Document ID: SEC-2023-0923-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2023-08-25T04:00Z

[Federal Register Volume 88, Number 164 (Friday, August 25, 2023)]
[Notices]
[Pages 58336-58341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18308]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98187; File No. SR-CBOE-2023-040]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule Relating to the Select Customer Options Reduction 
Program, Livevol Fees, and Routing Fee Codes

August 21, 2023.
    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 11, 2023, 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.
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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.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
August 1, 2023 (SR-CBOE-2023-037). On August 2, 2023, the Exchange 
withdrew that filing and submitted SR-CBOE-2023-039. On August 11, 
2023 the Exchange withdrew SR-CBOE-2023-039 and submitted this 
proposal.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 16% of the market share.\4\ 
Thus, in such a low-concentrated and highly competitive market, no 
single options exchange possesses significant pricing power in the 
execution of option order flow. The Exchange believes that the ever-
shifting market share among the exchanges from month to month 
demonstrates that market participants can shift order flow or 
discontinue to reduce use of certain categories of products in response 
to fee changes. Accordingly, competitive forces constrain the 
Exchange's transaction fees, and market participants can readily trade 
on competing venues if they deem pricing levels at those other venues 
to be more favorable. In response to competitive pricing, the Exchange, 
like other options exchanges, offers rebates and assesses fees for 
certain order types executed on or routed through the Exchange.
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    \4\ See Cboe Global Markets U.S. Options Monthly Market Volume 
Summary (July 26, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
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Select Customer Options Reduction Program Changes
    The Exchange first proposes to amend the Select Customer Options 
Reduction program (``SCORe''). By way of background, SCORe is a 
discount program for Retail, Non-FLEX Customer (``C'' origin code) 
volume in the following options classes: SPX (including SPXW), VIX, 
RUT, MXEA, & MXEF (``Qualifying Classes''). The SCORe program is 
available to any Trading Permit Holder (``TPH'') Originating Clearing 
Firm or non-TPH Originating Clearing Firm that sign up for the 
program.\5\
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    \5\ For this program, an ``Originating Clearing Firm'' is 
defined as either (a) the executing clearing Options Clearing 
Corporation (``OCC'') number on any transaction which does not also 
include a Clearing Member Trading Agreement (``CMTA'') OCC clearing 
number or (b) the CMTA in the case of any transaction which does 
include a CMTA OCC clearing number.
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    Under the program, to determine the Discount Tier, an Originating 
Firm's Retail volume in the Qualifying Classes will be divided by total 
Retail volume in the Qualifying Classes executed on the Exchange. The 
program then provides a discount per retail contract, based on the 
determined Discount Tier thereunder. The program sets forth four 
discount tiers, with applicable discounts ranging from $0.00 to $0.14 
per retail contract. Under the current program, and as set forth in 
Footnote 48 to the Fees Schedule, ``Retail'' volume is defined as 
Customer order (``C'' capacity code) for which the original order size 
(in the case of a simple order) or largest leg size (in the case of a 
complex order) is 100 contracts or less. The Exchange proposes amending 
Footnote 48 to the Fees Schedule, to define ``Retail'' volume as 
Customer order (``C'' capacity code) for which the original order size 
(in the case of a simple order) or the largest leg size (in the case of 
a complex order) is 20 contracts or less.
    Additionally, the Exchange proposes to remove outdated language 
from Footnote 48 related to the SCORe program. Effective February 1, 
2023, the Exchange amended the program by eliminating the Qualifying 
Tiers construct.\6\ As amended, SCORe utilizes only one measure for 
participation and discount (i.e., the Discount Tiers). As such, the 
Exchange proposes to remove the outdated language related to the

[[Page 58337]]

determination of an Originating Firm's Qualifying Tier.
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    \6\ See Securities Exchange Act Release No. 96856 (February 9, 
2023), 88 FR 9938 (February 15, 2023) (SR-CBOE-2023-011).
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Livevol Fee Changes
    The Exchange proposes to amend certain fees related to its 
provision of Open-Close Data. By way of background, the Exchange 
currently offers End-of-Day (``EOD'') and Intraday Open-Close Data 
(collectively, ``Open-Close Data''). EOD Open-Close Data is an end-of-
day volume summary of trading activity on the Exchange at the option 
level by origin (customer, professional customer, broker-dealer, and 
market maker), side of the market (buy or sell), price, and transaction 
type (opening or closing). The customer and professional customer 
volume is further broken down into trade size buckets (less than 100 
contracts, 100-199 contracts, greater than 199 contracts). The Open-
Close Data is proprietary Cboe Options trade data and does not include 
trade data from any other exchange. It is also a historical data 
product and not a real-time data feed.
    The Exchange also offers Intraday Open-Close Data, which provides 
similar information to that of Open-Close Data but is produced and 
updated every 10 minutes during the trading day. Data is captured in 
``snapshots'' taken every 10 minutes throughout the trading day and is 
available to subscribers within five minutes of the conclusion of each 
10-minute period.\7\ The Intraday Open-Close Data provides a volume 
summary of trading activity on the Exchange at the option level by 
origin (customer, professional customer, broker-dealer, and market 
maker), side of the market (buy or sell), and transaction type (opening 
or closing). The customer and professional customer volume are further 
broken down into trade size buckets (less than 100 contracts, 100-199 
contracts, greater than 199 contracts). The Intraday Open-Close Data is 
also proprietary Cboe Options trade data and does not include trade 
data from any other exchange.
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    \7\ For example, subscribers to the intraday product will 
receive the first calculation of intraday data by approximately 9:42 
a.m. ET, which represents data captured from 9:30 a.m. to 9:40 a.m. 
Subscribers will receive the next update at 9:52 a.m., representing 
the data previously provided together with data captured from 9:40 
a.m. through 9:50 a.m., and so forth. Each update will represent the 
aggregate data captured from the current ``snapshot'' and all 
previous ``snapshots.''
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    Cboe LiveVol, LLC (``LiveVol''), a wholly owned subsidiary of the 
Exchange's parent company, Cboe Global Markets, Inc., makes the Open-
Close Data available for purchase to TPHs and non-TPHs on the LiveVol 
DataShop website (datashop.cboe.com). Customers may currently purchase 
Open-Close Data on a subscription basis (monthly or annually) or by ad 
hoc request for a specified month (e.g., request for Intraday Open-
Close Data for month of August 2023).
    Open-Close Data is subject to direct competition from similar end-
of-day and intraday options trading summaries offered by several other 
options exchanges.\8\ All of these exchanges offer essentially the same 
end-of-day and intraday options trading summary information.
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    \8\ These substitute products are: Nasdaq PHLX Options Trade 
Outline, Nasdaq Options Trade Outline, ISE Trade Profile, GEMX Trade 
Profile data; open-close data from C2, BZX, and EDGX; and Open Close 
Reports from MIAX Options, Pearl, and Emerald.
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End-of-Day Open-Close Data
    Currently, End-of-Day Open-Close Data is available to purchase and 
download in three formats. Customers may (1) download data on a per 
Cboe Security basis, (2) download data for all Cboe Securities 
(equities, indexes and ETFs), and/or (3) download daily updates for all 
Cboe Securities (equities, indexes and ETFs). Cboe is proposing to 
eliminate the End-of-Day Open-Close Data offering to download data on a 
per Cboe Security basis. The End-of-Day Open-Close Data offerings will 
remain available on an all Cboe Securities basis.
    The Exchange notes that removing the offering to download data on a 
per Cboe Security basis and offering such data for all Cboe Securities 
only is consistent with the offering of Open-Close Data at the 
Exchange's affiliates,\9\ as well as another exchange with a similar 
data product.\10\ The Exchange further notes that the purchase of Open-
Close historical data is discretionary and not compulsory.
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    \9\ See e.g., Cboe EDGX U.S. Options Exchange Fee Schedule, Cboe 
LiveVol, LLC Market Data Fees.
    \10\ See Nasdaq ISE, Options 7 Pricing Schedule, Section 10A., 
Nasdaq ISE Open/Close Trade Profile End of Day.
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    The Exchange also proposes a technical amendment to its Livevol 
fees, correcting a spelling error of ``Intrday'' to ``Intraday.''
Options Institute Research Grant Program 2023
    Through its educational division, the Options Institute, the 
Exchange has established the Options Institute Research Grant Program 
2023 (``Grant Program''). Under the Grant Program, selected grant 
recipients will conduct a research project in an eligible topic(s), 
including Derivatives Products and Performance, Market Performance, 
Operations and Risk Management, and Decision Theory. The Exchange seeks 
to provide historical data sets to selected grant recipients for use as 
part of the research project. As such, the Exchange proposes to amend 
its Fee Schedule to add Footnote 51, applicable to the Livevol Fees 
table of the Fee Schedule, stating that fees for Open-Close Data will 
be waived for grant recipients of the Grant Program.
    In order to qualify for the Grant Program, an applicant must be a 
faculty member or student of a qualifying, accredited educational 
institution that will use the data solely for their completion of the 
research project (i.e., academic use). The data must be used solely for 
the purposes of the research project, and any commercial or profit-
seeking usage is excluded. Researchers interested in qualifying for the 
Grant Program are required to submit an application, which describes 
the proposed research project. The Options Institute has the discretion 
to review such applications and select grant recipients.
    The Exchange believes that researchers at academic institutions 
provide a valuable service for the Exchange in studying and promoting 
the options market. Though academic institutions and researchers have a 
need for granular options data sets, they do not trade upon the data 
for which they subscribe. The Exchange believes the waiver of these 
Open-Close Data fees for any grant recipient under the Grant Program 
will encourage and promote research directed at increasing 
understanding and advancement of derivatives usage and financial 
exchange marketplace structures.
    The Exchange notes other exchanges offer academic discounts or 
credit for similar data feeds.\11\ The Exchange recognizes the high 
value of academic research and educational instruction and 
publications, and believes that the proposed waiver of historical Open-
Close Data fees will encourage academic research of the options 
industry, which will serve to benefit all market

[[Page 58338]]

participants while also opening up a new potential user base among 
students.
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    \11\ See e.g., Nasdaq ISE, Options 7 Pricing Schedule, Section 
10A., Market Data. See also Securities Exchange Act Release No. 
67955 (October 1, 2012) 77 FR 61037 (October 5, 2012) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Adopt 
Reduced Fees for Historical ISE Open/Close Trade Profile Intraday 
Market Data Offering) (SR-ISE-2012-76); Securities and Exchange Act 
Release 34-60654 (September 11, 2009) 74 FR 47848 (September 17, 
2009) (Notice of Filing of Proposed Rule Change Relating to 
Historical ISE Open/Close Trade Profile Fees) (SR-ISE-2009-64); 
Securities Exchange Act Release No. 53770 (May 8, 2006) 71 FR 27762 
(May 12, 2006) (Notice of Filing of Proposed Rule Change and 
Amendment No. 1 Thereto To Establish an Annual Administrative Fee 
for Market Data Distributors That Are Recipients of Nasdaq 
Proprietary Data Products) (SR-NASD-2006-030).
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Routing Fee Codes Changes
    Finally, the Exchange proposes to modify fees associated with 
certain routing fee codes. The Fees Schedule currently lists fee codes 
and their corresponding transaction fee for routed Customer orders to 
other options exchanges specifically in Exchange Traded Funds (``ETF'') 
and equity options, and for non-Customer orders routed in Penny and 
Non-Penny options classes.
    The Exchange notes that its current approach to routing fees is to 
set forth in a simple manner certain sub-categories of fees that 
approximate the cost of routing to other options exchanges based on the 
cost of transaction fees assessed by each venue as well as a flat $0.15 
assessment that covers costs to the Exchange for routing (i.e., 
clearing fees, connectivity and other infrastructure costs, membership 
fees, etc.) (collectively, ``Routing Costs''). The Exchange then 
monitors the fees charged as compared to the costs of its routing 
services and adjusts its routing fees and/or sub-categories to ensure 
that the Exchange's fees do indeed result in a rough approximation of 
overall Routing Costs, and are not significantly higher or lower in any 
area. The Exchange notes that other options exchanges currently assess 
routing fees in a similar manner as the Exchange's current approach to 
assessing approximate routing fees.\12\
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    \12\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c), 
``Fees for Customer Orders Routed to Another Options Exchange.''
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    The Exchange assesses fees in connection with orders routed away to 
various exchanges. Currently, under the Routing Fees table of the Fee 
Schedule, fee codes RD, RF, RI, TD, TE, TF, TG, TH, and TI are appended 
to certain Customer orders in ETF and Equity options, as follows:
     fee code RD is appended to Customer orders in ETF/Equity 
options routed to NYSE American (``AMEX''), BOX Options Exchange 
(``BOX''), Nasdaq BX Options (``BX''), Cboe EDGX Exchange, Inc. 
(``EDGX''), ISE Mercury, LLC (``MERC''), MIAX Options Exchange 
(``MIAX'') or Nasdaq PHLX LLC (``PHLX'') (excluding orders in SPY 
options), and assesses a charge of $0.25 per contract;
     fee code RF is appended to Customer orders in ETF/Equity, 
Penny options routed to NYSE Arca, Inc (``ARCA''), Cboe BZX Exchange, 
Inc. (``BZX''), Cboe C2 Exchange, Inc. (``C2''), Nasdaq ISE (``ISE''), 
ISE Gemini, LLC (``GMNI''), MIAX Emerald Exchange (``EMLD''), MIAX 
Pearl Exchange (``PERL''), Nasdaq Options Market LLC (``NOM''), or PHLX 
(for orders in SPY options only) and assesses a charge of $0.75 per 
contract;
     fee code RI is appended to Customer orders in ETF/Equity, 
Non-Penny options routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL or 
NOMX, and assesses a charge of $1.25 per contract.
     fee code TD is appended to Customer orders in ETF options 
originating on an Exchange-sponsored terminal for greater than or equal 
to 100 contracts routed to AMEX, BOX, BX, EDGX, MERC, MIAX, or PHLX, 
and assesses a charge of $0.18 per contract;
     fee code TE is appended to Customer orders in ETF/Equity 
options originating on an Exchange-sponsored terminal for less than 100 
contracts routed to AMEX, BOX, BX, EDGX, MERC, MIAX, PHLX, and assesses 
no charge per contract;
     fee code TF is appended to Customer orders in ETF, Penny 
options originating on an Exchange-sponsored terminal for greater than 
or equal to 100 contracts routed to ARCA, BZX, C2, ISE, GMNI, EMLD, 
PERL, or NOM, and assesses a charge of $0.18 per contract;
     fee code TG is appended to Customer orders in ETF, Non-
Penny options originating on an Exchange-sponsored terminal for greater 
than or equal to 100 contracts routed to ARCA, BZX, C2, ISE, GMNI, 
EMLD, PERL, or NOM, and assesses $0.18 per contract;
     fee code TH is appended to Customer orders in ETF/Equity, 
Penny options originating on an Exchange-sponsored terminal for less 
than 100 contracts routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL, or 
NOM, and assesses no charge per contract; and
     fee code TI is appended to Customer orders in ETF/Equity, 
Non-Penny options originating on an Exchange-sponsored terminal for 
less than 100 contracts routed to ARCA, BZX, C2, ISE, GMNI, EMLD, PERL, 
or NOM, and assesses no charge per contract.
    The Exchange proposes to amend fee codes RD, TD, and TE to exclude 
applicable Customer orders routed to ISE Mercury, LLC (MERC) and to 
amend fee codes RF, RI, TF, TG, TH, and TI to add applicable Customer 
orders routed to MERC. The Exchange further proposes to amend fee codes 
RF, RI, TF, TG, TH, and TI to add applicable Customer orders routed to 
MEMX LLC (``MEMX''), in anticipation of the launch of the new options 
exchange. The charges assessed per contract for each fee code remain 
the same under the proposed rule change.
    The proposed changes result in an assessment of fees that, 
following fee changes by an away options exchanges and in anticipation 
of the launch of another options exchange, is more in line with the 
Exchange's current approach to routing fees, that is, in a manner that 
approximates the cost of routing Customer orders to other away options 
exchanges, based on the general cost of transaction fees assessed by 
the sub-category of away options exchanges for such orders (as well as 
the Exchange's Routing Costs).\13\ The Exchange notes that routing 
through the Exchange is optional and that TPHs will continue to be able 
to choose where to route their Customer orders in ETF and equity 
options.
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    \13\ See Securities Exchange Act Release No. 97800 (June 26, 
2023), 88 FR 42409 (June 30, 2023) (SR-MRX-2023-11).
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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 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 the 
section 6(b)(5) \16\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with section 6(b)(4) of the Act,\17\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ Id.
    \17\ 15 U.S.C. 78f(b)(4).
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    First, the Exchange believes the proposal to amend the SCORe 
program

[[Page 58339]]

to define ``Retail'' volume as Customer order (``C'' capacity code) for 
which the original order size (in the case of a simple order) or the 
largest leg size (in the case of a complex order) is 20 contracts or 
less (changing from 100) is reasonable as Members are still eligible to 
receive discounts under the program, albeit at a smaller scale. 
Moreover, the Exchange is not required to maintain this program nor 
provide such discounts as are provided under the program. Further, the 
Exchange believes the program remains equitable and reasonable, as the 
proposed change to the number of contracts in the ``Retail'' definition 
does not substantively change the program, but rather adjusts a 
considered metric of the program. The Exchange believes the proposed 
change is also equitable and not unfairly discriminatory because it 
applies uniformly to any TPH Originating Clearing Firm or non-TPH 
Originating Firm who participates in the program. The Exchange believes 
SCORe, currently and as amended, continues to provide an incremental 
incentive for Originating Firms to strive for the highest tier level, 
which provides increasingly higher discounts. As such, the changes are 
designed to encourage increased Retail volume in the Qualifying 
Classes, which provides increased volume and greater trading 
opportunities for all market participants. Finally, the Exchange 
believes eliminating outdated language from Footnote 48 related to the 
SCORe program is reasonable as the Exchange no longer utilizes 
Qualifying Tiers under the program. The proposed deletions reduce 
potential confusion and maintain clarity in the Fees Schedule.
    The Exchange also believes the proposed changes to amend its End-
of-Day Open-Close Data offering to remove the offering to download data 
on a per Cboe Security basis and to offer such data on an all Cboe 
Securities basis only are reasonable. In adopting Regulation NMS, the 
Commission granted self-regulatory organizations (``SROs'') and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. It was believed that this authority would 
expand the amount of data available to consumers, and also spur 
innovation and competition for the provision of market data. The 
Exchange believes the proposed change will continue to broaden the 
availability of U.S. option market data to investors consistent with 
the principles of Regulation NMS. Open-Close Data is designed to help 
investors understand underlying market trends to improve the quality of 
investment decisions. Indeed, subscribers to the data will still be 
able to enhance their ability to analyze option trade and volume data 
and create and test trading models and analytical strategies. The 
Exchange believes Open-Close Data continues to provide a valuable tool 
that subscribers can use to gain comprehensive insight into the trading 
activity in a particular series, but also emphasizes such data is not 
necessary for trading and as noted above, is entirely optional. 
Moreover, several other exchanges offer a similar data product which 
offer the same type of data content through end-of-day or intraday 
reports.\18\
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    \18\ See supra note 8.
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    The Exchange also operates in a highly competitive environment. 
Indeed, there are currently 16 registered options exchanges that trade 
options. Based on publicly available information, no single options 
exchange has more than 16% of the market share.\19\ The Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Particularly, in Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \20\ Making similar data products available to 
market participants fosters competition in the marketplace, and 
constrains the ability of exchanges to charge supracompetitive fees. In 
the event that a market participant views one exchange's data product 
as more or less attractive than the competition they can and do switch 
between similar products. The Exchange notes the proposed change merely 
aligns the Exchange's offering of End-of-Day Open-Close Data with the 
data products of the Exchange's affiliates,\21\ as well as another 
exchange with a similar data product, in that such offerings do not 
include the ability to purchase the End-of-Day Open-Close Data on a per 
securities basis.\22\ The Exchange believes that the proposed changes 
to the Exchange's End-of-Day Open-Close Data offering are equitable and 
not unfairly discriminatory because the change to the offering applies 
to all current and potential subscribers of the product uniformly, in 
that no subscriber will be able to purchase the End-of-Day Open-Close 
Data on a per Cboe Securities basis. Further, End-of-Day the Open-Close 
Data will continue to be available for purchase to all subscribers on 
an all Cboe Securities basis.
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    \19\ See supra note 4
    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
    \21\ See supra note 9.
    \22\ See supra note 10.
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    The Exchange also believes that the waiver of Open-Close data fees 
for recipients of the Grant Program is reasonable because such data is 
utilized for a strict, limited purpose under the terms of the Grant 
Program and selected grant recipients are not able to monetize access 
to the data as they do not trade on the data set. The Exchange believes 
the waiver of fees for grant recipients will promote research and 
studies of the options industry to the benefit of all market 
participants. The Exchange believes that the proposed waiver is 
equitable and not unfairly discriminatory because it will apply equally 
to all selected grant recipients and in exchange, the Exchange will be 
granted certain usage rights with respect to the recipients' final 
research papers. Further, as noted above, other exchanges offer 
academic discounts or credit for similar data feeds.\23\
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    \23\ See supra note 11.
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    The Exchange also believes the proposed rule change to amend fee 
codes RD, RF, RI, TD, TE, TF, TG, TH, and TI to account for MERC's 
current assessment of fees for Customer orders and MEMX's expected 
assessment of fees for Customer orders is reasonable because it is 
reasonably designed to assess routing fees in line with the Exchange's 
current approach to routing fees. That is, the proposed rule change is 
intended to include Customer orders in ETF and equity options routed to 
MERC and MEMX in the most appropriate sub-category of fees that 
approximates the cost of routing to a group of away options exchanges 
based on the cost of transaction fees assessed by each venue as well as 
Routing Costs to the Exchange. As noted above, the Exchange operates in 
a highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or incentives to be insufficient. The 
Exchange notes that routing through the Exchange is optional and that 
TPHs will continue to be able to choose where to route their Customer 
orders in ETF and equity options in the same sub-category group of away 
exchanges as they currently may choose to route. The proposed rule

[[Page 58340]]

change reflects a competitive pricing structure designed to incentivize 
market participants to direct their order flow to the Exchange, which 
the Exchange believes would enhance market quality to the benefit of 
all Members. The Exchange further notes that other options exchanges 
currently approximate routing fees in a similar manner as the 
Exchange's current approach.\24\ The Exchange believes that the 
proposed rule change is equitable and not unfairly discriminatory 
because all Members' applicable Customer orders in ETF and equity 
options routed to MERC and MEMX will be automatically and uniformly 
assessed the applicable routing charges.
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    \24\ See supra note 12.
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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. The Exchange does not 
believe that the proposed changes to the SCORe program 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 to all registered Originating Firms uniformly, in that the 
updated definition of ``Retail'' volume will, for purposes of 
calculating discounts under the program, be applied to all Originating 
Firms.
    Further, the Exchange does not believe that the proposed changes to 
its offering of End-of-Day Open-Close Data will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. As noted above, the proposed 
amendments align the Exchange's offering of End-of-Day Open-Close Data 
with the data products of the Exchange's affiliates,\25\ as well as 
another exchange with a similar data product.\26\ The changes to the 
offering apply to all current and potential subscribers of the product 
uniformly, in that no subscriber will be able to purchase the End-of-
Day Open-Close Data on a per Cboe Securities basis. Further, End-of-Day 
the Open-Close Data will continue to be available for purchase to all 
subscribers on an all Cboe Securities basis.
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    \25\ See supra note 9.
    \26\ See supra note 10.
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    Additionally, the Exchange does not believe that the proposed 
waiver of Open-Close data fees for recipients of the Grant Program will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. All qualifying 
researchers are eligible to apply to the Grant Program, and the waiver 
of Open-Close data fees for recipients of the Grant Program will apply 
equally to all selected grant recipients. In exchange, the Exchange 
will be granted certain usage rights with respect to the recipients' 
final research papers. Further, while the waiver applies only to grant 
recipients, academic institutions' research and publications as a 
result of access to historical market data benefits all market 
participants.
    Finally, the Exchange does not believe the proposed rule change to 
amend fee codes RD, RF, RI, TD, TE, TF, TG, TH, and TI will impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. All Members' Customer orders 
routing to MERC and currently yielding fee code RD, TD, or TE will 
yield fee code RF, RI, RF, TG, TH, or TI (depending on the order) and 
will automatically and uniformly be assessed the current fees already 
in place for such routed orders, as applicable. Likewise, all Members' 
Customer orders routed to MEMX will automatically yield fee code RF, 
RI, RF, TG, TH, or TI (depending on the order) and uniformly be 
assessed the corresponding fee. The Exchange notes that other options 
exchange approximate routing costs in a similar manner as the 
Exchange's current approach.\27\
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    \27\ See supra note 12.
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    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. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including 15 other options exchanges and 
off-exchange venues. Additionally, the Exchange represents a small 
percentage of the overall market. Based on publicly available 
information, no single options exchange has more than 16% of the market 
share.\28\ Therefore, no exchange possesses significant pricing power 
in the execution of option order flow. Indeed, participants can readily 
choose to send their orders to other exchange and off-exchange venues 
if they deem fee levels at those other venues to be more favorable. 
Moreover, the Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Specifically, in 
Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \29\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission, the D.C. 
Circuit stated as follows: ``[n]o one disputes that competition for 
order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. 
national market system, buyers and sellers of securities, and the 
broker-dealers that act as their order-routing agents, have a wide 
range of choices of where to route orders for execution'; [and] `no 
exchange can afford to take its market share percentages for granted' 
because `no exchange possesses a monopoly, regulatory or otherwise, in 
the execution of order flow from broker dealers'. . . .''.\30\ 
Accordingly, the Exchange does not believe its proposed fee change 
imposes any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
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    \28\ See supra note 4.
    \29\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \30\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    Additionally, the Exchange also does not believe that the proposed 
rule change to waive Open-Close data fees for recipients of the Grant 
Program will impose any burden on intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act as 
other options exchanges offer academic discounts or credit for similar 
data feeds.\31\ Offering a discount for qualifying academic 
institutions that purchase the Exchange's historical Open-Close Data 
may make that data more attractive to such academic institutions and 
further increase competition with exchanges that offer similar 
historical data products.
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    \31\ See supra note 11.
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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.

[[Page 58341]]

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 \32\ and paragraph (f) of Rule 19b-4 \33\ 
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.
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    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2023-040 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-2023-040. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CBOE-2023-040 and should be 
submitted on or before September 15, 2023.
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    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18308 Filed 8-24-23; 8:45 am]
BILLING CODE 8011-01-P