[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