83 FR 28873 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Physical Port Fees for Cboe Options

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 120 (June 21, 2018)

[Federal Register Volume 83, Number 120 (Thursday, June 21, 2018)]
[Notices]
[Pages 28873-28874]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-13302]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83453; File No. SR-CBOE-2018-041]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Physical Port Fees for Cboe Options

June 15, 2018,
    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 June 1, 2018, 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

    The Exchange proposes to amend its Fees Schedule. 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 for Network Access Ports 
used for Disaster Recovery, effective June 1, 2018. Currently, the 
Exchange assesses $250 per port, per month for 1 gigabit (Gbps) and 10 
Gbps Network Access Ports that connect to the Exchange's Disaster 
Recovery Systems in Chicago (``Disaster Recovery Ports''). The Exchange 
proposes to increase its fees for Disaster Recovery Ports. 
Specifically, the Exchange proposes to assess a monthly fee of $2,000 
per 1 Gbps Disaster Recovery Port and a monthly fee of $6,000 per 10 
Gbps Disaster Recovery Port. This amount will continue to enable the 
Exchange to maintain the Disaster Recovery Ports in case they become 
necessary. The Exchange notes that the Disaster Recovery Ports may now 
also be used to access the Disaster Recovery Systems for the following 
affiliate exchanges: Cboe BZX Exchange, Inc., Cboe EDGX Exchange, Inc., 
Cboe EDGA Exchange, Inc., Cboe C2 Exchange, Inc., Cboe BYX Exchange, 
Inc. and Cboe Futures Exchange, LLC (``Affiliated Exchanges''). The 
Exchange proposes to provide that market participants will only be 
assessed a single fee for any Disaster Recovery Port that also accesses 
the Disaster Recovery Systems for these exchanges.\3\
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    \3\ For example, if a market participant uses a 1 Gbps Disaster 
Recovery Port to connect to the Disaster Recovery Systems for both 
Cboe Options and EDGX, the market participant would only be assessed 
one monthly fee of $2,000.
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    Lastly, the Exchange notes that the Fees Schedule currently 
provides that separate Network Access Port fees are assessed for 
unicast (orders, quotes) and multicast (market data) connectivity and 
includes a parenthetical that clarifies that ``if a TPH uses the 1 Gbps 
Disaster Recovery Network Access Port for unicast and multicast 
connectivity, the TPH will be charged $500 per month''. The exchange 
notes that certain Network Access Ports that connect to the Disaster 
Recovery Systems are able to receive both multicast and unicast 
traffic, whereas other Network Access Ports can only receive one type 
of connectivity each (thus requiring a market participants to maintain 
two ports if that market participant desires both types of 
connectivity). Accordingly, market participants are currently assessed 
fees based on connectivity (i.e., a TPH is charged two port fees 
regardless of whether it receives both unicast and multicast 
connectivity over a single port or each type of connectivity over two 
separate ports). The Exchange notes that physical ports, including 
Disaster Recovery Ports, at its Affiliated Exchanges allow for unicast 
and multicast connectivity to be received through a single port and 
that those Exchanges therefore assess only a ``per port'' fee (instead 
of a ``per connectivity type'' fee). Since market participants will be 
able to use Disaster Recovery Ports to access the Disaster Recovery 
Systems of Cboe Options and its Affiliated Exchanges, the Exchange 
proposes to no longer charge for unicast and multicast connectivity 
separately for Disaster Recovery Ports. Therefore, the Exchange 
proposes to eliminate the clarification pertaining to Disaster Recovery 
Ports currently in the parenthetical in the Notes section. Similarly, 
the Exchange also proposes to make clear in the Fees Schedule that if a 
market participant maintains two Disaster Recovery Ports of the same 
size in order to receive unicast and multicast connectivity (i.e., they 
cannot receive both connectivity types over 1 port), then the Exchange 
will only assess one Disaster Recovery Port fee (e.g., if a TPH has two 
1 Gb Disaster Recovery Ports, one of which receives unicast traffic and 
the other of which only receives multicast traffic, that TPH will be 
assessed $2,000, instead of $4,000).
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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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,

[[Page 28874]]

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 the Section 6(b)(5) \6\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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    The Exchange believes the proposed fee increase is reasonable 
because it will assist the Exchange in recouping costs associated with 
maintaining its Disaster Recovery Ports and Disaster Recovery Systems 
in case of necessity. The Exchange also notes that it hasn't amended 
the fee amount since it adopted the fee in 2012.\7\ Additionally, the 
proposed fees are the same as are concurrently being proposed for its 
Affiliate Exchanges and other exchanges assess similar fees for 
connection to their Disaster Recovery Systems by their market 
participants.\8\ The Exchange believes it's reasonable, equitable and 
not unfairly discriminatory to assess the Disaster Recovery Port fee 
only once if it connects with another affiliate exchange because only 
one port is being used and the Exchange does not wish to charge 
multiple fees for the same port. Similarly, the Exchange believes it's 
reasonable to assess only one fee for multicast and unicast 
connectivity, regardless if both connectivity types are available on a 
single port or separate ports, because the Exchange's affiliate 
exchanges do not charge port fees based on connectivity types. Lastly, 
the Exchange believes the proposed changes are equitable and 
nondiscriminatory because it applies uniformly to all market 
participants.
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    \7\ See Securities Exchange Act Release No. 68342 (December 3, 
2012) 77 FR 73096 (December 7, 2012) (SR-CBOE-2012-114).
    \8\ See e.g., NYSE Arca Equities Fees and Charges, NYSE Arca 
Marketplace: Other Fees and Charges, Connectivity Fees. See also, 
Nasdaq Phlx LLC Pricing Schedule, Section XI.
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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 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 proposed change 
applies uniformly to all market participants. The Exchange does not 
believe that the proposed rule change will impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. Market participants may opt to disfavor the Exchange's 
pricing if they believe that alternatives offer them better value. 
Further, excessive fees for connectivity would serve to impair an 
exchange's ability to compete for order flow rather than burdening 
competition.

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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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-2018-041 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-2018-041. 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-2018-041 and should be submitted on 
or before July 12, 2018.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13302 Filed 6-20-18; 8:45 am]
 BILLING CODE 8011-01-P