[Federal Register Volume 85, Number 79 (Thursday, April 23, 2020)]
[Notices]
[Pages 22770-22772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08594]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88678; File No. SR-CBOE-2020-033]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Amending
Its Fees Schedule
April 17, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 16, 2020, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (``SEC''
or ``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 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 Footnote 12 of the Fees Schedule,
which governs pricing changes in the event the Exchange trading floor
becomes inoperable. 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. Particularly, the Exchange proposes to amend Footnote 12 to
waive fees incurred from certain transactions executed in electronic
compression forums.
By way of background, the Exchange recently adopted Rule
5.24(e)(1)(E), which provides that in the event the trading floor is
inoperable, the Exchange will make available an electronic
``compression forum'' in the same manner as an open outcry
``compression forum'' as set forth in Rule 5.88, subject to certain
exceptions.\3\ When the trading floor is open, the Exchange facilitates
compression forums on the trading floor at the end of each calendar
week, month, and quarter in which Trading Permit Holders (``TPHs'') may
reduce open positions in series of SPX options in order to mitigate the
effects of capital constraints on market participants, which may
contribute to continued depth of liquidity in the SPX options
market.\4\ The Exchange adopted Rule 5.24(e)(1)(E) to provide for an
electronic forum that replicates the compression forum that is
available when the Exchange is operating with an open outcry
environment. Particularly, an electronic compression forum would
continue to provide TPHs an opportunity to efficiently reduce their
open SPX positions and free up capital in the event the Exchange must
operate in an all-electronic environment (as it currently is), which is
particularly important in volatile market conditions.
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\3\ See Securities and Exchange Act Release No. 88490 (March 26,
2020), 85 FR 18318 (April 1, 2020) (SR-CBOE-2020-026).
\4\ In general, under the floor Compression Forum process, each
month, TPHs may submit to the Exchange lists of open SPX positions
(these positions are referred to in Rule 5.88 as ``compression-list
positions'') they wish to close against opposing (long/short)
positions of other TPHs. The Exchange would then aggregate these
positions into a single list to allow TPHs to more easily identify
those positions with counterparty interest on the Exchange. The
Exchange then provides a forum on the Exchange's trading floor
during which TPHs could conduct closing-only transactions in series
of SPX options. The Exchange holds compression forums on the last
three trading days of each calendar month.
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The Exchange currently waives transaction fees (and surcharges)
incurred as a result of transactions that compress or reduce certain
open positions.\5\ One such waiver in particular is for transactions
involving SPX and SPXW compression-list positions executed in a floor
compression forum (pursuant to Rule 5.88).\6\ Particularly, the
Exchange waives SPX/SPXW transaction fees, including surcharges, in
order to encourage TPHs to submit compression-list positions in advance
of monthly compression forums and compress these positions during
compression forums.\7\ The Exchange wishes to similarly waive all
transaction fees, including any applicable surcharges (e.g., Index
License Surcharge and SPX/SPXW Execution Surcharges), for closing
transactions involving SPX and SPXW compression-list positions executed
in an electronic compression forum (pursuant to Rule 5.24).
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\5\ See CBOE Fees Schedule, Footnote 41.
\6\ See Cboe Options Fees Schedule, Footnote 41. The Exchange
notes it inadvertently failed to update the rule references in
Footnote 41, including Rule 5.88, when it relocated the rules upon
migration. See Securities and Exchange Act Release No. 86772 (August
27, 2019), 84 FR 46069 (September 3, 2019) (SR-CBOE-2019-042). The
Exchange proposes to update those rule references now.
\7\ See Cboe Options Fees Schedule, Footnote 41. A rebate of
transaction fees would include the transaction fee assessed along
with any other surcharges assessed per contract (e.g., the Index
License Surcharge).
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The Exchange believes compression of these positions may improve
market
[[Page 22771]]
liquidity by freeing capital currently tied up in positions for which
there is a minimal chance that a significant loss would occur. The
Exchange further believes advanced submission of compression-list
positions to the Exchange allows TPHs to more easily identify
counterparty interest and efficiently conduct closing transactions of
these positions during compression forums. The Exchange notes the
submission of compression-list positions is completely voluntary, open
to all TPHs with open positions in SPX, and does not require a TPH to
trade any compression-list position or participate in a compression
forum. As such, the Exchange believes it's appropriate to waive fees
incurred for transaction executed in an electronic compression forum.
The Exchange proposes to make clear that in order to receive a fee
waiver of all transaction fees and applicable surcharges for these
transactions, a TPH must mark its orders in a form and manner
determined by the Exchange to identify them as eligible for the
compression fee waiver. Orders identified as eligible for a fee waiver
will yield fee code ``SC''. The Exchange proposes to similarly clarify
in Footnote 41, that in order for a TPH to receive a rebate for
compression trades that occur on floor, a TPH must mark its orders in a
form and manner determined by the Exchange to identify them as eligible
for the compression rebates.\8\
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\8\ See Securities and Exchange Act Release No. 87338 (October
17, 2019), 84 FR 56873 (October 23, 2019) (SR-CBOE-2019-094).
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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.\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 believes the proposed rule change to waive transaction
fees, including the Index License Surcharge and SPX/SPXW Execution
Surcharges, for closing transactions involving SPX and SPXW
compression-list positions executed in an electronic compression forum
(pursuant to Rule 5.24) while the trading floor is inoperable is
reasonable because market participants will not be subject to
transaction fees or surcharges for these executions. While the trading
floor is inoperable, the Exchange still wishes to incentivize TPHs to
submit to the Exchange compression-list positions executed in a
compression forum, albeit for an electronic compression forum, and as
such, does not wish to assess any transaction fees or surcharges on
such volume that would otherwise be executed on the trading floor and
not be charged. The Exchange believes compression of these positions
would improve market liquidity by freeing capital currently tied up in
positions for which there is a minimal chance that a significant loss
would occur. All TPHs may submit compression-list positions and may
participate in compression forums. Moreover, as noted above, the
Exchange already waives transaction fees, including surcharges, for
closing transactions involving SPX and SPXW compression-list positions
executed in a compression forum on the trading floor (pursuant to Rule
5.88).\12\ The Exchange believes the proposed change is also equitable
and not unfairly discriminatory as it applies uniformly to all market
participants that identify eligible orders in the form and manner
determined by the Exchange.
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\12\ See Cboe Options Fees Schedule, Footnote 41.
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Lastly, the Exchange believes the proposed clarification and
updates to rule references in Footnote 41 maintains transparency in the
Fees Schedule and alleviates potential confusion, thereby removing
impediments to, and perfecting the mechanism of a free and open market
and a national market system, and, in general, protecting investors and
the public interest.
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 are not intended to address any competitive issue, but
rather to address a fee change it believes is reasonable in the event
the trading floor becomes 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. 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 \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:
[[Page 22772]]
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-2020-033 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-2020-033. 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 offices 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-2020-033, and should be submitted
on or before May 14, 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. 2020-08594 Filed 4-22-20; 8:45 am]
BILLING CODE 8011-01-P