Document ID: SEC-2021-1748-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-12-15T05:00Z

[Federal Register Volume 86, Number 238 (Wednesday, December 15, 2021)]
[Notices]
[Pages 71304-71310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27072]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93743; File No. SR-CBOE-2021-073]

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

December 9, 2021.
    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 December 2, 2021, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule in connection with 
the Exchange's planned extension of Global Trading Hours (``GTH'') and 
the GTH Cboe Volatility Index (``VIX'')/VIX Weekly (``VIXW'') Lead 
Market-Maker (``LMM'') Incentive Program and GTH S&P 500 Index 
(``SPX'')/SPX Weekly (``SPXW'') LMM Incentive Program.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
November 19, 2021 (SR-CBOE-2021-069). On December 2, 2021, the 
Exchange withdrew that filing and submitted this filing.
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    Beginning Sunday, November 21, 2021, the Exchange plans to extend 
the hours of its GTH session by starting the GTH trading session at 
7:15 p.m. CT \4\ on the immediately preceding calendar day, rather than 
at the current start time of 2:00 a.m. The GTH trading session will 
continue to end at 8:15 a.m. As such, the proposed rule change updates 
the Fees Schedule to reflect the extended GTH trading session. 
Specifically, footnote 37 of the Fees Schedule currently provides that 
GTH is a separate trading session from Regular Trading Hours (``RTH'') 
for VIX, SPX and SPW.\5\ GTH commences at 2:00 A.M. CST and terminates 
at 8:15 A.M. CST, and is conducted on an all-electronic trading model 
with no open outcry capability. Footnote 37 is currently appended to 
various transaction and surcharge fees for orders in VIX, SPX and SPXW 
under the Rate Table--Underlying Symbol List A of the Fees Schedule, as 
well as certain programs in the Fees Schedule.\6\ Such fees, surcharges 
and programs apply \7\ during both Regular Trading Hours (``RTH'') and 
GTH. In line with the newly extended GTH hours, the proposed rule 
change amends footnote 37 to provide that GTH commences at 7:15 P.M. 
CST and terminates at 8:15 A.M. CST. The fees, surcharges and programs 
applicable during GTH will continue to apply in the same manner as they 
currently do; the trading hours in which such fees, surcharges and 
programs apply are merely being extended.
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    \4\ Unless otherwise specified, all times herein this proposal 
are in Central Time.
    \5\ The proposed rule change makes a nonsubstantive change to 
capitalize the ``W'' in SPXW to make the term consistent with the 
manner in which the symbol is formatted throughout the Fees 
Schedule.
    \6\ See Cboe Options, Fees Schedule, Cboe Options Clearing 
Trading Permit Holder Proprietary Products Sliding Scale, Cboe 
Options Clearing Trading Permit Holder VIX Sliding Scale, Customer 
Large Trade Discount, Large Trade Discount, Electronic Trading 
Permit Fees, Trade Processing Services, Regulatory Fees, and TPH 
Transaction Fee Policies and Rebate Programs.
    \7\ The Fees Schedule also provides for the GTH Executing Agent 
Subsidy Program, which applies only during GTH.
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    The proposed rule change also amends the GTH VIX/VIXW LMM Incentive 
Program and GTH SPX/SPXW LMM Incentive Program. Both LMM Incentive 
Programs provide a rebate to Trading Permit Holders (``TPHs'') with LMM 
appointments to the respective incentive program that meet certain 
quoting standards in the applicable series in a month. The Exchange 
notes that meeting or exceeding the quoting standards (both current and 
as proposed; described in further detail below) in each of the LMM 
Incentive Program products to receive the

[[Page 71305]]

applicable rebate is optional for an LMM appointed to a program. 
Particularly, an LMM appointed to an incentive program is eligible to 
receive the corresponding rebate if it satisfies the applicable quoting 
standards, which the Exchange believes encourages the LMM to provide 
liquidity in the applicable class and trading session (i.e., GTH, 
including as extended). The Exchange may consider other exceptions to 
the programs' quoting standards based on demonstrated legal or 
regulatory requirements or other mitigating circumstances. In 
calculating whether an LMM appointed to an incentive program meets the 
applicable program's quoting standards each month, the Exchange 
excludes from the calculation in that month the business day in which 
the LMM missed meeting or exceeding the quoting standards in the 
highest number of the applicable series.\8\
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    \8\ The Exchange notes that, regarding the VIX/VIXW LMM 
Incentive Program, which has multiple sets of quoting standards, an 
LMM's worst quoting day will be excluded from the calculation 
applicable to each set of quoting standards for that month.
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    In light of the extended GTH trading session, the Exchange proposes 
to adopt an additional GTH LMM Incentive Program for both VIX/VIXW and 
SPX/SPXW to cover the newly extended portion of the GTH trading 
session. Specifically, the LMMs appointed to the proposed additional 
programs must provide continuous electronic quotes during GTH from 7:15 
P.M. CST to 2:00 A.M. CST (``GTH1'') \9\ that meet or exceed the 
proposed quoting standards under each program (as described in further 
detail below) for the same amount of time in the same number of series 
as they are currently required to quote pursuant to the current GTH 
VIX/VIXW and GTH SPX/SPX LMM Incentive Programs,\10\ as applicable, in 
order to receive the same rebates for each series as currently offered 
under the GTH VIX/VIXW and GTH SPX/SPX LMM Incentive Programs,\11\ as 
applicable. As with the current programs, the Exchange may consider 
other exceptions to the quoting standards for the proposed GTH1 LMM 
Incentive Programs based on demonstrated legal or regulatory 
requirements or other mitigating circumstances, and, in calculating 
whether an LMM met the applicable GTH1 LMM Incentive Program's quoting 
standards each month, the Exchange will exclude from the calculation in 
that month the business day in which the LMM missed meeting or 
exceeding the applicable quoting standard in the highest number of 
series.
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    \9\ The proposed rule change also renames the existing GTH VIX/
VIXW and GTH SPX/SPXW LMM Incentive Programs as ``GTH2 VIX/VIXW LMM 
Incentive Program'' and ``GTH2 SPX/SPXW LMM Incentive Program'' and 
clarifies in the programs' descriptions that GTH2 runs from 2:00 
A.M. CST to 8:15 A.M. CST. The Exchange notes that the scope of 
these current programs is not changing as the ``GTH2'' hours are the 
same as the current GTH hours.
    \10\ That is, at least 99% of each of the VIX and VIXW series, 
90% of the time in a given month pursuant to the GTH1 (as proposed) 
and current GTH (GTH2, as renamed) VIX/VIXW LMM Incentive Program, 
and in at least 85% of each of the SPX and SPXW series 90% of the 
time in a given month pursuant to the GTH1 (as proposed) and current 
GTH (GTH2, as renamed) SPX/SPXW LMM Incentive Program.
    \11\ That is: (1) A rebate for that month in the amount of 
$15,000 for VIX and $10,000 for VIXW, pursuant to the GTH1 (as 
proposed) and GTH (GTH2, as renamed) VIX/VIXW LMM Incentive Program, 
if the appointed LMM meets or exceeds the basic quoting standards 
(as proposed for the GTH1 program and currently for the GTH2 
program); (2) a rebate for that month of $0.02 per VIX/VIXW contract 
executed in its Market-Maker capacity during RTH, pursuant to the 
proposed GTH1 and current GTH2 VIX/VIXW LMM Incentive Program, if 
the appointed LMM meets or exceeds the heightened quoting standards; 
and (3) a rebate for that month in the amount of $15,000 for SPX and 
$35,000, pursuant to the SPXW GTH1 (as proposed) and GTH (GTH2, as 
renamed) SPX/SPXW LMM Incentive Program, if the appointed LMM meets 
or exceeds the heightened quoting standards (as proposed for the 
GTH1 program and currently for the GTH2 program).
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    Like the current GTH VIX/VIXW LMM Incentive Program, the proposed 
GTH1 VIX/VIXW LMM Incentive Program offers basic quoting standards for 
VIXW options and for VIX options, and heightened quoting standards for 
VIX options, that apply based on the VIX Index value at the prior 
market close (i.e., at the close of the preceding RTH session) as 
follows:
    Proposed GTH1 VIXW options basic quoting standards:

----------------------------------------------------------------------------------------------------------------
                                                       Less than 21 days to            21 days or greater to
                                                            expiration                      expiration
                  Premium level                  ---------------------------------------------------------------
                                                       Width           Size            Width           Size
----------------------------------------------------------------------------------------------------------------
                                          VIX Value at Prior Close <18
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................            1.00              10            1.50              10
$1.01-$3.00.....................................            1.50              10            2.50              10
$3.01-$5.00.....................................            2.50               3            4.00               3
$5.01-$10.00....................................            4.00               1            6.00               1
$10.01-$30.00...................................            6.00               1           10.00               1
Greater than $30.00.............................           10.00               1           10.00               1
----------------------------------------------------------------------------------------------------------------
                                       VIX Value at Prior Close from 18-25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................            1.50               5            2.00               5
$1.01-$3.00.....................................            2.50               5            4.00               5
$3.01-$5.00.....................................            4.00               1            5.00               1
$5.01-$10.00....................................            6.00               1            8.00               1
$10.01-$30.00...................................           10.00               1           10.00               1
Greater than $30.00.............................           10.00               1           10.00               1
----------------------------------------------------------------------------------------------------------------
                                   VIX Value at Prior Close from 25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................           10.00               1           10.00               1
$1.01-$3.00.....................................           10.00               1           10.00               1
$3.01-$5.00.....................................           10.00               1           10.00               1
$5.01-$10.00....................................           10.00               1           10.00               1
$10.01-$30.00...................................           10.00               1           10.00               1
Greater than $30.00.............................           10.00               1           10.00               1
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[[Page 71306]]

    Proposed GTH1 VIX options basic quoting standards:

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                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                       Less than 15 days        15 days to 60 days        61 days to 180 days       181 days or greater
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              VIX Value at Prior Close <18
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$0.00-$1.00.....................................         0.35         * 30         0.25         * 40         0.35         * 30         0.80          * 5
$1.01-$3.00.....................................         0.50         * 15         0.35         * 25         0.50         * 15         0.90          * 5
$3.01-$5.00.....................................         0.60         * 15         0.35         * 15         0.60         * 10         1.00          * 5
$5.01-$10.00....................................         1.00           10         0.80         * 10         1.30           10         2.00            5
$10.01-$30.00...................................         2.00            5         1.50            5         2.00            5         3.00            3
Greater than $30.00.............................         5.00            3         3.00            3         5.00            3         5.00            3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           VIX Value at Prior Close from 18-25
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$0.00-$1.00.....................................         0.50         * 15         0.35         * 30         0.50         * 15         1.00          * 5
$1.01-$3.00.....................................         0.50         * 10         0.50         * 20         0.70         * 10         1.00          * 5
$3.01-$5.00.....................................         0.80          * 5         0.50         * 15         0.80          * 5         1.30            5
$5.01-$10.00....................................         1.50          * 5         1.00          * 5         2.00            5         2.20            5
$10.01-$30.00...................................         3.00            1         2.50            1         3.00            1         5.00            1
Greater than $30.00.............................         5.00            1         5.00            1         5.00            1        10.00            1
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                                                       VIX Value at Prior Close from 25
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$0.00-$1.00.....................................         0.80         * 10         0.50         * 10         0.60         * 10         1.20          * 5
$1.01-$3.00.....................................         1.00           10         0.75         * 10         1.00           10         1.20          * 5
$3.01-$5.00.....................................         1.20          * 5         0.90           10         1.20            5         1.80            5
$5.01-$10.00....................................         2.00            5         1.50            5         2.50            5         3.00            3
$10.01-$30.00...................................         5.00            1         5.00            1         5.00            1         7.00            1
Greater than $30.00.............................        10.00            1        10.00            1        10.00            1        10.00            1
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    Proposed GTH1 VIX options heightened quoting standards:

----------------------------------------------------------------------------------------------------------------
                                                             Expiring                        Near term
                                                 ---------------------------------------------------------------
                  Premium level                          Less than 15 days              15 days to 60 days
                                                 ---------------------------------------------------------------
                                                       Width           Size            Width           Size
----------------------------------------------------------------------------------------------------------------
                                          VIX Value at Prior Close <18
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................            0.20            * 50            0.20            * 50
$1.01-$3.00.....................................                                            0.25            * 30
$3.01-$5.00.....................................                                            0.35            * 20
----------------------------------------------------------------------------------------------------------------
                                       VIX Value at Prior Close from 18-25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................            0.25            * 30            0.20            * 30
$1.01-$3.00.....................................                                            0.30            * 20
$3.01-$5.00.....................................                                            0.40            * 20
----------------------------------------------------------------------------------------------------------------
                                   VIX Value at Prior Close from 25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................            0.30            * 20            0.25            * 20
$1.01-$3.00.....................................                                            0.40            * 15
$3.01-$5.00.....................................                                            0.60            * 15
----------------------------------------------------------------------------------------------------------------

    The Exchange notes that the proposed VIXW options basic quoting 
standards under the proposed GTH1 program are identical to the VIXW 
options basic quoting standards under the current GTH program. 
Additionally, the proposed VIX options basic and heightened quoting 
standards under the proposed GTH1 program are, by and large, 
substantially the same as the VIX options basic and heightened quoting 
standards under the current GTH program, differing only in marginally 
smaller quote sizes in certain categories as marked by an asterisk in 
the tables above. The Exchange believes it is appropriate to adopt 
slightly smaller quote sizes, in general, for the quoting standards 
applicable during the new overnight hours as the Exchange anticipates 
that the newly extended portion of GTH may sustain lower volume and 
general participation and higher volatility, and thus it may be more 
difficult for LMMs to quote aggressively at the same sizes within the 
same widths as provided in the existing GTH VIX/VIXW LMM Incentive 
Program. The Exchange notes that it examined and compared quotes and 
volume in VIX futures during GTH1 trading hours and current GTH hours 
to assist it in determining the reduction in certain quote sizes from 
the current GTH program. Marginally smaller quote sizes are designed to 
incentivize LMMs appointed to the GTH1 VIX/VIXW program to quote 
aggressively in VIX options during the new extended hours

[[Page 71307]]

to receive the rebate offered under the program, resulting in tighter 
spreads and increased liquidity during the newly extended hours to the 
benefit of investors.;
    Like the current GTH SPX/SPXW LMM Incentive Program, the proposed 
GTH1 SPX/SPXW LMM Incentive Program offers heightened quoting standards 
for SPX/SPXW VIX Index value at the prior market close (i.e., at the 
close of the preceding RTH session) as follows:

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                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                        7 days or less           8 days to 60 days        61 days to 270 days      271 days to 500 days
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
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                                                              VIX Value at Prior Close <20
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$0.00-$1.00.....................................      $* 0.50         * 15        $0.40           15        $0.60            5        $1.20            5
$1.01-$3.00.....................................       * 0.70         * 15       * 0.70         * 15         1.50          * 5       * 2.50            5
$3.01-$5.00.....................................       * 1.40         * 10         2.00           15         2.00          * 5       * 5.00            5
$5.01-$10.00....................................       * 7.00          * 5         4.00           10       * 3.50          * 5       * 6.00            5
$10.01-$30.00...................................      * 18.00            1       * 6.00            5       * 5.00            5       * 8.00            5
Greater than $30.00.............................      * 24.00            1      * 10.00            1        12.00            1        50.00            1
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                                                           VIX Value at Prior Close from 20-30
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$0.00-$1.00.....................................       * 0.70         * 10         0.80           10         0.75            5         2.00            5
$1.01-$3.00.....................................       * 1.20         * 10       * 1.10         * 10       * 2.40            5       * 3.50            5
$3.01-$5.00.....................................       * 3.00           10         3.50           10       * 3.50            5       * 6.00            5
$5.01-$10.00....................................      * 12.00          * 5         7.00          * 5       * 4.00            5       * 8.00            5
$10.01-$30.00...................................      * 24.00            1      * 10.00          * 1       * 7.00            5      * 12.00            5
Greater than $30.00.............................      * 30.00            1        12.00            1         2.00            1        60.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         VIX Value at Prior Close 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................       * 1.20          * 5       * 1.20          * 5         1.00            5         3.00            5
$1.01-$3.00.....................................       * 3.00          * 5       * 2.70          * 5         3.00            5       * 5.00            5
$3.01-$5.00.....................................       * 5.00          * 5       * 5.50          * 5       * 6.00            5         8.00            5
$5.01-$10.00....................................      * 16.00            5      * 12.00            5       * 5.00            3        10.00            1
$10.01-$30.00...................................        20.00            1      * 15.00            5        15.00            1        18.00            1
Greater than $30.00.............................        30.00            1      * 30.00            1        30.00            1        70.00            1
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    The proposed SPX/SPXW options heightened quoting standards under 
the proposed GTH1 program are substantially similar to the SPX/SPXW 
options heightened quoting standards under the current GTH program, 
differing only in marginally smaller quote sizes and wider quote widths 
in certain categories as marked by an asterisk in the tables above. The 
Exchange believes it is appropriate to adopt slightly smaller quote 
sizes and wider widths, in general, for the quoting standards 
applicable during the new overnight hours for the same reasons as 
described above--the Exchange anticipates that the newly extended 
portion of GTH may sustain lower volume and general participation and 
higher volatility, and thus it may be more difficult for LMMs to quote 
aggressively at the same sizes within the same widths as provided in 
the existing GTH SPX/SPXW LMM Incentive Program. The Exchange also 
examined and compared quotes and volume in S&P 500 E-mini futures 
during GTH1 trading hours and current GTH hours to assist it in 
determining the reduction in certain quote sizes and widening of 
certain quote widths from the current GTH program. Marginally smaller 
quote sizes and wider widths are designed to incentivize LMMs appointed 
to the GTH1 SPX/SPXW program to quote aggressively in SPX/SPXW options 
during the new extended hours to receive the rebate offered under the 
program, resulting in tighter spreads and increased liquidity during 
the newly extended hours to the benefit of investors. The Exchange 
further notes that the quote widths and sizes typical in SPX/SPXW 
options differ from that in VIX options, therefore, the proposed GTH1 
SPX/SPXW heightened quoting requirements reflect quote widths and sizes 
that align with the market characteristics in SPX/SPXW options.
    The Exchange believes the proposed quoting requirements for VIX/
VIXW options under the proposed GTH1 VIX/VIXW LMM Incentive Program and 
SPX/SPXW options under the proposed GTH1 VIX/VIXW LMM Incentive Program 
are designed to encourage LMMs appointed to the program to provide 
significant liquidity in VIX/VIXW and SPX/SPXW options during the 
extended portion of the GTH trading session. The Exchange notes that 
each of the proposed programs provide for quoting standards that apply 
depending on the VIX Index value at the prior market close (i.e., at 
the close of the preceding RTH session). The VIX Index value categories 
under the proposed GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive 
Programs are identical to the VIX value categories in the existing GTH 
VIX/VIXW and GTH SPX/SPXW LMM Incentive Programs, respectively, and are 
designed to encourage LMMs appointed to the programs to meet the 
quoting standards by tailoring such quoting standards to reflect market 
characteristics in VIX/VIXW and SPX/SPXW options depending on the 
volatility levels of the VIX Index (i.e., in the proposed categories in 
which the value of the VIX is relatively higher based on the closing 
VIX Index value from the preceding trading session indicates that the 
VIX Index is experiencing generally higher volatility).
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.\12\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ 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

[[Page 71308]]

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,\14\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its TPHs and other persons using its facilities.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    First, the Exchange believes that the proposed rule change to 
update footnote 37 to reflect the extended GTH trading session, set to 
begin November 21, 2021, is reasonable, equitable and not unfairly 
discriminatory. In particular, the Exchange believes that the proposed 
rule change is reasonable because it merely updates footnote 37 to 
provide for the appropriate trading hours that will be in place for the 
GTH trading session as of November 21, 2021. The Exchange believes that 
the proposed rule change is equitable and not unfairly discriminatory 
because the newly extended GTH trading session hours will apply equally 
to all market participants, in that, all market participants that 
choose to trade during GTH will be able to trade during the new trading 
hours. The fees, surcharges and programs applicable during GTH will 
continue to apply in the same manner as they currently do; the trading 
hours in which such fees, surcharges and programs apply are merely 
being extended.
    Regarding both the GTH1 SPX/SPXW and GTH1 VIX/VIXW LMM Incentive 
Programs generally, the Exchange believes it is reasonable, equitable 
and not unfairly discriminatory to continue to offer LMM Incentive 
Programs as financial incentives, including as proposed, to LMMs 
appointed to the programs, because it benefits all market participants 
trading in the corresponding products during GTH (including as 
extended). These incentive programs encourage the LMMs appointed to 
such programs to satisfy the applicable quoting standards, which may 
increase liquidity and provide more trading opportunities and tighter 
spreads. Indeed, the Exchange notes that these LMMs serve a crucial 
role in providing quotes and the opportunity for market participants to 
trade VIX/VIXW and SPX/SPXW options, as applicable, which can lead to 
increased volume, providing for robust markets. The Exchange ultimately 
offers the LMM Incentive Programs, including as amended, to 
sufficiently incentivize LMMs appointed to each incentive program to 
provide key liquidity and active markets in the corresponding program 
products during the corresponding trading sessions (and specific 
trading session hours, as proposed), and believes that these incentive 
programs, as amended, will continue to encourage increased quoting to 
add liquidity in each of the corresponding program products, thereby 
protecting investors and the public interest. The Exchange also notes 
that an LMM appointed to an incentive program may undertake added costs 
each month to satisfy that heightened quoting standards (e.g., having 
to purchase additional logical connectivity).
    The Exchange believes that the proposed rule change to adopt the 
GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive Programs is reasonable. 
Particularly, the Exchange believes the proposed quoting requirements 
under each are reasonably designed to encourage LMMs appointed to each 
program to provide significant liquidity in VIX/VIXW and SPX/SPXW 
options during the extended, overnight portion of the GTH trading 
session in order to meet the applicable quoting standards and receive 
the corresponding rebate. The provision of liquid and active markets 
facilitates tighter spreads, increased trading opportunities, and 
overall enhanced market quality to the benefit of all market 
participants, particularly in during newly extended trading hours which 
may experience generally lower volume and participation.
    As described above, the continuous quoting requirements (i.e., 
percentage of time and percentage of series), the applicable rebates 
under the proposed GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive 
Programs, and the manner in which the proposed quoting standards are 
tailored to the VIX Index value are the same as those under the current 
GTH VIX/VIXW and GTH SPX/SPXW LMM Incentive Programs, respectively. The 
Exchange believes that the proposed quoting standards under the GTH1 
programs are reasonable because they are either identical (as is the 
case for the proposed basic quoting standards for VIXW options) or 
substantially similar (as is the case for the proposed basic and 
heightened quoting standards for VIX options and proposed heighten 
quoting standards for SPX/SPXW options) to the corresponding quoting 
standards currently in place for VIX and VIXW and SPX/SPXW under the 
existing GTH LMM Incentive Programs for these products. Regarding the 
proposed quoting standards applicable to VIX options and SPX/SPXW, the 
Exchange believes it is appropriate to adopt slightly smaller quote 
sizes (for VIX and SPX/SPXW options) and wider quote widths (for SPX/
SPXW options) for the proposed GTH1 quoting standards applicable during 
the new overnight hours because such overnight hours may sustain lower 
volume and general participation and higher volatility and, therefore, 
marginally smaller quote sizes and wider quote widths (where 
applicable) are designed to incentivize LMMs appointed to the GTH1 VIX/
VIXW or GTH1 SPX/SPXW program to quote aggressively in VIX options or 
SPX/SPXW options, respectively, during the extended GTH hours, 
resulting in tighter spreads and increased liquidity during the newly 
extended hours to the benefit of investors. As stated above, the quote 
widths and sizes typical in SPX/SPXW options differ from that in VIX 
options, therefore, the proposed GTH1 heightened quoting requirements 
for SPX/SPXW reflect quote widths and sizes that align with the market 
characteristics in SPX/SPXW options.
    The Exchange also believes it is equitable and not unfairly 
discriminatory to adopt new GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM 
Incentive Programs because such programs will equally apply to any and 
all TPHs with LMM appointments to the GTH1 VIX/VIXW LMM Incentive 
Program and GTH1 SPX/SPXW LMM Incentive Program, respectively, that 
seek to meet the applicable program's quoting standards in order to 
receive the same rebates as currently offered under the existing GTH 
VIX/VIXW and GTH SPX/SPXW LMM Incentive Programs. Additionally, like 
with all other existing LMM Incentive Programs in the Fees Schedule, if 
an LMM appointed to the GTH1 VIX/VIXW or GTH1 SPX/SPXW LMM Incentive 
Program does not satisfy the quoting standards for any given month, 
then it simply will not receive the corresponding rebate offered by the 
program for that month.

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. 
Rather, as discussed above, the Exchange believes that the proposed 
change would

[[Page 71309]]

encourage the submission of additional liquidity to a public exchange, 
thereby promoting market depth, price discovery and transparency and 
enhancing order execution and price improvement opportunities for all 
TPHs. As a result, the Exchange believes that the proposed change 
furthers the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.'' \15\
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    \15\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    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 as the newly 
extended GTH trading session hours will apply equally to all market 
participants, in that, all market participants that choose to trade 
during GTH will be able to trade during the new trading hours and the 
fees, surcharges and programs applicable during GTH will continue to 
apply in the same manner as they currently apply. Also, the proposed 
GTH1 VIX/VIXW and GTH1 SPX/SPXW LMM Incentive Programs will apply to 
all LMMs appointed to each program in a uniform manner. To the extent 
the LMMs appointed to one of the proposed programs receive a benefit 
that other market participants do not, as stated, these LMMs in their 
role as Market-Makers on the Exchange have different obligations and 
are held to different standards. For example, Market-Makers play a 
crucial role in providing active and liquid markets in their appointed 
products, thereby providing a robust market which benefits all market 
participants. Such Market-Makers also have obligations and regulatory 
requirements that other participants do not have. An LMM appointed to a 
program may undertake added costs each month that it needs to satisfy 
the quoting standards (e.g., having to purchase additional logical 
connectivity). The programs are ultimately designed to attract 
additional order flow in VIX/VIXW and SPX/SPXW options to the Exchange 
during the newly extended GTH trading session, wherein greater 
liquidity will benefit all market participants by providing more 
trading opportunities, tighter spreads, and added market transparency 
and price discovery, and signals to other market participants to direct 
their order flow to those markets, thereby contributing to robust 
levels of liquidity during new trading hours.
    The Exchange also does not believe that the proposed changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the Act because the proposed programs are 
applicable to transactions in products exclusively listed on the 
Exchange. Additionally, the Exchange notes that it operates in a highly 
competitive market. TPHs have numerous alternative venues that they may 
participate on and direct their order flow, including 15 other options 
exchanges, as well as off-exchange venues, where competitive products 
are available for trading. Based on publicly available information, no 
single options exchange has more than 15% of the market share.\16\ 
Therefore, no exchange possesses significant pricing power in the 
execution of option order flow. Indeed, participants can readily choose 
to send their orders to other exchange, and, additionally off-exchange 
venues, if they deem fee levels at those other venues to be more 
favorable. Moreover, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
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.'' \17\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission, the D.C. 
Circuit stated as follows: ``[n]o one disputes that competition for 
order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. 
national market system, buyers and sellers of securities, and the 
broker-dealers that act as their order-routing agents, have a wide 
range of choices of where to route orders for execution'; [and] `no 
exchange can afford to take its market share percentages for granted' 
because `no exchange possesses a monopoly, regulatory or otherwise, in 
the execution of order flow from broker dealers'. . . .''.\18\ 
Accordingly, the Exchange does not believe its proposed fee change 
imposes any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
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    \16\ See Cboe Global Markets U.S. Options Market Volume Summary, 
Month-to-Date (November 12, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \18\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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 \19\ and paragraph (f) of Rule 19b-4 \20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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 [email protected]. Please include 
File Number SR-CBOE-2021-073 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-2021-073. 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

[[Page 71310]]

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-
CBOE-2021-073 and should be submitted on or before January 5, 2022.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27072 Filed 12-14-21; 8:45 am]
BILLING CODE 8011-01-P