Notice2025-23517
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Sunset Date of the Current Options Regulatory Fee (ORF) From December 31, 2025 to June 30, 2026
Primary source
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Published
December 22, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 243 (Monday, December 22, 2025)</title>
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[Federal Register Volume 90, Number 243 (Monday, December 22, 2025)]
[Notices]
[Pages 59904-59906]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23517]
[[Page 59904]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104416; File No. SR-CBOE-2025-085]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend
the Sunset Date of the Current Options Regulatory Fee (ORF) From
December 31, 2025 to June 30, 2026
December 17, 2025.
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 December 12, 2025, 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 relating 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
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</a>), and at the principal office of the Exchange.
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 extend the sunset date of the current
Options Regulatory Fee (``ORF'') from December 31, 2025 to June 30,
2026. Therefore, as proposed, ORF will continue to be $0.0023 per
contract side, effective January 2, 2026.
Background
Today, ORF is assessed by the Exchange to each Trading Permit
Holder (``TPH'') for options transactions cleared by the TPH that are
cleared by the Options Clearing Corporation (``OCC'') in the customer
range, regardless of the exchange on which the transaction occurs.\3\
In other words, the Exchange imposes the ORF on all customer-range
transactions cleared by a TPH, even if the transactions do not take
place on the Exchange. The ORF is collected by OCC on behalf of the
Exchange from the Clearing Trading Permit Holder (``CTPH'') or non-CTPH
that ultimately clears the transaction. With respect to linkage
transactions, the Exchange reimburses its routing broker providing
Routing Services pursuant to the Exchange Rule 5.36 for options
regulatory fees it incurs in connection with the Routing Services it
provides.
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\3\ The Exchange notes ORF also applies to customer-range
transactions executed during Global Trading Hours.
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Revenue generated from ORF, when combined with all of the
Exchange's other regulatory fees and fines, is designed to recover a
material portion of the regulatory costs to the Exchange of the
supervision and regulation of TPH customer options business including
performing routine surveillances, investigations, examinations,
financial monitoring, and policy, rulemaking, interpretive, and
enforcement activities. Regulatory costs include direct regulatory
expenses and certain indirect expenses for work allocated in support of
the regulatory function. The direct expenses include in-house and
third-party service provider costs to support the day-to-day regulatory
work such as surveillances, investigations and examinations. The
indirect expenses include support from such areas as human resources,
legal, compliance, information technology, facilities and accounting.
These indirect expenses are estimated to be approximately 42% of the
Exchange' total regulatory costs for 2026. Thus, direct expenses are
estimated to be approximately 58% of total regulatory costs for 2026.
In addition, based on the Exchange' analysis of its regulatory work
associated with options regulation, and considering other regulatory
revenue, it is the Exchange's practice that revenue generated from ORF
not exceed more than 75% of total annual regulatory costs. These
expectations are estimated, preliminary and may be subject to change.
If the ORF rate were to revert back to $0.0017 per contract side as of
January 2, 2026, the Exchange would collect significantly lower than
the 75% threshold. Under that reverted rate, the Exchange forecasts for
2026 to collect closer to 54%.\4\
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\4\ The Exchange is not looking to capture its traditional 75%
threshold at this time, since it is contemporaneously submitting a
separate rule filing to adopt a new ORF model, effective July 1,
2026 (subject to adoption of a similar model by all options
exchanges).
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Proposal for January 2, 2026
The Exchange monitors its regulatory costs and revenues at a
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 in a given year, the Exchange will adjust the ORF by
submitting a fee change filing to the Securities and Exchange
Commission (the ``Commission''). Even with the temporary increase in
2025, the Exchange collected approximately 71% of its annual regulatory
costs.
The Exchange also notifies TPHs of adjustments to the ORF via an
Exchange Notice, including for the change being proposed herein.\5\
Based on the Exchange's most recent semi-annual review, the Exchange is
proposing to maintain the ORF rate of $0.0023 per contract side.\6\ The
proposed extension is based on the Exchange's estimated projections for
its regulatory costs, which projections have increased, coupled with a
projected decrease in the Exchange's other non-ORF regulatory fees.
Particularly, based on the Exchange's estimated projections for its
regulatory costs, the revenue generated by ORF using the rate of
$0.0017 per contract side (the rate to which ORF is set to revert after
December 31, 2025), would result in projected revenue that is
insufficient to cover a material portion of its regulatory costs (i.e.,
less than 75% of total annual regulatory costs). Further, when combined
with the Exchange's projected other non-ORF regulatory fees and fines,
the revenue generated by ORF using the current rate
[[Page 59905]]
is projected to result in combined revenue that is less than 100% of
the Exchange's estimated regulatory costs for the year. As noted above,
even with the extension of the sunset date for the temporarily
increased rate, the amount collected by the Exchange will be lower than
the 75% threshold. As the Exchange has done in the past, the Exchange
will also provide the Commission confidential details regarding the
Exchange's projected regulatory revenue, including projected revenue
from ORF, along with a breakout of its projected regulatory expenses,
including both direct and indirect allocations.
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\5\ See Exchange Notice, C2025112601 ``Cboe Options Exchange
Regulatory Fee Update Effective January 2, 2026.''
\6\ The Exchange proposes to have an automatic sunset of the
proposed fee on June 30, 2026.
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The Exchange will continue to monitor 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.
New ORF Model
The Exchange appreciates the evolving changes in the markets and
regulatory environment and has been evaluating its options while
considering industry and regulatory feedback. In light of this, the
Exchange has been reviewing its current methodologies and practices for
the assessment and collection of ORF. As a result of this review, the
Exchange is submitting contemporaneously with this filing another
filing that proposes to adopt a modified ORF model that updates the
Exchange's process of assessing and collecting ORF, in which model ORF
would be assessed to only on-Exchange transactions that clear in the
customer range at OCC. Under the proposed modified model, the Exchange
expects to continue its current practice that revenue generated from
ORF not exceed 75% of total annual regulatory costs. And as is the
Exchange's practice today, revenue generated by ORF will not be used
for nonregulatory purposes.
To create real ORF reform, moving to a new ORF model that only
assesses a fee to transactions that occur on one's own options exchange
seems right. However, for a new, modified model to be truly meaningful
and fair, a rate limited to transactions on one's own exchange should
be adopted by all options exchanges to provide a consistent methodology
in assessing and collecting ORF going forward. As set forth in its
separate filing that proposes the new, modified ORF model, the Exchange
is committed to switching to this new model as soon as a consistent
framework has been established with the SEC, adopted by all the options
exchanges and necessary regulatory filings submitted. Until that time,
the Exchange believes it's fair and reasonable to maintain the
temporarily higher rate under the existing model.
In light of the Exchange's pending proposal to revamp ORF, the
Exchange proposes to extend the current sunset date of December 31,
2025 for the current rate of $0.0023 per contract side to June 30,
2026, at which point the Exchange would revert back to $0.0017 per
contract side. The proposed sunset date will provide time for
establishment of one new, unified model going forward. The Exchange
will endeavor to implement the modified ORF structure prior to the
proposed June 30, 2026 sunset date.
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 Section
6(b)(4) of the Act,\8\ which provides that Exchange rules may provide
for the equitable allocation of reasonable dues, fees, and other
charges among its TPHs and other persons using its facilities.
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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed extended sunset date is
reasonable because it would help ensure that revenue collected from the
ORF, in combination with other regulatory fees and fines, would help
offset, but not exceed, the Exchange's total regulatory costs. As
discussed, the Exchange has designed the ORF to generate revenues that
would be less than or equal to 75% of the Exchange's regulatory costs,
which is consistent with the practice across the options industry and
the view of the Commission that regulatory fees be used for regulatory
purposes and not to support the Exchange's business side. The Exchange
determined to maintain the temporarily increased ORF rate after its
semi-annual review of its regulatory costs and regulatory revenues,
which includes revenues from ORF and other regulatory fees and fines.
When taking into account recent options volume, coupled with the
anticipated regulatory fees and anticipated reductions in other
regulatory fees, the Exchange believes it's reasonable to maintain the
temporarily increased ORF rate. Particularly, the proposed change is
reasonable as it would offset the anticipated increased regulatory
costs, while still not exceeding 75% of the Exchange's total regulatory
costs. Moreover, the current, temporarily raised rate is still lower
than the amount of ORF assessed on other exchanges \10\ and
significantly lower than the Exchange has assessed previously.\11\
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\10\ See, e.g., NYSE Arca Options Fees and Charges, Options
Regulatory Fee (``ORF'') and NYSE American Options Fees Schedule,
Section VII(A), which provide that ORF is assessed at a rate of
$0.0026 per contract side for each respective exchange (effective
January 1, 2026).
\11\ See, e.g., Securities Exchange Act Release No. 71007
(December 6, 2013), 78 FR 75653 (December 12, 2013) (SR-CBOE-2013-
117) (filing to increase ORF to $0.0095 per contract side). See also
Securities Exchange Act Release No. 76993 (January 28, 2016), 81 FR
5800 (February 3, 2016) (SR-CBOE-2016-004) (filing to increase ORF
to $0.0081 per contract side).
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As noted above, the Exchange will also continue to monitor on at
least a semi-annual basis the amount of revenue collected from the ORF,
even as amended, to ensure that it, in combination with its other
regulatory fees and fines, does not exceed the Exchange's total
regulatory costs. If the Exchange determines regulatory revenues would
exceed its regulatory costs in a given year, the Exchange will reduce
the ORF by submitting a fee change filing to the Commission.\12\
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\12\ Consistent with Rule 2.2 (Regulatory Revenue), the Exchange
notes that should excess ORF revenue be collected prior to any
reduction in an ORF rate, such excess revenue will not be used for
nonregulatory purposes.
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The Exchange also believes the proposed change is equitable and not
unfairly discriminatory in that it is charged to all TPHs on all their
transactions that clear in the customer range at the OCC through the
extended sunset date. The Exchange believes the ORF ensures fairness by
assessing higher fees to those TPHs that require more Exchange
regulatory services based on the amount of customer options business
they conduct. Regulating customer trading activity is much more labor
intensive and requires greater expenditure of human and technical
resources than regulating non-customer trading activity, which tends to
be more automated and less labor-intensive. For example, there are
costs associated with main office and branch office examinations (e.g.,
staff and travel expenses), as well as investigations into customer
complaints and the terminations of registered persons. As a result, the
costs associated with administering the customer component of the
Exchange's overall regulatory
[[Page 59906]]
program are materially higher than the costs associated with
administering the non-customer component (e.g., TPH proprietary
transactions) of its regulatory program.\13\ Moreover, the Exchange
notes that it has broad regulatory responsibilities with respect to its
TPHs' activities, irrespective of where their transactions take place.
Many of the Exchange's surveillance programs for customer trading
activity may require the Exchange to look at activity across all
markets, such as reviews related to position limit violations and
manipulation. Indeed, the Exchange cannot effectively review for such
conduct without looking at and evaluating activity regardless of where
it transpires. In addition to its own surveillance programs, the
Exchange also works with other SROs and exchanges on intermarket
surveillance related issues. Through its participation in the
Intermarket Surveillance Group (``ISG''),\14\ the Exchange shares
information and coordinates inquiries and investigations with other
exchanges designed to address potential intermarket manipulation and
trading abuses. Accordingly, there is a strong nexus between the ORF
and the Exchange's regulatory activities with respect to its TPHs'
customer trading activity.
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\13\ If the Exchange changes its method of funding regulation or
if circumstances otherwise change in the future, the Exchange may
decide to modify the ORF or assess a separate regulatory fee on TPH
proprietary transactions if the Exchange deems it advisable.
\14\ ISG is an industry organization formed in 1983 to
coordinate intermarket surveillance among the SROs by cooperatively
sharing regulatory information pursuant to a written agreement
between the parties. The goal of the ISG's information sharing is to
coordinate regulatory efforts to address potential intermarket
trading abuses and manipulations.
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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 intramarket burden on competition
because ORF applies to all customer activity, thereby raising
regulatory revenue to offset regulatory expenses. It also supplements
the regulatory revenue derived from noncustomer activity. The Exchange
notes, however, the proposed change is not designed to address any
competitive issues. Indeed, this proposal does not create an
unnecessary or inappropriate intermarket burden on competition because
it 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.
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 written 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 \15\ and paragraph (f) of Rule 19b-4 \16\
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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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#96e4e3faf3bbf5f9fbfbf3f8e2e5d6e5f3f5b8f1f9e0"><span class="__cf_email__" data-cfemail="ed9f988188c08e8280808883999ead9e888ec38a829b">[email protected]</span></a>. Please include
file number SR-CBOE-2025-085 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-2025-085. 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 filing 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-2025-085 and should be submitted on
or before January 12, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23517 Filed 12-19-25; 8:45 am]
BILLING CODE 8011-01-P
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