Document ID: SEC-2019-0075-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-02-06T05:00Z

[Federal Register Volume 84, Number 25 (Wednesday, February 6, 2019)]
[Notices]
[Pages 2288-2290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01172]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85015; File No. SR-CBOE-2019-003]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Its Fees Schedule

January 31, 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 January 29, 2019, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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. 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, effective 
February 1, 2019 to amend its fee incentive program for Lead Market-
Makers (``LMM'') in SPX during Global Trading Hours (``GTH''). By way 
of background, pursuant to Footnote 38 of the Fees Schedule, a GTH LMM 
in SPX will receive a rebate for that month in the amount of a pro-rata 
share of a compensation pool equal to $30,000 times the number of LMMs 
in that class (or pro-rated amount if an appointment begins after the 
first trading day of the month or ends prior to the last trading day of 
the month) if the LMM: (1) Provides continuous electronic quotes in at 
least the lesser of 99% of the non-adjusted series or 100% of the non-
adjusted series minus one call-put pair in an GTH allocated class 
(excluding intraday add-on series on the day during which such series 
are added for trading) during GTH in a given month; (2) enters opening 
quotes within five minutes of the initiation of an opening rotation in 
any series that is not open due to the lack of a quote, provided that 
the LMM will not be required to enter opening quotes in more than the 
same percentage of series set forth in clause (1) for at least 90% of 
the trading days during GTH in a given month; and (3) satisfies the 
following time-weighted average quote widths and bid/ask sizes for each 
moneyness category: (A) Out of the money options (``OTM''), average 
quote width of $0.75 or less and average bid/ask size of 15 contracts 
or greater; (B) at the money options (``ATM''), average quote width of 
$3.00 or less and bid/ask size of 10 contracts or greater; and (C) in 
the money options (``ITM''), average quote width of $10.00 or less and 
bid/ask size of 5 contracts or greater.\3\ GTH LMMs in SPX are not 
obligated to satisfy the heightened quoting standards described above 
or in Rule 8.15 during GTH. Rather, GTH LMMs in SPX are eligible to 
receive a rebate if they satisfy the heightened standards described in 
the Fees Schedule, which the Exchange believes will encourage SPX LMMs 
to provide liquidity during GTH.
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    \3\ See Cboe Options Fees Schedule, Footnote 38.
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    The Exchange proposes to amend Footnote 38 to modify the quoting 
standard a GTH LMM in SPX will need to satisfy in order to receive a 
rebate for its SPX GTH activity. Particularly, the Exchange proposes to 
modify prong

[[Page 2289]]

3(A) of the quoting standard with respect to the required average quote 
width for OTM options. As noted, above, a GTH LMM in SPX must, among 
other things, provide an average quote width of $0.75 or less and 
average bid/ask size of 15 contracts or greater for OTM options. The 
Exchange proposes to modify the OTM options average quote width 
requirement. Specifically the Exchange proposes to require that a GTH 
LMM in SPX provide an average quote width for OTM options of $0.90 or 
less instead of $0.75 or less. The Exchange proposes to widen the 
average quote width required as the current market has made it more 
difficult for a GTH LMM in SPX to maintain the same quality of markets 
as compared to previous market conditions that were less volatile. The 
Exchange continues to believe that time-weighted averages are a good 
way to assess the overall quality of the market.
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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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) \6\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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    The Exchange believes amending the third prong in Footnote 38 is 
reasonable as it does not change the financial benefit offered. 
Additionally, the Exchange believes the proposed amendment is 
reasonable, equitable and not unfairly discriminatory because it 
applies to any appointed GTH LMM in SPX uniformly and because if the 
third prong, as amended, is not met, a GTH SPX LMM merely will not 
receive the offered financial benefit. The Exchange also believes the 
requirement under the amended third prong is commensurate with the 
financial benefit offered. Additionally, the Exchange notes that 
current market conditions have made the current OTM average quote 
widths requirement more difficult to attain and the Exchange believes 
the amended averaged width quote is more appropriate given current 
market conditions. The Exchange believes that its proposed rule change 
removes impediments to and perfects the mechanism of a free and open 
national market system as it continues to incentivize any GTH LMMs in 
SPX to provide liquidity in SPX during GTH and meet the prescribed 
quoting standard.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because it applies uniformly to 
all SPX GTH LMMs. The Exchange does not believe that the proposed rule 
change will impose any burden on intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because SPX options are proprietary products that will only be traded 
on Cboe Options. To the extent that the proposed changes make Cboe 
Options a more attractive marketplace for market participants at other 
exchanges, such market participants are welcome to become Cboe Options 
market participants.

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 \7\ and paragraph (f) of Rule 19b-4 \8\ 
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 shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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-CBOE-2019-003 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-2019-003. 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

[[Page 2290]]

comment submissions. You should submit only information that you wish 
to make available publicly. All submissions should refer to File Number 
SR-CBOE-2019-003 and should be submitted on or before February 27, 
2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01172 Filed 2-5-19; 8:45 am]
 BILLING CODE 8011-01-P