Notice2022-03138
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule
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Published
February 15, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 31 (Tuesday, February 15, 2022)</title>
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[Federal Register Volume 87, Number 31 (Tuesday, February 15, 2022)]
[Notices]
[Pages 8621-8623]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-03138]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94201; File No. SR-CBOE-2022-004]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
February 9, 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 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,
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 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 to update the
Index License Surcharge fee for transactions in Dow Jones Industrial
Average Index (``DJX'') options and to make certain clarifying and
corrective changes in the Fees Schedule, effective February 1, 2022.
The Exchange proposes to increase the Index License Surcharge fee
currently applicable to orders executed in DJX options in Rate Table--
Underlying Symbol List A. The Exchange currently assesses an Index
License Surcharge fee of $0.10 per contract for non-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. 52851 (November 29,
2005), 70 FR 72480 (December 5, 2005) (SR-CBOE-2005-84).
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The proposed rule change also makes certain clarifying and
corrective changes to the Fees Schedule. The proposed rule change
removes language in the Floor Broker Trading Surcharge table related to
the requirement that a Floor Broker Trading Permit Holder submit the
SPX Tier Appointment Fee Exclusion for Multi-Class Broad-Based Index
Spread Transactions Form within three business days of execution of the
applicable spread transaction(s) in order to receive the SPX Surcharge
waiver for Floor Broker Trading Permit Holders who only execute SPX
(including SPXW) options transactions as part of multi-class broad-
based index spread transactions. Manual submission of such form by
Floor Broker Trading Permit Holders is no longer necessary as the
Exchange has automated the process for documenting such transactions
for Floor Broker Trading Permit Holders.
The proposed rule change makes a clarifying change regarding
Market-Maker Floor Permit Holders that execute contracts in SPX/SPXW in
the Market-Maker Tier Appointment Fees table. Specifically, the
proposed rule change adds that the SPX Surcharge will not be assessed
to a Market-Maker Floor Permit Holder who only executes SPX (including
SPXW) options transactions as part of multi-class broad-based index
spread transactions. In 2019, the Exchange restructured its Fees
Schedule in connection with a technology migration. The SPX Surcharge
waiver provision in connection with Market-Maker Floor Permit Holders
existed in the Fees Schedule prior to its 2019 restructuring; however,
the Exchange inadvertently did not include this waiver provision in the
restructured Fees Schedule. The Exchange notes that the same waiver
provision related to Floor Broker Trading Permit Holders (as
[[Page 8622]]
described above) was correctly carried over into the restructured Fees
Schedule upon the technology migration. As such, the proposed rule
change corrects this inadvertent omission and clarifies that the waiver
continues to apply to Market-Maker Floor Permit Holders today.
The proposed rule change lastly amends footnote 5, which is
appended to the Floor Brokerage Fees table. Currently, footnote 5
provides that floor brokerage fees are charged to the executing broker.
To be eligible for the discounted ``crossed'' rate, the executing
broker acronym and executing firm number must be the same on both the
buy and sell side of an order. The Exchange proposes to update footnote
5 to provide that in order to be eligible for the crossed rate, both
the executing broker acronym and Executing Firm ID (``EFID'') must be
the same on both the buy and sell side of an order. Particularly, upon
the 2019 technology migration, the Exchange adopted (and codified in
its Rulebook) EFIDs, which the System uses to identify the TPH and the
clearing number for the execution of orders and quotes submitted to the
System with that EFID. Indeed, since the 2019 technology migration, the
Exchange's billing system looks for the same executing broker acronym
and EFID to be on both the buy and sell side of an order, in
determining whether an order qualifies for the ``crossed'' rate.
Accordingly, the proposed rule change now updates the reference to
``executing firm number'' in footnote 5 to reflect ``EFID''.
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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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.
The Exchange believes the proposed rule changes (1) to remove
language related to the requirement that a Floor Broker Trading Permit
Holder manually submit the SPX Tier Appointment Fee Exclusion for
Multi-Class Broad-Based Index Spread Transactions Form (as the process
is now automated), (2) to correct an inadvertent omission regarding the
SPX Surcharge waiver for Market-Maker Floor Permit Holders that execute
multi-class broad-based index spread transactions in SPX/SPXW and (3)
to reflect an Exchange-defined term in footnote 5, are reasonable,
equitable and not unfairly discriminatory because they do not change
any of the fees or rebates assessed by the Exchange, but rather are
clarifying changes intended to more accurately reflect the Exchange's
current billing processes, thereby increasing transparency in the Fees
Schedule and alleviating any potential investor confusion.
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 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-Customer executions
in DJX options). The Exchange does not believe that the proposed change
in connection with the DJX Index License Surcharge fee 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 applies only to an
Exchange proprietary product, which is traded exclusively on Cboe
Options and Cboe-affiliated options exchanges. In addition to this, the
Exchange does not believe that the proposed rule changes to remove
language related to an obsolete requirement, to correct an inadvertent
omission, and to reflect a defined term will impose any burden on
intramarket or intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed rule changes merely provide clarifications in the Fees
Schedule that are designed to more accurately reflect current billing
processes, thereby increasing transparency in the Fees Schedule and
reducing potential confusion without having any impact on competition.
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
[[Page 8623]]
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 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#b5c7c0d9d098d6dad8d8d0dbc1c6f5c6d0d69bd2dac3"><span class="__cf_email__" data-cfemail="4735322b226a24282a2a222933340734222469202831">[email protected]</span></a>. Please include
File Number SR-CBOE-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-CBOE-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-CBOE-2022-004 and should be submitted on
or before March 8, 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. 2022-03138 Filed 2-14-22; 8:45 am]
BILLING CODE 8011-01-P
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