[Federal Register Volume 89, Number 156 (Tuesday, August 13, 2024)]
[Notices]
[Pages 65961-65964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17952]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100667; File No. SR-CBOE-2024-033]


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

August 7, 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 August 1, 2024, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Fees Schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for

[[Page 65962]]

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 August 
1, 2024.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 17 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 12% of the market share.\3\ 
Thus, in such a low-concentrated and highly competitive market, no 
single options exchange possesses significant pricing power in the 
execution of option order flow. The Exchange believes that the ever-
shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow or 
discontinue to reduce use of certain categories of products in response 
to fee changes. Accordingly, competitive forces constrain the 
Exchange's transaction fees, and market participants can readily trade 
on competing venues if they deem pricing levels at those other venues 
to be more favorable.
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    \3\ See Cboe Global Markets U.S. Options Monthly Market Volume 
Summary (July 30, 2024), available at https://markets.cboe.com/us/options/market_statistics/.
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    The Fees Schedule currently lists fee codes and their corresponding 
transaction fee for routed Customer orders to other options exchanges 
specifically in Exchange Traded Funds (``ETF'') and equity options, and 
for non-Customer orders routed in Penny and Non-Penny options classes. 
The Exchange notes that its current approach to routing fees is to set 
forth in a simple manner certain sub-categories of fees that 
approximate the cost of routing to other options exchanges based on the 
cost of transaction fees assessed by each venue as well as a flat $0.15 
assessment that covers costs to the Exchange for routing (i.e., 
clearing fees, connectivity and other infrastructure costs, membership 
fees, etc.) (collectively, ``Routing Costs''). The Exchange then 
monitors the fees charged as compared to the costs of its routing 
services and adjusts its routing fees and/or sub-categories to ensure 
that the Exchange's fees do indeed result in a rough approximation of 
overall Routing Costs, and are not significantly higher or lower in any 
area. The Exchange notes that another options exchange currently 
assesses routing fees in a similar manner as the Exchange's current 
approach to assessing approximate routing fees.\4\
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    \4\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c), 
``Fees for Customer Orders Routed to Another Options Exchange.''
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    Currently, under the Routing Fees table of the Fees Schedule, fee 
code RD is appended to Customer orders in ETF/Equity options routed to 
NYSE American (``AMEX''), BOX Options Exchange (``BOX''), Cboe EDGX 
Exchange, Inc. (``EDGX''), MIAX Options Exchange (``MIAX'') or Nasdaq 
PHLX LLC (``PHLX'') (excluding orders in SPY options), and assesses a 
charge of $0.25 per contract. The Exchange proposes to amend fee code 
RD to add applicable Customer orders routed to MIAX Sapphire, LLC 
(``SPHR''), in anticipation of the launch of the new options exchange. 
The charge assessed per contract for fee code RD remains the same under 
the proposed rule change.
    The proposed changes result in an assessment of fees that, in 
anticipation of the launch of another options exchange, is in line with 
the Exchange's current approach to routing fees, that is, in a manner 
that approximates the cost of routing Customer orders in ETF/Equity 
options to other away options exchanges, based on the general cost of 
transaction fees assessed by the sub-category of away options exchanges 
for such orders (as well as the Exchange's Routing Costs). The Exchange 
notes that routing through the Exchange is optional and that Trading 
Permit Holders (``TPHs'') will continue to be able to choose where to 
route their Customer orders in ETF and equity options.
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 TPHs 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 the proposed rule change to amend fee code RD 
to account for SPHR's expected assessment of fees for Customer orders 
is reasonable because it is reasonably designed to assess routing fees 
in line with the Exchange's current approach to routing fees. That is, 
the proposed rule change is intended to include Customer orders in ETF 
and equity options routed to SPHR in the most appropriate sub-category 
of fees that approximates the cost of routing to a group of away 
options exchanges based on the cost of transaction fees assessed by 
each venue as well as Routing Costs to the Exchange. As noted above, 
the Exchange operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues if they 
deem fee levels at a particular venue to be excessive or incentives to 
be insufficient. The Exchange notes that routing through the Exchange 
is optional and that TPHs will continue to be able to choose where to 
route their Customer orders in ETF and equity options in the same sub-
category group of away exchanges as they currently may choose to route. 
The proposed rule change reflects a competitive pricing structure 
designed to incentivize market participants to direct their order flow 
to the Exchange, which the Exchange believes would enhance market 
quality to the benefit of all TPHs. The Exchange further notes

[[Page 65963]]

that another options exchange currently approximates routing fees in a 
similar manner as the Exchange's current approach.\9\ The Exchange 
believes that the proposed rule change is equitable and not unfairly 
discriminatory because all TPHs' applicable Customer orders in ETF and 
equity options routed to SPHR will be automatically and uniformly 
assessed the applicable routing charge.
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    \9\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c), 
``Fees for Customer Orders Routed to Another Options Exchange.''
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the Exchange 
does not believe the proposed rule change to amend fee code RD will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. All TPHs' 
applicable Customer orders in ETF and equity options routed to SPHR 
will automatically yield fee code RD and uniformly be assessed the 
corresponding fee. The Exchange notes that another options exchange 
approximates routing costs in a similar manner as the Exchange's 
current approach.\10\
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    \10\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c), 
``Fees for Customer Orders Routed to Another Options Exchange.''
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    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 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 16% of the market 
share.\11\ 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.'' \12\ 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' . . . .''.\13\ 
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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    \11\ See supra note 3.
    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \13\ 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 \14\ and paragraph (f) of Rule 19b-4 \15\ 
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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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-2024-033 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-2024-033. 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-2024-033, and should be 
submitted on or before September 3, 2024.
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    \16\ 17 CFR 200.30-3(a)(12).


[[Page 65964]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17952 Filed 8-12-24; 8:45 am]
BILLING CODE 8011-01-P