Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Relating to Its Lead Market-Maker Incentive Programs, 51427-51431 [2021-19860]
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Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices
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;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSENAT–2021–16 and should be
submitted on or before October 6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–19853 Filed 9–14–21; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92915; File No. SR–CBOE–
2021–050]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule Relating to Its Lead MarketMaker Incentive Programs
September 9, 2021.
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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
September 1, 2021, Cboe Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘Cboe Options’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
its Fees Schedule with respect to its
Lead Market-Maker (‘‘LMM’’) Incentive
Programs. 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
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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
BILLING CODE 8011–01–P
30 17
website (https://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.aspx), at the Exchange’s Office of
the Secretary, and at the Commission’s
Public Reference Room.
1. Purpose
The Exchange proposes to amend its
Fees Schedule to amend: the Mini
Russell 2000 Index (‘‘MRUT’’) options
LMM Incentive Program; the MSCI
EAFE Index (‘‘MXEA’’) options and
MSCI Emerging Markets Index
(‘‘MXEF’’) options LMM Incentive
Program (i.e., the MSCI LMM Incentive
Program); and the Regular Trading
Hours (‘‘RTH’’) S&P 500 ESG Index
(‘‘SPESG’’) LMM Incentive Program, and
to remove an expiring fee waiver,
effective September 1, 2021.
Each LMM Incentive Program
provides a rebate 3 to Trading Permit
Holders (‘‘TPHs’’) with LMM
appointments to the respective
incentive program that meet certain
quoting standards in the applicable
series in a month. The Exchange notes
that meeting or exceeding the quoting
standards (both current and as
proposed; described in further detail
below) in each of the LMM Incentive
Program products to receive the
applicable rebate (both currently offered
and as proposed; described in further
detail below) is optional for an LMM
appointed to a program. Rather, an
LMM appointed to an incentive program
is eligible to receive the corresponding
rebate if it satisfies the applicable
quoting standards, which the Exchange
believes encourages the LMM to provide
3 The proposed rule change updates the term
‘‘payment’’ to ‘‘rebate’’ in the MSCI and MRUT
LMM Incentive Programs, which more accurately
reflects the type of payment an LMM appointed to
the MRUT or MSCI LMM Incentive Program is
eligible to receive and is consistent with language
in the other LMM Incentive Programs.
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51427
liquidity in the applicable class and
trading session. The Exchange may
consider other exceptions to the
programs’ quoting standards based on
demonstrated legal or regulatory
requirements or other mitigating
circumstances. In calculating whether
an LMM appointed to an incentive
program meets the applicable program’s
quoting standards each month, the
Exchange excludes from the calculation
in that month the business day in which
the LMM missed meeting or exceeding
the quoting standards in the highest
number of the applicable series.
MRUT LMM Incentive Program
The Exchange first proposes to amend
its MRUT LMM Incentive Program.
Currently, the program provides that if
the appointed LMM in MRUT provides
continuous electronic quotes during
RTH that meet or exceed the program’s
heightened quoting standards 4 in at
least 99% of the series 90% of the time
in a given month, the LMM will receive
a rebate 5 for that month in the amount
of $20,000 (or pro-rated amount if an
appointment begins after the first
trading day of the month or ends prior
to the last trading day of the month).
Specifically, the Exchange proposes to
amend certain quotes widths contained
in the MRUT LMM Incentive Program’s
heightened quoting standards.
Currently, for expiring MRUT options
(14 days or less), the appointed LMM
must meet, among other heightened
quoting standards, a $0.15 width for a
quote size of 1 contract at a premium
level of $1.01 to $3.00 and a $0.15 width
for a quote size of 1 contract at a
premium level of $3.01 to $5.00. The
proposed rule change marginally
decreases both such widths in these
categories to $0.14. Currently, for MRUT
options expiring in the near term (15
days to 60 days), the appointed LMM
must meet, among other heightened
quoting standards, a $0.15 width for a
quote size of 1 contract at a premium
level of $1.01 to $3.00, a $0.18 width for
a quote size of one contract at a
premium level of $3.01 to $5.00, and a
$0.20 width for a quote size of 1
contract at a premium level of $5.01 to
$10.00. The proposed rule change
marginally decreases these widths to a
$0.13 width, a $0.16 width, and a $0.18
width, respectively. The Exchange also
proposes to increase the compensation
payment offered by the MRUT LMM
Incentive Program to an LMM appointed
to the program for meeting the
4 Located in the ‘‘MRUT LMM Incentive
Program’’ table in the Fees Schedule.
5 See supra note 3.
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heightened quoting standards in a
month from $20,000 to $25,000.
The proposed rule change also makes
a nonsubstantive, clarifying change to
the language regarding the program’s
MRUT Volume Incentive Pool, which
currently states that, ‘‘in addition to the
above rebate, if the appointed LMM
meets or exceeds the above heightened
quoting standards in a given month and
provides an average daily volume
(‘‘ADV’’) in MRUT that meets or exceeds
25,000 contracts in a given month, the
LMM will receive the Monthly ADV
Payment amount that corresponds to the
level of ADV in MRUT for that month
per the MRUT Volume Incentive Pool
program below.’’ As proposed, this
language provides that, if in addition to
the above rebate, if the appointed LMM
meets or exceeds the above heightened
quoting standards in a given month, the
LMM will receive the Monthly ADV
Payment amount that corresponds to the
level of ADV provided by the LMM in
MRUT for that month per the MRUT
Volume Incentive Pool program below.
The Exchange believes the updated
language is simpler and more
straightforward regarding the
application of the MRUT Volume
Incentive Pool program to an LMM that
meets or exceeds the program’s
heightened quoting standards. The
Exchange believes that the proposed
rule change will encourage LMMs
appointed to the MRUT LMM Incentive
Program to strive to meet tighter width
standards in MRUT options in order to
receive the proposed higher rebate
offered under the MRUT LMM Incentive
Program. Tighter spreads generally
signal an increase in activity from other
market participants, contributing to
overall deeper, more liquid markets,
price discovery and transparency, and a
robust market ecosystem to the benefit
of all market participants.
In addition to this, the proposed rule
change also makes a nonsubstantive
change to the Fees Schedule by
removing an expiring fee waiver in
footnote 32 (and the locations in the
Fees Schedule to which it is appended
to MRUT options for Market-Maker and
Firm transaction fees in the Rate
Table—All Products Excluding
Underlying Symbol List A), which
provides that transaction fees for orders
executed in MRUT options with a
capacity code of ‘‘F’’, ‘‘L’’, or ‘‘M’’ will
be waived through August 31, 2021. As
intended, the waiver expired on August
31, 2021 and such orders will be
assessed the standard transaction fees
for orders submitted in MRUT options
in a Market-Maker ($0.03 per contract)
or Firm ($0.02 per contract) capacity.
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MSCI (MXEA and MXEF) LMM
Incentive Program
The Exchange proposes to amend its
MSCI LMM Incentive Program.
Currently, the program provides that if
the appointed LMM in MXEA and
MXEF options (collectively, ‘‘MSCI
options’’) provides continuous
electronic quotes during RTH that meet
or exceed the heightened quoting
standards 6 in at least 90% of the MXEA
and MXEF series 80% of the time in a
given month, the LMM will receive a
rebate 7 for that month in the amount of
$20,000 per class, per month.8
First, the Exchange proposes to
amend the number of days for MSCI
options to be considered as ‘‘expiring’’
and as ‘‘near-term’’ per the program.
Specifically, the proposed rule change
updates the days to expiry for MSCI
options to be considered as expiring for
purposes of the program from 7 days or
less to 6 days or less and updates the
days to expiry for MSCI options to be
considered as near-term for the
purposes of the program from 8 days to
60 days to 7 days to 60 days. The
Exchange has observed that there is
more significant demand for and
participation in MSCI options with time
to expiration of a week or more, whereas
those options with less than a week to
expiration tend to experience
significantly less demand and
participation, wherein it becomes more
difficult for LMMs to quote within
specified widths and sizes. As a result,
the proposed rule change to update the
days to expiry within the expiring and
near-term categories is intended to
delineate the expiry categories in a
manner that better reflects the
differences in market characteristics,
and thus the difference in the difficulty
in meeting the quoting standards that
correspond to each, between options
that expire in less than a week and
options that expire in a week or more
(up to 60 days).
Next, the Exchange proposes to
amend certain quote widths and sizes
contained in the MSCI LMM Incentive
Program’s heightened quoting
standards. Currently, for expiring MSCI
options, the appointed LMM must meet,
among other heightened quoting
6 Located in the ‘‘MSCI LMM Incentive Program’’
table in the Fees Schedule.
7 See supra note 3.
8 The proposed rule change also makes a
nonsubstantive clarifying change that makes it
explicit that the monthly payment may be a prorated amount if an appointment begins after the first
trading day of the month or ends prior to the last
trading day of the month, consistent with language
currently in each of the LMM Incentive Programs
and the manner in which the MSCI LMM Incentive
Program currently works today.
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standards, a $3.00 width for a quote size
of 5 contracts at a premium of $1.01 to
$3.00. The proposed rule change
marginally decreases this width to
$2.50. For MSCI options expiring in the
near-term, the appointed LMM must
currently meet, among other heightened
quoting standards, a $1.20 width for a
quote size of 20 contracts at a premium
level of $0.00 to $5.00 and a $5.00 width
for a quote size of 10 contracts at a
premium level of $15.01 to $50.00. The
proposed rule change marginally
reduces these widths to $1.05 and $4.50,
respectively. Additionally, the proposed
rule change also slightly reduces the
quote size standards for most all of the
premium categories for MSCI options
expiring in the near-term. More
specifically, the proposed rule change
reduces the quote size standard of 20
contracts at a premium level of $0.00 to
$5.00 to 12 contracts, the quote size
standard of 15 contracts at a premium
level of $5.01 to $15.00 to 9 contracts,
the quote size standard of 10 contracts
at a premium level of $15.01 to $50.00
to 7 contracts, the quote size standard of
7 contracts at a premium level of $50.01
to $100.00 to 5 contracts, and the quote
size standard of 3 contracts at a
premium level of $100.01 to $200.00 to
2 contracts. For MSCI options expiring
in the mid-term (61 days to 270 days),
the appointed LMM must currently
meet, among other heightened quoting
standards, a $10.00 width for a quote
size of 57 [sic] contracts at a premium
of $15.01 to $50.00. The proposed rule
change also marginally decreases this
quote width to $9.00. The proposed rule
change also slightly reduces the quote
size standards for certain premium
categories for MSCI options expiring in
the mid-term by reducing the quote size
standard of 15 contracts at a premium
level of $0.00 to $5.00 to 10 contracts,
the quote size standard of 10 contracts
at a premium level of $5.01 to $15.00 to
8 contracts, and the quote size standard
of 2 [sic] contracts at a premium level
of $100.01 to $200.00 to 2 contracts.
The Exchange believes that the
proposed tighter widths and smaller
quote sizes for the MSCI LMM Incentive
Program’s heightened quoting
requirements will incentivize LMMs
appointed to the program to make
tighter markets and quote more
aggressively in MSCI options to receive
the current rebate offered under the
program, resulting in tighter spreads
and increased liquidity to the benefits of
investors.
RTH SPESG LMM Incentive Program
The Exchange proposes to amend the
RTH SPESG LMM Incentive Program.
Currently, the program provides that, if
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Indeed, the Exchange notes that these
LMMs serve a crucial role in providing
quotes and the opportunity for market
participants to trade MRUT, MSCI and
5,000–10,000 contracts ................
15,000
SPESG options, as applicable, which
Greater than 10,000 contracts .....
20,000
can lead to increased volume, providing
for robust markets. The Exchange
The proposed SPESG Volume
ultimately offers the LMM Incentive
Incentive Pool offered by the RTH
Programs, as amended, to sufficiently
SPESG LMM Incentive Program is
designed to incentivize LMMs to further incentive LMMs appointed to each
incentive program to provide key
increase the provision of liquidity in
liquidity and active markets in the
SPESG options. Increased liquidity in
corresponding program products during
SPESG options would, in turn, provide
the corresponding trading sessions, and
greater trading opportunities, added
believes that these incentive programs,
market transparency and enhanced
as amended, will continue to encourage
price discovery for all market
increased quoting to add liquidity in
participants in SPESG.
each of the corresponding program
2. Statutory Basis
products, thereby protecting investors
The Exchange believes the proposed
and the public interest. The Exchange
rule change is consistent with the
also notes that an LMM appointed to an
Securities Exchange Act of 1934 (the
incentive program may undertake added
‘‘Act’’) and the rules and regulations
costs each month in order to satisfy that
thereunder applicable to the Exchange
heightened quoting standards (e.g.,
and, in particular, the requirements of
having to purchase additional logical
Section 6(b) of the Act.10 Specifically,
connectivity).
the Exchange believes the proposed rule
Particularly, the Exchange believes
change is consistent with the Section
that it is reasonable to amend certain
11
6(b)(5) requirements that the rules of
widths and sizes in the heightened
an exchange be designed to prevent
quoting standards under the MRUT and
fraudulent and manipulative acts and
MSCI LMM Incentive Programs, as
practices, to promote just and equitable
applicable. The Exchange believes the
principles of trade, to foster cooperation proposed rule change to tighten certain
and coordination with persons engaged
widths and reduce certain quote size
in regulating, clearing, settling,
standards in the MRUT and MSCI LMM
processing information with respect to,
Incentive Programs, as applicable, is
and facilitating transactions in
reasonably designed to facilitate LMMs
securities, to remove impediments to
appointed to the MRUT and MSCI
and perfect the mechanism of a free and Incentive Programs to post tighter
open market and a national market
spreads and more aggressive quotes in
system, and, in general, to protect
MRUT and MSCI options, as applicable,
investors and the public interest.
in order to meet the heightened quoting
Additionally, the Exchange believes the standards and receive the rebate offered
proposed rule change is consistent with
under the incentive program. An
Section 6(b)(4) of the Act,12 which
increase in quoting activity and tighter
requires that Exchange rules provide for
quotes tends to signal additional
the equitable allocation of reasonable
corresponding increase in order flow
dues, fees, and other charges among its
from other market participants, which
Trading Permit Holders and other
benefits all investors by deepening the
persons using its facilities.
Regarding each of the LMM Incentive Exchange’s liquidity pool, potentially
providing even greater execution
Programs generally, the Exchange
incentives and opportunities, offering
believes it is reasonable, equitable and
additional flexibility for all investors to
not unfairly discriminatory to continue
enjoy cost savings, supporting the
to offer these financial incentives,
quality of price discovery, promoting
including as amended, to LMMs
market transparency and improving
appointed to the programs, because it
investor protection. The Exchange also
benefits all market participants trading
believes that the proposed widths and
in the corresponding products during
sizes are reasonable because they
RTH. These incentive programs
remain generally aligned with the
encourage the LMMs appointed to such
current heightened standards in each
Monthly
programs to satisfy the heightened
SPESG ADV
ADV
program, as the proposed widths and
quoting
standards,
which
may
increase
payment
sizes are only marginally reduced in
liquidity and provide more trading
order to incentivize an increase in
0–999 contracts ............................
$0.00 opportunities and tighter spreads.
quoting activity and the provision of
1,000–4,999 contracts ..................
5,000
tighter markets. The Exchange also
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
notes that another options exchange
9 Located in the ‘‘RTH SPESG LMM Incentive
12 15 U.S.C. 78f(b)(4).
Program’’ table in the Fees Schedule.
offers similar incentive programs with
the appointed LMM provides
continuous electronic quotes during
RTH that meet or exceed the program’s
heightened quoting standards 9 in at
least 60% of SPESG series 90% of the
time in a given month, the LMM will
receive a rebate for that month in the
amount of a pro-rata share of a
compensation pool equal to $50,000 (or
pro-rated amount if an appointment
begins after the first trading day of the
month or ends prior to the last trading
day of the month) for that month. If, for
example, two LMMs meet the
heightened continuous quoting standard
in SPESG during a month, each will
receive $25,000. If only one LMM meets
the heightened continuous quoting
standard in SPESG during a month, that
LMM would receive $50,000 and the
other one would receive nothing. The
Exchange proposes to eliminate the
compensation pool structure (and
related explanatory language) currently
applicable to the RTH SPESG LMM
Incentive Program and adopt a flat-rate
rebate structure per month, consistent
with the current flat-rate rebate
structure of the other LMM Incentive
Programs. Specifically, the proposed
rule change provides that if the
appointed LMM provides continuous
electronic quotes during RTH that meet
or exceed the same heightened quoting
standards in the same percentage of the
series (60%) for the same percentage of
the time (90%) in a given month, the
LMM will receive a rebate for that
month in the amount of $20,000 (or prorated amount if an appointment begins
after the first trading day of the month
or ends prior to the last trading day of
the month) for that month.
The Exchange also proposes to offer
an SPESG Volume Incentive Pool under
the RTH SPESG LMM Incentive
Program, like that offered under the
MRUT LMM Incentive Program.
Specifically, the proposed rule change
to the program provides that, in
addition to the above rebate (i.e., the
proposed $20,000 per month rebate), if
the appointed LMM meets or exceeds
the above heightened quoting standards
in a given month, the LMM will receive
the Monthly ADV Payment amount that
corresponds to the level of ADV
provided by the LMM in SPESG for that
month per the SPESG Volume Incentive
Pool program below.
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ADV
payment
SPESG ADV
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corresponding quote widths, sizes and
premiums of comparable ranges.13
Likewise, the Exchange believes that the
proposed rule change to adopt an
SPESG Volume Incentive Pool as part of
the RTH SPESG LMM Incentive
Program is reasonably designed to
continue to encourage LMMs appointed
to the incentive program to provide
significant liquidity in SPESG options
during RTH. The Exchange notes that
the MRUT LMM Incentive Program also
offers a volume incentive pool
structured in a substantially similar
manner.
The Exchange believes that it is
reasonable to amend the number of days
to expiration that comprise certain
expiry categories in the MSCI LMM
Incentive Programs as this update is
reasonably designed to make it easier for
the LMMs appointed to the incentive
program to satisfy the heightened
quoting standards for options expiring a
certain number of days out, by better
aligning the applicable category of
heightened quoting standards with the
level of demand for MSCI options that
expire in less than a week versus a week
or more out.
The Exchange believes that it is
reasonable to amend the monthly rebate
amounts applicable to the MRUT and
RTH SPESG LMM Incentive Programs.
The Exchange believes that the
proposed increased rebate amounts are
reasonably designed to continue to
incentivize an appointed LMM to meet
the applicable quoting standards for
MRUT and SPESG options, thereby
providing liquid and active markets,
which facilitates tighter spreads,
increased trading opportunities, and
overall enhanced market quality to the
benefit of all market participants. The
Exchange believes that the proposed
rule change to eliminate the
compensation pool structure in the RTH
SPESG LMM Incentive Program and
replace it with a flat-rate rebate
structure is reasonable because it is
consistent with the flat-rate rebate
structure currently applicable to each of
the other LMM Incentive Programs. The
Exchange further believes that the
proposed rule change to amend the
rebate amount received for MRUT
($25,000) and SPESG options ($20,000)
is reasonable because it is comparable to
the rebates offered by other LMM
Incentive Programs. For example, the
MSCI LMM Program currently offers
$20,000 per each class (MXEF and
MXEA) in which the heightened quoting
standards are met in a given month and
the GTH VIX/VIXW LMM Incentive
13 See e.g., Nasdaq Phlx Options 7 Pricing
Schedule, Section 5.B, XND Incentive Program.
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Program offers $15,000 for VIX options
in which the quoting standards are met
in VIX options a given month.
The Exchange believes that the
proposed changes to the LMM Incentive
Programs are equitable and not unfairly
discriminatory. The Exchange believes
that it is equitable and not unfairly
discriminatory to amend certain quoting
widths and sizes in the MRUT and
MSCI LMM Incentive Program, to adopt
a volume incentive pool for the RTH
SPESG LMM Incentive Program and to
update the number of days to expiration
for certain expiry categories in the MSCI
LMM Incentive Program because such
quote widths and sizes, volume pool
program and expiry categories will
equally apply to any and all TPHs with
LMM appointments to the MRUT, MSCI
and RTH SPESG LMM Incentive
Programs, as applicable, that seek to
meet the programs’ heightened quoting
standards in order to receive the rebates
offered (both current and proposed, as
applicable) under each respective
program. The Exchange believes the
proposed rebates applicable to the
MRUT and RTH SPESG LMM Incentive
Programs are equitable and not unfairly
discriminatory because they, too, will
equally apply to any TPH that is
appointed as an LMM to the MRUT and
RTH SPESG LMM Incentive Programs.
Additionally, if an LMM appointed to
any of the LMM Incentive Programs
does not satisfy the corresponding
heightened quoting standard for any
given month, then it simply will not
receive the rebate offered by the
respective program for that month.
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 does impose any burden on
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed changes to existing LMM
Incentive Programs will apply to all
LMMs appointed to the applicable
program classes (i.e., MRUT, MXEF,
MXEA and SPESG) in a uniform
manner. To the extent these LMMs
appointed to an incentive program
receive a benefit that other market
participants do not, as stated, these
LMMs in their role as Mark-Makers on
the Exchange have different obligations
and are held to different standards. For
example, Market-Makers play a crucial
role in providing active and liquid
markets in their appointed products,
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thereby providing a robust market
which benefits all market participants.
Such Market-Makers also have
obligations and regulatory requirements
that other participants do not have. The
Exchange also notes that an LMM
appointed to an incentive program may
undertake added costs each month to
satisfy that heightened quoting
standards (e.g., having to purchase
additional logical connectivity). The
Exchange also notes that the incentive
programs are designed to attract
additional order flow to the Exchange,
wherein greater liquidity benefits all
market participants by providing more
trading opportunities, tighter spreads,
and added market transparency and
price discovery, and signals to other
market participants to direct their order
flow to those markets, thereby
contributing to robust levels of liquidity.
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 the LMM
Incentive Programs apply only to
transactions in products exclusively
listed on Cboe Options. Additionally, as
noted above, the incentive programs are
designed to attract additional order flow
to the Exchange, wherein greater
liquidity benefits all market participants
by providing more trading
opportunities, tighter spreads, and
added market transparency and price
discovery, and signals to other market
participants to direct their order flow to
those markets, thereby contributing to
robust levels of liquidity. The Exchange
notes it operates in a highly competitive
market. In addition to Cboe Options,
TPHs have numerous alternative venues
that they may participate on and
director their order flow, including 15
other options exchanges, as well as offexchange venues, where competitive
products are available for trading. Based
on publicly available information, no
single options exchange has more than
15% of the market share of executed
volume of options trades.14 Therefore,
no exchange possesses significant
pricing power in the execution of option
order flow. 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
14 See Cboe Global Markets, U.S. Options Market
Volume Summary by Month (August 24, 2021),
available at https://markets.cboe.com/us/options/
market_share/.
E:\FR\FM\15SEN1.SGM
15SEN1
Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices
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.’’ 15 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’. . . .’’.16 Accordingly, the
Exchange does not believe its proposed
changes to the incentive programs
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
khammond on DSKJM1Z7X2PROD with NOTICES
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 17 and paragraph (f) of Rule
19b–4 18 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.
15 See
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
16 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
17 15 U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
17:08 Sep 14, 2021
Jkt 253001
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:
51431
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–19860 Filed 9–14–21; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
SMALL BUSINESS ADMINISTRATION
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2021–050 on the subject line.
[Disaster Declaration #17163 and #17164;
New York Disaster Number NY–00206]
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2021–050. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2021–050 and
should be submitted on or before
October 6, 2021.
19 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00094
Fmt 4703
Sfmt 4703
Administrative Declaration of a
Disaster for the State of New York
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative declaration of a disaster
for the State of New York dated 09/09/
2021.
Incident: Severe Storms and Flooding.
Incident Period: 07/16/2021 through
07/19/2021.
DATES: Issued on 09/09/2021.
Physical Loan Application Deadline
Date: 11/08/2021.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/09/2022.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Otsego.
Contiguous Counties:
New York: Chenango, Delaware,
Herkimer, Madison, Montgomery,
Oneida, Schoharie.
The Interest Rates are:
SUMMARY:
Percent
For Physical Damage:
Homeowners with Credit Available Elsewhere ......................
Homeowners without Credit
Available Elsewhere ..............
Businesses with Credit Available Elsewhere ......................
Businesses without Credit
Available Elsewhere ..............
E:\FR\FM\15SEN1.SGM
15SEN1
3.250
1.625
5.760
2.880
]]>Agencies
[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Notices]
[Pages 51427-51431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19860]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92915; File No. SR-CBOE-2021-050]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule Relating to Its Lead Market-Maker Incentive Programs
September 9, 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 September 1, 2021, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its Fees Schedule with respect to its Lead Market-Maker
(``LMM'') Incentive Programs. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule to amend: the Mini
Russell 2000 Index (``MRUT'') options LMM Incentive Program; the MSCI
EAFE Index (``MXEA'') options and MSCI Emerging Markets Index
(``MXEF'') options LMM Incentive Program (i.e., the MSCI LMM Incentive
Program); and the Regular Trading Hours (``RTH'') S&P 500 ESG Index
(``SPESG'') LMM Incentive Program, and to remove an expiring fee
waiver, effective September 1, 2021.
Each LMM Incentive Program provides a rebate \3\ to Trading Permit
Holders (``TPHs'') with LMM appointments to the respective incentive
program that meet certain quoting standards in the applicable series in
a month. The Exchange notes that meeting or exceeding the quoting
standards (both current and as proposed; described in further detail
below) in each of the LMM Incentive Program products to receive the
applicable rebate (both currently offered and as proposed; described in
further detail below) is optional for an LMM appointed to a program.
Rather, an LMM appointed to an incentive program is eligible to receive
the corresponding rebate if it satisfies the applicable quoting
standards, which the Exchange believes encourages the LMM to provide
liquidity in the applicable class and trading session. The Exchange may
consider other exceptions to the programs' quoting standards based on
demonstrated legal or regulatory requirements or other mitigating
circumstances. In calculating whether an LMM appointed to an incentive
program meets the applicable program's quoting standards each month,
the Exchange excludes from the calculation in that month the business
day in which the LMM missed meeting or exceeding the quoting standards
in the highest number of the applicable series.
---------------------------------------------------------------------------
\3\ The proposed rule change updates the term ``payment'' to
``rebate'' in the MSCI and MRUT LMM Incentive Programs, which more
accurately reflects the type of payment an LMM appointed to the MRUT
or MSCI LMM Incentive Program is eligible to receive and is
consistent with language in the other LMM Incentive Programs.
---------------------------------------------------------------------------
MRUT LMM Incentive Program
The Exchange first proposes to amend its MRUT LMM Incentive
Program. Currently, the program provides that if the appointed LMM in
MRUT provides continuous electronic quotes during RTH that meet or
exceed the program's heightened quoting standards \4\ in at least 99%
of the series 90% of the time in a given month, the LMM will receive a
rebate \5\ for that month in the amount of $20,000 (or pro-rated amount
if an appointment begins after the first trading day of the month or
ends prior to the last trading day of the month).
---------------------------------------------------------------------------
\4\ Located in the ``MRUT LMM Incentive Program'' table in the
Fees Schedule.
\5\ See supra note 3.
---------------------------------------------------------------------------
Specifically, the Exchange proposes to amend certain quotes widths
contained in the MRUT LMM Incentive Program's heightened quoting
standards. Currently, for expiring MRUT options (14 days or less), the
appointed LMM must meet, among other heightened quoting standards, a
$0.15 width for a quote size of 1 contract at a premium level of $1.01
to $3.00 and a $0.15 width for a quote size of 1 contract at a premium
level of $3.01 to $5.00. The proposed rule change marginally decreases
both such widths in these categories to $0.14. Currently, for MRUT
options expiring in the near term (15 days to 60 days), the appointed
LMM must meet, among other heightened quoting standards, a $0.15 width
for a quote size of 1 contract at a premium level of $1.01 to $3.00, a
$0.18 width for a quote size of one contract at a premium level of
$3.01 to $5.00, and a $0.20 width for a quote size of 1 contract at a
premium level of $5.01 to $10.00. The proposed rule change marginally
decreases these widths to a $0.13 width, a $0.16 width, and a $0.18
width, respectively. The Exchange also proposes to increase the
compensation payment offered by the MRUT LMM Incentive Program to an
LMM appointed to the program for meeting the
[[Page 51428]]
heightened quoting standards in a month from $20,000 to $25,000.
The proposed rule change also makes a nonsubstantive, clarifying
change to the language regarding the program's MRUT Volume Incentive
Pool, which currently states that, ``in addition to the above rebate,
if the appointed LMM meets or exceeds the above heightened quoting
standards in a given month and provides an average daily volume
(``ADV'') in MRUT that meets or exceeds 25,000 contracts in a given
month, the LMM will receive the Monthly ADV Payment amount that
corresponds to the level of ADV in MRUT for that month per the MRUT
Volume Incentive Pool program below.'' As proposed, this language
provides that, if in addition to the above rebate, if the appointed LMM
meets or exceeds the above heightened quoting standards in a given
month, the LMM will receive the Monthly ADV Payment amount that
corresponds to the level of ADV provided by the LMM in MRUT for that
month per the MRUT Volume Incentive Pool program below. The Exchange
believes the updated language is simpler and more straightforward
regarding the application of the MRUT Volume Incentive Pool program to
an LMM that meets or exceeds the program's heightened quoting
standards. The Exchange believes that the proposed rule change will
encourage LMMs appointed to the MRUT LMM Incentive Program to strive to
meet tighter width standards in MRUT options in order to receive the
proposed higher rebate offered under the MRUT LMM Incentive Program.
Tighter spreads generally signal an increase in activity from other
market participants, contributing to overall deeper, more liquid
markets, price discovery and transparency, and a robust market
ecosystem to the benefit of all market participants.
In addition to this, the proposed rule change also makes a
nonsubstantive change to the Fees Schedule by removing an expiring fee
waiver in footnote 32 (and the locations in the Fees Schedule to which
it is appended to MRUT options for Market-Maker and Firm transaction
fees in the Rate Table--All Products Excluding Underlying Symbol List
A), which provides that transaction fees for orders executed in MRUT
options with a capacity code of ``F'', ``L'', or ``M'' will be waived
through August 31, 2021. As intended, the waiver expired on August 31,
2021 and such orders will be assessed the standard transaction fees for
orders submitted in MRUT options in a Market-Maker ($0.03 per contract)
or Firm ($0.02 per contract) capacity.
MSCI (MXEA and MXEF) LMM Incentive Program
The Exchange proposes to amend its MSCI LMM Incentive Program.
Currently, the program provides that if the appointed LMM in MXEA and
MXEF options (collectively, ``MSCI options'') provides continuous
electronic quotes during RTH that meet or exceed the heightened quoting
standards \6\ in at least 90% of the MXEA and MXEF series 80% of the
time in a given month, the LMM will receive a rebate \7\ for that month
in the amount of $20,000 per class, per month.\8\
---------------------------------------------------------------------------
\6\ Located in the ``MSCI LMM Incentive Program'' table in the
Fees Schedule.
\7\ See supra note 3.
\8\ The proposed rule change also makes a nonsubstantive
clarifying change that makes it explicit that the monthly payment
may be a pro-rated amount if an appointment begins after the first
trading day of the month or ends prior to the last trading day of
the month, consistent with language currently in each of the LMM
Incentive Programs and the manner in which the MSCI LMM Incentive
Program currently works today.
---------------------------------------------------------------------------
First, the Exchange proposes to amend the number of days for MSCI
options to be considered as ``expiring'' and as ``near-term'' per the
program. Specifically, the proposed rule change updates the days to
expiry for MSCI options to be considered as expiring for purposes of
the program from 7 days or less to 6 days or less and updates the days
to expiry for MSCI options to be considered as near-term for the
purposes of the program from 8 days to 60 days to 7 days to 60 days.
The Exchange has observed that there is more significant demand for and
participation in MSCI options with time to expiration of a week or
more, whereas those options with less than a week to expiration tend to
experience significantly less demand and participation, wherein it
becomes more difficult for LMMs to quote within specified widths and
sizes. As a result, the proposed rule change to update the days to
expiry within the expiring and near-term categories is intended to
delineate the expiry categories in a manner that better reflects the
differences in market characteristics, and thus the difference in the
difficulty in meeting the quoting standards that correspond to each,
between options that expire in less than a week and options that expire
in a week or more (up to 60 days).
Next, the Exchange proposes to amend certain quote widths and sizes
contained in the MSCI LMM Incentive Program's heightened quoting
standards. Currently, for expiring MSCI options, the appointed LMM must
meet, among other heightened quoting standards, a $3.00 width for a
quote size of 5 contracts at a premium of $1.01 to $3.00. The proposed
rule change marginally decreases this width to $2.50. For MSCI options
expiring in the near-term, the appointed LMM must currently meet, among
other heightened quoting standards, a $1.20 width for a quote size of
20 contracts at a premium level of $0.00 to $5.00 and a $5.00 width for
a quote size of 10 contracts at a premium level of $15.01 to $50.00.
The proposed rule change marginally reduces these widths to $1.05 and
$4.50, respectively. Additionally, the proposed rule change also
slightly reduces the quote size standards for most all of the premium
categories for MSCI options expiring in the near-term. More
specifically, the proposed rule change reduces the quote size standard
of 20 contracts at a premium level of $0.00 to $5.00 to 12 contracts,
the quote size standard of 15 contracts at a premium level of $5.01 to
$15.00 to 9 contracts, the quote size standard of 10 contracts at a
premium level of $15.01 to $50.00 to 7 contracts, the quote size
standard of 7 contracts at a premium level of $50.01 to $100.00 to 5
contracts, and the quote size standard of 3 contracts at a premium
level of $100.01 to $200.00 to 2 contracts. For MSCI options expiring
in the mid-term (61 days to 270 days), the appointed LMM must currently
meet, among other heightened quoting standards, a $10.00 width for a
quote size of 57 [sic] contracts at a premium of $15.01 to $50.00. The
proposed rule change also marginally decreases this quote width to
$9.00. The proposed rule change also slightly reduces the quote size
standards for certain premium categories for MSCI options expiring in
the mid-term by reducing the quote size standard of 15 contracts at a
premium level of $0.00 to $5.00 to 10 contracts, the quote size
standard of 10 contracts at a premium level of $5.01 to $15.00 to 8
contracts, and the quote size standard of 2 [sic] contracts at a
premium level of $100.01 to $200.00 to 2 contracts.
The Exchange believes that the proposed tighter widths and smaller
quote sizes for the MSCI LMM Incentive Program's heightened quoting
requirements will incentivize LMMs appointed to the program to make
tighter markets and quote more aggressively in MSCI options to receive
the current rebate offered under the program, resulting in tighter
spreads and increased liquidity to the benefits of investors.
RTH SPESG LMM Incentive Program
The Exchange proposes to amend the RTH SPESG LMM Incentive Program.
Currently, the program provides that, if
[[Page 51429]]
the appointed LMM provides continuous electronic quotes during RTH that
meet or exceed the program's heightened quoting standards \9\ in at
least 60% of SPESG series 90% of the time in a given month, the LMM
will receive a rebate for that month in the amount of a pro-rata share
of a compensation pool equal to $50,000 (or pro-rated amount if an
appointment begins after the first trading day of the month or ends
prior to the last trading day of the month) for that month. If, for
example, two LMMs meet the heightened continuous quoting standard in
SPESG during a month, each will receive $25,000. If only one LMM meets
the heightened continuous quoting standard in SPESG during a month,
that LMM would receive $50,000 and the other one would receive nothing.
The Exchange proposes to eliminate the compensation pool structure (and
related explanatory language) currently applicable to the RTH SPESG LMM
Incentive Program and adopt a flat-rate rebate structure per month,
consistent with the current flat-rate rebate structure of the other LMM
Incentive Programs. Specifically, the proposed rule change provides
that if the appointed LMM provides continuous electronic quotes during
RTH that meet or exceed the same heightened quoting standards in the
same percentage of the series (60%) for the same percentage of the time
(90%) in a given month, the LMM will receive a rebate for that month in
the amount of $20,000 (or pro-rated amount if an appointment begins
after the first trading day of the month or ends prior to the last
trading day of the month) for that month.
---------------------------------------------------------------------------
\9\ Located in the ``RTH SPESG LMM Incentive Program'' table in
the Fees Schedule.
---------------------------------------------------------------------------
The Exchange also proposes to offer an SPESG Volume Incentive Pool
under the RTH SPESG LMM Incentive Program, like that offered under the
MRUT LMM Incentive Program. Specifically, the proposed rule change to
the program provides that, in addition to the above rebate (i.e., the
proposed $20,000 per month rebate), if the appointed LMM meets or
exceeds the above heightened quoting standards in a given month, the
LMM will receive the Monthly ADV Payment amount that corresponds to the
level of ADV provided by the LMM in SPESG for that month per the SPESG
Volume Incentive Pool program below.
------------------------------------------------------------------------
Monthly
SPESG ADV ADV
payment
------------------------------------------------------------------------
0-999 contracts.............................................. $0.00
1,000-4,999 contracts........................................ 5,000
5,000-10,000 contracts....................................... 15,000
Greater than 10,000 contracts................................ 20,000
------------------------------------------------------------------------
The proposed SPESG Volume Incentive Pool offered by the RTH SPESG
LMM Incentive Program is designed to incentivize LMMs to further
increase the provision of liquidity in SPESG options. Increased
liquidity in SPESG options would, in turn, provide greater trading
opportunities, added market transparency and enhanced price discovery
for all market participants in SPESG.
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.\10\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ 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. Additionally,
the Exchange believes the proposed rule change is consistent with
Section 6(b)(4) of the Act,\12\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its Trading Permit Holders and other persons using
its facilities.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Regarding each of the LMM Incentive Programs generally, the
Exchange believes it is reasonable, equitable and not unfairly
discriminatory to continue to offer these financial incentives,
including as amended, to LMMs appointed to the programs, because it
benefits all market participants trading in the corresponding products
during RTH. These incentive programs encourage the LMMs appointed to
such programs to satisfy the heightened quoting standards, which may
increase liquidity and provide more trading opportunities and tighter
spreads. Indeed, the Exchange notes that these LMMs serve a crucial
role in providing quotes and the opportunity for market participants to
trade MRUT, MSCI and SPESG options, as applicable, which can lead to
increased volume, providing for robust markets. The Exchange ultimately
offers the LMM Incentive Programs, as amended, to sufficiently
incentive LMMs appointed to each incentive program to provide key
liquidity and active markets in the corresponding program products
during the corresponding trading sessions, and believes that these
incentive programs, as amended, will continue to encourage increased
quoting to add liquidity in each of the corresponding program products,
thereby protecting investors and the public interest. The Exchange also
notes that an LMM appointed to an incentive program may undertake added
costs each month in order to satisfy that heightened quoting standards
(e.g., having to purchase additional logical connectivity).
Particularly, the Exchange believes that it is reasonable to amend
certain widths and sizes in the heightened quoting standards under the
MRUT and MSCI LMM Incentive Programs, as applicable. The Exchange
believes the proposed rule change to tighten certain widths and reduce
certain quote size standards in the MRUT and MSCI LMM Incentive
Programs, as applicable, is reasonably designed to facilitate LMMs
appointed to the MRUT and MSCI Incentive Programs to post tighter
spreads and more aggressive quotes in MRUT and MSCI options, as
applicable, in order to meet the heightened quoting standards and
receive the rebate offered under the incentive program. An increase in
quoting activity and tighter quotes tends to signal additional
corresponding increase in order flow from other market participants,
which benefits all investors by deepening the Exchange's liquidity
pool, potentially providing even greater execution incentives and
opportunities, offering additional flexibility for all investors to
enjoy cost savings, supporting the quality of price discovery,
promoting market transparency and improving investor protection. The
Exchange also believes that the proposed widths and sizes are
reasonable because they remain generally aligned with the current
heightened standards in each program, as the proposed widths and sizes
are only marginally reduced in order to incentivize an increase in
quoting activity and the provision of tighter markets. The Exchange
also notes that another options exchange offers similar incentive
programs with
[[Page 51430]]
corresponding quote widths, sizes and premiums of comparable
ranges.\13\ Likewise, the Exchange believes that the proposed rule
change to adopt an SPESG Volume Incentive Pool as part of the RTH SPESG
LMM Incentive Program is reasonably designed to continue to encourage
LMMs appointed to the incentive program to provide significant
liquidity in SPESG options during RTH. The Exchange notes that the MRUT
LMM Incentive Program also offers a volume incentive pool structured in
a substantially similar manner.
---------------------------------------------------------------------------
\13\ See e.g., Nasdaq Phlx Options 7 Pricing Schedule, Section
5.B, XND Incentive Program.
---------------------------------------------------------------------------
The Exchange believes that it is reasonable to amend the number of
days to expiration that comprise certain expiry categories in the MSCI
LMM Incentive Programs as this update is reasonably designed to make it
easier for the LMMs appointed to the incentive program to satisfy the
heightened quoting standards for options expiring a certain number of
days out, by better aligning the applicable category of heightened
quoting standards with the level of demand for MSCI options that expire
in less than a week versus a week or more out.
The Exchange believes that it is reasonable to amend the monthly
rebate amounts applicable to the MRUT and RTH SPESG LMM Incentive
Programs. The Exchange believes that the proposed increased rebate
amounts are reasonably designed to continue to incentivize an appointed
LMM to meet the applicable quoting standards for MRUT and SPESG
options, thereby providing liquid and active markets, which facilitates
tighter spreads, increased trading opportunities, and overall enhanced
market quality to the benefit of all market participants. The Exchange
believes that the proposed rule change to eliminate the compensation
pool structure in the RTH SPESG LMM Incentive Program and replace it
with a flat-rate rebate structure is reasonable because it is
consistent with the flat-rate rebate structure currently applicable to
each of the other LMM Incentive Programs. The Exchange further believes
that the proposed rule change to amend the rebate amount received for
MRUT ($25,000) and SPESG options ($20,000) is reasonable because it is
comparable to the rebates offered by other LMM Incentive Programs. For
example, the MSCI LMM Program currently offers $20,000 per each class
(MXEF and MXEA) in which the heightened quoting standards are met in a
given month and the GTH VIX/VIXW LMM Incentive Program offers $15,000
for VIX options in which the quoting standards are met in VIX options a
given month.
The Exchange believes that the proposed changes to the LMM
Incentive Programs are equitable and not unfairly discriminatory. The
Exchange believes that it is equitable and not unfairly discriminatory
to amend certain quoting widths and sizes in the MRUT and MSCI LMM
Incentive Program, to adopt a volume incentive pool for the RTH SPESG
LMM Incentive Program and to update the number of days to expiration
for certain expiry categories in the MSCI LMM Incentive Program because
such quote widths and sizes, volume pool program and expiry categories
will equally apply to any and all TPHs with LMM appointments to the
MRUT, MSCI and RTH SPESG LMM Incentive Programs, as applicable, that
seek to meet the programs' heightened quoting standards in order to
receive the rebates offered (both current and proposed, as applicable)
under each respective program. The Exchange believes the proposed
rebates applicable to the MRUT and RTH SPESG LMM Incentive Programs are
equitable and not unfairly discriminatory because they, too, will
equally apply to any TPH that is appointed as an LMM to the MRUT and
RTH SPESG LMM Incentive Programs. Additionally, if an LMM appointed to
any of the LMM Incentive Programs does not satisfy the corresponding
heightened quoting standard for any given month, then it simply will
not receive the rebate offered by the respective program for that
month.
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 does impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
changes to existing LMM Incentive Programs will apply to all LMMs
appointed to the applicable program classes (i.e., MRUT, MXEF, MXEA and
SPESG) in a uniform manner. To the extent these LMMs appointed to an
incentive program receive a benefit that other market participants do
not, as stated, these LMMs in their role as Mark-Makers on the Exchange
have different obligations and are held to different standards. For
example, Market-Makers play a crucial role in providing active and
liquid markets in their appointed products, thereby providing a robust
market which benefits all market participants. Such Market-Makers also
have obligations and regulatory requirements that other participants do
not have. The Exchange also notes that an LMM appointed to an incentive
program may undertake added costs each month to satisfy that heightened
quoting standards (e.g., having to purchase additional logical
connectivity). The Exchange also notes that the incentive programs are
designed to attract additional order flow to the Exchange, wherein
greater liquidity benefits all market participants by providing more
trading opportunities, tighter spreads, and added market transparency
and price discovery, and signals to other market participants to direct
their order flow to those markets, thereby contributing to robust
levels of liquidity.
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 the LMM Incentive Programs
apply only to transactions in products exclusively listed on Cboe
Options. Additionally, as noted above, the incentive programs are
designed to attract additional order flow to the Exchange, wherein
greater liquidity benefits all market participants by providing more
trading opportunities, tighter spreads, and added market transparency
and price discovery, and signals to other market participants to direct
their order flow to those markets, thereby contributing to robust
levels of liquidity. The Exchange notes it operates in a highly
competitive market. In addition to Cboe Options, TPHs have numerous
alternative venues that they may participate on and director their
order flow, including 15 other options exchanges, as well as off-
exchange venues, where competitive products are available for trading.
Based on publicly available information, no single options exchange has
more than 15% of the market share of executed volume of options
trades.\14\ Therefore, no exchange possesses significant pricing power
in the execution of option order flow. 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
[[Page 51431]]
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.'' \15\ 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'. . . .''.\16\ Accordingly, the Exchange does not believe its
proposed changes to the incentive programs impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\14\ See Cboe Global Markets, U.S. Options Market Volume Summary
by Month (August 24, 2021), available at https://markets.cboe.com/us/options/market_share/.
\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\16\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 \18\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2021-050 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2021-050. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2021-050 and should be submitted on
or before October 6, 2021.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19860 Filed 9-14-21; 8:45 am]
BILLING CODE 8011-01-P
