[Federal Register Volume 86, Number 135 (Monday, July 19, 2021)]
[Notices]
[Pages 38137-38139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15193]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92389; File No. SR-CBOE-2021-039]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fees Schedule With Respect to Certain Fees Related to Qualified 
Contingent Cross Orders and the Clearing Trading Permit Holder Fee Cap

July 13, 2021.
    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 July 1, 2021, 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 the Fees Schedule with respect to certain fees related to 
Qualified Contingent Cross orders and the Clearing Trading Permit 
Holder (``TPH'') Fee Cap. 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

[[Page 38138]]

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 its Fees Schedule with respect to 
Qualified Contingent Cross (``QCC'') transaction fees and the Clearing 
TPH fee cap.
    The Exchange first notes that it 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. More specifically, the 
Exchange is only one of 16 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 15% of the market share.\3\ 
Thus, in such a low-concentrated and highly competitive market, no 
single options exchange possesses significant pricing power in the 
execution of option order flow. The Exchange believes that the ever-
shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow or 
discontinue to reduce use of certain categories of products in response 
to fee changes. Accordingly, competitive forces constrain the 
Exchange's transaction fees, and market participants can readily trade 
on competing venues if they deem pricing levels at those other venues 
to be more favorable. In response to competitive pricing, the Exchange, 
like other options exchanges, offers rebates and assesses fees for 
certain order types executed on or routed through the Exchange.
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    \3\ See Cboe Global Markets U.S. Options Monthly Market Volume 
Summary (June 29, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
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    By way of background, a QCC order is comprised of an `initiating 
order' to buy (sell) at least 1,000 contracts, coupled with a contra-
side order to sell (buy) an equal number of contracts and that for 
complex QCC transactions, the 1,000 contracts minimum is applied per 
leg. Currently, the Exchange assesses no fee for Customer (``C'' 
capacity), and Professional (``U'' capacity), and collectively referred 
to as ``customer transactions'' which are identified by fee code 
``QC'') QCC transactions and $0.17 per contract side for non-Customer 
transactions and non-Professional transactions (collectively referred 
to as ``non-customer transactions'' which are identified by fee code 
``QN''). In addition, the Exchange provides a $0.10 per contract credit 
for the initiating order side, regardless of origin code. Now, the 
Exchange proposes to increase the per contract credit for the 
initiating QCC order from $0.10 to $0.11 per contract. The proposed 
change is intended to incentivize TPHs to direct QCC order flow to the 
Exchange. Additionally, to offset the cost associated with the credit 
increase, the Exchange proposes to increase the transaction fee for QCC 
trades applied to non-customer transactions from $0.17 to $0.18 per 
contract. The proposed credit \4\ and fee \5\ change are in line with, 
yet also competitive with, rates assessed by other options exchanges.
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    \4\ See e.g., Cboe EDGX Options Fees Schedule, footnote 7, which 
offers rebates ranging from $0.14 up to $0.26 based on QCC volume 
thresholds.
    \5\ See e.g., NYSE American Options Fee Schedule, Section I, 
paragraph F ``QCC Fees & Credits'', which provides that non-customer 
participants excluding specialists and e-specialists, are assessed a 
fee of $0.20 per contract to volume executed as part of a QCC trade. 
See also MIAX Options Exchange Fee Schedule, Transaction Fees, QCC 
Fees, which assesses fees ranging from $0.00 up to $0.17 per 
contract for QCC trades depending on the type of market participant 
and initiator of the order.
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    The Exchange also applies a transaction fee cap of $55,000 per 
month per Clearing TPH for non-facilitation transactions executed in 
AIM, open outcry, or as a QCC or FLEX transaction in all products 
except Sector Indexes and products in Underlying Symbol List A as 
provided in footnote 34 of the Fees Schedule. The Exchange proposes to 
increase such fee cap to $65,000 per month per Clearing TPH. The 
proposed fee cap is in line with, albeit lower than, similar fee caps 
applied by other Exchanges.\6\
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    \6\ See e.g., NYSE American Options Fee Schedule, Section I. 
paragraph I ``Firm Monthly Fee Cap'', which provides a fee cap 
ranging from $65,000 up to $100,000 per month per firm for manual 
transactions. See also PHLX Options Pricing Schedule, Section 4, Fee 
per contract, which provides a monthly fee cap of $75,000.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Exchange Act of 1934 (the 
``Act''),\7\ in general, and furthers the objectives of Section 
6(b)(4),\8\ in particular, as it is designed to provide for the 
equitable allocation of reasonable dues, fees and other charges among 
its Trading Permit Holders (``TPHs'') and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \9\ 
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, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f.(b)(5).
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    As described above, 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 
reflects a competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
TPHs.
    The Exchange believes that the proposed amendments to the Fees 
Schedule are reasonable, equitable and not unfairly discriminatory. In 
particular, the Exchange believes the proposal to increase the fee 
assessed to non-customer QCC trades is reasonable because the proposed 
fee is less than fees assessed for similar transactions on other 
exchanges.\10\ Furthermore, the proposed fee increase is intended to 
offset the cost associated with the proposed credit increase applied to 
the initiating order of a QCC trade. The Exchange believes the proposed 
fee increase is equitable and not unfairly discriminatory because it 
will apply equally to all non-customer transactions and the proposed 
change reflects a competitive pricing structure designed to compete 
with other exchanges that similarly assess fees to these market 
participants.
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    \10\ Supra note 5.
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    The Exchange also believes the proposed credit increase applied to 
the initiating order of a QCC trade is reasonable because it is 
intended to incentivize market participants to direct their QCC order 
flow to the Exchange, which the Exchange believes would enhance market 
quality to the benefit of all TPHs. Additionally, the Exchange believes 
the proposed increase to the Clearing TPH transaction fee cap is

[[Page 38139]]

reasonable because it is in line with similar fee caps offered on 
another exchange.\11\ The Exchange believes the proposed credit 
increase and fee cap increase are equitable and not unfairly 
discriminatory because they will each apply to all market participants 
equally.
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    \11\ Supra note 6.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. First, the Exchange notes 
that the proposed changes apply uniformly to similarly-situated TPHs. 
The Exchange believes the proposed rule change serves to increase 
intramarket competition by incentivizing TPHs to direct their QCC 
orders to the Exchange, which will bring greater volume and liquidity, 
thereby benefitting all market participants by providing more trading 
opportunities and tighter spreads. Further, the Exchange notes that 
other Exchanges provide similar fees and credits as it relates to QCC 
transactions, and also provide similar fee caps.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. TPHs 
have numerous alternative venues they may participate on and direct 
their order flow, including 15 other options exchanges. Additionally, 
the Exchange represents a small percentage of the overall market. Based 
on publicly available information, no single options exchange has more 
than 15% of the market share. Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send their orders to other exchanges 
if they deem fee levels at those other venues to be more favorable. As 
noted above, the Exchange believes that the proposed fee changes are 
comparable to that of other exchanges offering similar functionality. 
Moreover, the Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Specifically, 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.'' The fact that 
this market is competitive has also long been recognized by the courts. 
In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .''. Accordingly, the Exchange 
does not believe its proposed fee change imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from TPHs or other interested parties.

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 \12\ and paragraph (f) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-2021-039 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-2021-039. 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-2021-039 and should be submitted on 
or before August 9, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15193 Filed 7-16-21; 8:45 am]
BILLING CODE 8011-01-P