[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86400-86404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27268]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99116; File No. SR-C2-2023-024]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Its Fees Schedule

December 7, 2023.
    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 1, 2023, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to 
amend its Fee Schedule. The text of the proposed rule change is in 
Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule, effective December 
1, 2023.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 17 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than approximately 16% of the 
market share and currently the Exchange represents approximately 3% of 
the market share.\3\ Thus, in such a low-concentrated and highly 
competitive market, no single options exchange, including the Exchange, 
possesses significant pricing power in the execution of option order 
flow. The Exchange believes that the ever-shifting market share among 
the exchanges from month to month demonstrates that market participants 
can shift order flow or discontinue to reduce use of certain categories 
of products, in response to fee changes. Accordingly, competitive 
forces constrain the Exchange's transaction fees, and market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets U.S. Options Market Volume Summary 
by Month (November 29, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

Fee Code Updates
    First, the Exchange proposes to amend the transaction fee for 
Public Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that 
remove liquidity. Currently, public customer orders in equity, 
multiply-listed index, ETF and ETN penny options classes (except SPY, 
AAPL, QQQ, IWM and SLV) that remove liquidity are assessed a standard 
transaction fee of $0.43 per contract and yield fee code ``PC''. The 
Exchange proposes to remove orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, 
and XLF from fee code PC and, instead, assess fee code ``SC'' for 
Public Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that 
remove liquidity. Fee code SC is currently appended to Public Customer 
orders in SPY, AAPL, QQQ, IWM and

[[Page 86401]]

SLV that remove liquidity and assesses a reduced fee (from that of fee 
code PC) of $0.37 per contract.
    The Exchange next proposes to amend the rebate for C2 Market Maker 
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that add liquidity, 
including if they are a National Best Bid or Offer (``NBBO'') Joiner or 
NBBO Setter. Currently, such C2 Market Makers orders are provided a 
rebate of $0.41 per contract and yield fee code ``PM''. Fee code SL is 
currently appended to C2 Market Maker orders in SPY, AAPL, QQQ, IWM and 
SLV that add liquidity and are a National Best Bid or Offer (``NBBO'') 
Joiner or NBBO Setter and offers a rebate of $0.31 per contract for 
such orders. Particularly, to qualify as a NBBO Joiner, a C2 market-
maker order must improve the C2 Best Bid or Offer (``BBO'') and result 
in C2 joining an existing NBBO. Only the first order received that 
results in C2 BBO joining the NBBO at a new price level will qualify 
for the enhanced rebate. If C2 is at the NBBO, the order will not 
qualify. Alternatively, C2 Market Makers may receive the enhanced 
rebate if they are a NBBO Setter. To qualify as a NBBO Setter and 
receive the enhanced rebate, a C2 Market Maker order must set the NBBO. 
The Exchange now proposes to add C2 Market Maker orders in AMC, AMD, 
AMZN, HYG, PLTR, TSLA, and XLF that add liquidity and are a National 
Best Bid or Offer (``NBBO'') Joiner or NBBO Setter to fee code SL. The 
Exchange also proposes to amend the rebate for orders yielding fee code 
SL, from $0.31 to $0.32. The Exchange believes assessing fee code SL 
and the corresponding enhanced rebate for C2 Market Makers in AMC, AMD, 
AMZN, HYG, PLTR, TSLA, and XLF that are NBBO Joiners or Setters will 
continue to incentivize liquidity providers to provide more 
aggressively priced liquidity in AMC, AMD, AMZN, HYG, PLTR, TSLA, and 
XLF options. Further, the Exchange believes that the increased rebate 
for orders yielding fee code SL will also incentivize liquidity 
providers to provide more aggressively priced liquidity in SPY, AAPL, 
QQQ, IWM and SLV options.
    The Exchange next proposes to amend the rebate for C2 Market Maker 
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that add liquidity. 
As noted above, currently, C2 Market Makers orders in equity, multiply-
listed index, ETF and ETN penny options classes (except SPY, AAPL, QQQ, 
IWM and SLV) that add liquidity are provided a rebate of $0.41 per 
contract and yield fee code ``PM''. The Exchange proposes to remove 
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF from fee code PM 
and, instead, assess existing fee code ``SM'' for C2 Market Maker 
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF. Fee code SM is 
currently appended to C2 Market Maker orders in SPY, AAPL, QQQ, IWM and 
SLV that add liquidity and offer a reduced rebate (from that of fee 
code PM) of $0.20 per contract.
    The Exchange also proposes to amend the rebate for non-Market 
Maker, non-Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF 
that add liquidity. Currently, non-Market Maker, non-Customer orders 
(i.e., Professional Customer, Firm, Broker/Dealer, non-C2 Market Maker, 
JBO, etc.) in equity, multiply-listed index, ETF and ETN penny options 
classes (except SPY, AAPL, QQQ, IWM and SLV) that add liquidity are 
provided a rebate of $0.36 per contract and yield fee code ``PN''. The 
Exchange proposes to remove orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, 
and XLF from fee code PN and, instead, assess existing fee code ``SN'' 
on non-Market Maker, non-Customer orders in AMC, AMD, AMZN, HYG, PLTR, 
TSLA, and XLF that add liquidity. Fee code SN is currently appended to 
such orders in SPY, AAPL, QQQ, IWM and SLV and assesses a reduced 
rebate (from that of fee code PN) of $0.20 per contract.
    The Exchange also proposes to add AMC, AMD, AMZN, HYG, PLTR, TSLA, 
and XLF to the table in the Fee Schedule that currently sets forth SPY, 
AAPL, QQQ, IWM and SLV-specific pricing. Like with SPY, AAPL, QQQ, IWM 
and SLV, the Exchange also proposes to clarify that the first 
transaction fee table, which does not apply to RUT, DJX, SPY, AAPL, 
QQQ, IWM and SLV, also does not apply to AMC, AMD, AMZN, HYG, PLTR, 
TSLA, and XLF. The Exchange notes that transaction fees and rebates 
that apply to (1) Public Customer orders in AMC, AMD, AMZN, HYG, PLTR, 
TSLA, and XLF that add liquidity (existing fee code ``PY'') (2) C2 
Market Maker orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that 
remove liquidity (existing fee code ``PR''), (3) non-Market Maker, non-
Customer orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that remove 
liquidity (existing fee code ``PP), (4) orders in AMC, AMD, AMZN, HYG, 
PLTR, TSLA, and XLF that trade at the open (existing fee code ``OO'') 
and (5) resting orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that 
trade with resting complex orders (existing fee code ``CA'') are not 
changing, nor are the associated fee codes.
Market Maker Volume Tiers
    The Exchange also proposes to amend Footnote 1 (Market Maker Volume 
Tiers), applicable to qualifying C2 Market Maker orders yielding fee 
code SM. Pursuant to Footnote 1 of the Fee Schedule, the Exchange 
currently offers two Market Maker Volume Tiers, which provide enhanced 
rebates between $0.26 and $0.30 per contract for qualifying Market 
Maker orders yielding fee code SM where a TPHTPH [sic] meets required 
criteria. Specifically, Tier 1 provides an enhanced rebate of $0.26 per 
contract where a TPH: (1) has an ADAV \4\ in Market-Maker orders in 
SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or SL) greater 
than or equal to 50,000 contracts; or (2) has a Step-Up ADAV \5\ in 
Market-Maker orders in SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee 
codes SM or SL) greater than or equal to 15,000 contracts from March 
2021. Tier 2 provides a higher rebate of $0.30 per contract where a TPH 
meets the more stringent criteria of having an ADAV in Market-Maker 
orders in SPY, AAPL, QQQ, IWM and SLV (i.e., yielding fee codes SM or 
SL) greater than or equal to 130,000 contracts.
---------------------------------------------------------------------------

    \4\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added, per day.
    \5\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
---------------------------------------------------------------------------

    The Exchange proposes to amend the required criteria for Tiers 1 
and 2. Specifically, the Exchange proposes to amend Tier 1 criteria to 
state that a TPHTPH [sic] must have (1) an ADAV in Market-Maker orders 
in SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF 
(i.e., yielding fee codes SM or SL) greater than or equal to 0.15% of 
Average OCV.\6\ The Exchange proposes to amend Tier 2 criteria to state 
that a TPHTPH [sic] must have an ADAV in Market-Maker orders in SPY, 
AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF (i.e., 
yielding fee codes SM or SL) greater than or equal to 0.35% of Average 
OCV. Additionally, the Exchange proposes to change the enhanced rebate 
for Tier 2 from $0.30 per contract to $0.28 per contract.
---------------------------------------------------------------------------

    \6\ ``OCV'' means, the total equity and ETF options volume that 
clears in the Customer range at the Options Clearing Corporation 
(``OCC'') for the month for which the fees apply, excluding volume 
on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close.
---------------------------------------------------------------------------

    The Exchange also proposes to add new Market Maker Volume Tier 3 to 
provide a rebate of $0.31 per contract if a TPH has an ADAV in Market-
Maker orders in SPY, AAPL, QQQ, IWM, SLV,

[[Page 86402]]

AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF (i.e., yielding fee codes SM 
or SL) greater than or equal to 0.60% of Average OCV. Finally, the 
Exchange propose to add new Market Maker Volume Tier 4 to provide an 
enhanced rebate of $0.32 per contract if a TPH has an ADAV in Market-
Maker orders in SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, 
TSLA, and XLF (i.e., yielding fee codes SM or SL) greater than or equal 
to 0.70% of Average OCV.
    The Exchange notes that other exchanges offer tiered product-
specific pricing incentives.\7\ The proposed changes are designed to 
encourage Market-Makers to increase or grow their order flow on the 
Exchange in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF, which facilitates 
tighter spreads, signaling increased activity from other market 
participants, and thus ultimately contributes to deeper and more liquid 
markets and provides greater execution opportunities on the Exchange to 
the benefit of all market participants.
---------------------------------------------------------------------------

    \7\ See, e.g., MIAX Pearl Fee Schedule, Section 1 Transaction 
Rebates/Fees, which provides for product-specific pricing for SPY, 
QQQ, and IWM; and Nasdaq ISE Pricing Schedule, Section 3, Footnote 
5, which provides for tiered rebates for market maker IWM and QCC 
orders that add liquidity between $0.10 and $0.26 per contract, as 
well as tired rebates for market maker orders in similar, single-
name options (AMZN, FB, and NVDA) between $0.15 and $0.22.
---------------------------------------------------------------------------

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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(4) of the Act,\11\ which 
requires that Exchange rules provide for the equitable allocation of 
reasonable dues, fees, and other charges among its TPHs and other 
persons using its facilities.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. In particular, the proposed 
changes to Exchange execution fees and rebates for certain orders in 
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF are intended to attract order 
flow to the Exchange by continuing to offer competitive pricing while 
also creating additional incentives to providing aggressively priced 
displayed liquidity, which the Exchange believes would enhance market 
quality to the benefit of all market participants.
    The Exchange believes its proposed changes are reasonable as they 
are competitive and in line with the Exchange's current pricing for the 
same orders in SPY, AAPL, QQQ, IWM, and SLV. The Exchange believes that 
it is reasonable to reduce the transaction fee for Public Customer 
orders in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF that remove 
liquidity because market participants will be subject to lower fees for 
such orders and thus may be encouraged to increase retail AMC, AMD, 
AMZN, HYG, PLTR, TSLA, and XLF order flow to the Exchange. The Exchange 
believes that it is reasonable to reduce the rebates for both C2 Market 
Maker and non-Market Maker, non-Customer orders in AMC, AMD, AMZN, HYG, 
PLTR, TSLA, and XLF that add liquidity because such market participants 
will still receive rebates for such orders, albeit at a lower amount, 
which are already in place for such orders in SPY, AAPL, QQQ, IWM and 
SLV. Additionally, Market Makers that are NBBO Joiners or Setters in 
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF would be eligible to receive 
the same rebate, as amended, that is currently offered for joining or 
setting an NBBO in SPY, AAPL, QQQ, IWM and SLV. The Exchange believes 
that offering the NBBO Joiner and Setter rebate for Market Maker orders 
in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF is reasonable as it is 
designed to continue to incentivize C2 Market Makers to improve the C2 
BBO resulting in C2 joining an existing NBBO or setting a new NBBO to 
receive the rebate, ultimately encouraging C2 Market Makers to submit 
more aggressive AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF orders that 
will maintain tight spreads, benefitting both TPHs and public 
investors. Further, the Exchange believes it is reasonable to increase 
the current rebate for the NBBO Joiner and Setter rebate for Market 
Maker orders in SPY, AAPL, QQQ, IWM and SLV, as such market 
participants will still receive a rebate for such orders.
    The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to adopt pricing specific to certain orders in 
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF as the Exchange already 
maintains the same pricing for such orders in SPY, AAPL, QQQ, IWM and 
SLV, as well as similar product-specific pricing for certain orders in 
other products, such as RUT and DJX.\12\ Additionally, as noted above, 
other exchanges similarly provide for product-specific pricing.\13\
---------------------------------------------------------------------------

    \12\ See Cboe C2 Options Exchange Fee Schedule, Transaction 
Fees.
    \13\ See supra note 8.
---------------------------------------------------------------------------

    The Exchange also believes that it is equitable and not unfairly 
discriminatory to assess a lower fee for Public Customer orders in AMC, 
AMD, AMZN, HYG, PLTR, TSLA, and XLF as compared to other market 
participants because customer order flow enhances liquidity on the 
Exchange for the benefit of all market participants. Specifically, 
customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts Market Makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. Moreover, the options industry has 
a long history of providing preferential pricing to customers, and the 
Exchange's current Fee Schedule currently does so in many places, as do 
the fees structures of multiple other exchanges.\14\ The Exchange notes 
that the proposed fee change will be applied equally to all Public 
Customers.
---------------------------------------------------------------------------

    \14\ See Cboe C2 Options Exchange Fee Schedule, Transaction 
Fees; see also BZX Options Fee Schedule, Fee Codes and Associated 
Fees.
---------------------------------------------------------------------------

    The Exchange believes it is equitable and not unfairly 
discriminatory to provide C2 Market-Makers that are NBBO Joiners or 
Setters in AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF an enhanced rebate 
(compared to the proposed rebate for other C2 Market-Makers) because 
such market participants are providing more

[[Page 86403]]

aggressively priced liquidity in AMC, AMD, AMZN, HYG, PLTR, TSLA, and 
XLF options. Additionally, increased add volume order flow, 
particularly by liquidity providers, contributes to a deeper, more 
liquid market, which, in turn, provides for increased execution 
opportunities and thus overall enhanced price discovery and price 
improvement opportunities on the Exchange. As such, this benefits all 
market participants by contributing towards a robust and well-balanced 
market ecosystem, offering additional flexibility for all investors to 
enjoy cost savings, supporting the quality of price discovery, 
promoting market transparency and improving investor protection. The 
Exchange believes the proposed changes to the rebates for non-Market 
Maker, non-Customer and C2 Market Maker AMC, AMD, AMZN, HYG, PLTR, 
TSLA, and XLF orders are also equitable and not unfairly discriminatory 
because they will be applied equally to all non-market-makers, non-
customers and Market-Makers, respectively.
    The Exchange believes amending Market Maker Volume Tiers for C2 
Market Maker orders yielding fee code SM or SL is reasonable because 
they provide additional opportunities for TPHs to receive enhanced 
rebates on qualifying orders in a manner that incentivizes increased 
Market Maker order flow in certain multiply-listed options on the 
Exchange. The Exchange believes the Market Maker Volume Tiers, as 
amended, are reasonable means to encourage Market Makers to increase 
their order flow to specific multiply-listed options on the Exchange 
(i.e., SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, TSLA, and 
XLF). The Exchange notes that increased Market Maker activity, 
particularly, facilitates tighter spreads and an increase in overall 
liquidity provider activity, both of which signal additional 
corresponding increase in order flow from other market participants, 
contributing towards a robust, well-balanced market ecosystem, 
particularly in multiply-listed options on the Exchange. The Exchange 
also believes that the amended enhanced rebate offered under Tier 2 and 
the proposed enhanced rebates offered under proposed Tiers 3 and 4 are 
reasonably based on the difficulty of satisfying the proposed tiers' 
criteria and ensures the proposed rebate and thresholds appropriately 
reflect the incremental difficulty in achieving the Market-Maker Volume 
Tier. The Exchange believes that the proposed enhanced rebates are also 
in line with the enhanced rebates currently offered by another exchange 
for similar products.\15\ The Exchange also believes it is reasonable, 
equitable and not unfairly discriminatory to adopt pricing specific to 
certain orders in SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, 
TSLA, and XLF as the Exchange already offers product-specific pricing 
for these orders and, and as noted above, other exchanges similarly 
provide for product-specific tiered pricing.\16\
---------------------------------------------------------------------------

    \15\ See supra note 8.
    \16\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the Market Maker Volume Tiers, as 
amended, represent an equitable allocation of fees and is not unfairly 
discriminatory because it applies uniformly to all Market Makers, in 
that all Market Makers have the opportunity to compete for and achieve 
the proposed tiers. The enhanced rebates will apply automatically and 
uniformly to all Market Makers that achieve the proposed corresponding 
criteria. While the Exchange has no way of knowing whether this 
proposed rule change would definitively result in any particular Market 
Maker qualifying for the proposed tiers, the Exchange believes that 
approximately two Market Makers will reasonably be able to achieve the 
amended criteria in Tier 1; approximately five Market Makers will be 
able to achieve the amended criteria in Tier 2; approximately two 
Market Makers will be able to achieve the criteria in proposed Tier 3; 
and approximately one Market Maker will be able to achieve the criteria 
in proposed Tier 4. The Exchange notes, however, that the tiers are 
open to any Market Maker that satisfies the tiers' criteria.
    The Exchange lastly notes that it does not believe the tiers, as 
amended, will adversely impact any TPH's pricing. Rather, should a TPH 
not meet the proposed criteria, the TPH will merely not receive the 
enhanced rebates corresponding to the tiers, and will instead receive 
the standard rebate.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed changes will encourage the 
submission of additional liquidity in AMC, AMD, AMZN, HYG, PLTR, TSLA, 
and XLF to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all TPHs. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering competition among orders, which promotes ``more efficient 
pricing of individual stocks for all types of orders, large and 
small.''
    The Exchange believes the proposed rule change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
change applies to all similarly situated TPHs equally. The proposed 
change to reduce the transaction fee for Public Customer orders in AMC, 
AMD, AMXN, HYG, PLTR, TSLA, and XLF is designed to attract additional 
AMC, AMD, AMZN, HYG, PLTR, TSLA, and XLF Public Customer orders that 
remove liquidity. As noted above, the changes to the rebates for non-
Market Maker, non-Customer and C2 Market Maker AMC, AMD, AMZN, HYG, 
PLTR, TSLA, and XLF orders will be applied equally to all non-market-
makers, non-customers and Market Makers, respectively. Further, the 
Exchange believes that the proposed change to increase the C2 Market 
Maker rebate for orders in SPY, AAPL, QQQ, and IWM and provide C2 
Market-Makers that are NBBO Joiners or Setters in AMC, AMD, AMZN, HYG, 
PLTR, TSLA, and XLF an enhanced rebate (compared to the proposed rebate 
for other C2 Market-Makers) will incentivize entry on the Exchange of 
more aggressive SPY, AAPL, QQQ, IWM, SLV, AMC, AMD, AMZN, HYG, PLTR, 
TSLA, and XLF orders that will maintain tight spreads, benefitting both 
TPHs and public investors criteria and, as a result, provide for deeper 
levels of liquidity, increasing trading opportunities for other market 
participants, thus signaling further trading activity, ultimately 
incentivizing more overall order flow and improving price transparency 
on the Exchange. Finally, as noted above, the changes to the Market 
Maker Volume Tiers apply uniformly to all Market Makers, in that all 
Market Makers have the opportunity to compete for and achieve the 
proposed tiers; the enhanced rebates will apply automatically and 
uniformly to all Market Makers that achieve the proposed corresponding 
criteria.
    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. TPHs 
have numerous alternative venues

[[Page 86404]]

that they may participate on and director their order flow, including 
16 other options exchanges and off-exchange venues. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single options exchange has more 
than 16% of the market share.\17\ Therefore, no exchange possesses 
significant pricing power in the execution of option order flow. 
Indeed, participants can readily choose to send their orders to other 
exchange and off-exchange venues if they deem fee levels at those other 
venues to be more favorable. Moreover, the Commission has repeatedly 
expressed its preference for competition over regulatory intervention 
in determining prices, products, and services in the securities 
markets. Specifically, in Regulation NMS, the Commission highlighted 
the importance of market forces in determining prices and SRO revenues 
and, also, recognized that current regulation of the market system 
``has been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' 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' . . . .''. Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \17\ See supra note 3.
---------------------------------------------------------------------------

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 \18\ and paragraph (f) of Rule 19b-4 \19\ 
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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#cbb9bea7aee6a8a4a6a6aea5bfb88bb8aea8e5aca4bd"><span class="__cf_email__" data-cfemail="641611080149070b0909010a1017241701074a030b12">[email protected]</span></a>. Please include 
file number SR-C2-2023-024 on the subject line.

Paper Comments

    <bullet> 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-C2-2023-024. 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-C2-2023-024 and should be 
submitted on or before January 3, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27268 Filed 12-12-23; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>