Notice2024-10592
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
May 15, 2024
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 89 Issue 95 (Wednesday, May 15, 2024)</title>
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[Federal Register Volume 89, Number 95 (Wednesday, May 15, 2024)]
[Notices]
[Pages 42521-42525]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-10592]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100091; File No. SR-CBOE-2024-021]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
May 9, 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 May 1, 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 the
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 42522]]
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, effective May 1,
2024.
New GTH SPX Customer Rebate Program
The Exchange proposes to amend its Fees Schedule to adopt a Global
Trading Hours (``GTH'') \3\ SPX Customer Rebate Program (the ``GTH SPX
Customer Rebate Program'' or the ``Program''). Under the Program, the
Exchange shall credit each Trading Permit Holder (``TPH'') the per
contract amount set forth in the table below resulting from each
Customer SPX order transmitted by that TPH which is executed on the
Exchange during GTH, provided the TPH meets certain volume thresholds
in a month as described below. The volume thresholds are calculated
based on the customer average daily volume over the course of the
month. Volume will be recorded for, and rebates will be delivered to,
the TPH that submits the order to the Exchange. Tier thresholds are
defined by two criteria sets: (1) minimum SPX Customer capacity volume
during GTH1 (i.e., 7:15 p.m. CT to 2:00 a.m. CT) and (2) minimum SPX
Customer capacity volume during the entirety of GTH. The Exchange
proposes to append Footnote 33 to the Program table and amend Footnote
33 to include the Program in the list of programs from which FLEX Micro
Options are excluded.
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\3\ Global Trading Hours are from 8:15 p.m. ET (previous day) to
9:15 a.m. ET on Monday through Friday. See Rule 5.1(c).
------------------------------------------------------------------------
Rebate per
Tier contract Required criteria
------------------------------------------------------------------------
1.............................. $0.00 (1) TPH has SPX
Customer capacity
volume during GTH1
(7:15 p.m.-2:00 a.m.
CST) <=50,000
contracts; and
(2) TPH has SPX
Customer capacity
volume during the
entirety of GTH
<=500,000 contracts.
2.............................. 0.02 (1) TPH has SPX
Customer capacity
volume during GTH1
>50,000 contracts; and
(2) TPH has SPX
Customer capacity
volume during the
entirety of GTH
>500,000 contracts.
3.............................. 0.04 (1) TPH has SPX
Customer capacity
volume during GTH1
>200,000 contracts;
and
(2) TPH has SPX
Customer capacity
volume during the
entirety of GTH
>1,000,000 contracts.
4.............................. 0.06 (1) TPH has SPX
Customer capacity
volume during GTH1
>400,000 contracts;
and
(2) TPH has SPX
Customer capacity
volume during the
entirety of GTH
>1,300,000 contracts.
------------------------------------------------------------------------
A TPH's tier and associated rebate payment will be determined by
the lower tier determined by each criteria set. For example, if, during
the month of May, a TPH trades a total of 100,000 SPX customer
contracts during GTH1 and 300,000 customer contracts during GTH (i.e.,
achieves Tier 2 on the GTH1 criteria and Tier 3 on the overall GTH
criteria), then the TPH would receive Tier 2 rebates of $0.04 on all
300,000 SPX Customer contracts executed in the month of May.
The purpose of the Program is to encourage TPHs to direct greater
Customer SPX trade volume to the Exchange during GTH. Increased
Customer volume will provide for greater liquidity, thereby providing
greater trading opportunities and tighter spreads for other market
participants and causing a corresponding increase in order flow from
such other market participants. The specific volume thresholds of the
Program's tiers were set based upon business determinations and an
analysis of current volume levels. The volume thresholds are intended
to incentivize firms that route some Customer orders to the Exchange to
increase the number of orders that are sent to the Exchange to achieve
the next threshold and to incentivize new participants to send Customer
orders as well. Increasing the number of orders sent to the Exchange
will in turn provide tighter and more liquid markets, and therefore
attract more business overall. Similarly, the different rebate amounts
at the different tier levels were based on an analysis of revenue and
volume levels and are intended to provide increasing ``rewards'' for
increasing the volume of trades sent to the Exchange. The specific
amounts of the tiers and rates were set in order to encourage suppliers
of Customer order flow to reach for higher tiers.
Update to GTH Executing Agent Subsidy Program
Additionally, the Exchange proposes to amend the GTH Executing
Agent Subsidy Program, set forth in the Fees Schedule. The GTH
Executing Agent Subsidy Program offers a monthly subsidy to TPHs with
executing agent operations \4\ during the GTH trading session. Pursuant
to the current GTH Executing Agent Subsidy 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, as
shown in the table below. Qualifying customer volume is limited to SPX
and VIX options.
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\4\ An executing agent operation is one that accepts orders from
customers (who may be public or broker-dealer customers) and submits
the orders for execution (either directly to the Exchange or through
another TPH).
------------------------------------------------------------------------
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
------------------------------------------------------------------------
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 current criteria states that a 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.
[[Page 42523]]
The Exchange proposes to amend the GTH monthly customer volume
thresholds and corresponding subsidy amounts, as shown in the table
below.
------------------------------------------------------------------------
GTH monthly customer SPX and VIX options volume Subsidy
------------------------------------------------------------------------
0-19,999 contracts...................................... $0.00
20,000-99,999 contracts................................. 15,000
100,000+ contracts...................................... 50,000
------------------------------------------------------------------------
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
volume thresholds, as amended, and receive the 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 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.
The Exchange also proposes to make a clarifying change to the GTH
Executing Agent Subsidy Program criteria. As noted above, current
criteria require, in relevant part, that a TPH maintains a GTH
executing agent operation willing to accept and execute orders on
behalf of customers, including customers for which the agent does not
hold accounts. The Exchange proposes to delete language referring to
customers for which the agent does not hold accounts, as this is not in
fact a requirement of the program and may result in potential confusion
for TPHs in regards to their responsibilities, both under the program
and in general as TPH.
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 adopt a GTH
SPX Customer Rebate Program is reasonably designed to encourage TPHs to
direct greater Customer SPX trade volume to the Exchange during GTH.
The program intends to attract Customer order flow, which will increase
liquidity, thereby providing greater trading opportunities and tighter
spreads for other market participants and causing a corresponding
increase in order flow from such other market participants.
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
SPX customer volumes. The proposed change is designed as an incentive
to all TPHs to submit additional SPX customer orders to the Exchange
during GTH. Each will have the opportunity to submit the requisite
order flow and will receive the applicable rebate if the volume
criteria is met. While the Exchange has no way of predicting with
certainty how the proposed tiers will impact TPH activity, the Exchange
anticipates that approximately two TPHs may be able to achieve Tier 1
criteria, one TPH may be able to achieve Tier 2 criteria, and one TPH
may be able to achieve Tier 3 criteria (with no firms currently
projected to achieve Tier 4 criteria). The Exchange also notes that the
proposed changes will not adversely impact any TPH's pricing or their
ability to qualify for other incentive programs. Rather, should a TPH
not meet the criteria for a tier, the TPH will merely not receive the
corresponding subsidy.
Further, the Exchange believes the proposed rule change to adopt a
GTH SPX Customer Rebate Program is equitable and not unfairly
discriminatory, as the program will be open to all TPHs.
Additionally, the Exchange believes that the proposed amendments to
the GTH Executing Agent Subsidy Program are reasonable. The GTH
Executing Agent Subsidy Program is overall 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 amended, remain 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
volume thresholds, as amended, remain commensurate with the
corresponding subsidy amounts. The proposed changes effectively
consolidate two of the current thresholds into one, so that designated
GTH executing agents that submit 20,000 to 99,999 customer contracts in
SPX or VIX options will receive a subsidy of $15,000. The amended
tiers, as proposed, present the opportunity for designated GTH
executing agents submitting 20,000 to 39,999 customer contracts in SPX
or VIX options to receive a slightly larger subsidy than that which is
currently offered by the program. As noted above, 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 volume thresholds, as amended, and
receive the 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.
Further, the Exchange believes proposed clarifying amendment to the
GTH Executing Agent Subsidy Program criteria is reasonable, given the
[[Page 42524]]
Exchange wishes to correct potentially misleading language.
The Exchange also believes that the proposed rule changes related
to the GTH Executing Agent Subsidy Program are equitable and not
unfairly discriminatory. In particular, the Exchange believes that
amending a volume threshold and corresponding subsidy for the GTH
Executing Agent Subsidy Program is equitable and not unfairly
discriminatory because 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 volume thresholds, as amended, and
receive corresponding subsidies. 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. While the Exchange has no way of predicting with certainty how
the changes will impact TPH activity, the Exchange anticipates that
approximately three TPHs may be able to achieve the 20,000 to 99,999
contracts volume threshold.
Finally, the Exchange believes the proposed change to the GTH
Executing Agent Subsidy Program criteria language is equitable and not
unfairly discriminatory, as the change is a technical, clarifying
amendment designed to avoid potential confusion, to the benefit of all
TPHs.
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 believes the
proposed rule change does not 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. In regard to the proposed GTH SPX
Customer Rebate Program, as stated above, the program is open to all
TPHs. The Exchange believes the proposed program will incentivize TPHs
to direct additional SPX Customer order flow to the Exchange and thus
provide additional liquidity that enhances the quality of its markets
and increases the volume of contracts traded on the Exchange. Enhanced
market quality and increased transaction volume that results from any
increase in order flow directed to the Exchange will benefit all market
participants and improve competition on the Exchange.
In regard to the proposed changes to the GTH Executing Agent
Subsidy Program, 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 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. Finally, the proposed amendment to the GTH
Executing Agent Subsidy Program criteria is not intended to have any
impact on competition, as the change is technical, clarifying amendment
designed to avoid potential confusion, that makes no substantive
changes.
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 \9\ and paragraph (f) of Rule 19b-4 \10\
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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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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#b8cacdd4dd95dbd7d5d5ddd6cccbf8cbdddb96dfd7ce"><span class="__cf_email__" data-cfemail="5725223b327a34383a3a323923241724323479303821">[email protected]</span></a>. Please include
file number SR-CBOE-2024-021 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-2024-021. 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
[[Page 42525]]
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-2024-021 and should be submitted on
or before June 5, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10592 Filed 5-14-24; 8:45 am]
BILLING CODE 8011-01-P
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