[Federal Register Volume 87, Number 97 (Thursday, May 19, 2022)]
[Notices]
[Pages 30542-30546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10737]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94912; File No. SR-C2-2022-011]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule Relating to the Sale of Open-Close Volume Data

May 13, 2022.
    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 May 2, 2022, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2 Options'') 
proposes to amend its Fees Schedule relating to the sale of Open-Close 
volume data. The text of the proposed rule change is provided in 
Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/ctwo/), 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.

[[Page 30543]]

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 (i) offer a 
free trial during the months of May, June and July 2022 for an ad-hoc 
request of three (3) historical months of Intraday Open-Close 
historical data to all C2 Trading Permit Holders (``TPHs'') and non-
TPHs who have never before subscribed to the Intraday Open-Close 
historical files and (ii) adopt fees for the external distribution of 
products derived from Open-Close Data, effective May 2, 2022.
    By way of background, the Exchange currently offers End-of-Day 
(``EOD'') and Intraday Open-Close Data (collectively, ``Open-Close 
Data''). EOD Open-Close Data is an end-of-day volume summary of trading 
activity on the Exchange at the option level by origin (customer, 
professional customer, broker-dealer, and market maker), side of the 
market (buy or sell), price, and transaction type (opening or closing). 
The customer and professional customer volume is further broken down 
into trade size buckets (less than 100 contracts, 100-199 contracts, 
greater than 199 contracts). The Open-Close Data is proprietary C2 
Options trade data and does not include trade data from any other 
exchange. It is also a historical data product and not a real-time data 
feed. The Exchange also offers Intraday Open-Close Data, which provides 
similar information to that of Open-Close Data but is produced and 
updated every 10 minutes during the trading day. Data is captured in 
``snapshots'' taken every 10 minutes throughout the trading day and is 
available to subscribers within five minutes of the conclusion of each 
10-minute period.\3\ The Intraday Open-Close Data provides a volume 
summary of trading activity on the Exchange at the option level by 
origin (customer, professional customer, broker-dealer, and market 
maker), side of the market (buy or sell), and transaction type (opening 
or closing). The customer and professional customer volume are further 
broken down into trade size buckets (less than 100 contracts, 100-199 
contracts, greater than 199 contracts). The Intraday Open-Close Data is 
also proprietary C2 Options trade data and does not include trade data 
from any other exchange.
---------------------------------------------------------------------------

    \3\ For example, subscribers to the intraday product will 
receive the first calculation of intraday data by approximately 9:42 
a.m. ET, which represents data captured from 9:30 a.m. to 9:40 a.m. 
Subscribers will receive the next update at 9:52 a.m., representing 
the data previously provided together with data captured from 9:40 
a.m. through 9:50 a.m., and so forth. Each update will represent the 
aggregate data captured from the current ``snapshot'' and all 
previous ``snapshots.''
---------------------------------------------------------------------------

    Cboe LiveVol, LLC (``LiveVol''), a wholly owned subsidiary of the 
Exchange's parent company, Cboe Global Markets, Inc., makes the Open-
Close Data available for purchase to TPHs and non-TPHs on the LiveVol 
DataShop website (datashop.cboe.com). Customers may currently purchase 
Open-Close Data on a subscription basis (monthly or annually) or by ad 
hoc request for a specified month (e.g., request for Intraday Open-
Close Data for month of January 2022).
    Open-Close Data is subject to direct competition from similar end-
of-day and intraday options trading summaries offered by several other 
options exchanges.\4\ All of these exchanges offer essentially the same 
end-of-day and intraday options trading summary information.
---------------------------------------------------------------------------

    \4\ These substitute products are: Nasdaq PHLX Options Trade 
Outline, Nasdaq Options Trade Outline, ISE Trade Profile, GEMX Trade 
Profile data; open-close data from Cboe Options, BZX, and EDGX; and 
Open Close Reports from MIAX Options, Pearl, and Emerald.
---------------------------------------------------------------------------

Free Trial
    The Exchange first seeks to adopt a free trial for historical ad 
hoc requests for Intraday Open-Close Data for new purchasers. 
Currently, ad hoc requests for historical Intraday Open-Close Data are 
available to all customers at the same price and in the same manner. 
The current charge for this historical Intraday Open-Close Data 
covering all of the Exchange's securities (Equities, Indexes & ETF's) 
is $500 per month. The Exchange now proposes to adopt a free trial 
available during the months of May, June and July 2022 to provide a 
total up to three (3) historical months of Intraday Open-Close Data to 
any TPH or non-TPH that has not previously subscribed to this 
offering.\5\ The Exchange notes that it previously offered this free 
trial period last year for the months of June and July 2021.\6\ The 
Exchange believes bringing back the proposed trial will again serve as 
an incentive for new users who have never purchased Intraday Open-Close 
historical data to start purchasing Intraday Open-Close historical 
data. Particularly, the Exchange believes it will give potential 
subscribers the ability to use and test the data offering before 
signing up for additional months. The Exchange also notes another 
exchange offers a free trial for new subscribers of a similar data 
product.\7\ Lastly, the purchase of Intraday Open-Close historical data 
is discretionary and not compulsory.
---------------------------------------------------------------------------

    \5\ For example, if a TPH or non-TPH that has never made an ad-
hoc request for a specified month of Intraday Open-Close historical 
data wishes to purchase Intraday Open-Close Data for the months of 
January, February and March 2022 during the month of June 2022, the 
historical files for those months would be provided free of charge. 
If a new user wishes to purchase Intraday Open-Close historical data 
for the months of January, February, March and April 2022 during the 
month of June 2022, then the data for January, February and March 
2022 would be provided free of charge, and the new user would be 
charged $500 for the April 2022 historical file.
    \6\ The Exchange notes it inadvertently never eliminated the 
obsolete rule text language from the Fees Schedule. The Exchange 
proposes to update the text to conform to the proposed fee change.
    \7\ See Nasdaq ISE, Options 7 Pricing Schedule, Section 10A., 
Nasdaq ISE Open/Close Trade Profile End of Day.
---------------------------------------------------------------------------

External Distribution of Derived Data
    The external distribution of Open-Close Data or any product derived 
from such data is not currently permitted. The Exchange proposes to 
remove that prohibition and allow vendors to distribute ``Derived 
Data'' based on Open-Close Data. ``Derived Data'' is pricing data or 
other data that (i) is created in whole or in part from Exchange Data, 
(ii) is not an index or financial product, and (iii) cannot be readily 
reverse-engineered to recreate Exchange Data or used to create other 
data that is a reasonable facsimile or substitute for Exchange Data.\8\ 
Derived Data may be created by Distributors for a number of different 
purposes, as determined by the Distributor. The Exchange believes 
allowing market data vendors to identify, develop, and sell derived 
market data products, enables them to harness the power of the 
competitive marketplace to promote innovation.
---------------------------------------------------------------------------

    \8\ ``Derived Data'' is not currently a defined term in the C2 
Options Fees Schedule. The Exchange proposes to add the definition 
to the Notes section of the LiveVol Fees table for clarity.
---------------------------------------------------------------------------

    The Exchange proposes to adopt a fee of $5,000 per month to allow 
the unlimited external distribution of Derived Data from Open-Close 
Data.\9\ The fee charged to distribute the Derived Data will be 
constrained by potential competition, as any exchange with an options 
trading product would be able to submit an immediately-effective fee 
filing to allow redistribution, most likely without needing to modify 
the underlying product in any way, thereby subjecting the proposed fee 
to market competition. Moreover, the Exchange notes at least

[[Page 30544]]

one other Exchange currently allows, and charges for, external 
distribution of derived data based on similar open-close data.\10\
---------------------------------------------------------------------------

    \9\ The External Distribution Fee for Derived Open-Close Data 
will be in addition to fees for the underlying data. For example, 
external distribution of data derived from the Intraday product will 
be $1,000 per month (the monthly subscription fee), plus the 
proposed $5,000 per month External Distribution fee.
    \10\ See Nasdaq PHLX, Options 7 Pricing Schedule, Photo 
Historical Data, External Distribution.
---------------------------------------------------------------------------

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.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ 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 the 
Section 6(b)(5) \13\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
---------------------------------------------------------------------------

    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data. The Exchange believes the proposed fee 
changes will further broaden the availability of U.S. option market 
data to investors consistent with the principles of Regulation NMS. 
Open-Close Data is designed to help investors understand underlying 
market trends to improve the quality of investment decisions. Indeed, 
subscribers to the data may be able to enhance their ability to analyze 
option trade and volume data and create and test trading models and 
analytical strategies. The Exchange believes Open-Close Data provides a 
valuable tool that subscribers can use to gain comprehensive insight 
into the trading activity in a particular series, but also emphasizes 
such data is not necessary for trading and as noted above, is entirely 
optional. Moreover, several other exchanges offer a similar data 
product which offer same type of data content through end-of-day or 
intraday reports.\14\
---------------------------------------------------------------------------

    \14\ See supra note 4.
---------------------------------------------------------------------------

    The Exchange also operates in a highly competitive environment. 
Indeed, there are currently 16 registered options exchanges that trade 
options. Based on publicly available information, no single options 
exchange has more than 16% of the market share.\15\ The Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Particularly, in Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \16\ Making similar data products available to 
market participants fosters competition in the marketplace, and 
constrains the ability of exchanges to charge supracompetitive [sic] 
fees. In the event that a market participant views one exchange's data 
product as more or less attractive than the competition they can and do 
switch between similar products. The proposed fees are a result of the 
competitive environment, as the Exchange seeks to adopt fees to attract 
purchasers of historical Intraday Open-Close Data, as well as attract 
Distributors for derived data of its Open-Close Data.
---------------------------------------------------------------------------

    \15\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (April 29, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    The Exchange believes that the proposed free trial for any TPH or 
non-TPH who has not previously purchased Intraday Open-Close historical 
data is reasonable because such users would not be subject to fees for 
up to 3 months' worth of Intraday Open-Close historical data. The 
Exchange believes the proposed free trial is also reasonable as it will 
give potential subscribers the ability to use and test the Intraday 
Open-Close historical data prior to purchasing additional months and 
will therefore encourage and promote new users to purchase the Intraday 
Open-Close historical data. The Exchange believes that the proposed 
discount is equitable and not unfairly discriminatory because it will 
apply equally to all TPHs and non-TPHs who have not previously 
purchased Intraday Open-Close historical data. Also as noted above, 
another exchange offers a free trial to new users for a similar data 
product \17\ and the Exchange itself previously offered a similar free 
trial.\18\ Lastly, the purchase of this data product is discretionary 
and not compulsory.
---------------------------------------------------------------------------

    \17\ See Nasdaq ISE, Options 7 Pricing Schedule, Section 10A., 
Nasdaq ISE Open/Close Trade Profile End of Day.
    \18\ See Securities Exchange Act Release No. 92173 (June 14, 
2021), 86 FR 33399 (June 24, 2021) (SR-C2-2021-010).
---------------------------------------------------------------------------

    Next, the Exchange notes that the proposal to allow the external 
distribution of derived data is subject to competition as discussed 
above, and also introduces a new category of market participant for 
Open-Close Data--market data vendors--into the equation. Currently, 
Open-Close data is not available for redistribution, in either native 
form or through Derived Data. This proposal will create a new market 
for the sale of Derived Data from the Exchange's Open-Close Data 
products to the general investing public. This is itself evidence of 
the competitive environment for Open-Close and its substitutes, as it 
is exactly the type of innovation one would expect to see in a 
competitive market. It will also spur further innovation by challenging 
market data vendors to create new and innovative Derived Data products. 
Any exchange that wishes to allow distribution of a Derived Data 
product based on options trading information would be able to do so 
with an immediately effective fee filing similar to this proposal, most 
likely without requiring any technological enhancement to the 
underlying product. Indeed, as discussed, another Exchange already 
allows, and charges for, external distribution of derived data based on 
similar open-close data.\19\
---------------------------------------------------------------------------

    \19\ See Nasdaq PHLX, Options 7 Pricing Schedule, Photo 
Historical Data, External Distribution.
---------------------------------------------------------------------------

    Allowing the redistribution of Derived Data, but not the underlying 
information, to the general investing public is an equitable allocation 
of reasonable dues, fees and other charges because it is the most 
efficient mechanism for widespread delivery of market sentiment 
information. The proposal is designed to promote the dissemination of a 
variety of analytical insights--previously available only to investment 
banks, market makers, asset managers and other buy-side investors--to 
the general investing public by creating an incentive for market data 
vendors to identify, develop, and sell

[[Page 30545]]

such indicators. Ordinarily, neither exchanges nor vendors allow 
redistribution of analytic products--such products are typically 
designed solely for the use of direct customers, not for redistribution 
to the customers of customers in the manner of a data feed. Allowing 
the redistribution of Derived Data provides an incentive for vendors to 
innovate with new compelling and varied analytic products for the 
general investing public that will provide broader access to market 
sentiment insights currently available only to sophisticated investors.
    The Exchange believes that the proposed fee for the external 
distribution of Derived Data from Open-Close Data is reasonable because 
the rate is the same as the amount charged by another exchange that 
also allows, and charges for, external distribution of derived data 
from similar open-close products.\20\ Furthermore, the proposed fee 
will only apply to Distributors that elect to distribute Derived Data 
from Open-Close Data and as discussed, Open-Close Data, and Derived 
Data therefrom, is purchased on a voluntary basis, in that neither the 
Exchange nor market data distributors are required by any rule or 
regulation to make this data available. Accordingly, Distributors can 
discontinue use at any time and for any reason, including due to an 
assessment of the reasonableness of fees charged. Firms have a wide 
variety of alternative market data products from which to choose, such 
as similar proprietary data products offered by other exchanges. 
Moreover, the Exchange is not required to make any proprietary data 
products available or to offer any specific pricing alternatives to any 
customers. While the Exchange has no way of predicting with certainty 
the impact of the proposed changes, it anticipates at least two 
Distributors will create Derived Data from Open-Close Data. Also, while 
the Exchange does not have a precise estimate of the number of 
individuals expected to benefit, which will ultimately depend on the 
usefulness of the Derived Data products that reach the market it 
expects this to be a popular product that may benefit thousands of 
investors.
---------------------------------------------------------------------------

    \20\ Id.
---------------------------------------------------------------------------

    The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to charge an external distributor of Derived 
Data a $5,000 fee as vendors will ordinarily charge a fee to their 
downstream customers for this service, and, even if the vendor is not 
charging a specific fee for this particular service, the Exchange 
expects Derived Data products from Open-Close Data to be part of a 
suite of offerings from distributors that generally promote sales. 
External distribution is also fundamentally different than internal 
use, in that the former generates revenue from external sales while the 
latter does not. Therefore, the Exchange believes it is reasonable, 
equitable and not unfairly discriminatory to charge a fee for a product 
that generates downstream revenue. Further, the proposed fee will apply 
equally to all distributors that choose to distribute Derived Data from 
Open-Close Data.
    Additionally, the Exchange does not believe it is unfair 
discrimination to allow the redistribution of Derived Data, but not the 
underlying information, to the general investing public. As explained 
above, neither exchanges nor vendors ordinarily allow redistribution of 
analytic products--such products are typically designed solely for the 
use of direct customers, not for redistribution to the customers of 
customers in the manner of a data feed. Allowing the redistribution of 
Derived Data provides an incentive for vendors to innovate with new 
compelling and varied analytic products for the general investing 
public that will provide access to market sentiment insights currently 
available only to sophisticated investors. This proposal is therefore 
not unfair discrimination, but rather allows for more equitable access 
to market sentiment information to the general investing public.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange operates in a 
highly competitive environment in which the Exchange must continually 
adjust its fees to remain competitive. Because competitors are free to 
modify their own fees in response, the Exchange believes that the 
degree to which fee changes in this market may impose any burden on 
competition is extremely limited.
    As discussed above, Open-Close Data is subject to direct 
competition from several other options exchanges that offer substitutes 
to Open-Close. Moreover, purchase of Open-Close is optional. It is 
designed to help investors understand underlying market trends to 
improve the quality of investment decisions, but is not necessary to 
execute a trade.
    The proposed rule changes are grounded in the Exchange's efforts to 
compete more effectively. The Exchange is proposing to broaden 
distribution of Open-Close information beyond investment banks, market 
makers, asset managers and other buy-side investors to market data 
vendors and the general investing public, and to provide a free trial 
for market participants to test investment strategies and trading 
models, and develop market sentiment indicators. These changes will not 
cause any unnecessary or inappropriate burden on intermarket 
competition, but rather will promote competition by expanding the 
market for Open-Close data and encouraging new market participants to 
investigate the product. Other exchanges are, of course, free to match 
these changes or undertake other competitive responses, enhancing 
overall competition.
    The proposed rule changes will not cause any unnecessary or 
inappropriate burden on intramarket competition. Particularly, the 
proposed fee applies uniformly to any Distributor, in that it does not 
differentiate between distributors that choose to distribute Derived 
Open-Close Data. Additionally, the Exchange believes it will foster 
competition by expanding dissemination of data to vendors and the 
general investing public, and by encouraging more market participants 
to use Open-Close data to help inform their investments strategies and 
analytic models. Lastly, the proposed fee will only apply to 
Distributors that elect to distribute Derived Data from Open-Close Data 
and as discussed, Open-Close Data, and Derived Data therefrom, is 
purchased on a voluntary basis.

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 is effective upon filing pursuant to 
Section 19(b)(3)(A) \21\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \22\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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

[[Page 30546]]

investors, or otherwise in furtherance of the purposes of the Act. If 
the Commission takes such action, the Commission shall institute 
proceedings under Section 19(b)(2)(B) \23\ of the Act to determine 
whether the proposed rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-C2-2022-011 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-C2-2022-011. 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-C2-2022-011 and should be 
submitted on or before June 9, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10737 Filed 5-18-22; 8:45 am]
BILLING CODE 8011-01-P


