83 FR 16137 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Transaction Fees for Use on Cboe BZX Exchange, Inc.'s Equity Platform

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 72 (April 13, 2018)

[Federal Register Volume 83, Number 72 (Friday, April 13, 2018)]
[Notices]
[Pages 16137-16140]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-07674]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83019; File No. SR-CboeBZX-2018-023]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Transaction Fees for Use on Cboe BZX Exchange, Inc.'s Equity Platform

April 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 March 29, 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 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

[[Page 16138]]

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 its fee schedule applicable to its 
equities trading platform (``BZX Equities'') to: (i) Amend the rate for 
orders that yield fee code HA; (ii) add a Non-Displayed Add Volume Tier 
and amend the required criteria for current Non-Displayed Add Volume 
Tiers 1 and 2 under footnote 1; (iii) delete the Step-Up Add Tier under 
footnote 4 Single MPID Investor Tiers; (iv) delete Tier 1 under 
footnote 13, Tape B Volume and Quoting Tiers; and (v) delete Tier 1 and 
adjust the rebates for current Tiers 2 and 3 under footnote 19, NBBO 
Setter Tiers.
Fee Code HA
    Fee code HA is appended to non-displayed orders that add liquidity 
and receive a rebate of $0.0017 per share.\6\ The Exchange proposes to 
reduce the rebate provided to orders that yield fee code HA from 
$0.0017 per share to $0.0015 per share.
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    \6\ See the Exchange's fee schedule available at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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Add Volume Tiers Under Footnote 1
    The Exchange currently offers thirteen Add Volume Tiers under 
footnote 1, which provide an enhanced rebate of $0.0025 [sic] to 
$0.0032 per share for qualifying orders which yield fee codes B, V, and 
Y,\7\ or HA. The Exchange now proposes to add a Non-Displayed Add 
Volume Tier and amend the required criteria for the current Non-
Displayed Add Volume Tiers 1 and 2 under footnote 1 which would be 
available for qualifying orders which yield fee code HA.
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    \7\ Fee codes B, V, and Y are appended to displayed orders that 
add liquidity in tape B, A, or C, respectively. Id.
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     Under the proposed Non-Displayed Add Volume Tier 1, a 
Member may receive an enhanced rebate of $0.0018 per share where they 
add an ADV \8\ greater than or equal to 0.05% of the TCV,\9\ as Non-
Displayed orders that yield fee codes HA or HI.\10\
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    \8\ ``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.
    \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. Id.
    \10\ Fee code HI is appended to non-displayed orders that 
receive price improvement and add liquidity. Id.
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     Under the current Non-Displayed Add Volume Tier 1 (to be 
renumbered as Tier 2), a Member may receive an enhanced rebate of 
$0.0020 per share where they add an ADV greater than or equal to 0.09% 
of the TCV, as Non-Displayed orders that yield fee codes HA or HI. The 
Exchange proposes to amend the tier's required criteria to now require 
that the Member add an ADV greater than or equal to 0.15% of the TCV. 
The Exchange does not proposes to amend any other portion of the tier's 
required criteria or its applicable rebate.
     Under the Non-Displayed Add Volume Tier 2 (to be 
renumbered as Tier 3), a Member may receive an enhanced rebate of 
$0.0025 per share where they add an ADV greater than or equal to 0.18% 
of the TCV, as Non-Displayed orders that yield fee codes HA or HI. The 
Exchange proposes to amend the tier's required criteria to now require 
that the Member add an ADV greater than or equal to 0.25% of the TCV. 
The Exchange does not proposes to amend any other portion of the tier's 
required criteria or its applicable rebate.
Single MPID Investor Tiers Under Footnote 4
    The Exchange currently offers two Single MPID Investor Tier under 
footnote 4, which provide an enhanced rebate of $0.0027 per share and 
$0.0031 per share for qualifying orders which yield fee codes B, V, or 
Y. The distinction between the existing tier under footnote 4 and other 
tiers offered by the Exchange, is that the volume measured to determine 
whether a Member qualifies is performed on a Market Participant 
Identifier (``MPID'') by MPID basis. The Exchange now proposes to 
delete the Step-Up Add Tier under footnote 4 under which a Member may 
receive an enhanced rebate of $0.0027 per share where the MPID has a 
Step-Up ADAV from November 2016, greater than or equal to 500,000 
shares.
Tape B Volume and Quoting Tiers Under Footnote 13
    The Exchange currently offers two tiers under footnote 13, which 
provide an enhanced rebate of $0.0027 per share and an additional 
rebate of $0.0001 per share for qualifying orders which yield fee codes 
B. The Exchange now proposes to delete Tier 1 under footnote 13 under 
which a Member may receive an enhanced rebate of $0.0027 per share 
where their have a Tape B ADAV \11\ as a percentage of TCV greater than 
or equal to 0.08%. The Exchange proposes to renumber existing Tier 2 as 
Tier 1 and to delete an ``s'' from the term ``fee codes'' in the 
footnote's introductory language.
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    \11\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. See the Exchange's fee schedule 
available at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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NBBO Setter Tiers Under Footnote 19
    The Exchange currently offers three NBBO Setter Tiers under 
footnote 19, which provide an additional rebate of $0.0001 to $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 
notes that the proposed the NBBO Setter Tiers are additive rebates, and 
thus, can be combined with other incentives and structures offered by 
the Exchange. The Exchange proposes to delete Tier 1 and adjust the 
rebates for current Tiers 2 and 3.
     Tier 1 provides an additional rebate of $0.0001 in 
qualifying orders where a Member has a Setter Add TCV \12\ of at least 
0.05%. The Exchange proposes to delete Tier 1.
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    \12\ ``Setter Add TCV'' means average daily added volume 
calculated as the number of displayed shares added that establish a 
new NBBO as a percentage of TCV. Id.
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     Tier 2 (to be renumbered as Tier 1) provides an additional 
rebate of $0.0002 in qualifying orders where a Member has a Setter Add 
TCV of at least 0.10%. The Exchange proposes to decrease the additional 
rebate provided by the tier to $0.00015 per share.
     Tier 3 (to be renumbered as Tier 2) provides an additional 
rebate of $0.0004 in qualifying orders where a Member has a Setter Add 
TCV of at least 0.15%. The Exchange only proposes to renumber the tier 
and does not propose to alter the tier's required criteria or 
additional rebate.
Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule on April 2, 2018.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are 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

[[Page 16139]]

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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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Fee Code HA
    The Exchange believes the proposed decrease to the rebate provided 
to orders that yield fee code HA is reasonable, fair and equitable, 
because the proposed rate equals the rebate provided to identical 
orders on Cboe EDGX Exchange, Inc. (``EDGX'').\15\ The proposed rebate 
for fee code HA is also non-discriminatory because it will be available 
to all Members who submit non-displayed orders that add liquidity.
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    \15\ See fee code HA in the EDGX fee schedule available at 
http://markets.cboe.com/us/equities/membership/fee_schedule/edgx/ 
(providing a rebate of $0.0015 per share to non-displayed orders 
that add liquidity).
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Tier Modifications
    The Exchange believes that the proposed modifications to the tiered 
pricing structure are reasonable, fair and equitable, and non-
discriminatory. The Exchange operates in a highly competitive market in 
which market participants may readily send order flow to many competing 
venues if they deem fees at the Exchange to be excessive or incentives 
provided to be insufficient. The proposed structure remains intended to 
attract order flow to the Exchange by offering market participants a 
competitive pricing structure. The Exchange believes it is reasonable 
to offer and incrementally modify incentives intended to help to 
contribute to the growth of the Exchange.
    Volume-based pricing 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 provisions and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes.
    Add Volume Tiers. The proposed addition of and modifications to the 
remaining two Non-Displayed Add Volume Tiers reinforces the purpose of 
the Add Volume Tier by incentivizing Members to send Non-Displayed 
orders to the Exchange. The proposes modifications to the current two 
tier required criteria are equitable and reasonable in light of the 
addition of a new Non-Displayed Add Volume Tier and serve to make the 
required criteria and related enhanced rebate reasonably related to 
each other and reflect the scaled difficulty in achieving each tier. 
Thus, the Exchange believes that the proposed modifications to the 
tiered pricing structure under footnote 1 are a reasonable, equitable, 
and not an unfairly discriminatory allocation of fees and rebates 
because they will provide Members with an incentive to reach certain 
thresholds on the Exchange by contributing a meaningful amount of order 
flow and because such an incentive is open to all Members on an equal 
basis.
    NBBO Setter Tiers. The Exchange believes the modification to the 
additional rebate provided by the one of the two remaining NBBO Setter 
Tiers under footnote 19 is a reasonable means to encourage Members to 
not only increase their liquidity on the Exchange but also to 
contribute to the market quality of the Exchange by offering 
aggressively priced liquidity. The Exchange further believes that the 
proposed rate represents an equitable allocation of reasonable dues, 
fees, and other charges because the thresholds necessary to achieve the 
tiers would continue to encourage Members to add additional liquidity 
to the Exchange. The revised additional rebate was modestly changed and 
continues to reasonably reflect the difficulty of achieving each tier's 
required criteria. The Exchange further believes that the NBBO Setter 
Tiers are not unreasonably discriminatory as they are equally available 
to all Members.
Elimination of Unused Tiers
    The Exchange believes that the proposed modifications to eliminate 
tiers under footnotes 4, 13, and 19 are reasonable, fair, and equitable 
because the current tiers were not providing the desired result of 
incentivizing Members to increase their participation in BZX Equities. 
Therefore, eliminating these tiers will have a negligible effect on 
order flow and market behavior. The Exchange believes the proposed 
changes are not unfairly discriminatory because they will apply equally 
to all Members.

(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 
that any of the proposed change to the Exchange's tiered pricing 
structure burden competition, but instead, that they enhance 
competition as they are intended to increase the competitiveness of BZX 
by modifying pricing incentives 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 changes are generally intended to enhance the 
rebates for liquidity added to the Exchange, which is intended to draw 
additional liquidity to the Exchange, and to eliminate a rebate that 
has not achieved its desired result. The Exchange does not believe the 
proposed amendments would burden intramarket competition as they 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

    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,

[[Page 16140]]

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-2018-023 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-2018-023. 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-2018-023 and should be submitted 
on or before May 4, 2018.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07674 Filed 4-12-18; 8:45 am]
 BILLING CODE 8011-01-P