[Federal Register Volume 89, Number 95 (Wednesday, May 15, 2024)]
[Notices]
[Pages 42521-42525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10592]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100091; File No. SR-CBOE-2024-021]


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

May 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 May 1, 2024, 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 the 
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.

[[Page 42522]]

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 May 1, 
2024.
New GTH SPX Customer Rebate Program
    The Exchange proposes to amend its Fees Schedule to adopt a Global 
Trading Hours (``GTH'') \3\ SPX Customer Rebate Program (the ``GTH SPX 
Customer Rebate Program'' or the ``Program''). Under the Program, the 
Exchange shall credit each Trading Permit Holder (``TPH'') the per 
contract amount set forth in the table below resulting from each 
Customer SPX order transmitted by that TPH which is executed on the 
Exchange during GTH, provided the TPH meets certain volume thresholds 
in a month as described below. The volume thresholds are calculated 
based on the customer average daily volume over the course of the 
month. Volume will be recorded for, and rebates will be delivered to, 
the TPH that submits the order to the Exchange. Tier thresholds are 
defined by two criteria sets: (1) minimum SPX Customer capacity volume 
during GTH1 (i.e., 7:15 p.m. CT to 2:00 a.m. CT) and (2) minimum SPX 
Customer capacity volume during the entirety of GTH. The Exchange 
proposes to append Footnote 33 to the Program table and amend Footnote 
33 to include the Program in the list of programs from which FLEX Micro 
Options are excluded.
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    \3\ Global Trading Hours are from 8:15 p.m. ET (previous day) to 
9:15 a.m. ET on Monday through Friday. See Rule 5.1(c).

------------------------------------------------------------------------
                                   Rebate per
              Tier                  contract        Required criteria
------------------------------------------------------------------------
1..............................           $0.00  (1) TPH has SPX
                                                  Customer capacity
                                                  volume during GTH1
                                                  (7:15 p.m.-2:00 a.m.
                                                  CST) <=50,000
                                                  contracts; and
                                                 (2) TPH has SPX
                                                  Customer capacity
                                                  volume during the
                                                  entirety of GTH
                                                  <=500,000 contracts.
2..............................            0.02  (1) TPH has SPX
                                                  Customer capacity
                                                  volume during GTH1
                                                  >50,000 contracts; and
                                                 (2) TPH has SPX
                                                  Customer capacity
                                                  volume during the
                                                  entirety of GTH
                                                  >500,000 contracts.
3..............................            0.04  (1) TPH has SPX
                                                  Customer capacity
                                                  volume during GTH1
                                                  >200,000 contracts;
                                                  and
                                                 (2) TPH has SPX
                                                  Customer capacity
                                                  volume during the
                                                  entirety of GTH
                                                  >1,000,000 contracts.
4..............................            0.06  (1) TPH has SPX
                                                  Customer capacity
                                                  volume during GTH1
                                                  >400,000 contracts;
                                                  and
                                                 (2) TPH has SPX
                                                  Customer capacity
                                                  volume during the
                                                  entirety of GTH
                                                  >1,300,000 contracts.
------------------------------------------------------------------------

    A TPH's tier and associated rebate payment will be determined by 
the lower tier determined by each criteria set. For example, if, during 
the month of May, a TPH trades a total of 100,000 SPX customer 
contracts during GTH1 and 300,000 customer contracts during GTH (i.e., 
achieves Tier 2 on the GTH1 criteria and Tier 3 on the overall GTH 
criteria), then the TPH would receive Tier 2 rebates of $0.04 on all 
300,000 SPX Customer contracts executed in the month of May.
    The purpose of the Program is to encourage TPHs to direct greater 
Customer SPX trade volume to the Exchange during GTH. Increased 
Customer volume will provide for greater liquidity, thereby providing 
greater trading opportunities and tighter spreads for other market 
participants and causing a corresponding increase in order flow from 
such other market participants. The specific volume thresholds of the 
Program's tiers were set based upon business determinations and an 
analysis of current volume levels. The volume thresholds are intended 
to incentivize firms that route some Customer orders to the Exchange to 
increase the number of orders that are sent to the Exchange to achieve 
the next threshold and to incentivize new participants to send Customer 
orders as well. Increasing the number of orders sent to the Exchange 
will in turn provide tighter and more liquid markets, and therefore 
attract more business overall. Similarly, the different rebate amounts 
at the different tier levels were based on an analysis of revenue and 
volume levels and are intended to provide increasing ``rewards'' for 
increasing the volume of trades sent to the Exchange. The specific 
amounts of the tiers and rates were set in order to encourage suppliers 
of Customer order flow to reach for higher tiers.
Update to GTH Executing Agent Subsidy Program
    Additionally, the Exchange proposes to amend the GTH Executing 
Agent Subsidy Program, set forth in the Fees Schedule. The GTH 
Executing Agent Subsidy Program offers a monthly subsidy to TPHs with 
executing agent operations \4\ during the GTH trading session. Pursuant 
to the current GTH Executing Agent Subsidy Program, a designated GTH 
executing agent receives the monthly subsidy amount that corresponds to 
the number of contracts executed on behalf of customers (including 
public and broker-dealer customers) during GTH in a calendar month, as 
shown in the table below. Qualifying customer volume is limited to SPX 
and VIX options.
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    \4\ An executing agent operation is one that accepts orders from 
customers (who may be public or broker-dealer customers) and submits 
the orders for execution (either directly to the Exchange or through 
another TPH).

------------------------------------------------------------------------
     GTH monthly customer SPX and VIX options volume          Subsidy
------------------------------------------------------------------------
0-19,999 contracts......................................           $0.00
20,000-39,999 contracts.................................          10,000
40,000-99,999 contracts.................................          15,000
100,000+ contracts......................................          50,000
------------------------------------------------------------------------

    To become a designated GTH executing agent, a TPH must submit a 
form to the Exchange no later than 3:00 p.m. on the second to last 
business day of a calendar month to be designated an GTH executing 
agent under the program, and thus eligible for the subsidy, beginning 
the following calendar month. The current criteria states that a TPH 
must include on or with the form information demonstrating it maintains 
an GTH executing agent operation: (1) physically staffed throughout 
each entire GTH trading session and (2) willing to accept and execute 
orders on behalf of customers, including customers for which the agent 
does not hold accounts. The designation will be effective the first 
business day of the following calendar month, subject to the Exchange's 
confirmation the TPH's GTH executing agent operations satisfies these 
two conditions and will remain in effect until the Exchange receives an 
email from the TPH terminating its designation or the Exchange 
determines the TPH's GTH executing agent operation no longer satisfies 
these two conditions.

[[Page 42523]]

    The Exchange proposes to amend the GTH monthly customer volume 
thresholds and corresponding subsidy amounts, as shown in the table 
below.

------------------------------------------------------------------------
     GTH monthly customer SPX and VIX options volume          Subsidy
------------------------------------------------------------------------
0-19,999 contracts......................................           $0.00
20,000-99,999 contracts.................................          15,000
100,000+ contracts......................................          50,000
------------------------------------------------------------------------

    The proposed changes are designed to continue to encourage 
designated GTH executing agents to increase their order flow executed 
as agent in SPX and VIX options that trade during GTH, to meet the 
volume thresholds, as amended, and receive the corresponding subsidies. 
The Exchange notes that incentivizing TPHs to conduct executing agent 
operations willing to accept orders from all customers during GTH is 
intended to increase customer accessibility to the GTH trading session. 
The Exchange believes that increased order flow through designated GTH 
executing agents would allow the Exchange to grow participation during 
GTH, which may benefit all market participants, as additional liquidity 
to the Exchange during GTH would create more trading opportunities 
during GTH, and in turn attract market participants to submit 
additional order flow during GTH.
    The Exchange also proposes to make a clarifying change to the GTH 
Executing Agent Subsidy Program criteria. As noted above, current 
criteria require, in relevant part, that a TPH maintains a GTH 
executing agent operation willing to accept and execute orders on 
behalf of customers, including customers for which the agent does not 
hold accounts. The Exchange proposes to delete language referring to 
customers for which the agent does not hold accounts, as this is not in 
fact a requirement of the program and may result in potential confusion 
for TPHs in regards to their responsibilities, both under the program 
and in general as TPH.
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.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ 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) \7\ 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,\8\ 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed rule change to adopt a GTH 
SPX Customer Rebate Program is reasonably designed to encourage TPHs to 
direct greater Customer SPX trade volume to the Exchange during GTH. 
The program intends to attract Customer order flow, which will increase 
liquidity, thereby providing greater trading opportunities and tighter 
spreads for other market participants and causing a corresponding 
increase in order flow from such other market participants.
    The Exchange believes the proposed volume thresholds and 
corresponding subsidy amounts provide benefits, similar to other volume 
incentives offered by the Exchange and other options exchanges, that 
are reasonably related to the value to an exchange's market quality and 
associated higher levels of market activity, in this case, increased 
SPX customer volumes. The proposed change is designed as an incentive 
to all TPHs to submit additional SPX customer orders to the Exchange 
during GTH. Each will have the opportunity to submit the requisite 
order flow and will receive the applicable rebate if the volume 
criteria is met. While the Exchange has no way of predicting with 
certainty how the proposed tiers will impact TPH activity, the Exchange 
anticipates that approximately two TPHs may be able to achieve Tier 1 
criteria, one TPH may be able to achieve Tier 2 criteria, and one TPH 
may be able to achieve Tier 3 criteria (with no firms currently 
projected to achieve Tier 4 criteria). The Exchange also notes that the 
proposed changes will not adversely impact any TPH's pricing or their 
ability to qualify for other incentive programs. Rather, should a TPH 
not meet the criteria for a tier, the TPH will merely not receive the 
corresponding subsidy.
    Further, the Exchange believes the proposed rule change to adopt a 
GTH SPX Customer Rebate Program is equitable and not unfairly 
discriminatory, as the program will be open to all TPHs.
    Additionally, the Exchange believes that the proposed amendments to 
the GTH Executing Agent Subsidy Program are reasonable. The GTH 
Executing Agent Subsidy Program is overall designed to encourage 
designated GTH executing agents to increase their customer order flow 
in SPX and VIX options traded during GTH. The Exchange believes the 
tiers, as amended, remain reasonable because they amend existing 
opportunities in a manner that incentivizes increased order flow to the 
GTH trading session via incrementally more challenging criteria in 
order to receive incrementally increasing subsidy amounts.
    Further, the Exchange believes such changes are reasonable, as the 
volume thresholds, as amended, remain commensurate with the 
corresponding subsidy amounts. The proposed changes effectively 
consolidate two of the current thresholds into one, so that designated 
GTH executing agents that submit 20,000 to 99,999 customer contracts in 
SPX or VIX options will receive a subsidy of $15,000. The amended 
tiers, as proposed, present the opportunity for designated GTH 
executing agents submitting 20,000 to 39,999 customer contracts in SPX 
or VIX options to receive a slightly larger subsidy than that which is 
currently offered by the program. As noted above, the proposed changes 
are designed to continue to encourage designated GTH executing agents 
to increase their order flow executed as agent in SPX and VIX options 
that trade during GTH, to meet the volume thresholds, as amended, and 
receive the corresponding subsidies. The Exchange believes that 
increased order flow would allow the Exchange to grow participation in 
the GTH trading session to the benefit of all market participants that 
trade during GTH, by providing greater trading opportunities as a 
result of increased liquidity, thereby attracting additional order flow 
from market participants during GTH.
    Further, the Exchange believes proposed clarifying amendment to the 
GTH Executing Agent Subsidy Program criteria is reasonable, given the

[[Page 42524]]

Exchange wishes to correct potentially misleading language.
    The Exchange also believes that the proposed rule changes related 
to the GTH Executing Agent Subsidy Program are equitable and not 
unfairly discriminatory. In particular, the Exchange believes that 
amending a volume threshold and corresponding subsidy for the GTH 
Executing Agent Subsidy Program is equitable and not unfairly 
discriminatory because all TPHs that conduct this type of operation 
during GTH will continue to have the opportunity to become a designated 
GTH executing agent and thus eligible for the monthly subsidy 
commensurate with applicable customer volumes. As noted above, the 
proposed changes reflect the growth of the GTH trading session and are 
designed to continue to encourage designated GTH executing agents to 
increase their order flow executed as agent in SPX and VIX symbols that 
trade during GTH, to meet the volume thresholds, as amended, and 
receive corresponding subsidies. TPHs that conduct executing agent 
operations willing to accept orders from all customers take on 
additional risks and potential costs (including those related to 
staffing and clearing) associated with this type of business. Such TPHs 
also provide benefits to investors during GTH, including increased 
customer accessibility to the GTH trading session and increased order 
flow. While the Exchange has no way of predicting with certainty how 
the changes will impact TPH activity, the Exchange anticipates that 
approximately three TPHs may be able to achieve the 20,000 to 99,999 
contracts volume threshold.
    Finally, the Exchange believes the proposed change to the GTH 
Executing Agent Subsidy Program criteria language is equitable and not 
unfairly discriminatory, as the change is a technical, clarifying 
amendment designed to avoid potential confusion, to the benefit of all 
TPHs.

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 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 Exchange notes that the proposed changes apply 
uniformly to similarly situated TPHs. In regard to the proposed GTH SPX 
Customer Rebate Program, as stated above, the program is open to all 
TPHs. The Exchange believes the proposed program will incentivize TPHs 
to direct additional SPX Customer order flow to the Exchange and thus 
provide additional liquidity that enhances the quality of its markets 
and increases the volume of contracts traded on the Exchange. Enhanced 
market quality and increased transaction volume that results from any 
increase in order flow directed to the Exchange will benefit all market 
participants and improve competition on the Exchange.
    In regard to the proposed changes to the GTH Executing Agent 
Subsidy Program, all TPHs that conduct executing agent operations 
willing to accept orders from all customers will continue to have an 
opportunity to be eligible for the GTH Executing Agent Subsidy program. 
Also, such TPHs that conduct this type of operation take on additional 
risks and potential costs (including those related to staffing and 
clearing) associated with this type of business, and may provide 
benefits to investors during GTH, including increased customer 
accessibility to, and liquidity and trading opportunities during, the 
GTH trading session. The proposed changes are designed to continue to 
encourage designated GTH executing agents to increase their order flow 
executed as agent in SPX and VIX symbols that trade during GTH, to meet 
the proposed amended volume thresholds and receive the proposed 
corresponding subsidies. Finally, the proposed amendment to the GTH 
Executing Agent Subsidy Program criteria is not intended to have any 
impact on competition, as the change is technical, clarifying amendment 
designed to avoid potential confusion, that makes no substantive 
changes.
    The Exchange also does not believe that the proposed changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the Act because each of the proposed 
changes applies only to fees and programs applicable to transactions in 
products exclusively listed on the Exchange.

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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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-2024-021 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-2024-021. 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 42525]]

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-2024-021 and should be submitted on 
or before June 5, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10592 Filed 5-14-24; 8:45 am]
BILLING CODE 8011-01-P