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[Federal Register Volume 89, Number 223 (Tuesday, November 19, 2024)]
[Notices]
[Pages 91447-91450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26868]

[[Page 91447]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101615; File No. SR-CboeBZX-2024-111]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt 
Fees for Its New Offering of Market Data Reports

November 13, 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 1, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to 
adopt fees for its new offering of market data reports. 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 (https://markets.cboe.com/us/equities/regulation/rule_filings/BZX/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its fee schedule to adopt fees for 
Cboe Timestamping Service reports, effective November 1, 2024. The 
Exchange recently adopted a new data product known as the Cboe 
Timestamping Service.\3\ The Cboe Timestamping Service provides 
timestamp information for orders and cancels for market participants. 
More specifically, the Cboe Timestamping Service reports provide 
various timestamps relating to the message lifecycle throughout the 
exchange system. The first report--the Missed Liquidity Report--covers 
order messages of the Member only and the second report--Cancels 
Report--covers cancel messages of the Member only. The reports are 
optional products that are available to all Members and Members may opt 
to choose both reports, one report, or neither report.
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    \3\ See Securities Exchange Act Release No. 100799 (August 27, 
2024), 89 FR 68672 (August 21, 2024) (SR-CboeBZX-2024-077).
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    The Cancels Report provides response time details for orders that 
rest on the book where the Member attempted to cancel that resting 
order or any other resting order but was unable to do so as the resting 
order was executed before the system processed the cancel message. The 
Cancels Report assists the Member in determining by how much time that 
order missed being canceled instead of executing.
    The Missed Liquidity Report provides time details for executions of 
orders that rest on the book where the Member attempted to execute 
against that resting order within an Exchange-determined amount of time 
(not to exceed 1 millisecond) after receipt of the first attempt to 
execute against the resting order and within an Exchange-determined 
amount of time (not to exceed 100 microseconds) before receipt of the 
first attempt to execute against the resting order.
    Both the Missed Liquidity Report and Cancels Report include the 
following data elements for orders \4\ and cancel messages,\5\ 
respectively: (1) Member Firm ID; (2) Symbol; (3) Execution ID; \6\ (3) 
Exchange System Timestamps for orders and cancels; \7\ (4) Matching 
Unit number; \8\ (5) Queued; \9\ (6) Port Type; \10\ and (7) Aggressor 
Order Type.\11\ No specific information about resting orders on the 
Exchange book are provided.
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    \4\ The Missed Liquidity Report only includes trade events which 
are triggered by an order that removed liquidity on entry and will 
exclude trade events resulting from: elected stop orders, orders 
routed and executed at away venues, and peg order movements, and 
auctions.
    \5\ Includes individual order cancellations, mass cancels, and 
purge orders messages that are sent via Financial Information 
Exchange (``FIX'') protocol or Binary Order Entry (BOE) protocol by 
a subscriber.
    \6\ The Execution ID is a unique reference number assigned by 
the Exchange for each trade.
    \7\ Includes Network Discovery Time (which is a network hardware 
switch timestamp taken at the network capture point); Order Handler 
NIC Timestamp (which is a hardware timestamp that represents when a 
BOE order handler server NIC observed the message); Order Handler 
Received Timestamp (which is software timestamp that represents when 
the FIX or BOE order handler has begun processing the order after 
the socket read); Order Handler Send Timestamp (which represents 
when the FIX or BOE order handler has finished processing the order 
and begun sending to the matching engine); Matching Engine NIC 
Timestamp (which is a hardware timestamp that represents when the 
target matching engine server NIC observed the message); and 
Matching Engine Transaction Timestamp (which is a software timestamp 
that represents when the matching engine has started processing an 
event).
    \8\ Represents the matching unit number.
    \9\ Flag to indicate whether a message was delayed due to 
message in flight limits (i.e., a limit on the total number of 
messages in flight between an order handler and a matching engine).
    \10\ Refers to the port type used by the session to send the 
applicable message.
    \11\ Indicates whether the order type of the response order that 
executed against the resting order was a new order or modify 
message.
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    These reports are in response to requests from Members for 
additional data concerning the timeliness of their incoming orders, 
cancel messages and executions against resting orders. The Exchange 
believes these reports will increase transparency by providing Members 
with an opportunity to learn more about better opportunities to access 
liquidity and receive better execution rates and improve order cancel 
success.
    The Exchange notes that the data included in the reports are based 
only on the data of the market participant that opts to subscribe to 
the reports (``Recipient Member'') and do not include information 
related to any Member other than the Recipient Member. Additionally, 
neither report includes real-time market data. Rather, the reports 
contain historical data from the prior trading day and are available 
after the end of the trading day, generally on a T+1 basis.
    The Exchange now proposes to assess the following monthly fees for 
Members that wish to purchase the Cancels Report and/or the Missed 
Liquidity Report. The Exchange proposes a monthly flat fee of $1,000 
for the Cancels Report for a subscribing Member. The Exchange also 
proposes a progressive monthly fee structure for the Missed Liquidity 
Report based on the

[[Page 91448]]

Member's subscribing logical (FIX or BOE) order entry ports (the 
``Ports'') \12\ with the following tiers: $1,500 for 1-10 Ports, $2,000 
for 11-20 Ports and $2,500 for 21 and more Ports.\13\ For a mid-month 
subscription, the monthly fee(s) shall be prorated based on the initial 
date of the subscription.\14\
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    \12\ Based on a Members' unique needs, Members may choose which 
Ports (if any) it would like to subscribe to the Missed Liquidity 
Report. For example, a Member that has 20 Ports, but is only 
interested in receiving data on 10 of their Ports would then be 
charged the $1,500 tier fee for its subscribing Ports.
    \13\ The Exchange proposes to make clear in the Fees Schedule 
that the proposed fees are not progressive (i.e., if a Member 
requests the Missed Liquidity Report for 20 Ports, it will be 
assessed $2,000 per month).
    \14\ Fees will be assessed on a look-back basis based on the 
maximum number of subscribing Ports a Member had in the prior 
calendar month. For example, if a Member had 10 Ports that were 
subscribed to the Missed Liquidity Report from September 1st-
September 26th and the Member added an additional Port to the Missed 
Liquidity Report on September 27th (for a total of 11 subscribing 
Ports), the Member would then be assessed a fee of $2,000 for the 
month of September for the Missed Liquidity Report. Additionally, 
the Exchange proposes to make clear in its fee schedule that new 
subscribers will be charged a prorated fee for a mid-month 
subscription based on the initial date of the subscription.
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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.\15\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \16\ 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) \17\ 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) of the Act,\18\ 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.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ Id.
    \18\ 15 U.S.C 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker dealers increased authority and 
flexibility to offer new and unique market data to consumers of such 
data. It was believed that this authority would expand the amount of 
data available to users and consumers of such data and also spur 
innovation and competition for the provision of market data. The 
Exchange believes that the proposed reports are the sort of market data 
product that the Commission envisioned when it adopted Regulation NMS.
    The Commission concluded that Regulation NMS--by deregulating the 
market in proprietary data--would itself further the Act's goals of 
facilitating efficiency and competition: ``[E]fficiency is promoted 
when broker-dealers who do not need the data beyond the prices, sizes, 
market center identifications of the NBBO and consolidated last sale 
information are not required to receive (and pay for) such data. The 
Commission also believes that efficiency is promoted when broker-
dealers may choose to receive (and pay for) additional market data 
based on their own internal analysis of the need for such data.'' \19\
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    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    By removing ``unnecessary regulatory restrictions'' on the ability 
of exchanges to sell their own data, Regulation NMS advanced the goals 
of the Act and the principles reflected in its legislative history. The 
Cboe Timestamping Service (i.e., the Missed Liquidity and Cancels 
Reports) provides investors with new options for receiving market data, 
which was a primary goal of the market data amendments adopted by 
Regulation NMS.\20\
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    \20\ See Regulation NMS Adopting Release, supra, at 37503.
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    The reports are designed for Members that are interested in gaining 
insight into latency in connection with their respective (1) orders 
that failed to execute against an order resting on the Exchange order 
book and/or (2) cancel messages that failed to cancel resting orders. 
The Exchange believes that providing this optional data to interested 
Members for a fee is consistent with facilitating transactions in 
securities, removing impediments to and perfecting the mechanism of a 
free and open market and a national market system, and, in general, 
protecting investors and the public interest because it provides 
Members with an opportunity to receive additional information and 
insight into their trading activity on the Exchange.
    The Exchange believes the fee proposals for both the Missed 
Liquidity Report and Cancels Report are reasonable as the Exchange is 
offering any Member access to subscribe to one or both report(s) in the 
Member's sole discretion based on their unique business needs. The 
reports are optional for Members to subscribe to if they believe it to 
be helpful and are not required for Members to purchase in order to 
access the Exchange. Additionally, Members may cancel their usage of 
this report at any time.
    The Exchange believes that the fee structure for the Missing 
Liquidity Report reflects an equitable allocation and will not be 
unfairly discriminatory as it is a voluntary product designed to ensure 
that the amount of the charge is tailored to the specific port usage 
patterns of the Recipient Member. The range of fee options further 
ensures that Recipient Members are not charged a fee that is 
inequitably disproportionate to the use that they make of the product. 
Additionally, Recipient Members aren't required to pay the set 
threshold for all Ports it has in a given month, instead, Members are 
able to select which Ports (if any) they would like to subscribe to the 
Missing Liquidity Report for a given month in order to study its orders 
in the market to be better informed market participants. Members are 
under no obligation to subscribe to the Missing Liquidity Report if it 
does not desire to do so.
    The fee structure for the Missing Liquidity Report closely aligns 
to the fee structure of the previously offered Missed Opportunity--
Latency report as part of its NASDAQ Trader Insights offering.\21\ 
However, the NASDAQ Missed Opportunity--Latency report included an 
additional tier with a higher price than the Exchange's proposed fee 
structure.\22\ The NASDAQ structure included an additional tier level 
that imposes a monthly fee of $3,500 for subscribers that have over 25 
ports \23\ while the Exchange fee structure

[[Page 91449]]

would provide its similar report for a fee of $2,500 for a Recipient 
Member that has 25 ports.
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    \21\ See Securities Exchange Act Release No. 78886 (September 
20, 2016), 81 FR 66113 (September 26, 2016) (SR-NASDAQ-2016-101) 
(Order Granting Approval of Proposed Rule Change, as Modified by 
Amendment Nos. 1 and 2, To Add NASDAQ Rule 7046 (Nasdaq Trading 
Insights).
    \22\ See Securities Exchange Act Release No. 79035 (October 11, 
2016), 81 FR 70207 (October 4, 2016) (SR-NASDAQ-2016-124).
    \23\ Id.
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    The Exchange believes its proposed fee for the Cancels Report is 
reasonable as it's a modest, flat fee of $1,000/month. As the Exchange 
offers mass cancels through Purge Ports in addition to standard cancels 
through the Ports, and since cancels may occur through a variety of 
port types as opposed to just the Ports, the Exchange found a modest, 
flat fee to be more appropriate for the Cancels Report.
    The proposed fees are also reasonable as they are lower than the 
fees assessed for similar reports offered by other exchanges. For 
example, the MIAX Emerald Liquidity Taker Event Report is substantially 
similar to the Missed Liquidity Report and Cancels Report \24\ and has 
a monthly fee of $4,000 or an annual fee of $24,000.\25\ A Member is 
able to receive both the Cancels Report and the Missed Liquidity Report 
for a monthly fee no greater than $3,500 a month- making the Cboe 
Timestamping Reports less than the MIAX Emerald report. With the 
Exchange's approach of (i) bifurcating the orders and cancels to two 
separate and distinct offerings (Missing Liquidity Report and Cancels 
Report) and (ii) allowing Members to select its subscribing Ports for 
the Missed Liquidity Report, it allows Members to further curb costs if 
they choose to subscribe to one or both of these reports. As such, the 
Exchange believes that the proposed fees for the both the Missed 
Liquidity Report and Cancels Report are fair and reasonable as they are 
set at a level either similar to or lower than other exchanges that 
offer similar reports.
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    \24\ See e.g., MIAX Emerald Rule 531. See also Securities 
Exchange Act Release No. 91356 (March 18, 2021), 86 FR 15759 (March 
24, 2021) (SR-EMERALD-2021-09). Although not clearly defined, the 
Exchange believes that MIAX Emerald's Liquidity Taker Event Report 
also provides information relating to cancel messages. Particularly, 
MIAX Emerald Liquidity Taker Event Report provides, among other 
things, data relating to the ``type of each response submitted by 
the Recipient Member.'' See MIAX Emerald Rule 5.31(a)(iii)(C). MIAX 
Emerald's technical specifications outline the various types of 
available liquidity messages including, Simple Mass Quote Cancel 
Request and Mass Liquidity Cancel Request See MIAX Express Interface 
for Quoting and Trading Options, MEI Interface Specification, 
Section 4.1 (Liquidity Messages), available at: 
MIAX_Express_Interface_MEI_v2.2a.pdf (miaxglobal.com).
    \25\ See MIAX Emerald Fee Schedule, Section 7, Reports.
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    The proposal would also not permit unfair discrimination as both 
the Cancels Report and Missed Liquidity Report will be available to all 
Members, who may opt to subscribe to one, both, or neither, and will 
help to protect a free and open market by continuing to provide 
additional non-core data (offered on an optional basis for a fee) to 
the marketplace and by providing investors with greater choices.\26\ As 
such, the Exchange believes that the proposed fees are reasonable and 
set at a level to compete with other exchanges that may choose to offer 
similar reports. Moreover, if a market participant views another 
exchange's potential report as more attractive, then such market 
participant can merely choose not to purchase the Exchange's reports 
and instead purchase another exchange's similar data product(s), which 
may offer similar data points, albeit based on that other market's 
trading activity.
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    \26\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision 
Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding 
the existence of vigorous competition with respect to non-core 
market data). See also the decision of the United States Court of 
Appeals for the District of Columbia Circuit in NetCoalition v. SEC, 
615 F.3d 525 (D.C. Cir. 2010) (``NetCoalition I'') (upholding the 
Commission's reliance upon competitive markets to set reasonable and 
equitably allocated fees for market data).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
reports will contribute to robust competition among national securities 
exchanges. The Missed Liquidity Report and Late Cancels Report further 
enhances competition between exchanges by allowing the Exchange to 
expand its product offerings to include reports similar to reports that 
are currently offered by other exchanges.\27\
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    \27\ See e.g., MIAX Emerald Rule 531.
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    The Exchange also does not believe the proposed fees would cause 
any unnecessary or inappropriate burden on intermarket competition as 
other exchanges are free to introduce their own comparable reports with 
lower prices to better compete with the Exchange's offerings. The 
Exchange operates in a highly competitive environment, and its ability 
to price the reports is constrained by competition among exchanges who 
choose to adopt similar products. The Exchange must consider this in 
its pricing discipline in order to compete for subscribers of the 
Exchange's market data via the reports. For example, proposing fees 
that are excessively higher than fees for potentially similar data 
products would simply serve to reduce demand for the Exchange's 
reports, which as discussed, Members are under no obligation to 
utilize. In this competitive environment, potential purchasers are free 
to choose which, if any, similar product to purchase to satisfy their 
need for market information. As a result, the Exchange believes this 
proposed rule change permits fair competition among national securities 
exchanges.
    The Exchange does not believe the proposed rule change would cause 
any unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposed fees apply uniformly to any purchaser in 
that the Exchange does not differentiate between the different Members 
that may purchase the reports. While the Exchange does propose to 
implement tiered pricing for its Missed Liquidity Report (similar to 
the pricing used for NASDAQ Trader Insight offering),\28\ the tiered 
pricing shall apply to all Members that wish to purchase the Missed 
Liquidity Report and this proposed pricing structure is reflective of 
the specific port usage patterns of the Recipient Member. The proposed 
fees are set at a modest level that would allow any interested Member 
to purchase such data based on their business needs.
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    \28\ See Securities Exchange Act Release No. 79035 (October 11, 
2016), 81 FR 70207 (October 4, 2016) (SR-NASDAQ-2016-124).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \29\ and paragraph (f) of Rule 19b-4 \30\ 
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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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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,

[[Page 91450]]

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-CboeBZX-2024-111 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-2024-111. 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-2024-111 and should 
be submitted on or before December 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26868 Filed 11-18-24; 8:45 am]
BILLING CODE 8011-01-P
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