Notice2023-10037
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Pilot Programs in Connection With the Listing and Trading of P.M.-Settled Series on Certain Broad-Based Index Options
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
May 11, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 91 (Thursday, May 11, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Notices]
[Pages 30353-30356]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-10037]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97443; File No. SR-CboeEDGX-2023-035]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Extend the Pilot Programs in Connection With the Listing and Trading of
P.M.-Settled Series on Certain Broad-Based Index Options
May 5, 2023.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 2, 2023, Cboe EDGX Exchange, Inc. (``Exchange'' or ``EDGX'')
filed with the Securities and Exchange Commission (``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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'')
proposes to extend the pilot programs in connection with the listing
and trading of P.M.-settled series on certain broad-based index
options. The text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/options/regulation/rule_filings/edgx/">http://markets.cboe.com/us/options/regulation/rule_filings/edgx/</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 proposed rule change extends the listing and trading of P.M.-
settled series on certain broad-based index options on a pilot
basis.\5\ Rule 29.11(a)(6) currently
[[Page 30354]]
permits the listing and trading of XSP options with third-Friday-of-
the-month expiration dates, whose exercise settlement value will be
based on the closing index value on the expiration day (``P.M.-
settled'') on a pilot basis set to expire on May 8, 2023 (the ``XSPPM
Pilot Program''). Rule 29.11(j)(3) also permits the listing and trading
of P.M.-settled options on broad-based indexes with weekly expirations
(``Weeklys'') and end-of-month expirations (``EOMs'') on a pilot basis
set to expire on May 8, 2023 (the ``Nonstandard Expirations Pilot
Program'', and together with the XSPPM Pilot Program, the ``Pilot
Programs''). The Exchange proposes to extend the Pilot Programs through
November 6, 2023.
---------------------------------------------------------------------------
\5\ The Exchange is authorized to list for trading options that
overlie the Mini-SPX Index (``XSP'') and the Russell 2000 Index
(``RUT''). See Rule 29.11(a). See also Securities Exchange Act
Release Nos. 84481 (October 24, 2018), 83 FR 54624 (October 30,
2018) (Notice of Filing of a Proposed Rule Change To Permit the
Listing and Trading of P.M.-Settled Series on Certain Broad-Based
Index Options on a Pilot Basis) (SR-CboeEDGX-2018-037) (``Notice'');
85182 (February 22, 2019), 84 FR 6846 (February 28, 2019) (Notice of
Deemed Approval of a Proposed Rule Change To Permit the Listing and
Trading of P.M.-Settled Series on Certain Broad-Based Index Options
on a Pilot Basis) (SR-CboeEDGX-2018-037); 88054 (January 27, 2020),
85 FR 5761 (January 31, 2020) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Extend the Pilot Programs
in Connection With the Listing and Trading of P.M.-Settled Series on
Certain Broad-Based Index Options) (SR-CboeEDGX-2020-002); 88787
(April 30, 2020), 85 FR 26995 (May 6, 2020) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Extend the
Pilot Programs in Connection With the Listing and Trading of P.M.-
Settled Series on Certain Broad-Based Index Options) (SR-CboeEDGX-
2020-019); 90253 (October 22, 2020) 85 FR 68390 (October 28, 2020)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Extend the Pilot Programs in Connection With the Listing
and Trading of P.M.-Settled Series on Certain Broad-Based Index
Options) (SR-CboeEDGX-2020-050); 91700 (April 28, 2021), 86 FR 23770
(May 4, 2021) (Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Extend the Pilot Programs in Connection With
the Listing and Trading of P.M.-Settled Series on Certain Broad-
Based Index Options) (SR-CboeEDGX-2021-022); 93453 (October 28,
2021), 86 FR 60667 (November 3, 2021) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Extend the
Pilot Programs in Connection With the Listing and Trading of P.M.-
Settled Series on Certain Broad-Based Index Options) (SR-CboeEDGX-
2021-047); and 94803 (April 27, 2022), 87 FR 26237 (May 3, 2022)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Extend the Pilot Programs in Connection With the Listing
and Trading of P.M.-Settled Series on Certain Broad-Based Index
Options) (SR-CboeEDGX-2022-025); and 96209 (November 2, 2022), 87 FR
67520 (November 8, 2022) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Extend the Pilot Programs
in Connection with the Listing and Trading of P.M.-Settled Series on
Certain Broad-Based Index Options) (SR-CboeEDGX-2022-047).
---------------------------------------------------------------------------
XSPPM Pilot Program
Rule 29.11(a)(6) permits the listing and trading, in addition to
A.M.-settled XSP options, of P.M.-settled XSP options with third-
Friday-of-the-month expiration dates on a pilot basis. The Exchange
believes that continuing to permit the trading of XSP options on a
P.M.-settled basis will continue to encourage greater trading in XSP
options. Other than settlement and closing time on the last trading day
(pursuant to Rule 29.10(a)),\6\ contract terms for P.M.-settled XSP
options are the same as the A.M.-settled XSP options. The contract uses
a $100 multiplier and the minimum trading increments, strike price
intervals, and expirations are the same as the A.M.-settled XSP option
series. P.M.-settled XSP options have European-style exercise. The
Exchange also has flexibility to open for trading additional series in
response to customer demand.
---------------------------------------------------------------------------
\6\ Rule 29.10(a) permits transactions in P.M.-settled XSP
options on their last trading day to be effected on the Exchange
between the hours of 9:30 a.m. and 4:00 p.m. Eastern time. All other
transactions in index options are effected on the Exchange between
the hours of 9:30 a.m. and 4:15 p.m. Eastern time.
---------------------------------------------------------------------------
If the Exchange were to propose another extension of the XSPPM
Pilot Program, the Exchange would submit a filing proposing such
amendments to the XSPPM Pilot Program. Further, any positions
established under the XSPPM Pilot Program would not be impacted by the
expiration of the XSPPM Pilot Program. For example, if the Exchange
lists a P.M.-settled XSP option that expires after the XSPPM Pilot
Program expires (and is not extended), then those positions would
continue to exist. If the pilot were not extended, then the positions
could continue to exist. However, any further trading in those series
would be restricted to transactions where at least one side of the
trade is a closing transaction.
As part of the XSPPM Pilot Program, the Exchange submits a pilot
report to the Commission at least two months prior to the expiration
date of the pilot.\7\ This annual report contains an analysis of
volume, open interest, and trading patterns. In proposing to extend the
XSPPM Pilot Program, the Exchange will continue to abide by the
reporting requirements described in the Notice.\8\ Additionally, the
Exchange will provide the Commission with any additional data or
analyses the Commission requests because it deems such data or analyses
necessary to determine whether the XSPPM Pilot Program is consistent
with the Exchange Act. The Exchange is in the process of making public
on its website data and analyses previously submitted to the Commission
under the Pilot Program, and will make public any data and analyses it
submits to the Commission under the Pilot Program in the future. The
Exchange also notes that its affiliated options exchange, Cboe
Exchange, Inc. (``Cboe Options'') currently has pilots that permit
P.M.-settled third Friday-of-the-month XSP options.\9\
---------------------------------------------------------------------------
\7\ The Exchange notes that the Pilot Programs currently run on
a bi-annual pilot basis.
\8\ See supra note 5.
\9\ See Cboe Options Rule 4.13.13, which also permits P.M.-
settled third Friday-of-the-month SPX options on a pilot basis
(``SPXPM Pilot Program'').
---------------------------------------------------------------------------
Nonstandard Expirations Pilot Program
Rule 29.11(j)(1) permits the listing and trading, on a pilot basis,
of P.M.-settled options on broad-based indexes with nonstandard
expiration dates and is currently set to expire on May 8, 2023. The
Nonstandard Expirations Pilot Program permits both Weeklys and EOMs as
discussed below. Contract terms for the Weekly and EOM expirations are
similar to those of the A.M.-settled broad-based index options, except
that the Weekly and EOM expirations are P.M.-settled.
In particular, Rule 29.11(j)(1) permits the Exchange to open for
trading Weeklys on any broad-based index eligible for standard options
trading to expire on any Monday, Wednesday, or Friday (other than the
third Friday-of-the-month or days that coincide with an EOM). Weeklys
are subject to all provisions of Rule 29.11 and are treated the same as
options on the same underlying index that expire on the third Friday of
the expiration month. However, under the Nonstandard Expirations Pilot
Program, Weeklys are P.M.-settled, and new Weekly series may be added
up to and including on the expiration date for an expiring Weekly.
Rule 29.11(a)(2) permits the Exchange to open for trading EOMs on
any broad-based index eligible for standard options trading to expire
on the last trading day of the month. EOMs are subject to all
provisions of Rule 29.11 and treated the same as options on the same
underlying index that expire on the third Friday of the expiration
month. However, under the Nonstandard Expirations Pilot Program, EOMs
are P.M.-settled, and new series of EOMs may be added up to and
including on the expiration date for an expiring EOM.
As stated above, this proposed rule change extends the Nonstandard
Expirations Pilot Program for broad-based index options on a pilot
basis, for a period of six months. If the Exchange were to propose an
additional extension of the Nonstandard Expirations Pilot Program, the
Exchange would submit additional filings proposing such amendments.
Further, any positions established under the Nonstandard Expirations
Pilot Program would not be impacted by the expiration of the pilot. For
example, if the Exchange lists a Weekly or EOM that expires after the
Nonstandard Expirations Pilot Program expires (and is not extended),
then those positions would continue to exist. However, any further
trading in those series would be restricted to transactions where at
least one side of the trade is a closing transaction.
As part of the Nonstandard Expirations Pilot Program, the Exchange
submits a pilot report to the Commission at least two months prior to
[[Page 30355]]
the expiration date of the pilot.\10\ This annual report contains an
analysis of volume, open interest, and trading patterns. In proposing
to extend the Nonstandard Expirations Pilot Program, the Exchange will
continue to abide by the reporting requirements described in the
Notice.\11\ Additionally, the Exchange will provide the Commission with
any additional data or analyses the Commission requests because it
deems such data or analyses necessary to determine whether the
Nonstandard Expirations Pilot Program is consistent with the Exchange
Act. The Exchange makes its annual data and analyses previously
submitted to the Commission under the Pilot Program public on its
website and will continue to make public any data and analyses it
submits to the Commission under the Pilot Program in the future. The
Exchange notes that other exchanges, including its affiliated exchange,
Cboe Options, currently have pilots that have weekly and end-of-month
expirations.\12\
---------------------------------------------------------------------------
\10\ See supra note 7.
\11\ See supra note 5.
\12\ See Cboe Options Rule 4.13(e); and Phlx Rule 1101A(b)(5).
---------------------------------------------------------------------------
Additional Information
The Exchange believes there is sufficient investor interest and
demand in the XSPPM and Nonstandard Expirations Pilot Programs to
warrant their extension. The Exchange believes that the Programs have
provided investors with additional means of managing their risk
exposures and carrying out their investment objectives. The proposed
extensions will continue to offer investors the benefit of added
transparency, price discovery, and stability, as well as the continued
expanded trading opportunities in connection with different expiration
times. The Exchange proposes the extension of the Pilot Programs in
order to continue to give the Commission more time to consider the
impact of the Pilot Programs. To this point, the Exchange believes that
the Pilot Programs have been well-received by its Members and the
investing public, and the Exchange would like to continue to provide
investors with the ability to trade P.M.-settled XSP options and
contracts with nonstandard expirations. All terms regarding the trading
of the Pilot Products shall continue to operate as described in the
XSPPM and Nonstandard Expirations Notice.\13\ The Exchange merely
proposes herein to extend the terms of the Pilot Programs to November
6, 2023.
---------------------------------------------------------------------------
\13\ See supra note 5.
---------------------------------------------------------------------------
Furthermore, the Exchange has not experienced any adverse market
effects with respect to the Programs. The Exchange will continue to
monitor for any such disruptions or the development of any factors that
would cause such disruptions. The Exchange represents it continues to
have an adequate surveillance program in place for index options and
that the proposed extension will not have an adverse impact on
capacity.
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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposed extension of
the Pilot Programs will continue to provide greater opportunities for
investors. The Exchange believes that the Pilot Programs have been
successful to date. The proposed rule change allows for an extension of
the Program for the benefit of market participants. The Exchange
believes that there is demand for the expirations offered under the
Program and believes that P.M.-settled XSP, Weekly Expirations and EOMs
will continue to provide the investing public and other market
participants with the opportunities to trade desirable products and to
better manage their risk exposure. The proposed extension will also
provide the Commission further opportunity to observe such trading of
the Pilot Products. Further, the Exchange has not encountered any
problems with the Programs; it has not experienced any adverse effects
or meaningful regulatory or capacity concerns from the operation of the
Pilot Programs. Also, the Exchange believes that such trading pursuant
to the XSPPM Pilot Program has not, and will not, adversely impact fair
and orderly markets on Expiration Fridays for the underlying stocks
comprising the S&P 500 index.
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. Specifically, the Exchange
believes that, by extending the expiration of the Pilot Programs, the
proposed rule change will allow for further analysis of the Program and
a determination of how the Program shall be structured in the future.
In doing so, the proposed rule change will also serve to promote
regulatory clarity and consistency, thereby reducing burdens on the
marketplace and facilitating investor protection.
Specifically, the Exchange does not believe the continuation of the
Pilot Program will impose any unnecessary or inappropriate burden on
intramarket competition because it will continue to apply equally to
all EDGX Options market participants, and the Pilot Products will
continue to be available to all EDGX Options market participants. The
Exchange believes there is sufficient investor interest and demand in
the Pilot Programs to warrant its extension. The Exchange believes
that, for the period that the Pilot Programs has been in operation, it
has provided investors with desirable products with which to trade.
Furthermore, as stated above, the Exchange maintains that it has not
experienced any adverse market effects or regulatory concerns with
respect to the Pilot Programs. The Exchange further does not believe
that the proposed extension of the Pilot Programs will impose any
burden on intermarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act because it only applies to
trading on EDGX Options. To the extent that the continued trading of
the Pilot Products may make EDGX Options a more attractive marketplace
to market participants at other exchanges, such market participants may
elect to become EDGX Options market participants.
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.
[[Page 30356]]
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 \16\ and Rule 19b-
4(f)(6) thereunder.\17\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \19\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Exchange states that
waiver of the 30-day operative delay will allow it to extend the Pilot
Programs prior to its expiration on May 8, 2023, and maintain the
status quo, thereby reducing market disruption. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest as it will allow the
Pilot Programs to continue uninterrupted, thereby avoiding investor
confusion that could result from a temporary interruption in the Pilot
Programs. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change as operative
upon filing.\20\
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ 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).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#8dfff8e1e8a0eee2e0e0e8e3f9fecdfee8eea3eae2fb"><span class="__cf_email__" data-cfemail="2250574e470f414d4f4f474c5651625147410c454d54">[email protected]</span></a>. Please include
File Number SR-CboeEDGX-2023-035 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-CboeEDGX-2023-035. 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. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to File Number SR-CboeEDGX-2023-035, and should be
submitted on or before June 1, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-10037 Filed 5-10-23; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on May 11, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.