Notice2023-21953
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rule 4.13
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Published
October 4, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 191 (Wednesday, October 4, 2023)</title>
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[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68896-68899]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-21953]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98621; File No. SR-CBOE-2023-054]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Rule 4.13
September 28, 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 September 28, 2023, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 4.13. The text of the proposed rule change is provided
below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 4.13. Series of Index Options
* * * * *
(e) Nonstandard Expirations Program.
(1) Weekly Expirations. The Exchange may open for trading Weekly
Expirations on any broad-based index eligible for standard options
trading to expire on any Monday, Tuesday, Wednesday, Thursday, or
Friday (other than the third Friday-of-the-month or days that
coincide with an EOM expiration). [In addition, the Exchange may
also open for trading Weekly Expirations on S&P 500 Index and Mini-
S&P 500 Index options to expire on any Tuesday or Thursday (other
than days that coincide with an EOM expiration).] Weekly Expirations
shall be subject to all provisions of this Rule and treated the same
as options on the same underlying index that expire on the third
Friday of the expiration month; provided, however, that Weekly
Expirations shall be P.M.-settled and new series in Weekly
Expirations may be added up to and including on the expiration date
for an expiring Weekly Expiration.
The maximum number of expirations that may be listed for each
Weekly Expiration (i.e., a Monday expiration, Tuesday expiration,
Wednesday expiration, Thursday
[[Page 68897]]
expiration, or Friday expiration, as applicable) in a given class is
the same as the maximum number of expirations permitted in Rule
4.13(a)(2) for standard options on the same broad-based index.
Weekly Expirations need not be for consecutive Monday, Tuesday,
Wednesday, Thursday, or Friday expirations as applicable; however,
the expiration date of a non-consecutive expiration may not be
beyond what would be considered the last expiration date if the
maximum number of expirations were listed consecutively. Weekly
Expirations that are first listed in a given class may expire up to
four weeks from the actual listing date. If the Exchange lists EOMs
and Weekly Expirations as applicable in a given class, the Exchange
will list an EOM instead of a Weekly Expiration that expires on the
same day in the given class. Other expirations in the same class are
not counted as part of the maximum number of Weekly Expirations for
an applicable broad-based index class. If the Exchange is not open
for business on a respective Monday, the normally Monday expiring
Weekly Expirations will expire on the following business day. If the
Exchange is not open for business on a respective Tuesday,
Wednesday, Thursday, or Friday, the normally Tuesday, Wednesday,
Thursday, or Friday expiring Weekly Expirations will expire on the
previous business day. If two different Weekly Expirations [on S&P
500 Index or Mini-S&P 500 Index options] would expire on the same
day because the Exchange is not open for business on a certain
weekday, the Exchange will list only one of such Weekly Expirations.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</a>), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 4.13(e), which governs its
Nonstandard Expirations Program (``Program''), to permit P.M.-settled
options on any broad-based index eligible for standard options trading
that expire on Tuesday or Thursday. Currently under the Program, the
Exchange is permitted to list P.M.-settled options on any broad-based
index eligible for standard trading that expire on: (1) any Monday,
Wednesday, or Friday (other than the third Friday-of-the-month or days
that coincide with an EOM expiration (as defined below) and, with
respect to options on the S&P 500 Index (``SPX options'') and the Mini-
S&P 500 Index (``XSP options'') any Tuesday or Thursday (``Weekly
Expirations'') and (2) the last trading day of the month (``End of
Month Expirations'' or ``EOMs'').\3\ The Exchange notes that permitting
Tuesday and Thursday expirations for all broad-based indexes, as
proposed, would be in addition to the options with Monday, Wednesday
and Friday expirations that the Exchange may (and does) already list on
those indexes, as they are permissible Weekly Expirations for options
on a broad-based index pursuant to Rule 4.13(e)(1). The proposal merely
expands the availability of Tuesday and Thursday Weekly Expirations,
and thus all Weekly Expirations available under the Program, to all
broad-based indexes eligible for standard options trading, on which the
Exchange may currently list Monday, Wednesday, and Friday Weekly
expirations under the Program.
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\3\ See Rule 4.13(e).
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The Program for Weekly Expirations will apply to any broad-based
index option with Tuesday and Thursday expirations in the same manner
as it currently applies to all other P.M.-settled broad-based index
options with Monday, Wednesday, and Friday expirations and to SPX and
XSP options with Tuesday and Thursday expirations. Specifically, as set
forth in Rule 4.13(e), Weekly Expirations, including the proposed
Tuesday and Thursday expirations, are subject to all provisions of Rule
4.13 and treated the same as options on the same underlying index that
expire on the third Friday of the expiration month; provided, however,
that Weekly Expirations are P.M.-settled, and new series in Weekly
Expirations may be added up to and including on the expiration date for
an expiring Weekly Expiration.
The maximum number of expirations that may be listed for each
Weekly Expiration (i.e., a Monday expiration, Tuesday expiration,
Wednesday expiration, Thursday expiration, or Friday expiration, as
applicable) in a given class is the same as the maximum number of
expirations permitted in Rule 4.13(a)(2) for standard options on the
same broad-based index. Weekly Expirations need not be for consecutive
Monday, Tuesday, Wednesday, Thursday, or Friday expirations as
applicable; however, the expiration date of a nonconsecutive expiration
may not be beyond what would be considered the last expiration date if
the maximum number of expirations were listed consecutively. Weekly
Expirations that are first listed in a given class may expire up to
four weeks from the actual listing date. If the Exchange lists EOMs and
Weekly Expirations as applicable in a given class, the Exchange will
list an EOM instead of a Weekly Expiration that expires on the same day
in the given class. Other expirations in the same class are not counted
as part of the maximum number of Weekly Expirations for an applicable
broad-based index class. If the Exchange is not open for business on a
respective Monday, the normally Monday expiring Weekly Expirations will
expire on the following business day. If the Exchange is not open for
business on a respective Tuesday, Wednesday, Thursday, or Friday, the
normally Tuesday, Wednesday, Thursday, or Friday expiring Weekly
Expirations will expire on the previous business day. If two different
Weekly Expirations on a broad-based index would expire on the same day
because the Exchange is not open for business on a certain weekday, the
Exchange will list only one of such Weekly Expirations. In addition,
like all Weekly Expirations, pursuant to Rule 4.13(e)(3), transactions
in expiring broad-based index options with Tuesday and Thursday
expirations may be effected on the Exchange between the hours of 9:30
a.m. and 4:00 p.m. on their last trading day (Eastern Time).
The Exchange believes that that the introduction of Tuesday and
Thursday expirations for all broad-based index options (rather than
offering those expirations for just two indexes) will expand hedging
tools available to market participants while also providing greater
trading opportunities, regardless of in which index option market they
participate. By offering expanded Tuesday and Thursday expirations
along with the current Monday, Wednesday and Friday expirations, the
proposed rule change will allow market participants to purchase options
on all broad-based index options available for trading on the Exchange
in a manner more aligned with specific timing needs and more
effectively tailor their investment and
[[Page 68898]]
hedging strategies and manage their portfolios. In particular, the
proposed rule change will allow market participants to roll their
positions on more trading days, thus with more precision, spread risk
across more trading days and incorporate daily changes in the markets,
which may reduce the premium cost of buying protection.
The Exchange believes there is sufficient investor interest and
demand in Tuesday and Thursday expirations for broad-based index
options beyond SPX and XSP to warrant inclusion in the Program and that
the Program, as amended, will continue to provide investors with
additional means of managing their risk exposures and carrying out
their investment objectives.\4\ With regard to the impact of this
proposal on system capacity, the Exchange has analyzed its capacity and
represents that it believes that the Exchange and OPRA have the
necessary systems capacity to handle any potential additional traffic
associated with trading of broad-based index options with Tuesday and
Thursday expirations. The Exchange does not believe that its Trading
Permit Holders (``TPHs'') will experience any capacity issues as a
result of this proposal and represents that it will monitor the trading
volume associated with any possible additional options series listed as
a result of this proposal and the effect (if any) of these additional
series on market fragmentation and on the capacity of the Exchange's
automated systems.
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\4\ The Exchange currently lists Tuesday and Thursday
expirations in SPX and XSP options pursuant to the Program. The
Exchange also already allows options on broad-based indexes to
expire on Tuesdays for normally Monday or Wednesday expiring options
when the Exchange is not open for business on a respective Monday or
Wednesday (as applicable), and already allows options on broad-based
indexes to expire on Thursdays for normally Friday expiring options
when the Exchange is not open for business on a respective Friday.
Also, EOM options in any broad-based indexes may currently be listed
to expire on a Tuesday or Thursday.
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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.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \6\ 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 facilitation
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) \7\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
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In particular, the Exchange believes that the proposed rule change
will 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. The Exchange believes that that the
introduction of Tuesday and Thursday expirations for all broad-based
index options (rather than offering those expirations for just two
indexes) will provide investors with expanded hedging tools and greater
trading opportunities and flexibility, regardless of in which index
option market they participate. As a result, investors will have
additional means to manage their risk exposures and carry out their
investment objectives. By offering expanded Tuesday and Thursday
expirations along with the current Monday, Wednesday and Friday
expirations, the proposed rule change will allow market participants to
purchase options on all broad-based index options available for trading
on the Exchange in a manner more aligned with specific timing needs and
more effectively tailor their investment and hedging strategies and
manage their portfolios. For example, the proposed rule change will
allow market participants to roll their positions on more trading days,
thus with more precision, spread risk across more trading days and
incorporate daily changes in the markets, which may reduce the premium
cost of buying protection. The Exchange represents that it believes
that it has the necessary systems capacity to support any additional
traffic associated with trading of options on all broad-based index
options with Tuesday and Thursday expirations and does not believe that
its TPHs will experience any capacity issues as a result of this
proposal.
The Commission previously recognized that listing Tuesday and
Thursday expirations for SPX and XSP options was consistent with the
Act.\8\ The Commission noted that Tuesday and Thursday expirations in
these index options would ``offer additional investment options to
investors and may be useful for their investment or hedging objectives
. . . .'' \9\ The Exchange also notes it previously listed P.M.-settled
broad-based index options with weekly expirations pursuant to a pilot
program, so the Commission could monitor the impact of P.M. settlement
of cash-settled index derivatives on the underlying cash markets (while
recognizing that these risks may have been mitigated given enhanced
closing procedures in use in the primary equity markets); however, the
Commission recently approved a proposed rule change to make that pilot
program permanent. The Commission noted that the data it reviewed in
connection with the pilot demonstrated that these options (including
SPX and XSP options with Tuesday and Thursday expirations) ``benefitted
investors and other market participants by providing more flexible
trading and hedging opportunities while also having no disruptive
impact on the market'' and were thus consistent with the Act.\10\ The
proposed rule change is consistent with these findings, as it will
benefit investors and other market participants that participate in the
markets for broad-based index options other than SPX and XSP options in
the same manner by providing them with more flexible trading and
hedging opportunities. Additionally, the Exchange does not believe the
listing of additional P.M.-settled options on other broad-based indexes
will have any significant economic impact on the underlying component
securities surrounding the close as a result of expiring p.m.-settled
options or impact market quality, based on the data provided to and
reviewed by the Commission (and the Commission's own conclusions based
on that review, as noted above) and due to the significant changes in
closing procedures in the decades since index options moved to a.m.-
settlement.\11\
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\8\ See Securities Exchange Act Release Nos. 94682 (April 12,
2022), 87 FR 22993, 22994 (April 18, 2022) (SR-CBOE-2022-005)
(approval of proposed rule change to list P.M.-settled SPX options
that expire on Tuesdays and Thursdays) (``Daily SPX Option
Approval''); and 95795 (September 15, 2022), 87 FR 57745, 57746
(September 21, 2022) (SR-CBOE-2022-039) (approval of proposed rule
change to list P.M.-settled XSP options that expire on Tuesdays and
Thursdays) (``Daily XSP Option Approval'').
\9\ See Daily SPX Option Approval at 22995; and Daily XSP Option
Approval at 57746.
\10\ See Securities Exchange Act Release No. 98456 at 10-11
(September 20, 2023) (SR-CBOE-2023-020).
\11\ See id.
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[[Page 68899]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because options on broad-based
indexes with Tuesday and Thursday expirations will be available to all
market participants. By listing options on all available broad-based
indexes that expire on Tuesdays and Thursdays, the proposed rule change
will provide all investors that participate in the markets for options
on all broad-based indexes available for trading on the Exchange with
greater trading and hedging opportunities and flexibility to meet their
investment and hedging needs, which are already available for SPX and
XSP options. Additionally, Tuesday and Thursday expiring broad-based
index options will trade in the same manner as Weekly Expirations
currently trade, including Tuesday and Thursday expiring SPX and XSP
options.
The Exchange does not believe that the proposal to list options on
all broad-based indexes with Tuesday and Thursday expirations will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because these
options are proprietary Exchange products. Other exchanges offer
nonstandard expiration programs for index options as well as short-term
options programs for certain equity options (including options on
certain exchange-traded funds that track broad-based indexes) that
expire on Tuesdays and Thursdays \12\ and are welcome to similarly
propose to list Tuesday and Thursday options on those index or equity
products. To the extent that the addition of options on additional
broad-based indexes that expire on Tuesdays and Thursdays being
available for trading on the Exchange makes the Exchange a more
attractive marketplace to market participants at other exchanges, such
market participants are free to elect to become market participants on
the Exchange.
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\12\ See, e.g., Nasdaq PHLX, LLC Options 4A, Section 12
(permitting nonstandard expirations, including expirations on
Tuesdays and Thursdays, for Nasdaq-100 index options and Nasdaq 100-
Micro index options); and Nasdaq ISE, LLC Options 4, Section 5,
Supplementary Material .03 (permitting short-term options series
with daily expirations for SPY and QQQ options).
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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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2d5f584148004e4240404843595e6d5e484e034a425b"><span class="__cf_email__" data-cfemail="8cfef9e0e9a1efe3e1e1e9e2f8ffccffe9efa2ebe3fa">[email protected]</span></a>. Please include
file number SR-CBOE-2023-054 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-2023-054. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 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-CBOE-2023-054 and should be
submitted on or before October 25, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21953 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P
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