Notice2024-05737
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
March 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 54 (Tuesday, March 19, 2024)</title>
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[Federal Register Volume 89, Number 54 (Tuesday, March 19, 2024)]
[Notices]
[Pages 19617-19620]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05737]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99727; File No. SR-CBOE-2024-010]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
March 13, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 29, 2024, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its Fees Schedule. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</a>), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule.\3\ Specifically,
the Exchange proposes to amend the Global Trading Hours (``GTH'')
Executing Agent Subsidy Program, set forth in the Fees Schedule. The
GTH Executing Agent Subsidy Program offers a monthly subsidy to Trading
Permit Holders (``TPHs'') with executing agent operations \4\ during
the GTH trading session. Pursuant to the current program, a designated
GTH executing agent receives the monthly subsidy amount that
corresponds to the number of contracts executed on behalf of customers
(including public and broker-dealer customers) during GTH in a calendar
month per the GTH Executing Agent Subsidy Program table, as shown in
the table below. Qualifying customer volume is limited to those symbols
that trade during GTH (i.e., SPX, VIX, and XSP).
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\3\ The Exchange initially filed the proposed fee changes on
February 1, 2024 (SR-CBOE-2024-007). On February 14, 2024, the
Exchange withdrew that filing and submitted SR-CBOE-2024-009. On
February 29, 2024, the Exchange withdrew that filing and submitted
SR-CBOE-2024-010.
\4\ An executing agent operation is one that accepts orders from
customers (who may be public or broker-dealer customers and
including customers for which the agent does not hold accounts) and
submits the orders for execution (either directly to the Exchange or
through another TPH).
------------------------------------------------------------------------
GTH monthly customer volume Subsidy
------------------------------------------------------------------------
0-999 contracts......................................... $0.00
1,000-4,999 contracts................................... 5,000
5,000-29,999 contracts.................................. 15,000
30,000+ contracts....................................... 20,000
------------------------------------------------------------------------
To become a designated GTH executing agent, a TPH must submit a
form to the Exchange no later than 3:00 p.m. on the second to last
business day of a calendar month to be designated an GTH executing
agent under the program, and thus eligible for the subsidy, beginning
the following calendar month. The TPH must include on or with the form
information demonstrating it maintains an GTH executing agent
operation: (1) physically staffed throughout each entire GTH trading
session and (2) willing to accept and execute orders on behalf of
customers, including customers for which the agent does not hold
accounts. The designation will be effective the first business day of
the following calendar month, subject to the Exchange's confirmation
the TPH's GTH executing agent operations satisfies these two conditions
and will remain in effect until the Exchange receives an email from the
TPH terminating its designation or the Exchange determines the TPH's
GTH executing agent operation no longer satisfies these two conditions.
The Exchange proposes to amend the GTH Executing Agent Subsidy
Program to only include SPX and VIX options that trade during GTH; as
such, the Exchange proposes to add clarifying language to the table to
reflect that qualifying customer volume under the program is limited to
GTH monthly customer SPX and VIX Options volume. The Exchange also
proposes to increase the GTH monthly customer volume thresholds, as
well as certain subsidy amounts, as shown in the table below.
------------------------------------------------------------------------
GTH monthly customer SPX and VIX options volume Subsidy
------------------------------------------------------------------------
0-19,999 contracts...................................... $0.00
20,000-39,999 contracts................................. 10,000
40,000-99,999 contracts................................. 15,000
100,000+ contracts...................................... 50,000
------------------------------------------------------------------------
The proposed changes reflect the growth of the GTH trading session,
which has occurred predominantly in SPX and VIX options. The proposed
changes are designed to continue to encourage designated GTH executing
agents to increase their order flow executed as agent in SPX and VIX
options that trade during GTH, to meet the proposed amended volume
thresholds and receive the proposed corresponding subsidies. The
Exchange notes that incentivizing TPHs to conduct executing agent
operations willing to accept orders from all customers during GTH is
intended to increase customer accessibility to the GTH trading session.
The Exchange believes that increased order flow through designated GTH
executing
[[Page 19618]]
agents would allow the Exchange to grow participation during GTH, which
may benefit all market participants, as additional liquidity to the
Exchange during GTH would create more trading opportunities during GTH,
and in turn attract market participants to submit additional order flow
during GTH.
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.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \6\ 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) \7\ 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,\8\ 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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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed rule change to amend the
volume thresholds and certain corresponding subsidies for the GTH
Executing Agent Subsidy Program is reasonably designed to encourage
designated GTH executing agents to increase their customer order flow
in SPX and VIX options traded during GTH. The Exchange believes the
tiers, as proposed, are reasonable because they amend existing
opportunities in a manner that incentivizes increased order flow to the
GTH trading session via incrementally more challenging criteria in
order to receive incrementally increasing subsidy amounts.
Further, the Exchange believes such changes are reasonable, as the
proposed increased subsidy amounts remain commensurate with the higher
volume thresholds proposed. The current program provides a maximum
subsidy of $20,000 for designated GTH executing agents that submit
30,000 customer contracts or more in XSP, SPX or VIX options. The
amended tiers, as proposed, present additional opportunities for
designated GTH executing agents to receive larger subsidies than that
which is currently offered by the program, for submitting a larger
number of customer orders. Under the program as proposed, the maximum
subsidy available is $50,000 for designated GTH executing agents that
submit 100,000 customer contracts or more in SPX or VIX options. As
noted above, the proposed changes reflect the growth of the GTH trading
session, which has occurred predominantly in SPX and VIX options. The
proposed changes are designed to continue to encourage designated GTH
executing agents to increase their order flow executed as agent in SPX
and VIX options that trade during GTH, to meet the proposed amended
volume thresholds and receive the proposed corresponding subsidies. The
Exchange believes that increased order flow would allow the Exchange to
grow participation in the GTH trading session to the benefit of all
market participants that trade during GTH, by providing greater trading
opportunities as a result of increased liquidity, thereby attracting
additional order flow from market participants during GTH.
The Exchange believes the proposed volume thresholds and
corresponding subsidy amounts provide benefits, similar to other volume
incentives offered by the Exchange and other options exchanges, that
are reasonably related to the value to an exchange's market quality and
associated higher levels of market activity, in this case, increased
executing agent operations. The proposed changes to the volume
thresholds are designed as an incentive to any and all TPHs conducting
executing agent operations willing to accept orders from all customers
during GTH to submit additional customer orders to the Exchange. Each
will have the opportunity to submit the requisite order flow and will
receive the applicable subsidy if the volume criteria is met. Under
current criteria, one firm qualifies for the $15,000 subsidy and two
firms qualify for the $20,000 subsidy. While the Exchange has no way of
predicting with certainty how the proposed tiers will impact TPH
activity, the Exchange anticipates that approximately one TPH may be
able to achieve the $10,000 subsidy (20,000-39,999 contracts tier), one
TPH may be able to achieve the $15,000 subsidy (40,000-99,999 contracts
tier), and one TPH may be able to achieve the $50,000 subsidy (100,000
or more contracts tier). The Exchange also notes that the proposed
volume tiers will not adversely impact any TPH's pricing or their
ability to qualify for other incentive programs. Rather, should a TPH
that conducts executing agent operations not meet the criteria for a
tier, the TPH will merely not receive the corresponding subsidy.
Further, the Exchange believes limiting the GTH Executing Agent
Subsidy Program to only include SPX and VIX options that trade during
GTH is reasonable, given the Exchange wishes to incentivize increased
order flow in SPX and VIX options during GTH. The Exchange also
believes the proposed change is reasonable, as the Exchange no longer
wishes to include XSP in the GTH Executing Agent Subsidy Program and is
not required to do so.
The Exchange also believes that the proposed rule change is
equitable and not unfairly discriminatory. In particular, the Exchange
believes that increasing the volume thresholds and certain
corresponding subsidies for the GTH Executing Agent Subsidy Program is
equitable and not unfairly discriminatory because TPHs that conduct
executing agent operations willing to accept orders from all customers
take on additional risks and potential costs (including those related
to staffing and clearing) associated with this type of business. Such
TPHs also provide benefits to investors during GTH, including increased
customer accessibility to the GTH trading session and increased order
flow. All TPHs that conduct this type of operation during GTH will
continue to have the opportunity to become a designated GTH executing
agent and thus eligible for the monthly subsidy commensurate with
applicable customer volumes. As noted above, the proposed changes
reflect the growth of the GTH trading session and are designed to
continue to encourage designated GTH executing agents to increase their
order flow executed as agent in SPX and VIX symbols that trade during
GTH, to meet the proposed amended volume thresholds and receive the
proposed corresponding subsidies.
The Exchange believes the proposed change to offer up to a $50,000
subsidy to designated GTH executing agents that submit up to 100,000
contracts or more
[[Page 19619]]
of customer SPX and VIX options orders is equitable and not unfairly
discriminatory. As noted above, TPHs that conduct executing agent
operations willing to accept orders from all customers take on
additional risks and potential costs (including those related to
staffing and clearing) associated with this type of business. For
example, SPX and VIX options are high notional products and liquidity
may be more challenging to navigate during GTH, which session runs for
a total of thirteen hours, from 7:15pm CT to 8:15am CT. Further,
achieving higher volume threshold may require TPHs to incur additional
and incrementally higher costs, such as adding additional staff needed
to handle such volumes during the GTH session. The proposed changes are
therefore designed to encourage TPHs to incur these additional risks
and potentially higher costs and not only act as designated GTH
executing agents, but also incentivize them to strive to achieve the
highest thresholds, by providing increasingly higher benefits for
satisfying increasingly more stringent criteria. As such, the Exchange
believes it is not unfairly discriminatory to offer incrementally
higher subsidies to TPHs who act as designated GTH executing agents and
submit up to 100,000 or more customer contracts in SPX or VIX. All
designated GTH executing agents that participate in the program are
eligible to receive the subsidy amounts, if they meet the corresponding
volume threshold.
Finally, the Exchange believes the proposed change to limit the GTH
Executing Agent Subsidy Program to only include SPX and VIX options is
equitable and not unfairly discriminatory, as the change will uniformly
apply to all designated GTH executing agents that participate in the
program.
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. Rather, as discussed above,
the Exchange believes that the proposed change would encourage the
submission of additional liquidity to the floor of a public exchange,
thereby promoting market depth, price discovery and transparency and
enhancing order execution and price improvement opportunities for all
TPHs. As a result, the Exchange believes that the proposed change
furthers the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.'' \9\
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\9\ See Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
notes that the proposed changes apply uniformly to similarly situated
TPHs. As stated, all TPHs that conduct executing agent operations
willing to accept orders from all customers will continue to have an
opportunity to be eligible for the GTH Executing Agent Subsidy program.
Also, such TPHs that conduct this type of operation take on additional
risks and potential costs (including those related to staffing and
clearing) associated with this type of business, and may provide
benefits to investors during GTH, including increased customer
accessibility to, and liquidity and trading opportunities during, the
GTH trading session. The proposed changes reflect the growth of the GTH
trading session and are designed to continue to encourage designated
GTH executing agents to increase their order flow executed as agent in
SPX and VIX symbols that trade during GTH, to meet the proposed amended
volume thresholds and receive the proposed corresponding subsidies.
The Exchange also does not believe that the proposed changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the Act because each of the proposed
changes applies only to fees and programs applicable to transactions in
products exclusively listed on the Exchange.
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 \10\ and paragraph (f) of Rule 19b-4 \11\
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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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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#0b797e676e26686466666e657f784b786e68256c647d"><span class="__cf_email__" data-cfemail="cab8bfa6afe7a9a5a7a7afa4beb98ab9afa9e4ada5bc">[email protected]</span></a>. Please include
file number SR-CBOE-2024-010 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-2024-010. 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
[[Page 19620]]
submissions should refer to file number SR-CBOE-2024-010 and should be
submitted on or before April 9, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05737 Filed 3-18-24; 8:45 am]
BILLING CODE 8011-01-P
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