Notice2021-21985
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 4.5(d) To Allow Monday and Wednesday Expirations for Options Listed Pursuant to the Short Term Option Series Program on the iShares Russell 2000 ETF (“IWM”)
Primary source
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Published
October 8, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 193 (Friday, October 8, 2021)</title>
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[Federal Register Volume 86, Number 193 (Friday, October 8, 2021)]
[Notices]
[Pages 56332-56335]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21985]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93255; File No. SR-CBOE-2021-057]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 4.5(d) To Allow Monday and Wednesday Expirations for Options
Listed Pursuant to the Short Term Option Series Program on the iShares
Russell 2000 ETF (``IWM'')
October 4, 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 October 1, 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 4.5(d) to allow Monday and Wednesday expirations for
options listed pursuant to the Short Term Option Series Program on the
iShares Russell 2000 ETF (``IWM''). 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 4.5(d) to allow Monday and
Wednesday expirations for options listed pursuant to the Short Term
Option Series Program on IWM. The Exchange notes that this proposed
rule change is substantively identical to a rule change recently
adopted by Nasdaq Phlx LLC. (``Phlx'') \5\ and approved by the
Securities and Exchange Commission (``Commission'').\6\
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\5\ See Securities Exchange Release No. 92655 (August 12, 2021),
86 FR 46304 (August 18, 2021) (SR-Phlx-2021-43) (Notice of Filing of
Proposed Rule Change To Permit Monday and Wednesday Expirations for
Options Listed Pursuant to the Short Term Option Series Program on
the iShares Russell 2000 ETF (``IWM'')).
\6\ See Securities Exchange Release No. 93157 (September 28,
2021) (SR-Phlx-2021-43) (Order Approving a Proposed Rule Change to
Permit Monday and Wednesday Expirations for Options Listed Pursuant
to the Short Term Options Program on the iShares Russell 2000 ETF
(IWM)).
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Rule 4.5(d) currently governs the Exchange's Short Term Option
Series Program. Short Term Option Series are weekly series in an option
class that is approved for listing and trading on the Exchange, which
may be opened for trading on any Thursday or Friday that is a business
day and expires that expire at the close of business on each of the
next five Fridays that are business days and are not Fridays on which
monthly options series or Quarterly Options Series expire. Rule 4.5(d)
also provides that the Exchange may open weekly series for options on
the SPDR S&P 500 ETF Trust (``SPY'') and the Invesco QQQ Trust
(``QQQ'') with Monday and Wednesday expirations.
The proposed rule change amends Rule 4.5(d) to also allow Monday
and Wednesday expiations for options on IWM. Specifically, the proposed
rule change amends Rule 4.5(d) to provide that the Exchange may open
for trading on any Friday or Monday that is a business day series of
options on the SPDR S&P 500 ETF Trust (``SPY'') (``Monday SPY
Expiration Opening Date''), the iShares Russell 2000 ETF (``IWM'')
(``Monday IWM Expiration Opening Date'') and \7\ the Invesco QQQ Trust
(``QQQ'') (``Monday QQQ Expiration Opening Date'') that expire at the
close of business each of the next five Mondays that are business days
and are no Mondays on which Quarterly Options Series expire (``Monday
SPY Expirations'', ``Monday IWM Expirations'' and ``Monday QQQ
Expirations''), provided that any Monday SPY, IWM and QQQ Expiration
Opening Date that is a Friday is one business week and one business day
prior to expiration. The Exchange may also open for trading on any
Tuesday or Wednesday that is a business day series of SPY options
(``Wednesday SPY Expiration Opening Date''), IWM options (``Wednesday
IWM Expiration Opening Date'') and QQQ options (``Wednesday QQQ
Expiration Opening Date'') that expire at the close of business on each
of the next five Wednesdays that are business days and are not
Wednesdays on which Quarterly Options Series expire (``Wednesday SPY
Expirations'', ``Wednesday IWM Expirations'' and ``Wednesday QQQ
Expirations''). The Exchange may have no more than a total of five of
each Monday SPY, IWM and QQQ Expirations and no more than a total of
five of each Wednesday SPY, IWM and QQQ Expirations. Non-Monday and
non-Wednesday SPY, IWM and QQQ Expirations are not included as part of
this count. If the Exchange is not open for business on the respective
Friday or Monday, the Monday SPY, IWM and QQQ Expiration Opening Date
will be the first business day immediately prior to that respective
Friday or Monday. If the Exchange is not open for business on a Monday,
the expiration date for a Monday SPY, IWM and QQQ Expiration will be
the first business day immediately following that Monday. If the
Exchange is not open for business on the respective Tuesday or
Wednesday, the Wednesday SPY, IWM and QQQ Expiration Opening Date will
be the first business day immediately prior to that respective Tuesday
or Wednesday. Similarly, if the Exchange is not open for business on a
Wednesday, the expiration date for a Wednesday SPY, IWM and QQQ
Expiration will be the first business day immediately prior to that
Wednesday. Additionally, the proposed rule change amends Rule
4.5(d)(2), which currently excepts Monday and Wednesday SPY and QQQ
Expirations from the prohibition on Short Term Option Series expiring
in the same week in
[[Page 56333]]
which monthly option series on the same class expire, to provide that
no Short Term Option Series (excluding Monday and Wednesday SPY, IWM
and QQQ Expirations) may expire in the same week in which monthly
option series on the same class expire.
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\7\ The proposed rule change makes a nonsubstantive change in
order to simplify the rule language.
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Similar to SPY and QQQ, the Exchange believes that the introduction
of IWM Monday and Wednesday Expirations will expand hedging tools
available to market participants and continue to assist in reducing the
premium cost of buying protection. By offering Monday and Wednesday IWM
Expirations, the proposed rule change will allow market participants to
purchase IWM based on their timing needs and allow them to more
effectively tailor their investment and hedging strategies.
The Exchange notes that, pursuant to the proposed rule change, if
the Exchange is not open for business on a Wednesday, then a Wednesday
IWM Expiration will expire on the first business day immediately prior
to that Wednesday (e.g., Tuesday of that week). However, regarding
Monday IWM Expirations, if the Exchange is not open for business on a
Monday, then a Monday IWM Expiration will expire on the first business
day following that Monday (e.g., Tuesday of that week). This is the
same expiration process currently in place for Monday and Wednesday SPY
and QQQ Expirations. The Exchange believes that it is appropriate to
require Monday expiration series to expire on the Tuesday of that week,
rather than the previous business day (e.g., the previous Friday), when
expiration Monday does not fall on a business day because the
immediately following Tuesday is closer in time to the scheduled
expiration date of the series than the previous Friday. Therefore, the
following business day in this case may be more representative of
anticipated market conditions than the previous business day. The
Exchange notes that, not only are Monday SPY and QQQ Expirations
treated in the same manner today, but the same applies to weekly index
options listed pursuant to the Nonstandard Expiration Program.\8\ The
Exchange also notes that permitting Monday and Wednesday IWM
Expirations to expire in the same week as monthly options series on the
same class, like that of Monday and Wednesday SPY and QQQ Expirations,
is appropriate because Monday and Wednesday IWM Expirations and
standard monthly options will not expire on the same trading day, as
standard monthly options expire on Fridays. Additionally, the Exchange
believes that listing Monday and Wednesday IWM Expirations each week of
the month will provide consistency for investors and mitigate any
potential confusion regarding weekly listings.
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\8\ See Rule 4.13(e)(1).
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The Exchange notes that the interval between strike prices for the
proposed Monday and Wednesday IWM Expirations are the same as those for
the Monday and Wednesday SPY and QQQ Expirations and the Short Term
Option Series with Wednesday and Friday expirations.\9\ Specifically,
the proposed Monday and Wednesday IWM Expirations have a $0.50 strike
interval minimum.\10\ As is the case with other equity options series
listed pursuant to the Short Term Option Series Program, Monday and
Wednesday IWM Expirations are P.M.-settled. Also, pursuant to Rule
4.5(d)(1), the Exchange may open up to 30 Short Term Option Series for
each expiration date in each option class eligible for participation in
the Short Term Option Series Program. This includes Monday and
Wednesday IWM Expirations for IWM options. In addition to the 30 series
per class, the Exchange may open Short Term Option Series, including
Monday and Wednesday IWM Expirations, that are opened by other
securities exchanges in option classes selected by such exchanges under
their respective short term option rules.
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\9\ See Rule 4.5(d)(5).
\10\ See id.
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The Exchange does not believe that listing series of P.M.-settled
Monday and Wednesday expirations for options on IWM will have any
adverse impact on fair and orderly markets as the Exchange already
lists weekly series with the same settlement and expirations for
options on SPY and QQQ, as well as for weekly index options pursuant to
the Nonstandard Pilot Program,\11\ and has not experienced any issues
regarding adverse market impact in connection with the listing of these
series. The Exchange represents that it has the necessary capacity and
surveillance programs in place to support and properly monitor trading
in the proposed Monday and Wednesday IWM Expirations. The Exchange
currently deploys such surveillance programs to monitor Monday and
Wednesday SPY and QQQ Expirations and has not experienced any issues
with capacity in connection with listing Monday and Wednesday SPY and
QQQ Expirations. The Exchange intends to begin implementation of the
proposed rule change on October 5 2021, as Phlx, as well as its
affiliated options exchanges, intend to begin listing weekly Wednesday
IWM Expirations on this date.\12\ The Exchange will issue a notice of
the planned implementation date to its Trading Permit Holders
(``TPHs'') in advance.\13\
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\11\ See supra note 7.
\12\ See Options Trader Alert #2021--54, Nasdaq Introduces
Monday and Wednesday Weekly Expirations For IWM Options (September
22, 2021) available at: <a href="http://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2021-54">http://www.nasdaqtrader.com/MicroNews.aspx?id=OTA2021-54</a>. Phlx, BX, NOM, ISE, GEMX, and MRX
anticipate listing weekly Wednesday IWM Expirations on October 5,
2021.
\13\ See Rule 1.5, which provides that the Exchange announces to
Trading Permit Holders all determinations it makes pursuant to the
Rules via: (1) Specifications, Notices, or Regulatory Circulars with
appropriate advanced notice, which are posted on the Exchange's
website, or as otherwise provided in the Rules; (2) electronic
message; or (3) other communication method as provided in the Rules.
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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.\14\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \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 the
Section 6(b)(5) \16\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
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In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that listing Monday and
Wednesday IWM Expirations, like Monday and Wednesday SPY and QQQ
Expirations already listed for trading, will expand the ability of
investors to effectively hedge risk against market movements stemming
from economic releases or market events that occur throughout the
month. The Exchange believes that offering Monday and Wednesday IWM
Expirations will create greater trading and hedging opportunities and
[[Page 56334]]
flexibility for investors, allowing them to use IWM options listed
pursuant to the Short Term Option Series Program in a manner more
effectively tailored their investment and hedging objectives. As
already noted, the Exchange currently offers series with the same
settlement (P.M.) and expirations (Monday and Wednesday) for options on
SPY and QQQ and for weekly index options pursuant to the Nonstandard
Pilot Program.\17\ The Exchange again notes that the proposed rule
change is substantively identical to a rule recently adopted by Phlx
and approved by the Commission.\18\
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\17\ See supra note 8.
\18\ See supra notes 5 and 6.
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The manner in which Monday IWM Expirations will expire when
expiration Monday lands on a holiday is consistent with the manner in
which Monday SPY and QQQ Expirations currently expire under the same
circumstances. The Exchange believes that allowing Monday IWM
Expirations that expire on a holiday to fall on the following business
day, as opposed to the prior business day (as applicable to Wednesday
and Friday expirations that expire on a holiday), removes impediments
to and perfects the mechanism of a free and open market and national by
permitting such Monday expirations to occur closer in time to the
scheduled expiration date of the series, which may be more
representative of anticipated market conditions. Additionally, the
proposed rule change to except Monday and Wednesday IWM Expirations
from the prohibition on Short Term Option Series expiring in the same
week in which monthly option series on the same class expire is
consistent with the same exception that currently applies to Monday and
Wednesday SPY and QQQ Expirations.\19\ The proposed rule change is
designed to provide consistency for investors and mitigate any
potential confusion regarding weekly listings each week of the month.
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\19\ As stated herein, because monthly options expire on
Fridays, Monday and Wednesday weekly options will not land on the
same day.
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The Exchange does not believe that listing series of P.M.-settled
Monday and Wednesday expirations for options on IWM will have any
adverse impact on fair and orderly markets as the Exchange already
lists series with the same settlement and expirations for options on
SPY and QQQ, as well as for weekly index options pursuant to the
Nonstandard Pilot Program,\20\ and has not observed any adverse market
impact in connection with the listing of these series. The Exchange
represents that it already has an adequate surveillance program in
place to detect and deter any manipulative trading in Monday and
Wednesday expirations, including Monday and Wednesday IWM Expirations,
and that it has the necessary systems capacity to support the listing
and trading of the new series.
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\20\ See supra note 8.
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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 Monday and Wednesday IWM
Expirations will be available for quoting and trading on the Exchange
for all market participants. Therefore, all market participants will
equally be able to transact in IWM series listed with Monday and
Wednesday expirations for trading on the Exchange.
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 as it only
impacts the permissible expirations for an option series listed on the
Exchange. As stated, another options exchange has recently implemented
a substantively identical rule to permit Monday and Wednesday IWM
expirations on its exchange.\21\ As such, this proposal is a
competitive response that will permit the Exchange to list the same
expirations for series in a multiply-listed option as another options
exchange.
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\21\ See supra notes 5 and 6.
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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
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 \22\ and Rule 19b-
4(f)(6) thereunder.\23\
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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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 normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \24\ 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
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The
Commission notes that it recently approved Phlx's substantially similar
proposal to list and trade Monday IWM Expirations and Wednesday IWM
Expirations.\25\ The Exchange has stated that waiver of the 30-day
operative delay will allow the Exchange to implement the proposal as a
competitive response, permitting the Exchange to list the same
expirations for series in a multiply-listed option as another options
exchange, at the same time that such options exchange intends to list
such series. For these reasons, the Commission believes that the
proposed rule change presents no novel issues and that waiver of the
30-day operative delay is consistent with the protection of investors
and the public interest, and will allow the Exchange to remain
competitive with other exchanges. Accordingly, the Commission hereby
waives the operative delay and designates the proposed rule change
operative upon filing.\26\
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\24\ 17 CFR 240.19b-4(f)(6)(iii).
\25\ See supra note 6.
\26\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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.
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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
<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> Send an email to <a href="/cdn-cgi/l/email-protection#f684839a93db95999b9b93988285b6859395d8919980"><span class="__cf_email__" data-cfemail="6614130a034b05090b0b030812152615030548010910">[email protected]</span></a>. Please include
File Number SR-CBOE-2021-057 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-2021-057. 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-2021-057 and should be submitted on
or before October 29, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21985 Filed 10-7-21; 8:45 am]
BILLING CODE 8011-01-P
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