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Federal Register / Vol. 86, No. 44 / Tuesday, March 9, 2021 / Notices
6b5 15 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 6b4 of the Act,16 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.
Particularly, the Exchange believes the proposed rule change to adopt AIM
Hybrid Surcharges including an Originator Surcharge is reasonable because the proposed surcharges are reasonably designed to ensure that there is appropriate cost incentive to market participants to continue to execute through the Exchanges primary execution channels for SPX/SPXW once AIM is activated for SPX/SPXW. The Exchange believes that the proposed SPX AIM Hybrid Surcharges reasonably balance cost incentives between executing via the AIM Auctions and executing via open outcry or against quotes in the electronic Book, which is in the interest of the Exchange as it must both maintain robust hybrid markets, incentivizing liquidity to both its electronic and trading floor environments in order support price discovery and increased execution opportunities. The planned activation of this functionality for SPX/SPXW will allow market participants to interact with SPX/SPXW order flow in a manner not previously available,17 and, as a result, the Exchange believes it is reasonable to assess additional fees for market participants that choose to leverage auction execution opportunities outside of contributing to SPX/SPXW liquidity in open outcry and the on the electronic Book.
The Exchange also believes that the proposed fees in connection with SPX
AIM orders are reasonable as they do not represent a significant departure from the fees currently offered under the Fees Schedule. The Exchange believes 15 15

U.S.C. 78fb5.
U.S.C. 78fb4.
17 Previously only available while the trading floor was inoperable for a period of time during 2020. See supra note 6.
16 15

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that the proposed SPX AIM Hybrid Surcharges of $0.50 per contract for all Non-Customer and Market-Maker and $0.39 per contract for all Firm orders executed in AIM Agency/Primary, Contra and Response are reasonable because these surcharges are, respectively, comparable to or less than the $0.50 and $1.05 rates per contract, which are generally higher than the applicable standard transaction rates, currently assessed for certain AIM
orders submitted in all products with certain exceptions. The Exchange believes that the proposed SPX AIM
Hybrid Originator Surcharge is reasonable as it is equivalent to the AIM
Agency/Primary Surcharge of $0.10 that is assessed when the Exchange is operating in an screen-based only environment and likewise applies to all AIM Agency/Primary orders in SPX/
SPXW and is invoiced to the executing TPH. The Exchange again notes that it assesses certain surcharges on proprietary products i.e., SPX/SPXW, SPESG and VIX 18 in order to similarly create a reasonable cost equivalence between its primary execution channels open outcry and electronic book for such products as the Exchange seeks to maintain a robust hybrid system.19
Overall, the Exchange believes the proposed fees are reasonably designed to balance fees at an appropriate level in order to assess SPX/SPXW order flow to AIM Auctions while also maintaining incentive for participation in SPX/
SPXW on the trading floor and in the electronic book, thereby supporting incentive for continued liquidity in SPX/SPXW through the Exchanges primary execution channels while AIM
is activated for SPX/SPXW, to the benefit of all market participants.
The Exchange believes that the proposed SPX AIM Hybrid Surcharges including the Originator Surcharge are equitable and not unfairly discriminatory because the proposed SPX AIM Hybrid Surcharges will apply equally to all similarly situated TPHs that submit orders in SPX/SPXW into AIM. That is, the proposed fees will apply equally to all Non-Customer and Market-Maker orders in SPX/SPXW
executed in AIM, to all Firm orders in SPX/SPXW executed in AIM, and to all executing TPHs that submit AIM
Agency/Primary orders in SPX/SPXW.
The Exchange believes that it is equitable and not unfairly discriminatory to provide lower SPX
AIM Hybrid rates for Firms because the Exchange believes that Firm participation in the markets is essential 18 See 19 See
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supra note 12.
supra note 13.

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to a robust hybrid market ecosystem as Firms facilitate the execution of customer orders, as well as provide clearing services, both electronically and in open outcry. The Exchange recognizes Firms as an important source of liquidity when they facilitate their own customers trading activity, which enhances transparency and price discovery to the benefit of all market participants, and, as a result, currently assesses a lower rate to Firms in various places under the Fees Schedule, including for transactions in SPX/
SPXW.20
B. Self-Regulatory Organizations Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on intramarket or intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange does not believe the proposed SPX AIM Hybrid Surcharges including the Originator Surcharge will impose any burden on intramarket competition because they will apply equally to all similarly situated TPHs that submit orders in SPX/SPXW into AIM. That is, the proposed fees will apply equally to all Non-Customer and Market-Maker orders in SPX/SPXW
submitted to AIM, to all Firm orders in SPX/SPXW submitted to AIM, and to all executing TPHs that submit AIM
Agency/Primary orders in SPX/SPXW.
The Exchange does not believe that providing lower SPX AIM Hybrid rates for Firms will impose any significant burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the Exchange recognizes that Firm participation in the markets is essential to a robust hybrid market ecosystem as Firms facilitate the execution of customer orders, as well as provide clearing services, both in open outcry and electronically. As a result, the Exchange currently assesses a lower rate to Firms in various places under the Fees Schedule, including for transactions in SPX/SPXW.21 The Exchange believes that Firms can be an important source of liquidity when they facilitate their own customers trading activity, which enhances transparency and price discovery to the benefit of all market participants. The Exchange again notes that the proposed SPX AIM
20 See e.g., Cboe Options Fees Schedule, Rate TableUnderlying Symbol List A, which generally assesses lower rates for Firm transactions in SPX/SPXW $0.26 per contract than for MarketMakers $0.28 or Non-Customers $0.42 in SPX/
SPXW.
21 See id.

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