Document ID: SEC-2018-0747-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2018-05-15T04:00Z

[Federal Register Volume 83, Number 94 (Tuesday, May 15, 2018)]
[Notices]
[Pages 22565-22567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10260]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83200; File No. SR-CboeBZX-2018-031]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
Certain Routing Fees Related to its Equity Options Platform

May 9, 2018.
    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 1, 2018, 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 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to modify certain Routing Fees 
related to its equity options platform.
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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 parts of such 
statements.

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

1. Purpose
    The Exchange proposes to amend its fee schedule for its equity 
options platform (``BZX Options'') to make certain changes to the 
following tiers: (i) Quoting Incentive Program (``QIP'') Tier 2 under 
footnote 5; (ii) Non-Customer Non-Penny Pilot Take Volume Tiers 1 and 2 
under footnote 13; and (iii) Non-Customer Penny Pilot Take Volume Tiers 
1 and 3 under footnote 3, effective May 1, 2018.
QIP Volume Tier 2
    The Exchange currently offers two QIP Tiers under footnote 5, which 
provide an additional rebate ranging from $0.02 to $0.04 per contract 
for qualifying Market Maker \5\ orders that add liquidity in: (i) Penny 
Pilot Securities that yield fee code PM and; (ii) Non-Penny Pilot 
Securities that yield fee code NM. The additional rebate per contract 
is for an order that adds liquidity to BZX Options in options classes 
in which a Member is a Market Maker registered pursuant to Exchange 
Rule 22.2. The Exchange now proposes to amend the required criteria for 
QIP Tier 2. Particularly, under current Tier 2, a Member may receive an 
additional rebate of $0.04 per contract where they have an ADAV \6\ in 
Market Maker orders greater than or equal to 0.35% of average OCV.\7\ 
The Exchange proposes to amend the required criteria for Tier 2 to now 
require that the Member have an ADAV in Market Maker orders greater 
than or equal to 1.40% of average OCV.
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    \5\ A Market Maker must be registered with BZX Options in an 
average of 20% or more of the associated options series in a class 
in order to qualify for QIP rebates for that class.
    \6\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day. See Exchange Fee Schedule.
    \7\ ``OCV'' means the total equity and ETF options volume that 
clears in the Customer range at the Options Clearing Corporation 
(``OCC'') for the month for which the fees apply, excluding volume 
on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close. See 
Exchange Fee Schedule.

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[[Page 22566]]

Non-Customer Non-Penny Pilot Take Volume Tiers 1 and 2
    Fee code NP is currently appended to all Non-Customer orders in 
Non-Penny Pilot Securities that remove liquidity, and result in a 
standard fee of $1.10 per contract. The Exchange currently offers two 
Non-Customer Non-Penny Pilot Take Volume Tiers (``NP Volume Tiers'') 
under footnote 13, which provide a reduced fee of $1.04 per contract 
for orders that that yield fee code NP. The Exchange proposes to 
increase the rates set forth in NP Volume Tiers 1 and 2. Specifically, 
NP Volume Tiers 1 and 2 will increase from $1.04 per contract to $1.07 
per contract. The Exchange notes that the proposed rates still provide 
a discount from the standard Non-Customer NP rate and will continue to 
provide an incentive for Members to strive for the tier levels, which 
provide a discount off the standard rate.
Non-Customer Penny Pilot Take Volume Tiers 1 and 3
    Fee code PP is currently appended to all Non-Customer orders in 
Penny Pilot Securities that remove liquidity, and result in a standard 
fee of $0.50 per contract. The Exchange currently offers three Non-
Customer Penny Pilot Take Volume Tiers under footnote 3, which provide 
reduced fees ranging from $0.44 to $0.47 per contract for orders that 
that yield fee code PP.
    Pursuant to Volume Tier 1, a Member will pay a reduced fee 
(currently $0.44 per contract) if the Member (i) has an ADAV in 
Customer orders greater than or equal to 0.80% of average OCV; (ii) has 
an ADAV in Market Maker orders greater than or equal to 0.35% of 
average OCV; and (iii) has on BZX Equities an ADAV greater than or 
equal to 0.30% of average TCV.\8\ The Exchange proposes to add a fourth 
prong that requires the member to have an ADAV in Customer Non-Penny 
orders greater than or equal to 0.05% of average OCV.
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    \8\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges to the consolidated transaction 
reporting plan for the month for which the fees apply, excluding 
volume on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close.
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    Pursuant to Volume Tier 3, a Member will pay a reduced fee 
(currently $0.44 per contract) if the Member has an ADAV in Customer 
orders greater than or equal to 1.70% of average OCV. The Exchange 
proposes to add a second prong that requires the member to have an ADAV 
in Customer Non-Penny orders greater than or equal to 0.30% of average 
OCV. The Exchange believes the proposed changes will encourage the 
entry of additional orders to the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ in particular, as it is 
designed to 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.
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the increase to the rates in NP Volume Tiers 
1 and 2 is reasonable because Members submitting Non-Customer orders 
still have the opportunity to receive a lower fee in Non-Penny Pilot 
classes than the standard rate (albeit less of a discount than before). 
The Exchange also believes the rates will continue to provide an 
incentive for Members to strive for the tier levels, which provide 
discounts off the standard rate. The Exchange believes the proposed 
changes are equitable and nondiscriminatory because the proposed 
changes apply uniformly to all Members.
    The Exchange next notes that volume-based discounts such as those 
currently maintained on the Exchange have been widely adopted by 
options exchanges and are equitable and non-discriminatory because they 
are open to all Members on an equal basis and provide additional 
benefits or discounts that are reasonably related to the value of an 
exchange's market quality associated with higher levels of market 
activity, such as higher levels of liquidity provision and/or growth 
patterns, and introduction of higher volumes of orders into the price 
and volume discovery processes. While the proposed modifications to the 
existing QIP Tier 2 and NP Volume Tiers [sic] make such tiers more 
difficult to attain, each is intended to incentivize Members to send 
additional Market Maker and/or Customer orders, respectively, to the 
Exchange in an effort to qualify or continue to qualify for the lower 
fees made available by the tiers. As such, the Exchange also believes 
that the proposed changes are reasonable. The Exchange notes that 
increased volume on the Exchange provides greater trading opportunities 
for all market participants.

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

    The Exchange believes the proposed amendments to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed changes represent a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. 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 
change will impair the ability of Members or competing venues to 
maintain their competitive standing in the financial markets.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \11\ and paragraph (f) of Rule 19b-4 
thereunder.\12\ 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2018-031 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.

[[Page 22567]]

All submissions should refer to File Number SR-CboeBZX-2018-031. 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-2018-031, and should be 
submitted on or before June 5, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10260 Filed 5-14-18; 8:45 am]
 BILLING CODE 8011-01-P