[Federal Register Volume 89, Number 12 (Thursday, January 18, 2024)]
[Notices]
[Pages 3459-3462]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00847]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99325; File No. SR-C2-2024-001]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Add Historical Depth Data Fee

January 11, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 2, 2024, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') 
filed with the Securities and Exchange Commission (``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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') 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://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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, effective January 
2, 2024.
    By way of background, the Exchange currently makes available for 
purchase Depth Data, which is a daily archive of the Exchange's depth 
of book real-time feed, which provides depth-of-book quotations and 
execution information based on options orders entered into the 
System.\3\ The Exchange also offers Historical Depth Data, for no 
charge, which offers such data on a historical basis, i.e., T+1 or 
later, dating back to October 2019. The Depth Data and Historical Depth 
Data are available to Members and Non-Members on the Cboe LiveVol, LLC 
(``LiveVol'') website,\4\ for internal use only; LiveVol is a wholly 
owned subsidiary of the Exchange's parent company, Cboe Global Markets, 
Inc.
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    \3\ See Exchange Fees Schedule. Daily end-of-day delivery is 
provided via the DataShop SFTP. Files will typically become 
available after 8 p.m. ET; see also Exchange Rule 1.1, which defines 
``System.''
    \4\ See https://datashop.cboe.com/cboe-us-options-multicast-pitch.
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    The Exchange and affiliated equities and options exchanges (i.e., 
Cboe Exchange, Inc. (``Cboe Options''), Cboe EDGX Exchange, Inc. 
(``EDGX''), Cboe BYX Exchange, Inc. (``BYX''), Cboe BZX Exchange, Inc. 
(``BZX''), and Cboe EDGA Exchange, Inc. (``EDGA'') (collectively, 
``Affiliates'') also offer similar data products. Particularly, each of 
the Exchange's Affiliates offer a daily and historical archive of their 
depth of book real-time feed with execution information based on their 
trading

[[Page 3460]]

activity that is substantially similar to the information provided by 
the Exchange through its Depth Data products.
    Currently, the Exchange provides Historical Depth Data to users 
without a charge. Since the Exchange first began offering access to 
historical quotation and transactions data, the Exchange has made a 
number of significant enhancements to its platform, including, among 
other things, implementing a more efficient means of data delivery (via 
SFTP rather than shipment of hard drives), which consequently increases 
the value of the market data product.
    The Exchange now proposes to amend its Fees Schedule and assess a 
fee of $500 per month of Historical Depth Data accessed by a user. As 
is currently the case, the data will be provided to data recipients for 
internal use only, and thus, no redistribution will be permitted.
    The Exchange notes that the Depth Data products, including the 
Historical Depth Data, are completely voluntary products, in that the 
Exchange is not required by any rule or regulation to make the reports 
or services available and that potential subscribers may purchase it 
only if they voluntarily choose to do so. Further, the Exchange notes 
that other exchanges offer similar products for a fee.\5\
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    \5\ See, e.g., https://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#nom; and https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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) \8\ 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,\9\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed change to adopt a fee for 
Historical Depth Data is reasonable. In adopting Regulation NMS, the 
Commission granted self-regulatory organizations (``SROs'') and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. It was believed that this authority would 
expand the amount of data available to consumers, and also spur 
innovation and competition for the provision of market data.
    The Exchange also operates in a highly competitive environment. 
Indeed, there are currently 17 registered options exchanges that trade 
options. Based on publicly available information, no single options 
exchange has more than 12% of the market share.\10\ The Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Particularly, 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.'' \11\ Making similar data products available to 
market participants fosters competition in the marketplace, and 
constrains the ability of exchanges to charge supracompetitive fees. In 
the event that a market participant views one exchange's data product 
as more or less attractive than the competition they can and do switch 
between similar products. The Exchange believes the proposed change 
will continue to broaden the availability of U.S. option market data to 
investors consistent with the principles of Regulation NMS.
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    \10\ See Cboe Global Markets U.S. Options Market Volume Summary 
(December 18, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
    \11\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Additionally, the Exchange believes the proposed changes to the 
Historical Depth Data fee are reasonable, as the Exchange's Historical 
Depth Data is a competitively priced alternative to historical depth of 
book data disseminated by other national securities exchanges. The 
Exchange's Depth Data products, including Historical Depth Data, 
benefits a wide range of investors that participate in the national 
market system. As noted above, Nasdaq and NYSE have similar Depth Data 
offerings for a charge.\12\ The Exchange therefore believes that the 
proposed fees are reasonable and set at a level to compete with other 
exchanges that offer similar reports. Indeed, proposing fees that are 
excessively higher than established fees for similar data products 
would simply serve to reduce demand for the Exchange's data product, 
which as noted, is entirely optional. As such, if a market participant 
views another exchange's potential report as more attractive, then such 
market participant can merely choose not to purchase the Exchange's 
Historical Depth Data offering and instead purchase another exchange's 
similar data product, which offers similar data points, albeit based on 
other market's trading activity. Further, the Exchange believes the 
fees are reasonable since, as proposed, they represent a relatively 
modest fee for historical depth of book data that has proven valuable 
for investors.
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    \12\ See supra note 5.
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    The Exchange also believes that the proposed fee is reasonable 
because it is reasonably aligned with the value and benefits provided 
to users that choose to purchase Historical Depth Data from the 
Exchange. As discussed above, Historical Depth Data may be beneficial 
to Members and non-Members as it may provide helpful trading 
information regarding investor sentiment that may allow market 
participants to make more informed trading decisions and may be used to 
create and test trading models and analytical strategies and provide 
comprehensive insight into trading on the Exchange. As noted above, 
since first offering Historical Depth Data, the Exchange has made a 
number of significant enhancements to its platform, including, among 
other things, implementing a more efficient means of data delivery (via 
SFTP rather than shipment of hard drives), which consequently increases 
the value of the market data product. Finally, the Exchange believes 
that the proposed change to the Exchange's Historical

[[Page 3461]]

Depth Data offerings is equitable and not unfairly discriminatory 
because the change to the offering applies to all current and potential 
subscribers of the products uniformly, in that all subscribers will be 
assessed the new proposed fee for purchases of Historical Depth Data. 
As stated, purchase of Historical Depth Data is completely optional and 
not necessary for trading. Rather, the Exchange voluntarily makes 
Historical Depth Data available, and users may choose to purchase the 
data based on their own individual business needs.

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. As discussed above, the 
Exchange's Historical Depth Data offering is subject to direct 
competition from several other exchanges that offer similar data 
products. The proposed rule changes are grounded in the Exchange's 
efforts to compete more effectively. In this competitive environment, 
potential purchasers are free to choose which, if any, similar product 
to purchase to satisfy their need for market information. As a result, 
the Exchange believes the proposed rule changes permit fair competition 
among national securities exchanges.
    Additionally, the Exchange believes the proposed rule change does 
not impose any burden on intramarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. The change to 
the Historical Depth Data offering applies to all current and potential 
subscribers of the product uniformly, in that all subscribers will be 
assessed the same fee for subscribing to receive Historical Depth Data. 
Moreover, purchase of Historical Depth Data is optional.
    Further, the Exchange also 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. As 
noted above, other exchanges offer similar data products, which are 
similarly priced.\13\ As previously discussed, the Exchange operates in 
a highly competitive market. Members have numerous alternative venues 
that they may participate on and direct their order flow, including 16 
other options exchanges and off-exchange venues. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single options exchange has more 
than 12% of the market share.\14\ 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 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.'' \15\ 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'. . . .''.\16\ 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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    \13\ See supra note 5.
    \14\ See supra note 10.
    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ 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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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-C2-2024-001 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-C2-2024-001. 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

[[Page 3462]]

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-C2-2024-001 and should be submitted on 
or before February 8, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00847 Filed 1-17-24; 8:45 am]
BILLING CODE 8011-01-P