Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Relating to the Options Regulatory Fee, 44451-44454 [2021-17172]

Download as PDF Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices enhance competition among market participants, to the benefit of investors and the marketplace. Similarly, the Exchange believes that the proposed initial and continued listing standards are designed to promote disclosure and transparency with respect to the use of Custom Baskets consistent with an issuer’s exemptive relief. Specifically, the Exchange believes that requiring as an initial listing condition that an issuer and any person acting on behalf of the series of Active Proxy Portfolio Shares comply with Regulation Fair Disclosure under the Securities Exchange Act of 1934, including with respect to any Custom Basket, would further the full and fair disclosure objectives of Regulation Fair Disclosure to the benefit of the investing public and all market participants. Further, the Exchange believes that requiring as a continued listing condition that, with respect to each Custom Basket utilized by a series of Active Proxy Portfolio Shares, each business day, before the opening of trading in the Core Trading Session (as defined in Rule 7.34–E(a)), an investment company make publicly available on its website the composition of any Custom Basket transacted on the previous business day, except a Custom Basket that differs from the applicable Proxy Portfolio only with respect to cash, also furthers the goals of transparency and full and fair disclosure, to the benefit of 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 competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change, by permitting use of Custom Baskets consistent with an issuer’s exemptive relief, would introduce additional competition among various ETF products to the benefit of investors. lotter on DSK11XQN23PROD with NOTICES1 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate VerDate Sep<11>2014 20:11 Aug 11, 2021 Jkt 253001 and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. 44451 submissions should refer to File Number SR–NYSEArca–2021–64, and should be submitted on or before September 2, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 J. Matthew DeLesDernier, Assistant Secretary. 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: [FR Doc. 2021–17173 Filed 8–11–21; 8:45 am] 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– NYSEArca–2021–64 on the subject line. Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Relating to the Options Regulatory Fee 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–NYSEArca–2021–64. 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 such 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 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 August 2, 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. PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92597; File No. SR–CBOE– 2021–044] August 6, 2021. 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 amend its Fees Schedule relating to the Options Regulatory Fee. 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/CBOELegal RegulatoryHome.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 8 17 CFR 200.30–3(a)(12). 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 E:\FR\FM\12AUN1.SGM 12AUN1 44452 Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices 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 reduce the Options Regulatory Fee (‘‘ORF’’) from $0.0023 per contract to $0.0017 per contract, effective August 2, 2021, in order to help ensure that revenue collected from the ORF, in combination with other regulatory fees and fines, does not exceed the Exchange’s total regulatory costs. The ORF is assessed by Cboe Options to each Trading Permit Holder (‘‘TPH’’) for options transactions cleared by the TPH that are cleared by the Options Clearing Corporation (‘‘OCC’’) in the customer range, regardless of the exchange on which the transaction occurs.3 In other words, the Exchange imposes the ORF on all customer-range transactions cleared by a TPH, even if the transactions do not take place on the Exchange. The ORF is collected by OCC on behalf of the Exchange from the Clearing Trading Permit Holder (‘‘CTPH’’) or non-CTPH that ultimately clears the transaction. With respect to Volume January 2021 Total ....................................................... Customer ............................................... Total ADV .............................................. Customer ADV ....................................... lotter on DSK11XQN23PROD with NOTICES1 linkage transactions, Cboe Options reimburses its routing broker providing Routing Services pursuant to Cboe Options Rule 5.36 for options regulatory fees it incurs in connection with the Routing Services it provides. Revenue generated from ORF, when combined with all of the Exchange’s other regulatory fees and fines, is designed to recover a material portion of the regulatory costs to the Exchange of the supervision and regulation of TPH customer options business including performing routine surveillances, investigations, examinations, financial monitoring, and policy, rulemaking, interpretive, and enforcement activities. Regulatory costs include direct regulatory expenses and certain indirect expenses for work allocated in support of the regulatory function. The direct expenses include in-house and thirdparty service provider costs to support the day-to-day regulatory work such as surveillances, investigations and examinations. The indirect expenses include support from such areas as human resources, legal, compliance, information technology, facilities and accounting. These indirect expenses are estimated to be approximately 27% of Cboe Options’ total regulatory costs for 2021. Thus, direct expenses are estimated to be approximately 73% of total regulatory costs for 2021. In addition, it is Cboe Options’ practice that revenue generated from ORF not exceed more than 75% of total annual regulatory costs. The Exchange monitors its regulatory costs and revenues at a minimum on a 838,339,790 784,399,878 44,123,146.84 41,284,204.11 February 2021 823,412,827 782,113,450 43,337,517.20 41,163,865.79 semi-annual basis. If the Exchange determines regulatory revenues exceed or are insufficient to cover a material portion of its regulatory costs in a given year, the Exchange will adjust the ORF by submitting a fee change filing to the Commission. The Exchange also notifies TPHs of adjustments to the ORF via an Exchange Notice.4 Based on the Exchange’s most recent semi-annual review, the Exchange is proposing to reduce the amount of ORF that will be collected by the Exchange from $0.0023 per contract side to $0.0017 per contract side. The proposed decrease is based on the Exchange’s estimated projections for its regulatory costs, which have decreased, balanced with recent options volumes, which has increased. For example, total options contract volume in March 2021 was approximately 34% higher than the total options contract volume in March 2020 and the total options contract volume in June 2021 was approximately 25% higher than the total options contract volume in June 2020.5 In fact, March 2021 was the highest, and June 2021 was the second highest, options volume month in the history of U.S. equity options industry.6 Below is also industry data from OCC which illustrates the significant increase in volume from January 2021 through March 2021.7 Moreover, the options volume in the first quarter of 2021 was higher than the fourth quarter of 2020.8 Also April and May 2021 volumes remain significantly high as compared to 2020 options volume in general.9 March 2021 898,653,388 837,247,059 39,071,886.40 36,402,046.04 April 2021 May 2021 711,388,828 667,208,963 33,875,658.50 36,402,046.04 718,368,993 659,913,862 35,918,449.70 32,995,693.10 These expectations are estimated, preliminary and may change. There can be no assurance that the Exchange’s final costs for 2021 will not differ materially from these expectations and prior practice, nor can the Exchange predict with certainty whether options volume will remain at the current level going forward. The Exchange notes however, that when combined with the Exchange’s other non-ORF regulatory fees and fines, the revenue being generated by ORF using the current rate results in revenue that is running in excess of the Exchange’s estimated regulatory costs for the year.10 Particularly, as discussed above, the options market has seen a substantial increase in volume over the first half of the year, up even from last year’s unprecedented spike in volatility and volume. This increase resulted in higher volume than was originally projected by the Exchange (thereby resulting in higher ORF revenue than projected). Moreover, in addition to projected reductions in regulatory expenses, the Exchange experienced further unanticipated reductions in costs, in connection with the continuing COVID– 3 The Exchange notes ORF also applies to customer-range transactions executed during Global Trading Hours. 4 The Exchange endeavors to provide TPHs with such notice at least 30 calendar days prior to the effective date of the change. The Exchange notified TPHs of the proposed rate change for August 2, 2021 on July 1, 2021. See Exchange Notice, C2021070103 ‘‘Cboe Options Exchanges Regulatory Fee Update Effective August 2, 2021.’’ 5 See https://www.theocc.com/Newsroom/PressReleases/2021/04-05-OCC-March-2021-TotalVolume-Up-34-8-Percent and https:// www.theocc.com/Newsroom/Press-Releases/2021/ 07-02-OCC-June-2021-Total-Volume-Up-25-6Percent-f. 6 Id. 7 See data from OCC at: https://www.theocc.com/ Market-Data/Market-Data-Reports/Volume-andOpen-Interest/Volume-by-Account-Type. 8 Id. 9 Id. 10 Consistent with Rule 2.2 (Regulatory Revenue), the Exchange notes that notwithstanding the excess ORF revenue collected to date, it has not used such revenue for nonregulatory purposes. VerDate Sep<11>2014 20:11 Aug 11, 2021 Jkt 253001 PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 E:\FR\FM\12AUN1.SGM 12AUN1 Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices 19 pandemic (e.g., continued reduction in travel expenses).11 Accordingly, because revenue generated by the current ORF rates, when combined with the Exchange’s other non-ORF regulatory fees and fines, is expected to exceed the Exchange’s regulatory costs for the year, the Exchange proposes to decrease its ORF rate. Particularly, the Exchange believes that by [sic] decreasing the ORF, as amended, when combined with all of the Exchange’s other regulatory fees and fines, would allow the Exchange to continue covering a material portion of its regulatory costs, while lessening the potential for generating excess revenue that may otherwise occur using the current rate.12 The Exchange will continue to monitor the amount of revenue collected from the ORF to ensure that it, in combination with its other regulatory fees and fines, does not exceed the Exchange’s total regulatory costs. 2. Statutory Basis lotter on DSK11XQN23PROD with NOTICES1 The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.13 Specifically, the Exchange believes the proposed rule change is consistent with Section 6(b)(4) of the Act14 which provides that Exchange rules may provide for the equitable allocation of reasonable dues, fees, and other charges among its TPHs and other persons using its facilities. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 15 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes the proposed fee change is reasonable because customer transactions will be subject to a lower ORF fee than the current rate. Moreover, the proposed reduction is necessary in order to lessen the potential that the Exchange collects revenue in excess of its anticipated 11 The Exchange notes that in connection with proposed ORF rate changes, it provides the Commission confidential details regarding the Exchange’s projected regulatory revenue, including projected revenue from ORF, along with a breakout of its projected regulatory expenses, including both direct and indirect allocations. 12 The Exchange notes that its regulatory responsibilities with respect to TPH compliance with options sales practice rules have largely been allocated to FINRA under a 17d–2 agreement. The ORF is not designed to cover the cost of that options sales practice regulation. 1315 U.S.C. 78f(b). 1415 U.S.C. 78f(b)(4). 1515 U.S.C. 78f(b)(5). VerDate Sep<11>2014 20:11 Aug 11, 2021 Jkt 253001 regulatory costs, in combination with other regulatory fees and fines, which is consistent with the Exchange’s practices. The Exchange had designed the ORF to generate revenues that would be less than or equal to 75% of the Exchange’s regulatory costs, which is consistent with the view of the Commission that regulatory fees be used for regulatory purposes and not to support the Exchange’s business operations. As discussed above, however, after its semi-annual review of its regulatory costs and regulatory revenues, which includes revenues from ORF and other regulatory fees and fines, the Exchange determined that absent a reduction in ORF, it would be collecting revenue in excess of 75% of its regulatory costs. Indeed, the Exchange notes that when taking into account the recent options volume, coupled with the projected reduction in regulatory costs, it estimates the ORF will generate revenues that would cover more than the approximated 75% of the Exchange’s projected regulatory costs. Moreover, when coupled with the Exchange’s other regulatory fees and revenues, the Exchange estimates ORF to generate over 100% of the Exchange’s projected regulatory costs. As such, the Exchange believes it’s reasonable and appropriate to decrease the ORF amount from $0.0023 to $0.0017 per contract side. The Exchange also believes the proposed fee change is equitable and not unfairly discriminatory in that it is charged to all TPHs on all their transactions that clear in the customer range at the OCC. The Exchange believes the ORF ensures fairness by assessing higher fees to those TPHs that require more Exchange regulatory services based on the amount of customer options business they conduct. Regulating customer trading activity is much more labor intensive and requires greater expenditure of human and technical resources than regulating non-customer trading activity, which tends to be more automated and less labor-intensive. For example, there are costs associated with main office and branch office examinations (e.g., staff and travel expenses), as well as investigations into customer complaints and the terminations of Registered persons. As a result, the costs associated with administering the customer component of the Exchange’s overall regulatory program are materially higher than the costs associated with administering the non-customer component (e.g., TPH proprietary transactions) of its PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 44453 regulatory program.16 Moreover, the Exchange notes that it has broad regulatory responsibilities with respect to its TPHs’ activities, irrespective of where their transactions take place. Many of the Exchange’s surveillance programs for customer trading activity may require the Exchange to look at activity across all markets, such as reviews related to position limit violations and manipulation. Indeed, the Exchange cannot effectively review for such conduct without looking at and evaluating activity irregardless of where it transpires. In addition to its own surveillance programs, the Exchange also works with other SROs and exchanges on intermarket surveillance related issues. Through its participation in the Intermarket Surveillance Group (‘‘ISG’’) 17 the Exchange shares information and coordinates inquiries and investigations with other exchanges designed to address potential intermarket manipulation and trading abuses. Accordingly, there is a strong nexus between the ORF and the Exchange’s regulatory activities with respect to its TPH’s customer trading activity. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. This proposal does not create an unnecessary or inappropriate intra-market burden on competition because the ORF applies to all customer activity, thereby raising regulatory revenue to offset regulatory expenses. It also supplements the regulatory revenue derived from noncustomer activity. The Exchange notes, however, the proposed change is not designed to address any competitive issues. Indeed, this proposal does not create an unnecessary or inappropriate inter-market burden on competition because it is a regulatory fee that supports regulation in furtherance of the purposes of the Act. The Exchange is obligated to ensure that the amount of regulatory revenue collected from the 16 If the Exchange changes its method of funding regulation or if circumstances otherwise change in the future, the Exchange may decide to modify the ORF or assess a separate regulatory fee on TPH proprietary transactions if the Exchange deems it advisable. 17 ISG is an industry organization formed in 1983 to coordinate intermarket surveillance among the SROs by cooperatively sharing regulatory information pursuant to a written agreement between the parties. The goal of the ISG’s information sharing is to coordinate regulatory efforts to address potential intermarket trading abuses and manipulations. E:\FR\FM\12AUN1.SGM 12AUN1 44454 Federal Register / Vol. 86, No. 153 / Thursday, August 12, 2021 / Notices ORF, in combination with its other regulatory fees and fines, does not exceed regulatory costs. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 18 and paragraph (f) of Rule 19b–4 19 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: lotter on DSK11XQN23PROD with NOTICES1 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 No. SR– CBOE–2021–044 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 No. SR–CBOE–2021–044. 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 18 19 15 U.S.C. 78s(b)(3)(A). 17 CFR 240.19b–4(f). VerDate Sep<11>2014 20:11 Aug 11, 2021 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 No. SR–CBOE–2021–044, and should be submitted on or before September 2, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–17172 Filed 8–11–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–518, OMB Control No. 3235–0576] Proposed Collection; Comment Request Upon Written Request Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Extension: Regulation G Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. 20 Jkt 253001 PO 00000 Regulation G (17 CFR 244.100— 244.102) under the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) (15 U.S.C. 78a et seq.) requires publicly reporting companies that disclose or releases financial information in a manner that is calculated or presented other than in accordance with generally accepted accounting principles (‘‘GAAP’’) to provide a reconciliation of the non-GAAP financial information to the most directly comparable GAAP financial measure. Regulation G implemented the requirements of Section 401 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7261). We estimate that approximately 14,000 public companies must comply with Regulation G approximately six times a year for a total of 84,000 responses annually. We estimated that it takes approximately 0.5 hours per response (84,000 × 0.5 hours) for a total reporting burden of 42,000 hours annually. Written comments are invited on: (a) Whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate of the burden imposed by the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. 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. Please direct your written comment to David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o Cynthia Roscoe, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Dated: August 6, 2021. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–17160 Filed 8–11–21; 8:45 am] BILLING CODE 8011–01–P 17 CFR 200.30–3(a)(12). Frm 00123 Fmt 4703 Sfmt 9990 E:\FR\FM\12AUN1.SGM 12AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 153 (Thursday, August 12, 2021)]
[Notices]
[Pages 44451-44454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17172]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92597; File No. SR-CBOE-2021-044]


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

 August 6, 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 August 2, 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.
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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 amend its Fees Schedule relating to the Options Regulatory Fee. 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

[[Page 44452]]

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 reduce the Options Regulatory Fee 
(``ORF'') from $0.0023 per contract to $0.0017 per contract, effective 
August 2, 2021, in order to help ensure that revenue collected from the 
ORF, in combination with other regulatory fees and fines, does not 
exceed the Exchange's total regulatory costs.
    The ORF is assessed by Cboe Options to each Trading Permit Holder 
(``TPH'') for options transactions cleared by the TPH that are cleared 
by the Options Clearing Corporation (``OCC'') in the customer range, 
regardless of the exchange on which the transaction occurs.\3\ In other 
words, the Exchange imposes the ORF on all customer-range transactions 
cleared by a TPH, even if the transactions do not take place on the 
Exchange. The ORF is collected by OCC on behalf of the Exchange from 
the Clearing Trading Permit Holder (``CTPH'') or non-CTPH that 
ultimately clears the transaction. With respect to linkage 
transactions, Cboe Options reimburses its routing broker providing 
Routing Services pursuant to Cboe Options Rule 5.36 for options 
regulatory fees it incurs in connection with the Routing Services it 
provides.
---------------------------------------------------------------------------

    \3\ The Exchange notes ORF also applies to customer-range 
transactions executed during Global Trading Hours.
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    Revenue generated from ORF, when combined with all of the 
Exchange's other regulatory fees and fines, is designed to recover a 
material portion of the regulatory costs to the Exchange of the 
supervision and regulation of TPH customer options business including 
performing routine surveillances, investigations, examinations, 
financial monitoring, and policy, rulemaking, interpretive, and 
enforcement activities. Regulatory costs include direct regulatory 
expenses and certain indirect expenses for work allocated in support of 
the regulatory function. The direct expenses include in-house and 
third-party service provider costs to support the day-to-day regulatory 
work such as surveillances, investigations and examinations. The 
indirect expenses include support from such areas as human resources, 
legal, compliance, information technology, facilities and accounting. 
These indirect expenses are estimated to be approximately 27% of Cboe 
Options' total regulatory costs for 2021. Thus, direct expenses are 
estimated to be approximately 73% of total regulatory costs for 2021. 
In addition, it is Cboe Options' practice that revenue generated from 
ORF not exceed more than 75% of total annual regulatory costs.
    The Exchange monitors its regulatory costs and revenues at a 
minimum on a semi-annual basis. If the Exchange determines regulatory 
revenues exceed or are insufficient to cover a material portion of its 
regulatory costs in a given year, the Exchange will adjust the ORF by 
submitting a fee change filing to the Commission. The Exchange also 
notifies TPHs of adjustments to the ORF via an Exchange Notice.\4\ 
Based on the Exchange's most recent semi-annual review, the Exchange is 
proposing to reduce the amount of ORF that will be collected by the 
Exchange from $0.0023 per contract side to $0.0017 per contract side. 
The proposed decrease is based on the Exchange's estimated projections 
for its regulatory costs, which have decreased, balanced with recent 
options volumes, which has increased. For example, total options 
contract volume in March 2021 was approximately 34% higher than the 
total options contract volume in March 2020 and the total options 
contract volume in June 2021 was approximately 25% higher than the 
total options contract volume in June 2020.\5\ In fact, March 2021 was 
the highest, and June 2021 was the second highest, options volume month 
in the history of U.S. equity options industry.\6\ Below is also 
industry data from OCC which illustrates the significant increase in 
volume from January 2021 through March 2021.\7\ Moreover, the options 
volume in the first quarter of 2021 was higher than the fourth quarter 
of 2020.\8\ Also April and May 2021 volumes remain significantly high 
as compared to 2020 options volume in general.\9\
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    \4\ The Exchange endeavors to provide TPHs with such notice at 
least 30 calendar days prior to the effective date of the change. 
The Exchange notified TPHs of the proposed rate change for August 2, 
2021 on July 1, 2021. See Exchange Notice, C2021070103 ``Cboe 
Options Exchanges Regulatory Fee Update Effective August 2, 2021.''
    \5\ See https://www.theocc.com/Newsroom/Press-Releases/2021/04-05-OCC-March-2021-Total-Volume-Up-34-8-Percent and https://www.theocc.com/Newsroom/Press-Releases/2021/07-02-OCC-June-2021-Total-Volume-Up-25-6-Percent-f.
    \6\ Id.
    \7\ See data from OCC at: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-Open-Interest/Volume-by-Account-Type.
    \8\ Id.
    \9\ Id.

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                          Volume                              January 2021      February 2021        March 2021         April 2021          May 2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total....................................................        838,339,790        823,412,827        898,653,388        711,388,828        718,368,993
Customer.................................................        784,399,878        782,113,450        837,247,059        667,208,963        659,913,862
Total ADV................................................      44,123,146.84      43,337,517.20      39,071,886.40      33,875,658.50      35,918,449.70
Customer ADV.............................................      41,284,204.11      41,163,865.79      36,402,046.04      36,402,046.04      32,995,693.10
--------------------------------------------------------------------------------------------------------------------------------------------------------

    These expectations are estimated, preliminary and may change. There 
can be no assurance that the Exchange's final costs for 2021 will not 
differ materially from these expectations and prior practice, nor can 
the Exchange predict with certainty whether options volume will remain 
at the current level going forward. The Exchange notes however, that 
when combined with the Exchange's other non-ORF regulatory fees and 
fines, the revenue being generated by ORF using the current rate 
results in revenue that is running in excess of the Exchange's 
estimated regulatory costs for the year.\10\ Particularly, as discussed 
above, the options market has seen a substantial increase in volume 
over the first half of the year, up even from last year's unprecedented 
spike in volatility and volume. This increase resulted in higher volume 
than was originally projected by the Exchange (thereby resulting in 
higher ORF revenue than projected). Moreover, in addition to projected 
reductions in regulatory expenses, the Exchange experienced further 
unanticipated reductions in costs, in connection with the continuing 
COVID-

[[Page 44453]]

19 pandemic (e.g., continued reduction in travel expenses).\11\ 
Accordingly, because revenue generated by the current ORF rates, when 
combined with the Exchange's other non-ORF regulatory fees and fines, 
is expected to exceed the Exchange's regulatory costs for the year, the 
Exchange proposes to decrease its ORF rate. Particularly, the Exchange 
believes that by [sic] decreasing the ORF, as amended, when combined 
with all of the Exchange's other regulatory fees and fines, would allow 
the Exchange to continue covering a material portion of its regulatory 
costs, while lessening the potential for generating excess revenue that 
may otherwise occur using the current rate.\12\
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    \10\ Consistent with Rule 2.2 (Regulatory Revenue), the Exchange 
notes that notwithstanding the excess ORF revenue collected to date, 
it has not used such revenue for nonregulatory purposes.
    \11\ The Exchange notes that in connection with proposed ORF 
rate changes, it provides the Commission confidential details 
regarding the Exchange's projected regulatory revenue, including 
projected revenue from ORF, along with a breakout of its projected 
regulatory expenses, including both direct and indirect allocations.
    \12\ The Exchange notes that its regulatory responsibilities 
with respect to TPH compliance with options sales practice rules 
have largely been allocated to FINRA under a 17d-2 agreement. The 
ORF is not designed to cover the cost of that options sales practice 
regulation.
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    The Exchange will continue to monitor the amount of revenue 
collected from the ORF to ensure that it, in combination with its other 
regulatory fees and fines, does not exceed the Exchange's total 
regulatory costs.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\13\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act\14\ which provides that Exchange rules may provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its TPHs and other persons using its facilities. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \15\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \13\15 U.S.C. 78f(b).
    \14\15 U.S.C. 78f(b)(4).
    \15\15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed fee change is reasonable because 
customer transactions will be subject to a lower ORF fee than the 
current rate. Moreover, the proposed reduction is necessary in order to 
lessen the potential that the Exchange collects revenue in excess of 
its anticipated regulatory costs, in combination with other regulatory 
fees and fines, which is consistent with the Exchange's practices. The 
Exchange had designed the ORF to generate revenues that would be less 
than or equal to 75% of the Exchange's regulatory costs, which is 
consistent with the view of the Commission that regulatory fees be used 
for regulatory purposes and not to support the Exchange's business 
operations. As discussed above, however, after its semi-annual review 
of its regulatory costs and regulatory revenues, which includes 
revenues from ORF and other regulatory fees and fines, the Exchange 
determined that absent a reduction in ORF, it would be collecting 
revenue in excess of 75% of its regulatory costs. Indeed, the Exchange 
notes that when taking into account the recent options volume, coupled 
with the projected reduction in regulatory costs, it estimates the ORF 
will generate revenues that would cover more than the approximated 75% 
of the Exchange's projected regulatory costs. Moreover, when coupled 
with the Exchange's other regulatory fees and revenues, the Exchange 
estimates ORF to generate over 100% of the Exchange's projected 
regulatory costs. As such, the Exchange believes it's reasonable and 
appropriate to decrease the ORF amount from $0.0023 to $0.0017 per 
contract side.
    The Exchange also believes the proposed fee change is equitable and 
not unfairly discriminatory in that it is charged to all TPHs on all 
their transactions that clear in the customer range at the OCC. The 
Exchange believes the ORF ensures fairness by assessing higher fees to 
those TPHs that require more Exchange regulatory services based on the 
amount of customer options business they conduct. Regulating customer 
trading activity is much more labor intensive and requires greater 
expenditure of human and technical resources than regulating non-
customer trading activity, which tends to be more automated and less 
labor-intensive. For example, there are costs associated with main 
office and branch office examinations (e.g., staff and travel 
expenses), as well as investigations into customer complaints and the 
terminations of Registered persons. As a result, the costs associated 
with administering the customer component of the Exchange's overall 
regulatory program are materially higher than the costs associated with 
administering the non-customer component (e.g., TPH proprietary 
transactions) of its regulatory program.\16\ Moreover, the Exchange 
notes that it has broad regulatory responsibilities with respect to its 
TPHs' activities, irrespective of where their transactions take place. 
Many of the Exchange's surveillance programs for customer trading 
activity may require the Exchange to look at activity across all 
markets, such as reviews related to position limit violations and 
manipulation. Indeed, the Exchange cannot effectively review for such 
conduct without looking at and evaluating activity irregardless of 
where it transpires. In addition to its own surveillance programs, the 
Exchange also works with other SROs and exchanges on intermarket 
surveillance related issues. Through its participation in the 
Intermarket Surveillance Group (``ISG'') \17\ the Exchange shares 
information and coordinates inquiries and investigations with other 
exchanges designed to address potential intermarket manipulation and 
trading abuses. Accordingly, there is a strong nexus between the ORF 
and the Exchange's regulatory activities with respect to its TPH's 
customer trading activity.
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    \16\ If the Exchange changes its method of funding regulation or 
if circumstances otherwise change in the future, the Exchange may 
decide to modify the ORF or assess a separate regulatory fee on TPH 
proprietary transactions if the Exchange deems it advisable.
    \17\ ISG is an industry organization formed in 1983 to 
coordinate intermarket surveillance among the SROs by cooperatively 
sharing regulatory information pursuant to a written agreement 
between the parties. The goal of the ISG's information sharing is to 
coordinate regulatory efforts to address potential intermarket 
trading abuses and manipulations.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. This proposal does not create 
an unnecessary or inappropriate intra-market burden on competition 
because the ORF applies to all customer activity, thereby raising 
regulatory revenue to offset regulatory expenses. It also supplements 
the regulatory revenue derived from non-customer activity. The Exchange 
notes, however, the proposed change is not designed to address any 
competitive issues. Indeed, this proposal does not create an 
unnecessary or inappropriate inter-market burden on competition because 
it is a regulatory fee that supports regulation in furtherance of the 
purposes of the Act. The Exchange is obligated to ensure that the 
amount of regulatory revenue collected from the

[[Page 44454]]

ORF, in combination with its other regulatory fees and fines, does not 
exceed regulatory costs.

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

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \18\ and paragraph (f) of Rule 19b-4 \19\ 
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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-CBOE-2021-044 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 No. SR-CBOE-2021-044. 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 No. SR-CBOE-2021-044, and should be submitted on 
or before September 2, 2021.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17172 Filed 8-11-21; 8:45 am]
BILLING CODE 8011-01-P

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