[Federal Register Volume 88, Number 90 (Wednesday, May 10, 2023)]
[Notices]
[Pages 30178-30181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09902]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97436; File No. SR-CboeBZX-2023-027]


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

May 4, 2023.
    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 April 23, 2023, 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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[[Page 30179]]

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 US Equity 
Short Volume & Trades Report, effective, April 21, 2023.
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    \3\ 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. See the BZX Equities Exchange Fee Schedule at 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
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    The Exchange recently adopted a new data product known as the US 
Equity Short Volume & Trades Report (the, ``Report'').\4\ The Report, 
which will be available on April 21, 2023, contains (i) an end-of-day 
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; \5\ and (ii) an end-of-month report 
that provides a record of all short sale transactions for the month, 
and includes trade date and time, trade size, trade price, and type of 
short sale execution, by symbol and exchange.\6\ In addition to a 
monthly or annual subscription, a Member \7\ or non-Member may purchase 
the Report on a historical monthly basis, which provides the end-of-day 
reports for each day and the corresponding end-of-month report for a 
given calendar month.
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    \4\ See Securities and Exchange Act No. 97304 (April 13, 2023) 
(SR-CboeBZX-2023-024).
    \5\ The end-of-day report was originally titled ``Short Volume 
Report'' and was displayed as an individual product on the 
Exchange's Fee Schedule. The end-of-day report is now being 
incorporated into the Report and as such, the Exchange seeks to 
amend its Fee Schedule to display the applicable fees for the 
Report, which will contain both the end-of-day report and an end-of-
month report.
    \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 Report. As proposed, the Exchange would assess a 
monthly \8\ fee of $750 per month to an Internal Distributor \9\ of the 
Report, and a fee of $1,250 per month to an External Distributor \10\ 
of the Report. These fees may be paid on a monthly basis or on an 
annual basis.\11\ 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 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 Report are assessed on a rolling 
period based on the original subscription date. For example, if a 
User subscribes to the Report on April 24, 2023, the monthly fee 
will cover the period of April 24, 2023, through May 23, 2023. If 
the User cancels its subscription prior to May 23, 2023, and no 
refund is issued, the User will continue to receive both the end-of-
day and end-of-month components of the Report for the subscription 
period.
    \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.
    \11\ Users who subscribe to the US Equity Short Volume & Trades 
Report during the middle of a month will receive the end-of-day 
report for each day beginning on the date of subscription.
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    The Exchange also proposes to adopt fees for the Report provided on 
a historical basis. The Report will be available for each calendar 
month dating back to January 2015, and Users of such data will be 
assessed a fee of $500 per historical monthly Report for which they 
subscribe.\12\ Data provided via the historical Report is only for 
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 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.
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    \12\ Users who purchase the US Equity Short Volume & Trades 
report on an annual basis will receive 12 months of historical data 
free of charge, beginning with the month immediately prior to the 
date of subscription. Users who purchase the US Equity Short Volume 
& Trades report on a monthly basis would have the option of 
purchasing historical data on a per month basis.
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    The Exchange anticipates that a wide variety of market participants 
will purchase the Report, including, but not limited to, active equity 
trading firms and academic institutions. For example, the Exchange 
notes that academic institutions may utilize the 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 
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 further notes that the 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.\13\
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    \13\ See the ``Nasdaq Short Sale Volume Reports'' portion of the 
Nasdaq Fee Schedule at http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN. See also the ``NYSE Group Summary 
Data Products'' portion of the NYSE Historical Proprietary Market 
Data Pricing 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

[[Page 30180]]

Section 6(b) of the Act.\14\ Specifically, the Exchange believes the 
proposed rule change is consistent with Sections 6(b)(4) and 6(b)(5) of 
the Act,\15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 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 US Equity 
Short Volume & Trades Report further broadens the availability of U.S. 
equity market data to investors consistent with the principles of 
Regulation NMS. The Report also promotes increased transparency through 
the dissemination of short volume data. The Report benefits investors 
by providing access to the US Equity Short Volume & Trades 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.\16\ 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.'' \17\ Making similar data products 
available to market participants fosters competition in the 
marketplace, and constrains the ability of exchanges to charge 
supercompetitive 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 US Equity Short Volume & 
Trades Report.
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    \16\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (April 17, 2023), available at https://www.cboe.com/us/equities/market_/.
    \17\ 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 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 
Report on the Exchange. As discussed above, the 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 Report.
    The Exchange further believes the proposed fee is reasonable 
because the amount assessed is equal to or comparable to 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,\18\ which is 
identical to the proposed subscription fees for the US Equity Short 
Volume & Trades Report. 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.\19\ 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 is 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 Report and instead purchase another exchange's 
similar data product, which offers similar data points, albeit based on 
that other market's trading activity.
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    \18\ See http://www.nasdaqtrader.com/Trader.aspx?id=DPUSdata#short.
    \19\ See https://www.nyse.com/publicdocs/nyse/data/NYSE_Historical_Market_Data_.pdf.
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    In addition, the Exchange believes that the proposed fees are 
equitable and not unfairly discriminatory because they will apply 
equally to all Members and non-Members that choose to subscribe to the 
Report. As stated, the Report is completely optional and not necessary 
for trading. Rather, the Exchange voluntarily makes the 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 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 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 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 
Report.

[[Page 30181]]

Moreover, as described above, another Exchange similarly charges 
External Distributors higher fees as compared to Internal Distributors 
for a similar data product.\20\
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    \20\ See Nasdaq Rule 7 Section 152.
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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 because the Report will be 
available equally to all Members and non-Members that choose to 
subscribe to the report. As stated, the 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 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 
equally or comparable to the 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 \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-2023-027 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-2023-027. 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. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File Number SR-CboeBZX-2023-027, and should be 
submitted on or before May 31, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09902 Filed 5-9-23; 8:45 am]
BILLING CODE 8011-01-P


