Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Update Its Fees Schedule in Connection With the Exchange's Plans To List and Trade Options That Overlie a Reduced Value of the MSCI World Index, the Full Value of the MSCI ACWI Index, and a Reduced Value of the MSCI USA Index, 21640-21648 [2024-06588]
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Federal Register / Vol. 89, No. 61 / Thursday, March 28, 2024 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to file
number SR–NYSE–2024–17. 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–NYSE–2024–17 and should be
submitted on or before April 18, 2024.
[Release No. 34–99839; File No. SR–CBOE–
2024–014]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06581 Filed 3–27–24; 8:45 am]
ddrumheller on DSK120RN23PROD with NOTICES1
BILLING CODE 8011–01–P
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Update Its Fees
Schedule in Connection With the
Exchange’s Plans To List and Trade
Options That Overlie a Reduced Value
of the MSCI World Index, the Full Value
of the MSCI ACWI Index, and a
Reduced Value of the MSCI USA Index
March 22, 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 18,
2024, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to update
its Fees Schedule in connection with
the Exchange’s plans to list and trade
options that overlie a reduced value of
the MSCI World Index, the full value of
the MSCI ACWI Index, and a reduced
value of the MSCI USA Index. The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is 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
1 15
16 17
CFR 200.30–3(a)(12).
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Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fees Schedule in connection with its
plans to list and trade options that
overlie a reduced value of the MSCI
World Index (‘‘MXWLD options’’), the
full value of the MSCI ACWI Index
(‘‘MXACW options’’), and a reduced
value of the MSCI USA Index (‘‘MXUSA
options’’), effective March 18, 2024.
Background
Each of the MSCI World, ACWI, and
USA Indexes is a free float-adjusted
market capitalization index designed to
measure equity market performance
throughout the world (MSCI World and
ACWI Indexes) or the United States
(MSCI USA Index). The MSCI World,
ACWI, and USA Indexes are calculated
by MSCI Inc. (‘‘MSCI’’), which is a
provider of investment support tools.3
Each of these indexes is calculated in
U.S. dollars on a real-time basis from
the open of the first market on which
the components are traded to the closing
of the last market on which the
components are traded. The
methodology used to calculate each
index is similar to the methodology
used to calculate the value of other
benchmark market-capitalization
weighted indexes (including the MSCI
MXEA and MXEF Indexes, on which the
Exchange may currently list options).4
MXACW options are options that are
based on the value of the MSCI ACWI
Index. The MSCI ACWI Index is a free
float-adjusted market capitalization
index that is designed to measure the
equity performance of developed
markets and emerging markets. The
MSCI ACWI Index consists of
component stocks from 23 developed
markets 5 and 24 emerging markets.6
3 See
Rule 4.12(c).
Rule 4.10(h); see also Securities Exchange
Act Release No. 74681 (April 8, 2015), 80 FR 20032
(April 14, 2015) (SR–CBOE–2015–023) (order
approving proposed rule change to adopt rules to
permit listing and trading of options on the MSCI
EAFE Index (‘‘MXEA options’’) and the MSCI EM
Index) (‘‘MXEF options’’).
5 These developed markets include Australia,
Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy,
Japan, Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland,
the United Kingdom, and the United States.
6 These emerging markets include Brazil, Chile,
China, Colombia, Czech Republic, Egypt, Greece,
4 See
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Federal Register / Vol. 89, No. 61 / Thursday, March 28, 2024 / Notices
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The MSCI ACWI Index consists of largeand mid-cap components across these
markets, has 2,946 constituents, and
covers approximately 85% of the global
investable equity opportunity set.7
MSWLD options are options that are
based on 1/100th of the value of the
MSCI World Index. The MSCI World
Index is a free float-adjusted market
capitalization index that is designed to
measure the equity market performance
of developed markets. The MSCI World
Index consists of component stocks
from 23 developed markets.8 The MSCI
World Index consists of large- and midcap components across these markets,
has 1,509 constituents, and covers
approximately 85% of the free floatadjusted market capitalization in each
country.9
MXUSA options are options that are
based on 1/100th of the value of the
MSCI USA Index. The MSCI USA Index
is a free float-adjusted market
capitalization index that is designed to
measure the performance of the largeand mid-cap segments of the U.S.
market. The MSCI USA Index consists
of large- and mid-cap components from
the United States, has 625 constituents,
and covers approximately 85% of the
free float-adjusted market capitalization
in the United States.10
With a smaller index value, MXWLD
and MXUSA options may be more
accessible to a broad base of customers
with diverse investment objectives,
ranging from asset owners aiming to
track benchmark index exposure,
registered investment advisers in search
of new sources of yield, or individual
investors seeking straightforward
exposure to options linked to global
benchmark indices. The Exchange
believes that MXWLD and MXUSA
options, with a smaller index value, will
attract a greater source of customer
business and may enhance investors’
opportunities to hedge, or speculate on,
the market risk associated with the
stocks comprising the MSCI World
Index and MSCI USA Index,
respectively. Additionally, the Exchange
Hungary, India, Indonesia, Korea, Kuwait, Malaysia,
Mexico, Peru, Philippines, Poland, Qatar, Saudi
Arabia, South Africa, Taiwan, Thailand, Turkey,
and the United Arab Emirates.
7 See MSCI ACWI Index fact sheet (dated
November 30, 2023), available at MSCI ACWI
Index.
8 These developed markets include Australia,
Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Ireland, Israel, Italy,
Japan, Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland,
the United Kingdom, and the United States.
9 See MSCI World Index fact sheet (dated
November 30, 2023), available at MSCI World
Index.
10 See MSCI USA Index fact sheet (dated
November 30, 2023), available at MSCI USA Index.
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believes investors will benefit from the
availability of MXWLD and MXUSA
options, as investors will be able to use
this trading vehicle while extending a
smaller outlay of capital. The Exchange
believes this may attract additional
investors, and, in turn, create a more
active and liquid trading environment.
The MSCI World Index, MSCI ACWI
Index, and MSCI USA Index are
calculated using methodology as the
MSCI MXEA Index and the MSCI MXEF
Index on which the Exchange currently
lists options. The Exchange believes
offering MXACW, MXWLD, and
MXUSA options with similar terms as
MXEA and MXEF options will benefit
investors, as it will provide market
participants with additional investment
and hedging strategies consisting of
options over each of these indexes.
The Exchange now proposes to amend
its Fees Schedule to accommodate the
planned listing and trading of MXACW,
MXUSA, and MXWLD options. The
Exchange notes that because MXEA,
MXEF, MXACW, MXUSA, and MXWLD
options are intended for the same
investor-base, the majority of the
proposed changes amend the Fees
Schedule in connection with trading in
MXACW, MXUSA, and MXWLD
options in a manner that is generally
consistent with the way in which
existing transactions fees and programs
currently apply to trading in MXEA and
MXEF options, with slight differences to
account for the lower spot value of
underlying indexes of MXACW,
MXUSA, and MXWLD options, as
compared to the underlying indexes of
MXEA and MXEF options.
Standard Transaction Rates and
Surcharges
First, the Exchange proposes to adopt
certain standard transaction fees in
connection with MXWLD, MXACW,
and MXUSA options. Specifically, the
proposed rule change adopts certain
fees for MXWLD, MXACW, and MXUSA
options in the Rate Table for All
Products Excluding Underlying Symbol
A,11 as follows:
• Adopts fee code CG, appended to
all Customer (capacity ‘‘C’’) orders in
MXWLD, MXACW, and MXUSA
options and assesses a fee of $0.05 per
contract; 12
11 Underlying Symbol List A includes OEX, XEO,
RUT, RLG, RLV, RUI, UKXM, SPX (includes
SPXW), SPESG and VIX. See Exchange Fees
Schedule, Footnote 34.
12 Under the proposed changes, the Customer
Large Trade Discount Program, set forth in the
Exchange Fees Schedule, will apply to Customer
orders in MXWLD, MXACW, and MXUSA
(included in ‘‘Other Index Options’’ under the
program). Under the program, a customer large
trade discount program in the form of a cap on
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• Adopts fee code MG, which is
appended to all Market-Maker (capacity
‘‘M’’) orders in MXWLD, MXACW, and
MXUSA options and assesses a fee of
$0.10 per contract;
• Adopts fee code FG, appended to
all Firm (i.e., Clearing Trading Permit
Holders (capacity ‘‘F’’)) and NonClearing Trading Permit Holder
Affiliates (capacity ‘‘L’’)) orders in
MXWLD, MXACW, and MXUSA
options and assesses a fee of $0.15 per
contract;
• Adopts fee code BG, appended to
all non-Customer, non-Market-Maker,
non-Firm (i.e., Broker-Dealers (capacity
‘‘B’’), Joint Back-Offices (capacity ‘‘J’’),
Non-Trading Permit Holder MarketMakers (capacity ‘‘N’’), and
Professionals (capacity ‘‘U’’)) orders in
MXWLD, MXACW, and MXUSA
options and assesses a fee of $0.20 per
contract.
In addition to the above transaction
fees, the proposed rule change also
adopts certain surcharges to MXWLD
and MXACW options transactions
within the Rate Table—All Products
Excluding Underlying Symbol List A.
Currently, the MXEA and MXEF Index
License Surcharge Fee assesses a $0.12
charge for transactions in MXEA and
MXEF options. The proposed rule
change applies the MXEA and MXEF
Index License Surcharge Fee to all Firm,
Market-Maker and Non-Customer
transactions in MXWLD and MXACW
options and amends the fee name
accordingly. The proposed rule change
also adds MXWLD, MXACW, and
MXUSA options to the list of options for
which the FLEX Surcharge Fee of $0.10
(capped at $250 per trade) applies to
electronic FLEX orders executed by all
capacity codes, except for Cboe
Compression Services (‘‘CCS’’) and
FLEX Micro transactions.13
Fees Programs
The Exchange proposes to exclude
MXACW, MXUSA, and MXWLD
options from the Liquidity Provider
Sliding Scale, which offers credits on
Market-Maker orders where a MarketMaker achieves certain volume
thresholds based on total national
Market-Maker volume in all underlying
symbols, excluding Underlying Symbol
List A, MRUT, NANOS, XSP, and FLEX
Micros during the calendar month.
customer (‘‘C’’ capacity code) transaction fees is in
effect for the options set forth in the Customer Large
Trade Discount table. For MXWLD, MXACW, and
MXUSA options, regular customer transaction fees
will only be charged for up to 5,000 contracts per
order, similar to other index options other than VIX,
SPX/SPXW, SPESG, and XSP.
13 The FLEX Surcharge Fee will only be charged
up to the first 2,500 contracts per trade. See
Exchange Fees Schedule, Footnote 17.
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Federal Register / Vol. 89, No. 61 / Thursday, March 28, 2024 / Notices
Specifically, the proposed rule change
updates the Liquidity Provider Sliding
Scale table to provide that volume
thresholds are based on total national
Market-Maker volume in all underlying
symbols excluding Underlying Symbol
List A, MRUT, MXACW, MXUSA,
MXWLD, NANOS, XSP, and FLEX
Micros during the calendar month, and
that it applies in all underlying symbols
excluding Underlying Symbol List A,
MRUT MXACW, MXUSA, MXWLD,
NANOS, XSP, and FLEX Micros. The
proposed rule change also updates
Footnote 10 (appended to the Liquidity
Provider Sliding Scale) to provide that
the Liquidity Provider Sliding Scale
applies to Liquidity Provider (Exchange
Market-Maker, DPM and LMM)
transaction fees in all products except
(1) Underlying Symbol List A, MRUT,
MXACW, MXUSA, MXWLD, NANOS,
XSP, and FLEX Micros, (2) volume
executed in open outcry, and, and (3)
volume executed via AIM Responses.
The proposed rule change updates the
Volume Incentive Program (‘‘VIP’’) table
to exclude MXWLD, MXACW, and
MXUSA volume from the VIP, which
currently offers a per contract credit for
certain percentage threshold levels of
monthly Customer volume in all
underlying symbols, excluding
Underlying Symbol List A, Sector
Indexes, DJX, MRUT, MXEA, MXEF,
NANOS, XSP and FLEX Micros. The
proposed rule change also amends
Footnote 36 (appended to the VIP table)
to reflect the proposed exclusion of
MXWLD, MXACW, and MXUSA from
the VIP by providing (in relevant part)
that: the Exchange shall credit each TPH
the per contract amount resulting from
each public customer (‘‘C’’ capacity
code) order transmitted by that TPH
which is executed electronically on the
Exchange in all underlying symbols
excluding Underlying Symbol List A,
Sector Indexes, DJX, MRUT, MXACW,
MXEA, MXEF, MXUSA, MXWLD,
NANOS, XSP, FLEX Micros, QCC
trades, public customer to public
customer electronic complex order
executions, and executions related to
contracts that are routed to one or more
exchanges in connection with the
Options Order Protection and Locked/
Crossed Market Plan referenced in Rule
5.67, provided the TPH meets certain
percentage thresholds in a month as
described in the Volume Incentive
Program (VIP) table; the percentage
thresholds are calculated based on the
percentage of national customer volume
in all underlying symbols excluding
Underlying Symbol List A, Sector
Indexes, MRUT, MXACW, MXEA,
MXEF, MXUSA, MXWLD, NANOS,
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DJX, XSP, and FLEX Micros entered and
executed over the course of the month;
and in the event of a Cboe Options
System outage or other interruption of
electronic trading on Cboe Options, the
Exchange will adjust the national
customer volume in all underlying
symbols excluding Underlying Symbol
List A, Sector Indexes, MRUT, MXACW,
MXEA, MXEF, MXUSA, MXWLD,
NANOS, DJX, XSP, and FLEX Micros for
the entire trading day.
The proposed rule change excludes
MXACW, MXUSA, and MXWLD
options from the list of products eligible
to receive Break-Up Credits in orders
executed in AIM, SAM, FLEX AIM, and
FLEX SAM, by amending the Break-Up
Credits table to exclude MXACW,
MXUSA, and MXWLD along with the
products currently excluded—
Underlying Symbol List A, Sector
Indexes, DJX, MRUT, MXEA, MXEF,
NANOS, XSP and FLEX Micros.
The Exchange proposes to exclude
MXACW, MXUSA, and MXWLD
options from the Marketing Fee Program
by updating the Marketing Fee table to
provide that the marketing fee will be
assessed on transactions of MarketMakers (including DPMs and LMMs),
resulting from customer orders at the
per contract rate provided above on all
classes of equity options, options on
ETFs, options on ETNs and index
options, except that the marketing fee
shall not apply to Sector Indexes, DJX,
MRUT, MXEA, MXEF, MXACW,
MXUSA, MXWLD, XSP, NANOS, FLEX
Micros or Underlying Symbol List A.
The Exchange notes that, in this way,
MXACW, MXUSA, and MXWLD
options will be treated as most of the
Exchange’s other exclusively listed
products that are currently excluded
from the Marketing Fee Program. The
Exchange does believe that it is
necessary at the point of newly listing
and trading for MXACW, MXUSA, and
MXWLD options to be eligible for the
Marketing Fee Program and may
determine in the future to submit a fee
filing to add MRUT to the Marketing Fee
Program if the Exchange believes it
would potentially generate more
customer order flow in MXACW,
MXUSA, and MXWLD options.
The proposed rule change also
updates the Select Customer Options
Reduction (‘‘SCORe’’) program table to
include MXWLD, MXACW, and
MXUSA volume in the SCORe program,
which currently offers a per Retail
contract discount for certain percentage
threshold levels of monthly Retail,14
14 For purposes of this program ‘‘Retail’’ orders
will be defined as Customer orders for which the
original order size (in the case of a simple order)
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Non-FLEX Customer (‘‘C’’ origin code)
volume in the following options classes:
SPX (including SPXW), VIX, RUT,
MXEA, MXEF & XSP (‘‘Qualifying
Classes’’). The SCORe program is
available to any Trading Permit Holder
(‘‘TPH’’) Originating Clearing Firm or
non-TPH Originating Clearing Firm that
sign up for the program.15 The SCORe
program utilizes Discount Tiers to
determine the Originating Firm’s
applicable corresponding discounts. To
determine the Discount Tier, an
Originating Firm’s Retail volume in the
Qualifying Classes will be divided by
total Retail volume in the Qualifying
Classes executed on the Exchange. The
program then provides a discount per
retail contract, based on the determined
Discount Tier thereunder. The proposed
rule change also amends Footnote 48
(appended to the SCORe program table)
to reflect the proposed inclusion of
MXWLD, MXACW, and MXUSA in the
SCORe program by providing (in
relevant part) that: ‘‘Qualifying Classes’’
will be defined as SPX (including
SPXW), VIX, RUT, MXEA, MXEF,
MXWLD, MXACW & MXUSA.
The Exchange proposes to exclude
MXACW, MXUSA, and MXWLD
options from the Floor Broker Sliding
Scale Rebate Program, which offers
rebates for Firm Facilitated and nonFirm Facilitated orders that correspond
to certain volume tiers and is designed
to incentivize order flow in multiplylisted options to the Exchange’s trading
floor. The Exchange proposes to update
the Floor Broker Sliding Scale Rebate
Program to provide that the Floor Broker
Sliding Scale Rebate Program applies to
all products except Underlying Symbol
List A, Sector Indexes, DJX, MRUT,
MXEA, MXEF, MXACW, MXUSA,
MXWLD, NANOS, XSP and FLEX
Micros.
The Exchange next proposes to
exclude MXWLD, MXACW, and
MXUSA options from eligibility for the
Order Router Subsidy (‘‘ORS’’) and
Complex Order Router Subsidy
(‘‘CORS’’) Programs, in which
Participating TPHs or Participating NonCboe TPHs may receive a payment from
the Exchange for every executed
contract routed to the Exchange through
their system in certain classes.
Specifically, the proposed rule change
or largest leg size (in the case of a complex order)
is 100 contracts or less.
15 For this program, an ‘‘Originating Clearing
Firm’’ is defined as either (a) the executing clearing
Options Clearing Corporation (‘‘OCC’’) number on
any transaction which does not also include a
Clearing Member Trading Agreement (‘‘CMTA’’)
OCC clearing number or (b) the CMTA in the case
of any transaction which does include a CMTA
OCC clearing number.
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Federal Register / Vol. 89, No. 61 / Thursday, March 28, 2024 / Notices
updates the ORS/CORS Program tables
to provide that ORS/CORS participants
whose total aggregate non-customer
ORS and CORS volume is greater than
0.25% of the total national volume
(excluding volume in options classes
included in Underlying Symbol List A,
Sector Indexes, DJX, MRUT, MXACW,
MXEA, MXEF, MXUSA, MXWLD,
NANOS, XSP or FLEX Micros) will
receive an additional payment for all
executed contracts exceeding that
threshold during a calendar month, and
updates Footnotes 29 16 and 30
(appended to the ORS/CORS Program
tables) to accordingly provide that Cboe
Options does not make payments under
the program with respect to executed
contracts in options classes included in
Underlying Symbols List A, Sector
Indexes, DJX, MRUT, MXACW, MXEA,
MXEF, MXUSA, MXWLD, NANOS, XSP
or FLEX Micros.
The Exchange also proposes to amend
Footnote 6, which states that in the
event of an Exchange System outage or
other interruption of electronic trading
on the Exchange that lasts longer than
60 minutes, the Exchange will adjust the
national volume in all underlying
symbols excluding Underlying Symbol
List A, Sector Indexes, MRUT, MXEA,
MXEF, NANOS, DJX, XSP and FLEX
Micros for the entire trading day. The
Exchange proposes to add MXACW,
MXUSA, and MXWLD options to the
list of options, similar to MXEA and
MXEF options.
LMM Incentive Programs
Finally, the Exchange proposes to
adopt financial programs in connection
with MXACW, MXUSA, and MXWLD
options for LMMs appointed to the
programs (collectively, the ‘‘LMM
Incentive Programs’’).17 Each LMM
Incentive Program provides a rebate to
TPHs with LMM appointments to the
respective incentive program that meet
certain quoting standards in the
applicable series in a month. The
Exchange notes that meeting or
exceeding the quoting standards (as
proposed; described in further detail
below) in each of the LMM Incentive
Program products to receive the
applicable rebate (as proposed;
described in further detail below) is
optional for an LMM appointed to a
program. Rather, an LMM appointed to
an incentive program is eligible to
receive the corresponding rebate if it
satisfies the applicable quoting
standards, which the Exchange believes
encourages the LMM to provide
liquidity in the applicable class and
trading session. The Exchange may
consider other exceptions to the
programs’ quoting standards based on
demonstrated legal or regulatory
requirements or other mitigating
circumstances. In calculating whether
an LMM appointed to an incentive
program meets the applicable program’s
Premium level
Expiring
Near term
Mid term
Long term
6 days or
less
7 days to 60
days
61 days to 270
days
271 days or
greater
Width
ddrumheller on DSK120RN23PROD with NOTICES1
$0.00–$1.00 ......................................................................................................................
$1.01–$2.00 ......................................................................................................................
$2.01–$4.00 ......................................................................................................................
$4.01–$8.00 ......................................................................................................................
$8.01–$16.00 ....................................................................................................................
$16.01–$32.00 ..................................................................................................................
Greater than $32.00 ..........................................................................................................
quoting standards each month, the
Exchange excludes from the calculation
in that month the business day in which
the LMM missed meeting or exceeding
the quoting standards in the highest
number of the applicable series. The
heightened quoting requirements
offered by each of the LMM Incentive
Programs are designed to incentivize
LMMs appointed to the LMM Incentive
Programs to provide significant liquidity
in MXACW, MXUSA, and MXWLD
options during the trading day upon
their listing and trading on the
Exchange, which, in turn, would
provide greater trading opportunities,
added market transparency and
enhanced price discovery for all market
participants in MXACW, MXUSA, and
MXWLD options.
The Exchange first proposes to adopt
a MXACW LMM Incentive Program. As
proposed, the MXACW LMM Incentive
Program provides that if the LMM
appointed to the MXACW LMM
Incentive Program provides continuous
electronic quotes during Regular
Trading Hours that meet or exceed the
proposed heightened quoting standards
(below) in at least 90% of the series
90% of the time in a given month, the
LMM will receive a payment for that
month in the amount of $10,000 (or prorated amount if an appointment begins
after the first trading day of the month
or ends prior to the last trading day of
the month).
Size
$0.35
0.40
0.90
1.00
2.50
5.00
10.00
10
10
7
5
3
2
2
Width
$0.25
0.35
0.40
0.80
1.30
2.00
8.00
Size
20
15
15
10
5
2
2
Width
$0.40
0.60
1.00
2.00
3.50
4.00
10.00
Size
10
7
5
4
3
2
2
Width
Size
$0.50
1.00
2.00
3.00
5.00
6.00
12.00
The proposed rule change also adopts
a performance payment under the
MXACW LMM Incentive Program,
which provides that, in addition to the
above rebate, the LMM with the highest
performance in satisfying the above
heightened quoting standards in a
month will receive a performance
payment of $20,000 for that month. In
order to be eligible to receive the
performance payment in a month, an
LMM must meet or exceed the above
heightened quoting standards in that
month. Highest performance is
measured as the cumulative sum of
series in which an LMM meets or
exceeds the heightened quoting
requirements by the total series each
day (excluding the day in which an
LMM missed meeting or exceeding the
heightened quoting standard in the
highest number of series).
The Exchange next proposes to adopt
a MXUSA LMM Incentive Program. As
proposed, the MXUSA LMM Incentive
Program provides that if the LMM
appointed to the MXUSA LMM
Incentive Program provides continuous
electronic quotes during Regular
Trading Hours that meet or exceed the
proposed heightened quoting standards
(below) in at least 85% of the series
80% of the time in a given month, the
16 As part of the proposed rule change, the
Exchange proposes a clarifying change to add
MRUT and NANOS to the list of excluded options
in Footnote 29; such options are listed in the ORS
table, but were inadvertently not added to Footnote
29.
17 See Exchange Rule 3.55(a). In advance of the
LMM Incentive Program effective date, the
Exchange will send a notice to solicit applications
from interested TPHs for the LMM role and will,
from among those applications, select the program
LMMs. Factors to be considered by the Exchange in
selecting LMMs include adequacy of capital,
experience in trading options, presence in the
trading crowd, adherence to Exchange rules and
ability to meet the obligations specified in Rule
5.55.
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21644
Federal Register / Vol. 89, No. 61 / Thursday, March 28, 2024 / Notices
LMM will receive a payment for that
month in the amount of $10,000 (or pro-
rated amount if an appointment begins
after the first trading day of the month
Premium level
Expiring
Near term
Mid term
Long term
6 days or
less
7 days to 60
days
61 days to 270
days
271 days or
greater
Width
$0.00–$3.00 ......................................................................................................................
$3.01–$5.00 ......................................................................................................................
$5.01–$10.00 ....................................................................................................................
$10.01–$20.00 ..................................................................................................................
Greater than $20.00 ..........................................................................................................
The proposed rule change also adopts
a performance payment under the
MXUSA LMM Incentive Program,
which provides that, in addition to the
above rebate, the LMM with the highest
performance in satisfying the above
heightened quoting standards in a
month will receive a performance
payment of $15,000 for that month. In
order to be eligible to receive the
performance payment in a month, an
LMM must meet or exceed the above
heightened quoting standards in that
Size
$0.50
1.00
1.50
5.00
10.00
ddrumheller on DSK120RN23PROD with NOTICES1
$0.00–$3.00 ......................................................................................................................
$3.01–$5.00 ......................................................................................................................
$5.01–$10.00 ....................................................................................................................
$10.01–$20.00 ..................................................................................................................
Greater than $20.00 ..........................................................................................................
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
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6.00
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5
5
the LMM appointed to the MXWLD
LMM Incentive Program provides
continuous electronic quotes during
Regular Trading Hours that meet or
exceed the proposed heightened quoting
standards (below) in at least 90% of the
series 90% of the time in a given month,
the LMM will receive a payment for that
month in the amount of $15,000 (or prorated amount if an appointment begins
after the first trading day of the month
or ends prior to the last trading day of
the month).
Mid term
Long term
61 days to 270
days
271 days or
greater
Size
$0.30
0.60
0.75
2.00
5.00
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20
10
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5
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1.50
4.00
7.00
Size
10
10
10
5
5
proposed rule change is consistent with
section 6(b)(4) of the Act,21 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.
Standard Transaction Rates and
Surcharges
The Exchange believes that the
proposed amendments to the Fees
Schedule in connection with standard
transaction rates and surcharges for
MXACW, MXUSA, and MXWLD
transactions are reasonable, equitable
and not unfairly discriminatory.
Specifically, the Exchange believes that
it is reasonable to assess fees for
Customer, Market-Maker, Firm and nonMarket-Maker, non-Customer, non-Firm
orders in MXACW, MXUSA, and
MXWLD options that are based on, but
slightly less than, those fees for
transactions in MXEA and MXEF
options (all of which overly MSCI
benchmark market-capitalization
21 15
Fmt 4703
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U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00162
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days
20 Id.
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Expiring
and, in particular, the requirements of
section 6(b) of the Act.18 Specifically,
the Exchange believes the proposed rule
change is consistent with the section
6(b)(5) 19 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) 20 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
18 15
Width
6 days or
less
Width
The proposed rule change also adopts
a performance payment under the
MXWLD LMM Incentive Program,
which provides that, in addition to the
above rebate, the LMM with the highest
performance in satisfying the above
heightened quoting standards in a
month will receive a performance
payment of $25,000 for that month. In
order to be eligible to receive the
performance payment in a month, an
LMM must meet or exceed the above
heightened quoting standards in that
month. Highest performance is
measured as the cumulative sum of
series in which an LMM meets or
exceeds the heightened quoting
requirements by the total series each
day (excluding the day in which an
LMM missed meeting or exceeding the
heightened quoting standard in the
highest number of series).
10
10
5
5
5
month. Highest performance is
measured as the cumulative sum of
series in which an LMM meets or
exceeds the heightened quoting
requirements by the total series each
day (excluding the day in which an
LMM missed meeting or exceeding the
heightened quoting standard in the
highest number of series).
Finally, the Exchange proposes to
adopt a MXWLD LMM Incentive
Program. As proposed, the MXWLD
LMM Incentive Program provides that if
Premium level
or ends prior to the last trading day of
the month).
E:\FR\FM\28MRN1.SGM
U.S.C. 78f(b)(4).
28MRN1
ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 61 / Thursday, March 28, 2024 / Notices
weighted indexes) because the
underlying indexes of MXACW,
MXUSA, and MXWLD options have a
lower spot value than the underlying
indexes of MXEA and MXEF options
(and therefore, more contracts would
need to be traded to achieve an
equivalent notional size position).
Additionally, the Exchange believes it
is reasonable to charge different fee
amounts to different user types in the
manner proposed because the proposed
fees are consistent with the price
differentiation that exists today for other
index products. The Exchange also
believes that the proposed fee amounts
for MXACW, MXUSA, and MXWLD
options orders are reasonable because
the proposed fee amounts are within the
range of amounts assessed for the
Exchange’s other index products,
excluding Underlying Symbol List A.22
Moreover, the Exchange believes it is
reasonable to apply the MXEA and
MXEF Index License Surcharge Fee to
all non-public customer (i.e. Cboe
Options and non-Trading Permit Holder
market-maker, Clearing Trading Permit
Holder, JBO participant, and brokerdealer), including professional,
transactions in MXWLD and MXACW
options because the proposed surcharge
helps recoup some of the costs
associated with the license for MXWLD
and MXACW options. Additionally, the
Exchange notes that the surcharge
amount will provide consistency
between the fees assessed for orders in
MXEA and MXEF options, which, like
MXWLD and MXACW, all of which
overly MSCI benchmark marketcapitalization weighted indexes and are
designed to offer investors lower cost
options to obtain the potential benefits
of options on a broad-based index
option and intended for a similar
investor-base. Given current trading
practices, the Exchange believes that
MXUSA options may have a smaller
initial trading volume (as compared to
MXWLD and MXACW options), and as
such, wishes to incentivize trading in
MXUSA. Therefore, the Exchange
believes it is reasonable to not assess an
Index License Surcharge fee for MXUSA
options, as a way to encourage market
participants to trade the newly listed
product. The Exchange believes it is
reasonable to apply the FLEX Surcharge
Fee to MXWLD, MXACW, and MXUSA
options, as the FLEX Surcharge Fee
assists the Exchange in recouping the
cost of developing and maintaining the
FLEX system.
The Exchange believes the proposed
standard transaction rates and exclusion
22 See Exchange Fees Schedule, Rate Table—All
Products Excluding Underlying Symbol List A.
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from certain surcharges are equitable
and not unfairly discriminatory because
they will apply automatically and
uniformly to all capacities as applicable
(i.e., Customer, Market-Maker, Firm and
non-Market-Maker, non-Customer, nonFirm), in MXWLD, MXACW, and
MXUSA options. The Exchange also
believes that it is equitable and not
unfairly discriminatory to assess lower
fees to Customers 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 MarketMakers. 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. The fees offered to
customers are intended to attract more
customer trading volume to the
Exchange. Moreover, the options
industry has a long history of providing
preferential pricing to Customers, and
the Exchange’s current Fees Schedule
currently does so in many places, as do
the fees structures of many other
exchanges. Finally, all fee amounts
listed as applying to Customers will be
applied equally to all Customers
(meaning that all Customers will be
assessed the same amount).
The Exchange believes that it is
equitable and not unfairly
discriminatory to assess lower fees to
Market-Makers as compared to other
market participants other than
Customers because Market-Makers,
unlike other market participants, take
on a number of obligations, including
quoting obligations, that other market
participants do not have. Further, these
lower fees offered to Market-Makers are
intended to incent Market-Makers to
quote and trade more on the Exchange,
thereby providing more trading
opportunities for all market
participants. Additionally, the proposed
fee for Market-Makers will be applied
equally to all Market-Makers (meaning
that all Market-Makers will be assessed
the same amount). The Exchange also
notes that all fee amounts described
herein are intended to attract greater
order flow to the Exchange in MXWLD,
MXACW, and MXUSA options, which
should therefore serve to benefit all
Exchange market participants.
Similarly, it is equitable and not
unfairly discriminatory to assess lower
fees to Firm orders than those of other
market participants (except Customers
and Market-Makers) because Firms also
PO 00000
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Fmt 4703
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21645
have a number of obligations (such as
membership with the OCC), significant
regulatory burdens, and financial
obligations, that other market
participants do not need to take on.
Finally, the proposed surcharges will be
assessed uniformly to all market
participants to whom the FLEX
Surcharge and Index License Surcharge
Fee apply.
Fees Programs
The Exchange believes that the
proposed updates to the Fees Schedule
in connection with the application of
certain fees programs to transactions in
MXWLD, MXACW, and MXUSA
options are reasonable, equitable and
not unfairly discriminatory. The
Exchange believes it is reasonable to
exclude MXWLD, MXACW, and
MXUSA options from the Liquidity
Provider Sliding Scale, the VIP, BreakUp Credits applicable to Customer
Agency Orders in AIM and SAM, the
Marketing Fee, the Floor Broker Sliding
Scale Rebate Program, and the ORS/
CORS program because other
proprietary index products are also
excepted from these programs.23
Moreover, the Exchange notes that the
proposed rule change does not alter any
of the existing programs, but instead,
merely proposes not to include
transactions in MXWLD, MXACW, and
MXUSA options in those programs.
Similarly, the Exchange believes it is
reasonable to include transactions in
MXWLD, MXACW, and MXUSA
options in the SCORe program because
other proprietary index products,
including MXEA and MXEF options, are
also included in this program.24
The Exchange believes that excluding
MXWLD, MXACW, and MXUSA
options transactions from certain fees
programs is equitable and not unfairly
discriminatory because the programs
will equally not apply to, or exclude in
the same manner, all market
participants’ orders in MXWLD,
MXACW, and MXUSA options.
Similarly, the Exchange believes that
including MXWLD, MXACW, and
MXUSA options transactions in the
SCORe program is equitable and not
unfairly discriminatory because the
program will equally apply to, or
include in the same manner, all market
participants’ orders in MXWLD,
MXACW, and MXUSA options. The
23 See Exchange Fees Schedule, Liquidity
Provider Sliding Scale, Volume Incentive Program,
Break-Up Credits, Marketing Fee, Floor Broker
Sliding Scale Rebate Program, Order Router
Subsidy Program and Complex Order Router
Subsidy Program.
24 See Exchange Fees Schedule, Select Customer
Options Reduction (‘‘SCORe’’) Program.
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Exchange notes that the proposed rule
change does not alter any of the existing
program rates or volume calculations,
but instead, merely proposes include (or
not to) include transactions in MXWLD,
MXACW, and MXUSA options in those
programs and volume calculations in
the same way that transactions in MXEA
and MXEF options are (or are not)
currently included.
ddrumheller on DSK120RN23PROD with NOTICES1
LMM Incentive Programs
The Exchange believes the proposed
LMM Incentive Programs are
reasonable, equitable and not unfairly
discriminatory. Particularly, the
proposed MXWLD, MXACW, and
MXUSA LMM Incentive Programs are
reasonable financial incentive programs
because the proposed heightened
quoting standards and rebate amount for
meeting the heightened quoting
standards in each MXWLD, MXACW,
and MXUSA series, as applicable, are
reasonably designed to incentivize
LMMs appointed to the Programs to
meet the proposed heightened quoting
standards during RTH for MXWLD,
MXACW, and MXUSA, as applicable,
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, particularly in
newly listed and traded products on the
Exchange during the trading day.
The Exchange believes that the
proposed heightened quoting standards
are reasonable because they are similar
to the detail and format (corresponding
premiums, quote widths, and sizes) of
the quoting standards currently in place
for LMM Incentive Programs for other
proprietary Exchange products.25 The
Exchange also believes that proposed
heightened quoting requirements are
reasonably tailored to reflect market
characteristics of MXWLD, MXACW,
and MXUSA. The Exchange believes the
generally smaller premium levels and
widths appropriately reflect the lowerpriced MXWLD, MXACW, and MXUSA
product. The Exchange believes the
proposed finer premiums, smaller quote
widths and smaller sizes
(comparatively) in the proposed
heightened quoting standards for the
MXWLD, MXACW, and MXUSA LMM
Incentive Programs reasonably reflect
25 See Exchange Fees Schedule, ‘‘MRUT LMM
Incentive Program’’, ‘‘MSCI LMM Incentive
Program’’, ‘‘NANOS LMM Incentive Program’’,
‘‘GTH VIX/VIXW LMM Incentive Program’’, ‘‘GTH1
SPX/SPXW LMM Incentive Program’’, ‘‘GTH2 SPX/
SPXW LMM Incentive Program’’, ‘‘RTH XSP LMM
Incentive Program’’, ‘‘GTH1 XSP LMM Incentive
Program’’, ‘‘GTH2 XSP LMM Incentive Program’’,
and ‘‘RTH SPESG LMM Incentive Program’’.
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what the Exchanges believes will be
typical market characteristics in
MXWLD, MXACW, and MXUSA
options, given their smaller spot value,
their smaller notional value and general
anticipated retail base, thus smaller,
retail-sized orders. quoting requirements
in the future to accommodate expiry
categories.
The Exchange further believes that the
proposed rebate amounts received for
MXACW ($10,000), MXUSA ($10,000),
and MXWLD ($15,000) options is
reasonable because they are comparable
to the rebates offered by other LMM
Incentive Programs offered by the
Exchange. For example, the LMM
Program for MXEA and MXEF options
(the ‘‘MSCI LMM Program’’) currently
offers $15,000 per class, per month to
appointed LMMs for MXEA and MXEF
options if the heightened quoting
standards are met in a given month. The
Exchange believes that the proposed
rebate amounts are reasonably designed
to continue to incentivize an LMM
appointed to the respective program to
meet the applicable quoting standards
for MXACW, MXUSA, and MXWLD
options, 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.
Similarly, the Exchange believes that
the proposed performance payments for
MXACW ($20,000), MXUSA ($15,000),
and MXWLD ($25,000) options
provided to the LMM with the highest
performance in satisfying the relevant
heightened quoting standards for each
of the proposed LMM Programs is
reasonable and equitable as the LMM
Incentive Program for MXEA and MXEF
options offers a similar performance
payment. All appointed LMMs are
eligible for the performance payment,
which is designed to incentivize LMMs
in these newly listed products to
provide liquid and active markets in
these products to encourage their
growth.
Finally, the Exchange believes it is
equitable and not unfairly
discriminatory to offer the financial
incentive to LMMs appointed to the
LMM Incentive Programs, because it
will benefit all market participants
trading in MXWLD, MXACW, and
MXUSA 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
PO 00000
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Sfmt 4703
for market participants to trade
MXWLD, MXACW, and MXUSA, which
can lead to increased volume, providing
for robust markets. The Exchange
ultimately proposes to offer the
MXWLD, MXACW, and MXUSA LMM
Incentive Programs to sufficiently
incentivize the appointed LMMs to
provide key liquidity and active markets
in the newly listed and traded NANOS
options during the trading day to
encourage liquidity, thereby protecting
investors and the public interest. The
Exchange also notes that an LMM
appointed to the Programs may
undertake added costs each month to
satisfy that heightened quoting
standards (e.g., having to purchase
additional logical connectivity). The
Exchange believes the proposed
programs are equitable and not unfairly
discriminatory because similar
programs currently exist for LMMs
appointed to programs in other
proprietary products,26 and the
proposed programs will equally apply to
any TPH that is appointed as an LMM
to the each of the LMM Incentive
Programs, as applicable. Additionally, if
an appointed LMM does not satisfy the
heightened quoting standards in
MXWLD, MXACW, and MXUSA (as
applicable) for any given month, then it
simply will not receive the offered
payment for that month.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed MXWLD,
MXACW, and MXUSA transaction fees
for the separate types of market
participants will be assessed
automatically and uniformly to all such
market participants, i.e., all qualifying
Customer orders in MXWLD, MXACW,
and MXUSA will be assessed the same
amount, all Market-Maker orders in
MXWLD, MXACW, and MXUSA will be
assessed the same amount, all Firm
orders in MXWLD, MXACW, and
MXUSA will be assessed the same
amount, and all non-Customer, nonMarket-Maker, non-Firm orders in
MXWLD, MXACW, and MXUSA will be
assessed the same amount. As discussed
above, while different fees are assessed
to different market participants in some
26 Id.
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circumstances, these different market
participants have different obligations
and different circumstances as
discussed above. For example, MarketMakers have quoting obligations that
other market participants do not have.
Additionally, the proposed surcharges
will be assessed uniformly to all market
participants to whom the FLEX
Surcharge and Index License Surcharge
Fee apply.
Further, the proposed rule change
will uniformly exclude all transactions
in MXWLD, MXACW, and MXUSA
from certain programs (i.e., the VIP and
ORS/CORS Programs), as it currently
does for MXEA and MXEF options, and
as it does for many of the Exchange’s
other proprietary products. In addition
to this, the proposed rule change to
include MXWLD, MXACW, and
MXUSA in the SCORe program will
apply equally to all applicable
transactions in MXWLD, MXACW, and
MXUSA. Overall, the proposed rule
change is designed to increase incentive
for customer order flow providers to
submit customer order flow in a newly
listed and traded product, which, as
indicated above, contributes to a more
robust market ecosystem to the benefit
of all market participants.
The Exchange also does not believe
that the proposed LMM Incentive
Programs for MXWLD, MXACW, and
MXUSA options would impose any
burden on intramarket competition
because it applies to all LMMs
appointed to each of the LMM Incentive
Programs in a uniform manner, in the
same way similar programs apply to
appointed LMMs in other proprietary
products today. To the extent appointed
LMMs receive a benefit that other
market participants do not, these LMMs
in their role as Market-Makers on the
Exchange have different obligations and
are held to different standards. For
example, Market-Makers play a crucial
role in providing active and liquid
markets in their appointed products,
especially in the newly developing
MXWLD, MXACW, and MXUSA
market, thereby providing a robust
market which benefits all market
participants. Such Market-Makers also
have obligations and regulatory
requirements that other participants do
not have. The Exchange also notes that
an LMM appointed to an incentive
program may undertake added costs
each month to satisfy that heightened
quoting standards (e.g., having to
purchase additional logical
connectivity). The Exchange also notes
that the LMM Incentive Programs, like
the other LMM Incentive Programs, is
designed to attract additional order flow
to the Exchange, wherein greater
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liquidity benefits all market participants
by providing more trading
opportunities, tighter spreads, and
added market transparency and price
discovery, and signals to other market
participants to direct their order flow to
those markets, thereby contributing to
robust levels of liquidity.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed rule changes
apply only to products exclusively
listed on the Exchange. Additionally,
the Exchange notes it operates in a
highly competitive market. In addition
to Cboe Options, TPHs have numerous
alternative venues that they may
participate on and director their order
flow, including 16 other options
exchanges, as well as off-exchange
venues, where competitive products are
available for trading. Based on publicly
available information, no single options
exchange has more than 13% of the
market share of executed volume of
options trades.27 Therefore, no exchange
possesses significant pricing power in
the execution of option order flow.
Moreover, the Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 28 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
27 See Cboe Global Markets, U.S. Options Market
Volume Summary by Month (March 6, 2024),
available at https://markets.cboe.com/us/options/
market_share/.
28 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
PO 00000
Frm 00165
Fmt 4703
Sfmt 4703
21647
dealers’. . . .’’.29 Accordingly, the
Exchange does not believe its proposed
changes to the incentive programs
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section 19(b)(3)(A)
of the Act 30 and paragraph (f) of Rule
19b–4 31 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
CBOE–2024–014 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–2024–014. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
29 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)).
30 15 U.S.C. 78s(b)(3)(A).
31 17 CFR 240.19b–4(f).
E:\FR\FM\28MRN1.SGM
28MRN1
21648
Federal Register / Vol. 89, No. 61 / Thursday, March 28, 2024 / Notices
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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–2024–014, and
should be submitted on or before April
18, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06588 Filed 3–27–24; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99841; File No. SR–Phlx–
2024–15]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the
Exchange’s Fees for Top of PHLX
Options (TOPO), PHLX Orders, and
TOPO Plus Orders
ddrumheller on DSK120RN23PROD with NOTICES1
March 22, 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 20,
2024, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
20:27 Mar 27, 2024
Jkt 262001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Exchange’s proprietary data fees for Top
of PHLX Options (‘‘TOPO’’), PHLX
Orders, and TOPO Plus Orders at
Options 7, Section 10, as described
further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/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
BILLING CODE 8011–01–P
32 17
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s
proprietary data fees for Top of PHLX
Options (‘‘TOPO’’),3 PHLX Orders,4 and
3 See Options 3, Section 23(a)(1) (‘‘Top of PHLX
Options (‘TOPO’) is a direct data feed product that
includes the Exchange’s best bid and offer price,
with aggregate size, based on displayable order and
quoting interest on Phlx and last sale information
for trades executed on Phlx. The data contained in
the TOPO data feed is identical to the data
simultaneously sent to the processor for the OPRA
and subscribers of the data feed. The data provided
for each options series includes the symbols (series
and underlying security), put or call indicator,
expiration date, the strike price of the series, and
whether the option series is available for trading on
Phlx and identifies if the series is available for
closing transactions only.’’).
4 See Options 3, Section 23(a)(1) (‘‘PHLX Orders
is a real-time full Limit Order book data feed that
provides pricing information for orders on the
PHLX Order book for displayed order types as well
as market participant capacity. PHLX Orders is
PO 00000
Frm 00166
Fmt 4703
Sfmt 4703
TOPO Plus Orders at Options 7, Section
10.5
Top of PHLX Options (‘‘TOPO’’)
TOPO is a direct data feed that
provides subscribers with PHLX Best
Bid and Offer (‘‘BBO’’) 6 and last sale
information.7 The data distributed on
TOPO is identical to the data
simultaneously sent to the Options Price
Reporting Authority (‘‘OPRA’’).8 The
TOPO feed also provides administrative
information to facilitate trading on the
Exchange such as, for example, the list
of symbols trading on a particular day.9
TOPO reduces the transmission and
processing latencies for top of book
information relative to the OPRA feed
by avoiding the latencies generated by
the latter in consolidating data.
Monthly fees for TOPO are currently
$2,000 for Internal Distributors,10
$2,500 for External Distributors,11 $1 for
a Non-Professional Subscriber,12 and
currently provided as part of the TOPO Plus Orders
data product. PHLX Orders provides real-time
information to enable users to keep track of the
single and complex order book(s). The data
provided for each options series includes the
symbols (series and underlying security), put or call
indicator, expiration date, the strike price of the
series, leg information on complex strategies and
whether the option series is available for trading on
Phlx and identifies if the series is available for
closing transactions only. The feed also provides
auction and exposure notifications and order
imbalances on opening/reopening (size of matched
contracts and size of the imbalance)’’).
5 The proposed changes were initially filed on
November 16, 2023, as SR–Phlx–2023–51. On
December 5, 2023, SR–Phlx–2023–51 was
withdrawn and replaced with SR–Phlx–2023–57.
On January 29, 2024, SR–Phlx–2023–57 was
withdrawn and replaced with SR–Phlx 2024–03. On
March 20, 2024, SR–Phlx–2024–03 was withdrawn
and replaced with the instant filing to provide
additional detail regarding the proposal.
6 The Best Bid and Offer includes aggregate size
information based on displayable order and quoting
interest on the Exchange.
7 See PHLX, ‘‘Top of Phlx Options,’’ available at
https://www.nasdaqtrader.com/Micro.aspx?id=
TOPO#:∼:text=Top%20of%20PHLX
%20Options%20(TOPO,in%20
the%20consolidated%20market%20feed.
8 See Options 3 (Options Trading Rules), Section
23(a)(1) (Data Feeds and Trade Information) (‘‘The
data contained in the TOPO data feed is identical
to the data simultaneously sent to the processor for
the OPRA and subscribers of the data feed.’’).
9 See, e.g., Nasdaq, ‘‘Top of Phlx Options Interface
Specifications, Version 3.4’’ Section 4.3 available at
https://www.nasdaqtrader.com/content/technical
support/specifications/dataproducts/topofphlx.pdf
(describing the start of day options directory
message, which lists all symbols eligible for the
auction process).
10 See Options 7, Section 10 (Proprietary Data
Feed Fees) (Top of PHLX Options) (‘‘A ‘distributor’
of Nasdaq PHLX data is any entity that receives a
feed or data file . . . directly from Nasdaq PHLX
or indirectly through another entity and then
distributes it either internally (within that entity) or
externally (outside that entity). All distributors
execute a Nasdaq PHLX distributor agreement.’’).
11 See id.
12 See id. (‘‘A Non-Professional Subscriber is a
natural person who is neither: (i) registered or
E:\FR\FM\28MRN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 61 (Thursday, March 28, 2024)]
[Notices]
[Pages 21640-21648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06588]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99839; File No. SR-CBOE-2024-014]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Update
Its Fees Schedule in Connection With the Exchange's Plans To List and
Trade Options That Overlie a Reduced Value of the MSCI World Index, the
Full Value of the MSCI ACWI Index, and a Reduced Value of the MSCI USA
Index
March 22, 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 18, 2024, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (``SEC''
or ``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 update its Fees Schedule in connection with the Exchange's plans to
list and trade options that overlie a reduced value of the MSCI World
Index, the full value of the MSCI ACWI Index, and a reduced value of
the MSCI USA Index. The text of the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change is 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 in connection with
its plans to list and trade options that overlie a reduced value of the
MSCI World Index (``MXWLD options''), the full value of the MSCI ACWI
Index (``MXACW options''), and a reduced value of the MSCI USA Index
(``MXUSA options''), effective March 18, 2024.
Background
Each of the MSCI World, ACWI, and USA Indexes is a free float-
adjusted market capitalization index designed to measure equity market
performance throughout the world (MSCI World and ACWI Indexes) or the
United States (MSCI USA Index). The MSCI World, ACWI, and USA Indexes
are calculated by MSCI Inc. (``MSCI''), which is a provider of
investment support tools.\3\ Each of these indexes is calculated in
U.S. dollars on a real-time basis from the open of the first market on
which the components are traded to the closing of the last market on
which the components are traded. The methodology used to calculate each
index is similar to the methodology used to calculate the value of
other benchmark market-capitalization weighted indexes (including the
MSCI MXEA and MXEF Indexes, on which the Exchange may currently list
options).\4\
---------------------------------------------------------------------------
\3\ See Rule 4.12(c).
\4\ See Rule 4.10(h); see also Securities Exchange Act Release
No. 74681 (April 8, 2015), 80 FR 20032 (April 14, 2015) (SR-CBOE-
2015-023) (order approving proposed rule change to adopt rules to
permit listing and trading of options on the MSCI EAFE Index (``MXEA
options'') and the MSCI EM Index) (``MXEF options'').
---------------------------------------------------------------------------
MXACW options are options that are based on the value of the MSCI
ACWI Index. The MSCI ACWI Index is a free float-adjusted market
capitalization index that is designed to measure the equity performance
of developed markets and emerging markets. The MSCI ACWI Index consists
of component stocks from 23 developed markets \5\ and 24 emerging
markets.\6\
[[Page 21641]]
The MSCI ACWI Index consists of large- and mid-cap components across
these markets, has 2,946 constituents, and covers approximately 85% of
the global investable equity opportunity set.\7\
---------------------------------------------------------------------------
\5\ These developed markets include Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the
United States.
\6\ These emerging markets include Brazil, Chile, China,
Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia,
Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar,
Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and the United
Arab Emirates.
\7\ See MSCI ACWI Index fact sheet (dated November 30, 2023),
available at MSCI ACWI Index.
---------------------------------------------------------------------------
MSWLD options are options that are based on 1/100th of the value of
the MSCI World Index. The MSCI World Index is a free float-adjusted
market capitalization index that is designed to measure the equity
market performance of developed markets. The MSCI World Index consists
of component stocks from 23 developed markets.\8\ The MSCI World Index
consists of large- and mid-cap components across these markets, has
1,509 constituents, and covers approximately 85% of the free float-
adjusted market capitalization in each country.\9\
---------------------------------------------------------------------------
\8\ These developed markets include Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the
United States.
\9\ See MSCI World Index fact sheet (dated November 30, 2023),
available at MSCI World Index.
---------------------------------------------------------------------------
MXUSA options are options that are based on 1/100th of the value of
the MSCI USA Index. The MSCI USA Index is a free float-adjusted market
capitalization index that is designed to measure the performance of the
large- and mid-cap segments of the U.S. market. The MSCI USA Index
consists of large- and mid-cap components from the United States, has
625 constituents, and covers approximately 85% of the free float-
adjusted market capitalization in the United States.\10\
---------------------------------------------------------------------------
\10\ See MSCI USA Index fact sheet (dated November 30, 2023),
available at MSCI USA Index.
---------------------------------------------------------------------------
With a smaller index value, MXWLD and MXUSA options may be more
accessible to a broad base of customers with diverse investment
objectives, ranging from asset owners aiming to track benchmark index
exposure, registered investment advisers in search of new sources of
yield, or individual investors seeking straightforward exposure to
options linked to global benchmark indices. The Exchange believes that
MXWLD and MXUSA options, with a smaller index value, will attract a
greater source of customer business and may enhance investors'
opportunities to hedge, or speculate on, the market risk associated
with the stocks comprising the MSCI World Index and MSCI USA Index,
respectively. Additionally, the Exchange believes investors will
benefit from the availability of MXWLD and MXUSA options, as investors
will be able to use this trading vehicle while extending a smaller
outlay of capital. The Exchange believes this may attract additional
investors, and, in turn, create a more active and liquid trading
environment.
The MSCI World Index, MSCI ACWI Index, and MSCI USA Index are
calculated using methodology as the MSCI MXEA Index and the MSCI MXEF
Index on which the Exchange currently lists options. The Exchange
believes offering MXACW, MXWLD, and MXUSA options with similar terms as
MXEA and MXEF options will benefit investors, as it will provide market
participants with additional investment and hedging strategies
consisting of options over each of these indexes.
The Exchange now proposes to amend its Fees Schedule to accommodate
the planned listing and trading of MXACW, MXUSA, and MXWLD options. The
Exchange notes that because MXEA, MXEF, MXACW, MXUSA, and MXWLD options
are intended for the same investor-base, the majority of the proposed
changes amend the Fees Schedule in connection with trading in MXACW,
MXUSA, and MXWLD options in a manner that is generally consistent with
the way in which existing transactions fees and programs currently
apply to trading in MXEA and MXEF options, with slight differences to
account for the lower spot value of underlying indexes of MXACW, MXUSA,
and MXWLD options, as compared to the underlying indexes of MXEA and
MXEF options.
Standard Transaction Rates and Surcharges
First, the Exchange proposes to adopt certain standard transaction
fees in connection with MXWLD, MXACW, and MXUSA options. Specifically,
the proposed rule change adopts certain fees for MXWLD, MXACW, and
MXUSA options in the Rate Table for All Products Excluding Underlying
Symbol A,\11\ as follows:
---------------------------------------------------------------------------
\11\ Underlying Symbol List A includes OEX, XEO, RUT, RLG, RLV,
RUI, UKXM, SPX (includes SPXW), SPESG and VIX. See Exchange Fees
Schedule, Footnote 34.
---------------------------------------------------------------------------
Adopts fee code CG, appended to all Customer (capacity
``C'') orders in MXWLD, MXACW, and MXUSA options and assesses a fee of
$0.05 per contract; \12\
---------------------------------------------------------------------------
\12\ Under the proposed changes, the Customer Large Trade
Discount Program, set forth in the Exchange Fees Schedule, will
apply to Customer orders in MXWLD, MXACW, and MXUSA (included in
``Other Index Options'' under the program). Under the program, a
customer large trade discount program in the form of a cap on
customer (``C'' capacity code) transaction fees is in effect for the
options set forth in the Customer Large Trade Discount table. For
MXWLD, MXACW, and MXUSA options, regular customer transaction fees
will only be charged for up to 5,000 contracts per order, similar to
other index options other than VIX, SPX/SPXW, SPESG, and XSP.
---------------------------------------------------------------------------
Adopts fee code MG, which is appended to all Market-Maker
(capacity ``M'') orders in MXWLD, MXACW, and MXUSA options and assesses
a fee of $0.10 per contract;
Adopts fee code FG, appended to all Firm (i.e., Clearing
Trading Permit Holders (capacity ``F'')) and Non-Clearing Trading
Permit Holder Affiliates (capacity ``L'')) orders in MXWLD, MXACW, and
MXUSA options and assesses a fee of $0.15 per contract;
Adopts fee code BG, appended to all non-Customer, non-
Market-Maker, non-Firm (i.e., Broker-Dealers (capacity ``B''), Joint
Back-Offices (capacity ``J''), Non-Trading Permit Holder Market-Makers
(capacity ``N''), and Professionals (capacity ``U'')) orders in MXWLD,
MXACW, and MXUSA options and assesses a fee of $0.20 per contract.
In addition to the above transaction fees, the proposed rule change
also adopts certain surcharges to MXWLD and MXACW options transactions
within the Rate Table--All Products Excluding Underlying Symbol List A.
Currently, the MXEA and MXEF Index License Surcharge Fee assesses a
$0.12 charge for transactions in MXEA and MXEF options. The proposed
rule change applies the MXEA and MXEF Index License Surcharge Fee to
all Firm, Market-Maker and Non-Customer transactions in MXWLD and MXACW
options and amends the fee name accordingly. The proposed rule change
also adds MXWLD, MXACW, and MXUSA options to the list of options for
which the FLEX Surcharge Fee of $0.10 (capped at $250 per trade)
applies to electronic FLEX orders executed by all capacity codes,
except for Cboe Compression Services (``CCS'') and FLEX Micro
transactions.\13\
---------------------------------------------------------------------------
\13\ The FLEX Surcharge Fee will only be charged up to the first
2,500 contracts per trade. See Exchange Fees Schedule, Footnote 17.
---------------------------------------------------------------------------
Fees Programs
The Exchange proposes to exclude MXACW, MXUSA, and MXWLD options
from the Liquidity Provider Sliding Scale, which offers credits on
Market-Maker orders where a Market-Maker achieves certain volume
thresholds based on total national Market-Maker volume in all
underlying symbols, excluding Underlying Symbol List A, MRUT, NANOS,
XSP, and FLEX Micros during the calendar month.
[[Page 21642]]
Specifically, the proposed rule change updates the Liquidity Provider
Sliding Scale table to provide that volume thresholds are based on
total national Market-Maker volume in all underlying symbols excluding
Underlying Symbol List A, MRUT, MXACW, MXUSA, MXWLD, NANOS, XSP, and
FLEX Micros during the calendar month, and that it applies in all
underlying symbols excluding Underlying Symbol List A, MRUT MXACW,
MXUSA, MXWLD, NANOS, XSP, and FLEX Micros. The proposed rule change
also updates Footnote 10 (appended to the Liquidity Provider Sliding
Scale) to provide that the Liquidity Provider Sliding Scale applies to
Liquidity Provider (Exchange Market-Maker, DPM and LMM) transaction
fees in all products except (1) Underlying Symbol List A, MRUT, MXACW,
MXUSA, MXWLD, NANOS, XSP, and FLEX Micros, (2) volume executed in open
outcry, and, and (3) volume executed via AIM Responses.
The proposed rule change updates the Volume Incentive Program
(``VIP'') table to exclude MXWLD, MXACW, and MXUSA volume from the VIP,
which currently offers a per contract credit for certain percentage
threshold levels of monthly Customer volume in all underlying symbols,
excluding Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA,
MXEF, NANOS, XSP and FLEX Micros. The proposed rule change also amends
Footnote 36 (appended to the VIP table) to reflect the proposed
exclusion of MXWLD, MXACW, and MXUSA from the VIP by providing (in
relevant part) that: the Exchange shall credit each TPH the per
contract amount resulting from each public customer (``C'' capacity
code) order transmitted by that TPH which is executed electronically on
the Exchange in all underlying symbols excluding Underlying Symbol List
A, Sector Indexes, DJX, MRUT, MXACW, MXEA, MXEF, MXUSA, MXWLD, NANOS,
XSP, FLEX Micros, QCC trades, public customer to public customer
electronic complex order executions, and executions related to
contracts that are routed to one or more exchanges in connection with
the Options Order Protection and Locked/Crossed Market Plan referenced
in Rule 5.67, provided the TPH meets certain percentage thresholds in a
month as described in the Volume Incentive Program (VIP) table; the
percentage thresholds are calculated based on the percentage of
national customer volume in all underlying symbols excluding Underlying
Symbol List A, Sector Indexes, MRUT, MXACW, MXEA, MXEF, MXUSA, MXWLD,
NANOS, DJX, XSP, and FLEX Micros entered and executed over the course
of the month; and in the event of a Cboe Options System outage or other
interruption of electronic trading on Cboe Options, the Exchange will
adjust the national customer volume in all underlying symbols excluding
Underlying Symbol List A, Sector Indexes, MRUT, MXACW, MXEA, MXEF,
MXUSA, MXWLD, NANOS, DJX, XSP, and FLEX Micros for the entire trading
day.
The proposed rule change excludes MXACW, MXUSA, and MXWLD options
from the list of products eligible to receive Break-Up Credits in
orders executed in AIM, SAM, FLEX AIM, and FLEX SAM, by amending the
Break-Up Credits table to exclude MXACW, MXUSA, and MXWLD along with
the products currently excluded--Underlying Symbol List A, Sector
Indexes, DJX, MRUT, MXEA, MXEF, NANOS, XSP and FLEX Micros.
The Exchange proposes to exclude MXACW, MXUSA, and MXWLD options
from the Marketing Fee Program by updating the Marketing Fee table to
provide that the marketing fee will be assessed on transactions of
Market-Makers (including DPMs and LMMs), resulting from customer orders
at the per contract rate provided above on all classes of equity
options, options on ETFs, options on ETNs and index options, except
that the marketing fee shall not apply to Sector Indexes, DJX, MRUT,
MXEA, MXEF, MXACW, MXUSA, MXWLD, XSP, NANOS, FLEX Micros or Underlying
Symbol List A. The Exchange notes that, in this way, MXACW, MXUSA, and
MXWLD options will be treated as most of the Exchange's other
exclusively listed products that are currently excluded from the
Marketing Fee Program. The Exchange does believe that it is necessary
at the point of newly listing and trading for MXACW, MXUSA, and MXWLD
options to be eligible for the Marketing Fee Program and may determine
in the future to submit a fee filing to add MRUT to the Marketing Fee
Program if the Exchange believes it would potentially generate more
customer order flow in MXACW, MXUSA, and MXWLD options.
The proposed rule change also updates the Select Customer Options
Reduction (``SCORe'') program table to include MXWLD, MXACW, and MXUSA
volume in the SCORe program, which currently offers a per Retail
contract discount for certain percentage threshold levels of monthly
Retail,\14\ Non-FLEX Customer (``C'' origin code) volume in the
following options classes: SPX (including SPXW), VIX, RUT, MXEA, MXEF &
XSP (``Qualifying Classes''). The SCORe program is available to any
Trading Permit Holder (``TPH'') Originating Clearing Firm or non-TPH
Originating Clearing Firm that sign up for the program.\15\ The SCORe
program utilizes Discount Tiers to determine the Originating Firm's
applicable corresponding discounts. To determine the Discount Tier, an
Originating Firm's Retail volume in the Qualifying Classes will be
divided by total Retail volume in the Qualifying Classes executed on
the Exchange. The program then provides a discount per retail contract,
based on the determined Discount Tier thereunder. The proposed rule
change also amends Footnote 48 (appended to the SCORe program table) to
reflect the proposed inclusion of MXWLD, MXACW, and MXUSA in the SCORe
program by providing (in relevant part) that: ``Qualifying Classes''
will be defined as SPX (including SPXW), VIX, RUT, MXEA, MXEF, MXWLD,
MXACW & MXUSA.
---------------------------------------------------------------------------
\14\ For purposes of this program ``Retail'' orders will be
defined as Customer orders for which the original order size (in the
case of a simple order) or largest leg size (in the case of a
complex order) is 100 contracts or less.
\15\ For this program, an ``Originating Clearing Firm'' is
defined as either (a) the executing clearing Options Clearing
Corporation (``OCC'') number on any transaction which does not also
include a Clearing Member Trading Agreement (``CMTA'') OCC clearing
number or (b) the CMTA in the case of any transaction which does
include a CMTA OCC clearing number.
---------------------------------------------------------------------------
The Exchange proposes to exclude MXACW, MXUSA, and MXWLD options
from the Floor Broker Sliding Scale Rebate Program, which offers
rebates for Firm Facilitated and non-Firm Facilitated orders that
correspond to certain volume tiers and is designed to incentivize order
flow in multiply-listed options to the Exchange's trading floor. The
Exchange proposes to update the Floor Broker Sliding Scale Rebate
Program to provide that the Floor Broker Sliding Scale Rebate Program
applies to all products except Underlying Symbol List A, Sector
Indexes, DJX, MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP and
FLEX Micros.
The Exchange next proposes to exclude MXWLD, MXACW, and MXUSA
options from eligibility for the Order Router Subsidy (``ORS'') and
Complex Order Router Subsidy (``CORS'') Programs, in which
Participating TPHs or Participating Non-Cboe TPHs may receive a payment
from the Exchange for every executed contract routed to the Exchange
through their system in certain classes. Specifically, the proposed
rule change
[[Page 21643]]
updates the ORS/CORS Program tables to provide that ORS/CORS
participants whose total aggregate non-customer ORS and CORS volume is
greater than 0.25% of the total national volume (excluding volume in
options classes included in Underlying Symbol List A, Sector Indexes,
DJX, MRUT, MXACW, MXEA, MXEF, MXUSA, MXWLD, NANOS, XSP or FLEX Micros)
will receive an additional payment for all executed contracts exceeding
that threshold during a calendar month, and updates Footnotes 29 \16\
and 30 (appended to the ORS/CORS Program tables) to accordingly provide
that Cboe Options does not make payments under the program with respect
to executed contracts in options classes included in Underlying Symbols
List A, Sector Indexes, DJX, MRUT, MXACW, MXEA, MXEF, MXUSA, MXWLD,
NANOS, XSP or FLEX Micros.
---------------------------------------------------------------------------
\16\ As part of the proposed rule change, the Exchange proposes
a clarifying change to add MRUT and NANOS to the list of excluded
options in Footnote 29; such options are listed in the ORS table,
but were inadvertently not added to Footnote 29.
---------------------------------------------------------------------------
The Exchange also proposes to amend Footnote 6, which states that
in the event of an Exchange System outage or other interruption of
electronic trading on the Exchange that lasts longer than 60 minutes,
the Exchange will adjust the national volume in all underlying symbols
excluding Underlying Symbol List A, Sector Indexes, MRUT, MXEA, MXEF,
NANOS, DJX, XSP and FLEX Micros for the entire trading day. The
Exchange proposes to add MXACW, MXUSA, and MXWLD options to the list of
options, similar to MXEA and MXEF options.
LMM Incentive Programs
Finally, the Exchange proposes to adopt financial programs in
connection with MXACW, MXUSA, and MXWLD options for LMMs appointed to
the programs (collectively, the ``LMM Incentive Programs'').\17\ Each
LMM Incentive Program provides a rebate to TPHs with LMM appointments
to the respective incentive program that meet certain quoting standards
in the applicable series in a month. The Exchange notes that meeting or
exceeding the quoting standards (as proposed; described in further
detail below) in each of the LMM Incentive Program products to receive
the applicable rebate (as proposed; described in further detail below)
is optional for an LMM appointed to a program. Rather, an LMM appointed
to an incentive program is eligible to receive the corresponding rebate
if it satisfies the applicable quoting standards, which the Exchange
believes encourages the LMM to provide liquidity in the applicable
class and trading session. The Exchange may consider other exceptions
to the programs' quoting standards based on demonstrated legal or
regulatory requirements or other mitigating circumstances. In
calculating whether an LMM appointed to an incentive program meets the
applicable program's quoting standards each month, the Exchange
excludes from the calculation in that month the business day in which
the LMM missed meeting or exceeding the quoting standards in the
highest number of the applicable series. The heightened quoting
requirements offered by each of the LMM Incentive Programs are designed
to incentivize LMMs appointed to the LMM Incentive Programs to provide
significant liquidity in MXACW, MXUSA, and MXWLD options during the
trading day upon their listing and trading on the Exchange, which, in
turn, would provide greater trading opportunities, added market
transparency and enhanced price discovery for all market participants
in MXACW, MXUSA, and MXWLD options.
---------------------------------------------------------------------------
\17\ See Exchange Rule 3.55(a). In advance of the LMM Incentive
Program effective date, the Exchange will send a notice to solicit
applications from interested TPHs for the LMM role and will, from
among those applications, select the program LMMs. Factors to be
considered by the Exchange in selecting LMMs include adequacy of
capital, experience in trading options, presence in the trading
crowd, adherence to Exchange rules and ability to meet the
obligations specified in Rule 5.55.
---------------------------------------------------------------------------
The Exchange first proposes to adopt a MXACW LMM Incentive Program.
As proposed, the MXACW LMM Incentive Program provides that if the LMM
appointed to the MXACW LMM Incentive Program provides continuous
electronic quotes during Regular Trading Hours that meet or exceed the
proposed heightened quoting standards (below) in at least 90% of the
series 90% of the time in a given month, the LMM will receive a payment
for that month in the amount of $10,000 (or pro-rated amount if an
appointment begins after the first trading day of the month or ends
prior to the last trading day of the month).
----------------------------------------------------------------------------------------------------------------
Expiring Near term Mid term Long term
-----------------------------------------------------------------------
6 days or less 7 days to 60 61 days to 270 271 days or
Premium level ------------------ days days greater
-----------------------------------------------------
Width Size Width Size Width Size Width Size
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00............................. $0.35 10 $0.25 20 $0.40 10 $0.50 5
$1.01-$2.00............................. 0.40 10 0.35 15 0.60 7 1.00 5
$2.01-$4.00............................. 0.90 7 0.40 15 1.00 5 2.00 5
$4.01-$8.00............................. 1.00 5 0.80 10 2.00 4 3.00 4
$8.01-$16.00............................ 2.50 3 1.30 5 3.50 3 5.00 3
$16.01-$32.00........................... 5.00 2 2.00 2 4.00 2 6.00 2
Greater than $32.00..................... 10.00 2 8.00 2 10.00 2 12.00 2
----------------------------------------------------------------------------------------------------------------
The proposed rule change also adopts a performance payment under
the MXACW LMM Incentive Program, which provides that, in addition to
the above rebate, the LMM with the highest performance in satisfying
the above heightened quoting standards in a month will receive a
performance payment of $20,000 for that month. In order to be eligible
to receive the performance payment in a month, an LMM must meet or
exceed the above heightened quoting standards in that month. Highest
performance is measured as the cumulative sum of series in which an LMM
meets or exceeds the heightened quoting requirements by the total
series each day (excluding the day in which an LMM missed meeting or
exceeding the heightened quoting standard in the highest number of
series).
The Exchange next proposes to adopt a MXUSA LMM Incentive Program.
As proposed, the MXUSA LMM Incentive Program provides that if the LMM
appointed to the MXUSA LMM Incentive Program provides continuous
electronic quotes during Regular Trading Hours that meet or exceed the
proposed heightened quoting standards (below) in at least 85% of the
series 80% of the time in a given month, the
[[Page 21644]]
LMM will receive a payment for that month in the amount of $10,000 (or
pro-rated amount if an appointment begins after the first trading day
of the month or ends prior to the last trading day of the month).
----------------------------------------------------------------------------------------------------------------
Expiring Near term Mid term Long term
-----------------------------------------------------------------------
6 days or less 7 days to 60 61 days to 270 271 days or
Premium level ------------------ days days greater
-----------------------------------------------------
Width Size Width Size Width Size Width Size
----------------------------------------------------------------------------------------------------------------
$0.00-$3.00............................. $0.50 10 $0.60 10 $0.80 10 $1.00 10
$3.01-$5.00............................. 1.00 10 0.80 10 1.20 5 1.50 5
$5.01-$10.00............................ 1.50 5 1.20 10 2.50 5 2.00 5
$10.01-$20.00........................... 5.00 5 3.50 5 6.00 5 6.00 5
Greater than $20.00..................... 10.00 5 10.00 5 12.00 5 12.00 5
----------------------------------------------------------------------------------------------------------------
The proposed rule change also adopts a performance payment under
the MXUSA LMM Incentive Program, which provides that, in addition to
the above rebate, the LMM with the highest performance in satisfying
the above heightened quoting standards in a month will receive a
performance payment of $15,000 for that month. In order to be eligible
to receive the performance payment in a month, an LMM must meet or
exceed the above heightened quoting standards in that month. Highest
performance is measured as the cumulative sum of series in which an LMM
meets or exceeds the heightened quoting requirements by the total
series each day (excluding the day in which an LMM missed meeting or
exceeding the heightened quoting standard in the highest number of
series).
Finally, the Exchange proposes to adopt a MXWLD LMM Incentive
Program. As proposed, the MXWLD LMM Incentive Program provides that if
the LMM appointed to the MXWLD LMM Incentive Program provides
continuous electronic quotes during Regular Trading Hours that meet or
exceed the proposed heightened quoting standards (below) in at least
90% of the series 90% of the time in a given month, the LMM will
receive a payment for that month in the amount of $15,000 (or pro-rated
amount if an appointment begins after the first trading day of the
month or ends prior to the last trading day of the month).
----------------------------------------------------------------------------------------------------------------
Expiring Near term Mid term Long term
-----------------------------------------------------------------------
6 days or less 7 days to 60 61 days to 270 271 days or
Premium level ------------------ days days greater
-----------------------------------------------------
Width Size Width Size Width Size Width Size
----------------------------------------------------------------------------------------------------------------
$0.00-$3.00............................. $0.30 25 $0.25 25 $0.60 15 $0.80 10
$3.01-$5.00............................. 0.60 20 0.50 20 1.00 15 1.20 10
$5.01-$10.00............................ 0.75 10 0.65 10 1.25 10 1.50 10
$10.01-$20.00........................... 2.00 5 1.50 5 3.00 5 4.00 5
Greater than $20.00..................... 5.00 5 3.00 5 5.00 5 7.00 5
----------------------------------------------------------------------------------------------------------------
The proposed rule change also adopts a performance payment under
the MXWLD LMM Incentive Program, which provides that, in addition to
the above rebate, the LMM with the highest performance in satisfying
the above heightened quoting standards in a month will receive a
performance payment of $25,000 for that month. In order to be eligible
to receive the performance payment in a month, an LMM must meet or
exceed the above heightened quoting standards in that month. Highest
performance is measured as the cumulative sum of series in which an LMM
meets or exceeds the heightened quoting requirements by the total
series each day (excluding the day in which an LMM missed meeting or
exceeding the heightened quoting standard in the highest number of
series).
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.\18\ Specifically, the
Exchange believes the proposed rule change is consistent with the
section 6(b)(5) \19\ 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) \20\ 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,\21\ 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
\20\ Id.
\21\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Standard Transaction Rates and Surcharges
The Exchange believes that the proposed amendments to the Fees
Schedule in connection with standard transaction rates and surcharges
for MXACW, MXUSA, and MXWLD transactions are reasonable, equitable and
not unfairly discriminatory. Specifically, the Exchange believes that
it is reasonable to assess fees for Customer, Market-Maker, Firm and
non-Market-Maker, non-Customer, non-Firm orders in MXACW, MXUSA, and
MXWLD options that are based on, but slightly less than, those fees for
transactions in MXEA and MXEF options (all of which overly MSCI
benchmark market-capitalization
[[Page 21645]]
weighted indexes) because the underlying indexes of MXACW, MXUSA, and
MXWLD options have a lower spot value than the underlying indexes of
MXEA and MXEF options (and therefore, more contracts would need to be
traded to achieve an equivalent notional size position).
Additionally, the Exchange believes it is reasonable to charge
different fee amounts to different user types in the manner proposed
because the proposed fees are consistent with the price differentiation
that exists today for other index products. The Exchange also believes
that the proposed fee amounts for MXACW, MXUSA, and MXWLD options
orders are reasonable because the proposed fee amounts are within the
range of amounts assessed for the Exchange's other index products,
excluding Underlying Symbol List A.\22\
---------------------------------------------------------------------------
\22\ See Exchange Fees Schedule, Rate Table--All Products
Excluding Underlying Symbol List A.
---------------------------------------------------------------------------
Moreover, the Exchange believes it is reasonable to apply the MXEA
and MXEF Index License Surcharge Fee to all non-public customer (i.e.
Cboe Options and non-Trading Permit Holder market-maker, Clearing
Trading Permit Holder, JBO participant, and broker-dealer), including
professional, transactions in MXWLD and MXACW options because the
proposed surcharge helps recoup some of the costs associated with the
license for MXWLD and MXACW options. Additionally, the Exchange notes
that the surcharge amount will provide consistency between the fees
assessed for orders in MXEA and MXEF options, which, like MXWLD and
MXACW, all of which overly MSCI benchmark market-capitalization
weighted indexes and are designed to offer investors lower cost options
to obtain the potential benefits of options on a broad-based index
option and intended for a similar investor-base. Given current trading
practices, the Exchange believes that MXUSA options may have a smaller
initial trading volume (as compared to MXWLD and MXACW options), and as
such, wishes to incentivize trading in MXUSA. Therefore, the Exchange
believes it is reasonable to not assess an Index License Surcharge fee
for MXUSA options, as a way to encourage market participants to trade
the newly listed product. The Exchange believes it is reasonable to
apply the FLEX Surcharge Fee to MXWLD, MXACW, and MXUSA options, as the
FLEX Surcharge Fee assists the Exchange in recouping the cost of
developing and maintaining the FLEX system.
The Exchange believes the proposed standard transaction rates and
exclusion from certain surcharges are equitable and not unfairly
discriminatory because they will apply automatically and uniformly to
all capacities as applicable (i.e., Customer, Market-Maker, Firm and
non-Market-Maker, non-Customer, non-Firm), in MXWLD, MXACW, and MXUSA
options. The Exchange also believes that it is equitable and not
unfairly discriminatory to assess lower fees to Customers 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.
The fees offered to customers are intended to attract more customer
trading volume to the Exchange. Moreover, the options industry has a
long history of providing preferential pricing to Customers, and the
Exchange's current Fees Schedule currently does so in many places, as
do the fees structures of many other exchanges. Finally, all fee
amounts listed as applying to Customers will be applied equally to all
Customers (meaning that all Customers will be assessed the same
amount).
The Exchange believes that it is equitable and not unfairly
discriminatory to assess lower fees to Market-Makers as compared to
other market participants other than Customers because Market-Makers,
unlike other market participants, take on a number of obligations,
including quoting obligations, that other market participants do not
have. Further, these lower fees offered to Market-Makers are intended
to incent Market-Makers to quote and trade more on the Exchange,
thereby providing more trading opportunities for all market
participants. Additionally, the proposed fee for Market-Makers will be
applied equally to all Market-Makers (meaning that all Market-Makers
will be assessed the same amount). The Exchange also notes that all fee
amounts described herein are intended to attract greater order flow to
the Exchange in MXWLD, MXACW, and MXUSA options, which should therefore
serve to benefit all Exchange market participants. Similarly, it is
equitable and not unfairly discriminatory to assess lower fees to Firm
orders than those of other market participants (except Customers and
Market-Makers) because Firms also have a number of obligations (such as
membership with the OCC), significant regulatory burdens, and financial
obligations, that other market participants do not need to take on.
Finally, the proposed surcharges will be assessed uniformly to all
market participants to whom the FLEX Surcharge and Index License
Surcharge Fee apply.
Fees Programs
The Exchange believes that the proposed updates to the Fees
Schedule in connection with the application of certain fees programs to
transactions in MXWLD, MXACW, and MXUSA options are reasonable,
equitable and not unfairly discriminatory. The Exchange believes it is
reasonable to exclude MXWLD, MXACW, and MXUSA options from the
Liquidity Provider Sliding Scale, the VIP, Break-Up Credits applicable
to Customer Agency Orders in AIM and SAM, the Marketing Fee, the Floor
Broker Sliding Scale Rebate Program, and the ORS/CORS program because
other proprietary index products are also excepted from these
programs.\23\ Moreover, the Exchange notes that the proposed rule
change does not alter any of the existing programs, but instead, merely
proposes not to include transactions in MXWLD, MXACW, and MXUSA options
in those programs. Similarly, the Exchange believes it is reasonable to
include transactions in MXWLD, MXACW, and MXUSA options in the SCORe
program because other proprietary index products, including MXEA and
MXEF options, are also included in this program.\24\
---------------------------------------------------------------------------
\23\ See Exchange Fees Schedule, Liquidity Provider Sliding
Scale, Volume Incentive Program, Break-Up Credits, Marketing Fee,
Floor Broker Sliding Scale Rebate Program, Order Router Subsidy
Program and Complex Order Router Subsidy Program.
\24\ See Exchange Fees Schedule, Select Customer Options
Reduction (``SCORe'') Program.
---------------------------------------------------------------------------
The Exchange believes that excluding MXWLD, MXACW, and MXUSA
options transactions from certain fees programs is equitable and not
unfairly discriminatory because the programs will equally not apply to,
or exclude in the same manner, all market participants' orders in
MXWLD, MXACW, and MXUSA options. Similarly, the Exchange believes that
including MXWLD, MXACW, and MXUSA options transactions in the SCORe
program is equitable and not unfairly discriminatory because the
program will equally apply to, or include in the same manner, all
market participants' orders in MXWLD, MXACW, and MXUSA options. The
[[Page 21646]]
Exchange notes that the proposed rule change does not alter any of the
existing program rates or volume calculations, but instead, merely
proposes include (or not to) include transactions in MXWLD, MXACW, and
MXUSA options in those programs and volume calculations in the same way
that transactions in MXEA and MXEF options are (or are not) currently
included.
LMM Incentive Programs
The Exchange believes the proposed LMM Incentive Programs are
reasonable, equitable and not unfairly discriminatory. Particularly,
the proposed MXWLD, MXACW, and MXUSA LMM Incentive Programs are
reasonable financial incentive programs because the proposed heightened
quoting standards and rebate amount for meeting the heightened quoting
standards in each MXWLD, MXACW, and MXUSA series, as applicable, are
reasonably designed to incentivize LMMs appointed to the Programs to
meet the proposed heightened quoting standards during RTH for MXWLD,
MXACW, and MXUSA, as applicable, 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, particularly in newly listed and traded
products on the Exchange during the trading day.
The Exchange believes that the proposed heightened quoting
standards are reasonable because they are similar to the detail and
format (corresponding premiums, quote widths, and sizes) of the quoting
standards currently in place for LMM Incentive Programs for other
proprietary Exchange products.\25\ The Exchange also believes that
proposed heightened quoting requirements are reasonably tailored to
reflect market characteristics of MXWLD, MXACW, and MXUSA. The Exchange
believes the generally smaller premium levels and widths appropriately
reflect the lower-priced MXWLD, MXACW, and MXUSA product. The Exchange
believes the proposed finer premiums, smaller quote widths and smaller
sizes (comparatively) in the proposed heightened quoting standards for
the MXWLD, MXACW, and MXUSA LMM Incentive Programs reasonably reflect
what the Exchanges believes will be typical market characteristics in
MXWLD, MXACW, and MXUSA options, given their smaller spot value, their
smaller notional value and general anticipated retail base, thus
smaller, retail-sized orders. quoting requirements in the future to
accommodate expiry categories.
---------------------------------------------------------------------------
\25\ See Exchange Fees Schedule, ``MRUT LMM Incentive Program'',
``MSCI LMM Incentive Program'', ``NANOS LMM Incentive Program'',
``GTH VIX/VIXW LMM Incentive Program'', ``GTH1 SPX/SPXW LMM
Incentive Program'', ``GTH2 SPX/SPXW LMM Incentive Program'', ``RTH
XSP LMM Incentive Program'', ``GTH1 XSP LMM Incentive Program'',
``GTH2 XSP LMM Incentive Program'', and ``RTH SPESG LMM Incentive
Program''.
---------------------------------------------------------------------------
The Exchange further believes that the proposed rebate amounts
received for MXACW ($10,000), MXUSA ($10,000), and MXWLD ($15,000)
options is reasonable because they are comparable to the rebates
offered by other LMM Incentive Programs offered by the Exchange. For
example, the LMM Program for MXEA and MXEF options (the ``MSCI LMM
Program'') currently offers $15,000 per class, per month to appointed
LMMs for MXEA and MXEF options if the heightened quoting standards are
met in a given month. The Exchange believes that the proposed rebate
amounts are reasonably designed to continue to incentivize an LMM
appointed to the respective program to meet the applicable quoting
standards for MXACW, MXUSA, and MXWLD options, 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.
Similarly, the Exchange believes that the proposed performance
payments for MXACW ($20,000), MXUSA ($15,000), and MXWLD ($25,000)
options provided to the LMM with the highest performance in satisfying
the relevant heightened quoting standards for each of the proposed LMM
Programs is reasonable and equitable as the LMM Incentive Program for
MXEA and MXEF options offers a similar performance payment. All
appointed LMMs are eligible for the performance payment, which is
designed to incentivize LMMs in these newly listed products to provide
liquid and active markets in these products to encourage their growth.
Finally, the Exchange believes it is equitable and not unfairly
discriminatory to offer the financial incentive to LMMs appointed to
the LMM Incentive Programs, because it will benefit all market
participants trading in MXWLD, MXACW, and MXUSA 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
MXWLD, MXACW, and MXUSA, which can lead to increased volume, providing
for robust markets. The Exchange ultimately proposes to offer the
MXWLD, MXACW, and MXUSA LMM Incentive Programs to sufficiently
incentivize the appointed LMMs to provide key liquidity and active
markets in the newly listed and traded NANOS options during the trading
day to encourage liquidity, thereby protecting investors and the public
interest. The Exchange also notes that an LMM appointed to the Programs
may undertake added costs each month to satisfy that heightened quoting
standards (e.g., having to purchase additional logical connectivity).
The Exchange believes the proposed programs are equitable and not
unfairly discriminatory because similar programs currently exist for
LMMs appointed to programs in other proprietary products,\26\ and the
proposed programs will equally apply to any TPH that is appointed as an
LMM to the each of the LMM Incentive Programs, as applicable.
Additionally, if an appointed LMM does not satisfy the heightened
quoting standards in MXWLD, MXACW, and MXUSA (as applicable) for any
given month, then it simply will not receive the offered payment for
that month.
---------------------------------------------------------------------------
\26\ Id.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed MXWLD,
MXACW, and MXUSA transaction fees for the separate types of market
participants will be assessed automatically and uniformly to all such
market participants, i.e., all qualifying Customer orders in MXWLD,
MXACW, and MXUSA will be assessed the same amount, all Market-Maker
orders in MXWLD, MXACW, and MXUSA will be assessed the same amount, all
Firm orders in MXWLD, MXACW, and MXUSA will be assessed the same
amount, and all non-Customer, non-Market-Maker, non-Firm orders in
MXWLD, MXACW, and MXUSA will be assessed the same amount. As discussed
above, while different fees are assessed to different market
participants in some
[[Page 21647]]
circumstances, these different market participants have different
obligations and different circumstances as discussed above. For
example, Market-Makers have quoting obligations that other market
participants do not have. Additionally, the proposed surcharges will be
assessed uniformly to all market participants to whom the FLEX
Surcharge and Index License Surcharge Fee apply.
Further, the proposed rule change will uniformly exclude all
transactions in MXWLD, MXACW, and MXUSA from certain programs (i.e.,
the VIP and ORS/CORS Programs), as it currently does for MXEA and MXEF
options, and as it does for many of the Exchange's other proprietary
products. In addition to this, the proposed rule change to include
MXWLD, MXACW, and MXUSA in the SCORe program will apply equally to all
applicable transactions in MXWLD, MXACW, and MXUSA. Overall, the
proposed rule change is designed to increase incentive for customer
order flow providers to submit customer order flow in a newly listed
and traded product, which, as indicated above, contributes to a more
robust market ecosystem to the benefit of all market participants.
The Exchange also does not believe that the proposed LMM Incentive
Programs for MXWLD, MXACW, and MXUSA options would impose any burden on
intramarket competition because it applies to all LMMs appointed to
each of the LMM Incentive Programs in a uniform manner, in the same way
similar programs apply to appointed LMMs in other proprietary products
today. To the extent appointed LMMs receive a benefit that other market
participants do not, these LMMs in their role as Market-Makers on the
Exchange have different obligations and are held to different
standards. For example, Market-Makers play a crucial role in providing
active and liquid markets in their appointed products, especially in
the newly developing MXWLD, MXACW, and MXUSA market, thereby providing
a robust market which benefits all market participants. Such Market-
Makers also have obligations and regulatory requirements that other
participants do not have. The Exchange also notes that an LMM appointed
to an incentive program may undertake added costs each month to satisfy
that heightened quoting standards (e.g., having to purchase additional
logical connectivity). The Exchange also notes that the LMM Incentive
Programs, like the other LMM Incentive Programs, is designed to attract
additional order flow to the Exchange, wherein greater liquidity
benefits all market participants by providing more trading
opportunities, tighter spreads, and added market transparency and price
discovery, and signals to other market participants to direct their
order flow to those markets, thereby contributing to robust levels of
liquidity.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed rule changes apply only to products exclusively listed on the
Exchange. Additionally, the Exchange notes it operates in a highly
competitive market. In addition to Cboe Options, TPHs have numerous
alternative venues that they may participate on and director their
order flow, including 16 other options exchanges, as well as off-
exchange venues, where competitive products are available for trading.
Based on publicly available information, no single options exchange has
more than 13% of the market share of executed volume of options
trades.\27\ Therefore, no exchange possesses significant pricing power
in the execution of option order flow. Moreover, the Commission has
repeatedly expressed its preference for competition over regulatory
intervention in determining prices, products, and services in the
securities markets. Specifically, in Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \28\ 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'. . . .''.\29\ Accordingly, the Exchange does not believe its
proposed changes to the incentive programs impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\27\ See Cboe Global Markets, U.S. Options Market Volume Summary
by Month (March 6, 2024), available at https://markets.cboe.com/us/options/market_share/.
\28\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\29\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \30\ and paragraph (f) of Rule 19b-4 \31\
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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\30\ 15 U.S.C. 78s(b)(3)(A).
\31\ 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-2024-014 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-2024-014. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
[[Page 21648]]
comments more efficiently, please use only one method. The Commission
will post all comments on the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of the Exchange. 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-2024-014, and should be submitted on or before April 18, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06588 Filed 3-27-24; 8:45 am]
BILLING CODE 8011-01-P
