fee Schedule, Footnotes.
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    Overall, the Exchange believes that the proposed rule changes to 
the Customer Penny Add Volume, Market Maker, Away Market Maker, and 
Professional Take Volume, and Customer Non-Penny Add Volume Tiers are 
reasonable in that they are reasonably designed to incentivize Members 
to submit both add (ADAV) and remove (ADRV) order flow to the Exchange, 
thereby contributing to a deeper and more liquid market. More 
specifically, incentivizing an increase in both liquidity adding volume 
and in liquidity removing volume, through additional criteria and 
enhanced rebate opportunities, encourages liquidity adding Members on 
the Exchange to contribute to a deeper, more liquid market, and to 
increase transactions and take execution opportunities provided by such 
increased liquidity, together providing for overall enhanced price 
discovery and price improvement opportunities on the Exchange. 
Additionally, the Exchange believes that it is reasonable and equitable 
to incentivize Market Maker (including Away Market Maker), Professional 
and Customer order flow, as these market participants provide key 
liquidity to the Exchange. For instance, Market Maker (including Away 
Market Maker) activity facilitates tighter spreads and signals 
additional corresponding increase in order flow from other market 
participants. Increased overall order flow benefits all investors by 
deepening the Exchange's liquidity pool, potentially providing even 
greater execution incentives and opportunities. Professionals generally 
provide a greater competitive stream of order flow (by definition, more 
than 390 orders in listed options per day on average during a calendar 
month), thus, providing increased competitive execution and improved 
pricing opportunities for all market participants. Customer order flow 
attracts additional liquidity to the Exchange, particularly in Non-
Penny classes, as proposed. Such additional liquidity provides more 
trading opportunities and signals an increase in Market-Maker activity, 
which facilitates tighter spreads. This may cause an additional 
corresponding increase in order flow from other market participants, 
contributing overall towards a robust and well-balanced market 
ecosystem.
    In particular, the Exchange believes that it is reasonable and 
equitable to eliminate Customer Penny Add Volume Tiers 5 and 7, as well 
as Customer Non-Penny Add Volume Tier 3, because the Exchange is not 
required to maintain this tier or provide Members an opportunity to 
receive reduced fees or enhanced rebates. As stated, no Members are 
currently satisfying the criteria under these tiers, nor have recently 
satisfied such criteria. Moreover, the Exchange believes it is 
reasonable to provide more consolidated, streamlined Customer Penny Add 
Volume Tiers by offering a single tier that provides an enhanced rebate 
of $0.53 (current Tier 6/new Tier 5), and believes that the proposed 
updated criteria in this single tier (current Tier 6/new Tier 5) is 
reasonably designed to provide a different opportunity for Members to 
achieve the tier to receive the same enhanced rebate.
    Regarding the proposed rule change to the Market Maker, Away Market 
Maker, and Professional Penny Take Volume Tiers, the Exchange believes 
that it is reasonable and equitable to incrementally increase the 
difficulty in meeting the tiers' criteria, by marginally increasing the 
volume threshold over average OCV and by adding additional prongs of 
criteria, as it is reasonably designed to incentivize Members to submit 
additional requisite liquidity to

[[Page 46032]]

meet the updated criteria. The Exchange also believes that the 
marginally increased reduced fees, as proposed, offered under each of 
the Market Maker, Away Market Maker, and Professional Penny Take Volume 
Tiers continue to be a reasonable distribution of reduced fees, 
commensurate with the corresponding proposed criteria. The Exchange 
notes that it offers similar reduced rates for criteria of comparable 
difficulty in other volume-based tier programs. For example, Tier 2 of 
the Non-Customer Non-Penny Take Volume Tiers in Footnote 13 of the Fee 
Schedule offers a higher reduced fee ($1.07) than the proposed reduced 
fees ($0.49, $0.48 and $0.47) where a Member must meet three different 
prongs of criteria.
    The Exchange also believes that it is reasonable and equitable to 
update the Customer Non-Penny Add Volume Tiers to provide different 
criteria (which the Exchange does not believe is necessarily more or 
less difficult than the existing criteria) and to also provide new 
criteria via new tiers because these modifications and additions are 
reasonably designed to provide Members with increased supplementary 
opportunities to receive corresponding enhanced rebates. The Exchange 
also believes that the marginally decreased enhanced rebates, as 
proposed, continue to be a reasonable distribution of enhanced rebates, 
commensurate with the corresponding proposed criteria, as the Customer 
Non-Penny Add Volume Tiers continue to offer a range of enhanced 
rebates ($0.90 to $1.05, as proposed) within a comparable range as 
offered today ($0.92 to $1.06). The proposed rule change just provides 
additional opportunities within the proposed comparable range of 
enhanced rebates for Members to meet criteria and receive an enhanced 
rebate.
    The Exchange believes that the proposed updated and new tiers 
represent an equitable allocation of fees and are not unfairly 
discriminatory because the Customer Penny Add Volume, Market Maker, 
Away Market Maker, and Professional Penny Take Volume, and Customer 
Non-Penny Add Volume Tiers Add Penny Tiers, as proposed, will continue 
to apply uniformly to all qualifying Members, in that all Members that 
submit the requisite order flow per each tier program have the 
opportunity to compete for and achieve the proposed tiers. The proposed 
changes to and additions of criteria in the Customer Penny Add Volume, 
Market Maker, Away Market Maker, and Professional Penny Take Volume, 
and Customer Non-Penny Add Volume Tiers are designed as an incentive to 
any and all Members interested in meeting modified and new tier 
criteria to submit additional, requisite order flow directly to the 
Exchange's Book. 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 will 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: Between five and six Members will be able to 
compete for and potentially achieve the proposed criteria in Customer 
Penny Add Volume Tier 5 (current Tier 6); at least two Members will be 
able to compete for and potentially achieve the proposed criteria in 
each of the updated Market Maker, Away Market Maker, and Professional 
Penny Take [sic] Tiers 1, 2 and 3; and at least four Members will be 
able to compete for and potentially achieve the proposed criteria in 
across the updated Customer Non-Penny Add Volume Tiers 1, 4 and 5, and 
new Tiers 6, 7 and 8. The Exchange also notes that the proposed tiers 
will not 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 enhanced rebate or reduced fee, as applicable. Finally, 
the Exchange believes the proposal to eliminate certain tiers is 
equitable and not unfairly discriminatory because it applies to all 
Members, in that, such tiers will not be available for any Member.
B. Self-Regulatory Organization's Statement on Burden on Competition
    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. 
Rather, as discussed above, the Exchange believes that the proposed 
change would encourage the submission of additional liquidity to a 
public exchange, thereby promoting market depth, price discovery and 
transparency and enhancing order execution opportunities 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.'' \18\
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    \18\ 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 
tiers apply to all Members equally, in that, all Members that submit 
the requisite order flow per each tier program are eligible to achieve 
the tiers' proposed criteria, have a reasonable opportunity to meet the 
tiers' proposed criteria and will all receive the corresponding reduced 
fees or enhanced rebates (as existing and proposed) if such criteria is 
met. Overall, the proposed rule change is designed to attract 
additional overall Customer and liquidity provider order flow to the 
Exchange, which, as described above, brings different, yet key, 
liquidity and trading activity to the Exchange, resulting in overall 
tighter spreads, more execution opportunities at improved prices, and/
or deeper levels of liquidity, which ultimately improves price 
transparency, provides continuous trading opportunities and enhances 
market quality on the Exchange, and generally continues to encourage 
Members to send orders to the Exchange, thereby contributing towards a 
robust and well-balanced market ecosystem to the benefit of all market 
participants.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and 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.\19\ 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

[[Page 46033]]

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.'' \20\ 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'. . . .''.\21\ 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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    \19\ See supra note 3.
    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \21\ 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 \22\ and paragraph (f) of Rule 19b-4 \23\ 
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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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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-2021-055 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-2021-055. 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-2021-055 and should be submitted 
on or before September 7, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17538 Filed 8-16-21; 8:45 am]
BILLING CODE 8011-01-P


