[Federal Register Volume 86, Number 201 (Thursday, October 21, 2021)]
[Notices]
[Pages 58335-58341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22927]



[[Page 58335]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93348; File No. SR-CBOE-2021-058]


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

October 15, 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 October 7, 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 
Global Trading Hours (``GTH'') Cboe Volatility Index (``VIX'') options 
and VIX Weekly (VIXW) options LMM Incentive Program and the GTH S&P 500 
Index (``SPX'') options and SPX Weekly (``SPXW'') options LMM Incentive 
Program.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
September 30, 2021 (SR-CBOE-2021-056). On October 7, 2021, the 
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------

    Both LMM Incentive Programs provide a rebate 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 (i.e., GTH). 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.
GTH VIX/VIXW LMM Program
    The Exchange first proposes to amend its GTH VIX/VIXW LMM Incentive 
Program. Currently, the program provides that if an LMM in VIX/VIXW 
provides continuous electronic quotes during GTH that meet or exceed 
the heightened quoting standards (below) in at least 99% of each of the 
VIX and VIXW series, 90% of the time in a given month, the LMM will 
receive a rebate for that month in the amount of $15,000 for VIX and 
$5,000 for VIXW (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. Additionally, if the appointed LMM provides 
continuous electronic quotes during GTH that meet or exceed the above 
VIX heightened quoting standards in at least 99% of the VIX series, 90% 
of the time in a given month, the LMM will receive a rebate for that 
month of $0.03 per VIX/VIXW contract executed in its Market-Maker 
capacity during RTH.

------------------------------------------------------------------------
                                                              Maximum
                      Premium level                          allowable
                                                               width
------------------------------------------------------------------------
VIXW:
    $0.00-$100.00.......................................          $10.00
    $100.01-$200.00.....................................           16.00
    Greater than $200.000...............................           24.00
------------------------------------------------------------------------


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                        15 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
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIX:
    $0.00-$1.00.................................        $0.75           25        $0.50           50        $0.50           50        $1.00           10
    $1.01-$3.00.................................         1.00           15         0.75           25         0.75           25         1.00           10
    $3.01-$5.00.................................         1.00           15         0.75           25         0.75           25         1.20            7
    $5.01-$10.00................................         1.50           10         1.00           10         1.00           10         2.00            5
    $10.01-$30.00...............................         2.50            5         1.50            5         2.50            5         4.00            3
    Greater than $30.00.........................         5.00            3         3.00            5         5.00            3         7.00            2
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 58336]]

    The Exchange proposes to restructure the GTH VIX/VIXW LMM Incentive 
Program by adopting a two sets of quoting standards for VIX options; a 
set of basic quoting standards and a set of heightened quoting 
standards. The Exchange notes that the current quoting standards for 
VIXW will remain the same but will be considered basic quoting 
standards for VIXW. As proposed, the program provides that, if the 
appointed LMM provides continuous electronic quotes during GTH that 
meet or exceed the basic quoting standards in the same percentage of 
series in the same percentage of time (i.e., 99% of each VIX/VIXW 
series, 90% of the time per month), the LMM will receive the same 
rebate ($15,000 for VIX and $5,000 for VIXW) for that month. The new 
basic quoting standards proposed for VIX options are as follows in the 
table below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                       Less than 15 days        15 days to 60 days        61 days to 180 days       181 days or greater
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              VIX Value at Prior Close <18
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................        $0.35           50        $0.25           75        $0.35           50        $0.80           10
$1.01-$3.00.....................................         0.50           30         0.35           50         0.50           30         0.90           10
$3.01-$5.00.....................................         0.60           25         0.35           25         0.60           20         1.00           10
$5.01-$10.00....................................         1.00           10         0.80           20         1.30           10         2.00            5
$10.01-$30.00...................................         2.00            5         1.50            5         2.00            5         3.00            3
Greater than $30.00.............................         5.00            3         3.00            3         5.00            3         5.00            3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           VIX Value at Prior Close from 18-25
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................        $0.50           25        $0.35           50        $0.50           40        $1.00           10
$1.01-$3.00.....................................         0.50           20         0.50           30         0.70           20         1.00           10
$3.01-$5.00.....................................         0.80           20         0.50           20         0.80           10         1.30            5
$5.01-$10.00....................................         1.50           10         1.00           10         2.00            5         2.20            5
$10.01-$30.00...................................         3.00            1         2.50            1         3.00            1         5.00            1
Greater than $30.00.............................         5.00            1         5.00            1         5.00            1        10.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       VIX Value at Prior Close from 25
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................         0.80           15         0.50           20         0.60           20         1.20           10
$1.01-$3.00.....................................         1.00           10         0.75           20         1.00           10         1.20           10
$3.01-$5.00.....................................         1.20           10         0.90           10         1.20            5         1.80            5
$5.01-$10.00....................................         2.00            5         1.50            5         2.50            5         3.00            3
$10.01-$30.00...................................         5.00            1         5.00            1         5.00            1         7.00            1
Greater than $30.00.............................        10.00            1        10.00            1        10.00            1        10.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Additionally, if the appointed LMM provides continuous electronic 
quotes during GTH that meet or exceed the new VIX heighted quoting 
standards (as proposed below) in the same percentage of VIX series 
(99%) for the same percentage of time (90%) of the time in a given 
month, the LMM will receive the same rebate currently offered ($0.03) 
for that month per VIX/VIXW contract executed in its Market-Maker 
capacity during Regular Trading Hours.

----------------------------------------------------------------------------------------------------------------
                                                             Expiring                        Near term
                                                 ---------------------------------------------------------------
                  Premium level                          Less than 15 days              15 days to 60 days
                                                 ---------------------------------------------------------------
                                                       Width           Size            Width           Size
----------------------------------------------------------------------------------------------------------------
                                          VIX Value at Prior Close <18
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................           $0.20             100           $0.20             100
$1.01-$3.00.....................................  ..............  ..............            0.25              50
$3.01-$5.00.....................................  ..............  ..............            0.35              25
----------------------------------------------------------------------------------------------------------------
                                       VIX Value at Prior Close from 18-25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................            0.25              50            0.20              50
$1.01-$3.00.....................................  ..............  ..............            0.30              30
$3.01-$5.00.....................................  ..............  ..............            0.40              30
----------------------------------------------------------------------------------------------------------------
                                   VIX Value at Prior Close from 25
----------------------------------------------------------------------------------------------------------------
$0.00-$1.00.....................................            0.30              30            0.25              30
$1.01-$3.00.....................................  ..............  ..............            0.40              20
$3.01-$5.00.....................................  ..............  ..............            0.60              20
----------------------------------------------------------------------------------------------------------------


[[Page 58337]]

    The Exchange believes the proposed basic and heightened quoting 
requirements for VIX options under the GTH VIX/VIXW LMM Incentive 
Program are designed to continue to encourage LMMs appointed to the 
program to provide significant liquidity in VIX options during GTH. 
Particularly, by adopting different sets of quoting standards that are 
applicable depending on the VIX Index value at the prior close (i.e., 
at the close of the preceding RTH session) the proposed rule change 
will encourage LMMs appointed to the program to meet the quoting 
standards by making it easier for them to satisfy such standards. 
Spreads in VIX options generally widen when the VIX experiences higher 
volatility (i.e., is higher in value). As a result, the Exchange 
understands that, when the VIX Index experiences higher volatility, 
LMMs appointed to the program find it increasingly challenging to meet 
the program's current quoting standards. Therefore, to better enable 
and encourage LMMs to meet the quoting standards, the proposed rule 
change adopts generally wider widths and smaller quote sizes where the 
VIX Index may be experiencing higher volatility (i.e., as the value of 
the VIX in the proposed VIX value categories becomes relatively higher 
based on the closing index value from the preceding trading session). 
The proposed rule change also adopts generally tighter widths and 
larger quote sizes in the expiration categories that are nearer in term 
and gradually widens the widths and reduces the quote sizes as the 
expiration categories become longer in term. The Exchange believes the 
proposed rule change provides a balance between providing more 
challenging opportunities, thus greater quoting incentive, in the 
expiration categories that are nearer in term and easing the width and 
size requirements as the expiration categories become longer in term, 
wherein the Exchange understands that demand and participation becomes 
less significant and thus more difficult for LMMs to quote within 
tighter widths and larger sizes. Also, by providing a set of heightened 
quoting standards that provide for tighter width and large size 
standards than the set of basic quoting standards, the proposed rule 
change offers LMMs appointed to the program a more challenging 
opportunity, thus further incentive, to strive to meet the heightened 
quoting standards in order to receive the additional rebate on their 
VIX/VIXW orders in RTH.
    In addition to this, the Exchange proposes to update the time to 
expiration in the mid-term expiration category for the VIX basic 
quoting standards (as proposed) from a range of 61 to 270 days to a 
range of 61 to 180 days, and in the long-term expiration category from 
271 days or greater to 181 days or greater. The Exchange notes that it 
has recently begun listing more VIX options that expire more than 180 
days out and that the Exchange understands that it is more difficult 
for LMMs to meet the narrower pricing standards current under the 
current mid-term expiration category for VIX options that expire in 181 
days or more. As such, the Exchange wishes to align the long-term 
expiration category in a manner that makes it easier for LMMs to 
achieve the quoting standards thereunder, particularly as the Exchange 
has increased the number of VIX options listed that expire more than 
180 days out.
GTH SPX/SPXW LMM Program
    The Exchange proposes to amend the GTH SPX/SPXW LMM Incentive 
Program. Currently, under the GTH SPX/SPXW LMM Incentive Program, if an 
LMM in SPX/SPXW provides continuous electronic quotes during GTH that 
meet or exceed the heightened quoting standards (below) in at least 85% 
of each of the SPX and SPXW series, 90% of the time in a given month, 
the LMM will receive a rebate for that month in the amount of $20,000 
for SPX and $30,000 for SPXW (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.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                        7 days or less           8 days to 60 days        61 days to 270 days       271 days or greater
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$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
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange proposes to adopt a new set of heightened quoting 
standards (below) under the GTH SPX/SPXW LMM Incentive Program, similar 
to the proposed new basic quoting standards under the GTH VIX/VIXW LMM 
Incentive Program, as described above.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Expiring                  Near term                 Mid term                  Long term
                                                 -------------------------------------------------------------------------------------------------------
                  Premium level                        7 days or less           8 days to 60 days        61 days to 270 days      271 days to 500 days
                                                 -------------------------------------------------------------------------------------------------------
                                                     Width         Size        Width         Size        Width         Size        Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              VIX Value at Prior Close <20
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00.....................................        $0.35           25        $0.40           15        $0.60            5        $1.20            5
$5.01-$15.00....................................         0.60           20         0.60           20         1.50           10         2.00            5
$15.01-$50.00...................................         1.20           15         2.00           15         2.00           10         4.00            5
$50.01-$100.00..................................         6.00           10         4.00           10         3.00           10         5.00            5
$100.01-$200.00.................................        15.00            1         5.00            5         4.00            5         6.00            5
Greater than $200.00............................        20.00            1         8.00            1        12.00            1        50.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 58338]]

 
                                                           VIX Value at Prior Close from 20-30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00.....................................         0.60           15         0.80           10         0.75            5         2.00            5
$5.01-$15.00....................................         1.00           15         1.00           15         2.20            5         3.00            5
$15.01-$50.00...................................         2.50           10         3.50           10          3.0            5         5.00            5
$50.01-$100.00..................................        10.00           10         7.00           10         3.50            5         7.00            5
$100.01-$200.00.................................        18.00            1         8.00            5         6.00            5        10.00            5
Greater than $200.00............................        25.00            1        12.00            1   2.00 [sic]            1        60.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         VIX Value at Prior Close 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00.....................................         0.90           10         1.00           10         1.00            5         3.00            5
$5.01-$15.00....................................         2.50           10         2.50           10         3.00            5         4.00            5
$15.01-$50.00...................................         4.00           10         5.00           10         5.00            5         8.00            5
$50.01-$100.00..................................        12.00            5        10.00            5         4.50            3        10.00            1
$100.01-$200.00.................................        20.00            1        12.00            5        15.00            1        18.00            1
Greater than $200.00............................        30.00            1        25.00            1        30.00            1        70.00            1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    For the same reasons described above regarding the new quoting 
standards for the GTH VIX/VIXW the LMM Incentive Program, the Exchange 
believes that, by adopting generally wider widths and smaller quote 
sizes as the value of the VIX in the proposed VIX value categories 
becomes relatively higher based on the closing VIX Index value from the 
preceding trading session, the proposed rule change is designed to 
better reflect market characteristics in SPX and SPXW options where the 
VIX Index may be experiencing higher volatility (i.e., in the proposed 
categories in which the value of the VIX is relatively higher based on 
the closing VIX Index value from the preceding trading session), and 
thus encourage LMMs appointed to the program to meet the quoting 
standards by making it easier for them to satisfy such standards. The 
Exchange also believes that by adopting generally tighter widths and 
larger quote sizes in the expiration categories that are nearer in term 
and gradually widening the widths and reducing the quote sizes as the 
expiration categories become longer in term, the proposed rule change 
provides more challenging opportunities, thus greater quoting 
incentive, in the expiration categories that are nearer in term while 
easing the width and size requirements as the expiration categories 
become longer in term, wherein the Exchange understands that demand and 
participation becomes less significant and thus more difficult for LMMs 
to quote within tighter widths and larger sizes.
    In addition to this, the Exchange proposes to update the time to 
expiration in the long-term expiration category from 271 days or 
greater to a range of 271 days to 500 days. The Exchange notes that it 
has recently begun listing more SPX/SPXW options with expirations 
greater than 271 days. The Exchange understands that it is difficult 
for LMMs to price options that generally expire more than 500 days out; 
therefore, the Exchange wishes to narrow the long-term expiration 
category in a manner that makes it easier for LMMs to achieve the 
quoting standards thereunder, particularly as the Exchange has 
increased the number of options listed within this expiry category.
    The Exchange also proposes to update the rebate amount received for 
meeting the heightened quoting standards, as proposed, in a given month 
in SPX, by slightly decreasing the rebate amount from $20,000 to 
$15,000 and in SPXW, by slightly increasing the rebate amount from 
$30,000 to $35,000. The Exchange has observed a recent increase in 
demand in SPWX options and therefore wishes to further incentive LMM 
appointed to the program to provide significant liquidity in SPXW 
options by meeting the heightened quoting standards, while continuing 
to allocate the same total rebate amount ($50,000) across SPX and SPXW.
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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ 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,\6\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Regarding both the GTH SPX/SPXW and VIX/VIXW 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 GTH. 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 VIX/VIXW and SPX/SPXW options, as 
applicable, which can lead to increased volume, providing for robust 
markets. The

[[Page 58339]]

Exchange ultimately offers the LMM Incentive Programs, as amended, to 
sufficiently incentivize 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 to satisfy that heightened quoting 
standards (e.g., having to purchase additional logical connectivity).
    The Exchange believes that the proposed changes to the LMM 
Incentive Programs are reasonable. Particularly, the Exchange believes 
that it is reasonable to adopt new quoting requirements in the GTH VIX/
VIXW and SPX/SPXW LMM Incentive Programs, as these proposed new quoting 
requirements are reasonably designed to continue to encourage LMMs 
appointed to the respective incentive programs to provide significant 
liquidity in VIX options and SPX/SPXW options during GTH. In 
particular, the Exchange believes that it is reasonable to adopt new 
widths and sizes in the quoting standards under the GTH VIX/VIXW and 
SPX/SPXW LMM Incentive Programs, as applicable, as the proposed rule 
change is generally designed to further align the quote widths and size 
standards for VIX options and SPX/SPXW options with the market 
characteristics in each applicable class. As such, the Exchange 
believes the new quote widths and size are reasonably designed to 
facilitate LMMs appointed to the GTH VIX/VIXW and SPX/SPXW LMM 
Incentive Programs in meeting the heightened quoting standards (in 
order to receive the rebate offered under the respective incentive 
program) by increasing their quoting activity and posting tighter 
spreads and more aggressive quotes in VIX options and SPX/SPXW options, 
as applicable. 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 believes that by adopting different sets of quoting 
standards that are applicable depending on the VIX Index value at the 
prior close (i.e., at the close of the preceding RTH session) the 
proposed rule change will encourage LMMs appointed to the program to 
meet the quoting standards by making it easier for them to satisfy such 
standards. In particular, the Exchange believes that the proposed rule 
change to adopt generally wider widths and smaller quote sizes as the 
value of the VIX in the proposed VIX value categories becomes 
relatively higher based on the closing VIX Index value from the 
preceding trading session is reasonably designed to better reflect 
market characteristics in VIX options and SPX/SPXW options where the 
VIX Index may be experiencing higher volatility (based on the closing 
VIX Index value from the preceding trading session), and thus encourage 
LMMs appointed to the programs to meet the quoting standards by making 
it easier for them to satisfy such standards.
    Additionally, and as described above, the Exchange believes that 
the proposed rule change to adopt generally tighter widths and larger 
quote sizes for VIX options and SPX/SPXW options in the expiration 
categories that are nearer in term and widen the widths and reduce the 
quote sizes as the expiration categories become longer in term is 
reasonably designed to provide more challenging opportunities, thus 
greater quoting incentive, in the expiration categories that are nearer 
in term while easing the width and size requirements as the expiration 
categories become longer in term. In addition to this, the Exchange 
believes that by providing a set of heightened quoting standards for 
VIX options that provide for tighter width and large size standards 
than the proposed set of basic quoting standards for VIX options, the 
proposed rule change offers LMMs appointed to the GTH VIX/VIXW LMM 
Incentive Program a more challenging opportunity, thus further 
incentive, to strive to meet the heightened quoting standards in VIX 
options in order to receive the current additional rebate on their VIX/
VIXW orders in RTH. The Exchange also notes that the proposed basic 
quoting standards for VIX options and proposed heightened quoting 
standards for VIX and for SPX/SPXW options do not represent a 
significant departure from each of the program's current quote width 
and size standards and remain generally aligned with the current range 
of widths and sizes; they are merely being tailored to better reflect 
market characteristics in VIX options and in SPX/SPX options as they 
each relate to volatility in the VIX Index. The Exchange further notes 
that quote widths and sizes typical in VIX options differ from that in 
SPX/SPXW options, therefore, the proposed heightened quoting 
requirements reflect quote widths and sizes that the Exchange believes 
aligns with the market characteristics specific to each.
    In addition to this, the Exchange believes that it is reasonable to 
amend the number of days to expiration that comprise certain expiry 
categories in the GTH VIX/VIXW and SPX/SPXW LMM Incentive Programs as 
these updates are reasonably designed to make it easier for the LMMs 
appointed to the respective incentive programs 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 market characteristics and level of demand 
for options that expire a certain number of days out.
    The Exchange believes that it is reasonable to amend the monthly 
rebate amounts applicable to the GTH SPX/SPXW Incentive Program. The 
Exchange believes that the proposed increased rebate amount (from 
$30,000 to $35,000) for SPXW options is reasonably designed to continue 
to incentivize an appointed LMM to meet the applicable quoting 
standards for SPXW 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 also believes that it is 
reasonable to shift the total rebate amount ($50,000) allocated across 
SPX and SPXW options under the program by offsetting the slightly 
increased rebate amount for SPXW ($35,000) options with a slightly 
decreased rebated amount for SPX options ($15,000) because the Exchange 
has observed a recent increase in demand in SPWX options and therefore 
wishes to further incentive LMM appointed to the program to provide 
significant liquidity in SPXW options by meeting the heightened quoting 
standards, while continuing to allocate the same total rebate amount 
across SPX and SPXW.
    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 adopt new quoting standards and to update the number of days to 
expiration for certain expiry

[[Page 58340]]

categories in the GTH VIX/VIXW and SPX/SPXW LMM Incentive Programs 
because such overall quoting standards and expiry categories will 
equally apply to any and all TPHs with LMM appointments to the GTH VIX/
VIXW and SPX/SPXW LMM Incentive Programs, as applicable, that seek to 
meet the programs' heightened quoting standards in order to receive the 
rebate offered (both current and proposed, as applicable) under the 
respective programs. The Exchange believes the proposed rebates 
applicable to the GTH SPX/SPXW Incentive Program are equitable and not 
unfairly discriminatory because they, too, will equally apply to any 
TPH that is appointed as an LMM to the GTH SPX/SPXW LMM Incentive 
Program. Additionally, if an LMM appointed to either the GTH SPX/SPXW 
or the GTH VIX/VIXW 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., VIX/VIXW and SPX/
SPXW) 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 that it needs 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 16% of the market share of executed volume of options 
trades.\7\ 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 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.'' \8\ 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'. . . .''.\9\ 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.
---------------------------------------------------------------------------

    \7\ See Cboe Global Markets, U.S. Options Market Volume Summary 
by Month (September 22, 2021), available at http://markets.cboe.com/us/options/market_share/.
    \8\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \9\ 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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 [email protected]. Please 
include File Number SR-CBOE-2021-058 on the subject line.

[[Page 58341]]

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-2021-058. 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-2021-058 and should be submitted on 
or before November 12, 2021.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22927 Filed 10-20-21; 8:45 am]
BILLING CODE 8011-01-P


