[Federal Register Volume 86, Number 189 (Monday, October 4, 2021)]
[Notices]
[Pages 54775-54777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21485]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93149; File No. SR-CboeBZX-2021-064]


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

September 28, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 21, 2021, Cboe BZX Exchange, Inc. (``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. 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'' or ``BZX 
Equities'') 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/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``BZX Equities'') to modify the rebate 
associated with a certain routing fee code and eliminate certain 
routing fee codes.\3\
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    \3\ The Exchange initially filed the proposed fee changes 
September 1, 2021 (SR-CboeBZX-2021-061). On September 13, 2021, the 
Exchange withdrew that filing and re-submitted the proposed fee 
changes (SR-CboeBZX-2021-062). On September 21, 2021, the Exchange 
withdrew that filing and re-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 14% 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, discontinue, or 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 (August 26, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange assesses fees and provides rebates in connection with 
orders routed away to various exchanges. Now, the Exchange proposes to 
modify a particular routing fee code currently under the Fee Codes and 
Associated Fees section of the Fee Schedule. First, the Exchange 
proposes to modify fee code NX, which is appended to orders routed to 
NYSE National, Inc. (``NYSE National'') using the TRIM or SLIM routing 
strategy, and currently provides a rebate of $0.00200 per share. The 
Exchange proposes to reduce the rebate to $0.00050 per share.
    Additionally, as a result of minimal use in the last months, the 
Exchange proposes to eliminate fee codes BO and SX in their entirety. 
Fee code BO is appended to orders routed using a destination specific 
routing strategy unless otherwise specified, and currently assesses a 
fee of $0.00300 per share. Fee code SX is appended to orders routed 
using the SLIM routing strategy (except to Cboe BYX Exchange, Inc. 
(``BYX Equities''), Cboe EDGA Exchange, Inc. (``EDGA Equities'') Nasdaq 
BX, Inc. (``Nasdaq BX''), NYSE American LLC (``NYSE American'') or NYSE 
National), and currently assesses a fee of $0.00290 per share. The 
Exchange believes that because so few users elect to route their orders 
with specifications to which fee code BO or SX is applicable, the 
current demand does not warrant the infrastructure and ongoing Systems 
maintenance required to support the separate fee codes. Therefore, the 
Exchange now proposes to delete fee code BO and SX in the Fee Schedule. 
The Exchange notes that users will continue to be able to choose to 
route their orders with the same specifications to which fee codes BO 
and SX currently applies --such orders will simply be assessed the fees 
currently in place for routed orders generally.\5\ That is, if any of 
the routed orders to which fee code BO or SX currently apply fee code X 
will be appended to such orders, which assesses a fee of $0.00300 per 
share.
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    \5\ The Exchange notes that there are other fee codes that apply 
to certain other routing specifications, however, those routed 
orders not otherwise specified in such other routing fee code 
descriptions yield the general routing fee code X.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with

[[Page 54776]]

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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    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 Exchange believes that 
its proposal to reduce the rebates applicable to fee code NX is fair, 
equitable, and reasonable because the proposed fees and rebate remain 
consistent with pricing offered by the Exchange's affiliates and 
competitors and does not represent a significant departure from the 
Exchange's general pricing structure. Specifically, the proposed 
rebates applicable to fee code NX are more than that offered by the 
Nasdaq Stock Market LLC (``Nasdaq''), which does not provide a standard 
rebate for similar orders.\9\ Therefore, the Exchange believes the 
proposed rebates associated with fee code NX remains consistent with 
pricing previously offered by the Exchange's affiliates and other 
exchanges and does not represent a significant departure from such 
pricing.
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    \9\ See ``Route Rates'' on the Nasdaq fee schedule at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    The Exchange believes the proposed rule change to remove fee code 
BO and SX is reasonable as the Exchange has observed a minimal amount 
of volume in orders yielding the fee code 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 code BO and SX are currently applicable the 
standard routing fee currently in place for all other routed orders--
via fee code X. The fee associated with fee code X is $0.00300, which 
is the same as the fee currently assessed for orders yielding fee code 
BO, and is only slightly higher than the fee currently assessed for fee 
code SX. 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 
and will be automatically and uniformly assessed the applicable 
standard rates in place for generally all other routed orders. 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.

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. The Exchange does not believe 
that the proposed modifications represent a significant departure from 
previous pricing offered by the Exchange or pricing offered by the 
Exchange's competitors. Further, while the Exchange is proposing to 
eliminate fee codes BO and SX orders that meet specifications of fee 
code BO or SX going forward will be assessed the rate for orders routed 
generally. Members may opt to disfavor the Exchange's pricing if they 
believe that alternatives offer them better value. Accordingly, the 
Exchange does not believe that the proposed change will impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets.
    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 
fee and rebate modifications will continue to apply to all Members 
equally, and as noted above, orders currently meeting the 
specifications of fee code BO or SX will be assessed the rate for 
orders routed generally under fee code X. The Exchange believes the 
proposed rule change does not impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. As previously discussed, the Exchange operates in 
a highly competitive market. Members have numerous alternative venues 
that they may participate on and direct their order flow, including 
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 14% of the market share.\10\ Therefore, 
no exchange possesses significant pricing power in the execution of 
order flow. Indeed, participants can readily choose to send their 
orders to other exchange and off-exchange venues if they deem fee 
levels at those other venues to be more favorable. Moreover, the 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Specifically, in Regulation NMS, the 
Commission highlighted the importance of market forces in determining 
prices and SRO revenues and, also, recognized that current regulation 
of the market system ``has been remarkably successful in promoting 
market competition in its broader forms that are most important to 
investors and listed companies.'' \11\ 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'. . ..''.\12\ Accordingly, the

[[Page 54777]]

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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    \10\ Supra note 3.
    \11\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \12\ 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 upon filing pursuant 
to Section 19(b)(3)(A) \13\ of the Act and paragraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange. 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 shall institute proceedings under Section 19(b)(2)(B) \15\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f).
    \15\ 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-2021-064 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-2021-064. 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 will also 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-2021-064 and should be submitted 
on or before October 25, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21485 Filed 10-1-21; 8:45 am]
BILLING CODE 8011-01-P


