Notice2023-03161
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Select Customer Options Reduction Program
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
February 15, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 31 (Wednesday, February 15, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 31 (Wednesday, February 15, 2023)]
[Notices]
[Pages 9938-9940]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-03161]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96856; File No. SR-CBOE-2023-011]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Select Customer Options Reduction Program
February 9, 2023.
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, 2023, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 the Select Customer Options Reduction program. 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 the Select Customer Options
Reduction program (``SCORe''), effective February 1, 2023.
By way of background, SCORe is a discount program for Retail, Non-
FLEX Customer (``C'' origin code) volume in the following options
classes: SPX (including SPXW), VIX, RUT, MXEA, MXEF & XSP (``Qualifying
Classes''). The SCORe program is available to any Trading Permit Holder
(``TPH'') Originating Clearing Firm or non-TPH Originating Clearing
Firm that sign up for the program.\3\
---------------------------------------------------------------------------
\3\ For this program, an ``Originating Clearing Firm'' is
defined as either (a) the executing clearing Options Clearing
Corporation (``OCC'') number on any transaction which does not also
include a Clearing Member Trading Agreement (``CMTA'') OCC clearing
number or (b) the CMTA in the case of any transaction which does
include a CMTA OCC clearing number.
---------------------------------------------------------------------------
Currently, SCORe currently utilizes two measures for participation
and discounts: (1) the Qualifying Tiers, which determine whether a firm
qualifies for the discounts in either Tier A or Tier B and (2) the
Discount Tiers, which determine the Originating Firm's applicable
discount tiers and corresponding discounts. Under the current program,
to determine an Originating Firm's Qualifying Tier, the Originating
Firm's total Retail volume in the Qualifying Classes will be divided by
the Originating Firm's total Customer volume, Retail and non-Retail, in
the Qualifying Classes. Based on the percentage result, an Originating
Firm qualifies for Tier A or Tier B discounts. To determine the
Discount Tier, an Originating Firm's Retail volume in the Qualifying
Classes will be divided by total Retail volume in the Qualifying
Classes executed on the Exchange. The program then provides a discount
per retail contract, based on the determined Qualifying Tier and
Discount Tier thereunder. Currently, the program sets forth three
discount tiers for Qualifying Tier A, with applicable discounts ranging
from $0 to $0.08 per retail contract, and five discount tiers for
Qualifying Tier B, with applicable discounts ranging from $0 to $0.25
per retail contract.
The Exchange proposes to streamline the program by eliminating the
Qualifying Tiers construct. As amended, SCORe would utilize only one
measure for participation and discount (i.e., the Discount Tiers). All
Originating Firms would be subject to the same discount tier structure,
which determines the corresponding applicable discounts.
The Exchange next proposes to amend the discount tier structure for
the Discount Tiers. Specifically, the Exchange proposes to consolidate
the program into four discount tiers based on qualifying volume, i.e.,
Discount Tiers 1-4, with corresponding discounts, as set forth below.
------------------------------------------------------------------------
Discount
Retail volume percentage in per
Tier qualifying classes retail
contract
------------------------------------------------------------------------
1.......................... 0.00%-5.00%..................... $0.00
2.......................... Above 5.00%-21.00%.............. 0.04
3.......................... Above 21.00%-31.00%............. 0.05
4.......................... Above 31.00%-100.00%............ 0.14
------------------------------------------------------------------------
The discount tier structure for the Discount Tiers will continue to
be based on the same calculation, i.e., to determine the Discount Tier,
an
[[Page 9939]]
Originating Firm's Retail volume in the Qualifying Classes will be
divided by total Retail volume in the Qualifying Classes executed on
the Exchange.
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 the
Section 6(b)(5) \6\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(4) of the Act,\7\ 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.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ Id.
\7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
First, the Exchange believes the proposal to eliminate the
utilization of Qualifying Tiers as a measure for its SCORe program is
reasonable because it no longer wishes to consider this metric as part
of the program's participation and discounts, and it is not required to
do so. The Exchange also notes that the Qualifying Tier measure was
only one part of SCORe and believes the intention of the program will
continue to be achieved through utilization of the Discount Tiers
measure. The Exchange believes the proposed changes to eliminate the
utilization of Qualifying Tiers as a measure for its SCORe program and
to consolidate the discount tier structure into four Discount Tiers are
reasonable because it eliminates potential program complexity and
provides for a simpler calculation in determining qualifying thresholds
and applicable discounts. Further, the Exchange believes the amended
discount tier structure, including qualifying thresholds for the
proposed four Discount Tiers and corresponding applicable discounts,
remain equitable and reasonable by adequately considering the
elimination of the Qualifying Tier and not materially changing the
program.
The Exchange believes SCORe, currently and as amended, continues to
provide an incremental incentive for Originating Firms to strive for
the highest tier level, which provides increasingly higher discounts.
As such, the changes are designed to encourage increased Retail volume
in the Qualifying Classes, which provides increased volume and greater
trading opportunities for all market participants. The Exchange
believes the proposed change is equitable and not unfairly
discriminatory because the qualifying volume thresholds apply to all
registered Originating Firms uniformly. Additionally, while the
Exchange has no way of predicting with certainty how many and which
Originating Firms will qualify for which Discount Tier, the Exchange
anticipates at least two Originating Firms will qualify for Tier 2, one
Originating Firm will qualify for Tier 3, and one Originating Firm will
qualify for Tier 4, to receive the applicable discounts for each Tier.
The Exchange does not believe the proposed discount will adversely
impact any Originating Firm's pricing. Rather, should an Originating
Firm not meet the proposed criteria, the Originating Firm will merely
not receive the proposed discount.
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 changes to the SCORe program will impose any
burden on intramarket competition because the proposed changes apply to
all registered Originating Firms uniformly, in that all Originating
Firms will be subject to the same qualifying thresholds for the
proposed four Discount Tiers and corresponding applicable discounts.
The Exchange does not believe that the proposed rule changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
Qualifying Classes are products that only trade on the Exchange. To the
extent that the proposed changes make the Exchange a more attractive
marketplace for market participants at other exchanges, such market
participants are welcome to become Cboe Options market participants.
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 \8\ and paragraph (f) of Rule 19b-4 \9\
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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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<ls-thn-eq> Send an email to <a href="/cdn-cgi/l/email-protection#ee9c9b828bc38d8183838b809a9dae9d8b8dc0898198"><span class="__cf_email__" data-cfemail="1b696e777e36787476767e756f685b687e78357c746d">[email protected]</span></a>. Please
include File Number SR-CBOE-2023-011 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-2023-011. 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
[[Page 9940]]
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-2023-011
and should be submitted on or before March 8, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03161 Filed 2-14-23; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on February 15, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.