89748 Federal Register / Vol. 88, No. 248 / Thursday, December 28, 2023 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Exchange initially filed the proposed fee 

changes on July 3, 2023 (SR–CboeBYX–2023–010). 

On September 1, 2023, the Exchange withdrew that 

filing and submitted SR–CboeBYX–2023–013. On 

September 29, 2023, the Securities and Exchange 

Commission issued a Suspension of and Order 

Instituting Proceedings to Determine whether to 

Approve or Disapprove a Proposed Rule Change to 

Amend its Fees Schedule Related to Physical Port 

Fees (the ‘‘OIP’’). On September 29, 2023, the 

Exchange filed the proposed fee change (SR– 

CboeBYX–2023–014). On October 13, 2023, the 

Exchange withdrew that filing and submitted SR– 

CboeBYX–2023–015. On December 12, 2023, 

Exchange filed the proposed fee change (SR– 

CboeBYX–2023–018). On December 12, 2023, the 

Exchange withdrew that filing and submitted this 

filing. 

4See e.g., The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’), General 8, Connectivity to the 

Exchange. Nasdaq and its affiliated exchanges 

charge a monthly fee of $15,000 for each 10Gb Ultra 

fiber connection to the respective exchange, which 

is analogous to the Exchange’s 10Gb physical port. 

See also New York Stock Exchange LLC, NYSE 

American LLC, NYSE Arca, Inc., NYSE Chicago 

Inc., NYSE National, Inc. Connectivity Fee 

Schedule, which provides that 10 Gb LX LCN 

Circuits (which are analogous to the Exchange’s 10 

Gb physical port) are assessed $22,000 per month, 

per port. 

5The Affiliate Exchanges are also submitting 

contemporaneous identical rule filings. 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(5). 

8 Id. 

9 15 U.S.C. 78f(b)(4). 

10See Securities and Exchange Release No. 83441 

(June 14, 2018), 83 FR 28684 (June 20, 2018) (SR– 

CboeBYX–2018–006). 

11See https://www.officialdata.org/us/inflation/ 

2010?amount=1. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99218; File No. SR– 

CboeBYX–2023–019] 

Self-Regulatory Organizations; Cboe 

BYX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fees Schedule Related to Physical 

Port Fees 

December 21, 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 December 

12, 2023, Cboe BYX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BYX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX Equities’’) 

proposes to amend its Fees 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 relating to physical 

connectivity fees.3

By way of background, a physical port 

is utilized by a Member or non-Member 

to connect to the Exchange at the data 

centers where the Exchange’s servers are 

located. The Exchange currently 

assesses the following physical 

connectivity fees for Members and nonMembers on a monthly basis: $2,500 per 

physical port for a 1 gigabit (‘‘Gb’’) 

circuit and $7,500 per physical port for 

a 10 Gb circuit. The Exchange proposes 

to increase the monthly fee for 10 Gb 

physical ports from $7,500 to $8,500 per 

port. The Exchange notes the proposed 

fee change better enables it to continue 

to maintain and improve its market 

technology and services and also notes 

that the proposed fee amount, even as 

amended, continues to be in line with, 

or even lower than, amounts assessed by 

other exchanges for similar 

connections.4 The physical ports may 

also be used to access the Systems for 

the following affiliate exchanges and 

only one monthly fee currently (and 

will continue) to apply per port: the 

Cboe BZX Exchange, Inc. (options and 

equities), Cboe EDGX Exchange, Inc. 

(options and equities platforms), Cboe 

EDGA Exchange, Inc., and Cboe C2 

Exchange, Inc. (‘‘Affiliate Exchanges’’).5

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

section 6(b) of the Act.6 Specifically, the 

Exchange believes the proposed rule 

change is consistent with the section 

6(b)(5) 7 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) 8 requirement that the 

rules of an exchange not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

The Exchange also believes the 

proposed rule change is consistent with 

section 6(b)(4) 9 of the Act, which 

requires that Exchange rules provide for 

the equitable allocation of reasonable 

dues, fees, and other charges among its 

Members and other persons using its 

facilities. 

The Exchange believes the proposed 

fee change is reasonable as it reflects a 

moderate increase in physical 

connectivity fees for 10 Gb physical 

ports. Further, the current 10 Gb 

physical port fee has remained 

unchanged since June 2018.10 Since its 

last increase 5 years ago however, there 

has been notable inflation. Particularly, 

the dollar has had an average inflation 

rate of 3.9% per year between 2018 and 

today, producing a cumulative price 

increase of approximately 21.1% 

inflation since the fee for the 10 Gb 

physical port was last modified.11

Moreover, the Exchange historically 

does not increase fees every year, 

notwithstanding inflation. Accordingly, 

the Exchange believes the proposed fee 

is reasonable as it represents only an 

approximate 13% increase from the 


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12See e.g., The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’), General 8, Connectivity to the 

Exchange. Nasdaq and its affiliated exchanges 

charge a monthly fee of $15,000 for each 10Gb Ultra 

fiber connection to the respective exchange, which 

is analogous to the Exchange’s 10Gb physical port. 

See also New York Stock Exchange LLC, NYSE 

American LLC, NYSE Arca, Inc., NYSE Chicago 

Inc., NYSE National, Inc. Connectivity Fee 

Schedule, which provides that 10 Gb LX LCN 

Circuits (which are analogous to the Exchange’s 10 

Gb physical port) are assessed $22,000 per month, 

per port. 

13 Id. 

14See Cboe Global Markets, U.S. Equities Market 

Volume Summary, Month-to-Date (June 29 2023), 

available at https://www.cboe.com/us/equities/_

statistics/. 

15See https://www.nyse.com/markets/nyse/ 

membership,. 

16See https://www.iexexchange.io/membership. 

17See https://www.miaxglobal.com/sites/default/ 

files/page-files/20230630_MIAX_Pearl_Equities_

Exchange_Members_June_2023.pdf. 

18Third-party resellers of connectivity play an 

important role in the capital markets infrastructure 

ecosystem. For example, third-party resellers can 

help unify access for customers who want exposure 

to multiple financial markets that are 

geographically dispersed by establishing 

connectivity to all of the different exchanges, so the 

customers themselves do not have to. Many of the 

third-party connectivity resellers also act as 

distribution agents for all of the market data 

generated by the exchanges as they can use their 

established connectivity to subscribe to, and 

redistribute, data over their networks. This may 

remove barriers that infrastructure requirements 

may otherwise pose for customers looking to access 

multiple markets and real-time data feeds. This 

facilitation of overall access to the marketplace is 

ultimately beneficial for the entire capital markets 

ecosystem, including the Exchange, on which such 

firms transact business. 

19See, e.g., Nasdaq Price List—U.S. Direct 

Connection and Extranet Fees, available at, US 

Direct-Extranet Connection (nasdaqtrader.com); 

and Securities Exchange Act Release Nos. 74077 

(January 16, 2022), 80 FR 3683 (January 23, 2022) 

(SR–NASDAQ–2015–002); and 82037 (November 8, 

2022), 82 FR 52953 (November 15, 2022) (SR– 

NASDAQ–2017–114). 

rates adopted five years ago, 

notwithstanding the cumulative rate of 

21.1%. The Exchange is also unaware of 

any standard that suggests any fee 

proposal that exceeds a certain yearly or 

cumulative inflation rate is 

unreasonable. 

The Exchange also believes the 

proposed fee is reasonable as it is still 

in line with, or even lower than, 

amounts assessed by other exchanges 

for similar connections.12 Indeed, the 

Exchange believes assessing fees that are 

a lower rate than fees assessed by other 

exchanges for analogous connectivity 

(which were similarly adopted via the 

rule filing process and filed with the 

Commission) is reasonable. As noted 

above, the proposed fee is also the same 

as is concurrently being proposed for its 

Affiliate Exchanges. Further, Members 

are able to utilize a single port to 

connect to any of the Affiliate 

Exchanges with no additional fee 

assessed for that same physical port. 

Particularly, the Exchange believes the 

proposed monthly per port fee is 

reasonable, equitable and not unfairly 

discriminatory as it is assessed only 

once, even if it connects with another 

affiliate exchange since only one port is 

being used and the Exchange does not 

wish to charge multiple fees for the 

same port. Indeed, the Exchange notes 

that several ports are in fact purchased 

and utilized across one or more of the 

Exchange’s affiliated Exchanges (and 

charged only once). 

The Exchange also believes that the 

proposed fee change is not unfairly 

discriminatory because it would be 

assessed uniformly across all market 

participants that purchase the physical 

ports. The Exchange believes increasing 

the fee for 10 Gb physical ports and 

charging a higher fee as compared to the 

1 Gb physical port is equitable as the 1 

Gb physical port is 1/10th the size of the 

10 Gb physical port and therefore does 

not offer access to many of the products 

and services offered by the Exchange 

(e.g., ability to receive certain market 

data products). Thus, the value of the 1 

Gb alternative is lower than the value of 

the 10 Gb alternative, when measured 

based on the type of Exchange access it 

offers. Moreover, market participants 

that purchase 10 Gb physical ports 

utilize the most bandwidth and 

therefore consume the most resources 

from the network. As such, the 

Exchange believes the proposed fee 

change for 10 Gb physical ports is 

reasonably and appropriately allocated. 

The Exchange also notes Members 

and non-Members will continue to 

choose the method of connectivity 

based on their specific needs and no 

broker-dealer is required to become a 

Member of, let alone connect directly to, 

the Exchange. There is also no 

regulatory requirement that any market 

participant connect to any one 

particular exchange. Moreover, direct 

connectivity is not a requirement to 

participate on the Exchange. The 

Exchange also believes substitutable 

products and services are available to 

market participants, including, among 

other things, other equities exchanges 

that a market participant may connect to 

in lieu of the Exchange, indirect 

connectivity to the Exchange via a thirdparty reseller of connectivity, and/or 

trading of any equities product, such as 

within the Over-the-Counter (OTC) 

markets which do not require 

connectivity to the Exchange. Indeed, 

there are currently 16 registered equities 

exchanges that trade equities (12 of 

which are not affiliated with Cboe), 

some of which have similar or lower 

connectivity fees.13 Based on publicly 

available information, no single equities 

exchange has more than approximately 

16% of the market share.14 Further, low 

barriers to entry mean that new 

exchanges may rapidly enter the market 

and offer additional substitute platforms 

to further compete with the Exchange 

and the products it offers. For example, 

in 2020 alone, three new exchanges 

entered the market: Long Term Stock 

Exchange (LTSE), Members Exchange 

(MEMX), and Miami International 

Holdings (MIAX Pearl). 

As noted above, there is no regulatory 

requirement that any market participant 

connect to any one equities exchange, 

nor that any market participant connect 

at a particular connection speed or act 

in a particular capacity on the 

Exchange, or trade any particular 

product offered on an exchange. 

Moreover, membership is not a 

requirement to participate on the 

Exchange. Indeed, the Exchange is 

unaware of any one equities exchange 

whose membership includes every 

registered broker-dealer. By way of 

example, while the Exchange has 110 

members that trade equities, Cboe EDGX 

has 124 members that trade equities, 

Cboe EDGA has 103 members and Cboe 

BZX has 132 members. There is also no 

firm that is a Member of BYX Equities 

only. Further, based on publicly 

available information regarding a 

sample of the Exchange’s competitors, 

NYSE has 143 members,15 IEX has 129 

members,16 and MIAX Pearl has 51 

members.17

A market participant may also submit 

orders to the Exchange via a Member 

broker or a third-party reseller of 

connectivity. The Exchange notes that 

third-party non-Members also resell 

exchange connectivity. This indirect 

connectivity is another viable 

alternative for market participants to 

trade on the Exchange without 

connecting directly to the Exchange 

(and thus not pay the Exchange 

connectivity fees), which alternative is 

already being used by non-Members and 

further constrains the price that the 

Exchange is able to charge for 

connectivity to its Exchange.18 The 

Exchange notes that it could, but 

chooses not to, preclude market 

participants from reselling its 

connectivity. Unlike other exchanges, 

the Exchange also chooses not to adopt 

fees that would be assessed to thirdparty resellers on a per customer basis 

(i.e., fee based on number of Members 

that connect to the Exchange indirectly 

via the third-party).19 Particularly, these 

third-party resellers may purchase the 

Exchange’s physical ports and resell 


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20For example, a third-party reseller may 

purchase one 10 Gb physical port from the 

Exchange and resell that connectivity to three 

different market participants who may only need 3 

Gb each and leverage the same single port. 

21See e.g., The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’), General 8, Connectivity to the 

Exchange. Nasdaq and its affiliated exchanges 

charge a monthly fee of $15,000 for each 10 Gbps 

Ultra fiber connection to the respective exchange, 

which is analogous to the Exchange’s 10 Gbps 

physical port. See also New York Stock Exchange 

LLC, NYSE American LLC, NYSE Arca, Inc., NYSE 

Chicago Inc., NYSE National, Inc. Connectivity Fee 

Schedule, which provides that 10 Gbps LX LCN 

Circuits (which are analogous to the Exchange’s 10 

Gbps physical port) are assessed $22,000 per 

month, per port. 

22See H.R. Rep. No. 94–229, at 92 (1975) (Conf. 

Rep.) (emphasis added). 

23 15 U.S.C. 78f(b)(5). 

24 15 U.S.C. 78f(8). 

25See also 15 U.S.C. 78k–l(a)(1)(C)(ii) (purposes 

of Exchange Act include to promote ‘‘fair 

competition among brokers and dealers, among 

exchange markets, and between exchange markets 

and markets other than exchange markets’’); Order, 

73 FR at 74781 (‘‘The Exchange Act and its 

legislative history strongly support the 

Commission’s reliance on competition, whenever 

possible, in meeting its regulatory responsibilities 

for overseeing the SROs and the national market 

system.’’). 

access to such ports either alone or as 

part of a package of services. The 

Exchange notes that multiple Members 

are able to share a single physical port 

(and corresponding bandwidth) with 

other non-affiliated Members if 

purchased through a third-party reseller.20 This allows resellers to 

mutualize the costs of the ports for 

market participants and provide such 

ports at a price that may be lower than 

the Exchange charges due to this 

mutualized connectivity. These thirdparty sellers may also provide an 

additional value to market participants 

in addition to the physical port itself as 

they may also manage and monitor 

these connections, and clients of these 

third-parties may also be able to connect 

from the same colocation facility either 

from their own racks or using the thirdparty’s managed racks and 

infrastructure which may provide 

further cost-savings. The Exchange 

believes such third-party resellers may 

also use the Exchange’s connectivity as 

an incentive for market participants to 

purchase further services such as 

hosting services. That is, even firms that 

wish to utilize a single, dedicated 10 Gb 

port (i.e., use one single 10 Gb port 

themselves instead of sharing a port 

with other firms), may still realize cost 

savings via a third-party reseller as it 

relate to a physical port because such 

reseller may be providing a discount on 

the physical port to incentivize the 

purchase of additional services and 

infrastructure support alongside the 

physical port offering (e.g., providing 

space, hosting, power, and other longhaul connectivity options). This is 

similar to cell phone carriers offering a 

new iPhone at a discount (or even at no 

cost) if purchased in connection with a 

new monthly phone plan. These 

services may reevaluate reselling or 

offering Cboe’s direct connectivity if 

they deem the fees to be excessive. 

Further, as noted above, the Exchange 

does not receive any connectivity 

revenue when connectivity is resold by 

a third-party, which often is resold to 

multiple customers, some of whom are 

agency broker-dealers that have 

numerous customers of their own. 

Therefore, given the availability of 

third-party providers that also offer 

connectivity solutions, the Exchange 

believes participation on the Exchange 

remains affordable (notwithstanding the 

proposed fee change) for all market 

participants, including trading firms 

that may be able to take advantage of 

lower costs that result from mutualized 

connectivity and/or from other services 

provided alongside the physical port 

offerings. Because third-party resellers 

also act as a viable alternative to direct 

connectivity to the Exchange, the price 

that the Exchange is able to charge for 

direct connectivity to its Exchange is 

constrained. Moreover, if the Exchange 

were to assess supracompetitve rates, 

members and non-members (such as 

third-party resellers) alike, may decide 

not to purchase, or to reduce its use of, 

the Exchange’s direct connectivity. 

Disincentivizing market participants 

from purchasing Exchange connectivity 

would only serve to discourage 

participation on the Exchange which 

ultimately does not benefit the 

Exchange. Further, the Exchange 

believes its offerings are more affordable 

as compared to similar offerings at 

competitor exchanges.21

Accordingly, the vigorous 

competition among national securities 

exchanges provides many alternatives 

for firms to voluntarily decide whether 

direct connectivity to the Exchange is 

appropriate and worthwhile, and as 

noted above, no broker-dealer is 

required to become a Member of the 

Exchange, let alone connect directly to 

it. In the event that a market participant 

views the Exchange’s proposed fee 

change as more or less attractive than 

the competition, that market participant 

can choose to connect to the Exchange 

indirectly or may choose not to connect 

to that exchange and connect instead to 

one or more of the other 12 non-Cboe 

affiliated equities markets. Indeed, 

market participants are free to choose 

which exchange or reseller to use to 

satisfy their business needs. Moreover, 

if the Exchange charges excessive fees, 

it may stand to lose not only 

connectivity revenues but also revenues 

associated with the execution of orders 

routed to it, and, to the extent 

applicable, market data revenues. The 

Exchange believes that this competitive 

dynamic imposes powerful restraints on 

the ability of any exchange to charge 

unreasonable fees for connectivity. 

Notwithstanding the foregoing, the 

Exchange still believes that the 

proposed fee increase is reasonable, 

equitably allocated and not unfairly 

discriminatory, even for market 

participants that determine to connect 

directly to the Exchange for business 

purposes, as those business reasons 

should presumably result in revenue 

capable of covering the proposed fee. 

The Exchange lastly notes that it is 

not required by the Exchange Act, nor 

any other rule or regulation, to 

undertake a cost-of-service or ratemaking approach with respect to fee 

proposals. Moreover, Congress’s intent 

in enacting the 1975 Amendments to the 

Act was to enable competition—rather 

than government order—to determine 

prices. The principal purpose of the 

amendments was to facilitate the 

creation of a national market system for 

the trading of securities. Congress 

intended that this ‘‘national market 

system evolve through the interplay of 

competitive forces as unnecessary 

regulatory restrictions are removed.’’ 22

Other provisions of the Act confirm that 

intent. For example, the Act provides 

that an exchange must design its rules 

‘‘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.’’ 23 Likewise, the Act 

grants the Commission authority to 

amend or repeal ‘‘[t]he rules of [an] 

exchange [that] impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of this chapter.’’ 24 In short, 

the promotion of free and open 

competition was a core congressional 

objective in creating the national market 

system.25 Indeed, the Commission has 

historically interpreted that mandate to 

promote competitive forces to determine 

prices whenever compatible with a 

national market system. Accordingly, 

the Exchange believes it has met its 

burden to demonstrate that its proposed 

fee change is reasonable and consistent 

with the immediate filing process 

chosen by Congress, which created a 

system whereby market forces 

determine access fees in the vast 

majority of cases, subject to oversight 


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26See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

27NetCoalition 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)). 

28 15 U.S.C. 78s(b)(3)(A). 

29 17 CFR 240.19b–4(f). 

only in particular cases of abuse or 

market failure. Lastly, and importantly, 

the Exchange believes that, even if it 

were possible as a matter of economic 

theory, cost-based pricing for the 

proposed fee would be so complicated 

that it could not be done practically. 

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. The 

proposed fee change will not impact 

intramarket competition because it will 

apply to all similarly situated Members 

equally (i.e., all market participants that 

choose to purchase the 10 Gb physical 

port). Additionally, the Exchange does 

not believe its proposed pricing will 

impose a barrier to entry to smaller 

participants and notes that its proposed 

connectivity pricing is associated with 

relative usage of the various market 

participants. For example, market 

participants with modest capacity needs 

can continue to buy the less expensive 

1 Gb physical port (which cost is not 

changing) or may choose to obtain 

access via a third-party re-seller. While 

pricing may be increased for the larger 

capacity physical ports, such options 

provide far more capacity and are 

purchased by those that consume more 

resources from the network. 

Accordingly, the proposed connectivity 

fees do not favor certain categories of 

market participants in a manner that 

would impose a burden on competition; 

rather, the allocation reflects the 

network resources consumed by the 

various size of market participants— 

lowest bandwidth consuming members 

pay the least, and highest bandwidth 

consuming members pays the most. 

The Exchange’s proposed fee is also 

still lower than some fees for similar 

connectivity on other exchanges and 

therefore may stimulate intermarket 

competition by attracting additional 

firms to connect to the Exchange or at 

least should not deter interested 

participants from connecting directly to 

the Exchange. Further, if the changes 

proposed herein are unattractive to 

market participants, the Exchange can, 

and likely will, see a decline in 

connectivity via 10 Gb physical ports as 

a result. The Exchange operates in a 

highly competitive market in which 

market participants can determine 

whether or not to connect directly to the 

Exchange based on the value received 

compared to the cost of doing so. 

Indeed, market participants have 

numerous alternative venues that they 

may participate on and direct their 

order flow, including 12 non-Cboe 

affiliated equities markets, as well as 

off-exchange venues, where competitive 

products are available for trading. 

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.’’ 26 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 brokerdealers 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’. . . .’’.27 Accordingly, the 

Exchange does not believe its proposed 

change 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 28 and paragraph (f) of Rule 

19b–4 29 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. 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

CboeBYX–2023–019 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–CboeBYX–2023–019. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://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 

a.m. and 3 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 


khammond on DSKJM1Z7X2PROD with NOTICES
89752 Federal Register / Vol. 88, No. 248 / Thursday, December 28, 2023 / Notices 

30 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Each capitalized term not otherwise defined 

herein has its respective meaning as set forth the 

Rules, By-Laws and Organization Certificate of DTC 

(the ‘‘Rules’’), available at http://www.dtcc.com/ 

legal/rules-and-procedures.aspx. 

4Available at https://www.dtcc.com/-/media/ 

Files/Downloads/legal/service-guides/ 

Settlement.pdf. The Settlement Guide is a 

Procedure of DTC. Pursuant to the Rules, the term 

‘‘Procedures’’ means the Procedures, service guides, 

and regulations of DTC adopted pursuant to Rule 

27, as amended from time to time. See Rule 1, 

Section 1, supra note 3. Procedures are binding on 

DTC and each Participant in the same manner that 

they are bound by the Rules. See Rule 27, supra 

note 3. 

5Pursuant to Rule 1, supra note 3, the term ‘‘Net 

Debit Cap’’ of a Participant means an amount 

determined by the Corporation in the manner 

specified in the Procedures; provided, however, 

that the maximum Net Debit Cap of the Participant 

shall be the least of (i) a maximum amount 

applicable to all Participants based on the liquidity 

resources of the Corporation, (ii) the Settling Bank 

Net Debit Cap applicable to such Participant, or (iii) 

any other amount determined by the Corporation, 

in its sole discretion. 

6Pursuant to Rule 1, supra note 3, the term 

‘‘Affiliated Family’’ means each Participant that 

controls or is controlled by another Participant and 

each Participant that is under the common control 

of any Person. For purposes of this definition, 

‘‘control’’ means the direct or indirect ownership of 

more than 50% of the voting securities or other 

voting interests of any Person. 

7Pursuant to Rule 1, supra note 3, the term 

‘‘Collateral Monitor’’ of a Participant, as used with 

respect to its obligations to the Corporation, means, 

on any Business Day, the record maintained by the 

Corporation for the Participant which records, in 

the manner specified in Procedures, the algebraic 

sum of (i) the Net Credit or Debit Balance of the 

Participant and (ii) the aggregate Collateral Value of 

the Collateral of the Participant. 

8Pursuant to Rule 1, supra note 3, the term 

‘‘Delivery Versus Payment’’ means a Delivery 

against a settlement debit to the Account of the 

Receiver, as provided in Rule 9(A) and Rule 9(B) 

and as specified in the Procedures. 

9Pursuant to Rule 1, supra note 3, the term 

‘‘Receiver’’, as used with respect to a Delivery of a 

Security, means the Person which receives the 

Security. 

10Pursuant to Rule 1, supra note 3, the term 

‘‘Collateral’’ of a Participant, as used with respect 

to its obligations to the Corporation, means, on any 

Business Day, the sum of (i) the Actual Participants 

Fund Deposit of the Participant, (ii) the Actual 

Preferred Stock Investment of a Participant, (iii) all 

Net Additions of the Participant and (iv) any 

settlement progress payments (‘‘SPP’’) wired by the 

Participant to the account of the Corporation at the 

Federal Reserve Bank of New York in the manner 

specified in the Procedures. A SPP is Collateral that 

increases a Participant’s Collateral Monitor, but also 

reduces a Participant’s Net Debit Balance. See 

Settlement Guide, supra note 4, at 73. Instructions 

for submission of a SPP are provided in the 

Settlement Guide. See Settlement Guide, supra note 

4, at 69. Pursuant to Rule 1, supra note 3, the term 

‘‘Net Debit Balance’’ of a Participant means the 

amount by which the Gross Debit Balance of the 

Participant exceeds its Gross Credit Balance. Id. The 

term ‘‘Gross Credit Balance’’ of a Participant on any 

Business Day means the aggregate amount of money 

the Corporation credits to all the Accounts in all the 

Account Families of the Participant without 

accounting for any amount of money the 

Corporation debits or charges thereto. Id. The term 

‘‘Gross Debit Balance’’ of a Participant on any 

Business Day means the aggregate amount of money 

the Corporation debits or charges to all the 

Accounts in all the Account Families of the 

Participant without accounting for any amount of 

money the Corporation credits thereto. Id. 

11See Settlement Guide, supra note 4, at 5 and 

72. 

12See Settlement Guide, supra note 4, at 6. 

13Pursuant to Rule 1, supra note 3, the term 

‘‘Aggregate Affiliated Family Net Debit Cap’’ means 

the sum of the Net Debit Caps for the Participants 

that are part of an Affiliated Family in the manner 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBYX–2023–019 and should be 

submitted on or before January 18, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Christina Z. Milnor, 

Assistant Secretary. 

[FR Doc. 2023–28604 Filed 12–27–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99234; File No. SR–DTC– 

2023–013] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing of Proposed Rule Change To 

Modify the DTC Settlement Service 

Guide 

December 22, 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 December 

20, 2023, The Depository Trust 

Company (‘‘DTC’’) 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 

primarily by the clearing agency. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change 3 consists of 

amendments to the DTC Settlement 

Service Guide (‘‘Settlement Guide’’) 4 to 

increase the amount of the maximum 

Net Debit Cap for individual 

Participants,5 as described below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The proposed rule change would 

modify the Settlement Guide to increase 

the amount of the maximum Net Debit 

Cap for individual Participants, as 

described below. 

Background 

Through its settlement services, DTC 

provides book-entry transfer and pledge 

of interests in Eligible Securities and 

end-of-day net funds settlement. DTC 

maintains a liquidity structure designed 

to facilitate its maintenance of sufficient 

financial resources to complete 

settlement each business day 

notwithstanding the failure to settle of 

a defaulting Participant, or Affiliated 

Family of Participants,6 with the largest 

settlement obligation. In this regard, the 

Collateral Monitor 7 and Net Debit Cap 

risk controls are employed by DTC to 

provide that each Delivery Versus 

Payment 8 is contingent on the 

Participant that is the Receiver 9

satisfying its end-of-day net settlement 

obligation, if any. 

The Collateral Monitor prevents the 

completion of transactions that would 

cause a Participant’s Net Debit Balance 

to exceed the value of Collateral in its 

account.10 In this regard, the settlement 

obligation of each Participant must be 

fully collateralized, based on the 

Collateral Monitor, which is DTC’s 

process for measuring the sufficiency of 

the Collateral in a Participant’s account 

to cover the Participant’s net settlement 

obligation.11 This is designed so if a 

Participant fails to pay for its settlement 

obligation, DTC will have sufficient 

Collateral to obtain funding for 

settlement. 

The Net Debit Cap limits the Net 

Debit Balance that each Participant can 

incur to an amount, based upon activity 

level, which would be covered by DTC’s 

liquidity resources. The Net Debit Cap 

is structured so that DTC will have 

sufficient liquidity to complete 

settlement should any single Participant 

or Participant family fail to settle. The 

Net Debit Cap limits the Net Debit 

Balance of an individual Participant at 

any point during DTC’s processing 

day.12 The Aggregate Affiliated Family 

Net Debit Cap 13 limits the sum of Net 


khammond on DSKJM1Z7X2PROD with NOTICES