Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add Certain Fees Related to the Listing and Trading of Options Contracts on the Mini-SPX Index (“XSP”) and Update Certain Other Language in the Fee Schedule, 73109-73113 [2020-25181]

Download as PDF jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices and prospective members for application to their own portfolios. Specifically, the proposed rule text would reflect the two sets of changes in the proposal. First, the proposed rule text would define the types of securities that would constitute ‘‘Illiquid Securities’’ as three particular categories of securities, as described in Section II.C(i), (ii), and (iii). By reviewing the definitions of an Illiquid Security, NSCC’s members should be able to understand the types of factors that would cause a security to be considered an Illiquid Security, all of which are ascertainable, such as its trading history (including whether it is traded on an exchange or not and, if so, on which exchange), its market capitalization, and the type of security (i.e., whether it is an ADR). The specific parameters of the illiquidity ratio test would also be reflected in NSCC’s Rules, thereby enabling a Member to determine whether a security that is an ADR or has a micro-capitalization of less than $300 million would be an Illiquid Security. Second, the proposed rule text would provide that NSCC would apply a haircut to Illiquid Securities to determine the appropriate volatility component, with Illiquid Securities grouped by price level to determine the appropriate haircut to apply to a particular security. The proposed rule text would further specify that the haircut percentage would be the highest of the three percentages as provided in Section II.D(i), and would be determined at least annually. Additionally, if a Member had questions with respect to a particular security, it could use the various client-facing tools described above to determine whether a security would be considered an Illiquid Security. Taken together, the Division believes that the proposal, which would be reflected in NSCC’s Rules, in conjunction with the various clientfacing tools, provides sufficient information to Members to understand the operation of the haircut-based volatility charges and how such charges would apply to particular transactions. The Commission further believes that NSCC provided sufficient information to Members to identify and evaluate the risks and other material costs they would incur due to securities with illiquid characteristics under the proposal. For these reasons, the Commission disagrees with the comments stating that the proposal lacks details and does not explain how the haircut-based volatility charge will be calculated, and that the proposal does not allow Members to predict the impact on their activities. The Commission VerDate Sep<11>2014 20:13 Nov 13, 2020 Jkt 253001 acknowledges that, as some commenters have noted, the proposal does not provide or specify the actual models or calculations that NSCC would use to determine the appropriate haircut or what constitutes an Illiquid Security. However, when adopting the CCA Standards, the Commission declined to adopt a commenter’s view that a covered clearing agency should be required to provide, at least quarterly, its methodology for determining initial margin requirements at a level of detail adequate to enable participants to replicate the covered clearing agency’s calculations, or, in the alternative, that the covered clearing agency should be required to provide a computational method with the ability to determine the initial margin associated with changes to each respective participant’s portfolio or hypothetical portfolio, participant defaults and other relevant information. The Commission stated that ‘‘[m]andating disclosure of this frequency and granularity would be inconsistent with the principles-based approach the Commission is taking in Rule 17Ad–22(e).’’ 118 Consistent with that approach, the Commission does not believe that Rule 17Ad–22(e)(23)(ii) would require NSCC to disclose its actual margin methodology, so long as NSCC has provided sufficient information for its Members to understand the potential costs and risks associated with participating in NSCC for clearing Illiquid Securities. For the reasons discussed above, the Commission believes that the proposals in the Advance Notice would enable NSCC to establish, implement, maintain, and enforce written policies and procedures reasonably designed to provide sufficient information to enable Members to identify and evaluate the risks, fees, and other material costs they incur as NSCC’s Members, consistent with Rule 17Ad–22(e)(23)(ii).119 IV. Conclusion It is therefore noticed, pursuant to Section 806(e)(1)(I) of the Clearing Supervision Act, that the Commission DOES NOT OBJECT to Advance Notice (SR–NSCC–2020–802) and that NSCC is AUTHORIZED to implement the proposal as of the date of this notice or the date of an order by the Commission approving proposed rule change SR– NSCC–2020–003, whichever is later. 118 See Standards for Covered Clearing Agencies, supra note 54, 81 FR at 70845. 119 17 CFR 240.17Ad–22(e)(23)(ii). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 73109 By the Commission. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–25202 Filed 11–13–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90381;File No. SR– CboeBZX–2020–080] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add Certain Fees Related to the Listing and Trading of Options Contracts on the Mini-SPX Index (‘‘XSP’’) and Update Certain Other Language in the Fee Schedule November 9, 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 November 2, 2020, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) 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 BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) proposes to add certain fees related to the listing and trading of options contracts on the MiniSPX Index (‘‘XSP’’) and update certain other language in the fee schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/bzx/), 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 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\16NON1.SGM 16NON1 73110 Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices 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 On November 2, 2020, the Exchange’s equity options platform (‘‘BZX Options’’) plans to begin listing XSP options for trading.3 Accordingly, the Exchange proposes to amend its Fee Schedule for BZX Options, effective November 2, 2020, to: (1) Adopt fee codes for XSP options that add or remove liquidity on the Exchange or are routed away from the Exchange; and (2) update applicable fee codes for certain volume tiers to include fee codes for XSP options. Additionally, the Exchange proposes to update the fees schedule to reflect the recent adoption of the Penny Program on a permanent basis. jbell on DSKJLSW7X2PROD with NOTICES Adoption of Fee Codes for Orders in XSP The Exchange first proposes to adopt fee codes for various orders in XSP options in the Fees and Associated Fees table in the Fee Schedule, as follows: • Proposed fee code XA is appended to all Professional orders in XSP that add liquidity and are provided a rebate of $0.25 per contract; • Proposed fee code XC is appended to all Customer orders in XSP that remove liquidity and are assessed a fee of $0.50 per contract; • Proposed fee code XF is appended to all Firm, Broker Dealer and Joint Back Office (‘‘JBO’’) orders in XSP that add liquidity and are provided a rebate of $0.25 per contract; • Proposed fee code XM is appended to all Market Maker orders in XSP that add liquidity and are provided a rebate of $0.29 per contract; • Proposed fee code XN is appended to all Away Market Maker orders in XSP that add liquidity and are provided a rebate of $0.26 per contract; • Proposed fee code XO is appended to all Customer orders in XSP that are routed away from the Exchange and executed at another exchange and are assessed a fee of $0.29 per contract. The Exchange notes that XSP is a proprietary product which is traded exclusively on the Exchange and the Exchange’s 3 See Rule 29.11(a). VerDate Sep<11>2014 20:13 Nov 13, 2020 Jkt 253001 affiliated options exchange, Cboe Exchange, Inc. (‘‘Cboe Options’’),4 therefore, orders in XSP are routed to execute on Cboe Options; • Proposed fee code XP is appended to all Non-Customer orders in XSP that remove liquidity and are assessed a fee of $0.50 per contract; • Proposed fee code XR is appended to all Non-Customer orders in XSP that are routed away from the Exchange and executed at another exchange and are assessed a fee of $0.90 per contract; and • Proposed fee code XY is appended to all Customer orders in XSP that add liquidity and are provided a rebate of $0.25 per contract. Addition of XSP Fee Codes to Volume Tiers The Exchange next proposes to add certain fee codes for XSP, as proposed, to the list of fee codes applicable to certain volume tiers currently in the Fee Schedule. The proposed rule change adds fee code XY (Customer orders in XSP that add liquidity) to the list of fee codes in footnote 1 5 applicable to the Customer Penny Add Volume 6 Tiers.7 Currently, the eight Customer Penny Add Volume Tiers provide Members’ orders yielding the applicable fee codes (currently, PY, appended to Customer orders that add liquidity in Penny Program Securities) an opportunity receive an additional rebate, ranging from $0.35 to $0.53 per contract, where a Member reaches certain volume thresholds (by submitting both Penny and non-Penny Program orders) over OCV 8 and/or TCV 9 that vary per tier. 4 The Exchange notes that, on November 2, 2020, the Exchange’s affiliated options exchange, Cboe EDGX Exchange, Inc. (‘‘EDGX Options’’), plans to delist XSP options. The Exchange’s affiliated options exchange, Cboe C2 Exchange, Inc. (‘‘C2’’) may also list and trade XSP options but does not currently do so. 5 And appends footnote 1 to fee code XY in the Fee Codes and Associated Fees table. 6 The Exchange adds the term ‘‘Volume’’ to the title of this tier in order to make it consistent with the titles of the Penny Add Volume Tiers applicable to other market participant orders (e.g., the MarketMaker Penny Add Volume Tiers). 7 The Exchange also proposes to update the title of each of the Penny Pilot Tiers and Non-Penny Pilot Tiers to remove the term ‘‘Pilot’’ in order to reflect the adoption of the Penny Pilot Program on a permanent basis (as described in detail below) and to additionally reflect the proposed inclusion, and any future potential inclusion, of classes with a minimum increment of a penny that are not in the Penny Interval Program (such as XSP). 8 ‘‘OCC Customer Volume’’ or ‘‘OCV’’ means the total equity and ETF options volume that clears in the Customer range at the Options Clearing Corporation (‘‘OCC’’) for the month for which the fees apply, excluding volume on any day that the Exchange experiences an Exchange System Disruption and on any day with a scheduled early market close. 9 ‘‘TCV’’ means total consolidated volume calculated as the volume reported by all exchanges PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 The proposed rule change adds fee code XF (Firm/Broker Dealer/JBO orders in XSP that add liquidity) to the list of fee codes in footnote 2 10 applicable to the Firm, Broker Dealer, and Joint Back Office Penny Add Volume Tiers. Currently, the two Firm, Broker Dealer, and Joint Back Office Penny Add Volume Tiers provide Members’ orders yielding the applicable fee codes (currently, PF, appended to Firm/Broker Dealer/JBO orders that add liquidity in Penny Program Securities) an opportunity to receive an additional rebate of $0.38 or $0.46 per contract, where a Member reaches certain volume thresholds (by submitting both Penny and non-Penny Program orders) over average OCV that vary per tier. The proposed rule change adds fee codes XM (Market Maker orders in XSP that add liquidity) and XN (Away Market Maker orders in XSP that add liquidity) to the list of fee codes in footnote 4 11 applicable to the NBBO Setter Tiers. Currently, the five NBBO Setter Tiers provide Members’ orders yielding the applicable fee codes (currently, PN and PM, appended to Away Market Maker and Market Maker orders, respectively, that add liquidity in Penny Program Securities) an opportunity to receive an additional rebate, ranging between $0.01 and $0.05 per contract, where a Member reaches certain volume thresholds (by submitting both Penny and non-Penny Program orders) over average OCV that vary per tier. The proposed rule change also adds fee code XM to the list of fee codes in footnote 6 12 applicable to the Market Maker Penny Add Volume Tiers. Currently, the ten Market Maker Penny Add Volume Tiers provide Members’ orders yielding the applicable fee codes (currently, PM) an opportunity to receive an additional rebate, ranging between $0.33 and $0.46 per contract, where a Member reaches certain volume thresholds (by submitting both Penny and non-Penny Program orders) over average OCV and/or TCV that vary per tier. The proposed rule change adds fee code XA (Professional orders in XSP that add liquidity) to the list of fee codes to the consolidated transaction reporting plan for the month for which the fees apply, excluding volume on any day that the Exchange experiences an Exchange System Disruption and on any day with a scheduled early market close. 10 And appends footnote 2 to fee code XF in the Fee Codes and Associated Fees table. 11 And appends footnote 4 to fee codes XM and XN in the Fee Codes and Associated Fees table. 12 And appends footnote 6 to fee code XM in the Fee Codes and Associated Fees table. E:\FR\FM\16NON1.SGM 16NON1 Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices in footnote 9 13 applicable to the Professional Penny Add Volume Tiers. Currently, the four Professional Penny Add Volume Tiers provide Members’ orders yielding the applicable fee codes (currently, PA, appended to Professional orders that add liquidity in Penny Program Securities) an opportunity to receive an additional rebate, ranging between $0.42 and $0.48 per contract, where a Member reaches certain volume thresholds (by submitting both Penny and non-Penny Program orders) over average OCV that vary per tier. Lastly, the proposed rule change also adds fee code XN to the list of fee codes in footnote 10 14 applicable to the Away Market Maker Penny Add Volume Tiers. Currently, the two Away Market Maker Penny Add Volume Tiers provide Members’ orders yielding the applicable fee codes (currently, PN) an opportunity to receive an additional rebate of $0.38 and $0.45 per contract, where a Member reaches certain volume thresholds (by submitting both Penny and non-Penny Program orders) over average OCV that vary per tier. Overall, the Exchange believes the proposed additions of Customer, Professional, Firm/Broker Dealer/JBO, Market Maker and Away Market Maker orders in XSP to be eligible to receive rebates offered per the respective Penny Add Volume Tiers, as well as Market Maker and Away Market Maker orders in XSP to be eligible to receive rebates offered per the NBBO Setter Tiers, will provide Members an additional opportunity to receive an enhanced rebate for meeting the corresponding tier criteria. As a result, the proposed change provides an additional incentive for Members to increase their order flow to the Exchange, including their order flow that establishes a new NBBO, thereby contributing to a deeper and more liquid market and providing greater execution opportunities, which benefits all market participants by creating a more robust and wellbalanced market ecosystem. jbell on DSKJLSW7X2PROD with NOTICES Updates Regarding Permanent Penny Program The proposed rule change also updates the term ‘‘Penny Pilot’’ throughout the Fee Schedule to reflect the recent adoption of the pilot program on a permanent basis.15 More specifically, April 1, 2020 the Commission approved an amendment 13 And appends footnote 9 to fee code XA in the Fee Codes and Associated Fees table. 14 And appends footnote 10 to fee code XN in the Fee Codes and Associated Fees table. 15 See Securities Exchange Act Release No. 89079 (June 17, 2020), 85 FR 37708 (June 23, 2020) (SR– CboeBZX–2020–051). VerDate Sep<11>2014 20:13 Nov 13, 2020 Jkt 253001 the Plan for the Purpose of Developing and Implementing Procedures Designed to Facilitate the Listing and Trading of Standardized Options (the ‘‘OLPP’’) to make permanent the Penny Pilot Program, and the Exchange accordingly conformed its Rules to the OLPP Program by deleting Interpretation and Policy .01 to Rule 21.5 (the ‘‘Penny Pilot Rule’’), replacing it with Rule 21.5(d) (Requirements for Penny Interval Program). As a result, the proposed rule change now updates the Fee Schedule to reflect the permanent Penny Program, as follows: • Replaces ‘‘Pilot’’ with ‘‘Program’’, where applicable, in Standard Rates table and in the description of fee codes PA, PC, PF, PM, PN, PP, PY, RN and RQ in the Fee Codes and Associated Fees table; • Amends the term ‘‘Penny Pilot Securities’’ to reflect the definition of ‘‘Penny Program Securities’’ in the Definition section and updates the definition to reflect Rule 21.5(d), which now governs the Penny Program; and • Removes the term ‘‘Pilot’’ from the volume tiers in footnotes 1 through 3 and 6 through 13.16 The Exchange believes that the proposed rule change will provide additional clarity in the Fee Schedule by updating references to the current permanent Penny Program and the corresponding Rule that now governs the program. The Exchange notes that the proposed rule change does not alter the securities eligible for the Penny Program nor any of the rates currently assessed for Penny Program Securities. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,17 in general, and furthers the objectives of Section 6(b)(4),18 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and issuers and other persons using its facilities. The Exchange also believes that the proposed rule change is consistent with the objectives of Section 6(b)(5) 19 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in supra note 4. U.S.C. 78f. 18 15 U.S.C. 78f(b)(4). 19 15 U.S.C. 78f.(b)(5). 73111 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 the proposed fee codes in connection with orders in XSP options are reasonable, equitable and not unfairly discriminatory. Specifically, the Exchange believes the proposed fee codes for orders XSP are reasonable because they correspond with the current standard fee codes in place for orders in Penny Program Securities. The Exchange notes that, although XSP is not included in the Penny Program, it likewise trades in increments of $0.01. As a result, the Exchange believes it is reasonable to: Offer a rebate of $0.25 for Professional (XA), Firm/Broker Dealer/ JBO (XF) and Customer (XY) orders that add liquidity in XSP as this is the standard rebate currently offered for Professional (PA), Firm/Broker Dealer/ JBO (PF) and Customer (PY) orders that add liquidity in Penny Program securities; to assess a charge of $0.50 for Customer (XC) and Non-Customer (XP) orders that remove liquidity in XSP as this is the standard fee currently assessed for Customer (PC) and NonCustomer (PP) that remove liquidity in Penny Program securities; to offer a rebate of $0.29 for Market Maker orders that add liquidity in XSP (XM) as this is the standard rebate currently offered for Market Maker orders that add liquidity in Penny Program securities (PM); to offer a rebate of $0.26 for Away Market Maker orders that add liquidity in XSP (XN) as this is the standard rebate currently offered for Away Market Maker orders that add liquidity in Penny Program securities (PN); and to assess a fee of $0.90 in Non-Customer orders that are routed away in XSP (XR) as this is the standard fee currently assessed for Non-Customer orders routed away in Penny Program securities (RN). In addition to this, the Exchange believes that the proposed fee of $0.29 assessed for Customer orders routed in XSP is reasonable because it combines the standard fee for Customer orders routed to Cboe Options (RP, which is assessed $0.25) and the rate assessed by Cboe Options for Customer orders in XSP ($0.04).20 Specifically, the Exchange believes that the routing fee for Customer orders in XSP to Cboe Options is reasonable because it 16 See 17 15 PO 00000 Frm 00095 Fmt 4703 20 See Cboe Options Fees Schedule, Rate Table— All Products Excluding Underlying Symbol List A, fee code CC. Sfmt 4703 E:\FR\FM\16NON1.SGM 16NON1 73112 Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES represents an approximation of the anticipated cost to the Exchange for routing orders to Cboe Options. The Exchange also notes that this combined rate is similar to the manner in which fee codes for routed Customer orders are currently provided in the Cboe Options Fees Schedule.21 The Exchange notes too that routing through the Exchange is voluntary. The Exchange also believes that it is equitable and not unfairly discriminatory to assess the different fees and rebates for different market participants’ orders in XSP because, as described above, such standard fees and rebates are currently assessed for different market participants’ orders in Penny Program securities. In addition to this, the Exchange believes that it is equitable and not unfairly discriminatory to generally provide higher enhanced rebates for Market Maker and Away Market Maker orders that add liquidity than for other market participant orders because Market Makers (including market makers at other exchanges), unlike other market participants, take on a number of obligations, including quoting obligations, that other market participants do not have. Further, these enhanced rebates offered to liquidity adding Market Makers and Away Market Maker orders are intended to incent increased provision of liquidity on the Exchange, thereby providing more trading opportunities for all market participants. An increase in general market making activity facilitates tighter spreads, which tend to signal additional corresponding increase in order flow from other market participants, ultimately incentivizing more overall order flow and improving liquidity levels and price transparency on the Exchange to the benefit of all market participants. Similarly, the Exchange believes that it is equitable and not unfairly discriminatory to provide a rebate for Customer, Firm/ Broker Dealer/JBO and Professional orders that add liquidity because these participants also contribute order flow that enhances liquidity on the Exchange for the benefit of all market participants. For example, Customer liquidity benefits all market participants by providing more execution opportunities, in turn, attracting Market Maker order flow, which, as stated above, ultimately 21 See generally Cboe Options Fees Schedule, Routing Fees table; see also Securities Exchange Act Release No. 87873 (December 31, 2019), 85 FR 754 (January 7, 2020) (SR–CBOE–2019–127), which explains that Cboe Options combines away market transaction fees, applicable transaction fees on Cboe Options and a $0.15 routing charge for routed orders. VerDate Sep<11>2014 20:13 Nov 13, 2020 Jkt 253001 enhances market quality on the Exchange to the benefit of all market participants. The Exchange also recognizes that Firms/Broker Dealers/ JBOs can be an important source of liquidity when they facilitate their own customers’ trading activity, thus, adding transparency and promoting price discovery to the benefit of all market participants, while Professionals generally provide a greater competitive stream of order flow (by definition, more than 390 orders in listed options per day on average during a calendar month), thus, providing increased competitive execution and improved pricing opportunities for all market participants. In addition to this, the Exchange believes that the proposed XSP fee amounts for each separate type of market participant are equitable and not unfairly discriminatory because they will be automatically and uniformly assessed to all such market participants, i.e. all Customer orders will be assessed the same amount, all Non-Customer orders will be assessed the same amount, all Professional orders will be assessed the same amount, and so on. The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to apply fee codes XY, XF, XM, XA and XN to the respective Add Volume Penny Tiers, and XM and XN to the NBBO Setter Tiers, because the comparable corresponding fee codes for orders in Penny Program Securities are currently applied to such tiers and orders yielding those fee codes currently receive the additional rebates available. The Exchange believes that adding the proposed fee codes for orders in XSP to the corresponding Add Volume Penny Tiers, and NBBO Setter Tiers, is reasonably designed to incentivize Members to increase their overall order flow, including that which establishes a new NBBO, to meet the respective tiers in order to receive an additional rebate on their orders in XSP. As described above, different market participants provide distinct sources of liquidity to the Exchange, each of which contributes overall to supporting a more robust, well-balanced market ecosystem. Therefore, the Exchange believes it is reasonable to provide an additional opportunity for these market participants to receive a rebate on their qualifying orders in XSP as incentivize to increase order flow from each type of market participant. Moreover, the Exchange believes that adding XSP fee codes as eligible for the additional rebates under the corresponding Add Volume Tiers, as well as the NBBO Setter Tiers, is equitable and not unfairly discriminatory because the rebates are PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 applied uniformly to all Members that submit orders in XSP yielding the applicable fee codes. The Exchange notes that the proposed addition of XSP fee codes as eligible to receive tiered pricing does not alter any of the current rebates offered under the Add Volume Penny Tiers or the NBBO Setter Tiers or any of the current criteria under such tiers, which therefore, does not impact any current opportunity for Members, nor any Member’s ability, to reach the tiers. Finally, the Exchange believes the proposed update to the Penny Program language and Rule reference in the Fee Schedule is reasonable, equitable and not unfairly discriminatory because it is intended to provide additional clarity in the Fee Schedule by updating references to the current permanent Penny Program and the corresponding Rule that now governs the program and does not alter the securities eligible for the Penny Program nor any of the rates currently assessed for Penny Program Securities. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange believes the proposed amendments to its Fee Schedule will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the XSP fee amounts for each separate type of market participant will be assessed equally to all such market participants. The Exchange notes that the same varying rates applicable to orders submitted by different market participants are currently in place for orders in Penny Program Securities (which, like XSP, trade in $0.01 increments). While different fees are assessed to different market participants in some circumstances, the obligations and circumstances between these market participants differ, as discussed above. For example, Market Makers have quoting obligations that are not applicable to other market participants. In addition to this, the Exchange notes that all Members will continue to have the opportunity to meet the Add Volume Penny Tiers and the NBBO Setter Tiers and the rebates provided under each tier will be applied uniformly to Members’ orders in XSP yielding the applicable fee codes. The Exchange does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in E:\FR\FM\16NON1.SGM 16NON1 Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices furtherance of the purposes of the Act because the propose fees assessed and rebates offered apply to an Exchange proprietary product, which are traded exclusively on the Exchange and the Exchange’s affiliated options exchange, Cboe Options.22 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 23 and paragraph (f) of Rule 19b–4 24 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– CboeBZX–2020–080 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–CboeBZX–2020–080. 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 supra note 4. U.S.C. 78s(b)(3)(A). 24 17 CFR 240.19b–4(f). 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–CboeBZX–2020–080 and should be submitted on or before December 7, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–25181 Filed 11–13–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90384; File No. SR–BX– 2020–032] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing of Proposed Rule Change To Amend Options 4, Section 5, To Limit Short Term Options Series Intervals Between Strikes Which are Available for Quoting and Trading on BX November 9, 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 November 6, 2020, Nasdaq BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission 25 17 23 15 1 15 20:13 Nov 13, 2020 (‘‘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 Options 4, Section 5, ‘‘Series of Options Contracts Open for Trading.’’ This proposal seeks to limit Short Term Options Series intervals between strikes which are available for quoting and trading on BX. 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 22 See VerDate Sep<11>2014 The Exchange proposes to amend Options 4, Section 5, ‘‘Series of Options Contracts Open for Trading.’’ Specifically, this proposal seeks to limit the intervals between strikes for multiply listed equity options classes within the Short Term Options Series program that have an expiration date more than twenty-one days from the listing date. Background Today, BX’s listing rules within Options 4, Section 5 permits the Exchange, after a particular class of options (call option contracts or put option contracts relating to a specific underlying stock, Exchange-Traded CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Jkt 253001 73113 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 E:\FR\FM\16NON1.SGM 16NON1

Agencies

[Federal Register Volume 85, Number 221 (Monday, November 16, 2020)]
[Notices]
[Pages 73109-73113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25181]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90381;File No. SR-CboeBZX-2020-080]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Add 
Certain Fees Related to the Listing and Trading of Options Contracts on 
the Mini-SPX Index (``XSP'') and Update Certain Other Language in the 
Fee Schedule

November 9, 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 November 2, 2020, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to 
add certain fees related to the listing and trading of options 
contracts on the Mini-SPX Index (``XSP'') and update certain other 
language in the fee schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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

[[Page 73110]]

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
    On November 2, 2020, the Exchange's equity options platform (``BZX 
Options'') plans to begin listing XSP options for trading.\3\ 
Accordingly, the Exchange proposes to amend its Fee Schedule for BZX 
Options, effective November 2, 2020, to: (1) Adopt fee codes for XSP 
options that add or remove liquidity on the Exchange or are routed away 
from the Exchange; and (2) update applicable fee codes for certain 
volume tiers to include fee codes for XSP options. Additionally, the 
Exchange proposes to update the fees schedule to reflect the recent 
adoption of the Penny Program on a permanent basis.
---------------------------------------------------------------------------

    \3\ See Rule 29.11(a).
---------------------------------------------------------------------------

Adoption of Fee Codes for Orders in XSP
    The Exchange first proposes to adopt fee codes for various orders 
in XSP options in the Fees and Associated Fees table in the Fee 
Schedule, as follows:
     Proposed fee code XA is appended to all Professional 
orders in XSP that add liquidity and are provided a rebate of $0.25 per 
contract;
     Proposed fee code XC is appended to all Customer orders in 
XSP that remove liquidity and are assessed a fee of $0.50 per contract;
     Proposed fee code XF is appended to all Firm, Broker 
Dealer and Joint Back Office (``JBO'') orders in XSP that add liquidity 
and are provided a rebate of $0.25 per contract;
     Proposed fee code XM is appended to all Market Maker 
orders in XSP that add liquidity and are provided a rebate of $0.29 per 
contract;
     Proposed fee code XN is appended to all Away Market Maker 
orders in XSP that add liquidity and are provided a rebate of $0.26 per 
contract;
     Proposed fee code XO is appended to all Customer orders in 
XSP that are routed away from the Exchange and executed at another 
exchange and are assessed a fee of $0.29 per contract. The Exchange 
notes that XSP is a proprietary product which is traded exclusively on 
the Exchange and the Exchange's affiliated options exchange, Cboe 
Exchange, Inc. (``Cboe Options''),\4\ therefore, orders in XSP are 
routed to execute on Cboe Options;
---------------------------------------------------------------------------

    \4\ The Exchange notes that, on November 2, 2020, the Exchange's 
affiliated options exchange, Cboe EDGX Exchange, Inc. (``EDGX 
Options''), plans to delist XSP options. The Exchange's affiliated 
options exchange, Cboe C2 Exchange, Inc. (``C2'') may also list and 
trade XSP options but does not currently do so.
---------------------------------------------------------------------------

     Proposed fee code XP is appended to all Non-Customer 
orders in XSP that remove liquidity and are assessed a fee of $0.50 per 
contract;
     Proposed fee code XR is appended to all Non-Customer 
orders in XSP that are routed away from the Exchange and executed at 
another exchange and are assessed a fee of $0.90 per contract; and
     Proposed fee code XY is appended to all Customer orders in 
XSP that add liquidity and are provided a rebate of $0.25 per contract.
Addition of XSP Fee Codes to Volume Tiers
    The Exchange next proposes to add certain fee codes for XSP, as 
proposed, to the list of fee codes applicable to certain volume tiers 
currently in the Fee Schedule. The proposed rule change adds fee code 
XY (Customer orders in XSP that add liquidity) to the list of fee codes 
in footnote 1 \5\ applicable to the Customer Penny Add Volume \6\ 
Tiers.\7\ Currently, the eight Customer Penny Add Volume Tiers provide 
Members' orders yielding the applicable fee codes (currently, PY, 
appended to Customer orders that add liquidity in Penny Program 
Securities) an opportunity receive an additional rebate, ranging from 
$0.35 to $0.53 per contract, where a Member reaches certain volume 
thresholds (by submitting both Penny and non-Penny Program orders) over 
OCV \8\ and/or TCV \9\ that vary per tier.
---------------------------------------------------------------------------

    \5\ And appends footnote 1 to fee code XY in the Fee Codes and 
Associated Fees table.
    \6\ The Exchange adds the term ``Volume'' to the title of this 
tier in order to make it consistent with the titles of the Penny Add 
Volume Tiers applicable to other market participant orders (e.g., 
the Market-Maker Penny Add Volume Tiers).
    \7\ The Exchange also proposes to update the title of each of 
the Penny Pilot Tiers and Non-Penny Pilot Tiers to remove the term 
``Pilot'' in order to reflect the adoption of the Penny Pilot 
Program on a permanent basis (as described in detail below) and to 
additionally reflect the proposed inclusion, and any future 
potential inclusion, of classes with a minimum increment of a penny 
that are not in the Penny Interval Program (such as XSP).
    \8\ ``OCC Customer Volume'' or ``OCV'' means the total equity 
and ETF options volume that clears in the Customer range at the 
Options Clearing Corporation (``OCC'') for the month for which the 
fees apply, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption and on any day with a 
scheduled early market close.
    \9\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges to the consolidated transaction 
reporting plan for the month for which the fees apply, excluding 
volume on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close.
---------------------------------------------------------------------------

    The proposed rule change adds fee code XF (Firm/Broker Dealer/JBO 
orders in XSP that add liquidity) to the list of fee codes in footnote 
2 \10\ applicable to the Firm, Broker Dealer, and Joint Back Office 
Penny Add Volume Tiers. Currently, the two Firm, Broker Dealer, and 
Joint Back Office Penny Add Volume Tiers provide Members' orders 
yielding the applicable fee codes (currently, PF, appended to Firm/
Broker Dealer/JBO orders that add liquidity in Penny Program 
Securities) an opportunity to receive an additional rebate of $0.38 or 
$0.46 per contract, where a Member reaches certain volume thresholds 
(by submitting both Penny and non-Penny Program orders) over average 
OCV that vary per tier.
---------------------------------------------------------------------------

    \10\ And appends footnote 2 to fee code XF in the Fee Codes and 
Associated Fees table.
---------------------------------------------------------------------------

    The proposed rule change adds fee codes XM (Market Maker orders in 
XSP that add liquidity) and XN (Away Market Maker orders in XSP that 
add liquidity) to the list of fee codes in footnote 4 \11\ applicable 
to the NBBO Setter Tiers. Currently, the five NBBO Setter Tiers provide 
Members' orders yielding the applicable fee codes (currently, PN and 
PM, appended to Away Market Maker and Market Maker orders, 
respectively, that add liquidity in Penny Program Securities) an 
opportunity to receive an additional rebate, ranging between $0.01 and 
$0.05 per contract, where a Member reaches certain volume thresholds 
(by submitting both Penny and non-Penny Program orders) over average 
OCV that vary per tier.
---------------------------------------------------------------------------

    \11\ And appends footnote 4 to fee codes XM and XN in the Fee 
Codes and Associated Fees table.
---------------------------------------------------------------------------

    The proposed rule change also adds fee code XM to the list of fee 
codes in footnote 6 \12\ applicable to the Market Maker Penny Add 
Volume Tiers. Currently, the ten Market Maker Penny Add Volume Tiers 
provide Members' orders yielding the applicable fee codes (currently, 
PM) an opportunity to receive an additional rebate, ranging between 
$0.33 and $0.46 per contract, where a Member reaches certain volume 
thresholds (by submitting both Penny and non-Penny Program orders) over 
average OCV and/or TCV that vary per tier.
---------------------------------------------------------------------------

    \12\ And appends footnote 6 to fee code XM in the Fee Codes and 
Associated Fees table.
---------------------------------------------------------------------------

    The proposed rule change adds fee code XA (Professional orders in 
XSP that add liquidity) to the list of fee codes

[[Page 73111]]

in footnote 9 \13\ applicable to the Professional Penny Add Volume 
Tiers. Currently, the four Professional Penny Add Volume Tiers provide 
Members' orders yielding the applicable fee codes (currently, PA, 
appended to Professional orders that add liquidity in Penny Program 
Securities) an opportunity to receive an additional rebate, ranging 
between $0.42 and $0.48 per contract, where a Member reaches certain 
volume thresholds (by submitting both Penny and non-Penny Program 
orders) over average OCV that vary per tier.
---------------------------------------------------------------------------

    \13\ And appends footnote 9 to fee code XA in the Fee Codes and 
Associated Fees table.
---------------------------------------------------------------------------

    Lastly, the proposed rule change also adds fee code XN to the list 
of fee codes in footnote 10 \14\ applicable to the Away Market Maker 
Penny Add Volume Tiers. Currently, the two Away Market Maker Penny Add 
Volume Tiers provide Members' orders yielding the applicable fee codes 
(currently, PN) an opportunity to receive an additional rebate of $0.38 
and $0.45 per contract, where a Member reaches certain volume 
thresholds (by submitting both Penny and non-Penny Program orders) over 
average OCV that vary per tier.
---------------------------------------------------------------------------

    \14\ And appends footnote 10 to fee code XN in the Fee Codes and 
Associated Fees table.
---------------------------------------------------------------------------

    Overall, the Exchange believes the proposed additions of Customer, 
Professional, Firm/Broker Dealer/JBO, Market Maker and Away Market 
Maker orders in XSP to be eligible to receive rebates offered per the 
respective Penny Add Volume Tiers, as well as Market Maker and Away 
Market Maker orders in XSP to be eligible to receive rebates offered 
per the NBBO Setter Tiers, will provide Members an additional 
opportunity to receive an enhanced rebate for meeting the corresponding 
tier criteria. As a result, the proposed change provides an additional 
incentive for Members to increase their order flow to the Exchange, 
including their order flow that establishes a new NBBO, thereby 
contributing to a deeper and more liquid market and providing greater 
execution opportunities, which benefits all market participants by 
creating a more robust and well-balanced market ecosystem.
Updates Regarding Permanent Penny Program
    The proposed rule change also updates the term ``Penny Pilot'' 
throughout the Fee Schedule to reflect the recent adoption of the pilot 
program on a permanent basis.\15\ More specifically, April 1, 2020 the 
Commission approved an amendment the Plan for the Purpose of Developing 
and Implementing Procedures Designed to Facilitate the Listing and 
Trading of Standardized Options (the ``OLPP'') to make permanent the 
Penny Pilot Program, and the Exchange accordingly conformed its Rules 
to the OLPP Program by deleting Interpretation and Policy .01 to Rule 
21.5 (the ``Penny Pilot Rule''), replacing it with Rule 21.5(d) 
(Requirements for Penny Interval Program). As a result, the proposed 
rule change now updates the Fee Schedule to reflect the permanent Penny 
Program, as follows:
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 89079 (June 17, 
2020), 85 FR 37708 (June 23, 2020) (SR-CboeBZX-2020-051).
---------------------------------------------------------------------------

     Replaces ``Pilot'' with ``Program'', where applicable, in 
Standard Rates table and in the description of fee codes PA, PC, PF, 
PM, PN, PP, PY, RN and RQ in the Fee Codes and Associated Fees table;
     Amends the term ``Penny Pilot Securities'' to reflect the 
definition of ``Penny Program Securities'' in the Definition section 
and updates the definition to reflect Rule 21.5(d), which now governs 
the Penny Program; and
     Removes the term ``Pilot'' from the volume tiers in 
footnotes 1 through 3 and 6 through 13.\16\
---------------------------------------------------------------------------

    \16\ See supra note 4.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change will provide 
additional clarity in the Fee Schedule by updating references to the 
current permanent Penny Program and the corresponding Rule that now 
governs the program. The Exchange notes that the proposed rule change 
does not alter the securities eligible for the Penny Program nor any of 
the rates currently assessed for Penny Program Securities.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4),\18\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \19\ 
requirements that the rules of an exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
    \19\ 15 U.S.C. 78f.(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed fee codes in connection 
with orders in XSP options are reasonable, equitable and not unfairly 
discriminatory. Specifically, the Exchange believes the proposed fee 
codes for orders XSP are reasonable because they correspond with the 
current standard fee codes in place for orders in Penny Program 
Securities. The Exchange notes that, although XSP is not included in 
the Penny Program, it likewise trades in increments of $0.01. As a 
result, the Exchange believes it is reasonable to: Offer a rebate of 
$0.25 for Professional (XA), Firm/Broker Dealer/JBO (XF) and Customer 
(XY) orders that add liquidity in XSP as this is the standard rebate 
currently offered for Professional (PA), Firm/Broker Dealer/JBO (PF) 
and Customer (PY) orders that add liquidity in Penny Program 
securities; to assess a charge of $0.50 for Customer (XC) and Non-
Customer (XP) orders that remove liquidity in XSP as this is the 
standard fee currently assessed for Customer (PC) and Non-Customer (PP) 
that remove liquidity in Penny Program securities; to offer a rebate of 
$0.29 for Market Maker orders that add liquidity in XSP (XM) as this is 
the standard rebate currently offered for Market Maker orders that add 
liquidity in Penny Program securities (PM); to offer a rebate of $0.26 
for Away Market Maker orders that add liquidity in XSP (XN) as this is 
the standard rebate currently offered for Away Market Maker orders that 
add liquidity in Penny Program securities (PN); and to assess a fee of 
$0.90 in Non-Customer orders that are routed away in XSP (XR) as this 
is the standard fee currently assessed for Non-Customer orders routed 
away in Penny Program securities (RN). In addition to this, the 
Exchange believes that the proposed fee of $0.29 assessed for Customer 
orders routed in XSP is reasonable because it combines the standard fee 
for Customer orders routed to Cboe Options (RP, which is assessed 
$0.25) and the rate assessed by Cboe Options for Customer orders in XSP 
($0.04).\20\ Specifically, the Exchange believes that the routing fee 
for Customer orders in XSP to Cboe Options is reasonable because it

[[Page 73112]]

represents an approximation of the anticipated cost to the Exchange for 
routing orders to Cboe Options. The Exchange also notes that this 
combined rate is similar to the manner in which fee codes for routed 
Customer orders are currently provided in the Cboe Options Fees 
Schedule.\21\ The Exchange notes too that routing through the Exchange 
is voluntary.
---------------------------------------------------------------------------

    \20\ See Cboe Options Fees Schedule, Rate Table--All Products 
Excluding Underlying Symbol List A, fee code CC.
    \21\ See generally Cboe Options Fees Schedule, Routing Fees 
table; see also Securities Exchange Act Release No. 87873 (December 
31, 2019), 85 FR 754 (January 7, 2020) (SR-CBOE-2019-127), which 
explains that Cboe Options combines away market transaction fees, 
applicable transaction fees on Cboe Options and a $0.15 routing 
charge for routed orders.
---------------------------------------------------------------------------

    The Exchange also believes that it is equitable and not unfairly 
discriminatory to assess the different fees and rebates for different 
market participants' orders in XSP because, as described above, such 
standard fees and rebates are currently assessed for different market 
participants' orders in Penny Program securities. In addition to this, 
the Exchange believes that it is equitable and not unfairly 
discriminatory to generally provide higher enhanced rebates for Market 
Maker and Away Market Maker orders that add liquidity than for other 
market participant orders because Market Makers (including market 
makers at other exchanges), unlike other market participants, take on a 
number of obligations, including quoting obligations, that other market 
participants do not have. Further, these enhanced rebates offered to 
liquidity adding Market Makers and Away Market Maker orders are 
intended to incent increased provision of liquidity on the Exchange, 
thereby providing more trading opportunities for all market 
participants. An increase in general market making activity facilitates 
tighter spreads, which tend to signal additional corresponding increase 
in order flow from other market participants, ultimately incentivizing 
more overall order flow and improving liquidity levels and price 
transparency on the Exchange to the benefit of all market participants. 
Similarly, the Exchange believes that it is equitable and not unfairly 
discriminatory to provide a rebate for Customer, Firm/Broker Dealer/JBO 
and Professional orders that add liquidity because these participants 
also contribute order flow that enhances liquidity on the Exchange for 
the benefit of all market participants. For example, Customer liquidity 
benefits all market participants by providing more execution 
opportunities, in turn, attracting Market Maker order flow, which, as 
stated above, ultimately enhances market quality on the Exchange to the 
benefit of all market participants. The Exchange also recognizes that 
Firms/Broker Dealers/JBOs can be an important source of liquidity when 
they facilitate their own customers' trading activity, thus, adding 
transparency and promoting price discovery to the benefit of all market 
participants, while Professionals generally provide a greater 
competitive stream of order flow (by definition, more than 390 orders 
in listed options per day on average during a calendar month), thus, 
providing increased competitive execution and improved pricing 
opportunities for all market participants. In addition to this, the 
Exchange believes that the proposed XSP fee amounts for each separate 
type of market participant are equitable and not unfairly 
discriminatory because they will be automatically and uniformly 
assessed to all such market participants, i.e. all Customer orders will 
be assessed the same amount, all Non-Customer orders will be assessed 
the same amount, all Professional orders will be assessed the same 
amount, and so on.
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to apply fee codes XY, XF, XM, XA and XN to the 
respective Add Volume Penny Tiers, and XM and XN to the NBBO Setter 
Tiers, because the comparable corresponding fee codes for orders in 
Penny Program Securities are currently applied to such tiers and orders 
yielding those fee codes currently receive the additional rebates 
available. The Exchange believes that adding the proposed fee codes for 
orders in XSP to the corresponding Add Volume Penny Tiers, and NBBO 
Setter Tiers, is reasonably designed to incentivize Members to increase 
their overall order flow, including that which establishes a new NBBO, 
to meet the respective tiers in order to receive an additional rebate 
on their orders in XSP. As described above, different market 
participants provide distinct sources of liquidity to the Exchange, 
each of which contributes overall to supporting a more robust, well-
balanced market ecosystem. Therefore, the Exchange believes it is 
reasonable to provide an additional opportunity for these market 
participants to receive a rebate on their qualifying orders in XSP as 
incentivize to increase order flow from each type of market 
participant.
    Moreover, the Exchange believes that adding XSP fee codes as 
eligible for the additional rebates under the corresponding Add Volume 
Tiers, as well as the NBBO Setter Tiers, is equitable and not unfairly 
discriminatory because the rebates are applied uniformly to all Members 
that submit orders in XSP yielding the applicable fee codes. The 
Exchange notes that the proposed addition of XSP fee codes as eligible 
to receive tiered pricing does not alter any of the current rebates 
offered under the Add Volume Penny Tiers or the NBBO Setter Tiers or 
any of the current criteria under such tiers, which therefore, does not 
impact any current opportunity for Members, nor any Member's ability, 
to reach the tiers.
    Finally, the Exchange believes the proposed update to the Penny 
Program language and Rule reference in the Fee Schedule is reasonable, 
equitable and not unfairly discriminatory because it is intended to 
provide additional clarity in the Fee Schedule by updating references 
to the current permanent Penny Program and the corresponding Rule that 
now governs the program and does not alter the securities eligible for 
the Penny Program nor any of the rates currently assessed for Penny 
Program Securities.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendments to its Fee Schedule 
will not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed rule change will impose any burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the XSP fee amounts for 
each separate type of market participant will be assessed equally to 
all such market participants. The Exchange notes that the same varying 
rates applicable to orders submitted by different market participants 
are currently in place for orders in Penny Program Securities (which, 
like XSP, trade in $0.01 increments). While different fees are assessed 
to different market participants in some circumstances, the obligations 
and circumstances between these market participants differ, as 
discussed above. For example, Market Makers have quoting obligations 
that are not applicable to other market participants. In addition to 
this, the Exchange notes that all Members will continue to have the 
opportunity to meet the Add Volume Penny Tiers and the NBBO Setter 
Tiers and the rebates provided under each tier will be applied 
uniformly to Members' orders in XSP yielding the applicable fee codes.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in

[[Page 73113]]

furtherance of the purposes of the Act because the propose fees 
assessed and rebates offered apply to an Exchange proprietary product, 
which are traded exclusively on the Exchange and the Exchange's 
affiliated options exchange, Cboe Options.\22\
---------------------------------------------------------------------------

    \22\ See supra note 4.
---------------------------------------------------------------------------

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 \23\ and paragraph (f) of Rule 19b-4 \24\ 
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.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-CboeBZX-2020-080 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-CboeBZX-2020-080. 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-CboeBZX-2020-080 and should be submitted 
on or before December 7, 2020.
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25181 Filed 11-13-20; 8:45 am]
BILLING CODE 8011-01-P
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