[Federal Register Volume 84, Number 223 (Tuesday, November 19, 2019)]
[Notices]
[Pages 63927-63929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24981]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87521; File No. SR-CboeBZX-2019-094]
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 the BZX Equities Trading Platform as it
Relates to Pricing for Orders Routed to Cboe EDGA Exchange, Inc. Using
the ALLB, TRIM, or SLIM Routing Strategy
November 13, 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 November 1, 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 and II
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. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to amend the fee schedule applicable to the BZX
equities trading platform (``BZX Equities'') as it relates to pricing
for orders routed to Cboe EDGA Exchange, Inc. (``EDGA'') using the
ALLB, TRIM, or SLIM routing strategy. The text of the proposed rule
change is provided in Exhibit 5.
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 BZX Equities fee schedule to
change the pricing applicable to orders routed to EDGA using the ALLB,
TRIM, or SLIM routing strategy, as a result of a recent pricing change
by EDGA effective on November 1, 2019. The Exchange proposes to
implement the proposed change to its fee schedule on November 1, 2019.
Currently, the Exchange provides a rebate of $0.0024 per share for
orders routed to EDGA using the ALLB, TRIM, or SLIM routing strategy
(yielding fee codes AA and BJ), which was a pass-through of the
standard rebate EDGA had previously provided to orders that removed
liquidity from EDGA. Effective November 1, 2019, EDGA reduced its
standard rebate per share for orders that remove liquidity in
securities priced at or above $1.00 from $0.0024 to $0.0018. As such,
the Exchange proposes to similarly reduce the per share rebate for
orders routed to EDGA (yielding fee codes AA and BJ) from $0.0024 to
$0.0018 in order to reflect the reduction in the rebate available for
orders removing liquidity on EDGA.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b) of the Act.\3\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\4\ which requires that Exchange Rules provide for
the equitable allocation of reasonable dues, fees, and other charges
among its Members and other persons using its facilities and does not
unfairly discriminate between customers, issuers, brokers or dealers.
The Exchange 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.
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\3\ 15 U.S.C. Sec. 78f(b).
\4\ 15 U.S.C. 78f(b)(4).
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In particular, the Exchange believes that the proposed change is
reasonable because it reflects a pass-through of a recent pricing
change by EDGA for liquidity removing orders, as described above. The
Exchange believes that the proposed change is reasonable because it
will maintain proportionality with the standard corresponding rebate
offered by EDGA while also maintaining Member interest in routing
orders through the Exchange by passing on better pricing to Members
that choose to enter such orders on the Exchange, thereby encouraging
additional order flow to be entered on the BZX Book. The Exchange
believes that additional order flow through the BZX Book will result in
greater liquidity to the benefit of all market participants on the
Exchange by providing more trading opportunities.
[[Page 63928]]
The Exchange also believes that the proposed change constitutes an
equitable allocation of reasonable fees that is not unfairly
discriminatory because the proposed rebate is designed to continue to
reflect the rebate offered (and recently updated) by EDGA to orders
that remove liquidity and would apply equally to all Members that
choose to use the Exchange to route liquidity removing orders to EDGA.
Furthermore, the Exchange notes that routing through the Exchange is
voluntary, and, because the Exchange operates in a highly competitive
environment as discussed below, Members that do not favor the proposed
pricing can readily direct order flow directly to EDGA or through
competing venues or providers of routing services.
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
Exchange believes the proposed routing fee change will not impose an
undue burden on competition because the proposed rebate is merely
intended to maintain consistency between the Exchange's rebates for
orders routed to EDGA with the rebates currently offered by EDGA for
liquidity removing orders.
The Exchange does not believe the proposed rebate will impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. As stated, the Exchange will
uniformly assess the proposed routing fee on all Members who choose to
route orders through the Exchange to EDGA. As noted above, the proposed
rebate intends pass through the same rebates for liquidity removing
orders from EDGA on to Members, thereby, adding order flow to the BZX
Book which will result in more trading opportunities to the benefit of
all market participants on the Exchange.
The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As noted above,
the Exchange operates in a highly competitive market and routing
through the Exchange is voluntary. Therefore, Members may opt to
disfavor the Exchange's pricing if they believe that alternatives,
including 12 other equities exchanges and 32 alternative trading
systems, offer them better value or if they disfavor the proposed
change. Additionally, the Exchange represents a small percentage of the
overall market. Based on publicly available information, no single
equities exchange has more than 17% of the market share.\5\ Therefore,
no exchange possesses significant pricing power in the execution of
equity order flow. Moreover, the Commission has repeatedly expressed
its preference for competition over regulatory intervention in
determining prices, products, and services in the securities markets.
Specifically, in Regulation National Market System (``NMS''), the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \6\ The fact that this market is
competitive has also long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\7\ Regardless, the Exchange
notes that the proposed change to the EDGA-related routing fee is
merely meant to pass through the rebate associated with executing
orders on that market, and is therefore not designed to have any
significant impact on competition. Accordingly, the Exchange does not
believe its proposed fee change imposes any burden on competition that
is not necessary or appropriate in furtherance of the purposes of the
Act.
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\5\ See Cboe Global Markets U.S. Equities Market Volume Summary
(October 28, 2019), available at http://markets.cboe.com/us/equities/market_share/.
\6\ See Securities Exchange Act Release No. 51808 (June 29,
2015) 70 FR 37495 (August 29, 2015).
\7\ NetCoalition v. Securities and Exchange Commission, 615 F.3d
525 (D.C. Cir. 2010).
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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 is effective upon filing pursuant to
Section 19(b)(3)(A) \8\ of the Act and subparagraph (f)(2) of Rule 19b-
4 \9\ thereunder, because it establishes a due, fee, or other charge
imposed by the Exchange.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such 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 shall institute proceedings under
Section 19(b)(2)(B) \10\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\10\ 15 U.S.C. 78s(b)(2)(B).
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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 [email protected]. Please include
File No. SR-CboeBZX-2019-094 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-2019-094. 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
[[Page 63929]]
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 No. SR-
CboeBZX-2019-094, and should be submitted on or before December 10,
2019.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24981 Filed 11-18-19; 8:45 am]
BILLING CODE 8011-01-P