Notice2024-15769
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Strike Interval for Options on SPDR® Gold Shares
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
July 18, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 138 (Thursday, July 18, 2024)</title>
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[Federal Register Volume 89, Number 138 (Thursday, July 18, 2024)]
[Notices]
[Pages 58442-58444]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-15769]
[[Page 58442]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100520; File No. SR-CBOE-2024-030]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Strike Interval for Options on SPDR[supreg] Gold Shares
July 12, 2024.
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 July 1, 2024, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I 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 Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend the strike interval for options on SPDR[supreg] Gold Shares
(``GLD''). The text of the proposed rule change is provided below.]
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 4.5. Series of Option Contracts Open for Trading
* * * * *
Interpretations and Policies
* * * * *
.07
* * * * *
(b) Notwithstanding Interpretation and Policy .01 and
Interpretation and Policy .07(a) above, the interval between strike
prices of series of options on Units of the Standard & Poor's
Depository Receipts Trust (``SPY''), iShares S&P 500 Index ETF
(``IVV''), PowerShares QQQ Trust (``QQQ''), iShares Russell 2000 Index
Fund (``IWM''), [and] The DIAMONDS Trust (``DIA''), and SPDR[supreg]
Gold Shares (``GLD'') will be $1 or greater.
* * * * *
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 4.5, ``Series of Options
Contracts Open for Trading.'' Specifically, the Exchange proposes to
amend Rule 4.5, Interpretation and Policy .07(b) to allow for the
interval between strike prices of series of options on Exchange-Traded
Fund Shares (``ETFs'' or ``Units'') of SPDR[supreg] Gold Shares or
``GLD'' to be $1 or greater, including where the strike price is
greater than $200.
Currently Rule 4.5, Interpretation and Policy .07(a) provides that,
Notwithstanding Interpretation and Policy .01 above, and except
for options on Units covered under Interpretation and Policies .05
and .06 above, the interval between strike prices of series of
options on Units, as defined under Interpretation and Policy .06 to
Rule 4.3, will be $1 or greater where the strike price is $200 or
less and $5.00 or greater where the strike price is greater than
$200. For options on Units that are used to calculate a volatility
index, the Exchange may open for trading $0.50 strike price
intervals as provided for in Interpretation and Policy .15 to this
Rule 4.5.
Further, current Rule 4.5, Interpretation and Policy .07(b)
provides that the interval between strike prices of series of options
on Units of the SPDR S&P 500 ETF (``SPY''), iShares Core S&P 500 ETF
(``IVV''), PowerShares QQQ Trust (``QQQ''), iShares Russell 2000 Index
Fund (``IWM''), and The DIAMONDS Trust (``DIA'') will be $1 or greater.
At this time, the Exchange proposes to modify the interval setting
regime to be $1 or greater for GLD options, similar to SPY, IVV, QQQ,
IWM and DIA. The Exchange believes that the proposed rule change would
make GLD options easier for investors and traders to use and more
tailored to their investment needs. GLD is an Exchange-Traded Fund
Share designed to closely track the price and performance of the price
of gold bullion. GLD is widely quoted as an indicator of gold stock
prices and is a significant indicator of overall economic health.
Investors use GLD to diversify their portfolios and benefit from market
trends. Additionally, GLD is a leading product in its asset class that
trades within a ``complex'' where, in addition to the underlying
security, there are multiple instruments available for hedging such as,
COMEX Gold Futures; Gold Daily Futures; iShares GOLD Trust; SPDR GOLD
Minishares Trust; Aberdeen Physical Gold Trust; and GraniteShares Gold
Shares. Accordingly, the Exchange believes that offering a wider base
of GLD options affords traders and investors important hedging and
trading opportunities, particularly in the midst of current price
trends. The Exchange believes that not having the proposed $1 strike
price intervals above $200 in GLD significantly constricts investors'
hedging and trading possibilities. The Exchange therefore believes that
by having smaller strike intervals in GLD, investors would have more
efficient hedging and trading opportunities due to the lower $1
interval ascension. The proposed $1 interval above the $200 strike
price, will result in having at-the-money series based upon the
underlying ETF moving less than 1%. The Exchange believes that the
proposed strike setting regime is in line with the slower movements of
broad-based indices. Considering the fact that $1 intervals already
exist below the $200 price point and that GLD have consistently
inclined in price toward the $200 level, the Exchange believes that
continuing to maintain the current $200 level (above which intervals
increase 500% to $5), may have a negative effect on investing, trading
and hedging opportunities, and volume. The Exchange believes that the
investing, trading, and hedging opportunities available with GLD
options far outweighs any potential negative impact of allowing GLD
options to trade in more finely tailored intervals above the $200 price
point. The proposed strike setting regime would permit strikes to be
set to more closely reflect the
[[Page 58443]]
increasing value in the underlying and allows investors and traders to
roll open positions from a lower strike to a higher strike in
conjunction with the price movements of the underlying ETF. Under the
current rule, where the next higher available series would be $5 away
above a $200 strike price, the ability to roll such positions would be
impaired. Accordingly, to move a position from a $200 strike to a $205
strike under the current rule, an investor would need for the
underlying product to move 2.5%, and would not be able to execute a
roll up until such a large movement occurred. The Exchange believes
that with the proposed rule change, the investor would be in a
significantly safer position of being able to roll his open options
position from a $200 to a $201 strike price, which is only a 0.5% move
for the underlying. As a result, the proposed rule change will allow
the Exchange to better respond to customer demand for GLD strike price
more precisely aligned with the smaller, longer-term incremental
increases in the underlying ETF. The Exchange believes that the
proposed rule change, like the other strike price programs currently
offered by the Exchange, will benefit investors by providing investors
the flexibility to more closely tailor their investment and hedging
decisions using GLD options. Moreover, by allowing series of GLD
options to be listed in $1 intervals between strike prices over $200,
the proposal will moderately augment the potential total number of
options series available on the Exchange. However, the Exchange
believes it and the Options Price Reporting Authority (``OPRA'') have
the necessary systems capacity to handle any potential additional
traffic associated with this proposed rule change. The Exchange also
believes that Trading Permit Holders (``TPHs'') will not have a
capacity issue due to the proposed rule change. In addition, the
Exchange represents that it does not believe that this expansion will
cause fragmentation of liquidity, but rather, believes that finer
strike intervals will serve to increase liquidity available as well as
price efficiency by providing more trading opportunities for all market
participants.
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 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) \7\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(1) of the Act,\8\ which provides
that the Exchange be organized and have the capacity to be able to
carry out the purposes of the Act and to enforce compliance by the
Exchange's TPHs and persons associated with its TPHs with the Act, the
rules and regulations thereunder, and the rules of the Exchange.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
\8\ 15 U.S.C. 78f(b)(1).
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In particular, the proposed rule change will allow investors to
more easily use GLD options. Moreover, the proposed rule change would
allow investors to better trade and hedge positions in GLD options
where the strike price is greater than $200, and ensure that investors
in both options are not at a disadvantage simply because of the strike
price. The Exchange believes the proposed rule change is consistent
with Section 6(b)(1) of the Act, which provides that the Exchange be
organized and have the capacity to be able to carry out the purposes of
the Act and the rules and regulations thereunder, and the rules of the
Exchange. The proposal allows the Exchange to respond to customer
demand to allow GLD options to trade in $1 intervals above a $200
strike price. The Exchange does not believe that the proposed rule
would create additional capacity issues or affect market functionality.
As noted above, ETF options trade in wider $5 intervals above a $200
strike price, whereby options at or below a $200 strike price trade in
$1 intervals. This creates a situation where contracts on the same
option class effectively may not be able to execute certain strategies
such as, for example, rolling to a higher strike price, simply because
of the $200 strike price above which options intervals increase by
500%. This proposal remedies the situation by establishing an exception
to the current ETF interval regime for GLD options to allow such
options to trade in $1 or greater intervals at all strike prices.
The Exchange believes that the proposed rule change, like other
strike price programs currently offered by the Exchange, will benefit
investors by giving them increased flexibility to more closely tailor
their investment and hedging decisions. By way of example, GLD is a
leading product in its asset class and it trades within a ``complex''
where, in addition to the underlying security, there are multiple
instruments available for hedging such as, COMEX Gold Futures; Gold
Daily Futures; iShares GOLD Trust; SPDR GOLD Minishares Trust; Aberdeen
Physical Gold Trust; and GraniteShares Gold Shares.
With regard to the impact of this proposal on system capacity, the
Exchange believes it and OPRA have the necessary systems capacity to
handle any potential additional traffic associated with this proposed
rule change. The Exchange believes that its TPHs will not have a
capacity issue as a result of this proposal. Further, the Exchange does
not believe the proposal does not unfairly discriminate among market
participants, as all market participants will be treated in the same
manner under this proposal.
Finally, the Exchange notes the proposed rule change is
substantively the same as a rule change proposed by Nasdaq ISE, LLC
(``ISE'') which the Commission recently approved.\9\
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\9\ See Securities Exchange Act Release No. 100447 (June 28,
2024) (SR-ISE-2024-17).
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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. Rather, the Exchange
believes that the proposed rule change will result in additional
investment options and opportunities to achieve the investment and
trading objectives of market participants seeking efficient trading and
hedging vehicles, to the benefit of investors, market participants, and
the marketplace in general. Specifically, the Exchange believes that
GLD options investors and traders will significantly benefit from the
availability of finer strike price intervals above a $200 price point.
In addition, the interval setting regime the
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Exchange proposes to apply to GLD options is currently applied to SPY,
IVV, QQQ, IWM and DIA options, which are similarly popular and widely
traded ETF products and track indexes at similarly high price levels.
Thus, the proposed strike setting regime for GLD options will allow
options on this an actively traded ETF with index levels at
corresponding price levels to trade pursuant to the same strike setting
regime. This will permit investors to employ similar investment and
hedging strategies for each of these options.
The Exchange does not believe the proposal will impose any burden
on inter-market competition, as nothing prevents other options
exchanges from proposing similar rules to make a finer strike price
intervals above a $200 price point available for GLD options. The
Exchange notes that the proposed rule change is not a novel proposal,
as the Commission recently approved a substantively identical proposal
of another exchange.\10\ 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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\10\ See Securities Exchange Act Release No. 100447 (June 28,
2024) (SR-ISE-2024-17).
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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 \11\ and Rule 19b-4(f)(6) thereunder.\12\
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 \13\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\14\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. According to
the Exchange, the proposed rule change is a competitive response to a
filing submitted by ISE that was recently approved by the
Commission.\17\ The Exchange has stated that waiver of the 30-day
operative delay would allow the Exchange to implement the proposal at
the same time as its competitor exchange, thus creating competition
among GLD options. 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 as operative upon filing.\18\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ See supra note 9.
\18\ 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="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#097b7c656c246a6664646c677d7a497a6c6a276e667f"><span class="__cf_email__" data-cfemail="fe8c8b929bd39d9193939b908a8dbe8d9b9dd0999188">[email protected]</span></a>. Please include
file number SR-CBOE-2024-030 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-2024-030. 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-2024-030 and should be
submitted on or before August 8, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15769 Filed 7-17-24; 8:45 am]
BILLING CODE 8011-01-P
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