Notice2025-04503
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rule 19.3 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 12914-12919]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-04503]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102648; File No. SR-CboeBZX-2025-034]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Rule 19.3 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX'')
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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'')
proposes to amend Rule 19.3 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://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</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 19.3 regarding the criteria
for underlying securities. Specifically, the Exchange proposes to amend
Rule 19.3(i) to allow the Exchange to list and trade options on Fund
Shares \3\ that
[[Page 12915]]
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 19.3(i) states that securities deemed appropriate for
options trading shall include shares or other securities (``Fund
Shares''), including but not limited to Partnership Units as defined
in this Rule, that are principally traded on a national securities
exchange and are defined as an ``NMS stock'' under Rule 600 of
Regulation NMS, and that (1) represent interests in registered
investment companies (or series thereof) organized as open-end
management investment companies, unit investment trusts or similar
entities, and that hold portfolios of securities comprising or
otherwise based on or representing investments in indexes or
portfolios of securities (or that hold securities in one or more
other registered investment companies that themselves hold such
portfolios of securities) (``Funds '') and/or financial instruments
including, but not limited to, stock index futures contracts,
options on futures, options on securities and indexes, equity caps,
collars and floors, swap agreements, forward contracts, repurchase
agreements and reverse repurchase agreements (the ``Financial
Instruments''), and money market instruments, including, but not
limited to, U.S. government securities and repurchase agreements
(the ``Money Market Instruments'') constituting or otherwise based
on or representing an investment in an index or portfolio of
securities and/or Financial Instruments and Money Market
Instruments, or (2) represent commodity pool interests principally
engaged, directly or indirectly, in holding and/or managing
portfolios or baskets of securities, commodity futures contracts,
options on commodity futures contracts, swaps, forward contracts
and/or options on physical commodities and/or non-U.S. currency
(``Commodity Pool ETFs'') or (3) represent interests in a trust or
similar entity that holds a specified non-U.S. currency or
currencies deposited with the trust or similar entity when
aggregated in some specified minimum number may be surrendered to
the trust by the beneficial owner to receive the specified non-U.S.
currency or currencies and pays the beneficial owner interest and
other distributions on the deposited non-U.S. currency or
currencies, if any, declared and paid by the trust (``Currency Trust
Shares''), or (4) represent interests in the SPDR Gold Trust or are
issued by the iShares COMEX Gold Trust or iShares Silver Trust, or
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.
\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 19.3(i) to provide that securities deemed appropriate for options
trading include Fund Shares 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 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 Fund Shares on which
options may be listed and traded on the Exchange will apply to
Commodity-Based Trust Shares. Pursuant to Rule 19.3(a), a security
(which includes a Fund Share) 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. Additionally, Rule 19.3(i) requires
that Fund Shares must either (1) meet the criteria and standards set
forth in Rule 19.3(a) and (b) \6\ or (2) be available for creation or
redemption each business day in cash or in kind from the investment
company, commodity pool or other entity at a price related to net asset
value, and the investment company, commodity pool or other entity is
obligated to provide that Fund Shares may be created even if some or
all of the securities and/or cash required to be deposited have not
been received by the Fund, the unit investment trust or the management
investment company, provided the authorized creation participant has
undertaken to deliver the securities and/or cash 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
Fund, all as described in the Fund's or unit trust's prospectus.
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\6\ Rule 19.3(b) 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 19.4(g) for Fund Shares deemed
appropriate for options trading pursuant to Rule 19.3(i). Rule 19.4(g)
provides that Fund Shares approved for options trading pursuant to Rule
19.3 will not be deemed 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 such Fund Shares if
the security is delisted from trading as provided in Rule 19.4(b)(4)
(i.e., the underlying security ceases to be an ``NMS stock'' as defined
in Rule 600 of Regulation NMS under the Act). In addition, the Exchange
shall consider suspension of opening transactions in any series of
options of the class covering Fund Shares in any of the following
circumstances: in the case of options covering Fund Shares approved
pursuant to Rule 19.3(i)(4)(A), in accordance with Rule 19.4(b)(1),
(2), and (3); (2) in the case of options covering Fund Shares approved
pursuant to Rule 19.3(i)(4)(B), following the initial 12-month period
beginning upon the commencement of trading in the Fund Shares on a
national securities exchange and are defined as NMS stock under Rule
600 of Regulation NMS, there were fewer than 50 record and/or
beneficial holders of such Fund Shares for 30 consecutive days; (3) the
value of the index, non-U.S. currency, 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 or Money Market Instruments,
or portfolio of securities on which the Fund Shares are based is no
longer calculated or available; or (4) such other event occurs or
condition exists that in the opinion of the Exchange makes further
dealing in such options on the Exchange inadvisable. The Exchange notes
that Fund Shares 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 19.3(i) are trusts structured in substantially
the same manner as options on a
[[Page 12916]]
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 Fund Share options, including Fund Shares
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
19.6, which governs the opening of options series on a specific
underlying security (including ETFs), the Exchange will open at least
one expiration month and one series of 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 basis.\11\ The Exchange may
also list long-term options series that expire from 12 to 39 months
from the time they are listed.\12\
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\7\ See Rule 19.2, 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 19.6(b) and (e). The monthly expirations are
subject to certain listing criteria for underlying securities
described within Rule 19.3. 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 19.6(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 19.6, Interpretation and Policy .05.
\10\ See Rule 19.6, Interpretation and Policy .08.
\11\ See Rule 19.6, Interpretation and Policy .04.
\12\ See Rule 19.8.
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Pursuant to Rule 19.6, Interpretation and Policy .01, which governs
strike prices of series of options on Fund Shares, the interval of
strike prices for series of options on Commodity-Based Fund Shares may
be $1 or greater where the strike price is $200 or less or $5 or
greater where the strike price is over $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
21.5, 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
19.6 and 21.5, as applicable.
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\13\ The Exchange notes that for options listed pursuant to the
Short Term Option Series Program, Rule 19.6, Interpretation and
Policy .05 sets forth intervals between strike prices for Short Term
Option Series.
\14\ See Rule 19.6, Interpretations and Policies .01 and .02.
\15\ See Rule 19.6, Interpretation and Policy .06.
\16\ See Rule 19.6, Interpretation and Policy .03.
\17\ See Rule 19.6(d)(5).
\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 21.5(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 Fund Share
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 Fund Shares 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 18.7 and
18.9, respectively, which refer to position and exercise limits fixed
by Cboe Exchange, Inc. (``Cboe Options'').\19\ Pursuant to Cboe Options
Rule 8.30 and 8.42, 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.\20\ Further, the Exchange notes that Rule 28.3, 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\ Cboe Options submitted a separate substantively identical
proposal to list options on Commodity-Based Trust Shares.
\20\ See Cboe Options 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.\21\ 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.\22\ Further, the
[[Page 12917]]
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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\21\ 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).
\22\ 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 \23\ and major
market data vendors.
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\23\ 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 \24\ for
ETFs based on indexes that consist of stocks listed on U.S.
exchanges.\25\ 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).\26\
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\24\ 17 CFR 240.19b-4(e).
\25\ 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).
\26\ 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 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)
\27\ 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) \28\ would not, however, preclude the Exchange from
submitting a separate filing pursuant to Section 19(b)(2) \29\
requesting Commission approval to list and trade options on a
particular Commodity-Based Trust Share.
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\27\ 17 CFR 240.19b-4(e).
\28\ Id.
\29\ 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.\30\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \31\ 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) \32\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
\32\ 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.\33\ 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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\33\ 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,
[[Page 12918]]
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,\34\ 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.\35\ 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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\34\ See Rule 19.3(i).
\35\ 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.\36\ 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 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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\36\ 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.\37\
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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\37\ 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.
[[Page 12919]]
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#95e7e0f9f0b8f6faf8f8f0fbe1e6d5e6f0f6bbf2fae3"><span class="__cf_email__" data-cfemail="7e0c0b121b531d1113131b100a0d3e0d1b1d50191108">[email protected]</span></a>. Please include
file number SR-CboeBZX-2025-034 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-CboeBZX-2025-034. 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-CboeBZX-2025-034 and should
be submitted on or before April 9, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-04503 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.