Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule With Respect to Expiring Fee Waivers and Incentive Programs, 34243-34247 [2019-15139]

Download as PDF Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices Europe. Therefore, the Commission finds that the proposed rule change is consistent with Rule 17Ad–22(e)(18).16 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(F) of the Act 17 and Rules 17Ad–22(e)(2) and (e)(18) thereunder.18 It is therefore ordered pursuant to Section 19(b)(2) of the Act 19 that the proposed rule change (SR–ICEEU–2019– 010) be, and hereby is, approved.20 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–15137 Filed 7–16–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86361; File No. SR–CBOE– 2019–031] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule With Respect to Expiring Fee Waivers and Incentive Programs July 11, 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 June 28, 2019, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) 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 Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit 16 17 CFR 240.17Ad–22(e)(18). U.S.C. 78q–1(b)(3)(F). 18 17 CFR 240.17Ad–22(e)(2) and (e)(18). 19 15 U.S.C. 78s(b)(2). 20 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 21 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). jbell on DSK3GLQ082PROD with NOTICES 17 15 VerDate Sep<11>2014 18:05 Jul 16, 2019 Jkt 247001 comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend its Fees Schedule with respect to expiring fee waivers and incentive programs. 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 (https://www.cboe.com/ AboutCBOE/CBOELegalRegulatory Home.aspx), 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 its Fees Schedule relating to various fee waivers and incentive programs that are set to expire June 30, 2019. The Exchange proposes to implement these amendments to its Fees Schedule on July 1, 2019. Sector Indexes Facilitation Fee First, the Exchange proposes to extend the current waiver of fees for facilitation orders in Sector Index options.5 Currently, Footnote 11 of the Fees Schedule provides that for facilitation orders for Sector Index options executed in open outcry, or electronically via AIM or as a Qualified Contingent Cross order (‘‘QCC’’) or CFLEX transaction, the Exchange will assess no Clearing Trading Permit Holder Proprietary transaction fees through June 30, 2019. By way of background ‘‘facilitation orders’’ are defined as any order in which a Clearing Trading Permit Holder (‘‘F’’ origin code) PO 00000 5 See Cboe Options Fees Schedule, Footnote 47. Frm 00128 Fmt 4703 Sfmt 4703 34243 or Non-Trading Permit Holder Affiliate (‘‘L’’ origin code) is contra to any other origin code order, provided the same executing broker and clearing firm are on both sides of the transaction (for open outcry) or both sides of a paired order (for orders executed electronically).6 In adopting a waiver for facilitation fees in Sector Index options, the Exchange recognized that Clearing Trading Permit Holders can be an important source of liquidity when they facilitate their own customers’ trading activity and, as such, the Exchange applied a waiver of Clearing Trading Permit Holder Proprietary transaction fees for facilitation orders through June 30, 2019.7 The Exchange continues to recognize the important role Clearing Trading Permit Holders play with respect to facilitating their own customers’ trading activity and as such proposes to extend the waiver through December 31, 2019. Sector Indexes License Surcharge The Exchange next proposes to extend the current waiver of the Index License Surcharge of $0.10 per contract. In order to promote and encourage trading of the recently adopted Sector Index options, the Exchange adopted a waiver of the Index License Surcharge for Sector Index option transactions.8 The current waiver is set to expire on June 30, 2019. As the volume in these relatively new products is low, the Exchange does not have enough information to evaluate the impact of the waiver. However, the Exchange wishes to extend this waiver through December 31, 2019 in order to continue to encourage the trading of Sector Index options and grow the product. The proposed waiver would apply to all non-customer transactions. VIX License Index Surcharge The Exchange next proposes to extend the current waiver of the Index License Surcharge of $0.10 per contract for Clearing Trading Permit Holder Proprietary (‘‘Firm’’) (origin codes ‘‘F’’ or ‘‘L’’) VIX orders that have a premium of $0.10 or lower and have series with an expiration of seven (7) calendar days or less. The Exchange wishes to extend this waiver through December 31, 2019. The Exchange adopted the waiver to reduce transaction costs on expiring, low-priced VIX options, which the Exchange believed would encourage Firms to seek to close and/or roll over 6 See Cboe Options Fees Schedule, Footnote 11. Securities Exchange Act Release No. 85167 (February 20, 2019), 84 FR 6039 (February 25, 2019) (SR–CBOE–2019–011). 8 See Securities Exchange Act Release No. 82854 (March 12, 2018), 83 FR 11803 (March 16, 2018) (SR–CBOE–2018–012). 7 See E:\FR\FM\17JYN1.SGM 17JYN1 34244 Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices such positions close to expiration at low premium levels, including facilitating customers to do so, in order to free up capital and encourage additional trading.9 The Exchange had proposed to waive the surcharge through June 30, 2019, at which time the Exchange had stated that it would evaluate whether the waiver has in fact prompted Firms to close and roll over these positions close to expiration as intended. After a review of Firms’ activity, the Exchange believes the waiver has indeed encouraged Firms to do so and as such, proposes to extend the waiver of the surcharge through December 31, 2019, at which time the Exchange will again reevaluate whether the waiver has continued to prompt Firms to close and roll over positions close to expiration at low premium levels. Accordingly, the Exchange proposes to delete the reference to the current waiver period of June 30, 2019 from the Fees Schedule and replace it with December 31, 2019. jbell on DSK3GLQ082PROD with NOTICES GTH Fees The Exchange proposes to also extend waivers for access fees for the Global Trading Hours (‘‘GTH’’) session. Currently, the Exchange charges $1,000 per month for each GTH Market-Maker Trading Permit and $500 per month for each GTH Electronic Access Trading Permit.10 The Exchange also assesses fees for Bandwidth Packets that may be used during GTH. Particularly, the Exchange charges $500 per month per GTH Quoting and Order Entry Bandwidth Packet and $250 per month per Order Entry Bandwidth Packet.11 The Exchange further assesses monthly fees for CMI Login IDs and FIX Login IDs used for GTH, which are currently $750 per Login ID. In order to promote and encourage trading during the GTH session, the Exchange currently waives GTH Trading Permit and Bandwidth Packet fees for one (1) of each initial Trading Permits and one (1) of each initial Bandwidth Packet, per affiliated Trading Permit Holder (‘‘TPH’’).12 The Exchange notes that the waivers are set to expire June 30, 2019. The Exchange also waives fees through June 30, 2019 for a CMI and FIX login ID if the CMI and/or FIX login ID is related to a waived GTH Trading Permit and/or 9 See Securities Exchange Act Release No. 76923 (January 15, 2016), 81 FR 3841 (January 22, 2016) (SR–CBOE–2016–002). 10 See Cboe Options Fees Schedule, Trading Permit and Tier Appointment Fees. Each Trading Permit provides bandwidth and three logins. 11 See Cboe Options Fees Schedule, Bandwidth Packet Fees Bandwidth Packets provide TPHs with additional bandwidth and logins. 12 See Securities Exchange Act Release No. 74422 (March 4, 2015), 80 FR 12680 (March 10, 2015) (SR– CBOE–2015–020). VerDate Sep<11>2014 18:05 Jul 16, 2019 Jkt 247001 waived Bandwidth packet. In order to continue to promote trading during GTH, the Exchange wishes to extend these waivers through September 30, 2019.13 Based on experience, the Exchange believes such waivers have encouraged participation during GTH. Continued participation during GTH results in potential increased order flow, which provides greater trading opportunities for all market participants. Additionally, the proposed waivers apply to all TPHs that wish to participate in the GTH session. MXEA and MXEF LMM Incentive Program The Exchange also proposes to extend the financial program for Lead MarketMakers (‘‘LMMs’’) appointed in MSCI EAFE Index (‘‘MXEA’’) options and MSCI Emerging Markets Index (‘‘MXEF’’) options.14 Currently, if the appointed LMM in MXEA and MXEF provides continuous electronic quotes during Regular Trading Hours that meet or exceed the above heightened quoting standards in at least 90% of the MXEA and MXEF series 80% of the time in a given month, the LMM will receive a payment for that month in the amount of $20,000 per class, per month. The Fees Schedule currently provides that this program will be in place through June 30, 2019. In order to continue to encourage LMM(s) in MXEA and MXEF to continue serving as LMMs and provide significant liquidity in these options, which would provide greater trading opportunities for all market participants, the Exchange proposes to renew this program through December 31, 2019. RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees In order to promote and encourage trading of seven FTSE Russell Index products (i.e., Russell 1000 Growth Index (‘‘RLG’’), Russell 1000 Value Index (‘‘RLV’’), Russell 1000 Index (‘‘RUI’’), FTSE Developed Europe Index (‘‘AWDE’’), FTSE Emerging Markets Index (‘‘FTEM’’), China 50 Index ‘‘(FXTM’’) and FTSE 100 Index (‘‘UKXM’’)), the Exchange waives all transaction fees (including the Floor Brokerage Fee, Index License Surcharge and CFLEX Surcharge Fee) for each of these products for all market 13 The Exchange notes that in October 2019, it is migrating the current Cboe Options trading platform onto new technology and in connection with such migration, is anticipating a new Trading Permit and connectivity structure. As such, the Exchange proposes to extend the GTH related waivers only through September 2019. 14 See Securities Exchange Act Release No. 83585 (July 2, 2018), 83 FR 31825 (July 9, 2018) (SR– CBOE–2018–050). PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 participants.15 This waiver is set to expire June 30, 2019. As the volume in these products is low, the Exchange does not have enough information to evaluate the impact of the waiver. However, the Exchange wishes to extend this waiver through December 31, 2019 in order to continue to encourage growth and trading of these products. UKXM The Exchange previously offered a compensation plan to the Designated Primary Market-Maker(s) (‘‘DPM(s)’’) appointed in UKXM to offset its DPM costs.16 Specifically, the DPM appointed for an entire month in UKXM will receive a payment of $5,000 per month through June 30, 2019. The Exchange proposes to extend this plan through December 31, 2019 to continue to incentivize the DPM(s) to continue to serve as a DPM in this product and provide the necessary liquidity, which provides greater trading opportunities for all market participants in this option class. Elimination of Obsolete Reference Lastly, the Exchange proposes to eliminate references to an obsolete fee and incentive program. Specifically, on February 11, 2019, the Exchange filed a rule filing, SR–CBOE–2019–012, which proposed, among other things, to eliminate the Supplemental VIX Total Firm Discount program (‘‘Supplemental VIX Discount’’), effective February 1, 2019.17 The Exchange notes that although it reflected the elimination of the program in the filing’s Exhibit 5, it mistakenly failed to eliminate references to the program in corresponding Footnote 11 of the Fees Schedule. Accordingly, the Exchange proposes to update Footnote 11 to eliminate references to the Supplemental VIX Discount. No substantive change is being made by this deletion. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations 15 See Securities Exchange Act Release No. 76288 (October 28, 2015), 80 FR 67805 (November 3, 2015) (SR–CBOE–2015–096). See also Securities Exchange Act Release No. 77547 (April 6, 2016), 81 FR 21611 (April 12, 2016) (SR–CBOE–2016–021) and Securities Exchange Act Release No. 78930 (September 26, 2016), 81 FR 67408 (September 30, 2016) (SR–CBOE–2016–070). 16 See Securities Exchange Act Release No. 77547 (April 6, 2016), 81 FR 21611 (April 12, 2016) (SR– CBOE–2016–021). 17 See Securities Exchange Act Release No. 85169 (February 21, 2019), 84 FR 6445 (February 27, 2019) (SR–CBOE–2019–012). E:\FR\FM\17JYN1.SGM 17JYN1 Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.18 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 19 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and 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. Additionally, the Exchange believes the proposed rule change is consistent with Section 6(b)(4) of the Act,20 which requires that Exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Trading Permit Holders and other persons using its facilities. The Exchange believes the proposed waiver extension of the Clearing Trading Permit Holder Proprietary transaction fee for facilitation orders in Sector Index options is reasonable because these orders will not be charged any fee. The Exchange believes that this is equitable and not unfairly discriminatory because a similar waiver also applies to other products, including other proprietary index products (e.g., MXEA, MXEF, DJX and XSP).21 Further, as noted above, Clearing Trading Permit Holders can be an important source of liquidity when they facilitate their own customers’ trading activity. Moreover, Clearing Trading Permit Holders have obligations, which normally do not apply to other market participants (e.g., must have higher capital requirements, clear trades for other market participants, must be members of OCC). The Exchange also notes that the waiver of fees for Sector Index facilitation orders executed in open outcry or electronically in AIM, QCC or as a CFLEX transaction applies to all such orders. The Exchange believes it’s appropriate to continue to waive the Index License Surcharge for Sector Indexes because the Sector Indexes are still relatively new products and the jbell on DSK3GLQ082PROD with NOTICES 18 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 20 15 U.S.C. 78f(b)(4). 21 See Cboe Fees Schedule, ‘‘Equity Options Rate Table, ‘‘ETF and ETN Options Rate Table’’ and ‘‘Index Options Rate Table—All Index Products Excluding Underlying Symbol List A and Sector Indexes’’, all of which provide a $0.00 facilitation fee for origin code ‘‘F’’ and ‘‘L’’ orders. 19 15 VerDate Sep<11>2014 18:05 Jul 16, 2019 Jkt 247001 Exchange wishes to encourage and promote trading of these products. The Exchange believes waiving this fee is a reasonable means to encourage trading of these products as it applies to all market participants and results in lower fees assessed for Sector Index transactions. The Exchange believes it’s appropriate to waive the Index License Surcharge for Clearing Trading Permit Holder Proprietary VIX orders that have a premium of $0.10 or lower and have series with an expiration of 7 calendar days or less because the Exchange wants to continue encouraging Firms to roll and close over positions close to expiration at low premium levels. Particularly, the Exchange believes it’s reasonable to waive the entire $0.10 per contract surcharge because without the waiver of the surcharge, firms are less likely to engage in these transactions, as opposed to other VIX transactions, due to the associated transaction costs. The Exchange believes it’s equitable and not unfairly discriminatory to limit the waiver to Clearing Trading Permit Holder Proprietary orders because they contribute capital to facilitate the execution of VIX customer orders with a premium of $0.10 or lower and series with an expiration of 7 calendar days or less. Additionally, as noted above, Clearing Trading Permit Holders have obligations, which normally do not apply to other market participants (e.g., must have higher capital requirements, clear trades for other market participants, must be members of OCC). The Exchange believes extending the waiver of the GTH fee for the first Quoting and Order Entry Bandwidth Packet and the first Order Entry Bandwidth Packet through September 2019 is reasonable, equitable and not unfairly discriminatory, because waiving those respective fees promotes and encourages trading during the GTH session. The Exchange believes it’s also reasonable, equitable and not unfairly discriminatory to waive fees for Login IDs in order to promote and encourage ongoing participation in GTH and also applies to all GTH TPHs. The Exchange believes it’s also reasonable, equitable and not unfairly discriminatory to waive GTH access fees through September, 2019 in order to further promote trading. To the extent that this purpose is achieved, all the Exchange’s market participants who participate in the GTH session should benefit from increased liquidity. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to extend the MXEA and MXEF LMM Incentive Program because the Exchange wants to ensure it PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 34245 continues incentivizing the LMM(s) in these products to provide liquid and active markets in these products to encourage its growth. The Exchange notes that without the proposed financial incentive, there may not be sufficient incentive for TPHs to undertake an obligation to quote at heightened levels, which could result in lower levels of liquidity to the detriment of all market participants. The Exchange believes it is equitable and not unfairly discriminatory to only offer this financial incentive to MXEA and MXEF LMM(s) because it benefits all market participants trading in these options to encourage the LMM(s) to satisfy the heightened quoting standard, which may increase liquidity and provide more trading opportunities and tighter spreads. Indeed, the Exchange notes that LMMs provides a crucial role in providing quotes and the opportunity for market participants to trade products, including MXEA and MXEF, which can lead to increased volume, thereby providing a robust market. Additionally, if a MSCI LMM does not satisfy the heightened quoting standard then it simply will not receive the offered per class payment for that month. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to extend the waiver of all transaction fees for RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM transactions, including the Floor Brokerage fee, the License Index Surcharge and CFLEX Surcharge Fee, because the respective fees are being waived in their entirety, which promotes and encourages trading of these products which are still relatively new. The waiver also would apply to all TPHs. The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to renew the compensation plan to continue to incentivize the DPM to continue to serve as a DPM in this product. Particularly, the Exchange notes that there is low volume in UKXM and as such, the Exchange wishes to ensure the DPM continues to play a crucial role in providing liquid and active markets in the product to encourage growth and provide trading opportunities which would benefit all market participants. Lastly, the Exchange believes eliminating references to the Supplemental VIX Discount program, which no longer exists, alleviates confusion and maintains clarity in the Fees Schedule, which removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in E:\FR\FM\17JYN1.SGM 17JYN1 34246 Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices general, protects investors and the public interest. jbell on DSK3GLQ082PROD with NOTICES 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 intramarket or intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. First, the Exchange believes the proposed rule change does impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Particularly, the proposed changes extend existing fee waivers and incentive programs and apply to all similarly situated TPHs uniformly. To the extent certain market participants receive a benefit others do not these different market participants have different obligations and circumstances. For example, DPMs and LMMs play a crucial role in providing active and liquid markets in their appointed products, thereby providing a robust market which benefits all market participants. Additionally, Clearing Trading Permit Holders can be an important source of liquidity when they facilitate their own customers’ trading activity and also have other obligations, which normally do not apply to other market participants (e.g., must have higher capital requirements, clear trades for other market participants, must be members of OCC). The Exchange also notes that the proposed waivers and incentive programs are designed to attract additional order flow to the Exchange. Greater liquidity benefits all market participants on the Exchange by providing more trading opportunities and tighter spreads and encourages all TPHs to send orders, thereby contributing to robust levels of liquidity. Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. First, the proposed changes only affect trading on Cboe Options. Next, the Exchange notes it operates in a highly competitive market. In addition to Cboe Options, TPHs have numerous alternative venues that they may participate on and director their order flow, including 15 options exchanges, as well as off-exchange venues. Based on publicly available information, no single options exchange has more than 23% of the market share of executed volume of VerDate Sep<11>2014 18:05 Jul 16, 2019 Jkt 247001 options trades.22 Therefore, no exchange possesses significant pricing power in the execution of option 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 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.’’ 23 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 brokerdealers 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’ . . . .’’.24 Accordingly, the Exchange does not believe its proposed changes to extend the above-mentioned fee waivers and incentive programs impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on 22 See Cboe Global Markets, U.S. Options Market Volume Summary (June 13,2019), available at https://markets.cboe.com/us/options/market_share/. 23 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 24 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782– 83 (December 9, 2008) (SR–NYSEArca–2006–21)). PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 25 and subparagraph (f)(6) of Rule 19b–4 thereunder.26 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of the filing. However, Rule 19b– 4(f)(6)(iii) 27 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing, Cboe Options requested that the Commission waive the 30-day operative delay. The Exchange indicated in its filing that its extension of the abovedescribed fee waivers and incentive programs was designed to encourage increased market participation, including in GTH and in relatively new products. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest as it will avoid the potential for disruption among TPHs associated with an interruption in the continuity of the proposed extensions set forth above. Accordingly, the Commission waives the 30-day operative delay and designates the proposed rule change operative upon filing.28 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: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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. 25 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 27 17 CFR 240.19b–4(f)(6)(iii). 28 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 26 17 E:\FR\FM\17JYN1.SGM 17JYN1 Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–86352; File No. SR– CboeEDGX–2019–044] • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2019–031 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. jbell on DSK3GLQ082PROD with NOTICES All submissions should refer to File Number SR–CBOE–2019–031. 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 (https://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–CBOE–2019–031, and should be submitted on or before August 7, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–15139 Filed 7–16–19; 8:45 am] CFR 200.30–3(a)(12) and (59). VerDate Sep<11>2014 18:05 Jul 16, 2019 July 11, 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 July 1, 2019, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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 EDGX Rules 15.1(a) and (c). 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 (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), 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 its fee schedule applicable to its options trading platform (‘‘EDGX Options’’) in connection with the fee assessed for Customer orders in Mini-SPX Index (‘‘XSP’’) options (yielding fee code XC), as well as add certain XSP-related fee codes to the Automated Improvement Mechanism (‘‘AIM’’) Pricing table, effective July 1, 2019. The Exchange currently provides a standard rebate of $0.05 for Customer orders in XSP (an Exchange proprietary product). The Exchange no longer wishes to provide a rebate for Customer XSP transactions and now proposes to remove the current rebate and amend the fee schedule so that Customer orders in XSP will be free. The Exchange notes that it currently assesses no charge or a marginal charge on other Customer transactions. For example, the Exchange does not charge a transaction fee for Customer Agency orders in an AIM auction (including Customer-toCustomer orders and AIM Agency orders in XSP), for certain Customer complex orders (including complex orders leg into the Simple Book and Customer-to-Customer complex orders), and Qualified Contingent Cross (‘‘QCC’’) orders (both Agency and Contra QCC orders). In addition to this, the Exchange also proposes to add the fee codes for AIMrelated orders in XSP to Footnote 6 and add references to the fee codes in the AIM Pricing table under Footnote 6. This includes fee code XD, appended to Customer AIM orders in XSP, and fee code XB, appended to Customer-toCustomer Immediate Cross AIM orders in XSP. The AIM Pricing table summarizes AIM fees and rebates for orders that transact in an AIM Auction (specifically, orders that yield fee codes, 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 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). 2 17 BILLING CODE 8011–01–P 29 17 Self-Regulatory Organizations; Cboe EDGX 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 EDGX Rules 15.1(a) and (c) Jkt 247001 PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 34247 E:\FR\FM\17JYN1.SGM 17JYN1

Agencies

[Federal Register Volume 84, Number 137 (Wednesday, July 17, 2019)]
[Notices]
[Pages 34243-34247]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15139]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86361; File No. SR-CBOE-2019-031]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule With Respect to Expiring Fee Waivers and Incentive 
Programs

July 11, 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 June 28, 2019, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') 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 Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Fees Schedule with respect to expiring fee waivers and 
incentive programs. 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 (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 its Fees Schedule relating to 
various fee waivers and incentive programs that are set to expire June 
30, 2019. The Exchange proposes to implement these amendments to its 
Fees Schedule on July 1, 2019.
Sector Indexes Facilitation Fee
    First, the Exchange proposes to extend the current waiver of fees 
for facilitation orders in Sector Index options.\5\ Currently, Footnote 
11 of the Fees Schedule provides that for facilitation orders for 
Sector Index options executed in open outcry, or electronically via AIM 
or as a Qualified Contingent Cross order (``QCC'') or CFLEX 
transaction, the Exchange will assess no Clearing Trading Permit Holder 
Proprietary transaction fees through June 30, 2019. By way of 
background ``facilitation orders'' are defined as any order in which a 
Clearing Trading Permit Holder (``F'' origin code) or Non-Trading 
Permit Holder Affiliate (``L'' origin code) is contra to any other 
origin code order, provided the same executing broker and clearing firm 
are on both sides of the transaction (for open outcry) or both sides of 
a paired order (for orders executed electronically).\6\ In adopting a 
waiver for facilitation fees in Sector Index options, the Exchange 
recognized that Clearing Trading Permit Holders can be an important 
source of liquidity when they facilitate their own customers' trading 
activity and, as such, the Exchange applied a waiver of Clearing 
Trading Permit Holder Proprietary transaction fees for facilitation 
orders through June 30, 2019.\7\ The Exchange continues to recognize 
the important role Clearing Trading Permit Holders play with respect to 
facilitating their own customers' trading activity and as such proposes 
to extend the waiver through December 31, 2019.
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    \5\ See Cboe Options Fees Schedule, Footnote 47.
    \6\ See Cboe Options Fees Schedule, Footnote 11.
    \7\ See Securities Exchange Act Release No. 85167 (February 20, 
2019), 84 FR 6039 (February 25, 2019) (SR-CBOE-2019-011).
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Sector Indexes License Surcharge
    The Exchange next proposes to extend the current waiver of the 
Index License Surcharge of $0.10 per contract. In order to promote and 
encourage trading of the recently adopted Sector Index options, the 
Exchange adopted a waiver of the Index License Surcharge for Sector 
Index option transactions.\8\ The current waiver is set to expire on 
June 30, 2019. As the volume in these relatively new products is low, 
the Exchange does not have enough information to evaluate the impact of 
the waiver. However, the Exchange wishes to extend this waiver through 
December 31, 2019 in order to continue to encourage the trading of 
Sector Index options and grow the product. The proposed waiver would 
apply to all non-customer transactions.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 82854 (March 12, 
2018), 83 FR 11803 (March 16, 2018) (SR-CBOE-2018-012).
---------------------------------------------------------------------------

VIX License Index Surcharge
    The Exchange next proposes to extend the current waiver of the 
Index License Surcharge of $0.10 per contract for Clearing Trading 
Permit Holder Proprietary (``Firm'') (origin codes ``F'' or ``L'') VIX 
orders that have a premium of $0.10 or lower and have series with an 
expiration of seven (7) calendar days or less. The Exchange wishes to 
extend this waiver through December 31, 2019. The Exchange adopted the 
waiver to reduce transaction costs on expiring, low-priced VIX options, 
which the Exchange believed would encourage Firms to seek to close and/
or roll over

[[Page 34244]]

such positions close to expiration at low premium levels, including 
facilitating customers to do so, in order to free up capital and 
encourage additional trading.\9\ The Exchange had proposed to waive the 
surcharge through June 30, 2019, at which time the Exchange had stated 
that it would evaluate whether the waiver has in fact prompted Firms to 
close and roll over these positions close to expiration as intended. 
After a review of Firms' activity, the Exchange believes the waiver has 
indeed encouraged Firms to do so and as such, proposes to extend the 
waiver of the surcharge through December 31, 2019, at which time the 
Exchange will again reevaluate whether the waiver has continued to 
prompt Firms to close and roll over positions close to expiration at 
low premium levels. Accordingly, the Exchange proposes to delete the 
reference to the current waiver period of June 30, 2019 from the Fees 
Schedule and replace it with December 31, 2019.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 76923 (January 15, 
2016), 81 FR 3841 (January 22, 2016) (SR-CBOE-2016-002).
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GTH Fees
    The Exchange proposes to also extend waivers for access fees for 
the Global Trading Hours (``GTH'') session. Currently, the Exchange 
charges $1,000 per month for each GTH Market-Maker Trading Permit and 
$500 per month for each GTH Electronic Access Trading Permit.\10\ The 
Exchange also assesses fees for Bandwidth Packets that may be used 
during GTH. Particularly, the Exchange charges $500 per month per GTH 
Quoting and Order Entry Bandwidth Packet and $250 per month per Order 
Entry Bandwidth Packet.\11\ The Exchange further assesses monthly fees 
for CMI Login IDs and FIX Login IDs used for GTH, which are currently 
$750 per Login ID. In order to promote and encourage trading during the 
GTH session, the Exchange currently waives GTH Trading Permit and 
Bandwidth Packet fees for one (1) of each initial Trading Permits and 
one (1) of each initial Bandwidth Packet, per affiliated Trading Permit 
Holder (``TPH'').\12\ The Exchange notes that the waivers are set to 
expire June 30, 2019. The Exchange also waives fees through June 30, 
2019 for a CMI and FIX login ID if the CMI and/or FIX login ID is 
related to a waived GTH Trading Permit and/or waived Bandwidth packet. 
In order to continue to promote trading during GTH, the Exchange wishes 
to extend these waivers through September 30, 2019.\13\ Based on 
experience, the Exchange believes such waivers have encouraged 
participation during GTH. Continued participation during GTH results in 
potential increased order flow, which provides greater trading 
opportunities for all market participants. Additionally, the proposed 
waivers apply to all TPHs that wish to participate in the GTH session.
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    \10\ See Cboe Options Fees Schedule, Trading Permit and Tier 
Appointment Fees. Each Trading Permit provides bandwidth and three 
logins.
    \11\ See Cboe Options Fees Schedule, Bandwidth Packet Fees 
Bandwidth Packets provide TPHs with additional bandwidth and logins.
    \12\ See Securities Exchange Act Release No. 74422 (March 4, 
2015), 80 FR 12680 (March 10, 2015) (SR-CBOE-2015-020).
    \13\ The Exchange notes that in October 2019, it is migrating 
the current Cboe Options trading platform onto new technology and in 
connection with such migration, is anticipating a new Trading Permit 
and connectivity structure. As such, the Exchange proposes to extend 
the GTH related waivers only through September 2019.
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MXEA and MXEF LMM Incentive Program
    The Exchange also proposes to extend the financial program for Lead 
Market-Makers (``LMMs'') appointed in MSCI EAFE Index (``MXEA'') 
options and MSCI Emerging Markets Index (``MXEF'') options.\14\ 
Currently, if the appointed LMM in MXEA and MXEF provides continuous 
electronic quotes during Regular Trading Hours that meet or exceed the 
above heightened quoting standards in at least 90% of the MXEA and MXEF 
series 80% of the time in a given month, the LMM will receive a payment 
for that month in the amount of $20,000 per class, per month. The Fees 
Schedule currently provides that this program will be in place through 
June 30, 2019. In order to continue to encourage LMM(s) in MXEA and 
MXEF to continue serving as LMMs and provide significant liquidity in 
these options, which would provide greater trading opportunities for 
all market participants, the Exchange proposes to renew this program 
through December 31, 2019.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 83585 (July 2, 
2018), 83 FR 31825 (July 9, 2018) (SR-CBOE-2018-050).
---------------------------------------------------------------------------

RLG, RLV, RUI, AWDE, FTEM, FXTM and UKXM Transaction Fees
    In order to promote and encourage trading of seven FTSE Russell 
Index products (i.e., Russell 1000 Growth Index (``RLG''), Russell 1000 
Value Index (``RLV''), Russell 1000 Index (``RUI''), FTSE Developed 
Europe Index (``AWDE''), FTSE Emerging Markets Index (``FTEM''), China 
50 Index ``(FXTM'') and FTSE 100 Index (``UKXM'')), the Exchange waives 
all transaction fees (including the Floor Brokerage Fee, Index License 
Surcharge and CFLEX Surcharge Fee) for each of these products for all 
market participants.\15\ This waiver is set to expire June 30, 2019. As 
the volume in these products is low, the Exchange does not have enough 
information to evaluate the impact of the waiver. However, the Exchange 
wishes to extend this waiver through December 31, 2019 in order to 
continue to encourage growth and trading of these products.
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 76288 (October 28, 
2015), 80 FR 67805 (November 3, 2015) (SR-CBOE-2015-096). See also 
Securities Exchange Act Release No. 77547 (April 6, 2016), 81 FR 
21611 (April 12, 2016) (SR-CBOE-2016-021) and Securities Exchange 
Act Release No. 78930 (September 26, 2016), 81 FR 67408 (September 
30, 2016) (SR-CBOE-2016-070).
---------------------------------------------------------------------------

UKXM
    The Exchange previously offered a compensation plan to the 
Designated Primary Market-Maker(s) (``DPM(s)'') appointed in UKXM to 
offset its DPM costs.\16\ Specifically, the DPM appointed for an entire 
month in UKXM will receive a payment of $5,000 per month through June 
30, 2019. The Exchange proposes to extend this plan through December 
31, 2019 to continue to incentivize the DPM(s) to continue to serve as 
a DPM in this product and provide the necessary liquidity, which 
provides greater trading opportunities for all market participants in 
this option class.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 77547 (April 6, 
2016), 81 FR 21611 (April 12, 2016) (SR-CBOE-2016-021).
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Elimination of Obsolete Reference
    Lastly, the Exchange proposes to eliminate references to an 
obsolete fee and incentive program. Specifically, on February 11, 2019, 
the Exchange filed a rule filing, SR-CBOE-2019-012, which proposed, 
among other things, to eliminate the Supplemental VIX Total Firm 
Discount program (``Supplemental VIX Discount''), effective February 1, 
2019.\17\ The Exchange notes that although it reflected the elimination 
of the program in the filing's Exhibit 5, it mistakenly failed to 
eliminate references to the program in corresponding Footnote 11 of the 
Fees Schedule. Accordingly, the Exchange proposes to update Footnote 11 
to eliminate references to the Supplemental VIX Discount. No 
substantive change is being made by this deletion.
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 85169 (February 21, 
2019), 84 FR 6445 (February 27, 2019) (SR-CBOE-2019-012).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations

[[Page 34245]]

thereunder applicable to the Exchange and, in particular, the 
requirements of Section 6(b) of the Act.\18\ Specifically, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \19\ requirements that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and 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. Additionally, the Exchange 
believes the proposed rule change is consistent with Section 6(b)(4) of 
the Act,\20\ which requires that Exchange rules provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its Trading Permit Holders and other persons using its facilities.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes the proposed waiver extension of the Clearing 
Trading Permit Holder Proprietary transaction fee for facilitation 
orders in Sector Index options is reasonable because these orders will 
not be charged any fee. The Exchange believes that this is equitable 
and not unfairly discriminatory because a similar waiver also applies 
to other products, including other proprietary index products (e.g., 
MXEA, MXEF, DJX and XSP).\21\ Further, as noted above, Clearing Trading 
Permit Holders can be an important source of liquidity when they 
facilitate their own customers' trading activity. Moreover, Clearing 
Trading Permit Holders have obligations, which normally do not apply to 
other market participants (e.g., must have higher capital requirements, 
clear trades for other market participants, must be members of OCC). 
The Exchange also notes that the waiver of fees for Sector Index 
facilitation orders executed in open outcry or electronically in AIM, 
QCC or as a CFLEX transaction applies to all such orders.
---------------------------------------------------------------------------

    \21\ See Cboe Fees Schedule, ``Equity Options Rate Table, ``ETF 
and ETN Options Rate Table'' and ``Index Options Rate Table--All 
Index Products Excluding Underlying Symbol List A and Sector 
Indexes'', all of which provide a $0.00 facilitation fee for origin 
code ``F'' and ``L'' orders.
---------------------------------------------------------------------------

    The Exchange believes it's appropriate to continue to waive the 
Index License Surcharge for Sector Indexes because the Sector Indexes 
are still relatively new products and the Exchange wishes to encourage 
and promote trading of these products. The Exchange believes waiving 
this fee is a reasonable means to encourage trading of these products 
as it applies to all market participants and results in lower fees 
assessed for Sector Index transactions.
    The Exchange believes it's appropriate to waive the Index License 
Surcharge for Clearing Trading Permit Holder Proprietary VIX orders 
that have a premium of $0.10 or lower and have series with an 
expiration of 7 calendar days or less because the Exchange wants to 
continue encouraging Firms to roll and close over positions close to 
expiration at low premium levels. Particularly, the Exchange believes 
it's reasonable to waive the entire $0.10 per contract surcharge 
because without the waiver of the surcharge, firms are less likely to 
engage in these transactions, as opposed to other VIX transactions, due 
to the associated transaction costs. The Exchange believes it's 
equitable and not unfairly discriminatory to limit the waiver to 
Clearing Trading Permit Holder Proprietary orders because they 
contribute capital to facilitate the execution of VIX customer orders 
with a premium of $0.10 or lower and series with an expiration of 7 
calendar days or less. Additionally, as noted above, Clearing Trading 
Permit Holders have obligations, which normally do not apply to other 
market participants (e.g., must have higher capital requirements, clear 
trades for other market participants, must be members of OCC).
    The Exchange believes extending the waiver of the GTH fee for the 
first Quoting and Order Entry Bandwidth Packet and the first Order 
Entry Bandwidth Packet through September 2019 is reasonable, equitable 
and not unfairly discriminatory, because waiving those respective fees 
promotes and encourages trading during the GTH session. The Exchange 
believes it's also reasonable, equitable and not unfairly 
discriminatory to waive fees for Login IDs in order to promote and 
encourage ongoing participation in GTH and also applies to all GTH 
TPHs. The Exchange believes it's also reasonable, equitable and not 
unfairly discriminatory to waive GTH access fees through September, 
2019 in order to further promote trading. To the extent that this 
purpose is achieved, all the Exchange's market participants who 
participate in the GTH session should benefit from increased liquidity.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to extend the MXEA and MXEF LMM Incentive Program 
because the Exchange wants to ensure it continues incentivizing the 
LMM(s) in these products to provide liquid and active markets in these 
products to encourage its growth. The Exchange notes that without the 
proposed financial incentive, there may not be sufficient incentive for 
TPHs to undertake an obligation to quote at heightened levels, which 
could result in lower levels of liquidity to the detriment of all 
market participants. The Exchange believes it is equitable and not 
unfairly discriminatory to only offer this financial incentive to MXEA 
and MXEF LMM(s) because it benefits all market participants trading in 
these options to encourage the LMM(s) to satisfy the heightened quoting 
standard, which may increase liquidity and provide more trading 
opportunities and tighter spreads. Indeed, the Exchange notes that LMMs 
provides a crucial role in providing quotes and the opportunity for 
market participants to trade products, including MXEA and MXEF, which 
can lead to increased volume, thereby providing a robust market. 
Additionally, if a MSCI LMM does not satisfy the heightened quoting 
standard then it simply will not receive the offered per class payment 
for that month.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to extend the waiver of all transaction fees for RLG, 
RLV, RUI, AWDE, FTEM, FXTM and UKXM transactions, including the Floor 
Brokerage fee, the License Index Surcharge and CFLEX Surcharge Fee, 
because the respective fees are being waived in their entirety, which 
promotes and encourages trading of these products which are still 
relatively new. The waiver also would apply to all TPHs.
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to renew the compensation plan to continue to 
incentivize the DPM to continue to serve as a DPM in this product. 
Particularly, the Exchange notes that there is low volume in UKXM and 
as such, the Exchange wishes to ensure the DPM continues to play a 
crucial role in providing liquid and active markets in the product to 
encourage growth and provide trading opportunities which would benefit 
all market participants.
    Lastly, the Exchange believes eliminating references to the 
Supplemental VIX Discount program, which no longer exists, alleviates 
confusion and maintains clarity in the Fees Schedule, which removes 
impediments to and perfects the mechanism of a free and open market and 
a national market system, and, in

[[Page 34246]]

general, protects investors and the public interest.

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 intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
    First, the Exchange believes the proposed rule change does impose 
any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Particularly, 
the proposed changes extend existing fee waivers and incentive programs 
and apply to all similarly situated TPHs uniformly. To the extent 
certain market participants receive a benefit others do not these 
different market participants have different obligations and 
circumstances. For example, DPMs and LMMs play a crucial role in 
providing active and liquid markets in their appointed products, 
thereby providing a robust market which benefits all market 
participants. Additionally, Clearing Trading Permit Holders can be an 
important source of liquidity when they facilitate their own customers' 
trading activity and also have other obligations, which normally do not 
apply to other market participants (e.g., must have higher capital 
requirements, clear trades for other market participants, must be 
members of OCC). The Exchange also notes that the proposed waivers and 
incentive programs are designed to attract additional order flow to the 
Exchange. Greater liquidity benefits all market participants on the 
Exchange by providing more trading opportunities and tighter spreads 
and encourages all TPHs to send orders, thereby contributing to robust 
levels of liquidity.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. First, the 
proposed changes only affect trading on Cboe Options. Next, the 
Exchange notes it operates in a highly competitive market. In addition 
to Cboe Options, TPHs have numerous alternative venues that they may 
participate on and director their order flow, including 15 options 
exchanges, as well as off-exchange venues. Based on publicly available 
information, no single options exchange has more than 23% of the market 
share of executed volume of options trades.\22\ Therefore, no exchange 
possesses significant pricing power in the execution of option 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 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.'' \23\ 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' . . . .''.\24\ 
Accordingly, the Exchange does not believe its proposed changes to 
extend the above-mentioned fee waivers and incentive programs impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
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    \22\ See Cboe Global Markets, U.S. Options Market Volume Summary 
(June 13,2019), available at https://markets.cboe.com/us/options/market_share/.
    \23\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \24\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \25\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\26\
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    \25\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \26\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of the filing. However, 
Rule 19b-4(f)(6)(iii) \27\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. In its filing, Cboe Options 
requested that the Commission waive the 30-day operative delay. The 
Exchange indicated in its filing that its extension of the above-
described fee waivers and incentive programs was designed to encourage 
increased market participation, including in GTH and in relatively new 
products. The Commission believes that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest as it will avoid the potential for disruption among TPHs 
associated with an interruption in the continuity of the proposed 
extensions set forth above. Accordingly, the Commission waives the 30-
day operative delay and designates the proposed rule change operative 
upon filing.\28\
---------------------------------------------------------------------------

    \27\ 17 CFR 240.19b-4(f)(6)(iii).
    \28\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

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.

[[Page 34247]]

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2019-031 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.

All submissions should refer to File Number SR-CBOE-2019-031. 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 (https://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-CBOE-2019-031, and should be submitted 
on or before August 7, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12) and (59).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-15139 Filed 7-16-19; 8:45 am]
BILLING CODE 8011-01-P
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