[Federal Register Volume 85, Number 77 (Tuesday, April 21, 2020)]
[Notices]
[Pages 22212-22216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08368]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88638; File No. SR-CBOE-2020-032]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend Its Fees Schedule
April 15, 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 April 1, 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
[[Page 22213]]
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make various amendments to its Fees
Schedule, including amending Footnote 12 of the Fees Schedule,
effective April 1, 2020. By way of background, Footnote 12 governs
pricing changes in the event the Exchange trading floor becomes
inoperable. Particularly, in the event the trading floor becomes
inoperable, the Exchange will continue to operate in a screen-based
only environment using a floorless configuration of the System that is
operational while the trading floor facility is inoperable. The
Exchange would operate using that configuration only until the
Exchange's trading floor facility became operational. Open outcry
trading would not be available in the event the trading floor becomes
inoperable. The exchange initially adopted Footnote 12 in anticipation
of the temporary closing of the trading floor in the middle of March
2020 to help prevent the spread of the novel coronavirus. As of March
16, 2020, the Exchange suspended open outcry trading and is currently
operating in an all-electronic configuration. In light of the extended
closure of the trading floor, the Exchange proposes to update a number
of its previous fee changes and adopt new pricing changes that the
Exchange believes is appropriate when the trading floor is inoperable
for an extended period of time.
Footnote 12 of the Fees Schedule currently provides that in the
event the trading floor becomes inoperable, holders of a Market-Maker
Floor Permit will be entitled to act as an electronic Market-Maker and
holders of a Floor Broker Permit will be entitled to access the
Exchange electronically to submit orders to the Exchange, at no further
cost. Generally, in order to act as a Market-Maker electronically a
Trading Permit Holder (``TPH'') must purchase a Market-Maker Electronic
Access Permit (``MM EAP''). In order to access the Exchange
electronically and submit orders to the Exchange, a TPH must purchase
an ``Electronic Access Permit'' (``EAP''). Conversely, TPHs that wish
to act as a Market-Maker on the floor have to purchase a Market-Maker
Permit and TPHs that wish to act as a Floor Broker on the floor of the
Exchange have to purchase a Floor Broker Permit. Effective March 16,
2020, the Exchange proposed to provide that holders of a Market-Maker
Floor Permit and Floor Broker Permit were entitled to operate
electronically in their registered capacity at no additional cost
(i.e., not charge for an additional Market-Maker Electronic Access
Permit or Electronic Access Permit). This proposal was adopted in order
to encourage floor-based market participants to continue to participate
on the Exchange electronically if the trading floor becomes inoperable
for the remainder of the month.\3\ The Exchange now proposes to provide
that any floor Market-Maker or Floor Broker that did not also already
hold a MM EAP or EAP, respectively, will be assessed the monthly fee
for one MM EAP or EAP, respectively, should such participant wish to
continue to participate electronically on the Exchange while the
trading floor is inoperable. The Exchange also proposes to provide that
in the event that the trading floor reopens mid-month, that floor
Trading Permit fees would be pro-rated based on the remaining trading
days in that calendar month.
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\3\ See Securities and Exchange Act Release No. 88426 (March 19,
2020), 85 FR 16978 (March 25, 2020) (SR-CBOE-2020-021).
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The Exchange next proposes to eliminate an exception relating to
the Market-Maker EAP Appointments Sliding Scale. Currently, Footnote 12
provides that for purposes of the Market-Maker EAP Appointments Sliding
Scale, the total quantity will be determined by the highest quantity
used at any point during the month excluding additional quantity added
during the time the Exchange operates in a screen-based only
environment. By of way of background, Electronic Market-Makers must
select appointments and are charged for one or more ``Appointment
Units'' (which are scaled from 1 ``unit'' to more than 5 ``units''),
depending on which classes they elect appointments in. Appointment
weights for each appointed class are set forth in Cboe Options Rule
5.50(g) and are summed for each Market-Maker in order to determine the
total Appointment Units, to which fees will be assessed. To determine
final fees, historically the total quantity was determined by the
highest quantity used at any point during the month. In anticipation of
the trading floor closing mid-month, the Exchange amended its fees
schedule to exclude from the total Appointment Units any additional
quantity added during the time the Exchange operates in a screen-based
only environment, in order to encourage continued participation on the
Exchange by Market-Makers for the remainder of the month. The Exchange
wishes to eliminate this exclusion in light of the continued trading
floor closure, as Market-Makers would otherwise be able to add
appointments unrelated to the floor closure throughout the month at no
cost.
The Exchange next proposes to waive the following Facility Fees for
as long as the trading floor is inoperable as such services and
products cannot be utilized while the trading floor is closed:
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Description Fee
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Standard Booth Rental Fees............. $195/month (Perimeter); $550/
month (OEX, Dow Jones/MNX/
VIX).
Non Standard Booth Rental Fees......... $1,250/month; $1.70 per sq ft./
month.
Access Badges.......................... $130/month (Floor Manager); $70/
month (Clerks).
Printer Maintenance.................... $75/month.
Wireless Phone Rental.................. $110/month.
ExchangeFone Maintenance............... $57/month.
Single Line Maintenance................ $11.50/month.
Lines--Intra Floor..................... $57.75/per month.
Lines--Voice Circuits.................. $16/month.
Data Circuits (DC) at Local Carrier $16/month.
(entrance).
DC @In-House Frame--Lines Between Comms $12.75/month.
Center and Trading Floor.
[[Page 22214]]
DC @In-House Frame--Lines between Local $12.75/month.
Carrier and Comms Center.
DC @In-House Frame--Lines Direct from $12.75/month.
Local Carrier to Trading Floor.
Arbitrage Phone Positions.............. $550/month.
PAR Workstation........................ $125/month.
Satellite TV........................... $50/month.
Cboe Options Trading Floor Terminal.... $250/month.
Thomas/Refinitive/Other (Basic Service) $425/month.
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Should the trading floor re-open mid-month, the Exchange shall
assess the fees listed above on a pro-rated basis for the remainder of
the month.
The Exchange next proposes to amend a current waiver of Routing
Fees. Currently, the Exchange assesses certain fees in connection with
orders routed to other exchanges. The Fees Schedule provides however,
that it will not pass through or otherwise charge customer orders (of
any size) routed to other exchanges that were originally transmitted to
the Exchange from the trading floor through an
Exchange[hyphen]sponsored terminal (e.g., a PULSe Workstation).\4\ The
Exchange proposes to eliminate the requirement that a customer order be
transmitted to the Exchange from the trading floor in the event the
trading floor is inoperable. More specifically, the Exchange proposes
to provide that it will not pass through or otherwise charge customer
orders (of any size) routed to other exchanges that were originally
transmitted to the Exchange from a registered Floor Broker through an
Exchange[hyphen]sponsored terminal (e.g., a PULSe Workstation). The
Exchange notes that the primary objective of routing fees are to recoup
some of the costs associated with large electronic orders that are
initially transmitted to the Exchange by parties who, in many
instances, could be seeking to avoid being assessed another market's
transaction fees. The Exchange adopted the current waiver because
orders that are initially transmitted from the trading floor are not
attempting to avoid fees since they incur brokerage commission charges
in connection with manual handling.\5\ Rather, orders that are
generally transmitted from the floor are large, complex orders that are
primarily executed on the Exchange, which only are transmitted to away
markets if, during their execution on the Exchange, it is necessary to
sweep some away markets. As such, the Exchange believed it was
appropriate to waive linkage fees for these orders. The Exchange
believes the waiver should apply to the same type of orders even when
the Exchange operates in a screen-based only environment. Particularly,
the Exchange notes that customer orders may still incur brokerage
commission charges when the operates in a screen-based only environment
in connection with handling by registered Floor Brokers (who may
participate electronically when the trading floor is inoperable, as
discussed above). As such, the Exchange believes it's appropriate to
continue to apply the waiver to such orders that are still handled by
Floor Brokers, albeit in a screen-based only environment instead of the
trading floor, and still otherwise incur brokerage commission charges.
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\4\ See Cboe Options Fees Schedule, Routing Fees.
\5\ See Securities and Exchange Act Release No. 87799 (December
18, 2019), 84 FR 71021 (December 26, 2019) (SR-CBOE-2019-124).
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Lastly, the Exchange proposes to eliminate language in the notes
section of the Logical Connectivity Fees Table. Currently, fees for one
FIX Logical Port used to access PULSe and one FIX Logical Port
connection used to access Cboe Silexx (for FLEX trading purposes) will
be waived per TPH. The Exchange notes that when it adopted this fee
waiver, Cboe Silexx only supported direct access to the Exchange for
trading of FLEX options. The Exchange anticipates expanding the current
Cboe Silexx platform to also support the trading of non-FLEX options in
the near future. As such, the Exchange proposes to eliminate ``(for
FLEX trading purposes)'' such that the waiver may apply to the use of
Silexx for trading of FLEX and non-FLEX options.
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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ 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,\8\ 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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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed rule change to allow holders of
Floor Trading Permits to operate in their registered capacity
electronically at the cost of one MM EAP or EAP, respectively, is
reasonable as such market participants would be paying the same amount
as any other market participant that holds a MM EAP or EAP,
respectively. The Exchange notes floor participants would also pay less
than the amount otherwise charged for floor Trading Permits. The
Exchange notes that it wishes to encourage floor-based market
participants to continue to participate on the Exchange electronically
when the Exchange must operate in a screen-based only environment, but
also notes it does not believe it's appropriate to allow such TPHs to
participate on the Exchange indefinitely at no cost, while other
participants are still subject to Trading Permit fees. The Exchange
believes the proposed rule change is equitable and not unfairly
discriminatory as all such floor participants will be treated equally.
Indeed, all similarly situated market participants will be treated
equally as all such market participants will be subject to the same
electronic Trading Permit fees.
The Exchange believes the proposal to eliminate the exclusion of
Appointment
[[Page 22215]]
Units added during a time when the Exchange operates in a screen-based
only environment toward the total quantity of Appointment Units for
purposes of calculating the Market-Maker EAP Appointments Sliding Scale
is reasonable, as the Exchange now expects the trading floor to be
inoperable for an extended period of time. Particularly, as noted
above, the Exchange adopted the current exclusion in anticipation of
closing the trading floor mid-month (in March 2020) in order to
encourage Market-Makers to continue to quote for the remainder of the
month in classes electronically that they quoted on the trading floor.
The Exchange notes however, that if the trading floor remains closed
for an extended period of time, the current exclusion would ``freeze''
each Market-Makers Appointment Unit weight to the highest quantity
maintained between March 1-March 13, 2020 (the last day the trading
floor was open). For example, absent the proposed change, if the
trading floor remains closed for the entire calendar months of April
and May, any Market-Maker, including Market-Makers that historically
only participated electronically, would be able to continuously add new
appointments at no further cost, even if such appointment was unrelated
to the trading floor being unavailable. The Exchange also notes that it
is not required to maintain the current exclusion in the Fees Schedule.
The proposed change is equitable and not unfairly discriminatory
because it will apply uniformly to all similarly situated market
participants, as it will apply to all Market-Makers.
The Exchange believes the proposal to waive the identified facility
fees is reasonable as market participants won't be subject to such
fees. The listed facility fees each apply to a product or service that
may only be utilized when the trading floor is open and operable. The
Exchange believes it's therefore appropriate to waive such fees when
the Exchange operates in a screen-based only environment. The Exchange
also believes its appropriate to pro-rate such fees if the trading
floor reopens mid-month as market participants will have the benefit of
using such services/products for the remainder of the month. The
Exchange believes the proposed rule change is equitable and not
unfairly discriminatory as it applies equally to all market
participants.
The Exchange next believes it's reasonable and appropriate to waive
certain routing fees for customer orders that were transmitted by a
registered Floor Broker through an Exchange sponsored terminal
(currently only PULSe workstation) when the trading floor is inoperable
as customers would not be subject to these fees. As noted above, the
Exchange adopted the current waiver because orders that are initially
transmitted from the trading floor are not attempting to avoid fees
since they incur brokerage commission charges in connection with manual
handling.\9\ Rather, orders that are generally transmitted from the
floor are large, complex orders that are primarily executed on the
Exchange, which only are transmitted to away markets if, during their
execution on the Exchange, it is necessary to sweep some away markets.
As such, the Exchange believed it was appropriate to waive linkage fees
for these orders. The Exchange believes it's reasonable and appropriate
that the waiver should apply to the same type of orders even when the
Exchange operates in a screen-based only environment. As discussed,
customer orders may still incur brokerage commission charges when the
Exchange operates in a screen-based only environment in connection with
handling by registered Floor Brokers (who may participate
electronically when the trading floor is inoperable). As such, the
Exchange believes it's appropriate to modify the waiver to eliminate
the requirement that such order be transmitted from the trading floor
and instead provide that it be transmitted by a registered Floor
Broker, as such order is still incurring a brokerage commission charge
and otherwise being handled by a Floor Broker (albeit in an electronic
environment instead of on the trading floor). The proposed waiver is
equitable and not unfairly discriminatory as it would apply to all
similarly situated market participants.
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\9\ See Securities and Exchange Act Release No. 87799 (December
18, 2019), 84 FR 71021 (December 26, 2019) (SR-CBOE-2019-124).
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Lastly, the Exchange believes its proposal to modify the notes
section of the Logical Connectivity Fees Table in order to provide that
the current fee waiver for one FIX Logical Port may apply to Cboe
Silexx for both FLEX and non-FLEX trading purposes is reasonable as
such users of Cboe Silexx that trade non-FLEX options will not be
subject to the FIX Logical Port fee. As discussed, when the Exchange
adopted the current logical connectivity fees, Cboe Silexx only
supported direct access for trading of FLEX options only. As the
Exchange proposes to expand the Cboe Silexx platform shortly to support
the trading of non-FLEX options, the Exchange believes it's appropriate
to eliminate the ``for FLEX trading purposes'' language and apply the
fee waiver to Cboe Silexx generally. The proposed waiver is equitable
and not unfairly discriminatory as it would apply to all similarly
situated market participants.
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 competition that are not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes the
proposed changes relating to Footnote 12 are not intended to address
any competitive issue, but rather to address fee changes it believes
are reasonable because the trading floor remains inoperable, thereby
only permitting electronic participation on the Exchange. 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 changes
apply equally to all similarly situated market participants.
Additionally, the proposed change to eliminate the restriction that the
FIX Logical Port fee waivers applies to Cboe Silexx for FLEX trading
only is also not intended to address any competitive issue, but rather
extend the current waiver to the new version of Silexx that will also
support non-FLEX trading, which would apply to all users of Silexx. The
Exchange does not believe that the proposed rule changes will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
proposed changes only affect trading on the Exchange in limited
circumstances.
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
[[Page 22216]]
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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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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-2020-032 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-2020-032. 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-2020-032 and should be submitted on
or before May 12, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08368 Filed 4-20-20; 8:45 am]
BILLING CODE 8011-01-P