[Federal Register Volume 87, Number 155 (Friday, August 12, 2022)]
[Notices]
[Pages 49907-49910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17319]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95444; File No. SR-CboeBYX-2022-018]


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

August 8, 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 August 1, 2022 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.
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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 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 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 (i) introducing 
a Non-Displayed Add Volume Tier under Footnote 1 (Add/Remove Volume 
Tiers) and (ii) amending the criteria of the Step-Up Tier under 
Footnote 2. The Exchange proposes to implement these changes effective 
August 1, 2022.
    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 
Securities

[[Page 49908]]

Exchange Act of 1934 (the ``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. 
Additionally, in response to the competitive environment, the Exchange 
also offers tiered pricing, which provides Members with opportunities 
to qualify for higher rebates or lower 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 more stringent 
criteria.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (July 26, 2022), available at https://markets.cboe.com/us/equities/market_statistics/.
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Add/Remove Volume Tiers
    Currently, the Exchange 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. These tiers are available to 
Members whose orders yield fee codes B,\4\ V,\5\ and Y,\6\ [sic]where a 
Member meets certain required volume-based criteria. The Exchange now 
proposes to adopt a Non-Displayed Add Volume Tier under Footnote 1, 
which will provide a reduced fee of $0.00050 for orders yielding fee 
codes MM \7\ or AH \8\. Currently, orders yielding fee codes MM or AH 
pay a fee of $0.00100 for orders in securities priced at or above 
$1.00. Under the proposed Non-Displayed Add Volume Tier, Members with 
an eligible order type (e.g., orders yielding fee codes MM or AH) that 
have a combined Auction ADV \9\ and ADAV \10\ greater than or equal to 
5,000,000 would be eligible for the reduced fee.
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    \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 yielding Fee Code Y are displayed orders that add 
liquidity to BYX (Tape C) and are assessed a standard fee of 
$0.00200.
    \7\ Orders yielding Fee Code MM are non-displayed orders that 
add liquidity using Mid-Point Peg. Mid-Point Peg is an order type 
defined in Exchange Rule 11.9(c)(9) as ``[a] limit order that after 
entry into the System, the price of the order is automatically 
adjusted by the System in response to changes in the NBBO to be 
pegged to the mid-point of the NBBO, or, alternatively, pegged to 
the less aggressive of the midpoint of the NBBO or one minimum price 
variation inside the same side of the NBBO as the order.''
    \8\ Orders yielding Fee Code AH are non-displayed orders that 
execute in a Periodic Auction.
    \9\ ``Auction ADV'' means average daily auction volume 
calculated as the number of shares executed in an auction per day. 
ADV means average daily volume calculated as the number of shares 
added or removed, combined, per day, and is calculated on a monthly 
basis.
    \10\ ``ADAV'' means average daily volume calculated as the 
number of shares added per day and is calculated on a monthly basis.
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    The proposed Non-Displayed Add Volume Tier is designed to 
incentivize overall order flow, particularly by offering a reduced fee 
for non-displayed orders that achieve the volume-based criteria. The 
Exchange also believes that the proposed fee associated with the 
proposed Non-Displayed Add Volume Tier is commensurate with the tier's 
criteria. Further, the proposed Non-Displayed Add Volume Tier will 
provide non-displayed liquidity providing Members on the Exchange 
incentives to contribute to a deeper, more liquid market, which in 
turn, provides additional execution opportunities for all Members. 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 that the proposed Non-Displayed 
Add Volume Tier will be available to all Members.
Step-Up Tier
    The Exchange also proposes to revise the criteria of the Step-Up 
Tier under Footnote 2 of the Fee Schedule. Currently, the Step-Up Tier 
offers a reduced fee of $0.0014 to Members whose orders yield fee 
codes, B,\11\ V,\12\ Y,\13\ and AD \14\ and increase their relative 
add-volume order flow each month over a predetermined baseline as well 
as add liquidity over an established threshold. Specifically, the 
current Step-Up Tier provides a reduced fee for eligible orders (e.g., 
those orders yielding fee codes B, V, Y, and AD) where a Member (i) has 
a combined Step-Up Auction ADV \15\ and Step-Up ADAV \16\ from June 
2021 greater than or equal to 0.05% of TCV \17\ or Member has a 
combined Step-Up Auction ADV and Step-Up ADAV from June 2021 greater 
than or equal to 2,000,000; and (ii) Member has a combined Auction ADV 
and ADAV greater than or equal to 0.25% of TCV. The Exchange now 
proposes to lower the reduced fee to $0.0012 (instead of $0.0014) and 
amend the criteria to read as follows:
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    \11\ Supra note 4.
    \12\ Supra note 5.
    \13\ Supra note 6.
    \14\ Orders yielding Fee Code AD are displayed orders that 
execute in a Periodic Auction.
    \15\ ``Step-Up Auction ADV'' means Auction ADV in the relevant 
baseline month subtracted from current Auction ADV.
    \16\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
    \17\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchange and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
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     Member has a combined Step-Up Auction ADV and Step-Up ADAV 
from April 2022 (as compared to June 2021) greater than or equal to 
3,000,000 (as compared to 2,000,000); and Member has a combined Auction 
ADV and ADAV greater than or equal to 0.25% of TCV.
    The Exchange believes the proposed change continues to incentivize 
increased overall order flow to the Exchange, albeit with slightly 
modified criteria, 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. Additionally, the Exchange believes the 
proposed lower reduced fee of $0.0012 is commensurate with the revised 
criteria as Members are still required to increase the amount of 
liquidity they provide on the Exchange, thereby contributing to a 
deeper and more liquid market, which benefits all market participants. 
Furthermore, the proposed Step-Up Tier continues to be available to all 
Members and provide Members an opportunity to receive a reduced fee, 
albeit using a slightly modified criteria.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 and the rules and regulations 
thereunder applicable to the Exchange and, in particular, the 
requirements of Section 6(b) of the Act.\18\ Specifically, the

[[Page 49909]]

Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \19\ 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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \20\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ Id.
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    The Exchange believes that the proposed Non-Displayed Add Volume 
Tier and the proposed changes to the Step-Up Tier are reasonable, 
equitable and not unfairly discriminatory because each tier, as 
proposed, will be available to all Members and provide Members an 
opportunity to receive a reduced fee. 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 taker-maker 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. Specifically, the Exchange 
notes that relative volume-based incentives and discounts have been 
widely adopted by exchanges,\21\ including the Exchange,\22\ 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 or liquidity provision and/or growth patterns.
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    \21\ See Cboe BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \22\ See Cboe BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes the proposed Non-Displayed Add 
Volume Tier is reasonable because it provides an additional opportunity 
for Members to receive a discounted rate by reaching the proposed 
threshold by means of liquidity adding non-displayed orders. The 
Exchange believes that adopting a Non-Displayed Add Volume Tier based 
on a Member's non-displayed liquidity adding orders will encourage non-
displayed liquidity providing Members to provide for a deeper, more 
liquid market, and, as a result, increased execution opportunities at 
improved price levels and, thus, overall order flow. The Exchange 
similarly believes that the proposed revised Step-Up Tier is reasonable 
because it continues to provide a discounted rate (albeit at a lower 
amount), which is commensurate with the revised criteria. The Exchange 
believes that removing the first requirement from the first prong of 
criteria while simultaneously updating the baseline month from June 
2021 to April 2022 and increasing the growth amount continues to 
provide a reasonable means to achieve a reduced fee while contributing 
towards a deeper and more liquid market. The Exchange believes that the 
proposed Non-Displayed Add Volume Tier and proposed revised Step-Up 
Tier continue to benefit all Members by contributing towards a robust 
and well-balanced market ecosystem. Increased overall order flow 
benefits all investors by deepening the Exchange's liquidity pool, 
providing greater execution incentives and opportunities, offering 
additional flexibility for all investors to enjoy cost savings, 
supporting the quality of price discovery, promoting market 
transparency and improving investor protection.
    The Exchange believes the proposed Non-Displayed Add Volume Tier 
and the proposed revisions to the Step-Up Tier represent an equitable 
allocation of fees and are not unfairly discriminatory because all 
Members continue to be eligible for those tiers, would have the 
opportunity to meet a tier's criteria, and would receive the proposed 
reduced fee if such criteria is met. Without having a view of activity 
on other market 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 tiers. While the Exchange has 
no way of predicting with certainty how the proposed tiers will impact 
Member activity, the Exchange anticipates that at least one Member will 
be able to satisfy the criteria for the proposed Non-Displayed Add 
Volume Tier and ten Members will be able to satisfy the proposed 
criteria for the Step-Up Tier. The Exchange also notes that the 
proposed changes 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 proposed or modified tier, the 
Member will merely not receive that corresponding reduced fee. The 
Exchange believes that the proposed addition of the Non-Displayed Add 
Volume Tier and the proposed changes to the Step-Up Tier will benefit 
all market participants by incentivizing additional hidden liquidity 
and, thus, deeper more liquid markets as well as increased execution 
opportunities. Particularly, the proposals are designed to incentivize 
liquidity, which further contributes to a deeper, more liquid market 
and provide even more execution opportunities for active market 
participants at improved prices. 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.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed change 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 
tier changes will apply to all Members equally, in that all Members 
will be eligible for the Non-Displayed Add Volume Tier and all Members 
will continue to be eligible for the Step-Up Tier. In addition, all 
Members will have a reasonable opportunity to meet the tiers' criteria 
and will receive the reduced fee on their qualifying orders if such 
criteria are met. The Exchange does not believe the proposed changes 
burden competition, but rather, enhance competition as they

[[Page 49910]]

are 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 benefit 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. 
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.\23\ 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.'' \24\ 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 states 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'. . .''.\25\
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    \23\ Supra note 3.
    \24\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \25\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC 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 \26\ and paragraph (f) of Rule 19b-4 \27\ 
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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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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-CboeBYX-2022-018 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-2022-018. 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. 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-2022-018, and should 
be submitted on or before September 2, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17319 Filed 8-11-22; 8:45 am]
BILLING CODE 8011-01-P


