[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Notices]
[Pages 51427-51431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19860]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92915; File No. SR-CBOE-2021-050]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule Relating to Its Lead Market-Maker Incentive Programs

September 9, 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 September 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 amend its Fees Schedule with respect to its Lead Market-Maker 
(``LMM'') Incentive Programs. 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 to amend: the Mini 
Russell 2000 Index (``MRUT'') options LMM Incentive Program; the MSCI 
EAFE Index (``MXEA'') options and MSCI Emerging Markets Index 
(``MXEF'') options LMM Incentive Program (i.e., the MSCI LMM Incentive 
Program); and the Regular Trading Hours (``RTH'') S&P 500 ESG Index 
(``SPESG'') LMM Incentive Program, and to remove an expiring fee 
waiver, effective September 1, 2021.
    Each LMM Incentive Program provides a rebate \3\ to Trading Permit 
Holders (``TPHs'') with LMM appointments to the respective incentive 
program that meet certain quoting standards in the applicable series in 
a month. The Exchange notes that meeting or exceeding the quoting 
standards (both current and as proposed; described in further detail 
below) in each of the LMM Incentive Program products to receive the 
applicable rebate (both currently offered and as proposed; described in 
further detail below) is optional for an LMM appointed to a program. 
Rather, an LMM appointed to an incentive program is eligible to receive 
the corresponding rebate if it satisfies the applicable quoting 
standards, which the Exchange believes encourages the LMM to provide 
liquidity in the applicable class and trading session. The Exchange may 
consider other exceptions to the programs' quoting standards based on 
demonstrated legal or regulatory requirements or other mitigating 
circumstances. In calculating whether an LMM appointed to an incentive 
program meets the applicable program's quoting standards each month, 
the Exchange excludes from the calculation in that month the business 
day in which the LMM missed meeting or exceeding the quoting standards 
in the highest number of the applicable series.
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    \3\ The proposed rule change updates the term ``payment'' to 
``rebate'' in the MSCI and MRUT LMM Incentive Programs, which more 
accurately reflects the type of payment an LMM appointed to the MRUT 
or MSCI LMM Incentive Program is eligible to receive and is 
consistent with language in the other LMM Incentive Programs.
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MRUT LMM Incentive Program
    The Exchange first proposes to amend its MRUT LMM Incentive 
Program. Currently, the program provides that if the appointed LMM in 
MRUT provides continuous electronic quotes during RTH that meet or 
exceed the program's heightened quoting standards \4\ in at least 99% 
of the series 90% of the time in a given month, the LMM will receive a 
rebate \5\ 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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    \4\ Located in the ``MRUT LMM Incentive Program'' table in the 
Fees Schedule.
    \5\ See supra note 3.
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    Specifically, the Exchange proposes to amend certain quotes widths 
contained in the MRUT LMM Incentive Program's heightened quoting 
standards. Currently, for expiring MRUT options (14 days or less), the 
appointed LMM must meet, among other heightened quoting standards, a 
$0.15 width for a quote size of 1 contract at a premium level of $1.01 
to $3.00 and a $0.15 width for a quote size of 1 contract at a premium 
level of $3.01 to $5.00. The proposed rule change marginally decreases 
both such widths in these categories to $0.14. Currently, for MRUT 
options expiring in the near term (15 days to 60 days), the appointed 
LMM must meet, among other heightened quoting standards, a $0.15 width 
for a quote size of 1 contract at a premium level of $1.01 to $3.00, a 
$0.18 width for a quote size of one contract at a premium level of 
$3.01 to $5.00, and a $0.20 width for a quote size of 1 contract at a 
premium level of $5.01 to $10.00. The proposed rule change marginally 
decreases these widths to a $0.13 width, a $0.16 width, and a $0.18 
width, respectively. The Exchange also proposes to increase the 
compensation payment offered by the MRUT LMM Incentive Program to an 
LMM appointed to the program for meeting the

[[Page 51428]]

heightened quoting standards in a month from $20,000 to $25,000.
    The proposed rule change also makes a nonsubstantive, clarifying 
change to the language regarding the program's MRUT Volume Incentive 
Pool, which currently states that, ``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 for that month per the MRUT 
Volume Incentive Pool program below.'' As proposed, this language 
provides that, if in addition to the above rebate, if the appointed LMM 
meets or exceeds the above heightened quoting standards in a given 
month, the LMM will receive the Monthly ADV Payment amount that 
corresponds to the level of ADV provided by the LMM in MRUT for that 
month per the MRUT Volume Incentive Pool program below. The Exchange 
believes the updated language is simpler and more straightforward 
regarding the application of the MRUT Volume Incentive Pool program to 
an LMM that meets or exceeds the program's heightened quoting 
standards. The Exchange believes that the proposed rule change will 
encourage LMMs appointed to the MRUT LMM Incentive Program to strive to 
meet tighter width standards in MRUT options in order to receive the 
proposed higher rebate offered under the MRUT LMM Incentive Program. 
Tighter spreads generally signal an increase in activity from other 
market participants, contributing to overall deeper, more liquid 
markets, price discovery and transparency, and a robust market 
ecosystem to the benefit of all market participants.
    In addition to this, the proposed rule change also makes a 
nonsubstantive change to the Fees Schedule by removing an expiring fee 
waiver in footnote 32 (and the locations in the Fees Schedule to which 
it is appended to MRUT options for Market-Maker and Firm transaction 
fees in the Rate Table--All Products Excluding Underlying Symbol List 
A), which 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. As intended, the waiver expired on August 31, 
2021 and such orders will be assessed the standard transaction fees for 
orders submitted in MRUT options in a Market-Maker ($0.03 per contract) 
or Firm ($0.02 per contract) capacity.
MSCI (MXEA and MXEF) LMM Incentive Program
    The Exchange proposes to amend its MSCI LMM Incentive Program. 
Currently, the program provides that if the appointed LMM in MXEA and 
MXEF options (collectively, ``MSCI options'') provides continuous 
electronic quotes during RTH that meet or exceed the heightened quoting 
standards \6\ in at least 90% of the MXEA and MXEF series 80% of the 
time in a given month, the LMM will receive a rebate \7\ for that month 
in the amount of $20,000 per class, per month.\8\
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    \6\ Located in the ``MSCI LMM Incentive Program'' table in the 
Fees Schedule.
    \7\ See supra note 3.
    \8\ The proposed rule change also makes a nonsubstantive 
clarifying change that makes it explicit that the monthly payment 
may be a 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, consistent with language currently in each of the LMM 
Incentive Programs and the manner in which the MSCI LMM Incentive 
Program currently works today.
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    First, the Exchange proposes to amend the number of days for MSCI 
options to be considered as ``expiring'' and as ``near-term'' per the 
program. Specifically, the proposed rule change updates the days to 
expiry for MSCI options to be considered as expiring for purposes of 
the program from 7 days or less to 6 days or less and updates the days 
to expiry for MSCI options to be considered as near-term for the 
purposes of the program from 8 days to 60 days to 7 days to 60 days. 
The Exchange has observed that there is more significant demand for and 
participation in MSCI options with time to expiration of a week or 
more, whereas those options with less than a week to expiration tend to 
experience significantly less demand and participation, wherein it 
becomes more difficult for LMMs to quote within specified widths and 
sizes. As a result, the proposed rule change to update the days to 
expiry within the expiring and near-term categories is intended to 
delineate the expiry categories in a manner that better reflects the 
differences in market characteristics, and thus the difference in the 
difficulty in meeting the quoting standards that correspond to each, 
between options that expire in less than a week and options that expire 
in a week or more (up to 60 days).
    Next, the Exchange proposes to amend certain quote widths and sizes 
contained in the MSCI LMM Incentive Program's heightened quoting 
standards. Currently, for expiring MSCI options, the appointed LMM must 
meet, among other heightened quoting standards, a $3.00 width for a 
quote size of 5 contracts at a premium of $1.01 to $3.00. The proposed 
rule change marginally decreases this width to $2.50. For MSCI options 
expiring in the near-term, the appointed LMM must currently meet, among 
other heightened quoting standards, a $1.20 width for a quote size of 
20 contracts at a premium level of $0.00 to $5.00 and a $5.00 width for 
a quote size of 10 contracts at a premium level of $15.01 to $50.00. 
The proposed rule change marginally reduces these widths to $1.05 and 
$4.50, respectively. Additionally, the proposed rule change also 
slightly reduces the quote size standards for most all of the premium 
categories for MSCI options expiring in the near-term. More 
specifically, the proposed rule change reduces the quote size standard 
of 20 contracts at a premium level of $0.00 to $5.00 to 12 contracts, 
the quote size standard of 15 contracts at a premium level of $5.01 to 
$15.00 to 9 contracts, the quote size standard of 10 contracts at a 
premium level of $15.01 to $50.00 to 7 contracts, the quote size 
standard of 7 contracts at a premium level of $50.01 to $100.00 to 5 
contracts, and the quote size standard of 3 contracts at a premium 
level of $100.01 to $200.00 to 2 contracts. For MSCI options expiring 
in the mid-term (61 days to 270 days), the appointed LMM must currently 
meet, among other heightened quoting standards, a $10.00 width for a 
quote size of 57 [sic] contracts at a premium of $15.01 to $50.00. The 
proposed rule change also marginally decreases this quote width to 
$9.00. The proposed rule change also slightly reduces the quote size 
standards for certain premium categories for MSCI options expiring in 
the mid-term by reducing the quote size standard of 15 contracts at a 
premium level of $0.00 to $5.00 to 10 contracts, the quote size 
standard of 10 contracts at a premium level of $5.01 to $15.00 to 8 
contracts, and the quote size standard of 2 [sic] contracts at a 
premium level of $100.01 to $200.00 to 2 contracts.
    The Exchange believes that the proposed tighter widths and smaller 
quote sizes for the MSCI LMM Incentive Program's heightened quoting 
requirements will incentivize LMMs appointed to the program to make 
tighter markets and quote more aggressively in MSCI options to receive 
the current rebate offered under the program, resulting in tighter 
spreads and increased liquidity to the benefits of investors.
RTH SPESG LMM Incentive Program
    The Exchange proposes to amend the RTH SPESG LMM Incentive Program. 
Currently, the program provides that, if

[[Page 51429]]

the appointed LMM provides continuous electronic quotes during RTH that 
meet or exceed the program's heightened quoting standards \9\ in at 
least 60% of SPESG series 90% of the time in a given month, the LMM 
will receive a rebate for that month in the amount of a pro-rata share 
of a compensation pool equal to $50,000 (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) for that month. If, for 
example, two LMMs meet the heightened continuous quoting standard in 
SPESG during a month, each will receive $25,000. If only one LMM meets 
the heightened continuous quoting standard in SPESG during a month, 
that LMM would receive $50,000 and the other one would receive nothing. 
The Exchange proposes to eliminate the compensation pool structure (and 
related explanatory language) currently applicable to the RTH SPESG LMM 
Incentive Program and adopt a flat-rate rebate structure per month, 
consistent with the current flat-rate rebate structure of the other LMM 
Incentive Programs. Specifically, the proposed rule change provides 
that if the appointed LMM provides continuous electronic quotes during 
RTH that meet or exceed the same heightened quoting standards in the 
same percentage of the series (60%) for the same percentage of the time 
(90%) in a given month, the LMM will receive a rebate 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) for that month.
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    \9\ Located in the ``RTH SPESG LMM Incentive Program'' table in 
the Fees Schedule.
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    The Exchange also proposes to offer an SPESG Volume Incentive Pool 
under the RTH SPESG LMM Incentive Program, like that offered under the 
MRUT LMM Incentive Program. Specifically, the proposed rule change to 
the program provides that, in addition to the above rebate (i.e., the 
proposed $20,000 per month rebate), if the appointed LMM meets or 
exceeds the above heightened quoting standards in a given month, the 
LMM will receive the Monthly ADV Payment amount that corresponds to the 
level of ADV provided by the LMM in SPESG for that month per the SPESG 
Volume Incentive Pool program below.

------------------------------------------------------------------------
                                                                Monthly
                          SPESG ADV                               ADV
                                                                payment
------------------------------------------------------------------------
0-999 contracts..............................................      $0.00
1,000-4,999 contracts........................................      5,000
5,000-10,000 contracts.......................................     15,000
Greater than 10,000 contracts................................     20,000
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    The proposed SPESG Volume Incentive Pool offered by the RTH SPESG 
LMM Incentive Program is designed to incentivize LMMs to further 
increase the provision of liquidity in SPESG options. Increased 
liquidity in SPESG options would, in turn, provide greater trading 
opportunities, added market transparency and enhanced price discovery 
for all market participants in SPESG.
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.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with 
Section 6(b)(4) of the Act,\12\ 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78f(b)(4).
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    Regarding each of the LMM Incentive Programs generally, the 
Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to continue to offer these financial incentives, 
including as amended, to LMMs appointed to the programs, because it 
benefits all market participants trading in the corresponding products 
during RTH. These incentive programs encourage the LMMs appointed to 
such programs to satisfy the heightened quoting standards, which may 
increase liquidity and provide more trading opportunities and tighter 
spreads. Indeed, the Exchange notes that these LMMs serve a crucial 
role in providing quotes and the opportunity for market participants to 
trade MRUT, MSCI and SPESG options, as applicable, which can lead to 
increased volume, providing for robust markets. The Exchange ultimately 
offers the LMM Incentive Programs, as amended, to sufficiently 
incentive LMMs appointed to each incentive program to provide key 
liquidity and active markets in the corresponding program products 
during the corresponding trading sessions, and believes that these 
incentive programs, as amended, will continue to encourage increased 
quoting to add liquidity in each of the corresponding program products, 
thereby protecting investors and the public interest. The Exchange also 
notes that an LMM appointed to an incentive program may undertake added 
costs each month in order to satisfy that heightened quoting standards 
(e.g., having to purchase additional logical connectivity).
    Particularly, the Exchange believes that it is reasonable to amend 
certain widths and sizes in the heightened quoting standards under the 
MRUT and MSCI LMM Incentive Programs, as applicable. The Exchange 
believes the proposed rule change to tighten certain widths and reduce 
certain quote size standards in the MRUT and MSCI LMM Incentive 
Programs, as applicable, is reasonably designed to facilitate LMMs 
appointed to the MRUT and MSCI Incentive Programs to post tighter 
spreads and more aggressive quotes in MRUT and MSCI options, as 
applicable, in order to meet the heightened quoting standards and 
receive the rebate offered under the incentive program. An increase in 
quoting activity and tighter quotes tends to signal additional 
corresponding increase in order flow from other market participants, 
which benefits all investors by deepening the Exchange's liquidity 
pool, potentially providing even greater execution incentives and 
opportunities, offering additional flexibility for all investors to 
enjoy cost savings, supporting the quality of price discovery, 
promoting market transparency and improving investor protection. The 
Exchange also believes that the proposed widths and sizes are 
reasonable because they remain generally aligned with the current 
heightened standards in each program, as the proposed widths and sizes 
are only marginally reduced in order to incentivize an increase in 
quoting activity and the provision of tighter markets. The Exchange 
also notes that another options exchange offers similar incentive 
programs with

[[Page 51430]]

corresponding quote widths, sizes and premiums of comparable 
ranges.\13\ Likewise, the Exchange believes that the proposed rule 
change to adopt an SPESG Volume Incentive Pool as part of the RTH SPESG 
LMM Incentive Program is reasonably designed to continue to encourage 
LMMs appointed to the incentive program to provide significant 
liquidity in SPESG options during RTH. The Exchange notes that the MRUT 
LMM Incentive Program also offers a volume incentive pool structured in 
a substantially similar manner.
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    \13\ See e.g., Nasdaq Phlx Options 7 Pricing Schedule, Section 
5.B, XND Incentive Program.
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    The Exchange believes that it is reasonable to amend the number of 
days to expiration that comprise certain expiry categories in the MSCI 
LMM Incentive Programs as this update is reasonably designed to make it 
easier for the LMMs appointed to the incentive program to satisfy the 
heightened quoting standards for options expiring a certain number of 
days out, by better aligning the applicable category of heightened 
quoting standards with the level of demand for MSCI options that expire 
in less than a week versus a week or more out.
    The Exchange believes that it is reasonable to amend the monthly 
rebate amounts applicable to the MRUT and RTH SPESG LMM Incentive 
Programs. The Exchange believes that the proposed increased rebate 
amounts are reasonably designed to continue to incentivize an appointed 
LMM to meet the applicable quoting standards for MRUT and SPESG 
options, 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. The Exchange 
believes that the proposed rule change to eliminate the compensation 
pool structure in the RTH SPESG LMM Incentive Program and replace it 
with a flat-rate rebate structure is reasonable because it is 
consistent with the flat-rate rebate structure currently applicable to 
each of the other LMM Incentive Programs. The Exchange further believes 
that the proposed rule change to amend the rebate amount received for 
MRUT ($25,000) and SPESG options ($20,000) is reasonable because it is 
comparable to the rebates offered by other LMM Incentive Programs. For 
example, the MSCI LMM Program currently offers $20,000 per each class 
(MXEF and MXEA) in which the heightened quoting standards are met in a 
given month and the GTH VIX/VIXW LMM Incentive Program offers $15,000 
for VIX options in which the quoting standards are met in VIX options a 
given month.
    The Exchange believes that the proposed changes to the LMM 
Incentive Programs are equitable and not unfairly discriminatory. The 
Exchange believes that it is equitable and not unfairly discriminatory 
to amend certain quoting widths and sizes in the MRUT and MSCI LMM 
Incentive Program, to adopt a volume incentive pool for the RTH SPESG 
LMM Incentive Program and to update the number of days to expiration 
for certain expiry categories in the MSCI LMM Incentive Program because 
such quote widths and sizes, volume pool program and expiry categories 
will equally apply to any and all TPHs with LMM appointments to the 
MRUT, MSCI and RTH SPESG LMM Incentive Programs, as applicable, that 
seek to meet the programs' heightened quoting standards in order to 
receive the rebates offered (both current and proposed, as applicable) 
under each respective program. The Exchange believes the proposed 
rebates applicable to the MRUT and RTH SPESG LMM Incentive Programs are 
equitable and not unfairly discriminatory because they, too, will 
equally apply to any TPH that is appointed as an LMM to the MRUT and 
RTH SPESG LMM Incentive Programs. Additionally, if an LMM appointed to 
any of the LMM Incentive Programs does not satisfy the corresponding 
heightened quoting standard for any given month, then it simply will 
not receive the rebate offered by the respective program 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.
    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. Particularly, the proposed 
changes to existing LMM Incentive Programs will apply to all LMMs 
appointed to the applicable program classes (i.e., MRUT, MXEF, MXEA and 
SPESG) in a uniform manner. To the extent these LMMs appointed to an 
incentive program receive a benefit that other market participants do 
not, as stated, these LMMs in their role as Mark-Makers on the Exchange 
have different obligations and are held to different standards. For 
example, Market-Makers play a crucial role in providing active and 
liquid markets in their appointed products, 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 also notes that an LMM appointed to an incentive 
program may undertake added costs each month to satisfy that heightened 
quoting standards (e.g., having to purchase additional logical 
connectivity). The Exchange also notes that the incentive programs are 
designed to attract additional order flow to the Exchange, wherein 
greater liquidity benefits all market participants by providing more 
trading opportunities, tighter spreads, and added market transparency 
and price discovery, and signals to other market participants to direct 
their order flow to those markets, thereby contributing to robust 
levels of liquidity.
    The Exchange believes the proposed rule change does not impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act as the LMM Incentive Programs 
apply only to transactions in products exclusively listed on Cboe 
Options. Additionally, as noted above, the incentive programs are 
designed to attract additional order flow to the Exchange, wherein 
greater liquidity benefits all market participants by providing more 
trading opportunities, tighter spreads, and added market transparency 
and price discovery, and signals to other market participants to direct 
their order flow to those markets, thereby contributing to robust 
levels of liquidity. The Exchange notes it operates in a highly 
competitive market. In addition to Cboe Options, TPHs have numerous 
alternative venues that they may participate on and director their 
order flow, including 15 other options exchanges, as well as off-
exchange venues, where competitive products are available for trading. 
Based on publicly available information, no single options exchange has 
more than 15% of the market share of executed volume of options 
trades.\14\ Therefore, no exchange possesses significant pricing power 
in the execution of option order flow. Moreover, the Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Specifically, in Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues

[[Page 51431]]

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.'' \15\ The fact that this market is competitive has also 
long been recognized by the courts. In NetCoalition v. Securities and 
Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one 
disputes that competition for order flow is `fierce.' . . . As the SEC 
explained, `[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .''.\16\ Accordingly, the Exchange does not believe its 
proposed changes to the incentive programs impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \14\ See Cboe Global Markets, U.S. Options Market Volume Summary 
by Month (August 24, 2021), available at http://markets.cboe.com/us/options/market_share/.
    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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 \17\ and paragraph (f) of Rule 19b-4 \18\ 
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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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-2021-050 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-2021-050. 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-2021-050 and should be submitted on 
or before October 6, 2021.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19860 Filed 9-14-21; 8:45 am]
BILLING CODE 8011-01-P


