Cboe Seeks to Reduce the Options Regulatory Fee

August 6th | 2020

Cboe recently submitted a proposal to reduce the Options Regulatory Fee (“ORF”) from $0.0045 per contract to $0.0023 per contract, effective August 3, 2020. The ORF is designed to recover a material part of the regulatory costs to the exchange of supervising and regulating its Trading Permit Holders’ (TPH) customer options business, which includes things like surveillance, examinations, enforcement, and rulemaking activities. Cboe charges the ORF to each TPH for options transactions that are cleared by the Options Clearing Corporation in the customer range, regardless of the exchange on which the transaction occurs.

Because of the record volumes recently, combined with a reduction in regulatory costs, Cboe is reducing the fee to help ensure that revenue collected from the ORF does not exceed the Exchange’s total regulatory costs. The increase in volume and decrease in costs appear to be at least in partially attributable to COVID-19’s impact. Indeed, increased volatility is likely why June 2020’s options volume was 82.2% higher than June 2019 and was the highest one-month volume in the history of U.S. equity options. The filing notes that reduction in regulatory costs is partially due to decreased expenses like travel.

This filing is an interesting peek into the operations behind how exchanges fulfill their self-regulatory obligations. Self-directed, zero-commission options and equities trading has seen a boost from COVID-19, so it is also interesting to speculate on whether this rule filing will add fuel to that trend.

31 views0 comments