Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 71021-71024 [2019-27733]
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Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices
of the purposes of the Act. The
proposed rule change enhances the
existing Sell Check for option orders of
all ATP Holders submitted to the
Exchange and is designed to ensure that
properly entered orders are not
inadvertently rejected or canceled by
the Exchange—insofar as the Sell Check
would exclude (and not interfere with
the operation of) ISO orders, and, would
apply a modified/more finely calibrated
percentage threshold to sell orders in
option series trading at a relatively low
price.
The Exchange further believes that
because the proposed rule change
would be applicable to all ATP Holders
it would not impose any burden on
intra-market 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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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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) of the Act 20 and Rule 19b–
4(f)(6) thereunder.21
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of 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.
21 17
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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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEAMER–2019–56 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–NYSEAMER–2019–56. 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–NYSEAMER–2019–56 and
should be submitted on or before
January 16, 2020.22
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27734 Filed 12–23–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87799; File No. SR–CBOE–
2019–124]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule
December 18, 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 December
18, 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, 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 Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
its Fees Schedule. 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/CBOELegal
RegulatoryHome.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
1 15
22 17
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices
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 various
amendments to its Fees Schedule.3
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SPX Select Market-Makers
Footnote 49 of the Fees Schedule
currently provides that any appointed
SPX Select Market-Maker (‘‘SMM’’) will
receive a monthly rebate of $8,000 if the
SMM provides continuous electronic
quotes in at least 99% of the SPX series
90% of the time in a given month.
SMMs are not obligated to satisfy the
heightened quoting standards described
in the Fees Schedule. Rather, SMMs are
eligible to receive a rebate if they satisfy
the heightened standards. SMMs must
still comply with the continuous
quoting obligation and other obligations
of Market-Makers described in Cboe
Options Rules.4 The Exchange adopted
the monthly rebate program to
encourage SMMs to provide liquidity in
SPX. The Exchange now proposes to
eliminate the SMM rebate program. The
Exchange no longer believes additional
liquidity by an SMM is necessary and
notes the Exchange is not required to
maintain such an incentive program.
The Exchange also notes that MarketMakers that were previously appointed
as SMMs will still be required to
comply with the continuous quoting
obligation and other obligations of
Market-Makers described in Cboe
Options Rules.
Linkage
The Exchange currently assesses
certain fees in connection with orders
routed to other exchanges. The
Exchange proposes to not pass through
or otherwise charge customer (capacity
code ‘‘C’’) orders (of any size) routed to
other exchanges that were originally
transmitted to the Exchange from the
trading floor through an Exchangesponsored terminal (e.g., PULSe
Workstation). The primary objective of
linkage fees are to recoup some of the
costs associated with large electronic
orders that are initially transmitted to
the Exchange by parties who, in many
3 The Exchange originally filed the proposed fee
changes on December 2, 2019 (SR–CBOE–2019–
114). On December 12, 2019, the Exchange
withdrew that filing and submitted SR–CBOE–
2019–120. On December 18, 2019, the Exchange
withdrew that filing and submitted this filing.
4 See e.g., Cboe Options Rule 5.51.
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instances, could be seeking to avoid
being assessed another market’s
transaction fees. Orders that are initially
transmitted from the trading floor are
not attempting to avoid fees since they
incur brokerage commission charges in
connection with manual handling.
Rather, orders that are generally
transmitted from the floor are large,
complex orders that are primarily
executed on the Exchange, which only
are transmitted to away markets if,
during their execution on the Exchange,
it is necessary to sweep some away
markets. As such, the Exchange believes
it’s appropriate to waive linkage fees for
these orders. The Exchange lastly notes
that the proposed waiver is not novel.
Indeed, the Exchange maintained the
proposed waiver prior to the migration
to a new billing system on October 7,
2019, but had eliminated the waiver
upon migration.5 After further
evaluation, the Exchange now wishes to
re-adopt the proposed waiver. The
Exchange notes the proposed waiver is
identical to the waiver in place premigration.
Tier Appointment Fees
The Exchange currently assesses a
SPX Tier Appointment Fee of $3,000
per month to any Market-Maker holding
a Market-Maker Electronic Access
Permit (‘‘EAP’’) (‘‘MM EAP’’) that trades
any SPX (including SPXW) contracts at
any time during the month. The
Exchange proposes to amend the Fees
Schedule to adopt a contract threshold.
Particularly, the Exchange proposes to
provide that the SPX Tier Appointment
Fee will be assessed to any MM EAP
that executes at least 1,000 contracts in
SPX (including SPXW) excluding
contracts executed during the opening
rotation on the final settlement date of
VIX options and futures with the
expiration used in the VIX settlement
calculation. The Exchange proposes to
exclude SPX and SPXW volume
executed during opening rotation on the
final settlement date of VIX options and
futures which have the expiration that
contribute to the VIX settlement, as such
orders help to facilitate the calculation
of a settlement price for VIX options and
futures and the Exchange does not wish
to discourage the sending of such
orders.6 The Exchange notes that the
5 See Securities and Exchange Act Release No.
87495 (November 8, 2019), 84 FR 63701 (November
18, 2019) (SR–CBOE–2019–106).
6 The Exchange notes that only electronic SPX
and SPXW orders participate in the opening
rotation on the final settlement date of VIX options
and futures. As open-outcry volume does not
facilitate the calculation of the settlement price for
VIX options and futures, the Exchange does not
believe it’s necessary to adopt a corresponding
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SPX Tier Appointment fee is intended
to be assessed to Market-Maker TPHs
who actually act as Market-Makers in
SPX and engage in trading in SPX (as
opposed to those who primarily execute
volume during the opening rotation on
VIX settlement days and subsequently
execute volume to close out of such
positions). The electronic Tier
Appointment Surcharges for VIX and
RUT similarly have a 1,000 contract
threshold.7
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
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.8 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 9 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, and
does not unfairly discriminate between
customers, issuers, brokers or dealers.
Additionally, the Exchange believes the
proposed rule change is consistent with
Section 6(b)(4) of the Act,10 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 eliminating
the SPX SMM Program is reasonable,
equitable and not unfairly
discriminatory because the Exchange is
not required to maintain such a rebate
program and no longer desires to do so.
The Exchange believes that there is
sufficient liquidity in SPX and does not
believe a rebate program is necessary to
further incentivize liquidity. The
Exchange believes the proposed change
is not unfairly discriminatory because it
will apply equally to all SMMs.
The Exchange believes it’s reasonable
to waive linkage fees for customer
exception to the SPX Tier Appointment for Floor
Market-Makers.
7 See Cboe Options Fees Schedule, Market-Maker
Tier Appointment Fees.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
10 15 U.S.C. 78f(b)(4).
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Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices
orders that were transmitted from the
trading floor through an Exchange
sponsored terminal (currently only
PULSe workstation) as customers would
not be subject to linkage fees. The
proposed waiver would apply to all
similarly situated market participants.
The Exchange believes limiting the
exception to customer orders that were
originally transmitted from the trading
floor through an exchange-sponsored
terminal is equitable, reasonable and not
unfairly discriminatory as the primary
objective of linkage fees are to recoup
some of the costs associated with large
electronic orders that are initially
transmitted to the Exchange by parties
who, in many instances, could be
seeking to avoid being assessed another
market’s transaction fees. As discussed
above, orders that are generally
transmitted from the floor are large,
complex orders that are primarily
executed on the Exchange and
transmitted to away markets if, during
their execution on the Exchange, it is
necessary to sweep some away markets.
The Exchange also believes limiting the
exception from Linkage Fees to
customer orders is equitable, reasonable
and not unfairly discriminatory because
non-customer (e.g., broker-dealer
proprietary) orders originate from
broker-dealers who are by and large
more sophisticated than public
customers (i.e., orders yielding capacity
code ‘‘C’’) and can readily control the
exchange to which their orders are
routed. While there may be some
customers who direct the exchange to
which their orders are routed, generally,
customers submit orders to their
brokerages but do not or cannot specify
the exchange to which its order is sent.
Therefore, non-customer order flow can,
in most cases, more easily route directly
to other markets if desired and thus
avoid Linkage Fees. This includes the
ability of broker-dealers to sweep betterpriced away markets in connection with
routing large orders to the Exchange’s
floor for handling by floor brokers.
Moreover, the Commission has a long
history of permitting differential
treatment of customers and noncustomer investors.
Finally, as noted above, the proposed
waiver is not novel. Indeed, the
Exchange maintained the proposed
waiver prior to the migration to a new
billing system on October 7, 2019, but
had eliminated the waiver upon
migration.11 After further evaluation,
the Exchange has determined to readopt the proposed waiver, which
11 See Securities and Exchange Act Release No.
87495 (November 8, 2019), 84 FR 63701 (November
18, 2019) (SR–CBOE–2019–106).
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waiver is identical to the waiver in
place pre-migration.
The Exchange believes the proposed
change to adopt a contract threshold to
trigger the electronic SPX Tier
Appointment Surcharge is reasonable as
MM EAPs that trade below such
threshold will not be subject to the MM
EAP SPX Tier Appointment Fee. The
Exchange believes the proposed change
is reasonable as the SPX Tier
Appointment surcharge was intended to
apply to TPHs who act as MarketMakers in SPX, not those that do not
regularly trade SPX electronically.
Additionally, while liquidity is
important to open all series on the
Exchange, given the potential impact on
the exercise settlement value
determined for expiring volatility index
derivatives, it is very important to
encourage a fair and orderly opening of
the series that are used to calculate the
final settlement value of expiring VIX
derivatives. Accordingly, the Exchange
does not wish to assess the SPX Tier
Appointment fee to MM EAPs who do
not conduct significant electronic
volume in SPX (or SPXW) other than
volume executed during opening
rotation on the final settlement date of
VIX options and futures which have the
expiration that are used in the VIX
settlement calculation and subsequent
volume executed to close out of such
positions. The Exchange believes it’s
equitable and not unfairly
discriminatory to adopt a threshold for
off-floor Markets-Markets and not onfloor Market-Makers as only electronic
SPX and SPXW orders participate in the
opening rotation on the final settlement
date of VIX options and futures. As
open-outcry volume does not facilitate
the calculation of the settlement price
for VIX options and futures, the
Exchange does not believe it’s necessary
to adopt a corresponding exception to
the SPX Tier Appointment for on-floor
Market-Makers. The Exchange notes that
any TPH that electronically executes
more than 1 contract but less than 1,000
contracts in SPX (including SPXW),
excluding volume executed during
opening rotation on the final settlement
date of VIX options and futures which
have the expiration that are used in the
VIX settlement calculation will no
longer have to pay the Tier
Appointment Fee. As noted above, the
Exchange is not proposing to change the
amount assessed for the electronic SPX
Tier Appointment Fee. The proposed
change is equitable and not unfairly
discriminatory because it will apply
uniformly to all TPHs. The Exchange
lastly notes that a similar 1,000 contract
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71023
threshold also applies to MM EAP Tier
Appointment Fees in RUT and VIX.12
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Specifically,
the Exchange does not believe that the
proposed change will impose any
burden on intramarket competitions that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed changes will be
applied equally to all similarly situated
market participants. For example,
although the proposed routing
exception only applies to Customers, as
discussed, above, the Exchange believes
limiting the exception to customer
orders is not unfairly discriminatory
because non-customer (e.g., brokerdealer proprietary) orders originate from
broker-dealers who are by and large
more sophisticated than public
customers and can readily control the
exchange to which their orders are
routed. Moreover, as discussed, the
Commission has a long history of
permitting differential treatment of
customers and non-customer investors.
The Exchange does not believe that
the proposed rule change regarding the
SMM Program or the SPX Tier
Appointment Fee will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed waiver applies to
a product traded exclusively on the
Exchange. Additionally, the Exchange
believes the proposed rule change
relating to linkage does not impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Particularly, the Exchange operates in a
highly competitive market. Members
have numerous alternative venues that
they may participate on and director
their order flow, including 15 other
options exchanges and off-exchange
venues. The Exchange represents a
small percentage of the overall market.
Based on publicly available information,
no single options exchange has more
than 24% of the market share.13
Therefore, no exchange possesses
significant pricing power in the
execution of option order flow. Indeed,
participants can choose to send their
12 See Cboe Options Fees Schedule, MarketMaker Tier Appointment Fees.
13 See Cboe Global Markets U.S. Options Market
Volume Summary (December 2, 2019), available at
https://markets.cboe.com/us/options/market_
statistics/.
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Federal Register / Vol. 84, No. 247 / Thursday, December 26, 2019 / Notices
orders to other exchanges and offexchange venues if they deem fee levels
at those other venues to be more
favorable. 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.’’ 14 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’. . . .’’.15 Accordingly, the
Exchange does not believe its proposed
fee changes imposes any burden on
competition that are not necessary or
appropriate in furtherance of the
purposes of the Act.
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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
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 16 and paragraph (f) of Rule
19b–4 17 thereunder. 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
14 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
15 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)).
16 15 U.S.C. 78s(b)(3)(A).
17 17 CFR 240.19b–4(f).
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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 will institute proceedings
to determine whether the proposed rule
change 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.
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 rule-comments@
sec.gov. Please include File Number SR–
CBOE–2019–124 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–2019–124. 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
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submissions should refer to File
Number SR–CBOE–2019–124 and
should be submitted on or before
January 16, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27733 Filed 12–23–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Securities Act of 1933 Release No. 33–
10735 / December 18, 2019; Securities
Exchange Act of 1934 Release No. 34–
87785 / December 18, 2019]
Order Approving Public Company
Accounting Oversight Board Budget
and Annual Accounting Support Fee
for Calendar Year 2020
The Sarbanes-Oxley Act of 2002, as
amended (the ‘‘Sarbanes-Oxley Act’’),1
established the Public Company
Accounting Oversight Board (‘‘PCAOB’’)
to oversee the audits of companies that
are subject to the securities laws, and
related matters, in order to protect the
interests of investors and further the
public interest in the preparation of
informative, accurate, and independent
audit reports. Section 982 of the DoddFrank Wall Street Reform and Consumer
Protection Act (the ‘‘Dodd-Frank Act’’) 2
amended the Sarbanes-Oxley Act to
provide the PCAOB with explicit
authority to oversee auditors of brokerdealers registered with the Securities
and Exchange Commission (the
‘‘Commission’’). The PCAOB is to
accomplish these goals through
registration of public accounting firms
and standard setting, inspection, and
disciplinary programs. The PCAOB is
subject to the comprehensive oversight
of the Commission.
Section 109 of the Sarbanes-Oxley Act
provides that the PCAOB shall establish
a reasonable annual accounting support
fee, as may be necessary or appropriate
to establish and maintain the PCAOB.
Under Section 109(f) of the SarbanesOxley Act, the aggregate annual
accounting support fee shall not exceed
the PCAOB’s aggregate ‘‘recoverable
budget expenses,’’ which may include
operating, capital, and accrued items.
The PCAOB’s annual budget and
accounting support fee are subject to
approval by the Commission. In
addition, the PCAOB must allocate the
18 17
CFR 200.30–3(a)(12).
U.S.C. 7201 et seq.
2 Public Law 111–203, 124 Stat. 1376 (2010).
1 15
E:\FR\FM\26DEN1.SGM
26DEN1
]]>Agencies
[Federal Register Volume 84, Number 247 (Thursday, December 26, 2019)]
[Notices]
[Pages 71021-71024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27733]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87799; File No. SR-CBOE-2019-124]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
December 18, 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 December 18, 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,
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.
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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 Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its Fees Schedule. 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
[[Page 71022]]
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 various amendments to its Fees Schedule.\3\
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\3\ The Exchange originally filed the proposed fee changes on
December 2, 2019 (SR-CBOE-2019-114). On December 12, 2019, the
Exchange withdrew that filing and submitted SR-CBOE-2019-120. On
December 18, 2019, the Exchange withdrew that filing and submitted
this filing.
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SPX Select Market-Makers
Footnote 49 of the Fees Schedule currently provides that any
appointed SPX Select Market-Maker (``SMM'') will receive a monthly
rebate of $8,000 if the SMM provides continuous electronic quotes in at
least 99% of the SPX series 90% of the time in a given month. SMMs are
not obligated to satisfy the heightened quoting standards described in
the Fees Schedule. Rather, SMMs are eligible to receive a rebate if
they satisfy the heightened standards. SMMs must still comply with the
continuous quoting obligation and other obligations of Market-Makers
described in Cboe Options Rules.\4\ The Exchange adopted the monthly
rebate program to encourage SMMs to provide liquidity in SPX. The
Exchange now proposes to eliminate the SMM rebate program. The Exchange
no longer believes additional liquidity by an SMM is necessary and
notes the Exchange is not required to maintain such an incentive
program. The Exchange also notes that Market-Makers that were
previously appointed as SMMs will still be required to comply with the
continuous quoting obligation and other obligations of Market-Makers
described in Cboe Options Rules.
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\4\ See e.g., Cboe Options Rule 5.51.
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Linkage
The Exchange currently assesses certain fees in connection with
orders routed to other exchanges. The Exchange proposes to not pass
through or otherwise charge customer (capacity code ``C'') orders (of
any size) routed to other exchanges that were originally transmitted to
the Exchange from the trading floor through an Exchange-sponsored
terminal (e.g., PULSe Workstation). The primary objective of linkage
fees are to recoup some of the costs associated with large electronic
orders that are initially transmitted to the Exchange by parties who,
in many instances, could be seeking to avoid being assessed another
market's transaction fees. Orders that are initially transmitted from
the trading floor are not attempting to avoid fees since they incur
brokerage commission charges in connection with manual handling.
Rather, orders that are generally transmitted from the floor are large,
complex orders that are primarily executed on the Exchange, which only
are transmitted to away markets if, during their execution on the
Exchange, it is necessary to sweep some away markets. As such, the
Exchange believes it's appropriate to waive linkage fees for these
orders. The Exchange lastly notes that the proposed waiver is not
novel. Indeed, the Exchange maintained the proposed waiver prior to the
migration to a new billing system on October 7, 2019, but had
eliminated the waiver upon migration.\5\ After further evaluation, the
Exchange now wishes to re-adopt the proposed waiver. The Exchange notes
the proposed waiver is identical to the waiver in place pre-migration.
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\5\ See Securities and Exchange Act Release No. 87495 (November
8, 2019), 84 FR 63701 (November 18, 2019) (SR-CBOE-2019-106).
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Tier Appointment Fees
The Exchange currently assesses a SPX Tier Appointment Fee of
$3,000 per month to any Market-Maker holding a Market-Maker Electronic
Access Permit (``EAP'') (``MM EAP'') that trades any SPX (including
SPXW) contracts at any time during the month. The Exchange proposes to
amend the Fees Schedule to adopt a contract threshold. Particularly,
the Exchange proposes to provide that the SPX Tier Appointment Fee will
be assessed to any MM EAP that executes at least 1,000 contracts in SPX
(including SPXW) excluding contracts executed during the opening
rotation on the final settlement date of VIX options and futures with
the expiration used in the VIX settlement calculation. The Exchange
proposes to exclude SPX and SPXW volume executed during opening
rotation on the final settlement date of VIX options and futures which
have the expiration that contribute to the VIX settlement, as such
orders help to facilitate the calculation of a settlement price for VIX
options and futures and the Exchange does not wish to discourage the
sending of such orders.\6\ The Exchange notes that the SPX Tier
Appointment fee is intended to be assessed to Market-Maker TPHs who
actually act as Market-Makers in SPX and engage in trading in SPX (as
opposed to those who primarily execute volume during the opening
rotation on VIX settlement days and subsequently execute volume to
close out of such positions). The electronic Tier Appointment
Surcharges for VIX and RUT similarly have a 1,000 contract
threshold.\7\
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\6\ The Exchange notes that only electronic SPX and SPXW orders
participate in the opening rotation on the final settlement date of
VIX options and futures. As open-outcry volume does not facilitate
the calculation of the settlement price for VIX options and futures,
the Exchange does not believe it's necessary to adopt a
corresponding exception to the SPX Tier Appointment for Floor
Market-Makers.
\7\ See Cboe Options Fees Schedule, Market-Maker Tier
Appointment Fees.
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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 thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ 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, and does not
unfairly discriminate between customers, issuers, brokers or dealers.
Additionally, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4) of the Act,\10\ 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.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes eliminating the SPX SMM Program is
reasonable, equitable and not unfairly discriminatory because the
Exchange is not required to maintain such a rebate program and no
longer desires to do so. The Exchange believes that there is sufficient
liquidity in SPX and does not believe a rebate program is necessary to
further incentivize liquidity. The Exchange believes the proposed
change is not unfairly discriminatory because it will apply equally to
all SMMs.
The Exchange believes it's reasonable to waive linkage fees for
customer
[[Page 71023]]
orders that were transmitted from the trading floor through an Exchange
sponsored terminal (currently only PULSe workstation) as customers
would not be subject to linkage fees. The proposed waiver would apply
to all similarly situated market participants. The Exchange believes
limiting the exception to customer orders that were originally
transmitted from the trading floor through an exchange-sponsored
terminal is equitable, reasonable and not unfairly discriminatory as
the primary objective of linkage fees are to recoup some of the costs
associated with large electronic orders that are initially transmitted
to the Exchange by parties who, in many instances, could be seeking to
avoid being assessed another market's transaction fees. As discussed
above, orders that are generally transmitted from the floor are large,
complex orders that are primarily executed on the Exchange and
transmitted to away markets if, during their execution on the Exchange,
it is necessary to sweep some away markets. The Exchange also believes
limiting the exception from Linkage Fees to customer orders is
equitable, reasonable and not unfairly discriminatory because non-
customer (e.g., broker-dealer proprietary) orders originate from
broker-dealers who are by and large more sophisticated than public
customers (i.e., orders yielding capacity code ``C'') and can readily
control the exchange to which their orders are routed. While there may
be some customers who direct the exchange to which their orders are
routed, generally, customers submit orders to their brokerages but do
not or cannot specify the exchange to which its order is sent.
Therefore, non-customer order flow can, in most cases, more easily
route directly to other markets if desired and thus avoid Linkage Fees.
This includes the ability of broker-dealers to sweep better-priced away
markets in connection with routing large orders to the Exchange's floor
for handling by floor brokers. Moreover, the Commission has a long
history of permitting differential treatment of customers and non-
customer investors.
Finally, as noted above, the proposed waiver is not novel. Indeed,
the Exchange maintained the proposed waiver prior to the migration to a
new billing system on October 7, 2019, but had eliminated the waiver
upon migration.\11\ After further evaluation, the Exchange has
determined to re-adopt the proposed waiver, which waiver is identical
to the waiver in place pre-migration.
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\11\ See Securities and Exchange Act Release No. 87495 (November
8, 2019), 84 FR 63701 (November 18, 2019) (SR-CBOE-2019-106).
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The Exchange believes the proposed change to adopt a contract
threshold to trigger the electronic SPX Tier Appointment Surcharge is
reasonable as MM EAPs that trade below such threshold will not be
subject to the MM EAP SPX Tier Appointment Fee. The Exchange believes
the proposed change is reasonable as the SPX Tier Appointment surcharge
was intended to apply to TPHs who act as Market-Makers in SPX, not
those that do not regularly trade SPX electronically. Additionally,
while liquidity is important to open all series on the Exchange, given
the potential impact on the exercise settlement value determined for
expiring volatility index derivatives, it is very important to
encourage a fair and orderly opening of the series that are used to
calculate the final settlement value of expiring VIX derivatives.
Accordingly, the Exchange does not wish to assess the SPX Tier
Appointment fee to MM EAPs who do not conduct significant electronic
volume in SPX (or SPXW) other than volume executed during opening
rotation on the final settlement date of VIX options and futures which
have the expiration that are used in the VIX settlement calculation and
subsequent volume executed to close out of such positions. The Exchange
believes it's equitable and not unfairly discriminatory to adopt a
threshold for off-floor Markets-Markets and not on-floor Market-Makers
as only electronic SPX and SPXW orders participate in the opening
rotation on the final settlement date of VIX options and futures. As
open-outcry volume does not facilitate the calculation of the
settlement price for VIX options and futures, the Exchange does not
believe it's necessary to adopt a corresponding exception to the SPX
Tier Appointment for on-floor Market-Makers. The Exchange notes that
any TPH that electronically executes more than 1 contract but less than
1,000 contracts in SPX (including SPXW), excluding volume executed
during opening rotation on the final settlement date of VIX options and
futures which have the expiration that are used in the VIX settlement
calculation will no longer have to pay the Tier Appointment Fee. As
noted above, the Exchange is not proposing to change the amount
assessed for the electronic SPX Tier Appointment Fee. The proposed
change is equitable and not unfairly discriminatory because it will
apply uniformly to all TPHs. The Exchange lastly notes that a similar
1,000 contract threshold also applies to MM EAP Tier Appointment Fees
in RUT and VIX.\12\
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\12\ See Cboe Options Fees Schedule, Market-Maker Tier
Appointment Fees.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Specifically, the Exchange
does not believe that the proposed change will impose any burden on
intramarket competitions that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed changes
will be applied equally to all similarly situated market participants.
For example, although the proposed routing exception only applies to
Customers, as discussed, above, the Exchange believes limiting the
exception to customer orders is not unfairly discriminatory because
non-customer (e.g., broker-dealer proprietary) orders originate from
broker-dealers who are by and large more sophisticated than public
customers and can readily control the exchange to which their orders
are routed. Moreover, as discussed, the Commission has a long history
of permitting differential treatment of customers and non-customer
investors.
The Exchange does not believe that the proposed rule change
regarding the SMM Program or the SPX Tier Appointment Fee will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed waiver applies to a product traded exclusively on the
Exchange. Additionally, the Exchange believes the proposed rule change
relating to linkage does not impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. Particularly, the Exchange operates in a highly
competitive market. Members have numerous alternative venues that they
may participate on and director their order flow, including 15 other
options exchanges and off-exchange venues. The Exchange represents a
small percentage of the overall market. Based on publicly available
information, no single options exchange has more than 24% of the market
share.\13\ Therefore, no exchange possesses significant pricing power
in the execution of option order flow. Indeed, participants can choose
to send their
[[Page 71024]]
orders to other exchanges and off-exchange venues if they deem fee
levels at those other venues to be more favorable. 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.'' \14\ 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'. . . .''.\15\ Accordingly, the Exchange
does not believe its proposed fee changes imposes any burden on
competition that are not necessary or appropriate in furtherance of the
purposes of the Act.
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\13\ See Cboe Global Markets U.S. Options Market Volume Summary
(December 2, 2019), available at https://markets.cboe.com/us/options/market_statistics/.
\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\15\ 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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \16\ and paragraph (f) of Rule 19b-4 \17\
thereunder. 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. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2019-124 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-2019-124. 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-2019-124 and should be submitted on
or before January 16, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27733 Filed 12-23-19; 8:45 am]
BILLING CODE 8011-01-P
