[Federal Register Volume 87, Number 97 (Thursday, May 19, 2022)]
[Notices]
[Pages 30538-30542]
[FR Doc No: 2022-10739]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94914; File No. SR-CboeEDGX-2022-028]

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

May 13, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 3, 2022, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

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

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to update its Fee Schedule for its equity
options platform (``EDGX Options'') to (i) offer a free trial during
the months of May, June and July 2022 for an ad-hoc request of three
(3) historical months of Intraday Open-Close historical data to all
EDGX Options Members and non-Members who have never before subscribed
to the Intraday Open-Close historical files and (ii) adopt fees for the
external distribution of products derived from Open-Close Data,
effective May 2, 2022.\3\
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    \3\ The Exchange initially filed the proposed fee changes on May
2, 2022 (SR-CboeEDGX-2022-027). On May 3, 2022, the Exchange
withdrew that filing and submitted this filing.
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    By way of background, the Exchange currently offers End-of-Day
(``EOD'') and Intraday Open-Close Data (collectively, ``Open-Close
Data''). EOD Open-Close Data is an end-of-day volume summary of trading
activity on the Exchange at the option level by origin (customer,
professional customer, broker-dealer, and market maker), side of the
market (buy or sell), price, and transaction type (opening or closing).
The customer and professional customer volume is further broken down
into trade size buckets (less than 100 contracts, 100-199 contracts,
greater than 199 contracts). The Open-Close Data is proprietary EDGX
Options trade data and does not

include trade data from any other exchange. It is also a historical
data product and not a real-time data feed. The Exchange also offers
Intraday Open-Close Data, which provides similar information to that of
Open-Close Data but is produced and updated every 10 minutes during the
trading day. Data is captured in ``snapshots'' taken every 10 minutes
throughout the trading day and is available to subscribers within five
minutes of the conclusion of each 10-minute period.\4\ The Intraday
Open-Close Data provides a volume summary of trading activity on the
Exchange at the option level by origin (customer, professional
customer, broker-dealer, and market maker), side of the market (buy or
sell), and transaction type (opening or closing). The customer and
professional customer volume are further broken down into trade size
buckets (less than 100 contracts, 100-199 contracts, greater than 199
contracts). The Intraday Open-Close Data is also proprietary EDGX
Options trade data and does not include trade data from any other
exchange.
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    \4\ For example, subscribers to the intraday product will
receive the first calculation of intraday data by approximately 9:42
a.m. ET, which represents data captured from 9:30 a.m. to 9:40 a.m.
Subscribers will receive the next update at 9:52 a.m., representing
the data previously provided together with data captured from 9:40
a.m. through 9:50 a.m., and so forth. Each update will represent the
aggregate data captured from the current ``snapshot'' and all
previous ``snapshots.''
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    Cboe LiveVol, LLC (``LiveVol''), a wholly owned subsidiary of the
Exchange's parent company, Cboe Global Markets, Inc., makes the Open-
Close Data available for purchase to Members and non-Members on the
LiveVol DataShop website (datashop.cboe.com). Customers may currently
purchase Open-Close Data on a subscription basis (monthly or annually)
or by ad hoc request for a specified month (e.g., request for Intraday
Open-Close Data for month of January 2022).
    Open-Close Data is subject to direct competition from similar end-
of-day and intraday options trading summaries offered by several other
options exchanges.\5\ All of these exchanges offer essentially the same
end-of-day and intraday options trading summary information.
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    \5\ These substitute products are: Nasdaq PHLX Options Trade
Outline, Nasdaq Options Trade Outline, ISE Trade Profile, GEMX Trade
Profile data; open-close data from Cboe Options, C2, and BZX; and
Open Close Reports from MIAX Options, Pearl, and Emerald.
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Free Trial
    The Exchange first seeks to adopt a free trial for historical ad
hoc requests for Intraday Open-Close Data for new purchasers.
Currently, ad hoc requests for historical Intraday Open-Close Data are
available to all customers at the same price and in the same manner.
The current charge for this historical Intraday Open-Close Data
covering all of the Exchange's securities (Equities, Indexes & ETF's)
is $500 per month. The Exchange now proposes to adopt a free trial
available during the months of May, June and July 2022 to provide a
total up to three (3) historical months of Intraday Open-Close Data to
any Member or non-Member that has not previously subscribed to this
offering.\6\ The Exchange notes that it previously offered this free
trial period last year for the months of June and July 2021.\7\ The
Exchange believes bringing back the proposed trial will again serve as
an incentive for new users who have never purchased Intraday Open-Close
historical data to start purchasing Intraday Open-Close historical
data. Particularly, the Exchange believes it will give potential
subscribers the ability to use and test the data offering before
signing up for additional months. The Exchange also notes another
exchange offers a free trial for new subscribers of a similar data
product.\8\ Lastly, the purchase of Intraday Open-Close historical data
is discretionary and not compulsory.
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    \6\ For example, if a Member or non-Member that has never made
an ad-hoc request for a specified month of Intraday Open-Close
historical data wishes to purchase Intraday Open-Close Data for the
months of January, February and March 2022 during the month of June
2022, the historical files for those months would be provided free
of charge. If a new user wishes to purchase Intraday Open-Close
historical data for the months of January, February, March and April
2022 during the month of June 2022, then the data for January,
February and March 2022 would be provided free of charge, and the
new user would be charged $500 for the April 2022 historical file.
    \7\ The Exchange notes it inadvertently never eliminated the
obsolete rule text language from the Fees Schedule. The Exchange
proposes to update the text to conform to the proposed fee change.
    \8\ See Nasdaq ISE, Options 7 Pricing Schedule, Section 10A.,
Nasdaq ISE Open/Close Trade Profile End of Day.
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External Distribution of Derived Data
    The external distribution of Open-Close Data or any product derived
from such data is not currently permitted. The Exchange proposes to
remove that prohibition and allow vendors to distribute ``Derived
Data'' based on Open-Close Data. ``Derived Data'' is pricing data or
other data that (i) is created in whole or in part from Exchange Data,
(ii) is not an index or financial product, and (iii) cannot be readily
reverse-engineered to recreate Exchange Data or used to create other
data that is a reasonable facsimile or substitute for Exchange Data.\9\
Derived Data may be created by Distributors for a number of different
purposes, as determined by the Distributor. The Exchange believes
allowing market data vendors to identify, develop, and sell derived
market data products, enables them to harness the power of the
competitive marketplace to promote innovation.
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    \9\ ``Derived Data'' is not currently a defined term in the Cboe
EDGX Options Fees Schedule. The Exchange proposes to add the
definition to the Notes section of the LiveVol Fees table for
clarity.
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    The Exchange proposes to adopt a fee of $5,000 per month to allow
the unlimited external distribution of Derived Data from Open-Close
Data.\10\ The fee charged to distribute the Derived Data will be
constrained by potential competition, as any exchange with an options
trading product would be able to submit an immediately-effective fee
filing to allow redistribution, most likely without needing to modify
the underlying product in any way, thereby subjecting the proposed fee
to market competition. Moreover, the Exchange notes at least one other
Exchange currently allows, and charges for, external distribution of
derived data based on similar open-close data.\11\
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    \10\ The External Distribution Fee for Derived Open-Close Data
will be in addition to fees for the underlying data. For example,
external distribution of data derived from the Intraday product will
be $1,000 per month (the monthly subscription fee), plus the
proposed $5,000 per month External Distribution fee.
    \11\ See Nasdaq PHLX, Options 7 Pricing Schedule, Photo
Historical Data, External Distribution.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\12\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the

proposed rule change is consistent with the Section 6(b)(5) \14\
requirement that the rules of an exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
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    In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data. The Exchange believes the proposed fee
changes will further broaden the availability of U.S. option market
data to investors consistent with the principles of Regulation NMS.
Open-Close Data is designed to help investors understand underlying
market trends to improve the quality of investment decisions. Indeed,
subscribers to the data may be able to enhance their ability to analyze
option trade and volume data and create and test trading models and
analytical strategies. The Exchange believes Open-Close Data provides a
valuable tool that subscribers can use to gain comprehensive insight
into the trading activity in a particular series, but also emphasizes
such data is not necessary for trading and as noted above, is entirely
optional. Moreover, several other exchanges offer a similar data
product which offer same type of data content through end-of-day or
intraday reports.\15\
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    \15\ See supra note 4.
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    The Exchange also operates in a highly competitive environment.
Indeed, there are currently 16 registered options exchanges that trade
options. Based on publicly available information, no single options
exchange has more than 16% of the market share.\16\ The Commission has
repeatedly expressed its preference for competition over regulatory
intervention in determining prices, products, and services in the
securities markets. Particularly, in Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and, also, recognized that current regulation of the
market system ``has been remarkably successful in promoting market
competition in its broader forms that are most important to investors
and listed companies.'' \17\ Making similar data products available to
market participants fosters competition in the marketplace, and
constrains the ability of exchanges to charge supracompetitive [sic]
fees. In the event that a market participant views one exchange's data
product as more or less attractive than the competition they can and do
switch between similar products. The proposed fees are a result of the
competitive environment, as the Exchange seeks to adopt fees to attract
purchasers of historical Intraday Open-Close Data, as well as attract
Distributors for derived data of its Open-Close Data.
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    \16\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (April 29, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
    \17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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    The Exchange believes that the proposed free trial for any Member
or non-Member who has not previously purchased Intraday Open-Close
historical data is reasonable because such users would not be subject
to fees for up to 3 months' worth of Intraday Open-Close historical
data. The Exchange believes the proposed free trial is also reasonable
as it will give potential subscribers the ability to use and test the
Intraday Open-Close historical data prior to purchasing additional
months and will therefore encourage and promote new users to purchase
the Intraday Open-Close historical data. The Exchange believes that the
proposed discount is equitable and not unfairly discriminatory because
it will apply equally to all Members and non-Members who have not
previously purchased Intraday Open-Close historical data. Also as noted
above, another exchange offers a free trial to new users for a similar
data product \18\ and the Exchange itself previously offered a similar
free trial.\19\ Lastly, the purchase of this data product is
discretionary and not compulsory.
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    \18\ See Nasdaq ISE, Options 7 Pricing Schedule, Section 10A.,
Nasdaq ISE Open/Close Trade Profile End of Day.
    \19\ See Securities Exchange Act Release No. 92167 (June 14,
2021), 86 FR 33439 (June 24, 2021) (SR-CboeEDGX-2021-028).
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    Next, the Exchange notes that the proposal to allow the external
distribution of derived data is subject to competition as discussed
above, and also introduces a new category of market participant for
Open-Close Data--market data vendors--into the equation. Currently,
Open-Close data is not available for redistribution, in either native
form or through Derived Data. This proposal will create a new market
for the sale of Derived Data from the Exchange's Open-Close Data
products to the general investing public. This is itself evidence of
the competitive environment for Open-Close and its substitutes, as it
is exactly the type of innovation one would expect to see in a
competitive market. It will also spur further innovation by challenging
market data vendors to create new and innovative Derived Data products.
Any exchange that wishes to allow distribution of a Derived Data
product based on options trading information would be able to do so
with an immediately effective fee filing similar to this proposal, most
likely without requiring any technological enhancement to the
underlying product. Indeed, as discussed, another Exchange already
allows, and charges for, external distribution of derived data based on
similar open-close data.\20\
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    \20\ See Nasdaq PHLX, Options 7 Pricing Schedule, Photo
Historical Data, External Distribution.
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    Allowing the redistribution of Derived Data, but not the underlying
information, to the general investing public is an equitable allocation
of reasonable dues, fees and other charges because it is the most
efficient mechanism for widespread delivery of market sentiment
information. The proposal is designed to promote the dissemination of a
variety of analytical insights--previously available only to investment
banks, market makers, asset managers and other buy-side investors--to
the general investing public by creating an incentive for market data
vendors to identify, develop, and sell such indicators. Ordinarily,
neither exchanges nor vendors allow redistribution of analytic
products--such products are typically designed solely for the use of
direct customers, not for redistribution to the customers of customers
in the manner of a data feed. Allowing the redistribution of Derived
Data provides an incentive for vendors to innovate with new compelling
and varied analytic products for the general investing public that will
provide broader access to market sentiment insights currently available
only to sophisticated investors.
    The Exchange believes that the proposed fee for the external
distribution of Derived Data from Open-Close Data is reasonable because
the rate is the same as the amount charged by another exchange that
also allows, and charges for, external distribution of derived data
from similar open-close products.\21\ Furthermore, the proposed fee
will only apply to Distributors that elect to distribute Derived Data
from Open-Close Data and as discussed, Open-Close Data, and Derived
Data therefrom, is purchased on a voluntary

basis, in that neither the Exchange nor market data distributors are
required by any rule or regulation to make this data available.
Accordingly, Distributors can discontinue use at any time and for any
reason, including due to an assessment of the reasonableness of fees
charged. Firms have a wide variety of alternative market data products
from which to choose, such as similar proprietary data products offered
by other exchanges. Moreover, the Exchange is not required to make any
proprietary data products available or to offer any specific pricing
alternatives to any customers. While the Exchange has no way of
predicting with certainty the impact of the proposed changes, it
anticipates at least two Distributors will create Derived Data from
Open-Close Data. Also, while the Exchange does not have a precise
estimate of the number of individuals expected to benefit, which will
ultimately depend on the usefulness of the Derived Data products that
reach the market it expects this to be a popular product that may
benefit thousands of investors.
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    \21\ Id.
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    The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to charge an external distributor of Derived
Data a $5,000 fee as vendors will ordinarily charge a fee to their
downstream customers for this service, and, even if the vendor is not
charging a specific fee for this particular service, the Exchange
expects Derived Data products from Open-Close Data to be part of a
suite of offerings from distributors that generally promote sales.
External distribution is also fundamentally different than internal
use, in that the former generates revenue from external sales while the
latter does not. Therefore, the Exchange believes it is reasonable,
equitable and not unfairly discriminatory to charge a fee for a product
that generates downstream revenue. Further, the proposed fee will apply
equally to all distributors that choose to distribute Derived Data from
Open-Close Data.
    Additionally, the Exchange does not believe it is unfair
discrimination to allow the redistribution of Derived Data, but not the
underlying information, to the general investing public. As explained
above, neither exchanges nor vendors ordinarily allow redistribution of
analytic products--such products are typically designed solely for the
use of direct customers, not for redistribution to the customers of
customers in the manner of a data feed. Allowing the redistribution of
Derived Data provides an incentive for vendors to innovate with new
compelling and varied analytic products for the general investing
public that will provide access to market sentiment insights currently
available only to sophisticated investors. This proposal is therefore
not unfair discrimination, but rather allows for more equitable access
to market sentiment information to the general investing public.

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

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

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

    The Exchange neither solicited nor received comments on the
proposed rule change.

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

    The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \22\ of the Act and subparagraph (f)(2) of Rule
19b-4 \23\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \24\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-CboeEDGX-2022-028 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeEDGX-2022-028. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CboeEDGX-2022-028 and should
be submitted on or before June 9, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10739 Filed 5-18-22; 8:45 am]
BILLING CODE 8011-01-P