Document ID: SEC-2019-1337-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe C2 Exchange, Inc.
Posted Date: 2019-09-17T04:00Z

[Federal Register Volume 84, Number 180 (Tuesday, September 17, 2019)]
[Notices]
[Pages 48968-48970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20013]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86928; File No. SR-C2-2019-019]

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Adopt Fees for a New Data Product To Be Known as Open-Close Data

September 11, 2019.
    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 August 30, 2019, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2 Options'') is 
filing with the Securities and Exchange Commission (``Commission'') a 
proposed rule change to adopt fees for a new data product to be known 
as Open-Close Data. 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://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to adopt fees for a new data product on C2 
Options to be known as Open-Close Data, which will be available for 
purchase to C2 Options Trading Permit Holders (``TPHs'') and Non-TPHs. 
Cboe LiveVol, LLC (``LiveVol''), a wholly owned subsidiary of the 
Exchange's parent company, Cboe Global Markets, Inc., will make the 
Open-Close Data available for purchase to TPHs and Non-TPHs on the 
LiveVol DataShop website (datashop.cboe.com). The Exchange proposes to 
amend its Fee Schedule to adopt fees for the product.
    The Exchange proposes to introduce the Open-Close Data product. 
Open-Close Data is a data product that summarizes volume (contracts 
traded on C2 Options) by origin (customer and firm orders), original 
order size and the opening or closing position of the order. The volume 
data is also summarized by day and series (symbol, expiration date, 
strike price, call or put). The Open-Close Data will be available for 
purchase to both C2 TPHs and Non-TPHs on a subscription and ad-hoc 
basis. The Exchange notes that its affiliate, Cboe Exchange, Inc. 
(``Cboe Options''), as well as other exchanges, offer a similar data 
product.\3\
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    \3\ See Securities Exchange Act Release No. 55062 (January 8, 
2007), 72 FR 2048 (January 17, 2007) (approving SR-CBOE-2006-88); 
See also Securities Exchange Act Release No. 56254 (August 15, 
2007), 72 FR 47104 (August 22, 2007) (SR-ISE-2007-70).
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    The Exchange proposes to provide in its Fee Schedule that TPHs and 
non-TPHs may purchase Open-Close Data on a subscription basis (end of 
day file) or by ad hoc request for a specified month (historical file). 
The Exchange proposes to assess a monthly fee of $500 for subscribing 
to a daily update which will consist of Open/Close data covering all 
Exchange-listed securities. TPHs and non-TPHs purchasing Open/Close 
data on a subscription basis will receive access to a daily data file. 
The Exchange proposes to assess a fee of $400 per request per month for 
an ad-hoc request of historical Open/Close data covering all Exchange-
listed securities. An ad-hoc request can be for any number of months 
beginning with January 2018 for which the data is available.\4\ The

[[Page 48969]]

proposed subscription and ad-hoc fees will apply both to TPHs or non-
TPHs. The Exchange notes that other exchanges, including its affiliate 
Exchange Cboe Exchange, Inc. (``Cboe Options'') provide similar data 
products that may be purchased on both a subscription and ad-hoc basis 
and are similarly priced.\5\
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    \4\ For example, a TPH or non-TPH that requests historical Open/
Close Data for the months of October 2018 and November 2018, would 
be assessed a total of $800. The Exchange notes that it may make 
historical data prior to January 2018 available in the future and 
that such historical data would be available to all TPHs or non-
TPHs.
    \5\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and to protect investors and the public 
interest, and that it is not designed to permit unfair discrimination 
among customers, brokers, or dealers. The Exchange also believes that 
its proposal to adopt fees for Open-Close Data is consistent with 
Section 6(b) of the Act in general, and furthers the objectives of 
Section 6(b)(4) of the Act \8\ in particular, in that it is an 
equitable allocation of dues, fees and other charges among its members 
and other recipients of Exchange data.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data. Particularly, Open-Close Data will further 
broaden the availability of U.S. option market data to investors 
consistent with the principles of Regulation NMS. The data product also 
promotes increased transparency through the dissemination of Open-Close 
Data and benefits investors by providing access to the Open-Close Data, 
which may promote better informed trading.
    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered options exchanges that trade options. 
The Commission has repeatedly expressed its preference for competition 
over regulatory intervention in determining prices, products, and 
services in the securities markets. Particularly, 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.'' \9\ Making alternative 
data products available to market participants ultimately ensures 
increased competition in the marketplace, and constrains the ability of 
exchanges to charge supracompetitive fees. In the event that a market 
participant views one exchange's data product as more or less 
attractive than the competition they can and do switch between 
competing products. The proposed fees are a result of the competitive 
environment, as the Exchange seeks to adopt fees to attract purchasers 
of the proposed Open-Close Data product.
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    \9\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes the proposed fees are reasonable as the 
proposed fees are both modest and similar to the fees assessed by other 
exchanges that provide similar data products.\10\ The Exchange also 
believes the proposed fees are reasonable as they would support the 
introduction of a new market data product that is designed to aid 
investors by providing insight into trading on C2 Options. The proposed 
Open-Close Data would provide options market participants with valuable 
information about opening and closing transactions executed on the 
Exchange, similar to other historical trade data products offered by 
competing options exchanges. In turn, this data would assist market 
participants in gauging investor sentiment and trading activity, 
resulting in potentially better informed trading decisions.
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    \10\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
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    Selling historical market data, such as Open-Close Data, is also a 
means by which exchanges compete to attract business. Specifically, the 
Open-Close Data would provide insight into trading activity on C2 
Options, and would therefore potentially encourage subscribers to 
direct order flow to the Exchange. To the extent that the Exchange is 
successful in attracting subscribers for the Open-Close Data, it may 
earn trading revenues and further enhance the value of its data 
products. If the market deems the proposed fees to be unfair or 
inequitable, firms can diminish or discontinue their use of the data 
and/or avail themselves of alternative products offered by other 
exchanges.\11\ The Exchange therefore believes that the proposed fees 
for Open-Close Data reflect the competitive environment and would be 
properly assessed on TPH or non-TPH users. The Exchange also believes 
the proposed fees are equitable and not unfairly discriminatory as the 
fees would apply equally to all users who choose to purchase such data. 
The Exchange's proposed fees would not differentiate between 
subscribers that purchase Open-Close Data, and are set at a modest 
level that would allow any interested TPH or non-TPH to purchase such 
data based on their business needs.
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    \11\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
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    The Exchange anticipates a wide variety of market participants to 
purchase Open-Close Data, including but not limited to buy-side 
investors, investment banks and academic institutions. The Exchange 
notes however, that the decision as to whether or not to purchase the 
Open-Close Data is entirely optional for all potential subscribers. 
Indeed, no market participant is required to purchase the Open-Close 
Data, and the Exchange is not required to make the Open-Close Data 
available to all investors. Rather, the Exchange is voluntarily making 
historical Open-Close Data available, as requested by customers, and 
market participants may choose to receive (and pay for) this data based 
on their own business needs. Potential purchasers may request the data 
at any time if they believe it to be valuable, or may decline to 
purchase such data.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, the 
Exchange believes that the proposal will promote competition by 
permitting the Exchange to sell a data product similar to those offered 
by other competitor options exchanges.\12\ The Exchange made Open-Close 
Data available for C2 Options in order to keep pace with changes in the 
industry and evolving customer needs, and believes the data product 
will contribute to robust competition among national securities 
exchanges. Furthermore, the Exchange operates in a highly competitive 
environment, and its ability to price the

[[Page 48970]]

proposed data product is constrained by competition among exchanges 
that offer similar data products to their customers. As discussed, 
there are currently a number of alternative products available to 
market participants and investors. At least three other U.S. options 
exchanges offer a market data product that is substantially similar to 
the Open-Close Data, which the Exchange must consider in its pricing 
discipline in order to compete for the market data.\13\ In this 
competitive environment, potential purchasers are free to choose which, 
if any, competing product to purchase to satisfy their need for market 
information. As a result, the Exchange believes this proposed rule 
change permits fair competition among national securities exchanges.
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    \12\ Id.
    \13\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A and Nasdaq PHLX Options 7 Pricing Schedule, Section 10, PHLX 
Options Trade Outline (``PHOTO'').
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    The Exchange also does not believe the proposed fees would cause 
any unnecessary or inappropriate burden on intermarket competition as 
other exchanges are free to introduce their own alternative and 
comparable data product and lower their prices to better compete with 
the Exchange's offering. The Exchange does not believe the proposed 
rule change would cause any unnecessary or inappropriate burden on 
intramarket competition. Particularly, the proposed product and fees 
apply uniformly to any purchaser, in that it does not differentiate 
between subscribers that purchase Open-Close Data. The proposed fees 
are set at a modest level that would allow any interested TPH or non-
TPH to purchase such data based on their business needs.

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

    The Exchange has neither solicited nor received written 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 \14\ and paragraph (f) of Rule 19b-4 \15\ 
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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-C2-2019-019 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-C2-2019-019. 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-C2-2019-019 and should be submitted on 
or before October 8, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-20013 Filed 9-16-19; 8:45 am]
 BILLING CODE 8011-01-P