[Federal Register Volume 88, Number 51 (Thursday, March 16, 2023)]
[Notices]
[Pages 16285-16288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05337]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97108; File No. SR-CboeBZX-2023-020]


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

March 10, 2023.
    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 6, 2023, 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. (the ``Exchange'' or ``BZX'' or ``BZX 
Equities'') proposes to amend its Fee Schedule. The text of the 
proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``BZX Equities'') as follows: (1) adopt a 
new Step-Up Tier and renumber the remaining tiers; and (2) adopt a new 
Non-Displayed Step-Up Tier. The Exchange proposes to implement the 
proposed change to its fee schedule on March 6, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
March 1, 2023 (SR-CboeBZX-2023-017). On March 6, 2023, the Exchange 
withdrew that filing and submitted this proposal.
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    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

[[Page 16286]]

16 registered equities exchanges, as well as a number of alternative 
trading systems and other off-exchange venues that do not have similar 
self-regulatory responsibilities under the Exchange Act, to which 
market participants may direct their order flow. Based on publicly 
available information,\4\ no single registered equities exchange has 
more than 15% of the market share. Thus, in such a low-concentrated and 
highly competitive market, no single equities exchange possesses 
significant pricing power in the execution of order flow. The Exchange 
in particular operates a ``Maker-Taker'' model whereby it pays credits 
to Members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's fee schedule sets forth the standard rebates 
and rates applied per share for orders that provide and remove 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00160 per 
share for orders that add liquidity and assesses a fee of $0.0030 per 
share for orders that remove liquidity.\5\ For orders in securities 
priced below $1.00, the Exchange does not provide a rebate or assess a 
fee for orders that add liquidity and assesses a fee of 0.30% of total 
dollar value for orders that remove liquidity.\6\ Additionally, in 
response to the competitive environment, the Exchange also offers 
tiered pricing which provides Members opportunities to qualify for 
higher rebates or reduced fees where certain volume criteria and 
thresholds are met. Tiered pricing provides an incremental incentive 
for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (February 22, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See BZX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Step-Up Tiers
    Pursuant to footnote 2 of the Fee Schedule, the Exchange currently 
offers Step Up Tiers (tiers 1 through 3) that provide Members an 
opportunity to receive an enhanced rebate from the standard rebate for 
liquidity adding orders that yield fee codes B,\7\ V,\8\ and Y \9\ 
where they increase their relative liquidity each month over a 
predetermined baseline. Specifically, the Tiers are as follows:
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    \7\ Orders yielding Fee Code ``B'' are displayed orders adding 
liquidity to BZX (Tape B).
    \8\ Orders yielding Fee Code ``V'' are displayed orders adding 
liquidity to BZX (Tape A).
    \9\ Orders yielding Fee Code ``Y'' are displayed orders adding 
liquidity to BZX (Tape C).
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     Tier 1 offers an enhanced rebate of $0.0032 per share for 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
(1) MPID has a Step-Up Add TCV \10\ from May 2019 >=0.10%; and (2) MPID 
has an ADV \11\ >=0.50% of the TCV.
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    \10\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in 
the relevant baseline month subtracted from current ADAV as a 
percentage of TCV. ADAV means average daily added volume calculated 
as the number of shares added per day. ADAV is calculated on a 
monthly basis. TCV means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
    \11\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day. ADV is calculated on 
a monthly basis.
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     Tier 2 offers an enhanced rebate of $0.0032 per share for 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
(1) Member has a Step-Up ADAV \12\ from January 2022 >=10,000,000 or 
Members has a Step-Up Add TCV from January 2022 >=0.10%; and (2) Member 
has an ADV >=0.30% of the TCV or Members has an ADV >=35,000,000.
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    \12\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
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     Tier 3 offers an enhanced rebate of $0.0032 per share for 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
(1) MPID has a Step-Up ADAV from May 2021 >=30,000,000 or MPID has a 
Step-Up Add TCV from May 2021 >=0.30%; and (2) MPID has an ADV >=0.30% 
of the TCV or MPID has an ADV >=35,000,000.
    The Exchange now proposes to add a new Tier 1 and renumber existing 
Tiers 1 through 3. Specifically, proposed Tier 1 would provide for the 
following:
     Proposed Tier 1 would offer an enhanced rebate of $0.0031 
per share for qualifying orders (i.e., orders yielding fee codes B, V, 
or Y) where (1) Member has a Step-Up ADAV from January 2023 
>=10,000,000 or Member has a Step-Up Add TCV from January 2023 >=0.10%; 
and (2) Member has an ADV >=0.60% of the TCV.
    Proposed Tiers 2 through 4 would have the same criteria and provide 
the same enhanced rebate as existing Tiers 1 through 3, respectively. 
The only proposed change is to modify the Tier numbers of Tier 1 
through 3 to Tier 2 through 4, respectively.
Non-Displayed Step-Up Tier
    In addition to the adoption of a new Step-Up Tier 1, the Exchange 
now proposes to amend footnote 2 to add a Non-Displayed Step-Up Tier, 
which will provide Members an opportunity to receive an enhanced rebate 
from the standard rebate \13\ for liquidity adding non-displayed orders 
that yield fee codes HB,\14\ HV,\15\ and HY \16\ and meet certain 
required volume-based criteria. The proposed criteria for the Non-
Displayed Step-Up Tier is as follows:
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    \13\ Currently, the Exchange provides a standard rebate of 
$0.00100 per share for liquidity adding non-displayed orders that 
yield fee codes HB, HV, or HY.
    \14\ Orders yielding Fee Code ``HB'' are non-displayed orders 
adding liquidity to BZX (Tape B).
    \15\ Orders yielding Fee Code ``HV'' are non-displayed orders 
adding liquidity to BZX (Tape A).
    \16\ Orders yielding Fee Code ``HY'' are non-displayed orders 
adding liquidity to BZX (Tape C).
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     The proposed Non-Displayed Step-Up Tier would offer an 
enhanced rebate of $0.0025 per share for qualifying orders (i.e., 
orders yielding fee codes HB, HV, or HY) where (1) Member has a Step-Up 
ADAV from January 2023 >=10,000,000 or Member has a Step-Up Add TCV 
from January 2023 >=0.10%; and (2) Member has an ADV >=0.60% of the 
TCV.
    The Exchange notes that the Step-Up Tiers in general are designed 
to provide Members with additional opportunities to receive enhanced 
rebates by increasing their order flow to the Exchange, which further 
contributes to a deeper, more liquid market and provides even more 
execution opportunities for active market participants. Like other 
Step-Up Tiers, the proposed Step-Up Tier 1 is designed to give members 
an additional opportunity to receive an enhanced rebate for orders 
meeting the applicable criteria. Furthermore, the proposed Non-
Displayed Step-Up Tier is designed to increase the Members' provision 
of liquidity to the Exchange, which increases execution opportunities 
and provides for overall enhanced price discovery and price improvement 
opportunities on the Exchange. Increased overall order flow benefits 
all Members by contributing towards a robust and well-balanced market 
ecosystem.
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.\17\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \18\ 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

[[Page 16287]]

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) \19\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \20\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
    \20\ 15 U.S.C. 78f(b)(4).
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    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes that 
its proposal to introduce a new Step-Up Tier 1 and a new Non-Displayed 
Step-Up Tier reflects a competitive pricing structure designed to 
incentivize market participants to direct their order flow to the 
Exchange, which the Exchange believes would enhance market quality to 
the benefit of all Members. The Exchange believes the proposed Step-Up 
Tier 1 and Non-Displayed Step-Up Tier are reasonable as they serve to 
incentivize Members to increase their liquidity-adding, displayed 
volume (Step-Up Tier 1) and liquidity-adding, non-displayed volume 
(Non-Displayed Step-Up Tier), which benefit all market participants by 
incentivizing continuous liquidity and thus, deeper, more liquid 
markets as well as increased execution opportunities. Particularly, the 
proposed incentives to provide displayed liquidity are designed to 
incentivize continuous displayed liquidity, which signals other market 
participants to take the additional execution opportunities provided by 
such liquidity, while the proposed incentives to provide non-displayed 
liquidity will further contribute 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.
    In particular, the Exchange believes the proposed Step-Up Tier 1 
and Non-Displayed Step-Up Tier represent an equitable allocation of 
rebates and are not unfairly discriminatory because all Members are 
eligible for those tiers and would have the opportunity to meet a 
tier's criteria and would receive the proposed rebate if such criteria 
is met. Further, the proposed rebates are commensurate with the 
proposed criteria. That is, the rebates reasonably reflect the 
difficulty in achieving the applicable criteria as proposed. Without 
having a view of activity on other markets and off-exchange venues, the 
Exchange has no way of knowing whether this proposed rule change would 
definitely result in any Members qualifying for the proposed tier. 
While the Exchange has no way of predicting with certainty how the 
proposed tiers will impact Member activity, the Exchange anticipates 
that at least one Member will be able to satisfy the criteria proposed 
under Step-Up Tier 1 and Non-Displayed Step-Up Tier 1. The Exchange 
also notes that proposed tier/rebate will not adversely impact any 
Member's ability to qualify for other reduced fee or enhanced rebate 
tiers. Should a Member not meet the proposed criteria under the 
modified tier, the Member will merely not receive that corresponding 
enhanced rebate.
    Additionally, 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 of 
liquidity provision and/or growth patterns. Competing equity exchanges 
offer similar tiered pricing structures, including schedules of rebates 
and fees that apply based upon members achieving certain volume and/or 
growth thresholds, as well as assess similar fees or rebates for 
similar types of orders, to that of the Exchange.
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    \21\ See, e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \22\ See, e.g., BZX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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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 changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the 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.'' \23\
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    \23\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange believes the proposed rule changes do 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 apply to all Members equally in that all Members continue 
to be eligible for the current Step-Up Tiers, the proposed Step-Up Tier 
1, and proposed Non-Displayed Step-Up Tier, have a reasonable 
opportunity to meet the tiers' criteria and will receive the 
corresponding additional rebates if such criteria are met. 
Additionally, the proposed tier changes are designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed tier criteria would incentivize market participants to direct 
liquidity adding displayed and non-displayed order flow to the 
Exchange, bringing with it additional execution opportunities for 
market participants and improved price transparency. Greater overall 
order flow, trading opportunities, and pricing transparency benefits 
all market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including 15 other equities exchanges and 
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

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exchange has more than 15% \24\ of the market share. 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.'' \25\ 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' . . . .''.\26\ Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \24\ Supra note 3.
    \25\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \26\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \27\ and paragraph (f) of Rule 19b-4 \28\ 
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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    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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-2023-020 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-2023-020. 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 such 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-2023-020 and should be submitted 
on or before April 6, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-05337 Filed 3-15-23; 8:45 am]
BILLING CODE 8011-01-P


