Notice2025-23527
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Temporarily Increase the Options Regulatory Fee (ORF) From January 2, 2026 Through 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 59882-59885]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23527]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104433; File No. SR-C2-2025-029]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Temporarily Increase the Options Regulatory Fee (ORF) From January 2,
2026 Through 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 17, 2025, Cboe C2 Exchange, Inc. (the ``Exchange'' or
``C2'') 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 C2 Exchange, Inc. (the ``Exchange'' or ``C2 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 (https://www.sec.gov/rules/
[[Page 59883]]
sro.shtml), 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 \3\ to temporarily increase the Options
Regulatory Fee (``ORF'') from $0.0002 per contract side to $0.0003 per
contract side,\4\ effective January 2, 2026.\5\
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\3\ The Exchange initially filed the proposed fee changes on
December 2, 2025 (SR-C2-2025-026). On December 15, 2025, the
Exchange withdrew that filing and submitted (SR-C2-2025-028). On
December 17, 2025, the Exchange withdrew that filing and submitted
this proposal.
\4\ The Exchange also proposes to make nonsubstantive changes to
the rule text that the ORF fee is charged per contract side. This is
consistent with how the ORF fee has been charged and is merely a
clarification to the Fee Schedule.
\5\ On July 1, 2026, the ORF rate will revert back to $0.0002
per contract side.
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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. 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 TPH or non-TPH that ultimately clears the
transaction. With respect to linkage transactions, the Exchange
reimburses its routing broker providing Routing Services pursuant to
Rule 5.36 for options regulatory fees it incurs in connection with the
Routing Services it provides.
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 23% of the
Exchange's total regulatory costs for 2026. Thus, direct expenses are
estimated to be approximately 77% of total regulatory costs for 2026.
In addition, based on the Exchange's 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.
Currently, and for quite some time now, the Exchange has been
collecting significantly lower than the 75% threshold. Under the
current rate the Exchange forecasts for 2026 to collect closer to 43%.
Even with this proposed temporary increase, the forecast only goes up
to approximately 64%.\6\
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\6\ 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 Commission. Although the Exchange
has been collecting at levels that do not cover a material portion of
its regulatory expenses, it has not raised its rate for quite some time
now but for this proposal.
The Exchange also notifies TPHs of adjustments to the ORF via an
Exchange Notice, including for the change being proposed herein.\7\
Based on the Exchange's most recent semi-annual review, the Exchange is
proposing to temporarily increase the amount of ORF that will be
collected by the Exchange from $0.0002 per contract side to $0.0003 per
contract side.\8\ The proposed temporary increase is based on the
Exchange's estimated projections for its regulatory costs, which
projections have increased. Particularly, based on the Exchange's
estimated projections for its regulatory costs, the revenue generated
by ORF using the current rate, 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 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 this proposed temporary rate increase, the amount collected
by the Exchange will be significantly 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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\7\ See Exchange Notice, C2025112601 ``Cboe Options Exchange
Regulatory Fee Update Effective January 2, 2026.''
\8\ The Exchange proposes to have an automatic sunset of the
proposed increased ORF rate 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
[[Page 59884]]
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 adopt a sunset date of June 30, 2026 for the
proposed rate of $0.0003 per contract side, at which point the ORF
would revert back to $0.0002 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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\10\ 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) \11\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed fee change 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 temporarily increase ORF 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 increase the ORF on a temporary basis, effective
January 2, 2026. 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 proposed amount is still lower than the amount of ORF assessed on
other exchanges.\12\
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\12\ 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).
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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.\13\
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\13\ 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 fee 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. 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 program are materially higher than the costs associated with
administering the non-customer component (e.g., TPH proprietary
transactions) of its regulatory program.\14\ 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'') \15\ 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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\14\ 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.
\15\ 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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[[Page 59885]]
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 non-customer 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 \16\ and paragraph (f) of Rule 19b-4 \17\
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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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#f183849d94dc929e9c9c949f8582b1829492df969e87"><span class="__cf_email__" data-cfemail="9be9eef7feb6f8f4f6f6fef5efe8dbe8fef8b5fcf4ed">[email protected]</span></a>. Please include
file number SR-C2-2025-029 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-C2-2025-029. 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-C2-2025-029 and should be submitted on
or before January 12, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23527 Filed 12-19-25; 8:45 am]
BILLING CODE 8011-01-P
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