[Federal Register Volume 85, Number 77 (Tuesday, April 21, 2020)]
[Notices]
[Pages 22212-22216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08368]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88638; File No. SR-CBOE-2020-032]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Its Fees Schedule

April 15, 2020.
    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 April 1, 2020, 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 its fees schedule. 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

[[Page 22213]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make various amendments to its Fees 
Schedule, including amending Footnote 12 of the Fees Schedule, 
effective April 1, 2020. By way of background, Footnote 12 governs 
pricing changes in the event the Exchange trading floor becomes 
inoperable. Particularly, in the event the trading floor becomes 
inoperable, the Exchange will continue to operate in a screen-based 
only environment using a floorless configuration of the System that is 
operational while the trading floor facility is inoperable. The 
Exchange would operate using that configuration only until the 
Exchange's trading floor facility became operational. Open outcry 
trading would not be available in the event the trading floor becomes 
inoperable. The exchange initially adopted Footnote 12 in anticipation 
of the temporary closing of the trading floor in the middle of March 
2020 to help prevent the spread of the novel coronavirus. As of March 
16, 2020, the Exchange suspended open outcry trading and is currently 
operating in an all-electronic configuration. In light of the extended 
closure of the trading floor, the Exchange proposes to update a number 
of its previous fee changes and adopt new pricing changes that the 
Exchange believes is appropriate when the trading floor is inoperable 
for an extended period of time.
    Footnote 12 of the Fees Schedule currently provides that in the 
event the trading floor becomes inoperable, holders of a Market-Maker 
Floor Permit will be entitled to act as an electronic Market-Maker and 
holders of a Floor Broker Permit will be entitled to access the 
Exchange electronically to submit orders to the Exchange, at no further 
cost. Generally, in order to act as a Market-Maker electronically a 
Trading Permit Holder (``TPH'') must purchase a Market-Maker Electronic 
Access Permit (``MM EAP''). In order to access the Exchange 
electronically and submit orders to the Exchange, a TPH must purchase 
an ``Electronic Access Permit'' (``EAP''). Conversely, TPHs that wish 
to act as a Market-Maker on the floor have to purchase a Market-Maker 
Permit and TPHs that wish to act as a Floor Broker on the floor of the 
Exchange have to purchase a Floor Broker Permit. Effective March 16, 
2020, the Exchange proposed to provide that holders of a Market-Maker 
Floor Permit and Floor Broker Permit were entitled to operate 
electronically in their registered capacity at no additional cost 
(i.e., not charge for an additional Market-Maker Electronic Access 
Permit or Electronic Access Permit). This proposal was adopted in order 
to encourage floor-based market participants to continue to participate 
on the Exchange electronically if the trading floor becomes inoperable 
for the remainder of the month.\3\ The Exchange now proposes to provide 
that any floor Market-Maker or Floor Broker that did not also already 
hold a MM EAP or EAP, respectively, will be assessed the monthly fee 
for one MM EAP or EAP, respectively, should such participant wish to 
continue to participate electronically on the Exchange while the 
trading floor is inoperable. The Exchange also proposes to provide that 
in the event that the trading floor reopens mid-month, that floor 
Trading Permit fees would be pro-rated based on the remaining trading 
days in that calendar month.
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    \3\ See Securities and Exchange Act Release No. 88426 (March 19, 
2020), 85 FR 16978 (March 25, 2020) (SR-CBOE-2020-021).
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    The Exchange next proposes to eliminate an exception relating to 
the Market-Maker EAP Appointments Sliding Scale. Currently, Footnote 12 
provides that for purposes of the Market-Maker EAP Appointments Sliding 
Scale, the total quantity will be determined by the highest quantity 
used at any point during the month excluding additional quantity added 
during the time the Exchange operates in a screen-based only 
environment. By of way of background, Electronic Market-Makers must 
select appointments and are charged for one or more ``Appointment 
Units'' (which are scaled from 1 ``unit'' to more than 5 ``units''), 
depending on which classes they elect appointments in. Appointment 
weights for each appointed class are set forth in Cboe Options Rule 
5.50(g) and are summed for each Market-Maker in order to determine the 
total Appointment Units, to which fees will be assessed. To determine 
final fees, historically the total quantity was determined by the 
highest quantity used at any point during the month. In anticipation of 
the trading floor closing mid-month, the Exchange amended its fees 
schedule to exclude from the total Appointment Units any additional 
quantity added during the time the Exchange operates in a screen-based 
only environment, in order to encourage continued participation on the 
Exchange by Market-Makers for the remainder of the month. The Exchange 
wishes to eliminate this exclusion in light of the continued trading 
floor closure, as Market-Makers would otherwise be able to add 
appointments unrelated to the floor closure throughout the month at no 
cost.
    The Exchange next proposes to waive the following Facility Fees for 
as long as the trading floor is inoperable as such services and 
products cannot be utilized while the trading floor is closed:

------------------------------------------------------------------------
              Description                              Fee
------------------------------------------------------------------------
Standard Booth Rental Fees.............  $195/month (Perimeter); $550/
                                          month (OEX, Dow Jones/MNX/
                                          VIX).
Non Standard Booth Rental Fees.........  $1,250/month; $1.70 per sq ft./
                                          month.
Access Badges..........................  $130/month (Floor Manager); $70/
                                          month (Clerks).
Printer Maintenance....................  $75/month.
Wireless Phone Rental..................  $110/month.
ExchangeFone Maintenance...............  $57/month.
Single Line Maintenance................  $11.50/month.
Lines--Intra Floor.....................  $57.75/per month.
Lines--Voice Circuits..................  $16/month.
Data Circuits (DC) at Local Carrier      $16/month.
 (entrance).
DC @In-House Frame--Lines Between Comms  $12.75/month.
 Center and Trading Floor.

[[Page 22214]]

 
DC @In-House Frame--Lines between Local  $12.75/month.
 Carrier and Comms Center.
DC @In-House Frame--Lines Direct from    $12.75/month.
 Local Carrier to Trading Floor.
Arbitrage Phone Positions..............  $550/month.
PAR Workstation........................  $125/month.
Satellite TV...........................  $50/month.
Cboe Options Trading Floor Terminal....  $250/month.
Thomas/Refinitive/Other (Basic Service)  $425/month.
------------------------------------------------------------------------

    Should the trading floor re-open mid-month, the Exchange shall 
assess the fees listed above on a pro-rated basis for the remainder of 
the month.
    The Exchange next proposes to amend a current waiver of Routing 
Fees. Currently, the Exchange assesses certain fees in connection with 
orders routed to other exchanges. The Fees Schedule provides however, 
that it will not pass through or otherwise charge customer orders (of 
any size) routed to other exchanges that were originally transmitted to 
the Exchange from the trading floor through an 
Exchange[hyphen]sponsored terminal (e.g., a PULSe Workstation).\4\ The 
Exchange proposes to eliminate the requirement that a customer order be 
transmitted to the Exchange from the trading floor in the event the 
trading floor is inoperable. More specifically, the Exchange proposes 
to provide that it will not pass through or otherwise charge customer 
orders (of any size) routed to other exchanges that were originally 
transmitted to the Exchange from a registered Floor Broker through an 
Exchange[hyphen]sponsored terminal (e.g., a PULSe Workstation). The 
Exchange notes that the primary objective of routing fees are to recoup 
some of the costs associated with large electronic orders that are 
initially transmitted to the Exchange by parties who, in many 
instances, could be seeking to avoid being assessed another market's 
transaction fees. The Exchange adopted the current waiver because 
orders that are initially transmitted from the trading floor are not 
attempting to avoid fees since they incur brokerage commission charges 
in connection with manual handling.\5\ Rather, orders that are 
generally transmitted from the floor are large, complex orders that are 
primarily executed on the Exchange, which only are transmitted to away 
markets if, during their execution on the Exchange, it is necessary to 
sweep some away markets. As such, the Exchange believed it was 
appropriate to waive linkage fees for these orders. The Exchange 
believes the waiver should apply to the same type of orders even when 
the Exchange operates in a screen-based only environment. Particularly, 
the Exchange notes that customer orders may still incur brokerage 
commission charges when the operates in a screen-based only environment 
in connection with handling by registered Floor Brokers (who may 
participate electronically when the trading floor is inoperable, as 
discussed above). As such, the Exchange believes it's appropriate to 
continue to apply the waiver to such orders that are still handled by 
Floor Brokers, albeit in a screen-based only environment instead of the 
trading floor, and still otherwise incur brokerage commission charges.
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    \4\ See Cboe Options Fees Schedule, Routing Fees.
    \5\ See Securities and Exchange Act Release No. 87799 (December 
18, 2019), 84 FR 71021 (December 26, 2019) (SR-CBOE-2019-124).
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    Lastly, the Exchange proposes to eliminate language in the notes 
section of the Logical Connectivity Fees Table. Currently, fees for one 
FIX Logical Port used to access PULSe and one FIX Logical Port 
connection used to access Cboe Silexx (for FLEX trading purposes) will 
be waived per TPH. The Exchange notes that when it adopted this fee 
waiver, Cboe Silexx only supported direct access to the Exchange for 
trading of FLEX options. The Exchange anticipates expanding the current 
Cboe Silexx platform to also support the trading of non-FLEX options in 
the near future. As such, the Exchange proposes to eliminate ``(for 
FLEX trading purposes)'' such that the waiver may apply to the use of 
Silexx for trading of FLEX and non-FLEX options.
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 
Section 6(b)(4) of the Act,\8\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed rule change to allow holders of 
Floor Trading Permits to operate in their registered capacity 
electronically at the cost of one MM EAP or EAP, respectively, is 
reasonable as such market participants would be paying the same amount 
as any other market participant that holds a MM EAP or EAP, 
respectively. The Exchange notes floor participants would also pay less 
than the amount otherwise charged for floor Trading Permits. The 
Exchange notes that it wishes to encourage floor-based market 
participants to continue to participate on the Exchange electronically 
when the Exchange must operate in a screen-based only environment, but 
also notes it does not believe it's appropriate to allow such TPHs to 
participate on the Exchange indefinitely at no cost, while other 
participants are still subject to Trading Permit fees. The Exchange 
believes the proposed rule change is equitable and not unfairly 
discriminatory as all such floor participants will be treated equally. 
Indeed, all similarly situated market participants will be treated 
equally as all such market participants will be subject to the same 
electronic Trading Permit fees.
    The Exchange believes the proposal to eliminate the exclusion of 
Appointment

[[Page 22215]]

Units added during a time when the Exchange operates in a screen-based 
only environment toward the total quantity of Appointment Units for 
purposes of calculating the Market-Maker EAP Appointments Sliding Scale 
is reasonable, as the Exchange now expects the trading floor to be 
inoperable for an extended period of time. Particularly, as noted 
above, the Exchange adopted the current exclusion in anticipation of 
closing the trading floor mid-month (in March 2020) in order to 
encourage Market-Makers to continue to quote for the remainder of the 
month in classes electronically that they quoted on the trading floor. 
The Exchange notes however, that if the trading floor remains closed 
for an extended period of time, the current exclusion would ``freeze'' 
each Market-Makers Appointment Unit weight to the highest quantity 
maintained between March 1-March 13, 2020 (the last day the trading 
floor was open). For example, absent the proposed change, if the 
trading floor remains closed for the entire calendar months of April 
and May, any Market-Maker, including Market-Makers that historically 
only participated electronically, would be able to continuously add new 
appointments at no further cost, even if such appointment was unrelated 
to the trading floor being unavailable. The Exchange also notes that it 
is not required to maintain the current exclusion in the Fees Schedule. 
The proposed change is equitable and not unfairly discriminatory 
because it will apply uniformly to all similarly situated market 
participants, as it will apply to all Market-Makers.
    The Exchange believes the proposal to waive the identified facility 
fees is reasonable as market participants won't be subject to such 
fees. The listed facility fees each apply to a product or service that 
may only be utilized when the trading floor is open and operable. The 
Exchange believes it's therefore appropriate to waive such fees when 
the Exchange operates in a screen-based only environment. The Exchange 
also believes its appropriate to pro-rate such fees if the trading 
floor reopens mid-month as market participants will have the benefit of 
using such services/products for the remainder of the month. The 
Exchange believes the proposed rule change is equitable and not 
unfairly discriminatory as it applies equally to all market 
participants.
    The Exchange next believes it's reasonable and appropriate to waive 
certain routing fees for customer orders that were transmitted by a 
registered Floor Broker through an Exchange sponsored terminal 
(currently only PULSe workstation) when the trading floor is inoperable 
as customers would not be subject to these fees. As noted above, the 
Exchange adopted the current waiver because orders that are initially 
transmitted from the trading floor are not attempting to avoid fees 
since they incur brokerage commission charges in connection with manual 
handling.\9\ Rather, orders that are generally transmitted from the 
floor are large, complex orders that are primarily executed on the 
Exchange, which only are transmitted to away markets if, during their 
execution on the Exchange, it is necessary to sweep some away markets. 
As such, the Exchange believed it was appropriate to waive linkage fees 
for these orders. The Exchange believes it's reasonable and appropriate 
that the waiver should apply to the same type of orders even when the 
Exchange operates in a screen-based only environment. As discussed, 
customer orders may still incur brokerage commission charges when the 
Exchange operates in a screen-based only environment in connection with 
handling by registered Floor Brokers (who may participate 
electronically when the trading floor is inoperable). As such, the 
Exchange believes it's appropriate to modify the waiver to eliminate 
the requirement that such order be transmitted from the trading floor 
and instead provide that it be transmitted by a registered Floor 
Broker, as such order is still incurring a brokerage commission charge 
and otherwise being handled by a Floor Broker (albeit in an electronic 
environment instead of on the trading floor). The proposed waiver is 
equitable and not unfairly discriminatory as it would apply to all 
similarly situated market participants.
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    \9\ See Securities and Exchange Act Release No. 87799 (December 
18, 2019), 84 FR 71021 (December 26, 2019) (SR-CBOE-2019-124).
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    Lastly, the Exchange believes its proposal to modify the notes 
section of the Logical Connectivity Fees Table in order to provide that 
the current fee waiver for one FIX Logical Port may apply to Cboe 
Silexx for both FLEX and non-FLEX trading purposes is reasonable as 
such users of Cboe Silexx that trade non-FLEX options will not be 
subject to the FIX Logical Port fee. As discussed, when the Exchange 
adopted the current logical connectivity fees, Cboe Silexx only 
supported direct access for trading of FLEX options only. As the 
Exchange proposes to expand the Cboe Silexx platform shortly to support 
the trading of non-FLEX options, the Exchange believes it's appropriate 
to eliminate the ``for FLEX trading purposes'' language and apply the 
fee waiver to Cboe Silexx generally. The proposed waiver is equitable 
and not unfairly discriminatory as it would apply to all similarly 
situated market participants.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange notes the 
proposed changes relating to Footnote 12 are not intended to address 
any competitive issue, but rather to address fee changes it believes 
are reasonable because the trading floor remains inoperable, thereby 
only permitting electronic participation on the Exchange. The Exchange 
does not believe that the proposed rule change will impose any burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed changes 
apply equally to all similarly situated market participants. 
Additionally, the proposed change to eliminate the restriction that the 
FIX Logical Port fee waivers applies to Cboe Silexx for FLEX trading 
only is also not intended to address any competitive issue, but rather 
extend the current waiver to the new version of Silexx that will also 
support non-FLEX trading, which would apply to all users of Silexx. The 
Exchange does not believe that the proposed rule changes will impose 
any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed changes only affect trading on the Exchange in limited 
circumstances.

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

[[Page 22216]]

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-2020-032 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-2020-032. 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-2020-032 and should be submitted on 
or before May 12, 2020.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08368 Filed 4-20-20; 8:45 am]
BILLING CODE 8011-01-P