[Federal Register Volume 90, Number 242 (Friday, December 19, 2025)]
[Notices]
[Pages 59608-59617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-23331]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104410; File No. SR-CboeBZX-2025-158]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt
Fees for New Logical Ports in Connection With a New Connectivity
Offering on Its Equity Options Platform
December 16, 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 December 4, 2025, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') 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 Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
adopt fees for new logical ports in connection with a new connectivity
offering on its equity options platform. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Commission's website (https://www.sec.gov/rules/sro.shtml), the
Exchange's website (https://www.cboe.com/us/equities/regulation/rule_filings/bzx/), and at the principal office of the Exchange.
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 fee schedule to adopt fees for
Unitized Logical Ports, a new connectivity offering for its equity
options platform (``BZX Options'') and adopt new Average Daily Quote
and Average Daily Order fees.\3\
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\3\ The Exchange initially submitted the proposed rule change on
August 30, 2024 and was effective September 3, 2024 (SR-CboeBZX-
2024-082). On September 13, 2024, the Exchange withdrew that filing
and submitted SR-CboeBZX-2024-088. On November 12, 2024, the
Exchange withdrew that filing and submitted SR-CboeBZX-2024-113. On
December 20, 2024, the Exchange withdrew that filing and submitted
SR-CboeBZX-2024-131. On February 3, 2025, the Exchange withdrew that
filing and submitted SR-CboeBZX-2025-016. On April 4, the Exchange
withdrew that filing and submitted SR-Cboe-BZX-2025-052. On June 2,
2025, the Exchange withdrew that filing and submitted SR-Cboe-BZX-
2025-075. On July 31, 2025, the Exchange withdrew that filing and
submitted SR-CboeBZX-2025-107. On September 26, 2025, the Exchange
submitted SR-CboeBZX-2025-134. On November 24, 2025, the Exchange
withdrew that filing and submitted SR-CboeBZX-2025-152. On December
4, 2025, the Exchange withdrew that filing and submitted this
filing.
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[[Page 59609]]
Unitized Port Fees
By way of background, Exchange Members may interface with the
Exchange's Trading System \4\ (hereinafter, ``System'') by utilizing
either the Financial Information Exchange (``FIX'') protocol or the
Binary Order Entry (``BOE'') protocol. The Exchange further offers a
variety of logical ports,\5\ which provide users of these ports with
the ability within the Exchange's System to accomplish a specific
function through a connection, such as order entry, data receipt or
access to information. For example, such ports include Logical
Ports,\6\ Purge Ports,\7\ and Ports with Bulk Quoting Capabilities \8\
(``Bulk Ports''). By way of further background, each of these ports
corresponds to a single running order handler. Each order handler
processes the messages it receives from these ports from the connected
Members. This processing includes determining whether the message
contains the required information to enter the System, whether the
message parameters satisfy port-level (i.e., pre-trade) risk controls,
and where to send that message within the System (i.e., to which
matching engine.\9\) Once an order handler completes the processing of
a message, it sends that message to the appropriate matching engine.
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\4\ The terms ``Trading System'' and ``System'' mean the
automated trading system used by BZX Options for the trading of
options contracts. See Chapter XVI. General Provisions--BZX Options,
Rule 16.1 Definitions.
\5\ See Exchange Rule 21.1 (l)(2), definition of ``logical
port.'' Logical ports include FIX and BOE ports (used for order
entry), drop logical port (which grants users the ability to receive
and/or send drop copies) and ports that are used for receipt of
certain market data feeds.
\6\ The term ``Logical Ports'' used herein shall refer to FIX
and BOE ports (used for order entry). See Cboe BZX Options Fee
Schedule, Options Logical Port Fees, ``Logical Ports'' (which
exclude Purge Port, Multicast PITCH Spin Server Port or GRP Port).
\7\ Purge Ports provide users the ability to cancel a subset (or
all) of open orders across Executing Firm ID(s) (``EFID(s)''),
Underlying symbol(s), or CustomGroupID(s), across multiple logical
ports/sessions. See Securities Exchange Act Release 79956 (February
3, 2017), 82 FR 10102 (February 9, 2017) (SR-BatsBZX-2017-05). See
also https://cdn.cboe.com/resources/membership/US_Options_BOE_Specification.pdf and https://cdn.cboe.com/resources/membership/__FIX_Specification.pdf.
\8\ See Exchange Rule 21.1 (l)(3), definition of ``bulk port.''
Bulk Ports provide users with the ability to submit and update
multiple quote bids and offers in one message through logical ports
enabled for bulk-quoting.
\9\ A matching engine is a part of the Exchange's System that
processes options quotes and trades on a symbol-by-symbol basis.
Some matching engines will process option classes with multiple root
symbols, and other matching engines will be dedicated to one single
option root symbol (for example, options on SPY will be processed by
one single matching engine that is dedicated only to SPY). A
particular root symbol may only be assigned to a single designated
matching engine. A particular root symbol may not be assigned to
multiple matching engines.
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Historically, all order handlers connect to all matching engines.
That is, under the BOEv2 and FIX protocols,\10\ Members were able to
access all symbols from a single logical port since each port
corresponds to a single order handler that conveniently connects to all
matching engines (``convenience layer''). Although the Exchange
configures the software and hardware for its order handlers in the same
manner, there can be a natural variance in the amount of time it takes
individual order handlers to process messages of the same type under
this architecture. Factors that contribute to this differentiation in
processing times include the availability of shared resources (such as
memory), which is impacted by (among other things) then-current message
rates, the number of active symbols (i.e., classes), and recent
messages for a symbol. This natural differentiation in processing times
inherently may cause some messages to be sent from an order handler to
a matching engine ahead of other messages that the Exchange's System
may have received earlier on a different order handler.
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\10\ The Exchange notes for clarity that while BOEv2 has been
decommissioned, Members can still access the convenience layer
through BOEv3 protocol.
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The Exchange recently implemented a new architecture and protocol
which includes, among other things, a single gateway per matching
engine (``unitized layer''), which renders the above-described natural
variance of order handler processing irrelevant for Members that
connect to the unitized order handler.\11\ More specifically, effective
August 19, 2024, the Exchange implemented this new unitized access
architecture and a new version of its Binary Order Entry (BOE) protocol
\12\ (``BOEv3''), which also resulted in the adoption of new logical
port types (``Unitized Logical Ports''), for which the Exchange is now
seeking to establish fees.\13\ Under the new unitized BOEv3
architecture, a single BOEv3 order handler corresponds to a single
matching engine and all message traffic (including FIX and BOEv3
convenience layer port traffic) \14\ passes through this unitized BOEv3
order handler before reaching that order handler's corresponding
matching engine.\15\ If a Member desires to access this unitized layer
of the BOEv3 architecture, the Member would need to obtain a Unitized
Logical Port for each corresponding matching engine(s) that process the
symbol(s) that Member desires to trade.\16\
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\11\ See Securities Exchange Act Release 100582 (July 23, 2024),
89 FR 60958 (July 29, 2024) (SR-CboeBZX-2024-071).
\12\ The BOE protocol is a proprietary order entry protocol used
by Members to connect to the Exchange. The current version is BOEv3.
\13\ See Securities Exchange Act Release No. 100582 (July 23,
2024) 89 FR 60958 (July 29, 2024) (SR-CboeBZX-2024-071).
\14\ The Exchange decommissioned BOEv2 in March 2025.
\15\ The Exchange notes that this improved infrastructure
improves the prior noted natural variance in the amount of time it
takes individual order handlers to process messages of the same type
for all Members due to the improved infrastructure, even if a
participant chooses to not utilize Unitized Logical Ports.
\16\ Members will be able to purchase Unitized Logical Ports
individually or may purchase a ``set,'' which will provide the total
number of ports needed to connect to each available matching engine.
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BOEv3 Unitized Logical Ports provide an expedited processing path
to a single matching engine over that of other inbound paths on a best-
efforts basis. Under routine circumstances, the System will process
pending purge messages from BOEv3 Unitized Logical Ports before
processing other inbound paths. Exceptions to this approach exist with
regard to various message traffic and rate controls that are
incorporated into the BOEv3 architecture. To illustrate how BOEv3
processes inbound messages, consider the following simplified example:
(1) process pending purge messages from BOEv3 Unitized Logical Ports;
(2) process all other pending messages from BOEv3 Unitized Logical
Ports; (3) process pending messages from convenience ports.
As noted above, to access the BOEv3 architecture a Member must
obtain a Unitized Logical Port for each corresponding matching
engine(s) that processes the symbol(s) the Member desires to trade. The
three new port types that have been adopted are: (1) BOE Unitized
Logical Ports,\17\ (2) Bulk
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\17\ Similar to the Exchange's preexisting Logical Ports, the
new Unitized Logical Ports allow Members to submit orders and
quotes.
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[[Page 59610]]
Unitized Logical Ports,\18\ and (3) Purge Unitized Logical Ports \19\
(collectively, ``Unitized Logical Port''). With the exception of
Exchange Options Market Makers \20\ (hereinafter, ``Market Makers'')
who may only quote via a BOE Bulk Unitized Logical Port,\21\ use of the
unitized architecture and purchase of a Unitized Logical Port is
completely voluntary, and Members (i.e., non-Market Makers) are not
required, or under any regulatory obligation, to utilize them.
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\18\ Similar to the Exchange's preexisting Bulk Ports, the new
Bulk Unitized Logical Ports allow Members to submit and update
multiple quote bids and offers in one message and are particularly
useful for Members that provide quotations in many different
options.
\19\ Similar to the Exchange's preexisting Purge Ports, the new
Purge Unitized Logical Ports are dedicated logical ports that
provide the ability to cancel/purge all open orders, or a subset
thereof, across multiple logical ports through a single cancel/purge
message. They also solely process purge messages and are designed to
assist Members, including Market Makers, in the management of, and
risk control over, their orders and quotes, particularly if the
Member is dealing with a large number of options.
\20\ The terms ``Options Market-Maker'' and ``Market-Maker''
mean an Options Member registered with the Exchange for the purpose
of making markets in options contracts traded on the Exchange and
that is vested with the rights and responsibilities specified in
Chapter XXII of these Rules. See Chapter XVI. General Provisions--
BZX Options, Rule 16.1 Definitions.
\21\ Market Makers may provide liquidity using either FIX, BOE
convenience ports, BOE Unitized Logical Ports, or BOE Bulk Unitized
sessions using either order or quote messages. Only the BOE Bulk
Unitized sessions support the quote messages. BOE Bulk convenience
sessions were not created due to lack of demand from MMs.
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The Exchange proposes to establish fees for the new Unitized
Logical Ports, which can be purchased on an individual basis (i.e.,
capable of accessing a specified matching engine (``Matching Unit''))
\22\ and/or as a set (``Unitized Logical Port Set'') (i.e., will
include the total number of ports needed to connect to each available
Matching Unit). The proposed fees for Unitized Logical Ports purchased
individually and as sets are as follows:
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\22\ The Exchange notes that it operates 32 separate matching
units.
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BOE Unitized Logical Port......... $350/port/month.
Bulk Unitized Logical Port........ $550/port/month.
Purge Unitized Logical Port....... $400/port/month.
BOE Unitized Logical Port (Set)... $2,500/month for 1st and 2nd port
set, $3,000/month for 3rd-14th port
set, $3,500/month for 15th-30th
port set.
Bulk Unitized Logical Port (Set).. $5,500/month for 1st and 2nd port
set, $6,000/month for 3rd-14th port
set, $6,500/month for 15th-30th
port set.
Purge Unitized Logical Port (Set). $2,500/month for 1st and 2nd port
set, $3,000/month for 3rd-14th port
set, $3,500/month for 15th-30th
port set.
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The proposed fees for Unitized Logical Port Sets are progressive.
For example, if a User were to purchase 11 BOE Unitized Logical Port
Sets, it will be charged a total of $32,000 per month ($2,500 * 2 +
$3,000 * 9). As is the case today for existing logical ports, the
monthly fees are assessed and applied in their entirety and are not
prorated. The Exchange notes the current standard fees assessed for
existing logical ports will remain applicable and unchanged,\23\ and
Members are still able to purchase and utilize such ports if they
choose to do so. The proposed fees for Unitized Logical Port Sets will
be assessed per set, per Port Type. As an example, if a Member requests
three BOE Unitized Logical Port Sets, one Bulk Unitized Logical Port
Set, and one Purge Unitized Logical Port Set, the firm would be charged
$8,000 ($2,500 + $2,500 + $3,000) for the three BOE Unitized Logical
Port Sets, $5,500 for the one Bulk Unitized Logical Port Set, and
$2,500 for the one Purge Unitized Logical Port Set.\24\
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\23\ For example, the Exchange currently assesses a monthly per
port fee of $750 for Logical Ports and Purge Ports. It also assesses
$1,500 per port month for the 1st and 2nd Bulk Ports and $2,500 for
the 3rd or more Bulk Ports. See Cboe BZX Options Fee Schedule,
Options Logical Port Fees.
\24\ The Exchange proposes to include this example in the Fee
Schedule to provide further clarity as to the application of the
proposed fees.
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Since the Exchange has a finite amount of capacity, it also
proposes to prescribe a maximum limit on the number of Unitized Logical
Ports that may be purchased and used on a per Member, per Matching Unit
basis. The purpose of establishing these limits is to manage the
allotment of Unitized Logical Ports in a fair and reasonable manner
while preventing the Exchange from being required to expend large
amounts of resources in order to provide an unlimited capacity to its
matching engines. The Exchange previously proposed to provide that the
two structures (i.e., individual unitized ports or unitized port sets)
can be combined for up to a maximum of 20 Unitized Logical Ports per
Member, per Matching Unit, per type of Unitized Logical Port.\25\ The
Exchange noted at the time it adopted this maximum that it would
continue monitoring interest by all Members and system capacity
availability with the goal of increasing these limits to meet Members'
needs if and when the demand is there and/or the Exchange is able to
accommodate such demand.\26\ Since then, the Exchange has determined
that it is able to accommodate an increased cap relative to current
demand and available to the Exchange's matching engine and order
handler capacity. As such, the Exchange proposes to increase the
maximum to 30 Unitized Logical Ports per Member, per Matching Unit, per
port type. As an example, a Member may request 12 BOE Unitized Logical
Port Sets and 18 individual BOE Unitized Logical Ports for Matching
Unit 1, providing a total max of 30 BOE Unitized Logical Ports on
Matching Unit 1 specifically. This would result in having 30 BOE
Unitized Logical Ports on Matching Unit 1 and 12 BOE Unitized Ports on
all additional Matching Units as part of the 12 BOE Unitized Logical
Port Sets requested. Additionally, a firm may request 30 Bulk Unitized
Logical Port Sets and 30 Purge Unitized Logical Port Sets as those
would constitute different port types.\27\ The Exchange believes the
proposed cap will be sufficient for the vast majority of Members, as
the Exchange understands that at this time, no Member desires more than
the current cap. The Exchange notes that it will continue to monitor
interest in Unitized Logical Ports and system capacity availability
with the goal of further increasing these limits to meet Members needs
if and when the demand is there, and the Exchange is able to
accommodate it. Additionally, Members
[[Page 59611]]
will still be able to utilize the existing logical port connectivity
offerings with no maximum limit in addition to their Unitized Logical
Port allocation.\28\ As further discussed below, the Exchange's pricing
for these new Unitized Logical Ports are less than or comparable to
similar offerings from other exchanges.\29\
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\25\ See Securities Exchange Act Release 101212 (September 27,
2024), 89 FR 80614 (October 3, 2024) (SR-CboeBZX-2024-088).
\26\ Id.
\27\ The Exchange proposes to include this example in its Fee
Schedule to provide clarity as to how Unitized Logical Port fees
will be assessed. The Exchange further notes that in its prior
filing (SR-CboeBZX-2025-016), it increased the cap to 30 and noted
as such in its fee schedule; however, the Exchange will now include
a clarifying update in its fee schedule to update the max tier
amount from 20 to 30 for consistency and clarity.
\28\ The Exchange notes that it does not support conversion of
any one port type to another. Members and Market Makers would need
to request new port and delete existing their port to transition
from convenience ports to a Unitized Logical Port.
\29\ See MIAX Express Interface for Quoting and Trading Options,
MEI Interface Specification, Section 1.2 (MEI Architecture)
available at: MIAX_Express_Interface_MEI_v2.10a.pdf (miaxglobal.com)
which indicates firms can connect directly to one or more matching
engines depending on which symbols they wish to trade and states
``MIAX trading architecture is highly scalable and consists of
multiple trade matching environments (clouds). Each cloud handles
trading for all options for a set of underlying instruments'' and
provides that ``Market Maker firms can connect to one or more pre-
assigned servers on each cloud. This will require the firm to
connect to more than one cloud in order to quote in all underlying
instruments they are approved to make markets in'' See also MIAX
Emerald Options Order Management Using FIX Protocol, FIX Interface
Specification, available at https://www.miaxglobal.com/sites/default/files/page-files/FIX_Order_Interface_FOI_v2.6c.pdf. MIAX
describes its FIX Order Interface Gateway as ``a high-speed FIX
Order Interface gateway [that] conveniently routes orders to our
trading engines through a common entry point to our trading
platform.'' See https://www.miaxglobal.com/markets/us-options/miax-options/interface-specifications.
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Average Daily Quotes and Average Daily Order Fees
The Exchange also proposes to adopt Average Daily Order (``ADO'')
and Average Daily Quote (``ADQ'') fees. ``ADO'' represents the total
number of orders for the month, divided by the number of trading days.
``ADQ'' represents the total number of quotes for the month, divided by
the number of trading days. When measuring a Member's ADO and ADQ,
orders, quotes, cancel/replace modify orders, and quote updates which
submit a bid or offer and do not include cancels, are included.
Further, ADO and ADQ will include orders and quotes submitted by a
Member from all logical port types (i.e., non-unitized logical ports
and Unitized Logical Ports). Each Member may submit up to 2,000,000
average daily orders or up to 250,000,000 average daily quotes per
calendar month without incurring any ADO or ADQ fees. In the event that
the average number of quotes per trading day during a calendar month
submitted exceeds 250,000,000, each incremental usage of up to 20,000
average daily quotes will incur an additional fee as set forth in the
table below. Similarly, in the event that the average number of orders
per trading day during a calendar month submitted exceeds 2,000,000,
each incremental usage of up to 1,000 average daily orders will incur
an additional ADO fee as set forth in the table below.\30\ A Member's
ADO and ADQ will be aggregated together with any affiliated Member
sharing at least 75% common ownership.
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\30\ The term ``quote'' refers to bids and offers submitted in
bulk messages. A bulk message means a single electronic message a
user submits with an M (Market-Maker) capacity to the Exchange in
which the User may enter, modify, or cancel up to an Exchange-
specified number of bids and offers. A User may submit a bulk
message through a bulk port as set forth in Exchange Rule
21.1(j)(3). See Rule 16.1 (definition of bulk message).
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Fee
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Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
<=250,000,000 >250,000,000 >500,000,000 >1,000,000,000 >3,500,000,000
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ADQ Fee Rate per 20,000 ADQ................................. $0.00 $0.05 $0.075 $0.10 $0.20
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Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
<=2,000,000 >2,000,000 >2,500,000 >3,000,000 >3,500,000
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ADO Fee Rate per 1,000 ADO.................................. $0.00 $1.00 $1.50 $2.00 $2.50
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As an example, a Member that has 510,000,000 ADQ would subsequently
have 25,500 ``ADQ increments'' (510,000,000 ADQ/20,000 ADQ increments).
While 12,500 of the 25,500 ADQ increments are free within Tier 1,
12,500 of the ADQ increments would be fee liable at $0.050 within Tier
2, while the remaining 500 ADQ increments would be fee liable at $.075
within Tier 3, resulting in a total ADQ fee of $662.50 for that
month.\31\
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\31\ The Exchange proposes to include this example in the Fees
Schedule to provide further clarity as to the application of the
proposed fees.
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The Exchange notes that market participants with incrementally
higher ADO or ADQ are likely to require more of the Exchange's Trading
System resources, bandwidth, and capacity. In this regard, higher ADO
or ADQ may, in turn, create System latency and potentially impact other
Members' ability to receive timelier executions. The proposed fee
structure has multiple thresholds, and the proposed fees are
incrementally greater at higher ADO and ADQ rates because the potential
impact on Exchange Systems, bandwidth, and capacity becomes greater
with increased ADO and ADQ rates. As noted above, the proposal
contemplates that a Member would have to exceed the high ADO rate of
2,000,000 and a Member would have to exceed the high ADQ rate of
250,000,000 before that market participant would be charged a fee under
the proposed respective tiers. The Exchange believes that it is in the
interests of all Members and market participants who access the
Exchange to not allow other market participants to strain System
resources, but rather encourage efficient usage of network capacity.
The Exchange also believes this proposal (and in particular the
proposed incrementally higher fee amounts associated with higher ADO
and ADQ) will help to moderate excessive order/quote and trade activity
from Members that may require the Exchange to otherwise increase its
storage capacity and will encourage such activity to be submitted in
good faith for legitimate purposes.
The Exchange also represents that the proposed fees are not
intended to raise profits; rather, as noted above, it is intended to
encourage efficient behavior so that market participants do not exhaust
System resources. Moreover, the Exchange provides Members with daily
reports, free of charge, which details their order and trade activity
in order for those firms to be fully aware of all order and trade
activity they (and their affiliates) are sending to the Exchange. This
will allow Members to monitor their behavior and determine whether it
is approaching any of the ADO or ADQ thresholds that trigger the
proposed fees.
Lastly, the Exchange notes that other exchanges have adopted
various fee programs that assess incrementally higher fees to Members
that have incrementally higher order and/or
[[Page 59612]]
quoting trading activity for similar reasons.\32\
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\32\ See, e.g., Securities Exchange Act Release No. 60102 (June
11, 2009), 74 FR 29251 (June 19, 2009) (SR-NYSEArca-2009-50)
(adopting fees applicable to Members based on the number of orders
entered compared to the number of executions received in a calendar
month). It appears that Nasdaq similarly assesses a penalty charge
to its members that exceed certain ``weighted order-to-trade
ratios''. See Price List--Trading Connectivity, NASDAQ, available at
https://www.nasdaqtrader.com/trader.aspx?id=pricelisttrading2. See
also Securities Exchange Act Release No. 91406 (March 25, 2021), 86
FR 16795 (March 31, 2023) (SR-EMERALD-2021-10) (adopting an
``Excessive Quoting Fee'' to ensure that Market Makers do not over
utilize the exchange's System by sending messages to the MIAX
Emerald, to the detriment of all other Members of the exchange).
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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.\33\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \34\ 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) \35\ 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) \36\ of the Act, which
requires that Exchange rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its Members and other
persons using its facilities.
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\33\ 15 U.S.C. 78f(b).
\34\ 15 U.S.C. 78f(b)(5).
\35\ Id.
\36\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed fees are reasonable because
Unitized Logical Ports provide a valuable service in that Unitized
Logical Ports are intended to create a more consistent, and more
deterministic experience for messages once received within the
Exchange's System under the recently adopted unitized BOEv3
architecture. As discussed above, the new architecture (and thereby the
new Unitized Logical Ports) was designed to create a more consistent
and more deterministic experience for messages once received within the
System, which the Exchange believes improves the overall access
experience on the Exchange and will enable future system enhancements.
As noted, the BOEv3 protocol and architecture, along with the three new
corresponding Unitized Logical Ports, are intended to reduce the
natural variance of order handler processing times for messages, and as
a result reduce the potential resulting ``reordering'' of messages when
they are sent from order handlers to matching engines. The adoption of
the unitized BOEv3 structure (including the corresponding new Unitized
Ports) was a technical solution that is intended to reduce the
potential of this reordering and increase determinism.\37\ The Exchange
believes the proposed fees are also reasonable to offset costs incurred
in order to build out an entirely new unitized architecture.
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\37\ See Securities Exchange Act Release 100582 (July 23, 2024),
89 FR 60958 (July 29, 2024) (SR-CboeBZX-2024-071).
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Furthermore, the Exchange also notes that it believes the proposed
fees are similar to or less than fees assessed by other exchanges, for
analogous connections as explained in further detail below.\38\ The
Exchange notes that other exchanges that offer similar pricing for
similar connections have a comparable, or even lower, market share as
the Exchange, as also detailed further below. Indeed, the Exchange has
reviewed the U.S. options market share for each of the eighteen options
markets utilizing total options contracts traded year-to-date as of the
end of June 2025, as set forth in the following graph: \39\
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\38\ See e.g. MIAX Pearl Options Fee Schedule.
\39\ Market share is the percentage of volume on a particular
exchange relative to the total volume across all exchanges, and
indicates the amount of order flow directed to that exchange. High
levels of market share enhance the value of trading and ports. Total
contracts include both multi-list options and proprietary options
products. Proprietary options products are products with
intellectual property rights that are not multi-listed. The Exchange
does not currently list proprietary products.
[GRAPHIC] [TIFF OMITTED] TN19DE25.000
[[Page 59613]]
The Exchange (market share of 4.30%) notes that the proposed Purge
Unitized Logical Port fee of $400 to connect to a matching engine is
lower than fees charged by at least two other exchanges with comparable
(indeed, even lower) market share, particularly by MIAX Emerald (3.90%
market share) and MIAX Pearl (2.7% market share). The Exchange does
note that both MIAX Emerald and MIAX Pearl offer two purge ports for a
matching engine connection at a cost of $600,\40\ while the Exchange
offers the primary Purge Unitized Logical Port as well as a secondary
Purge Unitized Logical Port for its redundant secondary data center
ports for $400. The Exchange believes that the bulk of the value
customers derive is not within the quantity of Purge Unitized Logical
Ports a Member purchases, but the ability to connect to the specific
matching engine.\41\ For instance, a Member may need to purchase
several convenience ports to minimize the natural variance of order
handler processing times for messages, but by comparison the same
Member may only need to purchase a single Unitized Logical Port to
achieve the same results. For this reason, the Exchange still believes
it is better priced than MIAX Emerald's and MIAX Pearl's comparable
offerings.
---------------------------------------------------------------------------
\40\ See e.g., MIAX Emerald Options Fee Schedule.
\41\ Due to the higher performance that offers higher throughput
with more deterministic outcomes for participants, the revised
architecture leads to a decreased demand in ports generally.
---------------------------------------------------------------------------
Furthermore, even when comparing the costs of purchasing Purge
Unitized Logical Ports to connect to all matching engines, the Exchange
still assesses a lower fee than MIAX Pearl or MIAX Emerald. Connecting
to all matching engines on MIAX Emerald or MIAX Pearl would cost
$7,200, while connecting to all matching engines on BZX Options costs
$2,500.\42\ As noted above, while the Exchange believes the bulk of the
value customers derive is the ability to connect to specific matching
engines, and in this case, all matching engines, if a customer did want
to have two Purge Unitized Logical Ports for all matching engines (in
addition to the included secondary purge ports provided), it would cost
the participant $5,000 ($2,500/set x 2)--still lower than the cost of
$7,200 for two purge ports for all matching engines that MIAX Emerald
and MIAX Pearl offer.
---------------------------------------------------------------------------
\42\ The pricing amounts for MIAX Pearl and MIAX Emerald are
based off of $600 per Purge Port fee per matching engine with a
total of 12 matching engines (see MIAX Pearl Options--Reminder of
rebalancing of the symbol distribution across Trade Matching
Environments (Clouds) effective for Trading on May 12, 2025 [verbar]
MIAX and MIAX Emerald Options Rebalancing of the symbol distribution
across Trade Matching Environments (Clouds) effective for Trading on
April 14, 2025 [verbar] MIAX). While the pricing for BZX Options is
based on connecting to all Matching Engines by purchasing a set.
---------------------------------------------------------------------------
While not as closely comparable, MIAX Emerald and MIAX Pearl both
offer Full Service MEI Ports (analogous to the Exchange's Bulk Port
offering) and Limited Service MEI Ports (analogous to the Exchange's
BOE Port offering) that are based on the lesser of a participant's per
class basis or percentage of total national average daily volume
measurement. For each matching engine a participant connects to (based
on their activity), they receive two Full Service MEI Ports and four
Limited Service MEI Ports.\43\ Based on publicly available information,
MEI ports provide market makers direct connections to each matching
engine for high-speed mass quoting.\44\ A Full Service MEI Ports
support all input message types, and Limited Service MEI Ports support
all message types except bulk quotes.
---------------------------------------------------------------------------
\43\ See e.g., MIAX Pearl Options Fee Schedule.
\44\ See MIAX Emerald Options Exchange, Market Access--MIAX
Express Interface, at 2, available at: https://www.miaxglobal.com/sites/default/files/website_file-files/MIAX_Emerald_Fact_Sheet_03272019.pdf.
---------------------------------------------------------------------------
Notably, MIAX Emerald and MIAX Pearl offer their Full Service MEI
Ports and Limited Service MEI Ports only to market makers on those
respective exchanges, and non-market maker members are not permitted to
purchase MEI connections. As such, when comparing the Unitized Logical
Port fees assessed to Market Makers by the Exchange to the Full Service
MEI and Limited Service MEI Ports assessed to market makers by MIAX
Emerald and MIAX Pearl, the Exchange believes that its proposed fee for
Unitized Logical Ports is reasonable and justified by the value derived
by Options Market Makers purchasing these connections in being able to
connect directly to a certain matching engine.
Specifically, presuming a participant is quoting up to 10 classes
for MIAX Pearl or 5 classes for MIAX Emerald (the lowest available tier
for each exchange), they are connecting to fewer matching engines than
another participant who may be quoting over 100 classes (the highest
tier available for both MIAX Pearl and MIAX Emerald). In comparing the
monthly cost using the pricing of the lowest tiers for MIAX Pearl and
MIAX Emerald, the Exchange presumes an estimated comparable connection
of connecting to 3 different matching engines at a cost of $550 per
Bulk Port per matching engine and $350 per BOE Port per matching
engine.\45\ This equates to $7,500 (($350 * 4 Ports * 3 matching
engines) + ($550 * 2 Ports * 3 matching engines) per month for BZX
Options, and $5,000 per month for both MIAX Pearl and Emerald. For the
highest tier, the Exchange presumes that if a participant was quoting
over 100 classes, they are likely connecting to all matching engines.
In this case, it costs a participant $12,000 per month for MIAX Pearl,
$20,500 per month for MIAX Emerald, and $22,000 ($5,500 * 2 Bulk Sets)
+ ($2,500 * 2 BOE Sets (Tier 1)) + ($3,000 * 2 BOE Sets (Tier 2)) per
month for BZX Options to connect to all matching engines.
---------------------------------------------------------------------------
\45\ The Exchange notes that, based on publicly available
information from MIAX Emerald and MIAX Pearl, a definitive
comparison is not feasible. Rather, the Exchange could only
reasonably infer that using the lowest tier for each of MIAX Emerald
and MIAX Pearl may reasonably equate to connecting to 3 Exchange
matching engines. The Exchange deduced that 3 Exchange matching
engines may be a relevant comparison given the number of quoting
symbols quoted per Exchange matching engine.
---------------------------------------------------------------------------
While the Exchange is priced higher in these specific examples, it
again believes the value comes from the ability to connect to
additional matching engines as opposed to the quantity of ports itself
and participants of the Exchange are able to determine their number of
desired ports as opposed to having a set package based on their
Exchange activity. For example, a participant of BZX Options can have
similar matching engine connectivity to the lowest tier of MIAX Emerald
or MIAX Pearl by connecting to three matching engines (using the same
presumed number as above) by purchasing three Bulk Ports for a cost of
$1,650 per month, substantially less than the fixed costs of $5,000 per
month of MIAX Emerald and MIAX Pearl. Additionally, a participant on
BZX Options is able to connect to all matching engines for a price of
$5,500 per month by purchasing a Bulk Set as opposed to the fixed cost
of MIAX Emerald and MIAX Pearl at $20,000 per month and $12,000 per
month, respectively. Furthermore, MIAX Emerald does allow participants
to purchase additional Limited Service ports at a price of $420 per
month, higher than the Exchange's comparable offering of $350 per month
for a BOE port. While it is challenging to compare the exact pricing on
these products, the Exchange believes that it is priced comparably, if
not lower than MIAX Pearl and MIAX Emerald.
The Exchange acknowledges that the above comparability analysis
does not consider the fees assessed to non-Options Market Makers on the
Exchange relative to non-market makers on MIAX Emerald or MIAX Pearl.
This is due,
[[Page 59614]]
however, to the fact that MIAX Emerald and MIAX Pearl do not permit
non-market makers to purchase MEI ports (the closest comparable product
to BZX's Unitized Logical Ports). Presumably, MIAX Emerald and MIAX
Pearl limit such participants to use of only MIAX's FIX ports.
Importantly, unlike MIAX Emerald and MIAX Pearl, the Exchange permits
its Members (i.e., non-Market Makers) to purchase a Unitized Logical
Port, should such Member deem the use of such connection to be
beneficial to their trading strategy. Additionally, Members (i.e., non-
Market Makers) may instead elect to purchase Exchange BOE convenience
or FIX Ports, or a combination of Unitized Logical Ports, BOE
convenience and FIX ports. Furthermore, Members and Market Makers are
free to choose to purchase Unitized Logical Ports in sets or by
individual ports (dependent on the firm's matching engine needs, which
may be based on products it trades, strategies, or other business
needs). As such, the Exchange's offering is both more widely available
and provides Members and Market Makers with more flexibility and
customization in contrast to MIAX's strict matching engine connectivity
based on the classes a Market Maker is quoting in and its rigid fee
structure.
As an additional point of comparison for non-market makers, the
Exchange notes the FIX port fees it charges it Members, relative to
those charged by MIAX Emerald and MIAX Pearl for their non-market maker
members.\46\ Specifically, the Exchange charges its Members $750 per
month, per convenience port (which may be FIX or BOE). MIAX Emerald
\47\ utilizes a progressive fee schedule for its FIX ports and charges
its members a fee of $550 per month, per port, for the first FIX port;
$350 per month, per port, for ports two through five; and $150 per
month, per port, for each FIX port above five. MIAX Pearl \48\ also
utilizes a progressive fee schedule for its FIX ports, and charges its
members $275 per month, per port, for the first FIX port; $175 per
month, per port, for FIX ports two through five; and $75 per month, per
port, for each sixth or more FIX port. While purchasing six FIX ports
on the Exchange ($4,500) \49\ would cost more than purchasing six FIX
ports on MIAX Emerald ($3,100) \50\ or MIAX Pearl ($1,225),\51\ the
Exchange again notes that its Members are, unlike MIAX Emerald and MIAX
Pearl members, permitted to purchase BOE ports, FIX ports, or Unitized
Logical Ports, or a combination of the three, depending on their needs
and strategy. In this regard, unlike MIAX Emerald and MIAX Pearl the
Exchange's Unitized Logical Port solution and its related benefits are
available to all Members, and at a lower cost than that assessed to
Members for a single FIX port ($750 for one FIX port, per month vs.
$350 for one BOE Unitized Logical Port). Therefore, while FIX ports on
the Exchange are more expensive than those on MIAX Emerald and MIAX
Pearl, the Exchange's port offerings as a whole provide Members and
Market Makers with more flexibility in how to manage their Exchange
access and better configure their connectivity costs based on their
needs The Exchange also emphasizes that the use of the Unitized Logical
Ports is not necessary for trading on the Exchange and, as noted above,
is entirely optional (other than Market Makers which must utilize a
Unitized Logical Port for quoting). The Exchange notes the following
usage stats, current as of September 25, 2025:
---------------------------------------------------------------------------
\46\ For the sake of clarity, the Exchange notes that Options
Market Makers are also permitted to purchase convenience ports
(which may be FIX or BOE).
\47\ Supra note 40.
\48\ Supra note 38.
\49\ $750 * 6 = $4,500.
\50\ $750 + $550 + $550 + $550 + $550 + $550 + $150 = $3,100.
\51\ $275 + $175 + $175 + $715 + $175 + $715 + $75 = $1,225.
---------------------------------------------------------------------------
Convenience Ports (FIX or BOEv3):
[cir] 57% of Members still utilize a convenience layer port (FIX or
BOEv3), in addition to or in lieu of Unitized Ports. On average, Market
Makers utilize 44 convenience ports.
BOEv3 Unitized Logical Port:
[cir] Market Makers constitute 71% of all BOEv3 Unitized Logical
Port usage, compared to 29% of Members (i.e., non-Market Makers).
[cir] Market Makers constitute 70% of all BOEv3 Unitized Logical
Port sets usage, while Members (i.e., non-Market Makers) constitute 30%
of BOEv3 Unitized Logical Port sets usage.
BOEv3 Unitized Logical Purge Port:
[cir] Market Makers constitute 100% of all BOEv3 Unitized Logical
Purge Port usage, and 100% of BOEv3 Unitized Logical Purge Port set
usage.
BOEv3 Unitized Logical Bulk Port:
[cir] Market Makers constitute 99% of all BOEv3 Unitized Logical
Bulk Port Usage, while Members (i.e., non-Market Makers) constitute 1%.
[cir] Market Makers constitute 99% of all BOEv3 Unitized Logical
Bulk Port set usage, while Members (i.e., non-Market Makers) constitute
1% of BOEv3 Unitized Logical Bulk Port set usage.
The Exchange believes that the above statistics demonstrate that
the use of Unitized Logical Ports and their associated fees are not
mandatory per se. Indeed, Market Makers and Members alike are free to
continue to utilize convenience ports for their message traffic as they
best see fit, and may continue to access the Exchange through existing
logical port offerings at existing rates. The Exchange believes that it
is a Member's specific business needs that will drive its decision
whether to use Unitized Logical Ports in lieu of, or in addition to,
existing logical ports (or, as emphasized, not use them at all). If a
Member finds little benefit in having these ports based on its business
model and trading strategies, or determines the Unitized Logical ports
are not cost-efficient for its needs, or does not provide sufficient
value to the firm, such Member may continue connecting to the Exchange
in the manner it does today, unchanged. Moreover, the Exchange believes
that providing Members the option of purchasing Unitized Logical Ports
individually or in sets provides Members further flexibility and an
opportunity for cost savings for those Members that wish to only trade
a subset of classes. The Exchange has seen firms take advantage of
individually priced Unitized Logical Ports when their needs do not
require connectivity to all matching engines--further allowing its
Members to pay reduced fees relative to a Unitized Logical Port set.
Furthermore, the Exchange notes that undertaking a technological
innovation, such as offering a new connectivity option for Members (of
which, 57% still utilize at least one FIX or BOEv3 Port through the
convenience layer), requires costs and resource allocation. In fact, as
the Exchange previously noted, such innovation has improved the
infrastructure for all Members of the Exchange. Such innovation is a
part of what allows the Exchange to continue to provide access to
markets in times of heightened volatility with zero downtime. The new
Chairman of the Securities Exchange Commission, Paul Atkins, even
recently heighted the importance of innovation by stating ``. . . we
are getting back to our roots of promoting, rather than stifling,
innovation. The markets innovate, and the SEC should not be in the
business of telling them to stand still.'' \52\ In order for exchanges
to continue to provide greater options through technological
[[Page 59615]]
innovation and, in turn, work to improve the resiliency of markets,
exchanges must have reasonable certainty around their ability to set
fees.
---------------------------------------------------------------------------
\52\ See Chairman Atkins ``Prepared remarks before SEC Speaks,''
May 19, 2025, available at: https://www.sec.gov/newsroom/speeches-statements/atkins-prepared-remarks-sec-speaks-051925.
---------------------------------------------------------------------------
The Exchange also believes that the proposed Unitized Logical Port
fees are equitable and not unfairly discriminatory because they
continue to be assessed uniformly to similarly situated users in that
all Members who choose to purchase Unitized Logical Ports will be
subject to the same proposed tiered fee schedule. Moreover, Members
purchasing Unitized Logical Ports will only do so if they find a
benefit and sufficient value in such ports as all Members can otherwise
continue to use the preexisting logical connectivity options.\53\ As
such, Members can choose whether to purchase Unitized Logical Ports
based on their respective business needs.
---------------------------------------------------------------------------
\53\ The Exchange notes that Market Makers are required to
purchase and utilize a Unitized Logical Port for their quoting
activity.
---------------------------------------------------------------------------
The proposed ascending tier structure for Unitized Logical Port
Sets is reasonable, equitable and not unfairly discriminatory as it is
designed to encourage market participants to be efficient with their
respective Unitized Logical Port usage. It also is designed so that
Members that use a higher allotment of the Exchange's system resources
pay higher rates, rather than placing that burden on market
participants that have more modest needs. The Exchange believes the
proposed ascending fee structure is therefore another appropriate
means, in conjunction with an established Unitized Logical Port limit,
to manage this finite resource (system capacity) and ensure it is
apportioned fairly.
In contrast, MIAX's structure limits its offering to a specific
subset of participants, Market Makers, and allocates its ports based on
quoting. In contrast, the Exchange and its participants are free to
utilize this product at their required level of consumption.
Furthermore, the Exchange already assesses higher fees to those that
consume more Exchange resources for the existing non-Unitized Bulk
Ports.\54\ The proposed limit on Unitized Logical Ports is also
reasonable, equitable and not unfairly discriminatory as the Exchange
believes that it is in the interests of all Members and market
participants who access the Exchange to not allow Members to exhaust
System resources, but to encourage efficient usage of network capacity.
The Exchange also notes that the new BOEv3 unitized architecture is
subject to software limitations on the number of sessions that can be
created on any one unitized process. Consideration was given to this
limitation as well as to the amount of ports firms had indicated they
would need prior to the implementation of Unitized Logical Ports.
---------------------------------------------------------------------------
\54\ See Cboe U.S. Options Fees Schedule, BZX Options, Options
Logical Port Fees, Ports with Bulk Quoting Capabilities.
---------------------------------------------------------------------------
The Exchange believes the proposed ADO and ADQ fees are reasonable
as Members that do not exceed the high thresholds of 2,000,000 ADO and
250,000,000 ADQ will not be charged any fee under the proposed tiers.
The Exchange notes that in establishing the proposed thresholds, it
evaluated average ADO and ADQ rates over several months and the
thresholds were designed to protect the Exchange's Matching Engines
from being adversely impacted from sustained and excessive orders/
quotes throughout the course of a given month. Further, the Exchange
considered the highest levels of ADO and ADQ rates amongst firms and
from there, reviewed what would be considered an unreasonable threshold
even at the highest levels. The ADQ thresholds are also designed to
ensure Market Makers quoting activity, which acts as an important
source of liquidity, is not impeded by the proposal.\55\ In fact, when
setting these thresholds, the Exchange reviewed to ensure that these
levels would not prohibit Market Makers from meetings quoting
obligations.
---------------------------------------------------------------------------
\55\ Since the implementation of the proposal on September 3,
2024, the Exchange notes that it has not received any feedback from
Market Maker participants that the proposal has impeded their
ability to meet their quoting obligations.
---------------------------------------------------------------------------
The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to assess higher fees when a Member has higher
ADO and ADQ rates because the potential impact on exchange systems,
bandwidth and capacity becomes greater with increased ADO and ADQ
rates. In this regard, the fees are designed to apply only to those
Members whose message traffic is noticeably beyond the proposed ADO and
ADQ rates. In particular, the proposed fee amounts that correspond to
higher ADO and ADQ rates are designed to incentivize Members to reduce
excessive order and quoting trade activity that the Exchange believes
can be detrimental to all market participants at those levels and
encourage such activity to be made in good faith and for legitimate
purposes. As of the end of August 2025, the Exchange notes that all but
one Member fell within the proposed ADO Tier 1, resulting in that one
single Member being assessed additional ADO fees. With regards to ADQ,
9 Members fell into Tier 1 and were not assessed any additional ADQ
fees. Additionally, 4 Members fell into Tier 2, 2 Members fell into
Tier 3, 2 Members fell into Tier 4, and 1 Member fell into Tier 5, and
were assessed related ADQ fees.\56\
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\56\ The Exchange notes that a Member's ADO and ADQ rates will
naturally vary based on options trading volume on the Exchange. In
its initial filing the Exchange noted that while it could not
predict with certainty any Member's actual ADO and ADQ rates, that
it believed approximately 74% of Members would fall into Tier 1, and
the remaining 26% would fall outside of Tier 1. In this filing, the
stated ADO and ADQ rates are from August 2025, and represent that
approximately 50% of Members fell out of Tier 1. While this
percentage is greater than the 26% of Members noted in the
Exchange's initial filing, the Exchange notes that average daily
volume (``ADV'') in August 2025 across Cboe's four U.S. options
exchange was at an all-time high of 19.2 million contracts,
comprised of: record multi-listed options ADV of 14.3 millions
contracts, which surpassed the ADV record of 13.6 million contracts
set in February 2025; and S&P 500 Index (SPX) options ADV of 3.8
million contracts, the second-best month of all time, with zero-
days-to-expiry (0DTE) trading representing a record ADV of 2.4
million contracts. See ``Cboe Global Markets Reports Trading Volume
for August 2025,'' available at: https://ir.cboe.com/news/news-
details/2025/Cboe-Global-Markets-Reports-Trading-Volume-for-August-
2025/
default.aspx#:~:text=record%20multi%2Dlisted%20options%20ADV,ADV%20of
%202.4%20million%20contracts.
---------------------------------------------------------------------------
Importantly, as noted above, the Exchange believes that it is in
the interests of all Members and market participants who access the
Exchange to not allow Members to exhaust System resources, but to
encourage efficient usage of network capacity. The Exchange therefore
also believes that the proposed fees are one method of facilitating the
Commission's goal of ensuring that critical market infrastructure has
``levels of capacity, integrity, resiliency, availability, and security
adequate to maintain their operational capability and promote the
maintenance of fair and orderly markets.'' \57\ Furthermore, the
Exchange believes adopting the proposed ADO and ADQ fees are reasonable
as unfettered usage of System capacity and network resource consumption
can have a detrimental effect on all market participants who access and
use the Exchange. As discussed above, high ADO and ADQ rates may
adversely impact system resources, bandwidth, and capacity which may,
in turn, create latency and impact other Members' ability to receive
timely executions.
---------------------------------------------------------------------------
\57\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72251 (December 5, 2014) (File No. S7-01-13)
(Regulation SCI Adopting Release).
---------------------------------------------------------------------------
Moreover, the Exchange believes that the proposed ADO and ADQ fees
are equitable and not unfairly discriminatory because they will be
assessed uniformly to similarly situated
[[Page 59616]]
users in that all Members that exceed the thresholds in connection with
ADO and ADQ will be assessed the proposed ADO and ADQ rates. Regarding
ADO and ADQ, no market participant is assessed any fees unless it
exceeds the proposed thresholds. The Exchange also believes it is
equitable and not unfairly discriminatory to assess incrementally
higher fees to Members that have higher ADO and ADQ rates because the
potential impact on exchange systems, bandwidth and capacity becomes
greater with increased ADO and ADQ.
Furthermore, the Exchange believes it is equitable and not unfairly
discriminatory to aggregate Members trading activity with any
affiliated Member sharing at least 75% common ownership \58\ in order
to prevent members from shifting their order flow or quoting activity
to other affiliates in order to circumvent the ADO and ADQ thresholds.
---------------------------------------------------------------------------
\58\ The Exchange notes that its usage of 75% of common
ownership is standard practice and utilized by the Exchange's
affiliated exchanges. For instance, Cboe EDGX Exchange, Inc. options
Market Maker Order-to-Trade Ratio fees provide that Order-to-Trade
Ratio fees will apply only to participants registered as Market
Makers on EDGX Options. The Order-to-Trade ratio will be calculated
monthly based on the total number of orders (including messages to
modify orders) submitted to EDGX Options, regardless of capacity,
divided by the total number of trades occurring on orders. The
calculation of the ration will not include quotes or trades
resulting from such quotes. A Market Maker's order flow will be
aggregated together with any affiliated Members sharing at least 75%
common ownership.'' See Cboe U.S. Options Fee Schedule, EDGX
Options, available at: https://www.cboe.com/us/options/membership/fee_schedule/edgx/; see also Nasdaq BX Options 7 Pricing Schedule,
``The term ``Common Ownership'' shall mean participants under 75%
common ownership or control. . .,'' available at: https://listingcenter.nasdaq.com/rulebook/bx/rules/bx-options-7.
---------------------------------------------------------------------------
The Exchange lastly believes that its proposal is reasonable,
equitably allocated and not unfairly discriminatory because it is not
intended to raise revenue for the Exchange; rather, it is intended to
encourage efficient behavior so that Members do not exhaust System
resources. Moreover, as noted above, competing options exchanges
similarly assess fees to deter Members from over utilizing their
respective systems by having excessive order and/or quoting trading
activity.\59\
---------------------------------------------------------------------------
\59\ See supra note 32.
---------------------------------------------------------------------------
Finally, the Exchange 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. The Exchange is
only one of 18 options exchanges which market participants may direct
their order flow and/or participate on, and it represents a small
percentage of the overall market.\60\ When determining reasonable
prices, the Exchange must ensure these are competitive prices in order
to maintain market share, as uncompetitive pricing, or prices that
Members deem to be excessive, can lead Members to take their order flow
to other exchanges.
---------------------------------------------------------------------------
\60\ See Cboe Global Markets, U.S. Options Market Volume
Summary, Month-to-Date (August 27, 2024), available at https://www.cboe.com/us/options/market_statistics/ which reflects the
Exchange representing only 3.3% of total market share.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change to
adopt fees for Unitized Logical Ports will impose any burden on
intramarket competition that is not necessary in furtherance of the
purposes of the Act because the proposed fees for will apply equally to
all similarly situated Members. As discussed above, Unitized Logical
Ports are optional \61\ and Members may choose to utilize Unitized
Logical Ports or not, based on their views of the additional benefits
and added value provided by these ports. The Exchange believes the
proposed fees will be assessed proportionately to the potential value
or benefit received by Members with a greater number of Unitized
Logical Ports and notes that Members may determine to cease using
Unitized Logical Ports should they determine that they are no longer
receiving value from these ports. As discussed, Members can also
continue to access the Exchange through existing Logical Ports, which
fees are not changing. Moreover, while the NYSE Arca Marketplace
(``Arca'') and Nasdaq Stock Market, LLC (``Nasdaq'') do not have
offerings directly comparable to Unitized Logical Ports, the Exchange
notes that Arca's and Nasdaq's port fees are higher than those of the
Exchange. Specifically, the Exchange notes that Arca charges a fee of
$621 per quoting/order entry port,\62\ and Nasdaq assess its members a
fee of $575 per FIX order entry port.\63\ In both cases, Arca and
Nasdaq's port fees are more expensive than the proposed fees for a
single BOE Unitized Logical Port ($350/port/month), a single Bulk
Unitized Logical Port ($550/port/month), and a single Purge Unitized
Logical Port ($400/port/month).
---------------------------------------------------------------------------
\61\ The Exchange notes that while use of Unitized Logical Ports
is optional, Market Makers are required to utilized a Unitized
Logical Port of their quoting activity.
\62\ See NYSE Arca Fees and Charges ``Connectivity Fees,''
available at: https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf.
\63\ See ``Price List--Trading Connectivity,'' available at:
https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------
Similarly, the Exchange does not believe that the proposed rule
change to adopt ADO and ADQ fees will impose any burden on intramarket
competition that is not necessary in furtherance of the purposes of the
Act because such fees will apply equally to all similarly situated
Members. Particularly, the proposed fees apply uniformly to all
Members, in that any Member who exceeds the ADO and/or ADQ Tier 1
thresholds will be subject to a fee under the proposed corresponding
tiers. The Exchange believes that the proposed change neither favors
nor penalizes one or more categories of market participants in a manner
that would impose an undue burden on competition. Rather, the proposal
seeks to benefit all market participants by encouraging the efficient
utilization of the Exchange's network while taking into account the
important liquidity provided by its Members. As discussed above
potential impact on exchange systems, bandwidth, and capacity becomes
greater with increased ADO and ADQ rates. Accordingly, the Exchange
believes that the proposed ADO and ADQ fees do not favor certain
categories of market participants in a manner that would impose a
burden on competition.
Next, the Exchange believes the proposed rule change does not
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,
including competition for order flow. Market Participants have numerous
alternative venues that they may participate on, including 17 other
options exchanges (including 3 other Cboe-affiliated options
exchanges), as well as off-exchange venues, where competitive products
are available for trading. Indeed, participants can readily choose to
submit their order flow 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
[[Page 59617]]
investors and listed companies.'' \64\ 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'. . . .''.\65\ Accordingly, the Exchange
does not believe its proposed change imposes any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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\64\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\65\ 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 \66\ and paragraph (f) of Rule 19b-4 \67\
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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\66\ 15 U.S.C. 78s(b)(3)(A).
\67\ 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-CboeBZX-2025-158 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-CboeBZX-2025-158. 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 filing 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-CboeBZX-2025-158 and should be submitted
on or before January 9, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\68\
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\68\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23331 Filed 12-18-25; 8:45 am]
BILLING CODE 8011-01-P