[Federal Register Volume 84, Number 218 (Tuesday, November 12, 2019)]
[Notices]
[Pages 61110-61113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24493]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87460; File No. SR-CboeEDGX-2019-066]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Adopt Fees for a New Data Product on its Equity Options Platform
(``EDGX Options'') To Be Known as Open-Close Data
November 5, 2019.
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 29, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'') is
filing with the Securities and Exchange Commission (``Commission'') a
proposed rule change to adopt fees for a new data product on its equity
options platform (``EDGX Options'') to be known as Open-Close Data. 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://markets.cboe.com/us/options/regulation/rule_filings/edgx/), 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 adopt fees for a new data product on EDGX
Options known as Open-Close Data, which is available for purchase to
EDGX Options Members and Non-Members.\3\ Cboe LiveVol, LLC
(``LiveVol''), a wholly owned subsidiary of the Exchange's parent
company, Cboe Global Markets, Inc., will make the Open-Close Data
available for purchase to Members and Non-Members on the LiveVol
DataShop website (datashop.cboe.com). The Exchange proposes to amend
its Fee Schedule to adopt fees for the product.\4\
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\3\ See Securities Exchange Act Release No. 86806 (August 29,
2019), 84 FR 46767 (September 5, 2019) (SR-CboeEDGX-2019-054).
\4\ The Exchange initially filed the proposed fees on business
date August 30, 2019 (SR-CboeEDGX-2019-055). On business date
October 29, 2019, the Exchange withdrew that filing and submitted
this filing.
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The Exchange recently introduced the Open-Close Data product. Open-
Close Data is a volume summary file for trading activity on EDGX
Options. The Exchange notes it is proprietary EDGX Options trade data
and does not include trade data from any other exchanges. It is also a
historical data product and not a real time data feed. The Open-Close
Data summarizes and buckets the volume by origin (customer,
professional customer, broker-dealer, and market maker), buying/
selling, and opening/closing criteria. The customer and professional
customer volume is further broken down into trade size buckets (less
than 100 contracts, 100-199 contracts, greater than 199 contracts). The
data currently goes back to January 2018 and contains all series in an
underlying security if it has
[[Page 61111]]
volume.\5\ The Exchange anticipates a wide variety of market
participants to purchase Open-Close Data, including, but not limited
to, individual customers, buy-side investors, investment banks and
academic institutions. For example, the Exchange notes that academic
institutions may utilize Open-Close Data and as a result promote
research and studies of the options industry to the benefit of all
market participants. The Exchange believes the Open-Close Data product
may also provide helpful trading information regarding investor
sentiment and may be used to create and test trading models and
analytical strategies and provides comprehensive insight into trading
on EDGX Options. It is a completely voluntary product, in that the
Exchange is not required by any rule or regulation to make this data
available and that potential subscribers may purchase it only if they
voluntarily choose to do so. The Exchange notes that its affiliate,
Cboe Exchange, Inc. (``Cboe Options''), as well as other exchanges,
offer a similar data product.\6\
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\5\ The Open-Close data file format specifications can be found
at https://datashop.cboe.com/Themes/Livevol/Content/static/OpenCloseSpecification.pdf.
\6\ See Securities Exchange Act Release No. 55062 (January 8,
2007), 72 FR 2048 (January 17, 2007) (approving SR-CBOE-2006-88);
See also Securities Exchange Act Release No. 56254 (August 15,
2007), 72 FR 47104 (August 22, 2007) (SR-ISE-2007-70).
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The Exchange proposes to provide in its Fee Schedule that Members
and non-Members may purchase Open-Close Data on a subscription basis
(end of day file) or by ad hoc request for a specified month
(historical file). The Exchange proposes to assess a monthly fee of
$500 for subscribing to a daily update which will consist of Open/Close
data covering all Exchange-listed securities. Members and non-Members
purchasing Open/Close data on a subscription basis will receive access
to a daily data file. The Exchange proposes to assess a fee of $400 per
request per month for an ad-hoc request of historical Open/Close data
covering all Exchange-listed securities. An ad-hoc request can be for
any number of months beginning with January 2018 for which the data is
available.\7\ The proposed subscription and ad-hoc fees will apply both
to Members or non-Members. The Exchange notes that other exchanges,
including its affiliate Exchange Cboe Exchange, Inc. (``Cboe Options'')
provide similar data products that may be purchased on both a
subscription and ad-hoc basis and are similarly priced.\8\
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\7\ For example, a Member or non-Member that requests historical
Open/Close Data for the months of October 2018 and November 2018,
would be assessed a total of $800. The Exchange notes that it may
make historical data prior to January 2018 available in the future
and that such historical data would be available to all Member or
non-Member.
\8\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and to protect investors and the public
interest, and that it is not designed to permit unfair discrimination
among customers, brokers, or dealers. The Exchange also believes that
its proposal to adopt fees for Open-Close Data is consistent with
Section 6(b) of the Act in general, and furthers the objectives of
Section 6(b)(4) of the Act \11\ in particular, in that it is an
equitable allocation of dues, fees and other charges among its members
and other recipients of Exchange data.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78f(b)(4).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data. Particularly, Open-Close Data further
broadens the availability of U.S. option market data to investors
consistent with the principles of Regulation NMS. The data product also
promotes increased transparency through the dissemination of Open-Close
Data and benefits investors by providing access to the Open-Close Data,
which may promote better informed trading, as well as research and
studies of the options industry. Particularly, information regarding
opening and closing activity across different option series may
indicate investor sentiment, which can be helpful research and/or
trading information. Subscribers to the data may be able to enhance
their ability to analyze option trade and volume data, and create and
test trading models and analytical strategies. The Exchange believes
Open-Close Data provides a valuable tool that subscribers can use to
gain comprehensive insight into the trading activity in a particular
series, but also emphasizes such data is not necessary for trading.
Moreover, the Exchange's affiliate Cboe Options, along with other
exchanges, also offer a similar data product.
The Exchange operates in a highly competitive environment. Indeed,
there are currently 16 registered options exchanges that trade options.
The Commission has repeatedly expressed its preference for competition
over regulatory intervention in determining prices, products, and
services in the securities markets. Particularly, 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.'' \12\ Making similar data
products available to market participants fosters competition in the
marketplace, and constrains the ability of exchanges to charge
supracompetitive fees. In the event that a market participant views one
exchange's data product as more or less attractive than the competition
they can and do switch between similar products. The proposed fees are
a result of the competitive environment, as the Exchange seeks to adopt
fees to attract purchasers of the recently introduced Open-Close Data
product.
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\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes the proposed fees are reasonable as the
proposed fees are both modest and similar to, or even lower than, the
fees assessed by other exchanges that provide similar data
products.\13\ Indeed, proposing fees that are excessively higher than
established fees for similar data products would simply serve to reduce
demand for the Exchange's data product, which as noted, is entirely
optional. Like the Exchange's Open-Close Data product, other exchanges
offer similar data products that each provide insight into trading on
those markets and may likewise aid in assessing investor sentiment.
Although each of these similar open-close data products provide only
proprietary trade data and not trade data from other exchanges, it's
possible investors are still able to gauge overall investor sentiment
across different option series based on open and closing interest on
any one
[[Page 61112]]
exchange.\14\ Similarly, market participants may be able to analyze
option trade and volume data, and create and test trading models and
analytical strategies using only open-close data relating to trading
activity on one or more of the other markets that provide similar data
products. As such, if a market participant views another exchange's
open-close data as more attractive than its Open-Close Data product,
then such market participant can merely choose not to purchase the
Exchange's Open-Close Data and instead purchase another exchange's
open-close data product, which offer similar data points, albeit based
on that other market's trading activity.
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\13\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A.
\14\ The exchange notes that its open-close data product does
not include data on any exclusive, singly-listed option series.
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The Exchange also believes the proposed fees are reasonable as they
would support the Open-Close Data product, which is designed to aid
investors by providing insight into trading on EDGX Options. The Open-
Close Data would provide options market participants with valuable
information about opening and closing transactions executed on the
Exchange, similar to other historical trade data products offered by
competing options exchanges. In turn, this data would assist market
participants in gauging investor sentiment and trading activity,
resulting in potentially better informed trading decisions. As noted
above, users may also use such data to create and test trading models
and analytical strategies.
Selling historical market data, such as Open-Close Data, is also a
means by which exchanges compete to attract business. To the extent
that the Exchange is successful in attracting subscribers for the Open-
Close Data, it may earn trading revenues and further enhance the value
of its data products. If the market deems the proposed fees to be
unfair or inequitable, firms can diminish or discontinue their use of
the data and/or avail themselves of similar products offered by other
exchanges.\15\ The Exchange therefore believes that the proposed fees
for Open-Close Data reflect the competitive environment and would be
properly assessed on Member or non-Member users. The Exchange also
believes the proposed fees are equitable and not unfairly
discriminatory as the fees would apply equally to all users who choose
to purchase such data. The Exchange's proposed fees would not
differentiate between subscribers that purchase Open-Close Data, and
are set at a modest level that would allow any interested Member or
non-Member to purchase such data based on their business needs.
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\15\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A.
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As noted above, the Exchange anticipates a wide variety of market
participants to purchase Open-Close Data, including but not limited to
individual customers, buy-side investors, investment banks and academic
institutions. For example, on its affiliate exchange Cboe Options,
which also offers an Open-Close Data product, approximately 38% of
purchases of historical ad hoc Open-Close Data files are individuals,
33% are buy-side investors or investment banks and 25% are academic
institutions. Accordingly, the Exchange anticipates that open-close
data may be used not just for commercial or monetizing purposes, but
also for educational use and research. The Exchange reiterates that the
decision as to whether or not to purchase the Open-Close Data is
entirely optional for all potential subscribers. Indeed, no market
participant is required to purchase the Open-Close Data, and the
Exchange is not required to make the Open-Close Data available to all
investors. Rather, the Exchange is voluntarily making historical Open-
Close Data available, as requested by customers, and market
participants may choose to receive (and pay for) this data based on
their own business needs. Potential purchasers may request the data at
any time if they believe it to be valuable, or may decline to purchase
such data.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Rather, the
Exchange believes that the proposal will promote competition by
permitting the Exchange to sell a data product similar to those offered
by other competitor options exchanges.\16\ The Exchange made Open-Close
Data available for EDGX Options in order to keep pace with changes in
the industry and evolving customer needs, and believes the data product
will contribute to robust competition among national securities
exchanges. At least three other U.S. options exchanges offer a market
data product that is substantially similar to the Open-Close Data. As a
result, the Exchange believes this proposed rule change permits fair
competition among national securities exchanges.
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\16\ Id.
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Furthermore, the Exchange operates in a highly competitive
environment, and its ability to price Open-Close Data is constrained by
competition among exchanges that offer similar data products to their
customers. As discussed, there are currently a number of similar
products available to market participants and investors. At least three
other U.S. options exchanges offer a market data product that is
substantially similar to the Open-Close Data, which the Exchange must
consider in its pricing discipline in order to compete for the market
data.\17\ For example, proposing fees that are excessively higher than
established fees for similar data products would simply serve to reduce
demand for the Exchange's data product, which as discussed, market
participants are under no obligation to utilize. In this competitive
environment, potential purchasers are free to choose which, if any,
similar product to purchase to satisfy their need for market
information. As a result, the Exchange believes this proposed rule
change permits fair competition among national securities exchanges.
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\17\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section
10.A and Nasdaq PHLX Options 7 Pricing Schedule, Section 10, PHLX
Options Trade Outline (``PHOTO'').
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The Exchange also does not believe the proposed fees would cause
any unnecessary or in appropriate burden on intermarket competition as
other exchanges are free to introduce their own comparable data product
and lower their prices to better compete with the Exchange's offering.
The Exchange does not believe the proposed rule change would cause any
unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposed product and fees apply uniformly to any
purchaser, in that it does not differentiate between subscribers that
purchase Open-Close Data. The proposed fees are set at a modest level
that would allow any interested Member or non-Member to purchase such
data based on their business needs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written 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)
[[Page 61113]]
of the Act \18\ and paragraph (f) of Rule 19b-4 \19\ 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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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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-CboeEDGX-2019-066 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-CboeEDGX-2019-066. 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-CboeEDGX-2019-066 and should be
submitted on or before December 3, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24493 Filed 11-8-19; 8:45 am]
BILLING CODE 8011-01-P