```

[Federal Register Volume 89, Number 249 (Monday, December 30, 2024)]
[Notices]
[Pages 106654-106660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30902]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101983; File No. SR-CBOE-2024-055]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Update 
its Fees Schedule in Connection With the Exchange's Plans To List and 
Trade Options That Overlie the Cboe Bitcoin U.S. ETF Index and the Cboe 
Mini Bitcoin U.S. ETF Index

December 19, 2024.
    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 11, 2024, 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.
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    \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 Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to update its Fees Schedule in connection with the Exchange's plans to 
list and trade options that overlie the Cboe Bitcoin U.S. ETF Index and 
the Cboe Mini Bitcoin U.S. ETF Index. The text of the proposed rule 
change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Fees Schedule in connection with 
its plans to list and trade options that overlie the Cboe Bitcoin U.S. 
ETF Index (``CBTX options'') and the Cboe Mini Bitcoin U.S. ETF Index 
(``MBTX options'').\3\ By way of background, the Cboe Bitcoin U.S. ETF 
Index is a modified market capitalization-weighted index that is 
designed to track the performance of a basket of spot Bitcoin ETFs 
listed on U.S. exchanges. CBTX options are cash-settled options based 
on the Cboe Bitcoin U.S. ETF Index. MBTX options are cash-settled 
options on the Cboe Mini Bitcoin U.S. ETF Index, which is a reduced 
value index based on 1/10th the value of the Cboe Bitcoin U.S. ETF 
Index.
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes on 
December 2, 2024 (SR-CBOE-2024-054). On December 11, 2024, the 
Exchange withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------

    The Exchange proposes to amend its Fees Schedule to accommodate the

[[Page 106655]]

planned listing and trading of CBTX and MBTX options.
Standard Transaction Rates and Surcharges
    First, the Exchange proposes to adopt certain standard transaction 
fees in connection with CBTX and MBTX options. Specifically, the 
proposed rule change adopts certain fees for CBTX and MBTX options in 
the Rate Table for All Products Excluding Underlying Symbol A,\4\ as 
follows:
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    \4\ Underlying Symbol List A includes OEX, XEO, RUT, RLG, RLV, 
RUI, UKXM, SPX (includes SPXW), SPESG and VIX. See Exchange Fees 
Schedule, Footnote 34.
---------------------------------------------------------------------------

     Adopts fee code B1, appended to all Customer (capacity 
``C'') orders in CBTX options and assesses a fee of $0.50 per contract; 
\5\
---------------------------------------------------------------------------

    \5\ Under the proposed changes, the Customer Large Trade 
Discount Program, set forth in the Exchange Fees Schedule, will 
apply to Customer orders in CBTX and MBTX (included in ``Other Index 
Options'' under the program). Under the program, a customer large 
trade discount program in the form of a cap on customer (``C'' 
capacity code) transaction fees is in effect for the options set 
forth in the Customer Large Trade Discount table. For CBTX and MBTX 
options, regular customer transaction fees will only be charged for 
up to 5,000 contracts per order, similar to other index options 
other than VIX, SPX/SPXW, SPESG, and XSP.
---------------------------------------------------------------------------

     Adopts fee code B2, which is appended to all non-Customer 
(i.e., Clearing Trading Permit Holders (capacity ``F''), Non-Clearing 
Trading Permit Holder Affiliates (capacity ``L''), Market-Maker 
(capacity ``M''), Broker-Dealers (capacity ``B''), Joint Back-Offices 
(capacity ``J''), Non-Trading Permit Holder Market-Makers (capacity 
``N''), and Professionals (capacity ``U'')) orders in CBTX options and 
assesses a fee of $1.00 per contract;
     Adopts fee code M1, appended to all Customer (capacity 
``C'') orders in MBTX options and assesses a fee of $0.25 per contract; 
and
     Adopts fee code M2, which is appended to all non-Customer 
(i.e., Clearing Trading Permit Holders (capacity ``F''), Non-Clearing 
Trading Permit Holder Affiliates (capacity ``L''), Market-Maker 
(capacity ``M''), Broker-Dealers (capacity ``B''), Joint Back-Offices 
(capacity ``J''), Non-Trading Permit Holder Market-Makers (capacity 
``N''), and Professionals (capacity ``U'')) orders in MBTX options and 
assesses a fee of $0.50 per contract.
    In addition to the above transaction fees, the proposed rule change 
also adopts a surcharge to CBTX and MBTX options transactions within 
the Rate Table--All Products Excluding Underlying Symbol List A. 
Specifically, the proposed rule change adds CBTX and MBTX options to 
the list of options for which the FLEX Surcharge Fee of $0.10 (capped 
at $250 per trade) applies to electronic FLEX orders executed by all 
capacity codes, except for Cboe Compression Services (``CCS'') and FLEX 
Micro transactions.\6\
---------------------------------------------------------------------------

    \6\ The FLEX Surcharge Fee will only be charged up to the first 
2,500 contracts per trade. See Exchange Fees Schedule, Footnote 17.
---------------------------------------------------------------------------

    The Exchange also proposes to exclude non-Customer complex orders 
in CBTX and MBTX from the Complex Surcharge by amending Footnote 35 
(appended to the Complex Surcharge) to provide that the Complex 
Surcharge applies per contract per side surcharge for noncustomer 
complex order executions that remove liquidity from the Complex Order 
Book (``COB'') and auction responses in the Complex Order Auction 
(``COA'') and AIM in all classes except CBTX, MBTX, MRUT, NANOS, XSP, 
FLEX Micros, Sector Indexes and Underlying Symbol List A.
Fees Programs
    The Exchange proposes to exclude CBTX and MBTX options from the 
Liquidity Provider Sliding Scale, which offers credits on Market-Maker 
orders where a Market-Maker achieves certain volume thresholds based on 
total national Market-Maker volume in all underlying symbols, excluding 
Underlying Symbol List A, MRUT, MXACW, MXUSA, MXWLD, NANOS, XSP and 
FLEX Micros during the calendar month. Specifically, the proposed rule 
change updates the Liquidity Provider Sliding Scale table to provide 
that volume thresholds are based on total national Market-Maker volume 
in all underlying symbols excluding Underlying Symbol List A, CBTX, 
MBTX, MRUT, MXACW, MXUSA, MXWLD, NANOS, XSP and FLEX Micros during the 
calendar month, and that it applies in all underlying symbols excluding 
Underlying Symbol List A, CBTX, MBTX, MRUT, MXACW, MXUSA, MXWLD, NANOS, 
XSP and FLEX Micros. The proposed rule change also updates Footnote 10 
(appended to the Liquidity Provider Sliding Scale) to provide that the 
Liquidity Provider Sliding Scale applies to Liquidity Provider 
(Exchange Market-Maker, DPM and LMM) transaction fees in all products 
except (1) Underlying Symbol List A, CBTX, MBTX, MRUT, MXACW, MXUSA, 
MXWLD, NANOS, XSP and FLEX Micros, (2) volume executed in open outcry, 
and (3) volume executed via AIM Responses.
    The proposed rule change also updates Footnote 44 (appended to the 
Liquidity Provider Sliding Scale Adjustment Table) to exclude CBTX and 
MBTX volume from the program by providing (in relevant part) that the 
Make Rate under the Liquidity Provider Sliding Scale Adjustment Table 
be derived from a Liquidity Provider's electronic volume the previous 
month in all symbols excluding Underlying Symbol List A, CBTX, MBTX, 
and XSP.
    The proposed rule change updates the Volume Incentive Program 
(``VIP'') table to also exclude CBTX and MBTX volume from the VIP, 
which currently offers a per contract credit for certain percentage 
threshold levels of monthly Customer volume in all underlying symbols, 
excluding Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA, 
MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP and FLEX Micros. The proposed 
rule change also amends Footnote 36 (appended to the VIP table) to 
reflect the proposed exclusion of CBTX and MBTX from the VIP by 
providing (in relevant part) that: the Exchange shall credit each TPH 
the per contract amount resulting from each public customer (``C'' 
capacity code) order transmitted by that TPH which is executed 
electronically on the Exchange in all underlying symbols excluding 
Underlying Symbol List A, Sector Indexes, DJX, CBTX, MBTX, MRUT, MXEA, 
MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP, FLEX Micros, QCC trades, public 
customer to public customer electronic complex order executions, and 
executions related to contracts that are routed to one or more 
exchanges in connection with the Options Order Protection and Locked/
Crossed Market Plan referenced in Rule 5.67, provided the Trading 
Permit Holder (``TPH'') meets certain percentage thresholds in a month 
as described in the Volume Incentive Program (VIP) table; the 
percentage thresholds are calculated based on the percentage of 
national customer volume in all underlying symbols excluding Underlying 
Symbol List A, Sector Indexes, CBTX, MBTX, MRUT, MXACW, MXEA, MXEF, 
MXUSA, MXWLD, NANOS, DJX, XSP, and FLEX Micros entered and executed 
over the course of the month; and in the event of a Cboe Options System 
outage or other interruption of electronic trading on Cboe Options, the 
Exchange will adjust the national customer volume in all underlying 
symbols excluding Underlying Symbol List A, Sector Indexes, CBTX, MBTX, 
MRUT, MXACW, MXEA, MXEF, MXUSA, MXWLD, NANOS, DJX, XSP, and FLEX Micros 
for the entire trading day.
    The proposed rule change excludes CBTX and MBTX options from the 
list of products eligible to receive Break-Up Credits in orders 
executed in AIM,

[[Page 106656]]

SAM, FLEX AIM, and FLEX SAM, by amending the Break-Up Credits table to 
exclude CBTX and MBTX along with the products currently excluded--
Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA, MXEF, MXACW, 
MXUSA, MXWLD, NANOS, XSP and FLEX Micros.
    The Exchange proposes to exclude CBTX and MBTX options from the 
Marketing Fee Program by updating the Marketing Fee table to provide 
that the marketing fee will be assessed on transactions of Market-
Makers (including DPMs and LMMs), resulting from customer orders at the 
per contract rate provided above on all classes of equity options, 
options on ETFs, options on ETNs and index options, except that the 
marketing fee shall not apply to Sector Indexes, DJX, CBTX, MBTX, MRUT, 
MXEA, MXEF, MXACW, MXUSA, MXWLD, XSP, NANOS, FLEX Micros or Underlying 
Symbol List A. The Exchange notes that, in this way, CBTX and MBTX 
options will be treated as most of the Exchange's other exclusively 
listed products that are currently excluded from the Marketing Fee 
Program. The Exchange does believe that it is necessary at the point of 
newly listing and trading for CBTX and MBTX options to be eligible for 
the Marketing Fee Program and may determine in the future to submit a 
fee filing to add CBTX and MBTX to the Marketing Fee Program if the 
Exchange believes it would potentially generate more customer order 
flow in CBTX and MBTX options.
    The Exchange proposes to exclude CBTX and MBTX options from the 
Floor Broker Sliding Scale Rebate Program, which offers rebates for 
Firm Facilitated and non-Firm Facilitated orders that correspond to 
certain volume tiers and is designed to incentivize order flow in 
multiply listed options to the Exchange's trading floor. The Exchange 
proposes to update the Floor Broker Sliding Scale Rebate Program to 
provide that the Floor Broker Sliding Scale Rebate Program applies to 
all products except Underlying Symbol List A, Sector Indexes, DJX, 
CBTX, MBTX, MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP and FLEX 
Micros.
    The Exchange next proposes to exclude CBTX and MBTX options from 
eligibility for the Order Router Subsidy (``ORS'') and Complex Order 
Router Subsidy (``CORS'') Programs, in which Participating TPHs or 
Participating Non-Cboe TPHs may receive a payment from the Exchange for 
every executed contract routed to the Exchange through their system in 
certain classes. Specifically, the proposed rule change updates the 
ORS/CORS Program tables to provide that ORS/CORS participants whose 
total aggregate non-customer ORS and CORS volume is greater than 0.25% 
of the total national volume (excluding volume in options classes 
included in Underlying Symbol List A, Sector Indexes, DJX, CBTX, MBTX, 
MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP or FLEX Micros) will 
receive an additional payment for all executed contracts exceeding that 
threshold during a calendar month. The proposed rule change also 
updates Footnote 29 (appended to the ORS Program table) to provide that 
Cboe Options does not make payments under the program with respect to 
executed contracts in options classes included in Underlying Symbols 
List A, Sector Indexes, DJX, CBTX, MBTX, MRUT, MXEA, MXEF, MXACW, 
MXUSA, MXWLD, NANOS, XSP or FLEX Micros or with respect to complex 
orders or spread orders; and updates Footnote 30 (appended to the CORS 
Program table) to provide that Cboe Options does not make payments 
under the program with respect to executed contracts in options classes 
included in Underlying Symbols List A, Sector Indexes, DJX, CBTX, MBTX, 
MRUT, MXEA, MXEF, MXACW, MXUSA, MXWLD, NANOS, XSP or FLEX Micros.
    The Exchange also proposes to amend Footnote 6, which states that 
in the event of an Exchange System outage or other interruption of 
electronic trading on the Exchange that lasts longer than 60 minutes, 
the Exchange will adjust the national volume in all underlying symbols 
excluding Underlying Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, 
MXACW, MXUSA, MXWLD, NANOS, DJX, XSP and FLEX Micros for the entire 
trading day. The Exchange proposes to add CBTX and MBTX options to the 
list of options.
    The Exchange also proposes to exclude Firm (i.e., Clearing Trading 
Permit Holders (capacity ``F'') and Non-Clearing Trading Permit Holder 
Affiliates (capacity ``L'')) transactions in CBTX and MBTX from the 
Clearing TPH Fee Cap. Specifically, it amends footnote 22 (appended to 
the Clearing TPH Fee Cap table) to provide that all non-facilitation 
business executed in AIM or open outcry, or as a QCC or FLEX 
transaction, transaction fees for Clearing TPH Proprietary and/or their 
Non-TPH Affiliates in all products except CBTX, MBTX, MRUT, NANOS, XSP, 
FLEX Micros, Sector Indexes and Underlying Symbol List A, in the 
aggregate, are capped at $65,000 per month per Clearing TPH. The 
proposed rule change additionally updates Footnote 11 (which is also 
appended to the Clearing TPH Fee Cap table) to provide that the 
Clearing TPH Fee Cap in all products except CBTX, MBTX, MRUT, NANOS, 
XSP, FLEX Micros, Underlying Symbol List A and Sector Indexes (the 
``Fee Cap''), the Cboe Options Proprietary Products Sliding Scale for 
Clearing TPH Proprietary Orders, and the Clearing TPH Proprietary VIX 
Sliding Scale apply to (i) Clearing TPH proprietary orders (``F'' 
capacity code), and (ii) orders of Non-TPH Affiliates of a Clearing 
TPH.
LMM Incentive Programs
    Finally, the Exchange proposes to adopt financial programs in 
connection with CBTX and MBTX options for LMMs appointed to the 
programs (collectively, the ``LMM Incentive Programs'').\7\ Each LMM 
Incentive Program provides a rebate to TPHs with LMM appointments to 
the respective incentive program that meet certain quoting standards in 
the applicable series in a month. The Exchange notes that meeting or 
exceeding the quoting standards (as proposed; described in further 
detail below) in each of the LMM Incentive Program products to receive 
the applicable rebate (as proposed; described in further detail below) 
is optional for an LMM appointed to a program. Rather, an LMM appointed 
to an incentive program is eligible to receive the corresponding rebate 
if it satisfies the applicable quoting standards, which the Exchange 
believes encourages the LMM to provide liquidity in the applicable 
class and trading session. The Exchange may consider other exceptions 
to the programs' quoting standards based on demonstrated legal or 
regulatory requirements or other mitigating circumstances. In 
calculating whether an LMM appointed to an incentive program meets the 
applicable program's quoting standards each month, the Exchange 
excludes from the calculation in that month the business day in which 
the LMM missed meeting or exceeding the quoting standards in the 
highest number of the applicable series.
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    \7\ See Exchange Rule 3.55(a). In advance of the LMM Incentive 
Program effective date, the Exchange will send a notice to solicit 
applications from interested TPHs for the LMM role and will, from 
among those applications, select the program LMMs. Factors to be 
considered by the Exchange in selecting LMMs include adequacy of 
capital, experience in trading options, presence in the trading 
crowd, adherence to Exchange rules and ability to meet the 
obligations specified in Rule 5.55.
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    The Exchange notes that it currently offers several LMM Incentive 
Programs for other proprietary Exchange products. The proposed 
heightened quoting standards are similar to the detail and

[[Page 106657]]

format (corresponding premiums, quote widths, and sizes) of the quoting 
standards currently in place for LMM Incentive Programs for other 
proprietary Exchange products,\8\ and, similar to the LMM Incentive 
Programs with respect to other propriety [sic] Exchange products, the 
heightened quoting requirements offered by each of the proposed LMM 
Incentive Programs are designed to incentivize LMMs appointed to the 
LMM Incentive Programs to provide liquidity in CBTX and MBTX options 
during the trading day upon their listing and trading on the Exchange 
and thereafter, which, in turn, would provide greater trading 
opportunities, added market transparency and enhanced price discovery 
for all market participants in CBTX and MBTX options.
---------------------------------------------------------------------------

    \8\ See Exchange Fees Schedule, ``MRUT LMM Incentive Program'', 
``MSCI LMM Incentive Program'', ``MXACW LMM Incentive Program'', 
``MXUSA LMM Incentive Program'', ``MXWLD LMM Incentive Program'', 
``NANOS LMM Incentive Program'', ``GTH VIX/VIXW LMM Incentive 
Program'', ``GTH1 SPX/SPXW LMM Incentive Program'', ``GTH2 SPX/SPXW 
LMM Incentive Program'', ``RTH XSP LMM Incentive Program'', ``GTH1 
XSP LMM Incentive Program'', ``GTH2 XSP LMM Incentive Program'', and 
``RTH SPESG LMM Incentive Program''.
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    The Exchange first proposes to adopt a MBTX/MBTXW LMM Incentive 
Program (``MBTX LMM Incentive Program''). As proposed, the MBTX LMM 
Incentive Program provides that if an LMM appointed to the MBTX LMM 
Incentive Program provides continuous electronic quotes during Regular 
Trading Hours (``RTH'') that meet or exceed the proposed heightened 
quoting standards (below) in at least 85% of MBTX series 85% of the 
time in a given month, the LMM will receive (i) a payment for that 
month in the amount of $10,000 (or pro-rated amount if an appointment 
begins after the first trading day of the month or ends prior to the 
last trading day of the month) for that month and (ii) a credit of 
$0.25/contract applied to all MBTX contracts executed in Market-Maker 
capacity during RTH.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               6 days or less       7 days to 14 days    15 days to 60 days      61 to 120 days        121 to 270 days
                                           -------------------------------------------------------------------------------------------------------------
                                              Width       Size      Width       Size      Width       Size      Width       Size      Width       Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00...............................      $0.15         20      $0.20         15      $0.25         10      $0.30          5      $0.80          5
$5.01-$15.00..............................       0.50         20       0.35         15       0.40         10       0.50          5       1.00          5
$15.01-$20.00.............................       1.00          5       1.50          5       0.50         10       0.50          5       2.00          3
$20.01-$50.00.............................       1.20          5       3.00          5       4.00          5       1.00          5       5.00          3
$50.01-$100.00............................       5.00          1       8.00          1       8.00          1       8.00          1       8.00          3
$100.01-$200.00...........................       8.00          1      10.00          1      12.00          1      12.00          1      14.00          1
Greater than $200.00......................      10.00          1      12.00          1      14.00          1      14.00          1      16.00          1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange next proposes to adopt a CBTX/CBTXW LMM Incentive 
Program (``CBTX LMM Incentive Program''). As proposed, the CBTX LMM 
Incentive Program provides that if an LMM appointed to the CBTX LMM 
Incentive Program provides continuous electronic quotes during RTH that 
meet or exceed the proposed heightened quoting standards (below) in at 
least 85% of CBTX series 85% of the time in a given month, the LMM will 
receive (i) a payment for that month in the amount of $10,000 (or pro-
rated amount if an appointment begins after the first trading day of 
the month or ends prior to the last trading day of the month) and (ii) 
a credit of $0.50/contract applied to all CBTX contracts executed in 
Market-Maker capacity during RTH.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               6 days or less       7 days to 14 days    15 days to 60 days      61 to 120 days        121 to 270 days
                                           -------------------------------------------------------------------------------------------------------------
                                              Width       Size      Width       Size      Width       Size      Width       Size      Width       Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00...............................      $0.40         10      $0.60         10      $1.00         10      $1.00          5      $2.00          5
$5.01-$15.00..............................       0.80         10       1.50         10       1.50         10       1.50          5       3.00          5
$15.01-$20.00.............................       2.00          5       3.00          5       3.50          5       3.50          5       5.00          5
$20.01-$50.00.............................       4.00          5       5.00          5       5.00          5       5.00          5       8.00          3
$50.01-$100.00............................       6.00          5       8.00          5       8.00          5       8.00          5      12.00          3
$100.01-$200.00...........................      12.00          1      12.00          1      12.00          1      12.00          3      12.00          1
Greater than $200.00......................      16.00          1      16.00          1      16.00          1      16.00          1      18.00          1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The heightened quoting requirements offered by the CBTX and MBTX 
LMM Incentive Programs are designed to incentivize LMMs appointed to 
the LMM Incentive Programs to provide significant liquidity in CBTX and 
MBTX options during the trading day upon their listing and trading on 
the Exchange, which, in turn, would provide greater trading 
opportunities, added market transparency and enhanced price discovery 
for all market participants in CBTX and MBTX options.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.

[[Page 106658]]

Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \11\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange also believes the 
proposed rule change is consistent with Section 6(b)(4) of the Act,\12\ 
which requires that Exchange rules provide for the equitable allocation 
of reasonable dues, fees, and other charges among its TPHs and other 
persons using its facilities.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
    \12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

Standard Transaction Rates and Surcharges
    The Exchange believes that the proposed amendments to the Fees 
Schedule in connection with standard transaction rates and surcharges 
for CBTX and MBTX options transactions are reasonable, equitable and 
not unfairly discriminatory. The Exchange believes that the proposed 
standard transaction rates for Customer and non-Customer orders in CBTX 
and MBTX options are reasonable. Specifically, the proposed fees are in 
line with or less than fees for transactions in similar industry 
products,\13\ when taking into account adjustments for notional size 
differences, based on the spot value of the underlying index of CBTX 
and MBTX options as compared to the spot value of other similar 
industry products and considering the difference in multipliers among 
the various products.
---------------------------------------------------------------------------

    \13\ See CME Fees Schedule, Bitcoin Futures & Options, Micro 
Bitcoin Futures & Options.
---------------------------------------------------------------------------

    Additionally, the Exchange believes it is reasonable to charge 
different fee amounts to different user types in the manner proposed 
because the proposed fees are consistent with the price differentiation 
that exists today for other index products. Moreover, the Exchange 
believes that it is reasonable to assess lower fees for MBTX options 
orders (as compared to CBTX options orders), because of the relation 
between MBTX options and CBTX options, wherein MBTX options overlie an 
index with 1/10th the value of the index that underlies CBTX options.
    The Exchange believes it is reasonable to apply the FLEX Surcharge 
Fee to CBTX and MBTX options, as the FLEX Surcharge Fee assists the 
Exchange in recouping the cost of developing and maintaining the FLEX 
system. Moreover, the Exchange believes it is reasonable to exclude 
CBTX and MBTX options from the Complex Surcharge because the proposed 
surcharge exclusions will provide consistency between the fees assessed 
for orders in other proprietary products, including MRUT, NANOS, XSP, 
FLEX Micros, Sector Indexes and Underlying Symbol List A.
    The Exchange believes the proposed standard transaction rates and 
exclusion from certain surcharges are equitable and not unfairly 
discriminatory because they will apply automatically and uniformly to 
all capacities as applicable (i.e., Customer and non-Customer), in CBTX 
and MBTX options. The Exchange also believes that it is equitable and 
not unfairly discriminatory to assess lower fees to Customers as 
compared to other market participants because Customer order flow 
enhances liquidity on the Exchange for the benefit of all market 
participants. Specifically, Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
Market-Makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
The fees offered to Customers are intended to attract more Customer 
trading volume to the Exchange. Moreover, the options industry has a 
long history of providing preferential pricing to Customers, and the 
Exchange's current Fees Schedule currently does so in many places, as 
do the fees structures of many other exchanges. Finally, all fee 
amounts listed as applying to Customers will be applied equally to all 
Customers (meaning that all Customers will be assessed the same 
amount).
Fees Programs
    The Exchange believes that the proposed updates to the Fees 
Schedule in connection with the application of certain fees programs to 
transactions in CBTX and MBTX options are reasonable, equitable and not 
unfairly discriminatory. The Exchange believes it is reasonable to 
exclude CBTX and MBTX options from the Liquidity Provider Sliding 
Scale, the VIP, Break-Up Credits applicable to Customer Agency Orders 
in AIM and SAM, the Marketing Fee, the Floor Broker Sliding Scale 
Rebate Program, and the ORS/CORS program because other proprietary 
index products are also excepted from these programs.\14\ Moreover, the 
Exchange notes that the proposed rule change does not alter any of the 
existing programs, but instead, merely proposes not to include 
transactions in CBTX and MBTX options in those programs.
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    \14\ See Exchange Fees Schedule, Liquidity Provider Sliding 
Scale, Volume Incentive Program, Break-Up Credits, Marketing Fee, 
Floor Broker Sliding Scale Rebate Program, Order Router Subsidy 
Program and Complex Order Router Subsidy Program.
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    The Exchange believes that excluding CBTX and MBTX options 
transactions from certain fees programs is equitable and not unfairly 
discriminatory because the programs will equally not apply to, or 
exclude in the same manner, all market participants' orders in CBTX and 
MBTX options. The Exchange notes that the proposed rule change does not 
alter any of the existing program rates or volume calculations, but 
instead, merely proposes to include (or not to) include transactions in 
CBTX and MBTX options in those programs and volume calculations in the 
same way that transactions in proprietary index products are (or are 
not) currently included.
LMM Incentive Programs
    The Exchange believes the proposed LMM Incentive Programs are 
reasonable, equitable and not unfairly discriminatory. Particularly, 
the proposed CBTX and MBTX LMM Incentive Programs are reasonable 
financial incentive programs because the proposed heightened quoting 
standards and rebate amount for meeting the heightened quoting 
standards in each CBTX and MBTX series, as applicable, are reasonably 
designed to incentivize LMMs appointed to the Programs to meet the 
proposed heightened quoting standards during RTH for CBTX and MBTX, as 
applicable, thereby providing liquid and active markets, which 
facilitates tighter spreads, increased trading opportunities, and 
overall enhanced market quality to the benefit of all market 
participants, particularly in newly listed and traded products on the 
Exchange during the trading day.
    The Exchange believes that the proposed heightened quoting 
standards are reasonable because they are similar to the detail and 
format (corresponding premiums, quote widths, and sizes) of the quoting 
standards currently in place for LMM Incentive Programs for other 
proprietary Exchange products.\15\ The Exchange believes the proposed

[[Page 106659]]

heightened quoting standards for the CBTX and MBTX LMM Incentive 
Programs reasonably reflect what the Exchange believes will be typical 
market characteristics in CBTX and MBTX options, given their relative 
spot value, notional value and general anticipated retail base.
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    \15\ See Exchange Fees Schedule, ``MRUT LMM Incentive Program'', 
``MSCI LMM Incentive Program'', ``MXACW LMM Incentive Program'', 
``MXUSA LMM Incentive Program'', ``MXWLD LMM Incentive Program'', 
``NANOS LMM Incentive Program'', ``GTH VIX/VIXW LMM Incentive 
Program'', ``GTH1 SPX/SPXW LMM Incentive Program'', ``GTH2 SPX/SPXW 
LMM Incentive Program'', ``RTH XSP LMM Incentive Program'', ``GTH1 
XSP LMM Incentive Program'', ``GTH2 XSP LMM Incentive Program'', and 
``RTH SPESG LMM Incentive Program''.
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    Further, the Exchange believes the proposed percentage of the 
series (85% of each series) in which an LMM must meet the proposed 
heightened quoting requirements is reasonable given the new market 
ecosystem for CBTX and MBTX options. Because the CBTX/MBTX market is 
still new and not yet as robust as that of other products, such as SPX/
SPXW, it may pose more difficulty for LMMs in CBTX and MBTX options to 
offset risk and hedge, thus more difficulty in achieving the heightened 
quoting requirement. Therefore, the Exchange believes the proposed 
percentage of the series is reasonably commensurate with the 
potentially higher risk, and challenge in achieving the heightened 
quoting requirements, LMMs would have to take on in the new CBTX/MBTX 
market. The Exchange notes that the percentage of the series in place 
under the LMM Programs for MXACW and MXUSA options (90% of series and 
85% of series, respectively), which are comparable in terms of 
potentially higher risk and challenge in achieving heightened quoting 
requirements, are tailored in a similar manner.
    The Exchange further believes that the proposed rebate amounts 
received for CBTX ($10,000) and MBTX ($10,000) options are reasonable 
because they are comparable to the rebates offered by other LMM 
Incentive Programs offered by the Exchange. For example, the LMM 
Programs for MXACW and MXUSA options, which are comparable in terms of 
potentially higher risk and challenge in achieving heightened quoting 
requirements, each currently offer $10,000 per class, per month to 
appointed LMMs for MXACW and MXUSA options if the heightened quoting 
standards are met in a given month. The Exchange believes that the 
proposed rebate amounts are reasonably designed to continue to 
incentivize an LMM appointed to the respective program to meet the 
applicable quoting standards for CBTX and MBTX options, thereby 
providing liquid and active markets, which facilitates tighter spreads, 
increased trading opportunities, and overall enhanced market quality to 
the benefit of all market participants.
    Similarly, the Exchange believes that the additional per contract 
credits for Market-Maker CBTX and MBTX options orders executed in RTH 
offered by the LMM Incentive Programs are reasonable and equitable as 
LMM Incentive Programs for other products have, in the past, offered 
similar additional per contract credits.\16\ All appointed LMMs are 
eligible for the additional per contract credits, which is designed to 
incentivize LMMs in these newly listed products to provide liquid and 
active markets in these products to encourage their growth.
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    \16\ See, for example, Securities Exchange Act Release No. 96510 
(December 15, 2022), 87 FR 78150 (December 21, 2022) (SR-CBOE-2022-
061), wherein the Exchange adopted an additional per contract credit 
for Market-Maker XSP orders executed in RTH, as part of its GTH1 XSP 
LMM Incentive Program.
---------------------------------------------------------------------------

    Finally, the Exchange believes it is equitable and not unfairly 
discriminatory to offer the financial incentive to LMMs appointed to 
the LMM Incentive Programs, because it will benefit all market 
participants trading in CBTX and MBTX during RTH by encouraging the 
appointed LMMs to satisfy the heightened quoting standards, which 
incentivizes continuous increased liquidity and thereby may provide 
more trading opportunities and tighter spreads. Indeed, the Exchange 
notes that these LMMs serve a crucial role in providing quotes and the 
opportunity for market participants to trade CBTX and MBTX, which can 
lead to increased volume, providing for robust markets. The Exchange 
ultimately proposes to offer the CBTX and MBTX LMM Incentive Programs 
to sufficiently incentivize the appointed LMMs to provide key liquidity 
and active markets in the newly listed and traded CBTX and MBTX options 
during the trading day to encourage liquidity, thereby protecting 
investors and the public interest. The Exchange also notes that an LMM 
appointed to the LMM Incentive Programs may undertake added costs each 
month to satisfy heightened quoting standards (e.g., having to purchase 
additional logical connectivity). The Exchange believes the proposed 
programs are equitable and not unfairly discriminatory because similar 
programs currently exist for LMMs appointed to programs in other 
proprietary products,\17\ and the proposed programs will equally apply 
to any TPH that is appointed as an LMM to the each of the LMM Incentive 
Programs, as applicable. Additionally, if an appointed LMM does not 
satisfy the heightened quoting standards in CBTX and MBTX (as 
applicable) for any given month, then it simply will not receive the 
offered payment for that month.
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    \17\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed CBTX and 
MBTX transaction fees for the separate types of market participants 
will be assessed automatically and uniformly to all such market 
participants, i.e., all qualifying Customer orders in CBTX and MBTX 
options will be assessed the same amount and all qualifying non-
Customer orders in CBTX and MBTX will be assessed the same amount. As 
discussed above, while different fees are assessed to different market 
participants in some circumstances, these different market participants 
have different obligations and different circumstances as discussed 
above. For example, preferential pricing to Customers is a long-
standing options industry practice which serves to enhance Customer 
order flow, thereby attracting Market-Makers to facilitate tighter 
spreads and trading opportunities to the benefit of all market 
participants. Additionally, the proposed surcharge will be assessed 
uniformly to all market participants to whom the FLEX Surcharge 
applies.
    Further, the proposed rule change will uniformly exclude all 
transactions in CBTX and MBTX options from certain programs and 
surcharge (i.e., Liquidity Provider Sliding Scale, the VIP, Break-Up 
Credits applicable to Customer Agency Orders in AIM and SAM, the 
Marketing Fee, the Floor Broker Sliding Scale Rebate Program, the ORS/
CORS program, and the Complex Surcharge), as it currently does for many 
of the Exchange's other proprietary products. Overall, the proposed 
rule change is designed to increase incentive for customer order flow 
providers to submit customer order flow in a newly listed and traded 
product, which, as indicated above, contributes to a more robust market 
ecosystem to the benefit of all market participants.
    The Exchange also does not believe that the proposed LMM Incentive 
Programs for CBTX and MBTX options would impose any burden on 
intramarket competition because it applies to all LMMs appointed to 
each of the LMM Incentive Programs in a

[[Page 106660]]

uniform manner, in the same way similar programs apply to appointed 
LMMs in other proprietary products today. To the extent appointed LMMs 
receive a benefit that other market participants do not, these LMMs in 
their role as Market-Makers on the Exchange have different obligations 
and are held to different standards. For example, Market-Makers play a 
crucial role in providing active and liquid markets in their appointed 
products, especially in the newly developing CBTX and MBTX market, 
thereby providing a robust market which benefits all market 
participants. Such Market-Makers also have obligations and regulatory 
requirements that other participants do not have. The Exchange also 
notes that an LMM appointed to an incentive program may undertake added 
costs each month to satisfy heightened quoting standards (e.g., having 
to purchase additional logical connectivity). The Exchange also notes 
that the LMM Incentive Programs, like the other LMM Incentive Programs, 
is designed to attract additional order flow to the Exchange, wherein 
greater liquidity benefits all market participants by providing more 
trading opportunities, tighter spreads, and added market transparency 
and price discovery, and signals to other market participants to direct 
their order flow to those markets, thereby contributing to robust 
levels of liquidity.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed rule changes apply only to products exclusively listed on the 
Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \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.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2024-055 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-2024-055. 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-CBOE-2024-055 and should be 
submitted on or before January 21, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-30902 Filed 12-27-24; 8:45 am]
BILLING CODE 8011-01-P
```