
[Federal Register Volume 88, Number 181 (Wednesday, September 20, 2023)]
[Notices]
[Pages 64942-64947]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20315]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98400; File No. SR-CBOE-2023-045]


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

September 14, 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 September 1, 2023, 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. 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, effective 
September 1, 2023. The Exchange first notes that it operates in a 
highly competitive market in which market participants can readily 
direct order flow to competing venues if they deem fee levels at a 
particular venue to be excessive or incentives to be insufficient. More 
specifically, the Exchange is only one of 16 options venues to which 
market participants may direct their order flow. Based on publicly 
available information, no single options exchange has more than 19% of 
the market share.\3\ Thus, in such a low-concentrated and highly 
competitive market, no single options exchange possesses significant 
pricing power in the execution of option order flow. The Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue or reduce use of certain categories of products, in 
response to fee changes. Accordingly, competitive forces constrain the 
Exchange's transaction fees, and market participants can readily trade 
on competing venues if they deem pricing levels at those other venues 
to be more favorable. In response to the competitive environment, the 
Exchange offers tiered pricing in its Fees Schedule, like that of other 
options exchanges fees schedules,\4\ which provides Trading Permit 
Holders (``TPHs'') opportunities to qualify for higher rebates or 
reduced fees where certain volume criteria and thresholds are met. 
Tiered pricing provides an incremental incentive for TPHs to strive for 
higher tier levels, which provides increasingly higher benefits or 
discounts for satisfying increasingly more stringent criteria.
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    \3\ See Cboe Global Markets U.S. Options Market Volume Summary 
(August 30, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
    \4\ See e.g., NASDAQ Stock Market Rules, Options Rules, Options 
7 Pricing Schedule, Sec. 2 Options Market--Fees and Rebates, Tiers 
1-6; see also NYSE Arca Options, Fees and Charges, Customer Posting 
Credit Tiers in Non-Penny Issues.

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[[Page 64943]]

Customer Volume Incentive Program and Affiliated Volume Plan
    The Exchange proposes to amend the Customer Volume Incentive 
Program (``VIP'') and the Affiliated Volume Plan (``AVP''). Under the 
VIP, the Exchange credits each TPH the per contract amount set forth in 
the VIP table for Public Customer (origin code ``C'') orders 
transmitted by TPHs (with certain exceptions) \5\ and executed 
electronically on the Exchange, provided the TPH meets certain volume 
thresholds in a month; volume for Professional Customers (origin code 
``U''), Broker-Dealers (origin code ``B''), and Joint Back-Offices 
(``JBO'') (origin code ``J'') orders are counted toward reaching such 
thresholds.\6\ Specifically, the percentage thresholds are calculated 
based on the percentage of national customer volume in all underlying 
symbols excluding Underlying Symbol List A \7\, Sector Indexes,\8\ the 
Dow Jones Industrial Average Index (``DJX''), the Mini Russell 2000 
Index (``MRUT''), the MSCI EAFE Index (``MXEA''), the MSCI Emerging 
Market Index (``MXEF''), the Mini S&P 500 Index (``NANOS''), Mini-SPX 
Index (``XSP'') and FLEX Micros entered and executed over the course of 
the month. VIP offers rates for both Complex and Simple orders (both in 
AIM and Non-AIM orders).
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    \5\ See Cboe Options Fees Schedule, Footnote 36.
    \6\ See Cboe Options Fees Schedule, Volume Incentive Program.
    \7\ See Cboe Options Fees Schedule, Footnote 34.
    \8\ See Cboe Options Fees Schedule, Footnote 47.
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    Currently, VIP offers 5 tiers. Particularly, a TPH may meet the 
criteria under Tier 1 if its qualifying volume in the qualifying 
classes is above 0% and up to 0.75% of national customer volume, under 
Tier 2 if its qualifying volume in qualifying classes is above 0.75% 
and up to 2.00% of national customer volume, under Tier 3 if its 
qualifying volume in the qualifying classes is above 2.00% and up to 
3.00% of national customer volume, under Tier 4 if its qualifying 
volume in the qualifying classes is above 3.00% and up to 4.00% of 
national customer volume, and under Tier 5 if its qualifying volume in 
the qualifying classes is above 4.00% of national customer volume.
    The Exchange proposes to eliminate Tier 4 and to amend the volume 
threshold for Tier 3 to be above 2.00% and up to 4.00% of national 
customer volume. The Exchange also proposes a corresponding non-
substantive amendment to update current Tier 5 to become Tier 4. The 
VIP credit rates for Simple and Complex orders remain unchanged under 
the proposed change.
    The proposed changes are designed to incentivize more volume to 
earn the same credits while also maintaining an incremental incentive 
for TPHs to strive for the highest tier level. The Exchange expects the 
impact of the change to be minimal, as currently, no TPHs qualify for 
Tier 4. Further, under current Tiers 4 and 5, the VIP credit rates for 
Simple and Complex Non-AIM contracts are the same (i.e., $0.15 for 
Simple Non-AIM contracts and $0.25 for Complex Non-AIM contracts), and 
the difference between VIP credit rates for Simple and Complex AIM 
contracts are $0.01 (i.e., $0.13 for Tier 4 Simple AIM contracts and 
$0.14 for Tier 5 Simple AIM contracts; $0.23 for Tier 4 Complex AIM 
contracts and $0.24 for Complex AIM contracts). The proposed changes 
are also designed to increase the amount of volume TPHs provide on the 
Exchange and further encourage them to contribute to a deeper, more 
liquid market, as well as to increase transactions and take such 
execution opportunities provided by such increased liquidity. The 
Exchange believes that this, in turn, benefits all market participants 
by contributing towards a robust and well-balanced market ecosystem. 
The Exchange notes the proposed tiers are competitively achievable for 
all TPHs that submit significant customer order flow, in that all firms 
that submit the requisite significant customer order flow could compete 
to meet the tiers.
    The Exchange proposes to make corresponding amendments to the 
Affiliated Volume Plan (``AVP''). Under AVP, if a Market-Maker 
Affiliate \9\ (``Affiliate OFP'') or Appointed OFP \10\ receives a 
credit under the VIP, the Market-Maker will receive an access credit on 
its BOE Bulk Ports corresponding to the VIP tier reached as well as a 
transaction fee credit on its sliding scale Market-Maker transaction 
fees (not including any additional surcharges or fees assessed as part 
of the Liquidity Provider Sliding Scale Adjustment Table). In 
connection with the proposed changes to the VIP, the Exchange proposes 
to make a corresponding change to the AVP and eliminate VIP Tier 4 (and 
corresponding MM Affiliate Access Credits and Liquidity Provider 
Sliding Scale Credits). The Exchange proposes to rename current VIP 
Tier 5 as VIP Tier 4, with the same corresponding Market-Marker 
Affiliate Access Credit of 25% and Liquidity Provider Sliding Scale 
Credit of 35%. All other Tiers and corresponding Market-Maker Affiliate 
Access Credits and Liquidity Provider Sliding Scale Credits remain 
unchanged under the proposed rule change.
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    \9\ For purposes of AVP, ``Affiliate'' is defined as having at 
least 75% common ownership between the two entities as reflected on 
each entity's Form BD, Schedule A.
    \10\ See Cboe Options Fees Schedule Footnote 23. Particularly, a 
Market-Maker may designate an Order Flow Provider (``OFP'') as its 
``Appointed OFP'' and an OFP may designate a Market-Maker to be its 
``Appointed Market-Maker'' for purposes of qualifying for credits 
under AVP.
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New AIM Responder Fee Code
    The Exchange proposes to amend its Fees Schedule in connection with 
the fees related to orders and auction responses executed in the 
Automated Improvement Mechanism (``AIM'') and Solicitation Auction 
Mechanism (``SAM'') Auctions.
    AIM and SAM include functionality in which a TPH (an ``Initiating 
TPH'') may electronically submit for execution an order it represents 
as agent on behalf of a customer,\11\ broker dealer, or any other 
person or entity (``Agency Order'') against any other order it 
represents as agent, as well as against principal interest in AIM only, 
(an ``Initiating Order'') provided it submits the Agency Order for 
electronic execution into the AIM or SAM Auctions.\12\ The Exchange may 
designate any class of options traded on Cboe Options as eligible for 
AIM or SAM. The Exchange notes that all Users, other than the 
Initiating TPH, may submit responses to an Auction (``AIM 
Responses'').\13\ AIM and SAM Auctions take into account AIM Responses 
to the applicable Auction as well as contra interest resting on the 
Cboe Options Book at the conclusion of the Auction (``unrelated 
orders''), regardless of whether such unrelated orders were already 
present on the Book when the Agency Order was received by the Exchange 
or were received after the Exchange commenced the applicable Auction. 
If contracts remain from one or more unrelated orders at the time the 
Auction ends, they are considered for participation in the AIM or SAM 
order allocation process.
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    \11\ The term ``customer'' means a Public Customer or a broker-
dealer. The term ``Public Customer'' means a person that is not a 
broker-dealer. See Rule 1.1.
    \12\ See Rule 5.37 (AIM); Rule 5.39 (SAM); Rule 5.38 (Complex 
AIM); Rule 5.40 (Complex SAM); Rule 5.73 (FLEX AIM); and Rule 5.74 
(FLEX SAM).
    \13\ For purposes of this filing and the proposed fee, the term 
``AIM Response'' will include responses submitted to AIM and SAM 
Auctions.
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    The Exchange assesses fees for certain AIM Responses (the ``AIM 
Response'' fees set forth in the fees schedule). For example, the 
Exchange assesses a fee of $0.50 per contract for non-Customer, non-
Market-Maker AIM Responses in penny classes, yielding fee code NB,

[[Page 64944]]

and a fee of $1.05 per contract for Non-Customer, Non-Market-Maker AIM 
Responses in non-penny classes, yielding fee code NC.
    The Exchange now proposes to add fee code ``MD'', which would be 
appended to Market-Maker AIM Responses \14\ and assessed a fee of $0.25 
per contract.
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    \14\ Currently, such orders are appended fee code MA, and 
assessed a standard fee of $0.23 per contract, subject to the 
Liquidity Provider Sliding Scale and Liquidity Provider Sliding 
Scale Adjustment Table.
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    The Exchange notes that the same FLEX AIM and FLEX SAM responses 
will be assessed the same fee, which is consistent with the structure 
of the Exchange's current fees for AIM Responses, which apply uniformly 
to qualifying orders in AIM, SAM, FLEX AIM, and FLEX SAM.\15\ The 
Exchange also notes that the Market-Maker AIM Responder fee applies to 
AIM Responses in Equity, ETF and ETN Options, Sectors Indexes,\16\ and 
all other index products, executed in AIM, SAM, FLEX AIM, and FLEX SAM 
Auctions.
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    \15\ See Cboe Exchange Fees Schedule, Footnote 20.
    \16\ See Cboe Exchange Fees Schedule, Footnote 47.
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    The Exchange also proposes to remove Market-Maker volume via AIM 
Market-Maker Responses (yielding fee code MD) from eligibility for 
credits pursuant to the Liquidity Provider Sliding Scale, similar to 
how Market-Maker orders transacted in open outcry (i.e., manual) in 
Equity, ETF, and ETN Options, Sector Indexes and All Other Index 
Products, which yield fee code MB, are handled today. Currently, the 
Liquidity Provider Sliding Scale offers credits on Market-Maker orders 
where a Market-Maker achieves certain volume thresholds based on total 
national Market-Maker volume in all underlying symbols \17\ during the 
calendar month. Footnote 10 (appended to the Liquidity Provider Sliding 
Scale) states that the Liquidity Provider Sliding Scale applies to 
Liquidity Provider (Cboe Options Market-Maker, DPM and LMM) transaction 
fees in all products except (1) Underlying Symbol List A \18\ (34), 
MRUT, NANOS, XSP and FLEX Micros, and (2) volume executed in open 
outcry. The proposed rule change amends Footnote 10 to add volume 
executed via AIM Responses to the list of Liquidity Provider Sliding 
Scale exclusions. The proposed rule change also adds language to 
Footnote 10 to make it clear that the volume thresholds under the 
Liquidity Provider Sliding Scale will continue to include volume 
executed via AIM Responses. The Exchange notes that it continues to 
include volume executed via AIM Responses in a Market-Maker's volume 
eligible to meet the tier thresholds in order to continue to 
incentivize Market-Maker order flow to the trading floor. The Exchange 
offers a hybrid market system and aims to continue to balance 
incentives for Market-Makers to contribute to deep liquid markets for 
investors on both its electronic and open outcry platforms.
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    \17\ Excluding products in Underlying Symbol List A (see 
Footnote 34), MRUT, NANOS, XSP and FLEX Micros.
    \18\ See Cboe Exchange Fees Schedule, Footnote 34.
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Score Program Changes
    The Exchange proposes to amend the Select Customer Options 
Reduction program (``SCORe''). By way of background, SCORe is a 
discount program for Retail, Non-FLEX Customer (``C'' origin code) 
volume in the following options classes: SPX (including SPXW), VIX, 
RUT, MXEA, MXEF & XSP (``Qualifying Classes''). The SCORe program is 
available to any TPH Originating Clearing Firm or non-TPH Originating 
Clearing Firm that sign up for the program.\19\ SCORe utilizes Discount 
Tiers to determine the Originating Firm's applicable corresponding 
discounts. To determine the Discount Tier, an Originating Firm's Retail 
volume in the Qualifying Classes will be divided by total Retail volume 
in the Qualifying Classes executed on the Exchange. The program then 
provides a discount per retail contract, based on the determined 
Discount Tier thereunder. Currently, the program sets forth four 
Discount Tiers, with applicable discounts ranging from $0 to $0.14 per 
retail contract.
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    \19\ For this program, an ``Originating Clearing Firm'' is 
defined as either (a) the executing clearing Options Clearing 
Corporation (``OCC'') number on any transaction which does not also 
include a Clearing Member Trading Agreement (``CMTA'') OCC clearing 
number or (b) the CMTA in the case of any transaction which does 
include a CMTA OCC clearing number.
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    The Exchange proposes to amend Footnote 48 to exclude from the 
SCORe program certain orders that are revised post-trade, using the 
Clearing Editor tool. Specifically, the Exchange proposes to exclude 
orders where the capacity is changed from another capacity to Customer 
using the Clearing Editor, and single leg orders created by hard-edits 
to complex orders using the Clearing Editor.
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.\20\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \21\ 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) \22\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ Id.
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    As stated above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The proposed rule change 
reflects a competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
TPHs.
Customer Volume Incentive Program and Affiliated Volume Plan
    The Exchange believes the proposed amendments to the VIP (and 
corresponding amendments to AVP) to eliminate Tier 4 and to amend the 
volume threshold for Tier 3 to be above 2.00%-4.00%, is reasonable 
because it continues to encourage TPHs to take the opportunity to 
receive credits on Customer orders by reaching the proposed volume 
thresholds. The Exchange notes that relative volume-based incentives 
and discounts have been widely adopted by exchanges \23\ and are 
reasonable, equitable and non-discriminatory because they are open to 
all TPHs on an equal basis and provide additional benefits or discounts 
that are reasonably related to (i) the value to an exchange's market 
quality and (ii) associated higher levels of market activity, such as 
higher levels of liquidity provision and/or growth patterns. 
Additionally, as noted above,

[[Page 64945]]

the Exchange operates in a highly competitive market. The Exchange is 
only one of several options venues to which market participants may 
direct their order flow. Competing options exchanges offer similar 
tiered pricing structures to that of the Exchange, including schedules 
of rebates/credits and fees that apply based upon members achieving 
certain volume and/or growth thresholds. These competing pricing 
schedules, moreover, are presently comparable to those that the 
Exchange provides, including the pricing of comparable tiers.\24\
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    \23\ See supra note 4.
    \24\ Id.
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    The Exchange believes adjusting the VIP volume thresholds by 
eliminating Tier 4 (and making corresponding changes to the AVP) and 
amending the volume threshold for Tier 3 is reasonable because it will 
continue to encourage TPHs to increase their overall order flow to the 
Exchange based on increasing their Customer, Professional Customer, 
Broker-Dealer, and JBO executed orders as a percentage of national 
customer volume. Particularly, the Exchange believes the proposed 
threshold change is reasonable because it will encourage increased 
volume, thus a deeper, more liquid market, and an increase in 
transaction opportunities provided by the increased liquidity. In turn, 
these increases benefit all TPHs by contributing towards a robust and 
well-balanced market ecosystem. Increased overall order flow benefits 
all investors by deepening the Exchange's liquidity pool, providing 
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 proposed volume thresholds also do not represent a significant 
departure from the current required criteria under the Exchange's 
existing tiers and is therefore still reasonable based on the 
difficulty of satisfying the tiers' criteria and ensures the existing 
credit and proposed thresholds appropriately reflect the incremental 
difficulty to achieve the existing VIP tiers. Further, the Exchange 
believes that the amendments are reasonable because it will still allow 
TPHs transmitting qualifying orders that reach a threshold of above 
3.00-4.00% to receive either the same credit for doing so, in the case 
of Simple and Complex Non-AIM Contracts, or a $0.01 lesser credit for 
Simple and Complex AIM Contracts. Additionally, as noted above, 
currently, no TPHs qualify for Tier 4. Finally, the changes to the AVP 
are reasonable because the AVP utilizes the VIP tier structure, and 
thus, any changes to the VIP tiers must be incorporated into the AVP.
    The Exchange believes Tiers 3 and 4, as amended, remain in line 
with existing tiers, both in required criteria and credits. For 
example, the volume threshold amount under existing Tier 1 is currently 
set as a range within a 0.75 percentage point (0%-0.75%) and Tier 2 is 
currently set as a range within a 1.25 percentage point (between 0.75% 
up to 2.00%). It is reasonable to incrementally increase this range for 
Tier 3 to be within 2 percentage points (between 2.00% and 4.00%), and 
then over 4.00% for Tier 4, as proposed, since higher credits are 
available for higher tiers. The Exchange also believes that the tiers, 
as amended, are in a reasonable increment to encourage overall order 
flow to the Exchange without so significantly increasing the difficulty 
in reaching the tiers' criteria.
    The Exchange believes that the proposal represents an equitable 
allocation of rebates and is not unfairly discriminatory because all 
TPHs have the opportunity to meet the tier thresholds. The Exchange 
also notes that the proposed changes will not adversely impact any 
TPH's pricing or ability to qualify for other credit tiers. Rather, 
should a TPH not meet the proposed criteria, the TPH will merely not 
receive the proffered credit, for both the VIP and AVP.
New AIM Responder Fee Code
    The Exchange believes that the proposed rule change to adopt a fee 
code and assess a standard rate for Market-Maker AIM Responses is 
reasonable, equitable and not unfairly discriminatory. As noted above, 
the Exchange operates in a highly competitive market. The Exchange is 
only one of several options venues to which market participants may 
direct their order flow, and it represents a small percentage of the 
overall market. The Exchange believes that the proposed fees are 
reasonable, equitable, and not unfairly discriminatory in that 
competing options exchanges,\25\ including the Exchange's affiliated 
options exchanges,\26\ offer substantially the same fees and credits in 
connection with similar price improvement auctions, as the Exchange now 
proposes.
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    \25\ See MIAX Options Fee Schedule, Section 1(a)(v), ``MIAX 
Price Improvement Mechanism (``PRIME'') Fees, which assesses a fee 
of $0.50 (Penny Classes) and $1.10 (non-Penny Classes) for Market-
Maker PRIME responses; see also NYSE American Options Fee Schedule, 
Section I(G), ``CUBE Auction Fees and Credits'', which assesses a 
fee of $0.50 (Penny Classes) and $1.05 (non-Penny Classes) for Non-
Customer CUBE (its Customer Best Execution Auction) responses.
    \26\ See EDGX Options Exchange Fee Schedule, ``Fee Codes and 
Associated Fees'', fee code BD is appended to AIM Responder Penny 
orders and is assessed a fee of $0.50 per share, and fee code BE is 
appended to AIM Responder Non-Penny orders and is assessed a fee of 
$1.05 per share.
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    Additionally, the Exchange believes that the proposed rule change 
is equitable and not unfairly discriminatory because the proposed fee 
will apply automatically and uniformly to all Market-Maker AIM Response 
orders. The Exchange also believes that the proposed fees in connection 
with Market-Maker AIM Response orders do not represent a significant 
departure from the fees and credits rebates currently offered under the 
fees schedule for these market participants. For example, under the 
existing fees schedule electronic orders in Equity, ETF and ETN 
Options, Sectors Indexes,\27\ and all other index products with M 
Capacity Codes are assessed a fee of $0.23 per contract in Penny and 
non-Penny Classes.
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    \27\ See Cboe Exchange Fees Schedule, Footnote 47.
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    The Exchange also believes that assessing a fee applicable to 
Market-Maker responses that is lower than non-Customer, non-Market-
Maker responses is equitable and not unfairly discriminatory because 
Market-Makers are already subject to certain other transaction fees not 
otherwise applicable to other market participants. In particular, in 
addition to Market-Maker-specific standard transaction fees,\28\ 
Market-Makers are also currently assessed a marketing fee of $0.25 in 
Penny Program classes and $0.70 in all other classes on certain 
transactions resulting from customer orders,\29\ including qualifying 
orders submitted as AIM Responses. Further, Market-Makers, unlike other 
market participants, take on a number of obligations, including quoting 
obligations that other market participants do not have, as well as 
added market making and regulatory requirements, which normally do not 
apply to other market participants. For example, Market-Makers have 
obligations to maintain continuous markets, engage in a course of 
dealings reasonably calculated to contribute to the maintenance of a 
fair and orderly market, and to not make bids or offers or enter into 
transactions that are inconsistent with a course of dealing.

[[Page 64946]]

Additionally, the Exchange notes that Market-Makers (with an 
appointment in the applicable class) may not submit solicited orders 
into an AIM Auction; \30\ this restriction does not apply to Firm 
orders. As stated, the Exchange also recognizes that Market-Makers are 
the primary liquidity providers in the options markets, and 
particularly, during AIM auctions. Thus, the Exchange believes Market-
Makers provide the most accurate prices reflective of the true state of 
the market and are primarily responsible for encouraging more 
aggressive quoting and superior price improvement during an AIM 
Auction. As a result, the Exchange believes it is important to continue 
to incentivize Market-Makers to actively participate in such auctions 
by means of assessing a lower transaction fee for Market-Maker AIM 
Response orders. Increased Market-Maker liquidity also increases 
trading opportunities and signals to other participants to increase 
their order flow, which benefits all market participants.
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    \28\ See Cboe Options Fees Schedule, ``SPX Liquidity Provider 
Sliding Scale'' table; ``Liquidity Provider Sliding Scale'' table; 
and ``Liquidity Provider Sliding Scale Adjustment Table''.
    \29\ That is, Market-Maker orders that execute against customer 
orders.
    \30\ This is also true for SAM Auctions. See Rule 5.39.
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    The proposed rule change to remove Market-Maker volume transacted 
via AIM Responses from eligibility for credits pursuant to the 
Liquidity Provider Sliding Scale is reasonable because it is also 
reasonably designed to balance incentivizing Market-Maker's 
participation in AIM Auctions with establishing a fee in-line with 
other AIM Response fees. The Exchange also believes that it is 
reasonable to continue to include Market-Maker AIM Response volume in 
the volume thresholds for meeting the Liquidity Provider Sliding Scale 
tiers because, as stated above, it is designed to continue to 
incentivize Market-Maker participation in AIM Auctions and would assist 
the Exchange in continuing to provide a robust hybrid market. The 
Exchange notes that the AIM and C-AIM Auctions generally deliver 
meaningful opportunities for price improvement to orders and provide an 
efficient manner of access to liquidity for members. Increased overall 
auction-related order flow 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 notes, too, that other programs in the Fees 
Schedule include certain volume in meeting volume thresholds while not 
including the same volume as eligible for credits or reduced rates 
under such programs.\31\ The proposed rule change is equitable and not 
unfairly discriminatory because the proposed rule change will apply 
equally to all Market-Maker AIM Response volume, in that, no such 
volume will be allotted credits under the Liquidity Provider Sliding 
Scale Program.
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    \31\ See e.g., Cboe Options Fees Schedule, Volume Incentive 
Program (VIP) table (which counts volume for capacity B, J and U 
towards tier qualification but not as eligible for the VIP credit), 
and Cboe Options Clearing Trading Permit Holder Proprietary Products 
Sliding Scale table (which counts volume in products not included in 
Underlying Symbol List A towards reaching the tiers, but provides 
reduced rates to volume in products included in Underlying Symbol 
List A).
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SCORe Program Changes
    The Exchange believes the proposal to exclude certain orders that 
are revised post-trade, using the Clearing Editor tool is reasonable 
because it no longer wishes to include these orders as part of the 
program, and it is not required to do so. The Exchange notes that 
orders where the capacity is changed from another capacity to Customer 
using the Clearing Editor and single leg orders created by hard-edits 
to complex orders using the Clearing Editor were not intended to be a 
part of the program and believes the intention of the program will 
continue to be achieved as a result of the proposed changes. The 
Exchange believes the proposed changes are reasonable because they 
provide further clarity regarding what orders are (and are not) 
eligible for the program. Further, the Exchange believes the changes 
remain equitable and reasonable by not materially changing the program. 
The Exchange believes SCORe, currently and as amended, continues to 
provide an incremental incentive for Originating Firms to strive for 
the highest tier level, which provides increasingly higher discounts. 
As such, the changes are designed to encourage increased Retail volume 
in the Qualifying Classes, which provides increased volume and greater 
trading opportunities for all market participants. The Exchange 
believes the proposed change is equitable and not unfairly 
discriminatory because the exclusions of certain orders that are 
revised post-trade, using the Clearing Editor tool apply to all 
registered Originating Firms uniformly.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Specifically, the Exchange 
believes the proposed rule change to the VIP and AVP does not impose 
any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
believes that the proposed changes to the VIP, and corresponding 
changes to the AVP, will encourage the submission of additional 
liquidity to a public exchange, thereby promoting market depth, price 
discovery and transparency and enhancing order execution opportunities 
for all TPHs. As a result, the Exchange believes that the proposed 
change furthers the Commission's goal in adopting Regulation NMS of 
fostering competition among orders, which promotes ``more efficient 
pricing of individual stocks for all types of orders, large and 
small.'' \32\ Further, the proposed change applies to all TPHs 
submitting qualified orders equally, in that all TPHs submitting such 
orders are eligible for the tiers (as amended), have a reasonable 
opportunity to meet the tiers' criteria (as amended) and will all 
receive the existing credit if such criteria is met. As described 
above, while only certain orders would count towards the qualifying 
thresholds, specifically, Customers, Professionals, Broker-Dealers and 
JBOs, these market participants' orders are primarily executed as 
agency orders, whose order flow would bring greater volume and 
liquidity, which benefits all market participants by providing more 
trading opportunities and tighter spreads. Overall, the proposed change 
is designed to encourage additional order flow to the Exchange, which 
the Exchange believes benefits all market participants on the Exchange 
by providing more liquidity, thus trading opportunities, encouraging 
even more TPHs to send orders, thereby contributing towards a robust 
and well-balanced market ecosystem to the benefit of all market 
participants.
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    \32\ See Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange does not believe that the proposed rule change to 
adopt a new fee code for Market-Maker AIM Responses will impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes will apply uniformly to all Market-Maker AIM Responses, in that 
all such orders will automatically and uniformly yield fee code MD and 
be assessed the standard fee for MD. Further, all such orders will 
uniformly not be eligible for credits

[[Page 64947]]

under the Liquidity Provider Sliding Scale.
    Additionally, the Exchange does not believe that the proposed 
changes to the SCORe program will impose any burden on intramarket 
competition because the proposed changes apply to all registered 
Originating Firms uniformly, in that exclusions of certain orders that 
are revised post-trade, using the Clearing Editor tool apply to all 
registered Originating Firms uniformly.
    Finally, the Exchange believes the proposed rule changes do not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including 15 other options exchanges. 
Based on publicly available information, no single options exchange has 
more than 19% of the market share.\33\ Therefore, no exchange possesses 
significant pricing power in the execution of option order flow. 
Indeed, participants can readily choose to send their orders to other 
exchange, and, additionally off-exchange venues, if they deem fee 
levels at those other venues to be more favorable. 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.'' \34\ 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'. . . .''.\35\ Accordingly, the Exchange 
does not believe its proposed fee change imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \33\ See supra note 3.
    \34\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \35\ 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)(ii) of the Act,\36\ and Rule 19b-4(f)(2) \37\ 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 shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
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    \36\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \37\ 17 CFR 240.19b-4(f)(2).
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2023-045 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CBOE-2023-045. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CBOE-2023-045 and should be 
submitted on or before October 11, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20315 Filed 9-19-23; 8:45 am]
BILLING CODE 8011-01-P


