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Federal Register / Vol. 86, No. 31 / Thursday, February 18, 2021 / Notices A. Self-Regulatory Organizations Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
SECURITIES AND EXCHANGE
COMMISSION
Release No. 3491108; File No. SRC2
2021004

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Its Fees Schedule February 11, 2021.

Pursuant to Section 19b1 of the Securities Exchange Act of 1934 the Act,1 and Rule 19b4 thereunder,2
notice is hereby given that on February 5, 2021, Cboe C2 Exchange, Inc. the Exchange or C2 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.
I. Self-Regulatory Organizations Statement of the Terms of Substance of the Proposed Rule Change Cboe C2 Exchange, Inc. the Exchange or C2 is filing with the Securities and Exchange Commission Commission a proposed rule change to amend the 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 Exchanges website http markets.cboe.com/us/
options/regulation/rule_filings/ctwo/, at the Exchanges Office of the Secretary, and at the Commissions Public Reference Room.

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II. Self-Regulatory Organizations 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.
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1. Purpose The Exchange proposes to amend its Fee Schedule to amend certain standard transaction fees for AAPL, QQQ, IWM
and SLV transactions. Specifically, the Exchange proposes to 1 amend the transaction fee for public customer AAPL, QQQ, IWM and SLV orders that remove liquidity, 2 amend the rebate for C2 Market Maker AAPL, QQQ, IWM
and SLV orders that add liquidity, 3
amend the rebate for non-Customer, non-Market Maker AAPL, QQQ, IWM
and SLV orders that add liquidity and 4 adopt an enhanced rebate for C2
Market Maker AAPL, QQQ, IWM and SLV orders that are NBBO Joiners or NBBO Setters.3
The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 options venues to which market participants may direct their order flow.
Based on publicly available information, no single options exchange has more than 16% of the market share and currently the Exchange represents approximately 3% of the market share.4
Thus, in such a low-concentrated and highly competitive market, no single options exchange, including the Exchange, possesses significant pricing power in the execution of option order flow. The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to fee changes.
Accordingly, competitive forces constrain the Exchanges transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable.
First, the Exchange proposes to amend the transaction fee for Public Customer orders in AAPL, QQQ, IWM
and SLV that remove liquidity.
Currently, public customer orders in all 3 The Exchange initially filed the proposed fee changes on February 1, 2021 SRC22021003.
On February 5, 2021, the Exchange withdrew that filing and submitted this proposal.
4 See Cboe Global Markets U.S. Options Market Volume Summary by Month January 26, 2021, available at https markets.cboe.com/us/options/
market_statistics/.

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equity, multiply-listed index, ETF and ETN penny options classes, including AAPL, QQQ, IWM and SLV, that remove liquidity are assessed a standard transaction fee of $0.43 per contract and yield fee code PC. The Exchange proposes to remove orders in AAPL, QQQ, IWM and SLV from fee code PC
and, instead, assess fee code SC for Public Customer orders in AAPL, QQQ, IWM and SLV that remove liquidity. Fee code SC is currently appended to Public Customer orders in SPY that remove liquidity and assesses a reduced fee from that of fee code PC of $0.39 per contract.5
The Exchange next proposes to amend the rebate for C2 Market Maker orders in AAPL, QQQ, IWM and SLV that add liquidity. Currently, C2 Market Makers orders in all equity, multiply-listed index, ETF and ETN penny options classes, including AAPL, QQQ, IWM
and SLV, that add liquidity are provided a rebate of $0.41 per contract and yield fee code PM. The Exchange proposes to remove orders in AAPL, QQQ, IWM
and SLV from fee code PM and, instead, assess existing fee code SM for C2
Market Maker orders in AAPL, QQQ, IWM and SLV. Fee code SM is currently appended to C2 Market Maker orders in SPY that add liquidity and offer a reduced rebate from that of fee code PM of $0.26 per contract.
The Exchange also proposes to amend the rebate for non-Market Maker, nonCustomer orders in AAPL, QQQ, IWM
and SLV that add liquidity. Currently, non-Market Maker, non-Customer orders i.e., Professional Customer, Firm, Broker/Dealer, non-C2 Market Maker, JBO, etc. in all equity, multiplylisted index, ETF and ETN penny options classes, including AAPL, QQQ, IWM and SLV, that add liquidity are provided a rebate of $0.36 per contract and yield fee code PN. The Exchange proposes to remove orders in AAPL, QQQ, IWM and SLV from fee code PN
and, instead, assess existing fee code SN on non-Market Maker, nonCustomer orders in AAPL, QQQ, IWM
and SLV that add liquidity. Fee code SN
is currently appended to such orders in SPY and assesses a reduced rebate from that of fee code PN of $0.20 per contract.
5 The Exchange notes that when it adopted the SPY pricing table and fee codes SC, SL, SM and SN, it inadvertently did not add these fee codes to the Fee Codes and Associated Fees table, which lists all available fee codes for orders on C2. The Exchange will now add these fee codes to the Fee Codes and Associated Fees table. This does not change any current rates or alter the description except as proposed herein of these fee codes. See Securities Exchange Release No. 89828 September 11, 2020, 85 FR 58078 September 17, 2020 SR
C22020013.

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