[Federal Register Volume 85, Number 109 (Friday, June 5, 2020)]
[Notices]
[Pages 34670-34688]
[FR Doc No: 2020-12165]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88984; File No. SR-CBOE-2020-048]

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

June 1, 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 May 22, 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.
    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.\3\ 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 \4\ to be
approximately 1.75% lower than connectivity revenue pre-migration.\5\
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.\6\
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    \3\ As of October 7, 2019, market participants no longer have
the ability to connect to the old Exchange architecture.
    \4\ 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.
    \5\ 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 16.50% 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, it adopted a number
of corresponding temporary pricing changes, including waiving floor
Trading Permit fees. See Cboe Options Fees Schedule, as of May 1,
2020. The Exchange also notes that, 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 SEC Division of Trading and Markets (the
``Division'') issued fee filing guidance titled ``Staff Guidance on
SRO Rule Filings Relating to Fees'' (``Guidance'') issued on May 21,
2029. The non-rulemaking Guidance covers all aspects of a fee
filing, which the Exchange nonetheless has extensively addressed
throughout this filing.
    \6\ The Exchange initially filed the proposed fee changes on
October 1, 2019 (SR-CBOE-2019-077). On business date October 2,
2019, 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''). On
business date November 29, 2019, the Exchange withdrew the Original
Filing and submitted SR-CBOE-2019-111, See Securities Exchange Act
Release No. 87727 (December 12, 2019), 84 FR 69428, (December 18,
2019) (``Second Proposed Rule Change''). On January 28, 2020 the
Exchange withdrew that filing and submitted SR-CBOE-2020-005, See
Securities Exchange Act Release No. 88164 (February 11, 2020), 85 FR
8897, (February 18, 2020) (``Third Proposed Rule Change''). On March
27, 2020, the Exchange submitted SR-CBOE-2020-028, See Securities
Exchange Act Release No. 88586 (April 8, 2020), 85 FR 20773, (April
14, 2020) (``Fourth Proposed Rule Change''). On May 21, 2020, the
Exchange withdrew that filing and submitted this filing (``Fifth
Proposed Rule Change''). The Exchange refiled the Fifth Proposed
Rule Change on May 22, 2020 (SR-CBOE-2020-048) due to a technical
error.

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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.\7\ 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
\8\ 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.\9\ 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.\10\ Additionally, the new
infrastructure utilizes new and faster switches resulting in lower
overall latency.
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    \7\ 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.
    \8\ A market participant's ``cage'' is the cage within the data
center that contains a market participant's servers, switches and
cabling.
    \9\ 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.
    \10\ 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.\11\
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    \11\ 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.\12\
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    \12\ 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 \13\ 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.\14\ 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.\15\
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    \13\ 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.
    \14\ 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., $1,000 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).
    \15\ 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.\16\
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    \16\ 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 \17\ 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.\18\ 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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    \17\ 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.
    \18\ 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.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         CMI/FIX login Ids                                      BOE/FIX logical ports
                                       -----------------------------------------------------------------------------------------------------------------
                                                  Quotes                    Orders                                  Quotes/Orders
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bandwidth Limit per login.............  5,000 quotes/3 sec \19\..  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.\20\
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    \19\ 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.
    \20\ See Cboe BZX Options Exchange Fee Schedule, Options Logical
Port Fees.
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    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.\21\ 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:
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    \21\ 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.
    \22\ See Cboe Options Rule 1.1.
    \23\ 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.

------------------------------------------------------------------------
                  CMI/FIX login Ids
-----------------------------------------------------   BOE bulk ports
             Quotes                   Quotes \22\
------------------------------------------------------------------------
Bandwidth Limit.................  5,000 quotes/3 sec  225,000 quotes 3
                                   \23\.               sec.
Cost............................  $750 each.........  $1,500/$2,500/
                                                       $3,000 each.
Cost per Quote/Order [email protected] 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.\24\
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    \24\ See Cboe BZX Options Exchange Fee Schedule, Options Logical
Port Fees.
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    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.\25\
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    \25\ 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.
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    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.\26\
---------------------------------------------------------------------------

    \26\ 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.\27\ By way of background, under AVP,
if a TPH Affiliate \28\ or Appointed OFP \29\ (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.\30\ The proposed credits are as follows:
---------------------------------------------------------------------------

    \27\ 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.
    \28\ 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.
    \29\ 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.
    \30\ 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
     Market maker  affiliate access  credit       VIP    on monthly BOE
                                                  tier   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.\31\ 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'').\32\ 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:
---------------------------------------------------------------------------

    \31\ See Cboe Options Exchange Fees Schedule, Liquidity Provider
Sliding Scale Adjustment Table.
    \32\ 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 on   Percent credit on
        Market maker access credit              adjustment              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.\33\ 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.
---------------------------------------------------------------------------

    \33\ 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.\34\
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.\35\ 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.\36\
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.\37\ 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.\38\ 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.\39\
---------------------------------------------------------------------------

    \34\ See Cboe Options Rules 3.1(a)(iv)-(v).
    \35\ The fees were waived through September 2019 for the first
Market-Maker and Electronic Access GTH Trading Permits.
    \36\ See Cboe Options Fees Schedule.
    \37\ Id.
    \38\ Id.
    \39\ 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 \40\ 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.
---------------------------------------------------------------------------

    \40\ 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.\41\
---------------------------------------------------------------------------

    \41\ 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.\42\
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.
---------------------------------------------------------------------------

    \42\ 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.\43\ 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.\44\
---------------------------------------------------------------------------

    \43\ See Cboe Options Rule 5.50 (Appointment of Market-Makers).
    \44\ 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.\45\ 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:\46\
---------------------------------------------------------------------------

    \45\ See Cboe Options Rule 5.50(a).
    \46\ 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: \47\
---------------------------------------------------------------------------

    \47\ 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.\48\ The criteria and corresponding percentage rebates are noted
below.\49\
---------------------------------------------------------------------------

    \48\ 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.
    \49\ 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
                                                                (%)
------------------------------------------------------------------------
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.\50\ 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.\51\
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.
---------------------------------------------------------------------------

    \50\ 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.
    \51\ 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.\52\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \53\ 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,\54\ 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) \55\ requirement that the
rules of an exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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    \52\ 15 U.S.C. 78f(b).
    \53\ 15 U.S.C. 78f(b)(5).
    \54\ 15 U.S.C. 78f(b)(4).
    \55\ 15 U.S.C. 78f(b)(5).
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    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 aligns 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. Indeed, there are currently 16 registered options
exchanges that trade options. Based on publicly available information,
no single options exchange has more than 21% of the market share.\56\
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. 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.\57\ Indeed, the Exchange is unaware of any one options exchange
whose membership includes every registered broker-dealer.\58\ The rule
structure for options exchanges are, in fact, 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. Gone are the days when the retail brokerage firms (the
Fidelity's, the Schwab's, the eTrade's) 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. 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. Indeed, a number of firms currently do not
participate on the Exchange or participate on the Exchange though
sponsored access arrangements rather than by becoming a member.
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    \56\ See Cboe Global Markets U.S. Options Market Volume Summary
(March 26, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
    \57\ 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.
    \58\ The Exchange further notes that even the number of members
between the Exchange and its 3 other options exchange affiliates
vary.
---------------------------------------------------------------------------

    Additionally, the Exchange notes that non-TPHs such as Service
Bureaus and Extranets resell Cboe Options connectivity.\59\ This
indirect connectivity is another viable alternative that is already
being used by non-TPHs, which further constrains the price that the
Exchange is able to charge for connectivity to its Exchange.
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.\60\ Rather, the Exchange believes the transitions demonstrate
that indirect connectivity is in fact a viable option for market
participants, therefore reflecting a competitive environment. 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.
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    \59\ 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 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. 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.
    \60\ 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.
---------------------------------------------------------------------------

    Additionally, pre-migration, in August 2019, the Exchange had 97
members (TPH organizations), of which nearly half connected indirectly
to the Exchange. Similarly, in December 2019, the Exchange had 97
members, of which nearly half of the participants connected indirectly
to the Exchange.\61\ 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.\62\ 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.\63\ 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).\64\ 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.
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    \61\ As of April 30, 2020, the Exchange had 94 TPH
organizations.
    \62\ 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.
    \63\ 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/.
    \64\ The Exchange notes that it does not know how many, and
which kind of, connections each TPH that indirectly connects to the
Exchange has.
---------------------------------------------------------------------------

    Accordingly, 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.
    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.'' \65\ 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 21% provides the Exchange with anti-competitive pricing
power. 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.
---------------------------------------------------------------------------

    \65\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------

    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.\66\ 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 Over-the-Counter (OTC) markets.
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, singly-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'').\67\ 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. In connection with a recently proposed
amendment to the National Market System Plan Governing the Consolidated
Audit Trail (``CAT NMS Plan''),\68\ 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.\69\ 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.''
\70\ 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.\71\
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.\72\ 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.
---------------------------------------------------------------------------

    \66\ 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.
    \67\ 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.
    \68\ See Securities Exchange Act Release No. 86901 (September 9,
2019), 84 FR 48458 (September 13, 2019) (File No. S7-13-19).
    \69\ Id.
    \70\ Id.
    \71\ Id.
    \72\ 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.
---------------------------------------------------------------------------

    For all the reasons discussed above and in this filing, the
Exchange believes its proposed fees are reasonable as 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. 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,\73\ including its
own affiliated exchanges which have the same connectivity
infrastructure the Exchange has migrated to.\74\
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    \73\ 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.
    \74\ 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.
---------------------------------------------------------------------------

    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 seven
months ago), nor were any timely comment letters received by the
Commission by the comment period submission deadline of November 12,
2019.\75\ The Exchange also underscores the fact that no comment
letters were received in response to either its Second Proposed Rule
Change or Third 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
Second, Third or Fourth Proposed Rule Change to meets its burden to
demonstrate its proposed fees are consistent with the requirements of
the Exchange Act.
---------------------------------------------------------------------------

    \75\ See Exchange Notice ``Cboe Options Exchange Access and
Capacity Fee Schedule Changes Effective October 1, 2019 and November
1, 2019'' Reference ID C2019081900.
---------------------------------------------------------------------------

    The proposed connectivity structure and corresponding fees, like
the pre-migration connectivity structure and fees, continues 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,\76\ including the
Cboe Affiliated Exchanges, which have the same connectivity
infrastructure the Exchange has migrated to and some of which also
offer exclusive products.\77\ 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.
---------------------------------------------------------------------------

    \76\ 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.
    \77\ 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.
---------------------------------------------------------------------------

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 \78\ 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.
---------------------------------------------------------------------------

    \78\ The Exchange notes the reduction in market participants
that pay the data port fee is due to firm consolidations and
acquisitions.
---------------------------------------------------------------------------

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.\79\ The proposed logical
connectivity fees are also equitable and not unfairly discriminatory
because the Exchange will apply the same fees to all market
participants that use the same respective connectivity options.
---------------------------------------------------------------------------

    \79\ See Affiliated Exchange Fee Schedules, Logical Port Fees.
---------------------------------------------------------------------------

    The Exchange believes the proposed Logical Port fees are reasonable
as it is the same fee for Drop Ports and the first five BOE/FIX Ports
that is assessed for CMI and FIX Logins, which the Exchange is
eliminating in lieu of logical ports. Additionally, while the proposed
ports will be assessed the same monthly fees as current CMI/FIX Login
IDs, the proposed logical ports provide for significantly more message
traffic. Specifically, the proposed BOE/FIX Logical Ports will provide
for 3 times the amount of quoting \80\ capacity and approximately 165
times order entry capacity. Similarly, the Exchange believes the
proposed BOE Bulk Port fees are reasonable because while the fees are
higher than the CMI and FIX Login Id fees and the proposed Logical Port
fees, BOE Bulk Ports offer significantly more bandwidth capacity than
both CMI and FIX Login Ids and Logical Ports. Particularly, a single
BOE Bulk Port offers 45 times the amount of quoting bandwidth than CMI/
FIX Login Ids \81\ and 5 times the amount of quoting bandwidth than
Logical Ports will offer. Additionally, the Exchange believes that its
fees for logical connectivity are reasonable, equitable, and not
unfairly discriminatory as they are designed to ensure that firms that
use the most capacity pay for that capacity, rather than placing that
burden on market participants that have more modest needs. Although the
Exchange charges a ``per port'' fee for logical connectivity, it notes
that this fee is in effect a capacity fee as each FIX, BOE or BOE Bulk
port used for order/quote entry supports a specified capacity (i.e.,
messages per second) in the matching engine, and firms purchase
additional logical ports when they require more capacity due to their
business needs.
---------------------------------------------------------------------------

    \80\ Based on the purchase of a single Market-Maker Trading
Permit or Bandwidth Packet.
    \81\ Based on the purchase of a single Market-Maker Trading
Permit or Bandwidth Packet.
---------------------------------------------------------------------------

    An obvious driver for a market participant's decision to purchase
multiple ports will be their desire to send or receive additional
levels of message traffic in some manner, either by increasing their
total amount of message capacity available, or by segregating order
flow for different trading desks and clients to avoid latency sensitive
applications from competing for a single thread of resources. For
example, a TPH may purchase one or more ports for its market making
business based on the amount of message traffic needed to support that
business, and then purchase separate ports for proprietary trading or
customer facing businesses so that those businesses have their own
distinct connection, allowing the firm to send multiple messages into
the Exchange's trading system in parallel rather than sequentially.
Some TPHs that provide direct market access to their customers may also
choose to purchase separate ports for different clients as a service
for latency sensitive customers that desire the lowest possible latency
to improve trading performance. Thus, while a smaller TPH that demands
more limited message traffic may connect through a service bureau or
other service provider, or may choose to purchase one or two logical
ports that are billed at a rate of $750 per month each, a larger market
participant with a substantial and diversified U.S. options business
may opt to purchase additional ports to support both the volume and
types of activity that they conduct on the Exchange. While the Exchange
has no way of predicting with certainty the amount or type of logical
ports market participants will in fact purchase post-migration, the
Exchange anticipated approximately 16% of TPHs to purchase one to two
logical ports, and approximately 22% of TPHs to not purchase any
logical ports. In December 2019, 13% of TPHs purchased one to two
logical ports and 27% have not purchased any logical ports. At the same
time, market participants that desire more total capacity due to their
business needs, or that wish to segregate order flow by purchasing
separate capacity allocations to reduce latency or for other
operational reasons, would be permitted to choose to purchase such
additional capacity at the same marginal cost. The Exchange believes
the proposal to assess an additional Logical and BOE Bulk port fee for
incremental usage per logical port is reasonable because the proposed
fees are modestly higher than the

proposed Logical Port and BOE Bulk fees and encourage users to mitigate
message traffic as necessary. The Exchange notes one of its Affiliated
Exchanges has similar implied port fees.\82\
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    \82\ See e.g., Cboe C2 Options Exchange Fees Schedule, Logical
Connectivity Fees.
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    In sum, the Exchange believes that the proposed BOE/FIX Logical
Port and BOE Bulk Port fees are appropriate as these fees would ensure
that market participants continue to pay for the amount of capacity
that they request, and the market participants that pay the most are
the ones that demand the most resources from the Exchange. The Exchange
also believes that its logical connectivity fees are aligned with the
goals of the Commission in facilitating a competitive market for all
firms that trade on the Exchange and of ensuring that critical market
infrastructure has ``levels of capacity, integrity, resiliency,
availability, and security adequate to maintain their operational
capability and promote the maintenance of fair and orderly markets.''
\83\
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    \83\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72251 (December 5, 2014) (File No. S7-01-13)
(Regulation SCI Adopting Release).
---------------------------------------------------------------------------

    The Exchange believes waiving the FIX/BOE Logical Port fee for one
FIX Logical Port used to access PULSe and Silexx (for FLEX Trading) is
reasonable because it will allow all TPHs using PULSe and Silexx to
avoid having to pay a fee that they would otherwise have to pay. The
waiver is equitable and not unfairly discriminatory because TPHs using
PULSe are already subject to a monthly fee for the PULSe Workstation,
which the Exchange views as inclusive of fees to access the Exchange.
Moreover, while PULSe users today do not require a FIX/CMI Login Id,
post-migration, due to changes to the connectivity infrastructure,
PULSe users will be required to maintain a FIX Logical Port and as such
incur a fee they previously would not have been subject to. Similarly,
the Exchange believes that the waiver for Silexx (for FLEX trading)
will encourage TPHs to transact business using FLEX Options using the
new Silexx System and encourage trading of FLEX Options. Additionally,
the Exchange notes that it currently waives the Login Id fees for Login
IDs used to access the CFLEX system.
    The Exchange believes its proposed fee for Purge Ports is
reasonable as it is also in line with the amount assessed for purge
ports offered by its Affiliated Exchanges, as well as other
exchanges.\84\ Moreover, the Exchange believes that offering purge port
functionality at the Exchange level promotes robust risk management
across the industry, and thereby facilitates investor protection. Some
market participants, and, in particular, larger firms, could build
similar risk functionality on their trading systems that permit the
flexible cancellation of orders entered on the Exchange. Offering
Exchange level protections however, ensures that such functionality is
widely available to all firms, including smaller firms that may
otherwise not be willing to incur the costs and development work
necessary to support their own customized mass cancel functionality.
The Exchange operates in a highly competitive market in which exchanges
offer connectivity and related services as a means to facilitate the
trading activities of TPHs and other participants. As the proposed
Purge Ports provide voluntary risk management functionality, excessive
fees would simply serve to reduce demand for this optional product. The
Exchange also believes that the proposed Purge Port fees are not
unfairly discriminatory because they will apply uniformly to all TPHs
that choose to use dedicated Purge Ports. The proposed Purge Ports are
completely voluntary and, as they relate solely to optional risk
management functionality, no TPH is required or under any regulatory
obligation to utilize them. The Exchange believes that adopting
separate fees for these ports ensures that the associated costs are
borne exclusively by TPHs that determine to use them based on their
business needs, including Market-Makers or similarly situated market
participants. Similar to Purge Ports, Spin and GRP Ports are optional
products that provide an alternative means for market participants to
receive multicast data and request and receive a retransmission of such
data. As such excessive fees would simply serve to reduce demand for
these products, which TPHs are under no regulatory obligation to
utilize. All TPHs that voluntarily select these service options (i.e.,
Purge Ports, Spin Ports or GRP Ports) will be charged the same amount
for the same respective services. All TPHs have the option to select
any connectivity option, and there is no differentiation among TPHs
with regard to the fees charged for the services offered by the
Exchange.
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    \84\ See Affiliated Exchange Fee Schedules, Logical Port Fees.
See also, Nasdaq ISE Pricing Schedule, Section 7(C). ISE charges a
fee of $1,100 per month for SQF Purge Ports.
---------------------------------------------------------------------------

Access Credits
    The Exchange believes the proposal to adopt credits for BOE Bulk
Ports is reasonable, equitable and not unfairly discriminatory because
it provides an opportunity for TPHs to pay lower fees for logical
connectivity. The Exchange notes that the proposed credits are in lieu
of the current credits that Market-Makers are eligible to receive today
for Trading Permits fees. Although only Market-Makers may receive the
proposed BOE Bulk Port credits, Market-Makers are valuable market
participants that provide liquidity in the marketplace and incur costs
that other market participants do not incur. For example, Market-Makers
have a number of obligations, including quoting obligations and fees
associated with appointments that other market participants do not
have. The Exchange also believes that the proposals provide incremental
incentives for TPHs to strive for the higher tier levels, which provide
increasingly higher benefits for satisfying increasingly more stringent
criteria, including criteria to provide more liquidity to the Exchange.
The Exchange believes the value of the proposed credits is commensurate
with the difficulty to achieve the corresponding tier thresholds of
each program.
    First, the Exchange believes the proposed BOE Bulk Port fee credits
provided under AVP will incentivize the routing of orders to the
Exchange by TPHs that have both Market-Maker and agency operations, as
well as incent Market-Makers to continue to provide critical liquidity
notwithstanding the costs incurred with being a Market-Maker. More
specifically, in the options industry, many options orders are routed
by consolidators, which are firms that have both order router and
Market-Maker operations. The Exchange is aware not only of the
importance of providing credits on the order routing side in order to
encourage the submission of orders, but also of the operations costs on
the Market-Maker side. The Exchange believes the proposed change to AVP
continues to allow the Exchange to provide relief to the Market-Maker
side via the credits, albeit credits on BOE Bulk Port fees instead of
Trading Permit fees. Additionally, the proposed credits may incentivize
and attract more volume and liquidity to the Exchange, which will
benefit all Exchange participants through increased opportunities to
trade as well as enhancing price discovery. While the Exchange has no
way of predicting with certainty how many and which TPHs will satisfy
the required

criteria to receive the credits, the Exchange had anticipated
approximately two TPHs (out of approximately 5 TPHs that are eligible
for AVP) to reach VIP Tiers 4 or 5 and consequently earn the BOE Bulk
Port fee credits for their respective Market-Maker affiliate. For the
month of October 2019, two TPHs received access credits under Tier 5
and no TPHs received credits under Tier 4. The Exchange notes that it
believes its reasonable, equitable and not unfairly discriminatory to
no longer provider access credits for Market-Makers whose affiliates
achieve VIP Tiers 2 or 3 as the Exchange has adopted another
opportunity for all Market-Makers, not just Market-Makers that are part
of a consolidator, to receive credits on BOE Bulk Port fees (i.e.,
credits available via the proposed Market-Maker Access Credit Program).
More specifically, limiting the credits under AVP to the top two tiers
enables the Exchange to provide further credits under the new Market-
Maker Access Credit Program. Furthermore, the Exchange notes that it is
not required to provide any credits at any tier level.
    The Exchange believes the proposed BOE Bulk Port fee credits
available for TPHs that reach certain Performance Tiers under the
Liquidity Provider Sliding Scale Adjustment Table is reasonable as the
credits provide for reduced connectivity costs for those Market-Makers
that reach the required thresholds. The Exchange believe it's
reasonable, equitable and not unfairly discriminatory to provide
credits to those Market-Makers that primarily provide and post
liquidity to the Exchange, as the Exchange wants to continue to
encourage Market-Makers with significant Make Rates to continue to
participate on the Exchange and add liquidity. Greater liquidity
benefits all market participants by providing more trading
opportunities and tighter spreads.
    Moreover, the Exchange notes that Market-Makers with a high Make
Rate percentage generally require higher amounts of capacity than other
Market-Makers. Particularly, Market-Makers with high Make Rates are
generally streaming significantly more quotes than those with lower
Make Rates. As such, Market-Makers with high Make Rates may incur more
costs than other Market-Makers as they may need to purchase multiple
BOE Bulk Ports in order to accommodate their capacity needs. The
Exchange believes the proposed credits for BOE Bulk Ports encourages
Market-Makers to continue to provide liquidity for the Exchange,
notwithstanding the costs incurred by purchasing multiple ports.
Particularly, the proposal is intended to mitigate the 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).
While the Exchange cannot predict with certainty which Market-Makers
will reach Performance Tiers 4 and 5 each month, based on historical
performance it anticipated approximately 10 Market-Makers would achieve
Tiers 4 or 5. In October 2019, 12 Market-Makers achieved Tiers 4 or 5.
Lastly, the Exchange notes that it is common practice among options
exchanges to differentiate fees for adding liquidity and fees for
removing liquidity.\85\
---------------------------------------------------------------------------

    \85\ See e.g., MIAX Options Fees Schedule, Section 1(a), Market
Maker Transaction Fees.
---------------------------------------------------------------------------

Bandwidth Packets and CMI CAS Server Fees
    The Exchange believes it's reasonable to eliminate Bandwidth Packet
fees and the CMI CAS Server fee because TPHs will not pay fees for
these connectivity options and because Bandwidth Packets and CAS
Servers have been retired and rendered obsolete as part of the
migration. The Exchange believes that even though it will be
discontinuing Bandwidth Packets, the proposed incremental pricing for
Logical Ports and BOE Bulk Ports will continue to encourage users to
mitigate message traffic. The proposed change is equitable and not
unfairly discriminatory because it will apply uniformly to all TPHs.
Access Fees
    The Exchange believes the restructuring of its Trading Permits is
reasonable in light of the changes to the Exchange's connectivity
infrastructure in connection with the migration and the resulting
separation of bandwidth allowance, logins and appointment costs from
each Trading Permit. The Exchange also believes that it is reasonable
to harmonize the Exchange's Trading Permit structure and corresponding
connectivity options to more closely align with the structures offered
at its Affiliated Exchanges once the Exchange is on a common platform
as its Affiliated Exchanges.\86\ The proposed Trading Permit structure
and corresponding fees are also in line with the structure and fees
provided by other exchanges. The proposed Trading Permit fees are also
equitable and not unfairly discriminatory because the Exchange will
apply the same fees to all market participants that use the same type
and number of Trading Permits.
---------------------------------------------------------------------------

    \86\ For example, the Exchange's affiliate, C2, similarly
provides for Trading Permits that are not tied to connectivity, and
similar physical and logical port options at similar pricings. See
Cboe C2 Options Exchange Fees Schedule. Physical connectivity and
logical connectivity are also not tied to any type of permits on the
Exchange's other options exchange affiliates.
---------------------------------------------------------------------------

    With respect to electronic Trading Permits, the Exchange notes that
TPHs previously requested multiple Trading Permits because of
bandwidth, login or appointment cost needs. As described above, in
connection with migration, bandwidth, logins and appointment costs are
no longer tied to Trading Permits or Bandwidth Packets and as such, the
need to hold multiple permits and/or Bandwidth Packets is obsolete. As
such, the Exchange believes the structure to require only one of each
type of applicable electronic Trading Permit is appropriate. Moreover,
the Exchange believes offering separate marketing making permits for
off-floor and on-floor Market-Makers provides for a cleaner, more
streamlined approach to trading permits and corresponding fees. Other
exchanges similarly provide separate and distinct fees for Market-
Makers that operate on-floor vs off-floor and their corresponding fees
are similar to those proposed by the Exchange.\87\
---------------------------------------------------------------------------

    \87\ See e.g., PHLX Section 8A, Permit and Registration Fees.
See also, BOX Options Fee Schedule, Section IX Participant Fees;
NYSE American Options Fees Schedule, Section III(A) Monthly ATP Fees
and NYSE Arca Options Fees and Charges, OTP Trading Participant
Rights. For similar Trading Floor Permits for Floor Market Makers,
Nasdaq PHLX charges $6,000; BOX charges up to $5,500 for 3
registered permits in addition to a $1,500 Participant Fee, NYSE
Arca charges up to $6,000; and NYSE American charges up to $8,000.
---------------------------------------------------------------------------

    The Exchange believes the proposed fee for its MM EAP Trading
Permits is reasonable as it is the same fee it assess today for Market-
Maker Trading Permits (i.e., $5,000 per month per permit).
Additionally, the proposed fee is in line with, and in some cases even
lower than, the amounts assessed for similar access fees at other
exchanges, including its affiliate C2.\88\ The Exchange believes the
proposed EAP fee is also reasonable, and in line with the fees assessed
by other Exchanges for non-Market-Maker electronic access.\89\ The
Exchange notes that while the Trading Permit fee is increasing, TPHs
overall cost to access the Exchange may be reduced in light of the fact
that a TPH no longer must purchase multiple

Trading Permits, Bandwidth Packets and Login Ids in order to receive
sufficient bandwidth and logins to meet their respective business
needs. To illustrate the value of the new connectivity infrastructure,
the Exchange notes that the cost that would be incurred by a TPH today
in order to receive the same amount of order capacity that will be
provided by a single Logical Port post-migration (i.e., 5,000 orders
per second), is approximately 98% higher than the cost for the same
capacity post-migration. The following examples further demonstrate
potential cost savings/value added for an EAP holder with modest
capacity needs and an EAP holder with larger capacity needs:
---------------------------------------------------------------------------

    \88\ See e.g., Cboe C2 Options Exchange Fees Schedule. See also,
NYSE Arca Options Fees and Charges, General Options and Trading
Permit (OTP) Fees, which assesses up to $6,000 per Market Maker OTP
and NYSE American Options Fee Schedule, Section III. Monthly ATP
Fees, which assess up to $8,000 per Market Maker ATP. See also, PHLX
Section 8A, Permit and Registration Fees, which assesses up to
$4,000 per Market Maker Permit.
    \89\ See e.g., PHLX Section 8A, Permit and Registration Fees,
which assesses up to $4,000 per Permit for all member and member
organizations other than Floor Specialists and Market Makers.

------------------------------------------------------------------------
                                      Current fee     Post-migration fee