[Federal Register Volume 86, Number 177 (Thursday, September 16, 2021)]
[Notices]
[Pages 51687-51690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19969]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92933; File No. SR-CboeBYX-2021-018]


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

September 10, 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 September 1, 2021, Cboe BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') 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/byx/), 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

[[Page 51688]]

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 to amend the 
criteria for Add Volume Tiers 1 through 4, effective September 1, 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 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, no single registered equities 
exchange has more than 16% of the market share.\3\ Thus, in such a low-
concentrated and highly competitive market, no single equities exchange 
possesses significant pricing power in the execution of order flow. The 
Exchange in particular operates a ``Taker-Maker'' model whereby it pays 
credits to members that remove liquidity and assesses fees to those 
that add liquidity. The Exchange's Fee Schedule sets forth the standard 
rebates and rates applied per share for orders that remove and provide 
liquidity, respectively. Particularly, for securities at or above 
$1.00, the Exchange provides a standard rebate of $0.00020 per share 
for orders that remove liquidity and assesses a fee of $0.00200 per 
share for orders that add liquidity. For orders priced below $1.00, the 
Exchange does not assess a fee or provide a rebate for orders that add 
liquidity and assesses a fee of 0.10% of total dollar value for orders 
that remove liquidity. 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.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (August 30, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------

    Additionally, in response to the competitive environment, the 
Exchange also offers tiered pricing which provides Members 
opportunities to qualify for higher rebates or reduced fees where 
certain volume criteria and thresholds are met. Tiered pricing provides 
an incremental incentive for Members to strive for higher tier levels, 
which provides increasingly higher benefits or discounts for satisfying 
increasingly more stringent criteria. For example, the Exchange 
currently offers various Add/Remove Volume Tiers under footnote 1 of 
the Fee Schedule, which offer various enhanced rebates and reduced fees 
for reaching certain, incrementally more challenging volume-based 
thresholds.
    The Exchange proposes to amend the criteria for Add Volume Tiers 1 
through 4 under footnote 1 of the Fee Schedule, which tiers currently 
provide Members an opportunity to qualify for reduced fees for orders 
yielding fee codes B,\4\ V,\5\ and Y \6\ where a Member meets certain 
required volume-based criteria. Specifically, Add Volume Tiers 1 
through 4 are as follows:
---------------------------------------------------------------------------

    \4\ Orders yielding Fee Code B are displayed orders that add 
liquidity to BYX (Tape B) and are assessed a standard fee of 
$0.00200.
    \5\ Orders yielding Fee Code V are displayed orders that add 
liquidity to BYX (Tape A) and are assessed a standard fee of 
$0.00200.
    \6\ Orders and orders yielding Fee Code Y are displayed orders 
that add liquidity to BYX (Tape C) and are assessed a standard fee 
of $0.00200.
---------------------------------------------------------------------------

     Tier 1 provides a reduced fee of $0.0017 per share to a 
Member that has an ADAV \7\ as a percentage of TCV \8\ greater than or 
equal to 0.25%.
---------------------------------------------------------------------------

    \7\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \8\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
---------------------------------------------------------------------------

     Tier 2 provides a reduced fee of $0.0014 per share to a 
Member that has an ADAV as a percentage of TCV greater than or equal to 
0.30%.
     Tier 3 provides a reduced fee of $0.0013 per share to a 
Member that has an ADAV as a percentage of TCV greater than or equal to 
0.45%.
     Tier 4 provides a reduced fee of $0.0012 per share to a 
Member that has an ADAV as a percentage of TCV greater than or equal to 
1.00%.
    Now, the Exchange proposes to modify these tiers to reduce the ADAV 
as a percentage of TCV thresholds. The proposed Add Volume Tiers are as 
follows:
     To meet the proposed criteria in Tier 1, a Member must 
have an ADAV as a percentage of TCV equal to or greater than 0.20% 
(instead of 25%).
     To meet the proposed criteria in Tier 2, a Member must 
have an ADAV as a percentage of TCV equal to or greater than 0.25% 
(instead of 30%).
     To meet the proposed criteria in Tier 3, a Member must 
have an ADAV as a percentage of TCV equal to or greater than 0.30% 
(instead of 45%).
     To meet the proposed criteria in Tier 4, a Member must 
have an ADAV as a percentage of TCV equal to or greater than 0.60% 
(instead of 1.00%).
    The proposed changes to these tiers are designed to make each 
tier's criteria easier to reach by lowering the volume-based criteria 
(i.e., the ADAV as a percentage of TCV thresholds). The Exchange 
believes that by easing the tiers' criteria difficulty it will 
encourage those Members who could not previously achieve these Tiers to 
increase their order flow as a means to receive the Tiers' proffered 
fee reductions. The Exchange does not propose any changes to the 
corresponding reduced fee under each tier and notes that it believes 
the current rates remain commensurate with each tier's criteria, even 
as amended. The Exchange also believes the Add Volume Tiers, as 
amended, continue to provide liquidity providing Members on the 
Exchange additional opportunities to receive discounted rates. The Add 
Volume Tiers are designed to provide Members that submit displayed 
liquidity on the Exchange incentives to contribute to a deeper, more 
liquid market, in turn, providing additional execution opportunities at 
transparent prices as a result of such increased, displayed liquidity. 
The Exchange believes that this benefits all Members by enhancing 
overall market quality and contributing towards a robust and well-
balanced market ecosystem. The Exchange notes the modified tiers are 
available to all Members.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ 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) \11\ 
requirements that the rules of

[[Page 51689]]

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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 changes 
reflect a competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
Members. Also, as described above, the Exchange notes that relative 
volume-based incentives and discounts have been widely adopted by 
exchanges,\12\ including the Exchange,\13\ 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. Competing equity 
exchanges offer similar tiered pricing structures, including schedules 
of rebates and fees that apply based upon members achieving certain 
volume and/or growth thresholds, as well as assess similar fees or 
rebates for similar types of orders, to that of the Exchange.
---------------------------------------------------------------------------

    \12\ See e.g., Nasdaq BX, Equity 7 Pricing Schedule, Section 
118.
    \13\ See BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed changes to ease 
the volume-based criteria under Add Volume Tiers 1 through 4 is a 
reasonable means to encourage Members to increase their add liquidity 
on the Exchange. Further, the Exchange believes that the proposed 
changes are reasonable as the proposed criteria does not represent a 
significant departure from the criteria currently required of each 
tier. Additionally, the Exchange believes Add Volume Tiers 1 through 4 
will continue to provide Members additional opportunities to meet 
criteria to receive a reduced fee, even as modified. The Exchange also 
believes that the proposed reduced fees under Add Volume Tiers 1 
through 4, which are not being changed, continue to be commensurate 
with the new criteria.
    As noted above, the Exchange believes the proposed changes 
incentivize Members to increase their overall add volume order flow, 
which may provide for deeper, more liquid markets and execution 
opportunities at improved prices, which the Exchange believes signals 
an increase in activity from other market participants. This overall 
increase in activity deepens the Exchange's liquidity pool, offers 
additional cost savings, supports the quality of price discovery, 
promotes market transparency and improves market quality, for all 
investors.
    The Exchange believes that the proposed rule change represents an 
equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members are eligible for the Add Volume 
Tiers and have the opportunity to meet the tiers' criteria and receive 
the corresponding reduced fees if such criteria, even as amended, is 
met. The Exchange notes that currently one Member is satisfying the 
current criteria under Add Volume Tier 2 and no Members are satisfying 
the current criteria under Add Volume Tiers 1, 3 or 4. Without having a 
view of activity on other markets and off-exchange venues, the Exchange 
has no way of predicting with certainty how the proposed changes will 
impact Member activity. However, the Exchange anticipates that at least 
one Member will be able to satisfy the criteria proposed under Add 
Volume Tier 3 and does not anticipate any firms immediately satisfying 
Add Volume Tiers 1, 2 or 4. The Exchange also notes that the proposed 
changes will not adversely impact any Member's ability to qualify for 
reduced fees or enhanced rebate offered under other tiers. Should a 
Member not meet the proposed new criteria, the Member will merely not 
receive the corresponding reduced fees.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Rather, as discussed above, the 
Exchange believes that the proposed changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further 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.''
    The Exchange believes the proposed rule change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes to Add Volume Tiers 1 through 4 applies to all Members equally 
in that all Members are eligible for these tiers, have a reasonable 
opportunity to meet the tiers' criteria and will receive the reduced 
fee on their qualifying orders if such criteria is met. The Exchange 
does not believe the proposed changes burdens competition, but rather, 
enhances competition as it is intended to increase the competitiveness 
of BYX by amending existing pricing incentives in order to attract 
order flow and incentivize participants to increase their participation 
on the Exchange, providing for additional execution opportunities for 
market participants and improved price transparency. Greater overall 
order flow, trading opportunities, and pricing transparency benefits 
all market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.
    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. In 
such an environment, the Exchange must continually review, and consider 
adjusting, its fees and rebates to remain competitive with other 
exchanges. Members have numerous alternative venues that they may 
participate on and direct their order flow, including other equities 
exchanges, off-exchange venues, and alternative trading systems. 
Additionally, the Exchange represents a small percentage of the overall 
market. Based on publicly available information, no single equities 
exchange has more than 16% of the market share.\14\ Therefore, no 
exchange possesses significant pricing power in the execution of order 
flow. Indeed,

[[Page 51690]]

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.'' \15\ 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'. . . .''.\16\ Accordingly, the Exchange does not believe its 
proposed fee changes imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \14\ See supra note 3.
    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ 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)).
---------------------------------------------------------------------------

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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-CboeBYX-2021-018 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-CboeBYX-2021-018. 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-CboeBYX-2021-018 and should be submitted 
on or before October 7, 2021.
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19969 Filed 9-15-21; 8:45 am]
BILLING CODE 8011-01-P


