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Notice2022-03020

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule

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Published
February 14, 2022

Issuing agencies

Securities and Exchange Commission

Full Text

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<title>Federal Register, Volume 87 Issue 30 (Monday, February 14, 2022)</title>
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[Federal Register Volume 87, Number 30 (Monday, February 14, 2022)]
[Notices]
[Pages 8314-8316]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-03020]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94185; File No. SR-C2-2022-004]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule

February 8, 2022.
    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 February 1, 2022, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') 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://markets.cboe.com/us/options/regulation/rule_filings/ctwo/">http://markets.cboe.com/us/options/regulation/rule_filings/ctwo/</a>), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

[[Page 8315]]

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 
the Index License Surcharge Fee for transactions in Dow Jones 
Industrial Average Index (``DJX'') options, effective February 1, 2022.
    Specifically, the Exchange proposes to increase the Index License 
Surcharge Fee currently applicable to orders executed in DJX options in 
Index License Surcharge Fees table of the Fee Schedule. The Exchange 
currently assesses an Index License Surcharge Fee of $0.10 per contract 
for non-Public Customer orders executed in DJX options. The proposed 
rule change increases the Index License Surcharge Fee applicable to 
orders executed in DJX options from $0.10 per contract to $0.12 per 
contract. The Exchange notes that the Index License Surcharge Fee in 
place for DJX options is designed to recoup some of the costs 
associated with the licenses for this index.\3\ The Exchange has 
recently renewed its license arrangements for its DJX index license 
and, as a result, the proposed rule change amends the Index License 
Surcharge Fee for DJX options in order to continue to offset some of 
the costs associated with the license for the index in light of the 
renewal of the license.
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    \3\ See Securities Exchange Release No. 85855 (May 14, 2019), 84 
FR 22916 (May 20, 2019) (SR-C2-2019-010).
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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 
Section 6(b)(4) of the Act,\6\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange believes that it is reasonable to 
increase the amount of the Index License Surcharge Fee for orders in 
DJX options as the proposed increase is consistent with the purpose of 
such surcharge fee--it is intended to continue to help recoup some of 
the costs associated with the license for DJX index products in light 
of recently renewed license arrangements between the Exchange and the 
DJX index provider. The proposed Index License Surcharge Fee is also 
equitable and not unfairly discriminatory because the surcharge fee 
will continue to be assessed uniformly for all non-Customer orders in 
DJX options.

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 intramarket or intermarket 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 in connection 
with the DJX Index License Surcharge Fee will impose any burden on 
intramarket competition because it applies uniformly to all similarly 
situated TPHs in a uniform manner (i.e., to all non-Public Customer 
executions in DJX options). 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 amendment to the DJX Index License 
Surcharge Fee apply only to an Exchange proprietary product, which is 
traded exclusively on C2 and Cboe-affiliated options exchanges.
    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 15 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 15% of the market share.\7\ 
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.'' \8\ 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'. . . . ''.\9\ 
Accordingly, the Exchange does not believe its proposed fee change 
imposes any burden on competition that is not necessary or

[[Page 8316]]

appropriate in furtherance of the purposes of the Act.
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    \7\ See Cboe Global Markets U.S. Options Market Volume Summary, 
Month-to-Date (January 26, 2022), available at <a href="https://www.cboe.com/us/options/market_statistics/">https://www.cboe.com/us/options/market_statistics/</a>.
    \8\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \9\ 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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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

    <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#5220273e377f313d3f3f373c2621122137317c353d24"><span class="__cf_email__" data-cfemail="2e5c5b424b034d4143434b405a5d6e5d4b4d00494158">[email&#160;protected]</span></a>. Please include 
File Number SR-C2-2022-004 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-C2-2022-004. 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 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-C2-2022-004 and should be submitted on 
or before March 7, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03020 Filed 2-11-22; 8:45 am]
BILLING CODE 8011-01-P


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