Document ID: SEC-2020-1344-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-08-21T04:00Z

[Federal Register Volume 85, Number 163 (Friday, August 21, 2020)]
[Notices]
[Pages 51811-51815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18351]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89585; File No. SR-CBOE-2020-076]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Adopt Fees for a Recently Adopted Data Product Known as Intraday 
Open-Close Data

August 17, 2020.
    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 3, 2020, 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 Commission 
is publishing this notice to

[[Page 51812]]

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'') is 
filing with the Securities and Exchange Commission (``Commission'') a 
proposed rule change to adopt fees for a recently adopted data product 
known as Intraday 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://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 recently adopted a new data product on Cboe Options to 
be known as Intraday Open-Close Data, which will be available for 
purchase to Cboe Options Trading Permit Holders (``TPHS'') and non-
TPHs.\3\ The Exchange now proposes to adopt fees for Intraday Open-
Close Data. Cboe LiveVol, LLC (``LiveVol''), a wholly owned subsidiary 
of the Exchange's parent company, Cboe Global Markets, Inc., will make 
the Intraday Open-Close Data available for purchase to TPHs and non-
TPHs on the LiveVol DataShop website (datashop.cboe.com).
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    \3\ See SR-CBOE-2020-070.
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    By way of background, the Exchange historically offered Open-Close 
Data, which is an end-of-day volume summary of trading activity on the 
Exchange at the option level by origin (customer, professional 
customer, broker-dealer, and market maker), side of the market (buy or 
sell), price, and transaction type (opening or closing). The customer 
and professional customer volume is further broken down into trade size 
buckets (less than 100 contracts, 100-199 contracts, greater than 199 
contracts). The Open-Close Data is proprietary Cboe Options trade data 
and does not include trade data from any other exchange. It is also a 
historical data product and not a real-time data feed.
    The Exchange recently adopted a similar product: Intraday Open-
Close Data. The Intraday Open-Close Data will provide similar 
information to that of Open-Close Data but will be produced and updated 
every 10 minutes during the trading day. Data is captured in 
``snapshots'' taken every 10 minutes throughout the trading day and is 
available to subscribers within five minutes of the conclusion of each 
10-minute period. For example, subscribers to the intraday product will 
receive the first calculation of intraday data by approximately 9:42 
a.m. ET, which represents data captured from 9:30 a.m. to 9:40 a.m. 
Subscribers will receive the next update at 9:52 a.m., representing the 
data previously provided together with data captured from 9:40 a.m. 
through 9:50 a.m., and so forth. Each update will represent the 
aggregate data captured from the current ``snapshot'' and all previous 
``snapshots.'' The Intraday Open-Close Data will provide a volume 
summary of trading activity on the Exchange at the option level by 
origin (customer, professional customer, broker-dealer, and market 
maker), side of the market (buy or sell), and transaction type (opening 
or closing). The customer and professional customer volume will be 
further broken down into trade size buckets (less than 100 contracts, 
100-199 contracts, greater than 199 contracts). The Intraday Open-Close 
Data is also proprietary Cboe Options trade data and does not include 
trade data from any other exchange. In contrast to the existing Open-
Close Data product, the Intraday Open-Close Data will not provide 
execution price.
    The Exchange anticipates a wide variety of market participants to 
purchase Intraday Open-Close Data, including, but not limited to, 
individual customers, buy-side investors, and investment banks. The 
Exchange believes the Intraday Open-Close Data product may also provide 
helpful trading information regarding investor sentiment that may allow 
market participants to make better trading decisions throughout the day 
and may be used to create and test trading models and analytical 
strategies and provides comprehensive insight into trading on the 
Exchange. For example, intraday open data may allow a market 
participant to identify new interest or possible risks throughout the 
trading day, while intraday closing data may allow a market participant 
to identify fading interests in a security. The product is a completely 
voluntary product, in that the Exchange is not required by any rule or 
regulation to make this data available and that potential subscribers 
may purchase it only if they voluntarily choose to do so. The Exchange 
notes that other exchanges offer a similar data product.\4\
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    \4\ See Securities Exchange Act Release No. 61317 (January 8, 
2010), 75 FR 2915 (January 19, 2010) (SR-ISE-2009-103); Securities 
Exchange Act Release No. 62887 (September 10, 2010), 75 FR 57092 
(September 17, 2010) (SR-Phlx-2010-121); Securities Exchange Act 
Release No. 65587 (October 18, 2011), 76 FR 65765 (October 24, 2011) 
(SR-NASDAQ-2011-144); and Securities Exchange Act Release No. 81632 
(September 15, 2017), 82 FR 44235 (September 21, 2017) (SR-GEMX-
2017-42).
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    The Exchange proposes to provide in its Fee Schedule that TPHs and 
non-TPHs may purchase Intraday Open-Close Data on a subscription basis 
(monthly or annually) or by ad hoc request for a specified month 
(historical file). The Exchange proposes to assess a monthly fee of 
$2,000 (or $24,000 per year) for subscribing to the data feed. The 
Exchange also proposes to assess a fee of $1,000 per request per month 
for an ad-hoc request of historical Intraday Open/Close data covering 
all Exchange-listed securities. An ad-hoc request can be for any number 
of months beginning with October 2019 for which the data is 
available.\5\ The proposed subscription and ad-hoc fees will apply both 
to TPHs or non-TPHs. The Exchange notes that other exchanges provide 
similar data products that may be purchased on both a subscription and 
ad-hoc basis and are similarly priced.\6\
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    \5\ For example, a TPH or non-TPH that requests historical 
Intraday Open/Close Data for the months of January 2020 and February 
2020, would be assessed a total of $1,000. The Exchange notes that 
it may make historical data prior to October 2019 available in the 
future and that such historical data would be available to all TPHs 
or non-TPHs.
    \6\ See Price List--U.S. Derivatives Data for Nasdaq PHLX, LLC 
(``PHLX''), The Nasdaq Stock Market, LLC (``Nasdaq''), Nasdaq ISE, 
LLC (``ISE''), and Nasaq GEMX, LLC (``GEMX''), available at http://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#web. 
Particularly, PHLX offers ``Nasdaq PHLX Options Trade Outline 
(PHOTO)'' and assesses $1,500 per month for an intra-day 
subscription and $750 per month for historical reports; Nasdaq 
offers the ``Nasdaq Options Trade Outline (NOTO)'' and assesses $750 
per month for an intra-day subscription and $500 per month for 
historical reports; ISE offers the ``Nasdaq ISE Open/Close Trade 
Profile'' and assesses $2,000 per month for an intra-day 
subscription and $1,000 per month for historical reports; and GEMX 
offers the ``Nasdaq GEMX Open/Close Trade Profile'' and assesses 
$1,000 per month for an intra-day subscription and $750 per month 
for historical reports.

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[[Page 51813]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ 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 Intraday 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 \9\ 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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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 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, Intraday Open-Close Data 
further broadens 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 Intraday Open-Close Data. Particularly, information regarding 
opening and closing activity across different option series during the 
trading day may indicate investor sentiment, which may allow market 
participants to make better informed trading decisions throughout the 
day. Subscribers to the data may also be able to enhance their ability 
to analyze option trade and volume data and create and test trading 
models and analytical strategies. The Exchange believes Intraday Open-
Close Data provides a valuable tool that subscribers can use to gain 
comprehensive insight into the trading activity in a particular series, 
but also emphasizes such data is not necessary for trading. Moreover, 
other exchanges offer a similar data product.\10\
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    \10\ See supra note 4.
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    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered options exchanges that trade options. 
Based on publicly available information, no single options exchange has 
more than 17% of the market share and currently the Exchange represents 
only approximately 16.52% of the market share.\11\ 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.'' \12\ Making similar data products available to 
market participants fosters 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 similar products. The proposed fees are a result of the 
competitive environment, as the Exchange seeks to adopt fees to attract 
purchasers of the recently introduced Intraday Open-Close Data product.
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    \11\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (July 31, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
    \12\ 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 in line with the fees assessed by other exchanges 
that provide similar data products.\13\ Indeed, proposing fees that are 
excessively higher than established fees for similar data products 
would simply serve to reduce demand for the Exchange's data product, 
which as noted, is entirely optional. Like the Exchange's Intraday 
Open-Close Data product, other exchanges offer similar data products 
that each provide insight into trading on those markets and may 
likewise aid in assessing investor sentiment. Although each of these 
similar Intraday Open-Close data products provide only proprietary 
trade data and not trade data from other exchanges, it's possible 
investors are still able to gauge overall investor sentiment across 
different option series based on open and closing interest on any one 
exchange. Similarly, market participants may be able to analyze option 
trade and volume data, and create and test trading models and 
analytical strategies using only Intraday Open-Close data relating to 
trading activity on one or more of the other markets that provide 
similar data products. As such, if a market participant views another 
exchange's Intraday Open-Close data as more attractive than its 
proposed Intraday Open-Close data product, then such market participant 
can merely choose not to purchase the Exchange's Intraday Open-Close 
Data and instead purchase another exchange's Intraday Open-Close data 
product, which offer similar data points, albeit based on that other 
market's trading activity.
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    \13\ See supra note 6. The Exchange notes the proposed fees are 
the same as the fees assessed for the Nasdaq ISE Open/Close Trade 
Profile.
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    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 Cboe 
Options. The recently adopted Intraday Open-Close Data would provide 
options market participants with valuable information about opening and 
closing transactions executed on the Exchange throughout the trading 
day, similar to other 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. As noted above, users 
may also use such data to create and test trading models and analytical 
strategies.
    Selling market data, such as Intraday Open-Close Data, is also a 
means by which exchanges compete to attract business. To the extent 
that the Exchange is successful in attracting subscribers for the 
Intraday 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 similar 
products offered by other exchanges.\14\ The Exchange therefore 
believes that the proposed fees for Intraday 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

[[Page 51814]]

between subscribers that purchase Intraday 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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    \14\ See supra note 6.
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    As noted above, the Exchange anticipates a wide variety of market 
participants to purchase Intraday Open-Close Data, including but not 
limited to individual customers, buy-side investors and investment 
banks. The Exchange reiterates that the decision as to whether or not 
to purchase the Intraday Open-Close Data is entirely optional for all 
potential subscribers. Indeed, no market participant is required to 
purchase the Intraday Open-Close Data, and the Exchange is not required 
to make the Intraday Open-Close Data available to all investors. 
Rather, the Exchange is voluntarily making Intraday 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.\15\ The Exchange made Open-Close 
Data available 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. At least 
four other U.S. options exchanges offer a market data product that is 
substantially similar to the Intraday Open-Close Data. As a result, the 
Exchange believes this proposed rule change permits fair competition 
among national securities exchanges.
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    \15\ Id.
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    Furthermore, the Exchange operates in a highly competitive 
environment, and its ability to price Intraday Open-Close Data is 
constrained by competition among exchanges that offer similar data 
products to their customers. As discussed, there are currently a number 
of similar products available to market participants and investors. At 
least four other U.S. options exchanges offer a market data product 
that is substantially similar to the Intraday Open-Close Data, which 
the Exchange must consider in its pricing discipline in order to 
compete for the market data.\16\ For example, proposing fees that are 
excessively higher than established fees for similar data products 
would simply serve to reduce demand for the Exchange's data product, 
which as discussed, market participants are under no obligation to 
utilize. In this competitive environment, potential purchasers are free 
to choose which, if any, similar 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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    \16\ 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 in appropriate burden on intermarket competition as 
other exchanges are free to introduce their own 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 Intraday 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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
thereunder, because it establishes a due, fee, or other charge imposed 
by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(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:

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-2020-076 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-2020-076. 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-

[[Page 51815]]

2020-076 and should be submitted on or before September 11, 2020.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18351 Filed 8-20-20; 8:45 am]
BILLING CODE 8011-01-P