[Federal Register Volume 85, Number 197 (Friday, October 9, 2020)]
[Notices]
[Pages 64189-64194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22378]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90093; File No. SR-CBOE-2020-088]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Update Its Fees Schedule in Connection With the Exchange's Plans To 
List and Trade Options on the S&P 500 ESG Index (``SPESG'')

October 5, 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 September 23, 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 update its Fees Schedule in connection with the Exchange's plans to 
list and trade options on the S&P 500 ESG Index (``SPESG''). 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 
its plans to list and trade SPESG, effective September 21, 2020.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
September 18, 2020 (SR-CBOE-2020-087). On September 23, 2020, the 
Exchange withdrew that filing and submitted this filing.
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    By way of background, the S&P 500 ESG Index is a broad-based, 
market-capitalization-weighted index that is designed to measure the 
performance of securities meeting sustainability criteria, while 
maintaining similar overall industry group weights as the S&P 500. Each 
constituent of a S&P 500 ESG Index is a constituent of the S&P 500 
Index. S&P Dow Jones Indices' (``S&P DJI'') assigns constituents to a 
S&P 500 ESG Index based on S&P DJI ESG Scores and other environmental, 
social and governance (``ESG'') data to select companies, targeting 75% 
of the market capitalization of each global industry classification 
standard (``GICS'') industry group within the S&P 500. Because of the 
relation between the S&P 500 ESG Index and the S&P 500, which will 
likely result in market participants' investment and hedging strategies 
consisting of options over both, the Exchange will allow the same 
monthly expirations, settlement and exercise style, Market-Maker 
appointment weights, as the other options on the S&P 500 (``SPX'').\4\ 
The Exchange now proposes to amend its Fees Schedule to accommodate the 
planned listing and trading of SPESG. The proposed changes amend the 
Fees Schedule so that the majority of the existing transactions fees 
and programs currently applicable to trading in SPX will also apply to 
trading in SPESG.
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    \4\ See Securities Exchange Release No. 89749 (September 2, 
2020), 85 FR 55723 (September 9, 2020) (SR-CBOE-2020-080), which 
amends certain Exchange Rules in connection with the Exchange's 
plans to list and trade S&P 500 ESG Index options.
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    The proposed rule change adds SPESG to the list of products in 
Underlying Symbol List A in footnote 34 of the Fees Schedule, which 
currently includes SPX (and SPX Weeklys (``SPXW'')). Underlying Symbol 
List A represents a specific set of proprietary products \5\ that are 
collectively included or excluded from a variety of programs, 
qualification calculations and transaction fees as a

[[Page 64190]]

result of the considerable resources the Exchange expends developing 
and maintaining its proprietary, exclusively listed products. Like SPX 
and the other products currently represented by ``Underlying Symbol 
List A,'' SPESG options are not listed on any other exchange. As such, 
the Exchange proposes to add SPESG to the products that make up 
Underlying Symbol List A. Therefore, by their inclusion in Underlying 
Symbol List A, transactions in SPESG are excluded from the Liquidity 
Provider Sliding Scale \6\ (as proposed and discussed below, SPESG 
transactions are included in the SPX Liquidity Provider Sliding Scale), 
Volume Incentive Program (``VIP''),\7\ Break-Up Credits applicable to 
Customer Agency Orders in AIM and SAM,\8\ the Marketing Fee,\9\ the 
Clearing Trading Permit Holder Fee Cap (``Fee Cap''),\10\ the Clearing 
Trading Permit Holder Proprietary and/or their Non-Trading Permit 
Holder Affiliates transaction fees for all non-facilitation business 
executed in AIM or open outcry, or as a QCC or FLEX transaction,\11\ 
the AIM Responder Fee,\12\ exemption from fees for facilitation 
orders,\13\ the AIM Contra Execution Fee,\14\ the Order Router Subsidy 
(``ORS'') and Complex Order Router Subsidy (``CORS'') Programs,\15\ and 
the per contract per side surcharge for noncustomer complex order 
executions that remove liquidity from the COB and auction response in 
the complex order auction and AIM.\16\ Also, by including SPESG in 
Underlying Symbol List A, the FLEX Surcharge Fee \17\ of $0.10 (capped 
at $250 per trade) applies to all FLEX transactions in SPESG, and 
transactions in SPESG are eligible for reduced rates under the Clearing 
Trading Permit Holder Proprietary Products Sliding Scale.\18\
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    \5\ See Cboe Options Fees Schedule, Footnote 34, Underlying 
Symbol List A currently includes: OEX, XEO, RUT, RLG, RLV, RUI, 
UKXM, SPX (includes SPXW) and VIX.
    \6\ See Cboe Options Fees Schedule, Liquidity Provider Sliding 
Scale table and footnote 10.
    \7\ See Cboe Options Fees Schedule, Volume Incentive Program 
(VIP) table and Footnote 36.
    \8\ See Cboe Options Fees Schedule.
    \9\ See Cboe Options Fees Schedule, Marketing Fees table.
    \10\ See Cboe Options Fees Schedule, Clearing Trading Permit 
Holder Fee Cap table and footnotes 11 and 22.
    \11\ See Cboe Options Fees Schedule, Footnote 22.
    \12\ See Cboe Options Fees Schedule, Footnote 20.
    \13\ See Cboe Options Fees Schedule, Footnote 11.
    \14\ See Cboe Options Fees Schedule, Footnote 18.
    \15\ See Cboe Options Fees Schedule, Order Router Subsidy 
Program and Complex Order Router Subsidy Program table and Footnotes 
29 and 30.
    \16\ See Cboe Options Fees Schedule, Footnote 35.
    \17\ See Cboe Options Fees Schedule, Footnote 17. The Exchange 
also notes that the proposed rule change updates an existing error 
within the FLEX Surcharge Fee line by correcting the spelling of 
``except''.
    \18\ See Cboe Options Fees Schedule, Cboe Options Clearing 
Trading Permit Holder Proprietary Products Sliding Scale table and 
footnote 11.
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    The proposed rule change also adopts the following transaction fees 
and adds SPESG to the description of the existing fees for various 
orders in SPX, including:
     Non-Customer, Non-Market-Maker, Non-Firm orders in SPX 
(yielding fee code ``BT'') and are assessed a standard fee of $0.42;
     Customer, Premium orders for less than $1.00 in SPX 
(yielding fee code ``CS'') and are assessed a standard fee of $0.36;
     Customer Premium orders for greater than or equal to $1.00 
in SPX (yielding fee code ``CT'') and are assessed a standard fee of 
$0.45;
     Market-Maker orders in SPX (yielding fee code ``MS'') and 
are assessed a standard fee of $0.28; and
     Firm orders in Underlying Symbol List A, under which SPX 
is currently listed and to which the Exchange proposes to add SPESG as 
discussed above, (yielding fee code ``FH'') and are assessed a standard 
fee of $0.26.
    The proposed rule change also adds SPESG to the existing surcharges 
assessed on transactions in SPX, including:
     The Execution Surcharge of $0.21;
     the AIM Response Surcharge Fee of $0.05;
     the AIM Contra Surcharge Fee of $0.10; and
     the AIM Agency/Primary Surcharge Fee of $.10.
    The Exchange does not at this time propose to assess the Index 
License fee on transactions in SPESG in order to promote and encourage 
trading of SPESG once listed. The Exchange notes that Index License 
fees are likewise currently waived for options in other classes in 
order to continue to promote their trading and growth.\19\ Where the 
proposed rule change adds SPESG to the existing transactions fees and 
surcharges in place for SPX, as listed above, the proposed change also 
updates footnotes 12 and 21, appended to such transactions and 
surcharges, to reflect the inclusion of SPESG. Specifically, footnote 
12 provides for pricing changes if the Exchange is operating in an all-
electronic environment and, within the footnote, the proposed rule 
updates: Item (3), to provide that SPX and SPESG, and SPXW Execution 
Surcharges will be waived, where applicable, for SPX/SPXW and SPESG 
orders executed via AIM and for SPX/SPXW Related Future Cross (``RFC'') 
orders; item (4), to provide that the AIM Agency/Primary Surcharge for 
SPX/SPXW, SPESG and VIX and RFC Execution Surcharge for SPX/SPXW and 
VIX will apply to all SPX/SPXW, SPESG and VIX AIM Agency/Primary orders 
and all SPX/SPXW and VIX RFC initiating orders, respectively, when the 
Exchange operates in a screen-based only environment and such fee will 
be invoiced to the executing Trading Permit Holder; and item (9), to 
provide that the AIM Contra Surcharge and AIM Response Surcharge will 
apply to all SPX/SPXW and SPESG AIM Contra and AIM Response/Priority 
Response orders, respectively, when the Exchange operates in a screen-
based only environment.\20\ Additionally, in the event the Exchange 
operates in a screen-based only environment, AIM may be available for 
SPX/SPXW and SPESG during Regular Trading Hours The Exchange notes that 
RFC orders are limited to SPX/SPXW and VIX, therefore, the proposed 
rule change to item (4) in footnote 12 makes it clear that RFC 
Execution Surcharges will continue to apply to SPX/SPXW and VIX while 
the Execution Surcharges will apply to SPX/SPXW, SPESG and VIX. The 
proposed rule change updates footnote 21 to include SPESG, where 
applicable, and provides that all electronic executions in SPX, SPXW 
and SPESG shall be assessed the SPX, SPXW and SPESG Execution 
Surcharge, respectively, except that this fee shall not apply to: (i) 
Orders in SPX or SPXW options in the SPX electronic book for those SPX 
or SPXW options that are executed during opening rotation on the final 
settlement date of VIX options and futures which have the expiration 
that are used in the VIX settlement calculation and (ii) orders 
executed in SPX, SPXW and SPESG by a floor broker using a PAR terminal. 
The Exchange notes that SPESG will not be included in the VIX 
settlement (therefore item (i) within footnote 21 does not apply) and 
that SPESG

[[Page 64191]]

executed from PAR will be treated the same as SPX/SPXW.
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    \19\ See e.g. Securities Exchange Act Release No. 87953 (January 
13, 2020), 85 FR 3091 (January 17, 2020) (SR-CBOE-2020-001), which 
waived permanently the Index License fees for transactions in Sector 
Index options to continue to encourage their growth and trading.
    \20\ The Exchange notes that it the proposed rule change does 
not add SPESG to item (5), in connection with the SPX/SPXW, VIX and 
RUT Tier Appointment Fee, because, the Exchange wishes to encourage 
trading and participation in the new SPESG market and believes that 
not assessing the appointment fees at this time for those 
participants that elect to support the new product is a reasonable 
means by which to do so. The Exchange notes that, at a future date, 
and as the SPESG market develops, it may look to assess such fees 
for SPESG.
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    Likewise, the proposed rule change also includes SPESG, along with 
SPX (and SPXW),\21\ in the Floor Brokerage Fees table, which assesses 
volume executed in open outcry. The proposed rule change also updates 
footnote 24, which accompanies the Floor Brokerage Fees table, to 
reflect the addition of SPESG. Footnote 24 provides for fee changes 
when the Exchange is operating in a modified state due to COVID-19 and 
the proposed rule change updates item (2) within the footnote to 
provide that SPX/SPXW and SPESG Floor Brokerage Fees will be assessed 
the rate of $0.05 per contract for non-crossed orders and $0.03 per 
contract for crossed orders. The Exchange notes that the proposed 
changes to footnotes 12, 21 and 24 do not alter the application of any 
of the existing fees but merely adds SPESG, where applicable, to 
reflect its inclusion in the relevant fee tables.
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    \21\ The proposed rule change also updates ``SPX Index Options'' 
to instead read ``SPX/SPXW'' to provide additional clarity within 
the Floor Brokerage Fees table.
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    The proposed rule change also adds SPESG to the SPX Liquidity 
Provider Sliding Scale \22\ and the Floor Brokerage Fees Discount 
Scale. The SPX Liquidity Provider Sliding Scale provides incremental 
incentives for Market-Makers to reach the highest tier level and 
provides progressively lower rates if increased volume thresholds in 
SPX (including SPXW) options are attained during a month and, likewise, 
the Floor Brokerage Fees Discount Scale provides discounted floor 
brokerage fees if floor brokers meet certain volume thresholds in SPX 
(as well as other proprietary products) during a given month. The 
proposed rule change extends the same opportunities currently provided 
to Trading Permit Holders for transactions in SPX to transactions in 
SPESG options in order to encourage trading in such options.
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    \22\ The proposed rule change also updates the title of the 
table to ``SPX/SPXW and SPESG Liquidity Provider Sliding Scale'' to 
provide additional clarity regarding the products eligible under the 
table.

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                                               Expiring, 7 days or less   Near term, 8 days to 60    Mid term, 61 days to 270    Long term, 271 days or
                                             ---------------------------            days                       days                     greater
                Premium level                                           --------------------------------------------------------------------------------
                                                   Width         Size         Width         Size         Width         Size         Width         Size
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$0.00-$5.00.................................           $0.50         10           $0.40         25           $0.60         15           $1.00         10
$5.01-$15.00................................            2.00          7            1.60         18            2.40         11            4.00          7
15.01-50.00.................................            5.00          5            4.00         13            6.00          8           10.00          5
50.01-100.00................................           10.00          3            8.00          8           12.00          5           20.00          3
100.01-200.00...............................           20.00          2           16.00          5           24.00          3           40.00          2
Greater than 200.00.........................           30.00          1           24.00          3           36.00          1           60.00          1
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    The above heightened quoting standards in the table above are 
substantively identical to the heightened quoting standards for the GTH 
SPX/SPXW LMM Incentive Program. The Exchange notes that, unlike the 
SPX/SPXW LMM Incentive Program, an LMM in SPESG may meet the heightened 
quoting standard in RTH in 60% of the series. Like with the GTH SPX/
SPXW Incentive Program, LMMs in SPESG are not obligated to satisfy the 
heightened quoting standards described in the table above, but instead 
are eligible to receive the rebate if they satisfy the heightened 
requirements. The heightened requirements are designed to incentivize 
LMMs to provide significant liquidity in SPESG during the trading day 
upon their listing and trading on the Exchange. The Exchange may also 
consider other exceptions to this quoting standard based on 
demonstrated legal or regulatory requirements or other mitigating 
circumstances.
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.\23\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\24\ 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. Additionally, the Exchange believes the proposed rule 
change is consistent with the Section 6(b)(5) \25\ requirement that the 
rules of an exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4).
    \25\ Id.
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    The Exchange believes that it is reasonable and equitable to add 
SPESG to Underlying Symbol List A, thus including SPESG transactions 
in, or excluding transactions from, certain programs, qualification 
calculations and transactions fees currently applicable to SPX (along 
with other proprietary products in Underlying Symbol List A), and to 
assess the same transaction and surcharge fees, as well as incentive 
scale tables (i.e. Clearing Trading Permit Holder Proprietary Products, 
SPX Liquidity Provider and Floor Brokerage Discount sliding scales), 
for SPESG that currently apply to SPX options, because of the relation 
between the S&P 500 ESG Index and the S&P 500 Index, wherein each 
constituent of a S&P 500 ESG Index is a constituent of the S&P 500 
Index. The Exchange notes that the proposed rule change does not alter 
any of the existing program rates or transaction fees, but instead, 
proposes to assess those rates and fees for transactions in SPESG 
options in the same way the Exchange currently assesses them for 
transactions in SPX options. The Exchange also believes that it is 
reasonable and equitable not to assess the Index License fee on 
transactions in SPESG because SPESG is a new product and the Exchange 
wishes to promote and encourage trading of SPESG once listed. The 
Exchange notes the Index License fees are likewise currently waived for 
options in other classes in order to continue to promote their trading 
and growth.\26\
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    \26\ See supra note 17.
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    In addition to this, the Exchange believes that it is reasonable to 
extend the existing opportunities under the SPX Liquidity Provider 
Sliding Scale and the Floor Brokerage Fees Discount Scale to Market- 
Makers and/or floor brokers, respectively, for SPESG so they may have 
opportunities to receive a discount by achieving various levels of 
volume in SPESG. The Exchange believes the programs are reasonably 
designed to encourage such participants to increase their submission of 
liquidity in SPESG, both electronically and in open outcry. This 
increase in the

[[Page 64192]]

Exchange's hybrid liquidity pool may bring greater trading activity, 
execution opportunities, pricing transparency and discovery to the 
SPESG market, both electronically and on the trading floor, to the 
benefit of all market participants. Similarly, the Exchange believes it 
is reasonable to extend the existing opportunity under the Clearing 
Trading Permit Holder Proprietary Products Sliding Scale (by nature of 
the proposed addition of SPESG to Underlying Symbol List A) for 
Clearing Trading Permit Holders to receive reduced fees in their 
transactions in SPESG, because it applies to all other Underlying 
Symbol List A products, including SPX and because it is reasonably 
designed to incentivize Clearing Trading Permit Holders to increase 
their overall volume, which may increase liquidity, in turn may provide 
greater trading activity, execution opportunities, pricing transparency 
and discovery for those options markets, thereby benefitting all market 
participants.
    The Exchange believes that the proposed RTH SPESG LMM Incentive 
Program is reasonable and equitable because the amended heightened 
quoting standards and rebate amount for meeting the heightened quoting 
standards in SPESG series are reasonably designed to incentivize an 
appointed LMM to meet the RTH quoting standards for SPESG, thereby 
providing liquid and active markets, which facilitates tighter spreads, 
increased trading opportunities, and overall enhanced market quality to 
the benefit of all market participants, particularly in a newly listed 
and traded product on the Exchange during the trading day. The Exchange 
believes that the proposed heightened quoting standards in SPESG are 
reasonable in that they are substantially identical to the heightened 
quoting standards currently in place for GTH SPX/SPXW LMMs. While the 
proposed percentage of the series (60% of SPESG series) that an LMM 
must meet the proposed heightened quoting requirements is less than the 
percentage of the series that an LMM must meet the heightened quoting 
requirements in SPX and/or SPXW (85% of each series) is reasonable 
given the new market ecosystem for SPESG as compared to that of SPX/
SPXW. The established SPX/SPXW market contains deep pools of liquidity 
and is highly active, which, in turn, assists LMMs in SPX/SPXW to more 
easily offset risk and hedge, as needed. Because the SPESG market is 
still new and not yet as robust as that of SPX/SPXW, it may pose more 
difficulty for LMMs in SPESG to offset risk and hedge, thus more 
difficulty in achieving the heightened quoting requirement. Therefore, 
the Exchange believes the proposed percentage of the series is 
reasonably commensurate with the potentially higher risk, and challenge 
in achieving the heightened quoting requirements, LMMs would have to 
take on in the new SPESG market. Moreover, the Exchange believes that 
the proposed monthly rebate pool of $50,000 split between LMMs that 
meet the heightened quoting standards in SPESG in a month, as proposed, 
is reasonable and equitable as it that falls within a comparable realm 
of rebates offered for other, similar LMM incentive programs for 
similar products,\27\ and such similar LMM incentive programs have 
prior had similar compensation pools in place.\28\ If, for example, two 
LMMs were to meet the proposed heightened quoting requirements, they 
would each receive $25,000, which is comparable to the $20,000 
available to SPX/SPXW LMMs that meet the heightened quoting 
requirements in both series pursuant to the GTH SPX/SPXW LMM Incentive 
Program. In addition to this, the Exchange believes that it is 
reasonable to offer $50,000 as the entirety of the compensation pool, 
as it is designed to encourage substantial liquidity during RTH in a 
newly listed and traded product by providing a large enough pool for 
which multiple LMMs may compete, and receive meaningful incentive in a 
pro-rata share. While the Exchange has no way of predicting with 
certainty how the proposed rule change would impact LMM trading 
activity, it anticipates that at least two LMMs will be able to 
reasonably compete for and reach the heightened quoting requirements. 
The Exchange further notes that, if one LMM were to achieve the 
heightened quoting requirements in a month, it believes that $50,000 is 
a reasonable incentive given the risks and level of difficulty posed by 
the newly developing SPESG market as described above.
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    \27\ See Cboe Options Fees Schedule, GTH SPX/SPXW LMM Incentive 
Program, which provides a monthly rebate in the amount of $10,000 
per each series (for an opportunity to receive $20,000 in total) for 
reaching the heightened quoting requirements.
    \28\ See Securities Exchange Release No. 87265 (October 9, 
2019), 84 FR 87265 (October 16, 2019) (SR-CBOE-2019-083).
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    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess lower fees for certain market participants 
transacting in SPESG because the current Clearing Trading Permit Holder 
Proprietary Products, SPX and SPESG (as proposed) Sliding, and Floor 
Brokerage Fees Discount scales already provide the same for such 
transactions in SPX. Moreover, the Exchange believes that it is 
equitable and not unfairly discriminatory to assess lower fees for 
Clearing Trading Permit Holders transacting in SPESG because it will 
apply to all Clearing Trading Permit Holders uniformly, as it currently 
does for transactions in all proprietary products within Underlying 
Symbol List A. The Exchange also believes offering discounts to 
Clearing Trading Permit Holders is equitable and not unfairly 
discriminatory because Clearing Trading Permit Holders must take on 
certain obligations and responsibilities, such as clearing and 
membership with the Options Clearing Corporation, as well as 
significant regulatory burdens and financial obligations, that other 
market participants are not required to undertake. Similarly, assessing 
lower fees for Market-Makers in SPESG pursuant to the SPX/SPXW and 
SPESG (as proposed) Liquidity Provider Sliding Scale, as compared to 
other market participants, is equitable and not unfairly discriminatory 
because Market-Makers, unlike other market participants, take on a 
number of obligations, including quoting obligations, that other market 
participants do not have. The Exchange notes that it provides Market-
Maker-specific incentives in a number of places within the Fees 
Schedule.\29\ Further, these lower fees offered to Market-Makers are 
intended to incent Market-Makers to quote and trade more on the 
Exchange, thereby providing more trading opportunities for all market 
participants. Additionally, the proposed fee for Market-Makers applies 
equally to all Market-Makers, meaning that all Market-Makers in SPESG 
are subject to the SPX/SPXW and SPESG Liquidity Provider Sliding Scale. 
Likewise, the Exchange believes providing discounts for Floor Brokers' 
transactions in SPESG is equitable and not unfairly discriminatory 
because it applies equally to all Floor Brokers, which function to 
bring necessary liquidity to the Exchange's trading floor thus 
maintaining a robust hybrid market on the Exchange to the benefit of 
all market participants.
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    \29\ See e.g., Cboe Options Fees Schedule, Liquidity Provider 
Sliding Scale table, GTH VIX/VIXW LMM Incentive Program, and GTH 
SPX/SPXW Incentive Program.
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    Finally, the Exchange believes it is equitable and not unfairly 
discriminatory to offer the financial incentive to SPESG LMMs pursuant 
to the proposed RTH SPESG LMM Incentive Program, because it will

[[Page 64193]]

benefit all market participants trading SPESG during RTH by encouraging 
the LMMs to satisfy the heightened quoting standard, which incentivizes 
continuous increased liquidity and thereby may provide more trading 
opportunities and tighter spreads. Indeed, the Exchange notes that its 
LMMs serve a crucial role in providing quotes and the opportunity for 
market participants to trade SPESG, which can lead to increased volume, 
providing for robust markets. The Exchange ultimately wishes to 
sufficiently incentivize LMMs to provide liquid and active markets in 
the newly listed and traded SPESG during the trading day to encourage 
liquidity, thereby protecting investors and the public interest. The 
Exchange also notes that an LMM may have added costs each month that it 
needs to undertake in order to satisfy that heightened quoting standard 
(e.g., having to purchase additional logical connectivity). The 
Exchange believes the proposed program is equitable and not unfairly 
discriminatory because similar programs currently exist for LMMs in 
VIX/VIXW and SPX/SPXW, and the proposed program will equally apply to 
any TPH that is appointed as a SPESG LMM. Additionally, if an LMM does 
not satisfy the heightened quoting standard in SPESG for any given 
month, then it simply will not receive the offered payment for that 
month.

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. Specifically, the Exchange 
believes the proposed rule change does impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because it uniformly includes transactions in SPESG 
in, or excludes transactions in SPESG from, certain programs, 
qualification calculations and transactions fees, as well as uniformly 
assesses transaction and surcharge fees, for all qualifying Trading 
Permit Holders' transactions in SPESG, as it currently does for related 
SPX options. Moreover, 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, while different fees and rebates are assessed to different 
market participants in some circumstances, these different market 
participants have different obligations and different circumstances. 
For example, Clearing TPHs have clearing obligations that other market 
participants do not have. Market-Makers have quoting obligations that 
other market participants do not have. Further, the Exchange current 
fees and rebates are intended to encourage market participants to bring 
increased volume to the Exchange, to the benefit of all market 
participants. The Exchange also does not believe that the proposed LMM 
incentive program for SPESG would impose any burden on intramarket 
competition because it applies to all LMMs appointed to SPESG in a 
uniform manner, in the same way similar programs apply to LMMs in VIX/
VIXW and SPX/SPXW today. To the extent these LMMs receive a benefit 
that other market participants do not, as stated, LMMs have different 
obligations and are held to different standards. For example, LMMs play 
a crucial role in providing active and liquid markets in their 
appointed products, especially in the newly developing SPESG market, 
thereby providing a robust market which benefits all market 
participants. Such Market-Makers also have obligations and regulatory 
requirements that other participants do not have.
    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 
propose fees assessed and discount apply to an Exchange proprietary 
product, SPESG, which will be listed and traded exclusively on the 
Exchange on September 21, 2020.

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 \30\ and paragraph (f) of Rule 19b-4 \31\ 
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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    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 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 NumberSR-CBOE-2020-088 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-2020-088. 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-2020-088 and should be submitted on 
or before October 30, 2020.


[[Page 64194]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22378 Filed 10-8-20; 8:45 am]
BILLING CODE 8011-01-P


