Document ID: SEC-2018-0917-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe C2 Exchange, Inc.
Posted Date: 2018-06-18T04:00Z

[Federal Register Volume 83, Number 117 (Monday, June 18, 2018)]
[Notices]
[Pages 28302-28305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12925]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83409; File No. SR-C2-2018-012]

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fees Schedule in Connection With the Technology Migration of C2 
Onto the Options Platform of the Exchange's Affiliated Options 
Exchanges, Cboe EDGX Exchange, Inc. and Cboe BZX Exchange, Inc.

June 12, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 31, 2018, Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange has designated this 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii) 
thereunder,\4\ which renders it effective upon filing with the 
Commission. 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).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Fees Schedule in connection with 
the technology migration of C2 onto the options platform of the 
Exchange's affiliated options exchanges, Cboe EDGX Exchange, Inc. 
(``EDGX'' or ``EDGX Options'') and Cboe BZX Exchange, Inc. (``BZX'' or 
``BZX Options'').
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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

[[Page 28303]]

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 parts of such statements.

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

1. Purpose
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc., 
which is also the parent company of Cboe Exchange, Inc. (``Cboe 
Options''), acquired EDGX and BZX and its affiliated exchanges, Cboe 
EDGA Exchange, Inc. (``EDGA'') and Cboe BYX Exchange, Inc. (``BYX''). 
C2 migrated its technology onto the same trading platform as BZX, BYX, 
EDGA and BZX (``Affiliated Exchanges'') on May 14, 2018 (the 
``migration''). In connection with the Migration, the Exchange proposes 
to amend the Fees Schedule to adopt fees codes and make other non-
substantive clarifying changes.\5\
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    \5\ The Exchange initially filed the proposed changes on May 10, 
2018 (SR-C2-2018-010). On May 21, 2018, the Exchange withdrew that 
filing and had already submitted SR-C2-2018-011 in its place on May 
18, 2018. On May 31, 2018, the Exchange withdrew SR-C2-2018-011 and 
submitted this filing.
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Fee Codes
    The Exchange first proposes to adopt and codify in its Fees 
Schedule fee codes for its standard transaction fees for (i) simple, 
non-complex orders in all equity, multiply-listed index, ETF and ETN 
options classes (except RUT), (ii) complex orders in equity, multiply-
listed index, ETF and ETN options classes (except RUT), and (iii) RUT 
transactions. The Exchange notes that on the Affiliated Exchanges, 
rather than returning a monetary value indicating the rebate or charge 
for an execution, a fee code is utilized as an indication of a fee 
classification corresponding to an item on the venue's fee schedule. 
Each Affiliated Exchange publishes its fee codes in their respective 
fee schedules.\6\ Upon migration, the Exchange's billing system will 
also utilize various fee codes. The Exchange believes codifying these 
fee codes directly into the fees schedule will maintain clarity in the 
Fees Schedule and allow Trading Permit Holders (``TPHs'') to more 
easily validate their bills on a monthly basis. The Exchange notes that 
none of these changes substantively amend any fee or rebate, nor do 
they alter the manner in which the Exchange assesses fees or calculates 
rebates.
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    \6\ See Cboe EDGA U.S. Equities Exchange Fee Schedule; Cboe EDGX 
U.S. Equities Exchange Fee Schedule; Cboe BZX U.S. Equities Exchange 
Fee Schedule; Cboe BYX U.S. Equities Exchange Fee Schedule; Cboe 
EDGX Options Exchange Fee Schedule; and Cboe BZX Options Exchange 
Fee Schedule (collectively, ``Affiliated Exchange Fee Schedules'').
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    Similarly, the Exchange proposes to adopt fee codes for Linkage 
Routing Fees. Currently, the Exchange's Fees Schedule provides 
generally that a Linkage Routing fee of ``$0.70 per routed contract in 
addition to applicable C2 taker fee'' is assessed to orders that link 
away to other markets. The Exchange proposes to specifically specify 
the exact cost of linkage for each type of transaction and adopt a 
corresponding fee code. Particularly, the Exchange will list the fee 
code and transaction fee for routed (i) Customer orders in Penny and 
Non-Penny classes, (ii) Market-Maker orders in Penny and Non-Penny 
classes, (iii) Non-Customer, Non-Market Maker orders in Penny and Non-
Penny classes, and (iv) Customer, Market-Maker and Non-Customer, Non-
Market Maker orders in RUT. The Exchange notes that the linkage routing 
rates are not changing. Rather the Exchange is merely expressing the 
fee as single rate by combining the $0.70 per contract fee and the 
applicable C2 taker fee for each type of routed order and also 
assigning a unique fee code for each type of transaction.
    The Exchange also proposes to add a section titled ``Fee Codes and 
Associated Fees,'' which will include the fee or rebate, fee code, and 
a description for each possible execution that could occur on the 
Exchange. The Exchange notes that this section is merely a consolidated 
table which lists each of the proposed fee codes already listed in the 
transaction fee tables above it.
Access Fees
    Currently, the Fees Schedule provides that Market-Maker Permits 
entitle the holder to act as a Market-Maker and also provides an 
appointment credit, quote and order bandwidth allowance and a login 
allowance and Electronic Access Permits entitle the holder to access 
the Exchange and also provides an order entry bandwidth allowance and a 
login allowance. Post-Migration, bandwidth allocation and logins will 
not be tied to a Permit, and as such, the Exchange proposes to 
eliminate references to bandwidth and logins in the Access Fees section 
of the Fees Schedule. The Exchange also proposes to update the 
reference to the ``Registration Department'' to ``Membership Services 
Department'' to reflect the current name of the department. The 
Exchange lastly proposes to eliminate the language that provides that 
if cancellation of a Trading Permit is effective prior to the end of 
the applicable month, and the cancelling TPH later requests issuance of 
the same type of Trading Permit for the remainder of that month, the 
Exchange may issue the same type of Trading Permit (provided that a 
Trading Permit is available) but will not impose the additional 
prorated access fee for that month. The Exchange notes that currently 
this action rarely happens, and it will be less likely to occur once 
bandwidth and logins are not tied to permits. Therefore, the Exchange 
proposes to eliminate this language as it no longer wishes to maintain 
this fee waiver.
Other Non-Substantive Changes
    The Exchange proposes to add clarifying language to the language 
below the transaction rate table for simple orders. Currently, the Fees 
Schedule provides that ``For executions that occur within the Complex 
Order Auction (``COA'') against auction responses, the incoming/
auctioned order is considered maker, and auction responses are 
considered taker.'' The Exchange first proposes to clarify that 
``unrelated orders'' are also considered takers, as unrelated orders 
may trade against incoming/auctioned orders, just as responses do. The 
Exchange notes that no substantive change is being made by this 
proposed language. As the new transaction rate tables use the 
terminology ``Add'' in lieu of ``Maker'' and ``Remove'' in lieu of 
``Taker'', the Exchange also proposes to amend this language to remove 
references to Maker and Taker and replace it with corresponding 
references to Add and Remove.
    The Exchange next proposes to change all references to ``Permit 
Holders'' to ``Trading Permit Holders'' or ``TPHs''.\7\ The Exchange 
notes that it recently filed a rule filing which proposed to eliminate 
references to ``Permit Holder'' in the Exchange's rules and instead use 
only ``Trading Permit Holder'' throughout the rules for consistency.\8\ 
The Exchange proposes to make corresponding changes in the Fees 
Schedule to provide more consistency throughout the Fees Schedule and 
also harmonize its Fees Schedule with its rulebook.
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    \7\ See C2 Fees Schedule, current Sections 7, 8 and 9.
    \8\ See Securities Exchange Act Release No. 83214 (May 11, 2018) 
83 FR 22796 (May 16, 2018) (SR-C2-2018-005).
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    The Exchange also proposes to update an obsolete reference to the 
Series 56

[[Page 28304]]

exam in the Regulatory Fees Section and replace it with a reference to 
the Series 57 exam. The Exchange notes that the Series 56 exam no 
longer exists and as such, proposes to update the parenthetical in 
which it's referenced to a current exam.
    The Exchange also is proposing formatting changes to the Fees 
Schedule. First, in order to harmonize the appearance of the Fees 
Schedule with the Fee Schedules of its affiliated exchanges, the 
Exchange proposes to eliminate the section numbers and certain outline 
formatting from the Fees Schedule and make corresponding non-
substantive formatting changes. The Exchange also proposes to reflect 
fees and rebates in table form. The Exchange notes that no substantive 
changes are being made, rather the fees, rebates and text of the Fees 
Schedule are being reformatted to make the Fees Schedule easier to read 
and to harmonize the appearance with that of its affiliated exchanges.
C2 Cboe Data Services Fees
    The Exchange proposes to consolidate the C2 Cboe Data Services, LLC 
(CDS) Fee Schedule and the C2 Fees Schedule. Currently the CDS Fee 
Schedule is maintained separately from the C2 Fees Schedule. The 
Exchange proposes to eliminate the CDS Fee Schedule in its entirety and 
relocate the fees to the C2 Fees Schedule. The Exchange believes this 
provides a more streamlined fees schedule and allows TPHs to more 
readily and easily find all fees applicable to C2. The Exchange notes 
that no substantive changes are being made with the relocation of the 
CDS fees.
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 Section 
6(b)(4) of the Act,\10\ which provides that Exchange rules may provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its Permit Holders and other persons using its 
facilities. 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed changes are reasonable and 
equitable because they are clarifying and non-substantive and the 
Exchange is not changing any fees or rebates that apply to trading 
activity on the Exchange or routed executions. Further, the changes are 
designed to eliminate practices that are not utilized, make the fee 
schedule easier to read and for TPHs to validate the bills that they 
receive from the Exchange. The Exchange also believes that the proposal 
is non-discriminatory because it applies uniformly to all TPHs, and 
again, the Exchange is not making any changes to existing fees and 
rebates. Finally, the Exchange believes that the proposed fee schedule 
will be clearer and less confusing for investors and will eliminate 
potential investor confusion, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.

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. The 
proposed changes are intended to harmonize the appearance of the Fees 
Schedule with the Fee Schedules of its affiliated exchanges, to adopt 
fee codes in connection with the migration to new billing technology 
and to make clarifying, non-substantive changes to make the Fees 
Schedule easier to read and alleviate confusion. The Exchange notes 
that the proposal does not change the amount of any C2 fees or rebates, 
but rather makes clarifying and formatting changes, and therefore does 
not raise any competitive issues.

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

    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)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of the filing. However, 
Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. In its filing, C2 requested that the 
Commission waive the 30-day operative delay. The Exchange represented 
that the proposal did not change the amount of any fees or rebates that 
apply to trading activity on the Exchange or to routed executions, but 
instead made clarifying and formatting changes in connection with the 
migration of C2 to the options platform used by its affiliate options 
exchanges. The Commission believes that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest, as such waiver will permit this non-substantive proposed rule 
change to become operative immediately and thereby facilitate a 
smoother migration to the new options platform for members of the 
Exchange. Accordingly, the Commission waives the 30-day operative delay 
and designates the proposed rule change operative upon filing.\15\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

[[Page 28305]]

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 [email protected]. Please include 
File Number SR-C2-2018-012 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-C2-2018-012. 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-C2-2018-012, and should be submitted on 
or before July 9, 2018.

    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) and (59).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12925 Filed 6-15-18; 8:45 am]
 BILLING CODE 8011-01-P