Notice2023-17533
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule Related to the Options Regulatory Fee
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
August 16, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 157 (Wednesday, August 16, 2023)</title>
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[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Notices]
[Pages 55801-55804]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-17533]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98109; File No. SR-CboeBZX-2023-061]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule Related to the Options Regulatory Fee
August 10, 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 August 8, 2023, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
amend its Fee Schedule related to the Options Regulatory Fee. 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://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</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 Options Fee Schedule, to
harmonize the language and processes relating to the Options Regulatory
Fee (``ORF'').\3\ By way of background, the ORF is designed to recover
a material portion of the costs to the Exchange of the supervision and
regulation of Member customer options business, including performing
routine surveillances, investigations, examinations, financial
monitoring, as well as policy, rulemaking, interpretive and enforcement
activities. The revenue generated from the ORF, when combined with all
of the Exchange's other regulatory fees and fines, covers a material
portion, but not all, of the Exchange's regulatory costs.
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\3\ The Exchange initially filed the proposed rule change on
August 1, 2023 (SR-CboeBZX-2023-057). On August 8, 2023, the
Exchange withdrew that filing and submitted this proposal.
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The Exchange monitors the amount of revenue collected from the ORF
to ensure that it, in combination with its other regulatory fees and
fines, does not exceed the Exchange's total regulatory costs. The
Exchange monitors its regulatory costs and revenues at a
[[Page 55802]]
minimum on a semi-annual basis. If the Exchange determines regulatory
revenues exceed or are insufficient to cover a material portion of its
regulatory costs, the Exchange will adjust the ORF by submitting a fee
change filing to the Commission. The Exchange notifies Members of
adjustments to the ORF via an exchange notice. The Exchange provides
Members with such notice at least 30 calendar days prior to the
effective date of the change.
The Options Regulatory Fee section of the fees schedule sets forth
the details and description of how and when the ORF is assessed. For
example, the fee schedule explicitly specifies that the Exchange may
only increase or decrease the ORF semi-annually, and any such fee
change will be effective on the first business day of February or
August. The fee schedule further states that the Exchange will notify
participants of any change in the amount of the fee at least 30
calendar days prior to the effective date of the change.
The Exchange proposes to update the fee schedule language relating
to the timing of ORF changes. Particularly, the Exchange proposes to
eliminate the strict requirement that the ORF may only be modified on
the first business day of February or August, and also the explicit
requirement that it must provide at least 30 calendar days prior to the
effective date.
The Exchange first proposes to eliminate the requirement that ORF
may only be modified on the first business day of February or August to
afford the Exchange increased flexibility in amending the ORF. As noted
above, the ORF is based in part on options transactions volume, and as
such the amount of ORF collected is variable. If options transactions
reported to OCC in a given month increase, the ORF collected from
Members may increase as well. Similarly, if options transactions
reported to OCC in a given month decrease, the ORF collected from
Members may decrease as well. Accordingly, the Exchange monitors the
amount of ORF collected to ensure that it does not exceed the
Exchange's total regulatory costs. If the Exchange determines the
amount of ORF collected exceeds costs over an extended period, the
proposed rule change allows the Exchange to adjust the ORF by
submitting a fee change filing to the Securities and Exchange
Commission (the ``Commission'') in a month other than just February or
August. Although the Exchange proposes to eliminate the explicit
language in the fee schedule that provides the Exchange will adjust the
ORF only semi-annually, and only on the first business day of February
or August, it would continue to monitor its regulatory costs and
revenues at a minimum on a semi-annual basis and submit a proposed rule
change for each modification of the ORF as needed.
The Exchange also proposes to eliminate the explicit language in
the fee schedule that it will notify participants of any change in the
amount of the fee at least 30 calendar days prior to the effective date
of the change. Although the Exchange proposes to eliminate this
language from the fee schedule, it notes that it will endeavor to
notify Members of any planned change to the ORF by Exchange Notice at
least 30 calendar days prior to the effective date of such change. The
Exchange believes this proposed change also provides the Exchange
additional flexibility. For example, the Exchange often provides fee
change notices on the first business day of the month. It may be the
case that such date is less than 30 days from the effective date of
proposed change (e.g., if the Exchange wished to amend the ORF,
effective, August 1, 2023, the Exchange would not have met the 30-day
notice requirement if it had announced on the first business day of
July, as it has been historic practice, since the first business day
falls on July 3, 2023). As such, the proposed rule changes provides
added flexibility while still committing to provide notice on the
timing of any changes to the ORF and ensuring that Members are prepared
to configure their systems to properly account for the ORF.
The Exchange notes that the proposed changes result in ORF
processes and fee schedule language that aligns with those of its
affiliated exchanges, Cboe Exchange, Inc. (``Cboe Options'') and Cboe
C2 Exchange, Inc. (``C2 Options).\4\ Particularly, although typically
the practice, neither Cboe Options nor C2 Options are limited to only
adjusting ORF to only the first business day of August or February.
Moreover, other options exchanges recently amended their fees to allow
for flexibility to adjust ORF during months other than February or
August.\5\ The Exchange notes that neither Cboe Options nor C2 Options
explicitly provide in their fees schedules that it will provide notice
at least 30 calendar days in advance of any ORF change. They have both
represented in various ORF fee filings that they endeavor to notify
Members of any planned change to the ORF by Exchange Notice at least 30
calendar days prior to the effective date of such change, just as the
Exchange represents here.\6\ The Exchange believes the proposed change
provides uniformity across is affiliated options exchanges and reduces
potential confusion. It also provides the Exchange added flexibility as
to when modifications to the ORF may occur.
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\4\ See Cboe Options Fees Schedule and Cboe C2 Options Fees
Schedule. The Exchange intends to submit an identical proposal for
its affiliate, Cboe EDGX Exchange, Inc. (``EDGX Options'').
\5\ See e.g., Securities Exchange Act Release No. 96066 (October
13, 2022), 87 FR 63565 (October 19, 2022) (SR-NYSEAMER-2022-45).
\6\ See e.g., Securities Exchange Act Release No. 92597 (August
6, 2021), 86 FR 44451 (August 12, 2021 (SR-CBOE-2021-044). See also
Securities Exchange Act Release No. 92596 (August 6, 2021), 86 FR
44461 (August 12, 2021 (SR-C2-2021-012).
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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.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ 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) \9\ 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,\10\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed changes to the Fees Schedule
with respect to how ORF is assessed and collected are appropriate as it
provides the Exchange more flexibility in its assessment of ORF based
on its periodic monitoring of ORF rates. The Exchange also represents
that it will continue to monitor its regulatory costs and revenues at a
minimum on a semi-
[[Page 55803]]
annual basis, just as it, and its affiliated options exchanges
(including Cboe Options and C2 Options) do today. The Exchange believes
that the proposed elimination of language specifying that the Exchange
may only increase or decrease the ORF on the first business day
February or August is reasonable because it is designed to afford the
Exchange increased flexibility in making necessary adjustments to the
ORF, as the Exchange is required to monitor the amount collected from
the ORF to ensure that it, in combination with its other regulatory
fees and fines, does not exceed total regulatory costs.
The Exchange also represents that it will endeavor to provide
notice of any changes at least 30 days in advance of the effective date
of such change, thereby providing Members with adequate time to make
any necessary adjustments to accommodate any proposed changes. Taking
out the strict requirements from the fee schedule, however, will
provide the Exchange flexibility in modifying ORF and being able to
adjust ORF even if it doesn't meet the strict 30-day deadline in event
extenuating circumstances prevent the Exchange from meeting this
deadline or in the event such notice is a day or two less than 30 days
due to when the first business days of the month fall. For example, as
noted above, the Exchange often provides fee change notices on the
first business day of the month. It may be the case that such date is
less than 30 days from the effective date of proposed change (e.g., if
the Exchange wished to amend the ORF, effective, August 1, 2023, the
Exchange would not have met the 30-day notice requirement if it had
announced on the first business day of July, as it has been historic
practice, since the first business day falls on July 3, 2023).
The Exchange believes the proposed rule changes are reasonable,
equitable and not unfairly discriminatory because they conform to the
process and fee schedule language used by two of its affiliated options
exchanges, thereby providing consistency across the Cboe family options
exchanges and reducing potential confusion. The proposed changes also
apply uniformly to all Members subject to ORF. As noted above, other
options exchanges are also not confined to making ORF changes on the
first business day of February or August.\11\
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\11\ See e.g., Securities Exchange Act Release No. 96066
(October 13, 2022), 87 FR 63565 (October 19, 2022) (SR-NYSEAMER-
2022-45).
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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 not necessary or appropriate in
furtherance of the purposes of the Act. This proposal does not create
an unnecessary or inappropriate intra-market burden on competition
because the proposed change will apply to all Members subject to ORF
uniformly. Further, the proposed change is not designed to address any
competitive issues. Indeed, this proposal does not create an
unnecessary or inappropriate inter-market burden on competition because
it merely amends the fees schedule and timing relating to the
modification of the ORF and conforms to the timing and fee schedule
language of the Exchange's affiliated options exchanges, Cboe Options
and C2 Options. Further, ORF is a regulatory fee that supports
regulation in furtherance of the purposes of the Act. The Exchange is
obligated to ensure that the amount of regulatory revenue collected
from the ORF, in combination with its other regulatory fees and fines,
does not exceed regulatory costs and the proposed rule change does not
seek to change that.
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
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) \13\ thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange originally
filed this proposal under Rule 19b-4(f)(2) on August 1, 2023.\16\
Because the proposed rule change does not raise any novel legal or
regulatory issues, the Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest. Therefore, the Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\17\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ See supra, note 3.
\17\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7301061f165e101c1e1e161d0700330016105d141c05"><span class="__cf_email__" data-cfemail="5f2d2a333a723c3032323a312b2c1f2c3a3c71383029">[email protected]</span></a>. Please include
file number SR-CboeBZX-2023-061 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.
[[Page 55804]]
All submissions should refer to file number SR-CboeBZX-2023-061. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeBZX-2023-061 and should
be submitted on or before September 6, 2023.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17533 Filed 8-15-23; 8:45 am]
BILLING CODE 8011-01-P
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