Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Update its Fees Schedule in Connection With the Exchange's Plans To List and Trade Options on the Mini-RUT Index (“MRUT” or “Mini-RUT”), 14494-14500 [2021-05348]
Download as PDF
<![CDATA[
14494
Federal Register / Vol. 86, No. 49 / Tuesday, March 16, 2021 / Notices
11a–2 in the total number of burden
hours estimated for completing the
relevant registration statements and
reports the burden of Rule 11a–2 in the
separate Paperwork Reduction Act
(‘‘PRA’’) submissions for those
registration statements (see the separate
PRA submissions for Form N–3 (17 CFR
274.11b), Form N–4 (17 CFR 274.11c)
and Form N–6 (17 CFR 274.11d). The
Commission is requesting a burden of
one hour for Rule 11a–2 for
administrative purposes.
The estimate of average burden hours
is made solely for the purposes of the
PRA, and is not derived from a
comprehensive or even a representative
survey or study of the costs of
Commission rules or forms. With regard
to Rule 11a–2, the Commission includes
the estimate of burden hours in the total
number of burden hours estimated for
completing the relevant registration
statements and reported on the separate
PRA submissions for those statements
(see the separate PRA submissions for
Form N–3, Form N–4 and Form N–6).
The information collection
requirements imposed by Rule 11a–2
are mandatory. Responses to the
collection of information will not be
kept confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission, c/
o Cynthia Roscoe, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: March 11, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
PLACE:
This meeting will be closed to
the public.
STATUS:
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
[FR Doc. 2021–05378 Filed 3–15–21; 8:45 am]
Dated: March 11, 2021.
Vanessa A. Countryman,
Secretary.
BILLING CODE 8011–01–P
[FR Doc. 2021–05456 Filed 3–12–21; 11:15 am]
jbell on DSKJLSW7X2PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
March 18, 2021.
TIME AND DATE:
VerDate Sep<11>2014
16:52 Mar 15, 2021
Jkt 253001
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91288; File No. SR–CBOE–
2021–015]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Update its Fees
Schedule in Connection With the
Exchange’s Plans To List and Trade
Options on the Mini-RUT Index
(‘‘MRUT’’ or ‘‘Mini-RUT’’)
March 10, 2021.
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 March 1,
2021, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to update
its Fees Schedule in connection with
the Exchange’s plans to list and trade
options on the Mini-RUT Index
(‘‘MRUT’’ or ‘‘Mini-RUT’’). 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
1 15
2 17
Frm 00092
Fmt 4703
Sfmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\16MRN1.SGM
16MRN1
Federal Register / Vol. 86, No. 49 / Tuesday, March 16, 2021 / Notices
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fees Schedule in connection with its
plans to list and trade MRUT options,
effective March 1, 2021.
jbell on DSKJLSW7X2PROD with NOTICES
Background
MRUT options are options on the
Mini-RUT Index, the value of which is
1/10th the value of the Russell 2000
(‘‘RUT’’) Index. The Russell 2000 Index
measures the performance of small-cap
segment of the U.S. equity universe. It
is a subset of the Russell 3000 Index and
includes approximately 2,000 U.S.based securities based on a combination
of their market cap and current index
membership. The Russell 2000 Index is
constructed to provide a comprehensive
and unbiased small-cap barometer and
is completely reconstituted annually to
ensure larger stocks do not distort the
performance and characteristics of the
true small-cap opportunity set. The
Russell 2000 Index is a commonly used
benchmark for mutual funds that
identify themselves as ‘‘small-cap,’’ and
much like the S&P 500 Index (‘‘SPX’’),
is used to benchmark large
capitalization stocks. The Exchange
understands that investors often use
Russell 2000 Index-related products to
diversify their portfolios and benefit
from market trends. RUT options
currently offer these benefits to
investors but may be expensive given
their larger notional value and are
therefore primarily used by institutional
market participants. By contrast, MRUT
options are reduced-value options (1/
10th) compared to RUT options that will
offer individual investors lower cost
options to obtain the potential benefits
of options on the Russell 2000 Index.
The Exchange believes that investors
will benefit from the availability of
Mini-RUT option contracts by making
options overlying the higher-valued
RUT Index more readily available as an
investing tool and at more affordable
prices for investors. The Exchange also
believes that the investor-base for
MRUT options are likely to be the same
investor-base for Mini-SPX options
(‘‘XSP’’), which are also proprietary,
reduced-value options on a broad-based
index (SPX), as they are both designed
to provide low-cost means to hedge
investors’ portfolios in connection with
higher-value broad-based indexes (i.e.,
the RUT and SPX Index) with a smaller
VerDate Sep<11>2014
16:52 Mar 15, 2021
Jkt 253001
outlay of capital. As such, the Exchange
will allow the same type of expirations,
settlement and exercise style, minimum
increments, strike price intervals and
Market-Maker appointment weights for
MRUT options as it currently does for
XSP options and anticipates that MRUT
options will have the same investor base
as XSP options.3 The Exchange now
proposes to amend its Fees Schedule to
accommodate the planned listing and
trading of MRUT options. The Exchange
notes that because both MRUT and XSP
are mini-index options intended for the
same investor-base, the majority of the
proposed changes amend the Fees
Schedule in connection with trading in
MRUT options in a manner that is
generally consistent with the way in
which existing transactions fees and
programs currently apply to trading in
XSP options.
Standard Transaction Rates and
Surcharges
First, the Exchange proposes to adopt
certain standard transaction fees in
connection with MRUT options in a
manner that closely aligns the fees
assessed for MRUT options with that of
the fees assessed for RUT options. As
described above, MRUT options and
RUT options track the same underlying
index, yet MRUT options are 1/10th the
size of standard RUT options contracts.
As such, the proposed rule change
adopts certain fees for MRUT options in
the Rate Table for All Products
Excluding Underlying Symbol A 4 that
are approximately 1/10th of the fees
currently assessed for RUT options, as
follows:
• Adopts fee code CQ, appended to
all Customer (capacity ‘‘C’’) orders in
MRUT options and assesses a fee of
$0.02 per contract. This proposed fee is
approximately 1/10th of the fees
assessed for Customer orders in RUT
options ($0.18).
• Adopts fee code FM, appended to
all Clearing Trading Permit Holder
(‘‘TPHs’’) (capacity ‘‘F’’) and for NonTPH Affiliate of a Clearing TPH
(capacity ‘‘L’’) (collectively, ‘‘Firms’’)
orders in MRUT options and assesses a
fee of $0.02 per contract. The proposed
fee is approximately 1/10th of the fees
assessed for Firm orders in RUT options
($0.26);
3 See Securities Exchange Act Release Nos. 90748
(December 21, 2020), 85 FR 85759 (December 29,
2021) (SR–CBOE–2020–118); and 91067 (February
5, 2021), 86 FR 9108 (February 11, 2021) (SR–
CBOE–2020–118) [sic].
4 Underlying Symbol List A includes OEX, XEO,
RUT, RLG, RLV, RUI, UKXM, SPX (includes
SPXW), SPESG and VIX. See Cboe Options Fees
Schedule, Footnote 34.
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
14495
• Adopts fee code MM, which is
appended to all Market-Maker (capacity
‘‘M’’) orders in MRUT options and
assesses a fee of $0.03 per contract. The
proposed fee is approximately 1/10th of
the fees assessed for Market-Maker
orders in RUT options ($0.30); and
• Adopts fee code BM, appended to
all Broker-Dealer (capacity ‘‘B’’), Joint
Back-Office (capacity ‘‘J’’), Non-TPH
Market-Maker (capacity ‘‘N’’), and
Professional (capacity ‘‘U’’)
(collectively, ‘‘Non-Customers’’) orders
in MRUT options and assesses a fee of
$0.04 per contract. The proposed fee is
approximately 1/10th of the difference
between the two rates assessed for NonCustomer orders in RUT options ($0.25
for manual and AIM transactions and
$0.65 for non-AIM electronic
transactions).
The Exchange also proposes to waive
the proposed MRUT transaction fees for
Firms and Market-Makers through
August 31, 2021. Specifically, proposed
footnote 32 (appended to MRUT options
for Market-Maker and Firm transaction
fees in the Rate Table—All Products
Excluding Underlying Symbol List A)
provides that transaction fees for orders
executed in MRUT options with a
capacity code of ‘‘F’’, ‘‘L’’, or ‘‘M’’ will
be waived through August 31, 2021. The
proposed waiver is intended to
encourage liquidity in a newly listed
and traded product on the Exchange.
In addition to the above transaction
fees, the proposed rule change also
adopts certain surcharges to MRUT
transactions within the Rate Table—All
Products Excluding Underlying Symbol
List A. The proposed rule change
applies an Index License Surcharge Fee
of $0.02 to all Firm, Market-Maker and
Non-Customer transactions in MRUT
options. Currently, the Index License
Surcharge Fee assesses a $0.10 charge
for transactions in DJX, MXEA and
MXEF options. The proposed lower
Index License Surcharge rate for MRUT
options is intended to promote and
encourage trading of MRUT options
once listed. The Exchange notes that
this is similar to lower (or waived)
Index License fees for other options
classes in order to similarly continue to
promote their trading and growth.5
5 See e.g. Securities Exchange Act Release No
90093 (October 5, 2020), 85 FR 64189 (October 9,
2020) (SR–CBOE–2020–088), which provides that
‘‘[t]he Exchange does not at this time propose to
assess the Index License fee on transactions in
SPESG in order to promote and encourage trading
of SPESG once listed.’’; and Securities Exchange
Act Release No. 87953 (January 13, 2020), 85 FR
3091 (January 17, 2020) (SR–CBOE–2020–001),
which waived permanently the Index License fees
for transactions in Sector Index options to continue
to encourage their growth and trading.
E:\FR\FM\16MRN1.SGM
16MRN1
14496
Federal Register / Vol. 86, No. 49 / Tuesday, March 16, 2021 / Notices
The proposed rule change adds
MRUT options to the list of options,
which currently includes XSP, for
which the FLEX Surcharge Fee of $0.10
(capped at $250 per trade) applies to
electronic FLEX orders executed by all
capacity codes.6 The proposed rule
change adopts an Exotic Surcharge of
$0.03 for Customer transactions in
MRUT, which is consistent with the
Exotic Surcharge currently assessed for
Customer transactions in XSP.
Additionally, the Exchange proposes to
exclude MRUT orders from the AIM
Contra Fee by amending footnote 18
(appended to the AIM Contra Fee) to
provide that the AIM Contra Execution
Fee applies to all orders (excluding
facilitation orders, per footnote 11) in all
products, except MRUT, XSP,7 Sector
Indexes and Underlying Symbol List A,
executed in the Automated
Improvement Mechanism (‘‘AIM’’),
Solicitation Auction Mechanism
(‘‘SAM’’), FLEX AIM and FLEX SAM
auctions, that were initially entered as
the contra party to an Agency/Primary
Order. Applicable standard transaction
fees will apply to AIM, SAM, FLEX AIM
and FLEX SAM executions in MRUT,
XSP, Sector Indexes and Underlying
Symbol List A. The Exchange also
proposes to exclude Firm, Market-Maker
and Non-Customer complex orders in
MRUT from the Complex Surcharge by
amending footnote 35 (appended to the
Complex Surcharge) to provide that the
Complex Surcharge applies per contract
per side surcharge for noncustomer
complex order executions that remove
liquidity from the COB and auction
responses in the Complex Order
Auction (‘‘COA’’) and AIM in all classes
except MRUT, XSP, Sector Indexes and
Underlying Symbol List A. The
proposed FLEX and Exotic surcharges
and exclusion from the AIM Contra Fee
(and, instead, the application of the
proposed standard transaction fees) and
Complex Surcharge in connection with
transactions in MRUT will provide
consistency with the fees and
exclusions currently applicable to
transactions in XSP.
jbell on DSKJLSW7X2PROD with NOTICES
Fees Programs
The proposed rule change excludes
MRUT volume from the Liquidity
Provider Sliding Scale, which offers
6 The FLEX Surcharge Fee will only be charged
up to the first 2,500 contracts per trade. See Cboe
Options Fees Schedule, Footnote 17.
7 The proposed rule change also makes clear in
the first sentence of footnote 18 that the AIM Contra
Execution Fee is not applicable to transaction in
XSP. This is currently the case and is clear in the
subsequent language within footnote 18 as well as
the manner in which the fees are presented in Rate
Table—All Products Excluding Underlying Symbol
List A.
VerDate Sep<11>2014
16:52 Mar 15, 2021
Jkt 253001
credits on Market-Maker orders where a
Market-Maker achieves certain volume
thresholds based on total national
Market-Maker volume in all underlying
symbols, excluding Underlying Symbol
List A and XSP, during the calendar
month. Specifically, the proposed rule
change updates the Liquidity Provider
Sliding Scale table to provide that
volume thresholds are based on total
national Market-Maker volume in all
underlying symbols excluding
Underlying Symbol List A, MRUT and
XSP during the calendar month, and
that it applies in all underlying symbols
excluding Underlying Symbol List A,
MRUT and XSP. The proposed rule
change also updates footnote 10
(appended to the Liquidity Provider
Sliding Scale) to provide that the
Liquidity Provider Sliding Scale applies
to Liquidity Provider (Cboe Options
Market-Maker, DPM and LMM)
transaction fees in all products except
(1) Underlying Symbol List A (34),
MRUT and XSP,8 and (2) volume
executed in open outcry.9
The proposed rule change updates the
Volume Incentive Program (‘‘VIP’’) table
to exclude MRUT volume from the VIP,
which currently offers a per contract
credit for certain percentage threshold
levels of monthly Customer and NonCustomer volume in all underlying
symbols, excluding Underlying Symbol
List A, Sector Indexes, DJX, MXEA,
MXEF and XSP. The proposed rule
change also amends footnote 36
(appended to the VIP table) to reflect the
proposed exclusion of MRUT from the
VIP by providing (in relevant part) that:
The Exchange shall credit each Trading
Permit Holder the per contract amount
resulting from each public customer
(‘‘C’’ capacity code) order transmitted by
that Trading Permit Holder which is
executed electronically on the Exchange
in all underlying symbols excluding
Underlying Symbol List A, Sector
Indexes, DJX, MRUT, MXEA, MXEF,
XSP, QCC trades, public customer to
public customer electronic complex
order executions, and executions related
8 The proposed rule change corrects an
inadvertent grammatical error in footnote 10 in
connection with the exclusion of XSP from the
Liquidity Provider Sliding Scale.
9 The proposed rule change also updates footnote
6, which is appended to the Liquidity Provider
Sliding Scale Program, the VIP, and the ORS/CORS
Programs to reflect the exclusion of MRUT options
from these programs in the same manner as the
options classes currently excluded from these
programs. Specifically, amended footnote 6
provides that in the event of a Cboe Options System
outage or other interruption of electronic trading on
Cboe Options that lasts longer than 60 minutes, the
Exchange will adjust the national volume in all
underlying symbols excluding Underlying Symbol
List A, Sector Indexes, MRUT, MXEA, MXEF, DJX
and XSP for the entire trading day.
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
to contracts that are routed to one or
more exchanges in connection with the
Options Order Protection and Locked/
Crossed Market Plan referenced in Rule
5.67, provided the Trading Permit
Holder meets certain percentage
thresholds in a month as described in
the Volume Incentive Program (VIP)
table; the percentage thresholds are
calculated based on the percentage of
national customer volume in all
underlying symbols excluding
Underlying Symbol List A, Sector
Indexes, MRUT, MXEA, MXEF, DJX and
XSP entered and executed over the
course of the month; and in the event
of a Cboe Options System outage or
other interruption of electronic trading
on Cboe Options, the Exchange will
adjust the national customer volume in
all underlying symbols excluding
Underlying Symbol List A, Sector
Indexes, MRUT, MXEA, MXEF, DJX and
XSP for the entire trading day.10
The proposed rule change excludes
MRUT from the list of products eligible
to receive Break-Up Credits in orders
executed in AIM, SAM, FLEX AIM, and
FLEX SAM, by amending the Break-Up
Credits table to exclude MRUT along
with the products currently excluded—
Underlying Symbol List A, Sector
Indexes, DJX, MXEA, MXEF and XSP.
The Exchange also proposes to
exclude Firm transactions in MRUT
from the Clearing TPH Fee Cap.
Specifically, it amends footnote 22
(appended to the Clearing TPH Fee Cap
table) to provide that all non-facilitation
business executed in AIM or open
outcry, or as a QCC or FLEX transaction,
transaction fees for Clearing TPH
Proprietary and/or their Non-TPH
Affiliates in all products except MRUT,
XSP, Sector Indexes and Underlying
Symbol List A (which includes SPX), in
the aggregate, are capped at $55,000 per
month per Clearing TPH. It additionally
updates footnote 11 (which is also
appended to the Clearing TPH Fee Cap
table) to provide that the Clearing TPH
Fee Cap in all products except MRUT,
XSP, Underlying Symbol List A and
Sector Indexes (the ‘‘Fee Cap’’),11 among
other programs, apply to (i) Clearing
TPH proprietary orders (‘‘F’’ capacity
code), and (ii) orders of Non-TPH
Affiliates of a Clearing TPH.
The Exchange proposes to exclude
MRUT from eligibility for the Order
Router Subsidy (‘‘ORS’’) and Complex
Order Router Subsidy (‘‘CORS’’)
Programs, in which Participating TPHs
10 See
supra note 8.
Exchange notes that it also corrects an
error in footnote 11 by moving the abbreviated
definition for the Clearing TPH Fee Cap (‘‘Fee Cap’’)
[sic], to the end of the clause describing the cap.
11 The
E:\FR\FM\16MRN1.SGM
16MRN1
14497
Federal Register / Vol. 86, No. 49 / Tuesday, March 16, 2021 / Notices
or Participating Non-Cboe TPHs may
receive a payment from the Exchange
for every executed contract routed to the
Exchange through their system in
certain classes. Specifically, the
proposed rule change updates the ORS/
CORS Program tables to provide that
ORS/CORS participants whose total
aggregate non-customer ORS and CORS
volume is greater than 0.25% of the total
national volume (excluding volume in
options classes included in Underlying
Symbol List A, Sector Indexes, DJX,
MRUT, MXEA, MXEF or XSP) will
receive an additional payment for all
executed contracts exceeding that
threshold during a calendar month, and
updates footnote 30 (appended to the
ORS/CORS Program tables) to
accordingly provide that Cboe Options
does not make payments under the
program with respect to executed
contracts in options classes included in
Underlying Symbols List A, Sector
Indexes, DJX, MRUT, MXEA, MXEF or
XSP.12
Premium level
Mid term
Long term
14 days or less
15 days to 60 days
61 days to 270 days
271 days or greater
Width
Width
jbell on DSKJLSW7X2PROD with NOTICES
Size
$0.08
0.15
0.15
0.45
1.25
3.00
8.00
supra note 8.
U.S.C. 78f.
Width
1
1
1
1
1
1
1
$0.10
0.15
0.18
0.20
0.55
2.00
8.00
1
1
1
1
1
1
1
Size
$0.15
0.15
0.20
0.35
0.50
1.75
8.00
1
1
1
1
1
1
1
$0.80
0.85
1.00
1.25
2.25
4.00
8.00
Size
1
1
1
1
1
1
1
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,13
Monthly ADV
MRUT ADV
in
general, and furthers the objectives of
payment
Section 6(b)(4),14 in particular, as it is
0–24,999 contracts ...............
$0.00 designed to provide for the equitable
25,000–49,999 contracts ......
25,000 allocation of reasonable dues, fees and
50,000–100,000 contracts ....
35,000 other charges among its Members and
Greater than 100,000 conissuers and other persons using its
tracts .................................
50,000 facilities. The Exchange also believes
that the proposed rule change is
The heightened requirements and
consistent with the objectives of Section
MRUT Volume Incentive Pool offered
6(b)(5) 15 requirements that the rules of
by the MRUT LMM Incentive Program
an exchange be designed to prevent
are designed to incentivize LMMs to
fraudulent and manipulative acts and
provide significant liquidity in MRUT
practices, to promote just and equitable
options during the trading day upon
principles of trade, to foster cooperation
their listing and trading on the
and coordination with persons engaged
Exchange, which, in turn, would
in regulating, clearing, settling,
provide greater trading opportunities,
processing information with respect to,
added market transparency and
and facilitating transactions in
enhanced price discovery for all market securities, to remove impediments to
participants in MRUT.
and perfect the mechanism of a free and
14 15
13 15
15 15
Jkt 253001
Size
MRUT provided for that month per the
MRUT Volume Incentive Pool program
below:
12 See
16:52 Mar 15, 2021
Finally, the Exchange proposes to
adopt a financial program for LMMs
appointed in MRUT options. As
proposed, the MRUT LMM Incentive
Program provides that if the appointed
LMM in MRUT provides continuous
electronic quotes during Regular
Trading Hours that meet or exceed the
proposed heightened quoting standards
(below) in at least 99% of the series
90% of the time in a given month, the
LMM will receive a payment for that
month in the amount of $20,000 (or prorated amount if an appointment begins
after the first trading day of the month
or ends prior to the last trading day of
the month).
Near term
Meeting or exceeding the heightened
quoting standards in MRUT, as
proposed, to receive the proposed
compensation payment is optional for
an MRUT LMM. The Exchange may
consider other exceptions to this
quoting standard based on demonstrated
legal or regulatory requirements or other
mitigating circumstances. In calculating
whether an LMM met the heightened
quoting standard each month, the
Exchange will exclude from the
calculation in that month the business
day in which the LMM missed meeting
or exceeding the heightened quoting
standard in the highest number of
series. In addition to the above rebate,
if the appointed LMM meets or exceeds
the above heightened quoting standards
in a given month and provides an
average daily volume (‘‘ADV’’) in MRUT
that meets or exceeds 25,000 contracts
in a given month, the LMM will receive
the Monthly ADV Payment amount that
corresponds to the level of ADV in
VerDate Sep<11>2014
MRUT LMM Program
Expiring
Width
$0.00–$1.00 .....................
$1.01–$3.00 .....................
$3.01–$5.00 .....................
$5.01–$10.00 ...................
$10.01–$25.00 .................
$25.01–$100.00 ...............
Greater than $100.00 .......
and trading for MRUT options to be
eligible for the Marketing Fee Program
and may determine in the future to
submit a fee filing to add MRUT to the
Marketing Fee Program if the Exchange
believes it would potentially generate
more customer order flow in MRUT.
The Exchange notes that excluding
MRUT transactions from the abovedescribed programs is consistent with
the manner in which XSP transactions
are also excluded each of these
programs today.
Additionally, the Exchange proposes
to exclude MRUT from the Marketing
Fee Program by updating the Marketing
Fee table to provide that the marketing
fee will be assessed on transactions of
Market-Makers (including DPMs and
LMMs), resulting from customer orders
at the per contract rate provided above
on all classes of equity options, options
on ETFs, options on ETNs and index
options, except that the marketing fee
shall not apply to Sector Indexes, DJX,
MXEA, MXEF or Underlying Symbol
List A. The Exchange notes that, in this
way, MRUT will be treated as most of
the Exchange’s other exclusively listed
products that are currently excluded
from the Marketing Fee Program. The
Exchange does believe that it is
necessary at the point of newly listing
PO 00000
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(5).
Frm 00095
Fmt 4703
Sfmt 4703
E:\FR\FM\16MRN1.SGM
16MRN1
14498
Federal Register / Vol. 86, No. 49 / Tuesday, March 16, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
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.
Standard Transaction Rates and
Surcharges
The Exchange believes that the
proposed amendments to the Fees
Schedule in connection with standard
transaction rates and surcharges for
MRUT transactions are reasonable,
equitable and not unfairly
discriminatory. Specifically, the
Exchange believes that it is reasonable
to assess fees for Customer, MarketMaker, Firm, and Non-Customer orders
in MRUT that reflect approximately 1/
10th of the transactions fees assessed for
corresponding orders in RUT because of
the relation between MRUT options and
RUT options, wherein MRUT options
overlie an index 1/10th the value of the
index that underlies RUT options.
Additionally, the Exchange believes it is
reasonable to waive the transaction fees
for Market-Maker and Firm orders in
MRUT options through August 31, 2021
because the waiver is designed to
encourage order flow from these market
participants in a newly listed and traded
options class on the Exchange. The
Exchange recognizes that MarketMakers and Firms each provide
important and distinct sources of
liquidity to the Exchange and increased
liquidity provides more trading
opportunities, in turn, signaling
additional corresponding increase in
order flow from other market
participants, and, as a result,
contributing towards a robust, wellbalanced market ecosystem. The
Exchange also believes that it is
reasonable to assess a lower Index
License fee on transactions in MRUT
because MRUT is a new product and the
Exchange wishes to promote and
encourage trading of MRUT once listed.
The Exchange notes that, similar to
assessing a lower Index License fee, the
Index License fees for certain options in
other classes are waived in order to
continue to promote their trading and
growth.16 Moreover, the Exchange
believes it is reasonable to assess the
same FLEX and Exotic surcharge rates to
orders in MRUT as it does for XSP and
to exclude MRUT from the Complex
Surcharge and AIM Contra Fee (and to
apply the standard transaction fees for
MUT orders in lieu of the AIM Contra
Fee) because these proposed surcharges
and surcharge exclusions will provide
consistency between the fees assessed
16 See
supra note 5.
VerDate Sep<11>2014
16:52 Mar 15, 2021
Jkt 253001
for orders in MRUT and XSP, which are
both mini-index options designed to
offer investors lower cost options to
obtain the potential benefits of options
on a broad-based index options and
intended for the same investor-base.
Therefore, the Exchange believes it is
appropriate to amend the Fees Schedule
in a manner that similarly situates fees
assessed for orders in MRUT options
with those assessed for orders in XSP
options.
The Exchange believes the proposed
standard transaction rates and
surcharges (or exclusions) are equitable
and not unfairly discriminatory because
they will apply automatically and
uniformly to all Customer, Firm,
Market-Maker and/or Non-Customer,
orders, as applicable, in MRUT options.
The Exchange also believes that it is
equitable and not unfairly
discriminatory to waive the transaction
fees (through August 31, 2021) for
Market-Maker and Firm orders in MRUT
because, as stated above, the Exchange
recognizes that these market
participants can provide key and
distinct sources of liquidity, which is
particularly important for a newly listed
and traded options class on the
Exchange. 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
also recognizes that Firms 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. The Exchange
notes too that Market-Makers and Firms
take on a number of obligations that
other market participants do not have.
For example, unlike other market
participants, Market-Makers take on
quoting obligations and other market
making requirements and Firms must
have higher capital requirements, clear
trades for other market participants, and
must be members of OCC.
Fees Programs
The Exchange believes that the
proposed updates to the Fees Schedule
in connection with the application of
certain fees programs to transactions in
MRUT options are reasonable, equitable
and not unfairly discriminatory.
Particularly, the Exchange believes it is
reasonable to exclude transactions in
MRUT options from the Liquidity
Provider Sliding Scale, the VIP, the
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
Break-Up Credits table, the Clearing
TPH Fee cap, and the ORS/CORS
programs in the same manner in which
transactions in XSP options are
currently excluded from the same
programs today as the Exchange
believes it is appropriate to update these
fees programs in a manner that similarly
situates transactions in MRUT with
transactions in XSP, as both mini-index
options are designed to offer investors
lower cost options to obtain the
potential benefits of options on a broadbased index options and are intended
for the same investor base. Additionally,
the Exchange believes that excluding
MRUT from the Marketing Fee Program
is reasonable most of the Exchange’s
other proprietary products are currently
excluded from the Marketing Fee
Program. The Exchange does believe
that it is necessary at the point of newly
listing and trading for MRUT
transactions to be eligible for the
Marketing Fee Program and may
determine in the future to submit a fee
filing to add MRUT to the Marketing Fee
Program if the Exchange believes it
would potentially generate more
customer order flow in MRUT options.
The Exchange believes that excluding
MRUT transactions from certain fees
programs is equitable and not unfairly
discriminatory because the programs
will equally not apply to, or exclude in
the same manner, all market
participants’ orders in MRUT options.
The Exchange notes that the proposed
rule change does not alter any of the
existing program rates or volume
calculations, but instead, merely
proposes not to include transactions in
MRUT in those programs and volume
calculations in the same way that
transactions in XSP options are not
currently included, or, regarding the
Marketing Fee Program, in the same way
transactions in most of the Exchange’s
other exclusively listed products are not
currently included.
MRUT LMM Program
The Exchange believes the proposed
MRUT LMM Incentive Program is
reasonable, equitable and not unfairly
discriminatory. Particularly, the
proposed MRUT LMM Incentive
Program is a reasonable financial
incentive program because the proposed
heightened quoting standards and rebate
amount for meeting the heightened
quoting standards in MRUT series are
reasonably designed to incentivize an
appointed LMM to meet the proposed
heightened quoting standards during
RTH for MRUT, thereby providing
liquid and active markets, which
facilitates tighter spreads, increased
trading opportunities, and overall
E:\FR\FM\16MRN1.SGM
16MRN1
Federal Register / Vol. 86, No. 49 / Tuesday, March 16, 2021 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
enhanced market quality to the benefit
of all market participants, particularly
in a newly listed and traded product on
the Exchange during the trading day.
The Exchange believes that the
proposed heightened quoting standards
are reasonable because they are similar
to the detail and format (specific
expiration categories and corresponding
premiums, quote widths, and sizes) of
the heightened quoting standards
currently in place for MSCI LMMs,
SPESG LMMs, GTH SPX/SPXW LMMs
and GTH VIX LMMs.17 For example, the
expiration categories are the same as
those for the GTH VIX LMM heightened
quoting standards. The Exchange
believes the proposed smaller quote
widths and sizes in the proposed
heightened quoting standards for MRUT
LMMs reasonably reflect what the
Exchanges believes will be typical
market characteristics in MRUT options,
given their smaller notional value and
minimum increments and general retail
base, thus smaller, retail-sized orders.
Moreover, the Exchange believes that
the proposed $20,000 monthly rebate for
an LMM that meets the proposed
heightened quoting standards in MRUT
in a month is reasonable and equitable
as it equal or comparable to the rebates
offered for other LMM incentive
programs for other proprietary
products.18 For example, the MSCI
LMM Incentive Program also offers
$20,000 per month for each MSCI series
in which the appointed LMM meets the
given heighten quoting standards. The
Exchange also believes it is reasonable
to offer an additional payment that
corresponds to an MRUT LMM’s level of
ADV in MRUT options, if it meets the
heightened quoting standards, because
the proposed MRUT Volume Incentive
Pool is a volume-based incentive
designed to further encourage LMMs to
provide significant liquidity in MRUT
options during the trading day, which is
particularly important for a newly listed
and traded options class on the
Exchange. The Exchange also offers
many other volume-based incentives in
the Fees Schedule.19
Finally, the Exchange believes it is
equitable and not unfairly
discriminatory to offer the financial
17 See Cboe Options Fees Schedule, ‘‘MSCI LMM
Incentive Program’’, ‘‘GTH VIX/VIXW LMM
Incentive Program’’, ‘‘GTH SPX/SPXW LMM
Incentive Program’’, and ‘‘RTH SPESG LMM
Incentive Program’’.
18 See id.
19 See e.g., Cboe Options Fees Schedule, Volume
Incentive Program table, Liquidity Provider Sliding
Scale table, Cboe Options Clearing Trading Permit
Holder Proprietary Products Sliding Scale table,
and Floor Broker ADV Discount table, each of
which offers reduced transaction fees for meeting
various levels of options volume.
VerDate Sep<11>2014
16:52 Mar 15, 2021
Jkt 253001
incentive to MRUT LMMs pursuant to
the proposed MRUT LMM Incentive
Program, because it will benefit all
market participants trading MRUT
during RTH by encouraging the LMMs
to satisfy the heightened quoting
standard, which incentivizes
continuous increased liquidity and
thereby may provide more trading
opportunities and tighter spreads.
Indeed, the Exchange notes that its
LMMs serve a crucial role in providing
quotes and the opportunity for market
participants to trade MRUT, which can
lead to increased volume, providing for
robust markets. The Exchange
ultimately wishes to sufficiently
incentivize LMMs to provide liquid and
active markets in the newly listed and
traded MRUT options during the trading
day to encourage liquidity, thereby
protecting investors and the public
interest. The Exchange also notes that
an LMM may have added costs each
month that it needs to undertake in
order to satisfy that heightened quoting
standard (e.g., having to purchase
additional logical connectivity). The
Exchange believes the proposed
program is equitable and not unfairly
discriminatory because similar
programs currently exist for LMMs in
other proprietary products,20 and the
proposed program will equally apply to
any TPH that is appointed as a MRUT
LMM. Additionally, if an LMM does not
satisfy the heightened quoting standard
in MRUT for any given month, then it
simply will not receive the offered
payment for that month.
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 proposed MRUT
transactions fee and surcharge amounts
for each separate type of market
participant will be assessed
automatically and uniformly to all such
market participants, i.e., all qualifying
Customer orders in MRUT will be
assessed the same amount, all MarketMaker orders in MRUT will be assessed
the same amount, and so on. Likewise,
the proposed rule change will uniformly
exclude all transactions in MRUT from
certain programs and fees/surcharges
(i.e., the AIM Contra Fee and Complex
20 See
PO 00000
supra note 17.
Frm 00097
Fmt 4703
Sfmt 4703
14499
Surcharge), as it currently does for XSP
options or as it does for the Exchange’s
other proprietary products. The
Exchange does not believe that waiving
the MRUT transaction fees for MarketMakers and Firms in the first six months
of MRUT options listing and trading on
the Exchange will impose any burden
on intramarket competition because
these participants may, as discussed
above, provide key and distinct sources
of liquidity, which is particularly
important for a newly listed and traded
options class on the Exchange. Also,
Market-Makers and Firms take on a
number of obligations that other market
participants do not have. Unlike other
market participants, Market-Makers take
on quoting obligations and other market
making requirements and Firms must
have higher capital requirements, clear
trades for other market participants, and
must be members of OCC. The Exchange
also does not believe that the proposed
LMM incentive program for MRUT
options would impose any burden on
intramarket competition because it
applies to all LMMs appointed to MRUT
in a uniform manner, in the same way
similar programs apply to LMMs in
other proprietary products today. To the
extent these LMMs receive a benefit that
other market participants do not, as
stated, LMMs have different obligations
and are held to different standards. For
example, LMMs play a crucial role in
providing active and liquid markets in
their appointed products, especially in
the newly developing MRUT market,
thereby providing a robust market
which benefits all market participants.
Such Market-Makers also have
obligations and regulatory requirements
that other participants do not have.
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
because the propose fees assessed and
rebates offered apply to a product
exclusively listed on the Exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any written
comments from members or other
interested parties.
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)
E:\FR\FM\16MRN1.SGM
16MRN1
14500
Federal Register / Vol. 86, No. 49 / Tuesday, March 16, 2021 / Notices
of the Act 21 and paragraph (f) of Rule
19b–4 22 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:
jbell on DSKJLSW7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2021–015 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–2021–015. 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–2021–015 and
should be submitted on or before April
6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–05348 Filed 3–15–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91291; File No. SR–DTC–
2021–002]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of a Proposed Rule Change To
Revise the Clearing Agency
Investment Policy
March 10, 2021.
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 March 8,
2021, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared by the clearing
agency. The Commission is publishing
this notice to solicit comments on the
proposed rule change from interested
persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change would
revise the Clearing Agency Investment
Policy (‘‘Investment Policy’’) of The
Depository Trust Company (‘‘DTC’’) and
its affiliates, National Securities
Clearing Corporation (‘‘NSCC’’) and
Fixed Income Clearing Corporation
(‘‘FICC,’’ and together with DTC and
NSCC, the ‘‘Clearing Agencies’’) in order
to (1) enhance the methodology for
determining investment limits for
investments in bank deposits, and (2)
clarify the description of certain
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
21 15
U.S.C. 78s(b)(3)(A).
22 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
16:52 Mar 15, 2021
1 15
Jkt 253001
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
investable funds of the Government
Securities Division of FICC (‘‘GSD’’), as
described in greater detail below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency 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
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The Clearing Agencies are proposing
to revise the Investment Policy, which
was adopted for each clearing agency in
December 2016 3 and is maintained in
compliance with Rule 17Ad–22(e)(16)
under the Act,4 in order to (1) enhance
the methodology for determining
investment limits for investments in
bank deposits, and (2) clarify the
description of certain investable funds
of GSD, as described in greater detail
below.
Overview of the Investment Policy
The Investment Policy governs the
management, custody and investment of
cash deposited to the respective NSCC
and FICC Clearing Funds, and the DTC
Participants Fund,5 the proprietary
liquid net assets (cash and cash
equivalents) of the Clearing Agencies,
and other funds held by the Clearing
Agencies pursuant to their respective
rules.
3 See Securities Exchange Act Release No. 79528
(December 12, 2016), 81 FR 91232 (December 16,
2016) (SR–DTC–2016–007, SR–FICC–2016–005,
SR–NSCC–2016–003).
4 17 CFR 240.17Ad–22(e)(16). As discussed in
this filing, the Investment Policy also addresses
compliance with the requirements of Rule 17Ad–
22(e)(3). 17 CFR 240.17Ad–22(e)(3).
5 The respective Clearing Funds of NSCC and
FICC, and the DTC Participants Fund are described
further in the Rules & Procedures of NSCC (‘‘NSCC
Rules’’), the DTC Rules, By-laws and Organization
Certificate (‘‘DTC Rules’’), the Clearing Rules of the
Mortgage-Backed Securities Division of FICC
(‘‘MBSD Rules’’) or the Rulebook of the Government
Securities Division of FICC (‘‘GSD Rules’’),
respectively, available at https://dtcc.com/legal/
rules-and-procedures. See Rule 4 (Clearing Fund) of
the NSCC Rules, Rule 4 (Participants Fund and
Participants Investment) of the DTC Rules, Rule 4
(Clearing Fund and Loss Allocation) of the GSD
Rules and Rule 4 (Clearing Fund and Loss
Allocation) of the MBSD Rules.
E:\FR\FM\16MRN1.SGM
16MRN1
]]>Agencies
[Federal Register Volume 86, Number 49 (Tuesday, March 16, 2021)]
[Notices]
[Pages 14494-14500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05348]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91288; File No. SR-CBOE-2021-015]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Update
its Fees Schedule in Connection With the Exchange's Plans To List and
Trade Options on the Mini-RUT Index (``MRUT'' or ``Mini-RUT'')
March 10, 2021.
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 March 1, 2021, 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 Options'') proposes
to update its Fees Schedule in connection with the Exchange's plans to
list and trade options on the Mini-RUT Index (``MRUT'' or ``Mini-
RUT''). 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
[[Page 14495]]
the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule in connection with
its plans to list and trade MRUT options, effective March 1, 2021.
Background
MRUT options are options on the Mini-RUT Index, the value of which
is 1/10th the value of the Russell 2000 (``RUT'') Index. The Russell
2000 Index measures the performance of small-cap segment of the U.S.
equity universe. It is a subset of the Russell 3000 Index and includes
approximately 2,000 U.S.-based securities based on a combination of
their market cap and current index membership. The Russell 2000 Index
is constructed to provide a comprehensive and unbiased small-cap
barometer and is completely reconstituted annually to ensure larger
stocks do not distort the performance and characteristics of the true
small-cap opportunity set. The Russell 2000 Index is a commonly used
benchmark for mutual funds that identify themselves as ``small-cap,''
and much like the S&P 500 Index (``SPX''), is used to benchmark large
capitalization stocks. The Exchange understands that investors often
use Russell 2000 Index-related products to diversify their portfolios
and benefit from market trends. RUT options currently offer these
benefits to investors but may be expensive given their larger notional
value and are therefore primarily used by institutional market
participants. By contrast, MRUT options are reduced-value options (1/
10th) compared to RUT options that will offer individual investors
lower cost options to obtain the potential benefits of options on the
Russell 2000 Index.
The Exchange believes that investors will benefit from the
availability of Mini-RUT option contracts by making options overlying
the higher-valued RUT Index more readily available as an investing tool
and at more affordable prices for investors. The Exchange also believes
that the investor-base for MRUT options are likely to be the same
investor-base for Mini-SPX options (``XSP''), which are also
proprietary, reduced-value options on a broad-based index (SPX), as
they are both designed to provide low-cost means to hedge investors'
portfolios in connection with higher-value broad-based indexes (i.e.,
the RUT and SPX Index) with a smaller outlay of capital. As such, the
Exchange will allow the same type of expirations, settlement and
exercise style, minimum increments, strike price intervals and Market-
Maker appointment weights for MRUT options as it currently does for XSP
options and anticipates that MRUT options will have the same investor
base as XSP options.\3\ The Exchange now proposes to amend its Fees
Schedule to accommodate the planned listing and trading of MRUT
options. The Exchange notes that because both MRUT and XSP are mini-
index options intended for the same investor-base, the majority of the
proposed changes amend the Fees Schedule in connection with trading in
MRUT options in a manner that is generally consistent with the way in
which existing transactions fees and programs currently apply to
trading in XSP options.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release Nos. 90748 (December 21,
2020), 85 FR 85759 (December 29, 2021) (SR-CBOE-2020-118); and 91067
(February 5, 2021), 86 FR 9108 (February 11, 2021) (SR-CBOE-2020-
118) [sic].
---------------------------------------------------------------------------
Standard Transaction Rates and Surcharges
First, the Exchange proposes to adopt certain standard transaction
fees in connection with MRUT options in a manner that closely aligns
the fees assessed for MRUT options with that of the fees assessed for
RUT options. As described above, MRUT options and RUT options track the
same underlying index, yet MRUT options are 1/10th the size of standard
RUT options contracts. As such, the proposed rule change adopts certain
fees for MRUT options in the Rate Table for All Products Excluding
Underlying Symbol A \4\ that are approximately 1/10th of the fees
currently assessed for RUT options, as follows:
---------------------------------------------------------------------------
\4\ Underlying Symbol List A includes OEX, XEO, RUT, RLG, RLV,
RUI, UKXM, SPX (includes SPXW), SPESG and VIX. See Cboe Options Fees
Schedule, Footnote 34.
---------------------------------------------------------------------------
Adopts fee code CQ, appended to all Customer (capacity
``C'') orders in MRUT options and assesses a fee of $0.02 per contract.
This proposed fee is approximately 1/10th of the fees assessed for
Customer orders in RUT options ($0.18).
Adopts fee code FM, appended to all Clearing Trading
Permit Holder (``TPHs'') (capacity ``F'') and for Non-TPH Affiliate of
a Clearing TPH (capacity ``L'') (collectively, ``Firms'') orders in
MRUT options and assesses a fee of $0.02 per contract. The proposed fee
is approximately 1/10th of the fees assessed for Firm orders in RUT
options ($0.26);
Adopts fee code MM, which is appended to all Market-Maker
(capacity ``M'') orders in MRUT options and assesses a fee of $0.03 per
contract. The proposed fee is approximately 1/10th of the fees assessed
for Market-Maker orders in RUT options ($0.30); and
Adopts fee code BM, appended to all Broker-Dealer
(capacity ``B''), Joint Back-Office (capacity ``J''), Non-TPH Market-
Maker (capacity ``N''), and Professional (capacity ``U'')
(collectively, ``Non-Customers'') orders in MRUT options and assesses a
fee of $0.04 per contract. The proposed fee is approximately 1/10th of
the difference between the two rates assessed for Non-Customer orders
in RUT options ($0.25 for manual and AIM transactions and $0.65 for
non-AIM electronic transactions).
The Exchange also proposes to waive the proposed MRUT transaction
fees for Firms and Market-Makers through August 31, 2021. Specifically,
proposed footnote 32 (appended to MRUT options for Market-Maker and
Firm transaction fees in the Rate Table--All Products Excluding
Underlying Symbol List A) provides that transaction fees for orders
executed in MRUT options with a capacity code of ``F'', ``L'', or ``M''
will be waived through August 31, 2021. The proposed waiver is intended
to encourage liquidity in a newly listed and traded product on the
Exchange.
In addition to the above transaction fees, the proposed rule change
also adopts certain surcharges to MRUT transactions within the Rate
Table--All Products Excluding Underlying Symbol List A. The proposed
rule change applies an Index License Surcharge Fee of $0.02 to all
Firm, Market-Maker and Non-Customer transactions in MRUT options.
Currently, the Index License Surcharge Fee assesses a $0.10 charge for
transactions in DJX, MXEA and MXEF options. The proposed lower Index
License Surcharge rate for MRUT options is intended to promote and
encourage trading of MRUT options once listed. The Exchange notes that
this is similar to lower (or waived) Index License fees for other
options classes in order to similarly continue to promote their trading
and growth.\5\
---------------------------------------------------------------------------
\5\ See e.g. Securities Exchange Act Release No 90093 (October
5, 2020), 85 FR 64189 (October 9, 2020) (SR-CBOE-2020-088), which
provides that ``[t]he Exchange does not at this time propose to
assess the Index License fee on transactions in SPESG in order to
promote and encourage trading of SPESG once listed.''; and
Securities Exchange Act Release No. 87953 (January 13, 2020), 85 FR
3091 (January 17, 2020) (SR-CBOE-2020-001), which waived permanently
the Index License fees for transactions in Sector Index options to
continue to encourage their growth and trading.
---------------------------------------------------------------------------
[[Page 14496]]
The proposed rule change adds MRUT options to the list of options,
which currently includes XSP, for which the FLEX Surcharge Fee of $0.10
(capped at $250 per trade) applies to electronic FLEX orders executed
by all capacity codes.\6\ The proposed rule change adopts an Exotic
Surcharge of $0.03 for Customer transactions in MRUT, which is
consistent with the Exotic Surcharge currently assessed for Customer
transactions in XSP. Additionally, the Exchange proposes to exclude
MRUT orders from the AIM Contra Fee by amending footnote 18 (appended
to the AIM Contra Fee) to provide that the AIM Contra Execution Fee
applies to all orders (excluding facilitation orders, per footnote 11)
in all products, except MRUT, XSP,\7\ Sector Indexes and Underlying
Symbol List A, executed in the Automated Improvement Mechanism
(``AIM''), Solicitation Auction Mechanism (``SAM''), FLEX AIM and FLEX
SAM auctions, that were initially entered as the contra party to an
Agency/Primary Order. Applicable standard transaction fees will apply
to AIM, SAM, FLEX AIM and FLEX SAM executions in MRUT, XSP, Sector
Indexes and Underlying Symbol List A. The Exchange also proposes to
exclude Firm, Market-Maker and Non-Customer complex orders in MRUT from
the Complex Surcharge by amending footnote 35 (appended to the Complex
Surcharge) to provide that the Complex Surcharge applies per contract
per side surcharge for noncustomer complex order executions that remove
liquidity from the COB and auction responses in the Complex Order
Auction (``COA'') and AIM in all classes except MRUT, XSP, Sector
Indexes and Underlying Symbol List A. The proposed FLEX and Exotic
surcharges and exclusion from the AIM Contra Fee (and, instead, the
application of the proposed standard transaction fees) and Complex
Surcharge in connection with transactions in MRUT will provide
consistency with the fees and exclusions currently applicable to
transactions in XSP.
---------------------------------------------------------------------------
\6\ The FLEX Surcharge Fee will only be charged up to the first
2,500 contracts per trade. See Cboe Options Fees Schedule, Footnote
17.
\7\ The proposed rule change also makes clear in the first
sentence of footnote 18 that the AIM Contra Execution Fee is not
applicable to transaction in XSP. This is currently the case and is
clear in the subsequent language within footnote 18 as well as the
manner in which the fees are presented in Rate Table--All Products
Excluding Underlying Symbol List A.
---------------------------------------------------------------------------
Fees Programs
The proposed rule change excludes MRUT volume from the Liquidity
Provider Sliding Scale, which offers credits on Market-Maker orders
where a Market-Maker achieves certain volume thresholds based on total
national Market-Maker volume in all underlying symbols, excluding
Underlying Symbol List A and XSP, during the calendar month.
Specifically, the proposed rule change updates the Liquidity Provider
Sliding Scale table to provide that volume thresholds are based on
total national Market-Maker volume in all underlying symbols excluding
Underlying Symbol List A, MRUT and XSP during the calendar month, and
that it applies in all underlying symbols excluding Underlying Symbol
List A, MRUT and XSP. The proposed rule change also updates footnote 10
(appended to the Liquidity Provider Sliding Scale) to provide that the
Liquidity Provider Sliding Scale applies to Liquidity Provider (Cboe
Options Market-Maker, DPM and LMM) transaction fees in all products
except (1) Underlying Symbol List A (34), MRUT and XSP,\8\ and (2)
volume executed in open outcry.\9\
---------------------------------------------------------------------------
\8\ The proposed rule change corrects an inadvertent grammatical
error in footnote 10 in connection with the exclusion of XSP from
the Liquidity Provider Sliding Scale.
\9\ The proposed rule change also updates footnote 6, which is
appended to the Liquidity Provider Sliding Scale Program, the VIP,
and the ORS/CORS Programs to reflect the exclusion of MRUT options
from these programs in the same manner as the options classes
currently excluded from these programs. Specifically, amended
footnote 6 provides that in the event of a Cboe Options System
outage or other interruption of electronic trading on Cboe Options
that lasts longer than 60 minutes, the Exchange will adjust the
national volume in all underlying symbols excluding Underlying
Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, DJX and XSP for the
entire trading day.
---------------------------------------------------------------------------
The proposed rule change updates the Volume Incentive Program
(``VIP'') table to exclude MRUT volume from the VIP, which currently
offers a per contract credit for certain percentage threshold levels of
monthly Customer and Non-Customer volume in all underlying symbols,
excluding Underlying Symbol List A, Sector Indexes, DJX, MXEA, MXEF and
XSP. The proposed rule change also amends footnote 36 (appended to the
VIP table) to reflect the proposed exclusion of MRUT from the VIP by
providing (in relevant part) that: The Exchange shall credit each
Trading Permit Holder the per contract amount resulting from each
public customer (``C'' capacity code) order transmitted by that Trading
Permit Holder which is executed electronically on the Exchange in all
underlying symbols excluding Underlying Symbol List A, Sector Indexes,
DJX, MRUT, MXEA, MXEF, XSP, QCC trades, public customer to public
customer electronic complex order executions, and executions related to
contracts that are routed to one or more exchanges in connection with
the Options Order Protection and Locked/Crossed Market Plan referenced
in Rule 5.67, provided the Trading Permit Holder meets certain
percentage thresholds in a month as described in the Volume Incentive
Program (VIP) table; the percentage thresholds are calculated based on
the percentage of national customer volume in all underlying symbols
excluding Underlying Symbol List A, Sector Indexes, MRUT, MXEA, MXEF,
DJX and XSP entered and executed over the course of the month; and in
the event of a Cboe Options System outage or other interruption of
electronic trading on Cboe Options, the Exchange will adjust the
national customer volume in all underlying symbols excluding Underlying
Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, DJX and XSP for the
entire trading day.\10\
---------------------------------------------------------------------------
\10\ See supra note 8.
---------------------------------------------------------------------------
The proposed rule change excludes MRUT from the list of products
eligible to receive Break-Up Credits in orders executed in AIM, SAM,
FLEX AIM, and FLEX SAM, by amending the Break-Up Credits table to
exclude MRUT along with the products currently excluded--Underlying
Symbol List A, Sector Indexes, DJX, MXEA, MXEF and XSP.
The Exchange also proposes to exclude Firm transactions in MRUT
from the Clearing TPH Fee Cap. Specifically, it amends footnote 22
(appended to the Clearing TPH Fee Cap table) to provide that all non-
facilitation business executed in AIM or open outcry, or as a QCC or
FLEX transaction, transaction fees for Clearing TPH Proprietary and/or
their Non-TPH Affiliates in all products except MRUT, XSP, Sector
Indexes and Underlying Symbol List A (which includes SPX), in the
aggregate, are capped at $55,000 per month per Clearing TPH. It
additionally updates footnote 11 (which is also appended to the
Clearing TPH Fee Cap table) to provide that the Clearing TPH Fee Cap in
all products except MRUT, XSP, Underlying Symbol List A and Sector
Indexes (the ``Fee Cap''),\11\ among other programs, apply to (i)
Clearing TPH proprietary orders (``F'' capacity code), and (ii) orders
of Non-TPH Affiliates of a Clearing TPH.
---------------------------------------------------------------------------
\11\ The Exchange notes that it also corrects an error in
footnote 11 by moving the abbreviated definition for the Clearing
TPH Fee Cap (``Fee Cap'') [sic], to the end of the clause describing
the cap.
---------------------------------------------------------------------------
The Exchange proposes to exclude MRUT from eligibility for the
Order Router Subsidy (``ORS'') and Complex Order Router Subsidy
(``CORS'') Programs, in which Participating TPHs
[[Page 14497]]
or Participating Non-Cboe TPHs may receive a payment from the Exchange
for every executed contract routed to the Exchange through their system
in certain classes. Specifically, the proposed rule change updates the
ORS/CORS Program tables to provide that ORS/CORS participants whose
total aggregate non-customer ORS and CORS volume is greater than 0.25%
of the total national volume (excluding volume in options classes
included in Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA,
MXEF or XSP) will receive an additional payment for all executed
contracts exceeding that threshold during a calendar month, and updates
footnote 30 (appended to the ORS/CORS Program tables) to accordingly
provide that Cboe Options does not make payments under the program with
respect to executed contracts in options classes included in Underlying
Symbols List A, Sector Indexes, DJX, MRUT, MXEA, MXEF or XSP.\12\
---------------------------------------------------------------------------
\12\ See supra note 8.
---------------------------------------------------------------------------
The Exchange notes that excluding MRUT transactions from the above-
described programs is consistent with the manner in which XSP
transactions are also excluded each of these programs today.
Additionally, the Exchange proposes to exclude MRUT from the
Marketing Fee Program by updating the Marketing Fee table to provide
that the marketing fee will be assessed on transactions of Market-
Makers (including DPMs and LMMs), resulting from customer orders at the
per contract rate provided above on all classes of equity options,
options on ETFs, options on ETNs and index options, except that the
marketing fee shall not apply to Sector Indexes, DJX, MXEA, MXEF or
Underlying Symbol List A. The Exchange notes that, in this way, MRUT
will be treated as most of the Exchange's other exclusively listed
products that are currently excluded from the Marketing Fee Program.
The Exchange does believe that it is necessary at the point of newly
listing and trading for MRUT options to be eligible for the Marketing
Fee Program and may determine in the future to submit a fee filing to
add MRUT to the Marketing Fee Program if the Exchange believes it would
potentially generate more customer order flow in MRUT.
MRUT LMM Program
Finally, the Exchange proposes to adopt a financial program for
LMMs appointed in MRUT options. As proposed, the MRUT LMM Incentive
Program provides that if the appointed LMM in MRUT provides continuous
electronic quotes during Regular Trading Hours that meet or exceed the
proposed heightened quoting standards (below) in at least 99% of the
series 90% of the time in a given month, the LMM will receive a payment
for that month in the amount of $20,000 (or pro-rated amount if an
appointment begins after the first trading day of the month or ends
prior to the last trading day of the month).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Expiring Near term Mid term Long term
-------------------------------------------------------------------------------------------------------
Premium level 14 days or less 15 days to 60 days 61 days to 270 days 271 days or greater
-------------------------------------------------------------------------------------------------------
Width Size Width Size Width Size Width Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... $0.08 1 $0.10 1 $0.15 1 $0.80 1
$1.01-$3.00..................................... 0.15 1 0.15 1 0.15 1 0.85 1
$3.01-$5.00..................................... 0.15 1 0.18 1 0.20 1 1.00 1
$5.01-$10.00.................................... 0.45 1 0.20 1 0.35 1 1.25 1
$10.01-$25.00................................... 1.25 1 0.55 1 0.50 1 2.25 1
$25.01-$100.00.................................. 3.00 1 2.00 1 1.75 1 4.00 1
Greater than $100.00............................ 8.00 1 8.00 1 8.00 1 8.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Meeting or exceeding the heightened quoting standards in MRUT, as
proposed, to receive the proposed compensation payment is optional for
an MRUT LMM. The Exchange may consider other exceptions to this quoting
standard based on demonstrated legal or regulatory requirements or
other mitigating circumstances. In calculating whether an LMM met the
heightened quoting standard each month, the Exchange will exclude from
the calculation in that month the business day in which the LMM missed
meeting or exceeding the heightened quoting standard in the highest
number of series. In addition to the above rebate, if the appointed LMM
meets or exceeds the above heightened quoting standards in a given
month and provides an average daily volume (``ADV'') in MRUT that meets
or exceeds 25,000 contracts in a given month, the LMM will receive the
Monthly ADV Payment amount that corresponds to the level of ADV in MRUT
provided for that month per the MRUT Volume Incentive Pool program
below:
------------------------------------------------------------------------
Monthly ADV
MRUT ADV payment
------------------------------------------------------------------------
0-24,999 contracts...................................... $0.00
25,000-49,999 contracts................................. 25,000
50,000-100,000 contracts................................ 35,000
Greater than 100,000 contracts.......................... 50,000
------------------------------------------------------------------------
The heightened requirements and MRUT Volume Incentive Pool offered
by the MRUT LMM Incentive Program are designed to incentivize LMMs to
provide significant liquidity in MRUT options during the trading day
upon their listing and trading on the Exchange, which, in turn, would
provide greater trading opportunities, added market transparency and
enhanced price discovery for all market participants in MRUT.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\13\ in general, and
furthers the objectives of Section 6(b)(4),\14\ 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) \15\
requirements that the rules of an exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and
[[Page 14498]]
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.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Standard Transaction Rates and Surcharges
The Exchange believes that the proposed amendments to the Fees
Schedule in connection with standard transaction rates and surcharges
for MRUT transactions are reasonable, equitable and not unfairly
discriminatory. Specifically, the Exchange believes that it is
reasonable to assess fees for Customer, Market-Maker, Firm, and Non-
Customer orders in MRUT that reflect approximately 1/10th of the
transactions fees assessed for corresponding orders in RUT because of
the relation between MRUT options and RUT options, wherein MRUT options
overlie an index 1/10th the value of the index that underlies RUT
options. Additionally, the Exchange believes it is reasonable to waive
the transaction fees for Market-Maker and Firm orders in MRUT options
through August 31, 2021 because the waiver is designed to encourage
order flow from these market participants in a newly listed and traded
options class on the Exchange. The Exchange recognizes that Market-
Makers and Firms each provide important and distinct sources of
liquidity to the Exchange and increased liquidity provides more trading
opportunities, in turn, signaling additional corresponding increase in
order flow from other market participants, and, as a result,
contributing towards a robust, well-balanced market ecosystem. The
Exchange also believes that it is reasonable to assess a lower Index
License fee on transactions in MRUT because MRUT is a new product and
the Exchange wishes to promote and encourage trading of MRUT once
listed. The Exchange notes that, similar to assessing a lower Index
License fee, the Index License fees for certain options in other
classes are waived in order to continue to promote their trading and
growth.\16\ Moreover, the Exchange believes it is reasonable to assess
the same FLEX and Exotic surcharge rates to orders in MRUT as it does
for XSP and to exclude MRUT from the Complex Surcharge and AIM Contra
Fee (and to apply the standard transaction fees for MUT orders in lieu
of the AIM Contra Fee) because these proposed surcharges and surcharge
exclusions will provide consistency between the fees assessed for
orders in MRUT and XSP, which are both mini-index options designed to
offer investors lower cost options to obtain the potential benefits of
options on a broad-based index options and intended for the same
investor-base. Therefore, the Exchange believes it is appropriate to
amend the Fees Schedule in a manner that similarly situates fees
assessed for orders in MRUT options with those assessed for orders in
XSP options.
---------------------------------------------------------------------------
\16\ See supra note 5.
---------------------------------------------------------------------------
The Exchange believes the proposed standard transaction rates and
surcharges (or exclusions) are equitable and not unfairly
discriminatory because they will apply automatically and uniformly to
all Customer, Firm, Market-Maker and/or Non-Customer, orders, as
applicable, in MRUT options. The Exchange also believes that it is
equitable and not unfairly discriminatory to waive the transaction fees
(through August 31, 2021) for Market-Maker and Firm orders in MRUT
because, as stated above, the Exchange recognizes that these market
participants can provide key and distinct sources of liquidity, which
is particularly important for a newly listed and traded options class
on the Exchange. 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 also recognizes
that Firms 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.
The Exchange notes too that Market-Makers and Firms take on a number of
obligations that other market participants do not have. For example,
unlike other market participants, Market-Makers take on quoting
obligations and other market making requirements and Firms must have
higher capital requirements, clear trades for other market
participants, and must be members of OCC.
Fees Programs
The Exchange believes that the proposed updates to the Fees
Schedule in connection with the application of certain fees programs to
transactions in MRUT options are reasonable, equitable and not unfairly
discriminatory. Particularly, the Exchange believes it is reasonable to
exclude transactions in MRUT options from the Liquidity Provider
Sliding Scale, the VIP, the Break-Up Credits table, the Clearing TPH
Fee cap, and the ORS/CORS programs in the same manner in which
transactions in XSP options are currently excluded from the same
programs today as the Exchange believes it is appropriate to update
these fees programs in a manner that similarly situates transactions in
MRUT with transactions in XSP, as both mini-index options are designed
to offer investors lower cost options to obtain the potential benefits
of options on a broad-based index options and are intended for the same
investor base. Additionally, the Exchange believes that excluding MRUT
from the Marketing Fee Program is reasonable most of the Exchange's
other proprietary products are currently excluded from the Marketing
Fee Program. The Exchange does believe that it is necessary at the
point of newly listing and trading for MRUT transactions to be eligible
for the Marketing Fee Program and may determine in the future to submit
a fee filing to add MRUT to the Marketing Fee Program if the Exchange
believes it would potentially generate more customer order flow in MRUT
options.
The Exchange believes that excluding MRUT transactions from certain
fees programs is equitable and not unfairly discriminatory because the
programs will equally not apply to, or exclude in the same manner, all
market participants' orders in MRUT options. The Exchange notes that
the proposed rule change does not alter any of the existing program
rates or volume calculations, but instead, merely proposes not to
include transactions in MRUT in those programs and volume calculations
in the same way that transactions in XSP options are not currently
included, or, regarding the Marketing Fee Program, in the same way
transactions in most of the Exchange's other exclusively listed
products are not currently included.
MRUT LMM Program
The Exchange believes the proposed MRUT LMM Incentive Program is
reasonable, equitable and not unfairly discriminatory. Particularly,
the proposed MRUT LMM Incentive Program is a reasonable financial
incentive program because the proposed heightened quoting standards and
rebate amount for meeting the heightened quoting standards in MRUT
series are reasonably designed to incentivize an appointed LMM to meet
the proposed heightened quoting standards during RTH for MRUT, thereby
providing liquid and active markets, which facilitates tighter spreads,
increased trading opportunities, and overall
[[Page 14499]]
enhanced market quality to the benefit of all market participants,
particularly in a newly listed and traded product on the Exchange
during the trading day. The Exchange believes that the proposed
heightened quoting standards are reasonable because they are similar to
the detail and format (specific expiration categories and corresponding
premiums, quote widths, and sizes) of the heightened quoting standards
currently in place for MSCI LMMs, SPESG LMMs, GTH SPX/SPXW LMMs and GTH
VIX LMMs.\17\ For example, the expiration categories are the same as
those for the GTH VIX LMM heightened quoting standards. The Exchange
believes the proposed smaller quote widths and sizes in the proposed
heightened quoting standards for MRUT LMMs reasonably reflect what the
Exchanges believes will be typical market characteristics in MRUT
options, given their smaller notional value and minimum increments and
general retail base, thus smaller, retail-sized orders. Moreover, the
Exchange believes that the proposed $20,000 monthly rebate for an LMM
that meets the proposed heightened quoting standards in MRUT in a month
is reasonable and equitable as it equal or comparable to the rebates
offered for other LMM incentive programs for other proprietary
products.\18\ For example, the MSCI LMM Incentive Program also offers
$20,000 per month for each MSCI series in which the appointed LMM meets
the given heighten quoting standards. The Exchange also believes it is
reasonable to offer an additional payment that corresponds to an MRUT
LMM's level of ADV in MRUT options, if it meets the heightened quoting
standards, because the proposed MRUT Volume Incentive Pool is a volume-
based incentive designed to further encourage LMMs to provide
significant liquidity in MRUT options during the trading day, which is
particularly important for a newly listed and traded options class on
the Exchange. The Exchange also offers many other volume-based
incentives in the Fees Schedule.\19\
---------------------------------------------------------------------------
\17\ See Cboe Options Fees Schedule, ``MSCI LMM Incentive
Program'', ``GTH VIX/VIXW LMM Incentive Program'', ``GTH SPX/SPXW
LMM Incentive Program'', and ``RTH SPESG LMM Incentive Program''.
\18\ See id.
\19\ See e.g., Cboe Options Fees Schedule, Volume Incentive
Program table, Liquidity Provider Sliding Scale table, Cboe Options
Clearing Trading Permit Holder Proprietary Products Sliding Scale
table, and Floor Broker ADV Discount table, each of which offers
reduced transaction fees for meeting various levels of options
volume.
---------------------------------------------------------------------------
Finally, the Exchange believes it is equitable and not unfairly
discriminatory to offer the financial incentive to MRUT LMMs pursuant
to the proposed MRUT LMM Incentive Program, because it will benefit all
market participants trading MRUT during RTH by encouraging the LMMs to
satisfy the heightened quoting standard, which incentivizes continuous
increased liquidity and thereby may provide more trading opportunities
and tighter spreads. Indeed, the Exchange notes that its LMMs serve a
crucial role in providing quotes and the opportunity for market
participants to trade MRUT, which can lead to increased volume,
providing for robust markets. The Exchange ultimately wishes to
sufficiently incentivize LMMs to provide liquid and active markets in
the newly listed and traded MRUT options during the trading day to
encourage liquidity, thereby protecting investors and the public
interest. The Exchange also notes that an LMM may have added costs each
month that it needs to undertake in order to satisfy that heightened
quoting standard (e.g., having to purchase additional logical
connectivity). The Exchange believes the proposed program is equitable
and not unfairly discriminatory because similar programs currently
exist for LMMs in other proprietary products,\20\ and the proposed
program will equally apply to any TPH that is appointed as a MRUT LMM.
Additionally, if an LMM does not satisfy the heightened quoting
standard in MRUT for any given month, then it simply will not receive
the offered payment for that month.
---------------------------------------------------------------------------
\20\ See supra note 17.
---------------------------------------------------------------------------
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 proposed MRUT
transactions fee and surcharge amounts for each separate type of market
participant will be assessed automatically and uniformly to all such
market participants, i.e., all qualifying Customer orders in MRUT will
be assessed the same amount, all Market-Maker orders in MRUT will be
assessed the same amount, and so on. Likewise, the proposed rule change
will uniformly exclude all transactions in MRUT from certain programs
and fees/surcharges (i.e., the AIM Contra Fee and Complex Surcharge),
as it currently does for XSP options or as it does for the Exchange's
other proprietary products. The Exchange does not believe that waiving
the MRUT transaction fees for Market-Makers and Firms in the first six
months of MRUT options listing and trading on the Exchange will impose
any burden on intramarket competition because these participants may,
as discussed above, provide key and distinct sources of liquidity,
which is particularly important for a newly listed and traded options
class on the Exchange. Also, Market-Makers and Firms take on a number
of obligations that other market participants do not have. Unlike other
market participants, Market-Makers take on quoting obligations and
other market making requirements and Firms must have higher capital
requirements, clear trades for other market participants, and must be
members of OCC. The Exchange also does not believe that the proposed
LMM incentive program for MRUT options would impose any burden on
intramarket competition because it applies to all LMMs appointed to
MRUT in a uniform manner, in the same way similar programs apply to
LMMs in other proprietary products today. To the extent these LMMs
receive a benefit that other market participants do not, as stated,
LMMs have different obligations and are held to different standards.
For example, LMMs play a crucial role in providing active and liquid
markets in their appointed products, especially in the newly developing
MRUT market, thereby providing a robust market which benefits all
market participants. Such Market-Makers also have obligations and
regulatory requirements that other participants do not have.
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 because the
propose fees assessed and rebates offered apply to a product
exclusively listed on the Exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.
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)
[[Page 14500]]
of the Act \21\ and paragraph (f) of Rule 19b-4 \22\ 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.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 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-CBOE-2021-015 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-2021-015. 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-2021-015 and should be submitted on
or before April 6, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05348 Filed 3-15-21; 8:45 am]
BILLING CODE 8011-01-P
