Document ID: SEC-2022-0923-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2022-07-14T04:00Z

[Federal Register Volume 87, Number 134 (Thursday, July 14, 2022)]
[Notices]
[Pages 42222-42226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14997]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95225; File No. SR-CBOE-2022-034]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Update 
Its Fees Schedule in Connection With the Exchange's Plans To List and 
Trade FLexible EXchange Index Options With an Index Multiplier of One

July 8, 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 June 30, 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.
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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 update its Fees Schedule in connection with the Exchange's plans to 
list and trade FLexible EXchange (``FLEX'') index options with an index 
multiplier of one (``FLEX Micro Options''). 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 in connection with 
its plans to list and trade FLEX Micro Options.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
June 27, 2022 (SR-CBOE-2022-031). On June 28, 2022, the Exchange 
withdrew that filing and submitted SR-CBOE-2022-033. On June 30, 
2022 the Exchange withdrew that filing and submitting this filing.
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    By way of background, the Exchange has adopted rules to accommodate 
the listing and trading of certain FLexible EXchange (``FLEX'') index 
options with an index multiplier of one (``FLEX Micro Options'') rather 
than the conventional 100. FLEX Micro Options will be available on the 
following indices effective June 27, 2022: S&P 500, Russell 2000 (RUT), 
Dow Jones Industrial Average (DJX), MSCI Emerging Markets (MXEF), and 
MSCI EAF (MXEA). The Exchange believes FLEX Micro Options will expand 
investors' choices and flexibility by listing and trading FLEX options 
on larger-valued broad-based indexes, which provide investors with the 
ability to gain exposure to the market, with a notional value of 1/
100th of the value of currently available FLEX Index Options. The 
Exchange believes the additional granularity provided by FLEX Micro 
Options with respect to the prices at which investors may execute and 
exercise index options on the Exchange will appeal to institutional 
investors by providing them with an additional exchange-traded tool to 
manage the positions and associated risk in their portfolios more 
precisely based on notional value, which currently may equal a fraction 
of a standard contract. The Exchange now proposes to amend its Fees 
Schedule to accommodate the planned listing and trading of FLEX Micro 
options.
Standard Transaction Rates
    First, the Exchange proposes to adopt certain standard transaction 
fees in connection with FLEX Micro Options. Specifically, the proposed 
rule change adopts certain fees for FLEX Micro Options in the ``Rate 
Table for All Products Excluding Underlying Symbol A''.\4\ The Exchange 
notes that the proposed standard transaction fees in connection with 
FLEX Micros Options are lower-priced than standard FLEX options on the 
corresponding indices given their multiplier of one (as compared to 100 
for standard FLEX options). Indeed, the proposed transaction fees are 
generally near, or approximately, 1/100th of the fees currently 
assessed for the corresponding standard FLEX options (inclusive of the 
Execution Surcharge, License Surcharges and FLEX Surcharges, as 
applicable). The proposed fees are as follows:
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    \4\ Underlying Symbol List A currently includes OEX, XEO, RUT, 
RLG, RLV, RUI, UKXM, SPX (includes SPXW), SPESG and VIX. See Cboe 
Options Fees Schedule, Footnote 34.
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RUT FLEX Micro Options
     Adopts fee code GA, appended to all (i) Customer (capacity 
``C''), (ii) Market-Maker (capacity ``M''), and (iii) Clearing Trading 
Permit Holders (``TPHs'') (capacity ``F'') and Non-Clearing TPH 
Affiliates (capacity ``L'')(collectively, ``Firms'') orders in RUT FLEX 
Micro Options and assesses a fee of $0.009 per contract.
     Adopts fee code GB, appended to all Broker-Dealers 
(capacity ``B''), Joint Back-Offices (capacity ``J''), Non-Trading 
Permit Holder Market-Makers (capacity ``N''), and Professionals 
(capacity ``U'') (collectively, ``Non-Customers'') manual and AIM 
(Agency/Primary and Contra) orders in RUT FLEX Micro Options and 
assesses a fee of $0.009 per contract.; and
     Adopts fee code GC, which is appended to all Non-Customer 
electronic orders in RUT FLEX Micro Options and assesses a fee of 
$0.012 per contract.
SPX FLEX Micro Options
     Adopts fee code GE, appended to all (i) Customer and (ii) 
Firm orders in SPX FLEX Micro Options and assesses a fee of $0.008 per 
contract;

[[Page 42223]]

     Adopts fee code GF, appended to all Market-Maker orders in 
SPX FLEX Micro Options and assesses a fee of $0.006 per contract; and
     Adopts fee code GD, which is appended to all appended to 
all Non-Customer orders in SPX FLEX Micro Options and assesses a fee of 
$0.009 per contract.
MXEA and MXEF FLEX Micro Options
     Adopts fee code GG, appended to all Customer orders in 
MXEA and MXEF FLEX Micro Options and assesses a fee of $0.004 per 
contract;
     Adopts fee code GI, appended to all (i) Firm and (ii) Non-
Customer electronic orders in MXEA and MXEF FLEX Micro Options and 
assesses a fee of $0.010 per contract;
     Adopts fee code GH, appended to all Market-Maker manual, 
electronic and AIM Agency/Primary orders in MXEA and MXEF FLEX Micro 
Options and assesses a fee of $0.005 per contract;
     Adopts fee code GK, appended to all (i) Firm and (ii) Non-
Customer manual and AIM Agency/Primary orders in MXEA and MXEF FLEX 
Micro Options and assesses a fee of $0.005 per contract;
     Adopts fee code GL, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Contra orders in MXEA and MXEF FLEX 
Micro Options and assesses a fee of $0.003 per contract; and
     Adopts fee code GN, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Response orders in MXEA and MXEF FLEX 
Micro Options and assesses a fee of $0.013 per contract.
DJX FLEX Micro Options
     Adopts fee code GG, appended to all Customer orders in DJX 
FLEX Micro Options and assesses a fee of $0.004 per contract;
     Adopts fee code GJ, appended to all (i) Firm and (ii) Non-
Customer electronic orders in DJX FLEX Micro Options and assesses a fee 
of $0.007 per contract;
     Adopts fee code GH, appended to all Market-Maker manual, 
electronic and AIM Agency/Primary orders in DJX FLEX Micro Options and 
assesses a fee of $0.005 per contract;
     Adopts fee code GK, appended to all (i) Firm and (ii) Non-
Customer manual and AIM Agency/Primary orders in DJX FLEX Micro Options 
and assesses a fee of $0.005 per contract;
     Adopts fee code GL, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Contra orders in DJX FLEX Micro 
Options and assesses a fee of $0.003 per contract; and
     Adopts fee code GM, appended to all (i) Firm, (ii) Market-
Maker and (iii) Non-Customer AIM Response orders in DJX FLEX Micro 
Options and assesses a fee of $0.007 per contract.
Surcharges
    The Exchange does not propose to apply any current surcharges to 
FLEX Micro options.\5\ Particularly, the Exchange proposes to exclude 
FLEX Micro Options from the surcharges set forth in the Rate Table for 
All Products Excluding Underlying Symbol List A (i.e., the Complex 
Surcharge Fee, the Surcharge Fee Index License and the FLEX Surcharge 
Fee). The Exchange proposes to amend corresponding footnotes 35, 14, 
and 17, respectively, to make clear FLEX Micro Options transactions are 
excluded from these surcharges.
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    \5\ The Exchange notes the Trading Processing Services Fee, 
which is currently assessed a rate of $0.0025 per contract side, 
will apply to FLEX Micro Options.
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Fee Programs
    The Exchange proposes to exclude FLEX Micro Options from all 
pricing programs. The Exchange notes that because FLEX Micro Options 
are all options on broad-based indices, the majority of the proposed 
changes amend the Fees Schedule in connection with trading in FLEX 
Micro Options in a manner that is generally consistent with the way in 
which many existing fee programs currently do not apply to trading 
standard options on those same indices. Additionally, the Exchange 
notes that the majority of the proposed changes also amend the Fees 
Schedule in a manner that is generally consistent with the way in which 
existing fee programs currently do not apply to trading in another 
options product that has an index multiplier of one and thus a smaller 
notional value (i.e., NANOS \6\).
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    \6\ NANOS options are options on the Mini-S&P 500 (``XSP'') 
Index (the value of which is 1/10th the value of the S&P 500 
(``SPX'') Index) that have an index multiplier of one.
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    First, the Exchange proposes to adopt footnote 33 (and append to 
fee tables as applicable and needed) to make clear that FLEX Micro 
Options volume will be excluded from the following programs: \7\ (i) 
SPX/SPXW and SPESG Liquidity Provider Sliding Scale, which offers 
credits on Market-Maker orders where a Market-Maker achieves certain 
volume thresholds based on Market-Maker volume in SPX, SPXW and SPESG, 
(ii) the Liquidity Provider Sliding Scale, which offers credits on 
Market-Maker orders where a Market-Maker achieves certain volume 
thresholds based on total national Market-Maker volume in all 
underlying symbols, excluding Underlying Symbol List A, MRUT, NANOS and 
XSP during the calendar month, (iii) the Liquidity Provider Sliding 
Scale Adjustment Table, which provides that Taker fees be applied to 
electronic ``Taker'' volume and a Maker rebate be applied to electronic 
``Maker'' volume, in addition to the transaction fees assessed under 
the Liquidity Provider Sliding Scale, (iv) the Volume Incentive Program 
(``VIP''), which offers a per contract credit for certain percentage 
threshold levels of monthly Customer volume in all underlying symbols, 
excluding Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA, 
MXEF, NANOS and XSP, (v) Break-Up Credits, which provides credits to 
orders executed in AIM, SAM, FLEX AIM, and FLEX SAM to all products 
except Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA, MXEF, 
NANOS and XSP, (vi) Marketing Fee, which is assessed on transactions of 
Market-Makers resulting from Customer orders in all products except 
Sector Indexes, DJX, MRUT, MXEA, MXEF and Underlying Symbol List A,\8\ 
(vii) the Cboe Options Clearing Trading Permit Holder Proprietary 
Products Sliding Scale, which provides transaction fees for Firms in 
Underlying Symbol List A will be reduced provided a Firm reaches 
certain average daily volume (``ADV'') thresholds, (vii), Clearing TPH 
Fee Cap, which provides a cap on Firm transaction fees, (viii), Select 
Customer Options Reduction (``SCORe'') Program, which is a discount 
program for Retail, Customer volume in SPX, SPXW, VIX,

[[Page 42224]]

RUT, MXEA, and MXEF,\9\ (ix) Customer Large Trade Discount, which 
provides a discount in the form of a cap on transaction fees for 
certain Customer executions, (x) Market-Maker Tier Appointment Fees, 
which assesses per permit surcharges if Market-Makers meet certain 
volume thresholds in SPX/SPX, VIX and RUT, respectively, (xi) Floor 
Broker Trading Surcharge, which assesses a surcharge to Floor Brokers 
if they execute a certain threshold in SPX/SPXW and VIX volume, 
respectively, (xii) Floor Broker Sliding Scale Rebate Program, offers 
rebates for Firm Facilitated and non-Firm Facilitated orders that 
correspond to certain volume tiers and is designed to incentivize order 
flow in multiply-listed options to the Exchange's trading floor, (xiii) 
Floor Broker ADV Discount, which provides Floor Brokers rebates on 
their Trading Permit fees based on ADV thresholds, (xiv) Floor 
Brokerage Fees, which provides discounted rates to executing brokers 
for cross and non-crossed orders in OEX, XEO, RUT, RLG, RLV, RUI, UKXM, 
SPX/SPXW, SPESG and VIX, (xv) Floor Brokerage Fees Discount Scale, 
which provides Floor Brokers opportunity to receive discounts on fees 
for orders in OEX, XEO, RUT, SPX, SPXW, SPESG, VIX based on meeting 
certain volume thresholds, (xvi) GTH Executing Agent Subsidy Program 
which provides designated GTH executing agents a monthly subsidy based 
on GTH monthly Customer volume thresholds, (xvii) Order Router Subsidy 
Program and Complex Order Router Subsidy Program, which provides that 
Participating TPHs or Participating Non-Cboe TPHs may receive a payment 
from the Exchange for every executed contract routed to the Exchange 
through their system in certain classes and (xviii) Frequent Trader 
Program, which provides an opportunity for customer orders to receive 
rebates based on meeting different volume thresholds in SPX/SPXW, VIX 
and RUT.
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    \7\ The Exchange proposes to eliminate the current language 
under footnote 33 relating to billing information for October 2019, 
as it is no longer relevant or needed, and replace it with the 
proposed new language. Footnote 33 is already appended to the 
following tables in the Fees Schedule: SPX/SPXW and SPESG Liquidity 
Provider Sliding Scale, Liquidity Provider Sliding Scale, Liquidity 
Provider Sliding Scale Adjustment Table, Volume Incentive Program, 
Affiliate Volume Plan, Clearing Trading Permit Holder Proprietary 
Products Sliding Scale, Clearing Trading Permit Holder VIX Sliding 
Scale, and Select Customer Options Reduction (``SCORe'') Program. 
The Exchange is maintaining the appended references to footnote 33 
in each of these tables, other than the Clearing Trading Permit 
Holder VIX Sliding Scale, as footnote 33 will continue to be 
applicable to the programs as such programs will be listed in 
proposed footnote 33 as a program where FLEX Micro options is 
excluded. Because the Exchange is not offering a VIX FLEX Micro 
Option product at this time, the Clearing Trading Permit Holder VIX 
Sliding Scale is not applicable and the Exchange therefore proposes 
to eliminate the current reference to footnote 33 that currently is 
appended to that table.
    \8\ The Exchange notes that the Marketing Fee already excludes 
all FLEX Options. See Cboe Options Fees Schedule, Marketing Fee 
Table. The Exchange still proposes to append proposed footnote 33 to 
the Marketing Fee Table for further clarity as to applicability of 
the exclusion for FLEX Micros Options.
    \9\ The Exchange notes that the SCORe program already excludes 
all FLEX Options. See Cboe Options Fees Schedule, SCORe Table. The 
Exchange still proposes maintain footnote 33, which is currently 
appended to the SCORe Table, for further clarity as to applicability 
of the exclusion for FLEX Micros Options.
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    The Exchange also proposes to update footnote 6, which is appended 
to the Liquidity Provider Sliding Scale Program, Liquidity Provider 
Sliding Scale Adjustment Table, Affiliate Volume Plan, VIP, SCORe and 
the ORS/CORS Programs and footnote 36 which is appended to VIP. 
Specifically, current footnotes 6 and 36 provides that in the event of 
a Cboe Options System outage or other interruption of electronic 
trading on Cboe Options that lasts longer than 60 minutes, the Exchange 
will adjust the national volume in all underlying symbols excluding 
Underlying Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, NANOS, DJX, 
and XSP for the entire trading day. The Exchange proposes to add FLEX 
Micro Options to the exclusion list.
    The Exchange also proposes to clarify in footnote 11, that for 
facilitation orders (other than Sector Indexes (47), FLEX Micros and 
Underlying Symbol List A (34)) executed in open outcry, Cboe Options 
will assess no Clearing Trading Permit Holder Proprietary transaction 
fees, as proposed fee codes for Firm orders in FLEX Micro transactions 
will supersede facilitation fee codes (currently FF or FI) for any 
facilitation orders in FLEX Micro Options.
    The Exchange notes that a few of the programs listed above in which 
FLEX Micros will be excluded also exclude and enumerate other products 
in the respective program's table header, notes section and/or 
corresponding footnote. Where such exclusions are listed, the Exchange 
proposes to add references to FLEX Micros to make clear that, as 
discussed above and as will be reflected in proposed [sic] 33, FLEX 
Micros are also excluded from the applicable program. Accordingly, the 
Exchange proposes to add a reference to FLEX Micros to the exclusion 
lists set forth in each of the following respective program table 
headers, notes sections and/or footnotes: Liquidity Provider Sliding 
Scale notes section, VIP header, Break-Up Credits header, Marketing Fee 
notes section, Floor Broker Sliding Scale Rebate Program notes section, 
ORS and CORS notes sections, footnote 10, footnote 11, footnote 22, 
footnote 29, footnote 30, and footnote 36.
Clarifying Changes
    The Exchange lastly proposes to amend footnotes 18, 19 and 20 of 
the Fees Schedule. The foregoing footnotes describe the AIM Contra 
Execution Fee, the AIM Agency/Primary Fee and the AIM Responder Fee, 
respectively. The Exchange proposes to revise the current language in 
each footnote to make clear that applicable standard transaction fees 
apply for all orders executed in the Automated Improvement Mechanism 
(``AIM''), Solicitation Auction Mechanism (``SAM''), FLEX AIM and FLEX 
SAM auctions (that were initially entered as (i) the contra party to an 
Agency/Primary Order, (ii) the Agency/Primary Order, or (iii) an AIM 
Response, respectively) unless otherwise indicated in the Rate Tables. 
The Exchange does not believe it is necessary to list the applicable 
products or exclusions in the footnotes, as the Rate Tables in the Fees 
Schedule already detail what fee codes and corresponding fees apply for 
each of these transactions for each capacity and product. The Exchange 
believes the proposed change eliminates unnecessary redundancy and 
eliminates potential confusion.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers the objectives of Section 6(b)(4),\11\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \12\ 
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, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendments to the Fees 
Schedule in connection with standard transaction rates for FLEX Micro 
Options transactions are reasonable, equitable and not unfairly 
discriminatory. Specifically, the Exchange believes that it is 
reasonable to assess fees for Customer, Market-Maker, Firm and Non-
Customer orders in FLEX Micro Options that are less than those fees for 
transactions in the corresponding standard RUT, SPX, MXEF, MXEA and DJX 
FLEX options (all of which overly the same respective indices as the 
proposed FLEX Micro Options) because FLEX Micro Options have a smaller 
notional value given their multiplier of one. Moreover, the Exchange 
believes the proposed transaction fees are reasonable as such fees 
reflect approximately 1/100th of the transaction fees (inclusive of 
surcharges)

[[Page 42225]]

assessed for the corresponding transactions in standard RUT, SPX, MXEF, 
MXEA and DJX FLEX options, which as discussed have a multiplier of 100 
instead of one like FLEX Micro Options. The Exchange believes its 
reasonable to exclude FLEX Micro Options from additional surcharges as 
TPHs will not be subject to such surcharges.
    The Exchange believes the proposed standard transaction rates and 
exclusion from certain surcharges are equitable and not unfairly 
discriminatory because they will apply automatically and uniformly to 
all capacities as applicable (i.e., Customer, Market-Make, Firm and 
Non-Customer), in FLEX Micro Options. The Exchange also notes that with 
respect to lower transaction rates for Customer transactions in certain 
FLEX Micro Options, there is a history in the options markets of 
providing preferential treatment to customers and customer order flow 
attracts additional liquidity to the Exchange, providing market 
participants with more trading opportunities and signaling an increase 
in Market-Maker activity, which facilitates tighter spreads. This may 
cause an additional corresponding increase in order flow from other 
market participants, contributing overall towards a robust and well-
balanced market ecosystem, particularly in a newly listed and traded 
product. The Exchange also believes that it is equitable and not 
unfairly discriminatory to propose lower transaction rates for certain 
Market-Maker and Firm orders in certain FLEX Micro Options because the 
Exchange recognizes that these market participants can provide key and 
distinct sources of liquidity, which is particularly important for a 
newly listed and traded options class on the Exchange. An increase in 
general market-making activity facilitates tighter spreads, which tend 
to signal additional corresponding increase in order flow from other 
market participants, ultimately incentivizing more overall order flow 
and improving liquidity levels and price transparency on the Exchange 
to the benefit of all market participants. Similarly, the Exchange also 
recognizes that Firms can be an important source of liquidity when they 
facilitate their own customers' trading activity, thus, adding 
transparency and promoting price discovery to the benefit of all market 
participants. The Exchange notes too that Market-Makers and Firms take 
on a number of obligations that other market participants do not have. 
For example, unlike other market participants, Market-Makers take on 
quoting obligations and other market making requirements and Firms must 
have higher capital requirements, clear trades for other market 
participants, and must be members of OCC. The Exchange also notes the 
proposal to not assess surcharges to FLEX Micro Options is equitable 
and not unfairly discriminatory as it applies to all market 
participants (i.e., no market participant will be subject to those 
surcharges).
    The Exchange believes that the proposed updates to the Fees 
Schedule in connection with the application (or rather exclusion) of 
fee programs to transactions in FLEX Micro Options are reasonable, 
equitable and not unfairly discriminatory. Particularly, the Exchange 
believes it is reasonable to exclude transactions in FLEX Micro Options 
from the: Liquidity Provider Sliding Scale, Liquidity Provider Sliding 
Scale Adjustment Table, Volume Incentive Program, Break-Up Credits, 
Affiliate Volume Plan, Clearing Trading Permit Holder Fee Cap, Floor 
Broker Sliding Scale Rebate Program, Program, and the ORS and CORS 
Programs in the same manner in which standard options on those same 
indices are excluded. The Exchange believes that excluding FLEX Micro 
Options transactions from certain fees programs is equitable and not 
unfairly discriminatory because the programs will equally not apply to, 
or exclude in the same manner, all market participants' orders in FLEX 
Micro Options. The Exchange believes it's reasonable, equitable and not 
unfairly discriminatory to exclude FLEX Micro transactions from the 
Marketing Fee and SCORe program as such programs similarly already 
exclude FLEX Options. Lastly, the Exchange believes it's reasonable, 
equitable, and not unfairly discriminatory to exclude FLEX Micro 
Options from the SPX/SPXW and SPESG Liquidity Provider Sliding Scale, 
Clearing Trading Permit Holder Proprietary Products Sliding Scale, 
Customer Large Trade Discount, Market-Maker Tier Appointment Fee 
thresholds, Floor Broker Trading Surcharge thresholds, Floor Broker ADV 
Discount, Floor Brokerage Fees Discount Scale, Floor Brokerage Fees, 
Frequent Trader, and the GTH Executing Agent Subsidy because the 
Exchange is not obligated to include any particular product in such 
pricing programs, and the exclusion applies to all market participants 
uniformly. Moreover, the Exchange notes that the proposed rule change 
does not alter any of the existing program rates or volume 
calculations, but instead, merely proposes not to include transactions 
in FLEX Micro Options in those programs and volume calculations.
    The Exchange lastly believes the proposed updates to footnotes 18, 
19 and 20 of the Fees Schedule makes the footnotes easier to read, 
eliminates redundancy between the Rate Tables and the footnotes and 
alleviates potential confusion as to the applicability of AIM-related 
fees, thereby removing impediments to and perfecting the mechanism of a 
free and open market and a national market system, and, in general, 
protecting investors and the public interest.

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

    The Exchange believes the proposed amendments to its Fee Schedule 
will not 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 FLEX Micro 
Options transaction fees for the separate types of market participants 
will be assessed automatically and uniformly to all similarly situated 
market participants. The Exchange again notes that there is a history 
in the options markets of providing preferential treatment to 
Customers, Market-Makers and Firms, as described above in the statutory 
basis section. Further, the proposed rule change will uniformly exclude 
all transactions in FLEX Micro Options from certain programs and fees/
surcharges as it currently does for many of the Exchange's other 
proprietary products, including another product with a one multiplier 
(i.e., NANOS).
    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 products exclusively listed on the 
Exchange. Additionally, 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 16% of the market share of executed volume of

[[Page 42226]]

options trades.\13\ 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.'' \14\ 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 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'. . . .''.\15\ 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.
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    \13\ See Cboe Global Markets, U.S. Options Market Volume Summary 
by Month (June 24, 2022), available at http://markets.cboe.com/us/options/market_share/.
    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \15\ 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)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \16\ and paragraph (f) of Rule 19b-4 \17\ 
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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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 [email protected]. Please include 
File Number SR-CBOE-2022-034 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-2022-034. 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-2022-034 
and should be submitted on or before August 4, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14997 Filed 7-13-22; 8:45 am]
BILLING CODE 8011-01-P