[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16111-16114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07617]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85625; File No. SR-CboeEDGX-2019-020]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating To Add Certain Fees Related to the Listing and Trading of 
Options Contracts on the Mini-SPX Index

April 11, 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 April 5, 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 and II

[[Page 16112]]

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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to 
add certain fees related to the listing and trading of options 
contracts on the Mini-SPX Index (``XSP''). The text of the proposed 
rule change is attached as Exhibit 5 [sic].
    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
    On April 8, 2019, the Exchange's equity options platform (``EDGX 
Options'') will begin listing XSP options for trading.\3\ Accordingly, 
the Exchange proposes to amend its Fee Schedule for EDGX Options to 
add: (i) Fee codes for XSP options that add or remove liquidity on the 
Exchange; (ii) Fee codes for XSP options executed through the Bats 
Auction Mechanism (``BAM''); (iii) Fee codes for complex orders in XSP 
options; (iv) Fee codes for XSP options that are routed away from the 
Exchange; and (v) to update the applicable fee codes under the Step Up 
Mechanism (``SUM'') Auction Pricing Tier. The proposed changes will be 
effective April 8, 2019.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 85182 (February 22, 
2019), 84 FR 6846 (February 28, 2019) (Notice of Deemed Approval of 
a Proposed Rule Change To Permit the Listing and Trading of P.M.-
Settled Series on Certain Broad-Based Index Options on a Pilot 
Basis) (SR-CboeEDGX-2018-037), which deemed the Exchange's proposed 
rule change to permit the listing and trading of P.M. settled XSP 
options with third-Friday-of-the-month expiration dates to have been 
approved January 28, 2019.
---------------------------------------------------------------------------

Proposed Fee Codes for XSP Options--Add or Remove Liquidity
    Proposed fee code XM will be appended to all Market Maker orders in 
XSP options that add liquidity, and will result in a fee of $0.20 per 
contract. Proposed fee code XF will be appended to all Firm orders in 
XSP options that add or remove liquidity, and will result in a fee of 
$0.45 per contract. Proposed fee code XC will be appended to all 
Customer orders in XSP options that add or remove liquidity, and will 
receive a rebate of $0.05 per contract. Proposed fee code XN will be 
appended to all Non-Customer or Non-Market Maker orders in XSP options 
that add or remove liquidity, and will result in a fee of $0.48. 
Proposed fee code XO will be appended to all orders in XSP options that 
trade on the open, and will be free.
Proposed Fee Codes for XSP Options--BAM Orders
    Proposed fee code XD will be appended to all BAM Customer orders in 
XSP options, which will be free. Proposed fee code XB will be appended 
to all BAM Customer-to-Customer Immediate Cross orders, which will also 
be free.
Proposed Fee Codes for XSP Options--Complex Orders
    Proposed fee code XP will be appended to all Customer complex 
orders executed on the complex order book (``COB'') against a Non-
Customer contra party order in XSP options that add or remove 
liquidity, and will receive a rebate of $0.45 per contract. Proposed 
fee code XL will be appended to all Customer complex orders executed on 
the COB against a Customer contra party order in XSP options. Such 
orders will be free. Proposed fee code XV will be appended to all 
Customer complex orders that are not executed on the COB but instead 
leg into the Simple Book in XSP options. Such orders will also be free.
Proposed Fee Codes for XSP Options--Routed Away
    Proposed fee code XR will be appended to all Customer orders in XSP 
options that are routed away from the Exchange and executed at another 
exchange, and will result in a fee of $0.25 per contract. Proposed Fee 
code XT will be appended to all Non-Customer orders in XSP options that 
are routed away from the Exchange and executed at another exchange, and 
will result in a fee of $0.90 per contract. Proposed Fee code XS will 
be appended to all orders in XSP options that route to another exchange 
at the open, and will be free.
Proposed Fee Codes for XSP Options Applicable to the SUM Auction 
Pricing Tier
    The Exchange also proposes to add proposed fee codes XM, XF, XC, 
and XN to the applicable fee codes under footnote 3 for the SUM Auction 
Pricing Tier. Currently, under this tier, orders yielding the 
applicable fee codes (currently, there are 16 applicable fee codes) may 
receive an additional rebate of $0.05 per contract if the Member 
responds to and executes against an order subject to the SUM Auction. 
This pricing tier encourages Members to respond to SUM auctions.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the Section 6 of the Act,\4\ in general, and Section 6(b)(4),\5\ 
in particular, as it is designed to provide for the equitable 
allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities.
---------------------------------------------------------------------------

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

    Specifically, the Exchange believes it is reasonable to charge 
different fee amounts to different user types in the manner proposed 
because the proposed fees are consistent with the price differentiation 
and type of Member transactions that exists today on the Exchange's 
affiliated exchange, Cboe Exchange, Inc. (``Cboe Options'') for index 
option products, including XSP options.\6\ Additionally, the Exchange 
believes the proposed fee amounts for XSP orders are reasonable because 
the proposed fee amounts are within the range of the transaction fee 
amounts charged (or not charged, as is the case for Cboe Options 
Customer orders in XSP options) for orders in XSP options at Cboe 
Options.\7\ The Exchange also notes that the proposed fees are 
reasonable as the Exchange's affiliated exchange, Cboe BZX Exchange, 
Inc. (``BZX Options'') recently added comparable fee codes for a newly 
listed index option product, the Russell 2000 Index options 
(``RUT'').\8\ The Exchange

[[Page 16113]]

believes these types of fee codes for newly or recently listed index 
options are reasonable because they promote and encourage trading in 
such products.
---------------------------------------------------------------------------

    \6\ See Cboe Options Fees Schedule, Index Options Rate Table.
    \7\ See Cboe Options Fees Schedule, Index Options Rate Table, 
which shows that standard transaction fees for all index products 
(including XSP) orders range from $0.00 per contract to $0.75 per 
contract.
    \8\ See Securities Exchange Act Release No. 84401 (October 11, 
2018), 83 FR 52591 (October 17, 2018) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change Related to Fees on 
Cboe BZX Exchange, Inc.) (SR-CboeBZX-2018-0750 [sic]).
---------------------------------------------------------------------------

    The Exchange also believes that it is equitable and not unfairly 
discriminatory to assess lower fees or enhanced rebates to Customers as 
compared to other market participants because Customer order flow 
enhances liquidity on the Exchange for the benefit of all market 
participants. Specifically, Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
Market Makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
Moreover, the options industry has a long history of providing 
preferential pricing to Customers, and the Exchange's current Fee 
Schedule currently does so in many places, as do the fees structures of 
multiple other exchanges. The Exchange notes that all fee amounts 
applicable to Customers will be applied equally to all Customers, i.e., 
all Customers will be assessed the same amount.
    Additionally, the Exchange believes that it is equitable and not 
unfairly discriminatory to assess lower fees to Market Makers as 
compared to other market participants other than Customers because 
Market Makers, unlike other market participants, take on a number of 
obligations, including quoting obligations, that other market 
participants do not have. Further, these lower fees offered to Market 
Makers are intended to incent Market Makers to quote and trade more on 
EDGX Options, thereby providing more trading opportunities for all 
market participants. The Exchange notes that all fee amounts applicable 
to Market Makers will be applied equally to all Market Makers, i.e., 
all Market Makers will be assessed the same amount. Similarly, the 
Exchange notes that the XSP fee amounts for each separate type of other 
market participant will be assessed equally to all such market 
participants, i.e., all Firm orders will be assessed the same amount, 
and all Non-Customer and Non-Market Maker orders will be assessed the 
same amount. The Exchange also believes the lower fees assessed for 
Firm orders in XSP, as compared to Non-Customer or Non-Market Maker 
orders, are equitable and not unfairly discriminatory because the 
Exchange recognizes that Firms can be an important source of liquidity 
when they facilitate their own customers' trading activity, in turn, 
adding transparency and promoting price discovery to the benefit of all 
market participants.
    The Exchange believes its proposed fees for XSP orders that are 
routed away from the Exchange are reasonable taking into account 
routing costs and also notes that the proposed fees are in line with 
amounts assessed by other exchanges.\9\ For the reasons described 
above, the Exchange also believes that it is equitable and not unfairly 
discriminatory to assess lower routing fees to Customers as compared to 
other market participants. The Exchange notes that routing through the 
Exchange is voluntary and market participants can readily direct order 
flow to another exchange if they deem Exchange fee levels to be 
excessive.
---------------------------------------------------------------------------

    \9\ See C2 Fees Schedule, Linkage Routing Fees. See also BZX 
Options Fee Schedule, Fee Codes and Associated Fees.
---------------------------------------------------------------------------

    Finally, the Exchange believes that it is reasonable to apply fee 
codes XM, XF, XC, and XN under footnote 3 for the SUM Auction Pricing 
Tier because various other comparable fee codes are currently applied 
to the SUM Auction Pricing Tier and orders yielding these fee codes 
currently receive the additional rebate. The Exchange believes that 
adding the proposed fee codes regarding orders in XSP options to the 
SUM Auction Pricing Tier is reasonable because an additional rebate per 
contract in XSP options is designed to increase liquidity and price 
discovery by encouraging Members to enter orders in newly listed XSP 
options in response to SUM auctions on the Exchange. Moreover, the 
Exchange believes the proposed additional fee codes eligible for the 
additional rebate under the SUM Auction Pricing Tier is equitable and 
not unfairly discriminatory because it is applied uniformly to all 
Members yielding the applicable fee codes.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendments to its Fee Schedule 
will not 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 XSP fee amounts for 
each separate type of market participant will be assessed equally to 
all such market participants. While different fees are assessed to 
different market participants in some circumstances, the obligations 
and circumstances between these market participants differ, as 
discussed above. For example, Market Makers have quoting obligations 
that are not applicable to other market participants. Further, the 
proposed fees structure for XSP is intended to encourage more trading 
of XSP, which brings liquidity to the Exchange and benefits all market 
participants.
    The Exchange also 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 the 
proposed XSP fees are in line with amounts assessed by other exchanges. 
The Exchange notes that to the extent that the proposed fee rates and 
rebates for certain orders in XSP options make the Exchange a more 
attractive venue for market participants than other exchanges, market 
participants are welcome to become Members and execute such orders on 
the Exchange. Also, as stated, market participants are free to direct 
order flow to other competing venues if they deem the Exchange's fees 
excessive.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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.

[[Page 16114]]

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-2019-020 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-2019-020. 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-2019-020, and should be 
submitted on or before May 8, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-07617 Filed 4-16-19; 8:45 am]
 BILLING CODE 8011-01-P


