Document ID: SEC-2022-1532-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2022-11-25T05:00Z

[Federal Register Volume 87, Number 226 (Friday, November 25, 2022)]
[Notices]
[Pages 72537-72539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25668]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96357; File No. SR-CboeBZX-2022-055]

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

November 18, 2022.
    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 10, 2022, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 
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 its Fee Schedule to modify the 
required criteria of the Tape B Volume and Quoting Tier 1 and to 
clarify that fee code X \3\ is applicable to certain routed orders that 
add or remove liquidity.\4\
---------------------------------------------------------------------------

    \3\ Fee code X is appended to routed orders.
    \4\ The Exchange initially filed the proposed fee changes on 
November 1, 2022 (SR-CboeBZX-2022-054). On November 10, 2022, the 
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------

    The Exchange first notes that its listing business also operates in 
a highly-competitive market in which market participants, which 
includes issuers of securities, Lead Market Makers (``LMMs''), and 
other liquidity providers, can readily transfer their listings, opt not 
to participate, or direct order flow to competing venues if they deem 
fee levels, liquidity provision incentive programs, or any other factor 
at a particular venue to be insufficient or excessive. Footnote 13 of 
the Fee Schedule provides for the Tape B Volume and Quoting Tiers, 
which are designed to incentivize market participants to enroll in LMP 
Securities,\5\ which the Exchange believes will enhance market quality 
in all securities listed on the Exchange and encourage issuers to list 
new products and transfer existing products to the Exchange.
---------------------------------------------------------------------------

    \5\ ``LMP Securities'' means a list of securities included in 
the Liquidity Management Program, the universe of which is 
determined by the Exchange and published in a circular distributed 
to Members and on the Exchange's website. Such LMP Securities 
include all Cboe-listed Exchange-Traded Products (``ETPs'') and 
certain non-Cboe-listed ETPs for which the Exchange wants to 
incentivize Members to provide enhanced market quality.
---------------------------------------------------------------------------

    The Exchange currently offers two Tape B Volume and Quoting Tiers 
under Footnote 13, which provide an additional rebate of $0.0001 (Tier 
1) and

[[Page 72538]]

$0.0002 (Tier 2) per share for orders that meet certain criteria. Tier 
1 provides an additional rebate if (i) the Member is enrolled in at 
least 50 BZX-listed LMP Securities, for which it meets the following 
criteria for at least 50% of the trading days in the applicable month: 
(1) the Member has a NBBO Time \6\ of equal to or greater than 15% or a 
NBBO Size Time \7\ of equal to or greater than 25%; and (2) the Member 
has a Displayed Size Time \8\ of equal to or greater than 90%; and (ii) 
the Member adds a Tape B ADV \9\ of equal to or greater than 0.50% of 
the TCV.\10\ All Members are eligible to enroll in LMP Securities and 
are eligible for the current Tape B Volume and Quoting Tiers. Such 
rebates are applicable to orders that add liquidity which are appended 
with fee code B.\11\ LMP incentives are designed to apply to Tape B 
trades as BZX-listed securities are Tape B securities. In order to 
further incentivize market participants to achieve the Tape B Volume 
and Quoting Tier 1, the Exchange proposes to eliminate the Tape B ADV 
requirement from the second prong (ii) of the Tier 1 criteria, which 
will make the criteria less stringent.
---------------------------------------------------------------------------

    \6\ ``NBBO Time'' means the average of the percentage of time 
during regular trading hours during which the Member maintains at 
least 100 shares at each of the NBB and NBO.
    \7\ ``NBBO Size Time'' means the percentage of time during 
regular trading hours during which there are size-setting quotes at 
the NBBO on the Exchange.
    \8\ ``Displayed Size Time'' means the percentage of time during 
regular trading hours during which the Member maintains at least 
2,500 displayed shares on the bid and separately maintains at least 
2,500 displayed shares on the offer that are priced no more than 2% 
away from the NBB and NBO, respectively.
    \9\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day.
    \10\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
    \11\ Fee code B is appended to a displayed order that adds 
liquidity to BZX (Tape B).
---------------------------------------------------------------------------

    Next, the Exchange proposes to clarify that fee code X is 
applicable to routed orders that add or remove liquidity. When certain 
fee codes were deleted from the Fee Schedule the Exchange 
simultaneously proposed to update fee code X to make clear it applies 
to all other routed orders that are not otherwise specified under other 
fee codes in the Fee Schedule.\12\ However, the Exchange did not make 
clear in the fee code table that fee code X is therefore also 
applicable to orders that both add and remove liquidity.\13\ Therefore, 
the Exchange is now proposing to add such language to the description 
of fee code X, as well as eliminate the reference to ``Removing'' 
liquidity in the Standard Rates header for the Routing Liquidity column 
(which is applicable to fee code X).
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act No. 91002 (January 27, 2021) 86 
FR 7902 (February 2, 2021) (SR-CboeBZX-2021-010).
    \13\ Under the Transaction Fees section of the Fee Schedule, 
bullet four provides ``[u]nless otherwise noted, all routing fees or 
rebates in the Fee Codes and Associated Fees table are for removing 
liquidity from the destination venue.''
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Exchange Act of 1934 (the 
``Act''),\14\ in general, and furthers the objectives of Section 
6(b)(4),\15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange notes that its listing business operates in a highly-
competitive market in which market participants, which includes issuers 
of securities, LMMs, and other liquidity providers, can readily 
transfer their listings, opt not to participate, or direct order flow 
to competing venues if they deem fee levels, liquidity provision 
incentive programs, or any other factor at a particular venue to be 
insufficient or excessive. The proposed rule change to the Tape B 
Volume and Quoting Tier 1 reflects a competitive pricing structure 
designed to incentivize market participants to enroll in LMP 
Securities, which the Exchange believes will enhance market quality in 
all securities listed on the Exchange and encourage issuers to list new 
products and transfer existing products to the Exchange. The Exchange 
believes that the proposed change to the Tape B Volume and Quoting 
Tier1 is consistent with the Act and represent a reasonable, equitable, 
and not unfairly discriminatory means to incentivize liquidity 
provision in ETPs listed on the Exchange. The marketplace for listings 
is extremely competitive and there are several other national 
securities exchanges that offer ETP listings. Transfers between listing 
venues occur frequently for numerous reasons, including market quality. 
This proposal is intended to help the Exchange compete as an ETP 
listing venue. LMP incentives are designed to apply to Tape B trades as 
BZX-listed securities are Tape B securities. The proposed change is 
designed to make Volume and Quoting Tier 1 less stringent. The Exchange 
believes that the proposal to amend Tape B Volume and Quoting Tier 1 
represents an equitable allocation of fees and other charges because 
the Tape B Volume and Quoting Tiers are available equally to all 
Members and all Members are eligible to enroll in LMP Securities. Based 
on the prior month's trading volume, the Exchange anticipates at least 
two Members will meet the amended Tape B Volume and Quoting Tier 1. 
Further, the Exchange believes that the proposal represents an 
equitable allocation of fees and other charges and is not unreasonably 
discriminatory because enrolling in LMP Securities is open to all 
Members and any Member that wishes to receive the Tape B Volume and 
Quoting Tier 1 must meet the proposed quoting and execution standards 
in order to receive the additional rebate, as outlined above. Where a 
Member does not meet the requirements, they will not receive the 
additional rebate. Further and as noted throughout, the Tape B Volume 
and Quoting Tiers are designed to enhance market quality in BZX-listed 
securities and to make the Exchange more competitive as an ETP listing 
venue.
    The Exchange believes the proposal to modify fee code X to 
explicitly provide that it is applicable to routed orders that add and 
remove liquidity on the destination exchange is not designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers. 
Specifically, the proposal is intended only to make a clarifying change 
to the Fee Schedule and involves no substantive change.

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 does not believe the proposed change to the Tape B 
Volume and Quoting Tier 1 burdens competition, but rather, enhances 
competition as it is intended to increase the competitiveness of BZX 
both among Members by incentivizing Members to enroll in LMP Securities 
and as a listing venue by enhancing market quality in BZX-listed 
securities. The marketplace for listings is extremely competitive and 
there are several other national securities exchanges that offer 
listings. Transfers between listing venues occur frequently for 
numerous reasons, including market quality. This proposal is intended 
to help the Exchange compete as a listing venue. Accordingly, the 
Exchange does not believe that the

[[Page 72539]]

proposed change will impair the ability of issuers, LMMs, other 
Members, or competing listing venues to maintain their competitive 
standing. The Exchange also notes that the proposed change is intended 
to enhance market quality in BZX-listed securities and other listed 
securities, to the benefit of all investors in such BZX-listed 
securities. The Exchange does not believe the proposed amendment would 
burden intramarket competition as it would be available to all Members 
uniformly.
    The Exchange believes its proposal to clarify that fee code X is 
applicable to liquidity adding and removing orders will have no impact 
on competition as it involves no substantive change, but merely is a 
clarifying change to the existing Fee Schedule.

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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2022-055 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-2022-055. 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-2022-055 and should be submitted 
on or before December 16, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25668 Filed 11-23-22; 8:45 am]
BILLING CODE 8011-01-P