[Federal Register Volume 88, Number 31 (Wednesday, February 15, 2023)]
[Notices]
[Pages 9938-9940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03161]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96856; File No. SR-CBOE-2023-011]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Select Customer Options Reduction Program

February 9, 2023.
    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 February 1, 2023, 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 Select Customer Options Reduction program. 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 the Select Customer Options 
Reduction program (``SCORe''), effective February 1, 2023.
    By way of background, SCORe is a discount program for Retail, Non-
FLEX Customer (``C'' origin code) volume in the following options 
classes: SPX (including SPXW), VIX, RUT, MXEA, MXEF & XSP (``Qualifying 
Classes''). The SCORe program is available to any Trading Permit Holder 
(``TPH'') Originating Clearing Firm or non-TPH Originating Clearing 
Firm that sign up for the program.\3\
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    \3\ For this program, an ``Originating Clearing Firm'' is 
defined as either (a) the executing clearing Options Clearing 
Corporation (``OCC'') number on any transaction which does not also 
include a Clearing Member Trading Agreement (``CMTA'') OCC clearing 
number or (b) the CMTA in the case of any transaction which does 
include a CMTA OCC clearing number.
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    Currently, SCORe currently utilizes two measures for participation 
and discounts: (1) the Qualifying Tiers, which determine whether a firm 
qualifies for the discounts in either Tier A or Tier B and (2) the 
Discount Tiers, which determine the Originating Firm's applicable 
discount tiers and corresponding discounts. Under the current program, 
to determine an Originating Firm's Qualifying Tier, the Originating 
Firm's total Retail volume in the Qualifying Classes will be divided by 
the Originating Firm's total Customer volume, Retail and non-Retail, in 
the Qualifying Classes. Based on the percentage result, an Originating 
Firm qualifies for Tier A or Tier B discounts. To determine the 
Discount Tier, an Originating Firm's Retail volume in the Qualifying 
Classes will be divided by total Retail volume in the Qualifying 
Classes executed on the Exchange. The program then provides a discount 
per retail contract, based on the determined Qualifying Tier and 
Discount Tier thereunder. Currently, the program sets forth three 
discount tiers for Qualifying Tier A, with applicable discounts ranging 
from $0 to $0.08 per retail contract, and five discount tiers for 
Qualifying Tier B, with applicable discounts ranging from $0 to $0.25 
per retail contract.
    The Exchange proposes to streamline the program by eliminating the 
Qualifying Tiers construct. As amended, SCORe would utilize only one 
measure for participation and discount (i.e., the Discount Tiers). All 
Originating Firms would be subject to the same discount tier structure, 
which determines the corresponding applicable discounts.
    The Exchange next proposes to amend the discount tier structure for 
the Discount Tiers. Specifically, the Exchange proposes to consolidate 
the program into four discount tiers based on qualifying volume, i.e., 
Discount Tiers 1-4, with corresponding discounts, as set forth below.

------------------------------------------------------------------------
                                                                Discount
                                Retail volume percentage in       per
            Tier                    qualifying classes           retail
                                                                contract
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1..........................  0.00%-5.00%.....................      $0.00
2..........................  Above 5.00%-21.00%..............       0.04
3..........................  Above 21.00%-31.00%.............       0.05
4..........................  Above 31.00%-100.00%............       0.14
------------------------------------------------------------------------

    The discount tier structure for the Discount Tiers will continue to 
be based on the same calculation, i.e., to determine the Discount Tier, 
an

[[Page 9939]]

Originating Firm's Retail volume in the Qualifying Classes will be 
divided by total Retail volume in the Qualifying Classes executed on 
the Exchange.
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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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 the 
Section 6(b)(5) \6\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(4) of the Act,\7\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
    \7\ 15 U.S.C. 78f(b)(4).
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    First, the Exchange believes the proposal to eliminate the 
utilization of Qualifying Tiers as a measure for its SCORe program is 
reasonable because it no longer wishes to consider this metric as part 
of the program's participation and discounts, and it is not required to 
do so. The Exchange also notes that the Qualifying Tier measure was 
only one part of SCORe and believes the intention of the program will 
continue to be achieved through utilization of the Discount Tiers 
measure. The Exchange believes the proposed changes to eliminate the 
utilization of Qualifying Tiers as a measure for its SCORe program and 
to consolidate the discount tier structure into four Discount Tiers are 
reasonable because it eliminates potential program complexity and 
provides for a simpler calculation in determining qualifying thresholds 
and applicable discounts. Further, the Exchange believes the amended 
discount tier structure, including qualifying thresholds for the 
proposed four Discount Tiers and corresponding applicable discounts, 
remain equitable and reasonable by adequately considering the 
elimination of the Qualifying Tier and not materially changing the 
program.
    The Exchange believes SCORe, currently and as amended, continues to 
provide an incremental incentive for Originating Firms to strive for 
the highest tier level, which provides increasingly higher discounts. 
As such, the changes are designed to encourage increased Retail volume 
in the Qualifying Classes, which provides increased volume and greater 
trading opportunities for all market participants. The Exchange 
believes the proposed change is equitable and not unfairly 
discriminatory because the qualifying volume thresholds apply to all 
registered Originating Firms uniformly. Additionally, while the 
Exchange has no way of predicting with certainty how many and which 
Originating Firms will qualify for which Discount Tier, the Exchange 
anticipates at least two Originating Firms will qualify for Tier 2, one 
Originating Firm will qualify for Tier 3, and one Originating Firm will 
qualify for Tier 4, to receive the applicable discounts for each Tier. 
The Exchange does not believe the proposed discount will adversely 
impact any Originating Firm's pricing. Rather, should an Originating 
Firm not meet the proposed criteria, the Originating Firm will merely 
not receive the proposed discount.

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. The Exchange does not 
believe that the proposed changes to the SCORe program will impose any 
burden on intramarket competition because the proposed changes apply to 
all registered Originating Firms uniformly, in that all Originating 
Firms will be subject to the same qualifying thresholds for the 
proposed four Discount Tiers and corresponding applicable discounts. 
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 
Qualifying Classes are products that only trade on the Exchange. To the 
extent that the proposed changes make the Exchange a more attractive 
marketplace for market participants at other exchanges, such market 
participants are welcome to become Cboe Options market participants.

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 \8\ and paragraph (f) of Rule 19b-4 \9\ 
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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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-2023-011 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-2023-011. 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

[[Page 9940]]

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-2023-011 
and should be submitted on or before March 8, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-03161 Filed 2-14-23; 8:45 am]
BILLING CODE 8011-01-P