[Federal Register Volume 86, Number 103 (Tuesday, June 1, 2021)]
[Notices]
[Pages 29312-29314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11406]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92013; File No. SR-CboeBZX-2021-040]


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

May 25, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 12, 2021, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``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'' or ``BZX 
Equities'') is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend its fee schedule. The 
text of the proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

[[Page 29313]]

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 eliminate the 
standard rebate for liquidity adding orders in securities priced below 
$1.00.\3\
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    \3\ The Exchange initially filed the proposed fee changes May 3, 
2021 (SRCboeBZX-2021-037). On May 12, 2021, the Exchange withdrew 
that filing and submitted this proposal.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Exchange Act, to which market participants may direct their order flow. 
Based on publicly available information,\4\ no single registered 
equities exchange has more than 15% of the market share. Thus, in such 
a low-concentrated and highly competitive market, no single equities 
exchange possesses significant pricing power in the execution of order 
flow. The Exchange in particular operates a ``Maker-Taker'' model 
whereby it pays credits to Members that add liquidity and assesses fees 
to those that remove liquidity. The Exchange's fee schedule sets forth 
the standard rebates and rates applied per share for orders that 
provide and remove liquidity, respectively.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (April 26, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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    For liquidity adding orders (i.e., yielding fee code B,\5\ V,\6\ 
and Y \7\), the Exchange provides a standard rebate of $0.0018 per 
share for orders in securities priced at or above $1.00, and a standard 
rebate of $0.0009 per share for orders in securities priced below 
$1.00. For liquidity removing orders (i.e., yielding fee code N,\8\ 
W,\9\ and BB \10\), the Exchange assesses a fee of $0.0030 per share 
for orders in securities at or above $1.00, and assesses a fee of 0.30% 
of the total dollar value for orders in securities priced below $1.00. 
The Exchange now proposes to eliminate the standard rebate applied to 
orders in securities priced below $1.00 and provide that such 
executions shall be free as the Exchange no longer wishes to, nor is it 
required to, provide such a rebate.
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    \5\ Fee code B is appended to displayed orders adding liquidity 
to BZX (Tape B).
    \6\ Fee code V is appended to displayed orders adding liquidity 
to BZX (Tape A).
    \7\ Fee code Y is appended to displayed orders adding liquidity 
to BZX (Tape C).
    \8\ Fee code N is appended to orders removing liquidity from BZX 
(Tape C).
    \9\ Fee code W is appended to orders removing liquidity from BZX 
(Tape A).
    \10\ Fee code BB is appended to orders removing liquidity from 
BZX (Tape B).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\11\ in general, and 
furthers the objectives of Section 6(b)(4) and 6(b)(5),\12\ in 
particular, as it is designed to provide for the equitable allocation 
of reasonable dues, fees and other charges among its Members, issuers 
and other persons using its facilities. The Exchange operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or incentives to be insufficient. The 
proposed rule changes reflect a competitive pricing structure designed 
to incentivize market participants to direct their order flow to the 
Exchange, which the Exchange believes would enhance market quality to 
the benefit of all Members.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    In particular, the Exchange believes that the proposed eliminating 
the rebate and providing free executions for liquidity adding orders in 
securities priced below $1.00 is reasonable because the Exchange no 
longer wishes to, nor is it required to, provide such a rebate. The 
Exchange believes the proposal is equitable and not unfairly 
discriminatory because Members still are not paying any fees for such 
executions. Further, the Exchange believes the proposal is equitable 
and not unfairly discriminatory because it applies equally to all 
Members. With the proposed amendments, the Exchange's make-take fee 
structure would continue to incentivize liquidity providers to continue 
to provide liquidity since such orders remain eligible for better 
pricing than orders that remove liquidity and are charged a fee. 
Further, the Exchange believes liquidity in securities priced less than 
$1.00 is sufficient without a rebate.

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 intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. 
Particularly, the proposal would apply uniformly to all Members, and 
Members may opt to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value. Accordingly, the Exchange does 
not believe that the proposed changes will impair the ability of 
Members or competing venues to maintain their competitive standing in 
the financial markets. Excessive fees would serve to impair an 
exchange's ability to compete for order flow and Members rather than 
burdening competition. Moreover, Members still would not be assessed 
fees for liquidity adding orders, which is designed to incentivize 
liquidity, which the Exchange believes will benefit all market 
participants by encouraging a transparent and competitive market. The 
Exchange believes liquidity in securities priced less than $1.00 is 
sufficient without a rebate.
    As previously discussed, the Exchange operates in a highly 
competitive market. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and rebates to 
remain competitive with other exchanges. Members have numerous 
alternative venues that they may participate on and direct their order 
flow, including other equities exchanges, off-exchange venues, and 
alternative trading systems. Additionally, the Exchange represents a 
small percentage of the overall market. Based on publicly available 
information, no single equities exchange has more than 15% of the 
market share.\13\ Therefore, no exchange possesses significant pricing 
power in the execution of order flow. Indeed, participants can readily 
choose to send their orders to other exchange and off-exchange venues 
if they deem fee levels at those other venues to be more favorable. 
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

[[Page 29314]]

investors and listed companies.'' \14\ The fact that this market is 
competitive has also long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .''.\15\ Accordingly, the Exchange 
does not believe its proposed fee changes imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \13\ Supra note 3.
    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \15\ NetCoalition 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)).
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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 \16\ and paragraph (f) of Rule 19b-4 \17\ 
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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3143445d541c525e5c5c545f4542714254521f565e47"><span class="__cf_email__" data-cfemail="97e5e2fbf2baf4f8fafaf2f9e3e4d7e4f2f4b9f0f8e1">[email protected]</span></a>. Please include 
File Number SR-CboeBZX-2021-040 on the subject line.

Paper Comments

    <bullet> 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-2021-040. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549-1090 on official business days between the hours of 10:00 a.m. 
and 3:00 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeBZX-2021-040 and should 
be submitted on or before June 22, 2021.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11406 Filed 5-28-21; 8:45 am]
BILLING CODE 8011-01-P


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