Document ID: SEC-2019-0255-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2019-03-07T05:00Z

[Federal Register Volume 84, Number 45 (Thursday, March 7, 2019)]
[Notices]
[Pages 8358-8359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04086]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85235; File No. SR-CboeBZX-2019-012]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fee Schedule Applicable to Members and Non-Members of the Exchange 
Pursuant to BZX Rules 15.1(a) and (c)

March 1, 2019.
    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 February 21, 2019, 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.
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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'') is filing 
with the Securities and Exchange Commission a proposed rule change to 
amend the fee schedule applicable to Members and non-Members \3\ of the 
Exchange pursuant to BZX Rules 15.1(a) and (c). The text of the 
proposed rule change is attached as Exhibit 5 [sic].
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    \3\ A 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 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 applicable to its 
equities trading platform (``BZX Equities'') to (i) add a second Single 
MPID Investor Tier and (ii) eliminate the NBBO Setter Tiers.\4\
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    \4\ The Exchange initially filed the proposed fee change on 
February 1, 2019 (SR-CboeBZX-2019-007). On business date February 
12, 2019, the Exchange withdrew that filing and submitted SR-
CboeBZX-2019-010. On business date February 21, 2019, the Exchange 
withdrew that filing and submitted this filing.
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Single MPID Investor Tier 2
    The Exchange currently offers a Single MPID Investor Tier under 
Footnote 4 of the fee schedule that provides Members with an additional 
way to qualify for an enhanced rebate for orders yielding fee codes 
B,\5\ V,\6\ or Y.\7\ The distinction between the Single MPID Investor 
Tier and other tiers offered by the Exchange, [sic] is that the volume 
measured to determine whether a Member qualifies is performed on a 
Member Participant Identifier (``MPID'') by MPID basis. The Exchange 
proposes to adopt a second Single MPID Investor Tier (Tier 2), which 
will provide Members an opportunity to receive an enhanced rebate of 
$0.0036 per share where the Member's MPID has an ADAV \8\ as a 
percentage of TCV \9\ greater than or equal to 2.25% on orders yielding 
fee codes B, V or Y. Members that achieve the proposed Single MPID 
Investor Tier must therefore increase the amount of liquidity that they 
provide on BZX, thereby contributing to a deeper and more liquid 
market.
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    \5\ Fee code B is appended to displayed orders which add 
liquidity to Tape B and is provided a rebate of $0.0025 per share.
    \6\ Fee code V is appended to displayed orders which add 
liquidity to Tape A and is provided a rebate of $0.0020 per share.
    \7\ Fee code Y is appended to displayed orders which add 
liquidity to Tape C and is provided a rebate of $0.0020 per share.
    \8\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \9\ ``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.
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NBBO Setter Tiers
    The Exchange currently offers two NBBO Setter Tiers under Footnote 
19 of the fee schedule which provide an additional rebate of $0.0003 
and $0.0004 per share for orders that establish a new National Best Bid 
or Offer (``NBBO'') and which are appended with fee code B, V, or Y. 
The Exchange no longer desires to maintain such tiers and therefore 
proposes to eliminate NBBO Setter Tier 1 and 2 from the fee schedule.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers [sic] the objectives of Section 6(b)(4),\11\ in particular, as 
it is [sic] 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 also 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 or incentives to be insufficient. The 
proposed rule changes reflect a competitive pricing structure designed 
to incentivize market participants to direct their order flow to the 
Exchange.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange notes that volume-based rebates such as 
that proposed herein have been widely adopted by exchanges, including 
the

[[Page 8359]]

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 Single MPID Investor 
Tier 2 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.
    More specifically, the Exchange believes the proposed additional 
Single MPID Investor Tier is a reasonable means to encourage Members to 
increase their liquidity on the Exchange in order to meet the proposed 
criteria to receive the proposed higher enhanced rebate. The Exchange 
further believes that the proposed tier represents an equitable 
allocation of reasonable dues, fees, and other charges because the 
threshold necessary to achieve the tier encourages Members to add 
increased liquidity to the BZX and the Exchange believes the proposed 
enhanced rebate is commensurate with the proposed threshold. 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 the proposed rebate is reasonable based on 
the difficulty of satisfying the tier's proposed criteria as compared 
to the existing Single MPID Investor Tier, which provides a lower 
rebate but less stringent criteria. Furthermore, the Exchange believes 
that the proposed tier is not unfairly discriminatory as it applies to 
all members that meet the required criteria.
    The Exchange believes it's reasonable to eliminate the NBBO Setter 
Tiers because it is not required to provide additional rebates. 
Additionally, the Exchange notes that orders yielding fee codes B, V or 
Y have other opportunities to obtain enhanced rebates, such as via the 
Add Volume Tiers or the Single MPID Investor Tiers.\12\ The Exchange 
believes it's equitable and not unfairly discriminatory because it 
applies uniformly to all Members.
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    \12\ See Cboe BZX U.S. Equities Exchange Fee Schedule.
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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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
the proposed change to adopt a new Single MPID Investor Tier burdens 
competition, but rather, enhances competition as it is intended to 
increase the competitiveness of BZX by adopting an additional pricing 
incentive in order to attract order flow and incentivize participants 
to increase their participation on the Exchange. 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 structures to be unreasonable or excessive. The proposed 
change to add a new Single MPID Investor Tier is generally intended to 
add an enhanced rebate for liquidity added to the Exchange, which is 
intended to draw additional liquidity to the Exchange. The Exchange 
does not believe the proposed amendment would burden intramarket 
competition as it would be available to all Members uniformly.

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

    No written comments were either solicited or received.

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 \13\ and paragraph (f) of Rule 19b-4 \14\ 
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.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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 rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2019-012 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-2019-012. 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-2019-012, and should be 
submitted on or before March 28, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04086 Filed 3-6-19; 8:45 am]
 BILLING CODE 8011-01-P