Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 76091-76094 [2022-26864]
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Federal Register / Vol. 87, No. 237 / Monday, December 12, 2022 / Notices
payable for 3 years following certain
distress and involuntary plan
terminations. PBGC’s regulations on
Premium Rates (29 CFR part 4006) and
Payment of Premiums (29 CFR part
4007) implement the termination
premium. Sections 4007.3 and
4007.13(b) of the premium payment
regulation require the filing of
termination premium information and
payments with PBGC. PBGC has issued
Form T and its corresponding
instructions for paying the termination
premium. In this renewal, PBGC is
updating the email address listed in the
filing instructions for Form T and
making a clarifying edit.
In general, the termination premium
applies where a single-employer plan
terminates in a distress termination
under section 4041(c) of ERISA (unless
contributing sponsors and controlled
group members meet the bankruptcy
liquidation requirements of section
4041(c)(2)(B)(i)) or in an involuntary
termination under section 4042 of
ERISA, and the termination date under
section 4048 of ERISA is after 2005.
The termination premium is payable
for 3 years. The same amount is payable
each year. The termination premium is
due on the 30th day of each of 3
consecutive 12-month periods. The first
12-month period generally begins
shortly after the termination date or
after the conclusion of bankruptcy
proceedings in certain cases. The
termination premium and related
information must be filed by a person
liable for the termination premium. The
persons liable for the termination
premium are contributing sponsors and
members of their controlled groups,
determined on the day before the plan
termination date. Section 4007.10 of the
premium payment regulation requires
the retention of records supporting or
validating the computation of premiums
paid and requires that the records be
made available to PBGC.
OMB has approved the termination
premium collection of information
(Form T and instructions) under control
number 1212–0064 through April 30,
2023. PBGC intends to request that OMB
extend approval of this collection of
information for 3 years, with minor
changes. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid OMB
control number.
PBGC estimates that, during the next
3 years, it will receive an average of 1
filing of Form T per year. PBGC
estimates that the total annual burden
for the collection of information will be
5 minutes and $67.
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PBGC is soliciting public comments
to—
• Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
• Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodologies and assumptions used;
• Enhance the quality, utility, and
clarity of the information to be
collected; and
• Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g. permitting electronic submission of
responses.
Issued in Washington, DC.
Hilary Duke,
Assistant General Counsel for Regulatory
Affairs, Pension Benefit Guaranty
Corporation.
[FR Doc. 2022–26924 Filed 12–9–22; 8:45 am]
BILLING CODE 7709–02–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96459; File No. SR–
NYSEARCA–2022–65]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Withdrawal of a
Proposed Rule Change To Amend the
NYSE Arca Options Fee Schedule
Concerning the Options Regulatory
Fee
December 7, 2022.
On September 28, 2022, NYSE Arca,
Inc. (‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend its Fee
Schedule regarding its Options
Regulatory Fee. The proposed rule
change was immediately effective upon
filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.3 The
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
2 17
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proposed rule change was published for
comment in the Federal Register on
October 19, 2022.4 On November 14,
2022, NYSE Arca withdrew the
proposed rule change (SR–NYSEARCA–
2022–65).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.5
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–26948 Filed 12–9–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96450; File No. SR–CBOE–
2022–060]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule
December 6, 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 November
23, 2022, 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/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
4 See Securities Exchange Act Release No. 96068
(October 13, 2022), 87 FR 63551.
5 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
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The Exchange proposes to amend its
Fees Schedule to modify the fee for the
SPX (and SPXW) Floor Market-Maker
Tier Appointment Fee.3
By way of background, Exchange Rule
5.50(g)(2) provides that the Exchange
may establish one or more types of tier
appointments and Exchange Rule
5.50(g)(2)(B) provides such tier
appointments are subject to such fees
and charges the Exchange may establish.
In 2010, the Exchange established the
SPX Tier Appointment and adopted an
initial fee of $3,000 per Market-Maker
trading permit, per month.4 The SPX
(and SPXW) Tier Appointment fee for
Floor Market-Makers currently applies
to any Market-Maker that executes any
contracts in SPX and/or SPXW on the
trading floor.5 The Exchange now seeks
to increase the fee for the SPX/SPXW
Floor Market-Maker Tier Appointment
from $3,000 per Market-Maker Floor
Trading Permit to $5,000 per MarketMaker Floor Trading Permit.
3 The Exchange initially filed the proposed fee
change, among other changes, on June 1, 2022 (SR–
CBOE–2022–026). On June 10, 2022, the Exchange
withdrew that filing and submitted SR–CBOE–
2022–029. On August 5, 2022, the Exchange
withdrew that filing and submitted SR–CBOE–
2022–042. On September 26, 2022, the Exchange
withdrew that filing and submitted SR–CBOE–
2022–050 to address the proposed fee change
relating to the SPX/SPXW Floor Market-Maker Tier
Appointment Fee. On November 23, 2022, the
Exchange withdrew that filing and submitted this
filing.
4 See Securities Exchange Act Release No. 62386
(June 25, 2010), 75 FR 38566 (July 2, 2010) (SR–
CBOE–2010–060).
5 The Exchange notes that the fee is not assessed
to a Market-Maker Floor Permit Holder who only
executes SPX (including SPXW) options
transactions as part of multi-class broad-based
index spread transactions. See Cboe Options Fees
Schedule, Market-Maker Tier Appointment Fees,
Notes.
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In connection with the proposed
change, the Exchange also proposes to
update Footnote 24 in the Fees
Schedule, as well as remove the
reference to Footnote 24 in the MarketMaker Tier Appointment Fee Table. By
way of background, in June 2020, the
Exchange adopted Footnote 24 to
describe pricing changes that would
apply for the duration of time the
Exchange trading floor was being
operated in a modified manner in
connection with the COVID–19
pandemic.6 Among other changes,
Footnote 24 provided that the monthly
fee for the SPX/SPXW Floor MarketMaker Tier Appointment Fee was to be
increased to $5,000 per Trading Permit
from $3,000 per Trading Permit. As the
Exchange now proposes to maintain the
$5,000 rate on a permanent basis (i.e.,
regardless of whether the Exchange is
operating in a modified state due to
COVID–19 pandemic), the Exchange
proposes to eliminate the reference to
the SPX/SPXW Floor Market-Maker Tier
Appointment Fee in Footnote 24.7
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.8 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 9 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
the Section 6(b)(5) 10 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
6 See Securities Exchange Act Release No. 89189
(June 30, 2020), 85 FR 40344 (July 6, 2020) (SR–
CBOE–2020–058).
7 The Exchange notes that since its transition to
a new trading floor facility on June 6, 2022, it has
not been operating in a modified manner. As such
Footnote 24 (i.e., the modified fee changes it
describes) does not currently apply.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
10 Id.
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The Exchange believes its proposal to
increase the SPX (and SPXW) Floor
Market-Maker Tier Appointment fee is
reasonable because the proposed
amount is not significantly higher than
was previously assessed (and is the
same amount that has been assessed
under Footnote 24 for the last two
years). Additionally, the Exchange
believes its proposal to increase the fee
is reasonable as the fee amount has not
been increased since it was adopted
over 12 years ago in July 2010.11 For
example, since its adoption 12 years
ago, there has been notable inflation.
Indeed, the dollar has had an average
inflation rate of 2.6% per year between
2010 and today, producing a cumulative
price increase of approximately 37%
inflation since 2010, when the SPX and
SPXW Floor Market-Maker Tier
Appointment was first adopted.12
Additionally, for nearly ten years,
Market-Makers were only subject to the
original rate that was adopted in 2010
(i.e., $3,000) notwithstanding an average
inflation rate of 2.64% per year. The
Exchange believes the proposed
increase is also reasonable in light of
increased costs of services since 2010,
including those relating to facility and
technology upgrades associated with the
new trading floor, which new floor
provides a state-of-the-art environment
and technology. Although the Exchange
recently adopted new, and/or updated
current, fees associated with the new
trading floor, it did not pass-through
other costs incurred in connection with
the new trading floor, including design,
construction and other on-going
maintenance costs. Further, the
Exchange has not modified many of its
facilities fees in several years. The
Exchange notes in particular that the
trading pit for SPX is the largest trading
pit on the new trading floor and
represents a significant amount of space
on the new trading floor. Accordingly,
the Exchange believes the proposed
change is reasonable because it allows
the Exchange to recoup additional fees
associated with the costs of operating a
modern and cutting-edge trading floor
from market participants that utilize the
most space and resources on said
trading floor.
Additionally, over the last decade the
Exchange has made, and continues to
make, further investments to encourage
growth trends in SPX volume, including
investments in marketing, sales teams,
global coverage teams, and new product
11 See Securities Exchange Act Release No. 62386
(June 25, 2010), 75 FR 38566 (July 2, 2010) (SR–
CBOE–2010–060).
12 See https://www.officialdata.org/us/inflation/
2010?amount=1.
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innovations (such as adding additional
weekly expirations and LEAPS). The
Exchange notes that the SPX (and
SPXW) Tier Appointment fee helps
fund these efforts. Moreover, although
the SPX (and SPXW) Tier Appointment
fee has not increased since 2010, SPX
volume, including volume on the
trading floor, has increased significantly
since that time. The Exchange therefore
believes the proposed fee increase is
reasonable because it allows the
Exchange to recoup fees associated with
the costs of maintaining and growing
SPX and SPXW, which products can
help market participants achieve broad
market protection.
The Exchange next notes that it
operates in a highly competitive
environment. The SEC Division of
Trading and Markets’ Fee Guidance
provides that in determining whether a
proposed fee is constrained by
significant competitive forces, the
Commission will consider whether
there are reasonable substitutes for the
product or service that is the subject of
a proposed fee.13 As described in further
detail below, the Exchange believes
substitutable products are in fact
available to market participants,
including in the Over-the-Counter
(OTC) markets. Indeed, there are
currently 16 registered options
exchanges that trade options. Based on
publicly available information, no single
options exchange has more than 17% of
the market share as of November 21,
2022.14 Further, low barriers to entry
mean that new exchanges may rapidly
and inexpensively enter the market and
offer additional substitute platforms to
further compete with the Exchange and
the products it offers. For example,
there are 3 exchanges that have been
added in the U.S. options markets in the
last 5 years (i.e., Nasdaq MRX, LLC,
MIAX Pearl, LLC, and MIAX Emerald
LLC) and one additional options
exchange that is expected to launch in
2023 (i.e., MEMX LLC).
The Exchange believes that
competition in the marketplace
constrains the ability of exchanges to
charge supracompetitive fees for access
to its products exclusive to that market
(‘‘proprietary products’’). Notably, just
as there is no regulatory requirement to
become a member of any one options
exchange, there is also no regulatory
requirement for any market participant
to trade any particular product, nor is
13 See Chairman Jay Clayton, Statement on
Division of Trading and Markets Staff Fee
Guidance, June 12, 2019.
14 See Cboe Global Markets U.S. Options Market
Volume Summary (November 21, 2022), available at
https://markets.cboe.com/us/options/market_
statistics/.
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there any requirement that any
Exchange create or indefinitely maintain
any particular product.15 The Exchange
also highlights that market participants
may trade an exchange’s proprietary
products through a third-party without
directly or indirectly connecting to the
exchange. Further, market participants,
including Market-Makers, may trade the
Exchange’s products, including
proprietary products, on or off the
Exchange’s trading floor (i.e., all
products are available both
electronically and via open outcry on
the Exchange’s trading floor). Indeed,
market participants are not obligated to
trade on the Exchange’s trading floor
and therefore a market participant,
including Market-Makers, can choose to
trade a product electronically instead of
on the Exchange’s trading floor at any
time and for any reason, including due
to an assessment of the reasonableness
of fees charged.
Additionally, market participants may
trade any options product, including
proprietary products, in the unregulated
Over-the-Counter (OTC) markets for
which there is no requirement for fees
related to those markets to be public.
Given the benefits offered by trading
options on a listed exchange, such as
increased market transparency and
heightened contra-party
creditworthiness due to the role of the
Options Clearing Corporation as issuer
and guarantor, the Exchange generally
seeks to incentivize market participants
to trade options on an exchange, which
further constrains fees that an Exchange
may assess. Market participants may
also access other exchanges to trade
other similar or competing proprietary
or multi-listed products. Alternative
products to the Exchange’s proprietary
products may include other options
products, including options on ETFs or
options futures, as well as particular
ETFs or futures. Particularly,
exclusively listed SPX options (i.e., a
proprietary product) may compete with
the following products traded on other
markets: multiply-listed SPY options
(options on the ETF), E-mini S&P 500
Options (options on futures), and E15 If an option class is open for trading on another
national securities exchange, the Exchange may
delist such option class immediately. For
proprietary products, the Exchange may determine
to not open for trading any additional series in that
option class; may restrict series with open interest
to closing transactions, provided that, opening
transactions by Market-Makers executed to
accommodate closing transactions of other market
participants and opening transactions by TPH
organizations to facilitate the closing transactions of
public customers executed as crosses pursuant to
and in accordance with Rule 6.74(b) or (d) may be
permitted; and may delist the option class when all
series within that class have expired. See Cboe Rule
4.4, Interpretations and Policies .11.
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76093
Mini S&P 500 futures (futures on index).
Accordingly, if a market participant
views the Exchange’s proprietary
product as more or less attractive than
the competition they can switch
between similar products. As such, the
Exchange is subject to competition and
does not possess anti-competitive
pricing power, even with its offering of
proprietary products such as SPX.
In connection with a previous
proposed amendment to the National
Market System Plan Governing the
Consolidated Audit Trail (‘‘CAT NMS
Plan’’) 16, the Commission discussed the
existence of competition in the
marketplace generally, and particularly
for exchanges with unique business
models. The Commission recognized for
example that while some exchanges
may have a unique business model that
is not currently offered by competitors,
a competitor could create similar
business models if demand were
adequate, and if a competitor did not do
so, the Commission believes it would be
likely that new entrants would do so if
the exchange with that unique business
model was otherwise profitable.17
Similarly, although the Exchange may
have proprietary products not offered by
other competitors, not unlike unique
business models, a competitor could
create similar products to an existing
proprietary product if demand were
adequate.
The proposed change is also equitable
and not unfairly discriminatory as it
applies to all Market-Makers that trade
SPX on the trading floor uniformly. The
Exchange believes it’s reasonable
equitable and not unfairly
discriminatory to increase the SPX/
SPXW floor Market-Maker Tier
Appointment fee and not the SPX/
SPXW electronic Market-Maker Tier
Appointment fee, as Floor MarketMakers are not subject to other costs
that electronic Market-Makers are
subject to. For example, while all Floor
Market-Makers automatically have an
appointment to trade open outcry in all
classes traded on the Exchange and at
no additional cost per appointment,
electronic Market-Makers must select an
appointment in a class (such as SPX) to
make markets electronically and such
appointments are subject to fees under
the Market-Maker Electronic
Appointments Sliding Scale.18
16 See Securities Exchange Act Release No. 86901
(September 9, 2019), 84 FR 48458 (September 13,
2019) (File No. S7–13–19).
17 Id.
18 See Cboe Options Rules 5.50(a) and (e). See
also Cboe Options Fees Schedule, Market-Maker
EAP Appointments Sliding Scale.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule changes will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed changes would be
applied in the same manner to all Floor
Market-Makers that trade SPX (and/or
SPXW). As noted above, the Exchange
believes it’s reasonable to increase the
SPX/SPWX Tier Appointment Fee for
only Floor Market-Makers only as
opposed to electronic Market-Makers,
because electronic Market-Makers are
subject to costs Floor Market-Makers are
not, such as the fees under MarketMaker EAP Appointments Sliding Scale.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed rule changes
apply only to a fee relating to a product
exclusively listed on the Exchange.
Additionally, the Exchange operates in
a highly competitive market. In addition
to Cboe Options, TPHs have numerous
alternative venues that they may
participate on (which, as described
above, list products that compete with
SPX options) and direct their order
flow, including 15 other options
exchanges (four of which also maintain
physical trading floors), as well as offexchange venues, where competitive
products are available for trading. Based
on publicly available information, no
single options exchange has more than
17% of the market share of executed
volume of options trades.19 Therefore,
no exchange possesses significant
pricing power in the execution of option
order flow. Moreover, the Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
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
19 See
Cboe Global Markets, U.S. Options Market
Volume Summary by Month (November 21, 2022),
available at https://markets.cboe.com/us/options/
market_share/.
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investors and listed companies.’’ 20 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’. . . .’’.21 Accordingly, the
Exchange does not believe its proposed
changes to the incentive programs
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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 22 and paragraph (f) of Rule
19b–4 23 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.
20 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
21 NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca–2006–21)).
22 15 U.S.C. 78s(b)(3)(A).
23 17 CFR 240.19b–4(f).
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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–2022–060 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–2022–060. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2022–060 and
should be submitted on or before
January 3, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–26864 Filed 12–9–22; 8:45 am]
BILLING CODE 8011–01–P
24 17
E:\FR\FM\12DEN1.SGM
CFR 200.30–3(a)(12).
12DEN1
Agencies
[Federal Register Volume 87, Number 237 (Monday, December 12, 2022)]
[Notices]
[Pages 76091-76094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26864]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96450; File No. SR-CBOE-2022-060]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
December 6, 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 November 23, 2022, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its Fees Schedule. 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 76092]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule to modify the fee
for the SPX (and SPXW) Floor Market-Maker Tier Appointment Fee.\3\
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\3\ The Exchange initially filed the proposed fee change, among
other changes, on June 1, 2022 (SR-CBOE-2022-026). On June 10, 2022,
the Exchange withdrew that filing and submitted SR-CBOE-2022-029. On
August 5, 2022, the Exchange withdrew that filing and submitted SR-
CBOE-2022-042. On September 26, 2022, the Exchange withdrew that
filing and submitted SR-CBOE-2022-050 to address the proposed fee
change relating to the SPX/SPXW Floor Market-Maker Tier Appointment
Fee. On November 23, 2022, the Exchange withdrew that filing and
submitted this filing.
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By way of background, Exchange Rule 5.50(g)(2) provides that the
Exchange may establish one or more types of tier appointments and
Exchange Rule 5.50(g)(2)(B) provides such tier appointments are subject
to such fees and charges the Exchange may establish. In 2010, the
Exchange established the SPX Tier Appointment and adopted an initial
fee of $3,000 per Market-Maker trading permit, per month.\4\ The SPX
(and SPXW) Tier Appointment fee for Floor Market-Makers currently
applies to any Market-Maker that executes any contracts in SPX and/or
SPXW on the trading floor.\5\ The Exchange now seeks to increase the
fee for the SPX/SPXW Floor Market-Maker Tier Appointment from $3,000
per Market-Maker Floor Trading Permit to $5,000 per Market-Maker Floor
Trading Permit.
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\4\ See Securities Exchange Act Release No. 62386 (June 25,
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-060).
\5\ The Exchange notes that the fee is not assessed to a Market-
Maker Floor Permit Holder who only executes SPX (including SPXW)
options transactions as part of multi-class broad-based index spread
transactions. See Cboe Options Fees Schedule, Market-Maker Tier
Appointment Fees, Notes.
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In connection with the proposed change, the Exchange also proposes
to update Footnote 24 in the Fees Schedule, as well as remove the
reference to Footnote 24 in the Market-Maker Tier Appointment Fee
Table. By way of background, in June 2020, the Exchange adopted
Footnote 24 to describe pricing changes that would apply for the
duration of time the Exchange trading floor was being operated in a
modified manner in connection with the COVID-19 pandemic.\6\ Among
other changes, Footnote 24 provided that the monthly fee for the SPX/
SPXW Floor Market-Maker Tier Appointment Fee was to be increased to
$5,000 per Trading Permit from $3,000 per Trading Permit. As the
Exchange now proposes to maintain the $5,000 rate on a permanent basis
(i.e., regardless of whether the Exchange is operating in a modified
state due to COVID-19 pandemic), the Exchange proposes to eliminate the
reference to the SPX/SPXW Floor Market-Maker Tier Appointment Fee in
Footnote 24.\7\
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\6\ See Securities Exchange Act Release No. 89189 (June 30,
2020), 85 FR 40344 (July 6, 2020) (SR-CBOE-2020-058).
\7\ The Exchange notes that since its transition to a new
trading floor facility on June 6, 2022, it has not been operating in
a modified manner. As such Footnote 24 (i.e., the modified fee
changes it describes) does not currently apply.
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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.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ 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 the
Section 6(b)(5) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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The Exchange believes its proposal to increase the SPX (and SPXW)
Floor Market-Maker Tier Appointment fee is reasonable because the
proposed amount is not significantly higher than was previously
assessed (and is the same amount that has been assessed under Footnote
24 for the last two years). Additionally, the Exchange believes its
proposal to increase the fee is reasonable as the fee amount has not
been increased since it was adopted over 12 years ago in July 2010.\11\
For example, since its adoption 12 years ago, there has been notable
inflation. Indeed, the dollar has had an average inflation rate of 2.6%
per year between 2010 and today, producing a cumulative price increase
of approximately 37% inflation since 2010, when the SPX and SPXW Floor
Market-Maker Tier Appointment was first adopted.\12\ Additionally, for
nearly ten years, Market-Makers were only subject to the original rate
that was adopted in 2010 (i.e., $3,000) notwithstanding an average
inflation rate of 2.64% per year. The Exchange believes the proposed
increase is also reasonable in light of increased costs of services
since 2010, including those relating to facility and technology
upgrades associated with the new trading floor, which new floor
provides a state-of-the-art environment and technology. Although the
Exchange recently adopted new, and/or updated current, fees associated
with the new trading floor, it did not pass-through other costs
incurred in connection with the new trading floor, including design,
construction and other on-going maintenance costs. Further, the
Exchange has not modified many of its facilities fees in several years.
The Exchange notes in particular that the trading pit for SPX is the
largest trading pit on the new trading floor and represents a
significant amount of space on the new trading floor. Accordingly, the
Exchange believes the proposed change is reasonable because it allows
the Exchange to recoup additional fees associated with the costs of
operating a modern and cutting-edge trading floor from market
participants that utilize the most space and resources on said trading
floor.
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\11\ See Securities Exchange Act Release No. 62386 (June 25,
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-060).
\12\ See https://www.officialdata.org/us/inflation/2010?amount=1.
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Additionally, over the last decade the Exchange has made, and
continues to make, further investments to encourage growth trends in
SPX volume, including investments in marketing, sales teams, global
coverage teams, and new product
[[Page 76093]]
innovations (such as adding additional weekly expirations and LEAPS).
The Exchange notes that the SPX (and SPXW) Tier Appointment fee helps
fund these efforts. Moreover, although the SPX (and SPXW) Tier
Appointment fee has not increased since 2010, SPX volume, including
volume on the trading floor, has increased significantly since that
time. The Exchange therefore believes the proposed fee increase is
reasonable because it allows the Exchange to recoup fees associated
with the costs of maintaining and growing SPX and SPXW, which products
can help market participants achieve broad market protection.
The Exchange next notes that it operates in a highly competitive
environment. The SEC Division of Trading and Markets' Fee Guidance
provides that in determining whether a proposed fee is constrained by
significant competitive forces, the Commission will consider whether
there are reasonable substitutes for the product or service that is the
subject of a proposed fee.\13\ As described in further detail below,
the Exchange believes substitutable products are in fact available to
market participants, including in the Over-the-Counter (OTC) markets.
Indeed, there are currently 16 registered options exchanges that trade
options. Based on publicly available information, no single options
exchange has more than 17% of the market share as of November 21,
2022.\14\ Further, low barriers to entry mean that new exchanges may
rapidly and inexpensively enter the market and offer additional
substitute platforms to further compete with the Exchange and the
products it offers. For example, there are 3 exchanges that have been
added in the U.S. options markets in the last 5 years (i.e., Nasdaq
MRX, LLC, MIAX Pearl, LLC, and MIAX Emerald LLC) and one additional
options exchange that is expected to launch in 2023 (i.e., MEMX LLC).
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\13\ See Chairman Jay Clayton, Statement on Division of Trading
and Markets Staff Fee Guidance, June 12, 2019.
\14\ See Cboe Global Markets U.S. Options Market Volume Summary
(November 21, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
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The Exchange believes that competition in the marketplace
constrains the ability of exchanges to charge supracompetitive fees for
access to its products exclusive to that market (``proprietary
products''). Notably, just as there is no regulatory requirement to
become a member of any one options exchange, there is also no
regulatory requirement for any market participant to trade any
particular product, nor is there any requirement that any Exchange
create or indefinitely maintain any particular product.\15\ The
Exchange also highlights that market participants may trade an
exchange's proprietary products through a third-party without directly
or indirectly connecting to the exchange. Further, market participants,
including Market-Makers, may trade the Exchange's products, including
proprietary products, on or off the Exchange's trading floor (i.e., all
products are available both electronically and via open outcry on the
Exchange's trading floor). Indeed, market participants are not
obligated to trade on the Exchange's trading floor and therefore a
market participant, including Market-Makers, can choose to trade a
product electronically instead of on the Exchange's trading floor at
any time and for any reason, including due to an assessment of the
reasonableness of fees charged.
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\15\ If an option class is open for trading on another national
securities exchange, the Exchange may delist such option class
immediately. For proprietary products, the Exchange may determine to
not open for trading any additional series in that option class; may
restrict series with open interest to closing transactions, provided
that, opening transactions by Market-Makers executed to accommodate
closing transactions of other market participants and opening
transactions by TPH organizations to facilitate the closing
transactions of public customers executed as crosses pursuant to and
in accordance with Rule 6.74(b) or (d) may be permitted; and may
delist the option class when all series within that class have
expired. See Cboe Rule 4.4, Interpretations and Policies .11.
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Additionally, market participants may trade any options product,
including proprietary products, in the unregulated Over-the-Counter
(OTC) markets for which there is no requirement for fees related to
those markets to be public. Given the benefits offered by trading
options on a listed exchange, such as increased market transparency and
heightened contra-party creditworthiness due to the role of the Options
Clearing Corporation as issuer and guarantor, the Exchange generally
seeks to incentivize market participants to trade options on an
exchange, which further constrains fees that an Exchange may assess.
Market participants may also access other exchanges to trade other
similar or competing proprietary or multi-listed products. Alternative
products to the Exchange's proprietary products may include other
options products, including options on ETFs or options futures, as well
as particular ETFs or futures. Particularly, exclusively listed SPX
options (i.e., a proprietary product) may compete with the following
products traded on other markets: multiply-listed SPY options (options
on the ETF), E-mini S&P 500 Options (options on futures), and E-Mini
S&P 500 futures (futures on index). Accordingly, if a market
participant views the Exchange's proprietary product as more or less
attractive than the competition they can switch between similar
products. As such, the Exchange is subject to competition and does not
possess anti-competitive pricing power, even with its offering of
proprietary products such as SPX.
In connection with a previous proposed amendment to the National
Market System Plan Governing the Consolidated Audit Trail (``CAT NMS
Plan'') \16\, the Commission discussed the existence of competition in
the marketplace generally, and particularly for exchanges with unique
business models. The Commission recognized for example that while some
exchanges may have a unique business model that is not currently
offered by competitors, a competitor could create similar business
models if demand were adequate, and if a competitor did not do so, the
Commission believes it would be likely that new entrants would do so if
the exchange with that unique business model was otherwise
profitable.\17\ Similarly, although the Exchange may have proprietary
products not offered by other competitors, not unlike unique business
models, a competitor could create similar products to an existing
proprietary product if demand were adequate.
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\16\ See Securities Exchange Act Release No. 86901 (September 9,
2019), 84 FR 48458 (September 13, 2019) (File No. S7-13-19).
\17\ Id.
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The proposed change is also equitable and not unfairly
discriminatory as it applies to all Market-Makers that trade SPX on the
trading floor uniformly. The Exchange believes it's reasonable
equitable and not unfairly discriminatory to increase the SPX/SPXW
floor Market-Maker Tier Appointment fee and not the SPX/SPXW electronic
Market-Maker Tier Appointment fee, as Floor Market-Makers are not
subject to other costs that electronic Market-Makers are subject to.
For example, while all Floor Market-Makers automatically have an
appointment to trade open outcry in all classes traded on the Exchange
and at no additional cost per appointment, electronic Market-Makers
must select an appointment in a class (such as SPX) to make markets
electronically and such appointments are subject to fees under the
Market-Maker Electronic Appointments Sliding Scale.\18\
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\18\ See Cboe Options Rules 5.50(a) and (e). See also Cboe
Options Fees Schedule, Market-Maker EAP Appointments Sliding Scale.
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[[Page 76094]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule changes will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed changes
would be applied in the same manner to all Floor Market-Makers that
trade SPX (and/or SPXW). As noted above, the Exchange believes it's
reasonable to increase the SPX/SPWX Tier Appointment Fee for only Floor
Market-Makers only as opposed to electronic Market-Makers, because
electronic Market-Makers are subject to costs Floor Market-Makers are
not, such as the fees under Market-Maker EAP Appointments Sliding
Scale.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed rule changes apply only to a fee relating to a product
exclusively listed on the Exchange. Additionally, the Exchange operates
in a highly competitive market. In addition to Cboe Options, TPHs have
numerous alternative venues that they may participate on (which, as
described above, list products that compete with SPX options) and
direct their order flow, including 15 other options exchanges (four of
which also maintain physical trading floors), 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 17% of the market share of executed volume of options trades.\19\
Therefore, no exchange possesses significant pricing power in the
execution of option order flow. Moreover, the Commission has repeatedly
expressed its preference for competition over regulatory intervention
in determining prices, products, and services in the securities
markets. Specifically, in Regulation NMS, the Commission highlighted
the importance of market forces in determining prices and SRO revenues
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.'' \20\ 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'. . . .''.\21\ Accordingly, the Exchange does not believe its
proposed changes to the incentive programs impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\19\ See Cboe Global Markets, U.S. Options Market Volume Summary
by Month (November 21, 2022), available at https://markets.cboe.com/us/options/market_share/.
\20\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\21\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC 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 \22\ and paragraph (f) of Rule 19b-4 \23\
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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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 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-2022-060 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-2022-060. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2022-060 and should be submitted on
or before January 3, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-26864 Filed 12-9-22; 8:45 am]
BILLING CODE 8011-01-P