Document ID: SEC-2019-1960-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-12-27T05:00Z

[Federal Register Volume 84, Number 248 (Friday, December 27, 2019)]
[Notices]
[Pages 71515-71518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27875]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87808; File No. SR-CBOE-2019-125]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Amend 
the Silexx Trading Platform (``Silexx'' or the ``Platform'') Fees 
Schedule

December 19, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 71516]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 18, 2019, 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 the Silexx trading platform (``Silexx'' or the ``platform'') 
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 purpose of this filing is to amend the Silexx Fees Schedule to 
adopt a new ``drop copy'' fee.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
December 2, 2019 (SR-CBOE-2019-113). On December 12, 2019, the 
Exchange withdrew that filing and refiled the proposed fee changes 
(SR-CBOE-2019-121).On December 18, 2019 the Exchange withdrew that 
filing and submitted this filing (SR-CBOE-2019-125).
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    By way of background, the Silexx platform consists of a ``front-
end'' order entry and management trading platform (also referred to as 
the ``Silexx terminal'') for listed stocks and options that supports 
both simple and complex orders,\4\ and a ``back-end'' platform which 
provides a connection to the infrastructure network. From the Silexx 
platform (i.e., the collective front-end and back-end platform), a 
Silexx user has the capability to send option orders to U.S. options 
exchanges, send stock orders to U.S. stock exchanges (and other trading 
centers), input parameters to control the size, timing, and other 
variables of their trades, and also includes access to real-time 
options and stock market data, as well as access to certain historical 
data. The Silexx platform is designed so that a user may enter orders 
into the platform to send to an executing broker (including Trading 
Permit Holders (``TPHs'')) of its choice with connectivity to the 
platform, which broker will then send the orders to Cboe Options (if 
the broker is a TPH) or other U.S. exchanges (and trading centers) in 
accordance with the user's instructions.\5\ The Silexx front-end and 
back-end platforms are a software application that are installed 
locally on a user's desktop. Silexx grants users licenses to use the 
platform, and a firm or individual does not need to be a TPH to license 
the platform. Use of Silexx is completely optional.
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    \4\ The platform also permits users to submit orders for 
commodity futures, commodity options and other non-security products 
to be sent to designated contract markets, futures commission 
merchants, introducing brokers or other applicable destinations of 
the users' choice.
    \5\ Silexx does not allow users to send orders directly to the 
Exchange or other market centers; however, an additional version of 
the Silexx platform, Silexx FLEX, supports the trading of FLEX 
Options and allows authorized Users with direct access to the 
Exchange. See Securities Exchange Act Release No. 87028 (September 
19, 2019) 84 FR 50529 (September 25, 2019) (SR-CBOE-2019-061).
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    In an effort to integrate Silexx and the PULSe drop copy network, 
the Exchange established a method by which a TPH or non-TPH market 
participant may connect to the Silexx back-end platform through a 
third-party terminal (i.e., a front-end platform other than a Silexx or 
PULSe terminal. Such a TPH or non-TPH market participant is hereinafter 
referred to as a ``Silexx integrated partner''). Specifically, such a 
Silexx integrated partner may access the Silexx back-end platform 
through a third-party front-end which will only provide the Silexx 
integrated partner with access to the PULSe drop copy network via a 
Financial Information eXchange (``FIX'') hub.\6\ FIX is an industry-
standard, non-proprietary application program interface (``API'') that 
permits market participants to connect to exchanges. FIX language-based 
connectivity, upon request, provides customers (both TPHs and non-TPHs) 
of TPHs that are brokers and PULSe \7\ users (``PULSe brokers'') with 
the ability to receive ``drop copy'' order fill messages from their 
PULSe brokers. These fill messages allow customers to update positions, 
risk calculations, and streamline back-office functions.
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    \6\ The Exchange notes that a Silexx integrated partner will 
have no access to Silexx front-end platform functionality. A Silexx 
integrated partner will only have access to the back-end platform, 
which provides connectivity to the PULSe drop copy network through a 
FIX hub.
    \7\ The PULSe workstation is a front-end order entry system 
designed for use with respect to orders that may be sent to the 
trading systems of the Exchange. TPHs may make PULSe workstations 
available to their customers, which may include TPHs, non-broker 
dealer public customers, and non-TPH broker dealers.
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    As a result of the recent integration between Silexx and the PULSe 
drop copy network, Silexx front-end users and Silexx integrated 
partners have access to the PULSe drop copy network. Therefore, both 
Silexx users and Silexx integrated partners may send notice execution 
messages to the PULSe drop copy network, who will then forward such 
messages (i.e., drop copies) on to a PULSe or Silexx-user customer (the 
``customer'') for which it has a connection. The Exchange proposes to 
adopt a fee applicable to the Silexx integrated partner, given this new 
functionality, which would allow a customer to receive drop copies via 
the PULSe drop copy network from a non-PULSe, non-Silexx terminal 
(i.e., a Silexx integrated partner). Particularly, the Exchange 
proposes to adopt a fee of $500 per month for each customer connection 
to which a Silexx integrated partner will submit drop copies from non-
PULSe, non-Silexx terminals. At this time, the Exchange proposes no fee 
to the customer receiving the drop copies from the Silexx integrated 
partner. To illustrate the manner in which the fee would be assessed, 
consider the following examples.
Example #1
    Consider a PULSe or Silexx user (the ``customer'') sends its order 
to a Silexx integrated partner that is also a TPH (the ``Silexx 
integrated TPH'') for execution via a third-party front-end platform 
(i.e., a terminal other than Silexx or PULSe). The Silexx integrated 
TPH then submits the order to the Exchange or another market center 
through its own third-party front-end system. Under the new 
functionality, for a $500/month fee the Silexx integrated TPH may 
establish a connection to the Silexx back-end platform which will 
provide

[[Page 71517]]

connectivity to the PULSe drop copy network and allow the Silexx 
integrated TPH to send fill messages back to its customer. The 
connection fee would be assessed to the Silexx integrated TPH on a per 
customer connection basis.\8\
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    \8\ The Exchange notes that the Silexx integrated TPH must 
establish a connection for each applicable customer to receive drop 
copies via the PULSe drop copy network. Thus, the fee is applied on 
a per customer or per connection basis. For example, if a Silexx 
integrated TPH has two customers that receive drop copies via the 
PULSe drop copy network, the Silexx integrated TPH would be assessed 
a monthly fee of $1,000 ($500 x 2).
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Example #2
    Consider a PULSe or Silexx user (the ``customer'') sends its order 
to a Silexx integrated partner that is a non-TPH (the ``Silexx 
integrated non-TPH'') for execution via a third-party front-end 
platform (i.e., a terminal other than Silexx or PULSe). The Silexx 
integrated non-TPH then submits the order to another market center (or 
to the Exchange through a third-party TPH) through its own front-end 
system. Under the new functionality, for a $500/month fee the Silexx 
integrated non-TPH may establish a connection to the Silexx back-end 
platform which will provide connectivity to the PULSe drop copy network 
and allow the Silexx integrated non-TPH to send fill messages back to 
its customer. The connection fee would be assessed to the Silexx 
integrated non-TPH on a per customer connection basis.\9\
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    \9\ The Exchange notes that the Silexx integrated non-TPH must 
establish a connection for each applicable customer to receive drop 
copies via the PULSe drop copy network. Thus, the fee is applied on 
a per customer or per connection basis. For example, if a Silexx 
integrated non-TPH has two customers that receive drop copies via 
the PULSe drop copy network, the Silexx integrated non-TPH would be 
assessed a monthly fee of $1,000 ($500 x 2).
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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.\10\ Specifically, 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 
and does not unfairly discriminate between customers, issuers, brokers 
or dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed fee is reasonable as it is 
similar to other established PULSe fees related to drop-copy 
functionality.\12\ For example, the PULSe Fees Schedule provides for a 
drop copy fee of $425 per month payable by the TPH customer receiving 
the drop copies. Specifically, for each PULSe-using TPH broker that 
provides a TPH customer drop copies, such receiving TPH customer incurs 
a fee of $425 per month. Similarly, the PULSe Fees schedule provides 
for a drop copy fee of $0.02/contract (capped at $400 per month) 
payable by the TPH sending the drop copies to its non-TPH customers. 
Specifically, for each non-TPH PULSe-using customer for which a TPH 
broker provides drop copies, the TPH broker incurs a fee of $0.02/
contract (capped at $400 per month). The proposed fee is slightly 
higher than the comparable PULSe fees because Silexx Integrated 
Partners are paying no additional fees, such as a PULSe or Silexx 
terminal fee.
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    \12\ See e.g., PULSe Fees Schedule drop copy fees.
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    Additionally, the proposed fee would support the introduction of a 
new drop copy functionality that provides an alternative means for 
customers to receive their fill messages. Particularly, the new drop 
copy functionality provides a Silexx integrated partner with the 
ability to leverage the existing infrastructure of the PULSe drop copy 
network, which provides customers with the ability to receive valuable 
information about transactions executed across the market place. By 
utilizing the existing infrastructure, customers already connected to 
the PULSe drop copy network may experience cost savings by eliminating 
the need to connect to another platform to receive drop copies. 
Further, customers will not be charged an additional fee to receive 
such drop copies via the PULSe drop copy network. Additionally, Silexx 
integrated partners may experience lower fees than those of competitor 
providers charging for drop copies. As noted above, the drop copy fill 
messages allow customers to update positions, risk calculations, and 
streamline back-office functions. The Exchange notes that the decision 
as to whether or not to utilize the PULSe drop copy network is entirely 
optional for all users.
    The Exchange believes that assessing the proposed fee to Silexx 
integrated partners using non-PULSe, non-Silexx terminals is equitable 
and not unfairly discriminatory as PULSe and Silexx terminal users 
already pay monthly fees related to the use of such workstations and 
access to the PULSe drop copy network. The Exchange believes the fee is 
equitable and not unfairly discriminatory because the monthly fee is 
assessed uniformly to any market participant who sends drop copies 
through the PULSe drop copy network from non-PULSe, non-Silexx 
terminals. Further, the Exchange believes the fee is equitable and not 
unfairly discriminatory because, as discussed above, the fee is similar 
to fees assessed to PULSe users utilizing the PULSe drop copy network.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Cboe Options 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 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 drop copy 
fee is assessed equally to similarly situated Silexx integrated TPHs or 
non-TPHs electing to use the drop copy functionality.
    The Exchange does not believe that the proposed change will cause 
any unnecessary burden on intermarket competition because the proposed 
fee relates to the use of an Exchange-supported order entry management 
system. To the extent that any proposed change makes Silexx a more 
attractive platform for market participants, such market participants 
are welcome to become Silexx users or Silexx integrated partners.

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 \13\ and paragraph (f) of Rule 19b-4 \14\ 
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

[[Page 71518]]

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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-2019-125 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-2019-125. 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-2019-125 and should be submitted on 
or before January 17, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12)
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27875 Filed 12-26-19; 8:45 am]
BILLING CODE 8011-01-P