Document ID: SEC-2018-1613-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2018-10-17T04:00Z

[Federal Register Volume 83, Number 201 (Wednesday, October 17, 2018)]
[Notices]
[Pages 52591-52593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22533]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84401; File No. SR-CboeBZX-2018-075]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees on Cboe BZX Exchange, Inc.

October 11, 2018.
    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 1, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to add certain fees related to the 
listing and trading of options that overlie the Russell 2000 Index 
(``RUT options'').
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On September 27, 2018, the Exchange's equity options platform 
(``BZX Options'') received approval from the Commission to list and 
trade RUT options.\5\ The Exchange intends to begin listing RUT options 
for trading on October 1, 2018. Accordingly, the Exchange proposes to 
amend its Fees Schedule for BZX Options to add: (i) An Index License 
Surcharge Fee to all Non-Customer transactions in RUT options; (ii) Fee 
codes for RUT options that add or remove liquidity on the Exchange; and 
(iii) Fee codes for RUT options that are routed away from the Exchange, 
effective October 1, 2018.
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    \5\ See Securities Exchange Act Release No. 84298 (September 27, 
2018) (SR-CboeBZX-2018-058).

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[[Page 52592]]

RUT Surcharge Fee
    The Exchange proposes to add an Index License Surcharge Fee of 
$0.45 per contract to all Non-Customer transactions (i.e., Market Maker 
and Away Market Maker, Firm, Broker Dealer, Joint Back Office, and 
Professional transactions) in RUT options. The proposed RUT Surcharge 
Fee will be assessed on all non-Customer orders that contain one of the 
proposed Fee codes described below (BM, BN, BO, GM, GN, and GO).
Fee Codes for RUT Options--Add or Remove Liquidity
    Proposed Fee code BC will be appended to all Customer orders in RUT 
options that add or remove liquidity, and result in a standard fee of 
$0.15 per contract. Proposed Fee code BM will be appended to all Market 
Maker orders in RUT options that add or remove liquidity, and result in 
a standard fee of $0.35 per contract. Proposed Fee code BN will be 
appended to all Non-Customer and Non-Market Maker orders in RUT options 
that add or remove liquidity, and result in a standard fee of $0.55 per 
contract. Proposed Fee code BO will be appended to all orders in RUT 
options that trade on the open, and will be free. Proposed Footnote 14 
attaches to each of the proposed non-Customer Fee codes to the 
Surcharge Fee described above.
Fee Codes for RUT Options--Routed Away
    Proposed Fee code GC will be appended to all Customer orders in RUT 
options that are routed away from the Exchange and executed at another 
exchange, and result in a standard fee of $0.85 per contract. Proposed 
Fee code GM will be appended to all Market Maker orders in RUT options 
that are routed away from the Exchange and executed at another 
exchange, and result in a standard fee of $1.05 per contract. Proposed 
Fee code GN will be appended to all Non-Customer and Non-Market Maker 
orders in RUT options that are routed away from the Exchange and 
executed at another exchange, and result in a standard fee of $1.25 per 
contract. Proposed Fee code GO will be appended to all orders in RUT 
options that route to another exchange at the open, and will be free. 
Proposed Footnote 14 attaches each of these proposed Fee codes to the 
Surcharge Fee described above.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the Section 6 of the Act,\6\ in general, and Section 6(b)(4),\7\ 
in particular, as it is designed to provide for the equitable 
allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
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    First, the Exchange believes implementing the RUT Surcharge Fee is 
equitable and not unfairly discriminatory because the amount will be 
assessed to all orders of non-Customer market participants to whom the 
RUT Surcharge Fee applies. Not applying the RUT Surcharge Fee to 
Customer orders is equitable and not unfairly discriminatory because 
this is designed to attract Customer RUT orders, which increases 
liquidity and provides greater trading opportunities to all market 
participants.
    Next, the Exchange believes it is reasonable to charge different 
fee amounts to different user types in the manner proposed because the 
proposed fees are consistent with the price differentiation that exists 
today at other options exchanges (for example, the proposed fees are 
comparable with fees for other index option products traded on other 
exchanges, including RUT).\8\ Additionally, the Exchange believes the 
proposed fee amounts for RUT orders are reasonable because the proposed 
fee amounts are within the range of standard transaction fee amounts 
charged for RUT at other options exchanges (i.e., Cboe Options and C2 
Options).\9\
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    \8\ See, e.g., C2 Fees Schedule, Fee Codes and Associated Fees.
    \9\ See e.g., C2 Fees Schedule, Fee Codes and Associated Fees, 
which shows that standard transaction fees for RUT orders range from 
$0.15 per contract to $0.55 per contract.
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    The Exchange also believes that it is equitable and not unfairly 
discriminatory to assess lower fees to Customers as compared to other 
market participants because Customer order flow enhances liquidity on 
the Exchange for the benefit of all market participants. Specifically, 
Customer liquidity benefits all market participants by providing more 
trading opportunities, which attracts Market Makers. An increase in the 
activity of these market participants in turn facilitates tighter 
spreads, which may cause an additional corresponding increase in order 
flow from other market participants. Moreover, the options industry has 
a long history of providing preferential pricing to Customers, and the 
Exchange's current Fees Schedule currently does so in many places, as 
do the fees structures of many other exchanges. The Exchange notes that 
all fee amounts listed as applying to Customers will be applied equally 
to all Customers (meaning that all Customers will be assessed the same 
amount).
    Additionally, the Exchange believes that it is equitable and not 
unfairly discriminatory to assess lower fees to Market Makers as 
compared to other market participants other than Customers because 
Market Makers, unlike other market participants, take on a number of 
obligations, including quoting obligations, that other market 
participants do not have. Further, these lower fees offered to Market 
Makers are intended to incent Market Makers to quote and trade more on 
BZX Options, thereby providing more trading opportunities for all 
market participants. The Exchange notes that all fee amounts listed as 
applying to Market Makers will be applied equally to all Market Makers 
(meaning that all Market Makers will be assessed the same amount). 
Similarly, the Exchange notes that the RUT fee amounts for each 
separate type of other market participant will be assessed equally to 
all such market participants (i.e. all Broker-Dealer orders will be 
assessed the same amount, all Joint Back-Office orders will be assessed 
the same amount, etc.).
    Finally, the Exchange believes its proposed fees for RUT orders 
that are routed away from the Exchange are reasonable taking into 
account routing costs and also notes that the proposed fees are in line 
with amounts assessed by other exchanges.\10\ For the reasons described 
above, the Exchange also believes that it is equitable and not unfairly 
discriminatory to assess lower routing fees to Customers and Market 
Makers as compared to other market participants. The Exchange notes 
that routing through the Exchange is voluntary and market participants 
can readily direct order flow to another exchange if they deem Exchange 
fee levels to be excessive.
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    \10\ See, e.g., C2 Fees Schedule, Linkage Routing Fees.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendments to its Fees Schedule 
would not impose any burden on 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 because the RUT fee amounts for 
each separate type of market participant will be assessed equally to 
all such market

[[Page 52593]]

participants. While different fees are assessed to different market 
participants in some circumstances, these different market participants 
have different obligations and different circumstances as discussed 
above. For example, Market Makers have quoting obligations that other 
market participants do not have. Further, the proposed fees structure 
for RUT is intended to encourage more trading of RUT, which brings 
liquidity to the Exchange and benefits all market participants.
    The Exchange also 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 RUT fees are in line with amounts assessed by other exchanges.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \11\ and paragraph (f) of Rule 19b-4 
thereunder.\12\ 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-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-CboeBZX-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-CboeBZX-2018-075, and should be 
submitted on or before November 7, 2018.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22533 Filed 10-16-18; 8:45 am]
 BILLING CODE 8011-01-P