[Federal Register Volume 87, Number 53 (Friday, March 18, 2022)]
[Notices]
[Pages 15464-15467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05698]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94408; File No. SR-CboeBZX-2022-019]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
the External Subscriber Fees Applicable to Cboe One Summary Derived 
Data API Service

March 14, 2022.
    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 March 10, 2022, 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. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to modify the External Subscriber fees applicable 
to Cboe One Summary Derived Data API Service. 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 modify fees charged to External 
Distributors that distribute Cboe One Summary Derived Data through an 
Application Programming Interface (``API'')--i.e., the Derived Data API 
Service, effective March 1, 2022.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
March 1, 2022 (SR-BZX-2022-010). On March 10, 2022, the Exchange 
withdrew that filing and submitted this proposal.
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Background
    By way of background, the Exchange offers a Financial Product 
Distribution Program (``Program''), under which a Distributor may 
subscribe to one of three Derived Data Service options, White Label 
Service,\4\ API Service \5\ or Platform Service,\6\ each of which 
offers either BZX Top Data, which is an uncompressed data feed that 
offers top of book quotations and execution information based on equity 
orders entered into the System \7\ or Cboe One Summary Data, which is a 
proprietary data product that provides the top of book quotations and 
execution information for all listed equity securities traded across 
the Exchange and its affiliated U.S. equities exchanges (the ``Cboe 
equity exchanges'').\8\ Under the Program, regardless of the Service 
option selected by a Distributor, the Distributors receive the same 
real-time Exchange data (i.e., BZX Top or Cboe One Summary) as all 
other subscribers of such Exchange data. From the Exchange data, a 
Distributor may create ``Derived Data'', which is pricing data or other 
data that (i) is created in whole or in part from Exchange data, (ii) 
is not an index or financial product, and (iii) cannot be readily 
reverse[hyphen]engineered to recreate Exchange data or used to create 
other data that is a reasonable facsimile or substitute for Exchange 
data. Derived Data may be created by Distributors for a number of 
different purposes, as determined by the Distributor. The specific use 
of Exchange data is determined by the Distributor, as applicable fees 
do not depend on the purpose for placing the Derived Data under the 
Program.
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    \4\ A ``White Label Service'' is a type of hosted display 
solution in which a Distributor hosts or maintains a website or 
platform on behalf of a third-party entity. The service allows 
Distributors to make Derived Data available on a platform that is 
branded with a third-party brand, or co-branded with a third party 
and a Distributor. The Distributor maintains control of the 
application's data, entitlements and display.
    \5\ An ``API Service'' is a type of data feed distribution in 
which a Distributor delivers an API or similar distribution 
mechanism to a third-party entity for use within one or more 
platforms. The service allows Distributors to provide Derived Data 
to a third-party entity for use within one or more downstream 
platforms that are operated and maintained by the third-party 
entity. The Distributor maintains control of the entitlements, but 
does not maintain technical control of the usage or the display.
    \6\ A ``Platform Service'' is a type of hosted display solution 
in which a Distributor provides derivative products to Platform 
Service Data Users within their infrastructure. The service allows 
Distributors to make Derived Data available as part of a platform, 
providing users remote access to derivative products based in whole 
or in part on Exchange Data.
    \7\ See Exchange Rule 13.8(c).
    \8\ See Exchange Rule 13.8(b). The Cboe One Summary external 
distribution fee is equal to the aggregate EDGX Top, BZX, Top, BYX 
Top, and EDGA Top fees external distribution fees.
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Cboe One Summary Derived Data API Service External Subscriber Fees
    The Derived Data API Service program offers discounted fees for 
Distributors that make Derived Data available through an API, thereby 
allowing Distributors to benefit from reduced fees when distributing 
Derived Data to subscribers that establish their own platforms (rather 
than relying on a hosted display solution). Instead of the regular flat 
fee for External Distribution of Exchange data, Distributors of Derived 
Data under the API Service are charged a tiered External Subscriber Fee 
based on the number of API Service Platforms (i.e., ``External 
Subscribers'') that receive Derived Data from the Distributor through a 
Derived Data API Service and may benefit from

[[Page 15465]]

discounted pricing based on the number of subscribers. Currently, 
Distributors under this program are charged a fee of $5,000 per month 
for each External Subscriber if the Distributor makes Derived Data 
available to 1-5 External Subscribers; $4,000 per month for each 
External Subscriber if the Distributor makes Derived Data available to 
6-20 External Subscribers, and further lowered to $3,000 per month for 
each External Subscriber if the Distributor makes Derived Data 
available to 21 or more External Subscribers. The Exchange now proposes 
to further reduce the distribution fees for Distributors of Cboe One 
Summary Derived Data through a Derived API Service. Particularly, the 
Exchange proposes to modify the External Subscriber fees as follows:

------------------------------------------------------------------------
                                                     Current    Proposed
          Number of external subscribers               fee        fee
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1-5...............................................     $5,000     $3,000
6-20..............................................      4,000      2,500
21 and above......................................      3,000      2,000
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    The Exchange notes that the External Subscriber Fee is non-
progressive and based on the number of External Subscribers that 
receive Derived Data from the Distributor. To illustrate how the 
discount is applied, the Exchange has codified an example in the Fees 
Schedule under the notes section of the Derived Data API Service 
section, which it now proposes to update in connection with the 
proposed changes to the External Subscriber fees.\9\ Currently, the 
example provides that a Distributor providing Derived Data based on 
Cboe One Summary to six (6) External Subscribers that are API Service 
Platforms would be charged a monthly fee of $24,000 (i.e., 6 External 
Subscribers x $4,000 each). The Exchange proposes to update the example 
to provide that Distributor providing Derived Data based on Cboe One 
Summary to six (6) External Subscribers that are API Service Platforms 
would be charged a monthly fee of $15,000 (i.e., 6 External Subscribers 
x $2,500 each). The proposal to reduce the External Subscriber fees is 
designed to provide a price structure that is competitive and attract 
Distributors for its Cboe One Summary data offering through the Derived 
Data API Service.
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    \9\ The Exchange notes that it inadvertently omitted appending 
three asterisks to the External Subscriber Fee in the ``Cboe One 
Summary Derived Data API Service'' table to reference the 
corresponding notes section that includes the summary as to how the 
discount is applied and seeks to update the Fees Schedule now to 
avoid potential confusion.
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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),\11\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act.\12\ Specifically, the 
proposed rule change supports (i) fair competition among brokers and 
dealers, among exchange markets, and between exchange markets and 
markets other than exchange markets, and (ii) the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. In addition, the 
proposed rule change is consistent with Rule 603 of Regulation NMS,\13\ 
which provides that any national securities exchange that distributes 
information with respect to quotations for or transactions in an NMS 
stock do so on terms that are not unreasonably discriminatory.
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    \12\ 15 U.S.C. 78k-1.
    \13\ See 17 CFR 242.603.
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    In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. It was believed that this authority would 
expand the amount of data available to consumers, and also spur 
innovation and competition for the provision of market data. The 
Exchange believes that the proposed fee change would further broaden 
the availability of U.S. equity market data to investors, consistent 
with the principles of Regulation NMS.
    The Exchange operates in a highly competitive environment. Indeed, 
there are 16 registered national securities exchanges that trade U.S. 
equities and have the capability to offer associated top of book market 
data products to their customers.\14\ Additionally, two other exchange 
families specifically offer similar consolidated top of book products 
that compete directly with Cboe One Summary.\15\ 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.'' \16\ The proposed fee change is a result of the 
competitive environment, as the Exchange seeks to amend its fees to 
attract additional Distributors for its Cboe One Summary data offering 
through the Derived Data API Service.
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    \14\ Competing top-of-book products include, Nasdaq Basic, BX 
Basic, PSX Basic, NYSE BQT, NYSE BBO/Trades, NYSE Arca BQT, NYSE 
Arca BBO/Trades, NYSE American BBO/Trades, NYSE Chicago BBO/Trades, 
IEX TOPS, MIAX PEARL Equities Top of Market Feed, and MEMX MEMOIR 
Top.
    \15\ Competing consolidated top of book products include Nasdaq 
Basic and NYSE BQT. As described on the Nasdaq website, available 
here: http://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic, Nasdaq 
Basic is a ``low cost alternative'' that provides ``Best Bid and 
Offer and Last Sale information for all U.S. exchange-listed 
securities based on liquidity within the Nasdaq market center, as 
well as trades reported to the FINRA Trade Reporting Facility 
(``TRF'').'' As described on the NYSE website, available here: 
https://www.nyse.com/market-data/real-time/nyse-bqt NYSE Best Quote 
and Trades (BQT) ``is a cost efficient, consolidated market data 
feed that provides a unified view of quotes and trades from NYSE, 
NYSE American, NYSE Arca, NYSE Chicago and NYSE National.''
    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes that the proposed change is reasonable as it 
lowers the existing External Subscriber fees and these fee reductions 
would continue to facilitate cost effective access to market 
information that is used primarily to create certain derivative 
instruments rather than to trade U.S. equity securities. As discussed, 
the Cboe One Summary data offering through the Derived Data API Service 
allows Distributors to create Derived Data that is based on a more 
comprehensive view of the U.S. equities market. Because Exchange data 
in this context is primarily purchased for the creation of Derived Data 
encompassing certain derivative instruments, Distributors do not 
require a consolidated view of the market across several exchanges, and 
will generally purchase such data from a single or select few 
exchange(s) for their purposes. As noted above, Cboe One Summary 
includes top of book quotation and transaction data across all four 
Cboe equity exchanges, which allows Distributors to create more 
meaningful Derived Data than that available from a single exchange's 
market data at a potentially reduced price.
    The existence of alternatives to the Program therefore ensures that 
the Exchange cannot set unreasonable or

[[Page 15466]]

unfairly discriminatory fees, as subscribers are free to elect such 
alternatives. That is, the Exchange competes with other exchanges that 
provide similar top of book and/or consolidated top of book products 
and pricing programs for Derived Data.\17\ The availability of diverse 
competitive products promotes additional competition as it ensures that 
alternative products from different sources are readily available to 
Distributors and the broader market. The Exchange therefore believes 
that the existing Derived Data API Service is not only constrained by 
competition but also ensures continued competition that acts as a 
constraint on the pricing of services provided by other national 
securities exchanges. If a competing exchange were to charge less for a 
similar product than the Exchange charges under the existing fee 
structure, even as amended, prospective subscribers may choose not to 
subscribe to, or cease subscribing to, the Program. The Exchange 
believes that further lowering the cost of accessing Derived Data may 
make the Exchange's market information more attractive, and encourage 
additional Distributors to subscribe to Exchange market data instead of 
competitor products. While the Exchange has no way of predicting with 
certainty the impact of the proposed changes, it anticipates up to two 
Distributors will create Derived Data from Cboe One Summary using the 
API Service.
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    \17\ See generally, the Nasdaq Basic fees at http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
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    Moreover, External Subscriber fees only apply to Distributors that 
elect to participate in the Program by distributing Derived Data from 
Cboe One Summary through an API Service. Cboe One Summary Feed is 
distributed and purchased on a voluntary basis, in that neither the 
Exchange nor market data distributors are required by any rule or 
regulation purchase this data or to make this data available. 
Accordingly, Distributors can discontinue distributing at any time and 
for any reason, including due to an assessment of the reasonableness of 
fees charged, Cboe One Summary Derived Data under the API Service. 
Indeed, there are no Distributors who are currently subscribing to the 
API Service for Cboe One Summary Derived Data. Further, as discussed, 
firms have a wide variety of alternative market data products from 
which to choose, such as similar proprietary consolidated top of book 
data products offered by other national securities exchanges,\18\ 
including those that choose to offer discounted fees for the 
distribution of Derived Data in an effort to compete for this business.
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    \18\ Supra note 14.
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    The proposed rule change also continues to provide an alternate, 
and as proposed, lower, fee structure for providing Cboe One Summary 
market data to Distributors that make Derived Data available to 
External Subscribers via API Services. If a Distributor uses an API 
Service to distribute Derived Data, the Distributor will still be 
charged a fee that is tiered based on the number of External 
Subscribers that are provided access to that data instead of the higher 
fee normally charged for external distribution. The Exchange believes 
that this fee is equitable and not unfairly discriminatory because the 
Exchange will apply the same fees to any similarly situated 
Distributors that elect to participate in the Program based on the 
number of External Subscribers provided access to Derived Data through 
an API Service. Also, all Distributors that make Derived Data available 
to External Subscribers through an API Service will receive a discount 
compared to the current pricing applicable for external distribution of 
Cboe One Summary.\19\ The Exchange also believes its equitable and not 
unfairly discriminatory to provide incrementally higher discounted 
rates to Distributors that provide access to Derived Data to a greater 
numbers of Subscribers as the discounted rates are designed to 
incentivize firms to grow the number of External Subscribers that 
purchase Derived Data from the Distributor.
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    \19\ See Cboe BZX U.S. Equities Exchange Fee Schedule.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive environment, and its ability to price 
these data products is constrained by competition among exchanges that 
offer similar data products, and pricing options, to their customers. 
Top of book data is broadly disseminated by competing U.S. equities 
exchanges. There are therefore a number of alternative products 
available to market participants and investors. In this competitive 
environment potential subscribers are free to choose which competing 
product to purchase to satisfy their need for market information. 
Often, the choice comes down to price, as broker-dealers or vendors 
look to purchase the lowest priced top of book data product, or 
quality, as market participants seek to purchase data that represents 
significant market liquidity. In order to better compete for this 
segment of the market, the Exchange is proposing to reduce fees charged 
to Distributors that distribute certain Derived Data through an API 
Service. The Exchange believes that this would facilitate greater 
access to Exchange data and Derived Data, ultimately benefiting 
investors that are provided access to such data.
    The Exchange believes that the proposed fees do not put any market 
participants at a relative disadvantage compared to other market 
participants. The proposed fees would apply equally to external 
distributors of Cboe One Summary that make Derived Data available 
through the API Service option offered by the Exchange under the 
Program. The continued difference in fees under the Program as compared 
to the normal External Distribution fee for Cboe One Summary is 
appropriate given that External Subscribers and Users receive Derived 
Data, which by definition cannot be readily reverse[hyphen]engineered 
to recreate Cboe One Summary data or used to create other data that is 
a reasonable facsimile or substitute for Cboe One Summary. The Exchange 
therefore believes that the proposed fees neither favor nor penalize 
one or more categories of market participants in a manner that would 
impose an undue burden on competition. Moreover, a number of national 
securities exchanges, including the Exchange and its affiliated Cboe 
U.S. equities exchanges offer pricing discounts for Derived Data 
today.\20\ These pricing programs reduce the cost of accessing top of 
book market information that is used, among other things, to create 
derivative instruments rather than to trade U.S. equity securities. 
Additionally, the Exchange is proposing to enhance the Program by 
reducing the fees for Cboe One Summary Derived Data. The Exchange does 
not believe that the proposal would cause any unnecessary or 
inappropriate burden on intermarket competition as other exchanges are 
free to lower their prices to better compete with the Exchange's 
offering. The Exchange believes that the proposed rule change is pro-
competitive as it seeks to offer pricing incentives to

[[Page 15467]]

customers to better position the Exchange as it competes to attract 
additional market data subscribers.
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    \20\ Supra note 16. See also Cboe BZX U.S. Equities Exchange Fee 
Schedule, Financial Product Distribution Program.
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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 \21\ and paragraph (f) of Rule 19b-4 \22\ 
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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-2022-019 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-2022-019. 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-2022-019 and should be submitted 
on or before April 8, 2022.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05698 Filed 3-17-22; 8:45 am]
BILLING CODE 8011-01-P


