Document ID: SEC-2021-1162-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-08-30T04:00Z

[Federal Register Volume 86, Number 165 (Monday, August 30, 2021)]
[Notices]
[Pages 48457-48459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18554]

[[Page 48457]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92739; File No. SR-CBOE-2021-048]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Fees Schedule Regarding Executions in the Cboe Compression Service

August 24, 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 August 12, 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 
and II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 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 in connection with 
executions of S&P 500 Index options (``SPX'') in the Cboe Compression 
Service (``CCS'') and to make a clarifying change regarding Position 
Compression Cross (``PCC'') orders, effective August 12, 2021.
    Specifically, the Exchange recently adopted the CCS for SPX 
(including SPX Weeklys (``SPXW'')),\3\ which it intends to launch on 
August 12, 2021. CCS is an additional, voluntary compression tool that 
Trading Permit Holders (``TPHs'') can use to close SPX positions to 
reduce regulatory capital attributable to their SPX holdings. To 
participate, a TPH must submit a ``position list'' prior to an 
Exchange-specified time after the close of trading on the specified day 
that details all of the open SPX positions it would like to close out. 
If all TPHs that submit position lists on that day agree to the 
compression proposal provided by the Exchange, the Exchange then runs 
an automated process to match offsetting positions in an anonymized 
manner and then effects the transactions at specified compression 
prices \4\ off the exchange.\5\
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    \3\ See Securities Exchange Release No. 92354 (July 8, 2021), 86 
FR 37197 (July 14, 2021) (SR-CBOE-2021-020) (Notice of Filing of 
Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Rule 
6.10 To Introduce a Voluntary Multilateral Compression Service for 
SPX Options).
    \4\ The ``compression price'' is generally the price of the 
option as close as possible to the midpoint of the NBBO at the close 
of the trading day or the daily marking time, subject to adjustment 
using generally accepted volatility and options pricing models in 
the event of wide markets, market volatility, or other unusual 
circumstances.
    \5\ The Exchange notifies the TPH participants of each TPH's 
individual compression proposal, and each TPH with at least one 
offsetting position must notify the Exchange whether it accepts its 
individual proposal in order to proceed with the CCS transactions.
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    The Exchange now proposes to amend its Fees Schedule in connection 
with the planned implementation of CCS for SPX/SPXW. Particularly, the 
Exchange proposes to waive all transaction fees and applicable 
surcharges incurred as a result of CCS transactions in SPX/SPXW.
    First, the proposed rule change amends footnote 41 so that 
transaction fees and applicable surcharges are waived for CCS 
transactions, as they currently are for Position Compression Cross 
(``PCC'') transactions, which TPHs may also use to compress their 
positions in SPX/SPXW. Specifically, the proposed rule change amends 
footnote 41 to provide that the Exchange shall waive transaction fees, 
including the Index License Surcharge and SPX/SPXW Execution Surcharge, 
for (i) PCC transactions executed electronically or in open outcry, as 
applicable, and (ii) CCS transactions, and that PCC and CCS 
transactions will not count towards any volume thresholds. The Exchange 
notes that Footnote 41 is currently appended to: (1) SPX/SPXW and SPESG 
Liquidity Provider Sliding Scale; (2) Clearing Trading Permit Holder 
Proprietary Products Sliding Scale; (3) Select Customer Options 
Reduction (``SCORe'') Program; (4) SPX/SPXW Market-Maker Tier 
Appointment Fees; (5) Floor Broker Trading Surcharge; (6) Floor Broker 
ADV Discount; (7) Floor Brokerage Fees Discount Scale; and (8) Frequent 
Trader Program; \6\ therefore, CCS transactions, like PCC transactions, 
will not count towards any volume thresholds for these programs. The 
proposed rule change also appends footnote 41 to the line item for SPX 
(incl SPXW) and SPESG that corresponds to Joint Back-Office (``JBO''), 
Non-TPH Market-Maker and Professional transaction fees to make it clear 
that all SPX/SPXW-related transaction fees and applicable surcharges 
for PCC transactions and CCS transactions, as proposed, are waived. 
Next, the proposed rule change amends footnote 17 of the Fees Schedule 
to explicitly exclude CCS transactions from the FLEX Surcharge Fee.\7\ 
Finally, the proposed rule change amends footnote 21 of the Fees 
Schedule to explicitly exclude PCC orders and CCS transactions from the 
SPX, SPXW and SPESG Execution Surcharge. The Exchange notes that the 
SPX, SPXW and SPESG Surcharge does not currently apply to PCC 
transactions, as provided in footnote 41; the proposed rule change 
merely adds PCC to footnote 21 to provide additional clarity in the 
Fees Schedule.
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    \6\ The Exchange notes that footnote 41 is also appended to the 
Floor Broker Sliding Scale Rebate Program; however, this program is 
not applicable generally to orders in SPX/SPXW.
    \7\ The Exchange notes that PCC for FLEX is not currently 
supported, therefore this surcharge is not currently applicable to 
PCC orders.
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    The Exchange wishes to waive transaction fees and surcharges for 
CCS transactions to encourage TPHs to use the service. The Exchange 
believes compression of SPX positions using the CCS would improve 
market liquidity by freeing TPHs' capital currently covering nearly 
worthless positions and allow them to put that capital back into the 
markets to facilitate execution of customer orders. As CCS transactions

[[Page 48458]]

will not incur any fees or surcharges, the Exchange does not believe 
that CCS volume should be counted towards volume thresholds for the 
applicable incentive programs. The Exchange again notes this is in line 
with the manner in which PCC orders, which is another compression tool 
available to TPHs, are currently treated pursuant to the Fees Schedule.
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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ 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,\10\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its Trading Permit Holders and other persons using 
its facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed rule change to waive SPX/SPXW 
transaction fees, including the SPX, SPXW and SPESG Execution 
Surcharge, and applicable SPX/SPXW surcharges, including the FLEX 
Surcharge Fee, for CCS transactions is reasonable because market 
participants will not be subject to transaction fees or surcharges for 
these executions. As such, the proposed waivers are reasonably designed 
to incentivize TPHs to submit compression lists to the Exchange and 
compress positions, which the Exchange believes would improve market 
liquidity by freeing TPHs' capital currently covering nearly worthless 
positions and allow them to put that capital back into the markets to 
facilitate execution of customer orders. The Exchange believes the 
proposed rule change to not count CCS volume towards volume thresholds 
for any applicable incentive program is reasonable, as such 
transactions will not incur any fees or surcharges for such volume. The 
Exchange also notes that it is reasonable to exclude such volume from 
the volume thresholds for the SPX/SPXW Market-Maker Tier Appointment 
Fee and SPX/SPXW Floor Broker Trading Surcharge because, like for PCC 
transactions, the Exchange does not want to discourage such compression 
transactions. The Exchange also believes that the proposed rule change 
is reasonable as the Exchange already waives SPX/SPXW transaction fees 
and applicable surcharges for PCC orders, which is another compression 
tool available to TPHs, and also excludes PCC volume from the same 
incentive programs.
    The Exchange believes that the proposed fee/surcharge waivers and 
exclusion from incentive program volume calculations for CCS 
transactions are equitable and not unfairly discriminatory because they 
apply uniformly to all market participants who choose to use CCS to 
compress their SPX/SPXW positions, in the same manner in which fee/
surcharge waivers and exclusions from incentive program volume 
calculations for PCC orders are applied uniformly to all market 
participants that submit PCC orders today.

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 the proposed changes 
apply equally to all similarly situated market participants, i.e., all 
market participants who choose to use CCS to compress their SPX/SPXW 
positions. 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 the 
proposed rule change applies only to an Exchange proprietary product, 
which is traded exclusively on Cboe Options. The Exchange believes the 
proposed rule change will promote competition, as it may incentivize 
TPHs to use the CCS to compress SPX positions, which the Exchange 
believes would improve market liquidity by freeing TPHs' capital 
currently covering nearly worthless positions and allow them to put 
that capital back into the markets to facilitate execution of customer 
orders.

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)(ii) of the Act \11\ and Rule 19b-4(f)(2) \12\ 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: (i) Necessary or 
appropriate in the public interest; (ii) for the protection of 
investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission will institute 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2021-048 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-2021-048. 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

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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-2021-048 and should be submitted on 
or before September 20, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18554 Filed 8-27-21; 8:45 am]
BILLING CODE 8011-01-P