Document ID: SEC-2021-0319-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2021-03-08T05:00Z

[Federal Register Volume 86, Number 43 (Monday, March 8, 2021)]
[Notices]
[Pages 13412-13414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04677]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91239; File No. SR-CboeBZX-2021-017]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposal To Permit the Exchange 
To Look Back Only to July 2020 To Correct Certain Billing Errors Which 
Were Discovered in October 2020

March 2, 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 February 18, 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 and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposal to permit the Exchange to look back only to July 2020 to 
correct certain billing errors which were discovered in October 2020. 
This rule change does not provide for any modifications to the text of 
the Exchange's rules or fees schedule.
    The text of the proposal 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 recently amended its equities and options fees 
schedules to adopt a provision relating to billing errors and fee 
disputes.\5\ Specifically, the Exchange adopted a provision that 
provides that all fees and rebates assessed prior to the three full 
calendar months before the month in which the Exchange becomes aware of 
a billing error shall be considered final. Particularly, the Exchange 
will resolve an error by crediting or debiting Members and Non-Members 
based on the fees or rebates that should have been applied in the three 
full calendar months preceding the month in which the Exchange became 
aware of the error, including to all impacted transactions that 
occurred during those months.\6\ The Exchange will apply the three 
month look back regardless of whether the error was discovered by the 
Exchange or by a Member or Non-Member that submitted a fee dispute to 
the Exchange. The Exchange's fees schedules also provide that all 
disputes concerning fees and rebates assessed by the Exchange would 
have to be submitted to the Exchange in writing and accompanied by 
supporting documentation. The purpose of this policy is to provide both 
the Exchange and Members and Non-Members subject to the Exchange's fee 
schedule finality and the ability to close their books after a known 
period of time. The Exchange further notes that several other exchanges 
have adopted similar provisions in their rules.\7\
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    \5\ See Securities Exchange Act Release No. 90897 (January 11, 
2021), 86 FR 4161 (January 15, 2021) (SR-CboeBZX-2020-094).
    \6\ For example, if the Exchange becomes aware of a transaction 
fee billing error on February 4, 2021, the Exchange will resolve the 
error by crediting or debiting Members based on the fees or rebates 
that should have been applied to any impacted transactions during 
November, 2020, December 2020 and January 2021. The Exchange notes 
that because it bills in arrears, the Exchange would be able to 
correct the error in advance of issuing the February 2021 invoice 
and therefore, transactions impacted through the date of discovery 
(in this example, February 4, 2021) and thereafter, would be billed 
correctly.
    \7\ See e.g., Securities Exchange Act Release No. 87650 
(December 3, 2019), 84 FR 67304 (December 9, 2019) (SR-NYSECHX-2019-
024); Securities Exchange Act Release No. 84430 (October 16, 2018), 
83 FR 53347 (October 22, 2018) (SR-NYSENAT-2018-23); and Securities 
Exchange Act Release No. 79060 (October 6, 2016), 81 FR 70716 
(October 13, 2016) (SR-ISEGemini-2016-11).
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    The Exchange proposes to apply the recently adopted billing policy 
to transactions impacted by billing errors that were discovered in 
October 2020. Particularly, in October 2020, the Exchange identified a 
billing error relating to certain fee codes. As a result of the 
discovery, the Exchange conducted a review of additional fee code 
configurations, which review was only recently completed. The review 
resulted in the discovery of additional billing errors relating to 
Exchange fee codes. These errors, along with the original error 
discovered in October 2020, resulted in various Members being over-
rebated or under-billed, and to a lesser extent over-billed, over the 
course of several years. In the absence of applying the recently 
adopted billing policy to transactions impacted by the October 2020 
billing errors, the Exchange would be required to credit or debit 
Members based on the fees or rebates that should have been applied to 
all impacted transactions, regardless of how far back the transactions 
occurred (which as noted above, is several years). If the Exchange were 
permitted to apply the current rule language to the billing errors 
discovered in October 2020 however, then the Exchange could limit its 
look back in correcting those errors to only those transactions that 
occurred

[[Page 13413]]

in the three months preceding the discovery of the errors (i.e., July 
2020 through September 2020).\8\ Moreover, the benefit to the Exchange 
of limiting the impact of these particular errors to three months is 
much smaller as compared to the benefit that Members would receive. 
Specifically, the nature of these particular billing errors is such 
that in correcting the errors, more money would be owed to the Exchange 
by Members due to over-rebating or under-billing than is owed to 
Members by the Exchange due to overbilling. Accordingly, the Exchange 
believes it's appropriate and equitable to apply the three-month look 
back for corrective billing to the errors that were discovered in 
October 2020.
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    \8\ The Exchange corrected errors in advance of issuing the 
October 2020 invoice and therefore, transactions impacted through 
the date of discovery and thereafter, were billed correctly.
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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.\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 the 
Section 6(b)(5) \11\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    In adopting its currently policy, the Exchange noted that it 
believed providing that all fees are final after 3 months is reasonable 
as both the Exchange and Members have an interest in knowing when its 
fee assessments are final and when reliance can be placed on those 
assessments. Indeed, without some deadline on fee disputes and billing 
errors, the Exchange and market participants would never be able to 
close their books with any confidence. Furthermore, as noted above, a 
number of Exchanges similarly consider their fees final after a similar 
period of time.\12\ As discussed above, in October 2020, the Exchange 
became aware of certain billings errors which resulted in various 
Members being over-rebated or under-billed, and to a lesser extent 
over-billed over the course of several years. The Exchange believes 
it's appropriate that Members that were impacted by these billing 
errors similarly be subject to the recently adopted billing policy to 
not resolve billing errors past three months from the time a billing 
error was discovered (in this case, not be invoiced for impacted 
transactions that occurred prior to July 2020).\13\ The Exchange does 
not think it is appropriate or equitable to have to correct billing 
errors for transactions that occurred prior to July 2020. As discussed, 
the Exchange believes it's reasonable and important for both Members 
and the Exchange to rely on the finality of fees and rebates assessed. 
Moreover, the proposed rule change would apply to all Members equally, 
in that the Exchange would be precluded from invoicing any Member for 
the correct amounts that should have been applied to trades that were 
otherwise billed incorrectly before July 2020. The Exchange also 
believes the proposal would be consistent with the protection of 
investors and the public interest because it would allow impacted 
market participants to benefit from the same rule recently adopted by 
the Exchange. Additionally, as discussed, Members would receive a 
greater benefit from the application of the current billing errors 
policy as compared to the Exchange with respect to these particular 
billing errors. Furthermore, the Exchange believes the proposal to 
limit the time period it must correct billing errors does not raise any 
new or novel issues that have not been already been considered by the 
Commission. Particularly, the proposal to limit how far back an 
exchange must go to correct billing errors is comparable to other 
policies and practices that have long been established at other 
exchanges.\14\
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    \12\ See supra note 7.
    \13\ Since the errors were discovered in October 2020, the three 
preceding months that would be corrected are July, August, and 
September 2020.
    \14\ See supra note 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. First, the Exchange notes 
the proposal is not intended to address any competitive issue, but 
rather provide finality to Members with respect to billing errors that 
were just recently discovered and extend to them the applicability of a 
recently adopted billing practice that considers all fees final after 
three months. Further, the Exchange does not believe that the proposed 
rule change will impose any burden on intramarket competition that is 
not necessary or appropriate in furtherance of the purposes of the Act 
because the proposed changes apply equally to all Members. The Exchange 
does not believe that the proposed rule change will impose any burden 
on intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed change only 
affects transactions that occurred on the Exchange. Additionally, other 
exchanges have long established policies in which fees shall be 
considered final after a specified period of time.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No comments were solicited or received on the proposed rule change.

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

    Because the foregoing proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and; (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) \16\ thereunder.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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

[[Page 13414]]

Commission takes such action, the Commission will institute proceedings 
to determine whether the proposed rule change should be approved or 
disapproved.

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 rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2021-017 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-2021-017. 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeBZX-2021-017 and should 
be submitted on or before March 29, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04677 Filed 3-5-21; 8:45 am]
BILLING CODE 8011-01-P