[Federal Register Volume 86, Number 199 (Tuesday, October 19, 2021)]
[Notices]
[Pages 57876-57879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22690]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93308; File No. SR-CboeBZX-2021-067]


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

 October 13, 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 30, 2021, Cboe BZX Exchange, Inc. (the ``Exchange'' 
or ``BZX'') filed with the Securities and Exchange Commission 
(``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'' 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 by (1) modifying 
Tier 2 of the Step-Up Tiers as provided under footnote 2 of the Fee 
Schedule; and (2) eliminating two existing tiers and introducing a new 
tier of the Single Market Participant Identifier (``MPID'') Investor 
Tiers, as provided under footnote 4 of the Fee Schedule, effective 
October 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,\3\ no single registered 
equities exchange has more than 17% 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 in particular operates a ``Maker-Taker'' model 
whereby it pays credits to Members that add liquidity and assesses fees 
to those that remove liquidity. The Exchange's fee schedule sets forth 
the standard rebates and rates applied per share for orders that 
provide and remove liquidity, respectively. Particularly, for 
securities at or above $1.00, the Exchange provides a standard rebate 
of $0.0018 per share for orders that add liquidity and assesses a fee 
of $0.0030 per share for orders that remove liquidity. 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.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (September 27, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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Step-Up Tiers
    The Step-Up Tiers set forth in footnote 2 of the Fee Schedule 
provides Members an opportunity to qualify for an enhanced rebate for 
liquidity adding orders that yield fee codes B, V and Y \4\ where they 
increase their relative liquidity each month over a predetermined 
baseline. Tier 2 of the Step-Up Tiers provides an enhanced rebate of 
$0.0032 per share to a Member that has a Step-Up Add TCV \5\ from April 
2020 equal to or greater than 0.30%. The Exchange notes that step-up 
tiers are designed to encourage Members that provide displayed 
liquidity on the Exchange to increase their order flow, which would 
benefit all Members by providing greater execution opportunities on the 
Exchange. Now the Exchange proposes to replace the current criteria for 
Step-Up Tier 2, with the following:
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    \4\ Fee code B is appended to displayed orders adding liquidity 
to BZX (Tape B), fee code V is appended to displayed orders adding 
liquidity to BZX (Tape A), and fee code V [sic] is appended to 
displayed orders adding liquidity to BZX (Tape C). Each is provided 
a rebate of $ 0.00180.
    \5\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in the 
relevant baseline month subtracted from current ADAV as a percentage 
of TCV.
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     Member has a Step-Up ADAV \6\ from June 2021 equal to or 
greater than 10,000,000; and
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    \6\ ``Step-Up ADAV'' means ADAV (as defined below) in the 
relevant baseline month subtracted from current ADAV.
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     Member has an ADV \7\ equal to or greater than 0.30% of 
the TCV \8\ or Member has an ADV equal to or greater than 35,000,000.
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    \7\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day and ``ADV'' means average daily 
volume calculated as the number of shares added or removed, 
combined, per day. ADAV and ADV are 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.
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    The Exchange believes that the tier as proposed will further 
incentivize increased order flow to the Exchange, which may contribute 
to a deeper, more liquid market to the benefit of all market 
participants by creating a more robust and well-balanced market 
ecosystem. Step-Up Tier 2, as modified, continues to be available to 
all Members and provide Members an opportunity to receive an enhanced 
rebate.

[[Page 57877]]

Single MPID Investor Tiers
    Pursuant to footnote 4 of the Fee Schedule, the Exchange currently 
offers three [sic] Single MPID Investor Tiers that provide Members an 
opportunity to receive incrementally greater enhanced rebates from the 
standard rebate for liquidity adding orders that yield fee codes B, V 
and Y where Members (by MPID) meet certain incrementally more difficult 
volume-based criteria. For example, Single MPID Investor Tier 1 
currently provides an enhanced rebate of $0.0030 per share for 
qualifying orders (i.e., yield fee code B, V and Y) where 1) an MPID 
has an Step-Up ADV \9\ from May 2021 equal to or greater than 0.10% TCV 
or the MPID has a Step-Up ADV from May 2021 equal to or greater than 
8,000,000; and 2) an MPID adds a Step-Up ADAV from May 2021 equal to or 
greater than 0.05% of TCV. The Exchange proposes to eliminate existing 
Tiers 2 and 3 of the Single MPID Investor Tiers, and rename existing 
Tier 4 to Tier 2. The Exchange notes that no Member has reached Tiers 2 
or 3 in several months, and the Exchange no longer wishes to, nor is it 
required to, maintain such tiers.
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    \9\ ``Step-Up ADV'' means ADV in the relevant baseline month 
subtracted from current day ADV.
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    The Exchange also proposes to adopt new Tier 3 of the Single MPID 
Investor Tiers. New Tier 3 provides a proposed enhanced rebate $0.0034 
for a Member's qualifying orders where an MPID has a Step-Up ADAV as a 
percentage of TCV equal to or greater than 0.20% from September 2021 or 
the MPID has a Step-Up ADAV from September 2021 equal to or greater 
than 20,000,000. Members that achieve the proposed Single MPID Investor 
Tier 3 must therefore increase the amount of liquidity added on BZX 
over a baseline amount, thereby contributing to a deeper and more 
liquid market. Incentivizing an increase in liquidity adding 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 opportunities 
provided by such increased liquidity, together providing for overall 
enhanced price discovery and price improvement opportunities on the 
Exchange. As such, increased overall order flow benefits all Members by 
contributing towards a robust and well-balanced market ecosystem.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers the objectives of Section 6(b)(4) and 6(b)(5),\11\ in 
particular, as it is designed to provide for the equitable allocation 
of reasonable dues, fees and other charges among its Members, issuers 
and other persons using its facilities. 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.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes the proposed changes to the Step-Up Tier 2 
are reasonable because the tier, as modified, continues to be available 
to all Members and provide Members an opportunity to receive an 
enhanced rebate. The Exchange next notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges, 
including the Exchange, and are reasonable, equitable, and non-
discriminatory because they are open to all Members on an equal basis 
and provide additional discounts that are reasonably related to (i) the 
value to an exchange's market quality and (ii) associated with higher 
levels of market activity, such as higher levels of liquidity provision 
and/or growth patterns. The Exchange also believes that the current 
enhanced rebates under the Step-Up Tier 2 continues to be commensurate 
with the proposed criteria. That is, the rebate reasonably reflects the 
difficulty in achieving the criteria as amended. The Exchange believes 
the proposed changes to the Step-Up Tier 2 represents an equitable 
allocation of rebates and is not unfairly discriminatory because all 
Members are eligible for the Step-Up Tier 2 and would have the 
opportunity to meet the tier's criteria and would receive the current 
rebate if such criteria is met. 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 would definitely result in 
any Members qualifying for the proposed tier. While the Exchange has no 
way of predicting with certainty how the proposed tier will impact 
Member activity, the Exchange anticipates that at least three Member 
will be able to satisfy the criteria proposed under the new tier.\12\ 
The Exchange also notes that proposed tier/rebate will not adversely 
impact any Member's ability to qualify for other reduced fee or 
enhanced rebate tiers. Should a Member not meet the proposed criteria 
under the modified tier, the Member will merely not receive that 
corresponding enhanced rebate.
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    \12\ The Exchange notes that no Members have met Step-Up Tier 2 
in recent months.
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    The Exchange believes the proposed amendment to remove the Single 
MPID Investor Tiers 2 and 3 is reasonable because no Member has 
achieved these tiers in several months. Furthermore, the Exchange is 
not required to maintain these tiers and Members still have a number of 
other opportunities and a variety of ways to receive enhanced rebates, 
including the proposed Single MPID Investor Tier 3. The Exchange 
believes the proposal to eliminate the Single MPID Investor Tiers 2 and 
3 is also equitable and not unfairly discriminatory because it applies 
to all Members.
    The Exchange also believes proposed Single MPID Investor Tier 3 is 
a reasonable means to encourage Members to increase their added 
liquidity on the Exchange each month over a predetermined baseline by 
offering Members an additional opportunity to meet criteria to receive 
an enhanced rebate. More specifically, the Exchange notes that greater 
add volume order flow may provide for deeper, more liquid markets and 
execution opportunities at improved prices, which the Exchange believes 
incentivizes liquidity providers to submit additional liquidity 
opportunities. 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.
    Further, the Exchange believes that the proposed Single MPID 
Investor Tier 3 is reasonable as it does not represent a significant 
departure from the criteria or corresponding enhanced rebates currently 
offered in the Fee Schedule, including other Single MPID Investor 
Tiers, and that the proposed enhanced rebate is commensurate with the 
new criteria. Particularly, the proposed rebate is reasonably based on 
the difficulty of satisfying the tier's proposed criteria as compared 
to the existing Single MPID Investor Tiers, which provide lower rebates 
for less stringent criteria. Indeed, the proposed criteria in new Tier 
3 includes higher growth thresholds that Members can

[[Page 57878]]

achieve than other Single MPID Investor Tiers and, as a result, a 
higher enhanced rebate of $0.0034, as proposed, than the enhanced 
rebates offered in the other Single MPID Investor Tiers.
    The Exchange also believes that the proposed Single MPID Investor 
Tier 3 represents an equitable allocation of fees and rebates and is 
not unfairly discriminatory because all Members are eligible for the 
new Single MPID Investor Tier 3 and have the opportunity to meet the 
tier's criteria and receive the applicable enhanced rebate if such 
criteria is met. 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 would definitely result in any Members qualifying 
for the proposed tier. While the Exchange has no way of predicting with 
certainty how the proposed tier will impact Member activity, the 
Exchange anticipates that at least one Member will be able to satisfy 
the criteria proposed under the new tier. The Exchange also notes that 
the proposed tier 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 proposed enhanced rebate.
    As noted above, the Exchange operates in a highly competitive 
market. The Exchange is only one of 16 equity venues to which market 
participants may direct their order flow, and it represents a small 
percentage of the overall market. It is also only one of several maker-
taker exchanges. Competing equity exchanges offer similar rates and 
tiered pricing structures to that of the Exchange, including schedules 
of rebates and fees that apply based upon members achieving certain 
volume thresholds.

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 Securities and Exchange Commission's (the ``Commission's'' 
or the ``SEC'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 amended 
Step-Up Tier 2 and proposed Single MPID Investor Tier 3 apply 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 enhanced rebate 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 BZX by adopting an additional pricing incentive 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 17% of the market share.\13\ 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.'' \14\ 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'. . . .''.\15\ 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.
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    \13\ See supra note 3.
    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \15\ 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 \16\ and paragraph (f) of Rule 19b-4 \17\ 
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

[[Page 57879]]

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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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 [email protected]. Please include 
File Number SR-CboeBZX-2021-067 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-2021-067. 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-2021-067, and should be 
submitted on or before November 9, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22690 Filed 10-18-21; 8:45 am]
BILLING CODE 8011-01-P


