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[Federal Register Volume 89, Number 229 (Wednesday, November 27, 2024)]
[Notices]
[Pages 93683-93685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27765]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101700; File No. SR-CboeBYX-2024-042]

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

November 21, 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 November 14, 2024, Cboe BYX Exchange, Inc. (``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') proposes to 
amend its Fee Schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/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
    Effective November 1, 2024, the Exchange proposes to amend its BYX 
Fee Schedule applicable to its equities trading platform.\3\ By 
implementing a remove fee (as opposed to a rebate) for fee code, AA, 
removing fee code, BJ, and adding EDGA to the list of venues to which 
orders appended with fee code, PL, are routed.
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    \3\ The Exchange initially filed the proposed fee change on 
November 1, 2024 (SR-CboeBYX-2024-040). On November 14, 2024, the 
Exchange withdrew that filing and submitted this filing.
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Fee Codes
    The Exchange proposes to implement a remove fee for fee code, AA. 
The proposed changes are as follows:
     For securities priced above $1.00,\4\ fee code AA is 
appended to orders that are routed to EDGA using the ALLB \5\ routing 
strategy. Currently, orders appended with fee code AA receive a rebate 
of $0.0018.
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    \4\ The Exchange notes for securities priced below $1.00, there 
is no fee or rebate for removing liquidity from EDGA using the ALLB 
routing strategy.
    \5\ ALLB is a routing option under which an order checks the 
System for available shares and is then sent to Cboe BZX Exchange, 
Inc., Cboe EDGA Exchange, Inc., and/or Cboe EDGX Exchange, Inc. in 
accordance with the System routing table. If shares remain 
unexecuted after routing, they are posted on the BYX Book, unless 
otherwise instructed by the User. See Rule 11.13(b)(3)(M).
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    The Exchange now proposes to amend fee code, AA, as follows:
     For securities priced above $1.00, fee code AA will 
continue to be appended to orders that are routed to EDGA using the 
ALLB routing strategy. However, orders appended with fee code AA will 
now pay a fee of $0.0030. The Exchange does not propose to add a fee or 
rebate for removing liquidity for securities priced below $1.00.
    The Exchange also proposes to remove fee code, BJ. For securities 
priced above $1.00,\6\ fee code BJ is currently appended to orders that 
are routed to EDGA using the TRIM \7\ or SLIM \8\ routing strategies 
and receive a rebate of $0.0018. However, effective November 1, 
2024,\9\ EDGA transitioned from an inverted fee model \10\ to a maker-
taker fee model.\11\
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    \6\ There is no charge or rebate for securities priced below 
$1.00.
    \7\ TRIM is a routing strategy under which an order checks EDGA 
for available shares if so instructed by the entering User, and then 
is sent to destinations on the applicable System routing table. See 
generally Rule 11.13(b)(3)(G)(iv).
    \8\ SLIM is a routing strategy under which an order checks EDGA 
for available shares if so instructed by the entering User, and then 
is sent to destinations on the applicable System routing table. See 
generally Rule 11.13(b)(3)(G)(v).
    \9\ See SR-CboeEDGA-2024-042; see also, SR-CboeEDGA-2024-045.
    \10\ The inverted As such, orders that remove liquidity from 
EDGA will pay a remove fee, rather than receive a rebate. Because 
Members typically utilize routing options TRIM and SLIM, and fee 
code BJ, to seek low-cost executions, it does not make sense to 
maintain fee code, BJ, as Members would not expect to pay a fee for 
removing liquidity from EDGA. Therefore, the Exchange proposes to 
discontinue this fee code, as it is no longer necessary, and BYX 
does not desire to charge such orders a fee for removing liquidity 
from EDGA.fee model is a pricing structure in which a market, such 
as an exchange, charges its participants a fee to provide liquidity 
in securities, and provides a rebate to participants that remove 
liquidity in securities. See SEC Market Structure Advisory 
Committee, Memorandum on ``Maker-Taker Fees on Equities Exchanges,'' 
October 20, 2015, available at: https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf.
    \11\ The maker-taker fee model is a pricing structure in which a 
market, such as an exchange, generally pays its members a per share 
rebate to provide (i.e., ``make'') liquidity in securities and 
assesses on them a fee to remove (i.e., ``take'') liquidity. Id.
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    The Exchange also proposes to edit the description of fee code, PL. 
The BYX Fee Schedule currently describes PL, as a fee code appended to 
orders that are ``[r]outed to BZX, EDGX, NYSE, NYSE Arca or Nasdaq 
using RMPL routing strategy.'' The Exchange now proposes to move EDGA 
to the list of high-cost destinations for the RMPL routing

[[Page 93684]]

strategy that are assigned the PL fee code, by amending the description 
in the Fee Schedule to read as follow: ``Routed to BZX, EDGX, EDGA, 
NYSE, NYSE Arca or Nasdaq using RMPL routing strategy.'' Previously, 
orders appended with fee code, PX, utilized routing option, RMPL, which 
is a midpoint liquidity seeking strategy that first targets low-cost 
executions at certain lower-cost venues, including EDGA. However, 
because EDGA is now transitioning to a maker-taker fee model, EDGA will 
now be assessing a full remove fee of $0.0030 for orders that remove 
liquidity from EDGA.\12\ As such, the Exchange believes that current 
fee code, PL--which charges a $0.0030 for routing orders to other 
exchanges--is now the more appropriate fee code to be appended to 
midpoint liquidity seeking orders that are routed to other major 
exchanges. Similar to EDGA, the other exchanges targeted by RMPL--NYSE, 
NYSE Arca, and Nasdaq--also charge a high remove fee to liquidity 
removing orders.\13\
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    \12\ See SR-CboeEDGA-2024-045.
    \13\ NYSE Arca charges a removal fee of $0.0030. See Section 
III--Standard Rates--Transactions (applicable when Tier Rates do not 
apply), Removing Liquidity, pg. 3, available at: https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf; NYSE charges a removal fee of 
$0.0030 for orders that remove midpoint liquidity. See NYSE Stock 
Exchange Price List, ``Equity per Share Charge--per transaction--MPL 
orders that remove liquidity from the NYSE (Adding Tier Credits do 
not apply) and with no Retail Modifier, as defined in Rule 13 
(``Retail Modifier'')), pg. 5, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf; Nasdaq charges a 
removal fee of $0.0030. See Fees to Remove Liquidity, Shares 
Executed at or above $1.00, available at: https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\14\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \15\ 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) \16\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \17\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ Id.
    \17\ 15 U.S.C. 78f(b)(4).
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    Adjusting fee code AA and removing fee code, BJ, is necessary to 
reflect the transition of EDGA to a maker-taker fee model, effective 
November 1, 2024. Prior to the November 1, 2024, orders entered onto 
BYX, that were appended with fee code, AA, and were routed to EDGA 
using routing option ALLB, received a rebate of $0.0018 for removing 
liquidity from the EDGA Book for securities priced at or above $1.00. 
However, given EDGA's transition to a maker-taker fee model, orders 
that remove liquidity will now need to pay a liquidity removal fee, 
rather than receive a rebate. Accordingly, removal of the current 
$0.00180 rebate associated with fee code, AA, and implementation of a 
$0.0030 remove fee is appropriate and consistent with the economics of 
a maker-taker model, as well as the expectations of Members that remove 
liquidity from EDGA (i.e., Members would expect to pay a fee to remove 
liquidity). Moreover, the proposed fee is not unfairly discriminatory 
because it applies to all Members equally, in that all Members will pay 
the same fee for orders routed to EDGA using the ALLB routing strategy, 
and appended with fee code, AA.
    The Exchange also believes that its removal of fee code, BJ, is 
reasonable, equitable, and not unfairly discriminatory as it does not 
change the fees or rebates assessed by the Exchange, but rather updates 
the BYX Fee Schedule to remove a fee code that the Exchange no longer 
desires to, nor is required to, offer to its Members. Therefore, the 
proposed rule change is reasonably designed to update the Fee Schedule 
to accurately reflect the Exchange's current product offerings and is 
designed to reduce any potential confusion regarding the routing of 
orders with fee code, BJ, from BYX to EDGA. Furthermore, as noted 
above, orders appended with fee code, BJ, entered onto BYX and routed 
to EDGA using the routing option TRIM or SLIM, previously received a 
rebate of $0.0018 for removing liquidity from the EDGA Book. However, 
effective November 1, 2024, EDGA transitioned from an inverted fee 
model to a maker-taker fee model. As such, orders that remove liquidity 
from EDGA will pay a remove fee, rather than receive a rebate. Because 
Members typically utilize routing options TRIM and SLIM, and fee code 
BJ, to seek low-cost executions, it does not make sense to maintain the 
BJ fee code, as Members utilizing this fee code would not expect to pay 
a fee for removing liquidity from EDGA. Therefore, the Exchange 
proposes to discontinue this fee code, as it is no longer necessary, 
and BYX does not desire to charge such orders a fee for removing 
liquidity from EDGA.
    Finally, the Exchange believes that moving EDGA to the list of 
high-cost destinations for the RMPL routing strategy that are assigned 
the PL fee code, and assessing such orders a fee of $0.0030, is 
necessary and appropriate. Members appending their orders with the PL 
fee code already expect to pay a remove fee for removing liquidity from 
exchanges accessed by RMPL, rather than receive a rebate for removing 
liquidity as they do with liquidity removing orders appended with the 
PX fee code. Additionally, the remove fee of $0.0030 per share 
represents an equitable allocation of reasonable dues, fees, and other 
charges. The proposed change would enable the Exchange to charge a rate 
reasonably related to the rate that Cboe Trading, Inc. (``Cboe 
Trading''), the Exchange's affiliated routing broker-dealer, would be 
charged for routing orders to destinations described in fee codes PL. 
As a result, when Cboe Trading is charged a fee when it routes an order 
which removes liquidity from a destination described in fee codes PL, 
Cboe Trading will pass through these rates to the Exchange and the 
Exchange, in turn, will charge the rate under fee codes PL. The 
proposed fee under fee code, PL, for orders routed pursuant to the RMPL 
routing strategy would enable the Exchange to equitably allocate its 
costs among all Members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Given EDGA's transition to a 
maker-taker fee model, orders that remove liquidity will now need to 
pay a liquidity removal fee, rather than receive a rebate. Accordingly, 
removing the current $0.0018 rebate associated with fee code, AA, and 
implementing a $0.0030 remove fee is appropriate and consistent

[[Page 93685]]

with the economics of a maker-taker model, as well as the expectations 
of Members that remove liquidity from EDGA (i.e., Members would expect 
to pay a fee to remove liquidity).
    Moreover, moving EDGA to the list of high-cost destinations for the 
RMPL routing strategy that are assigned the PL fee code simply reflects 
the fact that orders routed to EDGA that remove liquidity will now--
just as they do on other exchanges accessed with the PL fee code--pay a 
remove fee instead of receiving a rebate. In addition, the BJ fee code 
was typically appended to orders utilizing the TRIM or SLIM strategies, 
which are designed to seek low-cost executions. Given EDGA's transition 
to a maker-taker fee model, though, removers of liquidity will now pay 
a remove fee. As such, it is appropriate to remove the BJ fee code as 
Member's utilizing this fee code would expect to receive a rebate and 
not expect to pay a fee. Accordingly, these proposed changes are 
necessary and appropriate in order to align Members' expectations with 
the economics of EDGA's new maker-taker fee model and will not have any 
impact on competition.
    Additionally, moving EDGA from fee code, PX, to fee code is PL, 
will not have any impact on competition. Rather, it is necessary and 
appropriate given EDGA's transition to a maker-taker fee model. Users 
of the PL fee code already expect to pay fees for removing liquidity 
from exchanges, whereas users of the PX fee code would expect lower-
cost executions for removing liquidity from exchanges, including EDGA.

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 \18\ and paragraph (f) of Rule 19b-4 \19\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBYX-2024-042 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-2024-042. 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-CboeBYX-2024-042 and should 
be submitted on or before December 18, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27765 Filed 11-26-24; 8:45 am]
BILLING CODE 8011-01-P
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