Document ID: SEC-2019-0221-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2019-02-28T05:00Z

[Federal Register Volume 84, Number 40 (Thursday, February 28, 2019)]
[Notices]
[Pages 6844-6846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03472]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85183; File No. SR-CboeBZX-2019-009]

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

February 22, 2019.
    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 11, 2019, 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, 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 (``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.
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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 add a third Step-Up 
Tier under footnote 2.\4\ The Exchange currently offers two Step-Up 
Tiers that provide Members with additional ways to qualify for an 
enhanced rebate where they increase their relative liquidity each month 
over a predetermined baseline. Under the current Step-Up Tiers, a 
Member receives a rebate of $0.0030 or $0.0031 per share for qualifying 
orders which yield fee codes B,\5\ V,\6\ or Y \7\ if the corresponding 
required criteria is met.
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    \4\ The Exchange initially filed the proposed fee change on 
January 29, 2019 (SR-CboeBZX-2019-003). On business date February 
11, 2019, the Exchange withdrew that filing and submitted this 
filing.
    \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.
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    The Exchange now proposes to amend footnote 2 to add a third Step-
Up Tier. Under the proposed Step-Up Tier 3, a Member would receive a 
rebate of $0.0031 per share for their qualifying orders which yield fee 
codes B, V, or Y where the Member has a Step-Up Add TCV from December 
2018 greater or equal to 0.20%. As currently defined in the BZX 
Equities fee schedule, Step-Up Add TCV means ADAV \8\ as a percentage 
of TCV \9\ in the relevant baseline month

[[Page 6845]]

subtracted from current ADAV as a percentage of TCV.\10\ Members that 
achieve the proposed Step-Up Tier must therefore increase the amount of 
liquidity that they provide on BZX relative to the TCV each month, 
thereby contributing to a deeper and more liquid market.
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    \8\ ``ADAV'' means average daily 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.
    \10\ The following demonstrates how Step-Up Add TCV is 
calculated: In December 2018, Member A had an ADAV of 12,947,242 
shares and average daily TCV was 9,248,029,751, resulting in an ADAV 
as a percentage of TCV of 0.14%; In February 2019, Member A had an 
ADAV of 24,826,572 and average daily TCV was 7,093,306,325, 
resulting in an ADAV as a percentage of TCV of 0.35%. Member A's 
Step-Up Add TCV from December 2018 was therefore 0.21% which makes 
Member A eligible for the Tier 3 rebate. (i.e., 0.35% (Feb 2019)--
0.14% (Dec 2018), which is greater than 0.20% as required by Tier 
3).
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2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\11\ in general, and 
furthers the objectives of Section 6(b)(4),\12\ 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 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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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange notes that rebates such as that 
proposed herein have been widely adopted by exchanges,\13\ including 
the Exchange,\14\ 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 and (ii) associated higher levels of market activity, such as 
higher levels of liquidity provision and/or growth patterns. 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. Particularly, the proposed 
Tier rewards a Member's growth pattern since the end of the previous 
year (2018).
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    \13\ See e.g., NYSE Arca Equities, Fees and Charges, Step Up 
Tiers.
    \14\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote 
2, Step-Up Tiers 1 and 2.
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    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 relative volume above a predetermined 
baseline. 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, 
including using December 2018 as the predetermined baseline. 
Furthermore, the Exchange believes that the proposed Step-Up Tier is 
not unfairly discriminatory as it applies to all members that meet the 
required criteria.

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 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 is generally intended to enhance the 
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 \15\ and paragraph (f) of Rule 19b-4\16\ 
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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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-2019-009 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-2019-009. 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

[[Page 6846]]

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-2019-009 and should 
be submitted on or before March 21, 2019.

    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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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03472 Filed 2-27-19; 8:45 am]
 BILLING CODE 8011-01-P