[Federal Register Volume 89, Number 10 (Tuesday, January 16, 2024)]
[Notices]
[Pages 2681-2687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00639]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99301; File No. SR-CBOE-2024-001]


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

January 9, 2024.
    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 January 2, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 in connection with 
certain Lead Market-Maker (``LMM'') Incentive Programs, effective 
January 2, 2024. Specifically, the Exchange proposes to amend the 
following: the Mini Russell 2000 Index (``MRUT'') options LMM Incentive 
Program; the Nanos S&P 500 (``NANOS'') Index options LMM Incentive 
Program; the Global Trading Hours (``GTH'') Cboe Volatility Index 
(``VIX'') options and VIX Weekly (``VIXW'') options LMM Incentive 
Programs; and the GTH Mini-SPX Index (``XSP'') LMM Incentive Programs.
    Each LMM Incentive Program provides a rebate to Trading Permit 
Holders (``TPHs'') with LMM appointments to the respective incentive 
program that meet certain quoting standards in the applicable series in 
a month. The Exchange notes that meeting or exceeding the quoting 
standards (both current and as proposed; described in further detail 
below) in each of the LMM Incentive Program products to receive the 
applicable rebate (both currently offered and as proposed; described in 
further detail below) is optional for an LMM appointed to a program. 
Particularly, an LMM appointed to an incentive program is eligible to 
receive the corresponding rebate if it satisfies the applicable quoting 
standards, which the Exchange believes encourages appointed LMMs to 
provide liquidity in the applicable class and trading session (i.e., 
Regular Trading Hours (``RTH'') or GTH). The Exchange may consider 
other exceptions to the programs' quoting standards based on 
demonstrated legal or regulatory requirements or other mitigating 
circumstances. In calculating whether an LMM appointed to an incentive 
program meets the applicable program's quoting standards each month, 
the Exchange excludes from the calculation in that month the business 
day in which the LMM missed meeting or exceeding the quoting standards 
in the highest number of the applicable series.
MRUT LMM Incentive Program
    The Exchange first proposes to amend the current MRUT LMM Incentive 
Program. Currently, the program provides that if the appointed LMM in 
MRUT provides continuous electronic quotes during RTH that meet or 
exceed the program's heightened quoting standards \3\ in at least 97% 
of the series 90% of the time in a given month, the LMM will receive a 
rebate for that month in the amount of $15,000 (or pro-rated amount if 
an appointment begins after the first trading day of the month or ends 
prior to the last trading day of the month). In addition to the rebate, 
if the appointed LMM meets or exceeds the above heightened quoting 
standards in a given month, the LMM will receive the Monthly average 
daily volume (``ADV'') Payment amount that corresponds to the level of 
ADV provided by the LMM in MRUT for that

[[Page 2682]]

month per the program's Volume Incentive Pool.
---------------------------------------------------------------------------

    \3\ Located in the ``MRUT LMM Incentive Program'' table in the 
Fees Schedule.
---------------------------------------------------------------------------

    The Exchange now proposes to amend the time qualification 
requirement for the MRUT LMM Incentive Program. Specifically, the 
Exchange proposes to update the time qualification requirement to 
require the appointed LMM to provide continuous electronic quotes 
during RTH that meet or exceed the heightened quoting standards in at 
least 97% the MRUT series 88% of the time in a given month in order to 
receive the rebate, thereby decreasing the time qualification 
requirement by 2%.
    The Exchange also proposes to update the rebate amount received for 
meeting the heightened quoting standards, as proposed, in a given month 
in MRUT, by decreasing the rebate amount from $15,000 to $5,000.
    Additionally, the Exchange proposes to remove the MRUT Volume 
Incentive Pool program from the Fees Schedule, as the Exchange no 
longer wishes to offer the additional volume-based incentive program.
NANOS LMM Incentive Program
    Next, the Exchange proposes to amend the current NANOS LMM 
Incentive Program.\4\ Currently, the NANOS LMM Incentive Program 
provides that, for NANOS, if the appointed LMM provides continuous 
electronic quotes during RTH that meet or exceed the heightened quoting 
standards \5\ in at least 98% of the NANOS series 90% of the time in a 
given month, the LMM will receive a rebate for that month in the amount 
of $17,500 (or pro-rated amount if an appointment begins after the 
first trading day of the month or ends prior to the last trading day of 
the month). The heightened quoting standards are based on the VIX Index 
value at the prior market close, with three separate value categories 
(i.e., VIX value at prior close less than 20, VIX value at prior close 
from 20 to 30, and VIX value at prior close greater than 30). In 
addition to the rebate, if the appointed LMM meets or exceeds the above 
heightened quoting standards in a given month, the LMM will receive the 
Monthly ADV Payment amount that corresponds to the level of ADV 
provided by the LMM in NANOS for that month per the program's Volume 
Incentive Pool.
---------------------------------------------------------------------------

    \4\ As part of the proposed changes, the Exchange proposes to 
remove a reference to heightened quoting standards specific to March 
2022, as such reference is now outdated.
    \5\ Located in the ``NANOS LMM Incentive Program'' table in the 
Fees Schedule.
---------------------------------------------------------------------------

    The Exchange proposes to restructure the NANOS LMM Incentive 
Program and adopt a new set of heightened quoting standards. The VIX 
Index value categories and heightened quoting standards proposed for 
NANOS options are as follows in the table below:

------------------------------------------------------------------------
                 Premium level                     Width         Size
------------------------------------------------------------------------
                      VIX Value at Prior Close <30
------------------------------------------------------------------------
$0.00-$2.00...................................        $0.10          500
$2.01-$5.00...................................         0.12          500
$5.01-$15.00..................................         0.20          250
Greater than $15.00...........................         0.31          100
------------------------------------------------------------------------
                   VIX Value at Prior Close from >=30
------------------------------------------------------------------------
$0.00-$2.00...................................         0.16          300
$2.01-$5.00...................................         0.17          300
$5.01-$15.00..................................         0.31          150
Greater than $15.00...........................         0.38          100
------------------------------------------------------------------------

    The Exchange also proposes to amend the series qualification 
requirement for the NANOS LMM Incentive Program. Specifically, the 
Exchange proposes to update the series qualification requirement to 
require the appointed LMM to provide continuous electronic quotes 
during RTH that meet or exceed the heightened quoting standards in at 
least 97% the NANOS series 90% of the time in a given month in order to 
receive the rebate, thereby decreasing the series qualification 
requirement by 1%.
    The Exchange proposes to update the rebate amount received for 
meeting the heightened quoting standards in a given month in NANOS 
options, by decreasing the rebate amount from $17,500 to $5,000. 
Additionally, the Exchange proposes to remove the NANOS Volume 
Incentive Pool program from the Fees Schedule, as the Exchange no 
longer wishes to offer the additional volume-based incentive program.
VIX/VIXW LMM Incentive Programs
    The Exchange proposes to amend its GTH VIX/VIXW LMM Incentive 
Programs. Currently, the first GTH VIX/VIXW LMM Incentive Program 
(``GTH1 VIX/VIXW LMM Incentive Program'') provides that if an LMM in 
VIX/VIXW provides continuous electronic quotes during GTH from 7:15 
p.m. CST to 2:00 a.m. CST (``GTH1'') that meet or exceed the basic 
quoting standards \6\ in at least 99% of each of the VIX and VIXW 
series, 90% of the time in a given month, the LMM will receive a rebate 
for that month in the amount of $20,000 for VIX and $15,000 for VIXW 
(or pro-rated amount if an appointment begins after the first trading 
day of the month or ends prior to the last trading day of the month) 
for that month. Additionally, if the appointed LMM provides continuous 
electronic quotes during GTH that meet or exceed the heightened quoting 
standards \7\ in at least 99% of the VIX series, 90% of the time in a 
given month, the LMM will receive a rebate for that month of $0.02 per 
VIX/VIXW contract executed in its Market-Maker capacity during RTH.
---------------------------------------------------------------------------

    \6\ Located in the ``GTH1 VIX/VIXW LMM Incentive Program'' table 
in the Fees Schedule.
    \7\ Id.
---------------------------------------------------------------------------

    The second GTH VIX/VIXW LMM Incentive Program (``GTH2 VIX/VIXW LMM 
Incentive Program'') provides that if the appointed LMM provides 
continuous electronic quotes during GTH from 2:00 a.m. CST to 8:15 a.m. 
CST (``GTH2'') that meet or exceed the basic quoting standards \8\ in 
at least 99% of each of the VIX and VIXW series, 90% of the time in a 
given month, the LMM will receive a rebate for that month in the amount 
of $20,000 for VIX and $15,000 for VIXW (or pro-rated amount if an 
appointment begins after the first trading day of the month or ends 
prior to the last trading day of the

[[Page 2683]]

month) for that month. Additionally, if the appointed LMM provides 
continuous electronic quotes during GTH that meet or exceed the 
heighted quoting standards \9\ in at least 99% of the VIX series, 90% 
of the time in a given month, the LMM will receive a rebate for that 
month of $0.02 per VIX/VIXW contract executed in its Market-Maker 
capacity during RTH.
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    \8\ Located in the ``GTH2 LMM Incentive Program'' table in the 
Fees Schedule.
    \9\ Id.
---------------------------------------------------------------------------

    The Exchange proposes to restructure the GTH1 and GTH2 VIX/VIXW LMM 
Incentive Programs by combining the two GTH programs into a singular 
GTH VIX/VIXW LMM Incentive Program, with one set of basic quoting 
standards for VIX options and one set of basic quoting standards for 
VIXW options. The proposed program provides that, if the appointed LMM 
provides continuous electronic quotes during GTH (i.e., from 7:15 p.m. 
CT to 8:15 a.m. CT the next day) that meet or exceed the basic quoting 
standards \10\ in at least 95% of each of the VIX and VIXW series, 90% 
of the time in a given month, the LMM will receive a rebate for that 
month in the amount of $25,000 for VIX and $10,000 for VIXW (or pro-
rated amount if an appointment begins after the first trading day of 
the month or ends prior to the last trading day of the month) for that 
month.
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    \10\ Located in the proposed ``GTH VIX/VIXW LMM Incentive 
Program'' table in the Fees Schedule.
---------------------------------------------------------------------------

    The Exchange notes that the current basic quoting standards for the 
GTH1 VIX/VIXW LMM Incentive Program (which are substantially similar to 
the basic quoting standards for the GTH2 VIX/VIXW LMM Incentive 
Program, the only difference being that the current GTH1 basic quoting 
standards (i.e., the proposed GTH basic quoting standards) have 
slightly lower size requirements in certain instances than the current 
GTH2 basic quoting standards) will be the basic quoting standards for 
the new combined GTH VIX/VIXW LMM Incentive Program. The new proposed 
rebate amounts represent a slight increase of $5,000 for VIX options 
and a slight decrease of $5,000 for VIXW options, as compared to the 
current rebates in place for the GTH1 and GTH2 VIX/VIXW LMM Incentive 
Programs. There are no additional heightened quoting standards with 
additional rebate(s) under the proposed program.
    The proposed basic quoting standards for VIX options are as follows 
in the table below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Expiring less than 15    Near term 15 days to 60   Mid term 61 days to 180    Long term 181 days or
                                                            days                      days                      days                     greater
                  Premium level                  -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              VIX Value at Prior Close <18
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................        $0.35           30        $0.25           40        $0.35           30        $0.80            5
$1.01-$3.00.....................................         0.50           15         0.35           25         0.50           15         0.90            5
$3.01-$5.00.....................................         0.60           15         0.35           15         0.60           10         1.00            5
$5.01-$10.00....................................         1.00           10         0.80           10         1.30           10         2.00            5
$10.01-$30.00...................................         2.00            5         1.50            5         2.00            5         3.00            3
Greater than $30.00.............................         5.00            3         3.00            3         5.00            3         5.00            3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           VIX Value at Prior Close from 18-25
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................         0.50           15         0.35           30         0.50           15         1.00            5
$1.01-$3.00.....................................         0.50           10         0.50           20         0.70           10         1.00            5
$3.01-$5.00.....................................         0.80            5         0.50           15         0.80            5         1.30            5
$5.01-$10.00....................................         1.50            5         1.00            5         2.00            5         2.20            5
$10.01-$30.00...................................         3.00            1         2.50            1         3.00            1         5.00            1
Greater than $30.00.............................         5.00            1         5.00            1         5.00            1        10.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       VIX Value at Prior Close from 25
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................         0.80           10         0.50           10         0.60           10         1.20            5
$1.01-$3.00.....................................         1.00           10         0.75           10         1.00           10         1.20            5
$3.01-$5.00.....................................         1.20            5         0.90           10         1.20            5         1.80            5
$5.01-$10.00....................................         2.00            5         1.50            5         2.50            5         3.00            3
$10.01-$30.00...................................         5.00            1         5.00            1         5.00            1         7.00            1
Greater than $30.00.............................        10.00            1        10.00            1        10.00            1        10.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The proposed basic quoting standards for VIXW options are as 
follows in the table below:

----------------------------------------------------------------------------------------------------------------
                                                                Less than 21 days to      21 days or greater to
                                                                     expiration                expiration
                        Premium level                        ---------------------------------------------------
                                                                 Width         Size        Width         Size
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.................................................        $1.00           10        $1.50           10
$1.01-$3.00.................................................         1.50           10         2.50           10
$3.01-$5.00.................................................         2.50            3         4.00            3
$5.01-$10.00................................................         4.00            1         6.00            1
$10.01-$30.00...............................................         6.00            1        10.00            1

[[Page 2684]]

 
Greater than $30.00.........................................        10.00            1        10.00            1
----------------------------------------------------------------------------------------------------------------
                                VIX Value at Prior Close from 18-25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.................................................         1.50            5         2.00            5
$1.01-$3.00.................................................         2.50            5         4.00            5
$3.01-$5.00.................................................         4.00            1         5.00            1
$5.01-$10.00................................................         6.00            1         8.00            1
$10.01-$30.00...............................................        10.00            1        10.00            1
Greater than $30.00.........................................        10.00            1        10.00            1
----------------------------------------------------------------------------------------------------------------
                            VIX Value at Prior Close from 25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.................................................        10.00            1        10.00            1
$1.01-$3.00.................................................        10.00            1        10.00            1
$3.01-$5.00.................................................        10.00            1        10.00            1
$5.01-$10.00................................................        10.00            1        10.00            1
$10.01-$30.00...............................................        10.00            1        10.00            1
Greater than $30.00.........................................        10.00            1        10.00            1
----------------------------------------------------------------------------------------------------------------

GTH1 and GTH2 XSP LMM Incentive Programs
    Lastly, the Exchange proposes to amend the XSP LMM Incentive 
Programs. The GTH1 XSP LMM Incentive Program provides that if the 
appointed LMM provides continuous electronic quotes during GTH1 that 
meet or exceed the heightened quoting standards \11\ in at least 85% of 
the series 90% of the time in a given month, the LMM will receive (i) a 
rebate for that month in the amount of $20,000 (or pro-rated amounts if 
an appointment begins after the first trading day of the month or ends 
prior to the last trading day of the month) and (ii) a rebate for that 
month of $0.03 per XSP contract executed in a Market-Maker capacity 
which provide liquidity in the Simple Book during RTH. The GTH2 XSP LMM 
Incentive Program provides that if an LMM appointed to the Program 
provides continuous electronic quotes during GTH2 that meet or exceed 
the heightened quoting standards \12\ (which are the same as the 
heightened quoting standards in the GTH1 XSP LMM Incentive Program) in 
at least 85% of the series 90% of the time in a given month, the LMM 
will receive a payment for that month in the amount of $25,000 (or pro-
rated amount if an appointment begins after the first trading day of 
the month or ends prior to the last trading day of the month). For each 
of the XSP LMM Incentives Programs, the heightened quoting standards 
are based on the VIX Index value at the prior market close, with three 
separate value categories (i.e., VIX value at prior close less than 20, 
VIX value at prior close from 20 to 30, and VIX value at prior close 
greater than 30).
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    \11\ Located in the ``GTH1 XSP LMM Incentive Program'' table in 
the Fees Schedule.
    \12\ Located in the ``GTH2 XSP LMM Incentive Program'' table in 
the Fees Schedule.
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    The Exchange proposes to restructure the GTH1 and GTH2 XSP LMM 
Incentive Programs and adopt a new set of heightened quoting standards 
(which will apply to both programs). The proposed VIX Index value 
categories and heightened quoting standards for XSP options during each 
of GTH1 and GTH2 are as follows in the table below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   Expiring 7 days or less   Near term 8 days to 60    Mid term 61 days to 270    Long term 271 to 500
                                                 --------------------------           days                      days                      days
                  Premium level                                            -----------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              VIX Value at Prior Close <30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.01-$1.00.....................................        $0.10            5        $0.11            5        $0.15            5        $0.25            5
$1.01-$5.00.....................................         0.15            5         0.15            5         0.20            5         0.30            5
$5.01-$8.00.....................................         0.25            5         0.30            5         0.40            5         0.60            5
$8.01-$12.00....................................         0.60            5         0.80            5         1.10            5         1.35            5
$12.01-$20.00...................................         1.00            5         1.30            5         1.80            5         2.20            5
Greater than $20.00.............................         2.00            5         2.40            5         2.80            5         3.60            5
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         VIX Value at Prior Close =30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.01-$1.00.....................................         0.15            5         0.16            5         0.20            5         0.30            5
$1.01-$5.00.....................................         0.18            5         0.20            5         0.25            5         0.40            5
$5.01-$8.00.....................................         0.25            5         0.30            5         0.45            5         0.70            5
$8.01-$12.00....................................         0.60            5         0.90            5         1.20            5         1.50            5
$12.01-$20.00...................................         1.20            5         1.50            5         2.00            5         2.40            5
Greater than $20.00.............................         2.40            5         2.80            5         3.20            5         4.00            5
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 2685]]

    The Exchange also proposes to increase the rebates offered by the 
GTH1 and GTH2 XSP LMM Incentive Programs to an LMM appointed to the 
program for meeting the heightened quoting standards in a given month. 
The Exchange proposes to decrease such rebates from $20,000 to $15,000 
for the GTH1 XSP LMM Incentive Program, and from $25,000 to $15,000 for 
the GTH2 XSP LMM Incentive Program. Additionally, for the GTH1 XSP LMM 
Incentive Program, the Exchange proposes to eliminate the additional 
credit of $0.03 per contract applied to all XSP contracts executed in a 
Market-Maker capacity which provide liquidity in the Simple Book during 
RTH.
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.\13\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \14\ 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) \15\ 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,\16\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
    \16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to amend the monthly 
rebate amounts applicable to the MRUT, NANOS, GTH VIX/VIXW, and GTH1 
and GTH2 XSP LMM Incentive Programs. The Exchange notes that LMMs 
appointed to the respective programs will continue to receive a monthly 
rebate. The Exchange believes that the proposed rebate amounts are 
reasonably designed to continue to incentivize an LMM appointed to the 
respective program to meet the applicable quoting standards for MRUT, 
NANOS, VIX/VIXW, and XSP options, thereby providing liquid and active 
markets, which facilitates tighter spreads, increased trading 
opportunities, and overall enhanced market quality to the benefit of 
all market participants.
    The Exchange further believes that the proposed rule change to 
amend the rebate amounts received for MRUT ($5,000), NANOS ($5,000), 
VIX ($25,000), VIXW ($10,000), XSP ($15,000 for each of GTH1 and GTH2) 
options is reasonable because they are comparable to the rebates 
offered by other LMM Incentive Programs offered by the Exchange. For 
example, the SPESG LMM Program currently offers $10,000 to appointed 
LMMs for SPESG options if the heightened quoting standards are met in a 
given month. The Exchange believes the amount of the rebate for each 
LMM Program remains commiserate with the quoting requirements of each 
of the LMM Incentive Programs, of which some standards are being 
restructured, as proposed.
    Similarly, the Exchange believes that the proposed rule changes to 
eliminate the volume incentive pool programs for the MRUT and NANOS LMM 
Incentive Programs and to eliminate the additional per contract credit 
incentives for the GTH VIX/VIXW and GTH1 XSP LMM Incentive Programs are 
reasonable because it is consistent with the rebate structures 
currently in place for other LMM Incentive Programs, in that most do 
not offer a volume incentive pool program or additional per contract 
credit incentive. The Exchange notes that it is not required to 
maintain the volume incentive pool or additional per contract credit 
incentive, and now wishes to eliminate them from the respective 
programs.
    The Exchange believes it is reasonable to decrease the series 
requirement for the NANOS and VIX/VIXW LMM Incentive Programs, and 
decrease the time requirement for MRUT LMM Incentive Program, as such 
changes are reasonably designed to slightly ease the difficulty in 
meeting the heightened quoting standards offered under these programs 
(for which an appointed LMM receives the respective rebates), which, in 
turn, provides increased incentive for LMMs appointed to these programs 
to provide significant liquidity in NANOS, VIX/VIXW, and MRUT options. 
Such liquidity benefits all market participants by providing more 
trading opportunities, tighter spreads, and added market transparency 
and price discovery, and signals to other market participants to direct 
their order flow to those markets, thereby contributing to robust 
levels of liquidity.
    Additionally, the Exchange believes that it is reasonable to 
restructure the VIX Index value categories and amend widths and sizes 
in the heightened quoting standards under the NANOS, VIX/VIXW and XSP 
LMM Incentive Programs, as these proposed new quoting requirements are 
overall reasonably designed to continue to encourage LMMs appointed to 
the respective incentive programs to provide significant liquidity in 
NANOS, VIX/VIXW and XSP options, which benefits investors overall by 
providing more trading opportunities, tighter spreads, and added market 
transparency and price discovery. Further, by restructuring the 
programs, the Exchange believes that the proposed rule changes are 
reasonably designed to reflect then-current market conditions and 
market characteristics in NANOS, VIX/VIXW and XSP options where the VIX 
Index may be experiencing higher volatility, and thus encourage LMMs 
appointed to the programs to meet the quoting standards to receive a 
rebate. Additionally, the proposed rule change is, in light of the 
restructuring of VIX Index value categories, generally designed to 
further align the lesser premium quote widths and size standards for 
NANOS, VIX/VIXW and XSP options with the more expensive premium quote 
width and size standards, in order to incentivize an increase in 
quoting activity and the provision of tighter markets for all premium 
levels.
    The Exchange also believes the proposed change to adopt a singular 
GTH VIX/VIXW LMM Incentive Program (as compared to separate GTH1 and 
GTH2 VIX/VIXW LMM Incentive Programs) is reasonable. The Exchange 
believes the proposed changes are reasonably designed to continue to 
incentivize appointed LMMs to meet the proposed quoting standards for 
VIX/VIXW, thereby providing liquid and active markets, which 
facilitates tighter spreads, increased trading opportunities, and 
overall enhanced market quality to the benefit of all market 
participants. Additionally, the Exchange believes that the proposed 
widths and sizes for the singular program are reasonable because they 
remain aligned with the current heightened standards in each program.

[[Page 2686]]

    The Exchange believes that the proposed changes to the LMM 
Incentive Programs are equitable and not unfairly discriminatory. 
Specifically, the changes to the LMM Incentive Program will apply 
equally to any and all TPHs with LMM appointments to the MRUT, NANOS, 
GTH VIX/VIXW, and GTH1 and GTH2 XSP LMM Incentive Programs, as 
applicable, that seek to meet the programs' quoting standards in order 
to receive the rebates (as proposed) offered under each respective 
program. The Exchange additionally notes that, if an LMM appointed to 
any of the LMM Incentive Programs does not satisfy the corresponding 
heightened quoting standard for any given month, then it simply will 
not receive the rebate offered by the respective program for that 
month.
    Regarding each of the LMM Incentive Programs generally, the 
Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to continue to offer these financial incentives, 
including as amended, to LMMs appointed to the programs, because it 
benefits all market participants trading in the corresponding products 
during RTH (for MRUT and NANOS) and GTH (for VIX/VIXW and XSP). These 
incentive programs encourage the LMMs appointed to such programs to 
satisfy the applicable quoting standards, which may increase liquidity 
and provide more trading opportunities and tighter spreads. Indeed, the 
Exchange notes that these LMMs serve a crucial role in providing quotes 
and the opportunity for market participants to trade MRUT, NANOS, VIX/
VIXW, and XSP options, as applicable, which can lead to increased 
volume, providing for robust markets. The Exchange ultimately offers 
the LMM Incentive Programs, as amended, to sufficiently incentivize 
LMMs appointed to each incentive program to provide key liquidity and 
active markets in the corresponding program products during the 
corresponding trading sessions, and believes that these incentive 
programs, as amended, will continue to encourage increased quoting to 
add liquidity in each of the corresponding program products, thereby 
protecting investors and the public interest. The Exchange also notes 
that an LMM appointed to an incentive program may undertake added costs 
each month to satisfy that heightened quoting standards (e.g., having 
to purchase additional logical connectivity).

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 believes 
the proposed rule change does impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Particularly, the proposed changes to existing LMM 
Incentive Programs will apply to all LMMs appointed to the applicable 
program classes (i.e., MRUT, NANOS, VIX/VIXW, and XSP) in a uniform 
manner. To the extent these LMMs appointed to an incentive program 
receive a benefit that other market participants do not, as stated, 
these LMMs in their role as Mark-Makers on the Exchange have different 
obligations and are held to different standards. For example, Market-
Makers play a crucial role in providing active and liquid markets in 
their appointed products, thereby providing a robust market which 
benefits all market participants. Such Market-Makers also have 
obligations and regulatory requirements that other participants do not 
have. The Exchange also notes that an LMM appointed to an incentive 
program may undertake added costs each month to satisfy that heightened 
quoting standards (e.g., having to purchase additional logical 
connectivity). The Exchange also notes that the incentive programs are 
designed to attract additional order flow to the Exchange, wherein 
greater liquidity benefits all market participants by providing more 
trading opportunities, tighter spreads, and added market transparency 
and price discovery, and signals to other market participants to direct 
their order flow to those markets, thereby contributing to robust 
levels of liquidity. As a result, the Exchange believes that the 
proposed change furthers the Commission's goal in adopting Regulation 
NMS of fostering competition among orders, which promotes ``more 
efficient pricing of individual stocks for all types of orders, large 
and small.'' \17\
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    \17\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act as the LMM 
Incentive Programs apply only to transactions in products exclusively 
listed on the Exchange. As noted above, the incentive programs are 
designed to attract additional order flow to the Exchange, wherein 
greater liquidity benefits all market participants by providing more 
trading opportunities, tighter spreads, and added market transparency 
and price discovery, and signals to other market participants to direct 
their order flow to those markets, thereby contributing to robust 
levels of liquidity. 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 16 other options 
exchanges, as well as off-exchange venues, where competitive products 
are available for trading. Based on publicly available information, no 
single options exchange has more than 12% of the market share.\18\ 
Therefore, no exchange possesses significant pricing power in the 
execution of option order flow. Indeed, participants can readily choose 
to send their orders to other exchange, and, additionally off-exchange 
venues, if they deem 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

[[Page 2687]]

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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    \18\ See Cboe Global Markets U.S. Options Market Volume Summary, 
Month-to-Date (December 18, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \20\ See 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2024-001 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-2024-001. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CBOE-2024-001 and should be 
submitted on or before February 6, 2024.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00639 Filed 1-12-24; 8:45 am]
BILLING CODE 8011-01-P