Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 2971-2976 [2022-00871]
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Federal Register / Vol. 87, No. 12 / Wednesday, January 19, 2022 / Notices
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:
• 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–
EMERALD–2021–45 on the subject line.
Paper Comments
jspears on DSK121TN23PROD with NOTICES1
• 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–EMERALD–2021–45. 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–EMERALD–2021–45, and
should be submitted on or before
February 9, 2022.
CFR 200.30–3(a)(12).
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[FR Doc. 2022–00880 Filed 1–18–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
28 17
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
Jkt 256001
[Release No. 34–93958; File No. SR–CBOE–
2021–068]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Designation
of Longer Period for Commission
Action on a Proposed Rule Change To
Adopt a Modified Trading Schedule for
Holidays
January 12, 2022.
On November 15, 2021, Cboe
Exchange, Inc. 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
adopt a modified trading schedule for
holidays. The proposed rule change was
published for comment in the Federal
Register on December 3, 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 shall 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 January 17,
2022.
The Commission hereby is extending
the 45-day time period for Commission
action on the proposed rule change. The
Commission finds that it is 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, pursuant to Section
19(b)(2) of the Act,5 the Commission
15 U.S.C. 78s(b)(1).
17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 93677
(November 29, 2021), 86 FR 68703.
4 15 U.S.C. 78s(b)(2).
5 Id.
1
designates March 3, 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–CBOE–2021–068).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–00872 Filed 1–18–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93955; File No. SR–CBOE–
2021–076]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule
January 12, 2022.
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
30, 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/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
2
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17 CFR 200.30–3(a)(31).
15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
6
1
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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 the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to amend its
Fees Schedule in connection with
certain surcharges, a trading floorrelated fee and its Global Trading Hours
(‘‘GTH’’) Cboe Volatility Index (‘‘VIX’’)
options/VIX weekly (‘‘VIXW’’) options
and S&P 500 Index (‘‘SPX’’) options/
SPX weekly (‘‘SPXW’’) LMM Incentive
Programs, effective January 2, 2022.
First, the Exchange proposes to
amend the Execution Surcharge fee in
Rate Table—Underlying Symbol List A
of the Fees Schedule applicable to nonMarket-Maker orders 3 executed
electronically in SPXW options.
Currently, a surcharge fee of $0.13 per
contract is assessed for non-MarketMaker orders executed electronically in
SPXW. The proposed rule change
slightly increases this surcharge fee
from $0.13 per contract to $0.14 per
contract. The Exchange notes that the
proposed SPXW Execution Surcharge
fee is still less than the Execution
Surcharge fee assessed for SPX and
SPESG transactions.4
Next, the Exchange proposes to
marginally increase the Index License
Surcharge fees currently applicable to
orders executed in SPX (including
SPXW) options in Rate Table—
Underlying Symbol List A and to orders
executed in MSCI Emerging Markets
Index (‘‘MXEF’’) options and MSCI
3 Non-Market-Makers include Customers
(capacity ‘‘C’’), Clearing Trading Permit Holders
(capacity ‘‘F’’), Non-Clearing Trading Permit Holder
Affiliates (capacity ‘‘L’’), Broker-Dealers (capacity
‘‘B’’), Joint Back-Offices (capacity ‘‘J’’), Non-Trading
Permit Holder Market-Makers (capacity ‘‘N’’), and
Professionals (capacity ‘‘U’’). Capacity ‘‘M’’ applies
to Market-Makers.
4 See Cboe Options Fees Schedule, Rate Table—
Underlying Symbol List A, Execution Surcharge,
SPX (not including SPXW) and SPESG, which
assesses a surcharge fee of $0.21 per contract for
non-Market-Maker orders in SPX and SPESG.
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EAFE Index (‘‘MXEA’’) options
(collectively, ‘‘MSCI options’’) in Rate
Table—All Products Excluding
Underlying Symbol List A. Specifically,
the Exchange currently assesses an
Index License Surcharge fee of $0.17 per
contract for non-Customer orders
executed in SPX/SPXW and an Index
License Surcharge fee of $0.10 per
contract for non-Customer orders
executed in MSCI options. The
proposed rule change increases the
Index License Surcharge fee applicable
to orders executed in SPX/SPXW from
$0.17 per contract to $0.18 per contract
and the Index License Surcharge fee
applicable to orders executed in MSCI
options from $0.10 per contract to $0.12
per contract. The Exchange notes that
the Index License Surcharge fees in
place for SPX/SPXW and MSCI options
are designed to recoup some of the costs
associated with the licenses for these
indexes.5 The Exchange has recently
renewed its license arrangements for its
SPX and MSCI index licenses and, as a
result, the proposed rule change amends
the Index License Surcharge fees for
SPX/SPXW and MSCI options in order
to continue to offset some of the costs
associated with the licenses for these
indexes.
Next, the Exchange proposes to
amend a badge type in the Access
Badges table of the Fees Schedule.
Currently, a $70.00 fee is assessed for
Clerk badges to access the Exchange’s
trading floor. The Exchange proposes to
extend this badge fee to clerks and other
Trading Permit Hold (‘‘TPH’’)
employees in order to cover TPH
employees that also receive an access
badge to the Exchange’s trading floor
(e.g., TPH technical support personnel).
The Exchange notes that badge access is
optional and other TPH employees may
continue to be admitted to the trading
floor if signed in by authorized TPH
personnel.
Finally, the Exchange proposes to
amend the rebates provided under its
GTH1 and GTH2 VIX/VIXW LMM
Incentive Programs and amend certain
quote width categories under its GTH2
SPX/SPXW LMM Incentive Program. In
particular, the Exchange offers, among
other LMM incentive programs, a GTH1
VIX/VIXW LMM Incentive Program that
applies during GTH from 7:15 p.m. CST
to 2:00 a.m. CST (‘‘GTH1’’) and a GTH2
VIX/VIXW LMM Incentive Program and
GTH2 SPX/SPXW LMM Incentive
Program that apply during GTH from
2:00 a.m. CST to 8:15 a.m. CST
5 See Securities Exchange Release Nos. 74854
(April 30, 2015), 80 FR 26124 (May 6, 2015) (SR–
CBOE–2015–041); and 74422 (March 4, 2015), 80
FR 12680 (March 10, 2015) (SR–CBOE–2015–020).
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(‘‘GTH2’’). The Exchange notes that
these LMM incentive programs in the
Fees Schedule provide a rebate to TPHs
with LMM appointments to the
respective incentive program that meet
certain quoting standards in VIX/VIXW
and SPX/SPXW, as applicable, in a
month. The Exchange notes that
meeting or exceeding the quoting
standards in VIX/VIXW or SPX/SPXW
to receive the applicable rebates (as
currently offered and as proposed;
described in further detail below) is
optional for an LMM appointed to one
of the GTH VIX/VIXW and SPX/SPXW
LMM Incentive Programs. Rather, an
LMM appointed to an incentive program
is eligible to receive the corresponding
rebate if it satisfies the applicable
quoting standards (as currently offered
and as proposed, described in further
detail below), which the Exchange
believes encourages an LMM to provide
liquidity in the applicable program’s
products during GTH. 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 a GTH VIX/VIXW
or GTH2 SPX/SPXW 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 series.
An LMM appointed to one of the GTH
VIX/VIXW LMM Incentive Programs
must provide continuous electronic
quotes during GTH1 or GTH2, as
applicable, that meet or exceed the
quoting standards under the applicable
program in at least 99% of each of the
VIX and VIXW series, 90% of the time
in a given month in order to receive a
rebate for that month in the amount of
$15,000 for VIX and $10,000 for VIXW
(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. The
Exchange now proposes to increase each
rebate amount received under the GTH1
and GTH2 VIX/VIXW LMM Incentive
Programs for meeting the applicable
quoting standards in a given month in
VIX and VIXW, by slightly increasing
the rebate amount for VIX from $15,000
to $20,000 and in VIXW, by slightly
increasing the rebate amount from
$10,000 to $15,000. The Exchange notes
that no changes are being made to the
quoting standards under the GTH1 or
GTH2 VIX/VIXW LMM Incentive
Programs. The Exchange wishes to
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further incentivize the LMMs appointed
to the GTH VIX/VIXW LMM Incentive
Programs to provide significant liquidity
in VIX/VIXW options during all of GTH
by meeting the applicable quoting
standards currently under each program
in order to receive the proposed
increased rebates.
Premium level
An LMM appointed to the GTH2 SPX/
SPXW LMM Incentive Program must
provide continuous electronic quotes
during GTH2 that meet or exceed the
quoting standards, provided below, in at
least 85% of each of the SPX and SPXW
series, 90% of the time in a given month
in order to receive a rebate for that
month in the amount of $15,000 for SPX
and $35,000 for SPXW (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.
Expiring
Near term
Mid term
Long term
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–$5.00 ......................................................
$5.01–$15.00 ....................................................
$15.01–$50.00 ..................................................
$50.01–$100.00 ................................................
$100.01–$200.00 ..............................................
Greater than $200.00 ........................................
$0.35
0.60
1.20
6.00
15.00
20.00
25
20
15
10
1
1
$0.40
0.60
2.00
4.00
5.00
8.00
15
20
15
10
5
1
$0.60
1.50
2.00
3.00
4.00
12.00
5
10
10
10
5
1
$1.20
2.00
4.00
5.00
6.00
50.00
5
5
5
5
5
1
10
15
10
10
5
1
0.75
2.20
3.0
3.50
6.00
2.00
5
5
5
5
5
1
2.00
3.00
5.00
7.00
10.00
60.00
5
5
5
5
5
1
10
10
10
5
5
1
1.00
3.00
5.00
4.50
15.00
30.00
5
5
5
3
1
1
3.00
4.00
8.00
10.00
18.00
70.00
5
5
5
1
1
1
VIX Value at Prior Close from 20–30
$0.00–$5.00 ......................................................
$5.01–$15.00 ....................................................
$15.01–$50.00 ..................................................
$50.01–$100.00 ................................................
$100.01–$200.00 ..............................................
Greater than $200.00 ........................................
0.60
1.00
2.50
10.00
18.00
25.00
15
15
10
10
1
1
0.80
1.00
3.50
7.00
8.00
12.00
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VIX Value at Prior Close >30
$0.00–$5.00 ......................................................
$5.01–$15.00 ....................................................
$15.01–$50.00 ..................................................
$50.01–$100.00 ................................................
$100.01–$200.00 ..............................................
Greater than 200.00 ..........................................
0.90
2.50
4.00
12.00
20.00
30.00
The Exchange proposes to marginally
widen certain quotes widths applicable
when the VIX Index value at the prior
close is less than 20 for SPX/SPXW
options expiring in 7 days or less as
follows: Widen the quote width that
corresponds to the $5.01 to $15.00
premium level from $0.60 to $0.80;
widen the quote width that corresponds
to a premium level of $15.01 to $50.00
from $1.20 to $1.80; and widen the
quote width that corresponds to the
premium level of $50.01 to $100.00
from $6.00 to $7.50. The Exchange notes
that, generally, demand for and
participation in SPX/SPXW options
decreases as time to expiration
decreases and, as a result, it becomes
more difficult for LMMs to quote within
specified widths and sizes for SPX/
SPXW options that expire in 7 days or
less. As such, the proposed rule change
is designed to slightly ease the quoting
requirements under the expiration
category of 7 days or less (when the VIX
Index value is less than 20 at the prior
close) by marginally widen certain
quote widths in order to better enable
and encourage LMMs to satisfy the
quoting standards to receive the current
monthly rebate applicable to SPX and/
or SPXW.
2. Statutory Basis
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10
10
10
5
1
1
1.00
2.50
5.00
10.00
12.00
25.00
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.6 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 7 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,8 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.
The Exchange believes amending the
Execution Surcharge fee applicable to
non-Market-Maker electronic orders in
SPXW is reasonable as such fee is still
lower than the Execution Surcharge fee
applicable to non-Market-Maker orders
transacted in SPX and SPESG.9
Additionally, the proposed increase
helps to ensure that there is reasonable
cost equivalence between the primary
execution channels for SPXW. More
specifically, the SPXW Surcharge fee
was adopted to minimize the cost
differentials between manual and
electronic executions, which is in the
interest of the Exchange as it must both
maintain robust electronic systems as
well as provide for economic
opportunity for floor brokers to continue
to conduct business, as they serve an
important function in achieving price
discovery and customer executions.10
The Exchange believes the proposed
change is also equitable and not unfairly
9 See
supra note 4.
Securities Exchange Act Release No. 71295
(January 14, 2014) 79 FR 3443 (January 21, 2014)
(SR–CBOE–2013–129).
6 15
U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
8 15 U.S.C. 78f(b)(4).
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10 See
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discriminatory as it will continue to
apply uniformly to all non-MarketMaker orders executed electronically in
SPXW.
The Exchange believes that it is
reasonable to increase the amount of the
Index License Surcharge fees for orders
in SPX/SPXW and MSCI options as the
proposed increases are consistent with
the purpose of such surcharge fees as
they are intended to continue to help
recoup some of the costs associated with
the license for such products in light of
recently renewed license arrangements
between the Exchange and the
applicable index providers. The
proposed Index License Surcharge fees
are also equitable and not unfairly
discriminatory because the surcharge
fees will continue to be assessed
uniformly for all non-Customer orders
in SPX/SPXW and MSCI options, as
applicable.
The Exchange believes the proposed
rule change to extend the access badge
fee to other TPH employees, in addition
to clerks, is reasonable as it is designed
to cover TPH employees that also
receive an access badge to the
Exchange’s trading floor (e.g., TPH
technical support personnel). The
Exchange again notes that badge access
is optional and other TPH employees
may continue to be admitted to the
trading floor if signed in by TPH
personnel with badge access. The
extension of the access badge fee to
other TPH employees is equitable and
not unfairly discriminatory because it
will apply uniformly to all TPH
employees that opt to receive an access
badge.
Regarding the GTH VIX/VIXW LMM
Incentive Programs and the GTH2 SPX/
SPXW LMM Incentive Program,
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 GTH.
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, as amended, to sufficiently
incentivize LMMs appointed to each
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incentive program to provide key
liquidity and active markets in the
corresponding program products during
the corresponding trading sessions. The
Exchange 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).
In particular, the Exchange believes
that the proposed increases to the
rebates applicable to VIX and VIXW
provided under the GTH VIX/VIXW
LMM Incentive programs are reasonably
designed to continue to incentivize an
appointed LMM to meet the applicable
quoting standards for VIX/VIXW
options during GTH, 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
further believes that the proposed rule
change to amend the rebate amount
received for VIX ($20,000) and VIXW
options ($15,000) is reasonable because
it is comparable to and within the range
of the rebates offered by other LMM
Incentive Programs. For example, the
GTH SPX/SPXW LMM Programs
currently offers $15,000 for SPX and
$35,000 SPXW options in which the
applicable quoting standards are met in
a given month. The Exchange believes
the proposed rebates applicable to the
GTH VIX/VIXW LMM Incentive
Programs are equitable and not unfairly
discriminatory because they will
continue to apply equally to any TPH
that is appointed as an LMM to the
GTH1 and GTH2 VIX/VIXW LMM
Incentive Programs.
The Exchange believes that it is
reasonable to slightly ease the quoting
requirements under the GTH2 SPX/
SPXW LMM Incentive Program by
marginally widen certain quote widths
for SPX/SPXW options that expire in 7
days or less, wherein it becomes more
difficult for LMMs to quote within
specified widths, in order to better
enable and encourage LMMs to satisfy
the quoting standards to receive the
current monthly rebate applicable to
SPX and/or SPXW. As such, the
Exchange believes the slightly wider
quote widths are reasonably designed to
facilitate LMMs appointed to the GTH2
SPX/SPXW LMM Incentive Program in
meeting the heightened quoting
standards (in order to receive the
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current rebate offered under the
program) by increasing their quoting
activity and posting tighter spreads and
more aggressive quotes in SPX/SPXW
options during GTH2. 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 are reasonable
because they remain generally aligned
with the current heightened quoting
standards in the program, as the
proposed widths are only marginally
larger than the current widths. The
Exchange believes that the proposed
increase in certain quote widths under
the GTH2 SPX/SPXW LMM Incentive
Program is equitable and not unfairly
discriminatory because such quote
widths will continue to apply equally to
any and all TPHs with LMM
appointments to the GTH2 SPX/SPXW
LMM Incentive Program that seek to
meet the program’s heightened quoting
standards in order to receive the current
rebates offered under the program.
Additionally, the Exchange notes if an
LMM appointed to the GTH VIX/VIXW
LMM Incentive Programs or the GTH2
SPX/SPXW LMM Incentive Program
does not satisfy the corresponding
quoting standards for any given month,
then it simply will not receive the
rebate(s) 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 intramarket or
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule changes in connection
with surcharge fees will impose any
burden on intramarket competition
because each applies uniformly to all
similarly situated TPHs in a uniform
manner (i.e., to all non-Market-Maker
electronic executions in SPXW and to
all non-Customer executions in SPX/
SPXW or MSCI options). Additionally,
the access badge fee will apply
uniformly to all other TPH employees in
the same manner as it applies to all
clerk badges today. The Exchange again
notes that badge access is optional and
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other TPH employees may continue to
be admitted to the trading floor if signed
in by TPH personnel with badge access.
Additionally, the proposed changes to
existing GTH VIX/VIXW and SPX/
SPXW LMM Incentive Programs will
apply to all LMMs appointed to the
applicable program classes (i.e., VIX/
VIXW and SPX/SPXW) 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 that
it needs 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 does not believe that
the proposed rule changes will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed amendments to
the surcharges and the LMM Incentive
Programs, apply only to Exchange
proprietary products, which are traded
exclusively on Cboe Options.
Additionally, the Exchange notes that at
least one other options exchange
assesses a badge fee for employees of
on-floor registrants.11
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
11 See BOX FEE Schedule, Section VIII C, Trading
Floor Participant Fees, which assesses a $100 badge
fee for ‘‘all other registered on-floor persons
employed by or associated with a Floor Market
Maker or Floor Broker’’.
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available for trading. Based on publicly
available information, no single options
exchange has more than 15% of the
market share.12 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.’’ 13 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’. . . .’’.14 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
12 See Cboe Global Markets U.S. Options Market
Volume Summary, Month-to-Date (December 17,
2021), available at https://www.cboe.com/us/
options/market_statistics/.
13 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
14 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)).
PO 00000
Frm 00230
Fmt 4703
Sfmt 4703
2975
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 15 and paragraph (f) of Rule
19b–4 16 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–2021–076 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–2021–076. 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
15 15
16 17
E:\FR\FM\19JAN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
19JAN1
2976
Federal Register / Vol. 87, No. 12 / Wednesday, January 19, 2022 / 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.
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–2021–076 and
should be submitted on or before
February 9, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–00871 Filed 1–18–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: To be published.
PREVIOUSLY ANNOUNCED TIME AND DATE OF
THE MEETING: Thursday, January 20,
2022 at 2 p.m.
The Closed
Meeting scheduled for Thursday,
January 20, 2022 at 2 p.m. has been
changed to Thursday, January 20, 2022
at 2:15 p.m.
CHANGES IN THE MEETING:
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Authority: 5 U.S.C. 552b.
Dated: January 13, 2022.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2022–01000 Filed 1–14–22; 11:15 am]
jspears on DSK121TN23PROD with NOTICES1
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93966; File No. SR–FINRA–
2021–029]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving
Proposed Rule Change To Amend
FINRA Rule 6732 and Expand the
Scope of Exemptions That FINRA May
Grant ATSs From the TRACE
Reporting Requirements
January 12, 2022.
I. Introduction
On November 15, 2021, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) 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 amend FINRA
Rule 6732 (Exemption from Trade
Reporting Obligation for Certain
Transactions on an Alternative Trading
System) to expand the scope of
exemptions from the transaction
reporting obligations of FINRA Rule
6730 (Transaction Reporting) that
FINRA may grant to a member
alternative trading system (‘‘ATS’’). The
proposed rule change was published for
comment in the Federal Register on
November 30, 2021.3 The Commission
received no comments on the proposed
rule change. This order approves the
proposed rule change.
II. Description of the Proposal
FINRA Rule 6730(a) requires each
FINRA member that is a Party to a
Transaction in a TRACE-Eligible
Security 4 to report the transaction to the
Trade Reporting and Compliance Engine
(‘‘TRACE’’). FINRA Rule 6710(e) defines
‘‘Party to a Transaction’’ as an
introducing broker-dealer (if any), an
executing broker-dealer, or a customer.
An alternative trading system (‘‘ATS’’)
is a Party to a Transaction occurring
through its system and has a TRACE
transaction reporting obligation, unless
an exception or exemption applies.5
FINRA Rule 6732 provides FINRA
with the authority to exempt a member
ATS from TRACE reporting obligations
under FINRA Rule 6730. FINRA has
stated that it adopted Rule 6732 in
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 93651
(November 23, 2021), 86 FR 67996 (November 30,
2021) (‘‘Notice’’).
4 See FINRA Rule 6710(a) (defining ‘‘TRACEEligible Security’’).
5 See Regulatory Notice 14–53 (November 2014).
2 17
17
17 CFR 200.30–3(a)(12).
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response to concerns raised by members
regarding operational difficulties arising
from the reporting of certain
transactions on an ATS, particularly
when the ATS does not have a role in
the clearance and settlement for trades
on its system.6 If FINRA grants an ATS
an exemption under Rule 6732, a
member subscriber of the ATS, when
engaging in a trade on the ATS covered
by the Rule 6732 exemption, must
report against its counterparty (rather
than the ATS), which mitigates these
operational difficulties and facilitates
clearance and settlement.7
Currently, under Rule 6732, FINRA
may grant an ATS an exemption if the
following criteria are satisfied: (1) A
trade is between two FINRA members;
(2) the trade does not pass through any
ATS account, and the ATS seeking the
exemption does not exchange TRACEEligible Securities or funds on behalf of
the subscribers or take either side of the
trade for clearing or settlement
purposes, or in any other way insert
itself into the trade; (3) the ATS seeking
the exemption agrees to provide data
relating to each exempted trade to
FINRA on either a monthly basis or as
otherwise proscribed by FINRA, and
acknowledges that failure to meet this
requirement would result in its
exemption being revoked; (4) the ATS
seeking the exemption pays the
applicable reporting fee to FINRA; and
(5) the ATS seeking the exemption has
entered into a written agreement with
each member that is a Party to a
Transaction to ensure that each
exempted trade is properly reported.8
Where these criteria are satisfied, an
exempted trade occurring on the ATS
must be reported by a member (other
than the ATS) that meets the definition
of ‘‘Party to a Transaction’’ identifying
a counterparty other than the ATS with
respect to each side of the trade.9
FINRA is now proposing to amend
Rule 6732 to expand the scope of
transactions that may be exempted
under Rule 6732 to include trades that
involve only one FINRA member (other
than the ATS). Specifically, FINRA
proposes to delete the current language
in subparagraph (a)(1) of Rule 6732 that
requires an exempted transaction to be
between two FINRA members, and
6 See Notice, 86 FR at 67997. FINRA explained
that members’ back-end systems are often
programmed to clear against the counterparty
identified on TRACE trade reports, and when the
ATS is not involved in clearance and settlement,
member subscribers often prefer to TRACE-report
against the party with which they clear and settle
the trade (i.e., another subscriber, rather than the
ATS). See id.
7 See id.
8 See FINRA Rule 6732(a).
9 See FINRA Rule 6732(b).
E:\FR\FM\19JAN1.SGM
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]]>Agencies
[Federal Register Volume 87, Number 12 (Wednesday, January 19, 2022)]
[Notices]
[Pages 2971-2976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00871]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93955; File No. SR-CBOE-2021-076]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
January 12, 2022.
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 30, 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.
[[Page 2972]]
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
certain surcharges, a trading floor-related fee and its Global Trading
Hours (``GTH'') Cboe Volatility Index (``VIX'') options/VIX weekly
(``VIXW'') options and S&P 500 Index (``SPX'') options/SPX weekly
(``SPXW'') LMM Incentive Programs, effective January 2, 2022.
First, the Exchange proposes to amend the Execution Surcharge fee
in Rate Table--Underlying Symbol List A of the Fees Schedule applicable
to non-Market-Maker orders \3\ executed electronically in SPXW options.
Currently, a surcharge fee of $0.13 per contract is assessed for non-
Market-Maker orders executed electronically in SPXW. The proposed rule
change slightly increases this surcharge fee from $0.13 per contract to
$0.14 per contract. The Exchange notes that the proposed SPXW Execution
Surcharge fee is still less than the Execution Surcharge fee assessed
for SPX and SPESG transactions.\4\
---------------------------------------------------------------------------
\3\ Non-Market-Makers include Customers (capacity ``C''),
Clearing Trading Permit Holders (capacity ``F''), Non-Clearing
Trading Permit Holder Affiliates (capacity ``L''), Broker-Dealers
(capacity ``B''), Joint Back-Offices (capacity ``J''), Non-Trading
Permit Holder Market-Makers (capacity ``N''), and Professionals
(capacity ``U''). Capacity ``M'' applies to Market-Makers.
\4\ See Cboe Options Fees Schedule, Rate Table--Underlying
Symbol List A, Execution Surcharge, SPX (not including SPXW) and
SPESG, which assesses a surcharge fee of $0.21 per contract for non-
Market-Maker orders in SPX and SPESG.
---------------------------------------------------------------------------
Next, the Exchange proposes to marginally increase the Index
License Surcharge fees currently applicable to orders executed in SPX
(including SPXW) options in Rate Table--Underlying Symbol List A and to
orders executed in MSCI Emerging Markets Index (``MXEF'') options and
MSCI EAFE Index (``MXEA'') options (collectively, ``MSCI options'') in
Rate Table--All Products Excluding Underlying Symbol List A.
Specifically, the Exchange currently assesses an Index License
Surcharge fee of $0.17 per contract for non-Customer orders executed in
SPX/SPXW and an Index License Surcharge fee of $0.10 per contract for
non-Customer orders executed in MSCI options. The proposed rule change
increases the Index License Surcharge fee applicable to orders executed
in SPX/SPXW from $0.17 per contract to $0.18 per contract and the Index
License Surcharge fee applicable to orders executed in MSCI options
from $0.10 per contract to $0.12 per contract. The Exchange notes that
the Index License Surcharge fees in place for SPX/SPXW and MSCI options
are designed to recoup some of the costs associated with the licenses
for these indexes.\5\ The Exchange has recently renewed its license
arrangements for its SPX and MSCI index licenses and, as a result, the
proposed rule change amends the Index License Surcharge fees for SPX/
SPXW and MSCI options in order to continue to offset some of the costs
associated with the licenses for these indexes.
---------------------------------------------------------------------------
\5\ See Securities Exchange Release Nos. 74854 (April 30, 2015),
80 FR 26124 (May 6, 2015) (SR-CBOE-2015-041); and 74422 (March 4,
2015), 80 FR 12680 (March 10, 2015) (SR-CBOE-2015-020).
---------------------------------------------------------------------------
Next, the Exchange proposes to amend a badge type in the Access
Badges table of the Fees Schedule. Currently, a $70.00 fee is assessed
for Clerk badges to access the Exchange's trading floor. The Exchange
proposes to extend this badge fee to clerks and other Trading Permit
Hold (``TPH'') employees in order to cover TPH employees that also
receive an access badge to the Exchange's trading floor (e.g., TPH
technical support personnel). The Exchange notes that badge access is
optional and other TPH employees may continue to be admitted to the
trading floor if signed in by authorized TPH personnel.
Finally, the Exchange proposes to amend the rebates provided under
its GTH1 and GTH2 VIX/VIXW LMM Incentive Programs and amend certain
quote width categories under its GTH2 SPX/SPXW LMM Incentive Program.
In particular, the Exchange offers, among other LMM incentive programs,
a GTH1 VIX/VIXW LMM Incentive Program that applies during GTH from 7:15
p.m. CST to 2:00 a.m. CST (``GTH1'') and a GTH2 VIX/VIXW LMM Incentive
Program and GTH2 SPX/SPXW LMM Incentive Program that apply during GTH
from 2:00 a.m. CST to 8:15 a.m. CST (``GTH2''). The Exchange notes that
these LMM incentive programs in the Fees Schedule provide a rebate to
TPHs with LMM appointments to the respective incentive program that
meet certain quoting standards in VIX/VIXW and SPX/SPXW, as applicable,
in a month. The Exchange notes that meeting or exceeding the quoting
standards in VIX/VIXW or SPX/SPXW to receive the applicable rebates (as
currently offered and as proposed; described in further detail below)
is optional for an LMM appointed to one of the GTH VIX/VIXW and SPX/
SPXW LMM Incentive Programs. Rather, an LMM appointed to an incentive
program is eligible to receive the corresponding rebate if it satisfies
the applicable quoting standards (as currently offered and as proposed,
described in further detail below), which the Exchange believes
encourages an LMM to provide liquidity in the applicable program's
products during GTH. 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 a GTH VIX/VIXW or GTH2 SPX/SPXW 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 series.
An LMM appointed to one of the GTH VIX/VIXW LMM Incentive Programs
must provide continuous electronic quotes during GTH1 or GTH2, as
applicable, that meet or exceed the quoting standards under the
applicable program in at least 99% of each of the VIX and VIXW series,
90% of the time in a given month in order to receive a rebate for that
month in the amount of $15,000 for VIX and $10,000 for VIXW (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. The Exchange now proposes to increase each rebate amount
received under the GTH1 and GTH2 VIX/VIXW LMM Incentive Programs for
meeting the applicable quoting standards in a given month in VIX and
VIXW, by slightly increasing the rebate amount for VIX from $15,000 to
$20,000 and in VIXW, by slightly increasing the rebate amount from
$10,000 to $15,000. The Exchange notes that no changes are being made
to the quoting standards under the GTH1 or GTH2 VIX/VIXW LMM Incentive
Programs. The Exchange wishes to
[[Page 2973]]
further incentivize the LMMs appointed to the GTH VIX/VIXW LMM
Incentive Programs to provide significant liquidity in VIX/VIXW options
during all of GTH by meeting the applicable quoting standards currently
under each program in order to receive the proposed increased rebates.
An LMM appointed to the GTH2 SPX/SPXW LMM Incentive Program must
provide continuous electronic quotes during GTH2 that meet or exceed
the quoting standards, provided below, in at least 85% of each of the
SPX and SPXW series, 90% of the time in a given month in order to
receive a rebate for that month in the amount of $15,000 for SPX and
$35,000 for SPXW (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.
--------------------------------------------------------------------------------------------------------------------------------------------------------
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-$5.00..................................... $0.35 25 $0.40 15 $0.60 5 $1.20 5
$5.01-$15.00.................................... 0.60 20 0.60 20 1.50 10 2.00 5
$15.01-$50.00................................... 1.20 15 2.00 15 2.00 10 4.00 5
$50.01-$100.00.................................. 6.00 10 4.00 10 3.00 10 5.00 5
$100.01-$200.00................................. 15.00 1 5.00 5 4.00 5 6.00 5
Greater than $200.00............................ 20.00 1 8.00 1 12.00 1 50.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close from 20-30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00..................................... 0.60 15 0.80 10 0.75 5 2.00 5
$5.01-$15.00.................................... 1.00 15 1.00 15 2.20 5 3.00 5
$15.01-$50.00................................... 2.50 10 3.50 10 3.0 5 5.00 5
$50.01-$100.00.................................. 10.00 10 7.00 10 3.50 5 7.00 5
$100.01-$200.00................................. 18.00 1 8.00 5 6.00 5 10.00 5
Greater than $200.00............................ 25.00 1 12.00 1 2.00 1 60.00 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00..................................... 0.90 10 1.00 10 1.00 5 3.00 5
$5.01-$15.00.................................... 2.50 10 2.50 10 3.00 5 4.00 5
$15.01-$50.00................................... 4.00 10 5.00 10 5.00 5 8.00 5
$50.01-$100.00.................................. 12.00 5 10.00 5 4.50 3 10.00 1
$100.01-$200.00................................. 20.00 1 12.00 5 15.00 1 18.00 1
Greater than 200.00............................. 30.00 1 25.00 1 30.00 1 70.00 1
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The Exchange proposes to marginally widen certain quotes widths
applicable when the VIX Index value at the prior close is less than 20
for SPX/SPXW options expiring in 7 days or less as follows: Widen the
quote width that corresponds to the $5.01 to $15.00 premium level from
$0.60 to $0.80; widen the quote width that corresponds to a premium
level of $15.01 to $50.00 from $1.20 to $1.80; and widen the quote
width that corresponds to the premium level of $50.01 to $100.00 from
$6.00 to $7.50. The Exchange notes that, generally, demand for and
participation in SPX/SPXW options decreases as time to expiration
decreases and, as a result, it becomes more difficult for LMMs to quote
within specified widths and sizes for SPX/SPXW options that expire in 7
days or less. As such, the proposed rule change is designed to slightly
ease the quoting requirements under the expiration category of 7 days
or less (when the VIX Index value is less than 20 at the prior close)
by marginally widen certain quote widths in order to better enable and
encourage LMMs to satisfy the quoting standards to receive the current
monthly rebate applicable to SPX and/or SPXW.
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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ 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,\8\ 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes amending the Execution Surcharge fee
applicable to non-Market-Maker electronic orders in SPXW is reasonable
as such fee is still lower than the Execution Surcharge fee applicable
to non-Market-Maker orders transacted in SPX and SPESG.\9\
Additionally, the proposed increase helps to ensure that there is
reasonable cost equivalence between the primary execution channels for
SPXW. More specifically, the SPXW Surcharge fee was adopted to minimize
the cost differentials between manual and electronic executions, which
is in the interest of the Exchange as it must both maintain robust
electronic systems as well as provide for economic opportunity for
floor brokers to continue to conduct business, as they serve an
important function in achieving price discovery and customer
executions.\10\ The Exchange believes the proposed change is also
equitable and not unfairly
[[Page 2974]]
discriminatory as it will continue to apply uniformly to all non-
Market-Maker orders executed electronically in SPXW.
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\9\ See supra note 4.
\10\ See Securities Exchange Act Release No. 71295 (January 14,
2014) 79 FR 3443 (January 21, 2014) (SR-CBOE-2013-129).
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The Exchange believes that it is reasonable to increase the amount
of the Index License Surcharge fees for orders in SPX/SPXW and MSCI
options as the proposed increases are consistent with the purpose of
such surcharge fees as they are intended to continue to help recoup
some of the costs associated with the license for such products in
light of recently renewed license arrangements between the Exchange and
the applicable index providers. The proposed Index License Surcharge
fees are also equitable and not unfairly discriminatory because the
surcharge fees will continue to be assessed uniformly for all non-
Customer orders in SPX/SPXW and MSCI options, as applicable.
The Exchange believes the proposed rule change to extend the access
badge fee to other TPH employees, in addition to clerks, is reasonable
as it is designed to cover TPH employees that also receive an access
badge to the Exchange's trading floor (e.g., TPH technical support
personnel). The Exchange again notes that badge access is optional and
other TPH employees may continue to be admitted to the trading floor if
signed in by TPH personnel with badge access. The extension of the
access badge fee to other TPH employees is equitable and not unfairly
discriminatory because it will apply uniformly to all TPH employees
that opt to receive an access badge.
Regarding the GTH VIX/VIXW LMM Incentive Programs and the GTH2 SPX/
SPXW LMM Incentive Program, 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 GTH. 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, 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. The Exchange 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).
In particular, the Exchange believes that the proposed increases to
the rebates applicable to VIX and VIXW provided under the GTH VIX/VIXW
LMM Incentive programs are reasonably designed to continue to
incentivize an appointed LMM to meet the applicable quoting standards
for VIX/VIXW options during GTH, 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 further believes that the
proposed rule change to amend the rebate amount received for VIX
($20,000) and VIXW options ($15,000) is reasonable because it is
comparable to and within the range of the rebates offered by other LMM
Incentive Programs. For example, the GTH SPX/SPXW LMM Programs
currently offers $15,000 for SPX and $35,000 SPXW options in which the
applicable quoting standards are met in a given month. The Exchange
believes the proposed rebates applicable to the GTH VIX/VIXW LMM
Incentive Programs are equitable and not unfairly discriminatory
because they will continue to apply equally to any TPH that is
appointed as an LMM to the GTH1 and GTH2 VIX/VIXW LMM Incentive
Programs.
The Exchange believes that it is reasonable to slightly ease the
quoting requirements under the GTH2 SPX/SPXW LMM Incentive Program by
marginally widen certain quote widths for SPX/SPXW options that expire
in 7 days or less, wherein it becomes more difficult for LMMs to quote
within specified widths, in order to better enable and encourage LMMs
to satisfy the quoting standards to receive the current monthly rebate
applicable to SPX and/or SPXW. As such, the Exchange believes the
slightly wider quote widths are reasonably designed to facilitate LMMs
appointed to the GTH2 SPX/SPXW LMM Incentive Program in meeting the
heightened quoting standards (in order to receive the current rebate
offered under the program) by increasing their quoting activity and
posting tighter spreads and more aggressive quotes in SPX/SPXW options
during GTH2. 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 are
reasonable because they remain generally aligned with the current
heightened quoting standards in the program, as the proposed widths are
only marginally larger than the current widths. The Exchange believes
that the proposed increase in certain quote widths under the GTH2 SPX/
SPXW LMM Incentive Program is equitable and not unfairly discriminatory
because such quote widths will continue to apply equally to any and all
TPHs with LMM appointments to the GTH2 SPX/SPXW LMM Incentive Program
that seek to meet the program's heightened quoting standards in order
to receive the current rebates offered under the program.
Additionally, the Exchange notes if an LMM appointed to the GTH
VIX/VIXW LMM Incentive Programs or the GTH2 SPX/SPXW LMM Incentive
Program does not satisfy the corresponding quoting standards for any
given month, then it simply will not receive the rebate(s) 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 intramarket or intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act. The
Exchange does not believe that the proposed rule changes in connection
with surcharge fees will impose any burden on intramarket competition
because each applies uniformly to all similarly situated TPHs in a
uniform manner (i.e., to all non-Market-Maker electronic executions in
SPXW and to all non-Customer executions in SPX/SPXW or MSCI options).
Additionally, the access badge fee will apply uniformly to all other
TPH employees in the same manner as it applies to all clerk badges
today. The Exchange again notes that badge access is optional and
[[Page 2975]]
other TPH employees may continue to be admitted to the trading floor if
signed in by TPH personnel with badge access. Additionally, the
proposed changes to existing GTH VIX/VIXW and SPX/SPXW LMM Incentive
Programs will apply to all LMMs appointed to the applicable program
classes (i.e., VIX/VIXW and SPX/SPXW) 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 that it needs 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 does not believe that the proposed rule changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed amendments to the surcharges and the LMM Incentive Programs,
apply only to Exchange proprietary products, which are traded
exclusively on Cboe Options. Additionally, the Exchange notes that at
least one other options exchange assesses a badge fee for employees of
on-floor registrants.\11\
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\11\ See BOX FEE Schedule, Section VIII C, Trading Floor
Participant Fees, which assesses a $100 badge fee for ``all other
registered on-floor persons employed by or associated with a Floor
Market Maker or Floor Broker''.
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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.\12\
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.'' \13\ 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'. . . .''.\14\
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.
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\12\ See Cboe Global Markets U.S. Options Market Volume Summary,
Month-to-Date (December 17, 2021), available at https://www.cboe.com/us/options/market_statistics/.
\13\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\14\ 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 \15\ and paragraph (f) of Rule 19b-4 \16\
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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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-2021-076 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-2021-076. 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
[[Page 2976]]
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-2021-076 and should be submitted on or before February 9, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00871 Filed 1-18-22; 8:45 am]
BILLING CODE 8011-01-P
