[Federal Register Volume 85, Number 4 (Tuesday, January 7, 2020)]
[Notices]
[Pages 754-756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28534]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87873; File No. SR-CBOE-2019-127]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
December 31, 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 December 20, 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 adopt certain linkage fee codes. 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's Fees Schedule currently provides for fee codes for
Routing Fees. In particular, the Fees Schedule currently lists fee
codes and their corresponding transaction fee for routed Customer
orders to other options exchanges specifically in Exchange Traded Funds
(``ETF'') and equity options, and for non-Customer orders routed in
Penny and Non-Penny options classes. The Exchange notes that in
connection with a recent technology migration (including the migration
of the Exchange's billing system to a new
[[Page 755]]
billing system), the Exchange amended and updated a majority of its
Fees Schedule,\3\ which became effective upon the technology
migration.\4\ Prior to the migration-related amendments and updates,
the Fees Schedule had provided for a general transaction fee assessed
for all routed Customer orders in all options classes. More
specifically, it had provided that for Customer orders, in addition to
the customary Cboe Options execution charges for each Customer order
that is routed, the Exchange passed through the actual transaction fee
assessed by the exchange(s) to which the order was routed plus an
additional $0.15 per contract.
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\3\ See Securities and Exchange Act Release No. 87495 (November
8, 2019), 84 FR 63701 (November 18, 2019) (SR-CBOE-2019-106).
\4\ In 2016, the Exchange's parent company, Cboe Global Markets,
Inc. (formerly named CBOE Holdings, Inc.) (``Cboe Global''), which
is also the parent company of Cboe C2 Exchange, Inc. (``C2''),
acquired Cboe EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange,
Inc. (``EDGX'' or ``EDGX Options''), Cboe BZX Exchange, Inc.
(``BZX'' or ``BZX Options''), and Cboe BYX Exchange, Inc. (``BYX''
and, together with Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe
Affiliated Exchanges''). Cboe Options migrated its trading platform
to the same system used by the Cboe Affiliated Exchanges on October
7, 2019.
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In light of the migration, the Exchange amended, among other
things, the general routing fee for Customer orders to instead provide
for an exact charge for routing per specific types of transaction and a
particular corresponding fee code, which currently exists in the Fees
Schedule today. The Exchange, however, inadvertently did not adopt a
fee code for Customer orders routed in index options, which the
Exchange had intended to adopt in the migration-related Fee Schedule
amendments along with the fee codes currently in place for Customer
orders routed in ETF and equity options, as the general routing fee for
Customer orders contained in the Fees Schedule prior to migration was
assessed for orders in all option classes. As such, the Exchange now
proposes to adopt fee codes and reinstate fees in connection with
Customer orders routed in index options. Particularly, the Exchange
proposes to adopt fee code ``RX'', which would be appended to Customer
orders routed in Mini-SPX Index (``XSP'') options \5\ and assessed a
fee of $0.19, and fee code ``RS'', which would be appended to Customer
orders routed in all other index options \6\ and assessed a fee of
$0.48. The Exchange notes that the routing rates for routed Customer
orders in index options, as proposed, would not change from when such
fees were in place prior to the migration-related amendments to the
Fees Schedule, but rather, would be expressed as their specific, single
rates by combining the $0.15 per contract fee plus the customary Cboe
Options Customer execution charges (i.e., $0.04 for XSP options and
$0.18 in all other index options) and the actual transaction fee
assessed by the Exchange to which the order was routed (i.e., $0.00 for
EDGX Options, to which orders in XSP options may be routed, and $0.15
for C2 and BZX Options, to which orders in all other index options may
be routed).\7\ The Exchange also notes that this specific single rate
is consistent with the manner in which fee codes for Customer orders in
ETF and equity options are currently provided in the Fees Schedule. The
Exchange notes that other exchanges, including its affiliated
exchanges, assess routing fees expressed as a single fee for routed
Customer orders and that the proposed fees are in line with, and
generally lower than, those fees.\8\
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\5\ The Exchange notes the XPS options may be routed to its
affiliated exchange, Cboe EDGX Exchange, Inc. (``EDGX Options''), as
EDGX Options also lists XSP options.
\6\ The Exchange notes that all other index options include
Russell 2000 Index (``RUT'') and Dow Jones Industrial Average Index
(``DJX'') options. Orders in RUT options may be routed to the
Exchange's affiliates, Cboe C2 Exchange, Inc. (``C2'') and Cboe BZX
Exchange, Inc. (``BZX Options''), as these exchanges also list RUT
options, and orders in DJX options may be routed to C2, as C2 also
lists RUT options.
\7\ See supra note 5 and 6.
\8\ See Cboe C2 Options Exchange Fee Schedule, which assesses a
fee of $0.85 per routed Customer order in both RUT and DJX options;
Cboe BZX Options Exchange Fee Schedule, which also assesses a fee of
$0.85 per routed Customer order in RUT options; Cboe EDGX Exchange
Fee Schedule, which assesses a fee of $0.25 for routed Customer
orders in XSP options. See also MIAX Options Fees Schedule which
assesses $0.65 per routed Customer order in penny classes and $0.15
in non-penny classes.
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In addition, the Exchange also proposes to amend certain language
in the Fees Schedule under the Frequent Trader Program table.
Specifically, the Fees Schedule currently provides that the Exchange
will disperse a customer's rebates pursuant to the customer's
instructions, which may include receiving the rebates as a direct
payment or via a distribution to one or more of its Clearing Trading
Permit Holders. The Exchange notes that the integrated post-migration
billing system does not currently offer distribution to Clearing
Trading Permit Holder, therefore the Exchange proposed to remove this
payment method in connection with the Frequent Trader Program. As such,
the proposed change is designed to amend language in the Fees Schedule
in order to accurately reflect the manner in which the billing system
currently functions. Additionally, the Exchange notes that prior to the
migration-related changes made to the billing system the Exchange
generally dispersed all customers' rebates as direct payments.
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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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
Section 6(b)(4) of the Act,\11\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78f(b)(4).
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The Exchange also believes the proposed fee codes for Customer
orders routed in index options are reasonable and equitable because
such fees would be reinstated for the same amount they were previously
assessed in the Fees Schedule, as the Exchange inadvertently omitted
such fees, which were prior in place, when it made migration-related
amendments and updates to a majority of its Fees Schedule. As a result,
the proposed fee codes would alleviate potential confusion and provide
clarity for market participants by ensuring the continuation of fees
that were not intended, nor announced, to be discontinued. As stated,
the manner in which the proposed single fee rates for Customer orders
routed in index options would be provided in the Fees Schedule is
consistent with the manner in which the routed fee rates are currently
provided for Customer orders routed in ETF and equity options. The
Exchange also believes its proposed fees in connection with Customer
orders routed in index options are reasonable as the
[[Page 756]]
proposed fees take into account routing costs, as they did when
previously in place, and are in line with amounts assessed and
presented as single fee rates by other exchanges, including its
affiliated exchanges.\12\
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\12\ See supra note 5 [sic].
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The Exchange believes the proposed routing fees are equitable and
not unfairly discriminatory because the proposed fees apply equally to
all Customers who choose to use the Exchange to route orders in index
options (either in XSP or all other index options). The Exchange
highlights that routing through the Exchange is voluntary and that it
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues or providers of
routing services if they deem fee levels to be excessive.
Additionally, the Exchange believes that the proposed change to
remove the Frequent Trader Program payment method in connection with
distributions to Clearing Trading Permit Holders is reasonable because
it is intended to accurately reflect the payment methods currently
offered by the billing system post-migration, thereby providing for
clarity in the Fees Schedule and mitigating any potential confusion
surrounding the Frequent Trader Program payment options. The Exchange
also notes that the proposed change would not significantly impact
investors as prior to the migration the Exchange generally only
dispersed customer's rebates as a direct payment. The proposed change
would have no impact on the ability of customer's to receive their
payments. The Exchange further believes that the proposed rule change
is equitable and not unfairly discriminatory because, as proposed, the
same payment method would apply equally to all Frequent Trader Program
customer rebates.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that the
proposed change to the payment methods in connection with its Frequent
Trader Program does not involve or impact trading on the Exchange, and
is merely intended to clarify the manner in which the Exchange's
billing system currently functions.
Further, the Exchange does not believe that the proposed fee codes
would impose any burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because the proposed changes would, again, be applied equally to all
Customer orders routed in index options. As stated, the Exchange
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues if they deem fee
levels at a particular venue to be excessive or incentives to be
insufficient. The proposed rule change would merely reinstate an
inadvertently omitted fee in order to continue to reflect a competitive
pricing structure designed to incentivize market participants to direct
their order flow to the Exchange, which the Exchange believes enhances
market quality to the benefit of all TPHs. The Exchange does not
believe that the proposed rule change would impose any burden on
intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed fee codes
are not intended as a competitive change, as these fees were prior in
place in the Fees Schedule and recently removed inadvertently. As such,
the proposed rule change is corrective and clarifying in nature.
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 \13\ and paragraph (f) of Rule 19b-4 \14\
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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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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-2019-127 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-2019-127. 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-2019-127 and should be submitted on
or before January 28, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28534 Filed 1-6-20; 8:45 am]
BILLING CODE 8011-01-P