Notice2022-19225
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Rule Relating to Minimum Market-Maker Quote Size
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Published
September 7, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 172 (Wednesday, September 7, 2022)</title>
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[Federal Register Volume 87, Number 172 (Wednesday, September 7, 2022)]
[Notices]
[Pages 54746-54748]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-19225]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95647; File No. SR-CBOE-2022-043]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Rule Relating to Minimum Market-Maker Quote Size
August 31, 2022.
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 August 25, 2022, 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,
II, and III 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 its Rule relating to minimum Market-Maker quote size. The text
of the proposed rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 5.52. Market-Maker Quotes
(a) No change.
(b) Size. A Market-Maker's bid (offer) for a series must be
accompanied by the minimum number of contracts determined by the
Exchange on a class-by-class basis, and if the Exchange determines
on a premium basis and/or expiration basis for series with
expirations (1) no more than one week, (2)
[[Page 54747]]
between one week and two weeks, (3) between two weeks and one month,
(4) between one month and two months, (5) between two months and
three months, (6) between three months and six months, (7) between
six months and nine months, (8) between nine months and 15 months,
and (9) 15 months or more, the minimum of which will be one contract
at the price of the bid (offer) the Market-Maker is willing to buy
(sell). The System rejects a Market-Maker's bid (offer) that does
not meet the minimum initial quote size determined by the Exchange
for that class.
[(1) For SPX, the Exchange may also determine a minimum initial
quote size on a premium basis and an expiration basis for series
with expirations (1) no more than one week, (2) between one week and
three months, (3) between three months and six months, (4) between
six months and 15 months, and (5) 15 months or more.
(2)] The obligation of Market-Makers to make competitive markets
under Rule 5.51 does not preclude Trading Permit Holders in a
trading crowd from discussing a request for a market that is greater
than the disseminated size for that option class, for the purpose of
making a single bid (offer) based upon the aggregate of individual
bids (offers) by Trading Permit Holders in the trading crowd, but
only when the Trading Permit Holder representing the order asks for
a single bid (offer). Whenever a single bid (offer) pursuant to this
paragraph is made, such bid (offer) is a firm quote, and each ICMP
participating in the bid (offer) must fulfill his portion of the
single bid (offer) at the single price.
* * * * *
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 its Rule relating to minimum Market-
Maker quote size. Specifically, the Exchange proposes to amend Rule
5.52(b) \5\ to permit the Exchange to determine a minimum initial quote
size on a premium basis and/or an expiration basis for any option
class, not just S&P 500 Index (``SPX'') options.\6\ Currently, Rule
5.52 permits the Exchange to determine a minimum initial quote size on
a class-by-class basis. Subparagraph (b)(1) of that rule also permits
the Exchange, for SPX, to determine a minimum initial quote size on a
premium and an expiration basis for series with expirations (1) no more
than one week, (2) between one week and three months, (3) between three
months and six months, (4) between six months and 15 months, and (5) 15
months or more.
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\5\ The proposed rule change moves the language from Rule
5.52(b)(1), as amended, into the main part of Rule 5.52(b). As a
result, the proposed rule change deletes the numbering for
subparagraph (2), as that would be the only subparagraph for Rule
5.52(b) and thus will no longer require numbering.
\6\ The Exchange will announce any minimum quote size
requirements for any class with sufficient advance notice in
accordance with Rule 1.5.
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While different classes may exhibit different trading
characteristics, which make different minimum quote sizes appropriate
as permitted by the current Rule, the same may be true of series with
different premiums and expirations within a class to ensure the quote
size is not burdensome on Market-Makers. For example, series with
higher premiums or farther expirations generally have wider spreads and
lower trading volumes, and positions in those series carry additional
risk. These characteristics make lower minimum quote size requirements
more appropriate and less burdensome on Market-Makers. This is
generally true for all classes, not just SPX options.
Therefore, the Exchange proposes to permit the Exchange to
determine minimum initial quote size on a premium and/or expiration
basis for all classes.\7\ Additionally, it proposes to amend the
groupings of expirations to provide the Exchange with sufficient
flexibility to determine minimum quote sizes appropriate for each
class. Specifically, the proposed rule change will permit the Exchange
to determine the minimum quote size for any class on a premium basis
and/or expiration basis for series with expirations (1) no more than
one week, (2) between one week and two weeks, (3) between two weeks and
one month, (4) between one month and two months, (5) between two months
and three months, (6) between three months and six months, (7) between
six months and nine months, (8) between nine months and 15 months, and
(9) 15 months or more.\8\ To the extent the Exchange determines the
minimum quote size for a class will not be on a premium and/or
expiration basis, the Exchange will determine the minimum quote size
for that class as it does today, which is determining a minimum quote
size for all series in that class.
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\7\ The minimum quote size must continue to be at least one
contract at the price of the bid (offer) the Market-Maker is willing
to buy (sell). The System rejects a Market-Maker's bid (offer) that
does not meet the minimum initial quote size determined by the
Exchange for that class.
\8\ As noted above, Rule 5.52(b)(1) already permits the Exchange
to set minimum quote sizes on a premium and expiration basis for SPX
options. The proposed expiration groupings will permit the Exchange
to determine minimum quote sizes for SPX options in the same manner
as it does today, as it could determine the same minimum quote size
for multiple expiration groupings to conform to the current
expiration groupings (for example, the same minimum quote size for
proposed expiration groups two through five is equivalent to having
a minimum quote size equal to current expiration group two).
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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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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In particular, the Exchange believes the proposed rule change will
promote just and equitable principles of trade by permitting the
Exchange to impose more effective and not overly burdensome minimum
size requirements on Market-Makers in all classes, which the Exchange
believes will lead to continued liquidity on the Exchange, ultimately
benefiting investors. The
[[Page 54748]]
Exchange believes the proposed rule change maintains an appropriate
balance of obligations and benefits. The Exchange believes it is
appropriate to have authority to establish minimum quote sizes in a
class on an expiration or premium basis to reflect the different
trading characteristics of those series within that class. The Exchange
believes these proposed changes will continue to incentivize Market-
Makers to have appointments in any class in which the Exchange may
impose minimum quote size requirements on a premium or expiration
basis, which increases liquidity and in general protects investors.
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 Act because any minimum size requirements the
Exchange imposes in a class on a premium or expiration basis will apply
in the same manner to all Market-Makers with appointments in that
class. 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 Act because it relates solely to
quoting obligations the Exchange imposes on Market-Makers on the
Exchange. The Exchange believes the proposed rule change will maintain
an appropriate balance of Market-Maker obligations and benefits and
will permit the Exchange to impose more effective minimum size
requirements in a class without being overly burdensome on Market-
Makers given the differing trade characteristics applicable to series
with different expirations and premiums.
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)(iii) of the Act \12\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 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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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 under
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\14\ 15 U.S.C. 78s(b)(2)(B).
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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#fb898e979ed6989496969e958f88bb889e98d59c948d"><span class="__cf_email__" data-cfemail="c4b6b1a8a1e9a7aba9a9a1aab0b784b7a1a7eaa3abb2">[email protected]</span></a>. Please include
File Number SR-CBOE-2022-043 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to the Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number SR-CBOE-2022-043. 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-2022-043 and should be submitted on
or before September 28, 2022.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19225 Filed 9-6-22; 8:45 am]
BILLING CODE 8011-01-P
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