[Federal Register Volume 86, Number 49 (Tuesday, March 16, 2021)]
[Notices]
[Pages 14494-14500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05348]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91288; File No. SR-CBOE-2021-015]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Update 
its Fees Schedule in Connection With the Exchange's Plans To List and 
Trade Options on the Mini-RUT Index (``MRUT'' or ``Mini-RUT'')

March 10, 2021.
    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 March 1, 2021, 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 Mini-RUT Index (``MRUT'' or ``Mini-
RUT''). 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

[[Page 14495]]

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 MRUT options, effective March 1, 2021.
Background
    MRUT options are options on the Mini-RUT Index, the value of which 
is 1/10th the value of the Russell 2000 (``RUT'') Index. The Russell 
2000 Index measures the performance of small-cap segment of the U.S. 
equity universe. It is a subset of the Russell 3000 Index and includes 
approximately 2,000 U.S.-based securities based on a combination of 
their market cap and current index membership. The Russell 2000 Index 
is constructed to provide a comprehensive and unbiased small-cap 
barometer and is completely reconstituted annually to ensure larger 
stocks do not distort the performance and characteristics of the true 
small-cap opportunity set. The Russell 2000 Index is a commonly used 
benchmark for mutual funds that identify themselves as ``small-cap,'' 
and much like the S&P 500 Index (``SPX''), is used to benchmark large 
capitalization stocks. The Exchange understands that investors often 
use Russell 2000 Index-related products to diversify their portfolios 
and benefit from market trends. RUT options currently offer these 
benefits to investors but may be expensive given their larger notional 
value and are therefore primarily used by institutional market 
participants. By contrast, MRUT options are reduced-value options (1/
10th) compared to RUT options that will offer individual investors 
lower cost options to obtain the potential benefits of options on the 
Russell 2000 Index.
    The Exchange believes that investors will benefit from the 
availability of Mini-RUT option contracts by making options overlying 
the higher-valued RUT Index more readily available as an investing tool 
and at more affordable prices for investors. The Exchange also believes 
that the investor-base for MRUT options are likely to be the same 
investor-base for Mini-SPX options (``XSP''), which are also 
proprietary, reduced-value options on a broad-based index (SPX), as 
they are both designed to provide low-cost means to hedge investors' 
portfolios in connection with higher-value broad-based indexes (i.e., 
the RUT and SPX Index) with a smaller outlay of capital. As such, the 
Exchange will allow the same type of expirations, settlement and 
exercise style, minimum increments, strike price intervals and Market-
Maker appointment weights for MRUT options as it currently does for XSP 
options and anticipates that MRUT options will have the same investor 
base as XSP options.\3\ The Exchange now proposes to amend its Fees 
Schedule to accommodate the planned listing and trading of MRUT 
options. The Exchange notes that because both MRUT and XSP are mini-
index options intended for the same investor-base, the majority of the 
proposed changes amend the Fees Schedule in connection with trading in 
MRUT options in a manner that is generally consistent with the way in 
which existing transactions fees and programs currently apply to 
trading in XSP options.
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    \3\ See Securities Exchange Act Release Nos. 90748 (December 21, 
2020), 85 FR 85759 (December 29, 2021) (SR-CBOE-2020-118); and 91067 
(February 5, 2021), 86 FR 9108 (February 11, 2021) (SR-CBOE-2020-
118) [sic].
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Standard Transaction Rates and Surcharges
    First, the Exchange proposes to adopt certain standard transaction 
fees in connection with MRUT options in a manner that closely aligns 
the fees assessed for MRUT options with that of the fees assessed for 
RUT options. As described above, MRUT options and RUT options track the 
same underlying index, yet MRUT options are 1/10th the size of standard 
RUT options contracts. As such, the proposed rule change adopts certain 
fees for MRUT options in the Rate Table for All Products Excluding 
Underlying Symbol A \4\ that are approximately 1/10th of the fees 
currently assessed for RUT options, as follows:
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    \4\ Underlying Symbol List A includes OEX, XEO, RUT, RLG, RLV, 
RUI, UKXM, SPX (includes SPXW), SPESG and VIX. See Cboe Options Fees 
Schedule, Footnote 34.
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     Adopts fee code CQ, appended to all Customer (capacity 
``C'') orders in MRUT options and assesses a fee of $0.02 per contract. 
This proposed fee is approximately 1/10th of the fees assessed for 
Customer orders in RUT options ($0.18).
     Adopts fee code FM, appended to all Clearing Trading 
Permit Holder (``TPHs'') (capacity ``F'') and for Non-TPH Affiliate of 
a Clearing TPH (capacity ``L'') (collectively, ``Firms'') orders in 
MRUT options and assesses a fee of $0.02 per contract. The proposed fee 
is approximately 1/10th of the fees assessed for Firm orders in RUT 
options ($0.26);
     Adopts fee code MM, which is appended to all Market-Maker 
(capacity ``M'') orders in MRUT options and assesses a fee of $0.03 per 
contract. The proposed fee is approximately 1/10th of the fees assessed 
for Market-Maker orders in RUT options ($0.30); and
     Adopts fee code BM, appended to all Broker-Dealer 
(capacity ``B''), Joint Back-Office (capacity ``J''), Non-TPH Market-
Maker (capacity ``N''), and Professional (capacity ``U'') 
(collectively, ``Non-Customers'') orders in MRUT options and assesses a 
fee of $0.04 per contract. The proposed fee is approximately 1/10th of 
the difference between the two rates assessed for Non-Customer orders 
in RUT options ($0.25 for manual and AIM transactions and $0.65 for 
non-AIM electronic transactions).
    The Exchange also proposes to waive the proposed MRUT transaction 
fees for Firms and Market-Makers through August 31, 2021. Specifically, 
proposed footnote 32 (appended to MRUT options for Market-Maker and 
Firm transaction fees in the Rate Table--All Products Excluding 
Underlying Symbol List A) provides that transaction fees for orders 
executed in MRUT options with a capacity code of ``F'', ``L'', or ``M'' 
will be waived through August 31, 2021. The proposed waiver is intended 
to encourage liquidity in a newly listed and traded product on the 
Exchange.
    In addition to the above transaction fees, the proposed rule change 
also adopts certain surcharges to MRUT transactions within the Rate 
Table--All Products Excluding Underlying Symbol List A. The proposed 
rule change applies an Index License Surcharge Fee of $0.02 to all 
Firm, Market-Maker and Non-Customer transactions in MRUT options. 
Currently, the Index License Surcharge Fee assesses a $0.10 charge for 
transactions in DJX, MXEA and MXEF options. The proposed lower Index 
License Surcharge rate for MRUT options is intended to promote and 
encourage trading of MRUT options once listed. The Exchange notes that 
this is similar to lower (or waived) Index License fees for other 
options classes in order to similarly continue to promote their trading 
and growth.\5\
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    \5\ See e.g. Securities Exchange Act Release No 90093 (October 
5, 2020), 85 FR 64189 (October 9, 2020) (SR-CBOE-2020-088), which 
provides that ``[t]he 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.''; and 
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.

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[[Page 14496]]

    The proposed rule change adds MRUT options to the list of options, 
which currently includes XSP, for which the FLEX Surcharge Fee of $0.10 
(capped at $250 per trade) applies to electronic FLEX orders executed 
by all capacity codes.\6\ The proposed rule change adopts an Exotic 
Surcharge of $0.03 for Customer transactions in MRUT, which is 
consistent with the Exotic Surcharge currently assessed for Customer 
transactions in XSP. Additionally, the Exchange proposes to exclude 
MRUT orders from the AIM Contra Fee by amending footnote 18 (appended 
to the AIM Contra Fee) to provide that the AIM Contra Execution Fee 
applies to all orders (excluding facilitation orders, per footnote 11) 
in all products, except MRUT, XSP,\7\ Sector Indexes and Underlying 
Symbol List A, executed in the Automated Improvement Mechanism 
(``AIM''), Solicitation Auction Mechanism (``SAM''), FLEX AIM and FLEX 
SAM auctions, that were initially entered as the contra party to an 
Agency/Primary Order. Applicable standard transaction fees will apply 
to AIM, SAM, FLEX AIM and FLEX SAM executions in MRUT, XSP, Sector 
Indexes and Underlying Symbol List A. The Exchange also proposes to 
exclude Firm, Market-Maker and Non-Customer complex orders in MRUT from 
the Complex Surcharge by amending footnote 35 (appended to the Complex 
Surcharge) to provide that the Complex Surcharge applies per contract 
per side surcharge for noncustomer complex order executions that remove 
liquidity from the COB and auction responses in the Complex Order 
Auction (``COA'') and AIM in all classes except MRUT, XSP, Sector 
Indexes and Underlying Symbol List A. The proposed FLEX and Exotic 
surcharges and exclusion from the AIM Contra Fee (and, instead, the 
application of the proposed standard transaction fees) and Complex 
Surcharge in connection with transactions in MRUT will provide 
consistency with the fees and exclusions currently applicable to 
transactions in XSP.
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    \6\ The FLEX Surcharge Fee will only be charged up to the first 
2,500 contracts per trade. See Cboe Options Fees Schedule, Footnote 
17.
    \7\ The proposed rule change also makes clear in the first 
sentence of footnote 18 that the AIM Contra Execution Fee is not 
applicable to transaction in XSP. This is currently the case and is 
clear in the subsequent language within footnote 18 as well as the 
manner in which the fees are presented in Rate Table--All Products 
Excluding Underlying Symbol List A.
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Fees Programs
    The proposed rule change excludes MRUT volume from the Liquidity 
Provider Sliding Scale, which offers credits on Market-Maker orders 
where a Market-Maker achieves certain volume thresholds based on total 
national Market-Maker volume in all underlying symbols, excluding 
Underlying Symbol List A and XSP, during the calendar month. 
Specifically, the proposed rule change updates the Liquidity Provider 
Sliding Scale table to provide that volume thresholds are based on 
total national Market-Maker volume in all underlying symbols excluding 
Underlying Symbol List A, MRUT and XSP during the calendar month, and 
that it applies in all underlying symbols excluding Underlying Symbol 
List A, MRUT and XSP. The proposed rule change also updates footnote 10 
(appended to the Liquidity Provider Sliding Scale) to provide that the 
Liquidity Provider Sliding Scale applies to Liquidity Provider (Cboe 
Options Market-Maker, DPM and LMM) transaction fees in all products 
except (1) Underlying Symbol List A (34), MRUT and XSP,\8\ and (2) 
volume executed in open outcry.\9\
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    \8\ The proposed rule change corrects an inadvertent grammatical 
error in footnote 10 in connection with the exclusion of XSP from 
the Liquidity Provider Sliding Scale.
    \9\ The proposed rule change also updates footnote 6, which is 
appended to the Liquidity Provider Sliding Scale Program, the VIP, 
and the ORS/CORS Programs to reflect the exclusion of MRUT options 
from these programs in the same manner as the options classes 
currently excluded from these programs. Specifically, amended 
footnote 6 provides that in the event of a Cboe Options System 
outage or other interruption of electronic trading on Cboe Options 
that lasts longer than 60 minutes, the Exchange will adjust the 
national volume in all underlying symbols excluding Underlying 
Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, DJX and XSP for the 
entire trading day.
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    The proposed rule change updates the Volume Incentive Program 
(``VIP'') table to exclude MRUT volume from the VIP, which currently 
offers a per contract credit for certain percentage threshold levels of 
monthly Customer and Non-Customer volume in all underlying symbols, 
excluding Underlying Symbol List A, Sector Indexes, DJX, MXEA, MXEF and 
XSP. The proposed rule change also amends footnote 36 (appended to the 
VIP table) to reflect the proposed exclusion of MRUT from the VIP by 
providing (in relevant part) that: The Exchange shall credit each 
Trading Permit Holder the per contract amount resulting from each 
public customer (``C'' capacity code) order transmitted by that Trading 
Permit Holder which is executed electronically on the Exchange in all 
underlying symbols excluding Underlying Symbol List A, Sector Indexes, 
DJX, MRUT, MXEA, MXEF, XSP, QCC trades, public customer to public 
customer electronic complex order executions, and executions related to 
contracts that are routed to one or more exchanges in connection with 
the Options Order Protection and Locked/Crossed Market Plan referenced 
in Rule 5.67, provided the Trading Permit Holder meets certain 
percentage thresholds in a month as described in the Volume Incentive 
Program (VIP) table; the percentage thresholds are calculated based on 
the percentage of national customer volume in all underlying symbols 
excluding Underlying Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, 
DJX and XSP entered and executed over the course of the month; and in 
the event of a Cboe Options System outage or other interruption of 
electronic trading on Cboe Options, the Exchange will adjust the 
national customer volume in all underlying symbols excluding Underlying 
Symbol List A, Sector Indexes, MRUT, MXEA, MXEF, DJX and XSP for the 
entire trading day.\10\
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    \10\ See supra note 8.
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    The proposed rule change excludes MRUT from the list of products 
eligible to receive Break-Up Credits in orders executed in AIM, SAM, 
FLEX AIM, and FLEX SAM, by amending the Break-Up Credits table to 
exclude MRUT along with the products currently excluded--Underlying 
Symbol List A, Sector Indexes, DJX, MXEA, MXEF and XSP.
    The Exchange also proposes to exclude Firm transactions in MRUT 
from the Clearing TPH Fee Cap. Specifically, it amends footnote 22 
(appended to the Clearing TPH Fee Cap table) to provide that all non-
facilitation business executed in AIM or open outcry, or as a QCC or 
FLEX transaction, transaction fees for Clearing TPH Proprietary and/or 
their Non-TPH Affiliates in all products except MRUT, XSP, Sector 
Indexes and Underlying Symbol List A (which includes SPX), in the 
aggregate, are capped at $55,000 per month per Clearing TPH. It 
additionally updates footnote 11 (which is also appended to the 
Clearing TPH Fee Cap table) to provide that the Clearing TPH Fee Cap in 
all products except MRUT, XSP, Underlying Symbol List A and Sector 
Indexes (the ``Fee Cap''),\11\ among other programs, apply to (i) 
Clearing TPH proprietary orders (``F'' capacity code), and (ii) orders 
of Non-TPH Affiliates of a Clearing TPH.
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    \11\ The Exchange notes that it also corrects an error in 
footnote 11 by moving the abbreviated definition for the Clearing 
TPH Fee Cap (``Fee Cap'') [sic], to the end of the clause describing 
the cap.
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    The Exchange proposes to exclude MRUT from eligibility for the 
Order Router Subsidy (``ORS'') and Complex Order Router Subsidy 
(``CORS'') Programs, in which Participating TPHs

[[Page 14497]]

or Participating Non-Cboe TPHs may receive a payment from the Exchange 
for every executed contract routed to the Exchange through their system 
in certain classes. Specifically, the proposed rule change updates the 
ORS/CORS Program tables to provide that ORS/CORS participants whose 
total aggregate non-customer ORS and CORS volume is greater than 0.25% 
of the total national volume (excluding volume in options classes 
included in Underlying Symbol List A, Sector Indexes, DJX, MRUT, MXEA, 
MXEF or XSP) will receive an additional payment for all executed 
contracts exceeding that threshold during a calendar month, and updates 
footnote 30 (appended to the ORS/CORS Program tables) to accordingly 
provide that Cboe Options does not make payments under the program with 
respect to executed contracts in options classes included in Underlying 
Symbols List A, Sector Indexes, DJX, MRUT, MXEA, MXEF or XSP.\12\
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    \12\ See supra note 8.
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    The Exchange notes that excluding MRUT transactions from the above-
described programs is consistent with the manner in which XSP 
transactions are also excluded each of these programs today.
    Additionally, the Exchange proposes to exclude MRUT from the 
Marketing Fee Program by updating the Marketing Fee table to provide 
that the marketing fee will be assessed on transactions of Market-
Makers (including DPMs and LMMs), resulting from customer orders at the 
per contract rate provided above on all classes of equity options, 
options on ETFs, options on ETNs and index options, except that the 
marketing fee shall not apply to Sector Indexes, DJX, MXEA, MXEF or 
Underlying Symbol List A. The Exchange notes that, in this way, MRUT 
will be treated as most of the Exchange's other exclusively listed 
products that are currently excluded from the Marketing Fee Program. 
The Exchange does believe that it is necessary at the point of newly 
listing and trading for MRUT options to be eligible for the Marketing 
Fee Program and may determine in the future to submit a fee filing to 
add MRUT to the Marketing Fee Program if the Exchange believes it would 
potentially generate more customer order flow in MRUT.
MRUT LMM Program
    Finally, the Exchange proposes to adopt a financial program for 
LMMs appointed in MRUT options. As proposed, the MRUT LMM Incentive 
Program provides that if the appointed LMM in MRUT provides continuous 
electronic quotes during Regular Trading Hours that meet or exceed the 
proposed heightened quoting standards (below) in at least 99% of the 
series 90% of the time in a given month, the LMM will receive a payment 
for that month in the amount of $20,000 (or pro-rated amount if an 
appointment begins after the first trading day of the month or ends 
prior to the last trading day of the month).

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                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                        14 days or less         15 days to 60 days        61 days to 270 days       271 days or greater
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................        $0.08            1        $0.10            1        $0.15            1        $0.80            1
$1.01-$3.00.....................................         0.15            1         0.15            1         0.15            1         0.85            1
$3.01-$5.00.....................................         0.15            1         0.18            1         0.20            1         1.00            1
$5.01-$10.00....................................         0.45            1         0.20            1         0.35            1         1.25            1
$10.01-$25.00...................................         1.25            1         0.55            1         0.50            1         2.25            1
$25.01-$100.00..................................         3.00            1         2.00            1         1.75            1         4.00            1
Greater than $100.00............................         8.00            1         8.00            1         8.00            1         8.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Meeting or exceeding the heightened quoting standards in MRUT, as 
proposed, to receive the proposed compensation payment is optional for 
an MRUT LMM. The Exchange may consider other exceptions to this quoting 
standard based on demonstrated legal or regulatory requirements or 
other mitigating circumstances. In calculating whether an LMM met the 
heightened quoting standard each month, the Exchange will exclude from 
the calculation in that month the business day in which the LMM missed 
meeting or exceeding the heightened quoting standard in the highest 
number of series. In addition to the above rebate, if the appointed LMM 
meets or exceeds the above heightened quoting standards in a given 
month and provides an average daily volume (``ADV'') in MRUT that meets 
or exceeds 25,000 contracts in a given month, the LMM will receive the 
Monthly ADV Payment amount that corresponds to the level of ADV in MRUT 
provided for that month per the MRUT Volume Incentive Pool program 
below:

------------------------------------------------------------------------
                                                            Monthly ADV
                        MRUT ADV                              payment
------------------------------------------------------------------------
0-24,999 contracts......................................           $0.00
25,000-49,999 contracts.................................          25,000
50,000-100,000 contracts................................          35,000
Greater than 100,000 contracts..........................          50,000
------------------------------------------------------------------------

    The heightened requirements and MRUT Volume Incentive Pool offered 
by the MRUT LMM Incentive Program are designed to incentivize LMMs to 
provide significant liquidity in MRUT options during the trading day 
upon their listing and trading on the Exchange, which, in turn, would 
provide greater trading opportunities, added market transparency and 
enhanced price discovery for all market participants in MRUT.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \15\ 
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

[[Page 14498]]

open market and a national market system, and, in general, to protect 
investors and the public interest, and, particularly, is not designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 15 U.S.C. 78f(b)(5).
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Standard Transaction Rates and Surcharges
    The Exchange believes that the proposed amendments to the Fees 
Schedule in connection with standard transaction rates and surcharges 
for MRUT transactions are reasonable, equitable and not unfairly 
discriminatory. Specifically, the Exchange believes that it is 
reasonable to assess fees for Customer, Market-Maker, Firm, and Non-
Customer orders in MRUT that reflect approximately 1/10th of the 
transactions fees assessed for corresponding orders in RUT because of 
the relation between MRUT options and RUT options, wherein MRUT options 
overlie an index 1/10th the value of the index that underlies RUT 
options. Additionally, the Exchange believes it is reasonable to waive 
the transaction fees for Market-Maker and Firm orders in MRUT options 
through August 31, 2021 because the waiver is designed to encourage 
order flow from these market participants in a newly listed and traded 
options class on the Exchange. The Exchange recognizes that Market-
Makers and Firms each provide important and distinct sources of 
liquidity to the Exchange and increased liquidity provides more trading 
opportunities, in turn, signaling additional corresponding increase in 
order flow from other market participants, and, as a result, 
contributing towards a robust, well-balanced market ecosystem. The 
Exchange also believes that it is reasonable to assess a lower Index 
License fee on transactions in MRUT because MRUT is a new product and 
the Exchange wishes to promote and encourage trading of MRUT once 
listed. The Exchange notes that, similar to assessing a lower Index 
License fee, the Index License fees for certain options in other 
classes are waived in order to continue to promote their trading and 
growth.\16\ Moreover, the Exchange believes it is reasonable to assess 
the same FLEX and Exotic surcharge rates to orders in MRUT as it does 
for XSP and to exclude MRUT from the Complex Surcharge and AIM Contra 
Fee (and to apply the standard transaction fees for MUT orders in lieu 
of the AIM Contra Fee) because these proposed surcharges and surcharge 
exclusions will provide consistency between the fees assessed for 
orders in MRUT and XSP, which are both mini-index options designed to 
offer investors lower cost options to obtain the potential benefits of 
options on a broad-based index options and intended for the same 
investor-base. Therefore, the Exchange believes it is appropriate to 
amend the Fees Schedule in a manner that similarly situates fees 
assessed for orders in MRUT options with those assessed for orders in 
XSP options.
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    \16\ See supra note 5.
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    The Exchange believes the proposed standard transaction rates and 
surcharges (or exclusions) are equitable and not unfairly 
discriminatory because they will apply automatically and uniformly to 
all Customer, Firm, Market-Maker and/or Non-Customer, orders, as 
applicable, in MRUT options. The Exchange also believes that it is 
equitable and not unfairly discriminatory to waive the transaction fees 
(through August 31, 2021) for Market-Maker and Firm orders in MRUT 
because, as stated above, the Exchange recognizes that these market 
participants can provide key and distinct sources of liquidity, which 
is particularly important for a newly listed and traded options class 
on the Exchange. An increase in general market-making activity 
facilitates tighter spreads, which tend to signal additional 
corresponding increase in order flow from other market participants, 
ultimately incentivizing more overall order flow and improving 
liquidity levels and price transparency on the Exchange to the benefit 
of all market participants. Similarly, the Exchange also recognizes 
that Firms can be an important source of liquidity when they facilitate 
their own customers' trading activity, thus, adding transparency and 
promoting price discovery to the benefit of all market participants. 
The Exchange notes too that Market-Makers and Firms take on a number of 
obligations that other market participants do not have. For example, 
unlike other market participants, Market-Makers take on quoting 
obligations and other market making requirements and Firms must have 
higher capital requirements, clear trades for other market 
participants, and must be members of OCC.
Fees Programs
    The Exchange believes that the proposed updates to the Fees 
Schedule in connection with the application of certain fees programs to 
transactions in MRUT options are reasonable, equitable and not unfairly 
discriminatory. Particularly, the Exchange believes it is reasonable to 
exclude transactions in MRUT options from the Liquidity Provider 
Sliding Scale, the VIP, the Break-Up Credits table, the Clearing TPH 
Fee cap, and the ORS/CORS programs in the same manner in which 
transactions in XSP options are currently excluded from the same 
programs today as the Exchange believes it is appropriate to update 
these fees programs in a manner that similarly situates transactions in 
MRUT with transactions in XSP, as both mini-index options are designed 
to offer investors lower cost options to obtain the potential benefits 
of options on a broad-based index options and are intended for the same 
investor base. Additionally, the Exchange believes that excluding MRUT 
from the Marketing Fee Program is reasonable most of the Exchange's 
other proprietary products are currently excluded from the Marketing 
Fee Program. The Exchange does believe that it is necessary at the 
point of newly listing and trading for MRUT transactions to be eligible 
for the Marketing Fee Program and may determine in the future to submit 
a fee filing to add MRUT to the Marketing Fee Program if the Exchange 
believes it would potentially generate more customer order flow in MRUT 
options.
    The Exchange believes that excluding MRUT transactions from certain 
fees programs is equitable and not unfairly discriminatory because the 
programs will equally not apply to, or exclude in the same manner, all 
market participants' orders in MRUT options. The Exchange notes that 
the proposed rule change does not alter any of the existing program 
rates or volume calculations, but instead, merely proposes not to 
include transactions in MRUT in those programs and volume calculations 
in the same way that transactions in XSP options are not currently 
included, or, regarding the Marketing Fee Program, in the same way 
transactions in most of the Exchange's other exclusively listed 
products are not currently included.
MRUT LMM Program
    The Exchange believes the proposed MRUT LMM Incentive Program is 
reasonable, equitable and not unfairly discriminatory. Particularly, 
the proposed MRUT LMM Incentive Program is a reasonable financial 
incentive program because the proposed heightened quoting standards and 
rebate amount for meeting the heightened quoting standards in MRUT 
series are reasonably designed to incentivize an appointed LMM to meet 
the proposed heightened quoting standards during RTH for MRUT, thereby 
providing liquid and active markets, which facilitates tighter spreads, 
increased trading opportunities, and overall

[[Page 14499]]

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 are reasonable because they are similar to 
the detail and format (specific expiration categories and corresponding 
premiums, quote widths, and sizes) of the heightened quoting standards 
currently in place for MSCI LMMs, SPESG LMMs, GTH SPX/SPXW LMMs and GTH 
VIX LMMs.\17\ For example, the expiration categories are the same as 
those for the GTH VIX LMM heightened quoting standards. The Exchange 
believes the proposed smaller quote widths and sizes in the proposed 
heightened quoting standards for MRUT LMMs reasonably reflect what the 
Exchanges believes will be typical market characteristics in MRUT 
options, given their smaller notional value and minimum increments and 
general retail base, thus smaller, retail-sized orders. Moreover, the 
Exchange believes that the proposed $20,000 monthly rebate for an LMM 
that meets the proposed heightened quoting standards in MRUT in a month 
is reasonable and equitable as it equal or comparable to the rebates 
offered for other LMM incentive programs for other proprietary 
products.\18\ For example, the MSCI LMM Incentive Program also offers 
$20,000 per month for each MSCI series in which the appointed LMM meets 
the given heighten quoting standards. The Exchange also believes it is 
reasonable to offer an additional payment that corresponds to an MRUT 
LMM's level of ADV in MRUT options, if it meets the heightened quoting 
standards, because the proposed MRUT Volume Incentive Pool is a volume-
based incentive designed to further encourage LMMs to provide 
significant liquidity in MRUT options during the trading day, which is 
particularly important for a newly listed and traded options class on 
the Exchange. The Exchange also offers many other volume-based 
incentives in the Fees Schedule.\19\
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    \17\ See Cboe Options Fees Schedule, ``MSCI LMM Incentive 
Program'', ``GTH VIX/VIXW LMM Incentive Program'', ``GTH SPX/SPXW 
LMM Incentive Program'', and ``RTH SPESG LMM Incentive Program''.
    \18\ See id.
    \19\ See e.g., Cboe Options Fees Schedule, Volume Incentive 
Program table, Liquidity Provider Sliding Scale table, Cboe Options 
Clearing Trading Permit Holder Proprietary Products Sliding Scale 
table, and Floor Broker ADV Discount table, each of which offers 
reduced transaction fees for meeting various levels of options 
volume.
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    Finally, the Exchange believes it is equitable and not unfairly 
discriminatory to offer the financial incentive to MRUT LMMs pursuant 
to the proposed MRUT LMM Incentive Program, because it will benefit all 
market participants trading MRUT 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 MRUT, 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 MRUT options 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 other proprietary products,\20\ and the proposed 
program will equally apply to any TPH that is appointed as a MRUT LMM. 
Additionally, if an LMM does not satisfy the heightened quoting 
standard in MRUT for any given month, then it simply will not receive 
the offered payment for that month.
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    \20\ See supra note 17.
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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 proposed MRUT 
transactions fee and surcharge amounts for each separate type of market 
participant will be assessed automatically and uniformly to all such 
market participants, i.e., all qualifying Customer orders in MRUT will 
be assessed the same amount, all Market-Maker orders in MRUT will be 
assessed the same amount, and so on. Likewise, the proposed rule change 
will uniformly exclude all transactions in MRUT from certain programs 
and fees/surcharges (i.e., the AIM Contra Fee and Complex Surcharge), 
as it currently does for XSP options or as it does for the Exchange's 
other proprietary products. The Exchange does not believe that waiving 
the MRUT transaction fees for Market-Makers and Firms in the first six 
months of MRUT options listing and trading on the Exchange will impose 
any burden on intramarket competition because these participants may, 
as discussed above, provide key and distinct sources of liquidity, 
which is particularly important for a newly listed and traded options 
class on the Exchange. Also, Market-Makers and Firms take on a number 
of obligations that other market participants do not have. Unlike other 
market participants, Market-Makers take on quoting obligations and 
other market making requirements and Firms must have higher capital 
requirements, clear trades for other market participants, and must be 
members of OCC. The Exchange also does not believe that the proposed 
LMM incentive program for MRUT options would impose any burden on 
intramarket competition because it applies to all LMMs appointed to 
MRUT in a uniform manner, in the same way similar programs apply to 
LMMs in other proprietary products 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 
MRUT 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 rebates offered apply to a product 
exclusively listed on the Exchange.

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)

[[Page 14500]]

of the Act \21\ and paragraph (f) of Rule 19b-4 \22\ 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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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 Number SR-CBOE-2021-015 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-2021-015. 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-2021-015 and should be submitted on 
or before April 6, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05348 Filed 3-15-21; 8:45 am]
BILLING CODE 8011-01-P


