31356 Federal Register / Vol. 86, No. 111 / Friday, June 11, 2021 / Notices 

designated March 11, 2021 as the date by which the 

Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

disapprove, the proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 91286, 

86 FR 14484 (March 16, 2021). 

8 15 U.S.C. 78s(b)(2). 

9 Id. 

10 17 CFR 200.30–3(a)(57). 

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

2 17 CFR 240.19b–4. 

3See Cboe Global Markets U.S. Options Market 

Volume Summary, Month-to-Date (May 24, 2021), 

available at https://markets.cboe.com/us/options/ 

market_statistics/. 

2021, the Exchange filed Amendment 

No. 1 to the proposed rule change, 

which replaced and superseded the 

proposed rule change as originally filed. 

On March 10, 2021, the Commission 

published notice of Amendment No. 1 

and instituted proceedings pursuant to 

Section 19(b)(2)(B) of the Act 6 to 

determine whether to approve or 

disapprove the proposed rule change, as 

modified by Amendment No. 1.7

Section 19(b)(2) of the Act 8 provides 

that, after initiating disapproval 

proceedings, the Commission shall issue 

an order approving or disapproving the 

proposed rule change not later than 180 

days after the date of publication of 

notice of filing of the proposed rule 

change. The Commission may extend 

the period for issuing an order 

approving or disapproving the proposed 

rule change, however, by not more than 

60 days if the Commission determines 

that a longer period is appropriate and 

publishes the reasons for such 

determination. The proposed rule 

change was published for notice and 

comment in the Federal Register on 

December 11, 2020. June 9, 2021 is 180 

days from that date, and August 8, 2021 

is 240 days from that date. 

The Commission finds it appropriate 

to designate a longer period within 

which to issue an order approving or 

disapproving the proposed rule change 

so that it has sufficient time to consider 

the proposed rule change and the 

comment letters. Accordingly, the 

Commission, pursuant to Section 

19(b)(2) of the Act,9 designates August 

8, 2021 as the date by which the 

Commission shall either approve or 

disapprove the proposed rule change 

(File No. SR–NASDAQ–2020–081), as 

modified by Amendment No. 1. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–12245 Filed 6–10–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92121; File No. SR–CBOE– 

2021–037] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Its Fees 

Schedule To Adopt a New Floor Broker 

Incentive Program and To Make a 

Clarifying Change to the Definition of 

Facilitation Orders 

June 7, 2021. 

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 June 1, 

2021, Cboe Exchange, Inc. (the 

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

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

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

or ‘‘Cboe Options’’) proposes to amend 

its Fees Schedule to adopt a new Floor 

Broker incentive program and to make 

a clarifying change to the definition of 

facilitation orders. 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 to adopt a new Floor 

Broker incentive program and to make 

a clarifying change to the definition of 

facilitation orders in footnote 11 of the 

Fees Schedule, effective June 1, 2021. 

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 

16 options venues to which market 

participants may direct their order flow. 

Based on publicly available information, 

no single options exchange has more 

than 16% of the market share.3 Thus, in 

such a low-concentrated and highly 

competitive market, no single options 

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 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. The Exchange offers specific 

rates and rebates in its Fees Schedule, 

like that of other options exchanges’ fees 

schedules, which the Exchange believes 

provide incentive to Trading Permit 

Holders (‘‘TPHs’’) to increase order flow 

of certain qualifying orders. 

Also, in response to the competitive 

environment, the Exchange offers 

various tiered incentive programs which 

provide TPHs opportunities to qualify 

for higher rebates or reduced rates 

where certain volume criteria and 

thresholds are met. Tiered pricing 

provides an incremental incentive for 

TPHs to strive for higher tier levels, 

which provides increasingly higher 

benefits or discounts for satisfying 

increasingly more stringent criteria. For 

example, the Exchange currently offers, 

among other tiered volume programs, a 


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4See Cboe Options Fees Schedule, Footnote 34, 

which provides that Underlying Symbol List A 

includes OEX, XEO, RUT, RLG, RLV, RUI, UKXM, 

SPX (includes SPXW), SPESG and VIX. 

5The rebate offered under each tier is only 

applied to the qualifying volume within that tier. 

In addition, the Exchange calculates the average 

rebate for each type of rebate (Firm Facilitated and 

Non-Firm Facilitated) based on the TPH’s total 

qualifying volume across all four tiers plus its 

qualifying baseline volume (which corresponds to 

a rebate of $0.00). Each respective average rebate is 

applied to the percentage of qualifying volume that 

corresponds specifically to the type of order (Firm 

Facilitated or Non-Firm Facilitated) volume and 

added together, which results in a final average 

rebate. The final average rebate is then applied to 

the TPH’s total qualifying executions. This is 

consistent with the manner in which the Exchange 

calculates rebates for other sliding scale programs 

offered under the Fees Schedule. 

6See id. 

7See Cboe Options Fees Schedule, Footnote 47, 

which provides that Sector Index underlying 

symbols include IXB, SIXC, IXE, IXI, IXM, IXR, 

IXRE, IXT, IXU, IXV AND IXY, and corresponding 

option symbols include SIXB, SIXC, SIXE, SIXI, 

SIXM, SIXR, SIXRE, SIXT, SIXU, SIXV AND SIXY. 

8Orders that yield fee code FF are not assessed 

a charge. See Cboe U.S. Options Fee Schedules, 

Fees and Associated Fee Codes, available at: https:// 

markets.cboe.com/us/options/membership/fee_

schedule/cboe/. 

9Non-Customers include all capacities except for 

‘‘C’’ (Customer), specifically: ‘‘M’’ capacity (MarketMaker); ‘‘N’’ capacity (Non-TPH Market-Maker); 

‘‘F’’ capacity (Clearing TPH); ‘‘L’’ capacity (NonClearing TPH Affiliates); ‘‘J’’ capacity (Joint BackOffice); ‘‘U’’ capacity (Professional); and ‘‘B’’ 

capacity (Broker-Dealer). 

10Footnote 13, in relevant part, provides that: a 

‘‘merger strategy’’ is defined as transactions done to 

achieve a merger arbitrage involving the purchase, 

sale and exercise of options of the same class and 

expiration date, each executed prior to the date on 

which shareholders of record are required to elect 

their respective form of consideration, i.e., cash or 

stock; a ‘‘short stock interest strategy’’ is defined as 

transactions done to achieve a short stock interest 

arbitrage involving the purchase, sale and exercise 

of in-the-money options of the same class; a 

‘‘reversal strategy’’ is established by combining a 

short security position with a short put and a long 

call position that shares the same strike and 

expiration; a ‘‘conversion strategy’’ is established by 

combining a long position in the underlying 

security with a long put and a short call position 

that shares the same strike and expiration; and a 

‘‘jelly roll strategy’’ is created by entering into two 

separate positions simultaneously. One position 

involves buying a put and selling a call with the 

same strike price and expiration. The second 

position involves selling a put and buying a call, 

with the same strike price, but with a different 

expiration from the first position. 

11The proposed rule change also appends: 

Footnote 39 to the Program, which provides that 

each Trading Permit Holder is responsible for 

notifying the Exchange of all of its affiliates and is 

required to inform the Exchange immediately of any 

event that causes an entity to cease to be an affiliate 

in a form and manner to be determined by the 

Exchange. An ‘‘affiliate’’ is defined as having at 

least 75% common ownership between two entities 

as reflected on each entity’s Form BD, Schedule A; 

and footnote 41 to the Program, which provides, in 

relevant part, that Position Compression Cross 

(‘‘PCC’’) transactions will not count towards any 

volume thresholds. 

12The proposed rule change corrects an 

inadvertent grammar error by changing ‘‘to be’’ to 

‘‘are’’. 

13The proposed rule change updates the format 

of this parenthetical to be consistent with similar 

parentheticals throughout footnote 11. 

Liquidity Provider Sliding Scale that 

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, except products in 

Underlying Symbol List A 4 and XSP, 

during the calendar month. 

The Exchange now proposes to adopt 

a new volume-based incentive program 

for its Floor Brokers. Specifically, the 

proposed Floor Broker Sliding Scale 

Rebate Program (or, the ‘‘Program’’) 

offers four tiers that provide rebates on 

a sliding scale 5 for qualifying orders 

where a TPH meets certain liquidity 

thresholds. As proposed, the Program 

applies to all products except for 

Underlying Symbol List A,6 Sector 

Indexes,7 DJX, MRUT, MXEA, MXEF 

and XSP (‘‘multiply-listed options’’). 

The Program offers two categories of 

rebates that correspond to each of the 

proposed tiers; one that applies to Firm 

Facilitated orders (i.e., orders that yield 

fee code FF) 8 and another that applies 

to all other non-Firm Facilitated orders 

(i.e., orders that do not yield fee code 

FF). The proposed rebates will apply 

only to Non-Customer,9 Non-Strategy, 

Floor Broker orders. The Exchange notes 

that the definition of facilitation orders 

is provided in footnote 11 of the Fees 

Schedule (as described in further detail 

below) and, therefore, the proposed rule 

change appends footnote 11 to the 

‘‘Firm Facilitated Rebate’’ column in the 

Floor Broker Incentive Program table. 

Further, Strategy Orders are defined in 

footnote 13 of the Fees Schedule and, 

therefore, the proposed rule change also 

appends footnote 13 to the ‘‘Criteria’’ 

column in the Floor Broker Incentive 

Program table.10 A TPH will receive the 

applicable rebates on its qualifying 

orders if it meets the corresponding tier 

criteria, measured over a month. The 

tiers’ criteria are also based on the 

amount of a TPH’s Non-Customer, NonStrategy, Floor Broker volume over a 

baseline month (‘‘Step-Up Volume’’). 

The specific Floor Broker Sliding Scale 

Rebate Program tiers and corresponding 

rebates, as proposed, are as follows: 

• Tier 1 provides a rebate of $0.01 per 

contract for all qualifying (i.e., NonCustomer, Non-Strategy, Floor Broker 

orders in all products except Underlying 

Symbol List A, Sector Indexes, DJX, 

MRUT, MXEA, MXEF and XSP) Firm 

Facilitated orders, and a rebate of $0.03 

per contract for all qualifying non-Firm 

Facilitated orders, where a TPH has a 

Step-Up Volume in Non-Customer, NonStrategy, Floor Broker Volume (in 

applicable products) from April 2021 

that is greater than zero contracts; 

• Tier 2 provides a rebate of $0.01 per 

contract for all qualifying Firm 

Facilitated orders, and a rebate of $0.04 

per contract for all qualifying non-Firm 

Facilitated orders, where a TPH has a 

Step-Up Volume in Non-Customer, NonStrategy, Floor Broker Volume (in 

applicable products) from April 2021 

that is greater than or equal to 100,000 

contracts; 

• Tier 3 provides a rebate of $0.01 per 

contract for all qualifying Firm 

Facilitated orders, and a rebate of $0.05 

per contract for all qualifying non-Firm 

Facilitated orders, where a TPH has a 

Step-Up Volume in Non-Customer, NonStrategy, Floor Broker Volume (in 

applicable products) from April 2021 

that is greater than or equal to 250,000 

contracts; and 

• Tier 4 provides a rebate of $0.015 

per contract for all qualifying Firm 

Facilitated orders, and a rebate of $0.06 

per contract for all qualifying non-Firm 

Facilitated orders, where a TPH has a 

Step-Up Volume in Non-Customer, NonStrategy, Floor Broker Volume (in 

applicable products) from April 2021 

that is greater than or equal to 500,000 

contracts. 

The proposed rule change also makes 

clear in the proposed Program table that 

the Exchange will aggregate a TPH’s 

volume with the volume of its affiliates 

(‘‘affiliate’’ defined as having at least 

75% common ownership between the 

two entities as reflected on each entity’s 

Form BD, Schedule A) for the purposes 

of calculating Step-Up Volume each 

month.11 The proposed Program is 

designed to encourage Floor Brokers to 

increase their order flow in all multiplylisted equity and ETP options to the 

Exchange’s trading floor to meet the 

proposed tier criteria in order to receive 

the proposed corresponding rebate for 

their qualifying orders. The Exchange 

believes that incentivizing increased 

liquidity to its trading floor allows the 

Exchange to maintain a robust hybrid 

trading environment that serves to 

support price discovery and increased 

execution opportunities in open outcry, 

to the benefit of all market participants. 

The proposed rule change also makes 

a clarifying amendment to footnote 11 of 

the Fees Schedule, which provides, in 

relevant part, for the definition of 

facilitation orders for the purposes of 

the Fees Schedule. Specifically, footnote 

11 currently provides that ‘‘facilitation 

orders’’ for this purpose are 12 defined as 

any order in which a Clearing Trading 

Permit Holder (‘‘F’’ capacity code) 13 or 

Non-Trading Permit Holder Affiliate 

(‘‘L’’ capacity code) is contra to any 

other origin code, provided the same 


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14 15 U.S.C. 78f. 

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

16See NYSE Arca Options Fee Schedule, FB 

Professional Customer Manual Program, which 

provides a credit of $013 per contract to floor 

brokers that increase their monthly ADV (in certain 

capacities) by a certain percentage over a baseline, 

and excludes strategy executions from the program; 

and NYSE American Options Fee Schedule, E.1, 

[sic] Floor Broker Fixed Cost Prepayment Incentive 

Program (the ‘‘FB Prepay Program’’), which offers 

participating floor brokers annual rebates for 

achieving growth in manual volume by a certain 

percentage as measured against certain benchmarks, 

and does not apply to volume executed as part of 

Strategy Execution Fee Cap (that is, strategy orders). 

17See Cboe Options Fees Schedule, Liquidity 

Provider Sliding Scale, Liquidity Provider Sliding 

Scale Adjustment Table, Volume Incentive 

Program, and Cboe Options Clearing Trading Permit 

Holder Proprietary Products Sliding Scale, each of 

which provides for a scale of rebates or reduced fees 

applicable to certain orders for various types of 

TPHs that meet certain volume thresholds under 

each. 

18See supra note 15 [sic]; and BOX Options Fee 

Schedule, Section II.C, Qualified Open Outcry 

(‘‘QOO’’) Order Rebate, which offers a rebate for 

floor broker orders $0.075 or $0.05 per contract 

(depending on the capacity) and does not apply to 

Strategy QOO Orders. 

19See supra note 16. 

20See e.g., Cboe Options Fees Schedule, Liquidity 

Provider Sliding Scale, Break-Up Credits table, 

Order Routing Subsidy Program, and Complex 

Order Routing Subsidy Program. 

21See e.g., Cboe Options Fees Schedule, Volume 

Incentive Program (VIP), Affiliate Volume Plan, 

QCC Rate Table, and Market-Maker EAP 

Appointments Sliding Scale. 

executing broker and clearing firm are 

on both sides of the transaction for open 

outcry. The Exchange notes that TPHs 

are permitted to make post-trade 

updates to their transactions, which 

may include changes to the executing or 

contra broker, the executing or contra 

clearing firm, and capacity. Such posttrade updates may potentially alter 

whether an order qualifies as a 

facilitation order for the purposes of the 

Fees Schedule. As such, the proposed 

rule change updates the definition of 

facilitation order to clarify that the 

executing broker and clearing firm must 

be the same on both sides of the trade 

following any post-trade changes made 

on the trade date. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6 of the Act,14 in general, and 

furthers the requirements of Section 

6(b)(4),15 in particular, as it is designed 

to provide for the equitable allocation of 

reasonable dues, fees and other charges 

among its facilities and does not 

unfairly discriminate between 

customers, issuers, brokers or dealers. 

As stated 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. The proposed fee changes 

reflect a competitive pricing structure 

designed to incentivize market 

participants to direct their order flow to 

the Exchange’s trading floor, which the 

Exchange believes would enhance 

market quality to the benefit of all TPHs. 

The Exchange notes that volume-based 

incentives and discounts have been 

widely adopted by exchanges,16

including the Exchange,17 and are 

reasonable, equitable and nondiscriminatory because they are open to 

all TPHs on an equal basis and provide 

additional benefits or discounts that are 

reasonably related to (i) the value to an 

exchange’s market quality and (ii) 

associated higher levels of market 

activity, such as higher levels of 

liquidity provision and/or growth 

patterns. Additionally, as noted above, 

the Exchange operates in a highly 

competitive market. The Exchange is 

only one of several options venues to 

which market participants may direct 

their order flow, and it represents a 

small percentage of the overall market. 

Competing options exchanges offer 

similar tiered pricing structures to that 

of the Exchange, including incentive 

programs that offer rebates or rates that 

apply based upon TPHs achieving 

certain volume thresholds. 

In particular, the Exchange believes 

that the proposed Floor Broker Sliding 

Scale Rebate Program is reasonable and 

equitable because it is designed to 

incentivize increased order flow in 

multiply-listed options to the 

Exchange’s trading floor. The Exchange 

believes that it is reasonable to apply 

the proposed Program to Non-Customer 

order flow as the Exchange recognizes 

that market participants that submit 

Non-Customer order flow provide 

different, yet key, liquidity to the 

Exchange’s trading floor. For instance, 

Market-Maker activity, including NonTPH Market-Makers (‘‘M’’ and ‘‘N’’ 

capacities), facilitates tighter spreads 

and signals additional corresponding 

increase in order flow from other market 

participants. Increased overall order 

flow benefits all investors by deepening 

the Exchange’s liquidity pool, 

potentially providing even greater 

execution incentives and opportunities. 

Clearing TPHs (‘‘F’’ capacity), NonClearing TPH Affiliates (‘‘L’’ capacity), 

Broker-Dealers (‘‘B’’ capacity), and Joint 

Back-Offices (‘‘J’’ capacity) can be an 

important source of liquidity as they 

specifically facilitate the execution of 

customer orders, which, in turn, adds 

transparency, promotes price discovery 

and serves to attract other participants, 

thus providing continuous liquidity to 

the Exchange. Also, Professionals (‘‘U’’ 

capacity) generally provide a greater 

competitive stream of order flow (by 

definition, more than 390 orders in 

listed options per day on average during 

a calendar month), thus, providing 

increased competitive execution and 

improved pricing opportunities for all 

market participants. The Exchange 

further believes that applying the 

proposed Program to Non-Strategy, 

multiply-listed order flow is reasonable 

as it is designed to compete with other 

option exchanges’ for floor broker nonstrategy order flow as other options 

exchanges’ have fee schedules in place 

that offer similar incentives to their 

floor brokers that submit non-strategy 

orders for execution in open outcry.18

The Exchange believes that the 

proposed rebate amounts are reasonable 

as they are comparable to the rebates or 

reduced rates offered under similar 

volume-based incentive programs 

offered in the Fees Schedule.19 For 

example, the Liquidity Provider Sliding 

Scale provides a reduced fee of between 

$0.17 to $0.03 per contract for MarketMaker orders (which are assessed a 

standard rate of $0.23 per contract) 

where a Market-Maker meets certain 

volume thresholds, a reduction of which 

the Exchange believes is comparable to 

the proposed rebates that range from 

$0.01 to $0.06. The Exchange also 

believes that it is reasonable to offer 

higher rebates for Non-Firm Facilitated 

order flow than for Firm Facilitated 

order flow (i.e., where the same 

executing broker and clearing firm are 

on both sides of the transaction) because 

it wishes to further incentivize order 

flow that attracts contra-side interest 

from a wider variety of market 

participants, which may further 

contribute towards a robust, wellbalance market ecosystem. Further, 

Firm Facilitated orders (i.e., orders 

yielding fee code FF) are not currently 

charged any fees, as compared to NonFirm Facilitated orders, which are 

assessed fees. The Exchange also notes 

that excluding Underlying Symbol List 

A, Sector Indexes, DJX, MRUT, MXEA, 

MXEF and XSP from the proposed 

program (thus, incentivizing increased 

order flow in multiply-listed options), 

as well as aggregating a TPH’s volume 

with the volume of its affiliates for the 

purposes of calculating Step-Up Volume 

each month, is consistent with the 

manner in which other incentive 

programs under the Fees Schedule 

exclude the same products 20 and/or 

aggregate volume and credits.21

Additionally, the Exchange notes that 

Floor Brokers already have an 


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22See Cboe Options Fees Schedule, Floor 

Brokerage Fees Discount Scale. 

23See generally Cboe Options Fee Schedule, 

which generally assesses lower transaction fees for 

Customer orders as compared to other capacities; 

see also Cboe Options Fee Schedule, Customer 

Large Trade Discount, Break-Up Credits table, 

Select Customer Options Reduction (‘‘SCORe’’) 

Program, and QCC Rate Table. 

24Securities Exchange Act Release No. 51808, 70 

FR 37495, 37498–99 (June 29, 2005) (S7–10–04) 

(Final Rule). 

25See supra note 21. 

opportunity to receive discounts on 

their fees for certain proprietary 

products under the Floor Brokerage Fees 

Discount Scale.22

In addition to this, the Exchange 

believes that the proposed update to the 

definition of facilitation orders in 

footnote 11 of the Fees Schedule is 

reasonable because it is designed to 

ensure and make clear that post-trade 

edits to orders will be considered in 

determining whether an order qualifies 

as a facilitation order and is appended 

fee code FF and the appropriate 

corresponding fees or fee waiver. The 

Exchange believes that it is appropriate 

to determine, for the purposes of the 

Fees Schedule, whether a transaction is 

considered a facilitation order following 

any same day post-trade updates made 

to the transaction because such posttrade edits may potentially alter 

whether the same executing broker and 

clearing firm are on both sides of a 

transaction, which is required in order 

for a transaction to qualify as a 

facilitation order. The proposed rule 

change is reasonable as it does not alter 

the definition of a facilitation order but 

merely clarifies the point at which the 

System will evaluate whether a 

transaction qualifies as such. 

The Exchange believes that the 

proposed Floor Broker Sliding Scale 

Rebate Program represents an equitable 

allocation of fees and is not unfairly 

discriminatory because the Program, as 

proposed, will apply uniformly to all 

qualifying TPHs, in that all TPHs that 

submit the requisite order flow (i.e., 

Non-Customer, Non-Strategy, Floor 

Broker Volume in multiply-listed 

options) have the opportunity to 

compete for and achieve the proposed 

tiers. The proposed rebates will apply 

automatically and uniformly to all TPHs 

that achieve the proposed 

corresponding criteria. The Exchange 

believes that the application of the 

proposed Program to TPHs that submit 

Non-Customer order flow is equitable 

and not unfairly discriminatory because 

such market participants provide 

unique and important liquidity to the 

Exchange’s trading floor. Such order 

flow, as described above, may result in 

overall tighter spreads, attracting order 

flow from other market participants, 

more execution opportunities at 

improved prices, and/or deeper levels of 

liquidity, which may ultimately 

improve price transparency, provide 

continuous trading opportunities and 

enhance market quality on the 

Exchange, to the benefit of all market 

participants. The Exchange also notes 

that the Fees Schedule currently 

provides for many other incentive 

opportunities and rebate or reduced fee 

opportunities for Customer orders.23

In addition to this, while the 

Exchange has no way of knowing 

whether this proposed rule change 

would definitively result in any 

particular TPH qualifying for the 

proposed tiers, the Exchange believes 

that at least five TPHs will reasonably 

be able to compete for and achieve the 

proposed criteria across the four 

proposed tiers by submitting the 

requisite volume. The Exchange notes, 

however, that the proposed tiers are 

open to any TPH that submits the 

requisite order flow to satisfy the tiers’ 

criteria. The Exchange also does not 

believe the proposed tiers will adversely 

impact any TPH’s pricing or ability to 

qualify for other fee programs. Rather, 

should a TPH not meet the criteria in 

any of the proposed tiers, the TPH will 

merely not receive the corresponding 

rebate. 

Finally, the Exchange believes that 

the proposed update to the definition of 

a facilitation order in footnote 11 of the 

Fees Schedule is equitable and not 

unfairly discriminatory because it will 

continue to apply the fee code FF 

(Facilitation Firm) automatically and 

uniformly to all orders that qualify as 

facilitation orders. The proposed update 

just clarifies that a transaction will be 

evaluated as to whether it qualifies as a 

facilitation order for the purposes of the 

Fees Schedule after any same day, posttrade edits are made to that transaction. 

The Exchange believes that considering 

potential post-trade edits made on the 

same trade date will more appropriately 

capture whether a transaction has the 

same executing broker and clear firm on 

both sides of the trade. 

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 intramarket or 

intermarket 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 change would 

encourage the submission of additional 

liquidity to the floor of a public 

exchange, thereby promoting market 

depth, price discovery and transparency 

and enhancing order execution and 

price improvement 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.’’ 24

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 Floor Broker 

Sliding Scale Rebate Program will apply 

equally to all similarly situated TPHs 

that submit the requisite order flow. 

That is, the proposed fees will apply 

equally to all Non-Customer, NonStrategy, Floor Broker orders in 

multiply-listed options. The Exchange 

does not believe that the application of 

the proposed Program to Non-Customer 

orders will impose any significant 

burden on intramarket competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act 

because the Exchange recognizes that 

Non-Customer participation in the 

markets is essential to a robust hybrid 

market ecosystem as each contributes 

unique and important liquidity to the 

Exchange’s trading floor, as described 

above. Such Non-Customer order flow 

may result in overall tighter spreads, 

attracting order flow from other market 

participants, more execution 

opportunities at improved prices, and/ 

or deeper levels of liquidity, which may 

ultimately improve price transparency, 

provide continuous trading 

opportunities and enhance market 

quality on the Exchange, to the benefit 

of all market participants. The Exchange 

again notes that the Fees Schedule 

currently provides for many other 

incentive opportunities and rebate or 

reduced fee opportunities for Customer 

orders.25 The Exchange also does not 

believe that the update to the definition 

of facilitation orders will impose any 

significant burden on intramarket 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act because it will 

continue to apply the fee code FF 

(Facilitation Firm) automatically and 

uniformly to all orders that qualify as 

facilitation orders. As stated above, the 

proposed update merely clarifies that a 

transaction will be evaluated as to 

whether it qualifies as a facilitation 

order following any same day, postVerDate Sep<11>2014 19:14 Jun 10, 2021 Jkt 253001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 E:\FR\FM\11JNN1.SGM 11JNN1

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31360 Federal Register / Vol. 86, No. 111 / Friday, June 11, 2021 / Notices 

26See supra notes 15 [sic] and 17. 

27See supra note 3. 

28See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

29NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 

Cir. 2010) (quoting Securities Exchange Act Release 

No. 59039 (December 2, 2008), 73 FR 74770, 74782– 

83 (December 9, 2008) (SR-NYSEArca–2006–21)). 

30 15 U.S.C. 78s(b)(3)(A). 

31 17 CFR 240.19b–4(f). 32 17 CFR 200.30–3(a)(12). 

trade edits, which will more 

appropriately capture whether a 

transaction has the same executing 

broker and clear firm on both sides of 

the trade. 

The Exchange also does not believe 

that the proposed changes will impose 

any burden on intermarket competition 

that is not necessary or appropriate in 

furtherance of the Act because, as noted 

above, competing options exchanges 

have similar incentive programs and 

discount opportunities in place in 

connection with floor broker order 

flow.26 The Exchange notes that the 

proposed update in connection with 

facilitation orders is not competitive in 

nature and merely clarifies a step in the 

billing process for qualifying facilitation 

orders. Additionally, and as previously 

discussed, the Exchange operates in a 

highly competitive market. TPHs have 

numerous alternative venues that they 

may participate on and direct their 

order flow, including 15 other options 

exchanges, many of which offer 

substantially similar price improvement 

auctions. Based on publicly available 

information, no single options exchange 

has more than 16% of the market 

share.27 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, additionally 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.’’ 28 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 brokerdealers 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’. . . .’’.29 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. 

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 30 and paragraph (f) of Rule 

19b–4 31 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. 

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–2021–037 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–2021–037. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CBOE–2021–037 and 

should be submitted on or before July 2, 

2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–12248 Filed 6–10–21; 8:45 am] 

BILLING CODE 8011–01–P 


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