Notice2025-04502
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rule 4.3 To Permit the Listing of Options on Commodity-Based Trust 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
March 19, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 52 (Wednesday, March 19, 2025)</title>
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[Federal Register Volume 90, Number 52 (Wednesday, March 19, 2025)]
[Notices]
[Pages 12865-12869]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-04502]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102647; File No. SR-CBOE-2025-014]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Rule 4.3 To Permit the
Listing of Options on Commodity-Based Trust Shares
March 13, 2025.
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 March 5, 2025, Cboe Exchange, Inc. (the ``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 4.3 to permit the listing of options on Commodity-Based
Trust Shares. 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 Rules 4.3 regarding the criteria for
underlying securities. Specifically, the Exchange proposes to amend
Rule 4.3, Interpretation and Policy .06(a)(4) to allow the Exchange to
list and trade options on Units \3\ that represent interests in
Commodity-Based Trusts. This is a competitive filing substantively
identical to proposals submitted by other options exchanges that are
currently pending with the Securities and Exchange Commission (the
``Commission'').\4\
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\3\ Rule 1.1 defines a ``Unit'' (which may also be referred to
as an exchange-traded fund (``ETF'')) as a share or other security
traded on a national securities exchange and defined as an NMS stock
as set forth in Rule 4.3.
\4\ See Securities Exchange Act Release No. 102465 (February 20,
2025) (SR-ISE-2025-08); SR-NYSEArca-2025-16 (February 24, 2025); and
SR-NYSEAmerican-2025-07 (February 24, 2025).
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A Commodity-Based Trust is defined in Cboe BZX Exchange, Inc.
14.11(e)(4), NYSE Arca, Inc. Rule 8.201(c)(1), and The Nasdaq Stock
Market LLC Rule 5711(d)(iv) as a security (a) that is issued by a trust
(``Trust'') that holds (1) a specified commodity deposited with the
Trust, or (2) a specified commodity and, in addition to such specified
commodity, cash; (b) that is issued by such Trust in a specified
aggregate minimum number in return for a deposit of a quantity of the
underlying commodity and/or cash; and (c) that, when aggregated in the
same specified minimum number, may be redeemed at a holder's request by
such Trust which will deliver to the redeeming holder the quantity of
the underlying commodity and/or cash. The Exchange proposes to amend
Rule 4.3, Interpretation and Policy .06 to provide that securities
deemed appropriate for options trading include Units that represent
interests in a security (A) issued by a trust that holds (i) a
specified commodity deposited with the trust, or (ii) a specified
commodity and, in addition to such specified commodity, cash; (B) that
is issued by such trust in a specified aggregate minimum number in
return for a deposit of a quantity of the underlying commodity and/or
cash; and (C) that, when aggregated in the same specified minimum
number, may be redeemed at a holder's request by such trust which will
deliver to the redeeming holder the quantity of the underlying
commodity and/or cash (``Commodity-Based Trust Share''). The proposed
rule change removes from that rule provision references to the SPDR
Gold Trust, the iShares COMEX Gold Trust, the iShares Silver Trust, the
Aberdeen Standard Physical Silver Trust, the Aberdeen Standard Physical
Gold Trust, the Aberdeen Standard Physical Palladium Trust, the
Aberdeen Standard Physical Platinum Trust, the Sprott Physical Gold
Trust, the Goldman Sachs Physical Gold ETF, the Fidelity Wise Origin
Bitcoin Fund, the ARK 21Shares Bitcoin ETF, the iShares Bitcoin Trust,
the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini Trust, or the
Bitwise Bitcoin ETF, which are all Commodity-Based Trust Shares, thus
making references to those trusts no
[[Page 12866]]
longer necessary. As a result of this proposed rule change, the
Exchange's listing criteria would allow any ETF approved to list on a
primary equities market as a Commodity-Based Trust Share to qualify as
an underlying for options traded on the Exchange, provided other
listing criteria have been met.\5\
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\5\ The Exchange believes this proposal is consistent with the
Options Clearing Corporation (``OCC'') recent amendment of ``Fund
Share'' (which covers ETFs), as defined in OCC's By-Laws (including
the Interpretation and Policy), to remove references to specific
precious metal commodity-based ETFs as ``no longer relevant or
necessary.'' See Securities Exchange Act Release No. 102018
(December 20, 2024), 89 FR 106660 (December 30, 2024) (SR-OCC-2024-
018). The impetus for this rule change was the staff advisory issued
by the Commodity Futures Trading Commission (``CFTC'') that deemed
it ```substantially likely' that spot commodity ETF shares would be
held to be securities'' which, in turn, resulted in the OCC's
determination that ``it no longer needs to seek product-by-product
exemptive relief from the CFTC to clear spot commodity-based ETF
products, including precious metals commodity-based ETFs.'' See id.
at 106661; see also CFTC Staff Advisory Relating to the Clearing of
Options on Spot Commodity Exchange Traded Funds (ETFs), Letter No.
24-16 (Nov. 15, 2024), available at <a href="https://www.cftc.gov/csl/24-16/">https://www.cftc.gov/csl/24-16/</a>
download.
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The Exchange's initial listing standards for Units on which options
may be listed and traded on the Exchange will apply to Commodity-Based
Trust Shares. Pursuant to Rule 4.3(a), a security (which includes a
Unit) on which options may be listed and traded on the Exchange must be
duly registered (with the Commission) and be an NMS stock (as defined
in Rule 600 of Regulation NMS under the Securities Exchange Act of
1934, as amended (the ``Act'')), and be characterized by a substantial
number of outstanding shares that are widely held and actively traded.
Pursuant to Rule 4.3, Interpretation and Policy .06, requires that
Units must either (1) meet the criteria and standards set forth in Rule
4.3, Interpretation and Policy .01(a),\6\ or (2) be available for
creation or redemption each business day from or through the issuer in
cash or in kind at a price related to net asset value, and the issuer
must be obligated to issue Units in a specified aggregate number even
if some or all of the investment assets required to be deposited have
not been received by the issuer, subject to the condition that the
person obligated to deposit the investments has undertaken to deliver
the investment assets as soon as possible and such undertaking is
secured by the delivery and maintenance of collateral consisting of
cash or cash equivalents satisfactory to the issuer, as provided in the
respective prospectus.
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\6\ Rule 4.3, Interpretation and Policy .01 provides for
guidelines to be followed by the Exchange when evaluating potential
underlying securities for Exchange option transactions.
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Additionally, Commodity-Based Trust Shares will also be subject to
the Exchange's set forth in Rule 4.4, Interpretation and Policy .06 for
Units deemed appropriate for options trading pursuant to Rule 4.3,
Interpretation and Policy .06. Rule 4.4, Interpretation and Policy .06
provides that Units that were initially approved for options trading
pursuant to Rule 4.3, Interpretation and Policy .06 shall be deemed not
to meet the requirements for continued approval, and the Exchange shall
not open for trading any additional series of option contracts of the
class covering that such Units, if the Units cease to be an NMS stock
or the Units are halted from trading in their primary market.
Additionally, options on Units may be subject to the suspension of
opening transactions in any of the following circumstances: (1) in the
case of options covering Units approved for trading under Rule 4.3,
Interpretation and Policy .06(b)(1), in accordance with the terms of
paragraphs (a), (b), and (c) of Rule 4.4, Interpretation and Policy
.01; (2) in the case of options covering Units approved for trading
under Rule 4.3 Interpretation and Policy .06(b)(2) (as is the case for
Commodity-Based Trust Shares), following the initial twelve-month
period beginning upon the commencement of trading in the Units on a
national securities exchange and are defined as an NMS stock, there are
fewer than 50 record and/or beneficial holders of such Units for 30 or
more consecutive trading days; (3) the value of the index or portfolio
of securities, non-U.S. currency, or portfolio of commodities including
commodity futures contracts, options on commodity futures contracts,
swaps, forward contracts and/or options on physical commodities and/or
financial instruments and money market instruments on which the Units
are based is no longer calculated or available; or (4) such other event
shall occur or condition exist that in the opinion of the Exchange
makes further dealing in such options on the Exchange inadvisable. The
Exchange notes that ETFs that hold financial instruments, money market
instruments, precious metal commodities, or cryptocurrencies that are
deemed commodities on which the Exchange may already list and trade
options pursuant to Rule 4.3, Interpretation and Policy .06 are trusts
structured in substantially the same manner as options on a Commodity-
Based Trust Share and essentially offer the same objectives and
benefits to investors, just with respect to different assets. The
Exchange notes that it has not identified any issues with the continued
listing and trading of any ETF options, including ETFs that hold
commodities (e.g., precious metals, cryptocurrencies) that it currently
lists and trades on the Exchange.
Options on a Commodity-Based Fund Share will be physically settled
contracts with American-style exercise.\7\ Consistent with current Rule
4.5, which governs the opening of options series on a specific
underlying security (including Units), the Exchange will open at least
one expiration month for options on a Commodity-Based Fund Share \8\ at
the commencement of trading on the Exchange and may also list series of
options on a Commodity-Based Fund Share for trading on a weekly,\9\
monthly,\10\ or quarterly \11\ basis. The Exchange may also list long-
term equity option series (``LEAPS'') that expire from 12 to 180 months
from the time they are listed.\12\
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\7\ See Rule 4.2, which provides that the rights and obligations
of holders and writers are set forth in the Rules of the Options
Clearing Corporation (``OCC''); and Equity Options Product
Specifications January 3, 2024), available at Equity Options
Specifications (<a href="http://cboe.com">cboe.com</a>); see also OCC Rules, Chapters VIII (which
governs exercise and assignment) and Chapter IX (which governs the
discharge of delivery and payment obligations arising out of the
exercise of physically settled stock option contracts).
\8\ See Rule 4.5(b). The monthly expirations are subject to
certain listing criteria for underlying securities described within
Rule 4.3. Monthly listings expire the third Friday of the month. The
term ``expiration date'' (unless separately defined elsewhere in the
OCC By-Laws), when used in respect of an option contract (subject to
certain exceptions), means the third Friday of the expiration month
of such option contract, or if such Friday is a day on which the
exchange on which such option is listed is not open for business,
the preceding day on which such exchange is open for business. See
OCC By-Laws Article I, Section 1. Pursuant to Rule 4.5(c),
additional series of options of the same class may be opened for
trading on the Exchange when the Exchange deems it necessary to
maintain an orderly market, to meet customer demand or when the
market price of the underlying stock moves more than five strike
prices from the initial exercise price or prices. New series of
options on an individual stock may be added until the beginning of
the month in which the options contract will expire. Due to unusual
market conditions, the Exchange, in its discretion, may add a new
series of options on an individual stock until the close of trading
on the business day prior to expiration.
\9\ See Rule 4.5(d).
\10\ See Rule 4.5(g).
\11\ See Rule 4.5(e).
\12\ See Rule 4.5(f).
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Pursuant to Rule 4.5, Interpretation and Policy .07, which governs
strike prices of series of options on Units, the interval of strikes
prices for series of options on Commodity-Based Fund Shares will be $1
or greater when the strike price is $200 or less and $5 or greater
where the strike price is over
[[Page 12867]]
$200.\13\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\14\ the $0.50 Strike
Program,\15\ the $2.50 Strike Price Program,\16\ and the $5 Strike
Program.\17\ Pursuant to Rule 5.4, where the price of a series of a
Commodity-Based Fund Share option is less than $3.00, the minimum
increment will be $0.05, and where the price is $3.00 or higher, the
minimum increment will be $0.10.\18\ Any and all new series of
Commodity-Based Fund Share options that the Exchange lists will be
consistent and comply with the expirations, strike prices, and minimum
increments set forth in Rules 4.5 and 5.4, as applicable.
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\13\ The Exchange notes that for options listed pursuant to the
Short Term Option Series Program, the Monthly Options Series
Program, and the Quarterly Options Series Program, Rules 4.5(d),
(e), and (g) specifically sets forth intervals between strike prices
on Quarterly Options Series, Short Term Option Series, and Monthly
Options Series, respectively.
\14\ See Rule 4.5, Interpretation and Policy .01(a).
\15\ See Rule 4.5, Interpretation and Policy .01(b).
\16\ See Rule 4.5, Interpretation and Policy .04.
\17\ See Rule 4.5, Interpretation and Policy .01(f).
\18\ If options on a Commodity-Based Fund Share are eligible to
participate in the Penny Interval Program, the minimum increment
will be $0.01 for series with a price below $3.00 and $0.05 for
series with a price at or above $3.00. See 5.4(d) (which describes
the requirements for the Penny Interval Program).
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Options on a Commodity-Based Trust Share will trade in the same
manner as options on other ETFs on the Exchange. The Exchange Rules
that currently apply to the listing and trading of all Unit options on
the Exchange, including, for example, Rules that govern listing
criteria, expirations, exercise prices, minimum increments, position
and exercise limits, margin requirements, customer accounts, and
trading halt procedures will apply to the listing and trading of
options on Commodity-Based Trust Shares on the Exchange in the same
manner as they apply to other options on all other Units that are
listed and traded on the Exchange.
Position and exercise limits for options, including options on a
Commodity-Based Trust Share are determined pursuant to Rules 8.30 and
8.42, respectively. Position and exercise limits for options on ETFs
vary according to the number of outstanding shares and the trading
volumes of the underlying security over the past six months, where the
largest in capitalization and the most frequently traded funds have an
option position and exercise limit of 250,000 contracts (with
adjustments for splits, re-capitalizations, etc.) on the same side of
the market; and smaller capitalization funds have position and exercise
limits of 200,000, 75,000, 50,000 or 25,000 contracts (with adjustments
for splits, re-capitalizations, etc.) on the same side of the
market.\19\ Further, the Exchange notes that Rule 10.3, which governs
margin requirements applicable to the trading of all options on the
Exchange, including options on ETFs, will also apply to the trading of
options on a Commodity-Based Trust Share.
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\19\ See Rule 8.30, Interpretation and Policy .02.
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The Exchange represents it has an adequate surveillance program in
place for options and intends to apply those same program procedures to
options on Commodity-Based Fund Shares that it applies to the
Exchange's other options products.\20\ The Exchange believes that
existing surveillance procedures are designed to deter and detect
possible manipulative behavior which might potentially arise from
listing and trading the proposed options on Commodity-Based Trust
Shares. Additionally, the Exchange is a member of the Intermarket
Surveillance Group (``ISG'') under the Intermarket Surveillance Group
Agreement. ISG members work together to coordinate surveillance and
investigative information sharing in the stock, options, and futures
markets. In addition, the Exchange has a Regulatory Services Agreement
with the Financial Industry Regulatory Authority (``FINRA'') for
certain market surveillance, investigation and examinations functions.
Pursuant to a multi-party 17d-2 joint plan, all options exchanges
allocate amongst themselves and FINRA responsibilities to conduct
certain options-related market surveillance that are common to rules of
all options exchanges.\21\ Further, the Exchange will implement any new
surveillance procedures it deems necessary to effectively monitor the
trading of options on Commodity-Based Fund Shares.
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\20\ The surveillance program includes surveillance patterns for
price and volume movements as well as patterns for potential
manipulation (e.g., spoofing and marking the close).
\21\ Section 19(g)(1) of the Act, among other things, requires
every self-regulatory organization (``SRO'') registered as a
national securities exchange or national securities association to
comply with the Act, the rules and regulations thereunder, and the
SRO's own rules, and, absent reasonable justification or excuse,
enforce compliance by its members and persons associated with its
members. See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2. Section
17(d)(1) of the Act allows the Commission to relieve an SRO of
certain responsibilities with respect to members of the SRO who are
also members of another SRO (``common members''). Specifically,
Section 17(d)(1) allows the Commission to relieve an SRO of its
responsibilities to: (i) receive regulatory reports from such
members; (ii) examine such members for compliance with the Act and
the rules and regulations thereunder, and the rules of the SRO; or
(iii) carry out other specified regulatory responsibilities with
respect to such members.
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The Exchange has also analyzed its capacity and represents that it
believes the Exchange and the Options Price Reporting Authority
(``OPRA'') have the necessary systems capacity to handle the additional
traffic associated with the listing of new series of ETFs, including on
Commodity-Based Trust Shares, up to the number of expirations currently
permissible under the Rules. The Exchange believes any additional
traffic generated from the trading of options on Commodity-Based Trust
Shares would be manageable. The Exchange represents that Exchange
members will not have a capacity issue as a result of this proposed
rule change.
Further, quotation and last sale information for Commodity-Based
Trust Shares is available via the Consolidated Tape Association
(``CTA'') high speed line. Quotation and last sale information for such
securities is also available from the exchange on which such securities
are listed. Quotation and last sale information for options on
Commodity-Based Fund Shares will be available via OPRA \22\ and major
market data vendors.
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\22\ Last sale reports and quotations are the core of the
information that OPRA disseminates. OPRA also disseminates certain
other types of information with respect to the trading of options on
the markets of the OPRA participants, such as the number of options
contracts traded, open interest and end of day summaries. OPRA also
disseminates certain kinds of administrative messages.
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The Exchange notes that the Commission has previously approved
generic listing standards pursuant to Rule 19b-4(e) of the Act \23\ for
ETFs based on indexes that consist of stocks listed on U.S.
exchanges.\24\ In addition, the Commission has previously approved
proposals for the listing and trading of options on ETFs based on
international indexes as well as global indexes (e.g., based on non-
U.S. and U.S. component stocks).\25\
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\23\ 17 CFR 240.19b-4(e).
\24\ See Securities Exchange Act Release No. 54739 (November 9,
2006), 71 FR 66993 (November 17, 2006) (SR-AMEX-2006-78) (approval
order relating to generic listing standards for ETFs based on
international or global indexes).
\25\ See, e.g., Securities Exchange Act Release Nos. 56778
(November 9, 2007), 72 FR 65113 (November 19, 2007) (SR-AMEX-2007-
100) (approval order to list and trade options on iShares MSCI
Mexico Index Fund); and 55648 (April 19, 2007), 72 FR 20902 (April
26, 2007) (SR-AMEX-2007-09) (approval order to list and trade
options on Vanguard Emerging Markets ETF); see also Securities
Exchange Act Release Nos. 50189 (August 12, 2004), 69 FR 51723
(August 20, 2004) (SR-AMEX-2001-05) (approving the listing and
trading of certain Vanguard International Equity Index Funds); and
44700 (August 14, 2001), 66 FR 43927 (August 21, 2001) (SR-2001-34)
(approving the listing and trading of series of the iShares Trust
based on foreign stock indexes).
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In approving Commodity-Based Trust Shares for equities exchange
trading, the
[[Page 12868]]
Commission thoroughly considered the structure of the Commodity-Based
Trust Shares, their usefulness to investors and to the markets, and
self-regulatory organization rules that govern their trading. The
Exchange believes that allowing the listing of options overlying
Commodity-Based Trust Shares that are listed pursuant to Commission
approval on equities exchanges and applying Rule 19b-4(e) \26\ should
fulfill the intended objective of that rule by allowing options on
those Commodity-Based Trust Shares that have satisfied the generic
listing standards to commence trading, without the need for the public
comment period and Commission approval. The proposed rule change has
the potential to significantly reduce the time and costs associated
with bringing options on Commodity-Based Trust Shares to market,
thereby reducing the burden on issuers and other market participants,
while also promoting competition among options exchanges, to the
benefit of the investing public. The failure of a particular Commodity-
Based Trust Share to comply with the generic listing standards under
Rule 19b-4(e) \27\ would not, however, preclude the Exchange from
submitting a separate filing pursuant to Section 19(b)(2) \28\
requesting Commission approval to list and trade options on a
particular Commodity-Based Trust Share.
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\26\ 17 CFR 240.19b-4(e).
\27\ Id.
\28\ 15 U.S.C. 78s(b)(2).
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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.\29\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \30\ 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) \31\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\29\ 15 U.S.C. 78f(b).
\30\ 15 U.S.C. 78f(b)(5).
\31\ Id.
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In particular, the Exchange believes the proposal will remove
impediments to and perfect the mechanism of a free and open market and
a national market system because it would allow the Exchange to
immediately list and trade options on Commodity-Based Trust Shares,
provided the initial listing criteria has been met, without requiring
additional approvals from the Commission.\32\ Commodity-Based Trust
Shares are securities approved for trading by the Commission. The
Exchange believes that allowing options on qualifying Commodity-Based
Trust Shares soon after the listing of such underlying security in the
primary market will benefit investors and the public interest as it
will afford market participants the opportunity to hedge their
positions in the underlying ETF in a timely manner. Given the potential
to reduce the time to market for options on Commodity-Based Trust
Shares, the proposed rule change will also reduce the burdens on
issuers and other market participants, while also promoting competition
among options exchanges to the benefit of the investing public. This
proposal will enable the listing of options on Commodity-Based Trust
Shares in the same manner as other securities listed and traded on the
Exchange. The Exchange notes that most ETFs are eligible for options
trading without the need for additional approvals, provided the ETFs
meet the initial listing criteria. Accordingly, the proposed rule
change would align the treatment of Commodity-Based Trust Shares with
other ETFs for purposes of options trading, which would add internal
consistency to Exchange rules.
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\32\ As noted herein, the Exchange believes this proposal is
consistent with the OCC's determination that, based on a staff
advisory from the CFTC, the ``it no longer needs to seek product-by-
product exemptive relief from the CFTC to clear spot commodity-based
ETF products.'' See supra note 5.
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The Exchange believes that the proposed rule change will facilitate
the listing and trading of options on additional ETFs that will enhance
competition among market participants, to the benefit of investors and
the marketplace. Like options on any other securities, options on
Commodity-Based Trust Shares will provide investors with the ability to
hedge exposure to the underlying security. The Exchange believes that
offering options on Commodity-Based Trust Shares will benefit investors
by providing them with a relatively lower-cost risk management tool,
which will allow them to manage their positions and associated risk in
their portfolios more easily in connection with exposure to the price
of a commodity. Additionally, the Exchange's offering of options on
Commodity-Based Trust Shares will provide investors with the ability to
transact in such options in a listed market environment as opposed to
in the unregulated over-the-counter market, which would increase market
transparency and enhance the process of price discovery conducted on
the Exchange through increased order flow to the benefit of all
investors.
As noted herein, the Exchange already lists options on other
commodity-based ETFs,\33\ which are trusts structured in substantially
the same manner as Commodity-Based Trust Shares. The Exchange has not
identified any issues with the continued listing and trading of options
on Commodity-Based Trust Shares. The Exchange also 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 is consistent with current Exchange Rules previously filed
with the Commission. Options on Commodity-Based Trust Shares must
satisfy the initial listing standards and continued listing standards
currently in the Exchange Rules applicable to options on all ETFs,
including ETFs that hold other commodities already deemed appropriate
for options trading on the Exchange.\34\ Options on Commodity-Based
Trust Shares will trade in the same manner as any other ETF options--
the same Exchange Rules that currently govern the listing and trading
of options, including permissible expirations, strike prices minimum
increments, position and exercise limits, and margin requirements, will
govern the listing and trading of options on Commodity-Based Trust
Shares in the same manner.
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\33\ See Rule 4.3, Interpretation and Policy .06.
\34\ See id.
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The Exchange believes the proposed rule change will result in
increased competition as other exchanges will likely adopt an identical
rule to the one proposed by the Exchange that would allow the listing
and trading of options on Commodity-Based Trust Shares that are
approved for trading on those other markets.\35\ Multiple listing of
ETFs, options and other securities and competition are some of the
central features of the national market system. The Exchange believes
that the proposal would encourage a more open market
[[Page 12869]]
and national market system based on competition and multiple listing.
The Exchange represents that it has the necessary systems capacity to
support the listing and trading of options on Commodity-Based Trust
Shares as the Exchange lists these products today, except that it
requires additional approvals prior to listing. The Exchange believes
that its existing surveillance and reporting safeguards are designed to
deter and detect possible manipulative behavior which might arise from
listing and trading of options on Commodity-Based Trust Shares.
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\35\ See supra note 4.
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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. To the contrary, the
Exchange believes that the proposal is pro-competitive and is a
competitive response to the Exchange's inability to list options on
Commodity-Based Trust Shares without submitting a separate proposed
rule change. The Exchange believes the proposed rule change will result
in additional investment options and opportunities to achieve the
investment objectives of market participants seeking efficient trading
and hedging vehicles, to the benefit of investors, market participants,
and the marketplace in general. Competition is one of the principal
features of the national market system. The Exchange believes that this
proposal will expand competitive opportunities to list and trade
products on the Exchange as noted.
The Exchange does not believe the proposal will impose any burden
on intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because Commodity-Based Trust
Shares, like any other ETF, would have to satisfy the Exchange's
initial listing standards to be eligible for options trading.
Additionally, the proposed rule change would apply to all market
participants in the same manner as options on Commodity-Based Trust
Shares will be equally available to all market participants who wish to
trade such options.
The Exchange does not believe the proposal will impose any burden
on inter-market competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as nothing prevents the other
options exchanges from proposing similar rules to list and trade
options on Commodity-Based Trust Shares. As noted herein, other options
exchanges have submitted proposed rule changes to adopt identical rules
to permit the listing and trading of options on Commodity-Based Trust
Shares without submitting a separate proposed rule change.\36\
Furthermore, the Exchange notes that listing and trading options on a
Commodity-Based Trust Share on the Exchange will subject such options
to transparent exchange-based rules as well as price discovery and
liquidity, as opposed to alternatively trading such options in the OTC
market. The Exchange believes that the proposed rule change may relieve
any burden on, or otherwise promote, competition as it is designed to
increase competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios in a timely manner.
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\36\ See id.
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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 written 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#aedcdbc2cb83cdc1c3c3cbc0daddeeddcbcd80c9c1d8"><span class="__cf_email__" data-cfemail="fa888f969fd7999597979f948e89ba899f99d49d958c">[email protected]</span></a>. Please include
file number SR-CBOE-2025-014 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-2025-014. 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-2025-014 and should be
submitted on or before April 9, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-04502 Filed 3-18-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 19, 2025.
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.