Document ID: SEC-2020-1110-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-07-15T04:00Z

[Federal Register Volume 85, Number 136 (Wednesday, July 15, 2020)]
[Notices]
[Pages 42939-42943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15213]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89281; File No. SR-CBOE-2020-061]

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 Expiring Fee Waivers and 
Incentive Programs

July 9, 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 July 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Fees Schedule with respect to expiring fee waivers and 
incentive programs. 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 to (1) make 
permanent the MSCI EAFE Index (``MXEA'') options and MSCI Emerging 
Markets Index (``MXEF'') options Lead Market Maker (``LMM'') Incentive 
Program that is otherwise set to expire June 30, 2020, (2) amend the 
Global Trading Hours (``GTH'') Cboe Volatility Index (``VIX'') options 
and VIX Weekly (``VIXW'') options LMM Incentive Program, (3) amend the 
S&P 500 Index (SPX) options and SPX Weekly (``SPXW'') options LMM 
Incentive Program and (4) clarify that certain facility fees will be 
waived while the trading floor is operating in a modified manner. The 
Exchange proposes to implement these amendments to its Fees Schedule on 
July 1, 2020.
MXEA and MXEF LMM Incentive Program
    The Exchange proposes to permanently adopt the financial program 
for LMMs appointed in MXEA and MXEF options.\3\ Currently, if the 
appointed LMM in MXEA and MXEF provides continuous electronic quotes 
during Regular Trading Hours that meet or exceed the above heightened 
quoting standards in at least 90% of the MXEA and MXEF series 80% of 
the time in a given month, the LMM will receive a payment for that 
month in the amount of $20,000 per class, per month. The Fees Schedule 
currently provides that this program will be in place through June 30, 
2020. The Exchange believes that making this incentive program 
permanent would continue to encourage LMM(s) in MXEA and MXEF to serve 
in an important role as LMMs that provide significant liquidity in 
these options, which, in turn, provides, and would continue to provide, 
greater trading opportunities, added market transparency and enhanced 
price discovery for all market participants in MXEA and MXEF. The 
Exchange notes, too, that it also proposes to remove obsolete language 
regarding applicability of the program in February 2019.
---------------------------------------------------------------------------

    \3\ See Cboe Options Fees Schedule, ``MSCI LMM Incentive 
Program'' Table; and Securities Exchange Act Release Nos. 83585 
(July 2, 2018), 83 FR 31825 (July 9, 2018) (SR-CBOE-2018-050); 85114 
(February 12, 2019), 84 FR 4878 (February 19, 2019) (SR-CBOE-2019-
006); 86361 (July 11, 2019), 84 FR 34243 (July 17, 2019) (SR-CBOE-
2019-031); and 87953 (January 13, 2020), 85 FR 3091 (January 17, 
2020) (SR-CBOE-2020-001).
---------------------------------------------------------------------------

GTH VIX/VIXW LMM Program
    The Exchange currently offers a financial incentive program for 
LMMs quoting in GTH appointed in VIX/VIXW.\4\ Currently, pursuant to 
the Fees Schedule, if an LMM in VIX/VIXW provides continuous electronic 
quotes during GTH that meet or exceed the below heightened quoting 
standards in at least 99% of each of the VIX and VIXW series, 90% of 
the time in a given month, the LMM will receive a rebate for that month 
in the amount of $20,000 for VIX and $5,000 for VIXW.
---------------------------------------------------------------------------

    \4\ The Exchange notes that an LMM appointed in VIX also holds 
an appointment in VIXW.

------------------------------------------------------------------------
                                                                Maximum
                        Premium level                          allowable
                                                                 width
------------------------------------------------------------------------
$0.00-$100.00...............................................      $10.00
$100.01-$200.00.............................................       16.00
Greater than $200.00........................................       24.00
------------------------------------------------------------------------

    Additionally, a GTH LMM in VIX/VIXW is not currently obligated to 
satisfy the heightened quoting standards described in the table above. 
Rather, an LMM is eligible to receive the rebate if it satisfies the 
heightened quoting standards above, which the Exchange believes 
encourages LMMs to provide liquidity during GTH. The Exchange may also 
consider other exceptions to this quoting standard based on 
demonstrated legal or regulatory requirements or other mitigating 
circumstances.
    The Exchange now proposes to amend the GTH VIX/VIXW LMM Incentive 
Program to apply new heightened quoting standards to VIX during GTH.\5\ 
Specifically, a GTH LMM in VIX must provide continuous electronic 
quotes during GTH that meet or exceed the new proposed heightened 
quoting standards (below), in the same percentage of the series (i.e., 
99%) for the same percentage of the time (i.e., 90%) in a given month 
in order to receive a rebate for that month in the proposed amount of 
$15,000.
---------------------------------------------------------------------------

    \5\ The current heighted quoting standard is not changing for 
VIXW.

[[Page 42940]]

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                        15 days or less         15 days to 60 days        61 days to 270 days       271 days or greater
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................        $0.75           25        $0.50           50        $0.50           50        $1.00           10
$1.01-$3.00.....................................         1.00           15         0.75           25         0.75           25         1.00           10
$3.01-$5.00.....................................         1.00           15         0.75           25         0.75           25         1.20            7
$5.01-$10.00....................................         1.50           10         1.00           10         1.00           10         2.00            5
$10.01-$30.00...................................         2.50            5         1.50            5         2.50            5         4.00            3
Greater than $30.00.............................         5.00            3         3.00            5         5.00            3         7.00            2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Additionally, each LMM that meets the proposed heightened quoting 
standards for VIX options will receive a proposed rebate in the amount 
of $0.03 per contract applied to all VIX/VIXW options contracts 
executed in its Market-Maker capacity during Regular Trading Hours. The 
Exchange also proposes to remove obsolete language regarding 
applicability of the program in February 2020.
    Meeting or exceeding the heightened quoting standards in VIX, as 
proposed, to receive the proposed compensation payment remains optional 
for a GTH LMM. The Exchange notes that the heightened quoting standard 
currently in place will continue to apply to VIXW, as will the $5,000 
rebate offered for meeting such standards in VIXW. Additionally, the 
Exchange notes that a GTH VIX/VIXW LMM may need to undertake expenses 
to be able to quote at a significantly heightened standard in VIX/VIXW, 
such as purchase more logical connectivity based on its increased 
capacity needs. The Exchange believes the proposed heightened quoting 
requirements and rebate for VIX under the GTH VIX/VIXW LMM Incentive 
Program is designed to continue to encourage GTH LMMs to provide 
significant liquidity in VIX options during GTH. The Exchange also 
notes that the proposed heightened quoting standards are substantially 
similar to the detail and format (specific expiration categories and 
corresponding premiums, quote widths, and sizes) of the heightened 
quoting standards currently in place for GTH SPX/SPXW LMMs.\6\
---------------------------------------------------------------------------

    \6\ See Fees Schedule, ``GTH SPX/SPXW Incentive Program'' Table.
---------------------------------------------------------------------------

GTH SPX/SPXW LMM Program
    As indicated above, the Exchange also currently offers a financial 
incentive program for LMMs quoting in GTH appointed in SPX/SPXW.\7\ 
Currently, pursuant to the Fees Schedule, if an LMM in SPX/SPXW 
provides continuous electronic quotes during GTH that meet or exceed 
the below heightened quoting standards in at least 99% of each of the 
SPX and SPXW series, 90% of the time in a given month, the LMM will 
receive a rebate for that month in the amount of $10,000 for SPX and 
$10,000 for SPXW.
---------------------------------------------------------------------------

    \7\ The Exchange notes that an LMM appointed in SPX also holds 
an appointment in SPXW.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                        7 days or less           8 days to 60 days        61 days to 270 days       271 days or greater
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00.....................................        $0.50           10        $0.40           25        $0.60           15        $1.00           10
$5.01-$15.00....................................         2.00            7         1.60           18         2.40           11         4.00            7
$15.01-$50.00...................................         5.00            5         4.00           13         6.00            8        10.00            5
$50.01-$100.00..................................        10.00            3         8.00            8        12.00            5        20.00            3
$100.01-$200.00.................................        20.00            2        16.00            5        24.00            3        40.00            2
Greater than $200.00............................        30.00            1        24.00            3        36.00            1        60.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Like with the GTH LMM VIX/VIXW Incentive Program, a GTH LMM in SPX/
SPXW is not currently obligated to satisfy the heightened quoting 
standards described in the table above, but instead is eligible to 
receive the rebate if they satisfy the heightened quoting standards 
above, which are also designed to encourage LMMs to provide liquidity 
during GTH. The Exchange may also consider other exceptions to this 
quoting standard based on demonstrated legal or regulatory requirements 
or other mitigating circumstances.
    The Exchange proposes to decrease the percentage of each the SPX 
and SPXW series that an LMM must quote in order to receive the current 
rebate under the GTH SPX/SPXW incentive program from at least 99% of 
the series to at least 85% of the series. The proposed decrease is 
intended to ease the heightened quoting standard for GTH LMMs in the 
appointed class so that LMMs are further incentivized to provide 
significant liquidity in GTH in SPX/SPXW to meet the incrementally less 
difficult heighten quoting standards.
Exchange Operating in Modified State--Footnote 24 Clarification
    The Exchange recently submitted a rule filing, SR-CBOE-2020-058, 
that adopted footnote 24 of the Fees Schedule to govern pricing changes 
that apply for the duration of time the Exchange trading floor is being 
operated in a modified manner in connection with the COVID-19 
pandemic.\8\ Footnote 24 provides, among other things, for certain 
pricing changes and waives certain facilities fees for the duration of 
time the Exchange is operating in a modified state in connection with 
the COVID-19 pandemic. The Exchange now proposes to amend footnote 24 
to clarify that, when the Exchange trading floor is being operate in a 
modified manner in connection with the COVID-19 pandemic, TPHs will not 
be assessed fees on facility services that are not currently in use, 
which may be due to the TPH being unable to be present on the trading 
floor as a consequence of the pandemic. Specifically, the proposed

[[Page 42941]]

amendment provides that, if a TPH is unable to utilize designated 
facility services while the trading floor is operating in a modified 
state, corresponding fees, including for Exchangefone maintenance, 
single line maintenance, intra floor lines, voice circuits, data 
circuits at local carrier (entrance), and data circuits at in-house 
frame, will not be assessed. The proposed change also incorporates 
references to footnote 24 next to each of the above-listed designated 
facility services within the Facility Fees (per month) Table in the 
Fees Schedule.
---------------------------------------------------------------------------

    \8\ See SR-CBOE-2020-058 (filed June 24, 2020).
---------------------------------------------------------------------------

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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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,\11\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

MXEA and MXEF LLM Incentive Program
    The Exchange believes it is reasonable to make the MXEA and MXEF 
LMM Incentive Program permanent because the Exchange wants to continue 
incentivizing the LMM(s) in these products to continue to provide 
liquid and active markets in these products to encourage its growth. 
The Exchange notes that without the proposed financial incentive, there 
may not be sufficient incentive for TPHs to undertake an obligation to 
quote at heightened levels, which could result in lower levels of 
liquidity to the detriment of all market participants. The Exchange 
believes that the program is equitable and not unfairly discriminatory 
to only offer this financial incentive to MXEA and MXEF LMM(s), because 
it benefits all market participants trading in these options to 
encourage the LMM(s) to satisfy the heightened quoting standard, in 
turn, increasing liquidity and providing more trading opportunities, 
tighter spreads, added market transparency, and enhanced price 
discovery. Indeed, the Exchange notes that LMMs provide a crucial role 
in providing quotes and the opportunity for market participants to 
trade products, including MXEA and MXEF, which can lead to increased 
volume, thereby providing for a robust market. In addition, the 
Exchange notes that all Market-Maker types (i.e. LMMs, DPMs, as well as 
Primary Market-Makers (``PMMs'')) take on a number of obligations, 
including quoting obligations, that other market participants do not 
have. Such Market-Makers have added market-making and regulatory 
requirements, which normally do not apply to other market participants. 
For example, Market-Makers have obligations to maintain continuous 
markets, engage in a course of dealings reasonably calculated to 
contribute to the maintenance of a fair and orderly market, and to not 
make bids or offers or enter into transactions that are inconsistent 
with a course of dealing. Also, if a MSCI LMM does not satisfy the 
heightened quoting standard, then it simply will not receive the 
offered per class payment for that month.
GTH VIX/VIXW LMM and GTH SPX/SPXW Incentive Programs
    The Exchange believes the amended heightened quoting standards and 
rebate amount, along with the proposed credit during RTH for meeting 
the heightened quoting standards, in VIX series are reasonably designed 
to continue to incentivize an appointed LMM to meet the GTH quoting 
standards for VIX, thereby providing liquid and active markets, which 
facilitates tighter spreads, increased trading opportunities, and 
overall enhanced market quality to the benefit of all market 
participants. The Exchange believes that the proposed changes to the 
program in connection with the heightened quoting standards in VIX are 
reasonable in that they are substantially similar to the detail and 
format (specific expiration categories and corresponding premiums, 
quote widths, and sizes) of the heightened quoting standards currently 
in place for GTH SPX/SPXW LMMs.\12\ Quote widths and sizes typical in 
VIX options differ from that in SPX options, therefore, the proposed 
heightened quoting requirements reflect quote widths and sizes that 
align with the market characteristic in VIX options. Additionally, the 
Exchange believes the 15 days or less expiration for the ``near term'' 
expiration category (as opposed to a 7 days or less expiration for the 
near term) makes it easier for GTH LMMs in VIX to satisfy the near-term 
heightened quoting standard category, as proposed, because higher 
volatility generally occurs within the 7 days or less expiration 
timeframe, wherein it becomes more difficult for LMMs to quote within 
specified widths and sizes. Moreover, the Exchange believes that 
reducing the monthly rebate from $20,000 to $15,000, and adopting a 
credit for all VIX/VIXW executions in a Market-Maker capacity, for 
meeting the heightened quoting standards in VIX, as proposed, is 
reasonable and equitable as it will continue to offer a monthly rebate, 
though reduced, that falls within a comparable realm of rebates offered 
for other, similar LMM incentive programs \13\ while also offering an 
additional opportunity in which a GTH VIX LMM may receive an additional 
rebate on its activity in VIX/VIXW.
---------------------------------------------------------------------------

    \12\ See supra note 5.
    \13\ See Fees Schedule, ``MSCI LMM Incentive Program'' Table, 
which offers appointed LMMs payment of $20,000 for meeting certain 
heightened quoting requirements; and ``GTH SPX/SPXW Incentive 
Program'' Table, which offers appointed LMMs payment of $10,000 for 
meeting certain heightened quoting requirements.
---------------------------------------------------------------------------

    Similarly, the Exchange believes it is reasonable to ease the 
percentage of the SPX/SPXW series for which a GTH SPX/SPXW LMM must 
quote in order to receive the existing rebate pursuant to the GTH SPX/
SPXW LMM Incentive Program, because the proposed change is reasonably 
designed to slightly decrease the difficulty in meeting the heightened 
quoting standards, which, in turn, provides increased incentivize for 
GTH LMMs to provide significant liquidity in SPX/SPXW during GTH. The 
Exchange believes that although the proposed change decreases the 
amount of the series that a GTH LMM may quote in order to receive the 
program's rebate, the proposed percentage (85%) remains well above even 
half the series, and, the Exchange notes, the 90% timing requirement 
will remain in place; consequently, a GTH LMM must continue to submit 
significant liquidity in order to receive the rebate.
    The Exchange believes it is equitable and not unfairly 
discriminatory to continue to only offer this financial incentive to 
GTH VIX/VIXW and GTH

[[Page 42942]]

SPX/SPXW LMMs, as amended, because it benefits all market participants 
trading VIX/VIXW and SPX/SPXW during GTH to encourage the LMMs to 
satisfy the heightened quoting standard, which ensures, and may even 
provide increased, liquidity, which thereby may provide more trading 
opportunities and tighter spreads. Indeed, the Exchange notes that the 
GTH LMMs serve a crucial role in providing quotes and the opportunity 
for market participants to trade VIX/VIXW and SPX/SPXW, which can lead 
to increased volume, providing for robust markets. The Exchange 
ultimately wishes to sufficiently incentive a GTH LMM to provide liquid 
and active markets in VIX/VIXW and SPX/SPXW during GTH to encourage 
liquidity. The Exchange believes that the programs, even as amended, 
will continue to encourage increased quoting to add liquidity in VIX, 
and in SPX/SPXW, thereby protecting investors and the public interest. 
The Exchange also notes that a GTH LMM may have added costs each month 
that it needs to undertake in order to satisfy that heightened quoting 
standard (e.g., having to purchase additional logical connectivity). 
The Exchange believes the proposed amendments are equitable and not 
unfairly discriminatory because they equally apply to any TPH that is 
appointed as a GTH VIX/VIXW or SPX/SPXW LMM, respectively. 
Additionally, if a GTH LMM does not satisfy the heightened quoting 
standard in VIX/VIXW or SPX/SPXW, as applicable, for any given month, 
then it simply will not receive the offered payment for that month.
Exchange Operating in Modified State--Footnote 24 Clarification
    The Exchange believes the proposed rule change to waive fees for 
designated facility services unable to be utilized when the trading 
floor is operated in a modified manner is reasonable because TPHs will 
not be assessed fees for such facility services that they are not 
currently using as a result of not accessing the trading floor due to 
the COVID-19 pandemic. The Exchange notes that footnote 24 already 
provides for waivers of certain facilities fees while the Exchange 
trading floor is operating in a modified manner and such facilities are 
not being used by TPHs. The proposed change merely clarifies that the 
fees normally assessed for designated facility services (Exchangefone 
maintenance, single line maintenance, intra floor lines, voice 
circuits, data circuits at local carrier (entrance), and data circuits 
at in-house frame) will be included in the list of floor-related fees 
for facility services that are waived when the services are not in use 
due to COVID-19 complications. The Exchange believes that it is 
reasonable not to charge a service fee to TPHs when such services are 
not being utilized as a result of the Exchange operating in a modified 
manner. The listed facility fees each apply to a service that a TPH may 
not be utilizing because such TPH is not currently active on the 
trading floor and using the facilities as a result of the COVID-19 
pandemic. The Exchange believes the proposed rule change relating to 
waiving certain service fees is also reasonable, equitable and not 
unfairly discriminatory as it applies equally to all floor TPHs who do 
not use such services while the trading floor is operating in a 
modified manner.

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 believes the proposed rule change does impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes to existing incentive programs that already apply to all LMMs 
appointed to the applicable classes (i.e. MXEF, MXEA, VIX, VIXW, SPX, 
SPXW) in a uniform manner. To the extent these LMMs receive a benefit 
that other market participants do not, as stated, LMMs have different 
obligations and are held to different standards. For example, LMMs play 
a crucial role in providing active and liquid markets in their 
appointed products, thereby providing a robust market which benefits 
all market participants. Such Market-Makers also have obligations and 
regulatory requirements that other participants do not have. The 
Exchange also notes that the incentive programs are designed to attract 
additional order flow to the Exchange, wherein greater liquidity 
benefits all market participants by providing more trading 
opportunities, tighter spreads, and added market transparency and price 
discovery, and signals to other market participants to direct their 
order flow to those markets, thereby contributing to robust levels of 
liquidity.
    The Exchange notes the proposed changes in connection with footnote 
24 are not intended to address any competitive issue, but rather to 
address fee changes it believes are reasonable because the trading 
floor is currently operating in a modified manner in connection with 
COVID-19 in order to help protect the safety and welfare of individuals 
access the trading floor. The Exchange does not believe that the 
proposed rule change to waive the service fees for those services not 
currently in use 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 floor TPHs not 
utilizing such facility services.
    The Exchange believes the proposed rule change does not impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed changes in 
connection with the incentive programs only affect trading on Cboe 
Options, as the incentive programs apply to transactions in products 
exclusively listed on Cboe Options. The Exchange notes it operates in a 
highly competitive market. In addition to Cboe Options, TPHs have 
numerous alternative venues that they may participate on and director 
their order flow, including 15 other options exchanges, as well as off-
exchange venues, where competitive products are available for trading. 
Based on publicly available information, no single options exchange has 
more than 18% of the market share of executed volume of options 
trades.\14\ Therefore, no exchange possesses significant pricing power 
in the execution of option order flow. 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.'' \15\ 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

[[Page 42943]]

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' . . . .'' \16\ Accordingly, the Exchange does not believe its 
proposed changes to the incentive programs impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
---------------------------------------------------------------------------

    \14\ See Cboe Global Markets, U.S. Options Market Volume Summary 
by Month (June 29, 2020), available at http://markets.cboe.com/us/options/market_share/.
    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ 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)).
---------------------------------------------------------------------------

    The Exchange does not believe that the proposed rule change in 
connection with the waiver of certain designated facility service fees 
will impose any burden on intermarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act because 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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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-2020-061 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-2020-061. 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. 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-2020-061, and should be 
submitted on or before August 5, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15213 Filed 7-14-20; 8:45 am]
BILLING CODE 8011-01-P