Notice2021-21355
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 4.13 To Allow the Exchange To List up to 12 Standard Monthly Expirations for Certain Index Options
Primary source
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Published
October 1, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 188 (Friday, October 1, 2021)</title>
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[Federal Register Volume 86, Number 188 (Friday, October 1, 2021)]
[Notices]
[Pages 54492-54494]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21355]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93134; File No. SR-CBOE-2021-055]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 4.13 To Allow the Exchange To List up to 12 Standard Monthly
Expirations for Certain Index Options
September 27, 2021.
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 September 22, 2021, 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
and II below, which Items have been prepared by the Exchange. The
Exchange filed the proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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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 Rule 4.13 to allow it to list up to 12 standard monthly
expirations for certain index options. 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 (<a href="http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</a>), 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 Rule 4.13 to allow it to list up to
12 standard monthly expirations for Mini-Russell 2000 Index (``Mini-
RUT'' or ``MRUT'') and Mini-S&P 500 Index (``Mini-SPX'' or ``XSP'')
options. Currently, Rule 4.13(a) provides that the Exchange may list up
to 12 standard monthly expirations at any one time for any class that
the Exchange (as the Reporting Authority) uses to calculate a
volatility index and for CBOE S&P 500 a.m./PM Basis, EAFE, EM, FTSE
Emerging, FTSE Developed, FTSE 100, China 50, S&P Select Sector Index
(SIXM, SIXE, SIXT, SIXV, SIXU, SIXR, SIXI, SIXY, SIXB, and SIXRE, and
SIXC), and S&P 500 ESG Index options. For all other index options,
including MRUT and XSP options, the Exchange may list up to six
standard monthly expirations at any one time. In addition to this, the
Exchange also proposes to amend Rule 4.13(a) to explicitly allow it to
list up to 12 standard monthly expirations for S&P 500 Index (``SPX'')
and Russell 2000 Index (``RUT'') options. The Exchange uses SPX options
to calculate the Cboe Volatility Index (``VIX'') and RUT options to
calculate the Cboe Russell 2000 Volatility Index (``RVX''). As stated,
Rule 4.13(a) allows the Exchange to list up to 12 standard monthly
expirations at any one time for any class that the Exchange (as the
Reporting Authority) uses to calculate a volatility index. Therefore,
the Exchange may currently list up to 12 standard monthly expirations
for SPX and RUT options.\5\ The proposed rule change simply amends Rule
4.13(a) to explicitly iterate in the Rule that SPX and RUT are index
options for which the Exchange may list up to 12 standard monthly
expirations; that is, notwithstanding the Exchange's use of such
options to calculate volatility indexes.
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\5\ The Exchange notes that it currently lists eight standard
monthly expirations for RUT options and 12 standard monthly
expirations for SPX options.
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The Exchange proposes to amend Rule 4.13(a) to permit the same
number of monthly expirations (up to 12) for XSP and MRUT options as
currently permitted for the corresponding full-value index options, SPX
and RUT options, respectively.\6\ More specifically, XSP options are
options on the Mini-SPX Index, the value of which is 1/10th the value
of the SPX, and MRUT options are options on the Mini-RUT Index, the
value of which is 1/10th the value of the RUT Index. The Mini-SPX and
Mini-RUT Index contain the same stocks with the same weightings as the
corresponding full-value index (SPX and RUT Index, respectively) and
are calculated in the same manner as the corresponding full-value
index, with the exception of being 1/10th the value of the
corresponding full-value index. Accordingly, market participants may
use both XSP and SPX options as a hedging vehicle to meet their
investment needs in connection with SPX Index-related products and cash
positions and, likewise, may use both MRUT and RUT options to meet
their investment needs in connection with RUT Index-related products
and cash positions. Because of the relation between these reduced-value
indexes and the related full-value indexes, the Exchange believes it is
appropriate to permit the Exchange to be able to list the same number
of monthly expirations for XSP and MRUT options as SPX and RUT options,
respectively.
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\6\ The Exchange notes that it currently lists P.M.-settled
standard third-Friday-of-the-month MRUT and XSP options pursuant to
the Exchange's P.M. Pilot Program. See Interpretation and Policy .13
to Rule 4.13. The Exchange does not currently list A.M.-settled
standard third-Friday-of-the-month MRUT or XSP options.
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In addition to this, and as described above, pursuant to Rule
4.13(a), the Exchange may already list up to 12 standard monthly
expirations for SPX and RUT options as each is currently used to
calculate a volatility index for which the Exchange is the Reporting
Authority. The proposed rule change merely amends Rule 4.13(a) to
explicitly iterate in the Rule that S&P 500 Index and Russell 2000
Index options are index options for which the Exchange may list up to
12 standard monthly expirations; that is, notwithstanding the
Exchange's use of such index options in its calculations for volatility
indexes.
[[Page 54493]]
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.\7\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
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The Exchange believes the proposed rule change to allow the
Exchange to list up to 12 standard monthly expirations for XSP and MRUT
options \10\ will remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general,
protect investors, because it will allow the Exchange to be able to
list the same number of expirations for these reduced-value index
options as it currently may for the corresponding full-value index
options. The Exchange notes that because the same components comprise
the SPX and Mini-SPX indexes and, likewise, the RUT and Mini-RUT
indexes, market participants may use each reduced-value index option as
a hedging vehicle to meet their investment needs in connection with the
corresponding full-value index-related products and cash positions.
Therefore, by allowing the Exchange to be able to list a consistent
number of expirations between full- and reduced-value options on the
SPX Index and on the RUT Index, the proposed rule change will benefit
investors by assisting them in more effectively using options that
track the same index to meet their investment needs. Further, the
proposed rule change to update Rule 4.13(a) to explicitly iterate in
the Rule that SPX and RUT options are index options for which the
Exchange may list up to 12 standard monthly expirations will remove
impediments to and perfect the mechanism of a free and open market and
national market system by updating the Rule to be more explicit in
connection with the number of monthly expirations that the Exchange is
already permitted to list for SPX and RUT options pursuant to Rule
4.13(a) (as the Exchange uses both index options to calculate a
volatility index).\11\ The Exchange notes that the ability to list up
to 12 standard monthly expirations for XSP, MRUT, SPX and RUT options,
each of which is an exclusively listed, broad-based option, is
consistent with the number of monthly expirations that the Exchange is
currently permitted to list for other exclusively-listed, broad-based
index options pursuant to Rule 4.13(a), also notwithstanding their use
in a volatility index calculation.
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\10\ See supra note 6.
\11\ See supra note 5.
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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 that is 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 as any and all monthly
expirations listed for XSP, MRUT, SPX and RUT options will be equally
available, or continue to be equally available (as is the case
regarding the proposed rule change in connection with SPX and RUT
options) to all market participants who trade such options, and the
proposed number of expirations will apply, or continue to apply, in the
same manner to all XSP, MRUT, SPX and RUT options. The proposed rule
change makes it possible for the same expirations to be listed for
reduced-value index that are currently available for full-value
indexes.
The Exchange does not believe that the proposed rule change
regarding the number of standard monthly expirations permissible for
XSP, MRUT, SPX and RUT options, will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because options on all such indexes are proprietary
Exchange products. To the extent that allowing up to 12 standard
monthly expirations for XSP and MRUT options (or SPX and RUT options,
as is currently the case) trading on the Exchange may make the Exchange
a more attractive marketplace to market participants at other
exchanges, such market participants are free to elect to become market
participants on the Exchange. As noted above, the Exchange believes
being able to list a consistent number of expirations between full- and
reduced-value options on the SPX Index and on the RUT Index may permit
investors to more effectively use options that track the same index to
meet their investment needs.
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
proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \14\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay. The
proposed rule change is composed of two parts. First, the Exchange
proposes to include the ticker symbols for SPX and RUT in the rule and
states that doing so does not raise any new issues as both index
options are already covered by the rule because both are used in a
volatility index calculation. Thus, the first change amends Cboe Rule
4.13(a) to explicitly identify by ticker state in the rule that SPX and
RUT are index options for which the Exchange may list up to 12 standard
monthly expirations. Second,
[[Page 54494]]
the Exchange proposes to amend Cboe Rule 4.13 to permit it to list up
to 12 standard monthly expirations for XSP and MRUT, whereas it can
currently list up to 6 standard monthly expirations for those products.
Accordingly, the proposal will allow the Exchange to list the same
number of monthly expirations (12) for XSP and MRUT as is currently
permitted for the corresponding full-value index options, SPX and RUT,
respectively. The Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest because the first part of the proposal does not make
any substantive change or raise any new issues and the second part of
the proposal will allow the Exchange to list, for the reduced-value
index options, the same number of standard monthly expirations as are
available for the corresponding full-value index options, thus allowing
the Exchange to accommodate customer demand for index options based on
the same underlying indexes. Therefore, the Commission hereby waives
the operative delay and designates the proposal as operative upon
filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.
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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet<ls-thn-eq> Send an email to <a href="/cdn-cgi/l/email-protection#a2d0d7cec78fc1cdcfcfc7ccd6d1e2d1c7c18cc5cdd4"><span class="__cf_email__" data-cfemail="bdcfc8d1d890ded2d0d0d8d3c9cefdced8de93dad2cb">[email protected]</span></a>. Please
include File Number SR-CBOE-2021-055 on the subject line.
Paper Comments
<bullet> 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-2021-055. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-055
and should be submitted on or before October 22, 2021.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21355 Filed 9-30-21; 8:45 am]
BILLING CODE 8011-01-P
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