[Federal Register Volume 84, Number 25 (Wednesday, February 6, 2019)]
[Notices]
[Pages 2288-2290]
[FR Doc No: 2019-01172]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85015; File No. SR-CBOE-2019-003]

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

January 31, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 29, 2019, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend its fees schedule. The text of the proposed rule change is
provided in Exhibit 5.
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Fees Schedule, effective
February 1, 2019 to amend its fee incentive program for Lead Market-
Makers (``LMM'') in SPX during Global Trading Hours (``GTH''). By way
of background, pursuant to Footnote 38 of the Fees Schedule, a GTH LMM
in SPX will receive a rebate for that month in the amount of a pro-rata
share of a compensation pool equal to $30,000 times the number of LMMs
in that class (or pro-rated amount if an appointment begins after the
first trading day of the month or ends prior to the last trading day of
the month) if the LMM: (1) Provides continuous electronic quotes in at
least the lesser of 99% of the non-adjusted series or 100% of the non-
adjusted series minus one call-put pair in an GTH allocated class
(excluding intraday add-on series on the day during which such series
are added for trading) during GTH in a given month; (2) enters opening
quotes within five minutes of the initiation of an opening rotation in
any series that is not open due to the lack of a quote, provided that
the LMM will not be required to enter opening quotes in more than the
same percentage of series set forth in clause (1) for at least 90% of
the trading days during GTH in a given month; and (3) satisfies the
following time-weighted average quote widths and bid/ask sizes for each
moneyness category: (A) Out of the money options (``OTM''), average
quote width of $0.75 or less and average bid/ask size of 15 contracts
or greater; (B) at the money options (``ATM''), average quote width of
$3.00 or less and bid/ask size of 10 contracts or greater; and (C) in
the money options (``ITM''), average quote width of $10.00 or less and
bid/ask size of 5 contracts or greater.\3\ GTH LMMs in SPX are not
obligated to satisfy the heightened quoting standards described above
or in Rule 8.15 during GTH. Rather, GTH LMMs in SPX are eligible to
receive a rebate if they satisfy the heightened standards described in
the Fees Schedule, which the Exchange believes will encourage SPX LMMs
to provide liquidity during GTH.
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    \3\ See Cboe Options Fees Schedule, Footnote 38.
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    The Exchange proposes to amend Footnote 38 to modify the quoting
standard a GTH LMM in SPX will need to satisfy in order to receive a
rebate for its SPX GTH activity. Particularly, the Exchange proposes to
modify prong

3(A) of the quoting standard with respect to the required average quote
width for OTM options. As noted, above, a GTH LMM in SPX must, among
other things, provide an average quote width of $0.75 or less and
average bid/ask size of 15 contracts or greater for OTM options. The
Exchange proposes to modify the OTM options average quote width
requirement. Specifically the Exchange proposes to require that a GTH
LMM in SPX provide an average quote width for OTM options of $0.90 or
less instead of $0.75 or less. The Exchange proposes to widen the
average quote width required as the current market has made it more
difficult for a GTH LMM in SPX to maintain the same quality of markets
as compared to previous market conditions that were less volatile. The
Exchange continues to believe that time-weighted averages are a good
way to assess the overall quality of the market.
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.\4\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \5\ 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) \6\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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    The Exchange believes amending the third prong in Footnote 38 is
reasonable as it does not change the financial benefit offered.
Additionally, the Exchange believes the proposed amendment is
reasonable, equitable and not unfairly discriminatory because it
applies to any appointed GTH LMM in SPX uniformly and because if the
third prong, as amended, is not met, a GTH SPX LMM merely will not
receive the offered financial benefit. The Exchange also believes the
requirement under the amended third prong is commensurate with the
financial benefit offered. Additionally, the Exchange notes that
current market conditions have made the current OTM average quote
widths requirement more difficult to attain and the Exchange believes
the amended averaged width quote is more appropriate given current
market conditions. The Exchange believes that its proposed rule change
removes impediments to and perfects the mechanism of a free and open
national market system as it continues to incentivize any GTH LMMs in
SPX to provide liquidity in SPX during GTH and meet the prescribed
quoting standard.

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

    The Exchange does not believe that the proposed rule changes will
impose any burden on competition that are not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because it applies uniformly to
all SPX GTH LMMs. The Exchange does not believe that the proposed rule
change will impose any burden on intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because SPX options are proprietary products that will only be traded
on Cboe Options. To the extent that the proposed changes make Cboe
Options a more attractive marketplace for market participants at other
exchanges, such market participants are welcome to become Cboe Options
market participants.

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

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

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2019-003 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2019-003. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from

comment submissions. You should submit only information that you wish
to make available publicly. All submissions should refer to File Number
SR-CBOE-2019-003 and should be submitted on or before February 27,
2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-01172 Filed 2-5-19; 8:45 am]
 BILLING CODE 8011-01-P