68822 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

23 15 U.S.C. 78s(b)(3)(A). 

24 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

25 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

values pilot does not raise any unique 

regulatory concerns. In particular, 

although p.m. settlements may raise 

questions with the Commission, the 

Exchange believes that, based on the 

Exchange’s experience in trading FLEX 

Options to date and over the pilot 

period, market impact and investor 

protection concerns will not be raised 

by this rule change. The Exchange also 

believes that the proposed rule change 

would continue to provide Trading 

Permit Holders and investors with 

additional opportunities to trade 

customized options in an exchange 

environment (which offers the added 

benefits of transparency, price 

discovery, liquidity, and financial 

stability as compared to the over-thecounter market) and subject to 

exchange-based rules, and investors 

would benefit as a result. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Cboe Options does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes there is sufficient 

investor interest and demand in the 

pilot program to warrant its extension. 

The Exchange believes that, for the 

period that the pilot has been in 

operation, the program has provided 

investors with additional means of 

managing their risk exposures and 

carrying out their investment objectives. 

Furthermore, the Exchange believes that 

it has not experienced any adverse 

market effects with respect to the pilot 

program, including any adverse market 

volatility effects that might occur as a 

result of large FLEX exercises in FLEX 

Option series that expire near Non-Flex 

expirations and use a p.m. settlement. 

Cboe Options believes that the 

restriction actually places the Exchange 

at a competitive disadvantage to its OTC 

counterparts in the market for 

customized options, and unnecessarily 

limits market participants’ ability to 

trade in an exchange environment that 

offers the added benefits of 

transparency, price discovery, liquidity, 

and financial stability. Therefore, the 

Exchange does not believe that the 

proposed rule change will impose any 

burden on competition. 

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 

Because the foregoing proposed rule 

change does not: (i) significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 23 and Rule 19b– 

4(f)(6) thereunder.24

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 shall institute proceedings 

to determine whether the proposed rule 

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–2023–057 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–2023–057. 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. Do not include 

personal identifiable information in 

submissions; you should submit only 

information that you wish to make 

available publicly. We may redact in 

part or withhold entirely from 

publication submitted material that is 

obscene or subject to copyright 

protection. All submissions should refer 

to File Number SR–CBOE–2023–057, 

and should be submitted on or before 

October 25, 2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21958 Filed 10–3–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98597; File No. SR– 

CboeBZX–2023–071] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Suspension of 

and Order Instituting Proceedings To 

Determine Whether To Approve or 

Disapprove a Proposed Rule Change 

To Amend Its Fee Schedule Relating to 

the Options Regulatory Fee 

September 28, 2023 

I. Introduction 

On September 12, 2023, Cboe BZX 

Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘BZX’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change 


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Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68823 

3See Securities Exchange Act Release No. 98420 

(September 18, 2023), 88 FR 65412 (September 22, 

2023) (‘‘Notice’’). 

4 15 U.S.C. 78s(b)(3)(A). A proposed rule change 

may take effect upon filing with the Commission if 

it is designated by the exchange as ‘‘establishing or 

changing a due, fee, or other charge imposed by the 

self-regulatory organization on any person, whether 

or not the person is a member of the self-regulatory 

organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii). 

5See Notice, supra note 3. 

6 15 U.S.C. 78s(b)(3)(C). 

7See Notice, supra note 3, at 65412. 

8See id. The ORF is collected by OCC on behalf 

of the Exchange from either the Clearing Member 

or the non-Member that ultimately clears the 

transaction. See id. 

9 Id. 

10 Id. at 65413. 

11 15 U.S.C. 78s(b)(3)(C). 

12 15 U.S.C. 78s(b)(1). 

13See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

14 Id. 

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

16 15 U.S.C. 78f(b)(5). 

17 15 U.S.C. 78f(b)(8). 

18Notice, supra note 3, at 65413. 

19 Id. 

20 Id. (stating that ‘‘the proposed change is 

reasonable as it would offset the anticipated 

increased regulatory costs, while still not exceeding 

75% of the Exchange’s total regulatory costs.’’). 

21 Id. No exchange has increased its ORF rate 

since 2019. 

22Notice, supra note 3, at 65414. 

23 Id. 

24 Id. 

25 Id. at 65412. 

(file number SR–CboeBZX–2023–071) to 

increase the amount of its Options 

Regulatory Fee (‘‘ORF’’).3 The proposed 

rule change was immediately effective 

upon filing with the Commission 

pursuant to Section 19(b)(3)(A) of the 

Act.4 The proposed rule change was 

published for comment in the Federal 

Register on September 22, 2023.5

Pursuant to Section 19(b)(3)(C) of the 

Act,6 the Commission is hereby: (1) 

temporarily suspending file number SR– 

CboeBZX–2023–071; and (2) instituting 

proceedings to determine whether to 

approve or disapprove file number SR– 

CboeBZX–2023–071. 

II. Description of the Proposed Rule 

Change 

The Exchange proposes to increase 

the amount of its ORF from $0.0001 to 

$0.0003 per contract.7 The Exchange 

assesses the ORF to each Member for 

options transactions cleared by the 

Member that are cleared by the Options 

Clearing Corporation (‘‘OCC’’) in the 

‘‘customer’’ range, regardless of the 

exchange on which the transaction 

occurs.8 The Exchange states that 

‘‘[r]evenue generated from ORF, when 

combined with all of the Exchange’s 

other regulatory fees and fines, is 

designed to recover a material portion of 

the regulatory costs to the Exchange of 

the supervision and regulation of 

Member customer option 

business. . ..’’ 9 Noting that it monitors 

the amount of ORF revenue it collects 

‘‘to ensure that it, in combination with 

its other regulatory fees and fines, does 

not exceed the Exchange’s total 

regulatory costs,’’ the Exchange 

proposed to increase the amount of its 

ORF ‘‘based on the Exchange’s 

estimated projections for its regulatory 

costs, which have increased.’’ 10

III. Suspension of the Proposed Rule 

Change 

Pursuant to Section 19(b)(3)(C) of the 

Act,11 at any time within 60 days of the 

date of filing of an immediately effective 

proposed rule change pursuant to 

Section 19(b)(1) of the Act,12 the 

Commission summarily may 

temporarily suspend the change in the 

rules of a self-regulatory organization 

(‘‘SRO’’) 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. As discussed below, the 

Commission believes a temporary 

suspension of the proposed rule change 

is necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act to allow for 

additional analysis of the proposed rule 

change’s consistency with the Act and 

the rules thereunder. 

When exchanges file their proposed 

rule changes with the Commission, 

including fee filings like the Exchange’s 

present proposal, they are required to 

provide a statement supporting the 

proposal’s basis under the Act and the 

rules and regulations thereunder 

applicable to the exchange.13 The 

instructions to Form 19b–4, on which 

exchanges file their proposed rule 

changes, specify that such statement 

‘‘should be sufficiently detailed and 

specific to support a finding that the 

proposed rule change is consistent with 

[those] requirements’’ 14

Section 6 of the Act, including 

Sections 6(b)(4), (5), and (8), require the 

rules of an exchange to: (1) provide for 

the equitable allocation of reasonable 

fees among members, issuers, and other 

persons using the exchange’s 

facilities; 15 (2) perfect the mechanism of 

a free and open market and a national 

market system, protect investors and the 

public interest, and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or 

dealers; 16 and (3) not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.17

In justifying its proposal, the 

Exchange stated that its proposal ‘‘is 

reasonable because [the proposed 

increase] would help ensure that 

revenue collected from the ORF, in 

combination with other regulatory fees 

and fines, would help offset, but not 

exceed, the Exchange’s total regulatory 

costs.’’ 18 According to the Exchange, its 

ORF is designed to ‘‘generate revenues 

that would be less than or equal to 75% 

of the Exchange’s regulatory costs.’’ 19

The Exchange stated that the proposed 

increase is reasonable based on ‘‘the 

Exchange’s estimated projections for its 

regulatory costs, which have 

increased.’’ 20 The Exchange further 

stated that ‘‘although recent options 

volumes have increased, it has not 

increased its ORF rate since it was 

adopted in 2015’’ and ‘‘has been 

steadily decreasing the rate over the last 

several years.’’ 21

The Exchange also asserted that the 

ORF is equitably allocated and not 

unfairly discriminatory because higher 

fees are assessed ‘‘to those Members that 

require more Exchange regulatory 

services based on the amount of 

customer options business they 

conduct.’’ 22 In addition, the Exchange 

stated that ‘‘[r]egulating customer 

trading activity is much more labor 

intensive and requires greater 

expenditure of human and technical 

resources than regulating non-customer 

trading activity, which tends to be more 

automated and less labor-intensive.’’ 23

Further, the Exchange stated that it has 

‘‘broad regulatory responsibilities with 

respect to its Members’ activities, 

irrespective of where their transactions 

take place’’ and therefore the 

surveillance programs for customer 

trading activity ‘‘may require the 

Exchange to look at activity across all 

markets.’’ 24 Consequently, the 

Exchange imposes the ORF ‘‘on all 

customer-range transactions cleared by a 

Member, even if the transactions do not 

take place on the Exchange.’’ 25

In temporarily suspending the 

Exchange’s proposed rule change, the 

Commission intends to further consider 

whether the proposal to increase the 

amount of the ORF is consistent with 

the statutory requirements applicable to 

a national securities exchange under the 

Act. In particular, the Commission will 

consider whether the proposed rule 

change satisfies the standards under the 

Act and the rules thereunder requiring, 

among other things, that an exchange’s 

rules provide for the equitable 

allocation of reasonable fees among 


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26See 15 U.S.C. 78f(b)(4), (5), and (8), 

respectively. 

27For purposes of temporarily suspending the 

proposed rule change, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

28 15 U.S.C. 78s(b)(3)(C). Once the Commission 

temporarily suspends a proposed rule change, 

Section 19(b)(3)(C) of the Act requires that the 

Commission institute proceedings under Section 

19(b)(2)(B) to determine whether a proposed rule 

change should be approved or disapproved. 

29 15 U.S.C. 78s(b)(2)(B). 

30 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the 

Act also provides that proceedings to determine 

whether to disapprove a proposed rule change must 

be concluded within 180 days of the date of 

publication of notice of the filing of the proposed 

rule change. See id. The time for conclusion of the 

proceedings may be extended for up to 60 days if 

the Commission finds good cause for such 

extension and publishes its reasons for so finding, 

or if the exchange consents to the longer period. See 

id. 

31 15 U.S.C. 78f(b)(4). 

32 15 U.S.C. 78f(b)(5). 

33 15 U.S.C. 78f(b)(8). 

34Notice, supra note 3, at 65412–13. 

35See Notice, supra note 3, at 65413. 

36Market share statistic as reported by the 

Exchange on September 26, 2023, available at 

https://www.cboe.com/us/options/market_

statistics/. 37 In recent years, several options exchanges have 

filed proposed rule changes to reduce their 

respective ORF rates due to unanticipated and 

sustained growth in customer options volume. See, 

e.g., Securities Exchange Act Release Nos. 98054 

(August 4, 2023) 88 FR 54362 (August 10, 2023) 

(SR–ISE–2023–14) (reducing ORF rate from $0.0014 

to $0.0013 because of continued options volume 

growth in 2023 and noting in particular that March 

2023 options volume was higher than any month 

in 2022); 98056 (August 4, 2023), 88 FR 54381 

(August 10, 2023) (SR–GEMX–2023–09) (reducing 

ORF rate from $0.0013 to $0.0012); and 94065 

(January 26, 2023), 87 FR 5548 (February 1, 2022) 

(SR–Phlx–2022–03) (reducing ORF rate from 

$0.0042 to $0.0034). 

members, issuers, and other persons 

using its facilities; not permit unfair 

discrimination between customers, 

issuers, brokers or dealers; and do not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act.26

Therefore, the Commission finds that 

it is necessary or appropriate in the 

public interest, for the protection of 

investors, and otherwise in furtherance 

of the purposes of the Act, to 

temporarily suspend the proposed rule 

change.27

IV. Proceedings To Determine Whether 

To Approve or Disapprove the 

Proposed Rule Change 

In addition to temporarily suspending 

the proposal, the Commission also 

hereby institutes proceedings pursuant 

to Sections 19(b)(3)(C) 28 and 19(b)(2)(B) 

of the Act 29 to determine whether the 

Exchange’s proposed rule change 

should be approved or disapproved. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved. Rather, the 

Commission seeks and encourages 

interested persons to provide additional 

comment on the proposed rule change 

to inform the Commission’s analysis of 

whether to approve or disapprove the 

proposed rule change. 

Pursuant to Section 19(b)(2)(B) of the 

Act,30 the Commission is providing 

notice of the grounds for possible 

disapproval under consideration: 

• Whether the Exchange has 

demonstrated how its proposed fee is 

consistent with Section 6(b)(4) of the 

Act, which requires that the rules of a 

national securities exchange ‘‘provide 

for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and issuers and 

other persons using its facilities’’ 31

(emphasis added); 

• Whether the Exchange has 

demonstrated how its proposed fee is 

consistent with Section 6(b)(5) of the 

Act, which requires, among other 

things, that the rules of a national 

securities exchange not be ‘‘designed to 

permit unfair discrimination between 

customers, issuers, brokers, or 

dealers’’ 32 (emphasis added); and 

• Whether the Exchange has 

demonstrated how its proposed fee is 

consistent with Section 6(b)(8) of the 

Act, which requires that the rules of a 

national securities exchange ‘‘not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of [the Act].’’ 33

As noted above, in response to ‘‘the 

Exchange’s estimated projections for its 

regulatory costs, which have increased,’’ 

the proposal purports to increase the 

amount of the ORF in a manner that is 

‘‘designed to recover a material portion 

of the regulatory costs to the Exchange 

of the supervision and regulation of 

Member customer options business 

. . . .’’ 34 However, those and other 

statements in support of its proposed 

regulatory fee increase are general in 

nature and lack sufficient detail and 

specificity. 

For example, the Exchange does not 

elaborate on the ‘‘material portion’’ of 

options regulatory expenses that it seeks 

to recover from the ORF and why the 

threshold it selected (i.e., that ORF will 

‘‘not exceed more than 75% of total 

annual regulatory costs’’) correlates to 

the degree of regulatory responsibility 

and expenses borne by the Exchange as 

it relates to the regulation of customer 

options transactions.35 For example, the 

Exchange has not provided any 

quantifiable information to support its 

assertion that regulating customer 

trading activity is ‘‘much more laborintensive’’ and therefore, more costly. 

The Exchange does not claim in its 

filing that its regulation of customer 

activity consumes 75% of total 

regulatory costs nor does it assert that 

customer activity requires a level of 

effort that occupies 75% of the 

regulatory department’s attention. The 

Exchange does not sufficiently analyze 

how funding 75% of its total regulatory 

costs (including direct and indirect 

expenses) from ORF, e.g., constitutes an 

equitable allocation of reasonable fees 

among members, and it does not 

provide sufficient detail to allow the 

Commission and commenters to 

consider those issues. 

Further, the Exchange has not 

provided specific or detailed 

information regarding the regulatory 

cost associated with monitoring and 

surveilling exchange activity compared 

to off exchange activity. In particular, 

the Exchange collects ORF on 

executions that do not occur on the 

Exchange. With a market share under 

6% based on matched volume, that 

means that the Exchange seeks to collect 

ORF on the over 94% of executions that 

happen elsewhere.36 However, the 

Exchange has not provided information 

or analysis in its filing to support the 

collection of ORF on away activity. The 

proposed ORF rate is the same for onexchange and off-exchange activity, so 

the proposal would result in the 

Exchange funding a very significant 

portion of its total regulatory costs from 

a fee charged on contracts that execute 

away from the Exchange. The Exchange 

does not provide a sufficiently detailed 

analysis or present specific facts to 

show the level of regulatory effort and 

regulatory costs it expends on contracts 

that execute on other exchanges. 

Without more information in the filing 

on the Exchange’s regulatory revenues, 

regulatory costs, and regulatory 

activities to supervise and regulate 

members, specifically, e.g., customer 

versus non-customer activity and onexchange versus off-exchange activity, 

the proposal lacks specific information 

that can speak to whether the proposed 

ORF is reasonable, equitably allocated, 

and not unfairly discriminatory, 

particularly given that the ORF is 

assessed only on transactions that clear 

in the ‘‘customer’’ range and regardless 

of the exchange on which the 

transaction occurs. 

Further, the Exchange states that 

recent volume has increased, but does 

not discuss the specifics or whether it 

considered how that volume has 

impacted its regulatory expenses and 

regulatory revenues.37


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38 17 CFR 201.700(b)(3). 

39See id. 

40See id. 

41See Susquehanna Int’l Grp., LLP v. SEC, 866 

F.3d 442, 447 (August 8, 2017). 

42See id. 

43See Notice, supra note 3. 

44See Notice, supra note 3, at 65413. 

45See id. 

46See id. at 65413–14. 

47See id. at 65414. 

48See id. 

49See id. 

Under the Commission’s Rules of 

Practice, the ‘‘burden to demonstrate 

that a proposed rule change is 

consistent with the [Act] and the rules 

and regulations issued thereunder . . . 

is on the [SRO] that proposed the rule 

change.’’ 38 The description of a 

proposed rule change, its purpose and 

operation, its effect, and a legal analysis 

of its consistency with applicable 

requirements must all be sufficiently 

detailed and specific to support an 

affirmative Commission finding,39 and 

any failure of an SRO to provide this 

information may result in the 

Commission not having a sufficient 

basis to make an affirmative finding that 

a proposed rule change is consistent 

with the Act and the applicable rules 

and regulations.40

As explained above, the Exchange’s 

statements in support of the proposed 

rule change are general in nature and 

lack detail and specificity. The 

Commission cannot unquestionably rely 

on an exchange’s statements and 

representations.41 Instead, the 

Commission needs sufficient 

information to support independent 

findings that a proposal is consistent 

with the requirements of the Act.42

Here, such an analysis includes, among 

other things, whether the proposed ORF 

is an equitable allocation of reasonable 

dues, fees, and other changes among the 

Exchange’s members, as well as whether 

the proposed ORF is equitable and not 

unfairly discriminatory. 

The Commission needs additional 

information from the Exchange to 

demonstrate how the proposal meets 

those and other applicable requirements 

of the Act, to assess whether the 

Exchange has established a sufficient 

nexus between the proposed ORF and 

the Exchange’s regulation of customer 

trading activity both on and off 

exchange. While the Commission 

broadly solicits comment from all 

interested parties on the proposal, the 

Commission believes that the Exchange 

alone has access to much of the specific 

detail necessary to fully address these 

questions and concerns because these 

matters involve qualitative and 

quantitative information about the 

Exchange’s operations. Specifically, 

among other things, the Commission 

asks that commenters address the 

sufficiency of the Exchange’s statements 

in support of the proposal contained in 

the Notice.43 In particular, the 

Commission seeks comment on the 

following aspects of the proposal and 

asks commenters to submit data where 

appropriate to support their views: 

1. Information on the Exchange’s 

Projected Regulatory Costs and 

Revenues. The Exchange states that its 

proposed ORF rate increase is 

reasonable after considering its 

projected increase in regulatory costs. 

The Exchange notes that its regulatory 

costs include direct regulatory expenses 

and certain indirect expenses for work 

‘‘allocated in support of the regulatory 

function.’’ 44 According to the Exchange, 

indirect regulatory expenses (including, 

among other things, human resources, 

legal, compliance, information 

technology, facilities and accounting) 

are estimated to be approximately 

50.5% of the Exchange’s total regulatory 

costs for 2023 and direct regulatory 

expenses are estimated to be 

approximately 49.5% of the Exchange’s 

total regulatory costs for 2023. The 

Exchange did not provide in the filing 

any further analysis regarding its 

projected regulatory cost increases. Do 

commenters believe the Exchange has 

provided adequate detail regarding 

these metrics? If not, what additional 

information should be provided to 

demonstrate how the proposal is 

consistent with the Act? How have 

recent options volumes impacted the 

Exchange’s regulatory expenses and 

revenues? How should the Commission 

consider the Exchange’s proposal in 

light of recent proposals from other 

exchanges to reduce their ORF on 

account of increasing customer options 

volume placing them at risk of overcollecting ORF in excess of their 

regulatory expenses? 

2. Information on the Exchange’s 

Imposition of ORF on Customer Orders. 

The Exchange states that it is its 

‘‘practice that revenue generated from 

ORF not exceed more that 75% of total 

annual regulatory costs.’’ 45 Do 

commenters believe that the Exchange 

has sufficiently analyzed and justified 

its proposal to fund 75% of its total 

regulatory expenses from a fee imposed 

only on options transactions clearing in 

the customer-range, where those 

expenses include the regulation of 

transactions that clear in the noncustomer-range (e.g., broker-dealer and 

market maker trades)? In addition, 

explaining that the proposed ORF 

would be charged to ‘‘all Members on 

all their transactions that clear in the 

customer range at the OCC,’’ the 

Exchange states that such methodology 

‘‘ensures fairness by assessing higher 

fees to those Members that require more 

Exchange regulatory services based on 

the amount of customer options 

business they conduct.’’ 46 The 

Exchange further asserts that 

‘‘[r]egulating customer trading activity is 

much more labor intensive and requires 

greater expenditure of human and 

technical resources than regulating noncustomer trading activity, which tends 

to be more automated and less laborintensive.’’ 47 According to the 

Exchange, ‘‘the costs associated with 

administering the customer component 

of the Exchange’s overall regulatory 

program are materially higher than the 

costs associated with administering the 

non-customer component (e.g., Member 

proprietary transaction) of its regulatory 

program.’’ 48 Do commenters believe 

that the Exchange has provided 

sufficiently detailed quantitative and 

qualitative evidence in support of this 

aspect of its proposal? Specifically, 

examples of information that would be 

helpful to demonstrate how the 

assessment of ORF only on orders that 

clear in the customer-range correlates to 

the level of effort and costs the 

Exchange expends to regulate customer 

options transactions include: (a) the 

percentage of volume that clears in the 

customer-range both on and off the 

Exchange compared to the percentage of 

volume that clears in a range other than 

customer both on and off Exchange; (b) 

the percentage of the Exchange’s 

regulatory budget attributable to the 

regulation of orders that clear in the 

customer-range compared to the 

percentage of the Exchange’s regulatory 

budget attributable to orders that clear 

in a range other than customer; (c) the 

percentage of the Exchange’s regulatory 

level of effort attributable to the 

regulation of orders that clear in the 

customer-range compared to the 

percentage of the Exchange’s regulatory 

level effort attributable to orders that 

clear in a range other than customer; 

and (d) the proportion of the Exchange’s 

revenues, as reported in the most recent 

annual financials it submitted on Form 

1, represented by ORF revenue. 

3. Information on the Exchange’s 

Assessment of ORF on Away-Market 

Activity. The Exchange states that ‘‘it 

has broad regulatory responsibilities 

with respect to its Members’ activities, 

irrespective of where their transactions 

take place.’’ 49 The Exchange therefore 


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68826 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

50See id. at 65412. 

51See id. at 65412. 

52See 15 U.S.C. 78f(b)(4), (5), and (8). 

53 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act 

grants the Commission flexibility to determine what 

type of proceeding—either oral or notice and 

opportunity for written comments—is appropriate 

for consideration of a particular proposal by an 

SRO. See Securities Acts Amendments of 1975, 

Report of the Senate Committee on Banking, 

Housing and Urban Affairs to Accompany S. 249, 

S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 54 15 U.S.C. 78s(b)(3)(C). 

believes that it is appropriate to impose 

the ORF on ‘‘all customer-range 

transactions cleared by a Member, even 

if the transactions do not take place on 

the Exchange.’’ 50 Do commenters 

believe that the Exchange has provided 

sufficiently detailed quantitative and 

qualitative evidence in support of how 

the assessment of ORF on away-market 

transactions correlates to the effort it 

expends on regulating away-market 

transactions compared to the level of 

effort the Exchange invests in regulating 

transactions on Exchange? Specifically, 

examples of information that would be 

helpful to assess the application of the 

ORF to executions that do not occur on 

the Exchange include: (a) the percentage 

of the Exchange’s overall regulatory 

budget attributable to the regulation of 

away-market transactions compared to 

the percentage of the Exchange’s overall 

regulatory budget allocated to regulating 

on-Exchange transactions; (b) the 

percentage of the Exchange’s regulatory 

level of effort attributable to the 

regulation of away-market transactions 

compared to the percentage of the 

Exchange’s regulatory level of effort 

attributable to the regulation of orders 

that execute on the Exchange; (c) the 

percentage of ORF revenue that is 

derived from away-market transactions 

compared to the percentage of ORF 

revenue that is derived from executions 

on the Exchange; and (d) more detail on 

the regulatory activities the exchange 

performs for trades that do not occur on 

the Exchange. 

4. Information on the Exchange’s 

Regulatory Program Concerning 

Clearing Brokers. The Exchange states 

that ORF is collected on ‘‘customer’’ 

range options transactions cleared by a 

Clearing Member regardless of the 

exchange on which the transaction 

occurs, including from a non-Member.51

Do commenters believe that the 

Exchange has provided sufficiently 

detailed quantitative and qualitative 

evidence in support of this aspect of its 

proposal? Specifically, examples of 

information that would be helpful to 

provide context for the collection of 

ORF from member and non-member 

clearing brokers and determine whether 

a sufficient nexus exists between the 

ORF and the Exchange’s regulation of 

Clearing Member clearing activity, 

include: (a) the percentage of the 

Exchange’s regulatory expenses and 

level of regulatory activity that pertain 

to clearance and settlement activity and 

the percentage this accounts for with 

respect to the Exchange’s overall 

regulatory costs and regulatory activity, 

and if that differs depending on whether 

the Clearing Member is an Exchange 

member or not and whether the contract 

executes on the Exchange or not; (b) the 

number of Clearing Members compared 

to the number of non-Members from 

which ORF is collected on behalf of the 

Exchange; and (c) the percentage of ORF 

revenues collected from Clearing 

Members compared to the percentage of 

ORF revenue collected from nonMembers. 

The Commission is instituting 

proceedings to allow for additional 

consideration and comment on the 

issues raised herein, including as to 

whether the proposed fees are 

consistent with the Act, and 

specifically, with the requirements that 

exchange fees be reasonable, equitably 

allocated, and not unfairly 

discriminatory.52

V. Commission’s Solicitation of 

Comments 

The Commission requests written 

views, data, and arguments with respect 

to the concerns identified above as well 

as any other relevant concerns. Such 

comments should be submitted by 

October 25, 2023. Rebuttal comments 

should be submitted by November 8, 

2023. Although there do not appear to 

be any issues relevant to approval or 

disapproval which would be facilitated 

by an oral presentation of views, data, 

and arguments, the Commission will 

consider, pursuant to Rule 19b–4, any 

request for an opportunity to make an 

oral presentation.53

The Commission asks that 

commenters address the sufficiency and 

merit of the Exchange’s statements in 

support of the proposal, in addition to 

any other comments they may wish to 

submit about the proposed rule change. 

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 rule-comments@

sec.gov. Please include file number SR– 

CboeBZX–2023–071 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–2023–071. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2023–071 and should be 

submitted on or before October 25, 

2023. Rebuttal comments should be 

submitted by November 8, 2023. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,54 that file 

number SR–CboeBZX–2023–071, be and 

hereby is, temporarily suspended. In 

addition, the Commission is instituting 

proceedings to determine whether the 

proposed rule change should be 

approved or disapproved. 


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55 17 CFR 200.30–3(a)(57) and (58). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). A proposed rule change 

may take effect upon filing with the Commission if 

it is designated by the exchange as ‘‘establishing or 

changing a due, fee, or other charge imposed by the 

self-regulatory organization on any person, whether 

or not the person is a member of the self-regulatory 

organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii). 

4See Securities Exchange Act Release No. 98173 

(August 21, 2023), 88 FR 58378 (SR–MIAX–2023– 

30) (‘‘Notice’’). Comment on the proposed rule 

change can be found at: https://www.sec.gov/ 

comments/sr-miax-2023-30/srmiax202330.htm. 

5 15 U.S.C. 78s(b)(3)(C). 

6The term ‘‘Member’’ means an individual or 

organization approved to exercise the trading rights 

associated with a Trading Permit. Members are 

deemed ‘‘members’’ under the Exchange Act. See 

Exchange Rule 100. 

7See Notice, supra note 4, at 58383. 

8On January 23, 2023, the Exchange bifurcated 

the Exchange and MIAX Pearl Options 10Gb ULL 

network and stated that this bifurcation was due to 

ever-increasing capacity constraints and anticipated 

access needs for Members and market participants. 

See Securities Exchange Act Release Nos. 96545 

(December 20, 2022), 87 FR 79393 (December 27, 

2022) (SR–MIAX–2022–48); and 96553 (December 

20, 2022), 87 FR 79379 (December 27, 2022) (SR– 

PEARL–2022–60). The instant filing would amend 

provisions in the Fee Schedule to reflect the 

bifurcation of the 10Gb ULL network and specify 

that only the 1Gb network provides access to both 

the Exchange and MIAX Pearl Options. See Notice, 

supra note 4, at 58383. 

9The MIAX Express Interface (‘‘MEI’’) is a 

connection to MIAX systems that enables Market 

Makers to submit simple and complex electronic 

quotes to MIAX. See Fee Schedule, note 26. 

10The term ‘‘Market Makers’’ refers to Lead 

Market Makers (‘‘LMMs’’), Primary Lead Market 

Makers (‘‘PLMMs’’), and Registered Market Makers 

(‘‘RMMs’’) collectively. See Exchange Rule 100. For 

purposes of Limit Service MEI Ports, Market Makers 

also include firms that engage in other types of 

liquidity activity, such as seeking to remove resting 

liquidity from the Exchange’s Book. The Exchange 

states that the Limited Service MEI Ports provide 

Market Makers with the ability to send eQuotes and 

quote purge messages only, but not Market Maker 

Quotes, to the MIAX System, in addition to being 

capable of receiving administrative information. See 

Notice, supra note 4, at 58383, n.61. 

11See Notice, supra note 4, at 58383. The 

Exchange initially filed the proposed fee change on 

December 30, 2022, with an effective date of 

January 1, 2023. See Securities Exchange Act 

Release No. 96629 (January 10, 2023), 88 FR 2729 

(January 17, 2023) (SR–MIAX–2022–50). That filing 

was withdrawn by the Exchange and the Exchange 

filed a new proposed fee change with additional 

justification (SR–MIAX–2023–08) on February 23, 

2023. See Securities Exchange Act Release No. 

97081 (March 8, 2023), 88 FR 15782 (March 14, 

2023). The Exchange subsequently withdrew that 

filing and replaced it with SR–MIAX–2023–18 on 

April 20, 2023. See Securities Exchange Act Release 

No. 97419 (May 2, 2023), 88 FR 29777 (May 8, 

2023). The Exchange subsequently withdrew that 

filing and replaced it with SR–MIAX–2023–25 on 

June 16, 2023. See Securities Exchange Act Release 

No. 97814 (June 27, 2023), 88 FR 42844 (July 3, 

2023). The Exchange subsequently withdrew that 

filing and replaced it with the instant filing to 

provide additional information and a revised 

justification for the proposal, which is discussed 

herein. See Notice, supra note 4, at 58379. 

12A ‘‘matching engine’’ is a part of the MIAX 

electronic 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. See Notice, supra note 

4, at 58383, n.62 (citing Fee Schedule, Section 

5)d)ii), note 29). 

13See Notice, supra note 4, at 58383. 

14See id. 

15See id. 

16 15 U.S.C. 78s(b)(3)(C). 

17 15 U.S.C. 78s(b)(1). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.55

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21962 Filed 10–3–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98657; File No. SR–MIAX– 

2023–30] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC; Suspension of and Order 

Instituting Proceedings To Determine 

Whether To Approve or Disapprove 

Proposed Rule Change To Amend the 

Fee Schedule To Modify Certain 

Connectivity and Port Fees 

September 29, 2023. 

I. Introduction 

On August 8, 2023, Miami 

International Securities Exchange, LLC 

(‘‘MIAX’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change 

(File No. SR–MIAX–2023–30) to amend 

certain connectivity and port fees. The 

proposed rule change was immediately 

effective upon filing with the 

Commission pursuant to Section 

19(b)(3)(A) of the Act.3 The proposed 

rule change was published for comment 

in the Federal Register on August 25, 

2023.4 Pursuant to Section 19(b)(3)(C) of 

the Act,5 the Commission is hereby: (1) 

temporarily suspending the proposed 

rule change; and (2) instituting 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change. 

II. Background and Description of the 

Proposed Rule Change 

As described in more detail in the 

Notice, the Exchange proposes to: (1) 

increase fees for a 10 gigabit (‘‘Gb’’) 

ultra-low latency (‘‘ULL’’) fiber 

connection for Members 6 and nonMembers from $10,000 to $13,500 per 

month; 7 (2) remove provisions in the 

Exchange’s Fee Schedule that provide 

for a shared 10 Gb ULL network with 

the Exchange’s affiliate MIAX Pearl 

Options; 8 and (3) increase fees for 

Limited Service MIAX Express 

Interface 9 (‘‘MEI’’) Ports available to 

Market Makers 10 through implementing 

a tiered-pricing structure.11 With 

respect to Limited Service MEI Ports, 

the Exchange will continue to provide 

two Limited Service MEI Ports for each 

matching engine 12 to which a Market 

Maker connects free of charge.13 Prior to 

the proposed fee change, Market Makers 

were assessed a $100 monthly fee for 

each additional Limited Service MEI 

Port for each matching engine above the 

first two Limited Service MEI Ports that 

were included for free.14 Now, the 

Exchange proposes to establish a tieredpricing structure for the Limited Service 

MEI Ports pursuant to which: (i) the 

third and fourth Limited Service MEI 

Ports for each matching engine will 

increase to $150 a month per port; (ii) 

the fifth and sixth Limited Service MEI 

Ports for each matching engine will 

increase to $200 a month per port; and 

(iii) the seventh or more Limited Service 

MEI Ports will increase to $250 a month 

per port.15

III. Suspension of the Proposed Rule 

Change 

Pursuant to Section 19(b)(3)(C) of the 

Act,16 at any time within 60 days of the 

date of filing of an immediately effective 

proposed rule change pursuant to 

Section 19(b)(1) of the Act,17 the 

Commission summarily may 

temporarily suspend the change in the 

rules of a self-regulatory organization 

(‘‘SRO’’) 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. The Commission believes a 

temporary suspension of the proposed 

rule change is necessary and 

appropriate to allow for additional 

analysis of the proposed rule change’s 

consistency with the Act and the rules 

thereunder. 

In support of the proposal, the 

Exchange states its belief that the 

proposed fees overall are reasonable 

because they promote parity among 

exchange pricing for access, which 

promotes competition, while allowing 

the Exchange to recover its costs to 

provide dedicated access via 10Gb ULL 

connectivity and Limited Service MEI 


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