Notice2023-05544
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Update the Cboe Data Services, LLC Fee Schedule
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
March 20, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 53 (Monday, March 20, 2023)</title>
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[Federal Register Volume 88, Number 53 (Monday, March 20, 2023)]
[Notices]
[Pages 16691-16697]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-05544]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97137; File No. SR-CBOE-2023-013]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Update
the Cboe Data Services, LLC Fee Schedule
March 14, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 28, 2023, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``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 the Cboe Data Services, LLC Fee 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 the fees set forth in the Cboe Data
Services, LLC (``CDS'') Fee Schedule.\3\ The Exchange proposes to (i)
relocate the fees in the CDS Fees Schedule to the Exchange's Fees
Schedule (ii) harmonize various definitions to align with the
definitions used by the Exchange's affiliates, and (iii) modify its
fees relating to the distribution of the BBO data feed.\4\
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\3\ The Exchange initially filed the proposed fee changes on
January 3, 2023 (SR-CBOE-2023-001). On February 28, 2023, the
Exchange withdrew that filing and submitted this proposal.
\4\ The BBO Data Feed is a real-time data feed that includes the
following information: (i) outstanding quotes and standing orders at
the best available price level on each side of the market; (ii)
executed trades time, size, and price; (iii) totals of customer
versus non-customer contracts at the best bid and offer (``BBO'');
(iv) all-or-none contingency orders priced better than or equal to
the BBO; (v) expected opening price and expected opening size; (vi)
end-of-day summaries by product, including open, high, low, and
closing price during the trading session; (vi) recap messages any
time there is a change in the open, high, low or last sale price of
a listed option; (vii) COB information; and (viii) product IDs and
codes for all listed options contracts. The quote and last sale data
contained in the BBO data feed is identical to the data sent to the
Options Price Reporting Authority (``OPRA'') for redistribution to
the public.
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Relocation of CDS Fees
The Exchange first proposes to consolidate the Cboe Data Services,
LLC (CDS) Fee Schedule and the Cboe Options Fees Schedule.
Historically, the CDS Fee Schedule set forth fees relating to real-time
Cboe Options market data products and has been maintained separately
from the Cboe Options Fees Schedule. The Exchange proposes to eliminate
the CDS Fee Schedule in its entirety and relocate the fees under the
CDS Fees Schedule to the Cboe Options Fees Schedule. The Exchange
believes this provides a more streamlined fee schedule for Cboe Options
fees and allows TPHs to more readily and easily find all fees
applicable to Cboe Options. The Exchange notes that no substantive
changes are being made with the relocation of the CDS fees other than
those discussed further below. The Exchange lastly notes that each of
its affiliated options exchanges also reflect
[[Page 16692]]
their respective fees for their respective real-time exchange market
data products in the respective exchange's fees schedule (instead of
being maintained separately), including the Exchange's affiliate Cboe
C2 Exchange, Inc., (``C2 Options''), which relocated its CDS fees
schedule into the C2 Options Exchange Fees Schedule in 2018.\5\ The
Exchange also believes the proposed change more accurately reflects the
Exchange's role as it relates to its market data products as CDS is
merely an affiliate that is the Cboe contracting entity for all U.S.
equities and options market data products, but the data products
themselves are made available by the Exchange.
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\5\ See BZX Options Exchange Fees Schedule EDGX Options Exchange
Fees Schedule and C2 Options Exchange Fees Schedule. See also
Securities Exchange Act Release No. 83409 (June 12, 20118), 83 FR
28302 (June 18, 2018) (SR-C2-2018-012).
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Definitions
In order to provide consistent rules and terminology amongst the
Exchange and its affiliated options exchanges, C2 Options, Cboe BZX
Exchange, Inc. (``BZX Options'') and Cboe EDGX Exchange, Inc. (``EDGX
Options'') (collectively, ``Affiliates'') the Exchange is proposing to
amend various definitions and product names to harmonize with such
terms used by its affiliates BZX Options and EDGX Options,
specifically.\6\ As such, the proposed rule change deletes a defined
term, adds certain defined terms, and makes certain non-substantive
changes to existing definitions, as further described in the table
below. The proposed rule change makes these changes throughout the
market data fee language to conform to the proposed defined terms and
the Exchange uses the proposed updated terms herein.
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\6\ C2 Options will be submitting a similar filing to harmonize
its definitions and products names to align with those of BZX
Options and EDGX Options as well.
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Description of
Defined term Provision Current CDS location change
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Customer.......................... A ``Customer'' is any person, Section I............ Deletes defined term
company or other entity that, to align terms with
pursuant to a market data BZX Options and
agreement with CDS, is EDGX Options. The
entitled to receive data, concept of
either directly from CDS or ``Customer'' is
through an authorized also better
redistributor (i.e., a captured through
Customer or an extranet the proposed new
service provider), whether term
that data is distributed ``Distributor''.
externally or used internally.
A third-party vendor of an
Approved Third-Party Device,
as defined in the CDS Fee
Schedule, is not a Customer
unless it has a market data
agreement in place with CDS. A
Floor Broker User, as defined
in the CDS Fee Schedule, is
not a Customer unless it has a
market data agreement in place
with CDS.
Distributor....................... A Distributor of an Exchange N/A.................. Codifies definition
Market Data product is any of ``Distributor''
entity that receives the in Footnote 49 of
Exchange Market Data product the Cboe Options
directly from the Exchange or Fees Schedule.
indirectly through another Definition is
entity and then distributes it identical to the
internally or externally to a definition used by
third party. BZX Options and
EDGX Options and
substantially
similar to the
language in the
first sentence of
the definition of
``Customer'' in the
CDS Fees Schedule.
Internal Distributor.............. An Internal Distributor of an N/A.................. Codifies definition
Exchange Market Data product of ``Internal
is a Distributor that receives Distributor'' in
the Exchange Market Data Footnote 49 of the
product and then distributes Cboe Options Fees
that data to one or more Users Schedule.
within the Distributor's own Definition is
entity. identical to the
definition used by
BZX Options and
EDGX Options.
External Distributor.............. An External Distributor of an N/A.................. Codifies definition
Exchange Market Data product of ``External
is a Distributor that receives Distributor'' in
the Exchange Market Data Footnote 49 of the
product and then distributes Cboe Options Fees
that data to a third party or Schedule.
one or more Users outside the Definition is
Distributor's own entity. identical to the
definition used by
BZX Options and
EDGX Options.
User.............................. A User of an Exchange Market N/A.................. Codifies definition
Data product is a natural of ``User'' in
person, a proprietorship, Footnote 49 of the
corporation, partnership, or Cboe Options Fees
entity, or device (computer or Schedule.
other automated service), that Definition is
is entitled to receive identical to one
Exchange data. used by BZX Options
and EDGX Options.
[[Page 16693]]
Non-Professional User............. A ``Non-Professional User'' is Sections I and III... Relocates definition
a natural person or qualifying to Footnote 49 of
trust that uses Data only for the Cboe Options
personal purposes and not for Fees Schedule and
any commercial purpose and, updates the rule
for a natural person who works reference to
in the United States, is not: ``Section 201(11)''
(i) registered or qualified in of the Investment
any capacity with the Advisors Act of
Securities and Exchange 1940 to ``Section
Commission, the Commodities 202(a)(11)''.
Futures Trading Commission,
any state securities agency,
any securities exchange or
association, or any
commodities or futures
contract market or
association; (ii) engaged as
an ``investment adviser'' as
that term is defined in
Section 201(11) of the
Investment Advisors Act of
1940 (whether or not
registered or qualified under
that Act); or (iii) employed
by a bank or other
organization exempt from
registration under federal or
state securities laws to
perform functions that would
require registration or
qualification if such
functions were performed for
an organization not so exempt;
or, for a natural person who
works outside of the United
States, does not perform the
same functions as would
disqualify such person as a
Non-Professional User if he or
she worked in the United
States.
Professional User................. A Professional User of an Sections I and III... Relocates definition
Exchange Market Data product to Footnote 49 of
is any natural person the Cboe Options
recipient of an Exchange Fees Schedule.
Market Data product who is not
a Non-Professional User.
Display Only Service.............. A ``Display Only Service'' Section I............ Relocates definition
allows a natural person end- to Footnote 49 of
user to view and manipulate the Cboe Options
data using the Distributor's Fees Schedule.
computerized service, but not
to save, copy, export or
transfer the data or any
results of the manipulation to
any other computer hardware,
software or media, except for
printing it to paper or other
non-magnetic media.
Device............................ A ``Device'' means any Section I under Relocates definition
computer, workstation or other ``Display Only User to Footnote 49 of
item of equipment, fixed or Fees''. the Cboe Options
portable, that receives, Fees Schedule.
accesses and/or displays data
in visual, audible or other
form.
Approved Third-Party Device....... An ``Approved Third-Party Section I under Relocates definition
Device'' means any computer, ``Floor Broker User to Footnote 49 of
workstation or other item of Fees''. the Cboe Options
equipment, fixed or portable, Fees Schedule.
that receives, accesses and/or
displays data in visual,
audible or other form that has
been provided by a third-party
and that has been approved, by
Cboe Options, for use on the
Cboe Options trading floor.
Floor Broker User................. A ``Floor Broker User'' is a Section I under Relocates definition
person or entity registered ``Floor Broker User to Footnote 49 of
with Cboe Options as a floor Fees''. the Cboe Options
broker pursuant to Cboe Fees Schedule.
Options Rules.
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The Exchange also proposes to rename the following market data
products and use the proposed names herein, in order to align with the
naming convention used by the Exchange's affiliates, BZX Options and
EDGX Options, for similar data products.\7\
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\7\ See BZX Options Exchange Fees Schedule, Market Data Fees and
EDGX Options Exchange Fees Schedule, Market Data Fees.
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Current name Proposed name
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BBO Data Feed............................. Cboe Options Top.
Book Depth Data Feed...................... Cboe Options Depth.
Complex Order Book (COB) Data Feed........ Cboe Complex Order Book
(COB).
FLEX Options Data Feed.................... Cboe Options FLEX Options.
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The Exchange believes the proposed changes to eliminate, modify and
adopt the terms discussed above will add additionally transparency to
the Fees Schedule and will protect investors, as the changes provide
more clarity within the rule and more harmonized rule language across
the Fees Schedules of the Cboe affiliated options exchanges. Further,
the Exchange notes that the changes are non-substantive changes or
provide additional detail in the rule regarding current market
participants that purchase or use the Exchange's market data products.
None of these differences impact the manner in which any of the terms
and corresponding fees apply, including how the Exchange would have
otherwise characterized a Distributor or User (Professional or Non-
Professional).
Cboe Options Top Fee Changes
The Exchange next proposes to modify the current monthly Data Fee
for Cboe Options Top. Currently, the Exchange assesses a ``Data Fee''
of $9,000 per month for internal use and external redistribution of the
Cboe Options Top Data Feed. A Distributor receiving the Cboe Options
Top Data Feed from another entity or directly from the Exchange is
assessed the Data Fee by the Exchange and is entitled to use the Data
internally and/or distribute it externally. The Exchange now proposes
to adopt separate fees for internal and external distribution.
Specifically, the Exchange proposes to maintain the current monthly fee
of $9,000 for internal distribution but adopt a lower fee of $5,000 per
month for external distribution.
The Exchange next proposes to modify its current User Fees. The
Exchange currently charges a ``User Fee'' of $50 per month per Device
or user ID for use of the data in the Cboe Options Top Data Feed by
``Display Only Service'' users. The current User fee is payable only
for ``external'' Display Only Service users who receive Cboe Options
Top.\8\ Internal Distributors may currently distribute Cboe Options Top
Data to an unlimited number of
[[Page 16694]]
internal users and Devices within the Distributor at no further cost.
The Exchange proposes to eliminate the current Cboe Options Top User
fee and in its place adopt Professional and Non-Professional User fees
for Cboe Options Top that would apply to both Internal and External
Distributors for all Professional and Non-Professional Users. The
Exchange proposes to charge Cboe Options Top Distributors a monthly fee
of $15.50 per Professional User and a monthly fee of $0.30 per Non-
Professional User.\9\
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\8\ Pursuant to the Cboe Global Markets North American Data
Policies, Distributors must report the number of authorized external
devices that receive Cboe Options Top data during a calendar month
within 15 days after such month in the manner and format specified
by the Exchange from time to time to determine applicable fees.
\9\ Distributors that receive Cboe Options Top Data will be
required to count every Professional User and Non-Professional User
to which they provide the data feed.
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Next, the Exchange proposes to eliminate a fee waiver for Customers
of Cboe Options Top Data. In particular, the CDS Fee Schedule currently
provides that the monthly data fee of $9,000 per month for the Cboe
Options Depth feed \10\ is waived for Cboe Options Top Data Customers.
The Exchange proposes to eliminate the fee waiver for Cboe Options
Depth for External Distributors of Cboe Options Top (i.e., the monthly
$9,000 data fee for Book Depth Data will only continue to be waived for
Internal Distributors of Cboe Options Top Data).
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\10\ The Cboe Options Depth feed is a real-time, low latency
data feed that includes all data contained in the Cboe Options Top
feed (as described above) plus outstanding quotes and standing
orders for an additional four price levels on each side of the
market, with aggregate size (``Book Depth''). The data in the Cboe
Options Depth feed is refreshed periodically during the trading
session.
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The Exchange lastly proposes to establish a $300,000 per month
Enterprise Fee that will permit a Distributor to purchase a monthly
(and optional) Enterprise license to receive the Cboe Options Top Data
for distribution to an unlimited number of Professional and Non-
Professional Users. The Enterprise Fee is an alternative to
Professional and Non-Professional User fees and will permit a
Distributor to pay a flat fee to receive the data for an unlimited
number of Professional and Non-Professional Users, which the Exchange
proposes to make clear in the Fee Schedule. Like User fees, the
Enterprise Fee would be assessed in addition to the Distribution Fees.
The Enterprise Fee may provide an opportunity to reduce fees. For
example, if a Distributor has 20,000 Professional Users who each
receive Cboe Options Top at $15.50 per month (as proposed), then that
Distributor will pay $310,000 per month in Professional Users fees. If
the Distributor instead were to purchase the proposed Enterprise
license, it would alternatively pay a flat fee of $300,000 for an
unlimited number of Professional and Non-Professional Users. A
Distributor must pay a separate Enterprise Fee for each entity that
controls the display of Cboe Options Top if it wishes for such Users to
be covered by the Enterprise Fee rather than by per User fees.\11\ A
Distributor that pays the Enterprise Fee will not have to report its
number of such Users on a monthly basis. Rather, every six months, the
recipient firm must provide the Exchange with a count of the total
number of Professional and Non-Professional Users of Cboe Options Top
Data.\12\ The Exchange notes that the purchase of an Enterprise license
is voluntary, and a firm may elect to instead use the per User
structure and benefit from the proposed per User Fees described above.
For example, a firm that does not have a sufficient number of Users to
benefit from purchase of the license need not do so.
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\11\ For example, if a Distributor that distributes Cboe Options
Top to Retail Brokerage Firm A and Retail Brokerage Firm B and
wishes to have the Users under each firm covered by an Enterprise
license, the Distributor would be subject to two Enterprise Fees.
\12\ See Cboe Global Markets North American Data Policies.
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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.\13\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \14\ 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,\15\ 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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ 15 U.S.C. 78f(b)(4).
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The Exchange first notes that it operates in a highly competitive
environment. Indeed, there are currently 16 registered options
exchanges that trade options. Based on publicly available information,
no single options exchange has more than 17% of the market share.\16\
The Exchange believes top-of-book quotation and transaction data is
highly competitive as national securities exchanges compete vigorously
with each other to provide efficient, reliable, and low-cost data to a
wide range of investors and market participants. Indeed, there are
several competing products offered by other national securities
exchanges today, not counting products offered by the Exchange's
affiliates, and each of the Exchange's affiliated U.S. options
exchanges also offers similar top-of-book data.\17\ Each of those
exchanges offer top-of-book quotation and last sale information based
on their own quotation and trading activity that is substantially
similar to the information provided by the Exchange through the Cboe
Options Top Feed. Further, the quote and last sale data contained in
the Cboe Options Data Feed is identical to the data sent to OPRA for
redistribution to the public, including data relating to the Exchange's
proprietary and exclusively listed products.\18\ Accordingly, Exchange
top-of-book data is widely available today from a number of different
sources.
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\16\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (February 24, 2023), available at <a href="https://markets.cboe.com/us/options/market_statistics/">https://markets.cboe.com/us/options/market_statistics/</a>.
\17\ See e.g., NYSE Arca Options Proprietary Market Data Fees
Schedule, MIAX Options Exchange, Fee Schedule, Section 6 (Market
Data Fees), Nasdaq PHLX Options 7 Pricing Schedule, Section 10
(Proprietary Data Feed Fees) and C2 Options Exchange Fees Schedule,
Cboe Data Services, LLC Fees.
\18\ The Exchange notes that it makes available the BBO data and
last sale data that is included in the Cboe Options Top Data Feed no
earlier than the time at which the Exchange sends that data to OPRA.
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Moreover, the Cboe Options Top Data Feed is distributed and
purchased on a voluntary basis, in that neither the Exchange nor market
data distributors are required by any rule or regulation to make this
data available. Accordingly, Distributors and Users can discontinue use
at any time and for any reason, including due to an assessment of the
reasonableness of fees charged. As described above, market participants
have a wide variety of alternative market data products from which to
choose, such as similar proprietary data products offered by other
exchanges and consolidated data. Further, the Exchange is not required
to make any proprietary data products available or to
[[Page 16695]]
offer any specific pricing alternatives to any customers. Moreover,
persons (including broker-dealers) who subscribe to any exchange
proprietary data feed must also have equivalent access to consolidated
Options Information \19\ from OPRA for the same classes or series of
options that are included in the proprietary data feed (including for
exclusively listed products), and proprietary data feeds cannot be used
to meet that particular requirement.\20\ As such, all proprietary data
feeds are optional.
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\19\ ``Consolidated Options Information'' means consolidated
Last Sale Reports combined with either consolidated Quotation
Information or the BBO furnished by OPRA. Access to consolidated
Options Information is deemed ``equivalent'' if both kinds of
information are equally accessible on the same terminal or work
station. See Limited Liability Company Agreement of Options Price
Reporting Authority, LLC (``OPRA Plan''), Section 5.2(c)(iii). The
Exchange notes that this requirement under the OPRA Plan is also
reiterated under the Cboe Global Markets Global Data Agreement and
Cboe Global Markets North American Data Policies, which subscribers
to any exchange proprietary product must sign and are subject to,
respectively. Additionally, the Exchange's Data Order Form (used for
requesting the Exchange's market data products) requires
confirmation that the requesting market participant receives data
from OPRA.
\20\ Id.
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The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. Particularly, 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.'' \21\ Making
similar data products available to market participants fosters
competition in the marketplace, and constrains the ability of exchanges
to charge supracompetitive fees. In the event that a market participant
views one exchange's data product as more or less attractive than the
competition they can and do switch between similar products. The
proposed fees are a result of the competitive environment, as the
Exchange seeks to adopt fees to attract purchasers of Cboe Options Top
Data.
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\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes the proposed External Distribution fee is
reasonable as it would represent a decreased fee for any Distributor
who is only interested in distributing Cboe Options Top externally. By
providing an opportunity for lower cost access to U.S. options market
data, Cboe Options Top benefits a wide range of investors that
participate in the national market system and makes it more broadly
available. The Exchange believes the proposed fees for external
distribution of Cboe Options Top will also continue to be allocated
fairly and equitably, and are not unfairly discriminatory, as the
proposed fee will apply equally to all Distributors that choose to
subscribe to Cboe Options Top and distribute that data to external
Users. More specifically, as proposed, all External Distributors of
Cboe Options Top will be subject to the same external distribution fee,
regardless of the type of business that they operate, or the use they
plan to make of the data feed. Thus, all External Distributors would
have access to Cboe Options Top for purposes of external distribution
on the same equitable and non-discriminatory terms.
The Exchange believes that it is also fair and equitable, and not
unfairly discriminatory to charge different fees for internal and
external distribution of the Cboe Options Top. Although the proposed
distribution fee charged to External Distributors will be lower than
the existing distribution fee charged to Internal Distributors,
External Distributors are subject to Non-Professional user fees to
which Internal Distributors are not subject, in addition to
Professional User fees (or alternatively the proposed Enterprise Fee).
Furthermore, the proposal is designed to incentivize External
Distributors to subscribe to Cboe Options Top Data. Moreover, as noted
above, Internal Distributors of Cboe Options Top will still have the
benefit of receiving Cboe Options Depth at no additional cost, whereas
such waiver will not be available for External Distributors of Cboe
Options Top. The Exchange also notes that Cboe Options Depth is more
likely to be used by Professional Users, including employees of
Distributors, whereas Cboe Options Top is more likely to be used by
Non-Professional Users who, by definition, do not receive the data for
commercial purposes (e.g., retail investors).
The Exchange believes the proposed changes to adopt new
Professional and Non-Professional User fees are reasonable as the User
fees continue to be in line with User fees assessed by other exchanges
for similar data.\22\ Moreover, External Distributors will now be
subject to lower fees as the Exchange proposes to significantly reduce
the monthly User fees from $50 per External User to $15.50 per
Professional User or $0.30 per Non-Professional User. Although External
Distributors are currently only subject to fees for external users, the
fee for external users (which are likely to be Non-Professional Users)
are significantly lower (i.e., $0.30 per Non-Professional User) than
the current $50 fee for external users. Moreover, the proposed fee
structure of differentiated Professional and Non-Professional fees that
are paid by both Internal and External Distributors has long been used
by other exchanges, including the Exchange, for their proprietary data
products, and by the OPRA plan in order to reduce the price of data to
retail investors and make it more broadly available.\23\ The Exchange
also believes offering Cboe Options Top Data to Non-Professional Users
at a lower cost than Professional Users results in greater equity among
data recipients, as Professional Users are categorized as such based on
their employment and participation in financial markets, and thus, are
compensated to participate in the markets. Although Non-Professional
Users too can receive significant financial benefits through their
participation in the markets, the Exchange believes it is reasonable to
charge more to those Users who are more directly engaged in the
markets. The Exchange believes that the
[[Page 16696]]
proposed fees are equitable and not unfairly discriminatory because
they will be charged uniformly to Distributors for their Professional
and Non-professional Users.
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\22\ See e.g., Nasdaq PHLX Options 7 Pricing Schedule, Section
10 (Proprietary Data Feed Fees), which provides for a fee of $40 per
month to professional users and $1.00 per month to non-professional
users to cover the usage of PHLX Options (TOPO) Data, TOPO Plus
Orders, PHLX Orders and PHLX Depth Data feeds. See also NYSE
American Options Proprietary Market Data Fees schedule, which
provides for a fee of $50 per month to professional users and $1.00
per month to non-professional users of American Options Top Data,
American Options Deep and American Options Complex products. By
comparison, the total Professional User fee for Cboe Options Top and
Cboe Options COB is in line with the above Professional User fee at
$40.50 per Professional User (i.e., $15.50 per Professional Users of
Cboe Options Top, as proposed, and $25 per Professional User of Cboe
Options COB). The Exchange's combined Non-Professional User Fee at
$0.30 per Non-Professional User (i.e., $0.30 per Non-Professional
User of Cboe Options Top, as proposed, and $0 per Non-Professional
User of Cboe Options COB) is lower than PHLX's and NYSE American's
aforementioned Non-Professional User fees. As discussed above, Cboe
Options Depth does not charge users based on Professional or Non-
Professional classification and market participants were always
subject to separate User fees across Cboe Options market data
products.
\23\ See, e.g., Securities Exchange Act Release No. 59544 (March
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131)
(establishing the $15 Non-Professional User Fee (Per User) for NYSE
OpenBook); See, e.g., Securities Exchange Act Release No. 67589
(August 2, 2012), 77 FR 47459 (August 8, 2012) (revising OPRA's
definition of the term ``Nonprofessional''); and See Securities
Exchange Act Release No. 70683 (October 15, 2013), 78 FR 62798
(October 22, 2013) (SR-CBOE-2013-087) (establishing Professional and
Non-Professional User fees for Cboe Options COB Data Feed).
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The Exchange next notes it is not required to charge a single
distribution fee to cover more than one of its available data products,
but none-the-less has opted to not charge for separate data fees for
Cboe Options Depth and Cboe Options COB for Distributors of Cboe
Options Top, since such waiver was adopted in January 1, 2015.\24\
However, the Exchange no longer wishes to maintain a fee waiver of Cboe
Options Depth and Cboe Options COB for External Distributors of Cboe
Options Top. Although External Distributors will not receive the
benefit of the fee waiver, they will be subject to a lower distribution
fee as compared to Internal Distributors who will continue to be
charged the higher fee of $9,000. Moreover, Distributors are less
likely to distribute Cboe Options Depth externally, as such data feed
is generally used more often by Professional Users. Moreover, the Cboe
Options Depth feed and Cboe Options COB, like all of the Exchange's
market data products, are purely optional. Only those Distributors that
deem the product to be of sufficient overall value and usefulness would
purchase them for distribution to Users. Further, Distributors are not
required to distribute, and Users are not required to receive, any one
particular data product and may choose to receive none, one, or several
of the Exchange's market data products. Indeed, only approximately 30%
of the Exchange's market data subscriptions is for Cboe Options Top.
Additionally, the Exchange is not required to provide any such waiver
to any Distributors of Cboe Options Top. The Exchange believes the
proposed change is equitable and not unfairly discriminatory as it will
apply uniformly to External Distributors.
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\24\ See Securities Exchange Act Release No. 70683 (October 15,
2013), 78 FR 62798 (October 22, 2013) (SR-CBOE-2013-087).
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The proposed Enterprise Fee for Cboe Options Top Feed is equitable
and reasonable as the proposed fee could result in a fee reduction for
Distributors with a large number of Professional and Non-Professional
Users. If a Distributor has a smaller number of Professional Users of
Cboe Options Top Data, then it may continue using the per User
structure and benefit from the proposed per Cboe Options Top User Fee
reductions. By reducing prices for recipient firms with a large number
of Professional and Non-Professional Users, the Exchange believes that
more firms may choose to receive and to distribute Cboe Options Top
Data, thereby expanding the distribution of this market data for the
benefit of investors.
The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count Professional and Non-Professional users every
six months, which is a significant reduction in administrative burden.
Finally, as described above the Enterprise Fee is entirely optional. A
firm that does not have a sufficient number of Users to benefit from
purchase of the license need not do so.
The Exchange lastly believes the proposed changes relating to the
defined terms and terminology will provide additional specificity and
clarity, while also harmonizing the various definition with that of its
affiliates. Doing so would ensure consistent terms amongst the Exchange
and its affiliates, thereby reducing the potential for confusion
amongst market data subscribers of the Exchange's and its affiliates'
market data products. Additionally, the proposed new terms are
identical to the terms already used by the Exchange's affiliates BZX
Options and EDGX Options. Similarly, the Exchange believes the proposal
to relocate the fees in the CDS Fees Schedule to the Cboe Options Fees
Schedule will provide for a more streamlined fees schedule and allow
TPHs to more readily and easily find all fees applicable to Cboe
Option, thereby reducing potential confusion. Further, the Exchange is
the only exchange of the Cboe options exchanges that currently
maintains a separate fees schedule for its market data product fees.
Accordingly, the Exchange believes the proposed changes remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, protect investors and the
public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
operates in a highly competitive environment, and its ability to price
top-of-book data is constrained by competition among exchanges that
offer similar data products to their customers. Top-of-book data is
broadly disseminated by competing U.S. options exchanges and through
OPRA. There are therefore a number of alternative products available to
market participants and investors, including products offered by
certain competing exchanges, as well as OPRA. Further, the Exchange's
proposal to eliminate the waiver for the Cboe Options Depth data fee
for External Distributors of Cboe Options Top does not modify the
existing fee amounts, but simply eliminates a waiver to receive such
data free of charge that the Exchange is not required to maintain.
Other exchanges are free to adopt a similar waiver if they choose. In
this competitive environment potential Distributors are free to choose
which competing product to purchase to satisfy their respective needs
for market information. Often, the choice comes down to price, as
market data participants look to purchase cheaper data products, and
quality, as market participants seek to purchase data that represents
significant market liquidity.
The Exchange believes that the proposed fees do not put any market
participants at a relative disadvantage compared to other market
participants. As discussed, the proposed fees and eliminated waiver
would apply to all similarly situated Distributors of Cboe Options Top
on an equal and non-discriminatory basis. The Exchange believes the
reduced fees for External Distributors and not Internal Distributors of
Cboe Options Top is appropriate given External Distributors are subject
to the proposed Non-Professional user fees to which Internal
Distributors are not subject, in addition to the proposed Professional
User fees. Additionally, Internal Distributors will continue to receive
the benefit of a fee waiver for Cboe Options Depth, which is the more
commonly used product for internal distribution amongst Professional
Users. The Exchange believes the differentiated fees for Professional
and Non-Professional Users of Cboe options Top is appropriate given
Professional Users are categorized as such based on their employment
and participation in financial markets, and thus, are compensated to
participate in the markets. Non-Professional Users too can receive
significant financial benefits through their participation in the
markets, however the Exchange believes it is reasonable to charge more
to those Users who are more directly engaged in the markets. The
Exchange therefore believes that the proposed fee neither favors nor
penalizes one or more categories of market participants in a
[[Page 16697]]
manner that would impose an undue burden on competition.
The Exchange believes that the proposed fees do not impose a burden
on competition or on other SROs that is not necessary or appropriate in
furtherance of the purposes of the Act. In particular, market
participants are not forced to subscribe to Cboe Options Top Data, or
any of the Exchange's data feeds, as described above. As noted, the
quote and last sale data contained in the Exchange's Cboe Options Top
feed is identical to the data sent to OPRA for redistribution to the
public, including data relating to the Exchange's proprietary and
exclusively listed products. Accordingly, Exchange top-of-book data is
therefore widely available today from a number of different sources.
Because market data customers can find suitable substitute feeds,
an exchange that overprices its market data products stands a high risk
that users may substitute another product. These competitive pressures
ensure that no one exchange's market data fees can impose an undue
burden on competition, and the Exchange's proposed fees do not do so
here.
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 \25\ and paragraph (f) of Rule 19b-4 \26\
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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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 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#4032352c256d232f2d2d252e3433003325236e272f36"><span class="__cf_email__" data-cfemail="285a5d444d054b4745454d465c5b685b4d4b064f475e">[email protected]</span></a>. Please include
File Number SR-CBOE-2023-013 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-2023-013. 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-2023-013 and should be submitted on
or before April 10, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR-200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05544 Filed 3-17-23; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 20, 2023.
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