Federal Register / Vol. 89, No. 181 / Wednesday, September 18, 2024 / Notices 76537 

51See Securities Exchange Act Release No. 51808 

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

52NetCoalition 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)). 

53 15 U.S.C. 78s(b)(3)(A). 

54 17 CFR 240.19b–4(f). 

55 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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.’’ 51 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’. . . .’’.52 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 53 and paragraph (f) of Rule 

19b–4 54 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– 

CboeEDGX–2024–057 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–CboeEDGX–2024–057. 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 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeEDGX–2024–057 and should be 

submitted on or before October 9, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.55

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–21172 Filed 9–17–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101011; File No. SRCboeBZX–2024–079] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fees Schedule Related to Physical 

Port Fees 

September 12, 2024. 

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 August 

29, 2024, Cboe BZX Exchange, Inc. (the 

‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX 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/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 


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3The Exchange initially filed the proposed fee 

changes on July 3, 2023 (SR–CboeBZX–2023–046). 

On September 1, 2023, the Exchange withdrew that 

filing and submitted SR–CboeBZX–2023–067. 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’’) in anticipation of a possible U.S. 

government shutdown. On October 2, 2023, the 

Exchange filed the proposed fee change (SR– 

CboeBZX–2023–080). On October 13, 2023, the 

Exchange withdrew that filing and on business date 

October 16, 2023 submitted SR–CboeBZX–2023– 

084. On December 12, 2023, the Exchange withdrew 

that filing and submitted SR–CboeBZX–2023–103. 

On February 9, 2024, the Exchange withdrew that 

filing and submitted SR–CboeBZX–2024–016. On 

April 9, 2024, the Exchange withdrew that filing 

and submitted SR–CboeBZX–2024–027. On June 7, 

2024, the Exchange withdrew that filing and 

submitted SR–CboeBZX–2024–051. On August 29, 

2024, 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. 6The Exchange notes that conversely, other 

exchange groups charge separate port fees for access 

to separate, but affiliated, exchanges. See e.g., 

Securities and Exchange Release No. 99822 (March 

21, 2024), 89 FR 21337 (March 27, 2024) (SR– 

MIAX–2024–016). 7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9 Id. 

10 15 U.S.C. 78f(b)(4). 

11See Chairman Jay Clayton, Statement on 

Division of Trading and Markets Staff Fee 

Guidance, June 12, 2019 (‘‘Fee Guidance’’). The Fee 

Guidance also recognized that ‘‘products need to be 

substantially similar but not identical to be 

substitutable.’’ 

12A substitute, or substitutable good, in 

economics and consumer theory refers to a product 

or service that consumers see as essentially the 

same or similar-enough to another product. See 

https://www.investopedia.com/terms/s/ 

substitute.asp. 

13See Fee Guidance. 

14The Supreme Court in Ohio v. American 

Express Co. recognized that, as platforms facilitate 

transactions between two or more sides of a market, 

their value is dependent on attracting users to both 

sides of the platform (i.e., network effects). See Ohio 

v. American Express Co. 138 S. Ct. 2274, 585 U.S. 

(2018). 

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 Exchange also notes 

that a single 10 Gb physical port can be 

used to access the Systems of the 

following affiliate exchanges: the Cboe 

BYX Exchange, Inc., Cboe EDGX 

Exchange, Inc. (options and equities 

platforms), Cboe EDGA Exchange, Inc., 

and Cboe C2 Exchange, Inc., (‘‘Affiliate 

Exchanges’’).5 Notably, only one 

monthly fee currently (and will 

continue) to apply per 10 Gb physical 

port regardless of how many affiliated 

exchanges are accessed through that one 

port.6

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.7 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 8 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) 9 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) 10 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 operates in a highly 

competitive environment. On May 21, 

2019, the SEC Division of Trading and 

Markets issued non-rulemaking fee 

filing guidance titled ‘‘Staff Guidance on 

SRO Rule Filings Relating to Fees’’ 

(‘‘Fee Guidance’’), which provided, 

among other things, that in determining 

whether a proposed fee is constrained 

by significant competitive forces, the 

Commission will consider whether 

there are reasonable substitutes for the 

product or service that is the subject of 

a proposed fee.11 As described in further 

detail below, the Exchange believes 

substitutable products 12 are in fact 

available to market participants, 

including by third-party resellers of the 

Exchange’s physical connectivity, and 

the availability to trade all of the 

products offered at the Exchange at one 

of the 16 other equities exchanges that 

trade equities or other off-exchange 

trading platforms. 

The 2019 Fee Guidance also 

acknowledged that platform 

competition may demonstrate a 

competitive environment and therefore 

constrain aggregate returns, regardless of 

the pricing of individual products, and 

that platforms often have joint 

products.13 Exchanges themselves are 

platforms.14 Particularly, exchanges are 

multi-sided platforms that facilitate 

interactions between multiple sides of 

the market—buyers and sellers, 

companies and investors, and traders 

and market watchers—and their value is 

dependent on attracting users to the 

multiple sides of the platform. As 

described in further detail below, the 

Exchange believes that competition 

among exchanges as trading platforms 

(and between exchanges and alternative 

trading venues) constrain exchanges 

from charging excessive fees for any 

exchange products, including trading, 

listings, connectivity and market data. 

As such, fees need not be analyzed from 

only one side, but rather can, and 

should, be considered within the larger 

context of the platform to test for anticompetitive behavior. And indeed, 

nothing in the Exchange Act requires 

the individual examination of specific 

product fees in isolation. Rather, the 

Exchange generally requires the rules of 

an exchange to provide for the 

‘‘equitable allocation of reasonable dues, 


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15See 15 U.S.C. 78f(b)(4). 16NetCoalition v. SEC, 715 F.3d 342, 534–35 

(D.C. Cir. 2013); see also H.R. Rep. No. 94–229 at 

92 (1975) (‘‘[I]t is the intent of the conferees that 

the national market system evolve through the 

interplay of competitive forces as unnecessary 

regulatory restrictions are removed.’’). 17 15 U.S.C. 78s(b)(3)(A). 18See 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 10Gbps 

Ultra fiber connection to the respective exchange, 

which is analogous to the Exchange’s 10Gbps 

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. 

19See Securities and Exchange Release No. 83442 

(June 14, 2018), 83 FR 28675 (June 20, 2018) (SR– 

CboeBZX–2018–037). 20The Consumer Price Index (‘‘CPI’’) is a measure 

of the average change over time in the prices paid 

by urban consumers for a market basket of 

consumer goods and services. The CPI represents 

all goods and services purchased for consumption 

by the reference population (U or W). The Bureau 

of Labor Statistics (‘‘BLS’’) has classified all 

expenditure items into more than 200 categories, 

arranged into eight major groups (food and 

beverages, housing, apparel, transportation, medical 

care, recreation, education and communication, and 

other goods and services). Included within these 

major groups are various government-charged user 

fees, such as water and sewerage charges, auto 

registration fees, and vehicle tolls. See https://

www.bls.gov/cpi/questions-and-answers.htm. 

21The PPI is a family of indexes that measures 

the average change over time in selling prices 

received by domestic producers of goods and 

services. PPIs measure price change from the 

perspective of the seller. This contrasts with other 

measures, such as the Consumer Price Index (CPI), 

that measure price change from the purchaser’s 

perspective. See https://www.bls.gov/ppi/ 

overview.htm. 

22See https://www.officialdata.org/us/inflation/ 

2010?amount=1. 

23See https://data.bls.gov/timeseries/ 

PCU5182105182105 (As of August 13, 2024). 

Among the industry-specific PPIs is for North 

American Industry Classification System (‘‘NAICS’’) 

Code 518210: ‘‘Data Processing, Hosting and 

Related Services: Hosting, Active Server Pages 

(ASP), and Other Information Technology (IT) 

Infrastructure Provisioning Services,’’ NAICS index 

codes categorize products and services that are 

common to particular industries. According to BLS, 

these codes ‘‘provide comparability with a wide 

assortment of industry-based data for other 

economic programs, including productivity, 

production, employment, wages, and earnings.’’ See 

https://www.bls.gov/ppi/overview.htm. BLS 

describes NAICS 51820 as follows: ‘‘The primary 

output of NAICS 518210 is the provision of 

electronic data processing services. In the broadest 

sense, computer services companies help their 

customers efficiently use technology. The 

processing services market consists of vendors who 

use their own computer systems—often utilizing 

proprietary software—to process customers’ 

transactions and data. Companies that offer 

processing services collect, organize, and store a 

customer’s transactions and other data for recordkeeping purposes.’’ 

24See https://www.cmegroup.com/education/ 

courses/learn-about-key-economic-events/ 

understandingconsumer-price-index-and-producerprice-index.html. 25See https://www.bls.gov/eci/tables.html (As of 

August 13, 2024). 26Unregulated competitors providing 

connectivity and co-location services often have 

annual price increases written into their agreements 

with customers to account for inflation and rising 

costs. 

fees and other charges among members 

and issuers and other persons using its 

facilities.’’ 15 The Exchange also notes 

that Congress has directed the 

Commission to ‘‘rely on ‘competition, 

whenever possible, in meeting its 

regulatory responsibilities for 

overseeing the’’ self-regulatory 

organizations (‘‘SROs’’) ‘‘and the 

national market system.’ ’’ 16 This is the 

basis for the congressional presumption 

that exchanges’ pricing decisions are 

constrained by competitive forces and 

should not be impaired by excessive 

regulatory scrutiny or rules. Following 

this mandate, the Commission and the 

courts have repeatedly expressed their 

preference for competition over 

regulatory intervention to determine 

prices, products, and services in the 

securities markets. This notion is further 

supported by the Dodd-Frank 

amendments authorizing immediately 

effective fees, not just for transactional 

pricing, but for market data and other 

products as well.17 For the reasons 

described further below, the Exchange 

believes that the Proposal supports 

competition, and therefore the proposed 

fees are reasonable and equitably 

allocated. Indeed, the Exchange believes 

the considerable amount of data both 

qualitative and quantitative, discussed 

below not only meets the Exchange’s 

burden demonstrating that the proposed 

rule change is consistent with the 

Exchange but goes beyond the type of 

reasoned evidence that the courts and 

the Commission have invited exchanges 

to submit in support of proposed fee 

changes. 

The Exchange also believes the 

proposed fee change is reasonable as it 

reflects a moderate increase in physical 

connectivity fees for 10 Gb physical 

ports. First, the Exchange believes its 

proposal is reasonable as its offering, 

even as amended, continues to be more 

affordable as compared to similar 

offerings at competitor exchanges.18 The 

Exchange also notes that the current 10 

Gb physical port fee has remained 

unchanged since June 2018.19 Since its 

last increase over 6 years ago however, 

there has been notable inflation and 

indeed, the proposed rate is below the 

rates of inflation as measured by either 

the Consumer Product Index (‘‘CPI’’) 20

or the Producer Price Index (‘‘PPI’’).21

Particularly, under the CPI, the dollar 

has had an average inflation rate of 

3.80% per year between 2018 and today, 

producing a cumulative price increase 

of approximately 25% inflation since 

the fee for the 10 Gb physical port was 

last modified.22 Moreover, a more 

specific and pertinent gauge of 

inflation—the PPI for data processing, 

hosting and related services, active 

services pages, and other IT 

infrastructure provisioning services— 

increased approximately 15% from 2018 

to 2024.23 Both the CPI and the PPI are 

considered ‘‘key data releases, meaning 

the monthly indicator is heavily 

scrutinized by traders, since they are 

used by the Federal Reserve to assess 

developments in the economy.’’ 24

Further, the Employment Cost Index 

(‘‘ECI’’), which measures the change in 

the hourly labor cost to employers over 

time, produced a cumulative price 

increase of approximately 25%.25

Notwithstanding such significant 

inflation, the Exchange has not 

increased its connectivity fees during 

this time, thereby eroding the value of 

the revenue it collects through such 

fees.26 The proposed fee represents 

approximately 13% increase from the 

current fee, which is far below the rate 

of inflation as measured by the CPI and 

on par with (and even lower than) the 

rate of inflation as measured by the PPI 

and ECI since 2018. Although the 

Exchange believes it would be 

reasonable to increase fees by an 

amount equal to the full rates of 

inflation, however measured, to 

reestablish the initial value of the 

revenues it earns through its fees, the 

Exchange does not propose to do this, 

as the Exchange is sensitive to the 

sticker shock that would occur if the 

Exchange raised its fees by 25%. 

Instead, the Exchange proposes a 13% 

increase, an amount that the Exchange 

believes to be reasonable on its face as 

it is significantly less than various 

measures of inflation discussed above. 

The Exchange believes further that it 

is reasonable to increase its fees to 

compensate for inflation because, over 

time, inflation has degraded the value of 

each dollar that the Exchange collects in 

fees, such that the real revenue collected 

today is considerably less than that 

same revenue collected in 2018. The 

impact of this inflationary effect is also 

independent of any change in the 

Exchange’s costs in providing its goods 

and services. The Exchange believes 

that it is reasonable for it to offset, in 

part, this erosion in the value of the 

revenues it collects. Additionally, the 

Exchange historically does not increase 

fees every year, notwithstanding 

inflation. Accordingly, the Exchange 

believes the proposed fee of $8,500 is 

reasonable as it only represents an 

approximate 13% increase from the rate 

adopted six years ago, notwithstanding 


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27 Id. 

28See Cboe Global Markets, U.S. Equities Market 

Volume Summary, Month-to-Date (June 6, 2024), 

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

market_statistics/. 

29See https://www.nyse.com/markets/nyse/ 

membership. 

30See https://www.iexexchange.io/membership. 

31See https://www.miaxglobal.com/sites/default/ 

files/page-files/20230630_MIAX_Pearl_Equities_

Exchange_Members_June_2023.pdf. 

32Third-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. 

33See, 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). 

34For 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. 

the cumulative inflation rates as noted 

above. Were the Exchange to adjust fully 

for inflation under the CPI, it would be 

proposing a monthly rate of $9,360, 

which is 10% more than the Exchange 

is actually proposing. To further 

demonstrate, the Exchange notes that 

$8,500 in 2024 is equivalent to 

approximately $6,800 in 2018, when 

adjusted for inflation. Accordingly, the 

Exchange believes the proposed rate is 

also reasonable as it is nearly 20% lower 

than the rate adopted in 2018 (i.e., 

$7,500) when adjusted for inflation. The 

Exchange is also unaware of any 

standard that suggests any fee proposal 

that exceeds a certain yearly or 

cumulative inflation rate is 

unreasonable, and in any event, in this 

instance the increase is well below the 

cumulative rate. 

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. Market participants 

may voluntarily choose to become a 

member of one or more of a number of 

different exchanges, of which, the 

Exchange is but one choice. 

Additionally, any Exchange member 

that is dissatisfied with the proposal is 

free to choose not to be a member of the 

Exchange and send order flow to 

another 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.27 Based on publicly 

available information, no single equities 

exchange has more than approximately 

15% of the market share.28 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, as of April 2024 Cboe BYX 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 the 

Exchange only. Further, based on 

publicly available information regarding 

a sample of the Exchange’s competitors, 

NYSE has 143 members, 29 IEX has 129 

members, 30 and MIAX Pearl has 51 

members.31

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.32 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).33 Particularly, these 

third-party resellers may purchase the 

Exchange’s physical ports and resell 

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.34 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 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 


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Federal Register / Vol. 89, No. 181 / Wednesday, September 18, 2024 / Notices 76541 

35See e.g., See 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 10Gbps 

Ultra fiber connection to the respective exchange, 

which is analogous to the Exchange’s 10Gbps 

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. 

36See Securities Exchange Act Release No. 86901 

(September 9, 2019), 84 FR 48458 (September 13, 

2019) (File No. S7–13–19). 

37 Id. 

38Mackintosh, Phil & Normyle, Michael. ‘‘How 

Exchanges Compete: An Economic Analysis of 

Platform Competition.’’ Nasdaq, March 2024, 

https://www.nasdaq.com/How-Exchanges-CompeteAn-Economic-Analysis-of-Platform-Competition 

services and infrastructure support 

alongside the physical port offering 

(e.g., providing space, hosting, power, 

and other long-haul 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. For example, 

there are approximately 12 third parties 

who resell Exchange connectivity across 

the 7 Affiliated Exchanges, which are all 

accessible on the same network. These 

third-party resellers collectively 

maintain approximately 48 physical 

ports from the Exchange, but have 

collectively almost 200 unique 

customers downstream, connected 

through these multi-Exchange ports. 

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.35

Accordingly, 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 to use to satisfy their 

business needs. Moreover, if the 

Exchange were to assess 

supracompetitve rates, members and 

non-members 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. For example, 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. 

Additionally, in connection with a 

proposed amendment to the National 

Market System Plan Governing the 

Consolidated Audit Trail (‘‘CAT NMS 

Plan’’) the Commission again discussed 

the existence of competition in the 

marketplace generally, and particularly 

for exchanges with unique business 

models.36 The Commission recognized 

that while some exchanges may have a 

unique business model that is not 

currently offered by competitors, a 

competitor could create similar business 

models if demand were adequate, and if 

a competitor did not do so, the 

Commission believes it would be likely 

that new entrants would do so if the 

exchange with that unique business 

model was otherwise profitable.37

As noted above, exchanges also 

compete as platforms. In the context of 

the competition among platforms, 

different exchanges operate a variety of 

different business models. In fact, there 

are a number of ways an exchange can 

differentiate itself, such as by pricing 

structure, technology and functionality 

offerings, and products. As discussed 

above, market participants can access 

the exchange without purchasing 

anything from an exchange, instead 

using third-party routers and data. For 

those whose business models 

necessitate the purchase of some mix of 

trading, connectivity, and data services, 

there are a variety of options at different 

price points, allowing market 

participants to exercise choice, and 

forcing exchanges to compete on their 

offerings and prices. Further, all 

elements of the platform—trade 

executions, market data, connectivity, 

membership, and listings—operate in 

concert. For example, trade executions 

increase the value of market data; 

market data functions as an 

advertisement for on-exchange trading; 

listings increase the value of trade 

executions and market data; and greater 

liquidity on the exchange enhances the 

value of ports and connectivity services. 

As such, demand for one set of platform 

services depends on the demand for 

other services and therefore to make its 

platform attractive to multiple 

constituencies, an exchange must 

consider inter-side externalities. In 

assessing competition for exchange 

services, exchanges must also consider 

not only explicit costs, such as fees for 

trading, market data, and connectivity, 

but the implicit costs, such as realized 

spreads, of trading on an exchange. 

When accounting for explicit and 

implicit costs, research has found that 

competition has largely equalized all-in 

trading costs to users across 

exchanges.38 For example, data has 

shown that venues with the highest 

explicit costs (typically inverted and 

fee-fee venues) have the lowest implicit 


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39Per-trade markout is a measure of theoretical 

profitability from the perspective of a liquidity 

provider. 

40Mackintosh, Phil & Normyle, Michael. ‘‘How 

Exchanges Compete: An Economic Analysis of 

Platform Competition.’’ Nasdaq, March 2024, 

https://www.nasdaq.com/How-Exchanges-CompeteAn-Economic-Analysis-of-Platform-Competition 

41See id. For example, research by Nasdaq found 

that it is over 60% more expensive to trade on the 

costliest exchange than on the cheapest. As Nasdaq 

noted, such a sizeable disparity suggests that there 

is another factor that keeps these exchanges in 

competition. Specifically, when implicit costs are 

considered, the difference in cost to trade is 

minimized. 

42Bershova, Nataliya & Jaquet, Paul. (2019). 

Execution Quality and Fee Structure: Passive Lit 

Executions. Bernstein Electronic Trading, Execution 

Research. 

43See 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. 

costs from markouts 39 and vice versa.40

Implicit costs explain how venues with 

higher explicit costs manage to compete 

with seemingly much cheaper venues 

(and conversely, how exchanges with 

higher implicit costs use lower fees to 

compete).41 Additional research also 

confirms that market participants route 

trades in a way that not only accounts 

for explicit and implicit costs—but also 

very efficiently values opportunity 

costs, like lower odds of getting a fill on 

inverted venues.42 As such, the 

Exchange believes the proposed fee 

change is reasonable as exchanges are 

constrained from charging excessive 

fees for any exchange product, 

including physical connectivity. 

The Exchange also believes the 

proposed fee increase is reasonable in 

light of recent and anticipated 

connectivity-related upgrades and 

changes. The Exchange and its affiliated 

exchanges recently launched a multiyear initiative to improve Cboe 

Exchange Platform performance and 

capacity requirements to increase 

competitiveness, support growth and 

advance a consistent world class 

platform. The goal of the project, among 

other things, is to provide faster and 

more consistent order handling and 

matching performance for options, 

while ensuring quicker processing time 

and supporting increasing volumes and 

capacity needs. For example, the 

Exchange recently performed switch 

hardware upgrades. Particularly, the 

Exchange replaced existing customer 

access switches with newer models, 

which the Exchange believes resulted in 

increased determinism. The recent 

switch upgrades also increased the 

Exchange’s capacity to accommodate 

more physical ports by nearly 50%. 

Network bandwidth was also increased 

nearly two-fold as a result of the 

upgrades, which among other things, 

can lead to reduce message queuing. 

The Exchange also believes these newer 

models result in less natural variance in 

the processing of messages. The 

Exchange notes that it incurred costs 

associated with purchasing and 

upgrading to these newer models, of 

which the Exchange has not otherwise 

passed through or offset. 

As of April 1, 2024, market 

participants also having the option of 

connecting to a new data center (i.e., 

Secaucus NY6 Data Center (‘‘NY6’’)), in 

addition to the current data centers at 

NY4 and NY5. The Exchange made NY6 

available in response to customer 

requests in connection with their need 

for additional space and capacity. In 

order to make this space available, the 

Exchange expended significant 

resources to prepare this space, and will 

also incur ongoing costs with respect to 

maintaining this offering, including 

costs related to power, space, fiber, 

cabinets, panels, labor and maintenance 

of racks. The Exchange also incurred a 

large cost with respect to ensuring NY6 

would be latency equalized, as it is for 

NY4 and NY5. 

The Exchange also has made various 

other improvements since the current 

physical port rates were adopted in 

2018. For example, the Exchange has 

updated its customer portal to provide 

more transparency with respect to firms’ 

respective connectivity subscriptions, 

enabling them to better monitor, 

evaluate and adjust their connections 

based on their evolving business needs. 

The Exchange also performs proactive 

audits on a weekly basis to ensure that 

all customer cross connects continue to 

fall within allowable tolerances for 

Latency Equalized connections. 

Accordingly, the Exchange expended, 

and will continue to expend, resources 

to innovate and modernize technology 

so that it may benefit its Members and 

continue to compete among other 

equities markets. The ability to continue 

to innovate with technology and offer 

new products to market participants 

allows the Exchange to remain 

competitive in the equities space which 

currently has 16 equities markets and 

potential new entrants. If the Exchange 

were not able to assess incrementally 

higher fees for its connectivity, it would 

effectively impact how the Exchange 

manages its technology and hamper the 

Exchange’s ability to continue to invest 

in and fund access services in a manner 

that allows it to meet existing and 

anticipated access demands of market 

participants. Disapproval of fee changes 

such as the proposal herein, could also 

have the adverse effect of discouraging 

an exchange from improving its 

operations and implementing 

innovative technology to the benefit of 

market participants if it believes the 

Commission would later prevent that 

exchange from recouping costs and 

monetizing its operational 

enhancements, thus adversely 

impacting competition as well as the 

interests of market participants and 

investors. 

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.43 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 all of its Affiliate Exchanges 

and will only be charged one single fee 

(i.e., a market participant will only be 

assessed the proposed $8,500 even if it 

uses that physical port to connect to the 

Exchange and another (or even all 6) of 

its Affiliate Exchanges. Particularly, the 

Exchange believes the proposed 

monthly per port fee is reasonable, 

equitable and not unfairly 

discriminatory since as the Exchange 

has determined to not 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 


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44Regarding market participant impact, it is 

notable that since the proposed fee change was first 

implemented over 14 months ago, the Exchange 

received no comments from any individual Member 

suggesting that it was unduly burdened by the 

proposed changes described herein, 

notwithstanding the opportunity to do so on several 

occasions during multiple comment periods. The 

only comment letters the Exchange did receive were 

all submitted by the same industry participant 

notorious for submitting comments opposing any 

and all market data and connectivity fee filings and 

equally notorious for the factual inaccuracies and 

conclusory statements contained therein. 

45See H.R. Rep. No. 94–229, at 92 (1975) (Conf. 

Rep.) (emphasis added). 

46 15 U.S.C. 78f(b)(5). 

47 15 U.S.C. 78f(8). 

48See 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.’’). 

49See e.g., letter from Brian Sopinsky, General 

Counsel, Susquehanna International Group, LLP 

(‘‘SIG’’), to Vanessa Countryman, Secretary, 

Commission, dated February 7, 2023, letters from 

Gerald D. O’Connell, SIG, to Vanessa Countryman, 

Secretary, Commission, dated March 21, 2023, May 

24, 2023, July 24, 2023 and September 18, 2023, 

and letters from John C. Pickford, SIG, to Vanessa 

Countryman, Secretary, Commission, dated January 

4, 2024, and March 1, 2024 and letters from Thomas 

M. Merritt, Deputy General Counsel, Virtu 

Financial, Inc. (‘‘Virtu’’), to Vanessa Countryman, 

Secretary, Commission, dated November 8, 2023 

and January 2, 2024. See also Securities Exchange 

Act Release No. 93883 (December 30, 2021), 87 FR 

523 (January 5, 2022) (SR–IEX–2021–14) 

(Suspension of and Order Instituting Proceedings 

To Determine Whether To Approve or Disapprove 

a Proposed Rule Change To Amend Its Fee 

Schedule for Market Data Fees) and Securities 

Exchange Act Release No. 94888 (May 11, 2022), 87 

FR 29892 (May 17, 2022) (SR–PEARL–2022–18) 

(Notice of Filing of a Proposed Rule Change To 

Amend the MIAX PEARL Options Fee Schedule To 

Increase Certain Connectivity Fees and To Increase 

the Monthly Fees for MIAX Express Network Full 

Service Port; Suspension of and Order Instituting 

Proceedings To Determine Whether To Approve or 

Disapprove the Proposed Rule Change). 

that purchase 10 Gb physical ports 

utilize the most bandwidth and 

therefore consume the most resources 

from the network. The Exchange also 

anticipates that firms that utilize 10 Gb 

ports will benefit the most from the 

Exchange’s investment in offering NY6 

as the Exchange anticipates there will be 

much higher quantities of 10 Gb 

physical ports connecting from NY6 as 

compared to 1 Gb ports. Indeed, the 

Exchange notes that 10 Gb physical 

ports account for approximately 90% of 

physical ports across the NY4, NY5, and 

NY6 data centers, and to date, 80% of 

new port connections in NY6 are 10 Gb 

ports. As such, the Exchange believes 

the proposed fee change for 10 Gb 

physical ports is reasonably and 

appropriately allocated. 

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, the Exchange 

notes that it did not raise any arguments 

relating to its profitability nor is it 

required to do so in order to 

demonstrate that its fees are reasonable 

and consistent with the Act. 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. In fact, the 

Exchange has represented to the 

Commission on numerous occasions 

that the type of data relating to profit 

margins and return on assets that the 

Commission is effectively mandating of 

all exchanges is not feasible for the 

Exchange, as its costs are not kept in the 

disaggregated manner necessary for 

such an analysis. Notwithstanding this 

fact, the Exchange has recently 

undertaken the exercise of reviewing its 

costs and expenses relating to 

connectivity to explore further costrelated justifications in an effort to 

address to the best of its ability the 

Commission’s request for such 

information. The Exchange represents 

that it again was not able to do so in the 

manner expected by the Commission. 

Furthermore, in setting fees for its 

physical connectivity, including this 

current proposed fee change, the 

Exchange did not perform the type of 

cost-analysis that the Commission is 

demanding (consistent with its inability 

to do so based on how it aggregates its 

costs and revenue). The Exchange 

instead considers, as it did here, various 

factors in setting fees, including the 

current competitive landscape, the rates 

historically paid by market participants 

for connectivity and the potential 

impact on market participants to ensure 

that the proposed fees would not create 

an undue financial burden on any 

market participants, including smaller 

market participants.44

The Exchange reiterates 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.’’ 45 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.’’ 46

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.’’ 47 In short, 

the promotion of free and open 

competition was a core congressional 

objective in creating the national market 

system.48 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 

only in particular cases of abuse or 

market failure. Indeed, the Exchange 

believes that classification of costs 

could likely not be done without ongoing debate over formulas for 

allocation,49 continual auditing, and 

considerable expense. The Exchange 

also believes cost-based analysis could 

create disincentives to reduce costs 

through efficient operation or 

innovation. Moreover, the industry 

could experience frequent rate increases 

based on escalating expense levels. 

Additionally, the manner in which one 

exchange defends its pricing should not 

be deemed unreasonable simply because 

it differs from the choices made by other 

exchanges (e.g., using a cost-based 

analysis versus discussion on 

competitive forces). The Exchange lastly 

cautions that as disputes arise regarding 

the appropriate measure and calculation 

of relevant costs and allocation of 

common costs, the Commission could 

find itself engaging in the kind of rigid 

ratemaking not contemplated by Section 

11A of the Exchange Act and which the 

Commission has historically sought to 

avoid. 

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 


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50See Securities Exchange Act Release No. 51808 

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

51NetCoalition 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)). 

52 15 U.S.C. 78s(b)(3)(A). 

53 17 CFR 240.19b–4(f). 54 17 CFR 200.30–3(a)(12). 

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.’’ 50 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’. . . .’’.51 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 52 and paragraph (f) of Rule 

19b–4 53 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– 

CboeBZX–2024–079 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–2024–079. 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 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2024–079 and should be 

submitted on or before October 9, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.54

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–21168 Filed 9–17–24; 8:45 am] 

BILLING CODE 8011–01–P 


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