[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5517-5519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02902]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85141; File No. SR-CBOE-2019-008]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Cboe Order Routing Subsidy Program (``ORS'') and Complex Order 
Routing Subsidy Program (``CORS'') To Exclude Subsidy Payments for 
Contracts Executed as Qualified Contingent Cross (``QCC'') Orders

February 14, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 5518]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 1, 2019, 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 the Cboe Order Routing Subsidy Program (``ORS'') and Complex 
Order Routing Subsidy Program (``CORS'') to exclude subsidy payments 
for contracts executed as Qualified Contingent Cross (``QCC'') orders. 
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 (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 ORS and CORS Programs 
(collectively ``Programs'') by eliminating the payment of subsidies for 
contracts executed as QCC orders. Currently, the ORS and CORS Programs 
allow the Exchange to enter into subsidy arrangements with any Cboe 
Trading Permit Holder (``TPH'') (each, a ``Participating TPH'') or Non-
Cboe TPH broker-dealer (each a ``Participating Non-Cboe TPH'') that 
meet certain criteria and provide certain order routing functionalities 
to other TPHs, Non-Cboe TPHs and/or use such functionalities 
themselves.\3\ Participating TPHs or Participating Non-Cboe TPHs in the 
ORS and CORS Programs (the ``Participants'') receive a payment from the 
Exchange for every executed contract routed to the Exchange through 
their system in all classes excluding classes in Underlying Symbols 
List A, Sector Indexes, DJX, MXEA, MXEF, XSP and XSPAM. Additionally, 
Participants do not receive payment for contracts executed in the 
Automated Improvement Mechanism (``AIM''),\4\ as contracts that execute 
via AIM already have an opportunity to earn various rebates and 
discounts. Similarly, contracts executed as QCC orders also have other 
opportunities to earn various rebates and discounts.\5\ Therefore, the 
Exchange proposes to expressly exclude contracts executed as QCC orders 
from the ORS and CORS Programs' payment of subsidies.
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    \3\ See Cboe Fees Schedule, ``Order Router Subsidy Program'' and 
``Complex Order Router Subsidy Program'' tables for more details on 
the ORS and CORS Programs.
    \4\ See Securities and Exchange Act Release 34-73354 (October 
15, 2015) 79 FR 62988 (October 21, 2014) (SR-CBOE-2014-075) (Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the CBOE Order Routing Subsidy Program and the Complex Order 
Routing Subsidy Program).
    \5\ See e.g., Cboe Fees Schedule, ``QCC Rate Table'', which 
provides a $0.10 per contract credit to the initiating side of a 
non-customer QCC transaction and ``ETF and ETN Options Rate Table'' 
Footnote 8, which provides that the Exchange will waive the 
transaction fee for public customer orders in all ETF and ETN 
options that are executed, among other order types, as a QCC.
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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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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) \8\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
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    In particular, the Exchange believes the proposed change to the ORS 
and CORS Programs to expressly exclude contracts executed as QCC orders 
from the Programs' payment of subsidies is reasonable as Participants 
will merely no longer receive a subsidy for QCC orders. The Exchange 
notes that AIM orders also are not eligible to receive a subsidy under 
the Programs. The Exchange believes it is equitable and not unfairly 
discriminatory to exclude QCC trades from both Programs because, like 
AIM orders, orders executed as a QCC already have an opportunity to 
earn various rebates or discounts.\9\ Lastly, the Exchange believes 
that the proposed change is equitable and not unfairly discriminatory 
because the change is applicable to all Participants and any Cboe TPH 
or broker-dealer that is not a Cboe TPH may continue to avail itself of 
the arrangements under the Programs, provided that their routing 
functionality incorporates the respective requirements of each Program.
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    \9\ See supra note 5.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed change will impose an unnecessary burden on 
intramarket competition because it will apply equally to all 
Participants in the Programs. Although the subsidy for orders routed to 
the Exchange through a Participant's system only applies to 
Participants of the Programs, the subsidies are designed to encourage 
the sending of more orders to the Exchange, which should provide 
greater liquidity and trading opportunities for all market 
participants. Further, the Exchange does not believe that such change 
will impose any burden on intermarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. The Exchange 
notes that excluding an order type from eligibility for a subsidy under 
the Cboe Fee Schedule does not pose any

[[Page 5519]]

competitive advantages over other exchanges. Further, the proposed 
changes only affect trading on the Exchange. To the extent that the 
proposed changes make Cboe Options a more attractive marketplace for 
market participants at other exchanges, such market participants are 
welcome to become Cboe Options market participants.

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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2019-008 on the subject line.

Paper Comments

     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-2019-008. 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 (http://www.sec.gov/rules/sro.shtml). 
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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CBOE-2019-008 and should be submitted on 
or before March 14, 2019.

    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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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02902 Filed 2-20-19; 8:45 am]
 BILLING CODE 8011-01-P