Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Its Fees Schedule, 86400-86404 [2023-27268]
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Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
its activities in all relevant
jurisdictions.10
The proposed rule change would help
provide a well-founded, clear,
transparent, and enforceable legal basis
for ICC’s clearance of SES contracts on
the Kingdom of Morocco and the
Federal Republic of Nigeria. By
amending Rule 26D–102 to add both the
Kingdom of Morocco and the Federal
Republic of Nigeria to the list of specific
Eligible SES Reference Entities to be
cleared by ICC, the proposed rule
change would help to ensure that ICC
can clear SES contracts on those
countries pursuant to its existing rules
in Subchapter 26D. The revised
Subchapter 26D would provide a wellfounded, clear, transparent, and
enforceable legal basis for ICC to clear
these contracts, consistent with the
requirements of Rule 17Ad–22(e)(1).11
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, and in
particular, with the requirements of
section 17A(b)(3)(F) of the Act 12 and
Rule 17Ad–22(e)(1) thereunder.13
It is therefore ordered pursuant to
section 19(b)(2) of the Act 14 that the
proposed rule change (SR–ICC–2023–
014), be, and hereby is, approved.15
BILLING CODE 8011–01–P
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CFR 240.17Ad–22(e)(1).
CFR 240.17Ad–22(e)(1).
12 15 U.S.C. 78q–1(b)(3)(F).
13 17 CFR 240.17Ad–22(e)(1).
14 15 U.S.C. 78s(b)(2).
15 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
16 17 CFR 200.30–3(a)(12).
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Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Amend Its
Fees Schedule
December 7, 2023.
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
1, 2023, Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) 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.
Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) proposes to amend
its Fee Schedule. The text of the
proposed rule change is in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/ctwo/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
[FR Doc. 2023–27275 Filed 12–12–23; 8:45 am]
11 17
[Release No. 34–99116; File No. SR–C2–
2023–024]
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Sherry R. Haywood,
Assistant Secretary.
10 17
SECURITIES AND EXCHANGE
COMMISSION
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.
1 15
2 17
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1. Purpose
The Exchange proposes to amend its
Fee Schedule, effective December 1,
2023.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
17 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than approximately 16% of the market
share and currently the Exchange
represents approximately 3% of the
market share.3 Thus, in such a lowconcentrated and highly competitive
market, no single options exchange,
including the Exchange, possesses
significant pricing power in the
execution of option order flow. The
Exchange believes that the ever-shifting
market share among the exchanges from
month to month demonstrates that
market participants can shift order flow
or discontinue to reduce use of certain
categories of products, in response to fee
changes. Accordingly, competitive
forces constrain the Exchange’s
transaction fees, and market participants
can readily trade on competing venues
if they deem pricing levels at those
other venues to be more favorable.
Fee Code Updates
First, the Exchange proposes to
amend the transaction fee for Public
Customer orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF that
remove liquidity. Currently, public
customer orders in equity, multiplylisted index, ETF and ETN penny
options classes (except SPY, AAPL,
QQQ, IWM and SLV) that remove
liquidity are assessed a standard
transaction fee of $0.43 per contract and
yield fee code ‘‘PC’’. The Exchange
proposes to remove orders in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF from fee code PC and, instead,
assess fee code ‘‘SC’’ for Public
Customer orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF that
remove liquidity. Fee code SC is
currently appended to Public Customer
orders in SPY, AAPL, QQQ, IWM and
3 See Cboe Global Markets U.S. Options Market
Volume Summary by Month (November 29, 2023),
available at https://markets.cboe.com/us/options/
market_statistics/.
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00086
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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SLV that remove liquidity and assesses
a reduced fee (from that of fee code PC)
of $0.37 per contract.
The Exchange next proposes to amend
the rebate for C2 Market Maker orders
in AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF that add liquidity,
including if they are a National Best Bid
or Offer (‘‘NBBO’’) Joiner or NBBO
Setter. Currently, such C2 Market
Makers orders are provided a rebate of
$0.41 per contract and yield fee code
‘‘PM’’. Fee code SL is currently
appended to C2 Market Maker orders in
SPY, AAPL, QQQ, IWM and SLV that
add liquidity and are a National Best
Bid or Offer (‘‘NBBO’’) Joiner or NBBO
Setter and offers a rebate of $0.31 per
contract for such orders. Particularly, to
qualify as a NBBO Joiner, a C2 marketmaker order must improve the C2 Best
Bid or Offer (‘‘BBO’’) and result in C2
joining an existing NBBO. Only the first
order received that results in C2 BBO
joining the NBBO at a new price level
will qualify for the enhanced rebate. If
C2 is at the NBBO, the order will not
qualify. Alternatively, C2 Market
Makers may receive the enhanced rebate
if they are a NBBO Setter. To qualify as
a NBBO Setter and receive the enhanced
rebate, a C2 Market Maker order must
set the NBBO. The Exchange now
proposes to add C2 Market Maker orders
in AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF that add liquidity and
are a National Best Bid or Offer
(‘‘NBBO’’) Joiner or NBBO Setter to fee
code SL. The Exchange also proposes to
amend the rebate for orders yielding fee
code SL, from $0.31 to $0.32. The
Exchange believes assessing fee code SL
and the corresponding enhanced rebate
for C2 Market Makers in AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF
that are NBBO Joiners or Setters will
continue to incentivize liquidity
providers to provide more aggressively
priced liquidity in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF options.
Further, the Exchange believes that the
increased rebate for orders yielding fee
code SL will also incentivize liquidity
providers to provide more aggressively
priced liquidity in SPY, AAPL, QQQ,
IWM and SLV options.
The Exchange next proposes to amend
the rebate for C2 Market Maker orders
in AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF that add liquidity. As
noted above, currently, C2 Market
Makers orders in equity, multiply-listed
index, ETF and ETN penny options
classes (except SPY, AAPL, QQQ, IWM
and SLV) that add liquidity are
provided a rebate of $0.41 per contract
and yield fee code ‘‘PM’’. The Exchange
proposes to remove orders in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
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XLF from fee code PM and, instead,
assess existing fee code ‘‘SM’’ for C2
Market Maker orders in AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF.
Fee code SM is currently appended to
C2 Market Maker orders in SPY, AAPL,
QQQ, IWM and SLV that add liquidity
and offer a reduced rebate (from that of
fee code PM) of $0.20 per contract.
The Exchange also proposes to amend
the rebate for non-Market Maker, nonCustomer orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF that add
liquidity. Currently, non-Market Maker,
non-Customer orders (i.e., Professional
Customer, Firm, Broker/Dealer, non-C2
Market Maker, JBO, etc.) in equity,
multiply-listed index, ETF and ETN
penny options classes (except SPY,
AAPL, QQQ, IWM and SLV) that add
liquidity are provided a rebate of $0.36
per contract and yield fee code ‘‘PN’’.
The Exchange proposes to remove
orders in AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF from fee code PN
and, instead, assess existing fee code
‘‘SN’’ on non-Market Maker, nonCustomer orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF that add
liquidity. Fee code SN is currently
appended to such orders in SPY, AAPL,
QQQ, IWM and SLV and assesses a
reduced rebate (from that of fee code
PN) of $0.20 per contract.
The Exchange also proposes to add
AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF to the table in the Fee
Schedule that currently sets forth SPY,
AAPL, QQQ, IWM and SLV-specific
pricing. Like with SPY, AAPL, QQQ,
IWM and SLV, the Exchange also
proposes to clarify that the first
transaction fee table, which does not
apply to RUT, DJX, SPY, AAPL, QQQ,
IWM and SLV, also does not apply to
AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF. The Exchange notes that
transaction fees and rebates that apply
to (1) Public Customer orders in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF that add liquidity (existing fee code
‘‘PY’’) (2) C2 Market Maker orders in
AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF that remove liquidity (existing
fee code ‘‘PR’’), (3) non-Market Maker,
non-Customer orders in AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF
that remove liquidity (existing fee code
‘‘PP), (4) orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF that trade
at the open (existing fee code ‘‘OO’’) and
(5) resting orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF that trade
with resting complex orders (existing
fee code ‘‘CA’’) are not changing, nor are
the associated fee codes.
PO 00000
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Market Maker Volume Tiers
The Exchange also proposes to amend
Footnote 1 (Market Maker Volume
Tiers), applicable to qualifying C2
Market Maker orders yielding fee code
SM. Pursuant to Footnote 1 of the Fee
Schedule, the Exchange currently offers
two Market Maker Volume Tiers, which
provide enhanced rebates between $0.26
and $0.30 per contract for qualifying
Market Maker orders yielding fee code
SM where a TPHTPH [sic] meets
required criteria. Specifically, Tier 1
provides an enhanced rebate of $0.26
per contract where a TPH: (1) has an
ADAV 4 in Market-Maker orders in SPY,
AAPL, QQQ, IWM and SLV (i.e.,
yielding fee codes SM or SL) greater
than or equal to 50,000 contracts; or (2)
has a Step-Up ADAV 5 in Market-Maker
orders in SPY, AAPL, QQQ, IWM and
SLV (i.e., yielding fee codes SM or SL)
greater than or equal to 15,000 contracts
from March 2021. Tier 2 provides a
higher rebate of $0.30 per contract
where a TPH meets the more stringent
criteria of having an ADAV in MarketMaker orders in SPY, AAPL, QQQ, IWM
and SLV (i.e., yielding fee codes SM or
SL) greater than or equal to 130,000
contracts.
The Exchange proposes to amend the
required criteria for Tiers 1 and 2.
Specifically, the Exchange proposes to
amend Tier 1 criteria to state that a
TPHTPH [sic] must have (1) an ADAV
in Market-Maker orders in SPY, AAPL,
QQQ, IWM, SLV, AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF (i.e.,
yielding fee codes SM or SL) greater
than or equal to 0.15% of Average
OCV.6 The Exchange proposes to amend
Tier 2 criteria to state that a TPHTPH
[sic] must have an ADAV in MarketMaker orders in SPY, AAPL, QQQ,
IWM, SLV, AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF (i.e., yielding fee
codes SM or SL) greater than or equal
to 0.35% of Average OCV. Additionally,
the Exchange proposes to change the
enhanced rebate for Tier 2 from $0.30
per contract to $0.28 per contract.
The Exchange also proposes to add
new Market Maker Volume Tier 3 to
provide a rebate of $0.31 per contract if
a TPH has an ADAV in Market-Maker
orders in SPY, AAPL, QQQ, IWM, SLV,
4 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added, per
day.
5 ‘‘Step-Up ADAV’’ means ADAV in the relevant
baseline month subtracted from current ADAV.
6 ‘‘OCV’’ means, the total equity and ETF options
volume that clears in the Customer range at the
Options Clearing Corporation (‘‘OCC’’) for the
month for which the fees apply, excluding volume
on any day that the Exchange experiences an
Exchange System Disruption and on any day with
a scheduled early market close.
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AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF (i.e., yielding fee codes SM or
SL) greater than or equal to 0.60% of
Average OCV. Finally, the Exchange
propose to add new Market Maker
Volume Tier 4 to provide an enhanced
rebate of $0.32 per contract if a TPH has
an ADAV in Market-Maker orders in
SPY, AAPL, QQQ, IWM, SLV, AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF (i.e., yielding fee codes SM or SL)
greater than or equal to 0.70% of
Average OCV.
The Exchange notes that other
exchanges offer tiered product-specific
pricing incentives.7 The proposed
changes are designed to encourage
Market-Makers to increase or grow their
order flow on the Exchange in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF, which facilitates tighter spreads,
signaling increased activity from other
market participants, and thus ultimately
contributes to deeper and more liquid
markets and provides greater execution
opportunities on the Exchange to the
benefit of all market participants.
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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
7 See, e.g., MIAX Pearl Fee Schedule, Section 1
Transaction Rebates/Fees, which provides for
product-specific pricing for SPY, QQQ, and IWM;
and Nasdaq ISE Pricing Schedule, Section 3,
Footnote 5, which provides for tiered rebates for
market maker IWM and QCC orders that add
liquidity between $0.10 and $0.26 per contract, as
well as tired rebates for market maker orders in
similar, single-name options (AMZN, FB, and
NVDA) between $0.15 and $0.22.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
10 Id.
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customers, issuers, brokers, or dealers.
The Exchange also believes the
proposed rule change is consistent with
Section 6(b)(4) of the Act,11 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
TPHs and other persons using its
facilities.
As described above, the Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. In
particular, the proposed changes to
Exchange execution fees and rebates for
certain orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF are
intended to attract order flow to the
Exchange by continuing to offer
competitive pricing while also creating
additional incentives to providing
aggressively priced displayed liquidity,
which the Exchange believes would
enhance market quality to the benefit of
all market participants.
The Exchange believes its proposed
changes are reasonable as they are
competitive and in line with the
Exchange’s current pricing for the same
orders in SPY, AAPL, QQQ, IWM, and
SLV. The Exchange believes that it is
reasonable to reduce the transaction fee
for Public Customer orders in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF that remove liquidity because
market participants will be subject to
lower fees for such orders and thus may
be encouraged to increase retail AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF order flow to the Exchange. The
Exchange believes that it is reasonable
to reduce the rebates for both C2 Market
Maker and non-Market Maker, nonCustomer orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF that add
liquidity because such market
participants will still receive rebates for
such orders, albeit at a lower amount,
which are already in place for such
orders in SPY, AAPL, QQQ, IWM and
SLV. Additionally, Market Makers that
are NBBO Joiners or Setters in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF would be eligible to receive the
same rebate, as amended, that is
currently offered for joining or setting
an NBBO in SPY, AAPL, QQQ, IWM
and SLV. The Exchange believes that
offering the NBBO Joiner and Setter
rebate for Market Maker orders in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF is reasonable as it is designed to
continue to incentivize C2 Market
Makers to improve the C2 BBO resulting
11 15
PO 00000
U.S.C. 78f(b)(4).
Frm 00088
Fmt 4703
Sfmt 4703
in C2 joining an existing NBBO or
setting a new NBBO to receive the
rebate, ultimately encouraging C2
Market Makers to submit more
aggressive AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF orders that will
maintain tight spreads, benefitting both
TPHs and public investors. Further, the
Exchange believes it is reasonable to
increase the current rebate for the NBBO
Joiner and Setter rebate for Market
Maker orders in SPY, AAPL, QQQ, IWM
and SLV, as such market participants
will still receive a rebate for such
orders.
The Exchange also believes it is
reasonable, equitable and not unfairly
discriminatory to adopt pricing specific
to certain orders in AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF as the
Exchange already maintains the same
pricing for such orders in SPY, AAPL,
QQQ, IWM and SLV, as well as similar
product-specific pricing for certain
orders in other products, such as RUT
and DJX.12 Additionally, as noted above,
other exchanges similarly provide for
product-specific pricing.13
The Exchange also believes that it is
equitable and not unfairly
discriminatory to assess a lower fee for
Public Customer orders in AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF as
compared to other market participants
because customer order flow enhances
liquidity on the Exchange for the benefit
of all market participants. Specifically,
customer liquidity benefits all market
participants by providing more trading
opportunities, which attracts Market
Makers. An increase in the activity of
these market participants in turn
facilitates tighter spreads, which may
cause an additional corresponding
increase in order flow from other market
participants. Moreover, the options
industry has a long history of providing
preferential pricing to customers, and
the Exchange’s current Fee Schedule
currently does so in many places, as do
the fees structures of multiple other
exchanges.14 The Exchange notes that
the proposed fee change will be applied
equally to all Public Customers.
The Exchange believes it is equitable
and not unfairly discriminatory to
provide C2 Market-Makers that are
NBBO Joiners or Setters in AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF an
enhanced rebate (compared to the
proposed rebate for other C2 MarketMakers) because such market
participants are providing more
12 See Cboe C2 Options Exchange Fee Schedule,
Transaction Fees.
13 See supra note 8.
14 See Cboe C2 Options Exchange Fee Schedule,
Transaction Fees; see also BZX Options Fee
Schedule, Fee Codes and Associated Fees.
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aggressively priced liquidity in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF options. Additionally, increased
add volume order flow, particularly by
liquidity providers, contributes to a
deeper, more liquid market, which, in
turn, provides for increased execution
opportunities and thus overall enhanced
price discovery and price improvement
opportunities on the Exchange. As such,
this benefits all market participants by
contributing towards a robust and wellbalanced market ecosystem, 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
believes the proposed changes to the
rebates for non-Market Maker, nonCustomer and C2 Market Maker AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF orders are also equitable and not
unfairly discriminatory because they
will be applied equally to all nonmarket-makers, non-customers and
Market-Makers, respectively.
The Exchange believes amending
Market Maker Volume Tiers for C2
Market Maker orders yielding fee code
SM or SL is reasonable because they
provide additional opportunities for
TPHs to receive enhanced rebates on
qualifying orders in a manner that
incentivizes increased Market Maker
order flow in certain multiply-listed
options on the Exchange. The Exchange
believes the Market Maker Volume
Tiers, as amended, are reasonable means
to encourage Market Makers to increase
their order flow to specific multiplylisted options on the Exchange (i.e.,
SPY, AAPL, QQQ, IWM, SLV, AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF). The Exchange notes that
increased Market Maker activity,
particularly, facilitates tighter spreads
and an increase in overall liquidity
provider activity, both of which signal
additional corresponding increase in
order flow from other market
participants, contributing towards a
robust, well-balanced market ecosystem,
particularly in multiply-listed options
on the Exchange. The Exchange also
believes that the amended enhanced
rebate offered under Tier 2 and the
proposed enhanced rebates offered
under proposed Tiers 3 and 4 are
reasonably based on the difficulty of
satisfying the proposed tiers’ criteria
and ensures the proposed rebate and
thresholds appropriately reflect the
incremental difficulty in achieving the
Market-Maker Volume Tier. The
Exchange believes that the proposed
enhanced rebates are also in line with
the enhanced rebates currently offered
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by another exchange for similar
products.15 The Exchange also believes
it is reasonable, equitable and not
unfairly discriminatory to adopt pricing
specific to certain orders in SPY, AAPL,
QQQ, IWM, SLV, AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF as the
Exchange already offers product-specific
pricing for these orders and, and as
noted above, other exchanges similarly
provide for product-specific tiered
pricing.16
The Exchange believes that the
Market Maker Volume Tiers, as
amended, represent an equitable
allocation of fees and is not unfairly
discriminatory because it applies
uniformly to all Market Makers, in that
all Market Makers have the opportunity
to compete for and achieve the proposed
tiers. The enhanced rebates will apply
automatically and uniformly to all
Market Makers that achieve the
proposed corresponding criteria. While
the Exchange has no way of knowing
whether this proposed rule change
would definitively result in any
particular Market Maker qualifying for
the proposed tiers, the Exchange
believes that approximately two Market
Makers will reasonably be able to
achieve the amended criteria in Tier 1;
approximately five Market Makers will
be able to achieve the amended criteria
in Tier 2; approximately two Market
Makers will be able to achieve the
criteria in proposed Tier 3; and
approximately one Market Maker will
be able to achieve the criteria in
proposed Tier 4. The Exchange notes,
however, that the tiers are open to any
Market Maker that satisfies the tiers’
criteria.
The Exchange lastly notes that it does
not believe the tiers, as amended, will
adversely impact any TPH’s pricing.
Rather, should a TPH not meet the
proposed criteria, the TPH will merely
not receive the enhanced rebates
corresponding to the tiers, and will
instead receive the standard rebate.
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. Rather, as
discussed above, the Exchange believes
that the proposed changes will
encourage the submission of additional
liquidity in AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF to a public
exchange, thereby promoting market
depth, price discovery and transparency
15 See
supra note 8.
16 Id.
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
86403
and enhancing order execution
opportunities for all TPHs. As a result,
the Exchange believes that the proposed
change furthers the Commission’s goal
in adopting Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’
The Exchange believes the proposed
rule change does not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed change applies to all
similarly situated TPHs equally. The
proposed change to reduce the
transaction fee for Public Customer
orders in AMC, AMD, AMXN, HYG,
PLTR, TSLA, and XLF is designed to
attract additional AMC, AMD, AMZN,
HYG, PLTR, TSLA, and XLF Public
Customer orders that remove liquidity.
As noted above, the changes to the
rebates for non-Market Maker, nonCustomer and C2 Market Maker AMC,
AMD, AMZN, HYG, PLTR, TSLA, and
XLF orders will be applied equally to all
non-market-makers, non-customers and
Market Makers, respectively. Further,
the Exchange believes that the proposed
change to increase the C2 Market Maker
rebate for orders in SPY, AAPL, QQQ,
and IWM and provide C2 MarketMakers that are NBBO Joiners or Setters
in AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF an enhanced rebate
(compared to the proposed rebate for
other C2 Market-Makers) will
incentivize entry on the Exchange of
more aggressive SPY, AAPL, QQQ,
IWM, SLV, AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF orders that will
maintain tight spreads, benefitting both
TPHs and public investors criteria and,
as a result, provide for deeper levels of
liquidity, increasing trading
opportunities for other market
participants, thus signaling further
trading activity, ultimately incentivizing
more overall order flow and improving
price transparency on the Exchange.
Finally, as noted above, the changes to
the Market Maker Volume Tiers apply
uniformly to all Market Makers, in that
all Market Makers have the opportunity
to compete for and achieve the proposed
tiers; the enhanced rebates will apply
automatically and uniformly to all
Market Makers that achieve the
proposed corresponding criteria.
Next, the Exchange believes the
proposed rule change does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market.
TPHs have numerous alternative venues
E:\FR\FM\13DEN1.SGM
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86404
Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
that they may participate on and
director their order flow, including 16
other options exchanges and offexchange venues. Additionally, the
Exchange represents a small percentage
of the overall market. Based on publicly
available information, no single options
exchange has more than 16% of the
market share.17 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 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.’’ 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’ . . . .’’. 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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and paragraph (f) of Rule
19b–4 19 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–
C2–2023–024 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–C2–2023–024. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
VerDate Sep<11>2014
16:54 Dec 12, 2023
Jkt 262001
[FR Doc. 2023–27268 Filed 12–12–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99104; File No. SR–ISE–
2023–32]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Adopt Monthly
Options Series and Amend the
Nonstandard Expirations Program
December 7, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
29, 2023, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
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
The Exchange proposes to adopt
Monthly Options Series and (ii) amend
its Nonstandard Expirations Program.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/ise/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
U.S.C. 78s(b)(3)(A).
19 17 CFR 240.19b–4(f).
supra note 3.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
20 17
18 15
17 See
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–C2–2023–024 and should be
submitted on or before January 3, 2024.
PO 00000
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]]>Agencies
[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86400-86404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27268]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99116; File No. SR-C2-2023-024]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend Its Fees Schedule
December 7, 2023.
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 1, 2023, Cboe C2 Exchange, Inc. (the ``Exchange'' or
``C2'') 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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to
amend its Fee Schedule. The text of the proposed rule change is in
Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule, effective December
1, 2023.
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 17 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than approximately 16% of the
market share and currently the Exchange represents approximately 3% of
the market share.\3\ Thus, in such a low-concentrated and highly
competitive market, no single options exchange, including the Exchange,
possesses significant pricing power in the execution of option order
flow. The Exchange believes that the ever-shifting market share among
the exchanges from month to month demonstrates that market participants
can shift order flow or discontinue to reduce use of certain categories
of products, in response to fee changes. Accordingly, competitive
forces constrain the Exchange's transaction fees, and market
participants can readily trade on competing venues if they deem pricing
levels at those other venues to be more favorable.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets U.S. Options Market Volume Summary
by Month (November 29, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
Fee Code Updates
First, the Exchange proposes to amend the transaction fee for
Public Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that
remove liquidity. Currently, public customer orders in equity,
multiply-listed index, ETF and ETN penny options classes (except SPY,
AAPL, QQQ, IWM and SLV) that remove liquidity are assessed a standard
transaction fee of $0.43 per contract and yield fee code ``PC''. The
Exchange proposes to remove orders in AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF from fee code PC and, instead, assess fee code ``SC'' for
Public Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that
remove liquidity. Fee code SC is currently appended to Public Customer
orders in SPY, AAPL, QQQ, IWM and
[[Page 86401]]
SLV that remove liquidity and assesses a reduced fee (from that of fee
code PC) of $0.37 per contract.
The Exchange next proposes to amend the rebate for C2 Market Maker
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that add liquidity,
including if they are a National Best Bid or Offer (``NBBO'') Joiner or
NBBO Setter. Currently, such C2 Market Makers orders are provided a
rebate of $0.41 per contract and yield fee code ``PM''. Fee code SL is
currently appended to C2 Market Maker orders in SPY, AAPL, QQQ, IWM and
SLV that add liquidity and are a National Best Bid or Offer (``NBBO'')
Joiner or NBBO Setter and offers a rebate of $0.31 per contract for
such orders. Particularly, to qualify as a NBBO Joiner, a C2 market-
maker order must improve the C2 Best Bid or Offer (``BBO'') and result
in C2 joining an existing NBBO. Only the first order received that
results in C2 BBO joining the NBBO at a new price level will qualify
for the enhanced rebate. If C2 is at the NBBO, the order will not
qualify. Alternatively, C2 Market Makers may receive the enhanced
rebate if they are a NBBO Setter. To qualify as a NBBO Setter and
receive the enhanced rebate, a C2 Market Maker order must set the NBBO.
The Exchange now proposes to add C2 Market Maker orders in AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF that add liquidity and are a National
Best Bid or Offer (``NBBO'') Joiner or NBBO Setter to fee code SL. The
Exchange also proposes to amend the rebate for orders yielding fee code
SL, from $0.31 to $0.32. The Exchange believes assessing fee code SL
and the corresponding enhanced rebate for C2 Market Makers in AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF that are NBBO Joiners or Setters will
continue to incentivize liquidity providers to provide more
aggressively priced liquidity in AMC, AMD, AMZN, HYG, PLTR, TSLA, and
XLF options. Further, the Exchange believes that the increased rebate
for orders yielding fee code SL will also incentivize liquidity
providers to provide more aggressively priced liquidity in SPY, AAPL,
QQQ, IWM and SLV options.
The Exchange next proposes to amend the rebate for C2 Market Maker
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that add liquidity.
As noted above, currently, C2 Market Makers orders in equity, multiply-
listed index, ETF and ETN penny options classes (except SPY, AAPL, QQQ,
IWM and SLV) that add liquidity are provided a rebate of $0.41 per
contract and yield fee code ``PM''. The Exchange proposes to remove
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF from fee code PM
and, instead, assess existing fee code ``SM'' for C2 Market Maker
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF. Fee code SM is
currently appended to C2 Market Maker orders in SPY, AAPL, QQQ, IWM and
SLV that add liquidity and offer a reduced rebate (from that of fee
code PM) of $0.20 per contract.
The Exchange also proposes to amend the rebate for non-Market
Maker, non-Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF
that add liquidity. Currently, non-Market Maker, non-Customer orders
(i.e., Professional Customer, Firm, Broker/Dealer, non-C2 Market Maker,
JBO, etc.) in equity, multiply-listed index, ETF and ETN penny options
classes (except SPY, AAPL, QQQ, IWM and SLV) that add liquidity are
provided a rebate of $0.36 per contract and yield fee code ``PN''. The
Exchange proposes to remove orders in AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF from fee code PN and, instead, assess existing fee code ``SN''
on non-Market Maker, non-Customer orders in AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF that add liquidity. Fee code SN is currently appended to
such orders in SPY, AAPL, QQQ, IWM and SLV and assesses a reduced
rebate (from that of fee code PN) of $0.20 per contract.
The Exchange also proposes to add AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF to the table in the Fee Schedule that currently sets forth SPY,
AAPL, QQQ, IWM and SLV-specific pricing. Like with SPY, AAPL, QQQ, IWM
and SLV, the Exchange also proposes to clarify that the first
transaction fee table, which does not apply to RUT, DJX, SPY, AAPL,
QQQ, IWM and SLV, also does not apply to AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF. The Exchange notes that transaction fees and rebates
that apply to (1) Public Customer orders in AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF that add liquidity (existing fee code ``PY'') (2) C2
Market Maker orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that
remove liquidity (existing fee code ``PR''), (3) non-Market Maker, non-
Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that remove
liquidity (existing fee code ``PP), (4) orders in AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF that trade at the open (existing fee code ``OO'')
and (5) resting orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that
trade with resting complex orders (existing fee code ``CA'') are not
changing, nor are the associated fee codes.
Market Maker Volume Tiers
The Exchange also proposes to amend Footnote 1 (Market Maker Volume
Tiers), applicable to qualifying C2 Market Maker orders yielding fee
code SM. Pursuant to Footnote 1 of the Fee Schedule, the Exchange
currently offers two Market Maker Volume Tiers, which provide enhanced
rebates between $0.26 and $0.30 per contract for qualifying Market
Maker orders yielding fee code SM where a TPHTPH [sic] meets required
criteria. Specifically, Tier 1 provides an enhanced rebate of $0.26 per
contract where a TPH: (1) has an ADAV \4\ in Market-Maker orders in
SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or SL) greater
than or equal to 50,000 contracts; or (2) has a Step-Up ADAV \5\ in
Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee
codes SM or SL) greater than or equal to 15,000 contracts from March
2021. Tier 2 provides a higher rebate of $0.30 per contract where a TPH
meets the more stringent criteria of having an ADAV in Market-Maker
orders in SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or
SL) greater than or equal to 130,000 contracts.
---------------------------------------------------------------------------
\4\ ``ADAV'' means average daily added volume calculated as the
number of contracts added, per day.
\5\ ``Step-Up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV.
---------------------------------------------------------------------------
The Exchange proposes to amend the required criteria for Tiers 1
and 2. Specifically, the Exchange proposes to amend Tier 1 criteria to
state that a TPHTPH [sic] must have (1) an ADAV in Market-Maker orders
in SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF
(i.e., yielding fee codes SM or SL) greater than or equal to 0.15% of
Average OCV.\6\ The Exchange proposes to amend Tier 2 criteria to state
that a TPHTPH [sic] must have an ADAV in Market-Maker orders in SPY,
AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF (i.e.,
yielding fee codes SM or SL) greater than or equal to 0.35% of Average
OCV. Additionally, the Exchange proposes to change the enhanced rebate
for Tier 2 from $0.30 per contract to $0.28 per contract.
---------------------------------------------------------------------------
\6\ ``OCV'' means, the total equity and ETF options volume that
clears in the Customer range at the Options Clearing Corporation
(``OCC'') for the month for which the fees apply, excluding volume
on any day that the Exchange experiences an Exchange System
Disruption and on any day with a scheduled early market close.
---------------------------------------------------------------------------
The Exchange also proposes to add new Market Maker Volume Tier 3 to
provide a rebate of $0.31 per contract if a TPH has an ADAV in Market-
Maker orders in SPY, AAPL, QQQ, IWM, SLV,
[[Page 86402]]
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF (i.e., yielding fee codes SM
or SL) greater than or equal to 0.60% of Average OCV. Finally, the
Exchange propose to add new Market Maker Volume Tier 4 to provide an
enhanced rebate of $0.32 per contract if a TPH has an ADAV in Market-
Maker orders in SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF (i.e., yielding fee codes SM or SL) greater than or equal
to 0.70% of Average OCV.
The Exchange notes that other exchanges offer tiered product-
specific pricing incentives.\7\ The proposed changes are designed to
encourage Market-Makers to increase or grow their order flow on the
Exchange in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF, which facilitates
tighter spreads, signaling increased activity from other market
participants, and thus ultimately contributes to deeper and more liquid
markets and provides greater execution opportunities on the Exchange to
the benefit of all market participants.
---------------------------------------------------------------------------
\7\ See, e.g., MIAX Pearl Fee Schedule, Section 1 Transaction
Rebates/Fees, which provides for product-specific pricing for SPY,
QQQ, and IWM; and Nasdaq ISE Pricing Schedule, Section 3, Footnote
5, which provides for tiered rebates for market maker IWM and QCC
orders that add liquidity between $0.10 and $0.26 per contract, as
well as tired rebates for market maker orders in similar, single-
name options (AMZN, FB, and NVDA) between $0.15 and $0.22.
---------------------------------------------------------------------------
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. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(4) of the Act,\11\ which
requires that Exchange rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its TPHs and other
persons using its facilities.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
\11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
As described above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. In particular, the proposed
changes to Exchange execution fees and rebates for certain orders in
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF are intended to attract order
flow to the Exchange by continuing to offer competitive pricing while
also creating additional incentives to providing aggressively priced
displayed liquidity, which the Exchange believes would enhance market
quality to the benefit of all market participants.
The Exchange believes its proposed changes are reasonable as they
are competitive and in line with the Exchange's current pricing for the
same orders in SPY, AAPL, QQQ, IWM, and SLV. The Exchange believes that
it is reasonable to reduce the transaction fee for Public Customer
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that remove
liquidity because market participants will be subject to lower fees for
such orders and thus may be encouraged to increase retail AMC, AMD,
AMZN, HYG, PLTR, TSLA, and XLF order flow to the Exchange. The Exchange
believes that it is reasonable to reduce the rebates for both C2 Market
Maker and non-Market Maker, non-Customer orders in AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF that add liquidity because such market participants
will still receive rebates for such orders, albeit at a lower amount,
which are already in place for such orders in SPY, AAPL, QQQ, IWM and
SLV. Additionally, Market Makers that are NBBO Joiners or Setters in
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF would be eligible to receive
the same rebate, as amended, that is currently offered for joining or
setting an NBBO in SPY, AAPL, QQQ, IWM and SLV. The Exchange believes
that offering the NBBO Joiner and Setter rebate for Market Maker orders
in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF is reasonable as it is
designed to continue to incentivize C2 Market Makers to improve the C2
BBO resulting in C2 joining an existing NBBO or setting a new NBBO to
receive the rebate, ultimately encouraging C2 Market Makers to submit
more aggressive AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF orders that
will maintain tight spreads, benefitting both TPHs and public
investors. Further, the Exchange believes it is reasonable to increase
the current rebate for the NBBO Joiner and Setter rebate for Market
Maker orders in SPY, AAPL, QQQ, IWM and SLV, as such market
participants will still receive a rebate for such orders.
The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to adopt pricing specific to certain orders in
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF as the Exchange already
maintains the same pricing for such orders in SPY, AAPL, QQQ, IWM and
SLV, as well as similar product-specific pricing for certain orders in
other products, such as RUT and DJX.\12\ Additionally, as noted above,
other exchanges similarly provide for product-specific pricing.\13\
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\12\ See Cboe C2 Options Exchange Fee Schedule, Transaction
Fees.
\13\ See supra note 8.
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The Exchange also believes that it is equitable and not unfairly
discriminatory to assess a lower fee for Public Customer orders in AMC,
AMD, AMZN, HYG, PLTR, TSLA, and XLF as compared to other market
participants because customer order flow enhances liquidity on the
Exchange for the benefit of all market participants. Specifically,
customer liquidity benefits all market participants by providing more
trading opportunities, which attracts Market Makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. Moreover, the options industry has
a long history of providing preferential pricing to customers, and the
Exchange's current Fee Schedule currently does so in many places, as do
the fees structures of multiple other exchanges.\14\ The Exchange notes
that the proposed fee change will be applied equally to all Public
Customers.
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\14\ See Cboe C2 Options Exchange Fee Schedule, Transaction
Fees; see also BZX Options Fee Schedule, Fee Codes and Associated
Fees.
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The Exchange believes it is equitable and not unfairly
discriminatory to provide C2 Market-Makers that are NBBO Joiners or
Setters in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF an enhanced rebate
(compared to the proposed rebate for other C2 Market-Makers) because
such market participants are providing more
[[Page 86403]]
aggressively priced liquidity in AMC, AMD, AMZN, HYG, PLTR, TSLA, and
XLF options. Additionally, increased add volume order flow,
particularly by liquidity providers, contributes to a deeper, more
liquid market, which, in turn, provides for increased execution
opportunities and thus overall enhanced price discovery and price
improvement opportunities on the Exchange. As such, this benefits all
market participants by contributing towards a robust and well-balanced
market ecosystem, 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 believes the proposed changes to the rebates for non-Market
Maker, non-Customer and C2 Market Maker AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF orders are also equitable and not unfairly discriminatory
because they will be applied equally to all non-market-makers, non-
customers and Market-Makers, respectively.
The Exchange believes amending Market Maker Volume Tiers for C2
Market Maker orders yielding fee code SM or SL is reasonable because
they provide additional opportunities for TPHs to receive enhanced
rebates on qualifying orders in a manner that incentivizes increased
Market Maker order flow in certain multiply-listed options on the
Exchange. The Exchange believes the Market Maker Volume Tiers, as
amended, are reasonable means to encourage Market Makers to increase
their order flow to specific multiply-listed options on the Exchange
(i.e., SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, TSLA, and
XLF). The Exchange notes that increased Market Maker activity,
particularly, facilitates tighter spreads and an increase in overall
liquidity provider activity, both of which signal additional
corresponding increase in order flow from other market participants,
contributing towards a robust, well-balanced market ecosystem,
particularly in multiply-listed options on the Exchange. The Exchange
also believes that the amended enhanced rebate offered under Tier 2 and
the proposed enhanced rebates offered under proposed Tiers 3 and 4 are
reasonably based on the difficulty of satisfying the proposed tiers'
criteria and ensures the proposed rebate and thresholds appropriately
reflect the incremental difficulty in achieving the Market-Maker Volume
Tier. The Exchange believes that the proposed enhanced rebates are also
in line with the enhanced rebates currently offered by another exchange
for similar products.\15\ The Exchange also believes it is reasonable,
equitable and not unfairly discriminatory to adopt pricing specific to
certain orders in SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF as the Exchange already offers product-specific pricing
for these orders and, and as noted above, other exchanges similarly
provide for product-specific tiered pricing.\16\
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\15\ See supra note 8.
\16\ Id.
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The Exchange believes that the Market Maker Volume Tiers, as
amended, represent an equitable allocation of fees and is not unfairly
discriminatory because it applies uniformly to all Market Makers, in
that all Market Makers have the opportunity to compete for and achieve
the proposed tiers. The enhanced rebates will apply automatically and
uniformly to all Market Makers that achieve the proposed corresponding
criteria. While the Exchange has no way of knowing whether this
proposed rule change would definitively result in any particular Market
Maker qualifying for the proposed tiers, the Exchange believes that
approximately two Market Makers will reasonably be able to achieve the
amended criteria in Tier 1; approximately five Market Makers will be
able to achieve the amended criteria in Tier 2; approximately two
Market Makers will be able to achieve the criteria in proposed Tier 3;
and approximately one Market Maker will be able to achieve the criteria
in proposed Tier 4. The Exchange notes, however, that the tiers are
open to any Market Maker that satisfies the tiers' criteria.
The Exchange lastly notes that it does not believe the tiers, as
amended, will adversely impact any TPH's pricing. Rather, should a TPH
not meet the proposed criteria, the TPH will merely not receive the
enhanced rebates corresponding to the tiers, and will instead receive
the standard rebate.
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. Rather, as discussed above,
the Exchange believes that the proposed changes will encourage the
submission of additional liquidity in AMC, AMD, AMZN, HYG, PLTR, TSLA,
and XLF to a public exchange, thereby promoting market depth, price
discovery and transparency and enhancing order execution opportunities
for all TPHs. As a result, the Exchange believes that the proposed
change furthers the Commission's goal in adopting Regulation NMS of
fostering competition among orders, which promotes ``more efficient
pricing of individual stocks for all types of orders, large and
small.''
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
change applies to all similarly situated TPHs equally. The proposed
change to reduce the transaction fee for Public Customer orders in AMC,
AMD, AMXN, HYG, PLTR, TSLA, and XLF is designed to attract additional
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF Public Customer orders that
remove liquidity. As noted above, the changes to the rebates for non-
Market Maker, non-Customer and C2 Market Maker AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF orders will be applied equally to all non-market-
makers, non-customers and Market Makers, respectively. Further, the
Exchange believes that the proposed change to increase the C2 Market
Maker rebate for orders in SPY, AAPL, QQQ, and IWM and provide C2
Market-Makers that are NBBO Joiners or Setters in AMC, AMD, AMZN, HYG,
PLTR, TSLA, and XLF an enhanced rebate (compared to the proposed rebate
for other C2 Market-Makers) will incentivize entry on the Exchange of
more aggressive SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR,
TSLA, and XLF orders that will maintain tight spreads, benefitting both
TPHs and public investors criteria and, as a result, provide for deeper
levels of liquidity, increasing trading opportunities for other market
participants, thus signaling further trading activity, ultimately
incentivizing more overall order flow and improving price transparency
on the Exchange. Finally, as noted above, the changes to the Market
Maker Volume Tiers apply uniformly to all Market Makers, in that all
Market Makers have the opportunity to compete for and achieve the
proposed tiers; the enhanced rebates will apply automatically and
uniformly to all Market Makers that achieve the proposed corresponding
criteria.
Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market. TPHs
have numerous alternative venues
[[Page 86404]]
that they may participate on and director their order flow, including
16 other options exchanges and off-exchange venues. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single options exchange has more
than 16% of the market share.\17\ 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 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.'' 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' . . . .''. 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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\17\ See supra note 3.
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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 \18\ and paragraph (f) of Rule 19b-4 \19\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-C2-2023-024 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-C2-2023-024. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-C2-2023-024 and should be
submitted on or before January 3, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27268 Filed 12-12-23; 8:45 am]
BILLING CODE 8011-01-P
