Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fees Schedule, 59788-59792 [2024-16108]
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Federal Register / Vol. 89, No. 141 / Tuesday, July 23, 2024 / Notices
request a hearing on any application by
emailing the SEC’s Secretary at
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the Applicants with a copy of the
request by email, if an email address is
listed for the relevant Applicant below,
or personally or by mail, if a physical
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should be received by the Commission
by 5:30 p.m. on August 12, 2024, and
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of an affidavit, or, for lawyers, a
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any facts bearing upon the desirability
of a hearing on the matter, the reason for
the request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary.
The Commission:
Secretarys-Office@sec.gov. Applicants:
Patrick T. Quinn, Esq., CION Grosvenor
Infrastructure Fund, pquinn@
cioninvestments.com, with copies to
Ryan P. Brizek, Esq., Simpson Thacher
& Bartlett LLP, Ryan.Brizek@
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Thacher & Bartlett LLP,
Mary.Richardson@stblaw.com, and
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Bartlett LLP, Wale.Oriola@stblaw.com.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
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Counsel, at (202) 551–6825 (Division of
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For
Applicants’ representations, legal
analysis, and conditions, please refer to
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2024, which may be obtained via the
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document, or for an Applicant using the
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SUPPLEMENTARY INFORMATION:
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Deputy Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100548; File No. SR–
CBOE–2024–032]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend its Fees
Schedule
July 17, 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 July 10,
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 amend
its Fees Schedule. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
[FR Doc. 2024–16072 Filed 7–22–24; 8:45 am]
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BILLING CODE 8011–01–P
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fees Schedule.3
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
17 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than 13% of the market share.4 Thus, in
such a low-concentrated and highly
competitive market, no single options
exchange possesses significant pricing
power in the execution of option order
flow. The Exchange believes that the
ever-shifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow or discontinue to
reduce use of certain categories of
products in response to fee changes.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees, and market participants can readily
trade on competing venues if they deem
pricing levels at those other venues to
be more favorable. In response to
competitive pricing, the Exchange, like
other options exchanges, offers rebates
and assesses fees for certain order types
executed on or routed through the
Exchange.
The Exchange assesses fees in
connection with orders routed away to
various exchanges. Currently, under the
Routing Fees table of the Fees Schedule,
fee codes TD, TE, TF, TG, TH and TI are
appended to certain Customer orders in
ETF and Equity options, as follows:
• fee code TD is appended to
Customer orders in ETF options
originating on an Exchange-sponsored
terminal for greater than or equal to 100
contracts routed to AMEX, BOX, EDGX,
MIAX, or PHLX, and assesses a charge
of $0.18 per contract;
• fee code TE is appended to
Customer orders in ETF/Equity options
originating on an Exchange-sponsored
terminal for less than 100 contracts
3 The Exchange initially filed the proposed fee
changes on July 1, 2024 (SR–CBOE–2024–029). On
July 10, 2024, the Exchange withdrew that filing
and submitted this proposal.
4 See Cboe Global Markets U.S. Options Monthly
Market Volume Summary (June 27, 2024), available
at https://markets.cboe.com/us/options/market_
statistics/.
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59789
routed to AMEX, BOX, EDGX, MIAX,
PHLX, and assesses no charge per
contract;
• fee code TF is appended to
Customer orders in ETF, Penny options
originating on an Exchange-sponsored
terminal for greater than or equal to 100
contracts routed to ARCA, BX, BZX, C2,
ISE, GMNI, MERC, EMLD, PERL,
NOMX, or MEMX, and assesses a charge
of $0.18 per contract;
• fee code TG is appended to
Customer orders in ETF, Non-Penny
options originating on an Exchangesponsored terminal for greater than or
equal to 100 contracts routed to ARCA,
BX, BZX, C2, ISE, GMNI, MERC, EMLD,
PERL, NOMX, or MEMX, and assesses
$0.18 per contract;
• fee code TH is appended to
Customer orders in ETF/Equity, Penny
options originating on an Exchangesponsored terminal for less than 100
contracts routed to ARCA, BX, BZX, C2,
ISE, GMNI, MERC, EMLD, PERL,
NOMX, or MEMX, and assesses no
charge per contract; and
• fee code TI is appended to
Customer orders in ETF/Equity, NonPenny options originating on an
Exchange-sponsored terminal for less
than 100 contracts routed to ARCA, BX,
BZX, C2, ISE, GMNI, MERC, EMLD,
PERL, NOMX, or MEMX, and assesses
no charge per contract.
The Exchange proposes to remove fee
codes TF, TG, TH, and TI and amend fee
codes TD and TE to consolidate
Customer routing fee codes.
Specifically, the Exchange proposes to
amend fee code TD to be appended to
all Customer orders in ETF options
originating on an Exchange-sponsored
terminal for greater than or equal to 100
contracts. Similarly, the Exchange
proposes to amend fee code TE to be
appended to all Customer orders in
ETF/Equity options originating on an
Exchange-sponsored terminal for less
than 100 contracts. The charges assessed
per contract for each fee code remain
the same under the proposed rule
change.
The Exchange notes that its current
approach to routing fees is to set forth
in a simple manner certain subcategories of fees that approximate the
cost of routing to other options
exchanges based on the cost of
transaction fees assessed by each venue
as well as a flat $0.15 assessment that
covers costs to the Exchange for routing
(i.e., clearing fees, connectivity and
other infrastructure costs, membership
fees, etc.) (collectively, ‘‘Routing
Costs’’). The Exchange then monitors
the fees charged as compared to the
costs of its routing services and adjusts
its routing fees and/or sub-categories to
ensure that the Exchange’s fees do
indeed result in a rough approximation
of overall Routing Costs, and are not
significantly higher or lower in any area.
The Exchange notes that other options
exchanges currently assess routing fees
in a similar manner to the Exchange.5
The Exchange believes that
eliminating fee codes TF, TG, TH, and
TI and amending fee codes TD and TE
to apply to applicable orders regardless
of class or which away exchange the
order is being routed to will simplify
and streamline the System’s billing
process for routed Customer orders in
ETF and equity options. As a result of
the proposed rule change, orders to
which TF, TG, TH, and TI are currently
applicable may then be absorbed into
orders to which TD and TE are currently
applicable and the routing fees for
Customer orders in ETF and equity
options originating on an Exchangesponsored terminal may be billed as one
of two fee codes, instead of six. For
example, fee code TI would, prior to
this proposal, be appended to Customer
orders in ETF/Equity Non-Penny
options originating on an Exchangesponsored terminal for less than 100
contracts routed to ARCA, BX, BZX, C2,
ISE, GMNI, MERC, EMLD, PERL,
NOMX, or MEMX; under the proposed
rule change, fee code TE would be
appended to such orders.
Additionally, the Exchange proposes
to amend the Regular Trading Hours
(‘‘RTH’’) XSP Lead Market-Makers
(‘‘LMMs’’) Incentive Program (the
‘‘Program’’). By way of background, the
Exchange offers several LMM Incentive
Programs which provide a rebate to
TPHs with LMM appointments to the
respective incentive program that meet
certain quoting standards in the
applicable series in a month.6 The
Exchange notes that meeting or
exceeding the quoting standards in each
of the LMM incentive program products
to receive the applicable rebate is
optional for an LMM appointed to a
program. Particularly, 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 appointed LMMs to
provide liquidity in the applicable class
and trading session (i.e., RTH or Global
Trading Hours). 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 Exchange proposes to amend the
current Program. Currently, the Program
provides that if an LMM appointed to
the Program provides continuous
electronic quotes during RTH that meet
or exceed the proposed heightened
quoting standards (below) in at least
95% of the series 90% of the time in a
given month, the LMM will receive (i)
a payment for that month in the amount
of $40,000 (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) and
(ii) a rebate of $0.27 per XSP contract
that is executed in RTH in MarketMaker capacity and adds liquidity
electronically contra to non-customer
capacity.
The Exchange now proposes to amend
a rebate offered under the Program. As
amended, if the LMM meets the
requirements of the Program, the LMM
will receive (i) a payment for that month
in the amount of $40,000 (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) and (ii) a rebate of $0.09 (rather
than $0.27) per XSP contract that is
executed in RTH in Market-Maker
capacity and adds liquidity
electronically contra to non-customer
capacity.
Further, the Exchange proposes to
amend the heightened quoting
requirements offered by the Program.
The current heightened quoting
requirements are as follows in the table
below:
5 See e.g., MIAX Options Exchange Fee Schedule,
Section 1(c), ‘‘Fees for Customer Orders Routed to
Another Options Exchange.’’
6 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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WIDTH
Moneyness
Expiring option
2 days to
5 days
1 day
6 days to
14 days
15 days to
35 days
VIX Value at Prior Close ≤30
[>3% ITM) ............................................................................
[3% ITM to 2% ITM) ............................................................
[2% ITM to 0.25% ITM) .......................................................
[0.25% ITM to ATM) ............................................................
[ATM to 1% OTM) ................................................................
[>1% OTM] ...........................................................................
$0.20
0.10
0.08
0.05
0.03
0.02
$0.25
0.13
0.10
0.06
0.04
0.03
$0.30
0.20
0.13
0.08
0.05
0.04
$0.40
0.25
0.16
0.10
0.06
0.05
$0.75
0.50
0.25
0.15
0.10
0.06
0.40
0.20
0.15
0.09
0.06
0.04
0.50
0.25
0.19
0.12
0.07
0.05
0.60
0.30
0.23
0.15
0.09
0.06
1.00
0.75
0.40
0.20
0.10
0.07
VIX Value at Prior Close >30
[>3% ITM) ............................................................................
[3% ITM to 2% ITM) ............................................................
[2% ITM to 0.25% ITM) .......................................................
[0.25% ITM to ATM) ............................................................
[ATM to 1% OTM) ................................................................
[>1% OTM] ...........................................................................
Size
(0 to 35 days
to expiry)
Moneyness
[>3% ITM) ........................................
[3% ITM to 2% ITM) ........................
[2% ITM to 0.25% ITM) ...................
5
5
10
0.30
0.15
0.12
0.08
0.05
0.03
Size
(0 to 35 days
to expiry)
Moneyness
[0.25% ITM to ATM) ........................
[ATM to 1% OTM) ...........................
[>1% OTM] ......................................
20
20
20
The Exchange proposes to adopt a
new set of heightened quoting standards
for the Program. The heightened quoting
standards proposed for XSP options are
as follows in the table below:
WIDTH
Moneyness
Expiring option
2 days to
5 days
1 day
6 days to
14 days
15 days to
35 days
VIX Value at Prior Close ≤30
[>3% ITM) ............................................................................
[3% ITM to 2% ITM) ............................................................
[2% ITM to 0.25% ITM) .......................................................
[0.25% ITM to ATM) ............................................................
[ATM to 1% OTM) ................................................................
[>1% OTM] ...........................................................................
$0.30
0.20
0.12
0.06
0.03
0.02
$0.30
0.20
0.12
0.08
0.04
0.03
$0.30
0.20
0.15
0.08
0.05
0.04
$0.50
0.30
0.20
0.12
0.06
0.05
$0.75
0.50
0.30
0.18
0.10
0.06
0.50
0.30
0.20
0.12
0.06
0.04
0.60
0.30
0.25
0.15
0.07
0.05
0.60
0.35
0.30
0.15
0.09
0.06
1.00
0.80
0.50
0.25
0.10
0.07
VIX Value at Prior Close >30
[>3% ITM) ............................................................................
[3% ITM to 2% ITM) ............................................................
[2% ITM to 0.25% ITM) .......................................................
[0.25% ITM to ATM) ............................................................
[ATM to 1% OTM) ................................................................
[>1% OTM] ...........................................................................
Moneyness
Size
(0 to 35 days
to expiry)
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[>3% ITM) ........................................
[3% ITM to 2% ITM) ........................
[2% ITM to 0.25% ITM) ...................
[0.25% ITM to ATM) ........................
[ATM to 1% OTM) ...........................
[>1% OTM] ......................................
5
5
10
20
20
20
The proposed heightened quoting
standards are designed to incentivize
LMMs appointed to the Program to
provide significant liquidity in XSP
options during the RTH session, which,
in turn, would provide greater trading
opportunities, added market
transparency and enhanced price
discovery for all market participants in
XSP.
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0.40
0.25
0.18
0.10
0.05
0.03
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.7 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 8 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
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8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 9 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange also believes the
proposed rule change is consistent with
9 Id.
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Section 6(b)(4) of the Act,10 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
Trading Permit Holders and other
persons using its facilities.
The Exchange believes that the
proposed rule change to remove fee
codes TF, TG, TH, and TI and amend fee
codes TD and TE is reasonable in that
it is reasonably designed to simplify and
streamline the System’s billing process
for routed Customer orders in ETF and
equity options. As a result of the
proposed rule change, orders to which
fee codes TF, TG, TH, and TI are
currently applicable may then be
absorbed into the orders to which fee
codes TD and TE are applicable and the
routing fees for Customer orders in ETF
and equity options originating on an
Exchange-sponsored terminal may be
billed as one of two fee codes, instead
of six.
The Exchange notes that routing
through the Exchange is optional and
that TPHs will continue to be able to
choose where to route their Customer
orders in ETF and equity options in the
same sub-category group of away
exchanges as they currently may choose
to route. The Exchange believes that the
proposed rule change is equitable and
not unfairly discriminatory because
TPHs’ routed Customer orders in ETF/
Equity options will continue to be
automatically and uniformly assessed
the applicable routing charges.
Additionally, the Exchange believes
that it is reasonable to amend the
Program’s heightened quoting
standards, as the proposed new quoting
requirements are overall reasonably
designed to continue to encourage
LMMs appointed to the Program to
provide significant liquidity in XSP
options, which benefits investors overall
by providing more trading
opportunities, tighter spreads, and
overall enhanced market quality to the
benefit of all market participants.
The Exchange believes that the
proposed changes to width sizes for the
Program’s heightened quoting
requirements eases the heightened
quoting standards in a manner that
makes it easier for appointed LMMs to
achieve such requirements and will
incentivize an increase in quoting
activity in XSP options. Particularly, by
increasing certain quote widths, the
Exchange believes the proposed changes
will encourage appointed LMMs to post
more aggressive quotes in XSP options,
in order to meet the heightened quoting
standards, as amended, and receive the
rebates offered under the incentive
10 15
U.S.C. 78f(b)(4).
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program, resulting in tighter spreads
and increased liquidity to the benefits of
investors. The Exchange also believes
that the proposed width sizes are
reasonable because they remain
generally aligned with the current
heightened standards in the Program, as
the proposed width sizes are only
marginally changed in order to
incentivize an increase in quoting
activity.
The Exchange further believes that the
proposed rule change to amend a rebate
amount received under the program,
from $0.27 to $0.09 per XSP contract
that is executed in RTH in MarketMaker capacity and adds liquidity
electronically contra to non-customer
capacity, is reasonable because the
rebate, as amended, is an incentive
reasonably designed to continue to
encourage appointed LMMs to provide
liquidity electronically contra to noncustomer capacity in XSP options
during the trading day. The Exchange
notes that LMMs appointed to the
Program will continue to receive a
monthly rebate and that it is not
required to maintain this additional per
contract credit incentive.
The Exchange believes that the
proposed changes to the Program are
equitable and not unfairly
discriminatory. Specifically, the
changes to the Program will apply
equally to any and all TPHs with LMM
appointments to the Program that seek
to meet the Program’s quoting standards
in order to receive the rebates offered.
The Exchange additionally notes that, if
an LMM appointed to the Program does
not satisfy the corresponding
heightened quoting standard for any
given month, then it simply will not
receive the rebate offered by the
Program for that month.
Regarding the Program generally, the
Exchange believes it is reasonable,
equitable and not unfairly
discriminatory to continue to offer
financial incentives to LMMs appointed
to the Program, because it benefits all
market participants trading in XSP
options during RTH. The incentive
program encourages the appointed
LMMs to satisfy the applicable quoting
standards, which may increase liquidity
and provide more trading opportunities
and tighter spreads. Indeed, the
Exchange notes that these LMMs serve
a crucial role in providing quotes and
the opportunity for market participants
to trade XSP options, which can lead to
increased volume, providing robust
markets. The Exchange ultimately offers
the Program, as amended, to sufficiently
incentivize LMMs appointed to the
Program to provide key liquidity and
active markets in the XSP options
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during RTH and believes that the
incentive program, as amended, will
continue to encourage increased quoting
to add liquidity in XSP options, thereby
protecting investors and the public
interest. The Exchange also notes that
an LMM appointed to an incentive
program may undertake added costs
each month to satisfy that heightened
quoting standards (e.g., having to
purchase additional logical
connectivity).
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 the proposed
rule change to remove certain routing
fee codes and to update other routing
fee codes accordingly to apply instead,
will impose any burden on intramarket
competition because all TPHs’ routed
Customer orders in ETF/Equity options
will continue to be able to route to the
same sub-category group of away
exchanges and will automatically and
uniformly be assessed the applicable
routing fees. Further, the proposed
changes to the Program will apply to all
LMMs appointed to the Program in a
uniform manner. To the extent these
LMMs appointed to an incentive
program receive a benefit that other
market participants do not, as stated,
these LMMs in their role as MarketMakers on the Exchange have different
obligations and are held to different
standards. For example, Market-Makers
play a crucial role in providing active
and liquid markets in their appointed
products, thereby providing a robust
market which benefits all market
participants. Such Market-Makers also
have obligations and regulatory
requirements that other participants do
not have. The Exchange also notes that
an LMM appointed to an incentive
program may undertake added costs
each month to satisfy that heightened
quoting standards (e.g., having to
purchase additional logical
connectivity). The Exchange also notes
that the incentive programs are designed
to attract additional order flow to the
Exchange, wherein greater liquidity
benefits all market participants by
providing more trading opportunities,
tighter spreads, and added market
transparency and price discovery, and
signals to other market participants to
direct their order flow to those markets,
thereby contributing to robust levels of
liquidity. As a result, the Exchange
believes that the proposed change
furthers the Commission’s goal in
E:\FR\FM\23JYN1.SGM
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ddrumheller on DSK120RN23PROD with NOTICES1
59792
Federal Register / Vol. 89, No. 141 / Tuesday, July 23, 2024 / Notices
adopting Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 11
The Exchange does not believe that
the proposed rule changes in connection
with routing fees will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because, as previously discussed, the
Exchange operates in a highly
competitive market. The Exchange notes
that, in addition to Cboe Options, TPHs
have numerous alternative venues that
they may participate on and direct their
order flow, including 16 other options
exchanges and off-exchange venues.
Additionally, the Exchange represents a
small percentage of the overall market.
Based on publicly available information,
no single options exchange has more
than 13% of the market share.12
Therefore, no exchange possesses
significant pricing power in the
execution of option order flow. Indeed,
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. Moreover, the Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 13 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’ . . . .’’.14 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
11 See Securities Exchange Act Release No. 51808,
70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
12 See supra note 4.
13 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
14 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
15 15 U.S.C. 78s(b)(3)(A).
16 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
18:47 Jul 22, 2024
Jkt 262001
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 15 and paragraph (f) of Rule
19b–4 16 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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–2024–032 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–2024–032. This file
number should be included on the
subject line if email is used. To help the
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CBOE–2024–032, and should be
submitted on or before August 13, 2024.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.17
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–16108 Filed 7–22–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100549; File No. SR–
PEARL–2024–30]
Self-Regulatory Organizations; MIAX
PEARL LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Exchange
Rule 404, Series of Option Contracts
Open for Trading To Amend the Strike
Interval for Options on SPDR® Gold
Shares
July 17, 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 July 9,
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\23JYN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 141 (Tuesday, July 23, 2024)]
[Notices]
[Pages 59788-59792]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16108]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100548; File No. SR-CBOE-2024-032]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
its Fees Schedule
July 17, 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 July 10, 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 amend its Fees Schedule. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
July 1, 2024 (SR-CBOE-2024-029). On July 10, 2024, the Exchange
withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 17 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 13% of the market share.\4\
Thus, in such a low-concentrated and highly competitive market, no
single options exchange possesses significant pricing power in the
execution of option order flow. The Exchange believes that the ever-
shifting market share among the exchanges from month to month
demonstrates that market participants can shift order flow or
discontinue to reduce use of certain categories of products in response
to fee changes. Accordingly, competitive forces constrain the
Exchange's transaction fees, and market participants can readily trade
on competing venues if they deem pricing levels at those other venues
to be more favorable. In response to competitive pricing, the Exchange,
like other options exchanges, offers rebates and assesses fees for
certain order types executed on or routed through the Exchange.
---------------------------------------------------------------------------
\4\ See Cboe Global Markets U.S. Options Monthly Market Volume
Summary (June 27, 2024), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
The Exchange assesses fees in connection with orders routed away to
various exchanges. Currently, under the Routing Fees table of the Fees
Schedule, fee codes TD, TE, TF, TG, TH and TI are appended to certain
Customer orders in ETF and Equity options, as follows:
fee code TD is appended to Customer orders in ETF options
originating on an Exchange-sponsored terminal for greater than or equal
to 100 contracts routed to AMEX, BOX, EDGX, MIAX, or PHLX, and assesses
a charge of $0.18 per contract;
fee code TE is appended to Customer orders in ETF/Equity
options originating on an Exchange-sponsored terminal for less than 100
contracts
[[Page 59789]]
routed to AMEX, BOX, EDGX, MIAX, PHLX, and assesses no charge per
contract;
fee code TF is appended to Customer orders in ETF, Penny
options originating on an Exchange-sponsored terminal for greater than
or equal to 100 contracts routed to ARCA, BX, BZX, C2, ISE, GMNI, MERC,
EMLD, PERL, NOMX, or MEMX, and assesses a charge of $0.18 per contract;
fee code TG is appended to Customer orders in ETF, Non-
Penny options originating on an Exchange-sponsored terminal for greater
than or equal to 100 contracts routed to ARCA, BX, BZX, C2, ISE, GMNI,
MERC, EMLD, PERL, NOMX, or MEMX, and assesses $0.18 per contract;
fee code TH is appended to Customer orders in ETF/Equity,
Penny options originating on an Exchange-sponsored terminal for less
than 100 contracts routed to ARCA, BX, BZX, C2, ISE, GMNI, MERC, EMLD,
PERL, NOMX, or MEMX, and assesses no charge per contract; and
fee code TI is appended to Customer orders in ETF/Equity,
Non-Penny options originating on an Exchange-sponsored terminal for
less than 100 contracts routed to ARCA, BX, BZX, C2, ISE, GMNI, MERC,
EMLD, PERL, NOMX, or MEMX, and assesses no charge per contract.
The Exchange proposes to remove fee codes TF, TG, TH, and TI and
amend fee codes TD and TE to consolidate Customer routing fee codes.
Specifically, the Exchange proposes to amend fee code TD to be appended
to all Customer orders in ETF options originating on an Exchange-
sponsored terminal for greater than or equal to 100 contracts.
Similarly, the Exchange proposes to amend fee code TE to be appended to
all Customer orders in ETF/Equity options originating on an Exchange-
sponsored terminal for less than 100 contracts. The charges assessed
per contract for each fee code remain the same under the proposed rule
change.
The Exchange notes that its current approach to routing fees is to
set forth in a simple manner certain sub-categories of fees that
approximate the cost of routing to other options exchanges based on the
cost of transaction fees assessed by each venue as well as a flat $0.15
assessment that covers costs to the Exchange for routing (i.e.,
clearing fees, connectivity and other infrastructure costs, membership
fees, etc.) (collectively, ``Routing Costs''). The Exchange then
monitors the fees charged as compared to the costs of its routing
services and adjusts its routing fees and/or sub-categories to ensure
that the Exchange's fees do indeed result in a rough approximation of
overall Routing Costs, and are not significantly higher or lower in any
area. The Exchange notes that other options exchanges currently assess
routing fees in a similar manner to the Exchange.\5\
---------------------------------------------------------------------------
\5\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c),
``Fees for Customer Orders Routed to Another Options Exchange.''
---------------------------------------------------------------------------
The Exchange believes that eliminating fee codes TF, TG, TH, and TI
and amending fee codes TD and TE to apply to applicable orders
regardless of class or which away exchange the order is being routed to
will simplify and streamline the System's billing process for routed
Customer orders in ETF and equity options. As a result of the proposed
rule change, orders to which TF, TG, TH, and TI are currently
applicable may then be absorbed into orders to which TD and TE are
currently applicable and the routing fees for Customer orders in ETF
and equity options originating on an Exchange-sponsored terminal may be
billed as one of two fee codes, instead of six. For example, fee code
TI would, prior to this proposal, be appended to Customer orders in
ETF/Equity Non-Penny options originating on an Exchange-sponsored
terminal for less than 100 contracts routed to ARCA, BX, BZX, C2, ISE,
GMNI, MERC, EMLD, PERL, NOMX, or MEMX; under the proposed rule change,
fee code TE would be appended to such orders.
Additionally, the Exchange proposes to amend the Regular Trading
Hours (``RTH'') XSP Lead Market-Makers (``LMMs'') Incentive Program
(the ``Program''). By way of background, the Exchange offers several
LMM Incentive Programs which provide a rebate to TPHs with LMM
appointments to the respective incentive program that meet certain
quoting standards in the applicable series in a month.\6\ The Exchange
notes that meeting or exceeding the quoting standards in each of the
LMM incentive program products to receive the applicable rebate is
optional for an LMM appointed to a program. Particularly, 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 appointed LMMs to provide
liquidity in the applicable class and trading session (i.e., RTH or
Global Trading Hours). 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.
---------------------------------------------------------------------------
\6\ 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 proposes to amend the current Program. Currently, the
Program provides that if an LMM appointed to the Program provides
continuous electronic quotes during RTH that meet or exceed the
proposed heightened quoting standards (below) in at least 95% of the
series 90% of the time in a given month, the LMM will receive (i) a
payment for that month in the amount of $40,000 (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) and (ii) a rebate of $0.27
per XSP contract that is executed in RTH in Market-Maker capacity and
adds liquidity electronically contra to non-customer capacity.
The Exchange now proposes to amend a rebate offered under the
Program. As amended, if the LMM meets the requirements of the Program,
the LMM will receive (i) a payment for that month in the amount of
$40,000 (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) and (ii) a rebate of $0.09 (rather than $0.27) per XSP contract
that is executed in RTH in Market-Maker capacity and adds liquidity
electronically contra to non-customer capacity.
Further, the Exchange proposes to amend the heightened quoting
requirements offered by the Program. The current heightened quoting
requirements are as follows in the table below:
[[Page 59790]]
Width
----------------------------------------------------------------------------------------------------------------
Expiring 2 days to 5 6 days to 14 15 days to 35
Moneyness option 1 day days days days
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <=30
----------------------------------------------------------------------------------------------------------------
[>3% ITM)....................... $0.20 $0.25 $0.30 $0.40 $0.75
[3% ITM to 2% ITM).............. 0.10 0.13 0.20 0.25 0.50
[2% ITM to 0.25% ITM)........... 0.08 0.10 0.13 0.16 0.25
[0.25% ITM to ATM).............. 0.05 0.06 0.08 0.10 0.15
[ATM to 1% OTM)................. 0.03 0.04 0.05 0.06 0.10
[>1% OTM]....................... 0.02 0.03 0.04 0.05 0.06
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close 30
----------------------------------------------------------------------------------------------------------------
[>3% ITM)....................... 0.30 0.40 0.50 0.60 1.00
[3% ITM to 2% ITM).............. 0.15 0.20 0.25 0.30 0.75
[2% ITM to 0.25% ITM)........... 0.12 0.15 0.19 0.23 0.40
[0.25% ITM to ATM).............. 0.08 0.09 0.12 0.15 0.20
[ATM to 1% OTM)................. 0.05 0.06 0.07 0.09 0.10
[>1% OTM]....................... 0.03 0.04 0.05 0.06 0.07
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
Size (0 to 35
Moneyness days to
expiry)
------------------------------------------------------------------------
[>3% ITM)............................................... 5
[3% ITM to 2% ITM)...................................... 5
[2% ITM to 0.25% ITM)................................... 10
[0.25% ITM to ATM)...................................... 20
[ATM to 1% OTM)......................................... 20
[>1% OTM]............................................... 20
------------------------------------------------------------------------
The Exchange proposes to adopt a new set of heightened quoting
standards for the Program. The heightened quoting standards proposed
for XSP options are as follows in the table below:
Width
----------------------------------------------------------------------------------------------------------------
Expiring 2 days to 5 6 days to 14 15 days to 35
Moneyness option 1 day days days days
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <=30
----------------------------------------------------------------------------------------------------------------
[>3% ITM)....................... $0.30 $0.30 $0.30 $0.50 $0.75
[3% ITM to 2% ITM).............. 0.20 0.20 0.20 0.30 0.50
[2% ITM to 0.25% ITM)........... 0.12 0.12 0.15 0.20 0.30
[0.25% ITM to ATM).............. 0.06 0.08 0.08 0.12 0.18
[ATM to 1% OTM)................. 0.03 0.04 0.05 0.06 0.10
[>1% OTM]....................... 0.02 0.03 0.04 0.05 0.06
----------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close 30
----------------------------------------------------------------------------------------------------------------
[>3% ITM)....................... 0.40 0.50 0.60 0.60 1.00
[3% ITM to 2% ITM).............. 0.25 0.30 0.30 0.35 0.80
[2% ITM to 0.25% ITM)........... 0.18 0.20 0.25 0.30 0.50
[0.25% ITM to ATM).............. 0.10 0.12 0.15 0.15 0.25
[ATM to 1% OTM)................. 0.05 0.06 0.07 0.09 0.10
[>1% OTM]....................... 0.03 0.04 0.05 0.06 0.07
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
Size (0 to 35
Moneyness days to
expiry)
------------------------------------------------------------------------
[>3% ITM)............................................... 5
[3% ITM to 2% ITM)...................................... 5
[2% ITM to 0.25% ITM)................................... 10
[0.25% ITM to ATM)...................................... 20
[ATM to 1% OTM)......................................... 20
[>1% OTM]............................................... 20
------------------------------------------------------------------------
The proposed heightened quoting standards are designed to
incentivize LMMs appointed to the Program to provide significant
liquidity in XSP options during the RTH session, which, in turn, would
provide greater trading opportunities, added market transparency and
enhanced price discovery for all market participants in XSP.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with
[[Page 59791]]
Section 6(b)(4) of the Act,\10\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its Trading Permit Holders and other persons using
its facilities.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
\10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change to remove fee
codes TF, TG, TH, and TI and amend fee codes TD and TE is reasonable in
that it is reasonably designed to simplify and streamline the System's
billing process for routed Customer orders in ETF and equity options.
As a result of the proposed rule change, orders to which fee codes TF,
TG, TH, and TI are currently applicable may then be absorbed into the
orders to which fee codes TD and TE are applicable and the routing fees
for Customer orders in ETF and equity options originating on an
Exchange-sponsored terminal may be billed as one of two fee codes,
instead of six.
The Exchange notes that routing through the Exchange is optional
and that TPHs will continue to be able to choose where to route their
Customer orders in ETF and equity options in the same sub-category
group of away exchanges as they currently may choose to route. The
Exchange believes that the proposed rule change is equitable and not
unfairly discriminatory because TPHs' routed Customer orders in ETF/
Equity options will continue to be automatically and uniformly assessed
the applicable routing charges.
Additionally, the Exchange believes that it is reasonable to amend
the Program's heightened quoting standards, as the proposed new quoting
requirements are overall reasonably designed to continue to encourage
LMMs appointed to the Program to provide significant liquidity in XSP
options, which benefits investors overall by providing more trading
opportunities, tighter spreads, and overall enhanced market quality to
the benefit of all market participants.
The Exchange believes that the proposed changes to width sizes for
the Program's heightened quoting requirements eases the heightened
quoting standards in a manner that makes it easier for appointed LMMs
to achieve such requirements and will incentivize an increase in
quoting activity in XSP options. Particularly, by increasing certain
quote widths, the Exchange believes the proposed changes will encourage
appointed LMMs to post more aggressive quotes in XSP options, in order
to meet the heightened quoting standards, as amended, and receive the
rebates offered under the incentive program, resulting in tighter
spreads and increased liquidity to the benefits of investors. The
Exchange also believes that the proposed width sizes are reasonable
because they remain generally aligned with the current heightened
standards in the Program, as the proposed width sizes are only
marginally changed in order to incentivize an increase in quoting
activity.
The Exchange further believes that the proposed rule change to
amend a rebate amount received under the program, from $0.27 to $0.09
per XSP contract that is executed in RTH in Market-Maker capacity and
adds liquidity electronically contra to non-customer capacity, is
reasonable because the rebate, as amended, is an incentive reasonably
designed to continue to encourage appointed LMMs to provide liquidity
electronically contra to non-customer capacity in XSP options during
the trading day. The Exchange notes that LMMs appointed to the Program
will continue to receive a monthly rebate and that it is not required
to maintain this additional per contract credit incentive.
The Exchange believes that the proposed changes to the Program are
equitable and not unfairly discriminatory. Specifically, the changes to
the Program will apply equally to any and all TPHs with LMM
appointments to the Program that seek to meet the Program's quoting
standards in order to receive the rebates offered. The Exchange
additionally notes that, if an LMM appointed to the Program does not
satisfy the corresponding heightened quoting standard for any given
month, then it simply will not receive the rebate offered by the
Program for that month.
Regarding the Program generally, the Exchange believes it is
reasonable, equitable and not unfairly discriminatory to continue to
offer financial incentives to LMMs appointed to the Program, because it
benefits all market participants trading in XSP options during RTH. The
incentive program encourages the appointed LMMs to satisfy the
applicable quoting standards, which may increase liquidity and provide
more trading opportunities and tighter spreads. Indeed, the Exchange
notes that these LMMs serve a crucial role in providing quotes and the
opportunity for market participants to trade XSP options, which can
lead to increased volume, providing robust markets. The Exchange
ultimately offers the Program, as amended, to sufficiently incentivize
LMMs appointed to the Program to provide key liquidity and active
markets in the XSP options during RTH and believes that the incentive
program, as amended, will continue to encourage increased quoting to
add liquidity in XSP options, thereby protecting investors and the
public interest. The Exchange also notes that an LMM appointed to an
incentive program may undertake added costs each month to satisfy that
heightened quoting standards (e.g., having to purchase additional
logical connectivity).
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 the proposed rule change to remove certain routing fee codes
and to update other routing fee codes accordingly to apply instead,
will impose any burden on intramarket competition because all TPHs'
routed Customer orders in ETF/Equity options will continue to be able
to route to the same sub-category group of away exchanges and will
automatically and uniformly be assessed the applicable routing fees.
Further, the proposed changes to the Program will apply to all LMMs
appointed to the Program in a uniform manner. To the extent these LMMs
appointed to an incentive program receive a benefit that other market
participants do not, as stated, these LMMs in their role as 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,
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 incentive programs are designed to attract additional
order flow to the Exchange, wherein greater liquidity benefits all
market participants by providing more trading opportunities, tighter
spreads, and added market transparency and price discovery, and signals
to other market participants to direct their order flow to those
markets, thereby contributing to robust levels of liquidity. As a
result, the Exchange believes that the proposed change furthers the
Commission's goal in
[[Page 59792]]
adopting Regulation NMS of fostering competition among orders, which
promotes ``more efficient pricing of individual stocks for all types of
orders, large and small.'' \11\
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\11\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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The Exchange does not believe that the proposed rule changes in
connection with routing fees will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because, as previously discussed, the Exchange
operates in a highly competitive market. The Exchange notes that, in
addition to Cboe Options, TPHs have numerous alternative venues that
they may participate on and direct their order flow, including 16 other
options exchanges and off-exchange venues. Additionally, the Exchange
represents a small percentage of the overall market. Based on publicly
available information, no single options exchange has more than 13% of
the market share.\12\ Therefore, no exchange possesses significant
pricing power in the execution of option order flow. Indeed,
participants can readily choose to send their orders to other exchange
and off-exchange venues if they deem fee levels at those other venues
to be more favorable. Moreover, the Commission has repeatedly expressed
its preference for competition over regulatory intervention in
determining prices, products, and services in the securities markets.
Specifically, in Regulation NMS, the Commission highlighted the
importance of market forces in determining prices and SRO revenues and,
also, recognized that current regulation of the market system ``has
been remarkably successful in promoting market competition in its
broader forms that are most important to investors and listed
companies.'' \13\ The fact that this market is competitive has also
long been recognized by the courts. In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers' . . . .''.\14\ Accordingly, the Exchange does not believe its
proposed fee change imposes any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\12\ See supra note 4.
\13\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\14\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \15\ and paragraph (f) of Rule 19b-4 \16\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CBOE-2024-032 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-2024-032. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549 on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CBOE-2024-032, and should be
submitted on or before August 13, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-16108 Filed 7-22-24; 8:45 am]
BILLING CODE 8011-01-P
