Document ID: SEC-2020-0643-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-04-23T04:00Z

[Federal Register Volume 85, Number 79 (Thursday, April 23, 2020)]
[Notices]
[Pages 22770-22772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08594]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88678; File No. SR-CBOE-2020-033]

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

April 17, 2020.
    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 April 16, 2020, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission (``SEC'' 
or ``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 Footnote 12 of the Fees Schedule, 
which governs pricing changes in the event the Exchange trading floor 
becomes inoperable. In the event the trading floor becomes inoperable, 
the Exchange will continue to operate in a screen-based only 
environment using a floorless configuration of the System that is 
operational while the trading floor facility is inoperable. The 
Exchange would operate using that configuration only until the 
Exchange's trading floor facility became operational. Open outcry 
trading would not be available in the event the trading floor becomes 
inoperable. Particularly, the Exchange proposes to amend Footnote 12 to 
waive fees incurred from certain transactions executed in electronic 
compression forums.
    By way of background, the Exchange recently adopted Rule 
5.24(e)(1)(E), which provides that in the event the trading floor is 
inoperable, the Exchange will make available an electronic 
``compression forum'' in the same manner as an open outcry 
``compression forum'' as set forth in Rule 5.88, subject to certain 
exceptions.\3\ When the trading floor is open, the Exchange facilitates 
compression forums on the trading floor at the end of each calendar 
week, month, and quarter in which Trading Permit Holders (``TPHs'') may 
reduce open positions in series of SPX options in order to mitigate the 
effects of capital constraints on market participants, which may 
contribute to continued depth of liquidity in the SPX options 
market.\4\ The Exchange adopted Rule 5.24(e)(1)(E) to provide for an 
electronic forum that replicates the compression forum that is 
available when the Exchange is operating with an open outcry 
environment. Particularly, an electronic compression forum would 
continue to provide TPHs an opportunity to efficiently reduce their 
open SPX positions and free up capital in the event the Exchange must 
operate in an all-electronic environment (as it currently is), which is 
particularly important in volatile market conditions.
---------------------------------------------------------------------------

    \3\ See Securities and Exchange Act Release No. 88490 (March 26, 
2020), 85 FR 18318 (April 1, 2020) (SR-CBOE-2020-026).
    \4\ In general, under the floor Compression Forum process, each 
month, TPHs may submit to the Exchange lists of open SPX positions 
(these positions are referred to in Rule 5.88 as ``compression-list 
positions'') they wish to close against opposing (long/short) 
positions of other TPHs. The Exchange would then aggregate these 
positions into a single list to allow TPHs to more easily identify 
those positions with counterparty interest on the Exchange. The 
Exchange then provides a forum on the Exchange's trading floor 
during which TPHs could conduct closing-only transactions in series 
of SPX options. The Exchange holds compression forums on the last 
three trading days of each calendar month.
---------------------------------------------------------------------------

    The Exchange currently waives transaction fees (and surcharges) 
incurred as a result of transactions that compress or reduce certain 
open positions.\5\ One such waiver in particular is for transactions 
involving SPX and SPXW compression-list positions executed in a floor 
compression forum (pursuant to Rule 5.88).\6\ Particularly, the 
Exchange waives SPX/SPXW transaction fees, including surcharges, in 
order to encourage TPHs to submit compression-list positions in advance 
of monthly compression forums and compress these positions during 
compression forums.\7\ The Exchange wishes to similarly waive all 
transaction fees, including any applicable surcharges (e.g., Index 
License Surcharge and SPX/SPXW Execution Surcharges), for closing 
transactions involving SPX and SPXW compression-list positions executed 
in an electronic compression forum (pursuant to Rule 5.24).
---------------------------------------------------------------------------

    \5\ See CBOE Fees Schedule, Footnote 41.
    \6\ See Cboe Options Fees Schedule, Footnote 41. The Exchange 
notes it inadvertently failed to update the rule references in 
Footnote 41, including Rule 5.88, when it relocated the rules upon 
migration. See Securities and Exchange Act Release No. 86772 (August 
27, 2019), 84 FR 46069 (September 3, 2019) (SR-CBOE-2019-042). The 
Exchange proposes to update those rule references now.
    \7\ See Cboe Options Fees Schedule, Footnote 41. A rebate of 
transaction fees would include the transaction fee assessed along 
with any other surcharges assessed per contract (e.g., the Index 
License Surcharge).
---------------------------------------------------------------------------

    The Exchange believes compression of these positions may improve 
market

[[Page 22771]]

liquidity by freeing capital currently tied up in positions for which 
there is a minimal chance that a significant loss would occur. The 
Exchange further believes advanced submission of compression-list 
positions to the Exchange allows TPHs to more easily identify 
counterparty interest and efficiently conduct closing transactions of 
these positions during compression forums. The Exchange notes the 
submission of compression-list positions is completely voluntary, open 
to all TPHs with open positions in SPX, and does not require a TPH to 
trade any compression-list position or participate in a compression 
forum. As such, the Exchange believes it's appropriate to waive fees 
incurred for transaction executed in an electronic compression forum. 
The Exchange proposes to make clear that in order to receive a fee 
waiver of all transaction fees and applicable surcharges for these 
transactions, a TPH must mark its orders in a form and manner 
determined by the Exchange to identify them as eligible for the 
compression fee waiver. Orders identified as eligible for a fee waiver 
will yield fee code ``SC''. The Exchange proposes to similarly clarify 
in Footnote 41, that in order for a TPH to receive a rebate for 
compression trades that occur on floor, a TPH must mark its orders in a 
form and manner determined by the Exchange to identify them as eligible 
for the compression rebates.\8\
---------------------------------------------------------------------------

    \8\ See Securities and Exchange Act Release No. 87338 (October 
17, 2019), 84 FR 56873 (October 23, 2019) (SR-CBOE-2019-094).
---------------------------------------------------------------------------

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 the 
Section 6(b)(5) \10\ 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 
Section 6(b)(4) of the Act,\11\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its Trading Permit Holders and other persons using 
its facilities.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change to waive transaction 
fees, including the Index License Surcharge and SPX/SPXW Execution 
Surcharges, for closing transactions involving SPX and SPXW 
compression-list positions executed in an electronic compression forum 
(pursuant to Rule 5.24) while the trading floor is inoperable is 
reasonable because market participants will not be subject to 
transaction fees or surcharges for these executions. While the trading 
floor is inoperable, the Exchange still wishes to incentivize TPHs to 
submit to the Exchange compression-list positions executed in a 
compression forum, albeit for an electronic compression forum, and as 
such, does not wish to assess any transaction fees or surcharges on 
such volume that would otherwise be executed on the trading floor and 
not be charged. The Exchange believes compression of these positions 
would improve market liquidity by freeing capital currently tied up in 
positions for which there is a minimal chance that a significant loss 
would occur. All TPHs may submit compression-list positions and may 
participate in compression forums. Moreover, as noted above, the 
Exchange already waives transaction fees, including surcharges, for 
closing transactions involving SPX and SPXW compression-list positions 
executed in a compression forum on the trading floor (pursuant to Rule 
5.88).\12\ The Exchange believes the proposed change is also equitable 
and not unfairly discriminatory as it applies uniformly to all market 
participants that identify eligible orders in the form and manner 
determined by the Exchange.
---------------------------------------------------------------------------

    \12\ See Cboe Options Fees Schedule, Footnote 41.
---------------------------------------------------------------------------

    Lastly, the Exchange believes the proposed clarification and 
updates to rule references in Footnote 41 maintains transparency in the 
Fees Schedule and alleviates potential 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 changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange notes the 
proposed changes are not intended to address any competitive issue, but 
rather to address a fee change it believes is reasonable in the event 
the trading floor becomes inoperable, thereby only permitting 
electronic participation on the Exchange. 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 the proposed changes apply equally to all 
similarly situated market participants. The Exchange does not believe 
that the proposed rule changes will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the proposed changes only affect trading on 
the Exchange in limited circumstances.

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 \13\ and paragraph (f) of Rule 19b-4 \14\ 
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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 22772]]

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-2020-033 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-2020-033. 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 offices 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-CBOE-2020-033, and should be submitted 
on or before May 14, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08594 Filed 4-22-20; 8:45 am]
 BILLING CODE 8011-01-P