Notice2023-20426
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule
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Published
September 21, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 182 (Thursday, September 21, 2023)</title>
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[Federal Register Volume 88, Number 182 (Thursday, September 21, 2023)]
[Notices]
[Pages 65218-65221]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-20426]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98406; File No. SR-CBOE-2023-047]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
September 15, 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 September 14, 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.
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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.
[[Page 65219]]
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 SR-CBOE-2022-050 to address the proposed fee
change relating to the SPX/SPXW Floor Market-Maker Tier Appointment
Fee. On November 23, 2022, the Exchange advised of its intent to
withdraw that filing and submitted SR-CBOE-2022-060. On January 20,
2023, the Exchange withdrew SR-CBOE-2022-060 and submitted SR-CBOE-
2023-008. On March 21, 2023, the Exchange withdrew SR-CBOE-2023-008
and submitted SR-CBOE-2023-016. On May 19, 2023, the Exchange
withdrew SR-CBOE-2023-016 and submitted SR-CBOE-2023-028. On July
18, 2023, the Exchange withdrew that filing and submitted SR-CBOE-
2023-035. On September 11, 2023, the Exchange withdrew that filing
and submitted SR-CBOE-2023-046. On September 14, 2023, the Exchange
withdrew that filing and submitted this proposal. Notably, no
comment letters were received in connection with any of the
foregoing rule filings.
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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 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. The Exchange also believes the proposed rule
change is consistent with section 6(b)(4) of the Act, 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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The Exchange believes the proposed fee is reasonable as the
Exchange believes it remains commensurate with the value of operating
as a Market-Maker on the Exchange's trading floor in the SPX pit, which
has the largest physical presence on the Exchange's trading floor. For
example, the Exchange recently transitioned from its previous trading
floor, which it had occupied since the 1980s, to a brand new, modern
and upgraded trading floor facility. The Exchange believes customers
continue to find value in open outcry trading and rely on the floor for
price discovery and the deep liquidity provided by floor Market-Makers.
The build out of a new modern trading floor reflects the Exchange's
commitment to open outcry trading and focus on providing the best
possible trading experience for its customers, including Market-Makers.
For example, the new trading floor provides a state-of-the-art
environment and technology and more efficient use of physical space,
which the Exchange believes better reflects and supports the current
trading environment. The Exchange also believes the new infrastructure
provides a cost-effective, streamlined, and modernized approach to
floor connectivity. For example, the new trading floor has more than
330 individual kiosks, equipped with top-of-the-line technology that
enables floor participants to plug in and use their devices with
greater ease and flexibility. The new trading floor provided by the
Exchange also provides floor Market-Makers with more space and
increased capacity to support additional floor-based traders on the
trading floor. Moreover, the new trading floor is conveniently located
across the street from the LaSalle trading floor, which resulted in
minimal disruption to TPH floor participants, many of whom have office
space nearby, including in the same facility in which the trading floor
is located. The Exchange believes the new location, which was also home
to the Exchange's original trading floor in the 1970s and early 1980s,
is also able to support robust trading floor infrastructure as it
currently hosts several banks, trading firms and even trading floors
(i.e., trading floors for the Chicago Mercantile Exchange and BOX
Options Market). The Exchange also believes the relocation to the new
trading floor resulted in a streamlined and simplified trading floor
and facility fee structure, as further described in the Exchange's
proposal to amend certain facility fees in connection with the new
[[Page 65220]]
trading floor.\11\ The Exchange also notes that is has not sought to
pass through a number of costs incurred in connection with the new
trading floor, including design, construction and other on-going
maintenance costs. The Exchange also intends to offer free coffee and
beverages on the new trading floor. Moreover, the Exchange has not
modified many of its facilities fees in several years. The Exchange
therefore believes the proposed increase to the SPX (and SPXW) Floor
Market-Maker Tier Appointment fee is reasonable because the Exchange's
investment in its new modern cutting-edge trading floor has improved
the quality of the trading floor, particularly to the benefit of SPX
Market-Makers as they operate in the largest pit on the new trading
floor.
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\11\ See Securities Exchange Act Release No. 96001 (October 6,
2022), 87 FR 62129 (October 13, 2022) (SR-CBOE-2022-049).
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The Exchange further believes the proposal to increase the fee is
reasonable as the Exchange has provided further value to Market-Makers
by expanding the suite of SPX products available to Market-Makers on
the trading floor since 2010 when the SPX (and SPXW) Floor Market-Maker
Tier Appointment fee was first adopted. For example, in 2013, the
Exchange began listing SPXPM.\12\ In 2016, the Exchange began listing
SPX Weekly options with Monday and Wednesday expirations.\13\ Most
recently in 2022, the Exchange added SPX Weekly options with Tuesday
and Thursday expirations.\14\ The introduction of these products means
SPX options now have an available expiration every trading day of the
week, thereby providing Floor Market-Makers with additional
opportunities to trade SPX and greater trading flexibility as compared
to 2010. Moreover, average daily volume (ADV) in SPX has increased
nearly 30%. In particular, Market-Maker open outcry ADV in SPX has
increased nearly 15% since 2010. Further, increased ADV, and
specifically increased Market-Maker open outcry in SPX provides
increased trading opportunities for SPX Market-Makers which the
Exchange believes is commensurate with the value of the proposed
increase of the Tier Appointment Fee.
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\12\ See Securities Exchange Act Release No. 68888 (February 8,
2013), 78 FR 10668 (February 14, 2013) (SR-CBOE-2012-120).
\13\ See Securities Exchange Act Release No. 76909 (January 14,
2016), 81 FR 3512 (January 21, 2016) (SR-CBOE-2015-106). See also
Securities Exchange Act Release No. 78531 (August 10, 2016), 81 FR
54643(August 16, 2016) (SR-CBOE-2016-146).
\14\ See Securities Exchange Act Release No. 94682 (April 12,
2022), 87 FR 22993 (April 18, 2022) (CBOE-2022-005).
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To demonstrate the value the Exchange believes Marker-Makers find
transacting with SPX on the trading floor (notwithstanding the proposed
fee change), Market-Maker presence on the new trading floor in SPX and
SPXW has actually increased. Particularly, as of December 30, 2022,
there are 12 additional Market-Makers trading SPX and SPXW on the
trading floor as compared to May 2022 (which was the month prior to the
proposed fee change being implemented on a permanent basis and
transition to the new trading floor).\15\ Further, in June 2022, the
month in which the proposed fee change took effect on the new trading
floor on a permanent basis, there were 5 additional Market-Makers
trading SPX and SPXW on the trading Floor as compared to May 2022.
Further, as of December 30, 2022, there are 4 additional Market-Makers
trading SPX and SPXW on the trading floor as compared to March 2020,
which was the last month the Exchange assessed $3,000 for the SPX and
SPXW Floor Market Maker Tier Appointment fee. The Exchange believes the
increasing SPX and SPXW Market-Maker presence on the trading floor
since the last time the Exchange assessed $3,000 for the SPX and SPXW
Floor Market Maker Tier Appointment fee (i.e., March 2020) and since
the time the current proposal was submitted (i.e., June 2020) speaks
not only to the value Market-Makers find in participating as a Market-
Maker in SPX and SPXW on the (new and improved) trading floor, but also
to the reasonableness of the fee.
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\15\ As noted above, the Exchange has been assessing $5,000 for
the SPX and SPXW Floor Market Maker Tier Appointment fee since June
2020 as the Exchange was operating in a modified state until its
transition to the new trading floor in June 2022, at which time the
Exchange submitted this proposal to make such increase permanent.
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The Exchange finally believes its proposal to increase the SPX (and
SPXW) Floor Market-Maker Tier Appointment fee is reasonable as it is
the same amount that has been assessed under Footnote 24 for the last
three 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.\16\ Particularly,
since its adoption 13 years ago, there has been notable inflation.
Indeed, the dollar has had an average inflation rate of 2.6% per year
between 2010 and today, producing a cumulative price increase of
approximately 40% inflation since 2010, when the SPX and SPXW Floor
Market-Maker Tier Appointment was first adopted.\17\ Additionally, for
nearly ten years, Market-Makers were only subject to the original rate
that was adopted in 2010 (i.e., $3,000) notwithstanding an average
inflation rate of 2.6% per year. The Exchange acknowledges its proposed
fee exceeds 40%. However, the Exchange believes such increase is
reasonable given many Market-Makers for nearly 10 years did not have to
pay increased fees notwithstanding yearly inflation. For example, by
not increasing the fee each year to correspond to the average per year
inflation rate of 2.6%, Market-Makers trading SPX on the trading floor
since 2011 through 2020 (when then Exchange originally increased the
fee due to the COVID-19 pandemic) have saved nearly $10,000. Moreover,
the Exchange historically does not increase fees every year,
notwithstanding inflation. The Exchange therefore believes that
proposing a fee in excess of the cumulative 40% inflation rate is still
reasonable, especially when considered in conjunction with all of the
additional and further rationale discussed above. The Exchange is also
unaware of any standard that suggests any fee proposal that exceeds a
yearly or cumulative inflation rate is unreasonable.
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\16\ See Securities Exchange Act Release No. 62386 (June 25,
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-060).
\17\ See <a href="https://www.officialdata.org/us/inflation/2010?amount=1">https://www.officialdata.org/us/inflation/2010?amount=1</a>.
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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.\18\
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\18\ See Cboe Options Rules 5.50(a) and (e). See also Cboe
Options Fees Schedule, Market-Maker EAP Appointments Sliding Scale.
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[[Page 65221]]
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 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. 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.
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 \19\ and paragraph (f) of Rule 19b-4 \20\
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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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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="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#681a1d040d450b0705050d061c1b281b0d0b460f071e"><span class="__cf_email__" data-cfemail="86f4f3eae3abe5e9ebebe3e8f2f5c6f5e3e5a8e1e9f0">[email protected]</span></a>. Please include
file number SR-CBOE-2023-047 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-2023-047. 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-CBOE-2023-047 and should be
submitted on or before October 12, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-20426 Filed 9-20-23; 8:45 am]
BILLING CODE 8011-01-P
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