[Federal Register Volume 84, Number 218 (Tuesday, November 12, 2019)]
[Notices]
[Pages 61088-61091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24504]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87461; File No. SR-CboeBZX-2019-093]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Adopt Fees for a New Data Product on Its Equity Options Platform 
(``BZX Options'') To Be Known as Open-Close Data

November 5, 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 October 29, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'') is 
filing with the Securities and Exchange Commission (``Commission'') a 
proposed rule change to adopt fees for a new data product on its equity 
options platform (``BZX Options'') to be known as Open-Close Data. 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://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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 adopt fees for a new data product on BZX 
Options known as Open-Close Data, which is available for purchase to 
BZX Options Members and Non-Members.\3\ Cboe LiveVol, LLC 
(``LiveVol''), a wholly owned subsidiary of the Exchange's parent 
company, Cboe Global Markets, Inc., will make the Open-Close Data 
available for purchase to Members and Non-Members on the LiveVol 
DataShop website (datashop.cboe.com). The Exchange proposes to amend 
its Fee Schedule to adopt fees for the product.\4\
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    \3\ See Securities Exchange Act Release No. 86811 (August 29, 
2019), 84 FR 46765 (September 5, 2019) (SR-CboeBZX-2019-079).
    \4\ The Exchange initially filed the proposed fees on business 
date August 30, 2019 (SR-CboeBZX-2019-080). On business date October 
29, 2019, the Exchange withdrew that filing and submitted this 
filing.
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    The Exchange recently introduced the Open-Close Data product. Open-
Close Data is a volume summary file for trading activity on BZX 
Options. The Exchange notes it is proprietary BZX Options trade data 
and does not include trade data from any other exchanges. It is also a 
historical data product and not a real time data feed. The Open-Close 
Data summarizes and buckets the volume by origin (customer, 
professional customer, broker-dealer, and market maker), buying/
selling, and opening/closing criteria. The customer and professional 
customer volume is further broken down into trade size buckets (less 
than 100 contracts, 100-199 contracts, greater than 199 contracts). The 
data currently goes back to January 2018 and contains all series in an 
underlying security if it has volume.\5\ The Exchange anticipates a 
wide variety of market participants to purchase Open-Close Data, 
including, but not limited to, individual customers, buy-side 
investors, investment banks and academic institutions. For example, the 
Exchange notes that academic institutions may utilize Open-Close Data 
and as a result promote research and studies of the options industry to 
the benefit of all market participants. The Exchange believes the Open-
Close Data product may also provide helpful trading information 
regarding investor sentiment and may be used to create

[[Page 61089]]

and test trading models and analytical strategies and provides 
comprehensive insight into trading on BZX Options. It is a completely 
voluntary product, in that the Exchange is not required by any rule or 
regulation to make this data available and that potential subscribers 
may purchase it only if they voluntarily choose to do so. The Exchange 
notes that its affiliate, Cboe Exchange, Inc. (``Cboe Options''), as 
well as other exchanges, offer a similar data product.\6\
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    \5\ The Open-Close data file format specifications can be found 
at https://datashop.cboe.com/Themes/Livevol/Content/static/OpenCloseSpecification.pdf.
    \6\ See Securities Exchange Act Release No. 55062 (January 8, 
2007), 72 FR 2048 (January 17, 2007) (approving SR-CBOE-2006-88); 
See also Securities Exchange Act Release No. 56254 (August 15, 
2007), 72 FR 47104 (August 22, 2007) (SR-ISE-2007-70).
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    The Exchange proposes to provide in its Fee Schedule that Members 
and non-Members may purchase Open-Close Data on a subscription basis 
(end of day file) or by ad hoc request for a specified month 
(historical file). The Exchange proposes to assess a monthly fee of 
$500 for subscribing to a daily update which will consist of Open/Close 
data covering all Exchange-listed securities. Members and non-Members 
purchasing Open/Close data on a subscription basis will receive access 
to a daily data file. The Exchange proposes to assess a fee of $400 per 
request per month for an ad-hoc request of historical Open/Close data 
covering all Exchange-listed securities. An ad-hoc request can be for 
any number of months beginning with January 2018 for which the data is 
available.\7\ The proposed subscription and ad-hoc fees will apply both 
to Members or non-Members. The Exchange notes that other exchanges, 
including its affiliate Exchange Cboe Exchange, Inc. (``Cboe Options'') 
provide similar data products that may be purchased on both a 
subscription and ad-hoc basis and are similarly priced.\8\
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    \7\ For example, a Member or non-Member that requests historical 
Open/Close Data for the months of October 2018 and November 2018, 
would be assessed a total of $800. The Exchange notes that it may 
make historical data prior to January 2018 available in the future 
and that such historical data would be available to all Member or 
non-Member.
    \8\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\10\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and to protect investors and the public 
interest, and that it is not designed to permit unfair discrimination 
among customers, brokers, or dealers. The Exchange also believes that 
its proposal to adopt fees for Open-Close Data is consistent with 
Section 6(b) of the Act in general, and furthers the objectives of 
Section 6(b)(4) of the Act \11\ in particular, in that it is an 
equitable allocation of dues, fees and other charges among its members 
and other recipients of Exchange data.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data. Particularly, Open-Close Data further 
broadens the availability of U.S. option market data to investors 
consistent with the principles of Regulation NMS. The data product also 
promotes increased transparency through the dissemination of Open-Close 
Data and benefits investors by providing access to the Open-Close Data, 
which may promote better informed trading, as well as research and 
studies of the options industry. Particularly, information regarding 
opening and closing activity across different option series may 
indicate investor sentiment, which can be helpful research and/or 
trading information. Subscribers to the data may be able to enhance 
their ability to analyze option trade and volume data, and create and 
test trading models and analytical strategies. The Exchange believes 
Open-Close Data provides a valuable tool that subscribers can use to 
gain comprehensive insight into the trading activity in a particular 
series, but also emphasizes such data is not necessary for trading. 
Moreover, the Exchange's affiliate Cboe Options, along with other 
exchanges, also offer a similar data product.
    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered options exchanges that trade options. 
The Commission has repeatedly expressed its preference for competition 
over regulatory intervention in determining prices, products, and 
services in the securities markets. Particularly, in Regulation NMS, 
the Commission highlighted the importance of market forces in 
determining prices and SRO revenues and, also, recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \12\ Making similar data 
products available to market participants fosters competition in the 
marketplace, and constrains the ability of exchanges to charge 
supracompetitive fees. In the event that a market participant views one 
exchange's data product as more or less attractive than the competition 
they can and do switch between similar products. The proposed fees are 
a result of the competitive environment, as the Exchange seeks to adopt 
fees to attract purchasers of the recently introduced Open-Close Data 
product.
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    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes the proposed fees are reasonable as the 
proposed fees are both modest and similar to, or even lower than, the 
fees assessed by other exchanges that provide similar data 
products.\13\ Indeed, proposing fees that are excessively higher than 
established fees for similar data products would simply serve to reduce 
demand for the Exchange's data product, which as noted, is entirely 
optional. Like the Exchange's Open-Close Data product, other exchanges 
offer similar data products that each provide insight into trading on 
those markets and may likewise aid in assessing investor sentiment. 
Although each of these similar open-close data products provide only 
proprietary trade data and not trade data from other exchanges, it's 
possible investors are still able to gauge overall investor sentiment 
across different option series based on open and closing interest on 
any one exchange.\14\ Similarly, market participants may be able to 
analyze option trade and volume data, and create and test trading 
models and analytical strategies using only open-close data relating to 
trading activity on one or more of the other markets that provide 
similar data products. As such, if a market participant views another 
exchange's open-close data as more attractive than its Open-Close Data 
product, then such market participant can merely choose not to purchase 
the Exchange's Open-Close Data and instead purchase another exchange's 
open-close data product, which offer similar data

[[Page 61090]]

points, albeit based on that other market's trading activity.
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    \13\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
    \14\ The exchange notes that its open-close data product does 
not include data on any exclusive, singly-listed option series.
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    The Exchange also believes the proposed fees are reasonable as they 
would support the Open-Close Data product, which is designed to aid 
investors by providing insight into trading on BZX Options. The Open-
Close Data would provide options market participants with valuable 
information about opening and closing transactions executed on the 
Exchange, similar to other historical trade data products offered by 
competing options exchanges. In turn, this data would assist market 
participants in gauging investor sentiment and trading activity, 
resulting in potentially better informed trading decisions. As noted 
above, users may also use such data to create and test trading models 
and analytical strategies.
    Selling historical market data, such as Open-Close Data, is also a 
means by which exchanges compete to attract business. To the extent 
that the Exchange is successful in attracting subscribers for the Open-
Close Data, it may earn trading revenues and further enhance the value 
of its data products. If the market deems the proposed fees to be 
unfair or inequitable, firms can diminish or discontinue their use of 
the data and/or avail themselves of similar products offered by other 
exchanges.\15\ The Exchange therefore believes that the proposed fees 
for Open-Close Data reflect the competitive environment and would be 
properly assessed on Member or non-Member users. The Exchange also 
believes the proposed fees are equitable and not unfairly 
discriminatory as the fees would apply equally to all users who choose 
to purchase such data. The Exchange's proposed fees would not 
differentiate between subscribers that purchase Open-Close Data, and 
are set at a modest level that would allow any interested Member or 
non-Member to purchase such data based on their business needs.
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    \15\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A.
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    As noted above, the Exchange anticipates a wide variety of market 
participants to purchase Open-Close Data, including but not limited to 
individual customers, buy-side investors, investment banks and academic 
institutions. For example, on its affiliate exchange Cboe Options, 
which also offers an Open-Close Data product, approximately 38% of 
purchases of historical ad hoc Open-Close Data files are individuals, 
33% are buy-side investors or investment banks and 25% are academic 
institutions. Accordingly, the Exchange anticipates that open-close 
data may be used not just for commercial or monetizing purposes, but 
also for educational use and research. The Exchange reiterates that the 
decision as to whether or not to purchase the Open-Close Data is 
entirely optional for all potential subscribers. Indeed, no market 
participant is required to purchase the Open-Close Data, and the 
Exchange is not required to make the Open-Close Data available to all 
investors. Rather, the Exchange is voluntarily making historical Open-
Close Data available, as requested by customers, and market 
participants may choose to receive (and pay for) this data based on 
their own business needs. Potential purchasers may request the data at 
any time if they believe it to be valuable, or may decline to purchase 
such data.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, the 
Exchange believes that the proposal will promote competition by 
permitting the Exchange to sell a data product similar to those offered 
by other competitor options exchanges.\16\ The Exchange made Open-Close 
Data available for BZX Options in order to keep pace with changes in 
the industry and evolving customer needs, and believes the data product 
will contribute to robust competition among national securities 
exchanges. At least three other U.S. options exchanges offer a market 
data product that is substantially similar to the Open-Close Data. As a 
result, the Exchange believes this proposed rule change permits fair 
competition among national securities exchanges.
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    \16\ Id.
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    Furthermore, the Exchange operates in a highly competitive 
environment, and its ability to price Open-Close Data is constrained by 
competition among exchanges that offer similar data products to their 
customers. As discussed, there are currently a number of similar 
products available to market participants and investors. At least three 
other U.S. options exchanges offer a market data product that is 
substantially similar to the Open-Close Data, which the Exchange must 
consider in its pricing discipline in order to compete for the market 
data.\17\ For example, proposing fees that are excessively higher than 
established fees for similar data products would simply serve to reduce 
demand for the Exchange's data product, which as discussed, market 
participants are under no obligation to utilize. In this competitive 
environment, potential purchasers are free to choose which, if any, 
similar product to purchase to satisfy their need for market 
information. As a result, the Exchange believes this proposed rule 
change permits fair competition among national securities exchanges.
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    \17\ See e.g., Cboe Options Fees Schedule, Livevol Fees, Open-
Close Data. See also Nasdaq ISE Options 7 Pricing Schedule, Section 
10.A and Nasdaq PHLX Options 7 Pricing Schedule, Section 10, PHLX 
Options Trade Outline (``PHOTO'').
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    The Exchange also does not believe the proposed fees would cause 
any unnecessary or inappropriate burden on intermarket competition as 
other exchanges are free to introduce their own comparable data product 
and lower their prices to better compete with the Exchange's offering. 
The Exchange does not believe the proposed rule change would cause any 
unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposed product and fees apply uniformly to any 
purchaser, in that it does not differentiate between subscribers that 
purchase Open-Close Data. The proposed fees are set at a modest level 
that would allow any interested Member or non-Member to purchase such 
data based on their business needs.

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

    The Exchange has neither solicited nor received written 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 \18\ and paragraph (f) of Rule 19b-4 \19\ 
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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

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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-CboeBZX-2019-093 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-CboeBZX-2019-093. 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-CboeBZX-2019-093 and  should be 
submitted on or before December 3, 2019.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24504 Filed 11-8-19; 8:45 am]
 BILLING CODE 8011-01-P


