Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 20421-20426 [2021-07960]

Download as PDF Federal Register / Vol. 86, No. 73 / Monday, April 19, 2021 / Notices the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list. Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request’s acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request. The public portions of the Postal Service’s request(s) can be accessed via the Commission’s website (https:// www.prc.gov). Non-public portions of the Postal Service’s request(s), if any, can be accessed through compliance with the requirements of 39 CFR 3011.301.1 The Commission invites comments on whether the Postal Service’s request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II. II. Docketed Proceeding(s) 1. Docket No(s).: MC2021–83 and CP2021–86; Filing Title: USPS Request to Add Priority Mail Contract 693 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: April 13, 2021; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Kenneth R. Moeller; Comments Due: April 21, 2021. This Notice will be published in the Federal Register. jbell on DSKJLSW7X2PROD with NOTICES Erica A. Barker, Secretary. [FR Doc. 2021–07977 Filed 4–16–21; 8:45 am] BILLING CODE 7710–FW–P 1 See Docket No. RM2018–3, Order Adopting Final Rules Relating to Non-Public Information, June 27, 2018, Attachment A at 19–22 (Order No. 4679). VerDate Sep<11>2014 17:11 Apr 16, 2021 Jkt 253001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91546; File No. SR–C2– 2021–005) Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule April 13, 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 April 1, 2021, Cboe C2 Exchange, Inc. (the ‘‘Exchange’’ or ‘‘C2’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe C2 Exchange, Inc. (the ‘‘Exchange’’ or ‘‘C2’’) is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to amend the fees schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/ctwo/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 1 15 2 17 PO 00000 Fmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule to (1) amend the standard transaction fees and rebates for certain SPY, AAPL, QQQ, IWM and SLV transactions, (2) adopt tiered pricing for SPY, AAPL, QQQ, IWM and SLV Market-Maker transactions, (3) adopt a discount program for Bulk BOE Logical Ports, (4) adopt a ‘‘Definitions’’ section in the fees schedule, and (5) eliminate outdated language and obsolete facilities fees, effective April 1, 2021. The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 options venues to which market participants may direct their order flow. Based on publicly available information, no single options exchange has more than approximately 17% of the market share and currently the Exchange represents approximately 3% of the market share.3 Thus, in such a lowconcentrated and highly competitive market, no single options exchange, including the Exchange, possesses significant pricing power in the execution of option order flow. The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to fee changes. Accordingly, competitive forces constrain the Exchange’s transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. SPY, AAPL, QQQ, IWM and SLV Pricing First, the Exchange proposes to amend the transaction fee for Public Customer orders in SPY, AAPL, QQQ, IWM and SLV that remove liquidity. Currently, Public Customer orders in SPY, AAPL, QQQ, IWM and SL, that remove liquidity are assessed a standard transaction fee of $0.39 per contract and yield fee code ‘‘SC’’. The Exchange proposes to reduce the standard transaction fee to $0.37 per contract. 3 See Cboe Global Markets U.S. Options Market Volume Summary by Month (March 29, 2021), available at https://markets.cboe.com/us/options/ market_statistics/. U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00061 20421 Sfmt 4703 E:\FR\FM\19APN1.SGM 19APN1 20422 Federal Register / Vol. 86, No. 73 / Monday, April 19, 2021 / Notices The Exchange also proposes to reduce the current standard rebate for C2 Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity. Currently, C2 Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity are provided a standard rebate of $0.26 per contract and yield fee code ‘‘SM’’. The Exchange proposes to reduce the standard rebate to $0.20 per contract. The Exchange notes that the proposed changes are in line with the pricing for similar market participants in similar products on other exchanges.4 jbell on DSKJLSW7X2PROD with NOTICES SPY, AAPL, QQQ, IWM and SLV Incentive Tiers The Exchange also proposes to adopt new incentive tiers for C2 Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity under a new section in the fees schedule titled ‘‘Footnotes’’. The proposed tiered pricing would provide Trading Permit Holders (‘‘TPHs’’) opportunities to qualify for higher rebates where certain volume criteria and thresholds are met in such products. Tiered pricing provides an incremental incentive for TPHs to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Particularly, the Exchange proposes to adopt under Footnote 1, new MarketMaker Volume Tiers, which would provide enhanced rebates for qualifying C2 Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity (i.e., orders yielding fee code SM) that meet certain liquidity thresholds. First, proposed Tier 1 would provide an enhanced rebate of $0.26 per contract where a TPH: (1) Has an ADAV 5 in Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or SL) 6 equal to or greater than 50,000 contracts; or (2) has a StepUp ADAV 7 in Market-Maker orders in 4 See, e.g., MIAX Pearl Fee Schedule, Section 1 Transaction Rebates/Fees, which provides for a fee of $0.46 per contract for priority customer SPY orders that remove liquidity, $0.50 per contract for priority customer IWM and QQQ orders that remove liquidity, and $0.50 per contract for priority customer orders in Penny Classes other than SPY, QQQ and IWM orders that remove liquidity. See also Nasdaq ISE Pricing Schedule, Section 3, Footnote 5, which provides for tiered rebates for Market-Maker SPY, QQQ, and IWM orders that add liquidity between $0.00–$0.26 per contract. 5 ‘‘ADAV’’ means average daily added volume calculated as the number of contracts added, per day. 6 Fee code SL is currently appended to C2 Market Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity and are a National Best Bid or Offer (‘‘NBBO’’) Joiner or NBBO Setter and offers a rebate of $0.31 per contract for such orders. 7 ‘‘Step-Up ADAV’’ means ADAV in the relevant baseline month subtracted from current ADAV. VerDate Sep<11>2014 17:11 Apr 16, 2021 Jkt 253001 SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or SL) equal to or greater than 15,000 contracts from March 2021. The Exchange also proposes to adopt Tier 2, which would provide a higher rebate of $0.30 per contract where a TPH meets the more stringent criteria of having an ADAV in Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or SL) equal to or greater than 130,000 contracts. The Exchange notes that other exchanges offer tiered pricing incentives for similar orders.8 The proposed enhanced rebates and corresponding criteria are designed to encourage Market-Makers to increase or grow their order flow on the Exchange in SPY, AAPL, QQQ, IWM and SLV, which facilitates tighter spreads, signaling increased activity from other market participants, and thus ultimately contributes to deeper and more liquid markets and provides greater execution opportunities on the Exchange to the benefit of all market participants. BOE Bulk Logical Ports Discount By way of background, the Exchange currently offers BOE Bulk Logical Ports (‘‘BOE Bulk Ports’’), which provide users with the ability to submit single and bulk order messages to enter, modify, or cancel orders designated as Post Only Orders with a Time-in-Force of Day or GTD with an expiration time on that trading day. BOE Bulk Ports are assessed $1,500 per port, per month for the first 5 BOE Bulk Ports and thereafter assessed $2,500 per port, per month for each additional BOE Bulk Port. Each Bulk BOE Port also incurs the logical port fee indicated in the table above when used to enter up to 30,000,000 orders per trading day per logical port as measured on average in a single month. Each incremental usage of up to 30,000,000 orders per day per BOE Bulk Port will incur an additional logical port fee of $2,500 per month (‘‘incremental usage fees’’). The Exchange now proposes to adopt a discount program for BOE Bulk Ports which provides an opportunity for Market-Makers to obtain credits on their monthly BOE Bulk Port fees (excluding incremental usage fees).9 More specifically, the Exchange proposes to provide that Market-Makers would receive a discount of 30% on monthly Bulk BOE Port fees (excluding 8 See, e.g, Nasdaq ISE Pricing Schedule, Section 3, Footnote 5, which provides for tiered rebates for Market-Maker SPY, QQQ, and IWM orders that add liquidity between $0.00–$0.26 per contract. 9 While BOE Bulk Ports are available to all market participants, they are used primarily by Market Makers or firms that conduct similar business activity. PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 incremental usage fees) where a MarketMaker has (1) a Step-Up ADAV equal to or greater than 0.025% of average OCV 10 from February 2021 and (2) a ‘‘Make Rate’’ equal to or greater than 85%. The ‘‘Make Rate’’ shall be derived from a Market-Maker’s volume the previous month in all symbols using the following formula: (i) The MarketMaker’s total simple add volume divided by (ii) the Market-Maker’s total simple volume.11 Trades on the open and complex orders will be excluded from the Make Rate calculation. The Exchange will aggregate the trading activity of separate Market-Maker firms for purposes of the discount tier and make rate calculation if there is at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A. The proposed BOE Bulk Port discount is designed to attract liquidity from traditional MarketMakers and encourage Market-Makers to grow their volume. Specifically, the Exchange believes the proposal mitigates costs incurred by traditional Market-Makers that focus on adding liquidity to the Exchange (as opposed to those that provide and take, or just take). The Exchange notes that its affiliate, Cboe Exchange, Inc. (‘‘Cboe Options’’) similarly provides discounts on BOE Bulk Port fees based on a Market-Maker’s Make Rate the previous month.12 Definitions The Exchange next proposes to adopt a new ‘‘Definitions’’ section of its fees schedule. As described above, the Exchange intends to adopt new tiered pricing for certain products and a new discount program for BOE Bulk Ports which will provide TPHs opportunities to qualify for higher rebates or a discount, respectively, where certain volume criteria and thresholds are met. The volume thresholds refer to certain terms that are not currently defined in the Exchange’s fees schedule (i.e., ‘‘ADAV’’, ‘‘Step-Up ADAV’’, and ‘‘OCV’’). The Exchange believes clearly defining those terms in the fees schedule would reduce potential 10 ‘‘OCV’’ (or ‘‘OCC Customer Volume’’ means, the total equity and ETF options volume that clears in the Customer range at the Options Clearing Corporation (‘‘OCC’’) for the month for which the fees apply, excluding volume on any day that the Exchange experiences an Exchange System Disruption and on any day with a scheduled early market close. 11 For example, a TPH’s total simple add volume in March 2021 is 2,600,000 contracts and its total simple volume is 3,000,000 contracts, resulting in a Make Rate of 86.6%. As such, the TPH would receive a 30% credit on its monthly Bulk Port fees for the month of April 2021. 12 See Cboe Options Fees Schedule, MarketMaker Access Credit. E:\FR\FM\19APN1.SGM 19APN1 Federal Register / Vol. 86, No. 73 / Monday, April 19, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES confusion, increase transparency, and benefit market participants. Accordingly, the Exchange proposes to adopt the following definitions. • ‘‘ADAV’’ means average daily added volume calculated as the number of contracts added, per day. Æ ADAV is calculated on a monthly basis, excluding contracts added or removed on any day that the Exchange’s system experiences a disruption that lasts for more than 60 minutes during regular trading hours (‘‘Exchange System Disruption’’) and on any day with a scheduled early market close. Æ Routed contracts are not included in ADAV calculation. Æ With prior notice to the Exchange, a TPH may aggregate ADAV or ADV with other TPHs that control, are controlled by, or are under common control with such TPH. • ‘‘Step-Up ADAV’’ means ADAV in the relevant baseline month subtracted from current ADAV. • ‘‘OCC Customer Volume’’ or ‘‘OCV’’ means the total equity and ETF options volume that clears in the Customer range at the Options Clearing Corporation (‘‘OCC’’) for the month for which the fees apply, excluding volume on any day that the Exchange experiences an Exchange System Disruption and on any day with a scheduled early market close. The Exchange notes the proposed definitions are substantively similar to the definitions contained in one of the Exchange’s affiliate fees schedules.13 Eliminate Outdated Language and Obsolete Facilities Fees The Exchange next proposes to eliminate obsolete language under the Physical and Logical Connectivity Fees sections that reference legacy physical and logical ports that were decommissioned in 2018. Particularly, under the Physical Connectivity Fees section, the Exchange proposes to eliminate the following language ‘‘[t]hrough June 30, 2018, C2 market participants can elect to connect to C2’s trading system via either a 1 Gigabit Ethernet or a 10 Gigabit Ethernet Network Access Port. No fees will be assessed for the legacy Network Access Ports’’, as such language is no longer relevant. The Exchange also proposes to make clear that TPHs and non-TPHs only connect to C2’s trading system via Physical Ports (instead of ‘‘may also’’ connect, which was relevant only when TPHs had the option of alternatively connecting via legacy Network Access Ports). Under the Logical Connectivity Fees section, the Exchange proposes to eliminate the following language ‘‘Port fees for BOE, FIX, BOE Bulk and Drop ports will be assessed the full month rates for May for ports available for use on the new trading platform beginning May 14, 2018’’, along with another reference to May 15, 2018, as such language is also outdated and no longer relevant or necessary to maintain. Lastly, the Exchange proposes to eliminate the ‘‘Facilities Fees’’ section, which includes fees for the PULSe Workstation and related footnotes. Particularly, on January 4, 2021, the Exchange decommissioned the PULSe Workstation. Accordingly, the related PULSe Workstation fees are no longer applicable nor necessary to maintain in the fees schedule. The Exchange therefore proposes to eliminate the language to avoid potential confusion and eliminate unnecessary language 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,14 in general, and furthers the objectives of Section 6(b)(4),15 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) 16 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and, particularly, is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. As described above, the Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. In particular, the proposed changes to Exchange execution fees and rebates for certain orders in SPY, AAPL, QQQ, IWM and SLV are intended to attract 14 15 13 See Cboe EDGX Exchange, Inc. Fees Schedule, Definitions. VerDate Sep<11>2014 17:11 Apr 16, 2021 Jkt 253001 U.S.C. 78f. U.S.C. 78f(b)(4). 16 15 U.S.C. 78f.(b)(5). 15 15 PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 20423 order flow to the Exchange by continuing to offer competitive pricing. More specifically, the Exchange believes it is reasonable to reduce the current fee for Public Customers that remove liquidity in SPY, AAPL, QQQ, IWM and SLV, as such market participants will be paying lower fees for such transactions and thus may be encouraged to increase retail SPY, AAPL, QQQ, IWM and SLV order flow to the Exchange. Furthermore, the Exchange believes its proposed change is reasonable as it is competitive and in line with pricing for many of the same products at other exchanges.17 The Exchange believes the proposed change is equitable and not unfairly discriminatory as it will apply to all Public Customers equally. The Exchange also believes that it is equitable and not unfairly discriminatory to assess a lower fee for Public Customer orders in SPY, AAPL, QQQ, IWM and SLV as compared to other market participants because customer order flow enhances liquidity on the Exchange for the benefit of all market participants. Specifically, customer liquidity benefits all market participants by providing more trading opportunities, which attracts Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Moreover, the options industry has a long history of providing preferential pricing to customers, and the Exchange’s current Fee Schedule currently does so in many places, as do the fees structures of multiple other exchanges. The Exchange believes it is reasonable to reduce the current rebate for MarketMakers that add liquidity in SPY, AAPL, QQQ, IWM and SLV, as such market participants will still be receive a rebate for such orders (albeit at a lower amount). Additionally, the Exchange believes its proposed change is reasonable as it is competitive and in line with pricing for many of the same products at other exchanges.18 The Exchange also notes that is providing opportunities for Market-Makers to receive higher rebates for these same transactions via the proposed Market17 See, e.g., MIAX Pearl Fee Schedule, Section 1 Transaction Rebates/Fees, which provides for a fee of $0.46 per contract for priority customer SPY orders that remove liquidity, $0.50 per contract for priority customer IWM and QQQ orders that remove liquidity, and $0.50 per contract for priority customer orders in Penny Classes other than SPY, QQQ and IWM orders that remove liquidity. 18 See, e.g., Nasdaq ISE Pricing Schedule, Section 3, Footnote 5, which provides for tiered rebates for Market-Maker SPY, QQQ, and IWM orders that add liquidity between $0.00–$0.26 per contract. E:\FR\FM\19APN1.SGM 19APN1 20424 Federal Register / Vol. 86, No. 73 / Monday, April 19, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES Maker Volume tiers. The Exchange believes the proposed change is equitable and not unfairly discriminatory as it will apply to all Market-Makers equally. The Exchange believes adopting Market-Maker Volume Tiers for C2 Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity because they provide additional opportunities for TPHs to receive enhanced rebates on qualifying orders in a manner that incentivizes increased Market-Maker order flow in certain multiply-listed options on the Exchange. The Exchange notes that volume-based incentives and discounts have been widely adopted by exchanges 19 and are reasonable, equitable and non-discriminatory because they are open to all TPHs on an equal basis and provide additional benefits or discounts that are reasonably related to (i) the value to an exchange’s market quality and (ii) associated higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns. The Exchange believes the proposed Market-Maker Penny Volume Tiers are reasonable means to encourage MarketMakers to increase their order flow to specific multiply-listed options on the Exchange (i.e., SPY, AAPL, QQQ, IWM and SLV). The Exchange notes that increased Market-Maker activity, particularly, facilitates tighter spreads and an increase in overall liquidity provider activity, both of which signal additional corresponding increase in order flow from other market participants, contributing towards a robust, well-balanced market ecosystem, particularly in multiply-listed options on the Exchange. The Exchange also believes that proposed enhanced rebates offered under proposed Tiers 1 and 2 are reasonably based on the difficulty of satisfying the proposed tiers’ criteria and ensures the proposed rebate and thresholds appropriately reflect the incremental difficulty in achieving the Market-Maker Volume Tier. The Exchange believes that the proposed enhanced rebates are also in line with the enhanced rebates currently offered by another exchange for similar products.20 The Exchange also believes it is reasonable, equitable and not unfairly discriminatory to adopt pricing specific to certain orders in SPY, AAPL, 19 See, e.g., Nasdaq ISE Pricing Schedule, Section 3, Footnote 5, which provides for tiered rebates for Market-Maker SPY, QQQ, and IWM orders that add liquidity between $0.00–$0.26 per contract. 20 See, e.g., Nasdaq ISE Pricing Schedule, Section 3, Footnote 5, which provides for tiered rebates for Market-Maker SPY, QQQ, and IWM orders that add liquidity between $0.00–$0.26 per contract. VerDate Sep<11>2014 17:11 Apr 16, 2021 Jkt 253001 QQQ, IWM and SLV as the Exchange already offers product-specific pricing for these orders and, and as noted above, other exchanges similarly provide for product-specific tiered pricing.21 The Exchange believes that the proposed Market-Maker Volume Tiers represent an equitable allocation of fees and is not unfairly discriminatory because it applies uniformly to all Market-Makers, in that all Market Makers have the opportunity to compete for and achieve the proposed tiers. The enhanced rebates will apply automatically and uniformly to all Market-Makers that achieve the proposed corresponding criteria. While the Exchange has no way of knowing whether this proposed rule change would definitively result in any particular Market-Maker qualifying for the proposed tiers, the Exchange believes that approximately four Market-Makers will reasonably be able to compete for and achieve the proposed criteria in proposed Tier 1 and at least one Market-Maker will be able to achieve proposed Tier 2. The Exchange notes, however, that the proposed tiers are open to any Market-Maker that satisfies the tiers’ criteria. The Exchange lastly notes that it does not believe the proposed tiers will adversely impact any TPH’s pricing. Rather, should a TPH not meet the proposed criteria, the TPH will merely not receive the enhanced rebates corresponding to Tier 1 or Tier 2, and will instead receive the standard rebate. The Exchange believes the proposal to adopt credits for BOE Bulk Ports is reasonable, equitable and not unfairly discriminatory because it provides an opportunity for TPHs to pay lower fees for logical connectivity. The Exchange notes that the proposed discount is in line with the discount offered to MarketMakers on its affiliate exchange, Cboe Options.22 Although only MarketMakers may receive the proposed BOE Bulk Port credits, Market-Makers are valuable market participants that provide liquidity in the marketplace and incur costs that other market participants do not incur. For example, Market-Makers have a number of obligations, including quoting obligations and fees associated with appointments that other market participants do not have. The Exchange also believes that the proposal provides an incentive for TPHs to provide more liquidity to the Exchange. Greater liquidity benefits all market participants 21 Id. 22 See Cboe Options Fees Schedule, MarketMaker Access Credit. PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 by providing more trading opportunities and tighter spreads. The Exchange believes it’s also reasonable, equitable and not unfairly discriminatory to provide credits to those Market-Makers that primarily provide and post liquidity to the Exchange, as the Exchange wants to continue to encourage Market-Makers with significant Make Rates to continue to participate on the Exchange and add liquidity. Moreover, the Exchange notes that Market-Makers with a high Make Rate percentage generally require higher amounts of capacity than other MarketMakers. Particularly, Market-Makers with high Make Rates are generally streaming significantly more quotes than those with lower Make Rates. As such, Market-Makers with high Make Rates may incur more costs than other Market-Makers as they may need to purchase multiple BOE Bulk Ports in order to accommodate their capacity needs. The Exchange believes the proposed credits for BOE Bulk Ports encourages Market-Makers to continue to provide liquidity for the Exchange, notwithstanding the costs incurred by purchasing multiple ports. Particularly, the proposal is intended to mitigate the costs incurred by traditional MarketMakers that focus on adding liquidity to the Exchange (as opposed to those that provide and take, or just take). The Exchange believes the value of the proposed discount is also commensurate with the difficulty to achieve the required thresholds. While the Exchange has no way of predicting with certainty how many and which TPHs will satisfy the proposed criteria to receive the discount, the Exchange anticipates at least two TPHs to satisfy the criteria and receive the discount. The Exchange does not believe the proposed discount will adversely impact any TPH’s pricing. Rather, should a TPH not meet the proposed criteria, the TPH will merely not receive the proposed discount. Lastly, the Exchange believes adopting a definitions section and eliminating outdated language and obsolete fees maintains transparency and clarity in the fees schedule and reduces potential confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on intramarket or intermarket competition that is not E:\FR\FM\19APN1.SGM 19APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 73 / Monday, April 19, 2021 / Notices necessary or appropriate in furtherance of the purposes of the Act. Rather, as discussed above, the Exchange believes that the proposed change would encourage the submission of additional to a public exchange, including in certain products (i.e., SPY, AAPL, QQQ, IWM and SLV) thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for all TPHs. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering competition among orders, which promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ The Exchange believes the proposed rule change does not impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Particularly, the proposed change applies to all similarly situated Trading Permit Holders equally. Additionally, the proposed change is designed to attract additional SPY, AAPL, QQQ, IWM and SLV Public Customer orders that remove liquidity and SPY, AAPL, QQQ, IWM and SLV Market Maker orders that add liquidity to the Exchange. The Exchange believes that the new C2 Market Maker tiered pricing for orders in SPY, AAPL, QQQ, IWM and SLV would incentivize entry on the Exchange of such orders, benefitting both TPHs and public investors and, as a result, provide for deeper levels of liquidity, increasing trading opportunities for other market participants, thus signaling further trading activity, ultimately incentivizing more overall order flow and improving price transparency on the Exchange. Similarly, although the proposed discount for BOE Bulk Port fees only applies to Market-Makers, MarketMakers are valuable market participants that provide liquidity in the marketplace and incur costs that other market participants do not incur. For example, Market-Makers have a number of obligations, including quoting obligations and fees associated with appointments that other market participants do not have. Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As previously discussed, the Exchange operates in a highly competitive market. Members have numerous alternative venues that they may participate on and director their order flow, including 15 other options exchanges and off- VerDate Sep<11>2014 17:11 Apr 16, 2021 Jkt 253001 exchange venues. Additionally, the Exchange represents a small percentage of the overall market. Based on publicly available information, no single options exchange has more than 17% of the market share. Therefore, no exchange possesses significant pricing power in the execution of option order flow. Indeed, participants can readily choose to send their orders to other exchange and off-exchange venues if they deem fee levels at those other venues to be more favorable. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’ . . . .’’. Accordingly, the Exchange does not believe its proposed fee change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 23 and paragraph (f) of Rule 19b–4 24 thereunder. At any time within 23 15 24 17 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00065 Fmt 4703 Sfmt 4703 20425 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– C2–2021–005 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–C2–2021–005. 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 offices of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit E:\FR\FM\19APN1.SGM 19APN1 20426 Federal Register / Vol. 86, No. 73 / Monday, April 19, 2021 / Notices 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–C2–2021–005, and should be submitted on or before May 10, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–07960 Filed 4–16–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91542; File No. SR–MIAX– 2021–09] Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 1801, Definitions and Exchange Rule 1809, Terms of Index Options Contracts April 13, 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 30, 2021, Miami International Securities Exchange, LLC (‘‘MIAX Options’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend Interpretation and Policy .01 to Exchange Rule 1801 and Exchange Rules 1809(a)(3)–(5), to amend the names of certain indexes on which the Exchange may list and trade options due to rebranding, and to update the reporting authority for those indexes.3 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 On April 16, 2020, the Exchange filed a Form 19b–4(e) with the Commission pursuant to Rule 19b–4(e) of the Act for the AF CRE Indexes (defined below). The Exchange has not yet listed options for trading on the AF CRE Indexes for business reasons. The Exchange notes that it will file a Form 19b–4(e) with the Commission pursuant to Rule 19b–4(e) of the Act for the BRIXX Indexes (defined below) at The text of the proposed rule change is available on the Exchange’s website at https://www.miaxoptions.com/rulefilings/ at MIAX Options’ principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Interpretation and Policy .01 to Exchange Rule 1801 and Exchange Rule 1809(a)(3)–(5), to amend the names of certain indexes on which the Exchange may list and trade options due to a rebranding of those index names, and to update the reporting authority for those indexes. The Exchange first proposes to amend Exchange Rule 1801, Interpretation and Policy .01, to amend the names of the Advanced Fundamentals LLC (‘‘Advanced Fundamentals’’) Commercial Real Estate Indexes (the ‘‘AF CRE Indexes’’), on which the Exchange may list options, due to the Exchange rebranding the AF CRE Indexes under new names. The Exchange also proposes to update the reporting authority service provider for the newly rebranded indexes. On April 17, 2020, the Exchange filed its proposal with the Commission to amend certain of the Exchange’s rules in connection with the Exchange’s plan to list and trade options on five AF CRE Indexes—the AF CRE Residential Index, AF CRE Retail Index, AF CRE Office Index, AF CRE Hospitality Index and AF CRE Composite Index.4 The AF CRE jbell on DSKJLSW7X2PROD with NOTICES 1 15 VerDate Sep<11>2014 17:11 Apr 16, 2021 Jkt 253001 the time the Exchange anticipates it will begin listing options for trading on the BRIXX Indexes. 4 See Securities Exchange Act Release No. 88767 (April 29, 2020), 85 FR 26743 (May 5, 2020) (SR– MIAX–2020–08) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to List and Trade Options That Overlie Five Advanced Fundamentals LLC Commercial Real Estate Indexes) (the ‘‘AF CRE Index Notice’’). PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 Indexes measure real-time real estate returns representing the performance of real estate investment trusts (‘‘REITs’’) and/or publicly listed equity companies across various sectors. Each constituent of an AF CRE Index is a REIT or equity company listed on a U.S. securities exchange. The individual components of each AF CRE Sector Index are determined from the REITs/equity companies that have the largest enterprise value (‘‘Enterprise Value’’) 5 within each individual sector and that meet certain minimum eligibility requirements. Since the publication of the AF CRE Index Notice and to date, the Exchange has not listed options for trading on the AF CRE Indexes (or options on the rebranded products, the BRIXX Indexes, described below), for business reasons. Recently, the Exchange rebranded the AF CRE Indexes as the BRIXXTM Commercial Real Estate Indexes (the ‘‘BRIXX Indexes’’), as follows: (1) The AF CRE Office Index is rebranded as the BRIXX Office Index; (2) the AF CRE Retail Index is rebranded as the BRIXX Retail Index; (3) the AF CRE Residential Index is rebranded as the BRIXX Residential Index; (4) the AF CRE Hospitality Index is rebranded as the BRIXX Hospitality Index; and (5) the AF CRE Composite Index is rebranded as the BRIXX Composite Index. Accordingly, the Exchange proposes to amend the table of indexes in Exchange Rule 1801, Interpretation and Policy .01, to insert each of the rebranded BRIXX Indexes in place of the AF CRE Indexes under the heading ‘‘Underlying Index.’’ The Exchange also proposes to amend Exchange Rule 1801, Interpretation and Policy .01, to update the reporting authority 6 for each of the BRIXX Indexes. The reporting authority in respect of a particular index means the institution or reporting service designated by the Exchange as the official source for calculating the level of the index from the reporting prices of the underlying securities that are the basis of the index and reporting such level.7 At the time of the AF CRE Index Notice, Refinitiv was listed as the reporting authority for each of the AF CRE Indexes (now known as the BRIXX Indexes).8 Refinitiv still monitors and 5 The term ‘‘Enterprise Value’’ refers to the measure of a company’s total value, calculated by adding the company’s market capitalization, total liabilities and preferred equity, then subtracting all cash and cash equivalents. See https:// www.investopedia.com/terms/e/ enterprisevalue.asp. 6 See Exchange Rule 1801(p). 7 See id. 8 Refinitiv is currently the reporting authority for each of the BRIXX Indexes (formerly, the AF CRE E:\FR\FM\19APN1.SGM 19APN1

Agencies

[Federal Register Volume 86, Number 73 (Monday, April 19, 2021)]
[Notices]
[Pages 20421-20426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07960]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91546; File No. SR-C2-2021-005)


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule

April 13, 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 April 1, 2021, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') is filing with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change to amend the fees schedule. The text of the proposed rule change 
is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule to (1) amend the 
standard transaction fees and rebates for certain SPY, AAPL, QQQ, IWM 
and SLV transactions, (2) adopt tiered pricing for SPY, AAPL, QQQ, IWM 
and SLV Market-Maker transactions, (3) adopt a discount program for 
Bulk BOE Logical Ports, (4) adopt a ``Definitions'' section in the fees 
schedule, and (5) eliminate outdated language and obsolete facilities 
fees, effective April 1, 2021.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than approximately 17% of the 
market share and currently the Exchange represents approximately 3% of 
the market share.\3\ Thus, in such a low-concentrated and highly 
competitive market, no single options exchange, including the Exchange, 
possesses significant pricing power in the execution of option order 
flow. The Exchange believes that the ever-shifting market share among 
the exchanges from month to month demonstrates that market participants 
can shift order flow or discontinue to reduce use of certain categories 
of products, in response to fee changes. Accordingly, competitive 
forces constrain the Exchange's transaction fees, and market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets U.S. Options Market Volume Summary 
by Month (March 29, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

SPY, AAPL, QQQ, IWM and SLV Pricing
    First, the Exchange proposes to amend the transaction fee for 
Public Customer orders in SPY, AAPL, QQQ, IWM and SLV that remove 
liquidity. Currently, Public Customer orders in SPY, AAPL, QQQ, IWM and 
SL, that remove liquidity are assessed a standard transaction fee of 
$0.39 per contract and yield fee code ``SC''. The Exchange proposes to 
reduce the standard transaction fee to $0.37 per contract.

[[Page 20422]]

The Exchange also proposes to reduce the current standard rebate for C2 
Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity. 
Currently, C2 Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that 
add liquidity are provided a standard rebate of $0.26 per contract and 
yield fee code ``SM''. The Exchange proposes to reduce the standard 
rebate to $0.20 per contract. The Exchange notes that the proposed 
changes are in line with the pricing for similar market participants in 
similar products on other exchanges.\4\
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    \4\ See, e.g., MIAX Pearl Fee Schedule, Section 1 Transaction 
Rebates/Fees, which provides for a fee of $0.46 per contract for 
priority customer SPY orders that remove liquidity, $0.50 per 
contract for priority customer IWM and QQQ orders that remove 
liquidity, and $0.50 per contract for priority customer orders in 
Penny Classes other than SPY, QQQ and IWM orders that remove 
liquidity. See also Nasdaq ISE Pricing Schedule, Section 3, Footnote 
5, which provides for tiered rebates for Market-Maker SPY, QQQ, and 
IWM orders that add liquidity between $0.00-$0.26 per contract.
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SPY, AAPL, QQQ, IWM and SLV Incentive Tiers
    The Exchange also proposes to adopt new incentive tiers for C2 
Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity 
under a new section in the fees schedule titled ``Footnotes''. The 
proposed tiered pricing would provide Trading Permit Holders (``TPHs'') 
opportunities to qualify for higher rebates where certain volume 
criteria and thresholds are met in such products. Tiered pricing 
provides an incremental incentive for TPHs to strive for higher tier 
levels, which provides increasingly higher benefits or discounts for 
satisfying increasingly more stringent criteria. Particularly, the 
Exchange proposes to adopt under Footnote 1, new Market-Maker Volume 
Tiers, which would provide enhanced rebates for qualifying C2 Market-
Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity (i.e., 
orders yielding fee code SM) that meet certain liquidity thresholds. 
First, proposed Tier 1 would provide an enhanced rebate of $0.26 per 
contract where a TPH: (1) Has an ADAV \5\ in Market-Maker orders in 
SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or SL) \6\ 
equal to or greater than 50,000 contracts; or (2) has a Step-Up ADAV 
\7\ in Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV (i.e., 
yielding fee codes SM or SL) equal to or greater than 15,000 contracts 
from March 2021. The Exchange also proposes to adopt Tier 2, which 
would provide a higher rebate of $0.30 per contract where a TPH meets 
the more stringent criteria of having an ADAV in Market-Maker orders in 
SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or SL) equal 
to or greater than 130,000 contracts. The Exchange notes that other 
exchanges offer tiered pricing incentives for similar orders.\8\ The 
proposed enhanced rebates and corresponding criteria are designed to 
encourage Market-Makers to increase or grow their order flow on the 
Exchange in SPY, AAPL, QQQ, IWM and SLV, which facilitates tighter 
spreads, signaling increased activity from other market participants, 
and thus ultimately contributes to deeper and more liquid markets and 
provides greater execution opportunities on the Exchange to the benefit 
of all market participants.
---------------------------------------------------------------------------

    \5\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added, per day.
    \6\ Fee code SL is currently appended to C2 Market Maker orders 
in SPY, AAPL, QQQ, IWM and SLV that add liquidity and are a National 
Best Bid or Offer (``NBBO'') Joiner or NBBO Setter and offers a 
rebate of $0.31 per contract for such orders.
    \7\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
    \8\ See, e.g, Nasdaq ISE Pricing Schedule, Section 3, Footnote 
5, which provides for tiered rebates for Market-Maker SPY, QQQ, and 
IWM orders that add liquidity between $0.00-$0.26 per contract.
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BOE Bulk Logical Ports Discount
    By way of background, the Exchange currently offers BOE Bulk 
Logical Ports (``BOE Bulk Ports''), which provide users with the 
ability to submit single and bulk order messages to enter, modify, or 
cancel orders designated as Post Only Orders with a Time-in-Force of 
Day or GTD with an expiration time on that trading day. BOE Bulk Ports 
are assessed $1,500 per port, per month for the first 5 BOE Bulk Ports 
and thereafter assessed $2,500 per port, per month for each additional 
BOE Bulk Port. Each Bulk BOE Port also incurs the logical port fee 
indicated in the table above when used to enter up to 30,000,000 orders 
per trading day per logical port as measured on average in a single 
month. Each incremental usage of up to 30,000,000 orders per day per 
BOE Bulk Port will incur an additional logical port fee of $2,500 per 
month (``incremental usage fees'').
    The Exchange now proposes to adopt a discount program for BOE Bulk 
Ports which provides an opportunity for Market-Makers to obtain credits 
on their monthly BOE Bulk Port fees (excluding incremental usage 
fees).\9\ More specifically, the Exchange proposes to provide that 
Market-Makers would receive a discount of 30% on monthly Bulk BOE Port 
fees (excluding incremental usage fees) where a Market-Maker has (1) a 
Step-Up ADAV equal to or greater than 0.025% of average OCV \10\ from 
February 2021 and (2) a ``Make Rate'' equal to or greater than 85%. The 
``Make Rate'' shall be derived from a Market-Maker's volume the 
previous month in all symbols using the following formula: (i) The 
Market-Maker's total simple add volume divided by (ii) the Market-
Maker's total simple volume.\11\ Trades on the open and complex orders 
will be excluded from the Make Rate calculation. The Exchange will 
aggregate the trading activity of separate Market-Maker firms for 
purposes of the discount tier and make rate calculation if there is at 
least 75% common ownership between the firms as reflected on each 
firm's Form BD, Schedule A. The proposed BOE Bulk Port discount is 
designed to attract liquidity from traditional Market-Makers and 
encourage Market-Makers to grow their volume. Specifically, the 
Exchange believes the proposal mitigates costs incurred by traditional 
Market-Makers that focus on adding liquidity to the Exchange (as 
opposed to those that provide and take, or just take). The Exchange 
notes that its affiliate, Cboe Exchange, Inc. (``Cboe Options'') 
similarly provides discounts on BOE Bulk Port fees based on a Market-
Maker's Make Rate the previous month.\12\
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    \9\ While BOE Bulk Ports are available to all market 
participants, they are used primarily by Market Makers or firms that 
conduct similar business activity.
    \10\ ``OCV'' (or ``OCC Customer Volume'' means, the total equity 
and ETF options volume that clears in the Customer range at the 
Options Clearing Corporation (``OCC'') for the month for which the 
fees apply, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption and on any day with a 
scheduled early market close.
    \11\ For example, a TPH's total simple add volume in March 2021 
is 2,600,000 contracts and its total simple volume is 3,000,000 
contracts, resulting in a Make Rate of 86.6%. As such, the TPH would 
receive a 30% credit on its monthly Bulk Port fees for the month of 
April 2021.
    \12\ See Cboe Options Fees Schedule, Market-Maker Access Credit.
---------------------------------------------------------------------------

Definitions
    The Exchange next proposes to adopt a new ``Definitions'' section 
of its fees schedule. As described above, the Exchange intends to adopt 
new tiered pricing for certain products and a new discount program for 
BOE Bulk Ports which will provide TPHs opportunities to qualify for 
higher rebates or a discount, respectively, where certain volume 
criteria and thresholds are met. The volume thresholds refer to certain 
terms that are not currently defined in the Exchange's fees schedule 
(i.e., ``ADAV'', ``Step-Up ADAV'', and ``OCV''). The Exchange believes 
clearly defining those terms in the fees schedule would reduce 
potential

[[Page 20423]]

confusion, increase transparency, and benefit market participants. 
Accordingly, the Exchange proposes to adopt the following definitions.
     ``ADAV'' means average daily added volume calculated as 
the number of contracts added, per day.
    [cir] ADAV is calculated on a monthly basis, excluding contracts 
added or removed on any day that the Exchange's system experiences a 
disruption that lasts for more than 60 minutes during regular trading 
hours (``Exchange System Disruption'') and on any day with a scheduled 
early market close.
    [cir] Routed contracts are not included in ADAV calculation.
    [cir] With prior notice to the Exchange, a TPH may aggregate ADAV 
or ADV with other TPHs that control, are controlled by, or are under 
common control with such TPH.
     ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
     ``OCC Customer Volume'' or ``OCV'' means the total equity 
and ETF options volume that clears in the Customer range at the Options 
Clearing Corporation (``OCC'') for the month for which the fees apply, 
excluding volume on any day that the Exchange experiences an Exchange 
System Disruption and on any day with a scheduled early market close.
    The Exchange notes the proposed definitions are substantively 
similar to the definitions contained in one of the Exchange's affiliate 
fees schedules.\13\
---------------------------------------------------------------------------

    \13\ See Cboe EDGX Exchange, Inc. Fees Schedule, Definitions.
---------------------------------------------------------------------------

Eliminate Outdated Language and Obsolete Facilities Fees
    The Exchange next proposes to eliminate obsolete language under the 
Physical and Logical Connectivity Fees sections that reference legacy 
physical and logical ports that were decommissioned in 2018. 
Particularly, under the Physical Connectivity Fees section, the 
Exchange proposes to eliminate the following language ``[t]hrough June 
30, 2018, C2 market participants can elect to connect to C2's trading 
system via either a 1 Gigabit Ethernet or a 10 Gigabit Ethernet Network 
Access Port. No fees will be assessed for the legacy Network Access 
Ports'', as such language is no longer relevant. The Exchange also 
proposes to make clear that TPHs and non-TPHs only connect to C2's 
trading system via Physical Ports (instead of ``may also'' connect, 
which was relevant only when TPHs had the option of alternatively 
connecting via legacy Network Access Ports). Under the Logical 
Connectivity Fees section, the Exchange proposes to eliminate the 
following language ``Port fees for BOE, FIX, BOE Bulk and Drop ports 
will be assessed the full month rates for May for ports available for 
use on the new trading platform beginning May 14, 2018'', along with 
another reference to May 15, 2018, as such language is also outdated 
and no longer relevant or necessary to maintain.
    Lastly, the Exchange proposes to eliminate the ``Facilities Fees'' 
section, which includes fees for the PULSe Workstation and related 
footnotes. Particularly, on January 4, 2021, the Exchange 
decommissioned the PULSe Workstation. Accordingly, the related PULSe 
Workstation fees are no longer applicable nor necessary to maintain in 
the fees schedule. The Exchange therefore proposes to eliminate the 
language to avoid potential confusion and eliminate unnecessary 
language
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(4),\15\ 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) \16\ 
requirements that the rules of an exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f.(b)(5).
---------------------------------------------------------------------------

    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. In particular, the proposed 
changes to Exchange execution fees and rebates for certain orders in 
SPY, AAPL, QQQ, IWM and SLV are intended to attract order flow to the 
Exchange by continuing to offer competitive pricing. More specifically, 
the Exchange believes it is reasonable to reduce the current fee for 
Public Customers that remove liquidity in SPY, AAPL, QQQ, IWM and SLV, 
as such market participants will be paying lower fees for such 
transactions and thus may be encouraged to increase retail SPY, AAPL, 
QQQ, IWM and SLV order flow to the Exchange. Furthermore, the Exchange 
believes its proposed change is reasonable as it is competitive and in 
line with pricing for many of the same products at other exchanges.\17\ 
The Exchange believes the proposed change is equitable and not unfairly 
discriminatory as it will apply to all Public Customers equally. The 
Exchange also believes that it is equitable and not unfairly 
discriminatory to assess a lower fee for Public Customer orders in SPY, 
AAPL, QQQ, IWM and SLV as compared to other market participants because 
customer order flow enhances liquidity on the Exchange for the benefit 
of all market participants. Specifically, customer liquidity benefits 
all market participants by providing more trading opportunities, which 
attracts Market Makers. An increase in the activity of these market 
participants in turn facilitates tighter spreads, which may cause an 
additional corresponding increase in order flow from other market 
participants. Moreover, the options industry has a long history of 
providing preferential pricing to customers, and the Exchange's current 
Fee Schedule currently does so in many places, as do the fees 
structures of multiple other exchanges.
---------------------------------------------------------------------------

    \17\ See, e.g., MIAX Pearl Fee Schedule, Section 1 Transaction 
Rebates/Fees, which provides for a fee of $0.46 per contract for 
priority customer SPY orders that remove liquidity, $0.50 per 
contract for priority customer IWM and QQQ orders that remove 
liquidity, and $0.50 per contract for priority customer orders in 
Penny Classes other than SPY, QQQ and IWM orders that remove 
liquidity.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to reduce the current rebate 
for Market-Makers that add liquidity in SPY, AAPL, QQQ, IWM and SLV, as 
such market participants will still be receive a rebate for such orders 
(albeit at a lower amount). Additionally, the Exchange believes its 
proposed change is reasonable as it is competitive and in line with 
pricing for many of the same products at other exchanges.\18\ The 
Exchange also notes that is providing opportunities for Market-Makers 
to receive higher rebates for these same transactions via the proposed 
Market-

[[Page 20424]]

Maker Volume tiers. The Exchange believes the proposed change is 
equitable and not unfairly discriminatory as it will apply to all 
Market-Makers equally.
---------------------------------------------------------------------------

    \18\ See, e.g., Nasdaq ISE Pricing Schedule, Section 3, Footnote 
5, which provides for tiered rebates for Market-Maker SPY, QQQ, and 
IWM orders that add liquidity between $0.00-$0.26 per contract.
---------------------------------------------------------------------------

    The Exchange believes adopting Market-Maker Volume Tiers for C2 
Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV that add liquidity 
because they provide additional opportunities for TPHs to receive 
enhanced rebates on qualifying orders in a manner that incentivizes 
increased Market-Maker order flow in certain multiply-listed options on 
the Exchange. The Exchange notes that volume-based incentives and 
discounts have been widely adopted by exchanges \19\ and are 
reasonable, equitable and non-discriminatory because they are open to 
all TPHs on an equal basis and provide additional benefits or discounts 
that are reasonably related to (i) the value to an exchange's market 
quality and (ii) associated higher levels of market activity, such as 
higher levels of liquidity provision and/or growth patterns.
---------------------------------------------------------------------------

    \19\ See, e.g., Nasdaq ISE Pricing Schedule, Section 3, Footnote 
5, which provides for tiered rebates for Market-Maker SPY, QQQ, and 
IWM orders that add liquidity between $0.00-$0.26 per contract.
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    The Exchange believes the proposed Market-Maker Penny Volume Tiers 
are reasonable means to encourage Market-Makers to increase their order 
flow to specific multiply-listed options on the Exchange (i.e., SPY, 
AAPL, QQQ, IWM and SLV). The Exchange notes that increased Market-Maker 
activity, particularly, facilitates tighter spreads and an increase in 
overall liquidity provider activity, both of which signal additional 
corresponding increase in order flow from other market participants, 
contributing towards a robust, well-balanced market ecosystem, 
particularly in multiply-listed options on the Exchange. The Exchange 
also believes that proposed enhanced rebates offered under proposed 
Tiers 1 and 2 are reasonably based on the difficulty of satisfying the 
proposed tiers' criteria and ensures the proposed rebate and thresholds 
appropriately reflect the incremental difficulty in achieving the 
Market-Maker Volume Tier. The Exchange believes that the proposed 
enhanced rebates are also in line with the enhanced rebates currently 
offered by another exchange for similar products.\20\ The Exchange also 
believes it is reasonable, equitable and not unfairly discriminatory to 
adopt pricing specific to certain orders in SPY, AAPL, QQQ, IWM and SLV 
as the Exchange already offers product-specific pricing for these 
orders and, and as noted above, other exchanges similarly provide for 
product-specific tiered pricing.\21\
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    \20\ See, e.g., Nasdaq ISE Pricing Schedule, Section 3, Footnote 
5, which provides for tiered rebates for Market-Maker SPY, QQQ, and 
IWM orders that add liquidity between $0.00-$0.26 per contract.
    \21\ Id.
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    The Exchange believes that the proposed Market-Maker Volume Tiers 
represent an equitable allocation of fees and is not unfairly 
discriminatory because it applies uniformly to all Market-Makers, in 
that all Market Makers have the opportunity to compete for and achieve 
the proposed tiers. The enhanced rebates will apply automatically and 
uniformly to all Market-Makers that achieve the proposed corresponding 
criteria. While the Exchange has no way of knowing whether this 
proposed rule change would definitively result in any particular 
Market-Maker qualifying for the proposed tiers, the Exchange believes 
that approximately four Market-Makers will reasonably be able to 
compete for and achieve the proposed criteria in proposed Tier 1 and at 
least one Market-Maker will be able to achieve proposed Tier 2. The 
Exchange notes, however, that the proposed tiers are open to any 
Market-Maker that satisfies the tiers' criteria.
    The Exchange lastly notes that it does not believe the proposed 
tiers will adversely impact any TPH's pricing. Rather, should a TPH not 
meet the proposed criteria, the TPH will merely not receive the 
enhanced rebates corresponding to Tier 1 or Tier 2, and will instead 
receive the standard rebate.
    The Exchange believes the proposal to adopt credits for BOE Bulk 
Ports is reasonable, equitable and not unfairly discriminatory because 
it provides an opportunity for TPHs to pay lower fees for logical 
connectivity. The Exchange notes that the proposed discount is in line 
with the discount offered to Market-Makers on its affiliate exchange, 
Cboe Options.\22\ Although only Market-Makers may receive the proposed 
BOE Bulk Port credits, Market-Makers are valuable market participants 
that provide liquidity in the marketplace and incur costs that other 
market participants do not incur. For example, Market-Makers have a 
number of obligations, including quoting obligations and fees 
associated with appointments that other market participants do not 
have. The Exchange also believes that the proposal provides an 
incentive for TPHs to provide more liquidity to the Exchange. Greater 
liquidity benefits all market participants by providing more trading 
opportunities and tighter spreads. The Exchange believes it's also 
reasonable, equitable and not unfairly discriminatory to provide 
credits to those Market-Makers that primarily provide and post 
liquidity to the Exchange, as the Exchange wants to continue to 
encourage Market-Makers with significant Make Rates to continue to 
participate on the Exchange and add liquidity. Moreover, the Exchange 
notes that Market-Makers with a high Make Rate percentage generally 
require higher amounts of capacity than other Market-Makers. 
Particularly, Market-Makers with high Make Rates are generally 
streaming significantly more quotes than those with lower Make Rates. 
As such, Market-Makers with high Make Rates may incur more costs than 
other Market-Makers as they may need to purchase multiple BOE Bulk 
Ports in order to accommodate their capacity needs. The Exchange 
believes the proposed credits for BOE Bulk Ports encourages Market-
Makers to continue to provide liquidity for the Exchange, 
notwithstanding the costs incurred by purchasing multiple ports. 
Particularly, the proposal is intended to mitigate the costs incurred 
by traditional Market-Makers that focus on adding liquidity to the 
Exchange (as opposed to those that provide and take, or just take).
---------------------------------------------------------------------------

    \22\ See Cboe Options Fees Schedule, Market-Maker Access Credit.
---------------------------------------------------------------------------

    The Exchange believes the value of the proposed discount is also 
commensurate with the difficulty to achieve the required thresholds. 
While the Exchange has no way of predicting with certainty how many and 
which TPHs will satisfy the proposed criteria to receive the discount, 
the Exchange anticipates at least two TPHs to satisfy the criteria and 
receive the discount. The Exchange does not believe the proposed 
discount will adversely impact any TPH's pricing. Rather, should a TPH 
not meet the proposed criteria, the TPH will merely not receive the 
proposed discount.
    Lastly, the Exchange believes adopting a definitions section and 
eliminating outdated language and obsolete fees maintains transparency 
and clarity in the fees schedule and reduces potential confusion, 
thereby removing impediments to and perfecting the mechanism of a free 
and open market and a national market system, and, in general, 
protecting investors and the public interest.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket or intermarket competition that is not

[[Page 20425]]

necessary or appropriate in furtherance of the purposes of the Act. 
Rather, as discussed above, the Exchange believes that the proposed 
change would encourage the submission of additional to a public 
exchange, including in certain products (i.e., SPY, AAPL, QQQ, IWM and 
SLV) thereby promoting market depth, price discovery and transparency 
and enhancing order execution opportunities for all TPHs. As a result, 
the Exchange believes that the proposed change furthers the 
Commission's goal in adopting Regulation NMS of fostering competition 
among orders, which promotes ``more efficient pricing of individual 
stocks for all types of orders, large and small.''
    The Exchange believes the proposed rule change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
change applies to all similarly situated Trading Permit Holders 
equally. Additionally, the proposed change is designed to attract 
additional SPY, AAPL, QQQ, IWM and SLV Public Customer orders that 
remove liquidity and SPY, AAPL, QQQ, IWM and SLV Market Maker orders 
that add liquidity to the Exchange. The Exchange believes that the new 
C2 Market Maker tiered pricing for orders in SPY, AAPL, QQQ, IWM and 
SLV would incentivize entry on the Exchange of such orders, benefitting 
both TPHs and public investors and, as a result, provide for deeper 
levels of liquidity, increasing trading opportunities for other market 
participants, thus signaling further trading activity, ultimately 
incentivizing more overall order flow and improving price transparency 
on the Exchange. Similarly, although the proposed discount for BOE Bulk 
Port fees only applies to Market-Makers, Market-Makers are valuable 
market participants that provide liquidity in the marketplace and incur 
costs that other market participants do not incur. For example, Market-
Makers have a number of obligations, including quoting obligations and 
fees associated with appointments that other market participants do not 
have.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and director their order flow, including 15 other options exchanges and 
off-exchange venues. Additionally, the Exchange represents a small 
percentage of the overall market. Based on publicly available 
information, no single options exchange has more than 17% of the market 
share. Therefore, no exchange possesses significant pricing power in 
the execution of option order flow. Indeed, participants can readily 
choose to send their orders to other exchange and off-exchange venues 
if they deem fee levels at those other venues to be more favorable. 
Moreover, the Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Specifically, in 
Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' The fact that 
this market is competitive has also long been recognized by the courts. 
In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers' . . . .''. Accordingly, the Exchange 
does not believe its proposed fee change imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \23\ and paragraph (f) of Rule 19b-4 \24\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-C2-2021-005 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-C2-2021-005. 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 offices of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit

[[Page 20426]]

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-C2-2021-005, and should be 
submitted on or before May 10, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07960 Filed 4-16-21; 8:45 am]
BILLING CODE 8011-01-P
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