[Federal Register Volume 85, Number 134 (Monday, July 13, 2020)]
[Notices]
[Pages 42042-42063]
[FR Doc No: 2020-14972]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89239; File No. SR-CBOE-2020-064]

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

July 7, 2020.
    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 July 2, 2020, 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 the
Substance of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its Fees Schedule in connection with migration. The text of
the proposed rule change is provided in Exhibit 5.\3\
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    \3\ The Exchange notes that subsequent to the Original Filing
that proposed these changes on October 1 and 2, 2019 (SR-CBOE-2019-
077 and SR-CBOE-2019-082) and subsequent to the Second Proposed Rule
Change and Third Proposed Rule Change Filings that proposed these
changes on November 29, 2019 (SR-CBOE-2019-111) and January 28, 2020
(SR-CBOE-2020-005), the Exchange submitted SR-CBOE-2020-021 which
adopted Footnote 12. Footnote 12 governs pricing changes in the
event the Exchange trading floor becomes inoperable and is appended
to the Market-Maker Tier Appointment Fees and Floor Broker Trading
Permit Sliding Scales tables. Additionally, subsequent to the Fourth
Proposed Rule Change filed on March 27, 2020 (SR-CBOE-2020-028), the
Exchange submitted SR-CBOE-2020-044, which appended Footnotes 41 to
the Market maker Tier Appointment Fees table and the Floor Broker
Trading Surcharge. Lastly, subsequent to the Exchange's Fifth
Proposed Rule Change filed on May 22, 2020 (SR-CBOE-2020-48), the
Exchange submitted (1) SR-CBOE-2020-058, which adopted new Footnote
24, appended Footnote 24 in the Market-Maker Tier Appointment Fees
table and Floor Trading Permit Sliding Scales Table, as well as
added language to the Floor Broker ADV Discount Table and (2) SR-
CBOE-2020-061 which added further language in Footnote 24. The
additions proposed by filings SR-CBOE-2020-021,SR-CBOE-2020-044, SR-
CBOE-2020-058 and SR-CBOE-2020-061 are double underlined in Exhibit
5A.

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    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
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Affiliated Exchanges'').
The Cboe Affiliated Exchanges recently aligned certain system
functionality, including with respect to connectivity, retaining only
intended differences between the Affiliated Exchanges, in the context
of a technology migration. The Exchange migrated its trading platform
to the same system used by the Affiliated Exchanges, which the Exchange
completed on October 7, 2019 (the ``migration''). As a result of this
migration, the Exchange's pre-migration connectivity architecture was
rendered obsolete, and as such, the Exchange now offers new
functionality, including new logical connectivity, and therefore
proposes to adopt corresponding fees.\4\ In determining the proposed
fee changes, the Exchange assessed the impact on market participants to
ensure that the proposed fees would not create an undue financial
burden on any market participants, including smaller market
participants. While the Exchange has no way of predicting with
certainty the impact of the proposed changes, the Exchange had
anticipated its post-migration connectivity revenue \5\ to be
approximately 1.75% lower than connectivity revenue pre-migration.\6\
In addition to providing a consistent technology offering across the
Cboe Affiliated Exchanges, the migration also provided market
participants a latency equalized infrastructure, improved system
performance, and increased sustained order and quote per second
capacity, as discussed more fully below. Accordingly, in connection
with the migration and in order to more closely align the Exchange's
fee structure with that of its Affiliated Exchanges, the Exchange
intends to update and simplify its fee structure with respect to access
and connectivity and adopt new access and connectivity fees.
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    \4\ As of October 7, 2019, market participants no longer have
the ability to connect to the old Exchange architecture.
    \5\ Connectivity revenue post-migration includes revenue from
physical port fees (other than for disaster recovery), Cboe Data
Services Port Fee, logical port fees, Trading Permit Fees, Market-
Maker EAP Appointment Unit fees, Tier Appointment Surcharges and
Floor Broker Trading Surcharges, less the Floor Broker ADV discounts
and discounts on BOE Bulk Ports via the Affiliate Volume Plan and
the Market-Maker Access Credit program.
    \6\ For February 2020, the Exchange's connectivity revenue was
approximately 2.5% higher than connectivity revenue pre-migration.
For purposes of a fair comparison of the Exchange's initial
projection of post-migration connectivity revenue to realized post-
migration revenue connectivity, the Exchange excluded from the
February 2020 calculation revenue from a Trading Permit Holder who
became a Market-Maker post October 7, 2019, a Trading Permit Holder
that grew it's footprint on the Exchange significantly, and revenue
derived from incremental usage in light of the extreme volatility
and volume experienced in February, as such circumstances were not
otherwise anticipated or incorporated into the Exchange's original
projection. As noted, the Exchange had no way of predicting with
certainty the impact of the proposed changes, nor control over
choices market participants ultimately decided to make. The Exchange
notes connectivity revenue was higher than anticipated in part due
to (1) a higher number of 10 Gb Physical Ports being maintained by
TPHs than expected (although 34% of Trading Permit Holders
maintained the same number of 10 Gb Physical and 44% reduced the
amount of 10 Gb Physical Ports maintained), (2) a higher quantity of
BOE/FIX Logical Ports being purchased than predicted, and (3) a
significantly higher quantity of the optional Drop, GRP, Multicast
PITCH/Top Spin Server Ports and Purge Ports being purchased than
predicted. For April 2020, the Exchange's connectivity revenue was
approximately 21.97% less than connectivity revenue pre-migration
using the same calculation. For May 2020, the Exchange's
connectivity revenue was approximately 22.32% less than connectivity
revenue pre-migration using the same calculation. The Exchange notes
that due to the closure of its trading floor on March 16, 2020
through June 15, 2020, it adopted a number of corresponding
temporary pricing changes, including waiving floor Trading Permit
fees. See Cboe Options Fees Schedule. The Exchange also notes that
it provided the dollar amounts of the Exchange's monthly
connectivity revenue to the Securities and Exchange Commission (the
``Commission'') for the months of February-May 2020 with a
confidential treatment request.
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    The Exchange initially filed the proposed fee changes on October 1,
2019 (SR-CBOE-2019-077) (the ``Original Filing'').\7\ The Commission
received only one comment letter on the Original Filing, six days after
the comment period deadline ended.\8\ On November 29, 2019, the
Exchange withdrew the Original Filing and submitted SR-CBOE-2019-111
(``Second Proposed Rule Change'').\9\ Among other things, the Second
Proposed Rule Change was filed in response to, and addressed, the
Commission's request for inclusion of the following information:
Clarity as to what revenue streams are included in the Exchange's
calculation of ``connectivity'' revenue; an update on post-migration
connectivity revenue; \10\ further information regarding the Exchange's
new latency equalized infrastructure including additional detail
regarding the benefits of such structure; clarity on how the Cboe Data
Services Port fee is applied; data regarding the number of market
participants that connect directly versus indirectly and the volume
attributed to each; enhanced discussion regarding products that compete
with exclusively listed products; an update on whether any market
participant terminated their direct connectivity or membership post-
migration (and whether it was because of the fee changes); and
generally provide an update on various projections made in the filing,
including how many ports market participants purchased post-migration,
how many Trading Permit Holders were paying higher or lower fees, and
how many

Trading Permit Holders achieved proposed incentive tiers. The
Commission received no comment letters on the Second Proposed Rule
Change.
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    \7\ On business date October 2, 2019, due to a technical error,
the Exchange withdrew that filing and submitted SR-CBOE-2019-082.
See Securities Exchange Act Release No. 87304 (October 15, 2019), 84
FR 56240, (October 21, 2019) (``Original Filing'').
    \8\ See Letter from Tyler Gellasch, Executive Director, The
Healthy Markets Association (``Healthy Markets''), to Vanessa
Countryman, Secretary, Commission, dated November 18, 2019.
    \9\ See Securities Exchange Act Release No. 87727 (December 12,
2019), 84 FR 69428 (December 18, 2019).
    \10\ Many market participants were still transitioning to the
new connectivity structure at that time and as such, the Exchange
noted it did not expect its connectivity revenue projections
regarding port purchases to be realized prior to February 2020.
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    On January 28, 2020, the Exchange withdrew the Second Proposed Rule
Change filing and submitted SR-CBOE-2020-005 (``Third Proposed Rule
Change'').\11\ The Third Proposed Rule Change was filed in response to,
and addressed, the Commission's request for further discussion
regarding how competitive forces constrained fees, further detail on
potential substitute products for the Exchange's exclusively listed
products, updated data on the number of ports purchased post-migration
and an update on the projected post-migration connectivity revenue.\12\
The Exchange also provided updated data on how many Trading Permit
Holders connected directly versus indirectly to the Exchange and the
volume attributed to each. The Commission received no comment letters
on the Third Proposed Rule Change.
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    \11\ See Securities Exchange Act Release No. 88164 (February 11,
2020), 85 FR 8897, (February 18, 2020).
    \12\ Many market participants were still transitioning to the
new connectivity structure at that time and as such, the Exchange
again noted it did not expect its connectivity revenue projections
regarding port purchases to be realized prior to February 2020.
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    On March 27, 2020, the Exchange submitted SR-CBOE-2020-028
(``Fourth Proposed Rule Change'').\13\ The Fourth Proposed Rule Change
was filed in response to the Commission's sole request to update the
connectivity revenue collected in February 2020, as the transition of
physical ports had been completed. The Commission received only one
comment letter on the Fourth Proposed Rule Change.\14\
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    \13\ See Securities Exchange Act Release No. 88586 (April 8,
2020), 85 FR 20773, (April 14, 2020).
    \14\ See Letter from Tyler Gellasch, Executive Director, The
Healthy Markets Association (``Healthy Markets''), to Vanessa
Countryman, Secretary, Commission, dated May 5, 2020, which letter
mischaracterized the Exchange's proposed fees as linking market data
costs to trading volume, among other factual inaccuracies.
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    On May 21, 2020, the Exchange withdrew that filing and submitted
SR-CBOE-20202-048 (``Fifth Proposed Rule Change'').\15\ The Fifth
Proposed Rule Change was filed in response to the Commission's request
for (1) updated connectivity revenue for April 2020, (2) examples of
alternative products to VIX and (3) any further evidence the Exchange
had to support its argument that competitive forces constrain pricing.
The Commission received no comments letters on the Fifth Proposed Rule
Change.
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    \15\ The Exchange refiled the Fifth Proposed Rule Change on May
22, 2020 due to a technical error (SR-CBOE-2020-048). See Securities
Exchange Act Release No. 88984 (June 1, 2020), 85 FR 34670, (June 6,
2020).
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    Today, the Exchange is withdrawing the Fifth Proposed Rule Change
and submitting this filing (``Sixth Proposed Rule Change'') as part of
its ongoing efforts to adopt the post-migration connectivity fees and
to respond to the Commission's request for another update on the
Exchange's post-migration connectivity revenue and to provide further
data demonstrating competition in the marketplace. The Exchange notes
the proposed fees have been effective, and thus have been paid by
Trading Permit Holders, for approximately nine months. The Exchange has
received no feedback from market participants claiming the proposed
fees are unreasonable.
    As discussed herein, the Exchange believes that the proposed
changes are consistent with the Act because they are reasonable,
equitably allocated, not unfairly discriminatory, and not an undue
burden on competition, as they are supported by evidence (including
data and analysis) and are constrained by significant competitive
forces. The Exchange also believes the proposed fees are reasonable as
they are in line with the amounts assessed by other exchanges for
similar connectivity offerings. Additionally, the Exchange believes the
proposed changes are consistent with the SEC Division of Trading and
Markets (the ``Division'') issued non-rulemaking fee filing guidance
titled ``Staff Guidance on SRO Rule Filings Relating to Fees'' (``Fee
Guidance'') issued on May 21, 2020.\16\ Accordingly, the Exchange
believes that the Commission should find that the Proposed Fee
Increases are consistent with the Act. The proposed rule change is
immediately effective upon filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.
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    \16\ Where possible, the Exchange is including numerical
examples and percentages, including with respect to revenue impact.
In addition, the Exchange is providing data to the Commission in
support of its arguments herein, which is consistent with the Fee
Guidance. The non-rulemaking Fee Guidance covers all aspects of a
fee filing, but as acknowledged by the Commission, has ``no legal
force or effect'', is ``not a rule, regulation or statement of the
Commission'', does not ``alter or amend applicable law'' and
``creates no new or additional obligations for SROs and the
Commission.'' See Chairman Jay Clayton, Statement on Division of
Trading and Markets Staff Fee Guidance, June 12, 2019. The Exchange
nonetheless has extensively addressed the Fee Guidance throughout
this filing and prior versions of this filing.
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Physical Connectivity
    A physical port is utilized by a Trading Permit Holder (``TPH'') or
non-TPH to connect to the Exchange at the data centers where the
Exchange's servers are located. The Exchange currently assesses fees
for Network Access Ports for these physical connections to the
Exchange. Specifically, TPHs and non-TPHs can elect to connect to Cboe
Options' trading system via either a 1 gigabit per second (``Gb'')
Network Access Port or a 10 Gb Network Access Port. Pre-migration the
Exchange assessed a monthly fee of $1,500 per port for 1 Gb Network
Access Ports and a monthly fee of $5,000 per port for 10 Gb Network
Access Ports for access to Cboe Options primary system. Through January
31, 2020, Cboe Options market participants will continue to have the
ability to connect to Cboe Options' trading system via the current
Network Access Ports. As of October 7, 2019, in connection with the
migration, TPHs and non-TPHs may alternatively elect to connect to Cboe
Options via new latency equalized Physical Ports.\17\ The new Physical
Ports similarly allow TPHs and non-TPHs the ability to connect to the
Exchange at the data center where the Exchange's servers are located
and TPHs and non-TPHs have the option to connect via 1 Gb or 10 Gb
Physical Ports. As noted above, both the new 1 Gb and 10 Gb Physical
Ports provide latency equalization, meaning that each market
participant will be afforded the same latency for 1 Gb or 10 Gb
Physical Ports in the primary data center to the Exchange's customer-
facing switches regardless of location of the market participant's cage
\18\ in the primary data center relative to the Exchange's servers.

Conversely, the legacy Network Access Ports are not latency equalized,
meaning the location of a market participant's cage within the data
center may affect latency. For example, in the legacy system, a cage
located further from the Exchange's servers may experience higher
latency than those located closer to the Exchange's servers.\19\ As
such, the proposed Physical Ports ensure all market participants
connected to the Exchange via the new Physical Ports will receive the
same respective latency for each port size and ensure that no market
participant has a latency advantage over another market participant
within the primary data center.\20\ Additionally, the new
infrastructure utilizes new and faster switches resulting in lower
overall latency.
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    \17\ As previously noted, market participants will continue to
have the option of connecting to Cboe Options via a 1 Gbps or 10
Gbps Network Access Port at the same rates as proposed,
respectively.
    \18\ A market participant's ``cage'' is the cage within the data
center that contains a market participant's servers, switches and
cabling.
    \19\ The Exchange equalizes physical connectivity in the data
center for its primary system by taking the farthest possible
distance that a Cboe market participant cage may exist from the
Exchange's customer-facing switches and using that distance as the
cable length for any cross-connect.
    \20\ The Exchange notes that 10 Gb Physical Ports have an 11
microsecond latency advantage over 1 Gb Physical Ports. Other than
this difference, there are no other means to receive a latency
advantage as compared to another market participant in the new
connectivity structure.
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    The Exchange proposes to assess the following fees for any physical
port, regardless of whether the TPH or non-TPH connects via the current
Network Access Ports or the new Physical Ports. Specifically, the
Exchange proposes to continue to assess a monthly fee of $1,500 per
port for 1 Gb Network Access Ports and new Physical Ports and increase
the monthly fee for 10 Gb Network Access Ports and new Physical Ports
to $7,000 per port. Physical port fees will be prorated based on the
remaining trading days in the calendar month. The proposed fee for 10
Gb Physical Ports is in line with the amounts assessed by other
exchanges for similar connections by its Affiliated Exchanges and other
Exchanges that utilize the same connectivity infrastructure.\21\
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    \21\ See Cboe EDGA U.S. Equities Exchange Fee Schedule, Physical
Connectivity Fees; Cboe EDGX U.S. Equities Exchange Fee Schedule,
Physical Connectivity Fees; Cboe BZX U.S. Equities Exchange Fee
Schedule, Physical Connectivity Fees; Cboe BYX U.S. Equities
Exchange Fee Schedule, Physical Connectivity Fees; Cboe EDGX Options
Exchange Fee Schedule, Physical Connectivity Fees; and Cboe BZX
Options Exchange Fee Schedule, Physical Connectivity Fees
(collectively, ``Affiliated Exchange Fee Schedules''). See e.g.,
Nasdaq PHLX and ISE Rules, General Equity and Options Rules, General
8. Phlx and ISE each charge a monthly fee of $2,500 for each 1Gb
connection, $10,000 for each 10Gb connection and $15,000 for each
10Gb Ultra connection. See also Nasdaq Price List--Trading
Connectivity. Nasdaq charges a monthly fee of $7,500 for each 10Gb
direct connection to Nasdaq and $2,500 for each direct connection
that supports up to 1Gb. See also NYSE American Fee Schedule,
Section V.B, and Arca Fees and Charges, Co-Location Fees. NYSE
American and Arca each charge a monthly fee of $5,000 for each 1Gb
circuit, $14,000 for each 10Gb circuit and $22,000 for each 10Gb LX
circuit.
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    In addition to the benefits resulting from the new Physical Ports
providing latency equalization and new switches (i.e., improved
latency), TPHs and non-TPHs may be able to reduce their overall
physical connectivity fees. Particularly, Network Access Port fees are
assessed for unicast (orders, quotes) and multicast (market data)
connectivity separately. More specifically, Network Access Ports may
only receive one type of connectivity each (thus requiring a market
participant to maintain two ports if that market participant desires
both types of connectivity). The new Physical Ports however, allow
access to both unicast and multicast connectivity with a single
physical connection to the Exchange. Therefore, TPHs and non-TPHs that
currently purchase two legacy Network Access Ports for the purpose of
receiving each type of connectivity now have the option to purchase
only one new Physical Port to accommodate their connectivity needs,
which may result in reduced costs for physical connectivity.\22\
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    \22\ The Exchange proposes to eliminate the current Cboe Command
Connectivity Charges table in its entirety and create and relocate
such fees in a new table in the Fees Schedule that addresses fees
for physical connectivity, including fees for the current Network
Access Ports, the new Physical Ports and Disaster Recovery (``DR'')
Ports. The Exchange notes that it is not proposing any changes with
respect to DR Ports other than renaming the DR ports from ``Network
Access Ports'' to ``Physical Ports'' to conform to the new Physical
Port terminology. The Exchange also notes that subsequent to the
initial filings that proposed these fee changes on October 1 and 2,
2019 (SR-CBOE-2019-077 and SR-CBOE-2019-082), the Exchange amended
the proposed port fees to waive fees for ports used for PULSe in
filing No. SR-CBOE-2019-105. The additions proposed by filing SR-
CBOE-2019-105 are double underlined in Exhibit 5A and the deletions
are doubled bracketed in Exhibit 5A.
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Cboe Data Services--Port Fees
    The Exchange proposes to amend the ``Port Fee'' under the Cboe Data
Services (``CDS'') Fees Schedule. Currently, the Port Fee is payable by
any Customer \23\ that receives data through two types of sources; a
direct connection to CDS (``direct connection'') or through a
connection to CDS provided by an extranet service provider (``extranet
connection''). The Port Fee applies to receipt of any Cboe Options data
feed but is only assessed once per data port. The Exchange proposes to
amend the monthly CDS Port Fee to provide that it is payable ``per
source'' used to receive data, instead of ``per data port''. The
Exchange also proposes to increase the fee from $500 per data port/
month to $1,000 per data source/month.\24\ The Exchange notes the
proposed change in assessing the fee (i.e., per source vs per port) and
the proposed fee amount are the same as the corresponding fee on its
affiliate C2.\25\
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    \23\ 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 extranet service provider),
whether that data is distributed externally or used internally.
    \24\ For example, under the pre-migration ``per port''
methodology, if a TPH maintained 4 ports that receive market data,
that TPH would be assessed $2,000 per month (i.e., $500 x 4 ports),
regardless of how many sources it used to receive data. Under the
proposed ``per source'' methodology, if a TPH maintains 4 ports that
receive market data, but receives data through only one source
(e.g., a direct connection) that TPH would be assessed $1,000 per
month (i.e., $1000 x 1 source). If that TPH maintains 4 ports but
receives data from both a direct connection and an extranet
connection, that TPH would be assessed $2,000 per month (i.e.,
$1,000 x 2 sources). Similarly, if that TPH maintains 4 ports and
receives data from two separate extranet providers, that TPH would
be assessed $2,000 per month (i.e., $1,000 x 2).
    \25\ See Cboe C2 Options Exchange Fee Schedule, Cboe Data
Services, LLC Fees, Section IV, Systems Fees.
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    In connection with the proposed change, the Exchange also proposes
to rename the ``Port Fee'' to ``Direct Data Access Fee''. As the fee
will be payable ``per data source'' used to receive data, instead of
``per data port'', the Exchange believes the proposed name is more
appropriate and that eliminating the term ``port'' from the fee will
eliminate confusion as to how the fee is assessed.
Logical Connectivity
    Next, the Exchange proposes to amend its login fees. By way of
background, Cboe Options market participants were able to access Cboe
Command via either a CMI or a FIX Port, depending on how their systems
are configured. Effective October 7, 2019, market participants are no
longer able to use CMI and FIX Login IDs. Rather, the Exchange utilizes
a variety of logical connectivity ports as further described below.
Both a legacy CMI/FIX Login ID and logical port represent a technical
port established by the Exchange within the Exchange's trading system
for the delivery and/or receipt of trading messages--i.e., orders,
accepts, cancels, transactions, etc. Market participants that wish to
connect directly to the Exchange can request a number of different
types of ports, including ports that support order entry, customizable
purge functionality, or the receipt of market data. Market participants
can also choose to connect indirectly through a number of different
third-party providers, such as another broker-dealer or service bureau
that the Exchange permits through specialized

access to the Exchange's trading system and that may provide additional
services or operate at a lower mutualized cost by providing access to
multiple members. In light of the discontinuation of CMI and FIX Login
IDs, the Exchange proposes to eliminate the fees associated with the
CMI and FIX login IDs and adopt the below pricing for logical
connectivity in its place.

------------------------------------------------------------------------
                Service                           Cost per month
------------------------------------------------------------------------
Logical Ports (BOE, FIX) 1 to 5........  $750 per port.
Logical Ports (BOE, FIX) >5............  $800 per port.
Logical Ports (Drop)...................  $750 per port.
BOE Bulk Ports 1 to 5..................  $1,500 per port.
BOE Bulk Ports 6 to 30.................  $2,500 per port.
BOE Bulk Ports >30.....................  $3,000 per port.
Purge ports............................  $850 per port.
GRP Ports..............................  $750/primary (A or C Feed).
Multicast PITCH/Top Spin Server Ports..  $750/set of primary (A or C
                                          feed)
------------------------------------------------------------------------

    The Exchange proposes to provide for each of the logical
connectivity fees that new requests will be prorated for the first
month of service. Cancellation requests are billed in full month
increments as firms are required to pay for the service for the
remainder of the month, unless the session is terminated within the
first month of service. The Exchange notes that the proration policy is
the same on its Affiliated Exchanges.\26\
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    \26\ See Affiliated Exchange Fee Schedules, Logical Port Fees.
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    Logical Ports (BOE, FIX, Drop): The new Logical Ports represent
ports established by the Exchange within the Exchange's system for
trading purposes. Each Logical Port established is specific to a TPH or
non-TPH and grants that TPH or non-TPH the ability to operate a
specific application, such as order/quote \27\ entry (FIX and BOE
Logical Ports) or drop copies (Drop Logical Ports). Similar to CMI and
FIX Login IDs, each Logical Port will entitle a firm to submit message
traffic of up to specified number of orders per second.\28\ The
Exchange proposes to assess $750 per port per month for all Drop
Logical Ports and also assess $750 per port per month (which is the
same amount currently assessed per CMI/FIX Login ID per month), for the
first 5 FIX/BOE Logical Ports and thereafter assess $800 per port, per
month for each additional FIX/BOE Logical Port. While the proposed
ports will be assessed the same monthly fees as current CMI/FIX Login
IDs (for the first five logical ports), the proposed logical ports
provide for significantly more message traffic (and thus cost less per
message sent) as shown below:
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    \27\ As of October 7, 2019, the definition of quote in Cboe
Options Rule 1.1 means a firm bid or offer a Market-Maker (a)
submits electronically as an order or bulk message (including to
update any bid or offer submitted in a previous order or bulk
message) or (b) represents in open outcry on the trading floor.
    \28\ Login Ids restrict the maximum number of orders and quotes
per second in the same way logical ports do, and Users may similarly
have multiple logical ports as they may have Trading Permits and/or
bandwidth packets to accommodate their order and quote entry needs.

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                                                       CMI/FIX Login Ids                  BOE/FIX Logical ports
                                      --------------------------------------------------------------------------
                                                Quotes                   Orders               Quotes/orders
----------------------------------------------------------------------------------------------------------------
Bandwidth Limit per login............  5,000 quotes/3 sec \29\  30 orders/sec..........  15,000 quotes/orders/3
                                                                                sec.
Cost.................................  $750 each..............  $750 each..............  $750/$800 each.
Cost per Quote/Order Sent @ Limit....  $0.15 per quote/3 sec..  $25.00 per order/sec...  $0.05/$0.053 per quote/
                                                                                order/3 sec.
----------------------------------------------------------------------------------------------------------------

    Logical Port fees will be limited to Logical Ports in the
Exchange's primary data center and no Logical Port fees will be
assessed for redundant secondary data center ports. Each BOE or FIX
Logical Port will incur the logical port fee indicated in the table
above when used to enter up to 70,000 orders per trading day per
logical port as measured on average in a single month. Each incremental
usage of up to 70,000 per day per logical port will incur an additional
logical port fee of $800 per month. Incremental usage will be
determined on a monthly basis based on the average orders per day
entered in a single month across all of a market participant's
subscribed BOE and FIX Logical Ports. The Exchange believes that the
pricing implications of going beyond 70,000 orders per trading day per
Logical Port encourage users to mitigate message traffic as necessary.
The Exchange notes that the proposed fee of $750 per port is the same
amount assessed not only for current CMI and FIX Login Ids, but also
similar ports available on an affiliate exchange.\30\
---------------------------------------------------------------------------

    \29\ Each Login ID has a bandwidth limit of 80,000 quotes per 3
seconds. However, in order to place such bandwidth onto a single
Login ID, a TPH or non-TPH would need to purchase a minimum of 15
Market-Maker Permits or Bandwidth Packets (each Market-Maker Permit
and Bandwidth Packet provides 5,000 quotes/3 sec). For purposes of
comparing ``quote'' bandwidth, the provided example assumes only 1
Market-Maker Permit or Bandwidth Packet has been purchased.
    \30\ See Cboe BZX Options Exchange Fee Schedule, Options Logical
Port Fees.
---------------------------------------------------------------------------

    The Exchange also proposes to provide that the fee for one FIX
Logical Port connection to PULSe and one FIX Logical Port connection to
Cboe Silexx will be waived per TPH. The Exchange notes that only one
FIX Logical Port connection is required to support a firm's access
through each of PULSe and Cboe Silexx FLEX.
    BOE Bulk Logical Ports: The Exchange also offers BOE Bulk Logical
Ports, which provide users with the ability to submit single and bulk
order messages to enter, modify, or cancel orders designated as Post
Only Orders with a Time-in-Force of Day or GTD with an expiration time
on that trading day. While BOE Bulk Ports will be available to all
market participants, the Exchange anticipates they will be used
primarily by Market-Makers or firms that conduct similar business
activity, as the primary purpose of the proposed bulk message
functionality is to encourage market-maker quoting on exchanges. As

indicated above, BOE Bulk Logical Ports are assessed $1,500 per port,
per month for the first 5 BOE Bulk Logical Ports, assessed $2,500 per
port, per month thereafter up to 30 ports and thereafter assessed
$3,000 per port, per month for each additional BOE Bulk Logical Port.
Like CMI and FIX Login IDs, and FIX/BOX Logical Ports, BOE Bulk Ports
will also entitle a firm to submit message traffic of up to specified
number of quotes/orders per second.\31\ The proposed BOE Bulk ports
also provide for significantly more message traffic (and thus cost less
per message sent) as compared to current CMI/FIX Login IDs, as shown
below:
---------------------------------------------------------------------------

    \31\ The Exchange notes that while technically there is no
bandwidth limit per BOE Bulk Port, there may be possible performance
degradation at 15,000 messages per second (which is the equivalent
of 225,000 quotes/orders per 3 seconds). As such, the Exchange uses
the number at which performance may be degraded for purposes of
comparison.

------------------------------------------------------------------------
                                   CMI/FIX Login Ids    BOE Bulk ports
                                 ---------------------------------------
                                        Quotes            Quotes \32\
------------------------------------------------------------------------
Bandwidth Limit.................  5,000 quotes/3 sec  225,000 quotes 3
                                   \33\.               sec.
Cost............................  $750 each.........  $1,500/$2,500/
                                                       $3,000 each.
Cost per Quote/Order Sent @Limit  $0.15 per quote/3   $0.006/$0.011/
                                   sec.                $0.013 per quote/
                                                       3 sec.
------------------------------------------------------------------------

    Each BOE Bulk Logical Port will incur the logical port fee
indicated in the table above when used to enter up to 30,000,000 orders
per trading day per logical port as measured on average in a single
month. Each incremental usage of up to 30,000,000 orders per day per
BOE Bulk Logical Port will incur an additional logical port fee of
$3,000 per month. Incremental usage will be determined on a monthly
basis based on the average orders per day entered in a single month
across all of a market participant's subscribed BOE Bulk Logical Ports.
The Exchange believes that the pricing implications of going beyond
30,000,000 orders per trading day per BOE Bulk Logical Port encourage
users to mitigate message traffic as necessary. The Exchange notes that
the proposed BOE Bulk Logical Port fees are similar to the fees
assessed for these ports by BZX Options.\34\
---------------------------------------------------------------------------

    \32\ See Cboe Options Rule 1.1.
    \33\ Each Login ID has a bandwidth limit of 80,000 quotes per 3
seconds. However, in order to place such bandwidth onto a single
Login ID, a TPH or non-TPH would need to purchase a minimum of 15
Market-Maker Permits or Bandwidth Packets (each Market-Maker Permit
and Bandwidth Packet provides 5,000 quotes/3 sec). For purposes of
comparing ``quote'' bandwidth, the provided example assumes only 1
Market-Maker Permit or Bandwidth Packet has been purchased.
    \34\ See Cboe BZX Options Exchange Fee Schedule, Options Logical
Port Fees.
---------------------------------------------------------------------------

    Purge Ports: As part of the migration, the Exchange introduced
Purge Ports to provide TPHs additional risk management and open order
control functionality. Purge ports were designed to assist TPHs, in the
management of, and risk control over, their quotes, particularly if the
TPH is dealing with a large number of options. Particularly, Purge
Ports allow TPHs to submit a cancelation for all open orders, or a
subset thereof, across multiple sessions under the same Executing Firm
ID (``EFID''). This would allow TPHs to seamlessly avoid unintended
executions, while continuing to evaluate the direction of the market.
While Purge Ports are available to all market participants, the
Exchange anticipates they will be used primarily by Market-Makers or
firms that conduct similar business activity and are therefore exposed
to a large amount of risk across a number of securities. The Exchange
notes that market participants are also able to cancel orders through
FIX/BOE Logical Ports and as such a dedicated Purge Port is not
required nor necessary. Rather, Purge Ports were specially developed as
an optional service to further assist firms in effectively managing
risk. As indicated in the table above, the Exchange proposes to assess
a monthly charge of $850 per Purge Port. The Exchange notes that the
proposed fee is in line with the fee assessed by other exchanges,
including its Affiliated Exchanges, for Purge Ports.\35\
---------------------------------------------------------------------------

    \35\ See e.g., Nasdaq ISE Options Pricing Schedule, Section
7(C), Ports and Other Services. See also Cboe EDGX Options Exchange
Fee Schedule, Options Logical Port Fees; Cboe C2 Options Exchange
Fee Schedule, Options Logical Port Fees and Cboe BZX Options
Exchange Fee Schedule, Options Logical Port Fees.
---------------------------------------------------------------------------

    Multicast PITCH/Top Spin Server and GRP Ports: In connection with
the migration, the Exchange also offers optional Multicast PITCH/Top
Spin Server (``Spin'') and GRP ports and proposes to assess $750 per
month, per port. Spin Ports and GRP Ports are used to request and
receive a retransmission of data from the Exchange's Multicast PITCH/
Top data feeds. The Exchange's Multicast PITCH/Top data feeds are
available from two primary feeds, identified as the ``A feed'' and the
``C feed'', which contain the same information but differ only in the
way such feeds are received. The Exchange also offers two redundant
feeds, identified as the ``B feed'' and the ``D feed.'' All secondary
feed Spin and GRP Ports will be provided for redundancy at no
additional cost. The Exchange notes a dedicated Spin and GRP Port is
not required nor necessary. Rather, Spin ports enable a market
participant to receive a snapshot of the current book quickly in the
middle of the trading session without worry of gap request limits and
GRP Ports were specially developed to request and receive
retransmission of data in the event of missed or dropped message. The
Exchange notes that the proposed fee is in line with the fee assessed
for the same ports on BZX Options.\36\
---------------------------------------------------------------------------

    \36\ See Cboe BZX Options Exchange Fee Schedule, Options Logical
Port Fees.
---------------------------------------------------------------------------

Access Credits
    The Exchange next proposes to amend its Affiliate Volume Plan
(``AVP'') to provide Market-Makers an opportunity to obtain credits on
their monthly BOE Bulk Port Fees.\37\ By way of background, under AVP,
if a TPH Affiliate \38\ or Appointed OFP \39\ (collectively, an
``affiliate'') of a Market-Maker qualifies under the Volume Incentive
Program (``VIP'') (i.e., achieves VIP Tiers 2-5), that Market-Maker
will also qualify for a discount on that Market-Maker's Liquidity
Provider (``LP'') Sliding Scale transaction fees and Trading Permit
fees. The Exchange proposes to amend AVP to provide that qualifying
Market-Makers will receive a discount on Bulk Port fees (instead of
Trading Permits) where an affiliate achieves VIP Tiers 4

or 5. As discussed more fully below, the Exchange is amending its
Trading Permit structure, such that off-floor Market-Makers no longer
need to hold more than one Market-Maker Trading Permit. As such, in
place of credits for Trading Permits, the Exchange will provide credits
for BOE Bulk Ports.\40\ The proposed credits are as follows:
---------------------------------------------------------------------------

    \37\ As noted above, while BOE Bulk Ports will be available to
all market participants, the Exchange anticipates they will be used
primarily by Market Makers or firms that conduct similar business
activity.
    \38\ 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.
    \39\ 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.
    \40\ The Exchange notes that Trading Permits currently each
include a set bandwidth allowance and 3 logins. Current logins and
bandwidth are akin to the proposed logical ports, including BOE Bulk
Ports which will primarily be used by Market-Makers.

------------------------------------------------------------------------
                                                      Percent credit on
 Market maker affiliate access credit    VIP Tier     monthly BOE bulk
                                                          port fees
------------------------------------------------------------------------
Credit Tier...........................           1                     0
                                                 2                     0
                                                 3                     0
                                                 4                    15
                                                 5                    25
------------------------------------------------------------------------

    The Exchange believes the proposed change to AVP continues to allow
the Exchange to provide TPHs that have both Market-Maker and agency
operations reduced Market-Maker costs via the credits, albeit credits
on BOE Bulk Port fees instead of Trading Permit fees. AVP also
continues to provide incremental incentives for TPHs to strive for the
higher tier levels, which provide increasingly higher benefits for
satisfying increasingly more stringent criteria.
    In addition to the opportunity to receive credits via AVP, the
Exchange proposes to provide an additional opportunity for Market-
Makers to obtain credits on their monthly BOE Bulk Port fees based on
the previous month's make rate percentage. By way of background, the
Liquidity Provider Sliding Scale Adjustment Table provides that Taker
fees be applied to electronic ``Taker'' volume and a Maker rebate be
applied to electronic ``Maker'' volume, in addition to the transaction
fees assessed under the Liquidity Provider Sliding Scale.\41\ The
amount of the Taker fee (or Maker rebate) is determined by the
Liquidity Provider's percentage of volume from the previous month that
was Maker (``Make Rate'').\42\ Market-Makers are given a Performance
Tier based on their Make Rate percentage which currently provides
adjustments to transaction fees. Thus, the program is designed to
attract liquidity from traditional Market-Makers. The Exchange proposes
to now also provide BOE Bulk Port fee credits if Market-Makers satisfy
the thresholds of certain Performance Tiers. Particularly, the
Performance Tier earned will also determine the percentage credit
applied to a Market-Maker's monthly BOE Bulk Port fees, as shown below:
---------------------------------------------------------------------------

    \41\ See Cboe Options Exchange Fees Schedule, Liquidity Provider
Sliding Scale Adjustment Table.
    \42\ More specifically, the Make Rate is derived from a
Liquidity Provider's electronic volume the previous month in all
symbols excluding Underlying Symbol List A using the following
formula: (i) The Liquidity Provider's total electronic automatic
execution (``auto-ex'') volume (i.e., volume resulting from that
Liquidity Provider's resting quotes or single sided quotes/orders
that were executed by an incoming order or quote), divided by (ii)
the Liquidity Provider's total auto-ex volume (i.e., volume that
resulted from the Liquidity Provider's resting quotes/orders and
volume that resulted from that LP's quotes/orders that removed
liquidity). For example, a TPH's electronic Make volume in September
2019 is 2,500,000 contracts and its total electronic auto-ex volume
is 3,000,000 contracts, resulting in a Make Rate of 83% (Performance
Tier 4). As such, the TPH would receive a 40% credit on its monthly
Bulk Port fees for the month of October 2019. For the month of
October 2019, the Exchange will be billing certain incentive
programs separately, including the Liquidity Provider Sliding Scale
Adjustment Table, for the periods of October 1-October 4 and October
7-October 31 in light of the migration of its billing system. As
such, a Market-Maker's Performance Tier for November 2019 will be
determined by the Market-Maker's percentage of volume that was Maker
from the period of October 7-October 31, 2019.

----------------------------------------------------------------------------------------------------------------
                                           Liquidity provider
                                              sliding scale      Make rate (percent based     Percent credit on
       Market maker access credit              adjustment             on prior month)         monthly BOE bulk
                                            performance tier                                      port fees
----------------------------------------------------------------------------------------------------------------
Credit Tier.............................                     1  0%-50%....................                     0
                                                             2  Above 50%-60%.............                     0
                                                             3  Above 60%-75%.............                     0
                                                             4  Above 75%-90%.............                    40
                                                             5  Above 90%.................                    40
----------------------------------------------------------------------------------------------------------------

    The Exchange believes the proposal mitigates costs incurred by
traditional Market-Makers that focus on adding liquidity to the
Exchange (as opposed to those that provide and take, or just take). The
Exchange lastly notes that both the Market-Maker Affiliate Access
Credit under AVP and the Market-Maker Access Credit tied to Performance
Tiers can both be earned by a TPH, and these credits will each apply to
the total monthly BOE Bulk Port Fees including any incremental BOE Bulk
Port fees incurred, before any credits/adjustments have been applied
(i.e. an electronic MM can earn a credit from 15% to 65%).
Bandwidth Packets
    As described above, post-migration, the Exchange utilizes a variety
of logical ports. Part of this functionality is similar to bandwidth
packets that were previously available on the Exchange. Bandwidth
packets restricted the maximum number of orders and quotes per second.
Post-migration, market participants may similarly have multiple Logical
Ports and/or BOE Bulk Ports as they may have had bandwidth packets to
accommodate their order and quote entry needs. As such, the Exchange
proposes to eliminate all of the current Bandwidth Packet fees.\43\ The
Exchange believes that the proposed pricing implications of going
beyond specified bandwidth described above in the logical connectivity
fees section will be able to otherwise mitigate message traffic as
necessary.
---------------------------------------------------------------------------

    \43\ See Cboe Options Fees Schedule, Bandwidth Packet Fees.

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

CAS Servers
    By way of background, in order to connect to the legacy Cboe
Command, which allowed a TPH to trade on the Cboe Options System, a TPH
had to connect via either a CMI or FIX interface (depending on the
configuration of the TPH's own systems). For TPHs that connected via a
CMI interface, they had to use CMI CAS Servers. In order to ensure that
a CAS Server was not overburdened by quoting activity for Market-
Makers, the Exchange allotted each Market-Maker a certain number of
CASs (in addition to the shared backups) based on the amount of quoting
bandwidth that they had. The Exchange no longer uses CAS Servers, post-
migration. In light of the elimination of CAS Servers, the Exchange
proposes to eliminate the CAS Server allotment table and extra CAS
Server fee.
Trading Permit Fees
    By way of background, the Exchange may issue different types of
Trading Permits and determine the fees for those Trading Permits.\44\
Pre-migration, the Exchange issued the following three types of Trading
Permits: (1) Market-Maker Trading Permits, which were assessed a
monthly fee of $5,000 per permit; (2) Floor Broker Trading Permits,
which were assessed a monthly fee of $9,000 per permit; and (3)
Electronic Access Permits (``EAPs''), which were assessed a monthly fee
of $1,600 per permit. The Exchange also offered separate Market-Maker
and Electronic Access Permits for the Global Trading Hours (``GTH'')
session, which were assessed a monthly fee of $1,000 per permit and
$500 per permit respectively.\45\ For further color, a Market-Maker
Trading Permit entitled the holder to act as a Market-Maker, including
a Market-Maker trading remotely, DPM, eDPM, or LMM, and also provided
an appointment credit of 1.0, a quoting and order entry bandwidth
allowance, up to three logins, trading floor access and TPH status.\46\
A Floor Broker Trading Permit entitled the holder to act as a Floor
Broker, provided an order entry bandwidth allowance, up to 3 logins,
trading floor access and TPH status.\47\ Lastly, an EAP entitled the
holder to electronic access to the Exchange. Holders of EAPs must have
been broker-dealers registered with the Exchange in one or more of the
following capacities: (a) Clearing TPH, (b) TPH organization approved
to transact business with the public, (c) Proprietary TPHs and (d)
order service firms. The permit did not provide access to the trading
floor. An EAP also provided an order entry bandwidth allowance, up to 3
logins and TPH status.\48\ The Exchange also provided an opportunity
for TPHs to pay reduced rates for Trading Permits via the Market Maker
and Floor Broker Trading Permit Sliding Scale Programs (``TP Sliding
Scales''). Particularly, the TP Sliding Scales allowed Market-Makers
and Floor Brokers to pay reduced rates for their Trading Permits if
they committed in advance to a specific tier that includes a minimum
number of eligible Market-Maker and Floor Broker Trading Permits,
respectively, for each calendar year.\49\
---------------------------------------------------------------------------

    \44\ See Cboe Options Rules 3.1(a)(iv)-(v).
    \45\ The fees were waived through September 2019 for the first
Market-Maker and Electronic Access GTH Trading Permits.
    \46\ See Cboe Options Fees Schedule.
    \47\ Id.
    \48\ Id.
    \49\ Due to the October 7 migration, the Exchange had amended
the TP Sliding Scale Programs to provide that any commitment to
Trading Permits under the TP Sliding Scales shall be in place
through September 2019, instead of the calendar year. See Cboe
Options Fees Schedule, Footnotes 24 and 25.
---------------------------------------------------------------------------

    As noted above, Trading Permits were tied to bandwidth allocation,
logins and appointment costs, and as such, TPH organizations may hold
multiple Trading Permits of the same type in order to meet their
connectivity and appointment cost needs. Post-Migration, bandwidth
allocation, logins and appointment costs are no longer tied to a
Trading Permit, and as such, the Exchange proposes to modify its
Trading Permit structure. Particularly, in connection with the
migration, the Exchange adopted separate on-floor and off-floor Trading
Permits for Market-Makers and Floor Brokers, adopted a new Clearing TPH
Permit, and proposes to modify the corresponding fees and discounts. As
was the case pre-migration, the proposed access fees discussed below
will continue to be non-refundable and will be assessed through the
integrated billing system during the first week of the following month.
If a Trading Permit is issued during a calendar month after the first
trading day of the month, the access fee for the Trading Permit for
that calendar month is prorated based on the remaining trading days in
the calendar month. Trading Permits will be renewed automatically for
the next month unless the Trading Permit Holder submits written
notification to the Membership Services Department by 4 p.m. CT on the
second-to-last business day of the prior month to cancel the Trading
Permit effective at or prior to the end of the applicable month.
Trading Permit Holders will only be assessed a single monthly fee for
each type of electronic Trading Permit it holds.
    First, TPHs no longer need to hold multiple permits for each type
of electronic Trading Permit (i.e., electronic Market-Maker Trading
Permits and/or and Electronic Access Permits). Rather, for electronic
access to the Exchange, a TPH need only purchase one of the following
permit types for each trading function the TPH intends to perform:
Market-Maker Electronic Access Permit (``MM EAP'') in order to act as
an off-floor Market-Maker and which will continue to be assessed a
monthly fee of $5,000, Electronic Access Permit (``EAP'') in order to
submit orders electronically to the Exchange \50\ and which will be
assessed a monthly fee of $3,000, and a Clearing TPH Permit, for TPHs
acting solely as a Clearing TPH, which will be assessed a monthly fee
of $2,000 (and is more fully described below). For example, a TPH
organization that wishes to act as a Market-Maker and also submit
orders electronically in a non-Market Maker capacity would have to
purchase one MM EAP and one EAP. TPHs will be assessed the monthly fee
for each type of Permit once per electronic access capacity.
---------------------------------------------------------------------------

    \50\ EAPs may be purchased by TPHs that both clear transactions
for other TPHs (i.e., a ``Clearing TPH'') and submit orders
electronically.
---------------------------------------------------------------------------

    Next, the Exchange proposes to adopt a new Trading Permit,
exclusively for Clearing TPHs that are approved to act solely as a
Clearing TPH (as opposed to those that are also approved in a capacity
that allows them to submit orders electronically). Currently any TPH
that is registered to act as a Clearing TPH must purchase an EAP,
whether or not that Clearing TPH acts solely as a Clearing TPH or acts
as a Clearing TPH and submits orders electronically. The Exchange
proposes to adopt a new Trading Permit, for any TPH that is registered
to act solely as Clearing TPH at a discounted rate of $2,000 per
month.\51\
---------------------------------------------------------------------------

    \51\ Cboe Option Rules provides the Exchange authority to issue
different types of Trading Permits which allows holders, among other
things, to act in one or more trading functions authorized by the
Rules. See Cboe Options Rule 3.1(a)(iv). The Exchange notes that
currently 17 out of 38 Clearing TPHs are acting solely as a Clearing
TPH on the Exchange.
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to eliminate its fees for
Global Trading Hours Trading Permits. Particularly, the Exchange
proposes to provide that any Market-Maker EAP, EAP and Clearing TPH
Permit provides access (at no

additional cost) to the GTH session.\52\ Additionally, the Exchange
proposes to amend Footnote 37 of the Fees Schedule regarding GTH in
connection with the migration. Currently Footnote 37 provides that
separate access permits and connectivity is needed for the GTH session.
The Exchange proposes to eliminate this language as that is no longer
the case post-migration (i.e., an electronic Trading Permits will grant
access to both sessions and physical and logical ports may be used in
both sessions, eliminating the need to purchase separate connectivity).
The Exchange also notes that in connection with migration, the Book
used during Regular Trading Hours (``RTH'') will be the same Book used
during GTH (as compared to pre-migration where the Exchange maintained
separate Books for each session). The Exchange therefore also proposes
to eliminate language in Footnote 37 stating that GTH is a segregated
trading session and that there is no market interaction between the two
sessions.
---------------------------------------------------------------------------

    \52\ The Exchange notes that Clearing TPHs must be properly
authorized by the Options Clearing Corporation (``OCC'') to operate
during the Global Trading Hours session and all TPHs must have a
Letter of Guarantee to participate in the GTH session (as is the
case today).
---------------------------------------------------------------------------

    The Exchange next proposes to adopt MM EAP Appointment fees. By way
of background, a registered Market-Maker may currently create a Virtual
Trading Crowd (``VTC'') Appointment, which confers the right to quote
electronically in an appropriate number of classes selected from
``tiers'' that have been structured according to trading volume
statistics, except for the AA tier.\53\ Each Trading Permit
historically held by a Market-Maker had an appointment credit of 1.0. A
Market-Maker could select for each Trading Permit the Market-Maker held
any combination of classes whose aggregate appointment cost did not
exceed 1.0. A Market-Maker could not hold a combination of appointments
whose aggregate appointment cost was greater than the number of Trading
Permits that Market-Maker held.\54\
---------------------------------------------------------------------------

    \53\ See Cboe Options Rule 5.50 (Appointment of Market-Makers).
    \54\ For example, if a Market-Maker selected a combination of
appointments that has an aggregate appointment cost of 2.5, that
Market-Maker must hold at least 3 Market-Maker Trading Permits.
---------------------------------------------------------------------------

    As discussed, post-migration, bandwidth allocation, logins and
appointment costs are no longer tied to a single Trading Permit and
therefore TPHs no longer need to have multiple permits for each type of
electronic Trading Permit. Market-Makers must still select class
appointments in the classes they seek to make markets
electronically.\55\ Particularly, a Market-Maker firm will only be
required to have one permit and will thereafter be charged for one or
more ``Appointment Units'' (which will scale from 1 ``unit'' to more
than 5 ``units''), depending on which classes they elect appointments
in. Appointment Units will replace the standard 1.0 appointment cost,
but function in the same manner. Appointment weights (formerly known as
``appointment costs'') for each appointed class will be set forth in
Cboe Options Rule 5.50(g) and will be summed for each Market-Maker in
order to determine the total appointment units, to which fees will be
assessed. This was the manner in which the tier costs per class
appointment were summed to meet the 1.0 appointment cost, the only
difference being that if a Market-Maker exceeds this ``unit'', then
their fees will be assessed under the ``unit'' that corresponds to the
total of their appointment weights, as opposed to holding another
Trading Permit because it exceeded the 1.0 ``unit''. Particularly, the
Exchange proposes to adopt a new MM EAP Appointment Sliding Scale.
Appointment Units for each assigned class will be aggregated for each
Market-Maker and Market-Maker affiliate. If the sum of appointments is
a fractional amount, the total will be rounded up to the next highest
whole Appointment Unit. The following lists the progressive monthly
fees for Appointment Units: \56\
---------------------------------------------------------------------------

    \55\ See Cboe Options Rule 5.50(a).
    \56\ For example, if a Market-Maker's total appointment costs
amount to 3.5 unites, the Market-Maker will be assessed a total
monthly fee of $14,000 (1 appointment unit at $0, 1 appointment unit
at $6,000 and 2 appointment units at $4,000) as and for appointment
fees and $5,000 for a Market-Maker Trading Permit, for a total
monthly sum of $19,000, where a Market-Maker currently (i.e., prior
to migration) with a total appointment cost of 3.5 would need to
hold 4 Trading Permits and would therefore be assessed a monthly fee
of $20,000.

------------------------------------------------------------------------
                                                           Monthly fees
      Market-Maker EAP appointments          Quantity       (per unit)
------------------------------------------------------------------------
Appointment Units.......................               1              $0
                                                       2           6,000
                                                  3 to 5           4,000
                                                      >5           3,100
------------------------------------------------------------------------

    As noted above, upon migration the Exchange required separate
Trading Permits for on-floor and off-floor activity. As such, the
Exchange proposes to maintain a Floor Broker Trading Permit and adopt a
new Market-Maker Floor Permit for on-floor Market-Makers. In addition,
RUT, SPX, and VIX Tier Appointment fees will be charged separately for
Permit, as discussed more fully below.
    As briefly described above, the Exchange currently maintains TP
Sliding Scales, which allow Market-Makers and Floor Brokers to pay
reduced rates for their Trading Permits if they commit in advance to a
specific tier that includes a minimum number of eligible Market-Maker
and Floor Broker Trading Permits, respectively, for each calendar year.
The Exchange proposes to eliminate the current TP Sliding Scales,
including the requirement to commit to a specific tier, and replace it
with new TP Sliding Scales as follows: \57\
---------------------------------------------------------------------------

    \57\ In light of the proposed change to eliminate the TP Sliding
Scale, the Exchange proposes to eliminate Footnote 24 in its
entirety.

----------------------------------------------------------------------------------------------------------------
                                                             Current                                 Proposed
        Floor TPH permits           Current permit qty     monthly fee     Proposed permit qty      monthly fee
                                                          (per permit)                             (per permit)
----------------------------------------------------------------------------------------------------------------
Market-Maker Floor Permit........  1-10................          $5,000  1......................          $6,000
                                   11-20...............           3,700  2 to 5.................           4,500
                                   21 or more..........           1,800  6 to 10................           3,500
                                                                         >10....................           2,000

Floor Broker Permit..............  1...................           9,000  1......................           7,500
                                   2-5.................           5,000  2 to 3.................           5,700
                                   6 or more...........           3,000  4 to 5.................           4,500
                                                                         >5.....................           3,200
----------------------------------------------------------------------------------------------------------------

Floor Broker ADV Discount
    Footnote 25, which governs rebates on Floor Broker Trading Permits,
currently provides that any Floor Broker that executes a certain
average of customer or professional customer/voluntary customer
(collectively ``customer'') open-outcry contracts per day over the
course of a calendar month in all underlying symbols excluding
Underlying Symbol List A (except RLG, RLV, RUI, and UKXM), DJX, XSP,
and subcabinet trades (``Qualifying Symbols''), will receive a rebate
on that TPH's Floor Broker Trading Permit Fees. Specifically, any Floor
Broker Trading Permit Holder that executes an average of 15,000
customer (``C'' origin code) and/or professional customer and voluntary
customer (``W'' origin code) open-outcry contracts per day over the
course of a calendar month in Qualifying Symbols will receive a rebate
of $9,000 on that TPH's Floor Broker Trading Permit fees. Additionally,
any Floor Broker that executes an average of 25,000 customer open-
outcry contracts per day over the course of a calendar month in
Qualifying Symbols will receive a rebate of $14,000 on that TPH's Floor
Broker Trading Permit fees. The Exchange proposes to maintain, but
modify, its discount for Floor Broker Trading Permit fees. First, the
measurement criteria to qualify for a rebate will be modified to only
include customer (``C'' origin code) open-outcry contracts executed per
day over the course of a calendar month in all underlying symbols,
while the rebate amount will be modified to be a percentage of the
TPH's Floor Broker Permit total costs, instead of a straight
rebate.\58\ The criteria and corresponding percentage rebates are noted
below.\59\
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    \58\ As is the case today, the Floor Broker ADV Discount will be
available for all Floor Broker Trading Permits held by affiliated
Trading Permit Holders and TPH organizations.
    \59\ In light of the proposal to eliminate the TP Sliding Scales
and the Floor Broker rebates currently set forth under Footnote 25,
the Exchange proposes to eliminate Footnote 25 in its entirety.

------------------------------------------------------------------------
                                                           Floor broker
  Floor broker ADV discount tier             ADV           permit rebate
                                                             (percent)
------------------------------------------------------------------------
1.................................  0 to 99,999.........               0
2.................................  100,000 to 174,999..              15
3.................................  >174,999............              25
------------------------------------------------------------------------

    Next, the Exchange proposes to modify its SPX, VIX and RUT Tier
Appointment Fees. Currently, these fees are assessed to any Market-
Maker TPH that either (i) has the respective SPX, VIX or RUT
appointment at any time during a calendar month and trades a specified
number of contracts or (ii) trades a specified number of contracts in
open outcry during a calendar month. More specifically, the Fees
Schedule provides that the $3,000 per month SPX Tier Appointment is
assessed to any Market-Maker Trading Permit Holder that either (i) has
an SPX Tier Appointment at any time during a calendar month and trades
at least 100 SPX contracts while that appointment is active or (ii)
conducts any open outcry transaction in SPX or SPX Weeklys at any time
during the month. The $2,000 per month VIX Tier Appointment is assessed
to any Market-Maker Trading Permit Holder that either (i) has an SPX
Tier Appointment at any time during a calendar month and trades at
least 100 VIX contracts while that appointment is active or (ii)
conducts at least 1000 open outcry transaction in VIX at any time
during the month. Lastly, the $1,000 RUT Tier Appointment is assessed
to any Market-Maker Trading Permit Holder that either (i) has an RUT
Tier Appointment at any time during a calendar month and trades at
least 100 RUT contracts while that appointment is active or (ii)
conducts at least 1000 open outcry transaction in RUT at any time
during the month.
    Because the Exchange is separating Market-Maker Trading Permits for
electronic and open-outcry market-making, the Exchange will be
assessing separate Tier Appointment Fees for each type of Market-Maker
Trading Permit. The Exchange proposes that a MM EAP will be assessed
the Tier Appointment Fee whenever the Market-Maker executes the
corresponding specified number of contracts, if any. The Exchange also
proposes to modify the threshold number of contracts a Market-Maker
must execute in a month to trigger the fee for SPX, VIX and RUT.
Particularly, for SPX, the Exchange proposes to eliminate the 100
contract threshold for electronic SPX executions.\60\ The Exchange
notes that historically, all TPHs that trade SPX electronically
executed more than 100 contracts electronically each month (i.e., no
TPH electronically traded between 1 and 100 contracts of SPX). As no
TPH would currently be negatively impacted by this change, the Exchange
proposes to eliminate the threshold for SPX and align the electronic
SPX Tier Appointment Fee with that of the floor SPX Tier Appointment
Fee, which is not subject to any executed volume threshold. For the VIX
and RUT Tier appointments, the Exchange proposes to increase the
threshold from 100 contracts a month to 1,000 contracts a month. The
Exchange notes the Tier Appointment Fee amounts are not

changing.\61\ In connection with the proposed changes, the Exchange
proposes to relocate the Tier Appointment Fees to a new table and
eliminate the language in the current respective notes sections of each
Tier Appointment Fee as it is no longer necessary.
---------------------------------------------------------------------------

    \60\ The Exchange notes that subsequent to the Original Filing
that proposed these changes on October 1 and 2, 2019 (SR-CBOE-2019-
077 and SR-CBOE-2019-082), and subsequent to the Second Proposed
Rule Change filing that proposed these changes on November 29, 2019
(SR-CBOE-2019-111), the Exchange amended the proposed Market-Maker
Tier Appointment fees to provide that the SPX Tier Appointment Fee
will be assessed to any Market-Maker EAP that executes at least
1,000 contracts in SPX (including SPXW) excluding contracts executed
during the opening rotation on the final settlement date of VIX
options and futures with the expiration used in the VIX settlement
calculation in filing No. SR-CBOE-2019-124. The additions proposed
by filing SR-CBOE-2019-124 are double underlined in Exhibit 5A and
the deletions are doubled bracketed in Exhibit 5A.
    \61\ Floor Broker Trading Surcharges for SPX/SPXW and VIX are
also not changing. The Exchange however, is creating a new table for
Floor Broker Trading Surcharges and relocating such fees in the Fees
Schedule in connection with the proposal to eliminate fees currently
set forth in the ``Trading Permit and Tier Appointment Fees'' Table.
---------------------------------------------------------------------------

Trading Permit Holder Regulatory Fee
    The Fees Schedule provides for a Trading Permit Holder Regulatory
Fee of $90 per month, per RTH Trading Permit, applicable to all TPHs,
which fee helps more closely cover the costs of regulating all TPHs and
performing regulatory responsibilities. In light of the changes to the
Exchange's Trading Permit structure, the Exchange proposes to eliminate
the TPH Regulatory Fee. The Exchange notes that there is no regulatory
requirement to maintain this fee.
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.\62\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \63\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with
Section 6(b)(4) of the Act,\64\ 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. Additionally, the Exchange believes the proposed rule
change is consistent with the Section 6(b)(5) \65\ requirement that the
rules of an exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78f(b).
    \63\ 15 U.S.C. 78f(b)(5).
    \64\ 15 U.S.C. 78f(b)(4).
    \65\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange first stresses that the proposed changes were not
designed with the objective to generate an overall increase in access
fee revenue, as demonstrated by the anticipated loss of revenue
discussed above. Rather, the proposed changes were prompted by the
Exchange's technology migration and the adoption of a new (and
improved) connectivity infrastructure, rendering the pre-migration
structure obsolete. Such changes accordingly necessitated an overhaul
of the Exchange's previous access fee structure and corresponding fees.
Moreover, the proposed changes more closely align the Exchange's access
fees to those of its Affiliated Exchanges, and reasonably so, as the
Affiliated Exchanges offer substantially similar connectivity and
functionality and are on the same platform that the Exchange has now
migrated to.
    The Exchange also notes that it operates in a highly competitive
environment. The SEC Division of Trading and Markets' Fee Guidance
provides that in determining whether a proposed fee is constrained by
significant competitive forces, the Commission will consider whether
there are reasonable substitutes for the product or service that is the
subject of a proposed fee. As described in further detail below, the
Exchange believes substitutable products and services are in fact
available to market participants, including, among other things, other
options exchanges a market participant may connect to in lieu of the
Exchange, indirect connectivity to the Exchange via a third-party
reseller of connectivity and/or trading of any options product,
including proprietary products, in the Over-the-Counter (OTC) markets.
Indeed, there are currently 16 registered options exchanges that trade
options, some of which have similar or lower connectivity fees.\66\
Based on publicly available information, no single options exchange has
more than 17% of the market share.\67\ Further, low barriers to entry
mean that new exchanges may rapidly and inexpensively enter the market
and offer additional substitute platforms to further compete with the
Exchange. For example, there have been 4 exchanges that have been added
in the U.S. options markets in the last 5 years (i.e., Cboe EDGX Inc.,
Nasdaq MRX, LLC, MIAX Pearl, LLC and MIAX Emerald LLC).
---------------------------------------------------------------------------

    \66\ See e.g., Affiliated Exchange Fee Schedules. See also e.g.,
BOX Options Fees Schedule, Section VI (Technology Fees) and Section
IX (Participant Fees).
    \67\ See Cboe Global Markets U.S. Options Market Volume Summary
(June 26, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    There is also no regulatory requirement that any market participant
connect to any one options exchange, that any market participant
connect at a particular connection speed or act in a particular
capacity on the Exchange, or trade any particular product offered on an
exchange. Moreover, membership is not a requirement to participate on
the Exchange. A market participant may submit orders to the Exchange
via a TPH broker.\68\ Indeed, the Exchange is unaware of any one
options exchange whose membership includes every registered broker-
dealer. In fact, the Exchange believes that as of June 2020, only 9
broker-dealers out of approximately 250 broker-dealers that are members
of at least one exchange that lists options for trading were members of
all 16 options exchanges.\69\ Additionally, several broker-dealers are
members of only a single exchange that lists options for trading.\70\
The Exchange has also identified numerous broker-dealers that are
members of other options exchanges, but not the Exchange. For example,
the Exchange has identified approximately 20 broker-dealers that are
members of Nasdaq ISE, LLC (an exchange that lists only options), but
not Cboe Exchange, Inc (which also lists only options). Similarly, the
Exchange has identified at least 4 broker-dealers that trade options
and are members of one or more of the Exchange's affiliated options
exchanges, but not Cboe Exchange, Inc. Indeed, the number of members at
each exchange that trades options varies greatly. Particularly, the
number of members of exchanges that trade options vary between
approximately 9 and 171 broker-dealers.\71\ Even the number of

members between the Exchange and its 3 other options exchange
affiliates vary. Particularly, while the Exchange currently has 94
members, Cboe EDGX and Cboe C2 have 53 members that trade options and
Cboe BZX has 63 members that trade options.
---------------------------------------------------------------------------

    \68\ Such market participant would be subject to the fees of
that broker. The Exchange notes that such broker is not required to
publicize, let alone justify or file with the Commission its fees,
and as such could charge the market participant any fees it deems
appropriate, even if such fees would otherwise be considered
potentially unreasonable or uncompetitive fees.
    \69\ See SEC June 2020 Active Broker Dealer Report.
    \70\ Id. Approximately 10 broker-dealers are members of the Cboe
Exchange, Inc. only, approximately 7 broker-dealers are members of
only Nasdaq PHLX LLC, approximately 3 broker-dealers are members of
only NYSE Arca, Inc., and approximately 3 broker-dealers are members
of only NYSE American LLC.
    \71\ See SEC June 2020 Active Broker Dealer Report. More
specifically, 1 exchange has 9 members, 4 exchanges have between 36-
50 members, 5 exchanges have between 50-100 members, 4 exchanges
have between 100-150 members and 2 exchanges have more than 150
members. The Exchange notes however that some of these exchanges
also trade equities and the Exchange is therefore unable to
determine how many members at each exchange trade options.
---------------------------------------------------------------------------

    The rule structure for options exchanges are also fundamentally
different from those of equities exchanges. In particular, options
market participants are not forced to connect to (and purchase market
data from) all options exchanges. For example, there are many order
types that are available in the equities markets that are not utilized
in the options markets, which relate to mid-point pricing and pegged
pricing which require connection to the SIPs and each of the equities
exchanges in order to properly execute those orders in compliance with
best execution obligations. Additionally, in the options markets, the
linkage routing and trade through protection are handled by the
exchanges, not by the individual members. Thus not connecting to an
options exchange or disconnecting from an options exchange does not
potentially subject a broker-dealer to violate order protection
requirements.\72\ Gone are the days when the retail brokerage firms
(such as Fidelity, Schwab, and eTrade) were members of the options
exchanges--they are not members of the Exchange or its affiliates, they
do not purchase connectivity to the Exchange, and they do not purchase
market data from the Exchange.
---------------------------------------------------------------------------

    \72\ The Exchange notes this discussion is consistent with the
Fee Guidance suggestion that any discussion of alternatives should
``include a discussion of how regulatory requirements, particularly
best execution obligations, Regulation NMS Rule 611 (the Order
Protection Rule), and/or the Options Order Protection and Locked/
Crossed Market Plan (Options Linkage Plan), as applicable, affect
the competitive analysis.''
---------------------------------------------------------------------------

    The Exchange is also not aware of any reason why any particular
market participant could not simply drop its connections and cease
being a TPH of the Exchange if the Exchange were to establish
``unreasonable'' and uncompetitive price increases for its connectivity
alternatives. As further evidence of the fact that market participants
can and do disconnect from exchanges based on connectivity pricing, R2G
Services LLC (``R2G'') filed a comment letter after BOX Exchange LLC
(``BOX'') proposed rule changes to increase its connectivity fees (SR-
BOX-2018-24, SRBOX-2018-37, and SR-BOX-2019-04).\73\ The R2G Letter
stated, ``[w]hen BOX instituted a $10,000/month price increase for
connectivity; we had no choice but to terminate connectivity into them
as well as terminate our market data relationship. The cost benefit
analysis just didn't make any sense for us at those new levels.''
Accordingly, this example shows that if an exchange sets too high of a
fee for connectivity and/or market data services for its relevant
marketplace, market participants can choose to disconnect from the
Exchange. Moreover, the Exchange does not assess any termination fee
for a market participant to drop its connectivity or membership, nor is
the Exchange aware of any other costs that would be incurred by a
market participant to do so. The Exchange notes that in fact, a number
of firms currently do not participate on the Exchange or participate on
the Exchange though sponsored access arrangements with other broker-
dealers rather than by becoming a member. Additionally, as noted above,
only 9 broker-dealers are members of all 16 options exchanges, which
the Exchange believes demonstrates that, in addition to the absence of
a rule requirement to connect to every option exchange, there is no
prevailing business model that would practically require a broker-
dealer to connect to every single options exchange.\74\
---------------------------------------------------------------------------

    \73\ See Letter from Stefano Durdic, R2G, to Vanessa Countryman,
Acting Secretary, Commission, dated March 27, 2019 (the ``R2G
Letter'').
    \74\ The Exchange further notes that these 9 broker-dealers
represent different market participants. Particularly, 5 of these
broker-dealers are bulge bracket banks (of which 1 is also a market-
maker), 2 are brokerage firms and 2 are clearing firms.
---------------------------------------------------------------------------

    Additionally, the Exchange notes that non-TPHs such as Service
Bureaus and Extranets resell Cboe Options connectivity.\75\ This
indirect connectivity is another viable alternative for market
participants to trade on the Exchange without connecting directly to
the Exchange (and thus not pay the Exchange's connectivity fees), which
alternative is already being used by non-TPHs and further constrains
the price that the Exchange is able to charge for connectivity to its
Exchange. The Exchange does not receive any connectivity revenue when
connectivity is resold by a third-party, which often is resold to
multiple customers, some of whom are agency broker-dealers that have
numerous customers of their own.\76\ Accordingly, in the event that a
market participant views one exchange's direct connectivity and access
fees as more or less attractive than the competition, they can choose
to connect to that exchange indirectly or may choose not to connect to
that exchange and connect instead to one or more of the other 15
options markets. For example, two TPHs that connected directly to the
Exchange pre-migration, now connect indirectly via an extranet
provider. The Exchange notes that it has not received any comments
that, and has no evidence to suggest, the two TPHs that transitioned
from direct connections to an indirect connections post-migration were
the result of an undue financial burden resulting from the proposed fee
changes.\77\ Rather, the Exchange believes the transitions demonstrate
that indirect connectivity is in fact a viable option for market
participants, therefore reflecting a competitive environment.\78\ It
further demonstrates the manner in which market participants connect to
the Exchange is entirely within the discretion of market participants,
who can consider the fees charged by the Exchange and by resellers when
making decisions.
---------------------------------------------------------------------------

    \75\ Prior to migration, there were 13 firms that resold Cboe
Options connectivity. Post-migration, the Exchange anticipated that
there would be 19 firms that resell Cboe Options connectivity (both
physical and logical) and as of January 2020 there are 15 firms that
resell Cboe Options connectivity. The Exchange does not have
specific knowledge as to what latency a market participant may
experience using an indirect connection versus a direct connection
and notes it may vary by the service provided by the extranet
provider and vary between extranet providers. The Exchange believes
however, that there are extranet providers able to provide
connections with a latency that is comparable to latency experienced
using a direct connection.
    \76\ The Exchange notes that resellers are not required to
publicize, let alone justify or file with the Commission their fees,
and as such could charge the market participant any fees it deems
appropriate (including connectivity fees higher than the Exchange's
connectivity fees), even if such fees would otherwise be considered
potentially unreasonable or uncompetitive fees.
    \77\ The Exchange notes that TPHs are not required to specify to
the Exchange why it opts to no longer be a TPH, or why it cancels
its ports, nor is a non-TPH market participating required to specify
to the Exchange why it opts to not be a TPH and directly connect to
the Exchange.
    \78\ As shown above, the availability of 15 alternative options
exchanges in addition to the viable option of indirect connectivity
demonstrates that substitute connectivity products and services do
exist supporting the assertion the proposed fees are constrained by
competitive forces.
---------------------------------------------------------------------------

    Additionally, pre-migration, in August 2019, the Exchange had 97
members (TPH organizations), of which nearly half connected indirectly
to the Exchange.\79\ Similarly, in December 2019, after a new broker-
dealer became a member of the Exchange in late

November 2019,\80\ the Exchange had 97 members, of which nearly half of
the participants connected indirectly to the Exchange. More
specifically, in December 2019, 47 TPHs connected directly to the
Exchange and accounted for approximately 66% of the Exchange's volume,
46 TPHs connected indirectly to the Exchange and accounted for
approximately 29% of the Exchange's volume and 4 TPHs utilized both
direct and indirect connections and accounted for approximately 5% of
the Exchange's volume. In December 2019, TPHs that connected directly
to the Exchange purchased a collective 179 physical ports (including
legacy physical ports), 144 of which were 10 Gb ports and 35 of which
were 1 Gb ports.\81\ The Exchange notes that of those market
participants that do connect to the Exchange, it is the individual
needs of each market participant that determine the amount and type of
Trading Permits and physical and logical connections to the
Exchange.\82\ With respect to physical connectivity, many TPHs were
able to purchase small quantities of physical ports. For example,
approximately 36% of TPHs that connected directly to the Exchange
purchased only one to two 1 Gb ports, approximately 40% purchased only
one to two 10 Gb ports, and approximately 40% had purchased a combined
total of one to two ports (for both 1 Gb and 10 Gb). Further, no TPHs
that connected directly to the Exchange had more than five 1 Gb ports,
and only 8.5% of TPHs that connected directly to the Exchange had
between six and ten 10 GB ports and only 8.5% had between ten and
fourteen 10 Gb ports. There were also a combined total of 41 ports used
for indirect connectivity (twenty-one 1 Gb ports and twenty 10 Gb
ports).\83\ The Exchange notes that all types of members connected
indirectly to the Exchange including Clearing firms, Floor Brokers,
order flow providers, and on-floor and off-floor Market-Makers, further
reflecting the fact that each type of market participant has the option
to participate on an exchange without direct connectivity. Indeed,
market participants choose if and how to connect to a particular
exchange and because it is a choice, the Exchange must set reasonable
connectivity pricing, otherwise prospective members would not connect
and existing members would disconnect or connect through a third-party
reseller of connectivity.
---------------------------------------------------------------------------

    \79\ The Exchange notes that one firm terminated in late
September 2019, but that it believes it was unrelated to the
migration and the proposed fee changes.
    \80\ In February 2020, such member also became a member of the
Exchange's affiliated options exchanges, which have similar physical
and logical connectivity fees to the proposed fees in this filing.
    \81\ Of the 4 TPHs that connected both directly and indirectly
to the Exchange, 1 TPH had two 1 Gb Ports and the remaining 3 TPHs
had a combined total of six 10 Gb ports.
    \82\ To assist market participants that are connected or
considering connecting to the Exchange, the Exchange provides
detailed information and specifications about its available
connectivity alternatives in the Cboe C1 Options Exchange
Connectivity Manual, as well as the various technical
specifications. See http://markets.cboe.com/us/options/support/technical/.
    \83\ The Exchange notes that it does not know how many, and
which kind of, connections each TPH that indirectly connects to the
Exchange has.
---------------------------------------------------------------------------

    Moreover, the Exchange notes that the Commission itself 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.'' \84\ The number of available exchanges to
connect to ensures increased competition in the marketplace, and
constrains the ability of exchanges to charge supracompetitive fees for
access to its market. The Exchange is also not aware of any evidence
that has been offered or demonstrated that a market share of
approximately 17% provides the Exchange with anti-competitive pricing
power. Additionally, the Exchange notes that its affiliated options
exchanges have substantially similar physical and logical connectivity
fees, notwithstanding a much lower market share ranging from
approximately 2.5%-9%.\85\ As discussed, if an exchange sets too high
of a fee for connectivity and/or market data services for its relevant
marketplace, market participants can choose to disconnect from the
Exchange.
---------------------------------------------------------------------------

    \84\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
    \85\ See Cboe Global Markets U.S. Options Market Volume Summary
(June 26, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    The Exchange also believes that competition in the marketplace
constrains the ability of exchanges to charge supracompetitive fees for
access to its market, even if such market, like the Exchange, offers
proprietary products exclusive to that market. Notably, just as there
is no regulatory requirement to become a member of any one options
exchange, there is also no regulatory requirement for any market
participant to trade any particular product, nor is there any
requirement that any Exchange create or indefinitely maintain any
particular product.\86\ The Exchange also highlights that market
participants may trade an Exchange's proprietary products through a
third-party without directly or indirectly connecting to the Exchange.
Additionally, market participants may trade any options product,
including proprietary products, in the unregulated Over-the-Counter
(OTC) markets for which there is no requirement for fees related to
those markets to be public. Given the benefits offered by trading
options on a listed exchange, such as increased market transparency and
heightened contra-party creditworthiness due to the role of the Options
Clearing Corporation as issuer and guarantor, the Exchange generally
seeks to incentivize market participants to trade options on an
exchange, which further constrains connectivity pricing. Market
participants may also access other exchanges to trade other similar or
competing proprietary or multi-listed products. Alternative products to
the Exchange's proprietary products may include other options products,
including options on ETFs or options futures, as well as particular
ETFs or futures. For example, exclusively listed SPX options may
compete with the following products traded on other markets: Multiply-
listed SPY options (options on the ETF), E-mini S&P 500 Options
(options on futures), and E-Mini S&P 500 futures (futures on index).
Additionally, exclusively listed VIX options may compete with the
following products traded on other markets: Multiply-listed VXX options
(options on the ETF) and exclusively listed SPIKES options on the Miami
International Securities Exchange, LLC (``MIAX'').\87\ Other options
exchanges are also not precluded from creating new proprietary products
that may achieve similar objectives to (and therefore

compete with) the Exchange's existing proprietary products. For
example, Nasdaq PHLX exclusively lists options on the Nasdaq-100, which
options, like index options listed on the Exchange, offer investors an
alternative method to manage and hedge portfolio exposure to the U.S.
equity markets. Indeed, even though exclusively listed proprietary
products may not be offered by competitors, a competitor could create
similar products if demand were adequate. As noted above for example,
MIAX created its exclusive product SPIKES specifically to compete
against VIX options.\88\ In connection with a recently proposed
amendment to the National Market System Plan Governing the Consolidated
Audit Trail (``CAT NMS Plan''),\89\ the Commission discussed the
existence of competition in the marketplace generally, and particularly
for exchanges with unique business models. Specifically, the Commission
contemplated the possibility of a forced exit by an exchange as a
result of a proposed amendment that could reduce the amount of CAT
funding a participant could recover if certain implementation
milestones were missed. The Commission acknowledged that, even if an
exchange were to exit the marketplace due to its proposed fee-related
change, it would not significantly impact competition in the market for
exchange trading services because these markets are served by multiple
competitors.\90\ The Commission explicitly stated that
``[c]onsequently, demand for these services in the event of the exit of
a competitor is likely to be swiftly met by existing competitors.''
\91\ The Commission further recognized that while some exchanges may
have a unique business model that is not currently offered by
competitors, a competitor could create similar business models if
demand were adequate, and if they did not do so, the Commission
believes it would be likely that new entrants would do so if the
exchange with that unique business model was otherwise profitable.\92\
Similarly, although the Exchange may have proprietary products not
offered by other competitors, not unlike unique business models, a
competitor could create similar products to an existing proprietary
product if demand were adequate. As noted above, other exchanges, that
have comparable connectivity fees, also currently offer exclusively
listed products.\93\ As such, the Exchange is still very much subject
to competition and does not possess anti-competitive pricing power,
even with its offering of proprietary products. Rather, the Exchange
must still set reasonable connectivity pricing, otherwise prospective
members would not connect, and existing members would disconnect or
connect through a third-party reseller of connectivity, regardless of
what products its offers.
---------------------------------------------------------------------------

    \86\ If an option class is open for trading on another national
securities exchange, the Exchange may delist such option class
immediately. For proprietary products, the Exchange may determine to
not open for trading any additional series in that option class; may
restrict series with open interest to closing transactions, provided
that, opening transactions by Market-Makers executed to accommodate
closing transactions of other market participants and opening
transactions by TPH organizations to facilitate the closing
transactions of public customers executed as crosses pursuant to and
in accordance with Rule 6.74(b) or (d) may be permitted; and may
delist the option class when all series within that class have
expired. See Cboe Rule 4.4, Interpretations and Policies .11.
    \87\ MIAX has described SPIKES options as ``designed
specifically to compete head-to-head against Cboe's proprietary
VIX[supreg] product.'' See MIAX Press Release, SPIKES Options
Launched on MIAX, February 21, 2019, available at https://www.miaxoptions.com/sites/default/files/press_release-files/MIAX_Press_Release_02212019.pdf.
    \88\ Id.
    \89\ See Securities Exchange Act Release No. 86901 (September 9,
2019), 84 FR 48458 (September 13, 2019) (File No. S7-13-19).
    \90\ Id.
    \91\ Id.
    \92\ Id.
    \93\ See e.g., Nasdaq PHLX LLC Rules, (Options 7 Pricing
Schedule), Section 8A (Permit and Registration Fees) which provide
for floor permit fees between $4,000 to $6,000 per permit and
Section 9B (Port Fees), which provides various port fees ranging
from $500 to $1,250 per port. See also Nasdaq PHLX LLC Rules,
General 8 Connectivity, which provides for monthly physical
connectivity fees including fees for 1 Gb physical connections
priced at $2,500 per port and for 10 Gb physical connections
starting at $10,000 per port and see MIAX Options Fees Schedule,
Section 3b (Membership Fees, Monthly Trading Permit Fee), which
provides for trading permit fees ranging from $1,500 to $22,000 per
permit (which may include market-maker appointment costs) and
Section 5 (System Connectivity Fees) which provides for monthly
physical connectivity fees including fees for 1 Gb physical
connections priced at $1,400 per port and for 10 Gb physical
connections priced at $6,100 per port.
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    For all the reasons discussed above, the Exchange believes its
proposed fees are reasonable and that the Exchange was subject to
significant competitive forces in setting its proposed fees. In
addition, the Exchange believes its proposed fees are reasonable in
light of the numerous benefits the new connectivity infrastructure
provides market participants. As described, the post-migration
connectivity architecture provides for a latency equalized
infrastructure, improved system performance, and increased sustained
order and quote per second capacity. As such, even where a fee for a
particular type or kind of connectivity may be higher than it was to
its pre-migration equivalent, such increase is reasonable given the
increased benefits market participants are getting for a similar or
modestly higher price. Moreover, as noted above, the objective of the
proposed fee changes was not to generate an overall increase in access
fee revenue, but rather adopt fees in connection with a new (and
improved) connectivity infrastructure. Indeed, the Exchange tried to
the best of its ability to approximate the overall connectivity revenue
generated by the Exchange's pre-migration fees. Notably, the Exchange's
pre-migration access fees were previously filed with the Commission and
not suspended nor disapproved.\94\ The Exchange further believes that
the reasonableness of its proposed connectivity fees is demonstrated by
the very fact that such fees are in line with, and in some cases lower
than, the costs of connectivity at other Exchanges,\95\ including its
own affiliated exchanges which have the same connectivity
infrastructure as the Exchange currently does since migration.\96\ The
Exchange notes these fees were similarly filed with the Commission and
not suspended nor disapproved.\97\
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    \94\ Although the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the ``Dodd-Frank Act'') amended 19(b) of the
Exchange Act to provide that SROs' fee changes become immediately
effective on filing, the legislative history makes clear that while
Congress intended to streamline SROs' rule filing procedures, the
proposed change did not ``[diminish ]the SEC's authority to reject
an improperly filed rule, disapprove a rule that is not consistent
with the Exchange Act or [diminish] the applicable public notice and
comment period.'' See S. Rep 111-176, at 106 (2010). The Commission
therefore had every right to pursue a suspension and disapproval
order of prior rule filings that adopted or amended connectivity
fees that were in place prior to the migration if it had believed
any proposed fees in those rule filings were not consistent with the
Exchange Act. Additionally, the Commission did not request
additional data or discussion in connection with prior rule filings
regarding connectivity fees, as it has with respect to the proposed
fees in this filing (and its previous versions). In the absence of
such an order, the Exchange presumes that its pre-migration fees
were reasonable and consistent with the Exchange Act.
    \95\ See e.g., Nasdaq PHLX and ISE Rules, General Equity and
Options Rules, General 8. Phlx and ISE each charge a monthly fee of
$2,500 for each 1Gb connection, $10,000 for each 10Gb connection and
$15,000 for each 10Gb Ultra connection. See also Nasdaq Price List--
Trading Connectivity. Nasdaq charges a monthly fee of $7,500 for
each 10Gb direct connection to Nasdaq and $2,500 for each direct
connection that supports up to 1Gb. See also NYSE American Fee
Schedule, Section V.B, and Arca Fees and Charges, Co-Location Fees.
NYSE American and Arca each charge a monthly fee of $5,000 for each
1Gb circuit, $14,000 for each 10Gb circuit and $22,000 for each 10Gb
LX circuit.
    \96\ See e.g., Affiliated Exchange Fee Schedules, Physical
Connectivity Fees. For example, Cboe BZX, Cboe EDGX and C2 each
charge a monthly fee of $2,500 for each 1Gb connection and $7,500
for each 10Gb connection.
    \97\ For the same reason noted above, the Exchange presumes that
the fees of other exchanges, including its affiliates, are
reasonable, as required by the Exchange Act in the absence of any
suspension or disapproval order by the Commission providing
otherwise. The Exchange highlights the Exchange's affiliate C2
similarly underwent a migration of its trading platform to the same
trading platform to which the Exchange migrated, overhauling its
connectivity structure and adopting similar connectivity fees under
similar circumstances as those proposed herein. See Securities
Exchange Act Release No. 83201 (May 9, 2018), 83 FR 22546 (May 15,
2018) (SR-C2-2018-006). While the Commission had the opportunity to
suspend that proposed rule change and institute proceedings to
determine whether that proposed rule change should be approved or
disapproved if the Commission believed C2 failed to meet its burden
to demonstrate its proposal was reasonable, equitable and not
unfairly discriminatory, it declined to do so. Additionally, the
Exchange notes the Commission did not repeatedly request data
regarding the proposed C2 connectivity fees as it has in connection
with the Exchange's proposed migration fees.

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    Furthermore, in determining the proposed fee changes discussed
above, the Exchange reviewed the current competitive landscape,
considered the fees historically paid by market participants for
connectivity to the pre-migration system, and also assessed the impact
on market participants to ensure that the proposed fees would not
create an undue financial burden on any market participants, including
smaller market participants. Indeed, the Exchange received no comments
from any TPH suggesting they were unduly burdened by the proposed
changes described herein, which were first announced via Exchange
Notice nearly two months in advance of the migration (i.e., now nine
months ago), nor were any timely comment letters received by the
Commission by the comment period submission deadline of November 12,
2019.\98\ The Exchange also underscores the fact that no comment
letters were received in response to its Second, Third or Fifth
Proposed Rule Change, and that no individual market participant has
provided any written comments specifically suggesting that the Exchange
has failed to provide sufficient information in the Original Second,
Third, Fourth or Fifth Proposed Rule Change to meets its burden to
demonstrate its proposed fees are consistent with the requirements of
the Exchange Act.
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    \98\ See Exchange Notice ``Cboe Options Exchange Access and
Capacity Fee Schedule Changes Effective October 1, 2019 and November
1, 2019'' Reference ID C2019081900.
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    The Exchange also highlights that two market participants have in
fact expanded their connectivity footprint since the implementation of
the proposed fee changes. One of those market participants was a TPH
that had discussed terminating its membership from the Exchange
altogether prior to migration. However, after that TPH reviewed the
notice the Exchange issued describing the proposed post-migration fees,
the TPH relayed to the Exchange that it would instead remain a member
and add logical connectivity in light of the cost savings it expected
to realize due to the proposed changes. The Exchange believes this
further demonstrates competition within the market for exchange
connectivity, which as a result constrains fees the Exchange may charge
for that connectivity. Another TPH, that prior to migration acted only
as a proprietary trading firm, added the trading function as a Market-
Maker on the Exchange (which required the purchase of additional
trading permits and connectivity). The Exchange also notes that since
migration, one TPH terminated its membership with the Exchange but
retained its membership with 10 other SROs.\99\ The Exchange believes
the fact that it lost only one TPH in the past nine months demonstrates
the proposed fees are appropriate and reasonable and not unduly
burdensome. While the TPH that did terminate did not specify to the
Exchange why it ended its membership, if it had in fact determined that
the Exchange's proposed connectivity fees did not make business sense
for itself, for all the reasons discussed above, it was free to leave
the Exchange at no cost and retain its membership with other SROs and/
or pursue new memberships.
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    \99\ Two other Trading Permit Holders also terminated their
respective memberships in the first quarter of 2020. The Exchange
notes, however, that one TPH consolidated its membership with an
affiliate and another TPH no longer appears to be a registered
broker-dealer.
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    The proposed connectivity structure and corresponding fees, like
the pre-migration connectivity structure and fees, continue to provide
market participants flexibility with respect to how to connect to the
Exchange based on each market participants' respective business needs.
For example, the amount and type of physical and logical ports are
determined by factors relevant and specific to each market participant,
including its business model, costs of connectivity, how its business
is segmented and allocated and volume of messages sent to the Exchange.
Moreover, the Exchange notes that it does not have unlimited system
capacity to support an unlimited number of order and quote entry per
second. Accordingly, the proposed connectivity fees, and connectivity
structure are designed to encourage market participants to be efficient
with their respective physical and logical port usage. While the
Exchange has no way of predicting with certainty the amount or type of
connections market participants will in fact purchase, if any, the
Exchange anticipates that like today, some market participants will
continue to decline to connect and participate on the Exchange, some
will participate on the Exchange via indirect connectivity, some will
only purchase one physical connection and/or logical port connection,
and others will purchase multiple connections.
    In sum, the Exchange believes the proposed fees are reasonable and
reflect a competitive environment, as the Exchange seeks to amend its
access fees in connection with the migration of its technology
platform, while still attracting market participants to continue to be,
or become, connected to the Exchange.
Physical Ports
    The Exchange believes increasing the fee for the new 10 Gb Physical
Port is reasonable because unlike, the current 10 Gb Network Access
Ports, the new Physical Ports provides a connection through a latency
equalized infrastructure with faster switches and also allows access to
both unicast order entry and multicast market data with a single
physical connection. As discussed above, legacy Network Access Ports do
not permit market participants to receive unicast and multicast
connectivity. As such, in order to receive both connectivity types pre-
migration, a market participant needed to purchase and maintain at
least two 10 Gb Network Access Ports. The proposed Physical Ports not
only provide latency equalization (i.e., eliminate latency advantages
between market participants based on location) as compared to the
legacy ports, but also alleviate the need to pay for two physical ports
as a result of needing unicast and multicast connectivity. Accordingly,
market participants who historically had to purchase two separate ports
for each of multicast and unicast activity, will be able to purchase
only one port, and consequently pay lower fees overall. For example,
pre-migration if a TPH had two 10 Gb legacy Network Access Ports, one
of which received unicast traffic and the other of which received
multicast traffic, that TPH would have been assessed $10,000 per month
($5,000 per port). Under the proposed rule change, using the new
Physical Ports, that TPH has the option of utilizing one single port,
instead of two ports, to receive both unicast and multicast traffic,
therefore paying only $7,000 per month for a port that provides both
connectivity types. The Exchange notes that pre-migration,
approximately 50% of TPHs maintained two or more 10 Gb Network Access
Ports. While the Exchange has no way of predicting with certainty the
amount or type of connections market participants will in fact purchase
post-migration, the Exchange anticipated approximately 50% of the TPHs
with two or more 10 Gb Network Access Ports to reduce the number of 10
Gb Physical Ports that they purchase and expected the remaining 50% of
TPHs to maintain their current 10 Gb Physical Ports, but reduce the
number of 1 Gb Physical Ports. Particularly, pre-

migration, a number of TPHs maintained two 10 Gb Network Access Ports
to receive multicast data and two 1 Gb Network Access Ports for order
entry (unicast connectivity). As the new 10 Gb Physical Ports are able
to accommodate unicast connectivity (order entry), TPHs may choose to
eliminate their 1 Gb Network Access Ports and utilize the new 10 Gb
Physical Ports for both multicast and unicast connectivity. The
Exchange notes that in February 2020, approximately 78% of TPHs that
maintained a 1 Gb Network Access Port pre-migration, no longer
maintained a 1 Gb Physical Port. Additionally, as of February 2020,
approximately 44% reduced the quantity of 10 Gb Physical Ports they
maintained as compared to pre-migration.
    As discussed above, if a TPH deems a particular exchange as
charging excessive fees for connectivity, such market participants may
opt to terminate their connectivity arrangements with that exchange,
and adopt a possible range of alternative strategies, including routing
to the applicable exchange through another participant or market center
or taking that exchange's data indirectly. Accordingly, if the Exchange
charges excessive fees, it would stand to lose not only connectivity
revenues but also revenues associated with the execution of orders
routed to it, and, to the extent applicable, market data revenues. The
Exchange believes that this competitive dynamic imposes powerful
restraints on the ability of any exchange to charge unreasonable fees
for physical connectivity. The Exchange also notes that the proposal
represents an equitable allocation of reasonable dues, fees and other
charges as its fees for physical connectivity are reasonably
constrained by competitive alternatives, as discussed above. The
proposed amounts are in line with, and in some cases lower than, the
costs of physical connectivity at other Exchanges,\100\ including the
Cboe Affiliated Exchanges, which have the same connectivity
infrastructure the Exchange has migrated to and some of which also
offer exclusive products.\101\ The Exchange does not believe it is
unreasonable to assess fees that are in line with fees that have
already been established for the same physical ports used to connect to
the same connectivity infrastructure and common platform. The Exchange
believes the proposed Physical Port fees are equitable and not
unreasonably discriminatory as the connectivity pricing is associated
with relative usage of the various market participants (including
smaller participants) and the Exchange has not been presented with any
evidence to suggest its proposed fee changes would impose a barrier to
entry for participants, including smaller participants. In fact, as
noted above, the Exchange is unaware of any market participant that has
terminated direct connectivity solely as a result of the proposed fee
changes. The Exchange also believes increasing the fee for 10 Gb
Physical Ports and charging a higher fee as compared to the 1 Gb
Physical Port is equitable as the 1 Gb Physical Port is 1/10th the size
of the 10 Gb Physical Port and therefore does not offer access to many
of the products and services offered by the Exchange (e.g., ability to
receive certain market data products). Thus the value of the 1 Gb
alternative is lower than the value of the 10 Gb alternative, when
measured based on the type of Exchange access it offers. Moreover,
market participants that purchase 10 Gb Physical Ports utilize the most
bandwidth and therefore consume the most resources from the network. As
such, the Exchange believes the proposed fees for the 1 and 10 Gb
Physical Ports, respectively are reasonably and appropriately
allocated.
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    \100\ See e.g., Nasdaq PHLX and ISE Rules, General Equity and
Options Rules, General 8. Phlx and ISE each charge a monthly fee of
$2,500 for each 1Gb connection, $10,000 for each 10Gb connection and
$15,000 for each 10Gb Ultra connection. See also Nasdaq Price List--
Trading Connectivity. Nasdaq charges a monthly fee of $7,500 for
each 10Gb direct connection to Nasdaq and $2,500 for each direct
connection that supports up to 1Gb. See also NYSE American Fee
Schedule, Section V.B, and Arca Fees and Charges, Co-Location Fees.
NYSE American and Arca each charge a monthly fee of $5,000 for each
1Gb circuit, $14,000 for each 10Gb circuit and $22,000 for each 10Gb
LX circuit.
    \101\ See e.g., Affiliated Exchange Fee Schedules, Physical
Connectivity Fees. For example, Cboe BZX, Cboe EDGX and C2 each
charge a monthly fee of $2,500 for each 1Gb connection and $7,500
for each 10Gb connection.
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Data Port Fees
    The Exchange believes assessing the data port fee per data source,
instead of per port, is reasonable because it may allow for market
participants to maintain more ports at a lower cost and applies
uniformly to all market participants. The Exchange believes the
proposed increase is reasonable because, as noted above, market
participants may pay lower fees as a result of charging per data source
and not per data port. Indeed, while the Exchange has no way of
predicting with certainty the impact of the proposed changes, the
Exchange had anticipated approximately 76% of the 51 market
participants who pay data port fees to pay the same or lower fees upon
implementation of the proposed change. As of December 2019, 46 market
participants \102\ pay the proposed data port fees, of which
approximately 78% market participants are paying the same or lower fees
in connection with the proposed change. Monthly savings for firms
paying lower fees range from $500 to $6,000 per month. The Exchange
also anticipated that 19% of TPHs who pay data port fees would pay a
modest increase of only $500 per month. In December 2019, approximately
22% market participants paid higher fees, with the majority of those
market participants paying a modest monthly increase of $500 and only 3
firms paying either $1,000 or $1,500 more per month. Additionally, as
discussed above, the Exchange's affiliate C2 has the same fee which is
also assessed at the proposed rate and assessed by data source instead
of per port. The proposed name change is also appropriate in light of
the Exchange's proposed changes and may alleviate potential confusion.
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    \102\ The Exchange notes the reduction in market participants
that pay the data port fee is due to firm consolidations and
acquisitions.
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Logical Connectivity
Port Fees
    The Exchange believes it's reasonable to eliminate certain fees
associated with legacy options for connecting to the Exchange and to
replace them with fees associated with new options for connecting to
the Exchange that are similar to those offered at its Affiliated
Exchanges. In particular, the Exchange believes it's reasonable to no
longer assess fees for CMI and FIX Login IDs because the Login IDs were
retired and rendered obsolete upon migration and because the Exchange
is proposing to replace them with fees associated with the new logical
connectivity options. The Exchange believes that it is reasonable to
harmonize the Exchange's logical connectivity options and corresponding
connectivity fees now that the Exchange is on a common platform as its
Affiliated Exchanges. Additionally, the Exchange notes the proposed
fees are the same as, or in line with, the fees assessed on its
Affiliated Exchanges for similar connectivity.\103\ The proposed
logical connectivity fees are also equitable and not unfairly