Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Schedule, 10760-10765 [2020-03646]
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10760
Federal Register / Vol. 85, No. 37 / Tuesday, February 25, 2020 / Notices
• 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–
NYSE–2020–11 on the subject line.
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
Symbol List A, (3) amend certain VIX
fees, (4) adopt fee codes for waived
linkage transactions, (5) re-adopt the
Clearing Trading Permit Holder position
re-assignment rebate, (6) clarify that
Network Access Ports will be available
for physical connections to PULSe
through February 29, 2020, and (7)
reduce the rebate under the GTH SPX/
SPXW LLM program.3
February 19, 2020.
SPX Fees
Paper Comments
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 February
6, 2020, 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.
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
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• 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–NYSE–2020–11. 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–NYSE–2020–11, and
should be submitted on or before March
17, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–03642 Filed 2–24–20; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88243; File No. SR–CBOE–
2020–011]
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The text of the proposed rule change
is 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 to (1) amend certain SPX
fees, (2) amend the standard transaction
fee for Clearing Trading Permit Holder
Proprietary orders in Underlying
BILLING CODE 8011–01–P
1 15
37 17
CFR 200.30–3(a)(12).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Standard Transaction Fees
The Exchange first proposes to adopt
modest fee increases for SPX and SPXW
transactions. With respect to Customer
orders (capacity ‘‘C’’) in SPX and SPXW,
the Exchange proposes to increase
transaction fees by $0.01 per contract.
More specifically, the Exchange
proposes to increase Customer
transaction fees for SPX/SPXW orders
with a premium of (1) $0.00-$0.10 and
$0.11-$0.99 from $0.35 per contract to
$0.36 per contract and (2) $1.00 or more
from $0.44 per contract to $0.45 per
contract. The Exchange next proposes to
increase transaction fees for BrokerDealer (capacity ‘‘B’’), Joint Back-Office
(capacity ‘‘J’’), Non-Trading Permit
Holder (‘‘TPH’’) Market-Maker (capacity
‘‘N’’), and Professional (capacity ‘‘U’’)
orders in SPX and SPXW from $0.40 per
contract to $0.42 4 per contract.
SPX Liquidity Provider Sliding Scale
The Exchange proposes to amend its
sliding scale for Market-Maker
transaction fees in SPX and SPXW
(‘‘SPX Liquidity Provider Sliding
Scale’’). Currently, Market-Makers’
transaction fees in SPX and SPXW are
determined by their average monthly
contracts in SPX and SPXW. The SPX
Liquidity Provider Sliding Scale
currently provides for five tiers. The
Exchange proposes to increase the
transaction fees under Tiers 4 and 5 of
the SPX Liquidity Provider Sliding
Scale by $0.01 per contract (and thereby
lessen the current discount). More
specifically, the Exchange proposes to
increase the transaction rate under Tier
4 5 from $0.22 per contract to $0.23 per
contract, and the transaction rate under
Tier 5 6 from $0.20 per contract to $0.21
per contract. The Exchange believes that
3 The Exchange initially filed the proposed fee
changes on February 3, 2020 (SR–CBOE–2020–008).
On February 4, 2020, the Exchange withdrew that
filing and submitted SR–CBOE–2020–009. On
February 6, 2020, the Exchange withdrew that filing
and submitted this filing.
4 The Exchange proposes to adopt new fee code
BT for Non-Customer, Non-Market-Maker SPX and
SPXW orders.
5 The volume threshold for Tier 4 is 9.00%–
$15.00%.
6 The volume threshold for Tier 5 is above
15.00%.
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notwithstanding the proposed
transaction fee increase under Tiers 4
and 5, the SPX Liquidity Provider
Sliding Scale will continue to provide
incremental incentives for MarketMakers to reach the highest tier level
and encourage trading of SPX options,
as it continues to provide progressively
lower rates if increased volume
thresholds in SPX (including SPXW)
options are attained during a month.
SPXW Execution Surcharge
The Exchange proposes to amend the
Execution Surcharge for SPXW (‘‘SPXW
Surcharge’’). Currently, the Exchange
assesses a SPXW Surcharge of $0.10 per
contract for non-Market-Maker orders in
SPXW that are executed electronically
(with some exceptions).7 The Exchange
proposes to increase the Execution
Surcharge for SPXW to $0.13 per
contract. The Exchange notes the
proposed SPXW Surcharge is still less
than the Execution Surcharge assessed
for SPX transactions.8
Clearing Trading Permit Holder
Proprietary Fees
SPX Index License Surcharge
The Exchange proposes to increase
the standard transaction fee for Clearing
Trading Permit Holders and for NonClearing Trading Permit Holder
Affiliates (‘‘Firms’’) (capacities ‘‘F’’ and
‘‘L’’, respectively) in Underlying Symbol
List A 9 (excluding VIX) by $0.01.
Specifically the Exchange proposes to
increase the fee from $0.25 per contract
to $0.26 per contract.
The Exchange proposes to increase
the Index License Surcharge Fee for SPX
(including SPXW) (the ‘‘SPX
Surcharge’’) from $0.16 per contract to
$0.17 per contract. The Exchange
licenses from S&P Dow Jones Indices
(‘‘SPDJI’’) (the ‘‘SPDJI License’’) the
right to offer an index option product
based on the S&P 500 index (that
product being SPX and other SPX-based
index option products). In order to
offset the costs associated with the
SPDJI License, the Exchange assesses
the SPX Surcharge. The Exchange
therefore proposes to increase the SPX
Surcharge from $0.16 per contract to
$0.17 per contract in order to offset
more of the costs associated with the
SPX license.
Current premium
Proposed premium
$0.00–$0.10 .........................
$0.11–$0.99 .........................
Greater than $1.00 ...............
N/A .......................................
$0.00–$0.10 ........................
$0.11–$0.99 ........................
$1.00–$1.99 ........................
$2.00 and above .................
The Exchange proposes to reduce fees
for Customer simple orders with a
premium between $1.00–$1.99 to
incentivize the sending of more orders
within this premium range. Similarly,
the Exchange proposes to adopt reduced
fees for Customer complex VIX orders in
order to encourage the sending of
additional complex VIX orders. The
Exchange did not believe it was
necessary to assess different fees for
simple and complex VIX orders with a
premium of $2.00 or greater. The
Exchange notes that Customer VIX
The Exchange next proposes to amend
standard Customer (capacity ‘‘C’’)
transaction fees for VIX transactions.
First the Exchange proposes to decrease
certain VIX transaction fees, adopt
separate fees for simple versus complex
VIX transactions, and adopt a new fee
for VIX orders with a premium of $2.00
or more, along with the noted fee codes,
as follows:
Proposed simple fees
Fee
code
No change ...........................
No change ...........................
$0.40 ...................................
$0.45 ...................................
CV
CW
CX
CY
Current
$0.10
0.25
0.45
N/A
VIX Fees
orders with a premium of $2.00 or
greater account for a very small
percentage of overall VIX trading.
Linkage Waiver
The Exchange proposes to adopt fee
codes for linkage transactions for which
away transaction fees are waived. More
specifically, the Exchange currently
provides that it will not pass through or
otherwise charge customer orders (of
any size) routed to other exchanges that
were originally transmitted to the
Exchange from the trading floor through
Proposed
complex fees
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Rate
Routed to AMEX, BOX, BX, EDGX, MERC, MIAX, PHLX, ≥100 contracts, ETF ..................................................
Routed to AMEX, BOX, BX, EDGX, MERC, MIAX, PHLX, <100 contracts ETF, Equity .......................................
Routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL, NOMX, ≥100 contracts ETF, Penny ...............................
Routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL, NOMX, ≥100 contracts ETF, Non-Penny .......................
Routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL, NOMX, <100 contracts ETF, Equity, Penny ...................
Routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL, NOMX, <100 contracts ETF, Equity, Non-Penny ...........
Routed, Index ..........................................................................................................................................................
Routed, XSP, originating on Exchange-sponsored terminal ..................................................................................
7 See
Cboe Options Fees Schedule, Footnote 21.
Cboe Options Fees Schedule, Rate Table—
Underlying Symbol List A, Execution Surcharge,
SPX only.
9 Underlying Symbol List A currently includes
OEX, XEO, RUT, RLG, RLV, RUI, UKXM, SPX
(includes SPXw) and VIX. See Cboe Options Fees
Schedule, Footnote 34.
8 See
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an Exchange-sponsored terminal (e.g. a
PULSe Workstation). Currently, this
waiver is implemented manually.
Beginning February 3, 2020, this waiver
will be automated and the Exchange
therefore proposes to adopt specific fee
codes for such transactions. Particularly,
the Exchange proposes to adopt the
following fee codes for customer orders
(of any size) routed to other exchanges
that were originally transmitted to the
Exchange from the trading floor through
an Exchange-sponsored terminal:
Fee Code
TD ..................
TE ..................
TF ...................
TG ..................
TH ..................
TI ....................
TS ..................
TX ..................
$0.05
0.17
0.30
0.45
Fee
code
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10 The Exchange assesses $0.18 per contract for
customer ETF orders that are ≥100 contracts, and
customer orders in multi-listed index products. See
Cboe Options Fees Schedule, Rate Table—All
Products Excluding Underlying Symbol List A.
11 The Exchange does not assess a fee for
customer ETF orders that are <100 contracts or for
customer orders in equity options. See Cboe
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10 $0.18
11 0.00
0.18
0.18
0.00
0.00
0.18
12 0.04
Options Fees Schedule, Rate Table—All Products
Excluding Underlying Symbol List A.
12 The Exchange assesses a $0.04 per contract fee
for customer XSP orders. See Cboe Options Fees
Schedule, Rate Table—All Products Excluding
Underlying Symbol List A.
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The Exchange notes the proposed fee
codes do not represent a substantive
change, but are being adopted merely in
light of the Exchange’s automation of a
current waiver.
also provide that a written request in a
form and manner prescribed by the
Exchange must be submitted within 3
business days of the original
transaction.
Clearing Trading Permit Holder Position
Re-Assignment Rebate
The Exchange proposes to adopt a
rebate for transaction fees assessed to a
Clearing Trading Permit Holder who, as
a result of a trade adjustment on any
business day following the original
trade, re-assigns a position established
by the initial trade to a different
Clearing Trading Permit Holder. In such
a circumstance, the Exchange will
rebate, for the party for whom the
position is being re-assigned, that
party’s transaction fees from the original
transaction as well as the transaction in
which the position is re-assigned. In all
other circumstances, including
corrective transactions, in which a
transaction is adjusted on any day after
the original trade date, regular Exchange
fees will be assessed. The Exchange
notes that the proposed rebate is not
novel. Indeed, the Exchange’s Fees
Schedule had included the proposed
rebate prior to the migration to a new
billing system on October 7, 2019, but
had eliminated the rebate upon
migration.13 After further evaluation,
the Exchange now wishes to re-adopt
the proposed rebate. The Exchange
lastly notes that because the Exchange
may not always be able to automatically
identify these situations, in order to
receive a rebate, the Fees Schedule will
Network Access Ports
By way of background, a physical port
is utilized by a TPH or non-TPH to
connect to the Exchange at the data
centers where the Exchange’s servers are
located. Prior to migration of its trading
platform to a new system on October 7,
2019, the Exchange utilized Network
Access Ports for these physical
connections to the Exchange. Upon
migration, the TPHs and non-TPHs had
the option to alternatively elect to
connect to Cboe Options via new
latency equalized Physical Ports. The
Exchange had noted in its Fees
Schedule that through January 31, 2020,
Cboe Options market participants would
continue to have the ability to connect
to Cboe Options’ trading system via the
current Network Access Ports. The
Exchange notes that all Network Access
Ports have been decommissioned as of
January 31, 2020, with the exception of
a couple Network Access Ports used
solely to connect to PULSe. The
Exchange notes that although the new
latency equalized Physical Ports became
available on October 7, 2019, the new
Physical Ports were not originally able
to be utilized to send orders to PULSe.
Accordingly, users who wished to route
orders to PULSe via the Exchange’s
physical ports had to maintain and use
a legacy Network Access Fee Port and
Premium
could not use any of the new Physical
Ports for such purpose. The Exchange
notes that although the new Physical
Ports are now able to be used to connect
to PULSe, a couple of TPHs have not yet
made the transition from the Exchange’s
legacy Network Access Ports to the new
Physical Ports for purposes of
connecting to PULSe. As such, the
Exchange proposes to amend the Fees
Schedule to clarify that Network Access
Ports will be available through February
29, 2020 to connect to PULSe. The fee
waiver for Network Access Ports used
solely to access PULSe will continue to
remain in place.
GTH SPX/SPXW LMM Incentive
Program
Pursuant to the Fees Schedule, a
LMM in SPX/SPXW will receive a prorata share of a compensation pool for
SPX equal to $15,000 times the number
of LMMs appointment in SPX and if the
LMM meets the heightened quoting
standard described below for SPXW, the
LMM will receive an additional pro-rata
share of a compensation pool for SPXW
equal to $15,000 times the number of
LMMs in that class (for a total of
$30,000 per month for meeting the
standard for both SPX and SPXW) if the
LMM(s) provide continuous electronic
quotes that meet or exceed the following
heightened quoting standards in at least
99% of each of SPX and SPXW series
90% of the time in a given month
during GTH:
Expiring
Near term
Mid term
Long term
7 days or less
8 days to 60 days
61 days to 270 days
271 days or greater
Level
Width
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$0–$5.00 ..........................................
$5.01–$15.00 ...................................
$15.01–$50.00 .................................
$50.01–$100.00 ...............................
$100.01–$200.00 .............................
Greater Than $200.00 .....................
Size
$0.50
2.00
5.00
10.00
20.00
30.00
A GTH LMM in SPX/SPXW is not
currently obligated to satisfy the
heightened quoting standards described
in the table above. Rather, an LMM is
eligible to receive the rebate if they
satisfy the heightened quoting standards
above. The Exchange now proposes to
amend the rebate available to LMM(s)
under the program. Specifically, the
Exchange proposes to eliminate the
current compensation pool structure
Width
10
7
5
3
2
1
$0.40
1.60
4.00
8.00
16.00
24.00
Size
Width
25
18
13
8
5
3
and reduce a straight rebate per product
per LMM. More specifically, the
Exchange proposes to provide that if a
GTH SPX/SPXW LMM meets the
proposed heightened quoting standard
described above, it will receive $10,000
per product. As is the case today, SPX/
SPXW GTH LMM(s) will still not be
obligated to satisfy the amended
heightened quoting standard. The
Exchange believes the program, as
Size
$0.60
2.40
6.00
12.00
24.00
36.00
15
11
8
5
3
1
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$1.00
4.00
10.00
20.00
40.00
60.00
Size
10
7
5
3
2
1
amended, will continue to encourage
SPX/SPXW GTH LMM(s) to provide
liquidity in SPX/SPXW during GTH.
Additionally, the Exchange notes that a
SPX/SPXW GTH LMM may need to
undertake expenses to be able to quote
at a significantly heightened standard in
SPX/SPXW, such as purchase more
logical connectivity based on its
increased capacity needs.
13 See Securities and Exchange Act Release No.
87303 (October 15, 2019), 84 FR 56276 (October 21,
2019) (SR–CBOE–2019–080).
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Federal Register / Vol. 85, No. 37 / Tuesday, February 25, 2020 / Notices
The Exchange also proposes to
eliminate (1) the example of how the
compensation pool works as it is no
longer necessary given the elimination
of the compensation pool structure, and
(2) obsolete language regarding how the
program was billed for October 2019.
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.14 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 15 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,16 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
increases to Customer SPX transaction
fees are reasonable as the proposed
increases are modest and modifies fees
that have not been otherwise amended
in well over 10 years.17 The Exchange
notes the proposed fees are also in line
with customer transaction fees assessed
in other index products.18 Similarly, the
Exchange believes the proposed fee
increase for Broker-Dealer, Joint BackOffice, Non-TPH Market-Maker and
Professional SPX/SPX orders is
reasonable as it too is a modest increase
to a fee that has not been modified in
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
16 15 U.S.C. 78f(b)(4).
17 See Securities Exchange Act Release No. 55193
(January 30, 2007) 72 FR 5476 (February 6, 2007)
(SR–CBOE–2006–111) and Securities Exchange Act
Release No. 57191 (January 24, 2008) 73 FR 5611
(January 30, 2008) (SR–CBOE–2007–150).
18 See e.g., Cboe Options Fees Schedule, Rate
Table—Underlying Symbol List A, customer
transaction fees.
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over ten years.19 The Exchange notes the
proposed fee is still in line with
transaction fees assessed in other index
products.20 The Exchange believes the
proposed standard transaction fee
increases are also equitable and not
unfairly discriminatory because the
changes apply to similarly situated
market participants uniformly.
The Exchange believes the proposed
amendment to the discounted MarketMaker fees in Tiers 4 and 5 of the SPX
Liquidity Provider Sliding Scale is
reasonable because Market-Makers are
still eligible to receive discounted fees
for satisfying the corresponding criteria
(albeit less of a discount). The Exchange
believes that notwithstanding the
proposed transaction fee increase under
Tiers 4 and 5, the SPX Liquidity
Provider Sliding Scale will continue to
provide incremental incentives for
Market-Makers to reach the highest tier
level and encourage trading of SPX
options, as it continues to provide
progressively lower rates if increased
volume thresholds in SPX (including
SPXW) options are attained during a
month. The Exchange also believes the
rebates, as amended, are still
commensurate with the difficultly level
of satisfying the respective tier’s criteria.
The Exchange believes the proposed fee
change is equitable and not unfairly
discriminatory as it applies uniformly to
all Market-Makers.
The Exchange believes amending the
Execution Surcharge for SPXW
Surcharge is reasonable as such fee is
still lower than the Execution Surcharge
for SPX transactions.21 Additionally, the
proposed increase helps to ensure that
there is reasonable cost equivalence
between the primary execution channels
for SPXW. More specifically, the SPXW
Surcharge was adopted to minimize the
cost differentials between manual and
electronic executions, which is in the
interest of the Exchange as it must both
maintain robust electronic systems as
well as provide for economic
opportunity for floor brokers to continue
to conduct business, as they serve an
important function in achieving price
discovery and customer executions.22
The Exchange believes the proposed
19 See Securities Exchange Act Release No. 55193
(January 30, 2007) 72 FR 5476 (February 6, 2007)
(SR–CBOE–2006–111).
20 See e.g., Cboe Options Fees Schedule, Rate
Table—Underlying Symbol List A, Broker-Dealer,
Joint Back-Office, Non-TPH Market-Maker and
Professional fees for RUT.
21 See Cboe Options Fees Schedule, Rate Table,
Underlying Symbol List A, which provides for a
$0.21 per contract Execution Surcharge for SPX
orders.
22 See Securities Exchange Act Release No. 71295
(January 14, 2014) 79 FR 3443 (January 21, 2014)
(SR–CBOE–2013–129).
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10763
change is also equitable and not unfairly
discriminatory as it applies uniformly to
all similarly situated market
participants.
Increasing the SPX Surcharge is
reasonable because the Exchange still
pays more for the SPX license than the
amount of the proposed SPX Surcharge
(meaning that the Exchange is, and will
still be, subsidizing the costs associated
with the SPX license). This increase is
equitable and not unfairly
discriminatory because the increased
amount will be assessed to all market
participants to whom the SPX Surcharge
applies.
The Exchange believes the proposed
increase to the standard Firm
transaction fee in Underlying Symbol
List A (excluding VIX) orders is
reasonable as the proposed increase is
modest and modifies a fee that has not
been amended in over 9 years.23 The
Exchange notes the proposed fees are
also in line with customer transaction
fees assessed in other index products.24
The Exchange also notes that Firms
continue to have an opportunity to earn
a discounted fee via the Clearing
Trading Permit Holder Proprietary
Products Sliding Scale. The Exchange
believes the proposed fee increase is
also equitable and not unfairly
discriminatory because the change
applies to Firms uniformly.
The Exchange next believes its
proposed change to reduce certain VIX
transaction fees is reasonable as
Customers will be paying lower fees for
such transactions. The Exchange notes
the proposed changes to VIX Customer
transaction fees are designed to
encourage the sending of additional VIX
orders, including complex orders. The
Exchange notes the proposed change is
also in line with other fee programs that
are designed to incentivize the sending
of complex orders to the Exchange. For
example, the Exchange provides higher
rebates under the Volume Incentive
Program for complex orders as
compared to simple orders.25 The
Exchange believes the proposed fee
changes are also equitable and not
unfairly discriminatory because they
apply to all Customers uniformly.
The Exchange believes adopting fee
codes for waived linkage transactions is
reasonable and equitable because the
Exchange believes such fee codes
provide further clarity in the Fees
23 See Securities Exchange Act Release No. 63701
(January 11, 2011) 76 FR 2934 (January 18, 2011)
(SR–CBOE–2010–116).
24 See, e.g., Cboe Options Fees Schedule, Rate
Table—Underlying Symbol List A, customer
transaction fees.
25 See Cboe Options Fees Schedule, Volume
Incentive Program.
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Schedule and the fee codes do not
amend the current linkage fees or fee
waiver. Rather, the Exchange is merely
adopting fee codes in light of the
transition from manual processing of the
current linkage waiver to automated
processing. Additionally, the Exchange
believes the proposed fee codes allow
TPHs to more easily validate the bills
they receive from the Exchange, thus
alleviating potential confusion.
The Exchange believes it is reasonable
to offer a rebate when a Clearing
Trading Permit Holder re-assigns a
position, as the Clearing Trading Permit
Holder may not have elected to take that
position in the first place (and may just
have been erroneously listed as a party
to the transaction). The Exchange
believes that this change is equitable
and not unfairly discriminatory for the
same reason; it is equitable to rebate fees
to a Clearing Trading Permit Holder that
was assessed fees for taking a position
from a transaction to which that
Clearing Trading Permit Holder was not
a party. Otherwise, the Exchange
believes it is equitable for a party that
made an error reporting a transaction to
be responsible for paying the fees
associated with making that error.
Further, the proposed changes will
apply equally to all market participants.
The Exchange also notes that the
proposed rebate is not novel. Indeed,
the Exchange’s Fees Schedule had
included the proposed rebate prior to
the migration to a new billing system on
October 7, 2019, but had eliminated the
rebate upon migration.26 After further
evaluation, the Exchange now wishes to
re-adopt the proposed rebate.
The Exchange believes the proposal to
allow TPHs to continue to utilize legacy
Network Access Ports through February
29, 2020 is reasonable as a few TPHs
have not yet been able to transition from
the Network Access Ports to the new
Physical Ports with respect to their
connection to PULSe. Any remaining
Network Access ports would be
configured to only allow routing of
orders to PULSe, The Exchange believes
updating the notes section for Network
Access Ports provides further clarity in
the rules as to the availability of such
ports. The Exchange believes its
proposal to eliminate obsolete language
in the notes section of the Network
Access Ports also alleviates potential
confusion.
The Exchange believes the amount of
the amended rebate for SPX/SPXW GTH
LMMs ($10,000 per product) is
reasonable because it continues to
26 See Securities and Exchange Act Release No.
87303 (October 15, 2019), 84 FR 56276 (October 21,
2019) (SR–CBOE–2019–080).
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provide a rebate (albeit a reduced
rebate) for meeting the heightened
quoting standard and takes into
consideration additional costs an LMM
may incur. Particularly, the Exchange
believes the proposed amount is such
that it will still incentivize an appointed
LMM to meet the GTH quoting
standards for SPX and SPXW, thereby
protecting investors and the public
interest. Additionally, if an LMM does
not satisfy the heightened quoting
standard, then it will simply not receive
the rebate. The Exchange believes it is
equitable and not unfairly
discriminatory to only offer the rebate to
SPX/SPXW LMMs because GTH LMMs
provide a crucial role in providing
quotes and the opportunity for market
participants to trade during GTH, which
can lead to increased volume, thereby
providing a robust market. The
Exchange also notes that the GTH LMM
may have added costs each month that
it needs to undertake in order to satisfy
that heightened quoting standard (e.g.,
having to purchase additional logical
connectivity).
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 as described
above apply to all similarly situated
TPHs in a uniform manner.
Additionally, while different fees and
rebates are assessed to different market
participants in some circumstances,
these different market participants have
different obligations and different
circumstances. For example, MarketMakers, including Lead Market-Makers
play a crucial role in providing active
and liquid markets in their appointed
products, thereby providing a robust
market which benefits all market
participants. Such Market-Makers also
have obligations and regulatory
requirements that other participants do
not have. There is also a history in the
options markets of providing
preferential treatment to customers, as
they often do not have as sophisticated
trading operations and systems as other
market participants, which often makes
other market participants prefer to trade
with customers. Further, the Exchange
fees and rebates, both current and those
proposed to be changed, are intended to
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
encourage market participants to bring
increased volume to the Exchange
(which benefits all market participants),
while still covering Exchange costs
(including those associated with the
upgrading and maintenance of Exchange
systems).
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, changes relating to the Exchange’s
proprietary products only affect trading
on Cboe Options, as such products are
exclusively listed 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 22% of
the market share of executed volume of
options trades.27 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.’’ 28 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
27 See Cboe Global Markets, U.S. Options Market
Volume Summary by Month (February 3, 2020)
available at https://markets.cboe.com/us/options/
market_share/.
28 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
E:\FR\FM\25FEN1.SGM
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Federal Register / Vol. 85, No. 37 / Tuesday, February 25, 2020 / Notices
dealers’. . . .’’.29 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
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 30 and paragraph (f) of Rule
19b–4 31 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.
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–2020–011 on the subject line.
jbell on DSKJLSW7X2PROD with NOTICES
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–2020–011. This file
number should be included on the
29 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).
30 15 U.S.C. 78s(b)(3)(A).
31 17 CFR 240.19b–4(f).
32 17 CFR 200.30–3(a)(12).
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20:34 Feb 24, 2020
Jkt 250001
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–2020–011 and
should be submitted on or before March
17, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–03646 Filed 2–24–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88236; File No. SR–BOX–
2020–04]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing of a
Proposed Rule Change To Amend the
Provisions of Its Limited Liability
Company Agreement and Bylaws To
Accommodate the Exchange’s
Regulation of Multiple Facilities
February 19, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
4, 2020, BOX Exchange LLC (‘‘BOX’’ or
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00119
Fmt 4703
Sfmt 4703
10765
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘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
The Exchange proposes to amend the
provisions of its limited liability
company agreement (the ‘‘LLC
Agreement’’) and bylaws (the ‘‘Bylaws’’)
to accommodate the Exchange’s
regulation of multiple facilities. The text
of the proposed rule change is available
from the principal office of the
Exchange, at the Commission’s Public
Reference Room and also on the
Exchange’s internet website at https://
boxoptions.com.
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
self-regulatory organization 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 self-regulatory organization 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 is a Delaware limited
liability company that therefore has an
LLC Agreement. The Exchange also has
Bylaws. The LLC Agreement and
Bylaws, collectively, are the Exchange’s
source of governance and operating
authority. Currently, the Exchange
regulates only one facility, BOX Options
Market LLC (‘‘BOX Options Market’’),
which is reflected in the existing LLC
Agreement and Bylaws. The Exchange
proposes certain discrete amendments
to the LLC Agreement and Bylaws that
would (i) provide sufficient flexibility in
the documents for them to contemplate
that there may be multiple Exchange
facilities under the Exchange’s
regulatory authority, (ii) simplify the
structure of the defined terms in the
LLC Agreement and Bylaws to make
E:\FR\FM\25FEN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 37 (Tuesday, February 25, 2020)]
[Notices]
[Pages 10760-10765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03646]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88243; File No. SR-CBOE-2020-011]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fees Schedule
February 19, 2020.
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 February 6, 2020, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The text of the proposed rule change is 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 to (1) amend
certain SPX fees, (2) amend the standard transaction fee for Clearing
Trading Permit Holder Proprietary orders in Underlying Symbol List A,
(3) amend certain VIX fees, (4) adopt fee codes for waived linkage
transactions, (5) re-adopt the Clearing Trading Permit Holder position
re-assignment rebate, (6) clarify that Network Access Ports will be
available for physical connections to PULSe through February 29, 2020,
and (7) reduce the rebate under the GTH SPX/SPXW LLM program.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
February 3, 2020 (SR-CBOE-2020-008). On February 4, 2020, the
Exchange withdrew that filing and submitted SR-CBOE-2020-009. On
February 6, 2020, the Exchange withdrew that filing and submitted
this filing.
---------------------------------------------------------------------------
SPX Fees
Standard Transaction Fees
The Exchange first proposes to adopt modest fee increases for SPX
and SPXW transactions. With respect to Customer orders (capacity ``C'')
in SPX and SPXW, the Exchange proposes to increase transaction fees by
$0.01 per contract. More specifically, the Exchange proposes to
increase Customer transaction fees for SPX/SPXW orders with a premium
of (1) $0.00-$0.10 and $0.11-$0.99 from $0.35 per contract to $0.36 per
contract and (2) $1.00 or more from $0.44 per contract to $0.45 per
contract. The Exchange next proposes to increase transaction fees for
Broker-Dealer (capacity ``B''), Joint Back-Office (capacity ``J''),
Non-Trading Permit Holder (``TPH'') Market-Maker (capacity ``N''), and
Professional (capacity ``U'') orders in SPX and SPXW from $0.40 per
contract to $0.42 \4\ per contract.
---------------------------------------------------------------------------
\4\ The Exchange proposes to adopt new fee code BT for Non-
Customer, Non-Market-Maker SPX and SPXW orders.
---------------------------------------------------------------------------
SPX Liquidity Provider Sliding Scale
The Exchange proposes to amend its sliding scale for Market-Maker
transaction fees in SPX and SPXW (``SPX Liquidity Provider Sliding
Scale''). Currently, Market-Makers' transaction fees in SPX and SPXW
are determined by their average monthly contracts in SPX and SPXW. The
SPX Liquidity Provider Sliding Scale currently provides for five tiers.
The Exchange proposes to increase the transaction fees under Tiers 4
and 5 of the SPX Liquidity Provider Sliding Scale by $0.01 per contract
(and thereby lessen the current discount). More specifically, the
Exchange proposes to increase the transaction rate under Tier 4 \5\
from $0.22 per contract to $0.23 per contract, and the transaction rate
under Tier 5 \6\ from $0.20 per contract to $0.21 per contract. The
Exchange believes that
[[Page 10761]]
notwithstanding the proposed transaction fee increase under Tiers 4 and
5, the SPX Liquidity Provider Sliding Scale will continue to provide
incremental incentives for Market-Makers to reach the highest tier
level and encourage trading of SPX options, as it continues to provide
progressively lower rates if increased volume thresholds in SPX
(including SPXW) options are attained during a month.
---------------------------------------------------------------------------
\5\ The volume threshold for Tier 4 is 9.00%-$15.00%.
\6\ The volume threshold for Tier 5 is above 15.00%.
---------------------------------------------------------------------------
SPXW Execution Surcharge
The Exchange proposes to amend the Execution Surcharge for SPXW
(``SPXW Surcharge''). Currently, the Exchange assesses a SPXW Surcharge
of $0.10 per contract for non-Market-Maker orders in SPXW that are
executed electronically (with some exceptions).\7\ The Exchange
proposes to increase the Execution Surcharge for SPXW to $0.13 per
contract. The Exchange notes the proposed SPXW Surcharge is still less
than the Execution Surcharge assessed for SPX transactions.\8\
---------------------------------------------------------------------------
\7\ See Cboe Options Fees Schedule, Footnote 21.
\8\ See Cboe Options Fees Schedule, Rate Table--Underlying
Symbol List A, Execution Surcharge, SPX only.
---------------------------------------------------------------------------
SPX Index License Surcharge
The Exchange proposes to increase the Index License Surcharge Fee
for SPX (including SPXW) (the ``SPX Surcharge'') from $0.16 per
contract to $0.17 per contract. The Exchange licenses from S&P Dow
Jones Indices (``SPDJI'') (the ``SPDJI License'') the right to offer an
index option product based on the S&P 500 index (that product being SPX
and other SPX-based index option products). In order to offset the
costs associated with the SPDJI License, the Exchange assesses the SPX
Surcharge. The Exchange therefore proposes to increase the SPX
Surcharge from $0.16 per contract to $0.17 per contract in order to
offset more of the costs associated with the SPX license.
Clearing Trading Permit Holder Proprietary Fees
The Exchange proposes to increase the standard transaction fee for
Clearing Trading Permit Holders and for Non-Clearing Trading Permit
Holder Affiliates (``Firms'') (capacities ``F'' and ``L'',
respectively) in Underlying Symbol List A \9\ (excluding VIX) by $0.01.
Specifically the Exchange proposes to increase the fee from $0.25 per
contract to $0.26 per contract.
---------------------------------------------------------------------------
\9\ Underlying Symbol List A currently includes OEX, XEO, RUT,
RLG, RLV, RUI, UKXM, SPX (includes SPXw) and VIX. See Cboe Options
Fees Schedule, Footnote 34.
\10\ The Exchange assesses $0.18 per contract for customer ETF
orders that are >=100 contracts, and customer orders in multi-listed
index products. See Cboe Options Fees Schedule, Rate Table--All
Products Excluding Underlying Symbol List A.
\11\ The Exchange does not assess a fee for customer ETF orders
that are <100 contracts or for customer orders in equity options.
See Cboe Options Fees Schedule, Rate Table--All Products Excluding
Underlying Symbol List A.
\12\ The Exchange assesses a $0.04 per contract fee for customer
XSP orders. See Cboe Options Fees Schedule, Rate Table--All Products
Excluding Underlying Symbol List A.
---------------------------------------------------------------------------
VIX Fees
The Exchange next proposes to amend standard Customer (capacity
``C'') transaction fees for VIX transactions. First the Exchange
proposes to decrease certain VIX transaction fees, adopt separate fees
for simple versus complex VIX transactions, and adopt a new fee for VIX
orders with a premium of $2.00 or more, along with the noted fee codes,
as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed
Current premium Proposed premium Current Proposed simple fees Fee code complex fees Fee code
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$0.10.............................. $0.00-$0.10................. $0.10 No change.................. CV $0.05 CZ
$0.11-$0.99.............................. $0.11-$0.99................. 0.25 No change.................. CW 0.17 DA
Greater than $1.00....................... $1.00-$1.99................. 0.45 $0.40...................... CX 0.30 DB
N/A...................................... $2.00 and above............. N/A $0.45...................... CY 0.45 DC
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Exchange proposes to reduce fees for Customer simple orders
with a premium between $1.00-$1.99 to incentivize the sending of more
orders within this premium range. Similarly, the Exchange proposes to
adopt reduced fees for Customer complex VIX orders in order to
encourage the sending of additional complex VIX orders. The Exchange
did not believe it was necessary to assess different fees for simple
and complex VIX orders with a premium of $2.00 or greater. The Exchange
notes that Customer VIX orders with a premium of $2.00 or greater
account for a very small percentage of overall VIX trading.
Linkage Waiver
The Exchange proposes to adopt fee codes for linkage transactions
for which away transaction fees are waived. More specifically, the
Exchange currently provides that it will not pass through or otherwise
charge customer orders (of any size) routed to other exchanges that
were originally transmitted to the Exchange from the trading floor
through an Exchange[hyphen]sponsored terminal (e.g. a PULSe
Workstation). Currently, this waiver is implemented manually. Beginning
February 3, 2020, this waiver will be automated and the Exchange
therefore proposes to adopt specific fee codes for such transactions.
Particularly, the Exchange proposes to adopt the following fee codes
for customer orders (of any size) routed to other exchanges that were
originally transmitted to the Exchange from the trading floor through
an Exchange-sponsored terminal:
------------------------------------------------------------------------
Fee Code Rate
------------------------------------------------------------------------
TD........................ Routed to AMEX, BOX, BX, \10\ $0.18
EDGX, MERC, MIAX, PHLX,
>=100 contracts, ETF.
TE........................ Routed to AMEX, BOX, BX, \11\ 0.00
EDGX, MERC, MIAX, PHLX,
<100 contracts ETF, Equity.
TF........................ Routed to ARCA, BZX, C2, 0.18
ISE, GMNI, EMLD, PERL,
NOMX, >=100 contracts ETF,
Penny.
TG........................ Routed to ARCA, BZX, C2, 0.18
ISE, GMNI, EMLD, PERL,
NOMX, >=100 contracts ETF,
Non-Penny.
TH........................ Routed to ARCA, BZX, C2, 0.00
ISE, GMNI, EMLD, PERL,
NOMX, <100 contracts ETF,
Equity, Penny.
TI........................ Routed to ARCA, BZX, C2, 0.00
ISE, GMNI, EMLD, PERL,
NOMX, <100 contracts ETF,
Equity, Non-Penny.
TS........................ Routed, Index............... 0.18
TX........................ Routed, XSP, originating on \12\ 0.04
Exchange-sponsored terminal.
------------------------------------------------------------------------
[[Page 10762]]
The Exchange notes the proposed fee codes do not represent a
substantive change, but are being adopted merely in light of the
Exchange's automation of a current waiver.
Clearing Trading Permit Holder Position Re-Assignment Rebate
The Exchange proposes to adopt a rebate for transaction fees
assessed to a Clearing Trading Permit Holder who, as a result of a
trade adjustment on any business day following the original trade, re-
assigns a position established by the initial trade to a different
Clearing Trading Permit Holder. In such a circumstance, the Exchange
will rebate, for the party for whom the position is being re-assigned,
that party's transaction fees from the original transaction as well as
the transaction in which the position is re-assigned. In all other
circumstances, including corrective transactions, in which a
transaction is adjusted on any day after the original trade date,
regular Exchange fees will be assessed. The Exchange notes that the
proposed rebate is not novel. Indeed, the Exchange's Fees Schedule had
included the proposed rebate prior to the migration to a new billing
system on October 7, 2019, but had eliminated the rebate upon
migration.\13\ After further evaluation, the Exchange now wishes to re-
adopt the proposed rebate. The Exchange lastly notes that because the
Exchange may not always be able to automatically identify these
situations, in order to receive a rebate, the Fees Schedule will also
provide that a written request in a form and manner prescribed by the
Exchange must be submitted within 3 business days of the original
transaction.
---------------------------------------------------------------------------
\13\ See Securities and Exchange Act Release No. 87303 (October
15, 2019), 84 FR 56276 (October 21, 2019) (SR-CBOE-2019-080).
---------------------------------------------------------------------------
Network Access Ports
By way of background, a physical port is utilized by a TPH or non-
TPH to connect to the Exchange at the data centers where the Exchange's
servers are located. Prior to migration of its trading platform to a
new system on October 7, 2019, the Exchange utilized Network Access
Ports for these physical connections to the Exchange. Upon migration,
the TPHs and non-TPHs had the option to alternatively elect to connect
to Cboe Options via new latency equalized Physical Ports. The Exchange
had noted in its Fees Schedule that through January 31, 2020, Cboe
Options market participants would continue to have the ability to
connect to Cboe Options' trading system via the current Network Access
Ports. The Exchange notes that all Network Access Ports have been
decommissioned as of January 31, 2020, with the exception of a couple
Network Access Ports used solely to connect to PULSe. The Exchange
notes that although the new latency equalized Physical Ports became
available on October 7, 2019, the new Physical Ports were not
originally able to be utilized to send orders to PULSe. Accordingly,
users who wished to route orders to PULSe via the Exchange's physical
ports had to maintain and use a legacy Network Access Fee Port and
could not use any of the new Physical Ports for such purpose. The
Exchange notes that although the new Physical Ports are now able to be
used to connect to PULSe, a couple of TPHs have not yet made the
transition from the Exchange's legacy Network Access Ports to the new
Physical Ports for purposes of connecting to PULSe. As such, the
Exchange proposes to amend the Fees Schedule to clarify that Network
Access Ports will be available through February 29, 2020 to connect to
PULSe. The fee waiver for Network Access Ports used solely to access
PULSe will continue to remain in place.
GTH SPX/SPXW LMM Incentive Program
Pursuant to the Fees Schedule, a LMM in SPX/SPXW will receive a
pro-rata share of a compensation pool for SPX equal to $15,000 times
the number of LMMs appointment in SPX and if the LMM meets the
heightened quoting standard described below for SPXW, the LMM will
receive an additional pro-rata share of a compensation pool for SPXW
equal to $15,000 times the number of LMMs in that class (for a total of
$30,000 per month for meeting the standard for both SPX and SPXW) if
the LMM(s) provide continuous electronic quotes that meet or exceed the
following heightened quoting standards in at least 99% of each of SPX
and SPXW series 90% of the time in a given month during GTH:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Premium Expiring Near term Mid term Long term
--------------------------------------------------------------------------------------------------------------------------------------------------------
7 days or less 8 days to 60 days 61 days to 270 days 271 days or greater
Level -----------------------------------------------------------------------------------------------
Width Size Width Size Width Size Width Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0-$5.00................................................ $0.50 10 $0.40 25 $0.60 15 $1.00 10
$5.01-$15.00............................................ 2.00 7 1.60 18 2.40 11 4.00 7
$15.01-$50.00........................................... 5.00 5 4.00 13 6.00 8 10.00 5
$50.01-$100.00.......................................... 10.00 3 8.00 8 12.00 5 20.00 3
$100.01-$200.00......................................... 20.00 2 16.00 5 24.00 3 40.00 2
Greater Than $200.00.................................... 30.00 1 24.00 3 36.00 1 60.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
A GTH LMM in SPX/SPXW is not currently obligated to satisfy the
heightened quoting standards described in the table above. Rather, an
LMM is eligible to receive the rebate if they satisfy the heightened
quoting standards above. The Exchange now proposes to amend the rebate
available to LMM(s) under the program. Specifically, the Exchange
proposes to eliminate the current compensation pool structure and
reduce a straight rebate per product per LMM. More specifically, the
Exchange proposes to provide that if a GTH SPX/SPXW LMM meets the
proposed heightened quoting standard described above, it will receive
$10,000 per product. As is the case today, SPX/SPXW GTH LMM(s) will
still not be obligated to satisfy the amended heightened quoting
standard. The Exchange believes the program, as amended, will continue
to encourage SPX/SPXW GTH LMM(s) to provide liquidity in SPX/SPXW
during GTH. Additionally, the Exchange notes that a SPX/SPXW GTH LMM
may need to undertake expenses to be able to quote at a significantly
heightened standard in SPX/SPXW, such as purchase more logical
connectivity based on its increased capacity needs.
[[Page 10763]]
The Exchange also proposes to eliminate (1) the example of how the
compensation pool works as it is no longer necessary given the
elimination of the compensation pool structure, and (2) obsolete
language regarding how the program was billed for October 2019.
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.\14\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \15\ 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,\16\ 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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed increases to Customer SPX
transaction fees are reasonable as the proposed increases are modest
and modifies fees that have not been otherwise amended in well over 10
years.\17\ The Exchange notes the proposed fees are also in line with
customer transaction fees assessed in other index products.\18\
Similarly, the Exchange believes the proposed fee increase for Broker-
Dealer, Joint Back-Office, Non-TPH Market-Maker and Professional SPX/
SPX orders is reasonable as it too is a modest increase to a fee that
has not been modified in over ten years.\19\ The Exchange notes the
proposed fee is still in line with transaction fees assessed in other
index products.\20\ The Exchange believes the proposed standard
transaction fee increases are also equitable and not unfairly
discriminatory because the changes apply to similarly situated market
participants uniformly.
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\17\ See Securities Exchange Act Release No. 55193 (January 30,
2007) 72 FR 5476 (February 6, 2007) (SR-CBOE-2006-111) and
Securities Exchange Act Release No. 57191 (January 24, 2008) 73 FR
5611 (January 30, 2008) (SR-CBOE-2007-150).
\18\ See e.g., Cboe Options Fees Schedule, Rate Table--
Underlying Symbol List A, customer transaction fees.
\19\ See Securities Exchange Act Release No. 55193 (January 30,
2007) 72 FR 5476 (February 6, 2007) (SR-CBOE-2006-111).
\20\ See e.g., Cboe Options Fees Schedule, Rate Table--
Underlying Symbol List A, Broker-Dealer, Joint Back-Office, Non-TPH
Market-Maker and Professional fees for RUT.
---------------------------------------------------------------------------
The Exchange believes the proposed amendment to the discounted
Market-Maker fees in Tiers 4 and 5 of the SPX Liquidity Provider
Sliding Scale is reasonable because Market-Makers are still eligible to
receive discounted fees for satisfying the corresponding criteria
(albeit less of a discount). The Exchange believes that notwithstanding
the proposed transaction fee increase under Tiers 4 and 5, the SPX
Liquidity Provider Sliding Scale will continue to provide incremental
incentives for Market-Makers to reach the highest tier level and
encourage trading of SPX options, as it continues to provide
progressively lower rates if increased volume thresholds in SPX
(including SPXW) options are attained during a month. The Exchange also
believes the rebates, as amended, are still commensurate with the
difficultly level of satisfying the respective tier's criteria. The
Exchange believes the proposed fee change is equitable and not unfairly
discriminatory as it applies uniformly to all Market-Makers.
The Exchange believes amending the Execution Surcharge for SPXW
Surcharge is reasonable as such fee is still lower than the Execution
Surcharge for SPX transactions.\21\ Additionally, the proposed increase
helps to ensure that there is reasonable cost equivalence between the
primary execution channels for SPXW. More specifically, the SPXW
Surcharge was adopted to minimize the cost differentials between manual
and electronic executions, which is in the interest of the Exchange as
it must both maintain robust electronic systems as well as provide for
economic opportunity for floor brokers to continue to conduct business,
as they serve an important function in achieving price discovery and
customer executions.\22\ The Exchange believes the proposed change is
also equitable and not unfairly discriminatory as it applies uniformly
to all similarly situated market participants.
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\21\ See Cboe Options Fees Schedule, Rate Table, Underlying
Symbol List A, which provides for a $0.21 per contract Execution
Surcharge for SPX orders.
\22\ See Securities Exchange Act Release No. 71295 (January 14,
2014) 79 FR 3443 (January 21, 2014) (SR-CBOE-2013-129).
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Increasing the SPX Surcharge is reasonable because the Exchange
still pays more for the SPX license than the amount of the proposed SPX
Surcharge (meaning that the Exchange is, and will still be, subsidizing
the costs associated with the SPX license). This increase is equitable
and not unfairly discriminatory because the increased amount will be
assessed to all market participants to whom the SPX Surcharge applies.
The Exchange believes the proposed increase to the standard Firm
transaction fee in Underlying Symbol List A (excluding VIX) orders is
reasonable as the proposed increase is modest and modifies a fee that
has not been amended in over 9 years.\23\ The Exchange notes the
proposed fees are also in line with customer transaction fees assessed
in other index products.\24\ The Exchange also notes that Firms
continue to have an opportunity to earn a discounted fee via the
Clearing Trading Permit Holder Proprietary Products Sliding Scale. The
Exchange believes the proposed fee increase is also equitable and not
unfairly discriminatory because the change applies to Firms uniformly.
---------------------------------------------------------------------------
\23\ See Securities Exchange Act Release No. 63701 (January 11,
2011) 76 FR 2934 (January 18, 2011) (SR-CBOE-2010-116).
\24\ See, e.g., Cboe Options Fees Schedule, Rate Table--
Underlying Symbol List A, customer transaction fees.
---------------------------------------------------------------------------
The Exchange next believes its proposed change to reduce certain
VIX transaction fees is reasonable as Customers will be paying lower
fees for such transactions. The Exchange notes the proposed changes to
VIX Customer transaction fees are designed to encourage the sending of
additional VIX orders, including complex orders. The Exchange notes the
proposed change is also in line with other fee programs that are
designed to incentivize the sending of complex orders to the Exchange.
For example, the Exchange provides higher rebates under the Volume
Incentive Program for complex orders as compared to simple orders.\25\
The Exchange believes the proposed fee changes are also equitable and
not unfairly discriminatory because they apply to all Customers
uniformly.
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\25\ See Cboe Options Fees Schedule, Volume Incentive Program.
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The Exchange believes adopting fee codes for waived linkage
transactions is reasonable and equitable because the Exchange believes
such fee codes provide further clarity in the Fees
[[Page 10764]]
Schedule and the fee codes do not amend the current linkage fees or fee
waiver. Rather, the Exchange is merely adopting fee codes in light of
the transition from manual processing of the current linkage waiver to
automated processing. Additionally, the Exchange believes the proposed
fee codes allow TPHs to more easily validate the bills they receive
from the Exchange, thus alleviating potential confusion.
The Exchange believes it is reasonable to offer a rebate when a
Clearing Trading Permit Holder re-assigns a position, as the Clearing
Trading Permit Holder may not have elected to take that position in the
first place (and may just have been erroneously listed as a party to
the transaction). The Exchange believes that this change is equitable
and not unfairly discriminatory for the same reason; it is equitable to
rebate fees to a Clearing Trading Permit Holder that was assessed fees
for taking a position from a transaction to which that Clearing Trading
Permit Holder was not a party. Otherwise, the Exchange believes it is
equitable for a party that made an error reporting a transaction to be
responsible for paying the fees associated with making that error.
Further, the proposed changes will apply equally to all market
participants. The Exchange also notes that the proposed rebate is not
novel. Indeed, the Exchange's Fees Schedule had included the proposed
rebate prior to the migration to a new billing system on October 7,
2019, but had eliminated the rebate upon migration.\26\ After further
evaluation, the Exchange now wishes to re-adopt the proposed rebate.
---------------------------------------------------------------------------
\26\ See Securities and Exchange Act Release No. 87303 (October
15, 2019), 84 FR 56276 (October 21, 2019) (SR-CBOE-2019-080).
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The Exchange believes the proposal to allow TPHs to continue to
utilize legacy Network Access Ports through February 29, 2020 is
reasonable as a few TPHs have not yet been able to transition from the
Network Access Ports to the new Physical Ports with respect to their
connection to PULSe. Any remaining Network Access ports would be
configured to only allow routing of orders to PULSe, The Exchange
believes updating the notes section for Network Access Ports provides
further clarity in the rules as to the availability of such ports. The
Exchange believes its proposal to eliminate obsolete language in the
notes section of the Network Access Ports also alleviates potential
confusion.
The Exchange believes the amount of the amended rebate for SPX/SPXW
GTH LMMs ($10,000 per product) is reasonable because it continues to
provide a rebate (albeit a reduced rebate) for meeting the heightened
quoting standard and takes into consideration additional costs an LMM
may incur. Particularly, the Exchange believes the proposed amount is
such that it will still incentivize an appointed LMM to meet the GTH
quoting standards for SPX and SPXW, thereby protecting investors and
the public interest. Additionally, if an LMM does not satisfy the
heightened quoting standard, then it will simply not receive the
rebate. The Exchange believes it is equitable and not unfairly
discriminatory to only offer the rebate to SPX/SPXW LMMs because GTH
LMMs provide a crucial role in providing quotes and the opportunity for
market participants to trade during GTH, which can lead to increased
volume, thereby providing a robust market. The Exchange also notes that
the GTH LMM may have added costs each month that it needs to undertake
in order to satisfy that heightened quoting standard (e.g., having to
purchase additional logical connectivity).
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 as described above apply to all similarly situated TPHs in a
uniform manner. Additionally, while different fees and rebates are
assessed to different market participants in some circumstances, these
different market participants have different obligations and different
circumstances. For example, Market-Makers, including Lead Market-Makers
play a crucial role in providing active and liquid markets in their
appointed products, thereby providing a robust market which benefits
all market participants. Such Market-Makers also have obligations and
regulatory requirements that other participants do not have. There is
also a history in the options markets of providing preferential
treatment to customers, as they often do not have as sophisticated
trading operations and systems as other market participants, which
often makes other market participants prefer to trade with customers.
Further, the Exchange fees and rebates, both current and those proposed
to be changed, are intended to encourage market participants to bring
increased volume to the Exchange (which benefits all market
participants), while still covering Exchange costs (including those
associated with the upgrading and maintenance of Exchange systems).
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, changes
relating to the Exchange's proprietary products only affect trading on
Cboe Options, as such products are exclusively listed 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 22% of
the market share of executed volume of options trades.\27\ 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.'' \28\ 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
[[Page 10765]]
dealers'. . . .''.\29\ 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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\27\ See Cboe Global Markets, U.S. Options Market Volume Summary
by Month (February 3, 2020) available at https://markets.cboe.com/us/options/market_share/.
\28\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\29\ 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 \30\ and paragraph (f) of Rule 19b-4 \31\
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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\30\ 15 U.S.C. 78s(b)(3)(A).
\31\ 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-2020-011 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-2020-011. 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-2020-011 and should be submitted on
or before March 17, 2020.
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\32\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03646 Filed 2-24-20; 8:45 am]
BILLING CODE 8011-01-P
