[Federal Register Volume 88, Number 14 (Monday, January 23, 2023)]
[Notices]
[Pages 4040-4043]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01116]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96674; File No. SR-C2-2023-001]


Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Cboe Data Services Section of the Fees Schedule

January 17, 2023.
    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 January 3, 2023, Cboe C2 Exchange, Inc. (the ``Exchange'' or 
``C2'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rules 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 C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to 
update its Fees Schedule. 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 4041]]

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 the Cboe Data Services, LLC 
(``CDS'') section of its Fees Schedule, effective January 3, 2023. The 
Exchange proposes to modify its fees relating to the distribution of 
the BBO data feed.\3\ Particularly, the Exchange proposes to modify the 
current User Fee and adopt a BBO Enterprise Fee. The Exchange also 
proposes to rename the ``BBO data feed'' to ``C2 Options Top Data 
Feed'' (or ``C2 Options Top Data''), and use the proposed name herein, 
in order to align with the naming convention used by the Exchange's 
affiliated options exchanges for similar data products.\4\
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    \3\ The BBO Data Feed is a real-time data feed that includes the 
following information: (i) outstanding quotes and standing orders at 
the best available price level on each side of the market; (ii) 
executed trades time, size, and price; (iii) totals of customer 
versus non-customer contracts at the best bid and offer (``BBO''); 
(iv) all-or-none contingency orders priced better than or equal to 
the BBO; (v) expected opening price and expected opening size; (vi) 
end-of-day summaries by product, including open, high, low, and 
closing price during the trading session; (vi) recap messages any 
time there is a change in the open, high, low or last sale price of 
a listed option; (vii) COB information; and (viii) product IDs and 
codes for all listed options contracts. The quote and last sale data 
contained in the BBO data feed is identical to the data sent to the 
Options Price Reporting Authority (``OPRA'') for redistribution to 
the public. This data feed is made available by the Exchange's 
affiliate CDS.
    \4\ See Cboe BZX Options Fee Schedule and Cboe EDGX Options Fee 
Schedule.
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    The Exchange first proposes to modify its current User Fees. The 
Exchange currently charges a ``User Fee'', payable by a Customer,\5\ of 
$50 per month per Device \6\ or user ID for use of the data in the C2 
Options Top Data Feed by ``Display Only Service'' \7\ users. The 
current User fee is payable only for ``external'' Display Only Service 
users (Devices or user IDs of Display Only Service users who are not 
employees or natural person independent contractors of the Customer, 
the Customer's affiliates, or an authorized service facilitator).\8\ 
The Exchange proposes to eliminate the current User fee (and 
corresponding description (other than the definition of ``Device'') in 
the Fee Schedule) and in its place adopt Professional and Non-
Professional User fees for C2 Options Top Data. Particularly, the 
Exchange proposes to charge distributors that redistribute C2 Options 
Top Data different fees for their Professional Users \9\ and Non-
Professional Users \10\ (and codify the definitions in the Fee 
Schedule). The Exchange proposes to assess a monthly fee for 
Professional Users of $5.00 per User and a monthly fee of $0.10 per 
Non-Professional User.\11\ The Exchange also proposes to clarify in the 
Fee Schedule that User fees for Professional Users are payable for both 
``internal'' Professional Users (Devices or user IDs of employees of a 
Customer) and ``external'' Professional Users (Devices or user IDs of 
Professional Users who receive the Data from a Customer and are not 
employed by the Customer), as well as make clear that Non-Professional 
Users must be external since a person who uses the Data for a 
commercial purpose cannot be a Non-Professional User.
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    \5\ A ``Customer'' is any person, company or other entity that, 
pursuant to a market data agreement with CDS, is entitled to receive 
data, either directly from CDS or through an authorized 
redistributor (i.e., a Customer or an extranet service provider), 
whether that data is distributed externally or used internally.
    \6\ A ``Device'' means any computer, workstation or other item 
of equipment, fixed or portable, that receives, accesses and/or 
displays data in visual, audible or other form.
    \7\ Display Only Service allows a natural person end-user to 
view and manipulate data using the Customer's computerized service, 
but not to save, copy, export or transfer the data or any results of 
the manipulation to any other computer hardware, software or media, 
except for printing it to paper or other non-magnetic media.
    \8\ Customers who distribute C2 Options Top Data to external 
users via a Display Only service must report to CDS the number of 
authorized external devices that receive C2 Options Top data from 
the Customer during a calendar month within 15 days after such month 
in the manner and format specified by CDS from time to time to 
determine applicable fees.
    \9\ A ``Professional User'' is any natural person recipient of 
Data who is not a Non-Professional User.
    \10\ A ``Non-Professional User'' is a natural person or 
qualifying trust that uses Data only for personal purposes and not 
for any commercial purpose and, for a natural person who works in 
the United States, is not: (i) registered or qualified in any 
capacity with the Securities and Exchange Commission, the 
Commodities Futures Trading Commission, any state securities agency, 
any securities exchange or association, or any commodities or 
futures contract market or association; (ii) engaged as an 
``investment adviser'' as that term is defined in section 201(11) of 
the Investment Advisors Act of 1940 (whether or not registered or 
qualified under that Act); or (iii) employed by a bank or other 
organization exempt from registration under federal or state 
securities laws to perform functions that would require registration 
or qualification if such functions were performed for an 
organization not so exempt; or, for a natural person who works 
outside of the United States, does not perform the same functions as 
would disqualify such person as a Non-Professional User if he or she 
worked in the United States. Professional User.
    \11\ Distributors that receive C2 Options Top Data will be 
required to count every Professional User and Non-Professional User 
to which they provide the data feed.
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    The Exchange lastly proposes to establish a $10,000 per month 
Enterprise Fee that will permit a recipient firm who receives C2 
Options Top Data from a Distributor to receive the data for an 
unlimited number of Professional and Non-Professional Users. The 
Enterprise Fee is an alternative to User fees and will permit a 
recipient firm who receives C2 Options Top Data from a Distributor to 
pay a flat fee to receive the data for an unlimited number of 
Professional and Non-Professional Users, which the Exchange proposes to 
make clear in the Fee Schedule. The Enterprise Fee may provide a 
recipient an opportunity to reduce its fees. For example, if a 
recipient firm has 10,000 Professional Users who each receive C2 
Options Top at $5.00 per month (as proposed), then that recipient firm 
will pay $50,000 per month in Professional Users fees. If the recipient 
firm instead were to purchase the proposed Enterprise license, the 
recipient firm would alternatively pay a flat fee of $10,000 for an 
unlimited number of Professional and Non-Professional Users. A 
recipient firm must pay a separate Enterprise Fee for each Distributor 
that controls the display of C2 Options Top if it wishes such User to 
be covered by an Enterprise Fee rather than by per User fees. A 
recipient firm that pays the Enterprise Fee will not have to report its 
number of such Users on a monthly basis. Rather, every six months, the 
recipient firm must provide the Exchange with a count of the total 
number of authorized person users of each product, including both 
Professional and Non-Professional Users. The Exchange notes that the 
purchase of an Enterprise license is voluntary, and a firm may elect to 
instead use the per User structure and benefit from the proposed per 
User Fees described above. For example, a firm that does not have a 
sufficient number of subscribers to benefit from purchase of the 
license need not do so.
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.\12\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \13\ 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,

[[Page 4042]]

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,\14\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange first notes that it 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 18% of the market share.\15\ 
The Exchange believes top-of-book quotation and transaction data is 
highly competitive as national securities exchanges compete vigorously 
with each other to provide efficient, reliable, and low-cost data to a 
wide range of investors and market participants. Indeed, there are 
several competing products offered by other national securities 
exchanges today, not counting products offered by the Exchange's 
affiliates, and each of the Exchange's affiliated U.S. options 
exchanges also offers similar top-of-book data.\16\ Each of those 
exchanges offer top-of-book quotation and last sale information based 
on their own quotation and trading activity that is substantially 
similar to the information provided by the Exchange through the C2 
Options Top Data Feed. Further, the quote and last sale data contained 
in the C2 Data Feed is identical to the data sent to OPRA for 
redistribution to the public.\17\ Accordingly, market participants can 
substitute C2 Options Top Data with feeds from other exchanges and/or 
through OPRA. Exchange top-of-book data is therefore widely available 
today from a number of different sources.
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    \15\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (December 27, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
    \16\ See e.g., NYSE Arca Options Proprietary Market Data Fees 
Schedule, MIAX Options Exchange, Fee Schedule, Section 6 (Market 
Data Fees), Nasdaq PHLX Options 7 Pricing Schedule, Section 10 
(Proprietary Data Feed Fees) and Cboe Data Services, LLC Fees 
Schedule.
    \17\ The Exchange notes that CDS makes available to 
``Customers'' the BBO data and last sale data that is included in 
the C2 Options Top Data Feed no earlier than the time at which the 
Exchange sends that data to OPRA.
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    Moreover, the C2 Options Top Data Feed is distributed and 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 and Users can discontinue use at 
any time and for any reason, including due to an assessment of the 
reasonableness of fees charged. As described above, market participants 
have a wide variety of alternative market data products from which to 
choose, such as similar proprietary data products offered by other 
exchanges and consolidated data. Further, the Exchange is not required 
to make any proprietary data products available or to offer any 
specific pricing alternatives to any customers. Moreover, all broker-
dealers involved in order routing must take consolidated data from 
OPRA, and proprietary data feeds cannot be used to meet that particular 
requirement. As such, all proprietary data feeds are optional.
    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.'' \18\ Making 
similar data products available to market participants fosters 
competition in the marketplace, and constrains the ability of exchanges 
to charge supracompetitive 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 C2 Options Top 
Data.
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    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes the proposed changes to adopt new 
Professional and Non-Professional User fees are reasonable as the User 
fees continue to be lower than User fees assessed by other exchanges 
for similar data.\19\ Moreover, External users will now be subject to 
lower fees as the Exchange proposes to significantly reduce the monthly 
User fees from $50 per External User to $5.00 per Professional User or 
$0.10 per Non-Professional User. The Exchange believes that the 
proposed fees are equitable and not unfairly discriminatory because 
they will be charged uniformly to recipient firms and Users. The fee 
structure of differentiated Professional and Non-Professional fees that 
are paid by both Internal and External Distributors has long been used 
by other exchanges, including the Exchange, for their proprietary data 
products, and by the OPRA plan in order to reduce the price of data to 
retail investors and make it more broadly available.\20\ The Exchange 
also believes offering C2 Options Top Data to Non-Professional Users at 
a lower cost than Professional Users results in greater equity among 
data recipients, as Professional Users are categorized as such based on 
their employment and participation in financial markets, and thus, are 
compensated to participate in the markets. Although Non-Professional 
Users too can receive significant financial benefits through their 
participation in the markets, the Exchange believes it is reasonable to 
charge more to those Users who are more directly engaged in the 
markets.
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    \19\ See e.g., Nasdaq PHLX Options 7 Pricing Schedule, Section 
10 (Proprietary Data Feed Fees), which provides for a fee of $40 per 
month to professional users and $1.00 per month to non-professional 
users of Top of PHLX Options (TOPO) Data. See also NYSE American 
Options Proprietary Market Data Fees schedule, which provides for a 
fee of $50 per month to professional users and $1.00 per month to 
non-professional users of American Options Top Data.
    \20\ See, e.g., Securities Exchange Act Release No. 59544 (March 
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131) 
(establishing the $15 Non-Professional User Fee (Per User) for NYSE 
OpenBook); See, e.g., Securities Exchange Act Release No. 67589 
(August 2, 2012), 77 FR 47459 (August 8, 2012) (revising OPRA's 
definition of the term ``Nonprofessional''); and See Securities 
Exchange Act Release No. 70684 (October 15, 2013), 78 FR 62849 
(October 22, 2013) (SR-C2-2013-035) (establishing Professional and 
Non-Professional User fees for C2 COB Data Feed).
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    The proposed Enterprise Fee for C2 Options Top Feed is equitable 
and reasonable as the proposed fee could result in a fee reduction for 
recipient firms with a large number of Professional and Non-
Professional Users. If a recipient firm has a smaller number of 
Professional Users of C2 Options Top Data, then it may continue using 
the per User structure and benefit from the proposed per User Fee 
reductions. By reducing prices for recipient firms with a large number 
of Professional and Non-Professional Users, the Exchange believes that 
more firms may choose to receive and to distribute C2 Options Top Data, 
thereby expanding the distribution of this market data for the benefit 
of investors.
    The Exchange further believes that the proposed Enterprise Fee is 
reasonable because it will simplify reporting for

[[Page 4043]]

certain recipients that have large numbers of Professional and Non-
Professional Users. Firms that pay the proposed Enterprise Fee will not 
have to report the number of Users on a monthly basis as they currently 
do, but rather will only have to count authorized users every six 
months, which is a significant reduction in administrative burden. 
Finally, as described above the Enterprise Fee is entirely optional. A 
firm that does not have a sufficient number of subscribers to benefit 
from purchase of the license need not do so.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive environment, and its ability to price 
top-of-book data is constrained by competition among exchanges that 
offer similar data products to their customers. Top-of-book data is 
broadly disseminated by competing U.S. options exchanges and through 
OPRA. There are therefore a number of alternative products available to 
market participants and investors, including products offered by 
certain competing exchanges. In this competitive environment potential 
subscribers are free to choose which competing product to purchase to 
satisfy their need for market information. Often, the choice comes down 
to price, as market data customers look to purchase cheaper data 
products, and quality, as market participants seek to purchase data 
that represents significant market liquidity.
    The Exchange believes that the proposed fees do not put any market 
participants at a relative disadvantage compared to other market 
participants. As discussed, the proposed fees would apply to all 
similarly situated recipient firms of C2 Options Top on an equal and 
non-discriminatory basis. The Exchange believes the differentiated fees 
for Professional and Non-Professional Users of C2 Options Top is 
appropriate given Professional Users are categorized as such based on 
their employment and participation in financial markets, and thus, are 
compensated to participate in the markets. Non-Professional Users too 
can receive significant financial benefits through their participation 
in the markets, however the Exchange believes it is reasonable to 
charge more to those Users who are more directly engaged in the 
markets. The Exchange therefore believes that the proposed fee neither 
favors nor penalizes one or more categories of market participants in a 
manner that would impose an undue burden on competition.
    The Exchange believes that the proposed fees do not impose a burden 
on competition or on other SROs that is not necessary or appropriate in 
furtherance of the purposes of the Act. In particular, market 
participants are not forced to subscribe to C2 Options Top Data, or any 
of the Exchange's data feeds, as described above. Also as described 
above, there are numerous substitute products offered by other national 
securities exchanges, as well as OPRA. Because market data customers 
can find suitable substitute feeds, an exchange that overprices its 
market data products stands a high risk that users may substitute 
another product. These competitive pressures ensure that no one 
exchange's market data fees can impose an undue burden on competition, 
and the Exchange's proposed fees do not do so here.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \21\ and paragraph (f) of Rule 19b-4 \22\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-C2-2023-001 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-C2-2023-001. 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-C2-2023-001 and should be submitted on 
or before February 13, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01116 Filed 1-20-23; 8:45 am]
BILLING CODE 8011-01-P


