Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule To Adopt New Fee Codes Related to the Execution of Equity Legs of a Stock-Option Order, 67804-67806 [2020-23571]
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67804
Federal Register / Vol. 85, No. 207 / Monday, October 26, 2020 / Notices
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–CboeBYX–2020–030 and
should be submitted on or before
November 16, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23572 Filed 10–23–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90229; File No. SR–CBOE–
2020–095]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule To Adopt New Fee Codes
Related to the Execution of Equity
Legs of a Stock-Option Order
October 20, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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17:31 Oct 23, 2020
Jkt 253001
notice is hereby given that on October
7, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe’’) is filing with the Securities
and Exchange Commission
(‘‘Commission’’) a proposal to amend its
Fees Schedule to adopt new fee codes
related to the execution of equity legs of
a stock-option order. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.aspx), at the Exchange’s Office of
the Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
fee schedule to adopt a new fee codes
for equity legs of a stock-option orders
managed by additional designated
broker-dealers, effective October 7,
2020.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
specifically, the Exchange is only one of
16 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than 16% of the market share.3 Thus, in
such a low-concentrated and highly
competitive market, no single options
exchange possesses significant pricing
power in the execution of option order
flow. The Exchange believes that the
ever-shifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow or discontinue to
reduce use of certain categories of
products in response to fee changes.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees, and market participants can readily
trade on competing venues if they deem
pricing levels at those other venues to
be more favorable. In response to
competitive pricing, the Exchange, like
other options exchanges, offers rebates
and assesses fees for certain order types
executed on or routed through the
Exchange.
Stock-option orders are complex
instruments that constitute the purchase
or sale of a stated number of units of an
underlying stock or a security
convertible into the underlying stock
coupled with the purchase or sale of an
option contract(s) on the opposite side
of the market and execute in the same
manner as complex orders. Through this
functionality, the stock portions of
stock-option strategy orders are
electronically communicated by the
Exchange to a designated broker-dealer
(currently, Penserrra and Cowen are the
only broker-dealers that may be
designated for this service), who then
manages the execution of such stock
portions. Currently, the Exchange
assesses a stock handling fee of $0.0010
per share for the processing and routing
by the Exchange of the stock portion of
stock-option strategy orders
communicated to Cowen (i.e., yielding
fee code EQ).4 The stock handling fee
covers the fees charges by the outside
venue that prints the trade, as well as
assists in covering the Exchange’s costs
in matching these stock-option orders
against other stock option orders on the
complex book. Additionally, the
Exchange also largely passes through to
3 See Cboe Global Markets U.S. Options Market
Volume Monthly Summary (October 2, 2020),
available at https://markets.cboe.com/us/options/
market_statistics/.
4 See Securities Exchange Act Release No. 67383
(July 10, 2012), 77 FR 41841 (July 16, 2012) (SR–
CBOE–2012–063) (stating the stock portions of
stock-option strategy orders will be electronically
communicated by the Exchange to a designated
broker-dealer, who will then manage the execution
of such stock portions).
E:\FR\FM\26OCN1.SGM
26OCN1
Federal Register / Vol. 85, No. 207 / Monday, October 26, 2020 / Notices
Trading Permit Holders (‘‘TPHs’’) the
fees assessed to the Exchange by the
designated broker, Cowen, that may
manage the execution of these stock
portions of stock-option strategy orders.
The fee schedule also provides for a cap
of $50 per execution for orders yielding
fee code EQ, which aligns with how
Cowen applies a cap to the execution
management of the stock portion of
stock-option strategy orders. In addition
to this, the Exchange also currently
assesses $0.00 for equity leg orders
whose executions are managed by
Penserra (i.e., yielding fee code EP).
Unlike Cowen, Penserra does not assess
the Exchange fees for managing the
stock portion of a stock-option order,
but assesses and bills its customers
directly.5 Therefore, the Exchange
assess no stock handling fee for such
orders managed by Penserra as it does
to (in part) recoup the fees assessed to
the Exchange by Cowen.
The Exchange proposes to amend its
fee schedule to reflect the option of
three additional designated brokerdealers, Libucki, FOG and SRT, to
manage the execution of the stock
portion of a stock-option strategy order.
Specifically, the Exchange proposes to
adopt: Fee code EL, applicable to equity
leg orders whose executions are
managed by Libucki; fee code EF,
applicable to equity leg orders whose
executions are managed by FOG; and fee
code ES, applicable to equity leg orders
whose executions are managed by SRT.
Like Penserra, the three additional
designated broker-dealers will not
assess the Exchange fees for managing
the stock-portion of a stock-option
order, but rather will assess and bill
their customers directly, and therefore,
the Exchange does not wish to assess a
stock handling fee on stock-option
orders yielding fee codes EL, EF and ES.
The proposed rule change reflects in the
Stock Portion of Stock-Option Strategy
Orders table of the Fees Schedule that,
along with stock-option strategy orders
managed by Penserra, such orders
managed by Libucki, FOG and SRT will
not be subject to a fee.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6 of the Act,6 in general, and
furthers the requirements of Section
6(b)(4),7 in particular, as it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
5 The Exchange notes it is possible Cowen
directly charges fees to customers in addition to the
stock handling fee the Exchange charges.
6 15 U.S.C. 78f.
7 15 U.S.C. 78f(b)(4).
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17:31 Oct 23, 2020
Jkt 253001
among its facilities and does not
unfairly discriminate between
customers, issuers, brokers or dealers.
The Exchange also believes that the
proposed rule change is consistent with
the objectives of Section 6(b)(5)
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,
particularly, is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes that its
proposed change to adopt fee codes EL,
EF and ES, which will assess no fee for
stock portions of stock-option strategy
order executions managed by Libucki,
FOG and SRT, respectively, is
consistent with Section 6(b)(4) of the
Act in that the proposal is reasonable,
equitable and not unfairly
discriminatory. Specifically, the
Exchange believes the proposal is
reasonable as market participants will
not be subject to a fee for the execution
of the stock-portion of a stock-option
order handled by these designated
broker-dealers. The Exchange believes
it’s appropriate to not assess a fee for
orders managed by these three brokerdealers as they will directly charge
customers for the stock portion of stockoption strategy orders and not charge
the Exchange (which would, if charged,
pass those fees through to customers).
Assessing no charge for orders yielding
the proposed fee codes is also
reasonable, equitable and not unfairly
discriminatory because the Exchange
currently assesses no charge for stockoption orders managed by another
designated broker-dealer, Penserra, for
the same reason Penserra also directly
charges customers instead of the
Exchange for handling of the equity
portion of a stock-option order. Further,
the Exchange believes the proposal is
equitable and not unfairly
discriminatory because the proposed
change applies to all TPHs and all TPHs
that execute stock-option orders in the
complex book will have the option to
utilize Libucki, FOG and SRT to manage
the execution of the stock portion of
their stock-option strategy orders.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
67805
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. 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 competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed change will apply
uniformly to the stock portions of all
market participants’ stock-option
strategy orders that are handled by
Libucki, FOG and SRT, respectively.
The proposed rule change provides
TPHs with additional options regarding
the Exchange’s handling of their stockoption orders.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market.
TPHs have numerous alternative venues
that they may participate on and direct
their order flow, including 15 other
options exchanges. Based on publicly
available information, no single options
exchange has more than 16% of the
market share.8 Therefore, no exchange
possesses significant pricing power in
the execution of option order flow. In
such an environment, the Exchange
must continually adjust its fees to
remain competitive with other
exchanges and to attract order flow to
the Exchange. Indeed, participants can
readily choose to send their orders to
other exchange, and, additionally 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
8 See
E:\FR\FM\26OCN1.SGM
supra note 3.
26OCN1
67806
Federal Register / Vol. 85, No. 207 / Monday, October 26, 2020 / Notices
investors and listed companies.’’ 9 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’. . ..’’ 10 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
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 11 and paragraph (f) of Rule
19b–4 12 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.
9 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
10 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)).
11 15 U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f).
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17:31 Oct 23, 2020
Jkt 253001
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
Sunshine Act Meetings
• 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–2020–095 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–2020–095. 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–2020–095 and
should be submitted on or before
November 16, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23571 Filed 10–23–20; 8:45 am]
PO 00000
CFR 200.30–3(a)(12).
Frm 00102
Fmt 4703
Dated: October 21, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–23706 Filed 10–22–20; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90228; File No. SR–
CboeEDGX–2020–048]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fees Schedule To Adopt New Fee
Codes Related to the Execution of
Equity Legs of a Stock-Option Order
October 20, 2020.
BILLING CODE 8011–01–P
13 17
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday, October
28, 2020, at 10:00 a.m.
PLACE: The meeting will be webcast on
the Commission’s website at
www.sec.gov.
STATUS: This meeting will begin at 10:00
a.m. (ET) and will be open to the public
via audio webcast only on the
Commission’s website at www.sec.gov.
MATTERS TO BE CONSIDERED: The
Commission will consider whether to
adopt rules and related amendments
designed to provide an updated and
more comprehensive approach to the
regulation of funds’ use of derivatives
and other transactions while enhancing
investor protections. The amendments
the Commission will consider also
would include new reporting
requirements to enhance the
Commission’s ability to effectively
oversee funds’ use of derivatives. The
Commission also will consider whether
to rescind existing guidance and
exemptive relief addressing derivatives
and other transactions that would be
covered by this new regulatory
framework.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact
Vanessa A. Countryman, Office of the
Secretary, at (202) 551–5400.
TIME AND DATE:
Sfmt 4703
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
E:\FR\FM\26OCN1.SGM
26OCN1
]]>Agencies
[Federal Register Volume 85, Number 207 (Monday, October 26, 2020)]
[Notices]
[Pages 67804-67806]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23571]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90229; File No. SR-CBOE-2020-095]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule To Adopt New Fee Codes Related to the Execution of
Equity Legs of a Stock-Option Order
October 20, 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 October 7, 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
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe'') is filing with
the Securities and Exchange Commission (``Commission'') a proposal to
amend its Fees Schedule to adopt new fee codes related to the execution
of equity legs of a stock-option order. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its fee schedule to adopt a new fee
codes for equity legs of a stock-option orders managed by additional
designated broker-dealers, effective October 7, 2020.
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 16% of the market share.\3\
Thus, in such a low-concentrated and highly competitive market, no
single options exchange possesses significant pricing power in the
execution of option order flow. The Exchange believes that the ever-
shifting market share among the exchanges from month to month
demonstrates that market participants can shift order flow or
discontinue to reduce use of certain categories of products in response
to fee changes. Accordingly, competitive forces constrain the
Exchange's transaction fees, and market participants can readily trade
on competing venues if they deem pricing levels at those other venues
to be more favorable. In response to competitive pricing, the Exchange,
like other options exchanges, offers rebates and assesses fees for
certain order types executed on or routed through the Exchange.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets U.S. Options Market Volume Monthly
Summary (October 2, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
Stock-option orders are complex instruments that constitute the
purchase or sale of a stated number of units of an underlying stock or
a security convertible into the underlying stock coupled with the
purchase or sale of an option contract(s) on the opposite side of the
market and execute in the same manner as complex orders. Through this
functionality, the stock portions of stock-option strategy orders are
electronically communicated by the Exchange to a designated broker-
dealer (currently, Penserrra and Cowen are the only broker-dealers that
may be designated for this service), who then manages the execution of
such stock portions. Currently, the Exchange assesses a stock handling
fee of $0.0010 per share for the processing and routing by the Exchange
of the stock portion of stock-option strategy orders communicated to
Cowen (i.e., yielding fee code EQ).\4\ The stock handling fee covers
the fees charges by the outside venue that prints the trade, as well as
assists in covering the Exchange's costs in matching these stock-option
orders against other stock option orders on the complex book.
Additionally, the Exchange also largely passes through to
[[Page 67805]]
Trading Permit Holders (``TPHs'') the fees assessed to the Exchange by
the designated broker, Cowen, that may manage the execution of these
stock portions of stock-option strategy orders. The fee schedule also
provides for a cap of $50 per execution for orders yielding fee code
EQ, which aligns with how Cowen applies a cap to the execution
management of the stock portion of stock-option strategy orders. In
addition to this, the Exchange also currently assesses $0.00 for equity
leg orders whose executions are managed by Penserra (i.e., yielding fee
code EP). Unlike Cowen, Penserra does not assess the Exchange fees for
managing the stock portion of a stock-option order, but assesses and
bills its customers directly.\5\ Therefore, the Exchange assess no
stock handling fee for such orders managed by Penserra as it does to
(in part) recoup the fees assessed to the Exchange by Cowen.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 67383 (July 10,
2012), 77 FR 41841 (July 16, 2012) (SR-CBOE-2012-063) (stating the
stock portions of stock-option strategy orders will be
electronically communicated by the Exchange to a designated broker-
dealer, who will then manage the execution of such stock portions).
\5\ The Exchange notes it is possible Cowen directly charges
fees to customers in addition to the stock handling fee the Exchange
charges.
---------------------------------------------------------------------------
The Exchange proposes to amend its fee schedule to reflect the
option of three additional designated broker-dealers, Libucki, FOG and
SRT, to manage the execution of the stock portion of a stock-option
strategy order. Specifically, the Exchange proposes to adopt: Fee code
EL, applicable to equity leg orders whose executions are managed by
Libucki; fee code EF, applicable to equity leg orders whose executions
are managed by FOG; and fee code ES, applicable to equity leg orders
whose executions are managed by SRT. Like Penserra, the three
additional designated broker-dealers will not assess the Exchange fees
for managing the stock-portion of a stock-option order, but rather will
assess and bill their customers directly, and therefore, the Exchange
does not wish to assess a stock handling fee on stock-option orders
yielding fee codes EL, EF and ES. The proposed rule change reflects in
the Stock Portion of Stock-Option Strategy Orders table of the Fees
Schedule that, along with stock-option strategy orders managed by
Penserra, such orders managed by Libucki, FOG and SRT will not be
subject to a fee.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act,\6\ in general, and furthers the requirements
of Section 6(b)(4),\7\ in particular, as it is designed to provide for
the equitable allocation of reasonable dues, fees and other charges
among its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers. The Exchange also believes that
the proposed rule change is consistent with the objectives of Section
6(b)(5) 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, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposed change to adopt fee codes
EL, EF and ES, which will assess no fee for stock portions of stock-
option strategy order executions managed by Libucki, FOG and SRT,
respectively, is consistent with Section 6(b)(4) of the Act in that the
proposal is reasonable, equitable and not unfairly discriminatory.
Specifically, the Exchange believes the proposal is reasonable as
market participants will not be subject to a fee for the execution of
the stock-portion of a stock-option order handled by these designated
broker-dealers. The Exchange believes it's appropriate to not assess a
fee for orders managed by these three broker-dealers as they will
directly charge customers for the stock portion of stock-option
strategy orders and not charge the Exchange (which would, if charged,
pass those fees through to customers). Assessing no charge for orders
yielding the proposed fee codes is also reasonable, equitable and not
unfairly discriminatory because the Exchange currently assesses no
charge for stock-option orders managed by another designated broker-
dealer, Penserra, for the same reason Penserra also directly charges
customers instead of the Exchange for handling of the equity portion of
a stock-option order. Further, the Exchange believes the proposal is
equitable and not unfairly discriminatory because the proposed change
applies to all TPHs and all TPHs that execute stock-option orders in
the complex book will have the option to utilize Libucki, FOG and SRT
to manage the execution of the stock portion of their stock-option
strategy orders.
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. 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 competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because the proposed change will apply uniformly to the stock
portions of all market participants' stock-option strategy orders that
are handled by Libucki, FOG and SRT, respectively. The proposed rule
change provides TPHs with additional options regarding the Exchange's
handling of their stock-option orders.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market. TPHs
have numerous alternative venues that they may participate on and
direct their order flow, including 15 other options exchanges. Based on
publicly available information, no single options exchange has more
than 16% of the market share.\8\ Therefore, no exchange possesses
significant pricing power in the execution of option order flow. In
such an environment, the Exchange must continually adjust its fees to
remain competitive with other exchanges and to attract order flow to
the Exchange. Indeed, participants can readily choose to send their
orders to other exchange, and, additionally 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
[[Page 67806]]
investors and listed companies.'' \9\ 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'. . ..'' \10\ Accordingly, the Exchange
does not believe its proposed fee change imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\8\ See supra note 3.
\9\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\10\ 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 \11\ and paragraph (f) of Rule 19b-4 \12\
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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2020-095 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-2020-095. 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-2020-095 and should be submitted on
or before November 16, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23571 Filed 10-23-20; 8:45 am]
BILLING CODE 8011-01-P
