[Federal Register Volume 84, Number 218 (Tuesday, November 12, 2019)]
[Notices]
[Pages 61129-61132]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24497]



[[Page 61129]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87463; File No. SR-C2-2019-023]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Introduce a New Data Product To Be Known as Open-Close Data and To 
Adopt Fees for Such Product

November 5, 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 October 29, 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 and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') is filing with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change to introduce a new data product to be known as Open-Close Data 
and to adopt fees for such product. The text of the proposed rule 
change is provided bin [sic] 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 introduce a new data product on C2 to be 
known as Open-Close Data, which will be available for purchase to C2 
Trading Permit Holders (``TPHS'') and non-TPHs and also adopt fees for 
Open-Close Data. 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).\5\
---------------------------------------------------------------------------

    \5\ The Exchange initially filed the proposed fee changes on 
business date August 30, 2019 (SR-C2-2019-019). On business date 
October 29, 2019, the Exchange withdrew that filing and submitted 
this filing.
---------------------------------------------------------------------------

    More specifically, Open-Close Data is a volume summary file for 
trading activity on C2 Options. The Exchange notes it is proprietary C2 
trade data and does not include trade data from any other exchanges. It 
is also a historical data product and not a real time data feed. The 
Open-Close Data summarizes and buckets the volume by origin (customer, 
professional customer, broker-dealer, and market maker), buying/
selling, and opening/closing criteria. The customer and professional 
customer volume is further broken down into trade size buckets (less 
than 100 contracts, 100-199 contracts, greater than 199 contracts). The 
data currently goes back to January 2018 and contains all series in an 
underlying security if it has volume.\6\ The Exchange anticipates a 
wide variety of market participants to purchase Open-Close Data, 
including, but not limited to, individual customers, buy-side 
investors, investment banks and academic institutions. For example, the 
Exchange notes that academic institutions may utilize the proposed 
Open-Close Data and as a result promote research and studies of the 
options industry to the benefit of all market participants. The 
Exchange believes the proposed Open-Close Data product may also provide 
helpful trading information regarding investor sentiment and may be 
used to create and test trading models and analytical strategies and 
provides comprehensive insight into trading on C2. It is a completely 
voluntary product, in that the Exchange is not required by any rule or 
regulation to make this data available and that potential subscribers 
may purchase it only if they voluntarily choose to do so. The Exchange 
notes that its affiliate, Cboe Exchange, Inc. (``Cboe Options''), as 
well as other exchanges, offer a similar data product.\7\
---------------------------------------------------------------------------

    \6\ The Open-Close data file format specifications can be found 
at https://datashop.cboe.com/Themes/Livevol/Content/static/OpenCloseSpecification.pdf
    \7\ 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).
---------------------------------------------------------------------------

    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.\8\ The 
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.\9\
---------------------------------------------------------------------------

    \8\ 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.
    \9\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ 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

[[Page 61130]]

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 \12\ in particular, in that it 
is an equitable allocation of dues, fees and other charges among its 
members and other recipients of Exchange data.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    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. The Exchange believes that the proposed Open-
Close Data would further broaden the availability of U.S. option market 
data to investors consistent with the principles of Regulation NMS. The 
proposal also promotes increased transparency through the dissemination 
of Open-Close Data. The proposed rule change would benefit investors by 
providing access to the Open-Close Data, which as noted above, may 
promote better informed trading, as well as research and studies of the 
options industry. Particularly, information regarding opening and 
closing activity across different option series may indicate investor 
sentiment, which can be helpful research and/or trading information. 
Subscribers to the data may be able to enhance their ability to analyze 
option trade and volume data, and create and test trading models and 
analytical strategies. The Exchange believes Open-Close Data provides a 
valuable tool that subscribers can use to gain comprehensive insight 
into the trading activity in a particular series, but also emphasizes 
such data is not necessary for trading. Moreover, the Exchange's 
affiliate Cboe Options, along with other exchanges, also offer a 
similar data product.\13\
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 55062 (January 8, 
2007), 72 FR 2048 (January 17, 2007) (approving SR-CBOE-2006-088); 
See also Securities Exchange Act Release No. 56254 (August 15, 
2007), 72 FR 47104 (August 22, 2007) (SR-ISE-2007-70).
---------------------------------------------------------------------------

    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.'' \14\ Making similar data 
products available to market participants fosters 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 similar 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.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    The Exchange believes the proposed fees are reasonable as the 
proposed fees are both modest and similar to, or even lower than, the 
fees assessed by other exchanges that provide similar data 
products.\15\ Indeed, proposing fees that are excessively higher than 
established fees for similar data products would simply serve to reduce 
demand for the Exchange's data product, which as noted, is entirely 
optional. Like the Exchange's proposed Open-Close Data product, other 
exchanges offer similar data products that each provide insight into 
trading on those markets and may likewise aid in assessing investor 
sentiment. Although each of these similar open-close data products 
provide only proprietary trade data and not trade data from other 
exchanges, it's possible investors are still able to gauge overall 
investor sentiment across different option series based on open and 
closing interest on any one exchange.\16\ Similarly, market 
participants may be able to analyze option trade and volume data, and 
create and test trading models and analytical strategies using only 
open-close data relating to trading activity on one or more of the 
other markets that provide similar data products. As such, if a market 
participant views another exchange's open-close data as more attractive 
than its proposed open-close data product, then such market participant 
can merely choose not to purchase the Exchange's Open-Close Data and 
instead purchase another exchange's open-close data product, which 
offer similar data points, albeit based on that other market's trading 
activity.
---------------------------------------------------------------------------

    \15\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
    \16\ The exchange notes that its open-close data product does 
not include data on any exclusive, singly-listed option series.
---------------------------------------------------------------------------

    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. As noted above, users may also use such 
data to create and test trading models and analytical strategies.
    Selling historical market data, such as Open-Close Data, is also a 
means by which exchanges compete to attract business. 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 similar products offered by other 
exchanges.\17\ 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.
---------------------------------------------------------------------------

    \17\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
---------------------------------------------------------------------------

    As noted above, the Exchange anticipates a wide variety of market 
participants to purchase Open-Close Data, including but not limited to 
individual customers, buy-side investors, investment banks and academic 
institutions. For example, on its affiliate exchange Cboe Options, 
which also offers an Open-Close Data

[[Page 61131]]

product, approximately 38% of purchases of historical ad hoc Open-Close 
Data files are individuals, 33% are buy-side investors or investment 
banks and 25% are academic institutions. Accordingly, the Exchange 
anticipates that open-close data may be used not just for commercial or 
monetizing purposes, but also for educational use and research. The 
Exchange reiterates 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 introduce and sell a data product similar to 
those offered by other competitor options exchanges.\18\ The Exchange 
is proposing to introduce Open-Close Data in order to keep pace with 
changes in the industry and evolving customer needs, and believes this 
proposed rule change would contribute to robust competition among 
national securities exchanges. As noted, at least three other U.S. 
options exchanges offer a market data product that is substantially 
similar to the Open-Close Data. As a result, the Exchange believes this 
proposed rule change permits fair competition among national securities 
exchanges.
---------------------------------------------------------------------------

    \18\ Id.
---------------------------------------------------------------------------

    Furthermore, the Exchange operates in a highly competitive 
environment, and its ability to price the 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 similar 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.\19\ For example, proposing fees that are 
excessively higher than established fees for similar data products 
would simply serve to reduce demand for the Exchange's data product, 
which as discussed, market participants are under no obligation to 
utilize. In this competitive environment, potential purchasers are free 
to choose which, if any, similar 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.
---------------------------------------------------------------------------

    \19\ 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'').
---------------------------------------------------------------------------

    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 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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) \21\ thereunder. 
Because the foregoing proposed rule change does not: (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \22\ and Rule 19b-4(f)(6) \23\ 
thereunder.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\25\ the Commission 
may designate a shorter time if such action is consistent with 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to permit the 
Exchange to provide Open-Close Data to its three subscribers on an 
uninterrupted basis.\26\ According to the Exchange, other exchanges 
offer a similar data product at similar prices, and the proposed rule 
change presents no new or novel issues. The Commission believes that 
waving the 30-day operative delay is consistent with the protection of 
investors and the public interest. Accordingly, the Commission 
designates the proposed rule change to be operative upon filing.\27\
---------------------------------------------------------------------------

    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ 17 CFR 240.19b-4(f)(6).
    \26\ As noted above, the Exchange previously filed proposed fees 
for the Open-Close Data product on August 30, 2019, as effective 
immediately. See supra, note 5, and Securities Exchange Act Release 
86928 (September 11, 2019), 84 FR 48968 (September 17, 2019) 
(noticing C2-2019-019). The Commission received only one comment 
letter on the proposed rule change from C2 withdrawing the filing. 
See Letter from Corinne Klott, Assistant General Counsel, C2, dated 
October 29, 2019. This filing withdrew and replaced the earlier 
filing.
    \27\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 61132]]

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-C2-2019-023 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-C2-2019-023. 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-C2-2019-023 and should be submitted on 
or before December 3, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12)
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24497 Filed 11-8-19; 8:45 am]
BILLING CODE 8011-01-P