Document ID: SEC-2021-0330-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-03-09T05:00Z

[Federal Register Volume 86, Number 44 (Tuesday, March 9, 2021)]
[Notices]
[Pages 13598-13601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04791]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91252; File No. SR-CBOE-2021-012]

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

March 3, 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 February 22, 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.
---------------------------------------------------------------------------

    \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 adopt 
surcharges in connection with the Exchange's plan to activate the 
Automated Improvement Mechanism (``AIM'') Auction \3\ for S&P 500 Index 
(``SPX'') and SPX Weekly (``SPXW'') options while the Exchange is 
operating in its normal hybrid environment, effective February 22, 
2021.
---------------------------------------------------------------------------

    \3\ The Exchange notes that this includes Complex AIM (``C-
AIM''), as set forth in proposed footnote 26.
---------------------------------------------------------------------------

    By way of background, AIM includes functionality in which a Trading 
Permit Holder (``TPH'') (an ``Initiating TPH'') may electronically 
submit for execution an order it represents as agent on behalf of a 
customer,\4\ broker dealer, or any

[[Page 13599]]

other person or entity (``Agency Order'') against any other order it 
represents as agent, as well as against principal interest in AIM (an 
``Initiating Order''), provided it submits the Agency Order for 
electronic execution into an AIM Auction.\5\ The Exchange may designate 
any class of options traded on Cboe Options as eligible for AIM. The 
Exchange notes that all Users, other than the Initiating TPH, may 
submit responses to an Auction (``AIM Responses''). AIM Auctions take 
into account AIM Responses to the applicable Auction as well as contra 
interest resting on the Cboe Options Book at the conclusion of the 
Auction (``unrelated orders''), regardless of whether such unrelated 
orders were already present on the Book when the Agency Order was 
received by the Exchange or were received after the Exchange commenced 
the applicable Auction. If contracts remain from one or more unrelated 
orders at the time the Auction ends, they are considered for 
participation in the AIM order allocation process.
---------------------------------------------------------------------------

    \4\ The term ``customer'' means a Public Customer or a broker-
dealer. The term ``Public Customer'' means a person that is not a 
broker-dealer. See Rule 1.1.
    \5\ See Rule 5.37 (AIM); and Rule 5.38 (C-AIM).
---------------------------------------------------------------------------

    The Exchange does not currently activate AIM for SPX/SPXW while it 
operates in its normal hybrid trading environment (i.e., when the 
trading floor is operable).\6\ The Exchange, however, plans to activate 
AIM for SPX/SPXW on February 22, 2021 for operation in the Exchange's 
normal hybrid environment. In connection with the planned activation of 
AIM for SPX/SPXW while the Exchange functions in its normal hybrid 
setting, the Exchange proposes to adopt certain surcharges under Rate 
Table--Underlying Symbol List A of the Fees Schedule. Specifically, the 
Exchange proposes to adopt an SPX AIM Hybrid Surcharge of $0.50 per 
contract for all Broker-Dealer (capacity ``B''), Joint Back-Office 
(capacity ``J''), Non-TPH Market-Maker (capacity ``N'') and 
Professional (capacity ``U'') (collectively, ``Non-Customers''), and 
Market-Maker (capacity ``M'') orders in SPX/SPXW options executed in 
AIM. The Exchange also proposes to adopt an SPX AIM Hybrid Surcharge of 
$0.39 per contract for all Clearing TPHs (capacity ``F'') and for Non-
Clearing TPH Affiliates (capacity ``L'') (collectively, ``Firms'') 
orders in SPX/SPXW options executed in AIM. Finally, the Exchange 
proposes to adopt an SPX AIM Hybrid Originator Surcharge of $0.10. 
Proposed footnote 26 is appended to the proposed surcharges and 
provides that the SPX AIM Hybrid Surcharges, including the Originator 
Surcharge, apply only to SPX/SPXW orders executed in AIM and C-AIM \7\ 
during RTH when the Exchange is operating in a hybrid environment 
(i.e., the trading floor is operable). The SPX AIM Hybrid Surcharge 
will apply to all SPX/SPXW AIM Agency/Primary, Contra and Response 
orders. The SPX AIM Hybrid Originator Surcharge will apply to all SPX/
SPXW Agency/Primary orders and such fee will be invoiced to the 
executing TPH.
---------------------------------------------------------------------------

    \6\ In March 2020, the Exchange suspended open outcry trading to 
help prevent the spread of the novel coronavirus and operated in an 
all-electronic configuration though June 2020. During this time, the 
Exchange activated AIM for SPX and SPXW options in an all-electronic 
environment to provide TPHs with a mechanism to execute crosses 
electronically, as they could no longer represent those crosses for 
open outcry execution. Footnote 12 in the Fees Schedule provides 
specifically that in the event the Exchange operates in a screen-
based only environment, AIM may be available for SPX and SPXW during 
Regular Trading Hours, and the Fees Schedule provides for certain 
SPX AIM Surcharges that apply only in that case.
    \7\ See supra note 3. The Exchange notes that it already 
activates FLEX AIM for SPX/SPXW and that all currently applicable 
FLEX transaction fees and surcharges will continue to apply.
---------------------------------------------------------------------------

    Particularly, the Exchange notes that it can determine AIM 
eligibility on a class-by-class basis \8\ and, as stated above, 
historically has not designated SPX/SPXW as eligible for AIM Auctions. 
As such, the Exchange wants to encourage market participants to 
continue to execute SPX/SPXW volume in open outcry or against quotes in 
its electronic Book when AIM is switched on for SPX/SPXW. The Exchange 
believes the SPX AIM Hybrid Surcharges (including the Originator 
surcharge) will provide a reasonable cost incentive to market 
participants to continue to execute SPX/SPXW orders as they do today as 
well as through AIM when appropriate once activated. More specifically, 
the SPX AIM Hybrid Surcharges aim to balance incentives between 
executing via the AIM Auctions and executing via open outcry or the 
electronic Book, which the Exchange believes will maintain robust 
hybrid markets and continue to incentivize the provision of liquidity 
to both its electronic and trading floor environments in order to 
support price discovery and increased execution opportunities. The new 
functionality for SPX/SPXW will allow market participants to interact 
with SPX/SPXW order flow in a manner not previously available in a 
hybrid trading environment.\9\ Therefore, the Exchange believes it is 
appropriate to assess additional fees to market participants that 
choose to leverage auction execution opportunities outside of 
contributing to SPX/SPXW liquidity in open outcry and the [sic] on the 
electronic Book. Indeed, the Exchange currently does so in various 
places in the Fees Schedule with respect to other classes. For example, 
the Exchange currently assesses a higher charge for Non-Customer and 
Firm AIM Responses in all products, except Sector Indexes \10\ and 
Underlying Symbol List A,\11\ of $0.50 (Penny classes) and $1.05 (Non-
Penny classes) than the applicable standard transaction rates. The 
Exchange also notes that when it is operating in a screen-based only 
environment, it assesses an AIM Agency/Primary Surcharge of $0.10, 
which, like the proposed SPX AIM Hybrid Originator Surcharge, applies 
to all AIM Agency/Primary orders in SPX/SPXW and is invoiced to the 
executing TPH. Additionally, the Exchange notes that it assesses 
certain surcharges on proprietary products (i.e., SPX/SPXW, SPESG and 
VIX) \12\ to similarly create a reasonable cost equivalence between the 
primary execution channels (open outcry and electronic book) for such 
products and likewise maintain a robust hybrid system.\13\ Overall, the 
proposed fees are designed to balance fees at an appropriate level in 
order to assess SPX/SPXW order flow to the AIM Auctions while also 
maintaining incentive for participation and the provision of liquidity 
in SPX/SPXW on the trading floor and in the electronic book when AIM is 
activated for SPX/SPXW.
---------------------------------------------------------------------------

    \8\ See Rule 5.37(a)(1) and 5.38(a)(1).
    \9\ Previously only available while the trading floor was 
inoperable for a period of time during 2020. See supra note 6.
    \10\ Sector Index underlying symbols: IXB, SIXC, IXE, IXI, IXM, 
IXR, IXRE, IXT, IXU, IXV AND IXY. Corresponding option symbols: 
SIXB, SIXC, SIXE, SIXI, SIXM, SIXR, SIXRE, SIXT, SIXU, SIXV AND 
SIXY.
    \11\ Underlying Symbol List A: OEX, XEO, RUT, RLG, RLV, RUI, 
UKXM, SPX (includes SPXW), SPESG and VIX.
    \12\ See Cboe Options Fees Schedule, ``Rate Table--Underlying 
Symbol List A'', which assesses an Execution Surcharge of $0.21 for 
all non-Market-Maker orders in SPX and SPESG and $0.13 for all non-
Market-Maker orders in SPXW, and assesses a Customer Priority 
Surcharge of $0.20 for all Customer maker orders in VIX.
    \13\ See e.g., Securities and Exchange Release Nos. 71295 
(January 14, 2014), 79 FR 3443 (January 21, 2014) (SR-CBOE-2013-
129); and 88426 (March 19, 2020), 85 FR 16978 (March 25, 2020) (SR-
CBOE-2020-021).
---------------------------------------------------------------------------

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

[[Page 13600]]

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).
---------------------------------------------------------------------------

    Particularly, the Exchange believes the proposed rule change to 
adopt AIM Hybrid Surcharges (including an Originator Surcharge) is 
reasonable because the proposed surcharges are reasonably designed to 
ensure that there is appropriate cost incentive to market participants 
to continue to execute through the Exchange's primary execution 
channels for SPX/SPXW once AIM is activated for SPX/SPXW. The Exchange 
believes that the proposed SPX AIM Hybrid Surcharges reasonably balance 
cost incentives between executing via the AIM Auctions and executing 
via open outcry or against quotes in the electronic Book, which is in 
the interest of the Exchange as it must both maintain robust hybrid 
markets, incentivizing liquidity to both its electronic and trading 
floor environments in order support price discovery and increased 
execution opportunities. The planned activation of this functionality 
for SPX/SPXW will allow market participants to interact with SPX/SPXW 
order flow in a manner not previously available,\17\ and, as a result, 
the Exchange believes it is reasonable to assess additional fees for 
market participants that choose to leverage auction execution 
opportunities outside of contributing to SPX/SPXW liquidity in open 
outcry and the on the electronic Book.
---------------------------------------------------------------------------

    \17\ Previously only available while the trading floor was 
inoperable for a period of time during 2020. See supra note 6.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed fees in connection 
with SPX AIM orders are reasonable as they do not represent a 
significant departure from the fees currently offered under the Fees 
Schedule. The Exchange believes that the proposed SPX AIM Hybrid 
Surcharges of $0.50 per contract for all Non-Customer and Market-Maker 
and $0.39 per contract for all Firm orders executed in AIM (Agency/
Primary, Contra and Response) are reasonable because these surcharges 
are, respectively, comparable to or less than the $0.50 and $1.05 rates 
per contract, which are generally higher than the applicable standard 
transaction rates, currently assessed for certain AIM orders submitted 
in all products (with certain exceptions). The Exchange believes that 
the proposed SPX AIM Hybrid Originator Surcharge is reasonable as it is 
equivalent to the AIM Agency/Primary Surcharge of $0.10 that is 
assessed when the Exchange is operating in an screen-based only 
environment and likewise applies to all AIM Agency/Primary orders in 
SPX/SPXW and is invoiced to the executing TPH. The Exchange again notes 
that it assesses certain surcharges on proprietary products (i.e., SPX/
SPXW, SPESG and VIX) \18\ in order to similarly create a reasonable 
cost equivalence between its primary execution channels (open outcry 
and electronic book) for such products as the Exchange seeks to 
maintain a robust hybrid system.\19\ Overall, the Exchange believes the 
proposed fees are reasonably designed to balance fees at an appropriate 
level in order to assess SPX/SPXW order flow to AIM Auctions while also 
maintaining incentive for participation in SPX/SPXW on the trading 
floor and in the electronic book, thereby supporting incentive for 
continued liquidity in SPX/SPXW through the Exchange's primary 
execution channels while AIM is activated for SPX/SPXW, to the benefit 
of all market participants.
---------------------------------------------------------------------------

    \18\ See supra note 12.
    \19\ See supra note 13.
---------------------------------------------------------------------------

    The Exchange believes that the proposed SPX AIM Hybrid Surcharges 
(including the Originator Surcharge) are equitable and not unfairly 
discriminatory because the proposed SPX AIM Hybrid Surcharges will 
apply equally to all similarly situated TPHs that submit orders in SPX/
SPXW into AIM. That is, the proposed fees will apply equally to all 
Non-Customer and Market-Maker orders in SPX/SPXW executed in AIM, to 
all Firm orders in SPX/SPXW executed in AIM, and to all executing TPHs 
that submit AIM Agency/Primary orders in SPX/SPXW. The Exchange 
believes that it is equitable and not unfairly discriminatory to 
provide lower SPX AIM Hybrid rates for Firms because the Exchange 
believes that Firm participation in the markets is essential to a 
robust hybrid market ecosystem as Firms facilitate the execution of 
customer orders, as well as provide clearing services, both 
electronically and in open outcry. The Exchange recognizes Firms as an 
important source of liquidity when they facilitate their own customers' 
trading activity, which enhances transparency and price discovery to 
the benefit of all market participants, and, as a result, currently 
assesses a lower rate to Firms in various places under the Fees 
Schedule, including for transactions in SPX/SPXW.\20\
---------------------------------------------------------------------------

    \20\ See e.g., Cboe Options Fees Schedule, ``Rate Table--
Underlying Symbol List A'', which generally assesses lower rates for 
Firm transactions in SPX/SPXW ($0.26 per contract) than for Market-
Makers ($0.28) or Non-Customers ($0.42) in SPX/SPXW.
---------------------------------------------------------------------------

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 the proposed SPX AIM Hybrid 
Surcharges (including the Originator Surcharge) will impose any burden 
on intramarket competition because they will apply equally to all 
similarly situated TPHs that submit orders in SPX/SPXW into AIM. That 
is, the proposed fees will apply equally to all Non-Customer and 
Market-Maker orders in SPX/SPXW submitted to AIM, to all Firm orders in 
SPX/SPXW submitted to AIM, and to all executing TPHs that submit AIM 
Agency/Primary orders in SPX/SPXW. The Exchange does not believe that 
providing lower SPX AIM Hybrid rates for Firms will impose any 
significant burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
Exchange recognizes that Firm participation in the markets is essential 
to a robust hybrid market ecosystem as Firms facilitate the execution 
of customer orders, as well as provide clearing services, both in open 
outcry and electronically. As a result, the Exchange currently assesses 
a lower rate to Firms in various places under the Fees Schedule, 
including for transactions in SPX/SPXW.\21\ The Exchange believes that 
Firms can be an important source of liquidity when they facilitate 
their own customers' trading activity, which enhances transparency and 
price discovery to the benefit of all market participants. The Exchange 
again notes that the proposed SPX AIM

[[Page 13601]]

Hybrid Surcharge comparable to or less than rates currently assessed 
for certain AIM orders submitted in all products (with certain 
exceptions) and the proposed SPX AIM Hybrid Originator Surcharge is 
equivalent to the existing AIM Agency/Primary Surcharge which likewise 
applies to AIM Agency/Primary orders in SPX/SPXW (when the Exchange is 
operating in an screen-based only environment).
---------------------------------------------------------------------------

    \21\ See id.
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change in 
connection with SPX AIM Hybrid Surcharges will impose any burden on 
intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the propose surcharges 
apply only to an Exchange proprietary product, which is traded 
exclusively on Cboe Options, and for orders executed in an auction on 
the Exchange.

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 \22\ and paragraph (f) of Rule 19b-4 \23\ 
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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 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-2021-012 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-2021-012. 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-2021-012 and should be submitted on 
or before March 30, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04791 Filed 3-8-21; 8:45 am]
BILLING CODE 8011-01-P