Document ID: SEC-2021-0186-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-02-09T05:00Z

[Federal Register Volume 86, Number 25 (Tuesday, February 9, 2021)]
[Notices]
[Pages 8814-8817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02591]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91053; File No. SR-CBOE-2021-010]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish a Policy Relating to Billing Errors

February 3, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 8815]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 25, 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 and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (``Cboe Options'' or the ``Exchange'') is 
filing with the Securities and Exchange Commission (the ``Commission'') 
a proposed rule change to establish a policy relating to billing 
errors. The Exchange has designated this proposal as non-controversial 
and provided the Commission with the notice required by Rule 19b-
4(f)(6)(iii) under the Act.\5\
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    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is provided in Exhibit 5. The 
text of the proposed rule change is available on the Exchange's website 
at http://markets.cboe.com/, at the Exchange's principal office and at 
the Public Reference Room of the Commission.

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 Footnote 7 of its fees schedule 
which relates to billing errors and fee disputes. Footnote 7 currently 
provides that that any potential billing errors relating to fees 
assessed by Cboe Options must be brought to the attention of Cboe 
Options' Accounting Department within three months from the invoice 
date. Additionally, all fees assessed shall be deemed final and non-
refundable after three months from the invoice date. However, Footnote 
7 further provides that the Exchange is not precluded from assessing 
fees more than three months after they were incurred if those fees were 
required to be paid pursuant to the Cboe Options Fee Schedule in effect 
at the time the fees were incurred. The Exchange proposes to eliminate 
the current language in Footnote 7 of the fees schedule and replace it 
with language recently adopted by its affiliated exchanges.\6\ 
Particularly, the Exchange proposes to provide: ``All fees and rebates 
assessed prior to the three full calendar months before the month in 
which the Exchange becomes aware of a billing error shall be considered 
final. Any dispute concerning fees or rebates billed by the Exchange 
must be submitted to the Exchange in writing and must be accompanied by 
supporting documentation.''
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    \6\ See SR-CboeBZX-2020-094; SR-CboeBYX-2020-034; SR-CboeEDGA-
2020-032; SR-CboeEDGX-2020-064.
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    The proposed language would result in all fees and rebates assessed 
prior to the three full calendar months before the month in which the 
Exchange becomes aware of a billing error to be considered final. 
Particularly, the Exchange will resolve an error by crediting or 
debiting Trading Permit Holders (``TPHs'') and Non-TPHs based on the 
fees or rebates that should have been applied in the three full 
calendar months preceding the month in which the Exchange became aware 
of the error, including to all impacted transactions that occurred 
during those months.\7\ The Exchange will apply the three month look 
back regardless of whether the error was discovered by the Exchange or 
by a TPH or Non-TPH that submitted a fee dispute to the Exchange. The 
Exchange will continue to provide all disputes concerning fees and 
rebates assessed by the Exchange would have to be submitted to the 
Exchange in writing and accompanied by supporting documentation.
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    \7\ For example, if the Exchange becomes aware of a transaction 
fee billing error on January 4, 2021, the Exchange will resolve the 
error by crediting or debiting Members based on the fees or rebates 
that should have been applied to any impacted transactions during 
October, November and December 2020. The Exchange notes that because 
it bills in arrears, the Exchange would be able to correct the error 
in advance of issuing the January 2021 invoice and therefore, 
transactions impacted through the date of discovery (in this 
example, January 4, 2021) and thereafter, would be billed correctly.
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    The Exchange notes that the proposed language continues to 
encourage TPHs and Non-TPHs to promptly review their Exchange invoices 
so that any disputed charges can be addressed in a timely manner. The 
Exchange notes that it provides TPHs with both daily and monthly fee 
reports and thus believes they should be aware of any potential billing 
errors within three months. Requiring that TPHs and Non-TPHs submit 
disputes in writing and provide supporting documentation encourages 
them to promptly review their invoices so that any disputed charges can 
be addressed in a timely manner while the information and data 
underlying those charges (e.g., applicable fees and order information) 
is still easily and readily available. This practice will avoid issues 
that may arise when TPHs or Non-TPHs do not dispute an invoice in a 
timely manner and will conserve Exchange resources that would have to 
be expended to resolve untimely billing disputes. As such, the 
requirement continues to alleviate administrative burdens related to 
billing disputes, which could divert staff resources away from the 
Exchange's regulatory and business purposes. The proposed rule change 
to eliminate the requirement that the Exchange assess fees beyond three 
months if they were required to be assessed pursuant to the fees 
schedule at the time incurred (i.e., all fees and rebates would be 
final after three months regardless of how far back a billing error 
occurred) would provide both the Exchange and TPHs and Non-TPHs 
finality and the ability to close their books after a known period of 
time.
    The Exchange notes that a number of exchanges have explicitly 
stated that they consider all fees to be final after a similar period 
of time.\8\ Additionally, several other exchanges have adopted similar 
provisions in their rules that provide for a process for their members 
and non-members to submit fee disputes.\9\ Moreover, the proposed 
language is identical to the language recently adopted on the 
Exchange's

[[Page 8816]]

affiliated exchanges.\10\ As such, the proposed change will also 
harmonize and conform the Exchange's billing practices with that of its 
affiliated exchanges. The proposed billing policy will apply to all 
charges and rebates reflected in the Exchange's fees schedules.
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    \8\ See e.g. Securities Exchange Act Release No. 87650 (December 
3, 2019), 84 FR 67304 (December 9, 2019) (SR-NYSECHX-2019-024); 
Securities Exchange Act Release No. 84430 (October 16, 2018), 83 FR 
53347 (October 22, 2018) (SR-NYSENAT-2018-23); and Securities 
Exchange Act Release No. 79060 (October 6, 2016), 81 FR 70716 
(October 13, 2016) (SR-ISEGemini-2016-11) .
    \9\ See e.g., MEMX LLC, Rule 15.3, IEX Rule 15.120, Nasdaq Rule 
Equity 7, Section 70, Nasdaq BX Rule Equity 7, Section 111, and 
Nasdaq PHLX Rule Equity 7, Section 2.
    \10\ See supra note 6.
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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.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ 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) \13\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    With respect to the proposed language regarding the billing 
procedure, the Exchange believes continuing to require the submission 
of all billing disputes in writing, and with supporting documentation 
is reasonable because the Exchange provides TPHs with ample tools to 
monitor and account for various charges incurred in a given month. 
Additionally, the Exchange notes that most TPHs and Non-TPHs that pay 
exchange fees are sophisticated entities, so it is appropriate to 
expect them to promptly review their invoices for errors and to be 
capable of identifying such errors. The proposed provision also 
continues to promote the protection of investors and the public 
interest by providing a clear and concise mechanism for TPH and Non-
TPHs to dispute fees and for the Exchange to review such disputes in a 
timely manner. Moreover, the proposed billing dispute language, which 
lowers the Exchange's administrative burden, is similar to billing 
dispute language of other exchanges, and the same as the Exchange's 
affiliates.\14\ In addition, the billing procedure is fair, equitable, 
and not unfairly discriminatory because it will apply equally to all 
TPHs (and Non-TPHs that pay Exchange fees).
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    \14\ See supra notes 6 and 9.
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    The Exchange also believes that providing that all fees and rebates 
are final after three months (i.e., always resolving billing errors 
only for the three full calendar months preceding the month in which 
the Exchange became aware of the error), is reasonable as both the 
Exchange and TPHs and Non-TPHs have an interest in knowing when its fee 
assessments are final and when reliance can be placed on those 
assessments. Indeed, without some deadline on billing errors, the 
Exchange and TPHs and Non-TPHs would never be able to close their books 
with any confidence. Furthermore, as noted above, a number of Exchanges 
similarly consider their fees final after a similar period of time.\15\ 
The proposed change is also equitable, and not unfairly discriminatory 
because it will apply equally to all TPHs (and Non-TPHs that pay 
Exchange fees) and apply in cases where either the TPH (or Non-TPH) 
discovers the error or the Exchange discovers the error. Lastly, the 
proposed changes to the fees schedule will align the Exchange's billing 
practices with those of its affiliated exchanges.
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    \15\ See supra notes 6 and 8.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. With respect to the billing 
procedure and billing error policy, the proposed rule change would 
provide a clear process that would apply equally to all TPHs. 
Additionally, the proposed rule change is similar to rules of other 
exchanges. The Exchange does not believe such proposed changes would 
impair the ability of TPHs or competing order execution venues to 
maintain their competitive standing in the financial markets. Moreover, 
because the proposed changes would apply equally to all TPHs, the 
proposal does not impose any burden on competition.

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

    No comments were solicited or received on the proposed rule change.

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

    Because the foregoing proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and; (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) \17\ thereunder.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay.\18\ The Commission finds that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
because waiver of the operative delay will allow the Exchange to 
provide a clear process for billing errors and fee disputes without 
delay. Moreover, the proposed rule changes are comparable to other 
policies and practices established by other exchanges and therefore 
does not raise any new or novel issues. Accordingly, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
operative upon filing.\19\
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    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    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:

[[Page 8817]]

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-2021-010 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-2021-010. 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2021-010 and should be 
submitted on or before March 2, 2021.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02591 Filed 2-8-21; 8:45 am]
BILLING CODE 8011-01-P