Document ID: SEC-2020-1707-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-10-26T04:00Z

[Federal Register Volume 85, Number 207 (Monday, October 26, 2020)]
[Notices]
[Pages 67782-67787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23574]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90232; File No. SR-CBOE-2020-097]

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

October 20, 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 October 8, 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.
---------------------------------------------------------------------------

    \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 its Fees Schedule to (1) remove 
Market-Maker floor volume from the Marketing Fees assessment; (2) adopt 
a new fee code for Market-Maker volume executed on the floor; (3) 
remove Market-Maker floor volume eligibility for credits under certain 
programs; (4) amend the Clearing Trading Permit Holder Fee Cap; (5) 
reinstate certain facility fees currently waived in light of the COVID-
19 pandemic; (6) add options on the S&P 500 ESG Index (``SPESG'') to 
the same Customer Large Trade Discount assessed for options on the S&P 
500 Index (``SPX''); and (7) amend the application of the Strategy Fees 
Cap to certain products, effective October 1, 2020.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes on 
October 1, 2020 (SR-CBOE-2020-093). On October 8, 2020, the Exchange 
withdrew that filing and submitted this filing.
---------------------------------------------------------------------------

    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 16% of the market share.\4\ 
Thus, in such a low-concentrated and highly competitive market, no 
single options exchange possesses significant pricing power in the 
execution of option order flow. The Exchange believes that the ever-
shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow or 
discontinue to reduce use of certain categories of products in response 
to fee changes. Accordingly, competitive forces constrain the 
Exchange's transaction fees, and market participants can readily trade 
on competing venues if they deem pricing levels at those other venues 
to be more favorable. In response to competitive pricing, the Exchange, 
like other options exchanges, offers rebates and assesses fees for 
certain order types executed on or routed through the Exchange.
---------------------------------------------------------------------------

    \4\ See Cboe Global Markets U.S. Options Monthly Market Volume 
Summary (September 29, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

Proposed Removal of Market-Maker Floor Volume From Assessment of 
Marketing Fees
    The Exchange first proposes to amend its Marketing Fee program. By 
way of background the Marketing Fee is assessed on transactions of 
Market-Makers, resulting from customer orders at the per contract rate 
provided above on all classes of equity options, options on ETFs, 
options on ETNs and index options.\5\ A Designated Primary Market-Maker 
(``DPM''), a ``Preferred Market[hyphen]Maker (``PMM''), or a Lead 
Market-Maker (``LMM'') (collectively ``Preferenced 
Market[hyphen]Maker'') are given access to the marketing fee funds 
generated from a Preferenced order. The funds collected via this 
Marketing Fee are then put into pools controlled by the Preferenced 
Market-Maker. The Preferenced Market-Maker controlling a certain pool 
of funds can then determine the order flow provider(s) to which the 
funds should be directed in order to encourage such order flow 
provider(s) to send orders to the Exchange. Currently, the Marketing 
Fee does not apply to Market-Maker transactions resulting from orders 
from non[hyphen]Trading Permit Holder market[hyphen]makers; 
transactions resulting from penny cabinet trades and sub-penny cabinet 
trades; transactions in FLEX Options; transactions executed as a 
qualified contingent cross (``QCC''); and transactions in the Penny 
Pilot classes resulting from orders executed through the Step Up 
Mechanism (``SUM''). Each month, undisbursed marketing fees in excess 
of $250,000 will be reimbursed to the Market-Makers that contributed to 
the pool based upon a one month look back and their pro-rata portion of 
the entire amount of marketing fee collected during that month.
---------------------------------------------------------------------------

    \5\ The marketing fee does not apply to Sector Indexes, DJX, 
MXEA, MXEF, XSP or products in Underlying Symbol List A.

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

[[Page 67783]]

    The proposed rule change amends the Marketing Fees table by adding 
transactions in open outcry to the list of Market-Maker transactions to 
which the Marketing Fee does not apply. As such, transactions in open 
outcry will not be assessed, thus will not contribute to the pool nor 
be included in the one month look back of pro-rata contributions in 
determining the allocation of undisbursed marketing fees. The Exchange 
has recently observed that collecting on and distributing funds for 
Market-Maker transactions in open outcry resulting from customer orders 
has not served as a significant incentive in attracting customer order 
flow to the trading floor as designed. Therefore, the proposed rule 
change removes this assessment for such transactions on the trading 
floor, which, in turn will also assist the Exchange in redirecting 
resources and funding into other programs intended to incentivize 
customer order flow providers. The Exchange also notes that the 
proposed amendment to the Marketing Fee program is also in line with 
how other exchanges with trading floors apply their respective 
marketing fee programs.\6\
---------------------------------------------------------------------------

    \6\ See NYSE American Options Fee Schedule, Section IA, Options 
Transaction Fees and Credits, Marketing Charges Per Contract for 
Electronic Transactions, which assesses marketing charges on NYSE 
American Options Market Makers who are counterparties to an 
Electronic trade only.
---------------------------------------------------------------------------

Proposed Fee Code for Market-Maker Volume Executed on the Trading Floor
    The Exchange proposes to adopt a new fee code for Market-Maker 
orders transacted on the trading floor (i.e., manual) in Equity, ETF, 
and ETN Options, Sector Indexes and All Other Index Products. Such 
orders will yield fee code ``MB'' and will be assessed a standard rate 
of $0.35 per contract. Currently, Market-Maker transactions in Equity, 
ETF, and ETN Options are assessed the same fee of $0.23 per contract. 
The proposed rule change is intended to assess manual Market-Maker 
order flow in light of the proposed change (described in detail above) 
to remove the assessment of Marketing Fees for manual Market-Maker 
order flow. Additionally, the proposed rule change is consistent with 
the manner in which other options exchanges with trading floors 
currently assess different standard rates between manual and electronic 
market maker volume.\7\
---------------------------------------------------------------------------

    \7\ See BOX Options Fee Schedule, Section IA, Electronic 
Transaction Fees: Non-Auction Transaction, which assesses $0.50 or 
$0.75 for (taker) market maker orders; and Section IIA, Manual 
Transaction Fees: Qualified Open Outcry Orders (``QOO''), which 
assesses $0.25 for manual market maker orders; see also NYSE Arca 
Options Fee Schedule, Trade-Related Charges for Standard Options, 
which assesses $0.25 for manual market maker orders and $0.50 or 
$1.10 for electronic (take liquidity) market maker orders.
---------------------------------------------------------------------------

Proposed Removal of Market-Maker Floor Volume Eligibility Under Certain 
Programs
    The Exchange proposes to remove Market-Maker volume transacted in 
open outcry from eligibility for credits pursuant to the Liquidity 
Provider Sliding Scale and the Affiliated Volume Plan (``AVP''). 
Currently, the Liquidity Provider Sliding Scale offers credits on 
Market-Maker orders where a Market-Maker achieves certain volume 
thresholds based on total national Market-Maker volume in all 
underlying symbols \8\ during the calendar month. Currently, under AVP, 
if a Market-Maker affiliate \9\ (``Affiliate OFP'') or Appointed OFP 
receives a credit under the Exchange's Volume Incentive Program 
(``VIP''), the Market-Maker will receive an access credit on their BOE 
Bulk Ports corresponding to the VIP tier reached as well as a 
transaction fee credit on their sliding scale Market-Maker transaction 
fees. Specifically, the proposed rule change provides in footnote 10 
(appended to the Liquidity Provider Sliding Scale) that the Liquidity 
Provider Sliding Scale applies to Liquidity Provider (Cboe Options 
Market-Maker, DPM and LMM) transaction fees in all products except (1) 
Underlying Symbol List A (34) excluding XSP, and (2) (as proposed) 
volume executed in open outcry. The proposed rule change will also make 
clear that the volume thresholds under the Liquidity Provider Sliding 
Scale will continue to include volume executed in open outcry. The 
Exchange notes that it continues to include volume executed in open 
outcry in a Market-Maker's volume eligible to meet the tier thresholds 
in order to continue to incentivize Market-Maker order flow to the 
trading floor. The Exchange offers a hybrid market system and aims to 
continue to balance incentives for Market-Makers to contribute to deep 
liquid markets for investors on both its electronic and open outcry 
platforms. The proposed rule change provides in footnote 23 (appended 
to the AVP table) that volume executed in open outcry is not eligible 
to receive a credit under AVP. The Exchange notes that no changes are 
being made to the Volume Incentive Program as it relates to Market-
Maker transactions in open outcry as it currently does not include 
Market-Maker volume. The proposed change to remove the eligibility of 
certain credits for Market-Maker volume in open outcry is also intended 
to balance the fact that Market-Makers will no longer be assessed 
Marketing Fees on such orders.
---------------------------------------------------------------------------

    \8\ Excluding products in Underlying Symbol List A and XSP.
    \9\ ``Affiliate'' defined as having at least 75% common 
ownership between the two entities as reflected on each entity's 
Form BD, Schedule A.
---------------------------------------------------------------------------

Proposed Amendment to Clearing Trading Permit Holder Fee Cap
    The Clearing Trading Permit Holder Fee Cap table and accompanying 
footnote 22 provides that, for all non-facilitation business executed 
in AIM or open outcry, or as a QCC or FLEX transaction, transaction 
fees for Clearing Trading Permit Holder Proprietary and/or their Non-
Trading Permit Holder Affiliates (collectively, ``Firms'') in all 
products except Sector Indexes and products in Underlying Symbol List 
A, in the aggregate, are capped at $75,000 per month per Clearing 
Trading Permit Holder. The proposed rule change amends the cap from 
$75,000 to $55,000. The proposed reduction in the fee cap amount is 
intended to incentivize Firms to submit increased order flow to the 
Exchange thus encouraging a healthy and diverse ecosystem as the 
Exchange has observed lower Firm volume across the industry in recently 
months than observed historically. Additionally, the Exchange notes 
that the proposed cap change is competitive with similar firm caps in 
place on other options exchanges.\10\
---------------------------------------------------------------------------

    \10\ See BOX Options Fee Schedule, Section IIA, Manual 
Transaction Fees: Qualified Open Outcry Orders, which provides that 
QOO Order fees for Broker Dealers will be capped at $75,000 per 
month per Broker Dealer; see also NYSE Arca Options Fee Schedule, 
Firm and Broker Dealer Monthly Firm Cap Tiers, which assesses a 
broker-dealer/firm cap between $65,000 and $100,000 for firms that 
achieve certain volume tiers.
---------------------------------------------------------------------------

Proposed Reinstatement of Certain Facility Fees
    Current footnote 24 provides for modified and waived fees for 
certain trading floor-related transaction fees and fees related to 
trading floor facilities while the trading floor operates in a modified 
state. Specifically, it provides that, among other things, monthly fees 
will be waived for the following facilities fees: Standard and non-
standard booth rentals, wireless phone rental, arbitrage phone 
positions and satellite TV, provided however that such fees will be 
pro-rated based on the remaining trading days in the calendar month if 
the trading floor becomes fully operational mid-month. If a TPH is 
unable to utilize designated facility services while the trading floor 
is operating in a modified state, corresponding fees, including for

[[Page 67784]]

standard and non-standard booth rentals, Exchangefone maintenance, 
single line maintenance, intra floor lines, voice circuits, data 
circuits at local carrier (entrance), and data circuits at in-house 
frame, will not be assessed.
    While the Exchange's trading floor continues to operate in a 
modified state due to the ongoing COVID-19 pandemic, on September 21, 
2020, the Exchange further expanded its trading floor capacity. As a 
result, Trading Permit Holders have been able to again occupy booths 
and utilize the wireless phone rentals. The Exchange notes also that as 
a result of the recent expansion all wireless phone rental will be in 
use, however, not all booths will be occupied. Therefore, the proposed 
rule change updates footnote 24 to reinstate fees for such facilities 
and provides that, beginning October 1, 2020, facilities fees for 
standard and non-standard booth rentals and wireless phone rental will 
be reinstated. The proposed rule change makes clear too that if a TPH 
is unable to utilize designated facility services while the trading 
floor is operating in a modified state, corresponding fees, including 
for standard and non-standard booth rentals will not be assessed.
Proposed Addition of SPESG to the Rate Provided for SPX in the Large 
Customer Discount Program
    On September 21, 2020, the Exchange submitted a fee filing to 
introduce fees for the newly listed and traded SPESG on the 
Exchange.\11\ The proposal generally amended the Fees Schedule so that 
the majority of the existing transactions fees and programs currently 
applicable to trading in SPX would also apply to trading in SPESG. 
However, it inadvertently did not include SPESG in the Customer Large 
Trade Discount along with SPX (and SPXW). As a result, SPESG currently 
falls under the transaction fees discount for ``All Other Options'' 
(which charges for only the first 5,000 contracts per order), where the 
Exchange had instead intended it to receive the same transaction fees 
discount as SPX (which charges for only the first 20,000 contracts per 
order), consistent with amendments made to accommodate SPESG throughout 
the proposal. Therefore, the proposed rule change amends the Customer 
Large Trade Discount to correct this inadvertent omission and apply the 
same Customer Large Trade Discount to SPESG as SPX going forward.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 90093 (October 5, 
2020) (SR-CBOE-2020-088).
---------------------------------------------------------------------------

Proposed To Amend the Application of the Strategy Cap
    By way of background, last month, the Exchange submitted a proposal 
that amended footnote 13 and updated the strategy cap from applying to 
strategies executed on the same trading day in the same option class 
for options on equities, ETFs and ETN to applying to strategies 
executed in open outcry on the same trading day in the same option 
class across all symbols.\12\ The Exchange notes that in the proposal 
it incorrectly applied the cap to strategies executed in open outcry on 
the same trading day in the same options across all symbols where, 
instead, the proposal was originally intended to clarify that the 
strategy cap would apply to strategies executed in open outcry on the 
same trading day in the same options classes across all symbols in 
equity, ETF and ETN options, as opposed to on a symbol by symbol basis. 
As such, the proposed rule change reapplies the strategy cap to 
executions (in open outcry) in equities, ETFs and ETNs, as was in place 
prior to just last month, and updates footnote 13 to clarify that the 
cap applies across all symbols within equity, ETF and ETN options. 
Specifically, proposed footnote 13 provides that Market-Maker, Clearing 
Trading Permit Holder, JBO participant, broker-dealer and non-Trading 
Permit Holder market-maker transaction fees are capped at $0.00 for all 
merger, short stock interest, reversal, conversion and jelly roll 
strategies executed in open outcry on the same trading day in the same 
option class across all symbols in equities, ETFs and ETNs.\13\
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 89831 (September 
11, 2020), 85 FR 58096 (September 17, 2020) (SR-CBOE-2020-084).
    \13\ The proposed rule change also removes footnote 13 
incorrectly appended to ``Rate Table--Underlying Symbol List A''.
---------------------------------------------------------------------------

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.\14\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \15\ 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,\16\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    As stated above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. Many of the proposed fee 
changes reflect a competitive pricing structure designed to incentivize 
market participants to direct their order flow to the Exchange's 
trading floor, which the Exchange believes would enhance market quality 
to the benefit of all TPHs. Particularly, the Exchange believes that 
its proposed amendment to the application of certain programs and 
assessments of Market-Maker volume executed in open outcry and the 
proposed $55,000 Clearing Trading Permit Holder Fee Cap are consistent 
with Section 6(b)(4) of the Act in that the proposed rule changes are 
reasonable, equitable and not unfairly discriminatory. As noted above, 
the Exchange operates in highly competitive market. The Exchange is 
only one of several options venues to which market participants may 
direct their order flow, and it represents a small percentage of the 
overall market. The Exchange believes that the proposed fees are 
reasonable, equitable, and not unfairly discriminatory in that 
competing options exchanges, and the Exchange itself, offer fees and 
credits in connection with Market-Maker transactions in open outcry 
\17\ or firm fee caps,\18\ as the Exchange now proposes. The Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue or reduce use of certain categories of products, in 
response to fee changes. Accordingly, competitive forces constrain 
options exchange transaction fees. Stated otherwise, changes to 
exchange transaction fees can have a direct effect on the ability of an 
exchange to compete for order flow. The

[[Page 67785]]

Exchange amends its Fees Schedule accordingly to respond to this 
competitive marketplace.
---------------------------------------------------------------------------

    \17\ See supra notes 6 and 7.
    \18\ See supra note 10.
---------------------------------------------------------------------------

Proposed Removal of Market-Maker Floor Volume From Assessment of 
Marketing Fees
    The Exchange believes that the proposed rule change to amend the 
Marketing Fees table by adding transactions in open outcry to the list 
of Market-Maker transactions to which the Marketing Fee does not apply 
is reasonable because the current assessment of such orders has not 
resulted in significant incentive in attracting customer order flow to 
the trading floor as designed. Therefore, the proposed rule change is 
reasonable in that it removes this assessment for such transactions, 
which will allow the Exchange to redirect such resources and funding 
into other programs intended to incentivize customer order flow 
providers. Impactful incentive programs for customer order flow 
providers would, in turn, encourage an increase in customer order flow, 
which attracts Market-Makers. A subsequent increase in Market-Maker 
activity tends to signal an increase in activity from other market 
participants, contributing to overall deeper, more liquid markets and a 
robust market ecosystem to the benefit of all market participants. The 
Exchange believes the proposed rule change is equitable and not 
unfairly discriminatory because the proposed rule change will apply 
equally to all Market-Maker volume in open outcry, in that, no such 
volume will be assessed, or otherwise a part of, the Marketing Fee 
program. Also, as described above, the proposed rule change is 
reasonable, equitable and not unfairly discriminatory as the Marketing 
Fee program, as proposed, is also in line with how other exchanges with 
trading floors apply their respective marketing fee programs.\19\
---------------------------------------------------------------------------

    \19\ See supra note 6.
---------------------------------------------------------------------------

Proposed Fee Code for Market-Maker Volume Executed on the Trading Floor
    The Exchange believes that the proposed rule change to adopt a fee 
code and assess a standard rate for Market-Maker manual orders is 
reasonable in that it is reasonably designed to balance the assessment 
of fees on such orders in light of the removal of the assessment of 
Marketing Fees on such orders as proposed. The Exchange believes that 
the proposed rule change is equitable and not unfairly discriminatory 
because the proposed fee will apply automatically and uniformly to all 
Market-Maker orders transacted in open outcry (i.e., manual). 
Additionally, the proposed rule change is reasonable, equitable and not 
unfairly discriminatory because it is consistent with the manner in 
which other options exchanges with trading floors currently assess 
different standard rates between manual and electronic Market-Maker 
volume.\20\
---------------------------------------------------------------------------

    \20\ See supra note 7.
---------------------------------------------------------------------------

Proposed Removal of Market-Maker Floor Volume Eligibility Under Certain 
Programs
    The proposed rule change to remove Market-Maker volume transacted 
in open outcry from eligibility for credits pursuant to the Liquidity 
Provider Sliding Scale and the AVP is reasonable because it is also 
reasonably designed to balance against the increased benefit to Market-
Makers as a result of not assessing Marketing Fees for Market-Maker 
volume in open outcry, which, the Exchange believes that even with the 
proposed standard fee applied, may result in reduced overall 
transaction fees for Market-Makers executing volume on the trading 
floor. The Exchange also believes that it is reasonable to continue to 
include Market-Maker open outcry volume in the volume thresholds for 
meeting the Liquidity Provider Sliding Scale tiers because, as stated 
above, it is designed to continue to incentivize Market-Maker order 
flow to the trading floor and would assist the Exchange in continuing 
to provide a robust hybrid market. Particularly, Market-Maker volume in 
open outcry facilitates tighter spreads on the Exchange and signals 
additional corresponding increase in order flow from other market 
participants. Increased overall order flow benefits all investors by 
deepening the Exchange's liquidity pool, potentially providing even 
greater execution incentives and opportunities, offering additional 
flexibility for all investors to enjoy cost savings, supporting the 
quality of price discovery, promoting market transparency and improving 
investor protection. The Exchange notes, too, that other programs in 
the Fees Schedule include certain volume in meeting volume thresholds 
while not including the same volume as eligible for credits or reduced 
rates under such programs.\21\ The proposed rule change is equitable 
and not unfairly discriminatory because the proposed rule change will 
apply equally to all Market-Maker volume in open outcry, in that, no 
such volume will be allotted credits under the Liquidity Provider 
Sliding Scale Program or AVP.
---------------------------------------------------------------------------

    \21\ See e.g., Cboe Options Fees Schedule, Volume Incentive 
Program (VIP) table (which counts volume for capacity B, J and U 
towards tier qualification but not as eligible for the VIP credit), 
and Cboe Options Clearing Trading Permit Holder Proprietary Products 
Sliding Scale table (which counts volume in products not included in 
Underlying Symbol List A towards reaching the tiers, but provides 
reduced rates to volume in products included in Underlying Symbol 
List A).
---------------------------------------------------------------------------

Proposed Amendment to Clearing Trading Permit Holder Fee Cap
    The Exchange believes that the proposed reduction in the Clearing 
Trading Permit Holder Fee Cap amount is reasonably designed to 
incentivize Firms to increase their order flow submitted to the 
Exchange in order to meet, and trade beyond, the reduced cap, 
particularly given the recent observation of Firm volume decline across 
the industry. As stated above, increases in order flow contributes to 
deeper, more liquid markets and an increase in overall trading 
activity. The Exchange further believes that Clearing Trading Permit 
Holder participation in the markets is essential to a robust market 
ecosystem as Clearing Trading Permit Holders facilitate the execution 
of customer orders as well as provide clearing services. The Exchange 
believes that the proposed fee cap is equitable and reasonable as it 
will continue to apply uniformly to all Clearing Permit Holders that 
submit qualifying volume to meet the cap. Additionally, the Exchange 
notes that the proposed cap change is competitive with similar firm 
caps in place on other options exchanges.\22\
---------------------------------------------------------------------------

    \22\ See supra note 10.
---------------------------------------------------------------------------

Proposed Reinstatement of Certain Facility Fees
    The Exchange believes that reinstating the facility fees for the 
use of booths (as occupied) and wireless phones is reasonable as the 
Exchange has recently expanded its trading floor capacity, though 
continues to operate in a modified state, and therefore these 
facilities are once again being used by Trading Permit Holders. The 
Exchange believes the proposed rule change is also reasonable, 
equitable and not unfairly discriminatory as it applies equally to all 
floor TPHs use such services.
Proposed Addition of SPESG to the Rate Provided for SPX in the Large 
Customer Discount Program
    The proposed rule change to add SPESG to the same existing 
transaction fees that apply to SPX under the Customer Large Trade 
Discount is reasonable as it is intended to correct an inadvertent 
omission of such via a recent proposal which amended the

[[Page 67786]]

Fees Schedule so that the majority of the existing transactions fees 
and programs currently applicable to trading in SPX would also apply to 
trading in SPESG.\23\ The Exchange also believes, and as stated in the 
recent proposal, it is reasonable to apply the same discount to SPESG 
as it currently does to SPX because of the relation between the S&P 500 
ESG Index and the S&P 500 Index, wherein each constituent of a S&P 500 
ESG Index is a constituent of the S&P 500 Index. The proposed rule 
change does not alter any of the current rates under the Customer Large 
Trade Discount. Moreover, the proposed rule change is equitable and not 
unfairly discriminatory because all customer orders in SPESG will be 
charged equally up to the first 20,000 contracts per order just as they 
are today for orders in SPX.
---------------------------------------------------------------------------

    \23\ See supra note 11.
---------------------------------------------------------------------------

Proposed To Amend the Application of the Strategy Cap
    The Exchange believes that the proposed rule change to re-apply the 
strategy fee cap to open outcry executions in equity, ETF and ETN 
options is reasonable because it corrects the Fees Schedule to reflect 
the original intention of the recent proposal that updated the strategy 
caps and footnote 13,\24\ and because, just until month ago, the cap 
applied exclusively to equities, ETFs and ETNs. By way of background, 
last month, the Exchange submitted a proposal that amended footnote 13 
and updated the strategy cap from applying to strategies executed on 
the same trading day in the same option class for options on equities, 
ETFs and ETN to applying to strategies executed in open outcry on the 
same trading day in the same option class across all symbols.\25\ The 
proposed rule change is reasonably designed to provide additional 
clarity in the Fees Schedule and mitigate any potential confusion 
regarding the application of the strategy cap to strategies executed in 
open outcry across all symbols in equity, ETF and ETN options (rather 
than an alternative reading that such might apply on a symbol by symbol 
basis). The proposed rule change does not alter the amount of the 
current strategy fee cap and will continue to be uniformly available to 
all similarly situated market participants, that is, all market-makers, 
Clearing Trading Permit Holders, JBO participants, broker-dealers and 
non-Trading Permit Holders that execute strategies in any class of 
equity, ETF or ETN options in open outcry will continue to be eligible 
to for the cap, thus, will continue to equally receive no charge on 
such orders.
---------------------------------------------------------------------------

    \24\ See supra note 12.
    \25\ See Securities Exchange Act Release No. 89831 (September 
11, 2020), 85 FR 58096 (September 17, 2020) (SR-CBOE-2020-084).
---------------------------------------------------------------------------

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.
    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. Particularly, 
the proposed change regarding Market-Maker volume in open outcry will 
apply uniformly to all such volume. That is, all Market-Makers that 
transact orders on the trading floor will not be assessed the Marketing 
Fee on such orders, such orders will uniformly not be eligible for 
credits under the Liquidity Provider Sliding Scale or AVP, and such 
orders will automatically and uniformly yield fee code MB and be 
assessed the standard rebate for MB. Likewise, the Clearing Trading 
Permit Holder Fee Cap will continue to apply uniformly, as it does 
today, to all Firms that submit qualifying orders to reach the cap. The 
proposed rule change merely reduces the cap as an incentive for 
Clearing Trading Permit Holders to submit additional liquidity to the 
Exchange, which would benefit all market participants. The Exchange 
notes that the remaining proposed rule changes do not alter any of the 
current fees in place. The proposed rule change to reinstate certain 
facilities fees will apply equally to all floor Trading Permit Holders 
utilizing such facility services, the proposed rule change to the 
Customer Large Trade Discount table will apply equally to all customer 
orders in SPESG, exactly as it does today for such orders in SPX, and 
the proposed rule change to re-apply the strategy cap to strategies 
executed in certain products will apply uniformly to all market-makers, 
Clearing Trading Permit Holders, JBO participants, broker-dealers and 
non-Trading Permit Holders that execute strategies in open outcry 
across all symbols in equity, ETF and ETN options.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because, as noted 
above, competing options exchanges, and the Exchange, currently have 
substantially similar fees in place in connection with Market-Maker 
orders executed in open outcry and firm fee caps. The Exchange notes it 
operates in a highly competitive market. In addition to Cboe Options, 
TPHs have numerous alternative venues that they may participate on and 
director 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 18% of the market share of executed volume of 
options trades.\26\ Therefore, no exchange possesses significant 
pricing power in the execution of option order flow. 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.'' \27\ 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' . . . .''.\28\ Accordingly, the 
Exchange does not believe its proposed changes to the incentive 
programs impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \26\ See supra note 4.
    \27\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \28\ 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)).
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change in 
connection with the waiver of certain designated facility service fees 
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

[[Page 67787]]

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 \29\ and paragraph (f) of Rule 19b-4 \30\ 
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.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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:

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-2020-097 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-2020-097. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CBOE-2020-097 and should be submitted on 
or before November 16, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23574 Filed 10-23-20; 8:45 am]
BILLING CODE 8011-01-P