Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 19901-19905 [2024-05838]
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Federal Register / Vol. 89, No. 55 / Wednesday, March 20, 2024 / Notices
D. Consistency With Rule 17Ad–
22(e)(20) Under the Exchange Act
Rules are consistent with Rule 17Ad–
22(e)(20) under the Exchange Act.59
Rule 17Ad–22(e)(20) under the
Exchange Act requires that a covered
clearing agency establish, implement,
maintain, and enforce written policies
and procedures reasonably designed to
identify, monitor, and manage risks
related to any link the covered clearing
agency establishes with one or more
other clearing agencies, financial market
utilities, or trading markets.55 For the
purposes of Rule 17Ad–22(e)(20), ‘‘link’’
means, among other things, a set of
contractual and operational
arrangements between two or more
clearing agencies, financial market
utilities, or trading markets that connect
them directly or indirectly for the
purpose of participating in settlement.56
In adopting Rule 17Ad–22(e)(20), the
Commission provided guidance that a
covered clearing agency generally
should consider in establishing and
maintaining policies and procedures
that address links.57 Notably, the
Commission stated that a covered
clearing agency should consider
whether a link has a well-founded legal
basis, in all relevant jurisdictions, that
supports its design and provides
adequate protection to the covered
clearing agencies involved in the link.58
As described above, the Accord is a
contractual arrangement between NSCC
and OCC that governs the processing of
E&A Activity, which consists of
settlement obligations arising out of
certain products cleared by OCC. The
Accord, therefore, is a link for the
purposes of Rule 17Ad–22(e)(20). The
specific legal basis for the Accord to
conform to a T+1 settlement cycle was
discussed above in section III.B.
Likewise, Section II discussed the ways
the Accord provides adequate
protection to both OCC and NSCC by
introducing the GSP, enhancing
information sharing between OCC and
NSCC, and ensuring that OCC and
NSCC have the tools and information
they need to monitor the potential
liquidity need posed by the GSP.
For the reasons discussed in those
sections, the Accord between OCC and
NSCC has a well-founded legal basis
that supports its design and provides
adequate protection to the covered
clearing agencies involved in the
Accord. Accordingly, the proposed
changes to the Accord and NSCC’s
IV. Conclusion
55 17
CFR 240.17Ad–22(e)(20).
CFR 240.17Ad–22(a)(8).
57 See Covered Clearing Agency Standards, 81 FR
at 70841.
58 Id.
56 17
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On the basis of the foregoing, the
Commission finds that the Proposed
Rule Change, as modified by Partial
Amendment No. 1 and Amendment No.
2, is consistent with the requirements of
the Exchange Act, and in particular, the
requirements of section 17A of the
Exchange Act 60 and the rules and
regulations thereunder.
It is therefore ordered, pursuant to
section 19(b)(2) of the Exchange Act,61
that the Proposed Rule Change, as
modified by Partial Amendment No. 1
and Amendment No. 2, (SR–NSCC–
2023–007) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.62
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–05832 Filed 3–19–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
19901
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to amend
its Fees Schedule. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.aspx), at the Exchange’s Office of
the Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
[Release No. 34–99740; File No. SR–CBOE–
2024–012]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fees
Schedule
1. Purpose
The Exchange proposes to amend its
Fees Schedule.3
March 14, 2024.
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 March 5,
2024, 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.
59 17
CFR 240.17Ad–22(e)(20).
approving the Proposed Rule Change, the
Commission has considered the proposed rules’
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
61 15 U.S.C. 78s(b)(2).
62 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
60 In
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New XSP RTH LMM Program
The Exchange proposes to amend its
Fees Schedule to adopt a Regular
Trading Hours (‘‘RTH’’) XSP Lead
Market-Makers (‘‘LMMs’’) Incentive
Program (the ‘‘Program’’) under which
LMMs appointed to the Program would
receive the proposed payment and
rebate if they provide continuous
electronic quotes during RTH from 8:30
a.m. CST to 3:15 p.m. CST that meet or
exceed the proposed quoting standards
under the Program (as described in
further detail below).
As proposed, if an LMM appointed to
the Program provides continuous
electronic quotes during RTH that meet
or exceed the proposed heightened
quoting standards (below) in at least
95% of the series 93% of the time in a
given month, the LMM will receive (i)
a payment for that month in the amount
of $40,000 and (ii) a rebate of $0.27 per
3 The Exchange initially filed the proposed fee
changes on March 1, 2024 (SR–CBOE–2024–011).
On March 5, 2024, the Exchange withdrew that
filing and submitted this proposal.
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Federal Register / Vol. 89, No. 55 / Wednesday, March 20, 2024 / Notices
XSP contract that is executed in RTH in
Market-Maker capacity and adds
liquidity electronically contra to noncustomer capacity.
WIDTH
Expiring
option
Moneyness 4
2 days to
5 days
1 day
6 days to
14 days
15 days to
35 days
VIX Value at Prior Close ≤30
[>3% ITM) ............................................................................
[3% ITM to 2% ITM) ............................................................
[2% ITM to 0.25% ITM) .......................................................
[0.25% ITM to ATM) ............................................................
[ATM to 1% OTM) ................................................................
[>1% OTM] ...........................................................................
$0.20
0.10
0.04
0.02
0.02
0.02
$0.25
0.15
0.05
0.03
0.02
0.02
$0.25
0.15
0.05
0.04
0.02
0.02
$0.50
0.25
0.06
0.05
0.03
0.02
$1.00
0.75
0.10
0.08
0.06
0.04
0.30
0.20
0.06
0.04
0.03
0.03
0.30
0.20
0.06
0.05
0.03
0.03
0.55
0.30
0.07
0.06
0.04
0.03
1.05
0.80
0.11
0.09
0.07
0.05
VIX Value at Prior Close >30
[>3% ITM) ............................................................................
[3% ITM to 2% ITM) ............................................................
[2% ITM to 0.25% ITM) .......................................................
[0.25% ITM to ATM) ............................................................
[ATM to 1% OTM) ................................................................
[>1% OTM] ...........................................................................
Moneyness
Size
(0 to 35 days
to expiry)
[>3% ITM) ........................................
[3% ITM to 2% ITM) ........................
[2% ITM to 0.25% ITM) ...................
[0.25% ITM to ATM) ........................
[ATM to 1% OTM) ...........................
[>1% OTM] ......................................
5
10
15
20
20
20
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Meeting or exceeding the heightened
quoting standards in XSP, as proposed,
to receive the proposed compensation
payment(s) is optional for any LMM
appointed to the Program. The Exchange
may consider other exceptions to this
quoting standard based on demonstrated
legal or regulatory requirements or other
mitigating circumstances. In calculating
whether an LMM met the heightened
quoting standard each month, the
Exchange will exclude from the
calculation in that month the business
day in which the LMM missed meeting
or exceeding the heightened quoting
standard in the highest number of
series. The heightened quoting
requirements offered by the Program are
designed to incentivize LMMs
appointed to the Program to provide
significant liquidity in XSP options
during the RTH session, which, in turn,
would provide greater trading
opportunities, added market
transparency and enhanced price
discovery for all market participants in
XSP.
4 Moneyness is calculated as 1—strike/index for
calls, strike/index—1 for puts. Negative numbers
are Out of the Money (‘‘OTM’’) and positive values
are In the Money (‘‘ITM’’). A Moneyness value of
zero for either calls or puts is considered At the
Money (‘‘ATM’’). For example, if the index is at
400, the 396 call = 1¥396/400 = 0.01 = 1% ITM,
whereas the 396 put = 396/400¥1 = ¥0.01 = 1%
OTM.
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0.25
0.15
0.05
0.03
0.03
0.03
Routing Fee Codes Changes
The Exchange also proposes to modify
fees associated with certain routing fee
codes. The Fees Schedule currently lists
fee codes and their corresponding
transaction fee for routed Customer
orders to other options exchanges
specifically in Exchange Traded Funds
(‘‘ETF’’) and equity options, and for
non-Customer orders routed in Penny
and Non-Penny options classes.
The Exchange notes that its current
approach to routing fees is to set forth
in a simple manner certain subcategories of fees that approximate the
cost of routing to other options
exchanges based on the cost of
transaction fees assessed by each venue
as well as a flat $0.15 assessment that
covers costs to the Exchange for routing
(i.e., clearing fees, connectivity and
other infrastructure costs, membership
fees, etc.) (collectively, ‘‘Routing
Costs’’). The Exchange then monitors
the fees charged as compared to the
costs of its routing services and adjusts
its routing fees and/or sub-categories to
ensure that the Exchange’s fees do
indeed result in a rough approximation
of overall Routing Costs, and are not
significantly higher or lower in any area.
The Exchange notes that at least one
other options exchange currently
assesses routing fees in a similar manner
as the Exchange’s current approach to
assessing approximate routing fees.5
The Exchange assesses fees in
connection with orders routed away to
various exchanges. Currently, under the
Routing Fees table of the Fee Schedule,
fee codes RD, RF, and RI are appended
5 See e.g., MIAX Options Exchange Fee Schedule,
Section 1(c), ‘‘Fees for Customer Orders Routed to
Another Options Exchange.’’
PO 00000
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to certain Customer orders in ETF and
Equity options, as follows:
• fee code RD is appended to
Customer orders in ETF/Equity options
routed to NYSE American (‘‘AMEX’’),
BOX Options Exchange (‘‘BOX’’),
Nasdaq BX Options (‘‘BX’’), Cboe EDGX
Exchange, Inc. (‘‘EDGX’’), MIAX
Options Exchange (‘‘MIAX’’) or Nasdaq
PHLX LLC (‘‘PHLX’’) (excluding orders
in SPY options), and assesses a charge
of $0.25 per contract;
• fee code RF is appended to
Customer orders in ETF/Equity, Penny
options routed to NYSE Arca, Inc
(‘‘ARCA’’), Cboe BZX Exchange, Inc.
(‘‘BZX’’), Cboe C2 Exchange, Inc. (‘‘C2’’),
Nasdaq ISE (‘‘ISE’’), ISE Gemini, LLC
(‘‘GMNI’’), ISE Mercury, LLC (‘‘MERC’’),
MIAX Emerald Exchange (‘‘EMLD’’),
MIAX Pearl Exchange (‘‘PERL’’), Nasdaq
Options Market LLC (‘‘NOM’’), or PHLX
(for orders in SPY options only) and
assesses a charge of $0.75 per contract;
• fee code RI is appended to
Customer orders in ETF/Equity, NonPenny options routed to ARCA, BZX,
C2, ISE, GMNI, MERC, EMLD, PERL or
NOMX, and assesses a charge of $1.25
per contract.
• fee code TD is appended to
Customer orders in ETF options
originating on an Exchange-sponsored
terminal for greater than or equal to 100
contracts routed to AMEX, BOX, BX,
EDGX, MIAX, or PHLX, and assesses a
charge of $0.18 per contract;
• fee code TE is appended to
Customer orders in ETF/Equity options
originating on an Exchange-sponsored
terminal for less than 100 contracts
routed to AMEX, BOX, BX, EDGX,
MIAX, PHLX, and assesses no charge
per contract;
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• fee code TF is appended to
Customer orders in ETF, Penny options
originating on an Exchange-sponsored
terminal for greater than or equal to 100
contracts routed to ARCA, BZX, C2, ISE,
GMNI, EMLD, PERL, MERC, or NOM,
and assesses a charge of $0.18 per
contract;
• fee code TG is appended to
Customer orders in ETF, Non-Penny
options originating on an Exchangesponsored terminal for greater than or
equal to 100 contracts routed to ARCA,
BZX, C2, ISE, GMNI, EMLD, PERL,
MERC, or NOM, and assesses $0.18 per
contract;
• fee code TH is appended to
Customer orders in ETF/Equity, Penny
options originating on an Exchangesponsored terminal for less than 100
contracts routed to ARCA, BZX, C2, ISE,
GMNI, EMLD, PERL, MERC, or NOM,
and assesses no charge per contract; and
• fee code TI is appended to
Customer orders in ETF/Equity, NonPenny options originating on an
Exchange-sponsored terminal for less
than 100 contracts routed to ARCA,
BZX, C2, ISE, GMNI, EMLD, PERL, or
NOM, and assesses no charge per
contract.
The Exchange proposes to amend fee
code RD, TD, and TE to exclude
applicable Customer orders routed to
Nasdaq BX Options (BX) and to amend
fee codes RF, RI, TF, TG, TH, and TI to
add applicable Customer orders routed
to BX. The charges assessed per contract
for each fee code remain the same under
the proposed rule change.
The proposed changes result in an
assessment of fees that, given fees of an
away options exchange, is more in line
with the Exchange’s current approach to
routing fees, that is, in a manner that
approximates the cost of routing
Customer orders to other away options
exchanges, based on the general cost of
transaction fees assessed by the subcategory of away options exchanges for
such orders (as well as the Exchange’s
Routing Costs).6 The Exchange notes
that routing through the Exchange is
optional and that TPHs will continue to
be able to choose where to route
applicable Customer orders.
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.7 Specifically, the
Exchange believes the proposed rule
6 See
BX Options 7 (Pricing Schedule), Section 2.
7 15 U.S.C. 78f(b).
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change is consistent with the section
6(b)(5) 8 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) 9 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,10 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
Trading Permit Holders and other
persons using its facilities.
The Exchange believes the proposed
XSP RTH LMM Incentive Program is
reasonable, equitable and not unfairly
discriminatory. Particularly, the
proposed Program is a reasonable
financial incentive program because the
proposed heightened quoting standards
and rebate amounts for meeting the
heightened quoting standards in XSP
series are reasonably designed to
incentivize LMMs appointed to the
Program to meet the proposed
heightened quoting standards during
RTH for XSP, thereby providing liquid
and active markets, which facilitates
tighter spreads, increased trading
opportunities, and overall enhanced
market quality to the benefit of all
market participants.
The Exchange believes that the
proposed heightened quoting standards
are reasonable because they are similar
to the detail and format of the quoting
standards currently in place for LMM
Incentive Programs for other proprietary
Exchange products that trade during
RTH.11 The Exchange also believes that
proposed heightened quoting
requirements are reasonably tailored to
reflect market characteristics of XSP.
For example, the Exchange believes the
generally smaller widths appropriately
reflect the lower-priced and smaller
8 15
U.S.C. 78f(b)(5).
9 Id.
10 15
U.S.C. 78f(b)(4).
Cboe Options Fees Schedule, ‘‘RTH SPESG
LMM Incentive Program’’, ‘‘MRUT LMM Incentive
Program’’, ‘‘NANOS LMM Incentive Program’’, and
‘‘MSCI LMM Incentive Program.’’
19903
notional sized XSP product (XSP
options are 1/10th the size of SPX
options). The Exchange believes
utilizing moneyness as a quoting
standard is reasonable, given the
program objectives to achieve tight
liquidity in a market where options
premiums change quickly.
The Exchange also believes that the
proposed incentive payment for
appointed LMMs that meet the
proposed heightened quoting standards
in XSP in a month is reasonable and
equitable as it is comparable to the
incentive payments offered for other
LMM Incentive Programs for other
proprietary products. For example, the
GTH1 and GTH2 LMM Incentive
Programs for SPX/SPXW offer incentive
payments of $40,000 per month, in
which an appointed LMM meets the
given quoting standards.12 The
Exchange also believes it is reasonable
to offer to an appointed LMM that meets
the given quoting standards a rebate of
$0.27 per XSP contract that is executed
in RTH in Market-Maker capacity and
adds liquidity electronically contra to
non-customer capacity because the
proposed rebate is an incentive
reasonably designed to encourage
appointed LMMs to provide liquidity
electronically contra to non-customer
capacity in XSP options during the
trading day.
Finally, the Exchange believes it is
equitable and not unfairly
discriminatory to offer the financial
incentive to LMMs appointed to the
Program because it will benefit all
market participants trading in XSP
during RTH by encouraging the
appointed LMMs to satisfy the
heightened quoting standards, which
incentivizes continuous increased
liquidity and thereby may provide more
trading opportunities and tighter
spreads. Indeed, the Exchange notes that
these LMMs serve a crucial role in
providing quotes and the opportunity
for market participants to trade XSP,
which can lead to increased volume,
providing for robust markets. The
Exchange ultimately proposes to offer
the Program to sufficiently incentivize
the appointed LMMs to provide key
liquidity and active markets in XSP
options to encourage liquidity, thereby
protecting investors and the public
interest. The Exchange also notes that
an LMM appointed to the Program may
undertake added costs each month to
satisfy that heightened quoting
standards (e.g., having to purchase
additional logical connectivity). The
11 See
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12 See Cboe Options Fees Schedule, SPX/SPXW
LMM Incentive Program’’, and GTH2 SPX/SPXW
LMM Incentive Program.’’
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19904
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Exchange believes the Program is
equitable and not unfairly
discriminatory because similar
programs currently exist for LMMs
appointed to programs in other
proprietary products,13 including for
XSP during the GTH session, and the
Program will equally apply to any TPH
that is appointed as an LMM to the
Program. Additionally, if an appointed
LMM does not satisfy the heightened
quoting standard in XSP for any given
month, then it simply will not receive
the offered payments or rebates for that
month.
The Exchange also believes the
proposed rule change to amend fee
codes RD, RF, RI, TD, TE, TF, TG, TH,
and TI to account for BX’s current
assessment of fees for Customer orders
is reasonable because it is reasonably
designed to assess routing fees in line
with the Exchange’s current approach to
routing fees. That is, the proposed rule
change is intended to include Customer
orders in ETF and equity options routed
to BX in the most appropriate subcategory of fees that approximates the
cost of routing to a group of away
options exchanges based on the cost of
transaction fees assessed by each venue
as well as Routing Costs to the
Exchange. As noted 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. The
Exchange notes that routing through the
Exchange is optional and that TPHs will
continue to be able to choose where to
route their Customer orders in ETF and
equity options in the same sub-category
group of away exchanges as they
currently may choose to route. The
proposed rule change reflects a
competitive pricing structure designed
to incentivize market participants to
direct their order flow to the Exchange,
which the Exchange believes would
enhance market quality to the benefit of
all TPHs. The Exchange further notes
that at least one other options exchange
currently approximates routing fees in a
similar manner as the Exchange’s
current approach.14 The Exchange
believes that the proposed rule change
is equitable and not unfairly
discriminatory because all TPHs’
applicable Customer orders in ETF and
equity options routed to BX will be
automatically and uniformly assessed
the applicable routing charges.
13 See
14 See
supra notes 11 and 12.
supra note 4.
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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 also does not believe that the
Program would impose any burden on
intramarket competition because it
applies to all LMMs appointed to the
Program in a uniform manner, in the
same way similar programs apply to
LMMs in other proprietary products
today. To the extent these LMMs receive
a benefit that other market participants
do not, as stated, LMMs have different
obligations and are held to different
standards. For example, LMMs play a
crucial role in providing active and
liquid markets in their appointed
products, thereby providing a robust
market which benefits all market
participants. Such Market-Makers also
have obligations and regulatory
requirements that other participants do
not have.
The Exchange does not believe the
proposed rule change to amend fee
codes RD, RF, RI, TD, TE, TF, TG, TH,
and TI will impose any burden on
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. All TPHs’
Customer orders routing to BX and
currently yielding fee code RD, TD, or
TE will yield fee code RF, RI, RF, TG,
TH, or TI (depending on the order) and
will automatically and uniformly be
assessed the current fees already in
place for such routed orders, as
applicable.
The Exchange does not believe that
the proposed rule change to establish
the Program will impose any burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because the
proposed incentive payment and rebate
apply to a product exclusively listed on
the Exchange.
Further, the Exchange does not
believe the proposed rule change to
amend fee codes RD, RF, RI, TD, TE, TF,
TG, TH, and TI will impose any burden
on intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange notes that at least one other
options exchange approximates routing
costs in a similar manner as the
Exchange’s current approach.15 Also,
the Exchange operates in a highly
competitive market. TPHs have
numerous alternative venues that they
15 Id.
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may participate on and direct 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.16
Therefore, no exchange possesses
significant pricing power in the
execution of option order flow. Indeed,
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. Moreover, the Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 17 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’.18 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
16 See Cboe Global Markets U.S. Options Market
Monthly Volume Summary (February 26, 2024),
available at https://markets.cboe.com/us/options/
market_statistics/.
17 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
18 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
E:\FR\FM\20MRN1.SGM
20MRN1
Federal Register / Vol. 89, No. 55 / Wednesday, March 20, 2024 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act 19 and paragraph (f) of Rule
19b–4 20 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSKJM1Z7X2PROD with NOTICES
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–2024–012 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–2024–012. 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–CBOE–2024–012 and should be
submitted on or before April 10, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–05838 Filed 3–19–24; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–99734; File No. SR–
NASDAQ–2024–010]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Clarify Its
Listing Standards Related to
Notification and Disclosure of Reverse
Stock Splits
March 14, 2024.
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 March 1,
2024, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘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.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
20 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
16:52 Mar 19, 2024
1 15
Jkt 262001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to clarify its
listing standards related to notification
and disclosure of reverse stock splits.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, 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
SECURITIES AND EXCHANGE
COMMISSION
21 17
19 15
19905
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
On June 21, 2023, Nasdaq filed with
the Commission a proposed rule change
related to notification and disclosure of
reverse stock splits.3 On November 1,
2023, the Commission approved the
proposed rule changes.4 Nasdaq is
proposing to amend Rule IM–5250–3
without changing the substance of the
rule. Nasdaq also is proposing an
additional change to the Company Event
Notification Form to further clarify the
requirement for companies to submit a
complete form.
Nasdaq Rule 5250(e)(7) already
provides that if a company takes legal
action to effect a reverse stock split
notwithstanding its failure to timely
satisfy the requirements of Rules
5250(b)(4) and (e)(7), or provides
incomplete or inaccurate information
about the timing or ratio of the reverse
stock split in its public disclosure,
Nasdaq will halt the stock in accordance
with the procedure set forth in Equity 4,
Rule 4120(a)(1).5 Nasdaq IM–5250–3
3 See Securities Exchange Act Release No. 98014
(July 28, 2023), 88 FR 51376 (August 3, 2023).
4 See Securities Exchange Act Release No. 98843
(November 1, 2023), 88 FR 76867 (November 7,
2023).
5 Equity 4, Rule 4120(a)(1) provides Nasdaq with
the authority to halt trading to permit the
Continued
E:\FR\FM\20MRN1.SGM
20MRN1
]]>Agencies
[Federal Register Volume 89, Number 55 (Wednesday, March 20, 2024)]
[Notices]
[Pages 19901-19905]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05838]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99740; File No. SR-CBOE-2024-012]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
March 14, 2024.
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 March 5, 2024, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its Fees Schedule. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
March 1, 2024 (SR-CBOE-2024-011). On March 5, 2024, the Exchange
withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------
New XSP RTH LMM Program
The Exchange proposes to amend its Fees Schedule to adopt a Regular
Trading Hours (``RTH'') XSP Lead Market-Makers (``LMMs'') Incentive
Program (the ``Program'') under which LMMs appointed to the Program
would receive the proposed payment and rebate if they provide
continuous electronic quotes during RTH from 8:30 a.m. CST to 3:15 p.m.
CST that meet or exceed the proposed quoting standards under the
Program (as described in further detail below).
As proposed, if an LMM appointed to the Program provides continuous
electronic quotes during RTH that meet or exceed the proposed
heightened quoting standards (below) in at least 95% of the series 93%
of the time in a given month, the LMM will receive (i) a payment for
that month in the amount of $40,000 and (ii) a rebate of $0.27 per
[[Page 19902]]
XSP contract that is executed in RTH in Market-Maker capacity and adds
liquidity electronically contra to non-customer capacity.
Width
----------------------------------------------------------------------------------------------------------------
Expiring 2 days to 5 6 days to 14 15 days to 35
Moneyness \4\ option 1 day days days days
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <=30
----------------------------------------------------------------------------------------------------------------
[>3% ITM)....................... $0.20 $0.25 $0.25 $0.50 $1.00
[3% ITM to 2% ITM).............. 0.10 0.15 0.15 0.25 0.75
[2% ITM to 0.25% ITM)........... 0.04 0.05 0.05 0.06 0.10
[0.25% ITM to ATM).............. 0.02 0.03 0.04 0.05 0.08
[ATM to 1% OTM)................. 0.02 0.02 0.02 0.03 0.06
[>1% OTM]....................... 0.02 0.02 0.02 0.02 0.04
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close 30
----------------------------------------------------------------------------------------------------------------
[>3% ITM)....................... 0.25 0.30 0.30 0.55 1.05
[3% ITM to 2% ITM).............. 0.15 0.20 0.20 0.30 0.80
[2% ITM to 0.25% ITM)........... 0.05 0.06 0.06 0.07 0.11
[0.25% ITM to ATM).............. 0.03 0.04 0.05 0.06 0.09
[ATM to 1% OTM)................. 0.03 0.03 0.03 0.04 0.07
[>1% OTM]....................... 0.03 0.03 0.03 0.03 0.05
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
Size (0 to 35
Moneyness days to
expiry)
------------------------------------------------------------------------
[>3% ITM)............................................... 5
[3% ITM to 2% ITM)...................................... 10
[2% ITM to 0.25% ITM)................................... 15
[0.25% ITM to ATM)...................................... 20
[ATM to 1% OTM)......................................... 20
[>1% OTM]............................................... 20
------------------------------------------------------------------------
Meeting or exceeding the heightened quoting standards in XSP, as
proposed, to receive the proposed compensation payment(s) is optional
for any LMM appointed to the Program. The Exchange may consider other
exceptions to this quoting standard based on demonstrated legal or
regulatory requirements or other mitigating circumstances. In
calculating whether an LMM met the heightened quoting standard each
month, the Exchange will exclude from the calculation in that month the
business day in which the LMM missed meeting or exceeding the
heightened quoting standard in the highest number of series. The
heightened quoting requirements offered by the Program are designed to
incentivize LMMs appointed to the Program to provide significant
liquidity in XSP options during the RTH session, which, in turn, would
provide greater trading opportunities, added market transparency and
enhanced price discovery for all market participants in XSP.
---------------------------------------------------------------------------
\4\ Moneyness is calculated as 1--strike/index for calls,
strike/index--1 for puts. Negative numbers are Out of the Money
(``OTM'') and positive values are In the Money (``ITM''). A
Moneyness value of zero for either calls or puts is considered At
the Money (``ATM''). For example, if the index is at 400, the 396
call = 1-396/400 = 0.01 = 1% ITM, whereas the 396 put = 396/400-1 =
-0.01 = 1% OTM.
---------------------------------------------------------------------------
Routing Fee Codes Changes
The Exchange also proposes to modify fees associated with certain
routing fee codes. The Fees Schedule currently lists fee codes and
their corresponding transaction fee for routed Customer orders to other
options exchanges specifically in Exchange Traded Funds (``ETF'') and
equity options, and for non-Customer orders routed in Penny and Non-
Penny options classes.
The Exchange notes that its current approach to routing fees is to
set forth in a simple manner certain sub-categories of fees that
approximate the cost of routing to other options exchanges based on the
cost of transaction fees assessed by each venue as well as a flat $0.15
assessment that covers costs to the Exchange for routing (i.e.,
clearing fees, connectivity and other infrastructure costs, membership
fees, etc.) (collectively, ``Routing Costs''). The Exchange then
monitors the fees charged as compared to the costs of its routing
services and adjusts its routing fees and/or sub-categories to ensure
that the Exchange's fees do indeed result in a rough approximation of
overall Routing Costs, and are not significantly higher or lower in any
area. The Exchange notes that at least one other options exchange
currently assesses routing fees in a similar manner as the Exchange's
current approach to assessing approximate routing fees.\5\
---------------------------------------------------------------------------
\5\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c),
``Fees for Customer Orders Routed to Another Options Exchange.''
---------------------------------------------------------------------------
The Exchange assesses fees in connection with orders routed away to
various exchanges. Currently, under the Routing Fees table of the Fee
Schedule, fee codes RD, RF, and RI are appended to certain Customer
orders in ETF and Equity options, as follows:
fee code RD is appended to Customer orders in ETF/Equity
options routed to NYSE American (``AMEX''), BOX Options Exchange
(``BOX''), Nasdaq BX Options (``BX''), Cboe EDGX Exchange, Inc.
(``EDGX''), MIAX Options Exchange (``MIAX'') or Nasdaq PHLX LLC
(``PHLX'') (excluding orders in SPY options), and assesses a charge of
$0.25 per contract;
fee code RF is appended to Customer orders in ETF/Equity,
Penny options routed to NYSE Arca, Inc (``ARCA''), Cboe BZX Exchange,
Inc. (``BZX''), Cboe C2 Exchange, Inc. (``C2''), Nasdaq ISE (``ISE''),
ISE Gemini, LLC (``GMNI''), ISE Mercury, LLC (``MERC''), MIAX Emerald
Exchange (``EMLD''), MIAX Pearl Exchange (``PERL''), Nasdaq Options
Market LLC (``NOM''), or PHLX (for orders in SPY options only) and
assesses a charge of $0.75 per contract;
fee code RI is appended to Customer orders in ETF/Equity,
Non-Penny options routed to ARCA, BZX, C2, ISE, GMNI, MERC, EMLD, PERL
or NOMX, and assesses a charge of $1.25 per contract.
fee code TD is appended to Customer orders in ETF options
originating on an Exchange-sponsored terminal for greater than or equal
to 100 contracts routed to AMEX, BOX, BX, EDGX, MIAX, or PHLX, and
assesses a charge of $0.18 per contract;
fee code TE is appended to Customer orders in ETF/Equity
options originating on an Exchange-sponsored terminal for less than 100
contracts routed to AMEX, BOX, BX, EDGX, MIAX, PHLX, and assesses no
charge per contract;
[[Page 19903]]
fee code TF is appended to Customer orders in ETF, Penny
options originating on an Exchange-sponsored terminal for greater than
or equal to 100 contracts routed to ARCA, BZX, C2, ISE, GMNI, EMLD,
PERL, MERC, or NOM, and assesses a charge of $0.18 per contract;
fee code TG is appended to Customer orders in ETF, Non-
Penny options originating on an Exchange-sponsored terminal for greater
than or equal to 100 contracts routed to ARCA, BZX, C2, ISE, GMNI,
EMLD, PERL, MERC, or NOM, and assesses $0.18 per contract;
fee code TH is appended to Customer orders in ETF/Equity,
Penny options originating on an Exchange-sponsored terminal for less
than 100 contracts routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL,
MERC, or NOM, and assesses no charge per contract; and
fee code TI is appended to Customer orders in ETF/Equity,
Non-Penny options originating on an Exchange-sponsored terminal for
less than 100 contracts routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL,
or NOM, and assesses no charge per contract.
The Exchange proposes to amend fee code RD, TD, and TE to exclude
applicable Customer orders routed to Nasdaq BX Options (BX) and to
amend fee codes RF, RI, TF, TG, TH, and TI to add applicable Customer
orders routed to BX. The charges assessed per contract for each fee
code remain the same under the proposed rule change.
The proposed changes result in an assessment of fees that, given
fees of an away options exchange, is more in line with the Exchange's
current approach to routing fees, that is, in a manner that
approximates the cost of routing Customer orders to other away options
exchanges, based on the general cost of transaction fees assessed by
the sub-category of away options exchanges for such orders (as well as
the Exchange's Routing Costs).\6\ The Exchange notes that routing
through the Exchange is optional and that TPHs will continue to be able
to choose where to route applicable Customer orders.
---------------------------------------------------------------------------
\6\ See BX Options 7 (Pricing Schedule), Section 2.
---------------------------------------------------------------------------
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.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
section 6(b)(5) \8\ 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) \9\ 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,\10\ which
requires that Exchange rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its Trading Permit
Holders and other persons using its facilities.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
\10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes the proposed XSP RTH LMM Incentive Program is
reasonable, equitable and not unfairly discriminatory. Particularly,
the proposed Program is a reasonable financial incentive program
because the proposed heightened quoting standards and rebate amounts
for meeting the heightened quoting standards in XSP series are
reasonably designed to incentivize LMMs appointed to the Program to
meet the proposed heightened quoting standards during RTH for XSP,
thereby providing liquid and active markets, which facilitates tighter
spreads, increased trading opportunities, and overall enhanced market
quality to the benefit of all market participants.
The Exchange believes that the proposed heightened quoting
standards are reasonable because they are similar to the detail and
format of the quoting standards currently in place for LMM Incentive
Programs for other proprietary Exchange products that trade during
RTH.\11\ The Exchange also believes that proposed heightened quoting
requirements are reasonably tailored to reflect market characteristics
of XSP. For example, the Exchange believes the generally smaller widths
appropriately reflect the lower-priced and smaller notional sized XSP
product (XSP options are 1/10th the size of SPX options). The Exchange
believes utilizing moneyness as a quoting standard is reasonable, given
the program objectives to achieve tight liquidity in a market where
options premiums change quickly.
---------------------------------------------------------------------------
\11\ See Cboe Options Fees Schedule, ``RTH SPESG LMM Incentive
Program'', ``MRUT LMM Incentive Program'', ``NANOS LMM Incentive
Program'', and ``MSCI LMM Incentive Program.''
---------------------------------------------------------------------------
The Exchange also believes that the proposed incentive payment for
appointed LMMs that meet the proposed heightened quoting standards in
XSP in a month is reasonable and equitable as it is comparable to the
incentive payments offered for other LMM Incentive Programs for other
proprietary products. For example, the GTH1 and GTH2 LMM Incentive
Programs for SPX/SPXW offer incentive payments of $40,000 per month, in
which an appointed LMM meets the given quoting standards.\12\ The
Exchange also believes it is reasonable to offer to an appointed LMM
that meets the given quoting standards a rebate of $0.27 per XSP
contract that is executed in RTH in Market-Maker capacity and adds
liquidity electronically contra to non-customer capacity because the
proposed rebate is an incentive reasonably designed to encourage
appointed LMMs to provide liquidity electronically contra to non-
customer capacity in XSP options during the trading day.
---------------------------------------------------------------------------
\12\ See Cboe Options Fees Schedule, SPX/SPXW LMM Incentive
Program'', and GTH2 SPX/SPXW LMM Incentive Program.''
---------------------------------------------------------------------------
Finally, the Exchange believes it is equitable and not unfairly
discriminatory to offer the financial incentive to LMMs appointed to
the Program because it will benefit all market participants trading in
XSP during RTH by encouraging the appointed LMMs to satisfy the
heightened quoting standards, which incentivizes continuous increased
liquidity and thereby may provide more trading opportunities and
tighter spreads. Indeed, the Exchange notes that these LMMs serve a
crucial role in providing quotes and the opportunity for market
participants to trade XSP, which can lead to increased volume,
providing for robust markets. The Exchange ultimately proposes to offer
the Program to sufficiently incentivize the appointed LMMs to provide
key liquidity and active markets in XSP options to encourage liquidity,
thereby protecting investors and the public interest. The Exchange also
notes that an LMM appointed to the Program may undertake added costs
each month to satisfy that heightened quoting standards (e.g., having
to purchase additional logical connectivity). The
[[Page 19904]]
Exchange believes the Program is equitable and not unfairly
discriminatory because similar programs currently exist for LMMs
appointed to programs in other proprietary products,\13\ including for
XSP during the GTH session, and the Program will equally apply to any
TPH that is appointed as an LMM to the Program. Additionally, if an
appointed LMM does not satisfy the heightened quoting standard in XSP
for any given month, then it simply will not receive the offered
payments or rebates for that month.
---------------------------------------------------------------------------
\13\ See supra notes 11 and 12.
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change to amend fee
codes RD, RF, RI, TD, TE, TF, TG, TH, and TI to account for BX's
current assessment of fees for Customer orders is reasonable because it
is reasonably designed to assess routing fees in line with the
Exchange's current approach to routing fees. That is, the proposed rule
change is intended to include Customer orders in ETF and equity options
routed to BX in the most appropriate sub-category of fees that
approximates the cost of routing to a group of away options exchanges
based on the cost of transaction fees assessed by each venue as well as
Routing Costs to the Exchange. As noted 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. The
Exchange notes that routing through the Exchange is optional and that
TPHs will continue to be able to choose where to route their Customer
orders in ETF and equity options in the same sub-category group of away
exchanges as they currently may choose to route. The proposed rule
change reflects a competitive pricing structure designed to incentivize
market participants to direct their order flow to the Exchange, which
the Exchange believes would enhance market quality to the benefit of
all TPHs. The Exchange further notes that at least one other options
exchange currently approximates routing fees in a similar manner as the
Exchange's current approach.\14\ The Exchange believes that the
proposed rule change is equitable and not unfairly discriminatory
because all TPHs' applicable Customer orders in ETF and equity options
routed to BX will be automatically and uniformly assessed the
applicable routing charges.
---------------------------------------------------------------------------
\14\ See supra note 4.
---------------------------------------------------------------------------
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 also does not
believe that the Program would impose any burden on intramarket
competition because it applies to all LMMs appointed to the Program in
a uniform manner, in the same way similar programs apply to LMMs in
other proprietary products today. To the extent these LMMs receive a
benefit that other market participants do not, as stated, LMMs have
different obligations and are held to different standards. For example,
LMMs play a crucial role in providing active and liquid markets in
their appointed products, thereby providing a robust market which
benefits all market participants. Such Market-Makers also have
obligations and regulatory requirements that other participants do not
have.
The Exchange does not believe the proposed rule change to amend fee
codes RD, RF, RI, TD, TE, TF, TG, TH, and TI will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act. All TPHs' Customer orders
routing to BX and currently yielding fee code RD, TD, or TE will yield
fee code RF, RI, RF, TG, TH, or TI (depending on the order) and will
automatically and uniformly be assessed the current fees already in
place for such routed orders, as applicable.
The Exchange does not believe that the proposed rule change to
establish the Program will impose any burden on intermarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because the proposed incentive payment and rebate apply to a
product exclusively listed on the Exchange.
Further, the Exchange does not believe the proposed rule change to
amend fee codes RD, RF, RI, TD, TE, TF, TG, TH, and TI will impose any
burden on intermarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that at
least one other options exchange approximates routing costs in a
similar manner as the Exchange's current approach.\15\ Also, the
Exchange operates in a highly competitive market. TPHs have numerous
alternative venues that they may participate on and direct 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.\16\ Therefore, no
exchange possesses significant pricing power in the execution of option
order flow. Indeed, participants can readily choose to send their
orders to other exchange and off-exchange venues if they deem fee
levels at those other venues to be more favorable. Moreover, the
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \17\ The fact that this market is
competitive has also long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\18\ Accordingly, the Exchange
does not believe its proposed fee change imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\15\ Id.
\16\ See Cboe Global Markets U.S. Options Market Monthly Volume
Summary (February 26, 2024), available at https://markets.cboe.com/us/options/market_statistics/.
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\18\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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[[Page 19905]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \19\ and paragraph (f) of Rule 19b-4 \20\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CBOE-2024-012 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-2024-012. 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-CBOE-2024-012 and should be submitted on
or before April 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05838 Filed 3-19-24; 8:45 am]
BILLING CODE 8011-01-P
