Document ID: SEC-2020-0799-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-05-21T04:00Z

[Federal Register Volume 85, Number 99 (Thursday, May 21, 2020)]
[Notices]
[Pages 31012-31014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10928]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88883; File No. SR-CBOE-2020-045]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule

May 15, 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 May 1, 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.
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fees schedule in connection with 
the fees related to orders and auction responses executed in S&P 500 
Index (``SPX'') and SPX Weekly (``SPXW'') options in the Automated 
Improvement Mechanism (``AIM'') Auction.
    AIM includes functionality in which a Trading Permit Holder 
(``TPH'') (an ``Initiating TPH'') may electronically submit for 
execution an order it represents as agent on behalf of a customer,\3\ 
broker dealer, or any other

[[Page 31013]]

person or entity (``Agency Order'') against any other order it 
represents as agent, as well as against principal interest in AIM (an 
``Initiating Order''), provided it submits the Agency Order for 
electronic execution into an AIM Auction.\4\ The Exchange may designate 
any class of options traded on Cboe Options as eligible for AIM. The 
Exchange notes that all Users, other than the Initiating TPH, may 
submit responses to an Auction (``AIM Responses''). AIM Auctions take 
into account AIM Responses to the applicable Auction as well as contra 
interest resting on the Cboe Options Book at the conclusion of the 
Auction (``unrelated orders''), regardless of whether such unrelated 
orders were already present on the Book when the Agency Order was 
received by the Exchange or were received after the Exchange commenced 
the applicable Auction. If contracts remain from one or more unrelated 
orders at the time the Auction ends, they are considered for 
participation in the AIM order allocation process.
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    \3\ The term ``customer'' means a Public Customer or a broker-
dealer. The term ``Public Customer'' means a person that is not a 
broker-dealer. See Rule 1.1.
    \4\ See Rule 5.37 (AIM); Rule 5.38 (Complex AIM); and Rule 5.73 
(FLEX AIM).
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    As of March 16, 2020, the Exchange suspended open outcry trading to 
help prevent the spread of the novel coronavirus and is currently 
operating in an all-electronic configuration. When the Exchange is 
operating in a hybrid environment with open outcry and electronic 
trading, the Exchange does not activate AIM in SPX and SPXW options. 
However, when the Exchange suspended open outcry trading, the Exchange 
activated AIM for SPX and SPXW options in an all-electronic environment 
to provide TPHs with a mechanism to execute crosses electronically, as 
they could no longer represent those crosses for open outcry execution. 
Footnote 12 in the Fees Schedule provides specifically that in the 
event the Exchange operates in a screen-based only environment, AIM may 
be available for SPX and SPXW during Regular Trading Hours. In light of 
the extended closure of the trading floor, the Exchange proposes to 
adopt new pricing changes and update a previous fee change that the 
Exchange believes is appropriate when the trading floor is inoperable 
for an extended period of time.
    Specifically, the Exchange proposes to adopt an AIM Contra 
Surcharge of $0.10 per contract for AIM Contra orders, and an AIM 
Response Surcharge of $0.05 per contract for AIM Response orders, 
executed in SPX and SPXW and applicable to all market participants. The 
Exchange also proposes to amend footnote 12, which governs pricing 
changes in the event the Exchange trading floor becomes inoperable, to 
provide clarity in that the AIM Contra Surcharge and AIM Response 
Surcharge will apply to all SPX/SPXW AIM Contra and AIM Response/
Priority Response orders, respectively, when the Exchange operates in a 
screen-based only environment.
    The Exchange also proposes to amend the AIM Execution Surcharge 
Fee,\5\ which also applies when the Exchange operates in a screen-based 
only environment to all market participant AIM Agency/Primary orders in 
SPX/SPXW,\6\ from $0.05 per contract to $0.10 per contract.
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    \5\ Currently, this fee is displayed in one line item as ``AIM 
and RFC Execution Surcharge''. In light of the proposed change only 
to the AIM Execution Surcharge, the proposed fee change updates this 
into two separate line items, ``AIM Agency/Primary Surcharge Fee'' 
and ``RFC Execution Surcharge Fee''. The Exchange also notes that it 
adds ``Agency/Primary'' to the title of the AIM Execution Surcharge 
Fee to add additional clarity as to which type of AIM orders the 
surcharge applies (as currently noted in footnote 12 of the Fees 
Schedule).
    \6\ See Cboe Options Fees Schedule, footnote 12.
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    As stated, since the trading floor has become inoperable, the only 
execution opportunities currently available for SPX and SPXW are 
electronic executions. The Exchange still wishes to encourage floor 
brokers to continue to conduct business on the Exchange, and, in order 
to approximate the trading floor environment electronically, the 
Exchange has activated AIM for SPX/SPXW, which historically have not 
been designated as eligible for AIM Auctions while the trading floor is 
operable. As such, the Exchange does not wish to discourage floor 
brokers from executing SPX and SPXW volume via AIM when the trading 
floor is inoperable, yet it also wishes to continue to assess fees for 
volume usually applicable to open-outcry trading, which volume has 
recently been moved to electronic channels. Due to the increased number 
of orders executed via AIM as a result of the transition of SPX and 
SPXW to an all-electronic trading environment, the proposed fees are 
designed to allow the Exchange to recoup the costs associated with 
implementing and maintaining AIM for SPX/SPXW while the trading floor 
remains inoperable.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act,\7\ in general, and furthers the requirements 
of Section 6(b)(4),\8\ in particular, as it is designed to provide for 
the equitable allocation of reasonable dues, fees and other charges 
among its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposed adoption of a surcharge for 
AIM Response and AIM Contra orders in SPX and SPXW, as well as amending 
the surcharge for AIM Agency/Primary executions is consistent with 
Section 6(b)(4) of the Act in that the proposal is reasonable, 
equitable and not unfairly discriminatory. The Exchange believes that 
it is reasonable to assess a surcharge of $0.05 for all AIM Responses, 
$0.10 for all AIM Contra orders, and $0.10 for all AIM Agency/Primary 
orders in SPX/SPXW while AIM is activated for SPX/SPXW in the current 
screen-based only environment because it is intended to recoup the 
costs associated with implementing and maintaining AIM for orders in 
SPX/SPXW. Indeed, the Exchange has experienced a significant increase 
in SPX/SPXW AIM orders since the activation of AIM in such classes, as 
the closure of the Exchange's trading floor essentially eliminated the 
sole mechanism by which TPHs could cross orders in SPX/SPXW.
    The Exchange also believes that the proposed fees in connection 
with AIM Responses and AIM Contra, and AIM Agency/Primary orders are 
reasonable and equitable because they do not represent a significant 
departure from, or are less than, other surcharge fees provided by the 
Fees Schedule for executions in SPX and other index classes. For 
example, the current Fees Schedule provides for a surcharge of $0.25 
exotic surcharge applicable to all Customer orders, as well as a $0.20 
surcharge for Customer Maker, non-turner orders executed in VIX.\9\ 
Additionally, the Exchange notes that, while the trading floor remains 
inoperable, it continues to assess an execution surcharge of $0.21 per 
contract for non-AIM, non-Market-Maker orders executed in SPX and an 
execution surcharge of $0.13 per contract for non-AIM, non-Market-Maker 
orders executed in SPXW.\10\
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    \9\ Applies to all such Customer orders in VIX with a premium of 
$1.00 or greater.
    \10\ See Cboe Options Fees Schedule, footnote 12.
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    Finally, the Exchange believes that the proposed fees are equitable 
and not unfairly discriminatory because the proposed fees for AIM 
Responses and AIM Contra, as well as AIM Agency/Primary orders will 
apply equally to all market participants, i.e., all TPHs will be 
assessed the same amount per qualifying order. In addition to this, the 
Exchange believes that adopting a lesser

[[Page 31014]]

surcharge for AIM Responses in SPX/SPXW is equitable and not unfairly 
discriminatory as it is designed to encourage more Responses in AIM 
while it is activated in SPX thereby increasing the opportunities for 
price improvement for all orders executed during the AIM Auction. The 
Exchange believes that increased opportunities for price improvement 
through the AIM Auctions would, in turn, facilitate a potential 
increase in SPX liquidity through the AIM Auctions, which would benefit 
all participants in the market, particularly while the trading floor 
remains inoperable.

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 intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
Exchange notes the proposed changes are not intended to address any 
competitive issue, but rather to address fee changes it believes are 
reasonable now that the trading floor is currently inoperable, thereby 
only permitting electronic participation on the Exchange. 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 in the same manner to all market participants submitting 
qualifying orders (i.e., AIM Responses and AIM Contra, as well as AIM 
Agency/Primary orders) in SPX/SPXW. In addition to this, and as stated 
above, the Exchange does not believe the proposed rule change to adopt 
a lesser fee for AIM Responses in SPX/SPXW will impose any burden on 
intramarket competition because it is designed to encourage AIM 
Responses in SPX/SPXW. A high level of AIM Responses would increase the 
opportunities for price improvement during the AIM Auctions, in turn, 
potentially attracting further liquidity to the AIM Auctions in SPX/
SPXW to the benefit of all market participants. 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 and SPXW options are 
proprietary products that are only traded on Cboe Options and, in 
addition to this, the proposed changes only affect trading on the 
Exchange in limited circumstances.

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 \11\ and paragraph (f) of Rule 19b-4 \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 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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    \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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2020-045 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-2020-045. 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-2020-045 and should be submitted on 
or before June 11, 2020.

    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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10928 Filed 5-20-20; 8:45 am]
BILLING CODE 8011-01-P