83 FR 44096 - Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use on Cboe BYX Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 168 (August 29, 2018)

[Federal Register Volume 83, Number 168 (Wednesday, August 29, 2018)]
[Notices]
[Pages 44096-44098]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-18676]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83925; File No. SR-CboeBYX-2018-017]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use on Cboe BYX Exchange, Inc.

August 23, 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 August 9, 2018, Cboe BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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 Exchange's fee schedule 
applicable to its equities trading platform to: (1) Increase the ADV 
requirements to qualify for Add/Remove Volume Tier 6 associated with 
fee codes W, BB, and N, and (2) increase the routing fee charged to 
orders routed to Investors Exchange LLC using the Destination Specific 
routing strategy under fee code IX, and eliminate an outdated reference 
to the TRIM and TRIM2 routing strategies in this fee code.
    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 purpose of the proposed rule change is to amend the Exchange's 
fee schedule applicable to its equities trading platform (``BYX 
Equities'') to: (1) Increase the ADV \5\ requirements to qualify for 
Add/Remove Volume Tier 6 associated with fee codes W,\6\ BB,\7\ and 
N,\8\ and (2) increase the routing fee charged to orders routed to 
Investors Exchange LLC (``IEX'') using the Destination Specific \9\ 
routing strategy under fee code IX,\10\ and eliminate an outdated 
reference to the TRIM and

[[Page 44097]]

TRIM2 \11\ routing strategies in this fee code.
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    \5\ ``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. See BYX Fee Schedule, Definitions. ADAV and ADV 
are calculated on a monthly basis. The Exchange excludes from its 
calculation of ADAV and ADV shares added or removed on any day that 
the Exchange's system experiences a disruption that lasts for more 
than 60 minutes during regular trading hours (``Exchange System 
Disruption''), on any day with a scheduled early market close and on 
the last Friday in June (the ``Russell Reconstitution Day''). Routed 
shares are not included in ADAV or ADV calculation. With prior 
notice to the Exchange, a Member may aggregate ADAV or ADV with 
other Members that control, are controlled by, or are under common 
control with such Member (as evidenced on such Member's Form BD).
    \6\ W is associated with orders that remove liquidity from BYX 
in Tape A securities.
    \7\ BB is associated with orders that remove liquidity from BYX 
in Tape B securities.
    \8\ N is associated with orders that remove liquidity from BYX 
in Tape C securities.
    \9\ Destination Specific is a routing option under which an 
order checks the System for available shares and then is sent to an 
away trading center or centers specified by the User. See Rule 
11.13(b)(3)(E).
    \10\ IX is associated with orders routed to IEX using the 
Destination Specific, TRIM or TRIM2 routing strategies.
    \11\ TRIM and TRIM2 are both routing options under which an 
order checks the System for available shares and then is sent to 
destinations on the applicable System routing table. See Rule 
11.13(b)(3)(G).
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Fee Codes W, BB, and N: Add/Remove Volume Tier 6
    The Exchange provides a standard rebate of $0.00050 for orders that 
remove liquidity from BYX in securities priced at or above $1.00. 
Members may also qualify for a higher rebate based on the Exchange's 
Add/Remove Volume Tiers, which are designed to encourage Members to 
bring order flow to BYX by providing higher rebates for removing 
liquidity and discounted fees for adding liquidity to firms based on 
their activity on the Exchange.\12\ Currently, Members can qualify for 
a higher rebate of $0.0015 pursuant to Tier 6 of the Add/Remove Volume 
Tiers if the Member has: (1) An ADV that is greater than or equal to 
0.05% of TCV,\13\ and (2) an ADAV that is greater than or equal to 
500,000 shares. The Exchange proposes to increase the ADV requirement 
for Tier 6 so that an ADV that is greater than or equal to 0.08% of TCV 
would be required. The current ADAV requirement of greater than or 
equal to 500,000 shares would remain unchanged. The proposed change 
applies to fee codes W, BB, and N, which relate to orders that remove 
liquidity from BYX in Tapes A, B, and C, respectively.
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    \12\ See BYX Fee Schedule, footnote 1, Add/Remove Volume Tiers.
    \13\ ``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. The Exchange excludes from its calculation of TCV volume 
on any day that the Exchange experiences an Exchange System 
Disruption, on any day with a scheduled early market close and the 
Russell Reconstitution Day.
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Fee Code IX: IEX Routing Fees
    Currently, the fee schedule provides that orders in securities 
priced at or above $1.00 routed to IEX using specified routing 
strategies--i.e., Destination Specific, TRIM, or TRIM2--are charged a 
fee of $0.0010 per share under fee code IX. The Exchange proposes to 
increase the routing fee charged to orders routed to IEX to $0.0030 so 
that the Exchange can recoup increased costs associated with routing 
order flow to that market. Furthermore, in May 2018, the Exchange 
removed IEX from the System routing table for its TRIM and TRIM2 
routing strategies, which are designed to route to low cost away 
markets, due to increased costs associated with routing to IEX. Since 
IEX is no longer considered as a potential routing destination for 
those strategies, the Exchange proposes to eliminate the reference to 
these routing strategies in fee code IX.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(4) and 6(b)(5),\15\ 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 and is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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Fee Codes W, BB, and N: Add/Remove Volume Tier 6
    The Exchange believes that the proposed changes to the Add/Remove 
Volume Tier 6 are reasonable because the proposed changes are designed 
to incentivize Members to bring more order flow to the Exchange. Under 
the Exchange's fee schedule members are eligible for a rebate for 
liquidity removing orders that may be increased based on meeting 
certain additional requirements. With respect to Add/Remove Volume Tier 
6, Members that meet specified ADV and ADAV requirements are eligible 
for such an increased remove rebate. The Exchange is proposing to 
increase the ADV requirements for this rebate tier to encourage Members 
to send more order flow to the Exchange in order to qualify for the 
rebate. The Exchange believes that the rebates are still competitive 
with rebates provided on other equities exchanges, notwithstanding the 
higher volume requirements required to meet this tier. The Exchange 
also believes that the proposed change is equitable and not unfairly 
discriminatory because the proposed ADV requirements (and associated 
rebate) would apply equally to all Members. Furthermore, the Exchange 
believes that all market participants would benefit from additional 
trading opportunities if the Exchange is successful in incentivizing 
increased order flow.
Fee Code IX: IEX Routing Fees
    As other exchanges amend the fees charged for accessing liquidity, 
the Exchange believes that it is appropriate to amend its own routing 
fees so that it can recoup costs associated with routing orders to such 
away markets. The Exchange believes that the proposed fees for orders 
routed to IEX are reasonable because they reflect the costs associated 
with executing orders on IEX and additional operational expenses 
incurred by the Exchange. The Exchange is proposing to increase its 
routing fees due to an announced change in IEX's fee schedule that 
would result in a significant increase in the transaction fees being 
charged by IEX to some orders, including orders routed by the 
Exchange.\16\ The Exchange believes that it is reasonable to pass these 
increased costs to Members that use the Exchange to route orders to 
that market. Members that do not wish to pay the proposed fee can send 
their routable orders directly to IEX instead of using routing 
functionality provided by the Exchange. The Exchange also believes that 
this change is equitable and not unfairly discriminatory because the 
proposed fees would apply equally to all Members that use the Exchange 
to route orders to IEX using the Destination Specific routing strategy. 
Routing through the Exchange is voluntary, and the Exchange operates in 
a competitive environment where market participants can readily direct 
order flow to competing venues or providers of routing services if they 
deem fee levels to be excessive.
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    \16\ See SR-IEX-2018-16 (pending publication).
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    The Exchange also believes that the proposed change to eliminate 
references to TRIM and TRIM2 is consistent with the public interest and 
the protection of investors as this is a non-substantive change being 
made because the Exchange no longer routes to IEX using these routing 
strategies. The Exchange had previously routed orders to IEX using the 
TRIM and TRIM2 order routing strategies, which are designed to route to 
low cost venues, but recently stopped doing so due increased routing 
costs associated with trading on IEX. As such, the Exchange believes 
that updating the fee schedule to reflect that these two routing 
strategies are not available for routing to IEX will increase 
transparency around the operation of the Exchange to the benefit of 
Members and investors. Because this change merely updates a fee code to 
remove references to routing strategies that are not in use on the 
Exchange, it will have

[[Page 44098]]

no impact on the transaction fees actually assessed to Members.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
proposed changes to the Add/Remove Tiers are designed to incentivize 
Members to bring more order flow to BYX as the Exchange competes for 
order flow with other equities markets. Furthermore, the proposed 
changes to the IEX routing fees are meant to recoup costs associated 
with executing orders on that market, and to increase transparency by 
properly reflecting the routing strategies available for IEX, and are 
therefore not designed to have any significant impact on competition. 
The Exchange operates in a highly competitive market in which market 
participants can readily direct their order flow to competing venues. 
In such an environment, the Exchange must continually review, and 
consider adjusting, its fees and rebates to remain competitive with 
other exchanges. For the reasons described above, the Exchange believes 
that the proposed fee changes reflect this competitive environment.

(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 \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 Number SR-CboeBYX-2018-017 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-CboeBYX-2018-017. 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 Number SR-CboeBYX-2018-017 and should be submitted 
on or before September 19, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18676 Filed 8-28-18; 8:45 am]
 BILLING CODE 8011-01-P