[Federal Register Volume 87, Number 61 (Wednesday, March 30, 2022)]
[Notices]
[Pages 18425-18427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06634]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94512; File No. SR-CBOE-2022-011]


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

March 24, 2022.
    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 March 14, 2022, 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 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 its Fees Schedule to adopt fees for 
Certification Logical Port fees, effective March 1, 2022.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
March 1, 2022 (SR-CBOE-2022-007). On March 14, 2022, the Exchange 
withdrew that filing and submitted this proposal.
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    By way of background, the Exchange offers a variety of logical 
ports, which provide users with the ability within the Exchange's 
System to accomplish a specific function through a connection, such as 
order entry, data receipt or access to information. Specifically, the 
Exchange offers BOE and FIX Logical Ports,\4\ BOE Bulk Logical 
Ports,\5\ Drop Logical Ports,\6\ Purge Ports,\7\ GRP Ports and 
Multicast PITCH/Top Spin Server Ports.\8\ For each type of the 
aforementioned logical ports that are used in the production 
environment, the Exchange also offers corresponding ports which provide 
Trading Permit Holders (``TPHs'') and non-TPHs access to the Exchange's 
certification environment to test proprietary systems and applications 
(i.e., ``Certification Logical Ports''). The certification environment 
facilitates testing using replicas of the Exchange's production 
environment process configurations which provide for a robust and 
realistic testing experience. For example, the certification 
environment allows unlimited firm-level testing of order types, order 
entry, order management, order throughput, acknowledgements, risk 
settings, mass cancelations, and purge requests. Historically, the 
Exchange has not assessed fees for Certification Logical Ports. The 
Exchange now proposes to establish a monthly fee for Certification 
Logical Ports. Particularly, the Exchange proposes to adopt a monthly 
fee of $250 per Certification Logical Port. However, the Exchange notes 
that it will continue to offer free of charge one Certification Logical 
Port per logical port type offered in the production environment (i.e., 
BOE, FIX, BOE Bulk, Drop Logical, Purge, GRP and Multicast PITCH/Top 
Spin Server Ports) to each TPH or non-TPH, as applicable. Any 
additional Certification Logical Ports will be assessed $250 per month 
per port.\9\ The Exchange notes that purchasing additional 
Certification Logical Ports is voluntary and not required in order to 
participate in the production environment, including live production 
trading on the Exchange. Additionally, TPHs and non-TPHs are not 
required to purchase any particular production logical port in order to 
receive a corresponding Certification Logical Port free of charge.\10\ 
Further, the Exchange also notes that other exchanges similarly

[[Page 18426]]

assess fees related to their respective testing environments.\11\
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    \4\ BOE or FIX Logical Ports provide users the ability to enter 
order/quotes.
    \5\ BOE Bulk Ports provide users with the ability to submit 
single and bulk order messages to enter, modify, or cancel orders 
designated as Post Only Orders with a Time-in-Force of Day or GTD 
with an expiration time on that trading day.
    \6\ Drop Logical Ports grants users the ability to receive and/
or send drop copies.
    \7\ Purge Ports allow users to submit a cancelation for all open 
orders, or a subset thereof, across multiple sessions under the same 
Executing Firm ID (``EFID'').
    \8\ Spin Ports and GRP Ports are used to request and receive a 
retransmission of data from the Exchange's Multicast PITCH/Top data 
feeds.
    \9\ For example, if a TPH maintains 3 FIX Certification Logical 
Ports, 1 Purge Certification Logical Port, and 1 set of Multicast 
PITCH Spin Server Certification Logical Port, the TPH will be 
assessed $500 per month for Certification Logical Port Fees (i.e., 1 
FIX, 1 Purge and 1 set of Multicast PITCH Spin Server Certification 
Logical Ports x $0 and 2 FIX Certification Logical Ports x $250).
    \10\ For example, a TPH may obtain a Certification Purge Port 
free of charge, even if that TPH has not otherwise purchased a Purge 
Port for the live production environment. Certification Logical 
Ports are not automatically enabled for each User, but rather must 
be proactively requested by users.
    \11\ See e.g., Nasdaq Stock Market LLC, Equity 7, Pricing 
Schedule, Section 130. See also MIAX Options Exchange Fee Schedule, 
Section 4, Testing and Certification Fees.
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    Lastly, the Exchange does not intend to prorate Certification 
Logical Ports for the first month of service and intends to make this 
clear in the notes section under the Logical Connectivity Fees section 
of the Fees Schedule.
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.\12\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ 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,\14\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(4).
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    As noted above, the Exchange's certification environment provides a 
robust and realistic testing experience using a replica of the 
Exchange's production environment process configurations. This 
environment enables market participants to manage risk more effectively 
through testing software development changes in certification prior to 
implementing them in the live trading environment, thereby reducing the 
likelihood of a potentially disruptive system failure in the live 
trading environment, which has the potential to affect all market 
participants. As such, the Exchange believes it's reasonable to adopt a 
Certification Logical Port fee as it better enables the Exchange to 
continue to maintain and improve its testing environment, which the 
Exchange believes serves to improve live production trading on the 
Exchange. The Exchange also believes the proposed Certification Logical 
Port fee is reasonable because while such ports will no longer be 
completely free, TPHs and non-TPHs will continue to be entitled to 
receive free of charge one Certification Logical Port for each type of 
logical port that is currently offered in the production environment. 
Notably, the Exchange believes one Certification Logical Port per 
logical port type will be sufficient for most users and indeed 
anticipates that the majority of users will not purchase additional 
Certification Logical Ports. More specifically, while the Exchange has 
no way of predicting with certainty the impact of the proposed changes, 
it anticipates approximately 41% of Users to be assessed fees for 
Certification Logical Ports (i.e., request Certification Ports in 
excess of the Certification Logical Ports provided free of charge). For 
those users who wish to obtain additional Certification Logical Ports 
based on their respective business needs, they are able to do so for a 
modest fee. Indeed, the proposed fee is lower than the fees assessed 
for the corresponding logical ports used in the Exchange's production 
environment.\15\ Additionally, the Exchange notes other exchanges 
similarly assess fees relating to their respective testing 
environments.\16\ Further, the decision to purchase additional ports is 
optional and no market participant is required or under any regulatory 
obligation to purchase excess Certification Logical Ports in order to 
access the Exchange's certification environment.\17\
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    \15\ See Cboe Options Fees Schedule, Logical Connectivity Fees.
    \16\ See e.g., Nasdaq Stock Market LLC, Equity 7, Pricing 
Schedule, Section 130. See also MIAX Options Exchange Fee Schedule, 
Section 4, Testing and Certification Fees.
    \17\ Although many Users use Certification Logical Ports on a 
daily basis, the Exchange notes frequency of use of Certification 
Logical Ports varies by User and depends on a User's business needs. 
To the extent a User purchases additional Certification Logical 
Ports and its respective needs change or it determines it no longer 
wishes to maintain excess Certification Logical Ports, the User is 
free to cancel such ports for the following month(s).
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    The Exchange believes the proposed fee is also equitable and not 
unfairly discriminatory because it applies uniformly to all market 
participants that choose to obtain additional Certification Logical 
Ports. The Exchange also believes the proposed fee is reasonable, 
equitable and not unfairly discriminatory because it is designed to 
encourage market participants to be efficient with their respective 
Certification Logical Port usage. Without some sort of fee for its 
Certification Logical Ports, the Exchange believes that TPHs and non-
TPHs may be less efficient in testing their systems, potentially 
resulting in excessive time and resources being consumed by the 
Exchange in supporting testing and certifying TPHs and non-TPHs to the 
detriment of all market participants as Exchange resources are diverted 
away from other trading operations. Additionally, similar to its 
production environment, the Exchange's certification environment does 
not have unlimited system capacity to support unlimited testing. As 
such, the proposed fee structure also ensures that firms that use the 
most capacity pay for that capacity, rather than placing that burden on 
market participants that have more modest needs. The Exchange lastly 
believes that its proposed fee is aligned with the goals of the 
Commission in facilitating a competitive market for all firms that 
trade on the Exchange and of ensuring that critical market 
infrastructure has ``levels of capacity, integrity, resiliency, 
availability, and security adequate to maintain their operational 
capability and promote the maintenance of fair and orderly markets.'' 
\18\
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    \18\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72251 (December 5, 2014) (File No. S7-01-13) 
(Regulation SCI Adopting Release).
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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 intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
Exchange does not believe that the proposed rule change will impose any 
burden on intramarket competition because as the proposed change 
applies uniformly to all market participants. Additionally, the 
Exchange does not believe that the proposed fee creates an undue burden 
on competition because the Exchange will continue to offer free of 
charge one Certification Logical Port per each logical port type 
offered in the production environment. Although the Exchange now 
proposes to charge users for additional Certification Logical Ports, 
the Exchange believes without some sort of fee assessed for excess 
Certification Logical Ports, TPHs and non-TPHs may be less efficient in 
testing their systems, potentially resulting in excessive time and 
resources being consumed by the Exchange and also potentially impacting 
the certification environment's capacity

[[Page 18427]]

thresholds. The proposed fee structure therefore would ensure that 
market participants that pay the proposed fee are the ones that demand 
the most resources from the Exchange. Also as discussed, the purchase 
of additional ports is optional and based on the business needs of each 
market participant. Moreover, such market participants will continue to 
benefit from access to the certification environment, which the 
Exchange believes provides a robust and realistic testing experience 
via a replica of the production environment.
    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. Particularly, 
the proposed change applies only to the Exchange's certification 
environment. Additionally, the Exchange notes that it operates in a 
highly competitive market. TPHs have numerous alternative venues that 
they may participate on and direct their order flow, including 15 other 
options exchanges, as well as off-exchange venues, where competitive 
products are available for trading. Indeed, participants can readily 
choose to send their orders to other exchanges, and, additionally off-
exchange venues, if they deem overall fee levels at those other venues 
to be more favorable. 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.'' \19\ 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' . . . .''.\20\ 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.
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    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \20\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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 \21\ and paragraph (f) of Rule 19b-4 \22\ 
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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-2022-011 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-2022-011. 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. All submissions should refer to 
File Number SR-CBOE-2022-011 and should be submitted on or before April 
20, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06634 Filed 3-29-22; 8:45 am]
BILLING CODE 8011-01-P