Notice2022-15775
Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 10.3 Regarding Margin Requirements
Primary source
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Published
July 25, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 141 (Monday, July 25, 2022)</title>
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[Federal Register Volume 87, Number 141 (Monday, July 25, 2022)]
[Notices]
[Pages 44163-44165]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15775]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95314; File No. SR-CBOE-2022-015]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule
10.3 Regarding Margin Requirements
July 19, 2022.
I. Introduction
On March 30, 2022, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change SR-CBOE-2022-015 (``Proposed
Rule Change'') pursuant to Section 19(b)(1) of the Securities Exchange
Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 \2\ thereunder, to
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amend Cboe Rule 10.3 regarding margin requirements that provide margin
relief for a cash-settled index option written against a holding in an
exchange-traded fund that tracks the same index as the index underlying
the index option. On April 13, 2022, the Exchange filed Amendment No. 1
to the Proposed Rule Change.\3\ The Proposed Rule Change was published
for public comment in the Federal Register on April 20, 2022.\4\ On
June 2, 2022 the Exchange consented to an extension of the time period
in which the Commission must approve the Proposed Rule Change,
disapprove the Proposed Rule Change, or institute proceedings to
determine whether to approve or disapprove the Proposed Rule Change to
July 19, 2022. The Commission is publishing this order to institute
proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act \5\ to
determine whether to approve or disapprove the Proposed Rule Change, as
modified by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 is available on the Commission's website at
<a href="https://www.sec.gov/comments/sr-cboe-2022-015/srcboe2022015-20123573-279781.pdf">https://www.sec.gov/comments/sr-cboe-2022-015/srcboe2022015-20123573-279781.pdf</a>.
\4\ See Exchange Act Release No. 94723 (Apr. 14, 2022), 87 FR
23629 (Apr. 20, 2022) (File No. SR-CBOE-2022-015) (``Notice''). The
Commission received one comment letter on the Proposed Rule Change.
See letter from Andrew Robison, (Apr. 22, 2022), available at:
<a href="https://www.sec.gov/comments/sr-cboe-2022-015/srcboe2022015.htm">https://www.sec.gov/comments/sr-cboe-2022-015/srcboe2022015.htm</a>. The
comments expressed by the commenter are not relevant to the Proposed
Rule Change.
\5\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
The Exchange is proposing to amend Rule 10.3 regarding margin
requirements. Generally, the Proposed Rule Change would amend Rule
10.3(c)(5)(C)(iii)(b) to update the exception to margin requirements
applicable to cash-settled short option positions or warrants on
indexes that are offset by positions in an underlying stock basket,
non-leveraged index mutual fund, or non-leveraged exchange-traded fund
(collectively referred to as ``ETFs'') that is based on the same index,
as well as move it within Rule 10.3 to Rule 10.3(c)(5)(C)(iv).\6\
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\6\ See Notice, 87 FR at 23630.
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The Proposed Rule Change would amend the form of margin required to
be held in an account for a short in-the-money index call (put) option
if there is a long position in an ETF based on the same index to be the
amount by which the value of an ETF is below (above) the aggregate
index value. Rather than necessitating the purchase or deposit of
additional ETF shares to address a deficiency in the value of the ETF
compared to the aggregate index value (regardless of the amount of the
deficiency), the Proposed Rule Change would enable excess maintenance
margin equity in a margin account to support the requirement. If excess
maintenance margin is insufficient or nonexistent, a deposit of
additional margin would be required, which can be in any form (e.g.,
cash and/or marginable securities) from the account owner in an amount
equal to any deficit.
Additionally, the Proposed Rule Change will require no margin when
an option is at- or out-of-the-money, regardless of whether the ETF
market value is at least equal to the aggregate index value, and
eliminates the requirement to mark the price of a long ETF with an
index call option written against it at the lower of the ETF's market
value or the index option strike price.\7\
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\7\ Id., at FR 23631.
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The Proposed Rule Change also makes clarifying, nonsubstantive
changes to conform to the language used throughout Rule 10.3.
III. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2022-015 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule
Change, as modified by Amendment No. 1, should be approved or
disapproved.\8\ Institution of proceedings is appropriate at this time
in view of the legal and policy issues raised by the Proposed Rule
Change, as modified by Amendment No. 1. Institution of proceedings does
not indicate that the Commission has reached any conclusions with
respect to the Proposed Rule Change, as modified by Amendment No. 1.
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\8\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Exchange Act,\9\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis and input concerning whether the Proposed Rule
Change, as modified by Amendment No. 1, is consistent with the Exchange
Act and the rules thereunder.
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\9\ Id.
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IV. Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the Proposed Rule Change, as modified by Amendment No. 1. In
particular, the Commission invites the written views of interested
persons concerning whether the Proposed Rule Change, as modified by
Amendment No. 1, is consistent with the Exchange Act and the rules
thereunder.
Although there do not appear to be any issues relevant to approval
or disapproval that would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4 any request for an opportunity to make an oral
presentation.\10\
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\10\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the Proposed Rule Change, as modified by
Amendment No. 1, should be approved or disapproved by August 9, 2022.
Any person who wishes to file a rebuttal to any other person's
submission must file that rebuttal by August 15, 2022.
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#c5b7b0a9a0e8a6aaa8a8a0abb1b685b6a0a6eba2aab3"><span class="__cf_email__" data-cfemail="d7a5a2bbb2fab4b8babab2b9a3a497a4b2b4f9b0b8a1">[email protected]</span></a>. Please include
File Number SR-CBOE-2022-015 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-2022-015. 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, as modified by
Amendment No. 1, that are filed with the Commission,
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and all written communications relating to the Proposed Rule Change, as
modified by Amendment No. 1, 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; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly.
All submissions should refer to File Number SR-CBOE-2022-015 and
should be submitted on or before August 9, 2022. Rebuttal comments
should be submitted by August 15, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-15775 Filed 7-22-22; 8:45 am]
BILLING CODE 8011-01-P
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