Notice2022-22181
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule
Primary source
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Published
October 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 197 (Thursday, October 13, 2022)</title>
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[Federal Register Volume 87, Number 197 (Thursday, October 13, 2022)]
[Notices]
[Pages 62166-62168]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22181]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96003; File No. SR-CBOE-2022-050]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
October 6, 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 September 26, 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 modify the fee
for the SPX (and SPXW) Floor Market-Maker Tier Appointment Fee.\3\
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\3\ The Exchange initially filed the proposed fee change, among
other changes, on June 1, 2022 (SR-CBOE-2022-026). On June 10, 2022,
the Exchange withdrew that filing and submitted SR-CBOE-2022-029. On
August 5, 2022, the Exchange withdrew that filing and submitted SR-
CBOE-2022-042. On September 26, 2022, the Exchange withdrew that
filing and submitted this filing to address the proposed fee change
relating to the SPX/SPXW Floor Market-Maker Tier Appointment Fee.
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By way of background, Exchange Rule 5.50(g)(2) provides that the
Exchange may establish one or more types of tier appointments and
Exchange Rule 5.50(g)(2)(B) provides such tier appointments are subject
to such fees and charges the Exchange may establish. In 2010, the
Exchange established the SPX Tier Appointment and adopted an initial
fee of $3,000 per Market-Maker trading permit, per month.\4\ The SPX
(and SPXW) Tier Appointment fee for Floor Market-Makers currently
applies to any Market-Maker that executes any contracts in SPX and/or
SPXW on the trading floor.\5\ The Exchange now seeks to increase the
fee for the SPX/SPXW Floor Market-Maker Tier Appointment from $3,000
per Market-Maker Floor Trading Permit to $5,000 per Market-Maker Floor
Trading Permit.
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\4\ See Securities Exchange Act Release No. 62386 (June 25,
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-060).
\5\ The Exchange notes that the fee is not 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. See Cboe Options Fees Schedule, Market-Maker Tier
Appointment Fees, Notes.
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In connection with the proposed change, the Exchange also proposes
to update Footnote 24 in the Fees Schedule, as well as remove the
reference to Footnote 24 in the Market-Maker Tier Appointment Fee
Table. By way of background, in June 2020, the Exchange adopted
Footnote 24 to describe pricing changes that would apply for the
duration of time the Exchange trading floor was being operated in a
modified manner in connection with the COVID-19
[[Page 62167]]
pandemic.\6\ Among other changes, Footnote 24 provided that the monthly
fee for the SPX/SPXW Floor Market-Maker Tier Appointment Fee was to be
increased to $5,000 per Trading Permit from $3,000 per Trading Permit.
As the Exchange now proposes to maintain the $5,000 rate on a permanent
basis (i.e., regardless of whether the Exchange is operating in a
modified state due to COVID-19 pandemic), the Exchange proposes to
eliminate the reference to the SPX/SPXW Floor Market-Maker Tier
Appointment Fee in Footnote 24.\7\
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\6\ See Securities Exchange Act Release No. 89189 (June 30,
2020), 85 FR 40344 (July 6, 2020) (SR-CBOE-2020-058).
\7\ The Exchange notes that since its transition to a new
trading floor facility on June 6, 2022, it has not been operating in
a modified manner. As such Footnote 24 (i.e., the modified fee
changes it describes) does not currently apply.
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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.\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 the
Section 6(b)(5) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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The Exchange believes its proposal to increase the SPX (and SPXW)
Floor Market-Maker Tier Appointment fee is reasonable because the
proposed amount is not significantly higher than was previously
assessed (and is the same amount that has been assessed under Footnote
24 for the last two years). Additionally, the Exchange believes its
proposal to increase the fee is reasonable as the fee amount has not
been increased since it was adopted over 12 years ago in July 2010.\11\
Since its adoption 12 years ago, there has been both inflation and
increased costs of services, including relating to facility and
technology upgrades associated with the new trading floor. Indeed, the
Exchange notes that the trading pit for SPX in particular is the
largest trading pit on the new trading floor and represents a
significant amount of space on the new trading floor. Additionally,
over the last decade the Exchange has made, and continues to make,
further investments to encourage growth trends in SPX volume, including
investments in marketing, sales teams, global coverage teams, and new
product innovations (such as adding additional weekly expirations and
LEAPS). The Exchange notes that the SPX (and SPXW) Tier Appointment fee
helps fund these efforts. Moreover, although the SPX (and SPXW) Tier
Appointment fee has not increased since 2010, SPX volume, including
volume on the trading floor, has increased significantly since that
time. The Exchange therefore believes the proposed fee increase is
reasonable because it allows the Exchange to recoup fees associated
with the costs of maintaining and growing SPX and SPXW, which products
can help market participants achieve broad market protection.
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\11\ See Securities Exchange Act Release No. 62386 (June 25,
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-060).
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The proposed change is also equitable and not unfairly
discriminatory as it applies to all Market-Makers that trade SPX on the
trading floor uniformly. The Exchange believes it's reasonable
equitable and not unfairly discriminatory to increase the SPX/SPXW
floor Market-Maker Tier Appointment fee and not the SPX/SPXW electronic
Market-Maker Tier Appointment fee, as Floor Market-Makers are not
subject to other costs that electronic Market-Makers are subject to.
For example, while all Floor Market-Makers automatically have an
appointment to trade open outcry in all classes traded on the Exchange
and at no additional cost per appointment, electronic Market-Makers
must select an appointment in a class (such as SPX) to make markets
electronically and such appointments are subject to fees under the
Market-Maker Electronic Appointments Sliding Scale.\12\
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\12\ See Cboe Options Rules 5.50(a) and (e). See also Cboe
Options Fees Schedule, Market-Maker EAP [sic] Appointments Sliding
Scale.
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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 changes 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
would be applied in the same manner to all Floor Market-Makers that
trade SPX (and/or SPXW). As noted above, the Exchange believes it's
reasonable to increase the SPX/SPWX Tier Appointment Fee for only Floor
Market-Makers only as opposed to electronic Market-Makers, because
electronic Market-Makers are subject to costs Floor Market-Makers are
not, such as the fees under Market-Maker EAP [sic] Appointments Sliding
Scale.
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 a fee relating to a product
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
(which list products that compete with SPX options) and direct their
order flow, including 15 other options exchanges (four of which also
maintain physical trading floors), 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 18% of
the market share of executed volume of 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
[[Page 62168]]
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 (September 26, 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 (DC 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 \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#8efcfbe2eba3ede1e3e3ebe0fafdcefdebeda0e9e1f8"><span class="__cf_email__" data-cfemail="087a7d646d256b6765656d667c7b487b6d6b266f677e">[email protected]</span></a>. Please include
File Number SR-CBOE-2022-050 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-2022-050. 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-2022-050 and should be submitted on
or before November 3, 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. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2022-22181 Filed 10-12-22; 8:45 am]
BILLING CODE 8011-01-P
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