[Federal Register Volume 83, Number 94 (Tuesday, May 15, 2018)]
[Notices]
[Pages 22565-22567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10260]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83200; File No. SR-CboeBZX-2018-031]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
Certain Routing Fees Related to its Equity Options Platform
May 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 May 1, 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 modify certain Routing Fees
related to its equity options platform.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its fee schedule for its equity
options platform (``BZX Options'') to make certain changes to the
following tiers: (i) Quoting Incentive Program (``QIP'') Tier 2 under
footnote 5; (ii) Non-Customer Non-Penny Pilot Take Volume Tiers 1 and 2
under footnote 13; and (iii) Non-Customer Penny Pilot Take Volume Tiers
1 and 3 under footnote 3, effective May 1, 2018.
QIP Volume Tier 2
The Exchange currently offers two QIP Tiers under footnote 5, which
provide an additional rebate ranging from $0.02 to $0.04 per contract
for qualifying Market Maker \5\ orders that add liquidity in: (i) Penny
Pilot Securities that yield fee code PM and; (ii) Non-Penny Pilot
Securities that yield fee code NM. The additional rebate per contract
is for an order that adds liquidity to BZX Options in options classes
in which a Member is a Market Maker registered pursuant to Exchange
Rule 22.2. The Exchange now proposes to amend the required criteria for
QIP Tier 2. Particularly, under current Tier 2, a Member may receive an
additional rebate of $0.04 per contract where they have an ADAV \6\ in
Market Maker orders greater than or equal to 0.35% of average OCV.\7\
The Exchange proposes to amend the required criteria for Tier 2 to now
require that the Member have an ADAV in Market Maker orders greater
than or equal to 1.40% of average OCV.
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\5\ A Market Maker must be registered with BZX Options in an
average of 20% or more of the associated options series in a class
in order to qualify for QIP rebates for that class.
\6\ ``ADAV'' means average daily added volume calculated as the
number of contracts added per day. See Exchange Fee Schedule.
\7\ ``OCV'' means the total equity and ETF options volume that
clears in the Customer range at the Options Clearing Corporation
(``OCC'') for the month for which the fees apply, excluding volume
on any day that the Exchange experiences an Exchange System
Disruption and on any day with a scheduled early market close. See
Exchange Fee Schedule.
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[[Page 22566]]
Non-Customer Non-Penny Pilot Take Volume Tiers 1 and 2
Fee code NP is currently appended to all Non-Customer orders in
Non-Penny Pilot Securities that remove liquidity, and result in a
standard fee of $1.10 per contract. The Exchange currently offers two
Non-Customer Non-Penny Pilot Take Volume Tiers (``NP Volume Tiers'')
under footnote 13, which provide a reduced fee of $1.04 per contract
for orders that that yield fee code NP. The Exchange proposes to
increase the rates set forth in NP Volume Tiers 1 and 2. Specifically,
NP Volume Tiers 1 and 2 will increase from $1.04 per contract to $1.07
per contract. The Exchange notes that the proposed rates still provide
a discount from the standard Non-Customer NP rate and will continue to
provide an incentive for Members to strive for the tier levels, which
provide a discount off the standard rate.
Non-Customer Penny Pilot Take Volume Tiers 1 and 3
Fee code PP is currently appended to all Non-Customer orders in
Penny Pilot Securities that remove liquidity, and result in a standard
fee of $0.50 per contract. The Exchange currently offers three Non-
Customer Penny Pilot Take Volume Tiers under footnote 3, which provide
reduced fees ranging from $0.44 to $0.47 per contract for orders that
that yield fee code PP.
Pursuant to Volume Tier 1, a Member will pay a reduced fee
(currently $0.44 per contract) if the Member (i) has an ADAV in
Customer orders greater than or equal to 0.80% of average OCV; (ii) has
an ADAV in Market Maker orders greater than or equal to 0.35% of
average OCV; and (iii) has on BZX Equities an ADAV greater than or
equal to 0.30% of average TCV.\8\ The Exchange proposes to add a fourth
prong that requires the member to have an ADAV in Customer Non-Penny
orders greater than or equal to 0.05% of average OCV.
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\8\ ``TCV'' means total consolidated volume calculated as the
volume reported by all exchanges to the consolidated transaction
reporting plan for the month for which the fees apply, excluding
volume on any day that the Exchange experiences an Exchange System
Disruption and on any day with a scheduled early market close.
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Pursuant to Volume Tier 3, a Member will pay a reduced fee
(currently $0.44 per contract) if the Member has an ADAV in Customer
orders greater than or equal to 1.70% of average OCV. The Exchange
proposes to add a second prong that requires the member to have an ADAV
in Customer Non-Penny orders greater than or equal to 0.30% of average
OCV. The Exchange believes the proposed changes will encourage the
entry of additional orders to the Exchange.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\9\ in general, and
furthers the objectives of Section 6(b)(4),\10\ 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.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the increase to the rates in NP Volume Tiers
1 and 2 is reasonable because Members submitting Non-Customer orders
still have the opportunity to receive a lower fee in Non-Penny Pilot
classes than the standard rate (albeit less of a discount than before).
The Exchange also believes the rates will continue to provide an
incentive for Members to strive for the tier levels, which provide
discounts off the standard rate. The Exchange believes the proposed
changes are equitable and nondiscriminatory because the proposed
changes apply uniformly to all Members.
The Exchange next notes that volume-based discounts such as those
currently maintained on the Exchange have been widely adopted by
options exchanges and are equitable and non-discriminatory because they
are open to all Members on an equal basis and provide additional
benefits or discounts that are reasonably related to the value of an
exchange's market quality associated with higher levels of market
activity, such as higher levels of liquidity provision and/or growth
patterns, and introduction of higher volumes of orders into the price
and volume discovery processes. While the proposed modifications to the
existing QIP Tier 2 and NP Volume Tiers [sic] make such tiers more
difficult to attain, each is intended to incentivize Members to send
additional Market Maker and/or Customer orders, respectively, to the
Exchange in an effort to qualify or continue to qualify for the lower
fees made available by the tiers. As such, the Exchange also believes
that the proposed changes are reasonable. The Exchange notes that
increased volume on the Exchange provides greater trading opportunities
for all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed amendments to its fee schedule
would not impose any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
does not believe that the proposed changes represent a significant
departure from previous pricing offered by the Exchange or pricing
offered by the Exchange's competitors. Members may opt to disfavor the
Exchange's pricing if they believe that alternatives offer them better
value. Accordingly, the Exchange does not believe that the proposed
change will impair the ability of Members or competing venues to
maintain their competitive standing in the financial markets.
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 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 \11\ and paragraph (f) of Rule 19b-4
thereunder.\12\ 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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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 [email protected]. Please include
File Number SR-CboeBZX-2018-031 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.
[[Page 22567]]
All submissions should refer to File Number SR-CboeBZX-2018-031. 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-2018-031, and should be
submitted on or before June 5, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10260 Filed 5-14-18; 8:45 am]
BILLING CODE 8011-01-P