Document ID: SEC-2023-0062-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2023-01-23T05:00Z

[Federal Register Volume 88, Number 14 (Monday, January 23, 2023)]
[Notices]
[Pages 4051-4054]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01115]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96673; File No. SR-CboeBZX-2023-001]

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

January 17, 2023.
    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 January 3, 2023, 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 Options'') 
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/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 the Fee Schedule, effective January 
3, 2023. The Exchange proposes to modify its market data fees for BZX 
Options Top.\3\ Particularly, the Exchange proposes to modify the 
Professional and Non-Professional User Fees and the Enterprise Fee for 
BXZ Options Top.
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    \3\ BZX Options Top is an uncompressed data feed that offers top 
of book quotations and execution information based on options orders 
entered into the System.
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    The Exchange first proposes to reduce the Professional and Non-
Professional User fees for BZX Options Top. The Exchange currently 
charges Internal Distributors and External Distributors that 
redistribute any of the BZX Options Data Feeds different fees for their 
Professional Users \4\ and Non-Professional Users.\5\ The Exchange 
currently assesses a monthly fee for Professional Users of $30.00 per 
User and a monthly fee of $1.00 per Non-Professional User.\6\ One User 
fee allows access to the BZX Options Top Feed and the BZX Options Depth 
Feed.\7\ The Exchange proposes to reduce the User fees for BZX Options 
Top. Particularly,

[[Page 4052]]

the Exchange proposes to reduce the monthly (i) Professional User fee 
from $30 per user to $5 per user and (ii) Non-Professional User fee 
from $1.00 per user to $0.10 per user. The Exchange also proposes to 
start charging separate User fees for BZX Options Top and BZX Options 
Depth Feed. The Exchange therefore proposes to eliminate the language 
under the BZX Options Top table and BZX Options Depth Feed table that 
states one User fee allows access to the BZX Options Top Feed and the 
BZX Options Depth Feed.\8\
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    \4\ A Professional User of an Exchange Market Data product is 
any User other than a Non-Professional User.
    \5\ A ``Non-Professional User'' of an Exchange Market Data 
product is a natural person or qualifying trust that uses Data only 
for personal purposes and not for any commercial purpose and, for a 
natural person who works in the United States, is not: (i) 
registered or qualified in any capacity with the Securities and 
Exchange Commission, the Commodities Futures Trading Commission, any 
state securities agency, any securities exchange or association, or 
any commodities or futures contract market or association; (ii) 
engaged as an ``investment adviser'' as that term is defined in 
section 202(a)(11) of the Investment Advisors Act of 1940 (whether 
or not registered or qualified under that Act); or (iii) employed by 
a bank or other organization exempt from registration under federal 
or state securities laws to perform functions that would require 
registration or qualification if such functions were performed for 
an organization not so exempt; or, for a natural person who works 
outside of the United States, does not perform the same functions as 
would disqualify such person as a Non-Professional User if he or she 
worked in the United States.
    \6\ Distributors that receive BZX Options Data Feeds are 
required to count every Professional User and Non-Professional User 
to which they provide the market data product(s).
    \7\ BZX Options Depth is an uncompressed data feed that offers 
depth of book quotations and execution information based on options 
orders entered into the System.
    \8\ The Exchange is not proposing any changes to the current 
User Fee rates for BZX Options Depth Feed at this time.
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    The Exchange next proposes to increase the current monthly 
Enterprise Fee. The Enterprise Fee permits a recipient firm who 
receives BZX Options Top from a Distributor to receive the data for an 
unlimited number of Professional and Non-Professional Users. Currently, 
the Exchange assesses an Enterprise Fee of $3,500 per month. The 
Exchange proposes to increase the Enterprise Fee to $20,000 per month. 
For example, if a recipient firm had 15,000 Professional Users who each 
receive BZX Options Top at $5.00 per month (as proposed), then that 
recipient firm will pay $75,000 per month in Professional Users fees. 
Under the proposed Enterprise Fee, the recipient firm will pay a flat 
fee of $20,000 for an unlimited number of Professional and Non-
Professional Users. A recipient firm must pay a separate Enterprise Fee 
for each Distributor that controls the display of BZX Options Top if it 
wishes such User to be covered by an Enterprise Fee rather than by per 
User fees. A recipient firm that pays the Enterprise Fee will not have 
to report its number of such Users on a monthly basis. However, every 
six months, a recipient firm must provide the Exchange with a count of 
the total number of authorized users of BZX Options Top, including both 
Professional and Non-Professional Users.
    The Exchange lastly proposes to add references to ``Depth Feed'' in 
the description of the Enterprise Fee under the BZX Options Depth Feed 
table to clarify which data feed such Enterprise fee currently applies 
to, thereby alleviating potential confusion.
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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \10\ 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 
section 6(b)(4) of the Act,\11\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange first notes that it operates in a highly competitive 
environment. Indeed, there are currently 16 registered options 
exchanges that trade options. Based on publicly available information, 
no single options exchange has more than 18% of the market share.\12\ 
The Exchange believes top-of-book quotation and transaction data is 
highly competitive as national securities exchanges compete vigorously 
with each other to provide efficient, reliable, and low-cost data to a 
wide range of investors and market participants. Indeed, there are 
several competing products offered by other national securities 
exchanges today, not counting products offered by the Exchange's 
affiliates, and each of the Exchange's affiliated U.S. options 
exchanges also offers similar top-of-book data.\13\ Each of those 
exchanges offer top-of-book quotation and last sale information based 
on their own quotation and trading activity that is substantially 
similar to the information provided by the Exchange through the BZX 
Options Top Feed. Further, the quote and last sale data contained in 
the BZX Options Top Feed is identical to the data sent to OPRA for 
redistribution to the public.\14\ Accordingly, market participants can 
substitute BZX Options Top with feeds from other exchanges and/or 
through OPRA. Exchange top-of-book data is therefore widely available 
today from a number of different sources.
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    \12\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (December 27, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
    \13\ See e.g., NYSE Arca Options Proprietary Market Data Fees 
Schedule, MIAX Options Exchange, Fee Schedule, Section 6 (Market 
Data Fees), Nasdaq PHLX Options 7 Pricing Schedule, Section 10 
(Proprietary Data Feed Fees) and Cboe Data Services, LLC Fees 
Schedule.
    \14\ The Exchange notes that it makes available to ``Customers'' 
the BBO data and last sale data that is included in the BZX Options 
Top Data Feed no earlier than the time at which the Exchange sends 
that data to OPRA.
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    Moreover, the BZX Options Top is distributed and purchased on a 
voluntary basis, in that neither the Exchange nor market data 
distributors are required by any rule or regulation to make this data 
available. Accordingly, Distributors and Users can discontinue use at 
any time and for any reason, including due to an assessment of the 
reasonableness of fees charged. As described above, market participants 
have a wide variety of alternative market data products from which to 
choose, such as similar proprietary data products offered by other 
exchanges and consolidated data. Further, the Exchange is not required 
to make any proprietary data products available or to offer any 
specific pricing alternatives to any customers. Moreover, all broker-
dealers involved in order routing must take consolidated data from 
OPRA, and proprietary data feeds cannot be used to meet that particular 
requirement. As such, all proprietary data feeds are optional.
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Particularly, 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.'' \15\ Making 
similar data products available to market participants fosters 
competition in the marketplace, and constrains the ability of exchanges 
to charge supracompetitive fees. In the event that a market participant 
views one exchange's data product as more or less attractive than the 
competition they can and do switch between similar products. The 
proposed fees are a result of the competitive environment, as the 
Exchange seeks to adopt fees to attract purchasers of BZX Options Top 
Data.
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    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').

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[[Page 4053]]

    The Exchange believes the proposed changes to reduce the current 
Professional and Non-Professional User fees are reasonable as recipient 
firms will be subject to lower User fees. Additionally, the User fees 
continue to be lower than User fees assessed by other exchanges for 
similar data.\16\ The Exchange believes that the proposed fees are 
equitable and not unfairly discriminatory because they will be charged 
uniformly to recipient firms and Users. The Exchange also believes 
continuing to offer BZX Options Top Data to Non-Professional Users at a 
lower cost than Professional Users results in greater equity among data 
recipients, as Professional Users are categorized as such based on 
their employment and participation in financial markets, and thus, are 
compensated to participate in the markets. Although Non-Professional 
Users too can receive significant financial benefits through their 
participation in the markets, the Exchange believes it is reasonable to 
charge more to those Users who are more directly engaged in the 
markets.
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    \16\ See e.g., Nasdaq PHLX Options 7 Pricing Schedule, Section 
10 (Proprietary Data Feed Fees), which provides for a fee of $40 per 
month to professional users and $1.00 per month to non-professional 
users of Top of PHLX Options (TOPO) Data. See also NYSE American 
Options Proprietary Market Data Fees schedule, which provides for a 
fee of $50 per month to professional users and $1.00 per month to 
non-professional users of American Options Top Data.
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    The Exchange believes the proposed change to start charging 
separate User fees for BZX Options Top and BZX Options Depth Feed is 
equitable and reasonable because the Exchange has not charged for 
separate User Fees for both feeds since BZX Options Top was adopted in 
March 2018 and the Exchange no longer wishes to continue to have a 
single fee.\17\ Moreover, the Book Depth Data Feed is purely optional. 
Only those Customers that deem the product to be of sufficient overall 
value and usefulness would purchase it. Additionally, the Exchange is 
not required to provide any such waiver to any Distributors of BZX 
Options Top. The Exchange believes the proposed change is equitable and 
not unfairly discriminatory as it will apply uniformly to recipient 
firms.
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    \17\ See Securities Exchange Act Release No. 82874 (March 14, 
2018), 83 FR 12210 (March 20, 2018) (SR-CboeBZX-2018-017).
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    The proposed increased Enterprise Fee for BZX Options Top Feed is 
equitable and reasonable as the proposed fee could still result in a 
fee reduction for recipient firms with a large number of Professional 
and Non-Professional Users. If a recipient firm has a smaller number of 
Professional Users of BZX Options Top, then it may continue using the 
per User structure and benefit from the proposed per User Fee 
reductions. By reducing prices for recipient firms with a large number 
of Professional and Non-Professional Users, the Exchange believes that 
more firms may choose to receive and to distribute BZX Options Top 
Data, thereby expanding the distribution of this market data for the 
benefit of investors.
    The Exchange further believes that the Enterprise Fee, even as 
amended, is reasonable because it simplifies reporting for certain 
recipients that have large numbers of Professional and Non-Professional 
Users. Firms that pay the proposed Enterprise Fee do have to report the 
number of Users on a monthly basis as they currently do, but rather 
only have to count authorized users every six months, which is a 
significant reduction in administrative burden. Finally, as described 
above the Enterprise Fee is entirely optional. A firm that does not 
have a sufficient number of subscribers to benefit from purchase of the 
license need not do so.

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

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive environment, and its ability to price 
top-of-book data is constrained by competition among exchanges that 
offer similar data products to their customers. Top-of-book data is 
broadly disseminated by competing U.S. options exchanges and through 
OPRA. There are therefore a number of alternative products available to 
market participants and investors, including products offered by 
certain competing exchanges. In this competitive environment potential 
subscribers are free to choose which competing product to purchase to 
satisfy their need for market information. Often, the choice comes down 
to price, as market data customers look to purchase cheaper data 
products, and quality, as market participants seek to purchase data 
that represents significant market liquidity.
    The Exchange believes that the proposed fees do not put any market 
participants at a relative disadvantage compared to other market 
participants. As discussed, the proposed fees would apply to all 
similarly situated recipient firms of BZX Options Top on an equal and 
non-discriminatory basis. The Exchange believes the differentiated fees 
for Professional and Non-Professional Users of BZX Options Top is 
appropriate given Professional Users are categorized as such based on 
their employment and participation in financial markets, and thus, are 
compensated to participate in the markets. Non-Professional Users too 
can receive significant financial benefits through their participation 
in the markets, however the Exchange believes it is reasonable to 
charge more to those Users who are more directly engaged in the 
markets. The Exchange therefore believes that the proposed fee neither 
favors nor penalizes one or more categories of market participants in a 
manner that would impose an undue burden on competition.
    The Exchange believes that the proposed fees do not impose a burden 
on competition or on other SROs that is not necessary or appropriate in 
furtherance of the purposes of the Act. In particular, market 
participants are not forced to subscribe to BZX Options Top, or any of 
the Exchange's data feeds, as described above. Also as described above, 
there are numerous substitute products offered by other national 
securities exchanges, as well as OPRA. Because market data customers 
can find suitable substitute feeds, an exchange that overprices its 
market data products stands a high risk that users may substitute 
another product. These competitive pressures ensure that no one 
exchange's market data fees can impose an undue burden on competition, 
and the Exchange's proposed fees do not do so here.

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

[[Page 4054]]

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2023-001 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-2023-001. 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, 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-2023-001 and should be submitted 
on or before February 13, 2023.

    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. 2023-01115 Filed 1-20-23; 8:45 am]
BILLING CODE 8011-01-P