[Federal Register Volume 87, Number 48 (Friday, March 11, 2022)]
[Notices]
[Pages 14053-14055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05148]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94372; File No. SR-CboeBZX-2021-078]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To Introduce a New Data Product To Be Known as the 
Short Volume Report

March 7, 2022.

I. Introduction

    On November 17, 2021, Cboe BZX Exchange, Inc. (``BZX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Exchange Rule 11.22(f) to introduce a new 
data product to be known as the Short Volume Report. The proposed rule 
change was published for comment in the Federal Register on

[[Page 14054]]

December 7, 2021.\3\ On January 20, 2022, pursuant to Section 19(b)(2) 
of the Act,\4\ the Commission designated a longer period within which 
to approve the proposed rule change, disapprove the proposed rule 
change, or institute proceedings to determine whether to disapprove the 
proposed rule change.\5\ This order institutes proceedings pursuant to 
Section 19(b)(2)(B) of the Act \6\ to determine whether to approve or 
disapprove the proposed rule change.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 93688 (December 1, 
2021), 86 FR 69319 (``Notice''). The comment letters received on the 
proposed rule change are available on the Commission's website at: 
https://www.sec.gov/comments/sr-cboebzx-2021-078/srcboebzx2021078.htm.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94010, 87 FR 4075 
(January 26, 2022). The Commission designated March 7, 2022 as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of and Comments on the Proposed Rule Change

A. Description of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 11.22(f) to provide 
for a new data product to be known as the Short Volume Report, which 
will be available for purchase to Members and non-Members.\7\ 
Specifically, the Exchange proposes to describe the Short Volume Report 
as ``an end-of-day report that summarizes equity trading activity on 
the Exchange, including trade count and volume by symbol for buy, sell, 
sell short, and sell short exempt trades.'' \8\ The Exchange proposes 
that the end-of-day report will include the following information: 
Trade date, symbol, total volume, buy volume, buy trade count, sell 
volume, sell trade count, sell short volume, sell short trade count, 
sell short exempt volume, and sell short exempt trade count.\9\ The 
Exchange proposes that the Short Volume Report will be available on a 
monthly subscription basis.\10\ The Exchange states subscribers will 
receive a daily end-of-day file that will be delivered after the 
conclusion of the After Hours Trading Session.\11\
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    \7\ See Notice, supra note 3, at 69320. The Exchange states that 
it intends to submit a separate rule filing to adopt fees for the 
Short Volume Report product. See Notice, supra note 3, at 69320.
    \8\ See proposed Rule 11.22(f).
    \9\ See Notice, supra note 3, at 69320.
    \10\ See id.
    \11\ Additionally, the Exchange proposes to make historical 
Short Volume Reports dating as far back as January 2, 2015 available 
for purchase on an ad hoc basis in monthly increments. According to 
the Exchange, the subscription files and historical files will 
include the same data points. See id.
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    In support of the proposal, the Exchange states that the proposed 
product includes substantially similar information as that included in 
comparable products offered on the Nasdaq Stock Market LLC (``Nasdaq'') 
and the New York Stock Exchange (``NYSE'') except that the Exchange 
proposes to also include buy and sell volume as well as trade counts 
for buy, sell, sell short, and sell short exempt volume.\12\ The 
Exchange states that while the proposed product offers volume and trade 
counts which are not offered in the comparable NYSE and Nasdaq short 
sale volume reports, similar data is otherwise available or 
determinable in other NYSE data product offerings.\13\ Specifically, 
the Exchange states that the NYSE Trade and Quote (``TAQ'') product 
provides trade and quote information for orders entered on the NYSE 
affiliated equity exchanges, which include buy, sell, and sell short 
volume.\14\ Thus, according to the Exchange, subscribers to NYSE TAQ 
could determine volume and trade counts from such data.\15\ 
Additionally, the Exchange states that the NYSE Monthly Short Sales 
report provides a record of every short sale transaction on NYSE during 
the month, which includes a size and short sale indicator.\16\ Thus, 
according to the Exchange, subscribers to the NYSE Monthly Short Sales 
report could determine the sell short and sell short exempt volume and 
trade count, albeit on a monthly basis rather than a daily basis.\17\
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    \12\ Specifically, the Exchange states that the Nasdaq daily 
short sale volume file reflects the aggregate number of shares 
executed on Nasdaq, Nasdaq BX, Inc. and Nasdaq PHLX LLC. According 
to the Exchange, the Nasdaq daily short volume report provides the 
following information: Trade date, symbol, volume during regular 
trading hours, and CTA market identifier. Additionally, the Exchange 
states that the NYSE Group Short Volume daily file reflects a 
summary of short sale volume for securities traded on NYSE, NYSE 
American LLC, NYSE Arca, Inc., NYSE National, Inc., and NYSE 
Chicago, Inc. According to the Exchange, the NYSE Group Short Volume 
product provides the following information: Trade date, symbol, 
short exempt volume, short volume, total volume all transactions, 
and market identifier. See id. at 69320-69321.
    \13\ See id. at 69321.
    \14\ See id.
    \15\ See id.
    \16\ See id.
    \17\ See id.
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    The Exchange states that the additional data points will benefit 
market participants because they will allow market participants to 
better understand the changing risk environment on a daily basis.\18\ 
The Exchange states that the proposed Short Volume Report would further 
broaden the availability of U.S. equity market data to investors, 
promoting increased transparency and better informed trading, 
specifically by allowing market participants to identify the source of 
selling pressure and whether it is long or short.\19\
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    \18\ See id.
    \19\ See id.
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B. Comments on the Proposed Rule Change

    One commenter states that the proposed rule text and the Exchange's 
description of the content of the proposed Short Volume Report are 
unclear.\20\ Specifically, the commenter states that the difference 
between ``total volume'' and ``buy volume'' is difficult to understand, 
``since every trade always includes a buyer.'' \21\ The commenter also 
states that the phrase ``buy and sell volume as well as trade counts 
for buy, sell, sell short, and sell short exempt volume'' is confusing, 
and questions how, for example, buy volume for sell short exempt trades 
and sell volume for short exempt trades would be any different.\22\ The 
commenter states that in order to be sensible ``buy and sell volume'' 
must either mean simply ``trade volume'' or else it describes splitting 
out buyer and seller-initiated trade volume or total buy and sell order 
volume.\23\ The commenter states that ``the public deserves to be 
told'' with greater clarity what data the proposed Short Volume Report 
contains and ``deserves a chance to comment before approval.'' \24\ In 
addition, the commenter states that the proposal could involve the 
provision and sale of ``sensitive'' or ``regulatory'' data and could 
reveal ``quite a bit about who is doing what in the markets.'' \25\
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    \20\ Letter from R.T. Leuchtkafer to Vanessa Countryman, 
Secretary, Commission, dated December 27, 2021, at 2-3.
    \21\ Id. at 2.
    \22\ Id.
    \23\ Id. Specifically, the commenter states that ``the phrase 
`buy and sell volume as well as trade counts for buy, sell, sell 
short, and sell short exempt volume' makes more sense if understood 
as (a) `buy[er-initiated] and sell[er-initiated] volume as well as 
trade counts for buy, sell, sell short, and sell short exempt 
volume' or (b) `buy [order] and sell [order] volume as well as trade 
counts for buy, sell, sell short, and sell short exempt volume.' '' 
Id.
    \24\ Id. at 2-3. For example, the commenter states that listed 
companies and investors may want to comment to the extent that the 
proposed Short Volume Report is intended to convey to high frequency 
trading firms, on a daily basis for every stock, the level of 
aggressive short selling or short sale order volume. Id.
    \25\ Id. at 1, 5-6.
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    This commenter also states that the data contained in the proposed 
Short Volume Report is substantially different from the data contained 
in products offered by other national securities exchanges, despite the 
Exchange's assertion that the proposed Short Volume Report is similar 
to those

[[Page 14055]]

products.\26\ Specifically, the commenter states that the Exchange's 
description of the NYSE TAQ data that it points to as precedent is 
inaccurate.\27\ According to the commenter, contrary to the Exchange's 
statements in the proposal, the TAQ data does not contain information 
that would enable subscribers to determine short sale volume or trade 
counts.\28\
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    \26\ Id. at 2-4.
    \27\ Id. at 3-4.
    \28\ Id. This commenter also submitted a second comment letter 
which objects to certain redactions made to the commenter's first 
letter, stating that the redactions diminished the commenter's 
``pointed criticism[s]'' of the Commission's performance in 
reviewing the proposal. See letter from R.T. Leuchtkafer to Vanessa 
Countryman, Secretary, Commission, dated January 4, 2022.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2021-078 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \29\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of proceedings is 
appropriate at this time in view of the legal and policy issues raised 
by the proposal. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide additional comment on the 
proposed rule change to inform the Commission's analysis of whether to 
approve or disapprove the proposed rule change.
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    \29\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\30\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
described above, the Exchange has proposed to amend its rules to 
provide for a new data product to be known as the Short Volume Report. 
The Commission has received comment letters that express concerns 
regarding the content of the proposed Short Volume Report, including 
the clarity of the Exchange's description of the proposed product.
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    \30\ Id.
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    The Commission is instituting proceedings to allow for additional 
analysis of, and input from commenters with respect to, the consistency 
of the proposal with Section 6(b)(5) \31\ of the Act. Section 6(b)(5) 
of the Act requires that the rules of a national securities exchange be 
designed, among other things, to promote just and equitable principles 
of trade, 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 not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \31\ 15 U.S.C. 78f(b)(5).
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V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is consistent with Section 6(b)(5) or any other provision of the Act, 
or the rules and regulations thereunder. Although there do not appear 
to be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of data, views, and arguments, the 
Commission will consider, pursuant to Rule 19b-4 under the Act,\32\ any 
request for an opportunity to make an oral presentation.\33\
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    \32\ 17 CFR 240.19b-4.
    \33\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 
94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by April 1, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
April 15, 2022.
    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal, and any other issues 
raised by the proposed rule change under the Act. In particular, the 
Commission seeks commenters' views regarding whether the Exchange has 
adequately described the proposed new data product for the Commission 
to make a determination under Section 6(b)(5) of 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 No. SR-CboeBZX-2021-078 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 No. SR-CboeBZX-2021-078. The 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 No. SR-CboeBZX-2021-078 and should be submitted by 
April 1, 2022. Rebuttal comments should be submitted by April 15, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05148 Filed 3-10-22; 8:45 am]
BILLING CODE 8011-01-P


