Notice2021-18554
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Fees Schedule Regarding Executions in the Cboe Compression Service
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Published
August 30, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 165 (Monday, August 30, 2021)</title>
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[Federal Register Volume 86, Number 165 (Monday, August 30, 2021)]
[Notices]
[Pages 48457-48459]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-18554]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92739; File No. SR-CBOE-2021-048]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Fees Schedule Regarding Executions in the Cboe Compression Service
August 24, 2021.
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 August 12, 2021, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 (<a href="http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</a>), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule in connection with
executions of S&P 500 Index options (``SPX'') in the Cboe Compression
Service (``CCS'') and to make a clarifying change regarding Position
Compression Cross (``PCC'') orders, effective August 12, 2021.
Specifically, the Exchange recently adopted the CCS for SPX
(including SPX Weeklys (``SPXW'')),\3\ which it intends to launch on
August 12, 2021. CCS is an additional, voluntary compression tool that
Trading Permit Holders (``TPHs'') can use to close SPX positions to
reduce regulatory capital attributable to their SPX holdings. To
participate, a TPH must submit a ``position list'' prior to an
Exchange-specified time after the close of trading on the specified day
that details all of the open SPX positions it would like to close out.
If all TPHs that submit position lists on that day agree to the
compression proposal provided by the Exchange, the Exchange then runs
an automated process to match offsetting positions in an anonymized
manner and then effects the transactions at specified compression
prices \4\ off the exchange.\5\
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\3\ See Securities Exchange Release No. 92354 (July 8, 2021), 86
FR 37197 (July 14, 2021) (SR-CBOE-2021-020) (Notice of Filing of
Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Rule
6.10 To Introduce a Voluntary Multilateral Compression Service for
SPX Options).
\4\ The ``compression price'' is generally the price of the
option as close as possible to the midpoint of the NBBO at the close
of the trading day or the daily marking time, subject to adjustment
using generally accepted volatility and options pricing models in
the event of wide markets, market volatility, or other unusual
circumstances.
\5\ The Exchange notifies the TPH participants of each TPH's
individual compression proposal, and each TPH with at least one
offsetting position must notify the Exchange whether it accepts its
individual proposal in order to proceed with the CCS transactions.
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The Exchange now proposes to amend its Fees Schedule in connection
with the planned implementation of CCS for SPX/SPXW. Particularly, the
Exchange proposes to waive all transaction fees and applicable
surcharges incurred as a result of CCS transactions in SPX/SPXW.
First, the proposed rule change amends footnote 41 so that
transaction fees and applicable surcharges are waived for CCS
transactions, as they currently are for Position Compression Cross
(``PCC'') transactions, which TPHs may also use to compress their
positions in SPX/SPXW. Specifically, the proposed rule change amends
footnote 41 to provide that the Exchange shall waive transaction fees,
including the Index License Surcharge and SPX/SPXW Execution Surcharge,
for (i) PCC transactions executed electronically or in open outcry, as
applicable, and (ii) CCS transactions, and that PCC and CCS
transactions will not count towards any volume thresholds. The Exchange
notes that Footnote 41 is currently appended to: (1) SPX/SPXW and SPESG
Liquidity Provider Sliding Scale; (2) Clearing Trading Permit Holder
Proprietary Products Sliding Scale; (3) Select Customer Options
Reduction (``SCORe'') Program; (4) SPX/SPXW Market-Maker Tier
Appointment Fees; (5) Floor Broker Trading Surcharge; (6) Floor Broker
ADV Discount; (7) Floor Brokerage Fees Discount Scale; and (8) Frequent
Trader Program; \6\ therefore, CCS transactions, like PCC transactions,
will not count towards any volume thresholds for these programs. The
proposed rule change also appends footnote 41 to the line item for SPX
(incl SPXW) and SPESG that corresponds to Joint Back-Office (``JBO''),
Non-TPH Market-Maker and Professional transaction fees to make it clear
that all SPX/SPXW-related transaction fees and applicable surcharges
for PCC transactions and CCS transactions, as proposed, are waived.
Next, the proposed rule change amends footnote 17 of the Fees Schedule
to explicitly exclude CCS transactions from the FLEX Surcharge Fee.\7\
Finally, the proposed rule change amends footnote 21 of the Fees
Schedule to explicitly exclude PCC orders and CCS transactions from the
SPX, SPXW and SPESG Execution Surcharge. The Exchange notes that the
SPX, SPXW and SPESG Surcharge does not currently apply to PCC
transactions, as provided in footnote 41; the proposed rule change
merely adds PCC to footnote 21 to provide additional clarity in the
Fees Schedule.
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\6\ The Exchange notes that footnote 41 is also appended to the
Floor Broker Sliding Scale Rebate Program; however, this program is
not applicable generally to orders in SPX/SPXW.
\7\ The Exchange notes that PCC for FLEX is not currently
supported, therefore this surcharge is not currently applicable to
PCC orders.
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The Exchange wishes to waive transaction fees and surcharges for
CCS transactions to encourage TPHs to use the service. The Exchange
believes compression of SPX positions using the CCS would improve
market liquidity by freeing TPHs' capital currently covering nearly
worthless positions and allow them to put that capital back into the
markets to facilitate execution of customer orders. As CCS transactions
[[Page 48458]]
will not incur any fees or surcharges, the Exchange does not believe
that CCS volume should be counted towards volume thresholds for the
applicable incentive programs. The Exchange again notes this is in line
with the manner in which PCC orders, which is another compression tool
available to TPHs, are currently treated pursuant to the Fees Schedule.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with
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.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed rule change to waive SPX/SPXW
transaction fees, including the SPX, SPXW and SPESG Execution
Surcharge, and applicable SPX/SPXW surcharges, including the FLEX
Surcharge Fee, for CCS transactions is reasonable because market
participants will not be subject to transaction fees or surcharges for
these executions. As such, the proposed waivers are reasonably designed
to incentivize TPHs to submit compression lists to the Exchange and
compress positions, which the Exchange believes would improve market
liquidity by freeing TPHs' capital currently covering nearly worthless
positions and allow them to put that capital back into the markets to
facilitate execution of customer orders. The Exchange believes the
proposed rule change to not count CCS volume towards volume thresholds
for any applicable incentive program is reasonable, as such
transactions will not incur any fees or surcharges for such volume. The
Exchange also notes that it is reasonable to exclude such volume from
the volume thresholds for the SPX/SPXW Market-Maker Tier Appointment
Fee and SPX/SPXW Floor Broker Trading Surcharge because, like for PCC
transactions, the Exchange does not want to discourage such compression
transactions. The Exchange also believes that the proposed rule change
is reasonable as the Exchange already waives SPX/SPXW transaction fees
and applicable surcharges for PCC orders, which is another compression
tool available to TPHs, and also excludes PCC volume from the same
incentive programs.
The Exchange believes that the proposed fee/surcharge waivers and
exclusion from incentive program volume calculations for CCS
transactions are equitable and not unfairly discriminatory because they
apply uniformly to all market participants who choose to use CCS to
compress their SPX/SPXW positions, in the same manner in which fee/
surcharge waivers and exclusions from incentive program volume
calculations for PCC orders are applied uniformly to all market
participants that submit PCC orders today.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition that are not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed changes
apply equally to all similarly situated market participants, i.e., all
market participants who choose to use CCS to compress their SPX/SPXW
positions. The Exchange does not believe that the proposed rule change
will impose any burden on intermarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act because the
proposed rule change applies only to an Exchange proprietary product,
which is traded exclusively on Cboe Options. The Exchange believes the
proposed rule change will promote competition, as it may incentivize
TPHs to use the CCS to compress SPX positions, which the Exchange
believes would improve market liquidity by freeing TPHs' capital
currently covering nearly worthless positions and allow them to put
that capital back into the markets to facilitate execution of customer
orders.
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)(ii) of the Act \11\ and Rule 19b-4(f)(2) \12\ 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: (i) Necessary or
appropriate in the public interest; (ii) for the protection of
investors; or (iii) 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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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#dcaea9b0b9f1bfb3b1b1b9b2a8af9cafb9bff2bbb3aa"><span class="__cf_email__" data-cfemail="0e7c7b626b236d6163636b607a7d4e7d6b6d20696178">[email protected]</span></a>. Please include
File Number SR-CBOE-2021-048 on the subject line.
Paper Comments
<bullet> 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-2021-048. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the
[[Page 48459]]
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2021-048 and should be submitted on
or before September 20, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18554 Filed 8-27-21; 8:45 am]
BILLING CODE 8011-01-P
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