Notice2022-25232
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Short Term Option Series Program in Rule 19.6, Interpretation and Policy .05 and a Related Definition in Rule 16.1
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 21, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 223 (Monday, November 21, 2022)</title>
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[Federal Register Volume 87, Number 223 (Monday, November 21, 2022)]
[Notices]
[Pages 70869-70875]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-25232]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96313; File No. SR-CboeBZX-2022-056]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Short Term Option Series Program in Rule 19.6, Interpretation and
Policy .05 and a Related Definition in Rule 16.1
November 15, 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 November 14, 2022, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'')
proposes to amend the Short Term Option Series Program in Rule 19.6,
Interpretation and Policy .05 and a related definition in Rule 16.1.
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://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), at the Exchange's Office of the Secretary,
[[Page 70870]]
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 the Short Term Option Series Program
in Rule 19.6, Interpretation and Policy .05. Specifically, the Exchange
proposes to amend the Short Term Option Series Program to: (1) limit
the number of Short Term Option Expiration Dates for options on SPDR
S&P 500 ETF Trust (SPY), the INVESCO QQQ TrustSM, Series 1 (QQQ), and
iShares Russell 2000 ETF (IWM) from five to two expirations for Monday
and Wednesday expirations; and (2) expand the Short Term Option Series
program to permit the listing and trading of options series with
Tuesday and Thursday expirations for options on SPY and QQQ listed
pursuant to the Short Term Option Series Program, subject to the same
proposed limitation of two expirations.
The Exchange also proposes to amend the definition of Short Term
Option Series in Rule 16.1.
Curtail Short Term Option Expiration Dates
Currently, after an option class has been approved for listing and
trading on the Exchange, the Exchange may open for trading on any
Thursday or Friday that is a business day (``Short Term Option Opening
Date'') series of options on that class 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 (``Short Term Option Expiration Dates''). The Exchange
may have no more than a total of five Short Term Option Expiration
Dates not including any Monday or Wednesday SPY, QQQ, and IWM
Expirations. Further, if the Exchange is not open for business on the
respective Thursday or Friday, the Short Term Option Opening Date will
be the first business day immediately prior to that respective Thursday
or Friday. Similarly, if the Exchange is not open for business on a
Friday, the Short Term Option Expiration Date will be the first
business day immediately prior to that Friday.
Today, with respect to Wednesday SPY, QQQ, and IWM Expirations, the
Exchange may open for trading on any Tuesday or Wednesday that is a
business day series of options on SPY, QQQ, and IWM to expire on any
Wednesday of the month that is a business day and is not a Wednesday in
which Quarterly Options Series expire (``Wednesday SPY Expirations,''
``Wednesday QQQ Expirations,'' and ``Wednesday IWM Expirations''). With
respect to Monday SPY, QQQ, and IWM Expirations, the Exchange may open
for trading on any Friday or Monday that is a business day series of
options on the SPY, QQQ, or IWM to expire on any Monday of the month
that is a business day and is not a Monday in which Quarterly Options
Series expire (``Monday SPY Expirations,'' ``Monday QQQ Expirations,''
and ``Monday IWM Expirations''), provided that Monday SPY Expirations,
Monday QQQ Expirations, and Monday IWM Expirations that are listed on a
Friday must be listed at least one business week and one business day
prior to the expiration. The Exchange may list up to five consecutive
Wednesday SPY Expirations, Wednesday QQQ Expirations, and Wednesday IWM
Expirations and five consecutive Monday SPY Expirations, Monday QQQ
Expirations, and Monday IWM Expirations at one time; the Exchange may
have no more than a total of five each of Wednesday SPY Expirations,
Wednesday QQQ Expirations, and Wednesday IWM Expirations and a total of
five each of Monday SPY Expirations, Monday QQQ Expirations, and Monday
IWM Expirations. Monday and Wednesday SPY Expirations, Monday and
Wednesday QQQ Expirations, and Monday and Wednesday IWM Expirations
will be subject to the provisions of Rule 19.6, Interpretation and
Policy .05.
Proposal
At this time, the Exchange proposes to curtail the number of Short
Term Option Expiration Dates from five to two \5\ for SPY, QQQ and IWM
for Monday and Wednesday Expirations, as well as the proposed Tuesday
and Thursday Expirations in SPY and QQQ (``Short Term Option Daily
Expirations''). The Exchange proposes to create a new category of Short
Term Option Expirations Dates called ``Short Term Option Daily
Expirations,'' which will only permit two Short Term Option Expiration
Dates for each of Monday, Tuesday, Wednesday, and Thursday expirations
at one time. The Exchange proposes to include a table, labelled ``Table
1'', within Rule 19.6, Interpretation and Policy .05(h), which
specifies each symbol that qualifies as a Short Term Option Daily
Expiration. The table would note the number of expirations for each
symbol as well as expiration days. The Exchange proposes to include
Monday and Wednesday expirations for SPY, QQQ, and IWM and Tuesday and
Thursday expirations for SPY and QQQ and list the number of expirations
as ``2'' for these symbols. The Exchange's proposal to permit Tuesday
and Thursday expirations for options on SPY and QQQ listed pursuant to
the Short Term Option Series Program is explained below in more detail.
In the event Short Term Option Daily Expirations expire on the same day
in the same class as a monthly options series or a Quarterly Options
Series, the Exchange would skip that week's listing and instead list
the following week; the two weeks of Short Term Option Expiration Dates
would therefore not be consecutive. Specifically, the Exchange proposes
to state within Rule 19.6, Interpretation and Policy .05(h):
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\5\ The Exchange proposes to list the two front months for Short
Term Option Daily Expirations.
In addition to the above, the Exchange may open for trading
series of options on the symbols provided in Table 1 below that
expire at the close of business on each of the next two Mondays,
Tuesdays, Wednesdays, and Thursdays, respectively, that are business
days and are not business days on which monthly options series or
Quarterly Options Series expire (``Short Term Option Daily
Expirations''). The Exchange may have no more than a total of two
Short Term Option Daily Expirations for each of Monday, Tuesday,
Wednesday, and Thursday expirations at one time. Short Term Option
Daily Expirations would be subject to this Interpretation and Policy
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.05
SPY, QQQ, and IWM Friday expirations and other option symbols
expiring on a Friday that are not noted in Table 1 will continue to
have a total of five Short Term Option Expiration Dates provided those
Friday expirations are not Fridays on which monthly options series or
Quarterly Options Series expire (``Friday Short Term Option Expiration
Dates''). These expirations would be referred to as ``Short Term Option
Weekly
[[Page 70871]]
Expirations'' to distinguish them from the proposed expirations that
would be subject to Short Term Option Daily Expirations. The Exchange
proposes to add rule text to Rule 19.6, Interpretation and Policy
.05(h) which states that Monday Short Term Option Expiration Dates,
Tuesday Short Term Option Expiration Dates, Wednesday Short Term Option
Expiration Dates, and Thursday Short Term Option Expiration Dates,
together with Friday Short Term Option Expiration Dates, are
collectively ``Short Term Option Expiration Dates.'' \6\
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\6\ Defining the term ``Short Term Option Expiration Dates''
will make clear that this term includes expiration dates for each
day Short Term Options are listed.
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Tuesday and Thursday Expirations
At this time, the Exchange proposes to expand the Short Term Option
Series Program to permit the listing and trading of no more than a
total of two consecutive Tuesday and Thursday ``Tuesday Short Term
Option Daily Expirations'' and ``Thursday Short Term Option Daily
Expirations'' each for SPY and QQQ at one time. Tuesday and Thursday
Short Term Option Daily Expirations would be subject to Rule 19.6,
Interpretation and Policy .05.
A Short Term Option Series means a series in an option class that
is approved for listing and trading on the Exchange in which the series
is opened for trading on any Monday, Tuesday, Wednesday, Thursday, or
Friday that is a business day and that expires on the Monday,
Wednesday, or Friday of the following business week that is a business
day, or, in the case of a series that is listed on a Friday and expires
on a Monday, is listed one business week and one business day prior to
that expiration. If a Tuesday, Wednesday, Thursday or Friday is not a
business day, the series may be opened (or shall expire) on the first
business day immediately prior to that Tuesday, Wednesday, Thursday or
Friday. For a series listed pursuant to this section for Monday
expiration, if a Monday is not a business day, the series shall expire
on the first business day immediately following that Monday.
The Exchange proposes to amend this definition in Rule 16.1 to
accommodate the listing of options series that expire on Tuesdays and
Thursdays. Specifically, the Exchange proposes to add Tuesday and
Thursdays to the permitted expiration days, which currently include
Monday, Wednesday, and Friday, that it may open for trading.
The Exchange also proposes corresponding changes within Rule 19.6,
Interpretation and Policy .05, which sets forth the requirements for
SPY and QQQ options that are listed pursuant to the Short Term Option
Series Program as Short Term Option Daily Expirations, to accommodate
the listing of options series that expire on Tuesdays and Thursdays.
Similar to Monday and Wednesday SPY, QQQ, and IWM Short Term Option
Daily Expirations within Rule 19.6, Interpretation and Policy .05, the
Exchange proposes that it may open for trading on any Monday or Tuesday
that is a business day series of options on the symbols provided in
Table 1 that expire at the close of business on each of the next two
Tuesdays that are business days and are not business days in which
monthly options series or Quarterly Options Series expire (``Tuesday
Short Term Option Expiration Date'').
Likewise, the Exchange proposes that it may open for trading on any
Wednesday or Thursday that is a business day series of options on
symbols provided in Table 1 that expire at the close of business on
each of the next two Thursdays that are business days and are not
business days in which monthly options series or Quarterly Options
Series expire (``Thursday Short Term Option Expiration Date'').
In the event that options on SPY and QQQ expire on a Tuesday or
Thursday and that Tuesday or Thursday is the same day that a monthly
option series or Quarterly Options Series expires, the Exchange would
skip that week's listing and instead list the following week; the two
weeks would therefore not be consecutive. Today, Monday and Wednesday
Expirations in SPY, QQQ, and IWM skip the weekly listing in the event
the weekly listing expires on the same day in the same class as a
Quarterly Options Series. Currently, there is no rule text provision
that states that Monday and Wednesday Expirations in SPY, QQQ, and IWM
skip the weekly listing in the event the weekly listing expires on the
same day in the same class as a monthly option series. Practically
speaking, Monday and Wednesday Expirations in SPY, QQQ, and IWM would
not expire on the same day as a monthly expiration.
The interval between strike prices for the proposed Tuesday and
Thursday SPY and QQQ Short Term Option Daily Expirations will be the
same as those for the current Short Term Option Series for Monday,
Wednesday, and Friday expirations applicable to the Short Term Option
Series Program.\7\ Specifically, the Tuesday and Thursday SPY and QQQ
Short Term Option Daily Expirations will have a $0.50 strike interval
minimum.\8\ As is the case with other equity options series listed
pursuant to the Short Term Option Series Program, the Tuesday and
Thursday SPY and QQQ Short Term Option Daily Expiration series will be
P.M.-settled.
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\7\ See Rule 19.6, Interpretation and Policy .05(e)
\8\ See id.
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Pursuant to proposed Rule 19.6, Interpretation and Policy .05, with
respect to the Short Term Option Series Program, a Tuesday or Thursday
expiration series will expire on the first business day immediately
prior to that Tuesday or Thursday, e.g., Monday or Wednesday of that
week, respectively, if the Tuesday or Thursday is not a business day.
Currently, for each option class eligible for participation in the
Short Term Option Series Program, the Exchange is limited to opening
thirty (30) series for each expiration date for the specific class.\9\
The thirty (30) series restriction does not include series that are
open by other securities exchanges under their respective weekly rules;
the Exchange may list these additional series that are listed by other
options exchanges.\10\ This thirty (30) series restriction would apply
to Tuesday and Thursday SPY and QQQ Short Term Option Daily Expiration
series as well. In addition, the Exchange will be able to list series
that are listed by other exchanges, assuming they file similar rules
with the Commission to list SPY and QQQ options expiring on Tuesdays
and Thursdays with a limit of two Tuesday Short Term Daily Expirations
and two Thursday Short Term Daily Expirations.
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\9\ See Rule 19.6, Interpretation and Policy .05(a).
\10\ See id.
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Finally, the Exchange is amending Rule 19.6, Interpretation and
Policy .05(b) to conform the rule text to the usage of the term ``Short
Term Option Daily Expirations.'' Today, with the exception of Monday
and Wednesday SPY Expirations, Monday and Wednesday QQQ Expirations,
and Monday and Wednesday IWM Expirations, no Short Term Option Series
may expire in the same week in which monthly option series on the same
class expire. With this proposal, Tuesday and Thursday SPY Expirations
and Tuesday and Thursday QQQ Expirations would be treated similarly to
existing Monday and Wednesday SPY, QQQ, and IWM Expirations. With
respect to monthly option series, Short Term Option Daily Expirations
will be permitted to expire in the same week in which monthly option
series in the same class expire. Not listing Short Term Option Daily
Expirations for one
[[Page 70872]]
week every month because there was a monthly on that same class on the
Friday of that week would create investor confusion. Further, as with
Monday and Wednesday SPY, QQQ, and IWM Expirations, the Exchange would
not permit Tuesday and Thursday Short Term Option Daily Expirations to
expire on a business day in which monthly options series or Quarterly
Options Series expire.\11\ Therefore, all Short Term Option Daily
Expirations would expire at the close of business on each of the next
two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that
are business days and are not business days on which monthly options
series or Quarterly Options Series expire. The Exchange believes that
it is reasonable to not permit two expirations on the same day in which
a monthly options series or a Quarterly Options Series would expire.
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\11\ While the Exchange proposes to add rule text within Rule
19.6, Interpretation and Policy .05 with respect to Monday
Expirations, Tuesday Expirations, and Wednesdays Expirations stating
that those expirations would not expire on business days that are
business days on which monthly options series expire, practically
speaking this would not occur.
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The Exchange does not believe that any market disruptions will be
encountered with the introduction of P.M.-settled Tuesday and Thursday
Short Term Option Daily Expirations. The Exchange has the necessary
capacity and surveillance programs in place to support and properly
monitor trading in the proposed Tuesday and Thursday Short Term Option
Daily Expirations. The Exchange currently trades P.M.-settled Short
Term Option Series that expire Monday and Wednesday for SPY, QQQ and
IWM and has not experienced any market disruptions nor issues with
capacity. Today, the Exchange has surveillance programs in place to
support and properly monitor trading in Short Term Option Series that
expire Monday and Wednesday for SPY, QQQ and IWM.
Impact of Proposal
The Exchange notes that listings in the Short Term Option Series
Program comprise a significant part of the standard listing in options
markets. The below tables sets forth the percentage of weekly listings
as compared to monthly, quarterly, and Long-Term Option Series in 2020
and 2022 in the options industry.\12\ The weekly strikes decreased from
24% to 19% in these two years. The Exchange notes that during this
timeframe, all options exchanges mitigated weekly strike intervals.
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\12\ Per Nasdaq ISE, LLC (``Nasdaq ISE''), this information was
sourced from The Options Clearing Corporation (``OCC''). The
information includes time averaged data for all 16 options markets
up to August 18, 2022. See Securities Exchange Act Release No. 95841
(September 20, 2022), 87 FR 58399 (September 26, 2022) (SR-ISE-2022-
18).
Number of Strikes--2020
------------------------------------------------------------------------
Percent of
Expiration total
series
------------------------------------------------------------------------
Monthly..................................................... 59
Weekly...................................................... 24
LEAP........................................................ 16
Quarterly................................................... 1
------------------------------------------------------------------------
Number of Strikes--2022
------------------------------------------------------------------------
Percent of
Expiration total
series
------------------------------------------------------------------------
Monthly..................................................... 64
Weekly...................................................... 19
LEAP........................................................ 17
Quarterly................................................... 0
------------------------------------------------------------------------
By limiting the number of Short Term Option Daily Expirations for
SPY, QQQ, and IWM to two expirations for Monday and Wednesday
expirations, and expanding the Short Term Option Series Program to
permit Tuesday and Thursday expirations for SPY and QQQ, the Exchange
anticipates that it would overall reduce the number of weekly
expiration dates. With respect to SPY, the reduction from five to two
expirations will reduce 11.80% of strikes on SPY with Monday and
Wednesday expirations. With respect to QQQ, the reduction from five to
two expirations will reduce 12.86% of strikes on QQQ with Monday and
Wednesday expirations. With respect to IWM, the reduction from five to
two expirations will reduce 11.86% of strikes on IWM with Monday and
Wednesday expirations. Additionally, expanding the Short Term Option
Series Program to permit the listing of Tuesday and Thursday
expirations in SPY and QQQ will account for the addition of 7.86% of
strikes in SPY and the addition of 8.57% of strikes in QQQ. Therefore,
the total net reduction would be 3.94% for SPY and 4.29% for QQQ.\13\
The overall reduction offered by this proposal reduces the number of
Short Term Option Expirations to be listed on the Exchange and should
encourage Market-Makers to continue to deploy capital more efficiently
and improve displayed market quality.\14\ Also, the Exchange's proposal
curtails the number of expirations in SPY, QQQ, and IWM without
reducing the classes of options available for trading on the Exchange.
The Exchange believes that despite the proposed curtailment of
expirations, Trading Permit Holders will continue to be able to expand
hedging tools because all days of the week would be available to permit
Trading Permit Holders to tailor their investment and hedging needs
more effectively in SPY and QQQ.
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\13\ Nasdaq ISE sourced this information, which are estimates,
from LiveVol[supreg]. The information includes data for all 16
options markets as of August 18, 2022. See id.
\14\ Market-Makers are required to quote a specified time in
their assigned options series. See Rule 22.6.
Total Volume--2022
[Through August 18]
------------------------------------------------------------------------
Percent of
Expiration total
series
------------------------------------------------------------------------
Monthly..................................................... 39
Weekly...................................................... 48
LEAP........................................................ 12
Quarterly................................................... 1
------------------------------------------------------------------------
Weeklies comprise 48% of the total volume of options listings.\15\
The Exchange believes that inner weeklies represent high volume as
compared to outer weeklies and would be more attractive to market
participants. Similar to SPY, QQQ and IWM Monday and Wednesday
Expirations, the introduction of SPY and QQQ Tuesday and Thursday
expirations will, among other things, expand hedging tools available to
market participants and continue the reduction of the premium cost of
buying protection. The Exchange believes that SPY and QQQ Tuesday and
Thursday expirations will allow market participants to purchase SPY and
QQQ options based on their timing as needed and allow them to tailor
their investment and hedging needs more effectively.
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\15\ This table sets forth industry volume. Weeklies comprise
48% of volume while only being 19% of the strikes. Nasdaq ISE
sourced this information from OCC. The information includes data for
all 16 options markets as of August 18, 2022. See Securities
Exchange Act Release No. 95841 (September 20, 2022), 87 FR 58399
(September 26, 2022) (SR-ISE-2022-18)
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Implementation
The Exchange proposes to implement this rule change on November 14,
2022. The Exchange will issue an Exchange Notice to notify Trading
Permit Holders of the implementation date. Notwithstanding this
implementation, Monday and Wednesday Expirations in SPY, QQQ, and IWM
that were listed prior to the date of implementation will continue to
be listed on the Exchange until those options expire pursuant to
[[Page 70873]]
current Short Term Option Series rules within Rule 19.6, Interpretation
and Policy .05.
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.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ 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) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
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The proposal is consistent with the Act as the overall reduction
offered by this proposal reduces the number of Short Term Option
Expirations to be listed on the Exchange. This reduction would remove
impediments to and perfect the mechanism of a free and open market by
encouraging Market-Makers to continue to deploy capital more
efficiently and improve displayed market quality.\19\ Also, the
Exchange's proposal curtails the number of Monday, Tuesday, Wednesday,
and Thursday expirations in SPY, QQQ, and IWM without reducing the
classes of options available for trading on the Exchange. The Exchange
believes that despite the proposed curtailment of expirations, Trading
Permit Holders will continue to be able to expand hedging tools and
tailor their investment and hedging needs more effectively in SPY, QQQ,
and IWM.
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\19\ Market-Makers are required to quote a specified time in
their assigned options series. See Rule 22.6.
---------------------------------------------------------------------------
Similar to SPY, QQQ, and IWM Monday and Wednesday Expirations
(proposed to be SPY, QQQ and IWM Monday and Wednesday Short Term Daily
Expirations), the introduction of SPY and QQQ Tuesday and Thursday
Short Term Daily Expirations is consistent with the Act as it will,
among other things, expand hedging tools available to market
participants and continue the reduction of the premium cost of buying
protection. The Exchange believes that SPY and QQQ Tuesday and Thursday
expirations (proposed to be SPY and QQQ Tuesday and Thursday Short Term
Daily Expirations) will allow market participants to purchase SPY and
QQQ options based on their timing as needed and allow them to tailor
their investment and hedging needs more effectively. Further, the
proposal to permit Tuesday and Thursday Short Term Daily Expirations
for options on SPY and QQQ listed pursuant to the Short Term Option
Series Program, subject to the proposed limitation of two expirations,
would protect investors and the public interest by providing the
investing public and other market participants more flexibility to
closely tailor their investment and hedging decisions in SPY and QQQ
options, thus allowing them to better manage their risk exposure.
In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that Tuesday and Thursday SPY
and QQQ Short Term Daily Expirations should simply expand the ability
of investors to hedge risk against market movements stemming from
economic releases or market events that occur throughout the month in
the same way that the Short Term Option Series Program has expanded the
landscape of hedging. Similarly, the Exchange believes Tuesday and
Thursday SPY and QQQ Short Term Daily Expirations should create greater
trading and hedging opportunities and flexibility and will provide
customers with the ability to tailor their investment objectives more
effectively. The Exchange currently lists Monday and Wednesday SPY,
QQQ, and IWM Expirations (proposed to be SPY, QQQ, and IWM Monday and
Wednesday Short Term Daily Expirations).\20\
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\20\ See Rule 19.6, Interpretation and Policy .05.
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Today, with the exception of Monday and Wednesday SPY Expirations,
Monday and Wednesday QQQ Expirations, and Monday and Wednesday IWM
Expirations, no Short Term Option Series may expire in the same week in
which monthly option series on the same class expire. With this
proposal, Tuesday and Thursday SPY Expirations and Tuesday and Thursday
QQQ Expirations would be treated similarly to existing Monday and
Wednesday SPY, QQQ, and IWM Expirations. The Exchange believes that
permitting Short Term Option Daily Expirations to expire in the same
week that standard monthly options expire on Fridays is consistent with
Act. Not listing Short Term Option Daily Expirations for one week every
month because there was a monthly on that same class on the Friday of
that week would create investor confusion.
Further, as with Monday and Wednesday SPY, QQQ, and IWM
Expirations, the Exchange would not permit Tuesday and Thursday Short
Term Option Daily Expirations to expire on a business day in which
monthly options series or Quarterly Options Series expire. Therefore,
all Short Term Option Daily Expirations would expire at the close of
business on each of the next two Mondays, Tuesdays, Wednesdays, and
Thursdays, respectively, that are business days and are not business
days in which monthly options series or Quarterly Options Series
expire. The Exchange believes that it is consistent with the Act to not
permit two expirations on the same day in which a monthly options
series or a Quarterly Options Series would expire similar to Monday and
Wednesday SPY, QQQ, and IWM Expirations.
There are no material differences in the treatment of Wednesday SPY
and QQQ expirations for Short Term Option Series as compared to the
proposed Tuesday and Thursday SPY and QQQ Short Term Daily Expirations.
Given the similarities between Wednesday SPY, QQQ and IWM Expirations
and the proposed Tuesday and Thursday SPY and QQQ Short Term Daily
Expirations, the Exchange believes that applying the provisions in Rule
19.6, Interpretation and Policy .05 that currently apply to Wednesday
SPY, QQQ and IWM Expirations to Tuesday and Thursday SPY and QQQ Short
Term Daily Expirations is justified.
The Exchange further represents that it has an adequate
surveillance program in place to detect manipulative trading in the
proposed Tuesday and Thursday SPY and QQQ Short Term Daily Expirations,
in the same way that it monitors trading in the current Short Term
Option Series and trading in Monday and Wednesday SPY, QQQ, and IWM
Expirations. The Exchange also represents that it has the necessary
systems capacity to support the new options series. Finally, the
Exchange does not believe that any market disruptions will be
encountered with the introduction of Tuesday and Thursday SPY and QQQ
Short Term Daily Expirations.
Finally, the Exchange notes the proposed rule change is
substantively
[[Page 70874]]
the same as a rule change proposed by ISE, which the Commission
recently approved.\21\
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\21\ See Securities and Exchange Act Release No. 96281 (November
9, 2022) (SR-ISE-2022-18).
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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 proposal will provide an
overall reduction in the number of Short Term Option Expirations to be
listed on the Exchange. The Exchange believes this reduction will not
impose an undue burden on competition, rather, it should encourage
Market-Makers to continue to deploy capital more efficiently and
improve displayed market quality.\22\ Also, the Exchange's proposal
curtails the number of weekly expirations in SPY, QQQ, and IWM without
reducing the classes of options available for trading on the Exchange.
The Exchange believes that despite the proposed curtailment of weekly
expirations, Trading Permit Holders will continue to be able to expand
hedging tools and tailor their investment and hedging needs more
effectively in SPY, QQQ, and IWM.
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\22\ Market-Makers are required to quote a specified time in
their assigned options series. See Rule 22.6.
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Similar to SPY, QQQ and IWM Monday and Wednesday Expirations, the
Exchange believes the introduction of SPY and QQQ Tuesday and Thursday
Short Term Daily Expirations will not impose an undue burden on
competition. The Exchange believes that it will, among other things,
expand hedging tools available to market participants and continue the
reduction of the premium cost of buying protection. The Exchange
believes that SPY and QQQ Tuesday and Thursday Short Term Daily
Expirations will allow market participants to purchase SPY and QQQ
options based on their timing as needed and allow them to tailor their
investment and hedging needs more effectively. The Exchange does not
believe the proposal will impose any burden on intermarket competition,
as nothing prevents the other options exchanges from proposing similar
rules to list and trade Short-Term Option Series with Tuesday and
Thursday Short Term Daily Expirations. The Exchange notes that having
Tuesday and Thursday SPY and QQQ expirations is not a novel proposal,
as Wednesday SPY, QQQ and IWM Expirations are currently listed on the
Exchange.\23\ Additionally, as noted above, the Commission recently
approved a substantively identical proposal of another exchange.\24\
Further, the Exchange does not believe the proposal will impose any
burden on intramarket competition, as all market participants will be
treated in the same manner under this proposal.
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\23\ See Rule 19.6, Interpretation and Policy .05.
\24\ See Securities and Exchange Act Release No. 96281 (November
9, 2022) (SR-ISE-2022-18).
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \25\ and Rule 19b-4(f)(6) thereunder.\26\
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 \27\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\28\ The Commission notes that it recently
approved Nasdaq ISE's substantially similar proposal.\29\ The Exchange
has stated that waiver of the 30-day operative delay will allow the
Exchange to implement the proposal at the same time as competitor
exchanges. 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. Accordingly, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\30\
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\25\ 15 U.S.C. 78s(b)(3)(A)(iii).
\26\ 17 CFR 240.19b-4(f)(6).
\27\ 15 U.S.C. 78s(b)(3)(A)(iii).
\28\ 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.
\29\ See Securities Exchange Act Release No. 96281 (November 9,
2022) (SR-ISE-2022-18).
\30\ 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 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> Send an email to <a href="/cdn-cgi/l/email-protection#2153544d440c424e4c4c444f5552615244420f464e57"><span class="__cf_email__" data-cfemail="82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2022-056 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-CboeBZX-2022-056. 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 such filing also will be available for inspection
and copying at the principal
[[Page 70875]]
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-CboeBZX-2022-
056 and should be submitted on or before December 12, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25232 Filed 11-18-22; 8:45 am]
BILLING CODE 8011-01-P
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