Document ID: SEC-2020-1799-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2020-11-10T05:00Z

[Federal Register Volume 85, Number 218 (Tuesday, November 10, 2020)]
[Notices]
[Pages 71705-71707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24883]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90332; File No. SR-CBOE-2020-107]

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

November 4, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 28, 2020, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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.

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 
Compression, or Position Compression Cross (``PCC''), orders, effective 
October 29, 2020.
    By way of background, the Exchange has historically permitted open 
outcry compression forums which allow Trading Permit Holders (``TPHs'') 
to reduce open interest in SPX options. Footnote 41 of the Fees 
Schedule currently provides a rebate of transaction fees, including the 
Index License Surcharge, for closing transactions involving SPX and 
SPXW compression-list positions executed in a compression forum. From 
March 16 to June 12, 2020, the Exchange's trading floor was closed due 
to the coronavirus pandemic. During that time, the Exchange operated in 
an all-electronic configuration, which would have prevented market 
participants from reducing open SPX interest in open outcry compression 
forums. As a result, the Exchange adopted Rule 5.24(e)(1)(E) to permit 
TPHs to reduce open interest in SPX options in electronic compression 
forums in the same manner as an open outcry compression forum (as set 
forth in Rule 5.88) while the trading floor was inoperable.\3\ Footnote 
12 of the Fees Schedule was also amended to provide a waiver for all 
transaction fees, including any applicable surcharges (e.g., Index 
License Surcharge and SPX/SPXW Execution Surcharges), for closing 
transactions involving SPX and SPXW compression-list positions executed 
in an electronic compression forum, like that of the waiver provided in 
footnote 41 for open outcry compression forums.\4\ The Exchange 
recently adopted Compression, or ``PCC'', orders that can be executed 
electronically or in open outcry on a permanent basis, and, as a 
result, removed Rule 5.24(e)(1)(E), as well as relocated and amended 
Rule 5.88.\5\ The Exchange notes that PCC

[[Page 71706]]

orders may be comprised of opening and closing positions. The Exchange 
plans to launch PCC order functionality on October 29, 2020.
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    \3\ See Securities Exchange Release No. 88490 (March 26, 2020), 
85 FR 18318 (April 1, 2020) (SR-CBOE-2020-026).
    \4\ See Securities Exchange Release No. 88678 (April 17, 2020), 
85 FR 22770 April 23, 2020) (SR-CBOE-2020-033).
    \5\ See Securities Exchange Release Nos. 89707 (August 28, 
2020), 85 FR 55040 (September 3, 2020) (SR-CBOE-2020-074) (Notice of 
Filing of a Proposed Rule Change Relating To Adopt Compression 
Orders); and 90179 (October 14, 2020), 85 FR 66590 (October 20, 
2020) (SR-CBOE-2020-074) (Order Granting Approval of a Proposed Rule 
Change To Adopt Position Compression Cross (``PCC'') Orders for 
SPX).
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    The Exchange proposes to amend the Fees Schedule in light of the 
adoption of PCC orders (i.e., compression orders) on a permanent basis. 
As noted above, footnote 12 currently provides that the Exchange shall 
waive transaction fees, including the Index License Surcharge and SPX/
SPXW Execution Surcharge, for closing transactions involving SPX and 
SPXW compression-list positions executed in a compression forum 
(pursuant to Rule 5.24) when the trading floor is inoperable. In order 
to receive a waiver of fees for compression forum transactions, a TPH 
must mark its orders in a form and manner determined by the Exchange to 
identify them as eligible for the compression rebates. Likewise, 
footnote 41 currently provides that the Exchange shall rebate 
transaction fees, including the Index License Surcharge, for closing 
transactions involving SPX and SPXW compression-list positions executed 
in a compression forum (pursuant to Rule 5.88). In order to receive 
either rebate, a TPH must mark its orders in a form and manner 
determined by the Exchange to identify them as eligible for the 
compression rebates. Pursuant to both footnote 12 and 41, orders 
identified as compression trades do not count towards any volume 
thresholds.\6\
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    \6\ This includes the following programs: (1) SPX Liquidity 
Provider Sliding Scale, (2) Clearing Trading Permit Holder 
Proprietary Products Sliding Scale, (3) Select Customer Options 
Reduction (``SCORe'') Program, (4) SPX/SPXW Market-Maker Tier 
Appointment Fees, (5) SPX/SPXW Floor Broker Trading Surcharge, (6) 
Floor Broker ADV Discount, (7) Floor Brokerage Fees Discount, and 
(8) Frequent Trader Program. See also Securities Exchange Release 
No. 88836 (May 7, 2020), 85 FR 28669 (May 13, 2020) (SR-CBOE-2020-
044).
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    The Exchange notes that the proposed rule change does not alter the 
current waiver already in place pursuant to footnote 12 for 
transactions in temporary electronic compression forums (when the 
Exchange's trading floor is inoperable) or rebate in place pursuant to 
footnote 41 for transactions in open outcry compression forums. 
Instead, the proposed rule change removes the electronic compression 
forum waiver language in footnote 12 and relocates it to footnote 41, 
as the waiver will now apply at all times, as PCC orders will be 
available at all times rather than only when the trading floor is 
inoperable. The proposed rule change updates and streamlines the 
compression waiver language in footnote 41 by replacing the language 
describing the prior compression forum process with ``PCC orders'', 
clarifying that the waiver will apply to PCC orders executed both 
electronically and in open outcry, removing references to closing 
transactions (as PCC orders may now be comprised of opening and closing 
positions) and removing references to prior Rules 5.24 and 5.88. 
Specifically, the proposed language in footnote 41 provides that the 
Exchange shall waive transaction fees, including the Index License 
Surcharge and SPX/SPXW Execution Surcharge, for PCC transactions 
executed electronically or in open outcry, as applicable.\7\ A PCC 
order submitted for execution in open outcry must be marked as 
``compression'' in order to receive waiver of fees for PCC orders. PCC 
transactions will not to count towards any volume thresholds. The 
Exchange notes that the proposed language provides for a waiver of 
transaction fees for all PCC orders, as is currently the case for 
electronic compression trades, instead of the rebate currently provided 
for compression trades in open outcry. This proposed rule change does 
not alter the ultimate amount charged or benefit provided to a TPH for 
compression transactions in open outcry, but instead removes the extra 
reimbursement step in the billing process and provides uniformity for 
the billing process across electronic and open outcry compression 
trades by waiving all compression transaction fees. Finally, the 
proposed rule change removes the requirement that in order to receive a 
waiver of fees for compression forum transactions, a TPH must mark its 
orders (for both electronic execution and open outcry) in a form and 
manner determined by the Exchange to identify them as eligible for the 
compression rebates. It replaces this former requirement with the 
requirement that only PCC orders submitted for execution in open outcry 
must be marked as ``compression'', as the System will now be able to 
automatically determine electronic PCC orders as ``compression'' 
without any other marking.
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    \7\ The proposed rule change also appends footnote 41 to the 
surcharges in the Fees Schedule to which the compression waiver for 
Rule 5.24 electronic compression trades applied, as the waiver will 
continue to apply for electronic PCC orders.
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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 
Section 6(b)(4) of the Act,\10\ 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\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed rule change is consistent with 
the Act, in that, it is reasonable, equitable and not unfairly 
discriminatory. The proposed rule change is reasonable because it does 
not alter the transaction fee waiver currently available for 
compression trades, but merely updates the waiver language to 
appropriately reflect its application to the permanent electronic 
compression orders (i.e., PCC orders) recently adopted by the Exchange 
and clarifies that only open outcry compression orders must be marked 
for open outcry execution. All compression transactions will continue 
not to count toward volume thresholds. Additionally, the Exchange notes 
that the proposed change to update the rebate applied to open outcry 
compression trades to a fee waiver is reasonable as it does not change 
the ultimate amount charged or benefit currently provided to a TPH for 
compression transactions, but instead removes the extra reimbursement 
step in the billing process and provides uniformity for the billing 
process across electronic and open outcry compression trades by waiving 
all compression transaction fees. Also, the Exchange believes that, 
generally, the transaction fee waiver in place for compression orders 
is reasonable and equitable because the compression of these positions 
would improve market liquidity by freeing capital currently tied up in 
positions for which there is a minimal chance that a significant loss 
would occur. Finally, the Exchange

[[Page 71707]]

believes that the proposed rule change is equitable and not unfairly 
discriminatory because the fee waiver will continue to apply in the 
same uniform manner for the same transactions, both electronically and 
in open outcry,\11\ for all TPHs that submit compression orders to the 
Exchange.
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    \11\ See supra note 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Exchange does not believe that the proposed rule change will impose 
any burden on intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
    The Exchange 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 
compression transaction fee waiver will apply to all TPHs that submit 
compression orders to the Exchange, as it does today and will to 
compression orders executed electronically and in open outcry. 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 transaction fee 
waiver will continue to apply to compression orders available only for 
Exchange proprietary products, SPX/SPXW.

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 \12\ and paragraph (f) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-2020-107 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2020-107. 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-2020-107 and should be submitted on 
or before December 1, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-24883 Filed 11-9-20; 8:45 am]
BILLING CODE 8011-01-P