Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fees Schedule, 84424-84430 [2024-24371]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 204 (Tuesday, October 22, 2024)]
[Notices]
[Pages 84424-84430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24371]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101367; File No. SR-CBOE-2024-044]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
its Fees Schedule

October 16, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 1, 2024, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities 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\ 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

[[Page 84425]]

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, effective October 
1, 2024.
XSP Fees
    The Exchange first proposes to amend certain fees related to 
transactions in Mini-SPX Index (``XSP'') options. Specifically, the 
proposed rule changes amends and adopts certain fees for XSP in the 
``Rate Table for All Products Excluding Underlying Symbol List A'', as 
follows:
     Amends fee code XC, appended to all Customer (capacity 
``C'') orders in XSP that are for less than 10 contracts and provides a 
rebate of $0.13 per contract, to provide a rebate of $0.30 per 
contract.
     Amends fee code MY, appended to all Market-Maker (capacity 
``M'') in XSP contra to non-customers that remove liquidity and that 
are executed electronically and assesses a fee of $0.14 per contract, 
to assess a fee of $0.30 per contract.
GTH Executing Agent Subsidy Program
    Next, the Exchange proposes to amend the Global Trading Hours 
(``GTH'') Executing Agent Subsidy Program, set forth in the Fees 
Schedule. The GTH Executing Agent Subsidy Program offers a monthly 
subsidy to Trading Permit Holders (``TPHs'') with executing agent 
operations \3\ during the GTH trading session. Pursuant to the current 
GTH Executing Agent Subsidy Program, a designated GTH executing agent 
receives the monthly subsidy amount that corresponds to the number of 
contracts executed on behalf of customers (including public and broker-
dealer customers) during GTH in a calendar month per the GTH Executing 
Agent Subsidy Program table, as shown in the table below. Qualifying 
customer volume is limited to SPX and VIX options.
---------------------------------------------------------------------------

    \3\ Under current rules, an executing agent operation is one 
that accepts orders from customers (who may be public or broker-
dealer customers) and submits the orders for execution (either 
directly to the Exchange or through another TPH).

------------------------------------------------------------------------
       GTH Monthly customer SPX and VIX options volume          Subsidy
------------------------------------------------------------------------
0-19,999 contracts...........................................      $0.00
20,000-99,999 contracts......................................     15,000
100,000+ contracts...........................................     50,000
------------------------------------------------------------------------

    To become a designated GTH executing agent, a TPH must submit a 
form to the Exchange no later than 3:00 p.m. on the second to last 
business day of a calendar month to be designated an GTH executing 
agent under the program, and thus eligible for the subsidy, beginning 
the following calendar month. The current criteria states that a TPH 
must include on or with the form information demonstrating it maintains 
an GTH executing agent operation: (1) physically staffed throughout 
each entire GTH trading session and (2) willing to accept and execute 
orders on behalf of customers. The designation will be effective the 
first business day of the following calendar month, subject to the 
Exchange's confirmation the TPH's GTH executing agent operations 
satisfies these two conditions and will remain in effect until the 
Exchange receives an email from the TPH terminating its designation or 
the Exchange determines the TPH's GTH executing agent operation no 
longer satisfies these two conditions.
    The Exchange proposes to amend the GTH Executing Agent Subsidy 
Program to include Professional Customers (i.e., capacity ``U'') in the 
program, so that a designated GTH executing agent receives the monthly 
subsidy amount that corresponds to the number of contracts executed on 
behalf of customers (including professional, public and broker-dealer 
customers) during GTH in a calendar month per the GTH Executing Agent 
Subsidy Program table.
    The proposed changes are designed to continue to encourage 
designated GTH executing agents to increase their order flow executed 
as agent (on behalf of customers, including professional customers) in 
SPX and VIX options that trade during GTH, to meet the volume 
thresholds and receive the corresponding subsidies. The Exchange notes 
that incentivizing TPHs to conduct executing agent operations willing 
to accept orders from all customers, including professional customers, 
during GTH is intended to increase customer accessibility to the GTH 
trading session. The Exchange believes that increased order flow 
through designated GTH executing agents would allow the Exchange to 
grow participation during GTH, which may benefit all market 
participants, as additional liquidity to the Exchange during GTH would 
create more trading opportunities during GTH, and in turn attract 
market participants to submit additional order flow during GTH.
Flex Surcharge Fee
    The Exchange also proposes to adopt the FLEX Surcharge fee for XND 
(Nasdaq 100 Micro Index Options) FLEX Options orders. Currently, the 
Exchange assesses a FLEX Surcharge Fee of $0.10-per-contract credit for 
DJX, MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NDX, NDXP and XSP FLEX 
Options orders (all capacity codes) executed electronically (except for 
Cboe Compression Service (``CCS'') and FLEX Micro transactions). The 
FLEX Surcharge Fee is only charged up to the first 2,500 contracts per 
trade ($250 per trade). The Exchange proposes to amend its Fees 
Schedule, to assess the FLEX Surcharge Fee to XND. The FLEX Surcharge 
Fee assists the Exchange in recouping the cost of developing and 
maintaining the FLEX system.
RTH XSP LMM Incentive Program
    Finally, the Exchange proposes to amend its Regular Trading Hours 
(``RTH'') XSP Lead Market-Maker (``LMM'') 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. The Exchange notes that meeting or 
exceeding the quoting standards in each of the LMM Incentive Program 
products to receive the applicable 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 GTH). 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

[[Page 84426]]

or exceed the basic quoting standards (below) in at least 95% of the 
series 93% of the time in a given month, the LMM will receive (i) a 
payment for that month in the amount of $40,000 (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 
per XSP contract that is executed in RTH in Market-Maker capacity and 
adds liquidity electronically contra to non-customer capacity.

                                                                          Width
--------------------------------------------------------------------------------------------------------------------------------------------------------
                          Moneyness *                            Expiring option      1 day      2 days to 5 days  6 days to 14 days  15 days to 35 days
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <=30:
    [>3% ITM).................................................              $0.20        $0.25              $0.25              $0.50               $1.00
    [3% ITM to 2% ITM)........................................               0.10         0.15               0.15               0.25                0.75
    [2% ITM to 0.25% ITM).....................................               0.04         0.05               0.05               0.06                0.10
    [0.25% ITM to ATM)........................................               0.02         0.03               0.04               0.05                0.08
    [ATM to 1% OTM)...........................................               0.02         0.02               0.02               0.03                0.06
    [>1% OTM].................................................               0.02         0.02               0.02               0.02                0.04
VIX Value at Prior Close >30:
    [>3% ITM).................................................               0.25         0.30               0.30               0.55                1.05
    [3% ITM to 2% ITM)........................................               0.15         0.20               0.20               0.30                0.80
    [2% ITM to 0.25% ITM).....................................               0.05         0.06               0.06               0.07                0.11
    [0.25% ITM to ATM)........................................               0.03         0.04               0.05               0.06                0.09
    [ATM to 1%OTM)............................................               0.03         0.03               0.03               0.04                0.07
    [>1% OTM].................................................               0.03         0.03               0.03               0.03                0.05
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Moneyness is calculated as 1 - strike/index for calls, strike/index -1 for puts. Negative numbers are Out of the Money (``OTM'') and positive values
  are In the Money (``ITM''). A Moneyness value of zero for either calls or puts is considered At the Money (``ATM''). For example, if the index is at
  400, the 396 call = 1 - 396/400 = 0.01 = 1% ITM, whereas the 396 put = 396/400 -1 = - 0.01 = 1% OTM.


------------------------------------------------------------------------
                                                Size (0 to 35 days to
                 Moneyness                             expiry)
------------------------------------------------------------------------
[>3% ITM)..................................                            5
[3% ITM to 2% ITM).........................                           10
[2% ITM to 0.25% ITM)......................                           15
[0.25% ITM to ATM).........................                           20
[ATM to 1% OTM)............................                           20
[>1% OTM]..................................                           20
------------------------------------------------------------------------

    The Exchange proposes to restructure the Program by adopting two 
sets of quoting standards for XSP options, a set of basic quoting 
standards and a set of advanced quoting standards. First, the Exchange 
proposes to adopt the basic quoting standards (below) under the 
Program.

                                                                          Width
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Moneyness                             Expiring option      1 day      2 days to 5 days  6 days to 14 days  15 days to 35 days
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <=30:
    [>3% ITM).................................................              $0.40        $0.40              $0.40              $0.40               $0.75
    [3% ITM to 2% ITM)........................................               0.30         0.30               0.30               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)........................................               0.08         0.08               0.10               0.12                0.18
    [ATM to 1% OTM)...........................................               0.05         0.05               0.06               0.06                0.12
    [>1% OTM].................................................               0.03         0.04               0.05               0.05                0.08
VIX Value at Prior Close >30:
    [>3% ITM).................................................               0.50         0.50               0.50               0.80                1.00
    [3% ITM to 2% ITM)........................................               0.30         0.30               0.30               0.50                0.75
    [2% ITM to 0.25% ITM).....................................               0.20         0.20               0.20               0.25                0.50
    [0.25% ITM to ATM)........................................               0.08         0.10               0.12               0.15                0.20
    [ATM to 1% OTM)...........................................               0.05         0.06               0.07               0.09                0.12
    [>1% OTM].................................................               0.04         0.05               0.05               0.06                0.10
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                          Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Expiring option      1 day      2 days to 5 days  6 days to 14 days  15 days to 35 days
--------------------------------------------------------------------------------------------------------------------------------------------------------
[>3% ITM).....................................................                  5            5                  5                  5                   5
[3% ITM to 2% ITM)............................................                  5            5                  5                 10                  10
[2% ITM to 0.25% ITM).........................................                 10           10                 10                 15                  15
[0.25% ITM to ATM)............................................                 20           20                 20                 20                  20
[ATM to 1% OTM)...............................................                 20           20                 20                 20                  20
[>1% OTM].....................................................                 20           20                 20                 20                  20
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 84427]]

    As proposed, under the Program, if an appointed LMM provides 
continuous electronic quotes during RTH that meet or exceed the basic 
quoting standards in at least 90% the series 90% of the time in a given 
month, the LMM will receive $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). In addition, the proposed 
rule change adopts a performance payment under the Program, which 
provides that, in addition to the above rebate, the LMM with the 
highest performance in satisfying the above basic quoting standards in 
a month will receive a performance payment of $10,000 for that month. 
In order to be eligible to receive the performance payment in a month, 
an LMM must meet or exceed the above quoting standards in that month. 
Highest performance is measured as the cumulative sum of series in 
which an LMM meets or exceeds the basic quoting requirements by the 
total series each day (excluding the day in which an LMM missed meeting 
or exceeding the basic quoting standard in the highest number of 
series).
    The Exchange proposes to eliminate the additional credit of $0.03 
per contract applied to all XSP contracts executed in a Market-Maker 
capacity which add liquidity electronically contra to non-customer 
capacity, currently offered to an LMM appointed to the Program which 
provides continuous electronic quotes during RTH that meet or exceed 
the XSP heightened quoting standards.
    The Exchange proposes to amend the Program to adopt advanced 
quoting standards (provided below). As proposed, if an LMM appointed to 
the Program provides continuous electronic quotes during RTH that meet 
or exceed the proposed advanced quoting standards (below) in at least 
85% of the series 85% of the time in a given month, the LMM will 
receive a payment for that month in the amount of $20,000 (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).

                                                                          Width
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Moneyness                             Expiring option      1 day      2 days to 5 days  6 days to 14 days  15 days to 35 days
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX Value at Prior Close <=30:
    [>3% ITM).................................................              $0.30        $0.25              $0.30              $0.40               $0.75
    [3% ITM to 2% ITM)........................................               0.12         0.15               0.20               0.25                0.50
    [2% ITM to 0.25% ITM).....................................               0.10         0.10               0.15               0.16                0.25
    [0.25% ITM to ATM)........................................               0.06         0.06               0.08               0.10                0.15
    [ATM to 1% OTM)...........................................               0.03         0.03               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               0.70                1.00
    [3% ITM to 2% ITM)........................................               0.20         0.25               0.25               0.30                0.75
    [2% ITM to 0.25% ITM).....................................               0.15         0.20               0.20               0.25                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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Expiring option      1 day      2 days to 5 days  6 days to 14 days  15 days to 35 days
--------------------------------------------------------------------------------------------------------------------------------------------------------
[>3% ITM).....................................................                  5            5                  5                  5                   5
[3% ITM to 2% ITM)............................................                  5            5                  5                 10                  10
[2% ITM to 0.25% ITM).........................................                 10           10                 10                 15                  15
[0.25% ITM to ATM)............................................                 20           20                 20                 20                  20
[ATM to 1% OTM)...............................................                 20           20                 20                 20                  20
[>1% OTM].....................................................                 20           20                 20                 20                  20
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange believes the proposed basic and advanced quoting 
requirements for XSP options under the Program are designed to continue 
to encourage LMMs appointed to the program to provide significant 
liquidity in XSP options during RTH, which, in turn, would provide 
greater trading opportunities, added market transparency and enhanced 
price discovery for all market participants in XSP. Further, by 
providing a set of advanced quoting standards that provide for tighter 
width standards, the proposed rule change offers LMMs appointed to the 
Program a more challenging opportunity, thus further incentive, to 
strive to meet the heightened quoting standards in order to receive the 
additional rebate.
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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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) \6\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.

[[Page 84428]]

The Exchange also believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\7\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed fee changes for certain 
Customer and Market-Maker orders in XSP are reasonable, equitable and 
not unfairly discriminatory. The Exchange believes that it is equitable 
and not unfairly discriminatory to provide a rebate of $0.30 per 
contract for all Customer orders in XSP that are for less than 10 
contracts, as such rebate is designed to incentivize Customer volume in 
XSP on the Exchange. The Exchange believes that incentivizing more 
Customer orders in XSP will create more trading opportunities, which, 
in turn attracts Market-Makers. A resulting increase in Market-Maker 
activity facilitates tighter spreads, which may lead to additional 
increase of order flow in XSP from other market participants, further 
contributing to a deeper, more liquid market to the benefit of all 
market participants by creating a more robust and well-balanced market 
ecosystem.
    Further, the Exchange believes the proposed change to the fee for 
Market-Maker orders in XSP contra to non-customers that remove 
liquidity and that are executed electronically is reasonable. The 
proposed fee, in general, aligns with current fees for other types of 
orders in XSP, namely Non-Customer, Non-Market Maker XSP orders contra 
to a customer or contra to a non-customer that add liquidity and are 
executed electronically (which yield fee code XF). The Exchange 
believes that the changes are reasonable and that the fee, even as 
amended, will continue to incentivize TPHs to send additional Market-
Maker orders to the Exchange.
    The Exchange believes that the proposed fees for certain Customer 
and Market-Maker orders in XSP are equitable and not unfairly 
discriminatory because the proposed fees will apply automatically and 
uniformly to all applicable Customer and Market-Maker orders in XSP 
which yield fee codes XC and MY, respectively.
    Additionally, the Exchange believes that the proposed amendment to 
the GTH Executing Agent Subsidy Program, to include Professional 
Customers (i.e., capacity ``U'') in the program, so that a designated 
GTH executing agent may receive specified subsidy amounts that 
correspond to the number of contracts executed on behalf of customers 
(including professional, public and broker-dealer customers) during GTH 
in a calendar month, is reasonable. The GTH Executing Agent Subsidy 
Program is overall designed to encourage designated GTH executing 
agents to increase their customer order flow in SPX and VIX options 
traded during GTH. The Exchange believes that adding professional 
customer capacity orders to the program will encourage increased order 
flow, which would allow the Exchange to grow participation in the GTH 
trading session to the benefit of all market participants that trade 
during GTH, by providing greater trading opportunities as a result of 
increased liquidity, thereby attracting additional order flow from 
market participants during GTH.
    The Exchange also believes that the proposed rule changes related 
to the GTH Executing Agent Subsidy Program are equitable and not 
unfairly discriminatory. In particular, the Exchange believes the 
proposed changes are equitable and not unfairly discriminatory because 
all TPHs that conduct this type of operation during GTH will continue 
to have the opportunity to become a designated GTH executing agent and 
to execute relevant orders on behalf of customers, including 
professional customers, and thus be eligible for the monthly subsidy 
commensurate with applicable customer volumes. As noted above, the 
proposed changes reflect the growth of the GTH trading session and are 
designed to continue to encourage designated GTH executing agents to 
increase their order flow executed as agent in SPX and VIX symbols that 
trade during GTH, to meet the volume thresholds and receive 
corresponding subsidies. TPHs that conduct executing agent operations 
provide benefits to investors during GTH, including increased customer 
accessibility, including for professional customers, to the GTH trading 
session and increased order flow.
    The Exchange believes assessing a FLEX Surcharge Fee of $0.10 per 
contract for all XND orders executed electronically on FLEX and capping 
it at $250 (i.e., first 2,500 contracts per trade) is reasonable 
because it is the same amount currently charged to other index products 
for the same transactions.\8\ The proposed Surcharge is also equitable 
and not unfairly discriminatory because the amount will be assessed to 
all market participants to whom the FLEX Surcharge applies.
---------------------------------------------------------------------------

    \8\ See Cboe Options Fees Schedule, Rate Table--All Products 
Excluding Underlying Symbol List A, FLEX Surcharge Fee.
---------------------------------------------------------------------------

    The Exchange believes the amended XSP RTH LMM Incentive Program, as 
proposed, is reasonable, equitable and not unfairly discriminatory. The 
Exchange believe the series and time requirement for the basic quoting 
standards (which are less than current Program requirements), as well 
as the basic quoting standards themselves (which are in general wider 
in quote size and quote width than current Program standards), are 
reasonable. As compared to the current Program, such changes are 
reasonably designed to slightly ease the difficulty in meeting the 
heightened quoting standards offered under the Program (for which an 
appointed LMM receives the respective rebates), which, in turn, 
provides increased incentive for LMMs appointed to these programs to 
provide significant liquidity in XSP options. Such 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 also believes the proposed rebate offered under the 
Program to an LMM appointed to the program for meeting the basic 
quoting standards in a given month ($15,000) remains reasonably 
designed to incentivize an appointed LMM to meet the applicable quoting 
standards for XSP 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. The Exchange further believes that the proposed rule 
change is reasonable because it is comparable to and within the range 
of the rebates offered by other LMM Incentive Programs. For example, 
the GTH1 and GTH2 XSP LMM Programs each currently offer $15,000 to 
appointed LMMs for XSP options if the heightened quoting standards are 
met in a given month.
    Further, the Exchange believes the proposed performance payment of 
$10,000 provided to the LMM with the highest performance in satisfying 
the relevant heightened quoting standards for the Program is reasonable 
and equitable as the LMM Incentive Programs for MXEA and MXEF, MXACW, 
MXUSA, and MXWLD options offers a similar performance payment. All 
appointed LMMs are eligible for the performance payment, which is 
designed to incentivize LMMs

[[Page 84429]]

to provide liquid and active markets in XSP options to encourage 
product growth.
    The Exchange also believes the elimination of the additional per 
contract credit incentive is reasonable, as the Exchange is not 
required to maintain the additional per contract incentive and now 
wishes to eliminate it from the Program.
    Additionally, the Exchange believes the proposed advanced quoting 
standards are reasonable. As noted above, by providing a set of 
advanced quoting standards that provide for tighter width standards, 
the proposed rule change offers LMMs appointed to the Program a more 
challenging opportunity, thus further incentive, to strive to meet the 
heightened quoting standards in order to receive the additional rebate.
    In general, the proposed Program is a reasonable financial 
incentive program because the proposed heightened quoting standards and 
rebate amounts for meeting the heightened quoting standards in XSP 
series are reasonably designed to incentivize LMMs appointed to the 
Program to meet the proposed heightened quoting standards during RTH 
for XSP, thereby providing liquid and active markets, which facilitates 
tighter spreads, increased trading opportunities, and overall enhanced 
market quality to the benefit of all market participants.
    The Exchange believes that the proposed heightened quoting 
standards are reasonable because they are similar to the detail and 
format of the quoting standards currently in place for LMM Incentive 
Programs for other proprietary Exchange products that trade during 
RTH.\9\ The Exchange also believes that proposed heightened quoting 
requirements are reasonably tailored to reflect market characteristics 
of XSP. For example, the Exchange believes the generally smaller widths 
appropriately reflect the lower-priced and smaller notional sized XSP 
product (XSP options are 1/10\th\ the size of SPX options). The 
Exchange believes continuing to utilize moneyness as a quoting standard 
is reasonable, given the program objectives to achieve tight liquidity 
in a market where options premiums change quickly.
---------------------------------------------------------------------------

    \9\ See Cboe Options Fees Schedule, ``RTH SPESG LMM Incentive 
Program'', ``MRUT LMM Incentive Program'', ``MXACW LMM Incentive 
Program'', ``MXUSA LMM Incentive Program'', ``MXWLD Incentive 
Program'', ``NANOS LMM Incentive Program'', and ``MSCI LMM Incentive 
Program.''
---------------------------------------------------------------------------

    Finally, the Exchange believes it is equitable and not unfairly 
discriminatory to offer the financial incentive to LMMs appointed to 
the Program because it will benefit all market participants trading in 
XSP during RTH by encouraging the appointed LMMs to satisfy the basic 
and advanced quoting standards, which incentivizes continuous increased 
liquidity and thereby may provide more trading opportunities and 
tighter spreads. Indeed, the Exchange notes that these LMMs serve a 
crucial role in providing quotes and the opportunity for market 
participants to trade XSP, which can lead to increased volume, 
providing for robust markets. The Exchange ultimately proposes to offer 
the Program to sufficiently incentivize the appointed LMMs to provide 
key liquidity and active markets in XSP options to encourage liquidity, 
thereby protecting investors and the public interest. The Exchange also 
notes that an LMM appointed to the Program may undertake added costs 
each month to satisfy that heightened quoting standards (e.g., having 
to purchase additional logical connectivity). The Exchange believes the 
Program is equitable and not unfairly discriminatory because similar 
programs currently exist for LMMs appointed to programs in other 
proprietary products,\10\ including for XSP during the GTH sessions, 
and the Program will equally apply to any TPH that is appointed as an 
LMM to the Program. Additionally, if an appointed LMM does not satisfy 
the heightened quoting standard in XSP for any given month, then it 
simply will not receive the offered payments or rebates for that month.
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    \10\ See Cboe Options Fees Schedule, ``MRUT LMM Incentive 
Program'', ``MSCI LMM Incentive Program'', ``MXACW LMM Incentive 
Program'', ``MXUSA LMM Incentive Program'', ``MXWLD Incentive 
Program'', ``NANOS LMM Incentive Program'', ``GTH VIX/VIXW LMM 
Incentive Program'', ``GTH1/GTH2 SPX/SPXW LMM Incentive Programs'', 
``GTH1/GTH2 XSP LMM Incentive Programs'', and ``RTH SPESG LMM 
Incentive Program.''
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change related to XSP fee codes will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed fees will apply automatically and uniformly to all applicable 
Customer and Market-Maker orders in XSP which yield fee codes XC and 
MY, respectively.
    In regard to the proposed changes to the GTH Executing Agent 
Subsidy Program, all TPHs that conduct executing agent operations 
willing to accept orders from all customers (including professional 
customers) will continue to have an opportunity to be eligible for the 
GTH Executing Agent Subsidy program. Also, such TPHs that conduct this 
type of operation may provide benefits to investors during GTH, 
including increased customer accessibility to, and liquidity and 
trading opportunities during, the GTH trading session. The proposed 
changes are designed to continue to encourage designated GTH executing 
agents to increase their order flow executed as agent in SPX and VIX 
symbols that trade during GTH, to receive specified subsidies.
    In regard to the proposed FLEX Surcharge rule changes, the Exchange 
believes that the proposed rule change will not impose any burden on 
intramarket competition because the proposed rule changes apply to all 
market participants that trade XND FLEX Options.
    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 
amendments to RTH XSP LMM Program will apply uniformly to any LMM 
appointment to the programs. To the extent LMMs appointed to these LMM 
Incentive Programs 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. An LMM appointed to an incentive program may also 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 proposed changes 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 adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of

[[Page 84430]]

individual stocks for all types of orders, large and small.'' \11\
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    \11\ 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 will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed fees and programs apply to Exchange proprietary products, 
which are traded exclusively on the Exchange. To the extent that the 
proposed changes make Cboe Options a more attractive marketplace for 
market participants at other exchanges, such market participants are 
welcome to become Cboe Options market participants.
    Additionally, the Exchange notes that it operates in a highly 
competitive market. TPHs have numerous alternative venues that they may 
participate on and direct their order flow, including 17 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 16% 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, additionally 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 Cboe Global Markets U.S. Options Market Volume Summary, 
Month-to-Date (March 29, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
    \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-2024-044 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-2024-044. 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-2024-044 and should be 
submitted on or before November 12, 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).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-24371 Filed 10-21-24; 8:45 am]
BILLING CODE 8011-01-P