83 FR 52285 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 200 (October 16, 2018)

[Federal Register Volume 83, Number 200 (Tuesday, October 16, 2018)]
[Notices]
[Pages 52285-52287]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-22425]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84395; File No. SR-CBOE-2018-065]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule

October 10, 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 September 28, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 
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

[[Page 52286]]

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, effective October 
1, 2018 to amend its fee incentive program for Lead Market-Makers 
(``LMM'') in VIX during Global Trading Hours (``GTH''). By way of 
background, pursuant to Footnote 38 of the Fees Schedule, if a LMM in 
VIX options during GTH (1) provides continuous electronic quotes in at 
least the lesser of 99% of the non-adjusted series or 100% of the non-
adjusted series minus one call-put pair in an GTH allocated class 
(excluding intra-day add-on series on the day during which such series 
are added for trading) and (2) enters opening quotes within five 
minutes of the initiation of an opening rotation in any series that is 
not open due to the lack of a quote, provided that the LMM will not be 
required to enter opening quotes in more than the same percentage of 
series set forth in clause (1) for at least 90% of the trading days 
during GTH in a given month, the LMM will receive a rebate for that 
month in the amount of a pro-rata share of a compensation pool equal to 
$15,000 times the number of LMMs in that class \3\ (or pro-rated if an 
appointment begins after the first trading day of the month or ends 
prior to the last trading day of the month). The Exchange proposes to 
amend Footnote 38 to increase the compensation pool for VIX LMMs to 
$20,000 per LMM. The Exchange also proposes to update the example of 
how the compensation pool works for the Fees Schedule. The Exchange 
notes that GTH LMMs are not obligated to satisfy the heightened quoting 
standards described in the Fees Schedule. Rather, the LMMs are eligible 
to receive a rebate if they satisfy the heightened standards, which the 
Exchange believes will encourage LMMs to provide liquidity during GTH. 
Additionally, the Exchange notes that LMMs may have to undertake other 
expenses to be able to quote at the heightened standard during GTH, 
such as purchase additional bandwidth.
---------------------------------------------------------------------------

    \3\ For example, if there is one LMM appointed in VIX, a 
compensation pool will be established each month totaling $20,000. 
If that LMM meets the heightened continuous quoting standard in VIX 
in a month, that LMM will receive $20,000. If there are two LMMs 
appointed in VIX, a compensation pool will be established each month 
totaling $40,000. If each LMM meets the heightened continuous 
quoting standard in VIX during a month, each will receive $20,000. 
If only one LMM meets the heightened continuous quoting standard in 
VIX during a month, that LMM would receive $40,000 and the other one 
would receive nothing.
---------------------------------------------------------------------------

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, 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes it is reasonable, equitable 
and not unfairly discriminatory to offer LMMs in VIX during GTH a 
rebate if they meet a certain heightened quoting standard (described 
above) to encourage LMMs in VIX to provide increased liquidity. More 
specifically, the Exchange believes the amount of the amended rebate 
($20,000) is reasonable because it provides an increased rebate for 
meeting the heightened quoting standard and takes into consideration 
additional costs an LMM may incur. Particularly, the Exchange believes 
the proposed amount is such that it will incentivize an appointed LMM 
to meet the GTH quoting standards for VIX. The Exchange notes the 
proposed amount is also in line with incentives given to LMMs for other 
products.\7\ Additionally, if a LMM does not satisfy the heightened 
quoting standard, then it will not receive the rebate. The Exchange 
believes it is equitable and not unfairly discriminatory to only offer 
the rebate to LMMs because it benefits all market participants in GTH 
to encourage LMMs to satisfy the heightened quoting standards, which 
may increase liquidity during those hours and provide more trading 
opportunities and tighter spreads.
---------------------------------------------------------------------------

    \7\ See e.g., Cboe Options Fees Schedule, MSCI LMM Incentive 
Program.
---------------------------------------------------------------------------

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 amended rebate is 
intended to encourage LMMs to bring liquidity in VIX during GTH, which 
benefits all market participants. Furthermore, 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 VIX is a proprietary 
product that will only be traded on Cboe Options. To the extent that 
the proposed changes make Cboe Options a more attractive marketplace 
for market participants at other exchanges, such market participants 
are welcome to become Cboe Options market participants.

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 \8\ and paragraph (f) of Rule 19b-4 \9\ 
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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f).

---------------------------------------------------------------------------

[[Page 52287]]

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-2018-065 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-2018-065. 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-2018-065 and should be submitted on 
or before November 6, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22425 Filed 10-15-18; 8:45 am]
 BILLING CODE 8011-01-P