Notice2022-14997
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Update Its Fees Schedule in Connection With the Exchange's Plans To List and Trade FLexible EXchange Index Options With an Index Multiplier of One
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 14, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 134 (Thursday, July 14, 2022)</title>
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[Federal Register Volume 87, Number 134 (Thursday, July 14, 2022)]
[Notices]
[Pages 42222-42226]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-14997]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95225; File No. SR-CBOE-2022-034]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Update
Its Fees Schedule in Connection With the Exchange's Plans To List and
Trade FLexible EXchange Index Options With an Index Multiplier of One
July 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 June 30, 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 update its Fees Schedule in connection with the Exchange's plans to
list and trade FLexible EXchange (``FLEX'') index options with an index
multiplier of one (``FLEX Micro Options''). 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
its plans to list and trade FLEX Micro Options.\3\
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\3\ The Exchange initially filed the proposed fee changes on
June 27, 2022 (SR-CBOE-2022-031). On June 28, 2022, the Exchange
withdrew that filing and submitted SR-CBOE-2022-033. On June 30,
2022 the Exchange withdrew that filing and submitting this filing.
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By way of background, the Exchange has adopted rules to accommodate
the listing and trading of certain FLexible EXchange (``FLEX'') index
options with an index multiplier of one (``FLEX Micro Options'') rather
than the conventional 100. FLEX Micro Options will be available on the
following indices effective June 27, 2022: S&P 500, Russell 2000 (RUT),
Dow Jones Industrial Average (DJX), MSCI Emerging Markets (MXEF), and
MSCI EAF (MXEA). The Exchange believes FLEX Micro Options will expand
investors' choices and flexibility by listing and trading FLEX options
on larger-valued broad-based indexes, which provide investors with the
ability to gain exposure to the market, with a notional value of 1/
100th of the value of currently available FLEX Index Options. The
Exchange believes the additional granularity provided by FLEX Micro
Options with respect to the prices at which investors may execute and
exercise index options on the Exchange will appeal to institutional
investors by providing them with an additional exchange-traded tool to
manage the positions and associated risk in their portfolios more
precisely based on notional value, which currently may equal a fraction
of a standard contract. The Exchange now proposes to amend its Fees
Schedule to accommodate the planned listing and trading of FLEX Micro
options.
Standard Transaction Rates
First, the Exchange proposes to adopt certain standard transaction
fees in connection with FLEX Micro Options. Specifically, the proposed
rule change adopts certain fees for FLEX Micro Options in the ``Rate
Table for All Products Excluding Underlying Symbol A''.\4\ The Exchange
notes that the proposed standard transaction fees in connection with
FLEX Micros Options are lower-priced than standard FLEX options on the
corresponding indices given their multiplier of one (as compared to 100
for standard FLEX options). Indeed, the proposed transaction fees are
generally near, or approximately, 1/100th of the fees currently
assessed for the corresponding standard FLEX options (inclusive of the
Execution Surcharge, License Surcharges and FLEX Surcharges, as
applicable). The proposed fees are as follows:
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\4\ Underlying Symbol List A currently includes OEX, XEO, RUT,
RLG, RLV, RUI, UKXM, SPX (includes SPXW), SPESG and VIX. See Cboe
Options Fees Schedule, Footnote 34.
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RUT FLEX Micro Options
<bullet> Adopts fee code GA, appended to all (i) Customer (capacity
``C''), (ii) Market-Maker (capacity ``M''), and (iii) Clearing Trading
Permit Holders (``TPHs'') (capacity ``F'') and Non-Clearing TPH
Affiliates (capacity ``L'')(collectively, ``Firms'') orders in RUT FLEX
Micro Options and assesses a fee of $0.009 per contract.
<bullet> Adopts fee code GB, appended to all Broker-Dealers
(capacity ``B''), Joint Back-Offices (capacity ``J''), Non-Trading
Permit Holder Market-Makers (capacity ``N''), and Professionals
(capacity ``U'') (collectively, ``Non-Customers'') manual and AIM
(Agency/Primary and Contra) orders in RUT FLEX Micro Options and
assesses a fee of $0.009 per contract.; and
<bullet> Adopts fee code GC, which is appended to all Non-Customer
electronic orders in RUT FLEX Micro Options and assesses a fee of
$0.012 per contract.
SPX FLEX Micro Options
<bullet> Adopts fee code GE, appended to all (i) Customer and (ii)
Firm orders in SPX FLEX Micro Options and assesses a fee of $0.008 per
contract;
[[Page 42223]]
<bullet> Adopts fee code GF, appended to all Market-Maker orders in
SPX FLEX Micro Options and assesses a fee of $0.006 per contract; and
<bullet> Adopts fee code GD, which is appended to all appended to
all Non-Customer orders in SPX FLEX Micro Options and assesses a fee of
$0.009 per contract.
MXEA and MXEF FLEX Micro Options
<bullet> Adopts fee code GG, appended to all Customer orders in
MXEA and MXEF FLEX Micro Options and assesses a fee of $0.004 per
contract;
<bullet> Adopts fee code GI, appended to all (i) Firm and (ii) Non-
Customer electronic orders in MXEA and MXEF FLEX Micro Options and
assesses a fee of $0.010 per contract;
<bullet> Adopts fee code GH, appended to all Market-Maker manual,
electronic and AIM Agency/Primary orders in MXEA and MXEF FLEX Micro
Options and assesses a fee of $0.005 per contract;
<bullet> Adopts fee code GK, appended to all (i) Firm and (ii) Non-
Customer manual and AIM Agency/Primary orders in MXEA and MXEF FLEX
Micro Options and assesses a fee of $0.005 per contract;
<bullet> Adopts fee code GL, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Contra orders in MXEA and MXEF FLEX
Micro Options and assesses a fee of $0.003 per contract; and
<bullet> Adopts fee code GN, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Response orders in MXEA and MXEF FLEX
Micro Options and assesses a fee of $0.013 per contract.
DJX FLEX Micro Options
<bullet> Adopts fee code GG, appended to all Customer orders in DJX
FLEX Micro Options and assesses a fee of $0.004 per contract;
<bullet> Adopts fee code GJ, appended to all (i) Firm and (ii) Non-
Customer electronic orders in DJX FLEX Micro Options and assesses a fee
of $0.007 per contract;
<bullet> Adopts fee code GH, appended to all Market-Maker manual,
electronic and AIM Agency/Primary orders in DJX FLEX Micro Options and
assesses a fee of $0.005 per contract;
<bullet> Adopts fee code GK, appended to all (i) Firm and (ii) Non-
Customer manual and AIM Agency/Primary orders in DJX FLEX Micro Options
and assesses a fee of $0.005 per contract;
<bullet> Adopts fee code GL, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Contra orders in DJX FLEX Micro
Options and assesses a fee of $0.003 per contract; and
<bullet> Adopts fee code GM, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Response orders in DJX FLEX Micro
Options and assesses a fee of $0.007 per contract.
Surcharges
The Exchange does not propose to apply any current surcharges to
FLEX Micro options.\5\ Particularly, the Exchange proposes to exclude
FLEX Micro Options from the surcharges set forth in the Rate Table for
All Products Excluding Underlying Symbol List A (i.e., the Complex
Surcharge Fee, the Surcharge Fee Index License and the FLEX Surcharge
Fee). The Exchange proposes to amend corresponding footnotes 35, 14,
and 17, respectively, to make clear FLEX Micro Options transactions are
excluded from these surcharges.
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\5\ The Exchange notes the Trading Processing Services Fee,
which is currently assessed a rate of $0.0025 per contract side,
will apply to FLEX Micro Options.
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Fee Programs
The Exchange proposes to exclude FLEX Micro Options from all
pricing programs. The Exchange notes that because FLEX Micro Options
are all options on broad-based indices, the majority of the proposed
changes amend the Fees Schedule in connection with trading in FLEX
Micro Options in a manner that is generally consistent with the way in
which many existing fee programs currently do not apply to trading
standard options on those same indices. Additionally, the Exchange
notes that the majority of the proposed changes also amend the Fees
Schedule in a manner that is generally consistent with the way in which
existing fee programs currently do not apply to trading in another
options product that has an index multiplier of one and thus a smaller
notional value (i.e., NANOS \6\).
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\6\ NANOS options are options on the Mini-S&P 500 (``XSP'')
Index (the value of which is 1/10th the value of the S&P 500
(``SPX'') Index) that have an index multiplier of one.
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First, the Exchange proposes to adopt footnote 33 (and append to
fee tables as applicable and needed) to make clear that FLEX Micro
Options volume will be excluded from the following programs: \7\ (i)
SPX/SPXW and SPESG Liquidity Provider Sliding Scale, which offers
credits on Market-Maker orders where a Market-Maker achieves certain
volume thresholds based on Market-Maker volume in SPX, SPXW and SPESG,
(ii) the Liquidity Provider Sliding Scale, which offers credits on
Market-Maker orders where a Market-Maker achieves certain volume
thresholds based on total national Market-Maker volume in all
underlying symbols, excluding Underlying Symbol List A, MRUT, NANOS and
XSP during the calendar month, (iii) the Liquidity Provider Sliding
Scale Adjustment Table, which provides that Taker fees be applied to
electronic ``Taker'' volume and a Maker rebate be applied to electronic
``Maker'' volume, in addition to the transaction fees assessed under
the Liquidity Provider Sliding Scale, (iv) the Volume Incentive Program
(``VIP''), which offers a per contract credit for certain percentage
threshold levels of monthly Customer volume in all underlying symbols,
excluding Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA,
MXEF, NANOS and XSP, (v) Break-Up Credits, which provides credits to
orders executed in AIM, SAM, FLEX AIM, and FLEX SAM to all products
except Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA, MXEF,
NANOS and XSP, (vi) Marketing Fee, which is assessed on transactions of
Market-Makers resulting from Customer orders in all products except
Sector Indexes, DJX, MRUT, MXEA, MXEF and Underlying Symbol List A,\8\
(vii) the Cboe Options Clearing Trading Permit Holder Proprietary
Products Sliding Scale, which provides transaction fees for Firms in
Underlying Symbol List A will be reduced provided a Firm reaches
certain average daily volume (``ADV'') thresholds, (vii), Clearing TPH
Fee Cap, which provides a cap on Firm transaction fees, (viii), Select
Customer Options Reduction (``SCORe'') Program, which is a discount
program for Retail, Customer volume in SPX, SPXW, VIX,
[[Page 42224]]
RUT, MXEA, and MXEF,\9\ (ix) Customer Large Trade Discount, which
provides a discount in the form of a cap on transaction fees for
certain Customer executions, (x) Market-Maker Tier Appointment Fees,
which assesses per permit surcharges if Market-Makers meet certain
volume thresholds in SPX/SPX, VIX and RUT, respectively, (xi) Floor
Broker Trading Surcharge, which assesses a surcharge to Floor Brokers
if they execute a certain threshold in SPX/SPXW and VIX volume,
respectively, (xii) Floor Broker Sliding Scale Rebate Program, offers
rebates for Firm Facilitated and non-Firm Facilitated orders that
correspond to certain volume tiers and is designed to incentivize order
flow in multiply-listed options to the Exchange's trading floor, (xiii)
Floor Broker ADV Discount, which provides Floor Brokers rebates on
their Trading Permit fees based on ADV thresholds, (xiv) Floor
Brokerage Fees, which provides discounted rates to executing brokers
for cross and non-crossed orders in OEX, XEO, RUT, RLG, RLV, RUI, UKXM,
SPX/SPXW, SPESG and VIX, (xv) Floor Brokerage Fees Discount Scale,
which provides Floor Brokers opportunity to receive discounts on fees
for orders in OEX, XEO, RUT, SPX, SPXW, SPESG, VIX based on meeting
certain volume thresholds, (xvi) GTH Executing Agent Subsidy Program
which provides designated GTH executing agents a monthly subsidy based
on GTH monthly Customer volume thresholds, (xvii) Order Router Subsidy
Program and Complex Order Router Subsidy Program, which provides that
Participating TPHs or Participating Non-Cboe TPHs may receive a payment
from the Exchange for every executed contract routed to the Exchange
through their system in certain classes and (xviii) Frequent Trader
Program, which provides an opportunity for customer orders to receive
rebates based on meeting different volume thresholds in SPX/SPXW, VIX
and RUT.
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\7\ The Exchange proposes to eliminate the current language
under footnote 33 relating to billing information for October 2019,
as it is no longer relevant or needed, and replace it with the
proposed new language. Footnote 33 is already appended to the
following tables in the Fees Schedule: SPX/SPXW and SPESG Liquidity
Provider Sliding Scale, Liquidity Provider Sliding Scale, Liquidity
Provider Sliding Scale Adjustment Table, Volume Incentive Program,
Affiliate Volume Plan, Clearing Trading Permit Holder Proprietary
Products Sliding Scale, Clearing Trading Permit Holder VIX Sliding
Scale, and Select Customer Options Reduction (``SCORe'') Program.
The Exchange is maintaining the appended references to footnote 33
in each of these tables, other than the Clearing Trading Permit
Holder VIX Sliding Scale, as footnote 33 will continue to be
applicable to the programs as such programs will be listed in
proposed footnote 33 as a program where FLEX Micro options is
excluded. Because the Exchange is not offering a VIX FLEX Micro
Option product at this time, the Clearing Trading Permit Holder VIX
Sliding Scale is not applicable and the Exchange therefore proposes
to eliminate the current reference to footnote 33 that currently is
appended to that table.
\8\ The Exchange notes that the Marketing Fee already excludes
all FLEX Options. See Cboe Options Fees Schedule, Marketing Fee
Table. The Exchange still proposes to append proposed footnote 33 to
the Marketing Fee Table for further clarity as to applicability of
the exclusion for FLEX Micros Options.
\9\ The Exchange notes that the SCORe program already excludes
all FLEX Options. See Cboe Options Fees Schedule, SCORe Table. The
Exchange still proposes maintain footnote 33, which is currently
appended to the SCORe Table, for further clarity as to applicability
of the exclusion for FLEX Micros Options.
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The Exchange also proposes to update footnote 6, which is appended
to the Liquidity Provider Sliding Scale Program, Liquidity Provider
Sliding Scale Adjustment Table, Affiliate Volume Plan, VIP, SCORe and
the ORS/CORS Programs and footnote 36 which is appended to VIP.
Specifically, current footnotes 6 and 36 provides that in the event of
a Cboe Options System outage or other interruption of electronic
trading on Cboe Options that lasts longer than 60 minutes, the Exchange
will adjust the national volume in all underlying symbols excluding
Underlying Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, NANOS, DJX,
and XSP for the entire trading day. The Exchange proposes to add FLEX
Micro Options to the exclusion list.
The Exchange also proposes to clarify in footnote 11, that for
facilitation orders (other than Sector Indexes (47), FLEX Micros and
Underlying Symbol List A (34)) executed in open outcry, Cboe Options
will assess no Clearing Trading Permit Holder Proprietary transaction
fees, as proposed fee codes for Firm orders in FLEX Micro transactions
will supersede facilitation fee codes (currently FF or FI) for any
facilitation orders in FLEX Micro Options.
The Exchange notes that a few of the programs listed above in which
FLEX Micros will be excluded also exclude and enumerate other products
in the respective program's table header, notes section and/or
corresponding footnote. Where such exclusions are listed, the Exchange
proposes to add references to FLEX Micros to make clear that, as
discussed above and as will be reflected in proposed [sic] 33, FLEX
Micros are also excluded from the applicable program. Accordingly, the
Exchange proposes to add a reference to FLEX Micros to the exclusion
lists set forth in each of the following respective program table
headers, notes sections and/or footnotes: Liquidity Provider Sliding
Scale notes section, VIP header, Break-Up Credits header, Marketing Fee
notes section, Floor Broker Sliding Scale Rebate Program notes section,
ORS and CORS notes sections, footnote 10, footnote 11, footnote 22,
footnote 29, footnote 30, and footnote 36.
Clarifying Changes
The Exchange lastly proposes to amend footnotes 18, 19 and 20 of
the Fees Schedule. The foregoing footnotes describe the AIM Contra
Execution Fee, the AIM Agency/Primary Fee and the AIM Responder Fee,
respectively. The Exchange proposes to revise the current language in
each footnote to make clear that applicable standard transaction fees
apply for all orders executed in the Automated Improvement Mechanism
(``AIM''), Solicitation Auction Mechanism (``SAM''), FLEX AIM and FLEX
SAM auctions (that were initially entered as (i) the contra party to an
Agency/Primary Order, (ii) the Agency/Primary Order, or (iii) an AIM
Response, respectively) unless otherwise indicated in the Rate Tables.
The Exchange does not believe it is necessary to list the applicable
products or exclusions in the footnotes, as the Rate Tables in the Fees
Schedule already detail what fee codes and corresponding fees apply for
each of these transactions for each capacity and product. The Exchange
believes the proposed change eliminates unnecessary redundancy and
eliminates potential confusion.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\10\ in general, and
furthers the objectives of Section 6(b)(4),\11\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and issuers and other persons
using its facilities. The Exchange also believes that the proposed rule
change is consistent with the objectives of Section 6(b)(5) \12\
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, and, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed amendments to the Fees
Schedule in connection with standard transaction rates for FLEX Micro
Options transactions are reasonable, equitable and not unfairly
discriminatory. Specifically, the Exchange believes that it is
reasonable to assess fees for Customer, Market-Maker, Firm and Non-
Customer orders in FLEX Micro Options that are less than those fees for
transactions in the corresponding standard RUT, SPX, MXEF, MXEA and DJX
FLEX options (all of which overly the same respective indices as the
proposed FLEX Micro Options) because FLEX Micro Options have a smaller
notional value given their multiplier of one. Moreover, the Exchange
believes the proposed transaction fees are reasonable as such fees
reflect approximately 1/100th of the transaction fees (inclusive of
surcharges)
[[Page 42225]]
assessed for the corresponding transactions in standard RUT, SPX, MXEF,
MXEA and DJX FLEX options, which as discussed have a multiplier of 100
instead of one like FLEX Micro Options. The Exchange believes its
reasonable to exclude FLEX Micro Options from additional surcharges as
TPHs will not be subject to such surcharges.
The Exchange believes the proposed standard transaction rates and
exclusion from certain surcharges are equitable and not unfairly
discriminatory because they will apply automatically and uniformly to
all capacities as applicable (i.e., Customer, Market-Make, Firm and
Non-Customer), in FLEX Micro Options. The Exchange also notes that with
respect to lower transaction rates for Customer transactions in certain
FLEX Micro Options, there is a history in the options markets of
providing preferential treatment to customers and customer order flow
attracts additional liquidity to the Exchange, providing market
participants with more trading opportunities and signaling an increase
in Market-Maker activity, which facilitates tighter spreads. This may
cause an additional corresponding increase in order flow from other
market participants, contributing overall towards a robust and well-
balanced market ecosystem, particularly in a newly listed and traded
product. The Exchange also believes that it is equitable and not
unfairly discriminatory to propose lower transaction rates for certain
Market-Maker and Firm orders in certain FLEX Micro Options because the
Exchange recognizes that these market participants can provide key and
distinct sources of liquidity, which is particularly important for a
newly listed and traded options class on the Exchange. An increase in
general market-making activity facilitates tighter spreads, which tend
to signal additional corresponding increase in order flow from other
market participants, ultimately incentivizing more overall order flow
and improving liquidity levels and price transparency on the Exchange
to the benefit of all market participants. Similarly, the Exchange also
recognizes that Firms can be an important source of liquidity when they
facilitate their own customers' trading activity, thus, adding
transparency and promoting price discovery to the benefit of all market
participants. The Exchange notes too that Market-Makers and Firms take
on a number of obligations that other market participants do not have.
For example, unlike other market participants, Market-Makers take on
quoting obligations and other market making requirements and Firms must
have higher capital requirements, clear trades for other market
participants, and must be members of OCC. The Exchange also notes the
proposal to not assess surcharges to FLEX Micro Options is equitable
and not unfairly discriminatory as it applies to all market
participants (i.e., no market participant will be subject to those
surcharges).
The Exchange believes that the proposed updates to the Fees
Schedule in connection with the application (or rather exclusion) of
fee programs to transactions in FLEX Micro Options are reasonable,
equitable and not unfairly discriminatory. Particularly, the Exchange
believes it is reasonable to exclude transactions in FLEX Micro Options
from the: Liquidity Provider Sliding Scale, Liquidity Provider Sliding
Scale Adjustment Table, Volume Incentive Program, Break-Up Credits,
Affiliate Volume Plan, Clearing Trading Permit Holder Fee Cap, Floor
Broker Sliding Scale Rebate Program, Program, and the ORS and CORS
Programs in the same manner in which standard options on those same
indices are excluded. The Exchange believes that excluding FLEX Micro
Options transactions from certain fees programs is equitable and not
unfairly discriminatory because the programs will equally not apply to,
or exclude in the same manner, all market participants' orders in FLEX
Micro Options. The Exchange believes it's reasonable, equitable and not
unfairly discriminatory to exclude FLEX Micro transactions from the
Marketing Fee and SCORe program as such programs similarly already
exclude FLEX Options. Lastly, the Exchange believes it's reasonable,
equitable, and not unfairly discriminatory to exclude FLEX Micro
Options from the SPX/SPXW and SPESG Liquidity Provider Sliding Scale,
Clearing Trading Permit Holder Proprietary Products Sliding Scale,
Customer Large Trade Discount, Market-Maker Tier Appointment Fee
thresholds, Floor Broker Trading Surcharge thresholds, Floor Broker ADV
Discount, Floor Brokerage Fees Discount Scale, Floor Brokerage Fees,
Frequent Trader, and the GTH Executing Agent Subsidy because the
Exchange is not obligated to include any particular product in such
pricing programs, and the exclusion applies to all market participants
uniformly. Moreover, the Exchange notes that the proposed rule change
does not alter any of the existing program rates or volume
calculations, but instead, merely proposes not to include transactions
in FLEX Micro Options in those programs and volume calculations.
The Exchange lastly believes the proposed updates to footnotes 18,
19 and 20 of the Fees Schedule makes the footnotes easier to read,
eliminates redundancy between the Rate Tables and the footnotes and
alleviates potential confusion as to the applicability of AIM-related
fees, thereby removing impediments to and perfecting the mechanism of a
free and open market and a national market system, and, in general,
protecting investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed amendments to its Fee Schedule
will not 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 will impose any burden
on intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed FLEX Micro
Options transaction fees for the separate types of market participants
will be assessed automatically and uniformly to all similarly situated
market participants. The Exchange again notes that there is a history
in the options markets of providing preferential treatment to
Customers, Market-Makers and Firms, as described above in the statutory
basis section. Further, the proposed rule change will uniformly exclude
all transactions in FLEX Micro Options from certain programs and fees/
surcharges as it currently does for many of the Exchange's other
proprietary products, including another product with a one multiplier
(i.e., NANOS).
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 changes apply only to products exclusively listed on the
Exchange. Additionally, the Exchange notes it operates in a highly
competitive market. In addition to Cboe Options, TPHs have numerous
alternative venues that they may participate on and director 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 16% of the market share of executed volume of
[[Page 42226]]
options trades.\13\ Therefore, no exchange possesses significant
pricing power in the execution of option order flow. 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.'' \14\ 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'. . . .''.\15\ Accordingly, the Exchange
does not believe its proposed changes to the incentive programs impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
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\13\ See Cboe Global Markets, U.S. Options Market Volume Summary
by Month (June 24, 2022), available at <a href="http://markets.cboe.com/us/options/market_share/">http://markets.cboe.com/us/options/market_share/</a>.
\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\15\ 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 has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.
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 \16\ and paragraph (f) of Rule 19b-4 \17\
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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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#f381869f96de909c9e9e969d8780b3809690dd949c85"><span class="__cf_email__" data-cfemail="c4b6b1a8a1e9a7aba9a9a1aab0b784b7a1a7eaa3abb2">[email protected]</span></a>. Please include
File Number SR-CBOE-2022-034 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-2022-034. 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-2022-034
and should be submitted on or before August 4, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14997 Filed 7-13-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on July 14, 2022.
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