[Federal Register Volume 84, Number 180 (Tuesday, September 17, 2019)]
[Notices]
[Pages 48968-48970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20013]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86928; File No. SR-C2-2019-019]
Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Adopt Fees for a New Data Product To Be Known as Open-Close Data
September 11, 2019.
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 August 30, 2019, 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'') is
filing with the Securities and Exchange Commission (``Commission'') a
proposed rule change to adopt fees for a new data product to be known
as Open-Close Data. 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://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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 adopt fees for a new data product on C2
Options to be known as Open-Close Data, which will be available for
purchase to C2 Options Trading Permit Holders (``TPHs'') and Non-TPHs.
Cboe LiveVol, LLC (``LiveVol''), a wholly owned subsidiary of the
Exchange's parent company, Cboe Global Markets, Inc., will make the
Open-Close Data available for purchase to TPHs and Non-TPHs on the
LiveVol DataShop website (datashop.cboe.com). The Exchange proposes to
amend its Fee Schedule to adopt fees for the product.
The Exchange proposes to introduce the Open-Close Data product.
Open-Close Data is a data product that summarizes volume (contracts
traded on C2 Options) by origin (customer and firm orders), original
order size and the opening or closing position of the order. The volume
data is also summarized by day and series (symbol, expiration date,
strike price, call or put). The Open-Close Data will be available for
purchase to both C2 TPHs and Non-TPHs on a subscription and ad-hoc
basis. The Exchange notes that its affiliate, Cboe Exchange, Inc.
(``Cboe Options''), as well as other exchanges, offer a similar data
product.\3\
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\3\ See Securities Exchange Act Release No. 55062 (January 8,
2007), 72 FR 2048 (January 17, 2007) (approving SR-CBOE-2006-88);
See also Securities Exchange Act Release No. 56254 (August 15,
2007), 72 FR 47104 (August 22, 2007) (SR-ISE-2007-70).
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The Exchange proposes to provide in its Fee Schedule that TPHs and
non-TPHs may purchase Open-Close Data on a subscription basis (end of
day file) or by ad hoc request for a specified month (historical file).
The Exchange proposes to assess a monthly fee of $500 for subscribing
to a daily update which will consist of Open/Close data covering all
Exchange-listed securities. TPHs and non-TPHs purchasing Open/Close
data on a subscription basis will receive access to a daily data file.
The Exchange proposes to assess a fee of $400 per request per month for
an ad-hoc request of historical Open/Close data covering all Exchange-
listed securities. An ad-hoc request can be for any number of months
beginning with January 2018 for which the data is available.\4\ The
[[Page 48969]]
proposed subscription and ad-hoc fees will apply both to TPHs or non-
TPHs. The Exchange notes that other exchanges, including its affiliate
Exchange Cboe Exchange, Inc. (``Cboe Options'') provide similar data
products that may be purchased on both a subscription and ad-hoc basis
and are similarly priced.\5\
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\4\ For example, a TPH or non-TPH that requests historical Open/
Close Data for the months of October 2018 and November 2018, would
be assessed a total of $800. The Exchange notes that it may make
historical data prior to January 2018 available in the future and
that such historical data would be available to all TPHs or non-
TPHs.
\5\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\7\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and to protect investors and the public
interest, and that it is not designed to permit unfair discrimination
among customers, brokers, or dealers. The Exchange also believes that
its proposal to adopt fees for Open-Close Data is consistent with
Section 6(b) of the Act in general, and furthers the objectives of
Section 6(b)(4) of the Act \8\ in particular, in that it is an
equitable allocation of dues, fees and other charges among its members
and other recipients of Exchange data.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(5).
\8\ 15 U.S.C. 78f(b)(4).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data. Particularly, Open-Close Data will further
broaden the availability of U.S. option market data to investors
consistent with the principles of Regulation NMS. The data product also
promotes increased transparency through the dissemination of Open-Close
Data and benefits investors by providing access to the Open-Close Data,
which may promote better informed trading.
The Exchange operates in a highly competitive environment. Indeed,
there are currently 16 registered options exchanges that trade options.
The Commission has repeatedly expressed its preference for competition
over regulatory intervention in determining prices, products, and
services in the securities markets. Particularly, in Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \9\ Making alternative
data products available to market participants ultimately ensures
increased competition in the marketplace, and constrains the ability of
exchanges to charge supracompetitive fees. In the event that a market
participant views one exchange's data product as more or less
attractive than the competition they can and do switch between
competing products. The proposed fees are a result of the competitive
environment, as the Exchange seeks to adopt fees to attract purchasers
of the proposed Open-Close Data product.
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\9\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes the proposed fees are reasonable as the
proposed fees are both modest and similar to the fees assessed by other
exchanges that provide similar data products.\10\ The Exchange also
believes the proposed fees are reasonable as they would support the
introduction of a new market data product that is designed to aid
investors by providing insight into trading on C2 Options. The proposed
Open-Close Data would provide options market participants with valuable
information about opening and closing transactions executed on the
Exchange, similar to other historical trade data products offered by
competing options exchanges. In turn, this data would assist market
participants in gauging investor sentiment and trading activity,
resulting in potentially better informed trading decisions.
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\10\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A.
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Selling historical market data, such as Open-Close Data, is also a
means by which exchanges compete to attract business. Specifically, the
Open-Close Data would provide insight into trading activity on C2
Options, and would therefore potentially encourage subscribers to
direct order flow to the Exchange. To the extent that the Exchange is
successful in attracting subscribers for the Open-Close Data, it may
earn trading revenues and further enhance the value of its data
products. If the market deems the proposed fees to be unfair or
inequitable, firms can diminish or discontinue their use of the data
and/or avail themselves of alternative products offered by other
exchanges.\11\ The Exchange therefore believes that the proposed fees
for Open-Close Data reflect the competitive environment and would be
properly assessed on TPH or non-TPH users. The Exchange also believes
the proposed fees are equitable and not unfairly discriminatory as the
fees would apply equally to all users who choose to purchase such data.
The Exchange's proposed fees would not differentiate between
subscribers that purchase Open-Close Data, and are set at a modest
level that would allow any interested TPH or non-TPH to purchase such
data based on their business needs.
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\11\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A.
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The Exchange anticipates a wide variety of market participants to
purchase Open-Close Data, including but not limited to buy-side
investors, investment banks and academic institutions. The Exchange
notes however, that the decision as to whether or not to purchase the
Open-Close Data is entirely optional for all potential subscribers.
Indeed, no market participant is required to purchase the Open-Close
Data, and the Exchange is not required to make the Open-Close Data
available to all investors. Rather, the Exchange is voluntarily making
historical Open-Close Data available, as requested by customers, and
market participants may choose to receive (and pay for) this data based
on their own business needs. Potential purchasers may request the data
at any time if they believe it to be valuable, or may decline to
purchase such data.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Rather, the
Exchange believes that the proposal will promote competition by
permitting the Exchange to sell a data product similar to those offered
by other competitor options exchanges.\12\ The Exchange made Open-Close
Data available for C2 Options in order to keep pace with changes in the
industry and evolving customer needs, and believes the data product
will contribute to robust competition among national securities
exchanges. Furthermore, the Exchange operates in a highly competitive
environment, and its ability to price the
[[Page 48970]]
proposed data product is constrained by competition among exchanges
that offer similar data products to their customers. As discussed,
there are currently a number of alternative products available to
market participants and investors. At least three other U.S. options
exchanges offer a market data product that is substantially similar to
the Open-Close Data, which the Exchange must consider in its pricing
discipline in order to compete for the market data.\13\ In this
competitive environment, potential purchasers are free to choose which,
if any, competing product to purchase to satisfy their need for market
information. As a result, the Exchange believes this proposed rule
change permits fair competition among national securities exchanges.
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\12\ Id.
\13\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A and Nasdaq PHLX Options 7 Pricing Schedule, Section 10, PHLX
Options Trade Outline (``PHOTO'').
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The Exchange also does not believe the proposed fees would cause
any unnecessary or inappropriate burden on intermarket competition as
other exchanges are free to introduce their own alternative and
comparable data product and lower their prices to better compete with
the Exchange's offering. The Exchange does not believe the proposed
rule change would cause any unnecessary or inappropriate burden on
intramarket competition. Particularly, the proposed product and fees
apply uniformly to any purchaser, in that it does not differentiate
between subscribers that purchase Open-Close Data. The proposed fees
are set at a modest level that would allow any interested TPH or non-
TPH to purchase such data based on their business needs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has 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 \14\ and paragraph (f) of Rule 19b-4 \15\
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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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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-C2-2019-019 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-C2-2019-019. 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-C2-2019-019 and should be submitted on
or before October 8, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20013 Filed 9-16-19; 8:45 am]
BILLING CODE 8011-01-P