Notice2025-04164
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Allow for Expiring Non-Volatility A.M.-Settled Index Options To Trade Until the Exercise Settlement Value Is Determined on the Expiration Date
Primary source
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Published
March 17, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 50 (Monday, March 17, 2025)</title>
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[Federal Register Volume 90, Number 50 (Monday, March 17, 2025)]
[Notices]
[Pages 12382-12384]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-04164]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102583; File No. SR-CBOE-2025-011]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Allow for Expiring Non-Volatility
A.M.-Settled Index Options To Trade Until the Exercise Settlement Value
Is Determined on the Expiration Date
March 11, 2025.
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 February 26, 2025, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
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
The Exchange proposes to amend Rule 4.13 to allow for expiring non-
Volatility A.M.-settled index options to trade until the exercise
settlement value is determined on the expiration date. 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://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 to allow for expiring non-
Volatility A.M.-settled index options to trade until the exercise
settlement value is determined on the expiration date. Currently, the
last day of trading for non-Volatility A.M.-settled index options is
the business day preceding the last day of trading in the underlying
securities prior to expiration. Expiring non-Volatility A.M.-settled
index options that are eligible to trade during Global Trading Hours
(``GTH'') \3\ stop
[[Page 12383]]
trading at the end of the Curb session (following Regular Trading Hours
(``RTH'')) on the Thursday prior to expiration day, with settlement on
Friday morning (i.e., expiration day); the option's settlement value is
determined by the RTH opening price on Friday (i.e., expiration day).
The GTH session from Thursday night to Friday morning is considered
part of the Friday business day. Thus, current rules prevent trading in
an expiring series during the GTH session on Thursday night and early
Friday morning, despite there being a trading opportunity during that
session and the settlement value of the option not being determined
until the opening of RTH on Friday morning (and thus after the close of
the GTH session), which leaves the possibility for overnight risk.
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\3\ The Exchange's Rules provide that the Exchange may designate
as eligible for trading during GTH any exclusively listed option
that the Exchange has designated for trading under Chapter 4,
Section B. Currently, S&P 500 Index options (``SPX''), Cboe
Volatility Index options (``VIX''), and Mini-SPX Index options
(``XSP'') are approved for trading during GTH. See Rule 5.1(c)(1).
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To help to mitigate this risk, the Exchange proposes to amend its
Rules to allow for expiring non-Volatility A.M.-settled index options
to trade until the exercise settlement value is determined on the
expiration date. This would allow Users an opportunity to trade and
manage risk for expiring index options through the GTH session prior to
settlement, for those non-Volatility A.M.-settled index options that
trade during GTH. This has no impact on options that are not eligible
to trade during GTH, as eligible trading for such options will continue
to end at the conclusion of the RTH session (or the Curb session, if
eligible) on the preceding Thursday.
Specifically, the Exchange proposes to amend Rule 4.13(a)(4).
Currently, Rule 4.13(a)(4) provides that the last day of trading for
non-Volatility A.M.-settled index options \4\ shall be the business day
preceding the last day of trading in the underlying securities prior to
expiration. The Exchange proposes to amend Rule 4.13(a)(4) to state
that expiring non-Volatility A.M.-settled index options may trade until
the exercise settlement value is determined on the expiration date. The
Exchange also proposes to amend Rule 4.13(a)(4) to provide that the
determination of the current index value at the expiration of an A.M.-
settled index option shall occur at the opening of the RTH trading
session on expiration day (rather than the last day of trading in the
underlying securities prior to expiration day).
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\4\ The Exchange notes that SPX and XSP are the non-Volatility
A.M.-settled index options currently approved for trading during
GTH. While the Exchange may list A.M.-settled XSP options, there are
none listed as of the date of this filing.
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The Exchange notes that S&P Index futures and options contracts
(offered by the Chicago Mercantile Exchange) are permitted to trade
until 9:30 a.m. ET on final settlement date/expiration date. As such,
the Exchange believes the proposed change will better align the
available trading hours for similar Exchange-traded products and
provide investors with additional opportunities to manage investment
risk.
Similarly, the Exchange proposes to amend Rule 4.13(a)(5)(C).
Currently, Rule 4.13(a)(5)(C) provides that the expiration date of a
Volatility Index option shall be the same day that the exercise
settlement value of the Volatility Index \5\ is calculated. Rule
4.13(a)(5)(C) also states that the last trading day for a Volatility
Index option shall be the business day immediately preceding the
expiration date of the Volatility Index option. When the last trading
day is moved because of an Exchange holiday, the last trading day for
an expiring option contract will be the day immediately preceding the
last regularly scheduled trading day. The Exchange proposes to amend
Rule 4.13(a)(5)(C) \6\ to remove language regarding last trading day
and instead provide that expiring Volatility Index options may trade
until 9:00 a.m. ET \7\ on the expiration date.
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\5\ The Exchange notes that VIX is the Volatility A.M.-settled
index option currently approved for trading during GTH.
\6\ As part of the proposed rule change, the Exchange proposes
to rename Rule 4.13(a)(5)(C) from ``Expiration Date and Last Day of
Trading'' to ``Expiration Date and End of Trading.''
\7\ See Rule 1.6.
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The Exchange notes that VIX futures contracts (offered by Cboe
Futures Exchange, LLC) are permitted to trade until 9:00 a.m. ET on the
final settlement date.\8\ As such, the Exchange believes the proposed
change will better align the available trading hours for related
Exchange-traded products and provide investors with additional
opportunities to manage investment risk.
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\8\ See Cboe Futures Exchange, LLC Rule 1202(b).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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In particular, the Exchange believes the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market and a national market system, because it may provide Users with
the ability to better manage their risk pre-settlement in classes that
trade during GTH. As noted above, for those classes that trade during
GTH, the last trading opportunity currently ends at the close of the
Curb session on Thursday despite the fact that there is a GTH trading
session that occurs between then and the determination of the
settlement value is at Friday's open, leaving the possibility of some
overnight risk. The GTH session was designed, in general, to provide
investors with the ability to manage risk more efficiently, react to
global macroeconomic events as they are happening and adjust options
positions (in those classes that trade during GTH) nearly around the
clock. The Exchange therefore believes that the proposed rule change is
consistent with that purpose, as it is reasonably designed to provide
an appropriate mechanism for Users to manage risk as options approach
expiration, while providing for continued Exchange oversight pursuant
to the Act, trade reporting, and surveillance within the GTH trading
session. The proposed changes align trading of expiring A.M.-settled
index options that trade during GTH with trading of those that trade
during only during RTH and Curb, i.e., allows for Users to take
advantage of all available trading hours up until the settlement value
is determined.
Further, the Exchange believes that eliminating the unnecessary gap
in trading and allowing these A.M.-settled options to trade during the
Thursday/Friday GTH session that are part of the expiration Friday
business day (the same as occurs on non-expiration weeks) may serve to
benefit investors by
[[Page 12384]]
providing additional trading opportunities for options closer to their
expiration. The proposed change will result in minimal impact to
current trading systems, as the change will extend trading
opportunities only for those expiring A.M.-settled options that
currently trade during GTH. As noted above, contracts for related
Exchange-traded products are permitted to trade until 9:00 a.m. ET (in
the case of VIX futures contracts) and 9:30 a.m. ET (in the case of S&P
Index futures and options contracts) on final settlement date/
expiration date. As such, the Exchange believes the proposed change
will better align the available trading hours for similar Exchange-
traded products and provide investors with additional opportunities to
manage investment risk. The proposed rule change has no impact on those
A.M.-settled options that do not trade during GTH, as trading for
expiring options in those classes will continue to end at the close of
RTH on the preceding Thursday as it does today.
The proposed rule change further removes impediments to a free and
open market and does not unfairly discriminate among market
participants, as all TPHs with access to the Exchange may trade A.M.-
settled index options until the exercise settlement value is determined
on the expiration date for expiring options.
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 will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, because all TPHs will be able to trade expiring
A.M.-settled index options until the exercise settlement value is
determined on the expiration date.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act, because the
proposed rule change relates to the trading hours of options that trade
on the Exchange during a trading session that other options exchanges
have not made available. Additionally, all options exchanges are free
to adopt similar rules. Ultimately, the Exchange believes the proposed
rule change will provide investors with additional opportunities to
trade expiring options before settlement, including to manage risk.
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#e193948d84cc828e8c8c848f9592a1928482cf868e97"><span class="__cf_email__" data-cfemail="2e5c5b424b034d4143434b405a5d6e5d4b4d00494158">[email protected]</span></a>. Please include
file number SR-CBOE-2025-011 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-2025-011. 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-2025-011 and should be
submitted on or before April 7, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-04164 Filed 3-14-25; 8:45 am]
BILLING CODE 8011-01-P
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