Document ID: SEC-2020-1621-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-10-14T04:00Z

[Federal Register Volume 85, Number 199 (Wednesday, October 14, 2020)]
[Notices]
[Pages 65099-65100]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22629]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90103; File No. SR-CBOE-2020-089]

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

October 7, 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 September 30, 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 with respect to its strategy fee cap. 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 
its strategy order fee cap, effective September 30, 2020.
    Effective September 1, 2020, the Exchange amended Footnote 13 to 
provide 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.\3\ Essentially, that rule change removed three previous 
strategy fee cap amounts, and, instead, adopted a $0.00 cap for 
strategies executed in open outcry in all classes (i.e., all strategies 
transacted on the trading floor will be free). The Exchange proposes to 
explicitly clarify in Footnote 13 that in order for a strategy 
transaction to be eligible for the fee cap (i.e., not be assessed 
transaction fees), TPHs must mark such strategy orders with a code 
approved by the Exchange identifying the orders as eligible for the fee 
cap.\4\ The Exchange also proposes to provide that strategy orders 
executed during September 2020 will be eligible for the fee cap 
notwithstanding not being marked, provided that a TPH submits a rebate 
request with supporting documentation for such orders to the Exchange 
within 3 business days of September 30, 2020 (i.e., October 5, 2020).
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 89831 (September 11, 
2020) 85 FR 58096 (September 17, 2020) (SR-CBOE-2020-084).
    \4\ The Exchange notes that its billing system is unable to 
recognize that an order is a strategy order absent such order being 
explicitly marked as a strategy order.
---------------------------------------------------------------------------

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 making it clear and explicit in its fees 
schedule that TPHs must mark strategy orders with a code approved by 
the Exchange in order to receive the fee cap is reasonable as it 
reduces the risk of orders not receiving the current fee cap that would 
otherwise be entitled to it by ensuring TPHs are aware of the marking 
requirement. Additionally, the clarification provides transparency in 
the fees schedule and alleviates potential confusion, thereby removing 
impediments to and perfecting the mechanism of a free and open market 
and a national market system and protecting investors and the public 
interest. The Exchange also believes the marking requirement is 
equitable and not unfairly discriminatory as it applies uniformly to 
all TPHs.
    The Exchange also believes it's reasonable to provide TPHs the 
option of submitting a written rebate request to qualify strategy 
orders executed in September 2020 for the fee cap as it provides TPHs 
who did not know to mark their orders an opportunity to receive the fee 
cap for strategies that would otherwise qualify. Particularly, the 
Exchange notes it operates in highly competitive market. To respond to 
this competitive marketplace, the Exchange adopted a fee cap of $0.00 
for all strategy orders, effective September 1, 2020, which was 
designed to incentivize Trading Permit Holders to increase their 
strategy orders submitted to and executed on the Exchange's trading 
floor, which can benefit all markets

[[Page 65100]]

participants. The Exchange believes that as a result of that change, 
TPHs did in fact send more strategy orders to the Exchange. However, 
due to the Exchange's inadvertent omission to explicitly state in the 
fees schedule that such orders must be marked to qualify for the fee 
cap, some TPHs were not aware of the requirement and did not mark their 
orders as strategy orders at the time of entry. As such, absent the 
proposed rule change, such orders submitted this month would not be 
eligible to receive the fee cap, notwithstanding the fact that such 
orders were strategy orders that otherwise could have qualified. The 
Exchange lastly believes allowing TPHs to submit documentation in order 
to qualify for the strategy order is equitable and not unfairly 
discriminatory as it applies uniformly to all TPHs who submitted 
strategy orders this month.

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 competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the proposed change 
applies uniformly to all TPHs and still provides for TPHs an 
opportunity to receive the above described fee cap. The Exchange 
believes that the proposed rule change will not cause an unnecessary 
burden on intermarket competition because it only applies to trading 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-2020-089 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-2020-089. 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-2020-089 and should be submitted on 
or before November 4, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

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

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22629 Filed 10-13-20; 8:45 am]
BILLING CODE 8011-01-P