Document ID: SEC-2018-0421-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2018-03-14T04:00Z

[Federal Register Volume 83, Number 50 (Wednesday, March 14, 2018)]
[Notices]
[Pages 11252-11254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05079]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82834; File No. SR-CboeBZX-2018-015]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Transaction Fees

March 8, 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 March 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 amend the fee schedule applicable 
to Members \5\ and non-Members of the

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Exchange pursuant to BZX Rules 15.1(a) and (c).
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the fee schedule applicable to its 
equities trading platform (``BZX Equities'') to add a second Step-Up 
Tier under footnote 2. The Exchange currently offers one Step-Up Tier 
that provides Members with an additional way to qualify for an enhanced 
rebate where they increase their liquidity each month over a 
predetermined baseline. Under the current Step-Up Tier, a Member 
receives a rebate of $0.0030 per share for qualifying orders which 
yield fee codes B,\6\ V,\7\ or Y \8\ where their: (1) Step-Up Add TCV 
\9\ from April 2016 is equal to or greater than 0.15%; and (2) ADAV 
\10\ as a percentage of TCV \11\ is equal to or greater than 0.20%.
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    \6\ Fee code B is appended to displayed orders which add 
liquidity to Tape B and is provided a rebate of $0.0025 per share.
    \7\ Fee code V is appended to displayed orders which add 
liquidity to Tape A and is provided a rebate of $0.0020 per share.
    \8\ Fee code Y is appended to displayed orders which add 
liquidity to Tape C and is provided a rebate of $0.0020 per share.
    \9\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in the 
relevant baseline month subtracted from current ADAV as a percentage 
of TCV. See the BZX Equities fee schedule available at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \10\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day and ``ADV'' means average daily 
volume calculated as the number of shares added or removed, 
combined, per day. ADAV and ADV are calculated on a monthly basis. 
Id.
    \11\ ``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. Id.
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    The Exchange now proposes to amend footnote 2 to add a second Step-
Up Tier under which the volume measured to determine whether a Member 
qualifies is performed on a Member Participant Identifier (``MPID'') by 
MPID basis.\12\ Under the proposed Tier 2, a Member would receive a 
rebate of $0.0031 per share for their qualifying orders which yield fee 
codes B, V, or Y where their individual MPID has: (1) A Step-Up Add TCV 
from January 2018 equal to or greater than 0.30%; and (2) an ADAV as a 
percentage of TCV equal to or greater than 0.45%. The Exchange proposes 
to implement this amendments to its fee schedule on March 1, 2018.
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    \12\ The Exchange proposes to number the existing tier as Tier 
1.
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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,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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. The Exchange 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. The proposed rule change reflects a competitive pricing 
structure designed to incent market participants to direct their order 
flow to the Exchange. The Exchange believes that the proposed tier is 
equitable and non-discriminatory in it would apply uniformly to all 
Members.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as that proposed herein have been widely 
adopted by exchanges, including the Exchange, and are equitable because 
they are open to all Members on an equal basis and provide additional 
benefits or discounts that are reasonably related to: (i) The value to 
an exchange's market quality; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provision and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange believes that the 
proposed tier is a reasonable, fair and equitable, and not unfairly 
discriminatory allocation of fees and rebates because it will continue 
to provide Members with an incentive to reach certain thresholds on the 
Exchange.
    In particular, the Exchange believes the proposed Step-Up Tier is a 
reasonable means to encourage Members to increase their liquidity on 
the Exchange based on increasing their volume above a predetermined 
baseline. The Exchange further believes that the proposed Step-Up Tier 
represents an equitable allocation of reasonable dues, fees, and other 
charges because the thresholds necessary to achieve the tier encourages 
Members to add increased liquidity to the BZX Book \15\ each month. The 
increased liquidity benefits all investors by deepening the Exchange's 
liquidity pool, offering additional flexibility for all investors to 
enjoy cost savings, supporting the quality of price discovery, 
promoting market transparency and improving investor protection. The 
Exchange also believes that proposed rebate is reasonable based on the 
difficulty of satisfying the tier's criteria as compared to the 
existing Step-Up Tier, which provides a lower rebate and less stringent 
criteria. By applying the tier on a single MPID rather than across a 
Member's entire trading activity, the Exchange is also allowing more 
Members to potentially receive the enhanced rebates for their trading 
activity related to that individual MPID's liquidity provisioning.
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    \15\ See Exchange Rule 1.5(e).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe its proposed tier would 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 tier represents a significant departure from previous 
pricing offered by the Exchange or pricing offered by the Exchange's 
competitors. Additionally, Members may opt to disfavor the Exchange's 
pricing if they believe that alternatives offer them better value. The 
Exchange does not believe that the proposed tier would burden 
competition, but instead, enhance competition, as it is intended to 
increase the competitiveness of and draw additional volume to the 
Exchange. The Exchange does not believe the proposed tier would burden 
intramarket competition as it would apply to all Members uniformly. 
Accordingly, the Exchange does not believe that the proposed change 
will impair the ability of Members or competing venues to

[[Page 11254]]

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 unsolicited 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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ 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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    \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 proposal 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 No. SR-CboeBZX-2018-015 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 No. SR-CboeBZX-2018-015. 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 such filing will also 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 No. SR-CboeBZX-2018-XXX and should be submitted on 
or before April 4, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05079 Filed 3-13-18; 8:45 am]
 BILLING CODE 8011-01-P