Document ID: SEC-2023-1042-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2023-09-21T04:00Z

[Federal Register Volume 88, Number 182 (Thursday, September 21, 2023)]
[Notices]
[Pages 65218-65221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20426]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98406; File No. SR-CBOE-2023-047]

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

September 15, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 14, 2023, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Fees Schedule. The text of the proposed rule change is 
provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 65219]]

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 modify the fee 
for the SPX (and SPXW) Floor Market-Maker Tier Appointment Fee.\3\
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    \3\ The Exchange initially filed the proposed fee change, among 
other changes, on June 1, 2022 (SR-CBOE-2022-026). On June 10, 2022, 
the Exchange withdrew that filing and submitted SR-CBOE-2022-029. On 
August 5, 2022, the Exchange withdrew that filing and submitted SR-
CBOE-2022-042. On September 26, 2022, the Exchange withdrew that 
filing and submitted SR-CBOE-2022-050 to address the proposed fee 
change relating to the SPX/SPXW Floor Market-Maker Tier Appointment 
Fee. On November 23, 2022, the Exchange advised of its intent to 
withdraw that filing and submitted SR-CBOE-2022-060. On January 20, 
2023, the Exchange withdrew SR-CBOE-2022-060 and submitted SR-CBOE-
2023-008. On March 21, 2023, the Exchange withdrew SR-CBOE-2023-008 
and submitted SR-CBOE-2023-016. On May 19, 2023, the Exchange 
withdrew SR-CBOE-2023-016 and submitted SR-CBOE-2023-028. On July 
18, 2023, the Exchange withdrew that filing and submitted SR-CBOE-
2023-035. On September 11, 2023, the Exchange withdrew that filing 
and submitted SR-CBOE-2023-046. On September 14, 2023, the Exchange 
withdrew that filing and submitted this proposal. Notably, no 
comment letters were received in connection with any of the 
foregoing rule filings.
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    By way of background, Exchange Rule 5.50(g)(2) provides that the 
Exchange may establish one or more types of tier appointments and 
Exchange Rule 5.50(g)(2)(B) provides such tier appointments are subject 
to such fees and charges the Exchange may establish. In 2010, the 
Exchange established the SPX Tier Appointment and adopted an initial 
fee of $3,000 per Market-Maker trading permit, per month.\4\ The SPX 
(and SPXW) Tier Appointment fee for Floor Market-Makers currently 
applies to any Market-Maker that executes any contracts in SPX and/or 
SPXW on the trading floor.\5\ The Exchange now seeks to increase the 
fee for the SPX/SPXW Floor Market-Maker Tier Appointment from $3,000 
per Market-Maker Floor Trading Permit to $5,000 per Market-Maker Floor 
Trading Permit.
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    \4\ See Securities Exchange Act Release No. 62386 (June 25, 
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-060).
    \5\ The Exchange notes that the fee is not 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. See Cboe Options Fees Schedule, Market-Maker Tier 
Appointment Fees, Notes.
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    In connection with the proposed change, the Exchange also proposes 
to update Footnote 24 in the Fees Schedule, as well as remove the 
reference to Footnote 24 in the Market-Maker Tier Appointment Fee 
Table. By way of background, in June 2020, the Exchange adopted 
Footnote 24 to describe pricing changes that would apply for the 
duration of time the Exchange trading floor was being operated in a 
modified manner in connection with the COVID-19 pandemic.\6\ Among 
other changes, Footnote 24 provided that the monthly fee for the SPX/
SPXW Floor Market-Maker Tier Appointment Fee was to be increased to 
$5,000 per Trading Permit from $3,000 per Trading Permit. As the 
Exchange now proposes to maintain the $5,000 rate on a permanent basis 
(i.e., regardless of whether the Exchange is operating in a modified 
state due to COVID-19 pandemic), the Exchange proposes to eliminate the 
reference to the SPX/SPXW Floor Market-Maker Tier Appointment Fee in 
Footnote 24.\7\
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    \6\ See Securities Exchange Act Release No. 89189 (June 30, 
2020), 85 FR 40344 (July 6, 2020) (SR-CBOE-2020-058).
    \7\ The Exchange notes that since its transition to a new 
trading floor facility on June 6, 2022, it has not been operating in 
a modified manner. As such Footnote 24 (i.e., the modified fee 
changes it describes) does not currently apply.
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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.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \9\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \10\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with section 6(b)(4) of the Act, which requires 
that Exchange rules provide for the equitable allocation of reasonable 
dues, fees, and other charges among its Trading Permit Holders and 
other persons using its facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    The Exchange believes the proposed fee is reasonable as the 
Exchange believes it remains commensurate with the value of operating 
as a Market-Maker on the Exchange's trading floor in the SPX pit, which 
has the largest physical presence on the Exchange's trading floor. For 
example, the Exchange recently transitioned from its previous trading 
floor, which it had occupied since the 1980s, to a brand new, modern 
and upgraded trading floor facility. The Exchange believes customers 
continue to find value in open outcry trading and rely on the floor for 
price discovery and the deep liquidity provided by floor Market-Makers. 
The build out of a new modern trading floor reflects the Exchange's 
commitment to open outcry trading and focus on providing the best 
possible trading experience for its customers, including Market-Makers. 
For example, the new trading floor provides a state-of-the-art 
environment and technology and more efficient use of physical space, 
which the Exchange believes better reflects and supports the current 
trading environment. The Exchange also believes the new infrastructure 
provides a cost-effective, streamlined, and modernized approach to 
floor connectivity. For example, the new trading floor has more than 
330 individual kiosks, equipped with top-of-the-line technology that 
enables floor participants to plug in and use their devices with 
greater ease and flexibility. The new trading floor provided by the 
Exchange also provides floor Market-Makers with more space and 
increased capacity to support additional floor-based traders on the 
trading floor. Moreover, the new trading floor is conveniently located 
across the street from the LaSalle trading floor, which resulted in 
minimal disruption to TPH floor participants, many of whom have office 
space nearby, including in the same facility in which the trading floor 
is located. The Exchange believes the new location, which was also home 
to the Exchange's original trading floor in the 1970s and early 1980s, 
is also able to support robust trading floor infrastructure as it 
currently hosts several banks, trading firms and even trading floors 
(i.e., trading floors for the Chicago Mercantile Exchange and BOX 
Options Market). The Exchange also believes the relocation to the new 
trading floor resulted in a streamlined and simplified trading floor 
and facility fee structure, as further described in the Exchange's 
proposal to amend certain facility fees in connection with the new

[[Page 65220]]

trading floor.\11\ The Exchange also notes that is has not sought to 
pass through a number of costs incurred in connection with the new 
trading floor, including design, construction and other on-going 
maintenance costs. The Exchange also intends to offer free coffee and 
beverages on the new trading floor. Moreover, the Exchange has not 
modified many of its facilities fees in several years. The Exchange 
therefore believes the proposed increase to the SPX (and SPXW) Floor 
Market-Maker Tier Appointment fee is reasonable because the Exchange's 
investment in its new modern cutting-edge trading floor has improved 
the quality of the trading floor, particularly to the benefit of SPX 
Market-Makers as they operate in the largest pit on the new trading 
floor.
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    \11\ See Securities Exchange Act Release No. 96001 (October 6, 
2022), 87 FR 62129 (October 13, 2022) (SR-CBOE-2022-049).
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    The Exchange further believes the proposal to increase the fee is 
reasonable as the Exchange has provided further value to Market-Makers 
by expanding the suite of SPX products available to Market-Makers on 
the trading floor since 2010 when the SPX (and SPXW) Floor Market-Maker 
Tier Appointment fee was first adopted. For example, in 2013, the 
Exchange began listing SPXPM.\12\ In 2016, the Exchange began listing 
SPX Weekly options with Monday and Wednesday expirations.\13\ Most 
recently in 2022, the Exchange added SPX Weekly options with Tuesday 
and Thursday expirations.\14\ The introduction of these products means 
SPX options now have an available expiration every trading day of the 
week, thereby providing Floor Market-Makers with additional 
opportunities to trade SPX and greater trading flexibility as compared 
to 2010. Moreover, average daily volume (ADV) in SPX has increased 
nearly 30%. In particular, Market-Maker open outcry ADV in SPX has 
increased nearly 15% since 2010. Further, increased ADV, and 
specifically increased Market-Maker open outcry in SPX provides 
increased trading opportunities for SPX Market-Makers which the 
Exchange believes is commensurate with the value of the proposed 
increase of the Tier Appointment Fee.
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    \12\ See Securities Exchange Act Release No. 68888 (February 8, 
2013), 78 FR 10668 (February 14, 2013) (SR-CBOE-2012-120).
    \13\ See Securities Exchange Act Release No. 76909 (January 14, 
2016), 81 FR 3512 (January 21, 2016) (SR-CBOE-2015-106). See also 
Securities Exchange Act Release No. 78531 (August 10, 2016), 81 FR 
54643(August 16, 2016) (SR-CBOE-2016-146).
    \14\ See Securities Exchange Act Release No. 94682 (April 12, 
2022), 87 FR 22993 (April 18, 2022) (CBOE-2022-005).
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    To demonstrate the value the Exchange believes Marker-Makers find 
transacting with SPX on the trading floor (notwithstanding the proposed 
fee change), Market-Maker presence on the new trading floor in SPX and 
SPXW has actually increased. Particularly, as of December 30, 2022, 
there are 12 additional Market-Makers trading SPX and SPXW on the 
trading floor as compared to May 2022 (which was the month prior to the 
proposed fee change being implemented on a permanent basis and 
transition to the new trading floor).\15\ Further, in June 2022, the 
month in which the proposed fee change took effect on the new trading 
floor on a permanent basis, there were 5 additional Market-Makers 
trading SPX and SPXW on the trading Floor as compared to May 2022. 
Further, as of December 30, 2022, there are 4 additional Market-Makers 
trading SPX and SPXW on the trading floor as compared to March 2020, 
which was the last month the Exchange assessed $3,000 for the SPX and 
SPXW Floor Market Maker Tier Appointment fee. The Exchange believes the 
increasing SPX and SPXW Market-Maker presence on the trading floor 
since the last time the Exchange assessed $3,000 for the SPX and SPXW 
Floor Market Maker Tier Appointment fee (i.e., March 2020) and since 
the time the current proposal was submitted (i.e., June 2020) speaks 
not only to the value Market-Makers find in participating as a Market-
Maker in SPX and SPXW on the (new and improved) trading floor, but also 
to the reasonableness of the fee.
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    \15\ As noted above, the Exchange has been assessing $5,000 for 
the SPX and SPXW Floor Market Maker Tier Appointment fee since June 
2020 as the Exchange was operating in a modified state until its 
transition to the new trading floor in June 2022, at which time the 
Exchange submitted this proposal to make such increase permanent.
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    The Exchange finally believes its proposal to increase the SPX (and 
SPXW) Floor Market-Maker Tier Appointment fee is reasonable as it is 
the same amount that has been assessed under Footnote 24 for the last 
three years. Additionally, the Exchange believes its proposal to 
increase the fee is reasonable as the fee amount has not been increased 
since it was adopted over 12 years ago in July 2010.\16\ Particularly, 
since its adoption 13 years ago, there has been notable inflation. 
Indeed, the dollar has had an average inflation rate of 2.6% per year 
between 2010 and today, producing a cumulative price increase of 
approximately 40% inflation since 2010, when the SPX and SPXW Floor 
Market-Maker Tier Appointment was first adopted.\17\ Additionally, for 
nearly ten years, Market-Makers were only subject to the original rate 
that was adopted in 2010 (i.e., $3,000) notwithstanding an average 
inflation rate of 2.6% per year. The Exchange acknowledges its proposed 
fee exceeds 40%. However, the Exchange believes such increase is 
reasonable given many Market-Makers for nearly 10 years did not have to 
pay increased fees notwithstanding yearly inflation. For example, by 
not increasing the fee each year to correspond to the average per year 
inflation rate of 2.6%, Market-Makers trading SPX on the trading floor 
since 2011 through 2020 (when then Exchange originally increased the 
fee due to the COVID-19 pandemic) have saved nearly $10,000. Moreover, 
the Exchange historically does not increase fees every year, 
notwithstanding inflation. The Exchange therefore believes that 
proposing a fee in excess of the cumulative 40% inflation rate is still 
reasonable, especially when considered in conjunction with all of the 
additional and further rationale discussed above. The Exchange is also 
unaware of any standard that suggests any fee proposal that exceeds a 
yearly or cumulative inflation rate is unreasonable.
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    \16\ See Securities Exchange Act Release No. 62386 (June 25, 
2010), 75 FR 38566 (July 2, 2010) (SR-CBOE-2010-060).
    \17\ See https://www.officialdata.org/us/inflation/2010?amount=1.
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    The proposed change is also equitable and not unfairly 
discriminatory as it applies to all Market-Makers that trade SPX on the 
trading floor uniformly. The Exchange believes it's reasonable 
equitable and not unfairly discriminatory to increase the SPX/SPXW 
floor Market-Maker Tier Appointment fee and not the SPX/SPXW electronic 
Market-Maker Tier Appointment fee, as Floor Market-Makers are not 
subject to other costs that electronic Market-Makers are subject to. 
For example, while all Floor Market-Makers automatically have an 
appointment to trade open outcry in all classes traded on the Exchange 
and at no additional cost per appointment, electronic Market-Makers 
must select an appointment in a class (such as SPX) to make markets 
electronically and such appointments are subject to fees under the 
Market-Maker Electronic Appointments Sliding Scale.\18\
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    \18\ See Cboe Options Rules 5.50(a) and (e). See also Cboe 
Options Fees Schedule, Market-Maker EAP Appointments Sliding Scale.

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[[Page 65221]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule changes 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 
would be applied in the same manner to all Floor Market-Makers that 
trade SPX (and/or SPXW). As noted above, the Exchange believes it's 
reasonable to increase the SPX/SPWX Tier Appointment Fee for only Floor 
Market-Makers only as opposed to electronic Market-Makers, because 
electronic Market-Makers are subject to costs Floor Market-Makers are 
not, such as the fees under Market-Maker EAP Appointments Sliding 
Scale.
    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 the 
proposed rule changes apply only to a fee relating to a product 
exclusively listed on the Exchange. 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.

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 \19\ and paragraph (f) of Rule 19b-4 \20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2023-047 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CBOE-2023-047. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CBOE-2023-047 and should be 
submitted on or before October 12, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-20426 Filed 9-20-23; 8:45 am]
BILLING CODE 8011-01-P