Notice2025-18674
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rules 4.13, 5.1, and 8.32 To Permit P.M.-Settled Options on the Cboe Magnificent 10 Index
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
September 26, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 185 (Friday, September 26, 2025)</title>
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[Federal Register Volume 90, Number 185 (Friday, September 26, 2025)]
[Notices]
[Pages 46424-46430]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18674]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104019; File No. SR-CBOE-2025-068]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Rules 4.13, 5.1, and 8.32 To
Permit P.M.-Settled Options on the Cboe Magnificent 10 Index
September 23, 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 September 10, 2025, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rules 4.13, 5.1, and 8.32 to permit options on the Cboe
Magnificent 10 Index to be P.M.-settled (``MGTN options'') .\3\ The
text of the proposed rule change is provided in Exhibit 5.
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\3\ The Exchange is contemporaneously submitting a separate rule
filing to make administrative updates to the Rules regarding the
listing of options on the Cboe Magnificent 10 Index. The Exchange
intends to begin listing options on the Cboe Magnificent 10 Index
pursuant to Rule 4.10(b), as the underlying index satisfies the
listing criteria for a narrow-based index option, and intends to
submit a form pursuant to Rule 19b-4(e) no later than five days
after the Exchange begins listing these options. Those options will
be A.M.-settled with standard third Friday-of-the-month expirations
in accordance with current Rules (see Rules 4.10(b) and 4.13(a)(2)).
The Exchange may also list options on this index that are P.M-
settled with end-of-month and end-of-quarter expirations pursuant to
the Monthly and Quarterly Options Programs (see Rule 4.13(a)(2)(B)
and (C)).
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The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</a>), and at the principal office of the Exchange.
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 4.13, 5.1, and 8.32. First,
the Exchange proposes to amend Rule 4.13(e), which governs its
Nonstandard Expirations Program (``Program''), to permit P.M.-settled
options on the Cboe Magnificent 10 Index (``MGTN options'') that expire
any Monday, Tuesday, Wednesday, Thursday, or Friday (other than the
third Friday-of-the-month (``Expiration Friday'') or days that coincide
with an end-of-month expiration) (``Weekly Expirations'') and that
expire on the last trading day of the month (``EOMs''). Currently,
under this Program, the Exchange is permitted to list P.M.-settled
options on any broad-based index eligible for standard trading that
expire on: (1) any Monday, Tuesday, Wednesday, Thursday, or Friday
(other than the third Friday-of-the-month or days that coincide with an
EOM expiration) and (2) the last trading day of the month.\4\ The
proposal expands the availability of Weekly and EOM expirations to MGTN
options,
[[Page 46425]]
which are narrow-based index options eligible for standard options
trading.\5\
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\4\ See Rule 4.13(e). The Exchange notes it has a separate rule
filing pending to permit these expirations for options on another
narrow-based index (both full- and reduced-value), the Cboe Bitcoin
U.S. ETF Index, which filing proposes some of the changes in this
proposed rule change. See Securities Exchange Act Release No. 102502
(February 27, 2025), 90 FR 11343 (March 5, 2025) (SR-CBOE-2025-004).
If the Commission approves that filing prior to this rule filing,
the Exchange will amend this rule filing to delete those proposed
changes from the scope of this rule filing.
\5\ The Exchange notes MGTN options are eligible for the Monthly
Options Series program pursuant to Rule 4.13(a)(2)(C), which permits
p.m.-settled options that expire on the last trading day of the
month (as do options with EOM expirations). The Exchange proposes to
make these options eligible for the EOM expirations pursuant to the
Nonstandard Expiration for consistency since the Exchange is
proposing to make these options eligible for the Weekly Expirations,
which are part of the Nonstandard Expiration Program.
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The Nonstandard Expiration Program will apply to MGTN options in
the same manner as it currently applies to broad-based index options.
Weekly and EOM Expirations are subject to all provisions of Rule 4.13
and treated the same as options on the same underlying index that
expire on the third Friday of the expiration month; provided, however,
that Weekly and EOM Expirations are P.M.-settled, and new series in
Weekly and EOM Expirations may be added up to and including on the
expiration date for an expiring Weekly or EOM Expiration.
The maximum number of expirations that may be listed for each
Weekly Expiration (i.e., a Monday expiration, Tuesday expiration,
Wednesday expiration, Thursday expiration, or Friday expiration, as
applicable) and each EOM expiration in a given class is the same as the
maximum number of expirations permitted in Rule 4.13(a)(2) for standard
options on the same index (which is currently six for MGTN options).\6\
Weekly Expirations need not be for consecutive Monday, Tuesday,
Wednesday, Thursday, or Friday expirations as applicable; however, the
expiration date of a nonconsecutive expiration may not be beyond what
would be considered the last expiration date if the maximum number of
expirations were listed consecutively. Weekly Expirations that are
first listed in a given class may expire up to four weeks from the
actual listing date. Similarly, EOM expirations need not be for
consecutive end of month expirations; however, the expiration date of a
nonconsecutive expiration may not be beyond what would be considered
the last expiration date if the maximum number of expirations were
listed consecutively. EOM Expirations that are first listed in a given
class may expire up to four weeks from the actual listing date. If the
Exchange lists EOMs and Weekly Expirations in a given class, the
Exchange will list an EOM instead of a Weekly Expiration that expires
on the same day in the given class. Other expirations in the same class
are not counted as part of the maximum number of Weekly or EOM
Expirations for an applicable index class.
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\6\ The proposed rule change deletes the phrase ``broad-based''
in several places in Rule 4.13(e), as the proposal would result in
the provisions within that Rule applying to indexes that are not
broad-based. These administrative changes merely accommodate the
proposed expansion of the Nonstandard Expiration Program. The
Exchange is not proposing to expand the Nonstandard Expiration
Program to narrow-based indices generally, but rather only to MGTN
options.
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If the Exchange is not open for business on a respective Monday,
the normally Monday expiring Weekly Expirations will expire on the
following business day. If the Exchange is not open for business on a
respective Tuesday, Wednesday, Thursday, or Friday, the normally
Tuesday, Wednesday, Thursday, or Friday expiring Weekly Expirations
will expire on the previous business day. If two different Weekly
Expirations on an index would expire on the same day because the
Exchange is not open for business on a certain weekday, the Exchange
will list only one of such Weekly Expirations. In addition, pursuant to
Rule 4.13(e)(3), transactions in expiring index options with Weekly and
EOM Expirations may be effected on the Exchange between the hours of
9:30 a.m. and 4:00 p.m. on their last trading day (Eastern Time).
Second, the Exchange proposes to amend Rule 4.13(c), which governs
quarterly index expirations (``QIXs''), to add MGTN options to the list
of options in Rule 4.13(c) that are eligible for quarterly index
expirations (``QIXs''), which are currently available for options on
the S&P 100 Index (``OEX options''), S&P 500 Index (``SPX options''),
Mini-S&P 500 Index (``XSP options''), S&P 500 Equal Weight Index (full-
value) (``SPEQ options''), S&P 500 Equal Weight Index (1/10th reduced-
value) (``SPEQX options''), Russell 2000 Index (``RUT options''), and
Mini-Russell 2000 Index (``MRUT options'').\7\ Pursuant to Rule
4.13(c), there may be up to eight near-term quarterly expirations open
for trading in a class, and these options will be P.M.-settled. The QIX
program will apply to MGTN options in the same manner as it currently
applies to the other options currently eligible for those expirations.
QIXs are subject to all provisions of Rule 4.13 and treated the same as
options on the same underlying index that expire on the third Friday of
the expiration month, except that QIXs, are P.M.-settled.
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\7\ The Exchange notes MGTN options are currently eligible for
the Quarterly Options Series program pursuant to Rule 4.13(a)(2)(B),
which permits P.M.-settled options that expire on the last trading
day of the quarter (as do QIXs). The Exchange proposes to make these
options eligible for QIXs for consistency, since QIXs are currently
available for certain index options available for trading on the
Exchange (which options are also eligible for the Nonstandard
Expirations Program).
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Third, the Exchange proposes to amend Rule 4.13, Interpretation and
Policy .13, to permit the listing of P.M.-settled MGTN options that
expire on Expiration Fridays. Currently, pursuant to Rule 4.13,
Interpretation and Policy .13, the Exchange is permitted to list P.M.-
settled SPX options, XSP options, SPEQ options, SPEQX options, RUT
options, and MRUT options that expire on Expiration Fridays. Combined
with the proposed rule change above to permit the Exchange to list
P.M.-settled MGTN options with Weekly Expirations, the Exchange would
be permitted to list P.M.-settled MGTN options with expirations on all
Fridays (in addition to all other days of the week). MGTN options that
are P.M.-settled and expire on Expiration Fridays are subject to all
provisions of Rule 4.13 and treated the same as A.M.-settled MGTN
options, except that they are P.M.-settled.\8\
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\8\ The proposed rule change also amends Rule 4.13,
Interpretation and Policy .13 to define P.M.-settled series in the
option classes specified in that Rule as ``P.M.-settled Third Friday
Index Options.''
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Finally, the Exchange proposes to amend Rule 5.1, which governs
trading days and hours, in conjunction with the proposed addition of
MGTN options that are P.M.-settled and expire on Expiration Friday.
Rule 5.1(b)(2)(C) currently provides that on their last trading day,
Regular Trading Hours for index options with Nonstandard Expirations,
as well as expiring P.M.-settled SPX, XSP, RUT, and MRUT options, may
be effected on the Exchange between 9:30 a.m. and 4:00 p.m. Eastern
Time \9\ (as opposed to the 9:30 a.m. to 4:15 p.m. Regular Trading
Hours for options with those expirations that are non-expiring). The
proposed rule change amends Rule 5.1(b)(2)(C) to include MGTN P.M.-
settled options.\10\ The primary listing markets for the component
securities that comprise the Cboe Magnificent 10 Index close trading in
those securities at 4:00 p.m., just as the primary listing markets for
the component securities that comprise the S&P 500, Mini-S&P 500,
Russell 2000, and Mini-Russell 2000 Indexes close trading at 4:00 p.m.
The primary listing exchanges for the component securities disseminate
closing prices for the component securities, which are used to
calculate the exercise settlement value
[[Page 46426]]
of these indexes. The Exchange believes that, under normal trading
circumstances, the primary listing markets have sufficient bandwidth to
prevent any data queuing that may cause any trades that are executed
prior to the closing time from being reported after 4:00 p.m. If
trading in expiring MGTN P.M.-settled options continued an additional
fifteen minutes until 4:15 p.m. on their last trading day, these
expiring options would be trading after the settlement index value for
those expiring options was calculated. Therefore, in order to mitigate
potential investor confusion and the potential for increased costs to
investors as a result of potential pricing divergence at the end of the
trading day, the Exchange believes that it is appropriate to cease
trading in the expiring MGTN P.M.-Settled options at 4:00 p.m., as it
already does for expiring P.M.-settled SPX, XSP, RUT, and MRUT options
that expire on Expiration Fridays and for expiring broad-based indexes
with Nonstandard Expirations (which are P.M.-settled) for the same
aforementioned reasons.\11\ The Exchange does not believe that the
proposed rule change will impact volatility on the underlying cash
market comprising the Cboe Magnificent 10 Index at the close on
Expiration Fridays, as it already closes trading on the last trading
day for expiring P.M.-settled index options at 4:00 p.m., which the
Exchange does not believe has had an adverse impact on fair and orderly
markets on Expiration Fridays for the underlying securities comprising
the corresponding indexes.\12\
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\9\ See Rule 1.6, which states that unless otherwise specified,
all times in the Rules are Eastern Time.
\10\ Current Rule 5.1(b)(2)(C) would apply to MGTN options with
Nonstandard Expirations and QIXs, as proposed; therefore, the
addition of MGTN P.M.-settled options to the list of options set
forth in this Rule covers these options that expire on Expiration
Fridays.
\11\ See Securities Exchange Act Release Nos. 68888 (February 8,
2013), 78 FR 10668 (February 14, 2013) (SR-CBOE-2012-120) (``SPXPM
Pilot Approval Order''); 70087 (July 31, 2013), 78 FR 47809 (August
6, 2013) (SR-CBOE-2013-055) (``XSPPM Pilot Approval Order''); and
91067 (February 5, 2021), 86 FR 9108 (February 11, 2021) (SR-CBOE-
2020-116) (``MRUTPM Pilot Approval Order'').
\12\ See Securities Exchange Act Release Nos. 98454 (September
20, 2023), 88 FR 66103 (September 26, 2023) (SR-CBOE-2023-005)
(``SPXPM Permanent Approval Order''); and 98455 (September 20,
2023), 88 FR 66073 (September 26, 2023) (SR-CBOE-2023-019) (``XSPPM
and MRUTPM Permanent Approval Order'').
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As noted above, current Rules permit the Exchange to list P.M.-
settled MGTN options with expirations on the last calendar of the month
and quarter.\13\ As a result, it is already possible under the Rules
for options on the Cboe Magnificent 10 Index to be P.M.-settled and to
expire on any day of the week (as the end of the month or the end of a
quarter may fall on any day of the week). The Rules also already allow
options on the Cboe Magnificent 10 Index to expire on Thursdays for
normally Friday expiring options when the Exchange is not open for
business on a respective Friday. Further, options on the Cboe
Magnificent 10 Index will be available for FLEX trading pursuant to
Rule 4.20 upon initial listing on the Exchange, which would permit
market participants to select expiration dates for these FLEX options
for any day of the week and may select p.m.-settlement.
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\13\ See Rule 4.13(a)(2)(C) and (B), respectively.
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The Exchange believes that the introduction of Weekly Expirations
and Expiration Friday expirations for options on the Cboe Magnificent
10 Index that are P.M.-settled will provide market participants with
additional hedging tools and greater trading opportunities, regardless
of in which index option market they participate. By offering expanded
expirations along with the current standard A.M.-settled expirations
(as well as P.M.-settled monthly and quarterly expirations), the
proposed rule change will allow market participants to purchase options
on the Cboe Magnificent 10 Index available for trading on the Exchange
in a manner more aligned with specific timing needs (such as to hedge
special events) and more effectively tailor their investment and
hedging strategies and manage their portfolios. In particular, the
proposed rule change will allow market participants to roll their
positions on more trading days, thus with more precision, spread risk
across more trading days and incorporate daily changes in the markets,
which may reduce the premium cost of buying protection. For example,
the Exchange believes that market participants may pay for more
protection than they need if they are seeking to hedge weekend or
special event risk that occurs. Therefore, the Exchange believes that
P.M.-settled daily expirations (including on all Fridays) would allow
market participants to purchase an option based on their needed timing
and allow them to tailor their investment or hedging needs more
effectively. In addition, because P.M.-settlement permits trading
throughout the day on the day the contract expires, the Exchange
believes this will permit market participants to more effectively
manage overnight risk and trade out of their positions up until the
time the contract settles.
The Exchange believes there is sufficient investor interest and
demand in Weekly Expirations and Expiration Friday P.M.-settled
expirations for options on the Cboe Magnificent 10 Index to warrant
inclusion in the Program and in the Rules, and that the Program and the
Rules, as amended, will continue to provide investors with additional
means of managing their risk exposures and carrying out their
investment objectives.\14\
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\14\ The Exchange currently may list Weekly and EOM Expirations
for any broad-based index option pursuant to the Program, and lists
Expiration Friday P.M.-settled expirations pursuant to the Rules,
for SPX, XSP, RUT, and MRUT.
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With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it believes that
the Exchange and OPRA have the necessary systems capacity to handle any
potential additional traffic associated with trading of P.M.-settled
Weekly and Expiration Friday expirations for MGTN options. The Exchange
does not believe that its Trading Permit Holders (``TPHs'') will
experience any capacity issues as a result of this proposal and
represents that it will monitor the trading volume associated with any
possible additional series of options on the Cboe Magnificent 10 Index
listed as a result of this proposal and the effect (if any) of these
additional series on market fragmentation and on the capacity of the
Exchange's automated systems.
In addition to this, the Exchange believes that its existing
surveillance and reporting safeguards in place are adequate to deter
and detect possible manipulative behavior which might arise from
listing and trading MGTN options with Weekly Expirations or Expiration
Friday expirations (as the Exchange currently applies these
surveillances to other options that are P.M.-settled with these
expirations and would for MGTN options that are P.M.-settled with
monthly and quarterly expirations pursuant to current Rules) and will
support the protection of investors and the public interest.
Furthermore, the trading of MGTN options with Weekly and Expiration
Friday expirations will be subject to the same rules that currently
govern the trading of options on the Cboe Magnificent 10 Index with
other expirations, including governing customer accounts, position and
exercise limits,\15\ margin requirements
[[Page 46427]]
and trading halt procedures, among other Rules, which are designed to
prevent fraudulent and manipulative acts and practices.
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\15\ The proposed rule change amends Rule 8.32(f) to provide
that positions in Nonstandard Expiration Program series will be
aggregated with positions in options contracts in the same index
class. Therefore, MGTN options positions that have Nonstandard
Expirations will be aggregated for purposes of position limits with
positions in MGTN options, respectively with other expirations
(including short-term, monthly, and quarterly expirations). This is
consistent with the treatment of positions for purposes of position
limits for other classes that participate in the Nonstandard
Expiration Program. See Rule 8.31(b). Similarly, the proposed rule
change adds QIXs and P.M.-Settled Third Friday Index Options to the
list of series types in Rule 8.32(f) that will be aggregated with
positions in options contracts in the same index class. This is true
today and merely codifies this in the Rules. Pursuant to Rule
8.42(b), which provides that the exercise limits for index options
(including MGTN options) are equivalent to the position limits set
forth in Rule 8.32. Pursuant to Rule 8.32(a) and 8.42(b), the
current position and exercise limits for MGTN options are 24,000
contracts (and may not be more than 31,500 without rule changes).
Therefore, investors would not be able to maintain significant open
interest in these options, which may further prevent investors from
being able to impact the value of the index.
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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.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitation
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
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In particular, the Exchange believes that the proposed rule change
will remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Exchange believes that the
introduction of P.M.-settled Weekly and Expiration Friday expirations
for MGTN options (rather than offering those expirations for just
broad-based indexes) will provide investors with expanded hedging tools
and greater trading opportunities and flexibility for an additional
index option.\19\ As a result, investors will have additional means to
manage their risk exposures and carry out their investment objectives.
By offering expanded expirations for options on the Cboe Magnificent 10
Index (along with the currently available P.M.-settled monthly and
quarterly options and standard A.M.-settled options), the proposed rule
change will allow market participants to purchase options on an
additional index in a manner more aligned with specific timing needs
and more effectively tailor their investment and hedging strategies and
manage their portfolios. For example, the proposed rule change will
allow market participants to roll their positions in options on the
Cboe Magnificent 10 Index on more trading days, thus with more
precision, spread risk across more trading days and incorporate daily
changes in the markets, which may reduce the premium cost of buying
protection. The Exchange represents that it believes that it has the
necessary systems capacity to support any additional traffic associated
with trading of options on the Cboe Magnificent 10 Index with Weekly
and Expiration Friday (P.M.-settled) expirations and does not believe
that its TPHs will experience any capacity issues as a result of this
proposal.
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\19\ Options on the Cboe Magnificent 10 Index may already be
listed with P.M.-settlement and expirations on the last calendar day
of the month or quarter pursuant to Rule 4.13(a)(2)(C) and (B),
respectively; therefore, the additional series that this proposed
rule would permit to be listed are P.M.-settled Weeklys and
Expiration Friday expirations. The proposed rule change merely adds
these options to different programs within the Rules that permit
these same expirations for consistency within the Rules.
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The Exchange does not believe that the addition of MGTN options to
the Nonstandard Expirations Program, to the P.M.-settled Expiration
Friday program, or the QIX program will raise any prohibitive
regulatory concerns, nor adversely impact fair and orderly markets on
expiration days. The Exchange has not experienced any meaningful
regulatory concerns, nor adverse impact on fair and orderly markets, in
connection with these programs and is unaware of any reason why adding
P.M.-settled options with expirations each day of the week for MGTN
options (which overlie a narrow-based index rather than a broad-based
index) would be create such concerns or impact. Particularly, the
Exchange does not believe increases in the number of P.M.-settled
options series and expirations will have any significant adverse
economic impact on the futures, index, or underlying index component
securities markets.\20\ The Exchange believes that the proposed rule
change will provide investors with greater trading and hedging
opportunities and flexibility, allowing them to transact in options on
the Cboe Magnificent 10 Index in a manner more aligned with specific
timing needs and more effectively tailor their investment and hedging
objectives by listing these options that expire each trading day of the
week, in addition to options that expire at the end of calendar month
and quarter (which, as noted above, current Rules already permit the
Exchange to do).
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\20\ The Exchange's affiliate, the Cboe Futures Exchange, LLC
(``CFE'') intends to list MGTN futures at or prior to the time when
the Exchange begins listing options on the Cboe Magnificent 10
Index.
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As also discussed above, current Rules permit the Exchange to list
P.M.-settled options on the Cboe Magnificent 10 Index that expire on
the last calendar day of the month and quarter; the proposed rule
change merely permits these listings to occur under different programs
within the Rules for consistency within the Exchange's Rules.\21\
Therefore, it is already possible under the Rules for options on the
Cboe Magnificent 10 Index to be P.M.-settled and to expire on any day
of the week (as the end of the month or the end of a quarter may fall
on any day of the week). The Rules also already allow options on the
Cboe Magnificent 10 Index to expire on Thursdays for normally Friday
expiring options when the Exchange is not open for business on a
respective Friday. Further, options on the Cboe Magnificent 10 Index
will be available for FLEX trading pursuant to Rule 4.20 when the
Exchange begins listing these options, and thus, market participants
will be able to select expiration dates for these FLEX options for any
day of the week and may select p.m.-settlement. The Exchange has no
reason to believe this proposed rule change will cause any significant
adverse economic impact on the futures, index, or underlying index
component securities markets as a result of these listings.
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\21\ For example, it may be confusing to list Weeklys under the
Nonstandard Expirations Program but monthlys under the Monthly
program rather than the Nonstandard Expirations Program. As
proposed, all index options the Exchange lists with expirations
other than Expiration Fridays would be eligible for those
expirations under the same programs.
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The Commission previously recognized that listing P.M.-settled
index options with Weekly Expirations and Expiration Friday expirations
(in addition to EOM Expirations (which would include expirations on the
last day of calendar quarters)) was consistent with the Act.\22\ The
[[Page 46428]]
Commission noted that expirations in those index options would ``offer
additional investment options to investors and may be useful for their
investment or hedging objectives . . . .'' \23\ The Exchange also notes
it previously listed P.M.-settled broad-based index options with
Weekly, EOM, and Expiration Friday expirations pursuant to pilot
programs, so the Commission could monitor the impact of P.M.-settlement
of cash-settled index derivatives on the underlying cash markets (while
recognizing that these risks may have been mitigated given enhanced
closing procedures in use in the primary equity markets); however, the
Commission approved proposed rule changes to make those pilot programs
permanent. The Commission noted that the data it reviewed in connection
with the pilot demonstrated that these options ``benefitted investors
and other market participants by providing more flexible trading and
hedging opportunities while also having no disruptive impact on the
market'' and were thus consistent with the Act.\24\ The proposed rule
change is consistent with these findings, as it will benefit investors
and other market participants that participate in the markets for
additional index options in the same manner by providing them with more
flexible trading and hedging opportunities.
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\22\ See Securities Exchange Act Release Nos. 98454 (September
20, 2023), 88 FR 66103 (September 26, 2023) (SR-CBOE-2023-005)
(``SPXPM Permanent Approval Order''); 98455 (September 20, 2023), 88
FR 66073 (September 26, 2023) (SR-CBOE-2023-019) (``XSPPM and MRUTPM
Permanent Approval Order'') (the Exchange initially listed P.M.-
Settled SPX, XSP, and MRUT options that expire on Expiration Fridays
pursuant to pilot programs, so the Commission could monitor the
impact of P.M. settlement of cash-settled index derivatives on the
underlying cash markets (while recognizing that these risks may have
been mitigated given enhanced closing procedures in use in the
primary equity markets); 94682 (April 12, 2022), 87 FR 22993, 22994
(April 18, 2022) (SR-CBOE-2022-005) (approval of proposed rule
change to list P.M.-settled SPX options that expire on Tuesdays and
Thursdays) (``Daily SPX Option Approval''); and 95795 (September 15,
2022), 87 FR 57745, 57746 (September 21, 2022) (SR-CBOE-2022-039)
(approval of proposed rule change to list P.M.-settled XSP options
that expire on Tuesdays and Thursdays) (``Daily XSP Option
Approval'').
\23\ See Daily SPX Option Approval at 22995; and Daily XSP
Option Approval at 57746.
\24\ See SPXPM Permanent Approval Order at 66106; and XSPPM and
MRUTPM Permanent Approval Order at 66076 (citing data the Commission
reviewed in connection with the pilot programs);
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Further, the Exchange believes P.M.-settlement is appropriate for
options on the Cboe Magnificent 10 Index because they will be trading
within a complex of other correlated instruments that track the
performance of the underlying components, in addition to the underlying
components themselves (e.g., options on the components, ETFs that track
the most active stocks (including the components), and futures on the
Cboe Magnificent 10 Index). This reduces the risk that listing these
options would strain liquidity providers. Further, the size of the
markets of the underlying components \25\ and the equal weighting of
the components make it unlikely the proposed rule change would
materially impact the component markets, the index value, or the
broader market.
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\25\ The index is designed to measure the price return of a
group of large capitalization U.S. technology and growth-oriented
companies and are intended to be among the most actively traded
stocks. Pursuant to the methodology for the Cboe Magnificent 10
Index, each component will have a market capitalization of at least
$500,000,000, a free float of at least 25%, a minimum of 1,000,000
shares trading volume in the preceding six months, one of the 100
largest market capitalizations, and one of the highest six-month
aggregate dollar values of average daily trading volume.
Additionally, the narrow-based listing criteria pursuant to which
these index options are listed impose various requirements on the
component securities related to the market capitalization and
liquidity, which further reduce the risk that the markets for the
components would be impacted by additional derivatives. For example,
pursuant to Rule 4.10(b): (1) the market capitalization for the
lowest-weighted component securities in the index that in the
aggregate account for no more than 10% of the weight of the index
must be at least $50 million, and the market capitalization of all
other components must be at least $75 million; (2) the trading
volume in each component must be at least 1,000,000 shares for each
of the last six months (from October 2024 through March 2025, the
lowest monthly trading volume for a component was over 1.5 million
shares), except that for each of the lowest-weighted component
securities in the index that in the aggregate account for no more
than 10% of the weight the index, the trading volume must be at
least 500,000 shares for each of the last six months); and (3) no
single component security may represent more than 25% of the weight
of the index, and the five highest-weighted component securities in
the index may not in the aggregate account for more than 50% (60%
for an index consisting of fewer than 25 component securities) of
the weight of the index.
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As is the case for options on broad-based indexes, the Exchange
does not believe the listing of additional P.M.-settled options on the
Cboe Magnificent 10 Index (which are narrow-based index options) will
have any significant economic impact (such as on market quality or
volatility) on the component securities underlying the index
surrounding the close as a result of expiring p.m.-settled options or
impact market quality. This is based on the data provided to and
reviewed by the Commission (and the Commission's own conclusions based
on that review, as noted above) and due to the significant changes in
closing procedures in the decades since index options moved to a.m.-
settlement.\26\ The Exchange believes the potential for any such impact
is not only no greater for narrow-based indexes than broad-based
indexes, but may be less likely for narrow-based indexes such as the
Cboe Magnificent 10 Index, as the indexes underlying such options are
by definition not representative of an entire market (as is the case
for options on the S&P 500 Index). Therefore, any potential impact
would be limited in scope (as noted above, the Commission found no
material impact with respect to P.M.-settled broad-based index
options), unlike for a broad-based index, which would impact the market
as a whole. Therefore, because, as noted above, the Commission found no
material impact with respect to broad-based index options, the Exchange
believes that it is reasonable that no material impact would occur with
respect to MGTN options for the reasons described above (including the
significant liquidity of the components and correlation of the
component securities and the availability of multiple correlated
instruments for hedging). The narrow scope of narrow-based indexes
aligns closer to the scope of equity options (which are P.M.-settled,
such as the options overlying the constituent securities that comprise
the Cboe Magnificent 10 Index).
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\26\ See id.
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Further, the Cboe Magnificent 10 Index satisfies the generic
listing criteria in Rule 4.10(b). Upon approval of those listing
criteria, the Commission noted that these generic standards were
reasonably designed to ensure the protection of investors and the
public interest and to ensure that the trading markets for the
components were adequately capitalized and sufficiently liquid, and
that no one component dominated the index, thus minimizing the
potential for manipulation.\27\ This listing criteria includes the
following:
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\27\ See Securities Exchange Act Release No. 34157 (June 3,
1994), 59 FR 30062 (June 10, 1994) (SR-Amex-92-35, SR-CBOE-93-59,
SR-NYSE-94-17, SR-PSE-94-07, and SR-Phlx-94-10). The Commission made
substantially similar findings with respect to generic listing
criteria for broad-based index options. See Securities Exchange Act
Release No. 53266 (February 9, 2006), 71 FR 8321 (February 16, 2006)
(SR-CBOE-2005-59) (the Commission noted that the listing criteria
were ``designed to ensure that the markets for the index's component
stocks are adequately capitalized and sufficiently liquid, and that
no one stock dominates the index'' and thus ``minimize the potential
for manipulating the underlying index'').
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<bullet> each component security has a market capitalization of at
least $75 million, except that for each of the lowest weighted
component securities in the index that in the aggregate account for no
more than 10% of the weight of the index, the market capitalization is
at least $50 million;
<bullet> trading volume of each component security has been at
least one million shares for each of the last six months,
[[Page 46429]]
except that for each of the lowest weighted component securities in the
index that in the aggregate account for no more than 10% of the weight
of the index, trading volume has been at least 500,000 shares for each
of the last six months;
<bullet> in a capitalization-weighted index or a modified
capitalization-weighted index, the lesser of the five highest weighted
component securities in the index or the highest weighted component
securities in the index that in the aggregate represent at least 30% of
the total number of component securities in the index each have had an
average monthly trading volume of at least 2,000,000 shares over the
past six months;
<bullet> no single component security represents more than 25% of
the weight of the index, and the five highest weighted component
securities in the index do not in the aggregate account for more than
50% (60% for an index consisting of fewer than 25 component securities)
of the weight of the index; and
<bullet> component securities that account for at least 90% of the
weight of the index and at least 80% of the total number of component
securities in the index satisfy the requirements of Rule 4.3 applicable
to individual underlying securities.
Therefore, by satisfying the generic listing criteria for narrow-
based index options, the Cboe Magnificent 10 Index is, like broad-based
indexes, designed to minimize the potential for manipulation, further
reducing any potential concerns associated with P.M.-settlement.
In addition, the Exchange believes that the proposal to end trading
at 4:00 p.m. on the last trading day for transactions in expiring P.M.-
settled MGTN options will prevent continued trading on a product after
the exercise settlement value has been fixed, thereby mitigating
potential investor confusion and the potential for increased costs to
investors as a result of potential pricing divergence at the end of the
trading day.
Finally, the Exchange believes the proposed rule change that
Nonstandard Expiration Program series of options on the Cboe
Magnificent 10 Index will be aggregated with other options within those
classes for purposes of position (and exercise) limits is designed to
prevent fraudulent and manipulative acts and practices and to promote
just and equitable principles of trade, and thus protect investors.
This proposed aggregation is consistent with the treatment of positions
for purposes of position (and exercise) limits for other classes that
participate in the Nonstandard Expiration Program.\28\ Therefore, the
current position and exercise limits that apply to options on the Cboe
Magnificent 10 Index will continue to apply, as the proposed additional
expirations for these options would have no impact on the number of
positions that may be held (or exercised) within a single account.
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\28\ See Rule 8.31(b).
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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. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because P.M.-settled options on
the Cboe Magnificent 10 Index with Weekly and Expiration Friday
expirations will be available to all market participants. By listing
options on the Cboe Magnificent 10 Index with these expirations (in
addition to the monthly, quarterly, and standard Expiration Friday
expirations (A.M.-settled) that are currently permitted under the
Rules), the proposed rule change will provide all investors that
participate in the markets for these index options available for
trading on the Exchange with greater trading and hedging opportunities
and flexibility to meet their investment and hedging needs, which are
already available for broad-based index options. Further, the proposed
change to make options on the Cboe Magnificent 10 Index that are P.M.-
settled and expire on the last business day of the month or quarter
eligible for listing under different programs under the Rules will have
any burden on competition, as this proposed rule change is intended to
maintain consistency within the Rules and will result in the same
series being listed. The proposed 4:00 p.m. closing time for expiring
P.M.-settled MGTN options on their expiration dates will apply equally
to all market participants trading these options.
The Exchange does not believe that the proposal to list P.M.-
options on the Cboe Magnificent 10 Index with Weekly and Expiration
Friday expirations will impose any burden on intermarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act because these options are proprietary Exchange products. The
Exchange may currently list the same expirations for other index
options, so the proposed rule change merely expands the availability of
these expiration programs to additional products. Other exchanges offer
similar expirations for index options as well as short-term options
programs for certain equity options that expire each day of the week,
at the end of the calendar month, at the end of the calendar quarter,
and on Expiration Fridays \29\ and are welcome to similarly propose to
list options on those index or equity products with similar
expirations. To the extent that the addition of these expirations for
options on the Cboe Magnificent 10 Index makes the Exchange a more
attractive marketplace to market participants at other exchanges, such
market participants are free to elect to become market participants on
the Exchange.
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\29\ See, e.g., Nasdaq PHLX, LLC Options 4A, Section 12
(permitting nonstandard expirations, including daily expirations for
Nasdaq-100 index options and Nasdaq 100-Micro index options); and
Nasdaq ISE, LLC Options 4, Section 5, Supplementary Material .03
(permitting short-term options series with daily expirations for SPY
and QQQ options).
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Additionally, options on the Cboe Magnificent 10 Index with these
expirations will trade in the same manner as other options with these
expirations currently do.
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:
[[Page 46430]]
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#deacabb2bbf3bdb1b3b3bbb0aaad9eadbbbdf0b9b1a8"><span class="__cf_email__" data-cfemail="9defe8f1f8b0fef2f0f0f8f3e9eeddeef8feb3faf2eb">[email protected]</span></a>. Please include
file number SR-CBOE-2025-068 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-2025-068. 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 filing 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-2025-068 and should be submitted on
or before October 17, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18674 Filed 9-25-25; 8:45 am]
BILLING CODE 8011-01-P
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