[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