Notice2026-19299
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule for Step Up Mechanism Auctions
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Published
September 22, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 182 (Tuesday, September 22, 2026)</title>
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[Federal Register Volume 91, Number 182 (Tuesday, September 22, 2026)]
[Notices]
[Pages 60184-60186]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19299]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106403; File No. SR-C2-2026-026]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule for Step Up Mechanism Auctions
September 17, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 11, 2026, 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
The Exchange proposes to amend its Fee Schedule to introduce new
language governing the fees applicable to executions in Step Up
Mechanism auctions.
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/ctwo/">https://www.cboe.com/us/options/regulation/rule_filings/ctwo/</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 amend its Fee Schedule to introduce new
language implementing the fees applicable to executions in Step Up
Mechanism (``SUM'') auctions.
Currently, SUM auction fees are handled in the same manner as
Complex Order Auctions (``COAs''). Meaning, that the incoming/auctioned
order will receive applicable Add rates, and auction response and
unrelated orders will receive applicable Remove rates.\3\ The Exchange
now proposes to include additional language in its Fee Schedule stating
that, for executions that occur within the SUM auction, the incoming
order will receive applicable Remove rate, and the auction response and
unrelated orders will receive the applicable Add rate.
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\3\ See C2 Options Fee Schedule.
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By way of background, the Exchange recently adopted SUM, a new
automated order handling mechanism.\4\ SUM is a feature within the
System that provides automated order handling in designated classes for
qualifying orders that are not automatically executed by the System and
is set forth in Exchange Rule 5.35.
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\4\ See Securities Exchange Act Release No. 106224 (August 28,
2026), 91 FR 56514 (September 2, 2026) (SR-C2-2026-024).
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Under Rule 5.35(b), upon receipt of a SUM-eligible order, the
System electronically exposes the order at the national best bid or
offer (``NBBO'') immediately upon receipt, for a period of time
determined by the Exchange on a class-by-class basis that may not
exceed one second. During the exposure period, all Users may submit
responses to the exposure message. The purpose of SUM is to provide all
Users with the opportunity to improve their prices and ``step up'' to
meet the NBBO in order to interact with orders sent to the Exchange. As
the Exchange explained in its prior filing, this allows the market
participant sending an order to the Exchange to increase its chances of
receiving an execution at the Exchange (the market participant's chosen
venue) instead of having the order be routed to another exchange.\5\
Further, SUM and the ``step up'' process enable Users to add liquidity
that is available to interact with orders sent to the Exchange.
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\5\ Id.
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In connection with the adoption of SUM,\6\ the Exchange proposes to
implement new language for the fees applicable to volume executed
through SUM auctions. As a general matter, the Exchange's Fee Schedule
assesses a fee to volume that removes liquidity (a ``remove'' fee) and
a separate fee (or, as applicable, a rebate or fee waiver) to volume
that adds liquidity (an ``add'' fee). There is existing language in the
Exchange's Fee Schedule for COAs: ``For executions that occur within
the Complex Order Auction (``COA'') against auction responses, the
incoming order will receive applicable Add rates, and auction responses
and unrelated orders will receive applicable Remove rates.'' Currently,
this same logic is being applied for SUM auction executions.
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\6\ SUM was implemented on the Exchange on September 4, 2026
(see Reminder--Cboe C2 Options to Introduce Step-Up Mechanism (SUM)
Auction).
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The Exchange proposes to add in new language for executions in SUM
auctions by stating that incoming orders will receive the applicable
Remove rate and auction responses and unrelated orders will receive the
applicable Add rates. As it relates to SUM auctions, the remove fee
would apply to the volume resulting from a primary order (i.e., the
order that initiates the SUM auction and is exposed by the System), and
the add fee would apply to the volume resulting from a response to SUM
(i.e., the liquidity-providing responses submitted by Users during the
exposure period) or an unrelated order that executes against the
initiating order in compliance with Rule 5.35. In other words, the
primary order that initiates a SUM auction is treated as removing
liquidity, while a response to a SUM auction or an unrelated order that
executes against the initiating order is treated as adding liquidity.
The Exchange believes this treatment appropriately reflects the
function of each side of a SUM auction: the primary order is seeking to
access liquidity, while the response is
[[Page 60185]]
providing liquidity that steps up to interact with the primary order.
The proposed change does not adopt any new fee and does not change
the amount of any fee assessed under the Fee Schedule; rather, it
implements an updated fee framework for SUM volume.
The proposed language is similar to the existing treatment of SUM
auctions on the Fee Schedule of the Exchange's affiliate, Cboe
Exchange, Inc (``Cboe''). Consistent with the Cboe Fee Schedule, the
Exchange's proposed language reflects the same principle that, in a SUM
auction, the primary order that initiates the auction is treated as
taker (removing) volume, and responses to the auction are treated as
maker (adding) volume. The Cboe Fee Schedule reflects this treatment in
Footnotes 9 and 44. As reflected in the Cboe Fee Schedule, the Taker
fees apply to the volume resulting from a Customer's primary orders
executed in SUM auctions, and the Maker fee waiver applies to volume
resulting from a Customer's responses to SUM actions. The Exchange's
proposed language is similar to the Cboe treatment for SUM auctions.
Lastly, the Exchange notes that this fee structure does not apply
to orders in DJX and RUT as these products have their own pricing
tables in the C2 Fee Schedule. The Exchange notes that this same
approach exists today for the fee structure specified above for COAs.
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 the
Section 6(b)(5) \8\ 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) \9\ 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,\10\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed rule change is reasonable
because it does not adopt any new fee or change the amount of any fee
currently assessed under the Fee Schedule. Rather, the proposed
language implements new language on how the Exchange's existing remove/
add fee framework applies to volume executed through a SUM auction--
namely, that the remove fee applies to the volume resulting from an
incoming order that prompts a SUM auction and the add fee applies to
the volume resulting from a response to SUM or an unrelated order
executed as part of SUM. The Exchange believes it is reasonable to
apply the remove fee to primary order volume and the add fee to
response volume and unrelated orders because this treatment reflects
the function of each side of a SUM auction, with the primary order
accessing liquidity and the contra-side providing liquidity.
The Exchange believes the proposed rule change is equitable and not
unfairly discriminatory because the proposed rule change applies to all
market participants equally. The proposed remove/add treatment of SUM
volume applies uniformly to the primary orders and responses of all
market participants that participate in SUM auctions. In addition, the
Exchange believes it is equitable and not unfairly discriminatory to
assess the remove fee for the primary order volume that removes
liquidity and to apply the add fee to the response volume that adds
liquidity because the Exchange wants to encourage market participation
and price improvement. By applying the add rate to responses that step
up to provide liquidity, the proposed rule change encourages Users to
submit responses during the SUM exposure period, which promotes the
competitive price-improvement dynamic that SUM is designed to foster
and benefits investors through improved execution quality. Similarly,
unrelated orders that execute against the order that initiates the SUM
auction also provide liquidity and as such, receive the add rate.
Finally, the Exchange believes the proposed rule change promotes
just and equitable principles of trade and supports consistency in SUM
auctions between both C2 and its affiliated exchange, Cboe. The
proposed language is similar to the existing treatment of SUM volume on
the Cboe Fee Schedule, as reflected in Footnotes 9 and 44. Because SUM
on C2 is based on Cboe Options Rule 5.35, the Exchange believes it is
appropriate and consistent with the Act for the C2 Fee Schedule to
reflect the same remove/add treatment of SUM volume as the Cboe Fee
Schedule. This consistency reduces potential confusion for market
participants that trade across the Cboe affiliated exchanges and
promotes a coherent fee framework across those affiliated markets.
Lastly, the Exchange believes that in explicitly calling out DJX and
RUT as inapplicable, that it provides clarity for participants as there
are already separate fee tables in place for these products.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
The Exchange does not believe the proposed rule change will impose
any burden on intramarket competition. The proposed language revises
the application of the remove/add fee framework to SUM volume. This
proposed framework applies uniformly to all market participants that
participate in SUM auctions. The Exchange believes because the proposed
treatment of primary orders as remove and contra-side interest as add
reflects the economic function of each side of a SUM auction and is
intended to encourage market participation and price improvement for
the benefit of all market participants.
The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
rule change concerns only the revised application of the Exchange's own
fees for volume executed on the Exchange through SUM auctions. To the
contrary, the proposed rule change is designed to parallel the existing
SUM fee treatment on the Exchange's affiliate, Cboe, thereby promoting
consistency across the Cboe affiliated exchanges. Trading Permit
Holders may readily direct their order flow to competing venues if they
deem the Exchange's fees to be excessive. Market participants on other
exchanges are welcome to become Trading Permit
[[Page 60186]]
Holders and trade at C2 if they determine that this proposed rule
change has made C2 more attractive or favorable.
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 \11\ and paragraph (f) of Rule 19b-4 \12\
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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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#641611080149070b0909010a1017241701074a030b12"><span class="__cf_email__" data-cfemail="6311160f064e000c0e0e060d1710231006004d040c15">[email protected]</span></a>. Please include
file number SR-C2-2026-026 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-C2-2026-026. 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-C2-2026-026 and should be submitted on
or before October 13, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-19299 Filed 9-21-26; 8:45 am]
BILLING CODE 8011-01-P
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