Federal Register / Vol. 85, No. 231 / Tuesday, December 1, 2020 / Notices 77295 

140 17 CFR 240.17Ad–22(e). 

141See CCA Standards Adopting Release, supra 

note 64, 81 FR at 70845. 

142 17 CFR 240.17Ad–22(e)(23)(ii). 

143 15 U.S.C. 78q–1. 

144 15 U.S.C. 78s(b)(2). 

145 In approving the proposed rule change, the 

Commission considered the proposals’ impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). See also Section II.B. 

146 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

reflected in NSCC’s Rules and therefore 

publicly available to NSCC’s Members 

and prospective members for 

application to their own portfolios. 

Specifically, the proposed rule text 

would reflect the two sets of changes in 

the proposal. First, the proposed rule 

text would define the types of securities 

that would constitute ‘‘Illiquid 

Securities’’ as three particular categories 

of securities, as described in Section 

I.C(i), (ii), and (iii). By reviewing the 

definitions of an Illiquid Security, 

NSCC’s members should be able to 

understand the types of factors that 

would cause a security to be considered 

an Illiquid Security, all of which are 

ascertainable, such as its trading history 

(including whether it is traded on an 

exchange or not and, if so, on which 

exchange), its market capitalization, and 

the type of security (i.e., whether it is an 

ADR). The specific parameters of the 

illiquidity ratio test would also be 

reflected in NSCC’s Rules, thereby 

enabling a Member to determine 

whether a security that is an ADR or has 

a micro-capitalization of less than $300 

million would be an Illiquid Security. 

Second, the proposed rule text would 

provide that NSCC would apply a 

haircut to Illiquid Securities to 

determine the appropriate volatility 

component, with Illiquid Securities 

grouped by price level to determine the 

appropriate haircut to apply to a 

particular security. The proposed rule 

text would further specify that the 

haircut percentage would be the highest 

of the three percentages as provided in 

Section I.D(i), and would be determined 

at least annually. Additionally, if a 

Member had questions with respect to a 

particular security, it could use the 

various client-facing tools described 

above to determine whether a security 

would be considered an Illiquid 

Security. Taken together, the 

Commission believes that the proposal, 

which would be reflected in NSCC’s 

Rules, in conjunction with the various 

client-facing tools, provides sufficient 

information to Members to understand 

the operation of the haircut-based 

volatility charges and how such charges 

would apply to particular transactions. 

The Commission further believes that 

NSCC provided sufficient information to 

Members to identify and evaluate the 

risks and other material costs they 

would incur due to securities with 

illiquid characteristics under the 

proposal. 

For these reasons, the Commission 

disagrees with the comments stating 

that the proposal lacks details and does 

not explain how the haircut-based 

volatility charge will be calculated, and 

that the proposal does not allow 

Members to predict the impact on their 

activities. The Commission 

acknowledges that, as some commenters 

have noted, the proposal does not 

provide or specify the actual models or 

calculations that NSCC would use to 

determine the appropriate haircut or 

what constitutes an Illiquid Security. 

However, when adopting the CCA 

Standards,140 the Commission declined 

to adopt a commenter’s view that a 

covered clearing agency should be 

required to provide, at least quarterly, 

its methodology for determining initial 

margin requirements at a level of detail 

adequate to enable participants to 

replicate the covered clearing agency’s 

calculations, or, in the alternative, that 

the covered clearing agency should be 

required to provide a computational 

method with the ability to determine the 

initial margin associated with changes 

to each respective participant’s portfolio 

or hypothetical portfolio, participant 

defaults and other relevant information. 

The Commission stated that 

‘‘[m]andating disclosure of this 

frequency and granularity would be 

inconsistent with the principles-based 

approach the Commission is taking in 

Rule 17Ad–22(e).’’ 141 Consistent with 

that approach, the Commission does not 

believe that Rule 17Ad–22(e)(23)(ii) 

would require NSCC to disclose its 

actual margin methodology, so long as 

NSCC has provided sufficient 

information for its Members to 

understand the potential costs and risks 

associated with participating in NSCC 

for clearing Illiquid Securities. 

For the reasons discussed above, the 

Commission believes that the proposals 

in the Proposed Rule Change would 

enable NSCC to establish, implement, 

maintain, and enforce written policies 

and procedures reasonably designed to 

provide sufficient information to enable 

Members to identify and evaluate the 

risks, fees, and other material costs they 

incur as NSCC’s Members, consistent 

with Rule 17Ad–22(e)(23)(ii).142

III. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular with the requirements of 

Section 17A of the Act 143 and the rules 

and regulations promulgated 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 144 that 

proposed rule change SR–NSCC–2020– 

003, be, and hereby is, approved.145

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.146

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26401 Filed 11–30–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90504; File No. SR–CBOE– 

2020–111] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating To Amend Its 

Fees Schedule 

November 24, 2020. 

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 November 

16, 2020, Cboe Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘Cboe Options’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe Exchange, Inc. (the ‘‘Exchange’’ 

or ‘‘Cboe Options’’) proposes to amend 

its fees schedule. The text of the 

proposed rule change is provided in 

Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/ 

AboutCBOE/CBOELegalRegulatory

Home.aspx), at the Exchange’s Office of 

the Secretary, and at the Commission’s 

Public Reference Room. 


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77296 Federal Register / Vol. 85, No. 231 / Tuesday, December 1, 2020 / Notices 

3On March 11, 2020, the World Health 

Organization characterized COVID–19 as a 

pandemic and to slow the spread of the disease, 

federal and state officials implemented socialdistancing measures, placed significant limitations 

on large gatherings, limited travel, and closed nonessential businesses. 

4For example, a TPH may have personnel other 

than Nominees on the floor that need to access the 

trading floor. Such persons will also be subject to 

testing requirements and will be assessed the 

proposed fee. 

5 15 U.S.C. 78f(b). 

6 15 U.S.C. 78f(b)(5). 

7 15 U.S.C. 78f(b)(4). 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f). 

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 adopt a 

new COVID–19 Test Fee in connection 

with the COVID–19 pandemic. By way 

of background, on March 16, 2020, the 

Exchange suspended open outcry 

trading to help prevent the spread of 

COVID–19 3 and was operating in an allelectronic configuration until June 15, 

2020. On June 15, 2020, the Exchange 

reopened its trading floor, but with a 

modified configuration of trading 

crowds in order to implement social 

distancing and other measures 

consistent with local and state health 

and safety guidelines to help protect the 

safety and welfare of individuals 

accessing the trading floor. In order to 

further protect the safety and welfare of 

individuals accessing the trading floor 

during the COVID–19 pandemic, the 

Exchange has determined to implement 

on-site COVID–19 testing for all trading 

floor personnel, beginning November 

16, 2020. The Exchange has contracted 

with an independent health care 

provider who will conduct the tests, 

which the Exchange anticipates will be 

conducted twice weekly. The Exchange 

proposes to adopt a pass-through fee of 

$150 per test for each TPH or associated 

person of a TPH 4 that is tested. The 

proposed COVID–19 Test Fee allows the 

Exchange to offset the costs incurred 

with on-site testing. The Exchange also 

notes that since the reopening of the 

trading floor, the Exchange has, and 

continues to, incur other COVID–19 

related costs that it has not passed 

through in connection with protecting 

the health and safety of TPHs and 

exchange personnel, including costs 

related to daily-deep cleaning. The 

Exchange represents that the proposed 

fee is a pass-through of the costs to the 

Exchange and that the Exchange will 

not generate any revenue in excess of 

those costs. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.5 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 6 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Additionally, the Exchange believes the 

proposed rule change is consistent with 

Section 6(b)(4) of the Act,7 which 

requires that Exchange rules provide for 

the equitable allocation of reasonable 

dues, fees, and other charges among its 

Trading Permit Holders and other 

persons using its facilities. 

The Exchange believes the proposed 

COVID–19 Test Fee is reasonable as the 

amount of the proposed fee is the same 

amount that is assessed to the Exchange 

by the independent health care provider 

that will be administering the tests. As 

noted above, the revenue generated from 

the proposed fee will not be more than 

the cost to the Exchange for 

administering the tests. The Exchange 

also notes that to date, it has absorbed 

all the costs incurred in connection with 

the safety and health protocols it has 

taken to ensure the safety and welfare of 

individuals access the trading floor, 

including daily deep-cleaning of its 

facilities. The Exchange believes 

administering COVID–19 tests will help 

further protect the safety and welfare of 

individuals accessing its trading floor. 

The Exchange believes the proposed fee 

is equitable and not unfairly 

discriminatory because such fee will be 

assessed to any TPH or associated 

person of a TPH that is tested and 

accesses the trading floor. The Exchange 

also notes that implementing on-site 

COVID–19 testing would benefit all 

persons accessing the trading floor as it 

is an additional precautionary measure 

intended to limit their exposure to 

COVID–19 and better ensure their safety 

and welfare. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule changes will impose 

any burden on competition that are not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange notes the proposed fee is not 

intended to address any competitive 

issue, but rather to recoup costs 

associated with COVID–19 testing in 

order to help protect the safety and 

welfare of individuals access the trading 

floor. 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 changes apply equally to all 

similarly situated market participants. 

The Exchange does not believe that the 

proposed rule changes will impose any 

burden on intermarket competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act 

because the proposed changes only 

affect trading on the Exchange in 

limited circumstances. 

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 8 and paragraph (f) of Rule 

19b–4 9 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 


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Federal Register / Vol. 85, No. 231 / Tuesday, December 1, 2020 / Notices 77297 

10 17 CFR 200.30–3(a)(12). 

1See Order Granting Approval of a Proposed Rule 

Change by Miami International Securities 

Exchange, LLC to List and Trade on the Exchange 

Options on the SPIKESTM Index, Exchange Act 

Release No. 84417 (Oct. 12, 2018), 83 FR 52865 

(Oct. 18, 2018) (SR–MIAX–2018–14) (‘‘SPIKES 

Options Approval Order’’). 

2See SPIKES Options Approval Order, 82 FR at 

52867 n. 36. 

3See The SPIKES Volatility Index: Methodology 

Guide (available at: https://www.miaxoptions.com/ 

sites/default/files/spikes-files/SPIKES_

Methodology_Guide.pdf) (‘‘SPIKES Methodology’’). 

Continued 

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. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CBOE–2020–111 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–2020–111. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. All submissions 

should refer to File Number SR–CBOE– 

2020–111 and should be submitted on 

or before December 22, 2020. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–26403 Filed 11–30–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90510] 

Order Granting Conditional Exemptive 

Relief, Pursuant to Section 36 of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) With Respect to 

Futures Contracts on the SPIKESTM

Index 

November 24, 2020. 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Exemptive order. 

SUMMARY: The Minneapolis Grain 

Exchange, Inc. (or any successor thereto) 

(‘‘MGEX’’) has expressed an interest in 

listing and trading contracts for sale for 

future delivery on the SPIKESTM Index 

(‘‘SPIKES’’) (such futures contracts (and 

any options thereon) hereinafter referred 

to as the ‘‘Product’’). After careful 

consideration, the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) believes that the 

Product has the potential to offer 

competition with the only comparable 

incumbent volatility product in the 

market, and is therefore conditionally 

exempting the Product from the 

definition of ‘‘security future’’ for all 

purposes other than as follows: First, 

the anti-fraud and anti-manipulation 

provisions under the Exchange Act will 

continue to apply; second, MGEX will 

continue to be subject to the 

requirement to register with the 

Commission as a national securities 

exchange (which may be done pursuant 

to a notice filing) and comply with 

related amendment and supplemental 

filing requirements; and third, MGEX 

will continue to be required, in its 

capacity as a national securities 

exchange, to make available to the 

Commission (or its representatives) 

books and records relating to 

transactions in the Product, upon 

request, and to make itself available to 

inspection and examination by the 

Commission (or its representatives), 

upon request. However, because 

registration as a notice-registered 

national securities exchange is intended 

only as a means to facilitate the 

Commission’s ability to exercise its 

books and records and examination 

authority over the Product, MGEX will 

be exempt from compliance with all 

other requirements applicable to 

national securities exchanges. Taken 

together, these actions will allow the 

Product to trade as a futures contract on 

MGEX, a designated contract market 

(‘‘DCM’’) and derivatives clearing 

organization (‘‘DCO’’) that is subject to 

the jurisdiction of the Commodity 

Futures Trading Commission (‘‘CFTC’’), 

consistent with the terms and 

conditions set forth below. 

DATES: This exemptive order is effective 

as of December 1, 2020. 

FOR FURTHER INFORMATION CONTACT: 

Carol McGee, Assistant Director, or 

Andrew Bernstein, Senior Special 

Counsel, at (202) 551–5870, Office of 

Derivatives Policy, Division of Trading 

and Markets, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–8010. 

I. Introduction 

A. Overview of the SPIKES Index 

On October 12, 2018, the Commission 

issued an order granting approval of a 

proposed rule change to allow the 

Miami International Securities 

Exchange LLC (‘‘MIAX’’) to list and 

trade options on SPIKES.1 Although that 

order permits MIAX to treat SPIKES as 

a broad-based index, as defined under 

MIAX’s rules, solely for purposes of 

determining the position limits, exercise 

limits, and margin requirements that 

apply to each options trade, the 

Commission stated explicitly that it was 

not determining whether SPIKES is a 

‘‘narrow-based security index,’’ as 

defined in Section 3(a)(55)(B) of the 

Exchange Act.2

SPIKES measures the expected 30-day 

volatility of the SPDR® S&P 500® ETF 

Trust (‘‘SPY’’), and is calculated using a 

variance swap methodology that 

includes live prices of existing 

exchange-traded options on the SPY to 

calculate volatility. Specifically, the 

SPIKES formula relies on the prices of 

standard monthly SPY options that 

expire on the third Friday of each 

calendar month.3 The formula uses 


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