[Federal Register Volume 85, Number 99 (Thursday, May 21, 2020)]
[Notices]
[Pages 31012-31014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10928]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88883; File No. SR-CBOE-2020-045]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
May 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 May 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 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 amend its fees schedule in connection with
the fees related to orders and auction responses executed in S&P 500
Index (``SPX'') and SPX Weekly (``SPXW'') options in the Automated
Improvement Mechanism (``AIM'') Auction.
AIM includes functionality in which a Trading Permit Holder
(``TPH'') (an ``Initiating TPH'') may electronically submit for
execution an order it represents as agent on behalf of a customer,\3\
broker dealer, or any other
[[Page 31013]]
person or entity (``Agency Order'') against any other order it
represents as agent, as well as against principal interest in AIM (an
``Initiating Order''), provided it submits the Agency Order for
electronic execution into an AIM Auction.\4\ The Exchange may designate
any class of options traded on Cboe Options as eligible for AIM. The
Exchange notes that all Users, other than the Initiating TPH, may
submit responses to an Auction (``AIM Responses''). AIM Auctions take
into account AIM Responses to the applicable Auction as well as contra
interest resting on the Cboe Options Book at the conclusion of the
Auction (``unrelated orders''), regardless of whether such unrelated
orders were already present on the Book when the Agency Order was
received by the Exchange or were received after the Exchange commenced
the applicable Auction. If contracts remain from one or more unrelated
orders at the time the Auction ends, they are considered for
participation in the AIM order allocation process.
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\3\ The term ``customer'' means a Public Customer or a broker-
dealer. The term ``Public Customer'' means a person that is not a
broker-dealer. See Rule 1.1.
\4\ See Rule 5.37 (AIM); Rule 5.38 (Complex AIM); and Rule 5.73
(FLEX AIM).
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As of March 16, 2020, the Exchange suspended open outcry trading to
help prevent the spread of the novel coronavirus and is currently
operating in an all-electronic configuration. When the Exchange is
operating in a hybrid environment with open outcry and electronic
trading, the Exchange does not activate AIM in SPX and SPXW options.
However, when the Exchange suspended open outcry trading, the Exchange
activated AIM for SPX and SPXW options in an all-electronic environment
to provide TPHs with a mechanism to execute crosses electronically, as
they could no longer represent those crosses for open outcry execution.
Footnote 12 in the Fees Schedule provides specifically that in the
event the Exchange operates in a screen-based only environment, AIM may
be available for SPX and SPXW during Regular Trading Hours. In light of
the extended closure of the trading floor, the Exchange proposes to
adopt new pricing changes and update a previous fee change that the
Exchange believes is appropriate when the trading floor is inoperable
for an extended period of time.
Specifically, the Exchange proposes to adopt an AIM Contra
Surcharge of $0.10 per contract for AIM Contra orders, and an AIM
Response Surcharge of $0.05 per contract for AIM Response orders,
executed in SPX and SPXW and applicable to all market participants. The
Exchange also proposes to amend footnote 12, which governs pricing
changes in the event the Exchange trading floor becomes inoperable, to
provide clarity in that the AIM Contra Surcharge and AIM Response
Surcharge will apply to all SPX/SPXW AIM Contra and AIM Response/
Priority Response orders, respectively, when the Exchange operates in a
screen-based only environment.
The Exchange also proposes to amend the AIM Execution Surcharge
Fee,\5\ which also applies when the Exchange operates in a screen-based
only environment to all market participant AIM Agency/Primary orders in
SPX/SPXW,\6\ from $0.05 per contract to $0.10 per contract.
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\5\ Currently, this fee is displayed in one line item as ``AIM
and RFC Execution Surcharge''. In light of the proposed change only
to the AIM Execution Surcharge, the proposed fee change updates this
into two separate line items, ``AIM Agency/Primary Surcharge Fee''
and ``RFC Execution Surcharge Fee''. The Exchange also notes that it
adds ``Agency/Primary'' to the title of the AIM Execution Surcharge
Fee to add additional clarity as to which type of AIM orders the
surcharge applies (as currently noted in footnote 12 of the Fees
Schedule).
\6\ See Cboe Options Fees Schedule, footnote 12.
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As stated, since the trading floor has become inoperable, the only
execution opportunities currently available for SPX and SPXW are
electronic executions. The Exchange still wishes to encourage floor
brokers to continue to conduct business on the Exchange, and, in order
to approximate the trading floor environment electronically, the
Exchange has activated AIM for SPX/SPXW, which historically have not
been designated as eligible for AIM Auctions while the trading floor is
operable. As such, the Exchange does not wish to discourage floor
brokers from executing SPX and SPXW volume via AIM when the trading
floor is inoperable, yet it also wishes to continue to assess fees for
volume usually applicable to open-outcry trading, which volume has
recently been moved to electronic channels. Due to the increased number
of orders executed via AIM as a result of the transition of SPX and
SPXW to an all-electronic trading environment, the proposed fees are
designed to allow the Exchange to recoup the costs associated with
implementing and maintaining AIM for SPX/SPXW while the trading floor
remains inoperable.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act,\7\ in general, and furthers the requirements
of Section 6(b)(4),\8\ in particular, as it is designed to provide for
the equitable allocation of reasonable dues, fees and other charges
among its facilities and does not unfairly discriminate between
customers, issuers, brokers or dealers.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that its proposed adoption of a surcharge for
AIM Response and AIM Contra orders in SPX and SPXW, as well as amending
the surcharge for AIM Agency/Primary executions is consistent with
Section 6(b)(4) of the Act in that the proposal is reasonable,
equitable and not unfairly discriminatory. The Exchange believes that
it is reasonable to assess a surcharge of $0.05 for all AIM Responses,
$0.10 for all AIM Contra orders, and $0.10 for all AIM Agency/Primary
orders in SPX/SPXW while AIM is activated for SPX/SPXW in the current
screen-based only environment because it is intended to recoup the
costs associated with implementing and maintaining AIM for orders in
SPX/SPXW. Indeed, the Exchange has experienced a significant increase
in SPX/SPXW AIM orders since the activation of AIM in such classes, as
the closure of the Exchange's trading floor essentially eliminated the
sole mechanism by which TPHs could cross orders in SPX/SPXW.
The Exchange also believes that the proposed fees in connection
with AIM Responses and AIM Contra, and AIM Agency/Primary orders are
reasonable and equitable because they do not represent a significant
departure from, or are less than, other surcharge fees provided by the
Fees Schedule for executions in SPX and other index classes. For
example, the current Fees Schedule provides for a surcharge of $0.25
exotic surcharge applicable to all Customer orders, as well as a $0.20
surcharge for Customer Maker, non-turner orders executed in VIX.\9\
Additionally, the Exchange notes that, while the trading floor remains
inoperable, it continues to assess an execution surcharge of $0.21 per
contract for non-AIM, non-Market-Maker orders executed in SPX and an
execution surcharge of $0.13 per contract for non-AIM, non-Market-Maker
orders executed in SPXW.\10\
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\9\ Applies to all such Customer orders in VIX with a premium of
$1.00 or greater.
\10\ See Cboe Options Fees Schedule, footnote 12.
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Finally, the Exchange believes that the proposed fees are equitable
and not unfairly discriminatory because the proposed fees for AIM
Responses and AIM Contra, as well as AIM Agency/Primary orders will
apply equally to all market participants, i.e., all TPHs will be
assessed the same amount per qualifying order. In addition to this, the
Exchange believes that adopting a lesser
[[Page 31014]]
surcharge for AIM Responses in SPX/SPXW is equitable and not unfairly
discriminatory as it is designed to encourage more Responses in AIM
while it is activated in SPX thereby increasing the opportunities for
price improvement for all orders executed during the AIM Auction. The
Exchange believes that increased opportunities for price improvement
through the AIM Auctions would, in turn, facilitate a potential
increase in SPX liquidity through the AIM Auctions, which would benefit
all participants in the market, particularly while the trading floor
remains inoperable.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket or intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act. The
Exchange notes the proposed changes are not intended to address any
competitive issue, but rather to address fee changes it believes are
reasonable now that the trading floor is currently 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 in the same manner to all market participants submitting
qualifying orders (i.e., AIM Responses and AIM Contra, as well as AIM
Agency/Primary orders) in SPX/SPXW. In addition to this, and as stated
above, the Exchange does not believe the proposed rule change to adopt
a lesser fee for AIM Responses in SPX/SPXW will impose any burden on
intramarket competition because it is designed to encourage AIM
Responses in SPX/SPXW. A high level of AIM Responses would increase the
opportunities for price improvement during the AIM Auctions, in turn,
potentially attracting further liquidity to the AIM Auctions in SPX/
SPXW to the benefit of all market participants. 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 SPX and SPXW options are
proprietary products that are only traded on Cboe Options and, in
addition to this, 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 \11\ and paragraph (f) of Rule 19b-4 \12\
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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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-2020-045 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-2020-045. 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-2020-045 and should be submitted on
or before June 11, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10928 Filed 5-20-20; 8:45 am]
BILLING CODE 8011-01-P