Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 71304-71310 [2021-27072]
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71304
Federal Register / Vol. 86, No. 238 / Wednesday, December 15, 2021 / Notices
with rules 12b–1 and 17d–3 as if those
rules applied to closed-end investment
companies, which they believe will
resolve any concerns that might arise in
connection with a Fund financing the
distribution of its shares through assetbased service and distribution fees.
3. For the reasons stated above,
applicants submit that the exemptions
requested under section 6(c) are
necessary and appropriate in the public
interest and are consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act. Applicants further
submit that the relief requested
pursuant to section 23(c)(3) will be
consistent with the protection of
investors and will ensure that
applicants do not unfairly discriminate
against any holders of the class of
securities to be purchased. Finally,
applicants state that the Funds’
imposition of asset-based distribution
and/or service fees is consistent with
the provisions, policies, and purposes of
the Act and does not involve
participation on a basis different from or
less advantageous than that of other
participants.
Applicants’ Condition:
Applicants agree that any order
granting the requested relief will be
subject to the following condition:
Each Fund relying on the order will
comply with the provisions of rules 6c–
10, 12b–1, 17d–3, 18f–3, 22d–1, and,
where applicable, 11a–3 under the Act,
as amended from time to time, as if
those rules applied to closed-end
management investment companies,
and will comply with the Sales Charge
Rule, as amended from time to time, as
if that rule applied to all closed-end
management investment companies.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Dated: December 10, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
khammond on DSKJM1Z7X2PROD with NOTICES
[Release No. 34–93743; File No. SR–CBOE–
2021–073]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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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. 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/CBOELegalRegulatory
Home.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 the
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2021–27158 Filed 12–14–21; 8:45 am]
December 9, 2021.
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
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. Purpose
The Exchange proposes to amend its
Fees Schedule in connection with the
Exchange’s planned extension of Global
Trading Hours (‘‘GTH’’) and the GTH
Cboe Volatility Index (‘‘VIX’’)/VIX
Weekly (‘‘VIXW’’) Lead Market-Maker
(‘‘LMM’’) Incentive Program and GTH
S&P 500 Index (‘‘SPX’’)/SPX Weekly
(‘‘SPXW’’) LMM Incentive Program.3
Beginning Sunday, November 21,
2021, the Exchange plans to extend the
15 U.S.C. 78s(b)(1).
17 CFR 240.19b–4.
3 The Exchange initially filed the proposed fee
changes on November 19, 2021 (SR–CBOE–2021–
069). On December 2, 2021, the Exchange withdrew
that filing and submitted this filing.
1
2
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Frm 00079
Fmt 4703
Sfmt 4703
hours of its GTH session by starting the
GTH trading session at 7:15 p.m. CT 4 on
the immediately preceding calendar
day, rather than at the current start time
of 2:00 a.m. The GTH trading session
will continue to end at 8:15 a.m. As
such, the proposed rule change updates
the Fees Schedule to reflect the
extended GTH trading session.
Specifically, footnote 37 of the Fees
Schedule currently provides that GTH is
a separate trading session from Regular
Trading Hours (‘‘RTH’’) for VIX, SPX
and SPW.5 GTH commences at 2:00
A.M. CST and terminates at 8:15 A.M.
CST, and is conducted on an allelectronic trading model with no open
outcry capability. Footnote 37 is
currently appended to various
transaction and surcharge fees for orders
in VIX, SPX and SPXW under the Rate
Table—Underlying Symbol List A of the
Fees Schedule, as well as certain
programs in the Fees Schedule.6 Such
fees, surcharges and programs apply 7
during both Regular Trading Hours
(‘‘RTH’’) and GTH. In line with the
newly extended GTH hours, the
proposed rule change amends footnote
37 to provide that GTH commences at
7:15 P.M. CST and terminates at 8:15
A.M. CST. The fees, surcharges and
programs applicable during GTH will
continue to apply in the same manner
as they currently do; the trading hours
in which such fees, surcharges and
programs apply are merely being
extended.
The proposed rule change also
amends the GTH VIX/VIXW LMM
Incentive Program and GTH SPX/SPXW
LMM Incentive Program. Both LMM
Incentive Programs provide a rebate 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
4 Unless otherwise specified, all times herein this
proposal are in Central Time.
5 The proposed rule change makes a
nonsubstantive change to capitalize the ‘‘W’’ in
SPXW to make the term consistent with the manner
in which the symbol is formatted throughout the
Fees Schedule.
6 See Cboe Options, Fees Schedule, Cboe Options
Clearing Trading Permit Holder Proprietary
Products Sliding Scale, Cboe Options Clearing
Trading Permit Holder VIX Sliding Scale, Customer
Large Trade Discount, Large Trade Discount,
Electronic Trading Permit Fees, Trade Processing
Services, Regulatory Fees, and TPH Transaction Fee
Policies and Rebate Programs.
7 The Fees Schedule also provides for the GTH
Executing Agent Subsidy Program, which applies
only during GTH.
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Federal Register / Vol. 86, No. 238 / Wednesday, December 15, 2021 / Notices
applicable rebate is optional for an
LMM appointed to a program.
Particularly, 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
(i.e., GTH, including as extended). 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.8
In light of the extended GTH trading
session, the Exchange proposes to adopt
an additional GTH LMM Incentive
Program for both VIX/VIXW and SPX/
SPXW to cover the newly extended
portion of the GTH trading session.
Specifically, the LMMs appointed to the
proposed additional programs must
provide continuous electronic quotes
during GTH from 7:15 P.M. CST to 2:00
A.M. CST (‘‘GTH1’’) 9 that meet or
exceed the proposed quoting standards
under each program (as described in
further detail below) for the same
amount of time in the same number of
series as they are currently required to
quote pursuant to the current GTH VIX/
VIXW and GTH SPX/SPX LMM
Incentive Programs,10 as applicable, in
order to receive the same rebates for
each series as currently offered under
the GTH VIX/VIXW and GTH SPX/SPX
LMM Incentive Programs,11 as
applicable. As with the current
programs, the Exchange may consider
other exceptions to the quoting
standards for the proposed GTH1 LMM
Incentive Programs based on
demonstrated legal or regulatory
requirements or other mitigating
circumstances, and, in calculating
whether an LMM met the applicable
GTH1 LMM Incentive Program’s quoting
standards each month, the Exchange
will exclude from the calculation in that
month the business day in which the
LMM missed meeting or exceeding the
applicable quoting standard in the
highest number of series.
Like the current GTH VIX/VIXW
LMM Incentive Program, the proposed
GTH1 VIX/VIXW LMM Incentive
Program offers basic quoting standards
for VIXW options and for VIX options,
and heightened quoting standards for
VIX options, that apply based on the
VIX Index value at the prior market
close (i.e., at the close of the preceding
RTH session) as follows:
Proposed GTH1 VIXW options basic
quoting standards:
Less than 21 days
to expiration
Premium level
Width
I
21 days or greater
to expiration
Size
Width
I
Size
VIX Value at Prior Close <18
$0.00–$1.00 .....................................................................................................
$1.01–$3.00 .....................................................................................................
$3.01–$5.00 .....................................................................................................
$5.01–$10.00 ...................................................................................................
$10.01–$30.00 .................................................................................................
Greater than $30.00 ........................................................................................
1.00
1.50
2.50
4.00
6.00
10.00
10
10
3
1
1
1
1.50
2.50
4.00
6.00
10.00
10.00
10
10
3
1
1
1
5
5
1
1
1
1
2.00
4.00
5.00
8.00
10.00
10.00
5
5
1
1
1
1
1
1
1
1
1
1
10.00
10.00
10.00
10.00
10.00
10.00
1
1
1
1
1
1
VIX Value at Prior Close from 18–25
$0.00–$1.00 .....................................................................................................
$1.01–$3.00 .....................................................................................................
$3.01–$5.00 .....................................................................................................
$5.01–$10.00 ...................................................................................................
$10.01–$30.00 .................................................................................................
Greater than $30.00 ........................................................................................
1.50
2.50
4.00
6.00
10.00
10.00
VIX Value at Prior Close from >25
khammond on DSKJM1Z7X2PROD with NOTICES
$0.00–$1.00 .....................................................................................................
$1.01–$3.00 .....................................................................................................
$3.01–$5.00 .....................................................................................................
$5.01–$10.00 ...................................................................................................
$10.01–$30.00 .................................................................................................
Greater than $30.00 ........................................................................................
8 The Exchange notes that, regarding the VIX/
VIXW LMM Incentive Program, which has multiple
sets of quoting standards, an LMM’s worst quoting
day will be excluded from the calculation
applicable to each set of quoting standards for that
month.
9 The proposed rule change also renames the
existing GTH VIX/VIXW and GTH SPX/SPXW
LMM Incentive Programs as ‘‘GTH2 VIX/VIXW
LMM Incentive Program’’ and ‘‘GTH2 SPX/SPXW
LMM Incentive Program’’ and clarifies in the
programs’ descriptions that GTH2 runs from 2:00
A.M. CST to 8:15 A.M. CST. The Exchange notes
that the scope of these current programs is not
changing as the ‘‘GTH2’’ hours are the same as the
current GTH hours.
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10.00
10.00
10.00
10.00
10.00
10.00
10 That is, at least 99% of each of the VIX and
VIXW series, 90% of the time in a given month
pursuant to the GTH1 (as proposed) and current
GTH (GTH2, as renamed) VIX/VIXW LMM
Incentive Program, and in at least 85% of each of
the SPX and SPXW series 90% of the time in a
given month pursuant to the GTH1 (as proposed)
and current GTH (GTH2, as renamed) SPX/SPXW
LMM Incentive Program.
11 That is: (1) A rebate for that month in the
amount of $15,000 for VIX and $10,000 for VIXW,
pursuant to the GTH1 (as proposed) and GTH
(GTH2, as renamed) VIX/VIXW LMM Incentive
Program, if the appointed LMM meets or exceeds
the basic quoting standards (as proposed for the
GTH1 program and currently for the GTH2
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
program); (2) a rebate for that month of $0.02 per
VIX/VIXW contract executed in its Market-Maker
capacity during RTH, pursuant to the proposed
GTH1 and current GTH2 VIX/VIXW LMM Incentive
Program, if the appointed LMM meets or exceeds
the heightened quoting standards; and (3) a rebate
for that month in the amount of $15,000 for SPX
and $35,000, pursuant to the SPXW GTH1 (as
proposed) and GTH (GTH2, as renamed) SPX/
SPXW LMM Incentive Program, if the appointed
LMM meets or exceeds the heightened quoting
standards (as proposed for the GTH1 program and
currently for the GTH2 program).
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Federal Register / Vol. 86, No. 238 / Wednesday, December 15, 2021 / Notices
Proposed GTH1 VIX options basic
quoting standards:
Premium level
Expiring
Near term
Mid term
Long term
Less than 15 days
15 days to 60 days
61 days to 180 days
181 days or greater
Width
Width
Width
I
Size
Width
I
Size
I
Size
I
Size
VIX Value at Prior Close <18
$0.00–$1.00 ......................................................
$1.01–$3.00 ......................................................
$3.01–$5.00 ......................................................
$5.01–$10.00 ....................................................
$10.01–$30.00 ..................................................
Greater than $30.00 ..........................................
0.35
0.50
0.60
1.00
2.00
5.00
I
* 30
* 15
* 15
10
5
3
0.25
0.35
0.35
0.80
1.50
3.00
I
I
* 40
* 25
* 15
* 10
5
3
0.35
0.50
0.60
1.30
2.00
5.00
* 30
* 20
* 15
*5
1
1
0.50
0.70
0.80
2.00
3.00
5.00
* 10
* 10
10
5
1
1
0.60
1.00
1.20
2.50
5.00
10.00
I
* 30
* 15
* 10
10
5
3
0.80
0.90
1.00
2.00
3.00
5.00
*5
*5
*5
5
3
3
1.00
1.00
1.30
2.20
5.00
10.00
*5
*5
5
5
1
1
1.20
1.20
1.80
3.00
7.00
10.00
*5
*5
5
3
1
1
I
VIX Value at Prior Close from 18–25
$0.00–$1.00 ......................................................
$1.01–$3.00 ......................................................
$3.01–$5.00 ......................................................
$5.01–$10.00 ....................................................
$10.01–$30.00 ..................................................
Greater than $30.00 ..........................................
0.50
0.50
0.80
1.50
3.00
5.00
I
* 15
* 10
*5
*5
1
1
0.35
0.50
0.50
1.00
2.50
5.00
I
I
I
* 15
* 10
*5
5
1
1
I
VIX Value at Prior Close from >25
$0.00–$1.00 ......................................................
$1.01–$3.00 ......................................................
$3.01–$5.00 ......................................................
$5.01–$10.00 ....................................................
$10.01–$30.00 ..................................................
Greater than $30.00 ..........................................
0.80
1.00
1.20
2.00
5.00
10.00
I
* 10
10
*5
5
1
1
I
0.50
0.75
0.90
1.50
5.00
10.00
I
I
* 10
10
5
5
1
1
I
Proposed GTH1 VIX options
heightened quoting standards:
Premium level
Expiring
Near term
Less than 15 days
15 days to 60 days
Width
I
Size
Width
I
Size
VIX Value at Prior Close <18
$0.00–$1.00 .....................................................................................................
$1.01–$3.00 .....................................................................................................
$3.01–$5.00 .....................................................................................................
0.20
* 50
0.20
0.25
0.35
* 50
* 30
* 20
* 30
0.20
0.30
0.40
* 30
* 20
* 20
* 20
0.25
0.40
0.60
* 20
* 15
* 15
VIX Value at Prior Close from 18–25
$0.00–$1.00 .....................................................................................................
$1.01–$3.00 .....................................................................................................
$3.01–$5.00 .....................................................................................................
0.25
VIX Value at Prior Close from >25
khammond on DSKJM1Z7X2PROD with NOTICES
$0.00–$1.00 .....................................................................................................
$1.01–$3.00 .....................................................................................................
$3.01–$5.00 .....................................................................................................
The Exchange notes that the proposed
VIXW options basic quoting standards
under the proposed GTH1 program are
identical to the VIXW options basic
quoting standards under the current
GTH program. Additionally, the
proposed VIX options basic and
heightened quoting standards under the
proposed GTH1 program are, by and
large, substantially the same as the VIX
options basic and heightened quoting
standards under the current GTH
program, differing only in marginally
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0.30
smaller quote sizes in certain categories
as marked by an asterisk in the tables
above. The Exchange believes it is
appropriate to adopt slightly smaller
quote sizes, in general, for the quoting
standards applicable during the new
overnight hours as the Exchange
anticipates that the newly extended
portion of GTH may sustain lower
volume and general participation and
higher volatility, and thus it may be
more difficult for LMMs to quote
aggressively at the same sizes within the
PO 00000
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Fmt 4703
Sfmt 4703
same widths as provided in the existing
GTH VIX/VIXW LMM Incentive
Program. The Exchange notes that it
examined and compared quotes and
volume in VIX futures during GTH1
trading hours and current GTH hours to
assist it in determining the reduction in
certain quote sizes from the current
GTH program. Marginally smaller quote
sizes are designed to incentivize LMMs
appointed to the GTH1 VIX/VIXW
program to quote aggressively in VIX
options during the new extended hours
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Federal Register / Vol. 86, No. 238 / Wednesday, December 15, 2021 / Notices
to receive the rebate offered under the
program, resulting in tighter spreads
and increased liquidity during the
newly extended hours to the benefit of
investors.
Like the current GTH SPX/SPXW
LMM Incentive Program, the proposed
GTH1 SPX/SPXW LMM Incentive
Program offers heightened quoting
standards for SPX/SPXW VIX Index
Expiring
Premium level
Near term
7 days or less
Width
I
value at the prior market close (i.e., at
the close of the preceding RTH session)
as follows:
Mid term
8 days to 60 days
Size
Width
I
Long term
61 days to 270 days
Size
Width
I
271 days to 500 days
Size
Width
I
Size
VIX Value at Prior Close <20
$0.00–$1.00 ......................................................
$1.01–$3.00 ......................................................
$3.01–$5.00 ......................................................
$5.01–$10.00 ....................................................
$10.01–$30.00 ..................................................
Greater than $30.00 ..........................................
$* 0.50
* 0.70
* 1.40
* 7.00
* 18.00
* 24.00
I
* 15
* 15
* 10
*5
1
1
I
$0.40
* 0.70
2.00
4.00
* 6.00
* 10.00
I
15
* 15
15
10
5
1
$0.60
1.50
2.00
* 3.50
* 5.00
12.00
10
* 10
10
*5
*1
1
0.75
* 2.40
* 3.50
* 4.00
* 7.00
2.00
*5
*5
*5
5
5
1
1.00
3.00
* 6.00
* 5.00
15.00
30.00
I
5
*5
*5
*5
5
1
I
$1.20
* 2.50
* 5.00
* 6.00
* 8.00
50.00
5
5
5
5
5
1
2.00
* 3.50
* 6.00
* 8.00
* 12.00
60.00
5
5
5
5
5
1
3.00
* 5.00
8.00
10.00
18.00
70.00
5
5
5
1
1
1
VIX Value at Prior Close from 20–30
$0.00–$1.00 ......................................................
$1.01–$3.00 ......................................................
$3.01–$5.00 ......................................................
$5.01–$10.00 ....................................................
$10.01–$30.00 ..................................................
Greater than $30.00 ..........................................
* 0.70
* 1.20
* 3.00
* 12.00
* 24.00
* 30.00
I
* 10
* 10
10
*5
1
1
I
0.80
* 1.10
3.50
7.00
* 10.00
12.00
I
I
5
5
5
5
5
1
I
VIX Value at Prior Close >30
khammond on DSKJM1Z7X2PROD with NOTICES
$0.00–$1.00 ......................................................
$1.01–$3.00 ......................................................
$3.01–$5.00 ......................................................
$5.01–$10.00 ....................................................
$10.01–$30.00 ..................................................
Greater than $30.00 ..........................................
* 1.20
* 3.00
* 5.00
* 16.00
20.00
30.00
I
The proposed SPX/SPXW options
heightened quoting standards under the
proposed GTH1 program are
substantially similar to the SPX/SPXW
options heightened quoting standards
under the current GTH program,
differing only in marginally smaller
quote sizes and wider quote widths in
certain categories as marked by an
asterisk in the tables above. The
Exchange believes it is appropriate to
adopt slightly smaller quote sizes and
wider widths, in general, for the quoting
standards applicable during the new
overnight hours for the same reasons as
described above—the Exchange
anticipates that the newly extended
portion of GTH may sustain lower
volume and general participation and
higher volatility, and thus it may be
more difficult for LMMs to quote
aggressively at the same sizes within the
same widths as provided in the existing
GTH SPX/SPXW LMM Incentive
Program. The Exchange also examined
and compared quotes and volume in
S&P 500 E-mini futures during GTH1
trading hours and current GTH hours to
assist it in determining the reduction in
certain quote sizes and widening of
certain quote widths from the current
GTH program. Marginally smaller quote
sizes and wider widths are designed to
incentivize LMMs appointed to the
GTH1 SPX/SPXW program to quote
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*5
*5
*5
5
1
1
I
* 1.20
* 2.70
* 5.50
* 12.00
* 15.00
* 30.00
I
aggressively in SPX/SPXW options
during the new extended hours to
receive the rebate offered under the
program, resulting in tighter spreads
and increased liquidity during the
newly extended hours to the benefit of
investors. The Exchange further notes
that the quote widths and sizes typical
in SPX/SPXW options differ from that
in VIX options, therefore, the proposed
GTH1 SPX/SPXW heightened quoting
requirements reflect quote widths and
sizes that align with the market
characteristics in SPX/SPXW options.
The Exchange believes the proposed
quoting requirements for VIX/VIXW
options under the proposed GTH1 VIX/
VIXW LMM Incentive Program and
SPX/SPXW options under the proposed
GTH1 VIX/VIXW LMM Incentive
Program are designed to encourage
LMMs appointed to the program to
provide significant liquidity in VIX/
VIXW and SPX/SPXW options during
the extended portion of the GTH trading
session. The Exchange notes that each of
the proposed programs provide for
quoting standards that apply depending
on the VIX Index value at the prior
market close (i.e., at the close of the
preceding RTH session). The VIX Index
value categories under the proposed
GTH1 VIX/VIXW and GTH1 SPX/SPXW
LMM Incentive Programs are identical
to the VIX value categories in the
PO 00000
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Sfmt 4703
I
5
5
5
3
1
1
I
existing GTH VIX/VIXW and GTH SPX/
SPXW LMM Incentive Programs,
respectively, and are designed to
encourage LMMs appointed to the
programs to meet the quoting standards
by tailoring such quoting standards to
reflect market characteristics in VIX/
VIXW and SPX/SPXW options
depending on the volatility levels of the
VIX Index (i.e., in the proposed
categories in which the value of the VIX
is relatively higher based on the closing
VIX Index value from the preceding
trading session indicates that the VIX
Index is experiencing generally higher
volatility).
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.12 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 13 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
12
13
15 U.S.C. 78f(b).
15 U.S.C. 78f(b)(5).
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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,14 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
TPHs and other persons using its
facilities.
First, the Exchange believes that the
proposed rule change to update footnote
37 to reflect the extended GTH trading
session, set to begin November 21, 2021,
is reasonable, equitable and not unfairly
discriminatory. In particular, the
Exchange believes that the proposed
rule change is reasonable because it
merely updates footnote 37 to provide
for the appropriate trading hours that
will be in place for the GTH trading
session as of November 21, 2021. The
Exchange believes that the proposed
rule change is equitable and not unfairly
discriminatory because the newly
extended GTH trading session hours
will apply equally to all market
participants, in that, all market
participants that choose to trade during
GTH will be able to trade during the
new trading hours. The fees, surcharges
and programs applicable during GTH
will continue to apply in the same
manner as they currently do; the trading
hours in which such fees, surcharges
and programs apply are merely being
extended.
Regarding both the GTH1 SPX/SPXW
and GTH1 VIX/VIXW LMM Incentive
Programs generally, the Exchange
believes it is reasonable, equitable and
not unfairly discriminatory to continue
to offer LMM Incentive Programs as
financial incentives, including as
proposed, to LMMs appointed to the
programs, because it benefits all market
participants trading in the
corresponding products during GTH
(including as extended). These incentive
programs encourage the LMMs
appointed to such programs to satisfy
the applicable 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 VIX/
VIXW and SPX/SPXW options, as
applicable, which can lead to increased
14
15 U.S.C. 78f(b)(4).
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17:04 Dec 14, 2021
Jkt 256001
volume, providing for robust markets.
The Exchange ultimately offers the
LMM Incentive Programs, including as
amended, to sufficiently incentivize
LMMs appointed to each incentive
program to provide key liquidity and
active markets in the corresponding
program products during the
corresponding trading sessions (and
specific trading session hours, as
proposed), 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 to satisfy that heightened
quoting standards (e.g., having to
purchase additional logical
connectivity).
The Exchange believes that the
proposed rule change to adopt the GTH1
VIX/VIXW and GTH1 SPX/SPXW LMM
Incentive Programs is reasonable.
Particularly, the Exchange believes the
proposed quoting requirements under
each are reasonably designed to
encourage LMMs appointed to each
program to provide significant liquidity
in VIX/VIXW and SPX/SPXW options
during the extended, overnight portion
of the GTH trading session in order to
meet the applicable quoting standards
and receive the corresponding rebate.
The provision of liquid and active
markets facilitates tighter spreads,
increased trading opportunities, and
overall enhanced market quality to the
benefit of all market participants,
particularly in during newly extended
trading hours which may experience
generally lower volume and
participation.
As described above, the continuous
quoting requirements (i.e., percentage of
time and percentage of series), the
applicable rebates under the proposed
GTH1 VIX/VIXW and GTH1 SPX/SPXW
LMM Incentive Programs, and the
manner in which the proposed quoting
standards are tailored to the VIX Index
value are the same as those under the
current GTH VIX/VIXW and GTH SPX/
SPXW LMM Incentive Programs,
respectively. The Exchange believes that
the proposed quoting standards under
the GTH1 programs are reasonable
because they are either identical (as is
the case for the proposed basic quoting
standards for VIXW options) or
substantially similar (as is the case for
the proposed basic and heightened
quoting standards for VIX options and
proposed heighten quoting standards for
SPX/SPXW options) to the
corresponding quoting standards
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
currently in place for VIX and VIXW
and SPX/SPXW under the existing GTH
LMM Incentive Programs for these
products. Regarding the proposed
quoting standards applicable to VIX
options and SPX/SPXW, the Exchange
believes it is appropriate to adopt
slightly smaller quote sizes (for VIX and
SPX/SPXW options) and wider quote
widths (for SPX/SPXW options) for the
proposed GTH1 quoting standards
applicable during the new overnight
hours because such overnight hours
may sustain lower volume and general
participation and higher volatility and,
therefore, marginally smaller quote sizes
and wider quote widths (where
applicable) are designed to incentivize
LMMs appointed to the GTH1 VIX/
VIXW or GTH1 SPX/SPXW program to
quote aggressively in VIX options or
SPX/SPXW options, respectively,
during the extended GTH hours,
resulting in tighter spreads and
increased liquidity during the newly
extended hours to the benefit of
investors. As stated above, the quote
widths and sizes typical in SPX/SPXW
options differ from that in VIX options,
therefore, the proposed GTH1
heightened quoting requirements for
SPX/SPXW reflect quote widths and
sizes that align with the market
characteristics in SPX/SPXW options.
The Exchange also believes it is
equitable and not unfairly
discriminatory to adopt new GTH1 VIX/
VIXW and GTH1 SPX/SPXW LMM
Incentive Programs because such
programs will equally apply to any and
all TPHs with LMM appointments to the
GTH1 VIX/VIXW LMM Incentive
Program and GTH1 SPX/SPXW LMM
Incentive Program, respectively, that
seek to meet the applicable program’s
quoting standards in order to receive the
same rebates as currently offered under
the existing GTH VIX/VIXW and GTH
SPX/SPXW LMM Incentive Programs.
Additionally, like with all other existing
LMM Incentive Programs in the Fees
Schedule, if an LMM appointed to the
GTH1 VIX/VIXW or GTH1 SPX/SPXW
LMM Incentive Program does not satisfy
the quoting standards for any given
month, then it simply will not receive
the corresponding rebate offered by the
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 intramarket or
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Rather, as
discussed above, the Exchange believes
that the proposed change would
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Federal Register / Vol. 86, No. 238 / Wednesday, December 15, 2021 / Notices
encourage the submission of additional
liquidity to a public exchange, thereby
promoting market depth, price
discovery and transparency and
enhancing order execution and price
improvement opportunities for all
TPHs. As a result, the Exchange believes
that the proposed change furthers the
Commission’s goal in adopting
Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 15
The Exchange does not believe that
the proposed rule change will impose
any burden on intramarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
as the newly extended GTH trading
session hours will apply equally to all
market participants, in that, all market
participants that choose to trade during
GTH will be able to trade during the
new trading hours and the fees,
surcharges and programs applicable
during GTH will continue to apply in
the same manner as they currently
apply. Also, the proposed GTH1 VIX/
VIXW and GTH1 SPX/SPXW LMM
Incentive Programs will apply to all
LMMs appointed to each program in a
uniform manner. To the extent the
LMMs appointed to one of the proposed
programs receive a benefit that other
market participants do not, as stated,
these LMMs in their role as MarketMakers 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. An LMM appointed to a
program may undertake added costs
each month that it needs to satisfy the
quoting standards (e.g., having to
purchase additional logical
connectivity). The programs are
ultimately designed to attract additional
order flow in VIX/VIXW and SPX/
SPXW options to the Exchange during
the newly extended GTH trading
session, wherein greater liquidity will
benefit 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,
Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
15
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17:04 Dec 14, 2021
Jkt 256001
thereby contributing to robust levels of
liquidity during new trading hours.
The Exchange also does not believe
that the proposed changes will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the Act because the
proposed programs are applicable to
transactions in products exclusively
listed on the Exchange. Additionally,
the Exchange notes that it operates in a
highly competitive market. TPHs have
numerous alternative venues that they
may participate on and direct 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.16 Therefore, no exchange
possesses significant pricing power in
the execution of option order flow.
Indeed, participants can readily choose
to send their orders to other exchange,
and, additionally off-exchange venues,
if they deem fee levels at those other
venues to be more favorable. Moreover,
the Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets.
Specifically, in Regulation NMS, the
Commission highlighted the importance
of market forces in determining prices
and SRO revenues and, also, recognized
that current regulation of the market
system ‘‘has been remarkably successful
in promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 17 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’. . . .’’.18 Accordingly, the
16 See Cboe Global Markets U.S. Options Market
Volume Summary, Month-to-Date (November 12,
2021), available at https://markets.cboe.com/us/
options/market_statistics/.
17 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
18 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
PO 00000
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Fmt 4703
Sfmt 4703
71309
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange 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 19 and paragraph (f) of Rule
19b–4 20 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2021–073 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–2021–073. 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
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
19 15 U.S.C. 78s(b)(3)(A).
20 17 CFR 240.19b–4(f).
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Federal Register / Vol. 86, No. 238 / Wednesday, December 15, 2021 / Notices
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–2021–073 and
should be submitted on or before
January 5, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–27072 Filed 12–14–21; 8:45 am]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[FR Doc. 2021–27075 Filed 12–14–21; 8:45 am]
[Release No. 34–93745; File No. SR–
CboeBYX–2021–024]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To Make Certain
Clarifying Changes Related to Periodic
Auctions
khammond on DSKJM1Z7X2PROD with NOTICES
December 9, 2021.
On October 14, 2021, Cboe BYX
Exchange, Inc. (‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to make certain clarifying
17 CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
21
1 15
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changes to Exchange Rule 11.25 related
to periodic auctions for the trading of
U.S. equity securities. The proposed
rule change was published for comment
in the Federal Register on October 26,
2021.3 The Commission has received no
comment letters on the proposed rule
change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding, or as to which the
self-regulatory organization consents,
the Commission will either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is December 10,
2021. The Commission is extending this
45-day time period.
The Commission finds it appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,5
designates January 24, 2022 as the date
by which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–CboeBYX–2021–024).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93744; File No. SR–CBOE–
2021–072]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule
December 9, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
3 See Securities Exchange Act Release No. 93390
(October 20, 2021), 86 FR 59202.
4 15 U.S.C. 78s(b)(2).
5 Id.
6 17 CFR 200.30–3(a)(31).
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‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
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. 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/CBOELegalRegulatory
Home.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 in connection with its
strategy order fee cap and the
installation fee for the tethering of new
equipment in connection with MarketMaker handheld terminals for indexes,
effective December 1, 2021.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
1 15
2 17
E:\FR\FM\15DEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
15DEN1
]]>Agencies
[Federal Register Volume 86, Number 238 (Wednesday, December 15, 2021)]
[Notices]
[Pages 71304-71310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27072]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93743; File No. SR-CBOE-2021-073]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
December 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 December 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.
---------------------------------------------------------------------------
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. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule in connection with
the Exchange's planned extension of Global Trading Hours (``GTH'') and
the GTH Cboe Volatility Index (``VIX'')/VIX Weekly (``VIXW'') Lead
Market-Maker (``LMM'') Incentive Program and GTH S&P 500 Index
(``SPX'')/SPX Weekly (``SPXW'') LMM Incentive Program.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
November 19, 2021 (SR-CBOE-2021-069). On December 2, 2021, the
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------
Beginning Sunday, November 21, 2021, the Exchange plans to extend
the hours of its GTH session by starting the GTH trading session at
7:15 p.m. CT \4\ on the immediately preceding calendar day, rather than
at the current start time of 2:00 a.m. The GTH trading session will
continue to end at 8:15 a.m. As such, the proposed rule change updates
the Fees Schedule to reflect the extended GTH trading session.
Specifically, footnote 37 of the Fees Schedule currently provides that
GTH is a separate trading session from Regular Trading Hours (``RTH'')
for VIX, SPX and SPW.\5\ GTH commences at 2:00 A.M. CST and terminates
at 8:15 A.M. CST, and is conducted on an all-electronic trading model
with no open outcry capability. Footnote 37 is currently appended to
various transaction and surcharge fees for orders in VIX, SPX and SPXW
under the Rate Table--Underlying Symbol List A of the Fees Schedule, as
well as certain programs in the Fees Schedule.\6\ Such fees, surcharges
and programs apply \7\ during both Regular Trading Hours (``RTH'') and
GTH. In line with the newly extended GTH hours, the proposed rule
change amends footnote 37 to provide that GTH commences at 7:15 P.M.
CST and terminates at 8:15 A.M. CST. The fees, surcharges and programs
applicable during GTH will continue to apply in the same manner as they
currently do; the trading hours in which such fees, surcharges and
programs apply are merely being extended.
---------------------------------------------------------------------------
\4\ Unless otherwise specified, all times herein this proposal
are in Central Time.
\5\ The proposed rule change makes a nonsubstantive change to
capitalize the ``W'' in SPXW to make the term consistent with the
manner in which the symbol is formatted throughout the Fees
Schedule.
\6\ See Cboe Options, Fees Schedule, Cboe Options Clearing
Trading Permit Holder Proprietary Products Sliding Scale, Cboe
Options Clearing Trading Permit Holder VIX Sliding Scale, Customer
Large Trade Discount, Large Trade Discount, Electronic Trading
Permit Fees, Trade Processing Services, Regulatory Fees, and TPH
Transaction Fee Policies and Rebate Programs.
\7\ The Fees Schedule also provides for the GTH Executing Agent
Subsidy Program, which applies only during GTH.
---------------------------------------------------------------------------
The proposed rule change also amends the GTH VIX/VIXW LMM Incentive
Program and GTH SPX/SPXW LMM Incentive Program. Both LMM Incentive
Programs provide a rebate 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
[[Page 71305]]
applicable rebate is optional for an LMM appointed to a program.
Particularly, 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 (i.e., GTH,
including as extended). 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.\8\
---------------------------------------------------------------------------
\8\ The Exchange notes that, regarding the VIX/VIXW LMM
Incentive Program, which has multiple sets of quoting standards, an
LMM's worst quoting day will be excluded from the calculation
applicable to each set of quoting standards for that month.
---------------------------------------------------------------------------
In light of the extended GTH trading session, the Exchange proposes
to adopt an additional GTH LMM Incentive Program for both VIX/VIXW and
SPX/SPXW to cover the newly extended portion of the GTH trading
session. Specifically, the LMMs appointed to the proposed additional
programs must provide continuous electronic quotes during GTH from 7:15
P.M. CST to 2:00 A.M. CST (``GTH1'') \9\ that meet or exceed the
proposed quoting standards under each program (as described in further
detail below) for the same amount of time in the same number of series
as they are currently required to quote pursuant to the current GTH
VIX/VIXW and GTH SPX/SPX LMM Incentive Programs,\10\ as applicable, in
order to receive the same rebates for each series as currently offered
under the GTH VIX/VIXW and GTH SPX/SPX LMM Incentive Programs,\11\ as
applicable. As with the current programs, the Exchange may consider
other exceptions to the quoting standards for the proposed GTH1 LMM
Incentive Programs based on demonstrated legal or regulatory
requirements or other mitigating circumstances, and, in calculating
whether an LMM met the applicable GTH1 LMM Incentive Program's quoting
standards each month, the Exchange will exclude from the calculation in
that month the business day in which the LMM missed meeting or
exceeding the applicable quoting standard in the highest number of
series.
---------------------------------------------------------------------------
\9\ The proposed rule change also renames the existing GTH VIX/
VIXW and GTH SPX/SPXW LMM Incentive Programs as ``GTH2 VIX/VIXW LMM
Incentive Program'' and ``GTH2 SPX/SPXW LMM Incentive Program'' and
clarifies in the programs' descriptions that GTH2 runs from 2:00
A.M. CST to 8:15 A.M. CST. The Exchange notes that the scope of
these current programs is not changing as the ``GTH2'' hours are the
same as the current GTH hours.
\10\ That is, at least 99% of each of the VIX and VIXW series,
90% of the time in a given month pursuant to the GTH1 (as proposed)
and current GTH (GTH2, as renamed) VIX/VIXW LMM Incentive Program,
and in at least 85% of each of the SPX and SPXW series 90% of the
time in a given month pursuant to the GTH1 (as proposed) and current
GTH (GTH2, as renamed) SPX/SPXW LMM Incentive Program.
\11\ That is: (1) A rebate for that month in the amount of
$15,000 for VIX and $10,000 for VIXW, pursuant to the GTH1 (as
proposed) and GTH (GTH2, as renamed) VIX/VIXW LMM Incentive Program,
if the appointed LMM meets or exceeds the basic quoting standards
(as proposed for the GTH1 program and currently for the GTH2
program); (2) a rebate for that month of $0.02 per VIX/VIXW contract
executed in its Market-Maker capacity during RTH, pursuant to the
proposed GTH1 and current GTH2 VIX/VIXW LMM Incentive Program, if
the appointed LMM meets or exceeds the heightened quoting standards;
and (3) a rebate for that month in the amount of $15,000 for SPX and
$35,000, pursuant to the SPXW GTH1 (as proposed) and GTH (GTH2, as
renamed) SPX/SPXW LMM Incentive Program, if the appointed LMM meets
or exceeds the heightened quoting standards (as proposed for the
GTH1 program and currently for the GTH2 program).
---------------------------------------------------------------------------
Like the current GTH VIX/VIXW LMM Incentive Program, the proposed
GTH1 VIX/VIXW LMM Incentive Program offers basic quoting standards for
VIXW options and for VIX options, and heightened quoting standards for
VIX options, that apply based on the VIX Index value at the prior
market close (i.e., at the close of the preceding RTH session) as
follows:
Proposed GTH1 VIXW options basic quoting standards:
----------------------------------------------------------------------------------------------------------------
Less than 21 days to 21 days or greater to
expiration expiration
Premium level ---------------------------------------------------------------
Width Size Width Size
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <18
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 1.00 10 1.50 10
$1.01-$3.00..................................... 1.50 10 2.50 10
$3.01-$5.00..................................... 2.50 3 4.00 3
$5.01-$10.00.................................... 4.00 1 6.00 1
$10.01-$30.00................................... 6.00 1 10.00 1
Greater than $30.00............................. 10.00 1 10.00 1
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 18-25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 1.50 5 2.00 5
$1.01-$3.00..................................... 2.50 5 4.00 5
$3.01-$5.00..................................... 4.00 1 5.00 1
$5.01-$10.00.................................... 6.00 1 8.00 1
$10.01-$30.00................................... 10.00 1 10.00 1
Greater than $30.00............................. 10.00 1 10.00 1
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 10.00 1 10.00 1
$1.01-$3.00..................................... 10.00 1 10.00 1
$3.01-$5.00..................................... 10.00 1 10.00 1
$5.01-$10.00.................................... 10.00 1 10.00 1
$10.01-$30.00................................... 10.00 1 10.00 1
Greater than $30.00............................. 10.00 1 10.00 1
----------------------------------------------------------------------------------------------------------------
[[Page 71306]]
Proposed GTH1 VIX options basic quoting standards:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Expiring Near term Mid term Long term
-------------------------------------------------------------------------------------------------------
Premium level Less than 15 days 15 days to 60 days 61 days to 180 days 181 days or greater
-------------------------------------------------------------------------------------------------------
Width Size Width Size Width Size Width Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <18
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 0.35 * 30 0.25 * 40 0.35 * 30 0.80 * 5
$1.01-$3.00..................................... 0.50 * 15 0.35 * 25 0.50 * 15 0.90 * 5
$3.01-$5.00..................................... 0.60 * 15 0.35 * 15 0.60 * 10 1.00 * 5
$5.01-$10.00.................................... 1.00 10 0.80 * 10 1.30 10 2.00 5
$10.01-$30.00................................... 2.00 5 1.50 5 2.00 5 3.00 3
Greater than $30.00............................. 5.00 3 3.00 3 5.00 3 5.00 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 18-25
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 0.50 * 15 0.35 * 30 0.50 * 15 1.00 * 5
$1.01-$3.00..................................... 0.50 * 10 0.50 * 20 0.70 * 10 1.00 * 5
$3.01-$5.00..................................... 0.80 * 5 0.50 * 15 0.80 * 5 1.30 5
$5.01-$10.00.................................... 1.50 * 5 1.00 * 5 2.00 5 2.20 5
$10.01-$30.00................................... 3.00 1 2.50 1 3.00 1 5.00 1
Greater than $30.00............................. 5.00 1 5.00 1 5.00 1 10.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 25
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 0.80 * 10 0.50 * 10 0.60 * 10 1.20 * 5
$1.01-$3.00..................................... 1.00 10 0.75 * 10 1.00 10 1.20 * 5
$3.01-$5.00..................................... 1.20 * 5 0.90 10 1.20 5 1.80 5
$5.01-$10.00.................................... 2.00 5 1.50 5 2.50 5 3.00 3
$10.01-$30.00................................... 5.00 1 5.00 1 5.00 1 7.00 1
Greater than $30.00............................. 10.00 1 10.00 1 10.00 1 10.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed GTH1 VIX options heightened quoting standards:
----------------------------------------------------------------------------------------------------------------
Expiring Near term
---------------------------------------------------------------
Premium level Less than 15 days 15 days to 60 days
---------------------------------------------------------------
Width Size Width Size
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <18
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 0.20 * 50 0.20 * 50
$1.01-$3.00..................................... 0.25 * 30
$3.01-$5.00..................................... 0.35 * 20
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 18-25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 0.25 * 30 0.20 * 30
$1.01-$3.00..................................... 0.30 * 20
$3.01-$5.00..................................... 0.40 * 20
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... 0.30 * 20 0.25 * 20
$1.01-$3.00..................................... 0.40 * 15
$3.01-$5.00..................................... 0.60 * 15
----------------------------------------------------------------------------------------------------------------
The Exchange notes that the proposed VIXW options basic quoting
standards under the proposed GTH1 program are identical to the VIXW
options basic quoting standards under the current GTH program.
Additionally, the proposed VIX options basic and heightened quoting
standards under the proposed GTH1 program are, by and large,
substantially the same as the VIX options basic and heightened quoting
standards under the current GTH program, differing only in marginally
smaller quote sizes in certain categories as marked by an asterisk in
the tables above. The Exchange believes it is appropriate to adopt
slightly smaller quote sizes, in general, for the quoting standards
applicable during the new overnight hours as the Exchange anticipates
that the newly extended portion of GTH may sustain lower volume and
general participation and higher volatility, and thus it may be more
difficult for LMMs to quote aggressively at the same sizes within the
same widths as provided in the existing GTH VIX/VIXW LMM Incentive
Program. The Exchange notes that it examined and compared quotes and
volume in VIX futures during GTH1 trading hours and current GTH hours
to assist it in determining the reduction in certain quote sizes from
the current GTH program. Marginally smaller quote sizes are designed to
incentivize LMMs appointed to the GTH1 VIX/VIXW program to quote
aggressively in VIX options during the new extended hours
[[Page 71307]]
to receive the rebate offered under the program, resulting in tighter
spreads and increased liquidity during the newly extended hours to the
benefit of investors.;
Like the current GTH SPX/SPXW LMM Incentive Program, the proposed
GTH1 SPX/SPXW LMM Incentive Program offers heightened quoting standards
for SPX/SPXW VIX Index value at the prior market close (i.e., at the
close of the preceding RTH session) as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Expiring Near term Mid term Long term
-------------------------------------------------------------------------------------------------------
Premium level 7 days or less 8 days to 60 days 61 days to 270 days 271 days to 500 days
-------------------------------------------------------------------------------------------------------
Width Size Width Size Width Size Width Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <20
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... $* 0.50 * 15 $0.40 15 $0.60 5 $1.20 5
$1.01-$3.00..................................... * 0.70 * 15 * 0.70 * 15 1.50 * 5 * 2.50 5
$3.01-$5.00..................................... * 1.40 * 10 2.00 15 2.00 * 5 * 5.00 5
$5.01-$10.00.................................... * 7.00 * 5 4.00 10 * 3.50 * 5 * 6.00 5
$10.01-$30.00................................... * 18.00 1 * 6.00 5 * 5.00 5 * 8.00 5
Greater than $30.00............................. * 24.00 1 * 10.00 1 12.00 1 50.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 20-30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... * 0.70 * 10 0.80 10 0.75 5 2.00 5
$1.01-$3.00..................................... * 1.20 * 10 * 1.10 * 10 * 2.40 5 * 3.50 5
$3.01-$5.00..................................... * 3.00 10 3.50 10 * 3.50 5 * 6.00 5
$5.01-$10.00.................................... * 12.00 * 5 7.00 * 5 * 4.00 5 * 8.00 5
$10.01-$30.00................................... * 24.00 1 * 10.00 * 1 * 7.00 5 * 12.00 5
Greater than $30.00............................. * 30.00 1 12.00 1 2.00 1 60.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00..................................... * 1.20 * 5 * 1.20 * 5 1.00 5 3.00 5
$1.01-$3.00..................................... * 3.00 * 5 * 2.70 * 5 3.00 5 * 5.00 5
$3.01-$5.00..................................... * 5.00 * 5 * 5.50 * 5 * 6.00 5 8.00 5
$5.01-$10.00.................................... * 16.00 5 * 12.00 5 * 5.00 3 10.00 1
$10.01-$30.00................................... 20.00 1 * 15.00 5 15.00 1 18.00 1
Greater than $30.00............................. 30.00 1 * 30.00 1 30.00 1 70.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
The proposed SPX/SPXW options heightened quoting standards under
the proposed GTH1 program are substantially similar to the SPX/SPXW
options heightened quoting standards under the current GTH program,
differing only in marginally smaller quote sizes and wider quote widths
in certain categories as marked by an asterisk in the tables above. The
Exchange believes it is appropriate to adopt slightly smaller quote
sizes and wider widths, in general, for the quoting standards
applicable during the new overnight hours for the same reasons as
described above--the Exchange anticipates that the newly extended
portion of GTH may sustain lower volume and general participation and
higher volatility, and thus it may be more difficult for LMMs to quote
aggressively at the same sizes within the same widths as provided in
the existing GTH SPX/SPXW LMM Incentive Program. The Exchange also
examined and compared quotes and volume in S&P 500 E-mini futures
during GTH1 trading hours and current GTH hours to assist it in
determining the reduction in certain quote sizes and widening of
certain quote widths from the current GTH program. Marginally smaller
quote sizes and wider widths are designed to incentivize LMMs appointed
to the GTH1 SPX/SPXW program to quote aggressively in SPX/SPXW options
during the new extended hours to receive the rebate offered under the
program, resulting in tighter spreads and increased liquidity during
the newly extended hours to the benefit of investors. The Exchange
further notes that the quote widths and sizes typical in SPX/SPXW
options differ from that in VIX options, therefore, the proposed GTH1
SPX/SPXW heightened quoting requirements reflect quote widths and sizes
that align with the market characteristics in SPX/SPXW options.
The Exchange believes the proposed quoting requirements for VIX/
VIXW options under the proposed GTH1 VIX/VIXW LMM Incentive Program and
SPX/SPXW options under the proposed GTH1 VIX/VIXW LMM Incentive Program
are designed to encourage LMMs appointed to the program to provide
significant liquidity in VIX/VIXW and SPX/SPXW options during the
extended portion of the GTH trading session. The Exchange notes that
each of the proposed programs provide for quoting standards that apply
depending on the VIX Index value at the prior market close (i.e., at
the close of the preceding RTH session). The VIX Index value categories
under the proposed GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive
Programs are identical to the VIX value categories in the existing GTH
VIX/VIXW and GTH SPX/SPXW LMM Incentive Programs, respectively, and are
designed to encourage LMMs appointed to the programs to meet the
quoting standards by tailoring such quoting standards to reflect market
characteristics in VIX/VIXW and SPX/SPXW options depending on the
volatility levels of the VIX Index (i.e., in the proposed categories in
which the value of the VIX is relatively higher based on the closing
VIX Index value from the preceding trading session indicates that the
VIX Index is experiencing generally higher volatility).
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.\12\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ 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
[[Page 71308]]
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,\14\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its TPHs and other persons using its facilities.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
First, the Exchange believes that the proposed rule change to
update footnote 37 to reflect the extended GTH trading session, set to
begin November 21, 2021, is reasonable, equitable and not unfairly
discriminatory. In particular, the Exchange believes that the proposed
rule change is reasonable because it merely updates footnote 37 to
provide for the appropriate trading hours that will be in place for the
GTH trading session as of November 21, 2021. The Exchange believes that
the proposed rule change is equitable and not unfairly discriminatory
because the newly extended GTH trading session hours will apply equally
to all market participants, in that, all market participants that
choose to trade during GTH will be able to trade during the new trading
hours. The fees, surcharges and programs applicable during GTH will
continue to apply in the same manner as they currently do; the trading
hours in which such fees, surcharges and programs apply are merely
being extended.
Regarding both the GTH1 SPX/SPXW and GTH1 VIX/VIXW LMM Incentive
Programs generally, the Exchange believes it is reasonable, equitable
and not unfairly discriminatory to continue to offer LMM Incentive
Programs as financial incentives, including as proposed, to LMMs
appointed to the programs, because it benefits all market participants
trading in the corresponding products during GTH (including as
extended). These incentive programs encourage the LMMs appointed to
such programs to satisfy the applicable 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 VIX/VIXW and SPX/SPXW options, as applicable, which can lead to
increased volume, providing for robust markets. The Exchange ultimately
offers the LMM Incentive Programs, including as amended, to
sufficiently incentivize LMMs appointed to each incentive program to
provide key liquidity and active markets in the corresponding program
products during the corresponding trading sessions (and specific
trading session hours, as proposed), 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 to satisfy that heightened quoting standards (e.g., having
to purchase additional logical connectivity).
The Exchange believes that the proposed rule change to adopt the
GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive Programs is reasonable.
Particularly, the Exchange believes the proposed quoting requirements
under each are reasonably designed to encourage LMMs appointed to each
program to provide significant liquidity in VIX/VIXW and SPX/SPXW
options during the extended, overnight portion of the GTH trading
session in order to meet the applicable quoting standards and receive
the corresponding rebate. The provision of liquid and active markets
facilitates tighter spreads, increased trading opportunities, and
overall enhanced market quality to the benefit of all market
participants, particularly in during newly extended trading hours which
may experience generally lower volume and participation.
As described above, the continuous quoting requirements (i.e.,
percentage of time and percentage of series), the applicable rebates
under the proposed GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive
Programs, and the manner in which the proposed quoting standards are
tailored to the VIX Index value are the same as those under the current
GTH VIX/VIXW and GTH SPX/SPXW LMM Incentive Programs, respectively. The
Exchange believes that the proposed quoting standards under the GTH1
programs are reasonable because they are either identical (as is the
case for the proposed basic quoting standards for VIXW options) or
substantially similar (as is the case for the proposed basic and
heightened quoting standards for VIX options and proposed heighten
quoting standards for SPX/SPXW options) to the corresponding quoting
standards currently in place for VIX and VIXW and SPX/SPXW under the
existing GTH LMM Incentive Programs for these products. Regarding the
proposed quoting standards applicable to VIX options and SPX/SPXW, the
Exchange believes it is appropriate to adopt slightly smaller quote
sizes (for VIX and SPX/SPXW options) and wider quote widths (for SPX/
SPXW options) for the proposed GTH1 quoting standards applicable during
the new overnight hours because such overnight hours may sustain lower
volume and general participation and higher volatility and, therefore,
marginally smaller quote sizes and wider quote widths (where
applicable) are designed to incentivize LMMs appointed to the GTH1 VIX/
VIXW or GTH1 SPX/SPXW program to quote aggressively in VIX options or
SPX/SPXW options, respectively, during the extended GTH hours,
resulting in tighter spreads and increased liquidity during the newly
extended hours to the benefit of investors. As stated above, the quote
widths and sizes typical in SPX/SPXW options differ from that in VIX
options, therefore, the proposed GTH1 heightened quoting requirements
for SPX/SPXW reflect quote widths and sizes that align with the market
characteristics in SPX/SPXW options.
The Exchange also believes it is equitable and not unfairly
discriminatory to adopt new GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM
Incentive Programs because such programs will equally apply to any and
all TPHs with LMM appointments to the GTH1 VIX/VIXW LMM Incentive
Program and GTH1 SPX/SPXW LMM Incentive Program, respectively, that
seek to meet the applicable program's quoting standards in order to
receive the same rebates as currently offered under the existing GTH
VIX/VIXW and GTH SPX/SPXW LMM Incentive Programs. Additionally, like
with all other existing LMM Incentive Programs in the Fees Schedule, if
an LMM appointed to the GTH1 VIX/VIXW or GTH1 SPX/SPXW LMM Incentive
Program does not satisfy the quoting standards for any given month,
then it simply will not receive the corresponding rebate offered by the
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 intramarket or intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Rather, as discussed above, the Exchange believes that the proposed
change would
[[Page 71309]]
encourage the submission of additional liquidity to a public exchange,
thereby promoting market depth, price discovery and transparency and
enhancing order execution and price improvement opportunities for all
TPHs. As a result, the Exchange believes that the proposed change
furthers the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.'' \15\
---------------------------------------------------------------------------
\15\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act as the newly
extended GTH trading session hours will apply equally to all market
participants, in that, all market participants that choose to trade
during GTH will be able to trade during the new trading hours and the
fees, surcharges and programs applicable during GTH will continue to
apply in the same manner as they currently apply. Also, the proposed
GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive Programs will apply to
all LMMs appointed to each program in a uniform manner. To the extent
the LMMs appointed to one of the proposed programs receive a benefit
that other market participants do not, as stated, these LMMs in their
role as Market-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. An LMM appointed to a
program may undertake added costs each month that it needs to satisfy
the quoting standards (e.g., having to purchase additional logical
connectivity). The programs are ultimately designed to attract
additional order flow in VIX/VIXW and SPX/SPXW options to the Exchange
during the newly extended GTH trading session, wherein greater
liquidity will benefit 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 during new trading hours.
The Exchange also does not believe that the proposed changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the Act because the proposed programs are
applicable to transactions in products exclusively listed on the
Exchange. Additionally, the Exchange notes that it operates in a highly
competitive market. TPHs have numerous alternative venues that they may
participate on and direct 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.\16\
Therefore, no exchange possesses significant pricing power in the
execution of option order flow. Indeed, participants can readily choose
to send their orders to other exchange, and, additionally off-exchange
venues, if they deem fee levels at those other venues to be more
favorable. Moreover, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \17\ 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'. . . .''.\18\
Accordingly, the Exchange does not believe its proposed fee change
imposes any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\16\ See Cboe Global Markets U.S. Options Market Volume Summary,
Month-to-Date (November 12, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\18\ 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)).
---------------------------------------------------------------------------
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 \19\ and paragraph (f) of Rule 19b-4 \20\
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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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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-2021-073 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-2021-073. 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
[[Page 71310]]
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-2021-073 and should be submitted on or before January 5, 2022.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27072 Filed 12-14-21; 8:45 am]
BILLING CODE 8011-01-P
