Notice2026-01375
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rules 4.13 and 5.1 To Permit Options on the Dow Jones Industrial Average To Be P.M.-Settled
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
January 26, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 16 (Monday, January 26, 2026)</title>
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[Federal Register Volume 91, Number 16 (Monday, January 26, 2026)]
[Notices]
[Pages 3284-3291]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01375]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104644; File No. SR-CBOE-2026-005]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Rules 4.13 and 5.1 To Permit
Options on the Dow Jones Industrial Average To Be P.M.-Settled
January 21, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 8, 2026, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange.
[[Page 3285]]
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 and 5.1 to permit options on the Dow Jones
Industrial Average to be P.M.-settled (``DJX options''). The text of
the proposed rule change is provided in Exhibit 5.
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
This proposed rule change amends certain rules to permit the
Exchange to list P.M.-settled \3\ DJX options. Specifically, the
Exchange proposes to amend (1) Rule 4.13, Interpretation and Policy .13
to permit the listing of P.M.-settled DJX options that expire on the
standard third Friday-of-the-month (``Expiration Friday''); \4\ (2)
amend Rule 4.13(c) to permit the listing of DJX options with Quarterly
Index Expirations (``QIXs''); \5\ (3) permit the Exchange to list DJX
options with Nonstandard Expirations pursuant to Rule 4.13(e).\6\
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\3\ An option with P.M.-settlement has its exercise settlement
value derived from the closing prices on the expiration date.
\4\ Rule 4.13, Interpretation and Policy .13 permits the
Exchange to list P.M.-settled
\5\ Rule 4.13(c) permits the Exchange to list QIXs on options on
the S&P 100 Index (``OEX options''), S&P 500 Index (``SPX
options''), Mini-SPX Index (``XSP options''), S&P 500 Equal Weight
Index (full-value) (``SPEQF options''), S&P 500 Equal Weight Index
(1/10th) (``SPEXQ options''), Russell 2000 Index (``RUT options''),
Mini-RUT Index (``MRUT options''), Cboe Bitcoin U.S. ETF Index
(``CBTX options''), Cboe Mini-Bitcoin U.S. ETF Index (``MBTX
options''), and Cboe Magnificent 10 Index (``MGTN options'').
\6\ Rule 4.13(e) permits the Exchange to open for trading Weekly
Expirations on any broad-based index eligible for standard options
trading on any Monday, Tuesday, Wednesday, Thursday, or Friday
(other than Expiration Fridays or days that coincide with an end-of-
month (``EOM'') expiration) or EOM expirations on any broad-based
index eligible for standard options trading. While the Exchange
believes it has the authority under this rule to list DJX options
with Nonstandard Expirations, Commission staff informed the Exchange
that it must submit a rule filing pursuant to Section 19(b)(2) under
the Act before it may list Nonstandard Expirations for these
classes.
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The Exchange may currently list P.M.-settled series that expire on
Expiration Friday, Nonstandard Expirations, and QIXs for several
different broad-based indexes. This proposed rule change would permit
the Exchange to list P.M.-settled DJX options that expire on Expiration
Fridays, Nonstandard Expirations, and QIXs. The availability of P.M.-
settled DJX options with these various expirations will provide market
participants with opportunities to trade those options in a manner more
aligned with specific timing needs and more effectively tailor their
investment and hedging strategies related to the Dow Jones Industrial
Average and manage their portfolios. In particular, the proposed rule
change will allow market participants to roll their positions in DJX
options with regularity and more precision, to spread risk across more
trading days, and incorporate daily, weekly, monthly, and quarterly
changes in the markets, which may reduce the premium cost of hedging.
First, the Exchange proposes to list DJX options pursuant to the
Nonstandard Expirations Program (``Program'') under Rule 4.13(e), which
would permit P.M.-settled DJX 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 and the Cboe Bitcoin U.S. ETF Index
(``CBTX options''), the Mini-Cboe Bitcoin U.S. ETF Index (``MBTX
options''), and the Cboe Magnificent 10 Index (``MGTN options'') (which
are narrow-based indexes) 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.\7\ The proposal expands the availability of
Weekly and EOM expirations to DJX options, which are broad-based index
options eligible for standard options trading.\8\
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\7\ See Rule 4.13(e).
\8\ The Exchange notes DJX 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 Expirations Program will apply to DJX options in
the same manner as it currently applies to other 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 DJX options).
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
[[Page 3286]]
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.
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) to permit the
Exchange to list P.M.-settled QIXs on DJX options.\9\ 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 DJX 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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\9\ The Exchange notes DJX 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 DJX options that
expire on Expiration Fridays. Combined with the proposed rule changes
above to permit the Exchange to list P.M.-settled DJX options with
Weekly Expirations, the Exchange would be permitted to list P.M.-
settled DJX options with expirations on all Fridays (in addition to all
other days of the week). DJX 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 DJX options, except that they are
P.M.-settled.
In connection with the proposed rule changes to Rule 4.13,
Interpretation and Policy .13, the Exchange proposes to amend Rule 5.1,
which governs trading days and hours, in conjunction with the proposed
addition of DJX 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 and QIXs, as well as expiring P.M.-settled SPX, XSP, RUT,
MRUT, CBTX, MBTX, and MGTN options, may be effected on the Exchange
between 9:30 a.m. and 4:00 p.m. Eastern Time \10\ (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 DJX P.M.-settled options.\11\ The primary
listing markets for the component securities that comprise the Dow
Jones Industrial Average 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, Mini-Russell
2000, Cboe Bitcoin U.S. ETF, Cboe Mini-Bitcoin U.S. ETF, and Cboe
Magnificent 10 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 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 DJX 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 DJX P.M.-
Settled options at 4:00 p.m., as it already does for expiring P.M.-
settled SPX, XSP, RUT, MRUT, CBTX, MBTX, and MGTN options that expire
on Expiration Fridays and for expiring indexes with Nonstandard
Expirations (which are P.M.-settled) for the same aforementioned
reasons.\12\ The Exchange does not believe that the proposed rule
change will impact volatility on the underlying cash market comprising
the Dow Jones Industrial Average 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 (as further discussed below).\13\
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\10\ See Rule 1.6, which states that unless otherwise specified,
all times in the Rules are Eastern Time.
\11\ Current Rule 5.1(b)(2)(C) would apply to DJX options with
Nonstandard Expirations and QIXs, as proposed; therefore, the
addition of DJX P.M.-settled options to the list of options set
forth in this Rule covers these options that expire on Expiration
Fridays.
\12\ 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'').
\13\ 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 DJX options with expirations on the last calendar of the month
and quarter.\14\ As a result, it is already possible under the Rules
for options on the Dow Jones Industrial Average 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 Dow Jones Industrial Average 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 Dow
Jones Industrial Average are available for FLEX trading pursuant to
Rule 4.20, which 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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\14\ 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 Dow Jones
Industrial Average 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
[[Page 3287]]
participate. By offering expanded expirations along with the current
standard A.M.-settled expirations (as well as P.M.-settled monthly and
quarterly expirations that are permitted under the Rules), the proposed
rule change will allow market participants to purchase options on the
Dow Jones Industrial Average 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 Dow Jones Industrial Average 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.\15\
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\15\ The Exchange currently may list Weekly, EOM, QIX, and
Expiration Friday P.M.-Settled Expirations for SPX, XSP, RUT, MRUT,
CBTX, MBTX, and MGTN options.
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The Exchange notes, as is the case for other p.m.-settled options,
that DJX options will be aggregated with all other option contracts for
those options for purposes of determining compliance with the
applicable position (and exercise) limit, as well as determining
position limit reporting requirements.\16\
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\16\ See Rules 8.31(b), 8.35(b) and (d), and 8.42(b) and (g).
There are no position and exercise limits for DJX options. Rule
8.35(b) requires Trading Permit Holders to report certain
information regarding FLEX positions in FLEX index options that are
subject to no position limits if they maintain in excess of 100,000
contracts in those options. Additionally, Rule 8.43 imposes various
reporting obligations with respect to options (including index
options), even for index options subject to no position limits.
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P.M.-settled DJX options will trade in the same manner as other
P.M.-settled index options listed on the Exchange. The Exchange Rules
that currently apply to the listing and trading of p.m.-settled index
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
P.M.-settled DJX options on the Exchange in the same manner as they
apply to other P.M.-settled index options that are listed and traded on
the Exchange.
The Exchange has analyzed its capacity and represents that it
believes that the Exchange has the necessary systems capacity to handle
any potential additional message traffic associated with the listing of
new series that would result from the introduction of the DJX options
up to the proposed number of possible p.m.-settled expirations. The
Options Price Reporting Authority (``OPRA'') also informed the Exchange
it believes it has the necessary systems capacity to handle the
additional traffic associated with the listing of new series that would
result from this proposed rule change. 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
DJX options 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 P.M.-settled DJX options and
will support the protection of investors and the public interest.
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.\17\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \18\ 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) \19\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ 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, because it will provide investors
with additional means to manage their risk exposures and carry out
their investment objectives with more flexibility. The Exchange
believes that P.M.-settled Weekly and Expiration Friday expirations for
DJX options will provide investors with expanded hedging tools and
greater trading opportunities and flexibility for an additional index
option.\20\ 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 Dow Jones Industrial
Average (along with 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 Dow
Jones Industrial Average on more trading days, thus with more
precision, spread
[[Page 3288]]
risk across more trading days and incorporate daily changes in the
markets, which may reduce the premium cost of buying protection.
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\20\ Options on the Dow Jones Industrial Average 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 DJX 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 DJX
options would 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. 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 Dow Jones
Industrial Average 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.
As noted above, current Rules permit the Exchange to list P.M.-
settled options on the Dow Jones Industrial Average 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 Dow Jones
Industrial Average 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 Dow Jones
Industrial Average 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 Dow Jones Industrial Average are
available for FLEX trading pursuant to Rule 4.20, 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
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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While the Commission's prior determination was based on data
specific to SPX options, the Exchange believes it is appropriate to
extrapolate the data to apply to P.M.-settled DJX options.\25\ The
components of the Dow Jones Industrial Average are all components of
the S&P 500 Index. Additionally, the three largest components (by
market capitalization) of the Down Jones Industrial Average (which
represent more than 80% of the total market capitalization of that
index) represent more than 26% of the total market capitalization of
the S&P 500 Index. Therefore, the Exchange believes extrapolating the
data results to an index comprised of the a subset of those components
(including some of the largest components of the S&P 500 Index) is more
than appropriate, as the Commission has already considered the impact
of P.M.-settled options on futures overlying an index that includes the
same components, concluding P.M.-settled options had minimal economic
impact on that future, index, and constituents.\26\ Overall, the
Commission concluded that the ``analysis of pilot data did not identify
any significant economic impact on the underlying component securities
surrounding the close as a result of expiring p.m.-settled options, nor
did it indicate a deterioration in market quality . . . for an existing
product when a new p.m.-settled expiration was introduced.
[[Page 3289]]
Further significant changes in closing procedures in the decades since
index options moved to a.m. settlement may also serve to mitigate the
potential impact of p.m.-settled index options on the underlying cash
markets.'' \27\
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\25\ See XSPPM and MRUTPM Permanent Approval at n. 31; and
Nonstandard Permanent Approval Order at n. 37 (at the time of that
approval order, the Exchange had listed Nonstandard Expirations for
RUT and MRUT options) (``The Commission agrees it is appropriate to
extrapolate the data to [p.m.-settled third Friday-of-the-month XSP
and MRUT options], as the Exchange's analysis examines liquidity and
volatility dynamics around the market close, which may be associated
with typical hedging activities tied to expiring p.m.-settled index
options.'') Ultimately, the Commission found that the Exchange's
filing, pilot data, and analysis demonstrated these p.m.-settled
products had no significant economic impact on the respective
underlying indexes or other products. See id.
\26\ See XSPPM and MRUTPM Permanent Approval at 66075; and
Nonstandard Permanent Approval Order at 66093-66094.
\27\ See XSPPM and MRUTPM Permanent Approval at 66076; and
Nonstandard Permanent Approval Order at 66094.
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The Exchange understands that investors may use other instruments
(such as futures overlying the same index and ETFs designed to track
the same index) to hedge their positions in options overlying this
index given potential investment challenges and risk, as well as cost,
of hedging with the underlying constituents (which would entail
obtaining positions in each of the 30 individual stocks that comprise
the index). With respect to these markets linked to DJX options, such
as securities underlying the index, futures overlying the same
index,\28\ and ETFs designed to track the same index,\29\ the Exchange
believes these markets can withstand any additional pressure that
listing these options may place on these markets. Additionally, trading
within this 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
Dow Jones Industrial Average), reduces the risk that listing these
options would strain liquidity providers.
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\28\ E-mini Dow futures currently trade on the Chicago
Mercantile Exchange.
\29\ For example, the SPDR Dow Jones Industrial Average ETF
Trust (``DIA'').
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Similar to the S&P 500 Index, all components of the Dow Jones
Industrial Average are highly liquid securities with substantial market
capitalizations ranging from approximately $10.36 billion to $4.57
trillion, with a combined market capitalization of approximately $14.48
trillion (as of December 29, 2025),\30\ and are components of the S&P
500 Index. The size of the markets of the underlying components make it
unlikely the proposed rule change would materially impact the component
markets, the index value, or the broader market. The Exchange,
therefore, believes the constituents would not be materially impacted
by any additional pressure resulting from the listing of these options
given their significant market capitalization and liquidity.
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\30\ The components of the Dow Jones Industrial Average are 30
large, established, blue-chip U.S. companies that are deemed
industry leaders. When the Commission approved the listing of DJX
options on the Exchange, it found that DJX options would provide
investors with an important trading and hedging mechanism. See
Securities Exchange Act Release No. 39011 (September 3, 1997), 62 FR
47840, 47843 (September 11, 1997) (SR-CBOE-97-26). The Commission
found the general broad diversification, capitalization, and highly
liquid markets of the Dow Jones Industrial Average represents a
broad cross-section of domestically traded high capitalization
stocks, with no single industry group or stock dominating the index,
significantly minimized the potential for manipulation of the index.
See id. While there is no specific maintenance listing criteria
codified in the Rules, the Exchange represented it would notify the
Commission staff if: (1) the market value of any component stock is
less than $75 million and that component is not options eligible;
(2) less than 80% of the weight of the index is represented by
component stocks that are eligible for options trading; (3) 10% or
more of the weight of the index is represented by component stocks
trading less than 20,000 shares per day; (4) the largest component
stock accounts for more than 15% of the weight of the index or the
largest five components in the aggregate account for more than 50%
of the weight of the index; and (5) if the index decreases to less
than 20 component stocks. Id.
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As is the case for options on other indexes eligible for P.M.-
settlement, the Exchange does not believe the listing of additional
P.M.-settled options on the Dow Jones Industrial Average 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 with respect to broad-based
indexes 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.\31\ Therefore, because, as noted
above, the Commission found no material impact with respect to certain
broad-based index options (including SPX options), the Exchange
believes that it is reasonable to infer that no material impact would
occur with respect to DJX 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 Exchange believes this to be particularly
true given that the components of the Dow Jones Industrial Average are
also components of the S&P 500 Index, which was the index the
Commission considered in those findings. Additionally, as described
above, the constituents of the Dow Jones Industrial Average are large,
highly capitalized, and heavily traded, which further reduce the
potential for manipulation of the index.
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\31\ See id.
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Further, the Exchange believes that because DJX options listed with
Nonstandard Expirations, QIXs, and P.M.-settlement on Third Fridays
will be aggregated with other options within those classes for purposes
of position (and exercise) limits, will further prevent fraudulent and
manipulative acts and practices and to promote just and equitable
principles of trade, and thus protect investors. This aggregation is
consistent with the treatment of positions for purposes of position
(and exercise) limits for other classes that may be listed with
Nonstandard Expirations, QIXs, and third Friday P.M.-settlement.\32\
Therefore, the current position and exercise limits that apply to DJX
options 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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\32\ See Rule 8.31(b).
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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 DJX 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.
The Exchange represents that it has the necessary systems capacity
to support the proposed new option series given. The Exchange believes
that its existing surveillance and reporting safeguards (including with
respect to p.m.-settled index option series) in place are adequate to
deter and detect possible manipulative behavior which might arise from
listing and trading P.M.-settled DJX options (as the Exchange currently
applies to other P.M.-settled index options with the same expiration)
and will support the protection of investors and the public
interest.\33\ 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 to obtaining information from its affiliated
markets, the Exchange would be able to obtain information from other
markets through ISG. In addition, the Exchange has a Regulatory
[[Page 3290]]
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.\34\ The Exchange
further notes that current Exchange Rules that apply to the trading of
other p.m.-settled index options traded on the Exchange, such as SPX
and XSP options, would also apply to the trading of p.m.-settled SPEQF
and SPEQX options, such as, for example, Exchange Rules governing
customer accounts, margin requirements, position and exercise
limits,\35\ and trading halt procedures, which are designed to prevent
fraudulent and manipulative acts.
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\33\ 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).
\34\ 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.
\35\ See Rules 8.31(b), 8.35(b) and (d), and 8.42(b) and (g).
There are no position and exercise limits for DJX options. Rule
8.35(b) requires Trading Permit Holders to report certain
information regarding FLEX positions in FLEX index options that are
subject to no position limits if they maintain in excess of 100,000
contracts in those options. Additionally, Rule 8.43 imposes various
reporting obligations with respect to options (including index
options), even for index options subject to no position limits.
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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 Dow Jones Industrial Average with Weekly and Expiration Friday
expirations will be available to all market participants. By listing
options on the Dow Jones Industrial Average 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 several other index options (both broad-based and
narrow-based). Further, the proposed change to make options on the Dow
Jones Industrial Average 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 DJX 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 Dow Jones Industrial Average 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 \36\ 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 Dow Jones Industrial Average 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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\36\ 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 Dow Jones Industrial Average 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 written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#dcaea9b0b9f1bfb3b1b1b9b2a8af9cafb9bff2bbb3aa"><span class="__cf_email__" data-cfemail="b9cbccd5dc94dad6d4d4dcd7cdcaf9cadcda97ded6cf">[email protected]</span></a>. Please include
file number SR-CBOE-2026-005 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-2026-005. 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
[[Page 3291]]
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-2026-005 and should be submitted on or before February 17,
2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-01375 Filed 1-23-26; 8:45 am]
BILLING CODE 8011-01-P
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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.