Document ID: SEC-2019-0064-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-02-05T05:00Z

[Federal Register Volume 84, Number 24 (Tuesday, February 5, 2019)]
[Notices]
[Pages 1810-1812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01179]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85018; File No. SR-CBOE-2018-075]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
its Fees Schedule With Respect to the SPX Select Market-Maker Program

January 31, 2019.
    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 19, 2018, 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 with respect to the SPX Select Market-Maker 
Program. 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

[[Page 1811]]

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 is proposing to amend the SPX Select Market-Maker 
(``SMM'') Program, effective December 31, 2018. By way of background, 
the Exchange recently established a financial incentive program for SPX 
SMMs, which provides that any appointed SPX SMM will receive a monthly 
waiver of the cost of one Market-Maker Trading Permit and one SPX Tier 
Appointment provided that the SMM satisfies a heightened quoting 
standard for that month, which standard is set forth in Footnote 49 of 
the Fees Schedule. Footnote 49 currently provides that an SMM will 
receive the monthly Trading Permit and SPX Tier Appointment waiver if 
it (1) provides continuous electronic quotes in 95% of all SPX series 
90% of the time in a given month, (2) submits opening quotes that are 
no wider than the Opening Exchange Prescribed Width (``OEPW'') within 
one minute of the initiation of an opening rotation in any series that 
is not open due to the lack of a qualifying quote, on all trading days, 
to ensure electronic quotes on the open that allow the series to open, 
(3) submit [sic] opening quotes that are no wider than the OEPW quote 
by 8:00 a.m. (CT) on volatility index derivative settlement days in the 
SPX series that expire in the month used to calculate the settlement 
value for expiring volatility index derivatives and (4) provides quotes 
for the end-of-month fair value closing rotation on a rotating 
basis.\3\
---------------------------------------------------------------------------

    \3\ The end-of-month fair value closing rotation is governed by 
Cboe Options Rule 6.2, Interpretation and Policy .06.
---------------------------------------------------------------------------

    The Exchange proposes to amend the criteria currently set forth in 
the fourth prong of the heightened quoting standard described above. 
Specifically, the Exchange proposes to no longer require that a 
designated SMM provide quotes for the end-of-month fair value closing 
rotation (``closing rotation'') on a rotating basis and instead require 
that within 30 minutes from the initiation of the end-of-month fair 
value closing rotation, the Exchange must disseminate end-of-month 
closing quotations pursuant to Cboe Options Rule 6.2(.06)(a) in order 
for the 4th prong to be satisfied. By way of background, Interpretation 
and Policy .06(a) of Rule 6.2 provides that on the last business day of 
each month, the Exchange will conduct special end-of-month non-trading 
rotations for each series of SPX options in order to determine the 
theoretical ``fair value'' of such series as [sic] of SPX as of the 
time of close of trading in the underlying cash market.\4\ The Exchange 
proposes to condition the SMM financial benefit on the closing rotation 
resulting in the dissemination of quotes pursuant to Cboe Options Rule 
6.2(.06)(a) as the Exchange believes the proposed change will encourage 
all SMMs to provide end-of-month non-trading settlement pricing 
quotations in SPX and SPXW as it would be in the interest of the SMMs 
to each participate in order to ensure that the Exchange is ultimately 
able to disseminate the fair value quotes, thereby satisfying the 
fourth prong. The Exchange also believes the proposed amendment to the 
fourth prong is commensurate with the financial benefit the Exchange 
offers through the SMM program.
---------------------------------------------------------------------------

    \4\ See Cboe Options Rule 6.2, Interpretation and Policy 
.06.(a).
---------------------------------------------------------------------------

    The Exchange lastly proposes to make non-substantive clean up 
changes to correct two typographical errors. First, the Exchange notes 
that the word ``to'' is missing from the second prong of Footnote 49 
and as such, proposes to add ``to'' in the second prong. Second, the 
Exchange proposes to add an ``s'' to the end of ``submit'' in the third 
prong so that the language in each prong is grammatically consistent.
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.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ 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,\7\ 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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes amending the fourth prong in Footnote 49 is 
reasonable as it does not change the financial benefit offered. 
Additionally, the Exchange believes the proposed amendment is 
reasonable, equitable and not unfairly discriminatory because it 
applies to all SMMs uniformly and because if the fourth prong, as 
amended, is not met, the SMMs merely will not receive the offered 
financial benefit. The Exchange also believes the requirement under the 
amended fourth prong is commensurate with the financial benefit 
offered. Additionally, the Exchange notes that its closing rotation is 
designed to foster consistency in the S&P 500 Index-related markets by 
aligning the price of SPX options and S&P 500 futures prices. The 
Exchange believes that its proposed rule change removes impediments to 
and perfects the mechanism of a free and open national market system as 
it continues to allow traders and investors to realize consistency 
across the different S&P 500 Index-related markets at the end of each 
month. Particularly, as noted above, the proposed amendment is designed 
to encourage all SMMs to provide end-of-month non-trading settlement 
pricing quotations in SPX and SPXW, which would increase the 
probability that the Exchange would be able to disseminate fair value 
quotes pursuant to Rule 6.2(.06)(a).
    The Exchange believes the proposal to fix two typographical errors 
makes the fees schedule easier to read and reduces potential confusion, 
thereby removing impediments to and perfecting the mechanism of a free 
and open market and a national market system, and, in general, 
protecting investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange 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 it applies uniformly to 
all SPX

[[Page 1812]]

SMMs. 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 SPX 
options are proprietary products that will only be traded on Cboe 
Options. To the extent that the proposed changes make Cboe Options a 
more attractive marketplace for market participants at other exchanges, 
such market participants are welcome to become Cboe Options market 
participants.

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 \8\ and paragraph (f) of Rule 19b-4 \9\ 
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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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-2018-075 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-2018-075. 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-2018-075, and should be submitted 
on or before February 20, 2019.
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01179 Filed 2-4-19; 8:45 am]
 BILLING CODE 8011-01-P