[Federal Register Volume 90, Number 88 (Thursday, May 8, 2025)]
[Notices]
[Pages 19562-19568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-07982]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102974; File No. SR-CBOE-2025-030]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Update
Its Fees Schedule in Connection With the Exchange's Plans To List and
Trade Options That Overlie the S&P 500 Equal Weight Index (``SPEQX
Options'')
May 2, 2025.
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 April 23, 2025, 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 and II
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 update its Fees Schedule in connection with the Exchange's plans to
list and trade options that overlie the S&P 500 Equal Weight Index
(``SPEQX options''); specifically, the Exchange proposes to adopt
certain standard transaction fees in connection with SPEQX options,
include/exclude SPEQX options from certain surcharges, exclude SPEQX
options from certain fees programs, and adopt a SPEQX LMM Incentive
Program. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule in connection with
its plans to list and trade options that overlie the S&P 500 Equal
Weight Index (``SPEQX options'').\3\ By way of background, the S&P 500
Equal Weight Index is the equal-dollar weighted version of the S&P 500
Index (which is capitalization-weighted). The S&P 500 Index measures
the performance of approximately 500 of the largest capitalization
stocks in the United States. The constituents of the S&P 500 Equal
Weight Index are the same as those of the S&P 500 Index, except each
constituent is allocated a fixed weight (rather than a capitalization
weight as is the case for the S&P 500 Index). SPEQX options are cash-
settled options based on the S&P 500 Equal Weight Index.
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\3\ The Exchange initially filed the proposed fee changes on
April 14, 2025 (SR-CBOE-2025-027). On April 23, 2025, the Exchange
withdrew that filing and submitted this proposal.
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The Exchange proposes to amend its Fees Schedule to accommodate the
planned listing and trading of SPEQX options.
Standard Transaction Rates and Surcharges
First, the Exchange proposes to adopt certain standard transaction
fees in connection with SPEQX options. Specifically, the proposed rule
change adopts certain fees for SPEQX options in the Rate Table for All
Products Excluding Underlying Symbol A,\4\ as follows:
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\4\ Underlying Symbol List A includes OEX, XEO, RUT, RLG, RLV,
RUI, UKXM, SPX (includes SPXW), SPESG and VIX. See Exchange Fees
Schedule, Footnote 34.
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Adopts fee code E1, appended to all Customer (capacity
``C'') orders in SPEQX options and assesses a fee of $0.05 per
contract; \5\
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\5\ Under the proposed changes, the Customer Large Trade
Discount Program, set forth in the Exchange Fees Schedule, will
apply to Customer orders in SPEQX options (included in ``Other Index
Options'' under the program). Under the program, a customer large
trade discount program in the form of a cap on customer (``C''
capacity code) transaction fees is in effect for the options set
forth in the Customer Large Trade Discount table. For SPEQX options,
regular customer transaction fees will only be charged for up to
5,000 contracts per order, similar to other index options other than
VIX, SPX/SPXW, SPESG, and XSP.
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Adopts fee code E2, which is appended to all non-Customer
(i.e., Clearing Trading Permit Holders (capacity ``F''), Non-Clearing
Trading Permit Holder Affiliates (capacity ``L''), Market-Maker
(capacity ``M''), Broker-Dealers (capacity ``B''), Joint Back-Offices
(capacity ``J''), Non-Trading Permit Holder Market-Makers (capacity
``N''), and Professionals (capacity ``U'')) orders in SPEQX options and
assesses a fee of $0.25 per contract;
In addition to the above transaction fees, the proposed rule change
also adopts a surcharge to SPEQX options transactions within the Rate
Table--All Products Excluding Underlying Symbol List A. Specifically,
the proposed rule change adds SPEQX options to the list of options for
which the FLEX Surcharge Fee of $0.10 (capped at $250 per trade)
applies to electronic FLEX orders executed by all capacity codes,
except for Cboe Compression Services (``CCS'') and FLEX Micro
transactions.\6\
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\6\ The FLEX Surcharge Fee will only be charged up to the first
2,500 contracts per trade. See Exchange Fees Schedule, Footnote 17.
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The Exchange also proposes to exclude non-Customer complex orders
in SPEQX from the Complex Surcharge by amending Footnote 35 (appended
to the Complex Surcharge) to provide that the Complex Surcharge applies
per contract per side surcharge for noncustomer complex order
executions that remove liquidity from the Complex Order Book (``COB'')
and auction responses in the Complex Order Auction (``COA'') and AIM in
all classes
[[Page 19563]]
except CBTX, MBTX, MRUT, NANOS, SPEQX, XSP, FLEX Micros, Sector Indexes
and Underlying Symbol List A.
Fees Programs
The Exchange proposes to exclude SPEQX options from the Liquidity
Provider Sliding Scale, which offers credits on Market-Maker orders
where a Market-Maker achieves certain volume thresholds based on total
national Market-Maker volume in all underlying symbols, excluding
Underlying Symbol List A, CBTX, MBTX, MRUT, MXACW, MXUSA, MXWLD, NANOS,
XSP and FLEX Micros during the calendar month. Specifically, the
proposed rule change updates the Liquidity Provider Sliding Scale table
to provide that volume thresholds are based on total national Market-
Maker volume in all underlying symbols excluding Underlying Symbol List
A, CBTX, MBTX, MRUT, MXACW, MXUSA, MXWLD, NANOS, SPEQX, XSP and FLEX
Micros during the calendar month, and that it applies in all underlying
symbols excluding Underlying Symbol List A, CBTX, MBTX, MRUT, MXACW,
MXUSA, MXWLD, NANOS, SPEQX, XSP and FLEX Micros. The proposed rule
change also updates Footnote 10 (appended to the Liquidity Provider
Sliding Scale) to provide that the Liquidity Provider Sliding Scale
applies to Liquidity Provider (Exchange Market-Maker, DPM and LMM)
transaction fees in all products except (1) Underlying Symbol List A,
CBTX, MBTX, MRUT, MXACW, MXUSA, MXWLD, NANOS, SPEQX, XSP and FLEX
Micros, (2) volume executed in open outcry, and (3) volume executed via
AIM Responses.
The proposed rule change also updates Footnote 44 (appended to the
Liquidity Provider Sliding Scale Adjustment Table) to exclude SPEQX
volume from the program by providing (in relevant part) that the Make
Rate under the Liquidity Provider Sliding Scale Adjustment Table be
derived from a Liquidity Provider's electronic volume the previous
month in all symbols excluding Underlying Symbol List A, CBTX, MBTX,
SPEQX, and XSP.
The proposed rule change updates the Volume Incentive Program
(``VIP'') table to also exclude SPEQX volume from the VIP, which
currently offers a per contract credit for certain percentage threshold
levels of monthly Customer volume in all underlying symbols, excluding
Underlying Symbol List A, Sector Indexes, DJX, CBTX, MBTX, MRUT, MXEA,
MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP and FLEX Micros. The proposed
rule change also amends Footnote 36 (appended to the VIP table) to
reflect the proposed exclusion of SPEQX from the VIP by providing (in
relevant part) that: the Exchange shall credit each TPH the per
contract amount resulting from each public customer (``C'' capacity
code) order transmitted by that TPH which is executed electronically on
the Exchange in all underlying symbols excluding Underlying Symbol List
A, Sector Indexes, DJX, CBTX, MBTX, MRUT, MXEA, MXEF, MXACW, MXUSA,
MXWLD, NANOS, SPEQX, XSP, FLEX Micros, QCC trades, public customer to
public customer electronic complex order executions, and executions
related to contracts that are routed to one or more exchanges in
connection with the Options Order Protection and Locked/Crossed Market
Plan referenced in Rule 5.67, provided the Trading Permit Holder
(``TPH'') meets certain percentage thresholds in a month as described
in the Volume Incentive Program (VIP) table; the percentage thresholds
are calculated based on the percentage of national customer volume in
all underlying symbols excluding Underlying Symbol List A, Sector
Indexes, CBTX, MBTX, MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS,
SPEQX, DJX, XSP and FLEX Micros entered and executed over the course of
the month; and in the event of a Cboe Options System outage or other
interruption of electronic trading on Cboe Options, the Exchange will
adjust the national customer volume in all underlying symbols excluding
Underlying Symbol List A, Sector Indexes, CBTX, MBTX, MRUT, MXEA, MXEF,
MXACW, MXUSA, MXWLD, NANOS, SPEQX, DJX, XSP and FLEX Micros for the
entire trading day.
The proposed rule change excludes SPEQX options from the list of
products eligible to receive Break-Up Credits in orders executed in
AIM, SAM, FLEX AIM, and FLEX SAM, by amending the Break-Up Credits
table to exclude SPEQX along with the products currently excluded--
Underlying Symbol List A, Sector Indexes, DJX, CBTX, MBTX, MRUT, MXEA,
MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP and FLEX Micros.
The Exchange proposes to exclude SPEQX options from the Marketing
Fee Program by updating the Marketing Fee table to provide that the
marketing fee will be assessed on transactions of Market-Makers
(including DPMs and LMMs), resulting from customer orders at the per
contract rate provided above on all classes of equity options, options
on ETFs, options on ETNs and index options, except that the marketing
fee shall not apply to Sector Indexes, DJX, CBTX, MBTX, MRUT, MXEA,
MXEF, MXACW, MXUSA, MXWLD, XSP, SPEQX, NANOS, FLEX Micros or Underlying
Symbol List A. The Exchange notes that, in this way, SPEQX options will
be treated as most of the Exchange's other exclusively listed products
that are currently excluded from the Marketing Fee Program. The
Exchange does believe that it is necessary at the point of newly
listing and trading for SPEQX options to be eligible for the Marketing
Fee Program and may determine in the future to submit a fee filing to
add SPEQX to the Marketing Fee Program if the Exchange believes it
would potentially generate more customer order flow in SPEQX options.
The Exchange proposes to exclude SPEQX options from the Floor
Broker Sliding Scale Rebate Program, which offers rebates for Firm
Facilitated and non-Firm Facilitated orders that correspond to certain
volume tiers and is designed to incentivize order flow in multiply
listed options to the Exchange's trading floor. The Exchange proposes
to update the Floor Broker Sliding Scale Rebate Program to provide that
the Floor Broker Sliding Scale Rebate Program applies to all products
except Underlying Symbol List A, Sector Indexes, DJX, CBTX, MBTX, MRUT,
MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, SPEQX, XSP and FLEX Micros.
The Exchange next proposes to exclude SPEQX options from
eligibility for the Order Router Subsidy (``ORS'') and Complex Order
Router Subsidy (``CORS'') Programs, in which Participating TPHs or
Participating Non-Cboe TPHs may receive a payment from the Exchange for
every executed contract routed to the Exchange through their system in
certain classes. Specifically, the proposed rule change updates the
ORS/CORS Program tables to provide that ORS/CORS participants whose
total aggregate non-customer ORS and CORS volume is greater than 0.25%
of the total national volume (excluding volume in options classes
included in Underlying Symbol List A, Sector Indexes, DJX, CBTX, MBTX,
MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, SPEQX, XSP or FLEX
Micros) will receive an additional payment for all executed contracts
exceeding that threshold during a calendar month. The proposed rule
change also updates Footnote 29 (appended to the ORS Program table) to
provide that Cboe Options does not make payments under the program with
respect to executed contracts in options classes included in Underlying
Symbols List A, Sector Indexes, DJX, CBTX, MBTX, MRUT, MXEA, MXEF,
MXACW,
[[Page 19564]]
MXUSA, MXWLD, NANOS, SPEQX, XSP or FLEX Micros or with respect to
complex orders or spread orders; and updates Footnote 30 (appended to
the CORS Program table) to provide that Cboe Options does not make
payments under the program with respect to executed contracts in
options classes included in Underlying Symbols List A, Sector Indexes,
DJX, CBTX, MBTX, MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, SPEQX,
XSP or FLEX Micros.
The Exchange also proposes to amend Footnote 6, which states that
in the event of an Exchange System outage or other interruption of
electronic trading on the Exchange that lasts longer than 60 minutes,
the Exchange will adjust the national volume in all underlying symbols
excluding Underlying Symbol List A, Sector Indexes, CBTX, MBTX, MRUT,
MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, DJX, XSP and FLEX Micros for
the entire trading day. The Exchange proposes to add SPEQX options to
the list of options.
The Exchange also proposes to exclude Firm (i.e., Clearing Trading
Permit Holders (capacity ``F'') and Non-Clearing Trading Permit Holder
Affiliates (capacity ``L'')) transactions in SPEQX from the Clearing
TPH Fee Cap. Specifically, it amends footnote 22 (appended to the
Clearing TPH Fee Cap table) to provide that all non-facilitation
business executed in AIM or open outcry, or as a QCC or FLEX
transaction, transaction fees for Clearing TPH Proprietary and/or their
Non-TPH Affiliates in all products except CBTX, MBTX, MRUT, NANOS, XSP,
SPEQX, FLEX Micros, Sector Indexes and Underlying Symbol List A, in the
aggregate, are capped at $65,000 per month per Clearing TPH. The
proposed rule change additionally updates Footnote 11 (which is also
appended to the Clearing TPH Fee Cap table) to provide that the
Clearing TPH Fee Cap in all products except CBTX, MBTX, MRUT, NANOS,
XSP, SPEQX, FLEX Micros, Underlying Symbol List A and Sector Indexes
(the ``Fee Cap''), the Cboe Options Proprietary Products Sliding Scale
for Clearing TPH Proprietary Orders, and the Clearing TPH Proprietary
VIX Sliding Scale apply to (i) Clearing TPH proprietary orders (``F''
capacity code), and (ii) orders of Non-TPH Affiliates of a Clearing
TPH.
LMM Incentive Programs
Finally, the Exchange proposes to adopt a financial program in
connection with SPEQX options for LMMs appointed to the programs (the
``LMM Incentive Program'').\7\ The LMM Incentive Program provides a
rebate to TPHs with LMM appointments to the incentive program that meet
certain quoting standards in the applicable series in a month. The
Exchange notes that meeting or exceeding the quoting standards (as
proposed; described in further detail below) in the LMM Incentive
Program product to receive the applicable rebate (as proposed;
described in further detail below) is optional for an LMM appointed to
the program. Rather, 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
the LMM to provide liquidity in the applicable class and trading
session. The Exchange may consider other exceptions to the program's
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.
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\7\ See Exchange Rule 3.55(a). In advance of the LMM Incentive
Program effective date, the Exchange will send a notice to solicit
applications from interested TPHs for the LMM role and will, from
among those applications, select the program LMMs. Factors to be
considered by the Exchange in selecting LMMs include adequacy of
capital, experience in trading options, presence in the trading
crowd, adherence to Exchange rules and ability to meet the
obligations specified in Rule 5.55.
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The Exchange notes that it currently offers several LMM Incentive
Programs for other proprietary Exchange products. The proposed
heightened quoting standards are similar to the detail and format
(corresponding premiums, quote widths, and sizes) of the quoting
standards currently in place for LMM Incentive Programs for other
proprietary Exchange products,\8\ and, similar to the LMM Incentive
Programs with respect to other propriety Exchange products, the
heightened quoting requirements offered by each of the proposed LMM
Incentive Programs are designed to incentivize LMMs appointed to the
LMM Incentive Programs to provide liquidity in SPEQX options during the
trading day upon their listing and trading on the Exchange and
thereafter, which, in turn, would provide greater trading
opportunities, added market transparency and enhanced price discovery
for all market participants in SPEQX options.
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\8\ See Exchange Fees Schedule, ``MRUT LMM Incentive Program'',
``MSCI LMM Incentive Program'', ``MXACW LMM Incentive Program'',
``MXUSA LMM Incentive Program'', ``MXWLD LMM Incentive Program'',
``NANOS LMM Incentive Program'', ``GTH VIX/VIXW LMM Incentive
Program'', ``GTH1 SPX/SPXW LMM Incentive Program'', ``GTH2 SPX/SPXW
LMM Incentive Program'', ``RTH XSP LMM Incentive Program'', ``GTH1
XSP LMM Incentive Program'', ``GTH2 XSP LMM Incentive Program'',
``RTH SPESG LMM Incentive Program'', ``RTH MBTX/MBTXW LMM Incentive
Program'', and ``RTH CBTX/CBTXW LMM Incentive Program.''
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The Exchange proposes to adopt a SPEQX LMM Incentive Program
(``SPEQX LMM Incentive Program''). As proposed, the SPEQX LMM Incentive
Program provides that if an LMM appointed to the SPEQX LMM Incentive
Program provides continuous electronic quotes during Regular Trading
Hours (``RTH'') that meet or exceed the proposed heightened quoting
standards (below) in at least 90% of SPEQX series 90% of the time in a
given month, the LMM will receive a payment 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) for that month.
[[Page 19565]]
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7 days or less 8 days to 30 days 31 days to 90 days 90 to 270 days
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Width Size Width Size Width Size Width Size
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VIX Value at Prior Close <=18:
$0.00-$3.00................................. $0.40 10 $0.50 10 $0.60 10 $0.90 3
$3.01-$8.00................................. 0.60 10 0.70 10 0.90 10 1.20 3
$8.01-$15.00................................ 3.00 5 2.00 5 2.50 5 3.00 2
$15.01-$25.00............................... 8.00 3 5.00 5 5.00 5 5.00 2
$25.01-$35.00............................... 10.00 1 10.00 3 10.00 5 7.00 2
$35.01-$50.00............................... 15.00 1 15.00 1 15.00 1 15.00 1
Greater than $50.00......................... 20.00 1 20.00 1 20.00 1 20.00 1
VIX Value at Prior Close >18 and <25:
$0.00-$3.00................................. 0.60 10 0.80 5 0.90 5 1.10 3
$3.01-$8.00................................. 0.80 10 1.00 5 1.40 5 2.00 3
$8.01-$15.00................................ 3.50 5 2.50 5 3.00 5 3.50 2
$15.01-$25.00............................... 8.00 3 8.00 3 5.00 3 5.00 2
$25.01-$35.00............................... 10.00 1 10.00 1 10.00 1 9.00 1
$35.01-$50.00............................... 20.00 1 20.00 1 20.00 1 20.00 1
Greater than $50.00......................... 25.00 1 25.00 1 25.00 1 25.00 1
VIX Value at Prior Close >=25:
$0.00-$3.00................................. 0.80 5 1.00 5 1.30 5 1.50 2
$3.01-$8.00................................. 1.80 5 2.00 5 2.50 5 3.00 2
$8.01-$15.00................................ 3.50 3 4.00 3 4.50 5 5.00 2
$15.01-$25.00............................... 12.00 1 7.50 3 8.00 3 6.00 1
$25.01-$35.00............................... 15.00 1 15.00 1 15.00 1 10.00 1
$35.01-$50.00............................... 20.00 1 20.00 1 20.00 1 20.00 1
Greater than $50.00......................... 25.00 1 25.00 1 25.00 1 25.00 1
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The heightened quoting requirements offered by the SPEQX LMM
Incentive Program is designed to incentivize LMMs appointed to the
SPEQX LMM Incentive Program to provide significant liquidity in SPEQX
options during the trading day upon their listing and trading on the
Exchange, which, in turn, would provide greater trading opportunities,
added market transparency and enhanced price discovery for all market
participants in SPEQX 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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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) \11\ 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,\12\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
\12\ 15 U.S.C. 78f(b)(4).
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Standard Transaction Rates and Surcharges
The Exchange believes that the proposed amendments to the Fees
Schedule in connection with standard transaction rates and surcharges
for SPEQX options transactions are reasonable, equitable and not
unfairly discriminatory. The Exchange believes that the proposed
standard transaction rates for Customer and non-Customer orders in
SPEQX options are reasonable. Specifically, the proposed fees are in
line with fees for transactions in other Exchange proprietary products,
when taking into account adjustments for notional size differences.
Additionally, the Exchange believes it is reasonable to charge
different fee amounts to different user types in the manner proposed
because the proposed fees are consistent with the price differentiation
that exists today for other index products.
The Exchange believes it is reasonable to apply the FLEX Surcharge
Fee to SPEQX options, as the FLEX Surcharge Fee assists the Exchange in
recouping the cost of developing and maintaining the FLEX system.
Moreover, the Exchange believes it is reasonable to exclude SPEQX
options from the Complex Surcharge because the proposed surcharge
exclusions will provide consistency between the fees assessed for
orders in other proprietary products, including CBTX, MBTX, MRUT,
NANOS, XSP, FLEX Micros, Sector Indexes and Underlying Symbol List A.
The Exchange believes the proposed standard transaction rates and
inclusion/exclusion from certain surcharges are equitable and not
unfairly discriminatory because they will apply automatically and
uniformly to all capacities as applicable (i.e., Customer and non-
Customer), in SPEQX options. The Exchange also believes that it is
equitable and not unfairly discriminatory to assess lower fees to
Customers as compared to other market participants because Customer
order flow enhances liquidity on the Exchange for the benefit of all
market participants. Specifically, Customer
[[Page 19566]]
liquidity benefits all market participants by providing more trading
opportunities, which attracts Market-Makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. The fees offered to Customers are
intended to attract more Customer trading volume to the Exchange.
Moreover, the options industry has a long history of providing
preferential pricing to Customers, and the Exchange's current Fees
Schedule currently does so in many places, as do the fees structures of
many other exchanges. Finally, all fee amounts listed as applying to
Customers will be applied equally to all Customers (meaning that all
Customers will be assessed the same amount).
Fees Programs
The Exchange believes that the proposed updates to the Fees
Schedule in connection with the application of certain fees programs to
transactions in SPEQX options are reasonable, equitable and not
unfairly discriminatory. The Exchange believes it is reasonable to
exclude SPEQX options from the Liquidity Provider Sliding Scale, the
VIP, Break-Up Credits applicable to Customer Agency Orders in AIM and
SAM, the Marketing Fee, the Floor Broker Sliding Scale Rebate Program,
and the ORS/CORS program because other proprietary index products are
also excepted from these programs.\13\ Moreover, the Exchange notes
that the proposed rule change does not alter any of the existing
programs, but instead, merely proposes not to include transactions in
SPEQX options in those programs.
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\13\ See Exchange Fees Schedule, Liquidity Provider Sliding
Scale, Volume Incentive Program, Break-Up Credits, Marketing Fee,
Floor Broker Sliding Scale Rebate Program, Order Router Subsidy
Program and Complex Order Router Subsidy Program.
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The Exchange believes that excluding SPEQX options transactions
from certain fees programs is equitable and not unfairly discriminatory
because the programs will equally not apply to, or exclude in the same
manner, all market participants' orders in SPEQX options. The Exchange
notes that the proposed rule change does not alter any of the existing
program rates or volume calculations, but instead, merely proposes to
include (or not to) include transactions in SPEQX options in those
programs and volume calculations in the same way that transactions in
proprietary index products are (or are not) currently included.
LMM Incentive Program
The Exchange believes the proposed LMM Incentive Program is
reasonable, equitable and not unfairly discriminatory. Particularly,
the proposed SPEQX LMM Incentive Program is a reasonable financial
incentive program because the proposed heightened quoting standards and
rebate amount for meeting the heightened quoting standards in SPEQX
series, as applicable, are reasonably designed to incentivize LMMs
appointed to the Program to meet the proposed heightened quoting
standards during RTH for SPEQX, as applicable, 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, particularly in newly listed and
traded products on the Exchange during the trading day.
The Exchange believes that the proposed heightened quoting
standards are reasonable because they are similar to the detail and
format (corresponding premiums, quote widths, and sizes) of the quoting
standards currently in place for LMM Incentive Programs for other
proprietary Exchange products.\14\ The Exchange believes the proposed
heightened quoting standards for the SPEQX LMM Incentive Programs
reasonably reflect what the Exchange believes will be typical market
characteristics in SPEQX options, given their notional value and
general anticipated retail base.
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\14\ See Exchange Fees Schedule, ``MRUT LMM Incentive Program'',
``MSCI LMM Incentive Program'', ``MXACW LMM Incentive Program'',
``MXUSA LMM Incentive Program'', ``MXWLD LMM Incentive Program'',
``NANOS LMM Incentive Program'', ``GTH VIX/VIXW LMM Incentive
Program'', ``GTH1 SPX/SPXW LMM Incentive Program'', ``GTH2 SPX/SPXW
LMM Incentive Program'', ``RTH XSP LMM Incentive Program'', ``GTH1
XSP LMM Incentive Program'', ``GTH2 XSP LMM Incentive Program'',
``RTH SPESG LMM Incentive Program'', ``RTH MBTX/MBTXW LMM Incentive
Program'', and ``RTH CBTX/CBTXW LMM Incentive Program.''
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Further, the Exchange believes the proposed percentage of the
series (90% of each series) in which an LMM must meet the proposed
heightened quoting requirements is reasonable given the new market
ecosystem for SPEQX options. The Exchange believes the proposed
percentage of the series is reasonably commensurate with the
potentially higher risk, and challenge in achieving the heightened
quoting requirements, LMMs would have to take on in a newly listed and
traded options class on the Exchange. The Exchange notes that the
percentage of the series in place under the LMM Programs for MXWLD
options (90% of series), which is comparable in terms of potentially
higher risk and challenge in achieving heightened quoting requirements,
are tailored in a similar manner.
The Exchange further believes that the proposed rebate amounts
received for SPEQX ($15,000) options is reasonable because it is
comparable to the rebates offered by other LMM Incentive Programs
offered by the Exchange. For example, the LMM Program for MXWLD
options, which is comparable in terms of potentially higher risk and
challenge in achieving heightened quoting requirements, currently
offers $15,000 per class, per month to appointed LMMs for MXWLD options
if the heightened quoting standards are met in a given month. 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 SPEQX 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.
Finally, the Exchange believes it is equitable and not unfairly
discriminatory to offer the financial incentive to LMMs appointed to
the LMM Incentive Program, because it will benefit all market
participants trading in SPEQX during RTH by encouraging the appointed
LMMs to satisfy the heightened quoting standards, which incentivizes
continuous increased liquidity and thereby may 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 SPEQX, which can lead to increased
volume, providing for robust markets. The Exchange ultimately proposes
to offer the SPEQX LMM Incentive Program to sufficiently incentivize
the appointed LMMs to provide key liquidity and active markets in the
newly listed and traded SPEQX options during the trading day to
encourage liquidity, thereby protecting investors and the public
interest. The Exchange also notes that an LMM appointed to the LMM
Incentive Program may undertake added costs each month to satisfy
heightened quoting standards (e.g., having to purchase additional
logical connectivity). The Exchange believes the proposed program is
equitable and not unfairly discriminatory because similar programs
currently exist for LMMs appointed to programs in other
[[Page 19567]]
proprietary products,\15\ and the proposed programs will equally apply
to any TPH that is appointed as an LMM to the LMM Incentive Program.
Additionally, if an appointed LMM does not satisfy the heightened
quoting standards in SPEQX (as applicable) for any given month, then it
simply will not receive the offered payment for that month.
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\15\ Id.
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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. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed SPEQX
transaction fees for the separate types of market participants will be
assessed automatically and uniformly to all such market participants,
i.e., all qualifying Customer orders in SPEQX options will be assessed
the same amount and all qualifying non-Customer orders in SPEQX options
will be assessed the same amount. As discussed above, while different
fees are assessed to different market participants in some
circumstances, these different market participants have different
obligations and different circumstances as discussed above. For
example, preferential pricing to Customers is a long-standing options
industry practice which serves to enhance Customer order flow, thereby
attracting Market-Makers to facilitate tighter spreads and trading
opportunities to the benefit of all market participants. Additionally,
the proposed surcharge will be assessed uniformly to all market
participants to whom the FLEX Surcharge applies.
Further, the proposed rule change will uniformly exclude all
transactions in SPEQX options from certain programs and surcharge
(i.e., Liquidity Provider Sliding Scale, the VIP, Break-Up Credits
applicable to Customer Agency Orders in AIM and SAM, the Marketing Fee,
the Floor Broker Sliding Scale Rebate Program, the ORS/CORS program,
and the Complex Surcharge), as it currently does for many of the
Exchange's other proprietary products. Overall, the proposed rule
change is designed to increase incentive for customer order flow
providers to submit customer order flow in a newly listed and traded
product, which, as indicated above, contributes to a more robust market
ecosystem to the benefit of all market participants.
The Exchange also does not believe that the proposed LMM Incentive
Program for SPEQX options would impose any burden on intramarket
competition because it applies to all LMMs appointed to the LMM
Incentive Program in a uniform manner, in the same way similar programs
apply to appointed LMMs in other proprietary products today. To the
extent appointed LMMs receive a benefit that other market participants
do not, these LMMs in their role as Market-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, especially in the newly developing
SPEQX market, 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 heightened quoting
standards (e.g., having to purchase additional logical connectivity).
The Exchange also notes that the LMM Incentive Program, like the other
LMM Incentive Programs, is 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 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 because the
proposed rule changes apply only to 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 \16\ and paragraph (f) of Rule 19b-4 \17\
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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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-2025-030 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-2025-030. 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 19568]]
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-2025-030 and should be submitted on
or before May 29, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07982 Filed 5-7-25; 8:45 am]
BILLING CODE 8011-01-P