Document ID: SEC-2020-0765-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-05-13T04:00Z

[Federal Register Volume 85, Number 93 (Wednesday, May 13, 2020)]
[Notices]
[Pages 28669-28671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10217]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88836; File No. SR-CBOE-2020-044]

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

May 7, 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 May 1, 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, 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 the 
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.

[[Page 28670]]

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 May 1, 
2020.
Compression Transaction
    The Exchange first proposes to amend its Fees Schedule with respect 
to compression transactions. By way of background, the Exchange 
currently waives transaction fees (and applicable surcharges) incurred 
as a result of transactions that compress or reduce certain open 
positions in SPX and SPXW.\3\ The Exchange adopted fee and surcharge 
waivers as 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. In order 
to receive a waiver of transaction fees, a TPH must mark its orders in 
a form and manner determined by the Exchange to identify them as 
eligible for the compression rebates.\4\ As these orders are not 
subject to any transaction fees or surcharges, the Exchange wishes to 
also exclude such volume from any volume thresholds calculated by the 
Exchange. More specifically, the Exchange proposes to not count SPX and 
SPXW orders marked as compression towards any volume thresholds for the 
following programs: (1) SPX Liquidity Provider Sliding Scale, (2) 
Clearing Trading Permit Holder Proprietary Products Sliding Scale, (3) 
Select Customer Options Reduction (``SCORe'') Program, (4) SPX/SPXW 
Market-Maker Tier Appointment Fees, (5) SPX/SPXW Floor Broker Trading 
Surcharge, (6) Floor Broker ADV Discount, (7) Floor Brokerage Fees 
Discount, and (8) Frequent Trader Program. The Exchange proposes to 
amend Footnotes 12 and 41 to make clear that identified compression 
transactions (i.e., those properly marked in a manner and form 
determined by the Exchange) shall not count towards any volume 
threshold.\5\
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    \3\ See CBOE Fees Schedule, Footnote 41 and Footnote 12.
    \4\ Id.
    \5\ The Exchange proposes to also append Footnotes 12 and 41 to 
affected programs, as applicable.
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Registration Fees
    The Exchange next proposes to add clarifying language to 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 clarify that certain registration fees are not 
applicable when the trading floor is inoperable.
    First, by way of background, every TPH organization must designate 
an individual nominee to represent the organization with respect to 
each Floor Broker Trading Permit or Market-Maker Floor Trading Permit 
in all matters relating to the Exchange.\6\ An ``inactive nominee'' of 
a TPH organization is an individual who is eligible to become an 
effective nominee of that organization with respect to any Floor Broker 
Trading Permit or Market-Maker Floor Trading Permit which the 
organization holds.\7\ Only active nominees are permitted to act as a 
Market-Maker or Floor Broker on the trading floor. In order for an 
inactive nominee to act as a Market-Maker or Floor Broker on the 
trading floor, the TPH organization it is associated with must purchase 
an additional Floor Trading Permit or must swap places with an active 
nominee on a Trading Permit, which nominee would then become inactive. 
The Exchange currently assesses a monthly fee of $300 for any nominee 
that retains inactive status (i.e., ``Inactive Nominee Status Fee 
(Parking Space)''). The Exchange also assesses $100 each time an 
inactive nominee swaps places with a nominee on a Trading Permit. The 
Exchange notes that the Fees Schedule currently provides that when the 
trading floor is inoperable, floor Market-Makers and Floor Brokers will 
be entitled to act in their registered capacities electronically, 
provided that any Floor Broker TPH that did not have an Electronic 
Access Permit (``EAP'') prior to the closure of the trading floor will 
be charged for one EAP per TPH organization and any floor Market-Maker 
that did not have a Market Maker EAP will be charged for one Market 
Maker EAP per TPH organization (i.e., floor TPHs will not be assessed 
per permit fees for floor Trading Permits).\8\ As TPH organizations do 
not purchase additional floor Trading Permits while the trading floor 
is inoperable, the Inactive Nominee Status fee and Inactive Nominee 
Status Change fee would also not apply and the Exchange wishes to make 
this clear in the Fees Schedule to provide additional transparency in 
the Fees Schedule.
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    \6\ See Cboe Options Rule 3.9(b).
    \7\ See Cboe Options Rule 3.9(e).
    \8\ See Cboe Options Fees Schedule, Footnote 41.
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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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed rule change to not count volume 
executed and marked as a compression transaction towards volume 
thresholds for any applicable incentive program is reasonable, as such 
transactions already do not incur any fees or surcharges for such 
volume. The Exchange also believes it's reasonable to exclude such 
volume from the volume thresholds for the SPX/SPXW Market-Maker Tier 
Appointment Fee and SPX/SPXW Floor Broker Trading Surcharge because the 
Exchange does not want to discourage such transactions. As discussed, 
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. 
The Exchange believes the proposed change is also equitable and not 
unfairly discriminatory as it applies uniformly to all market 
participants that

[[Page 28671]]

identify eligible orders in the form and manner determined by the 
Exchange.
    The Exchange believes the proposed clarifications regarding 
inactive nominee fees is reasonable as such clarifications provide 
additional transparency in the Fees Schedule and alleviate potential 
confusion, thereby reducing 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. The Exchange 
also notes not assessing these fees is reasonable, equitable and not 
unfairly discriminatory as TPHs would not be subject to such fees and 
it would apply uniformly to all nominees and inactive nominees.

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 \12\ and paragraph (f) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-2020-044 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-2020-044. 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. 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-2020-044, and should be 
submitted on or before June 3, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10217 Filed 5-12-20; 8:45 am]
 BILLING CODE 8011-01-P