[Federal Register Volume 87, Number 185 (Monday, September 26, 2022)]
[Notices]
[Pages 58396-58399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20730]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95846; File No. SR-CboeBZX-2022-048]


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

September 20, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 7, 2022, Cboe BZX Exchange, Inc. (``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'') is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change 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 to adopt monthly 
fees assessed to ``Users'' \3\ that elect to subscribe to the Short 
Volume Report, effective, August 24, 2022.\4\
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    \3\ As discussed further below, the Exchange is proposing to 
adopt a definition of User in its Fee Schedule.
    \4\ The Exchange initially filed the proposed fee changes on 
August 24, 2022 (SRCboeBZX-2022-046). On September 7, 2022, the 
Exchange withdrew that filing and submitted this filing.
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    First, under the Market Data Fees definitions section, the Exchange 
proposes to adopt the definition of ``User''. A User of an Exchange 
Market Data product is a natural person, a proprietorship, corporation, 
partnership, or entity, or device (computer or other automated 
service), that is entitled to receive Exchange data. The proposed 
definition is identical to the term User defined on the Exchange's 
affiliate Cboe BYX Exchange, Inc. (``BYX'') Equities Exchange Fee 
Schedule. The Exchange believes the proposed definition will enhance 
transparency in the Exchange's fee schedule.
    On August 9, 2022, the Exchange introduced a new data product known 
as the Short Volume Report.\5\ The Short Volume Report, which will be 
available on August 24, 2022, is an end-of-day

[[Page 58397]]

report that provides certain equity trading activity on the Exchange, 
and includes trade date, total volume, sell short volume, and sell 
short exempt volume, by symbol.\6\ In addition to the daily 
subscription, a Member \7\ or non-Member may purchase the Short Volume 
Report on a historical monthly basis, which provides the end-of-day 
report for each day during a given calendar month.
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    \5\ See Securities Exchange Act No. 95546 (August 18, 2022) 87 
FR 52099 (August 24, 2022) (SR-CboeBZX-2022-044).
    \6\ See Exchange Rule 11.22(f).
    \7\ See Exchange Rule 1.5(n).
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    The Exchange proposes to adopt fees applicable to Users that 
subscribe to the Short Volume Report. As proposed, the Exchange would 
assess a monthly \8\ fee of $300 per month to an Internal Distributor 
\9\ and a fee of $500 per month to an External Distributor \10\ of the 
Short Volume Report. External Distributors, unlike Internal 
Distributors, are typically compensated for the distribution of short 
sale data through subscription fees or other mechanisms. Some External 
Distributors incorporate short sale data into their own proprietary 
products, which they sell to downstream users. These distributors may 
not charge separately for data included in the Short Volume Report, but 
nevertheless gain value from the data by incorporating it into their 
product. The higher price for External Distributors reflects the 
additional value these distributors gain from the product.
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    \8\ The monthly fees for the Short Volume Report end-of-day 
reports are assessed based on a 30-day period. For example, if a 
User subscribes to the Short Volume Report on September 15, 2022, 
the monthly fee will cover the period of September 15, 2022 through 
October 15, 2022. If the User cancels its subscription prior to 
October 15, 2022, the User will not be charged for (or have access 
to) Short Volume Reports for the remainder of October.
    \9\ An ``Internal Distributor'' of an Exchange Market Data 
product is a Distributor that receives the Exchange Market Data 
product and then distributes that data to one or more Users within 
the Distributor's own entity. Supra note 3.
    \10\ An ``External Distributor'' of an Exchange Market Data 
product is a Distributor that receives the Exchange Market Data 
product and then distributes that data to a third party or one or 
more Users outside the Distributor's own entity. Supra note 3.
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    The Exchange also proposes to adopt fees for the Short Volume 
Report provided on a historical basis. The Short Volume Report will be 
available for each calendar month dating back to January 2015, and 
Users of such data will be assessed a fee of $150 per month of data. 
Data provided via the historical Short Volume Report is for only 
display use redistribution (e.g., the data may be provided on the 
User's platform). Therefore, Users of the historical data may not 
charge separately for data included in the Short Volume Report or 
incorporate such data into their product. Nonetheless, the Exchange 
believes it is reasonable, equitable and not unfairly discriminatory to 
charge a fee for display use redistribution that reflects the value 
these distributors gain from the historical product.
    The Exchange anticipates that a wide variety of market participants 
will purchase the proposed Short Volume Report, including, but not 
limited to, active equity trading firms and academic institutions. For 
example, the Exchange notes that academic institutions may utilize the 
Short Volume Report data and as a result promote research and studies 
of the equities industry to the benefit of all market participants. The 
Exchange further believes the proposed Short Volume Report may provide 
helpful trading information regarding investor sentiment that may allow 
market participants to make more informed trading decisions and may be 
used to create and test trading models and analytical strategies and 
provide comprehensive insight into trading on the Exchange.
    The Exchange notes that the Short Volume Report is a completely 
voluntary product, in that the Exchange is not required by any rule or 
regulation to make the reports or services available and that potential 
subscribers may purchase it only if they voluntarily choose to do so. 
Further, the Exchange notes that other exchanges offer similar products 
for a fee.\11\
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    \11\ See Nasdaq Rule 7 Section 152. See also NYSE Group Summary 
Data products available at https://www.nyse.com/publicdocs/nyse/data/NYSE_Historical_Market_Data_Pricing.pdf.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\12\ Specifically, the Exchange believes the proposed rule change 
is consistent with Sections 6(b)(4) and 6(b)(5) of the Act,\13\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility, and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4) and (5).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``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 Short Volume 
Report further broadens the availability of U.S. equity market data to 
investors consistent with the principles of Regulation NMS. The Short 
Volume Report also promotes increased transparency through the 
dissemination of short volume data. The Short Volume Report benefits 
investors by providing access to the Short Volume Report data, which 
may promote better informed trading, as well as research and studies of 
the equities industry.
    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered equities exchanges that trade 
equities. Based on publicly available information, no single equities 
exchange has more than 16% of the equity market share.\14\ The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Particularly, 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.'' \15\ Making similar data products 
available to market participants fosters competition in the 
marketplace, and constrains the ability of exchanges to charge 
supracompetitive fees. In the event that a market participant views one 
exchange's data product as more attractive than the competition, that 
market participant can, and often does, switch between similar 
products. The proposed fees are a result of the competitive environment 
of the U.S. equities industry as the Exchange seeks to adopt fees to 
attract purchasers of the recently introduced Short Volume Report.
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    \14\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (September 6, 2022), available at https://www.cboe.com/us/equities/market_statistics/.
    \15\ 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 fee for the Short Volume 
Report is consistent with the Act in that it is reasonable, equitable, 
and not unfairly discriminatory. In particular, the Exchange believes 
that the proposed fee is reasonable because it is reasonably aligned 
with the value and benefits provided to Users that choose to subscribe 
to the Short Volume Report on

[[Page 58398]]

the Exchange. As discussed above, the Short Volume Report may be 
beneficial to Members and non-Members as it may provide helpful trading 
information regarding investor sentiment that may allow market 
participants to make more informed trading decisions and may be used to 
create and test trading models and analytical strategies and provide 
comprehensive insight into trading on the Exchange. Therefore, the 
Exchange believes that it is reasonable to assess a modest fee to Users 
that subscribe to the Short Volume Report.
    The Exchange further believes the proposed fee is reasonable 
because the amount assessed is less than the analogous fees charged by 
competitor exchanges. For example, the Nasdaq Stock Market LLC 
(``Nasdaq'') charges $750 to Internal Distributors and $1,250 to 
External Distributors of the Nasdaq Short Sale Volume Reports provided 
on both a daily and historical monthly basis. Additionally, the New 
York Stock Exchange LLC (``NYSE'') and its affiliated equity markets 
(the ``NYSE Group'') also charge for the TAQ NYSE Group Short Sales 
(Monthly File) and TAQ NYSE Group Short Volume (Daily File). 
Specifically, NYSE Group charges an access fee of $1,000 per month for 
an ongoing subscription that includes 12 months of back history, then 
additional back history charged at $500 per data content month. NYSE 
Group also charges a back history fee, of $1,000 per data content month 
for the first 12 months of history, then additional back history 
charged at $500 per data content month. The Exchange therefore believes 
that the proposed fees are reasonable and set at a level to compete 
with other equity exchanges that offer similar reports. Indeed, 
proposing fees that are excessively higher than established fees for 
similar data products would simply serve to reduce demand for the 
Exchange's data product, which as noted, is entirely optional. Although 
each of these similar data products provide only proprietary trade data 
and not trade data from other exchanges, it's possible investors are 
still able to gauge overall investor sentiment across different 
equities based on the included data points on any one exchange. As 
such, if a market participant views another exchange's potential report 
as more attractive, then such market participant can merely choose not 
to purchase the Exchange's Short Volume Report and instead purchase 
another exchange's similar data product, which offers similar data 
points, albeit based on that other market's trading activity.
    In addition, the Exchange believes that the proposed fees are 
equitable and not unfairly discriminatory because they will apply to 
all Members and non-Members that choose to subscribe to the Short 
Volume Report equally. As stated, the Short Volume Report is completely 
optional and not necessary for trading. Rather, the Exchange 
voluntarily makes the Short Volume Report available, and Users may 
choose to subscribe (and pay for) the report based on their own 
individual business needs. Potential subscribers may subscribe to the 
Short Volume Report at any time if they believe it to be valuable or 
may decline to purchase it.
    The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to charge an External Distributor of the Short 
Volume Report a higher fee than an Internal Distributor as an External 
Distributor will ordinarily charge a fee to its downstream customers 
for this service, and, even if the vendor is not charging a specific 
fee for this particular service, the Exchange expects products from the 
Short Volume Report to be part of a suite of offerings from 
distributors that generally promote sales. External distribution is 
also fundamentally different than internal use, in that the former 
generates revenue from external sales while the latter does not. 
Therefore, the Exchange believes it is reasonable, equitable and not 
unfairly discriminatory to charge a higher fee for a product that 
generates downstream revenue. Further, the proposed fee will apply 
equally to Internal and External Distributors, respectively, that 
choose to distribute data from the Short Volume Report. Moreover, as 
described above, another Exchange similarly charges External 
Distributors higher fees as compared to Internal Distributors for a 
similar data product.\16\
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    \16\ See Nasdaq Rule 7 Section 152.
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    Finally, the Exchange believes the proposal to add the definition 
of User to its Fee Schedule is reasonable as it will enhance 
transparency in the Exchange's fee schedule.

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 because the Short Volume 
Report will be available equally to all Members and non-Members that 
choose to subscribe to the report. As stated, the Short Volume Report 
is optional and Members and non-Members may choose to subscribe to such 
report, or not, based on their view of the additional benefits and 
added value provided by utilizing the Short Volume Report. As such, the 
Exchange believes the proposed rule change imposes no burden on 
intramarket competition. 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, similar products offered by Nasdaq and the 
NYSE Group are priced higher than the Short Volume Report. 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.'' 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'. . .''. Accordingly, the Exchange does 
not believe its proposal imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.

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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule

[[Page 58399]]

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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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-2022-048 on the subject line.

Paper Comment

     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-2022-048. 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-2022-048, and should be 
submitted on or before October 17, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20730 Filed 9-23-22; 8:45 am]
BILLING CODE 8011-01-P


