Document ID: SEC-2022-0229-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2022-02-15T05:00Z

[Federal Register Volume 87, Number 31 (Tuesday, February 15, 2022)]
[Notices]
[Pages 8621-8623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03138]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94201; File No. SR-CBOE-2022-004]

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

February 9, 2022.
    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 February 1, 2022, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Fees Schedule. 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 update the 
Index License Surcharge fee for transactions in Dow Jones Industrial 
Average Index (``DJX'') options and to make certain clarifying and 
corrective changes in the Fees Schedule, effective February 1, 2022.
    The Exchange proposes to increase the Index License Surcharge fee 
currently applicable to orders executed in DJX options in Rate Table--
Underlying Symbol List A. The Exchange currently assesses an Index 
License Surcharge fee of $0.10 per contract for non-Customer orders 
executed in DJX options. The proposed rule change increases the Index 
License Surcharge fee applicable to orders executed in DJX options from 
$0.10 per contract to $0.12 per contract. The Exchange notes that the 
Index License Surcharge fee in place for DJX options is designed to 
recoup some of the costs associated with the licenses for this 
index.\3\ The Exchange has recently renewed its license arrangements 
for its DJX index license and, as a result, the proposed rule change 
amends the Index License Surcharge fee for DJX options in order to 
continue to offset some of the costs associated with the license for 
the index in light of the renewal of the license.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Release No. 52851 (November 29, 
2005), 70 FR 72480 (December 5, 2005) (SR-CBOE-2005-84).
---------------------------------------------------------------------------

    The proposed rule change also makes certain clarifying and 
corrective changes to the Fees Schedule. The proposed rule change 
removes language in the Floor Broker Trading Surcharge table related to 
the requirement that a Floor Broker Trading Permit Holder submit the 
SPX Tier Appointment Fee Exclusion for Multi-Class Broad-Based Index 
Spread Transactions Form within three business days of execution of the 
applicable spread transaction(s) in order to receive the SPX Surcharge 
waiver for Floor Broker Trading Permit Holders who only execute SPX 
(including SPXW) options transactions as part of multi-class broad-
based index spread transactions. Manual submission of such form by 
Floor Broker Trading Permit Holders is no longer necessary as the 
Exchange has automated the process for documenting such transactions 
for Floor Broker Trading Permit Holders.
    The proposed rule change makes a clarifying change regarding 
Market-Maker Floor Permit Holders that execute contracts in SPX/SPXW in 
the Market-Maker Tier Appointment Fees table. Specifically, the 
proposed rule change adds that the SPX Surcharge will not be assessed 
to a Market-Maker Floor Permit Holder who only executes SPX (including 
SPXW) options transactions as part of multi-class broad-based index 
spread transactions. In 2019, the Exchange restructured its Fees 
Schedule in connection with a technology migration. The SPX Surcharge 
waiver provision in connection with Market-Maker Floor Permit Holders 
existed in the Fees Schedule prior to its 2019 restructuring; however, 
the Exchange inadvertently did not include this waiver provision in the 
restructured Fees Schedule. The Exchange notes that the same waiver 
provision related to Floor Broker Trading Permit Holders (as

[[Page 8622]]

described above) was correctly carried over into the restructured Fees 
Schedule upon the technology migration. As such, the proposed rule 
change corrects this inadvertent omission and clarifies that the waiver 
continues to apply to Market-Maker Floor Permit Holders today.
    The proposed rule change lastly amends footnote 5, which is 
appended to the Floor Brokerage Fees table. Currently, footnote 5 
provides that floor brokerage fees are charged to the executing broker. 
To be eligible for the discounted ``crossed'' rate, the executing 
broker acronym and executing firm number must be the same on both the 
buy and sell side of an order. The Exchange proposes to update footnote 
5 to provide that in order to be eligible for the crossed rate, both 
the executing broker acronym and Executing Firm ID (``EFID'') must be 
the same on both the buy and sell side of an order. Particularly, upon 
the 2019 technology migration, the Exchange adopted (and codified in 
its Rulebook) EFIDs, which the System uses to identify the TPH and the 
clearing number for the execution of orders and quotes submitted to the 
System with that EFID. Indeed, since the 2019 technology migration, the 
Exchange's billing system looks for the same executing broker acronym 
and EFID to be on both the buy and sell side of an order, in 
determining whether an order qualifies for the ``crossed'' rate. 
Accordingly, the proposed rule change now updates the reference to 
``executing firm number'' in footnote 5 to reflect ``EFID''.
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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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,\6\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to increase the amount 
of the Index License Surcharge fee for orders in DJX options as the 
proposed increase is consistent with the purpose of such surcharge 
fee--it is intended to continue to help recoup some of the costs 
associated with the license for DJX index products in light of recently 
renewed license arrangements between the Exchange and the DJX index 
provider. The proposed Index License Surcharge fee is also equitable 
and not unfairly discriminatory because the surcharge fee will continue 
to be assessed uniformly for all non-Customer orders in DJX options.
    The Exchange believes the proposed rule changes (1) to remove 
language related to the requirement that a Floor Broker Trading Permit 
Holder manually submit the SPX Tier Appointment Fee Exclusion for 
Multi-Class Broad-Based Index Spread Transactions Form (as the process 
is now automated), (2) to correct an inadvertent omission regarding the 
SPX Surcharge waiver for Market-Maker Floor Permit Holders that execute 
multi-class broad-based index spread transactions in SPX/SPXW and (3) 
to reflect an Exchange-defined term in footnote 5, are reasonable, 
equitable and not unfairly discriminatory because they do not change 
any of the fees or rebates assessed by the Exchange, but rather are 
clarifying changes intended to more accurately reflect the Exchange's 
current billing processes, thereby increasing transparency in the Fees 
Schedule and alleviating any potential investor confusion.

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

    The Exchange does not believe that the proposed rule changes 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 does not believe that the proposed rule change in connection 
with the DJX Index License Surcharge fee will impose any burden on 
intramarket competition because it applies uniformly to all similarly 
situated TPHs in a uniform manner (i.e., to all non-Customer executions 
in DJX options). The Exchange does not believe that the proposed change 
in connection with the DJX Index License Surcharge fee will impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the proposed 
amendment to the DJX Index License Surcharge fee applies only to an 
Exchange proprietary product, which is traded exclusively on Cboe 
Options and Cboe-affiliated options exchanges. In addition to this, the 
Exchange does not believe that the proposed rule changes to remove 
language related to an obsolete requirement, to correct an inadvertent 
omission, and to reflect a defined term will impose any burden on 
intramarket or intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
proposed rule changes merely provide clarifications in the Fees 
Schedule that are designed to more accurately reflect current billing 
processes, thereby increasing transparency in the Fees Schedule and 
reducing potential confusion without having any impact on competition.
    Additionally, the Exchange notes that it operates in a highly 
competitive market. TPHs have numerous alternative venues that they may 
participate on and direct 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 15% of the market share.\7\ 
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, additionally 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.'' \8\ The fact 
that this market is competitive has also long been recognized by the 
courts. In NetCoalition v. Securities and

[[Page 8623]]

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'. . . .''.\9\ 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.
---------------------------------------------------------------------------

    \7\ See Cboe Global Markets U.S. Options Market Volume Summary, 
Month-to-Date (January 26, 2022), available at https://www.cboe.com/us/options/market_statistics/.
    \8\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \9\ 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)).
---------------------------------------------------------------------------

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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 [email protected]. Please include 
File Number SR-CBOE-2022-004 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-2022-004. 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-2022-004 and should be submitted on 
or before March 8, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03138 Filed 2-14-22; 8:45 am]
BILLING CODE 8011-01-P