Notice2026-01630
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 5.34(c) With Respect to Its Risk Monitor Mechanism, To Provide Users With Additional Flexibility in Establishing How Their Trading Activity Counts Towards Certain Risk Parameters
Primary source
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Published
January 28, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 18 (Wednesday, January 28, 2026)</title>
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[Federal Register Volume 91, Number 18 (Wednesday, January 28, 2026)]
[Notices]
[Pages 3763-3765]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01630]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104674; File No. SR-CBOE-2026-006]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 5.34(c) With Respect to Its Risk Monitor Mechanism, To Provide
Users With Additional Flexibility in Establishing How Their Trading
Activity Counts Towards Certain Risk Parameters
January 23, 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 14, 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
and II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 5.34(c) with respect to its Risk Monitor Mechanism, to
provide Users with additional flexibility in establishing how their
trading activity counts towards certain risk parameters. 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
The Exchange proposes to amend Rule 5.34(c), Order and Quote Price
Protection Mechanisms and Risk Controls (All Orders). Specifically, the
Exchange proposes changes to the Risk Monitor Mechanism to provide
Users with additional flexibility in establishing how their trading
activity counts towards certain risk parameters.
By way of background, the Risk Monitor Mechanism provides Users \3\
with the ability to manage their order and execution risk. Each User
may establish limits for various parameters in the Exchange's counting
program. The System \4\ counts each of the following within a class for
an EFID \5\ (``class limit'') and across all classes for an EFID
(``EFID limit'') and/or for all classes for a group of EFIDs (``EFID
Group'') (``EFID Group limit''), over a User-established time period
(``interval'') and on an absolute basis for a trading day (``absolute
limits''): (i) number of contracts executed (``volume''); (ii) notional
value of executions (``notional''); (iii) number of executions
(``count''); (iv) number of contracts executed as a percentage of
number of contracts outstanding within an Exchange-designated time
period or during the trading day, as applicable (``percentage''), which
the System determines by calculating the percentage of a User's
outstanding contracts that executed on each side of the market during
the time period or trading day, as applicable, and then summing the
series percentages on each side in the class; and (v) number of times
the limits established by the parameters (i) through (iv) are reached
(``risk trips'') (collectively, ``risk parameters''). Additionally,
when the System determines a risk parameter exceeds a User's class
limit within the interval or the absolute limit for the class, the Risk
Monitor Mechanism cancels or rejects such User's orders or quotes in
all series of the class and cancels or rejects any additional orders or
quotes from the User in the class until the counting program resets.
Similarly, when the System determines a risk parameter exceeds a User's
EFID limit within the interval or the absolute limit for the EFID, the
Risk Monitor Mechanism cancels or rejects such User's orders or quotes
in all classes and cancels or rejects any additional orders or quotes
from the EFID in all classes until the counting program resets.
Finally, when the System determines a risk parameter exceeds a User's
EFID Group limit within the interval or the absolute limit for the EFID
Group, the Risk Monitor Mechanism cancels or rejects such User's orders
or quotes in all classes and cancels or rejects any additional orders
or quotes from any EFID within the EFID Group in all classes until the
counting program resets.
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\3\ The term ``User'' means any TPH or Sponsored User who is
authorized to obtain access to the System pursuant to Rule 5.5. See
Rule 1.1.
\4\ The term ``System'' means the Exchange's hybrid trading
platform that integrates electronic and open outcry trading of
option contracts on the Exchange, and includes any connectivity to
the foregoing trading platform that is administered by or on behalf
of the Exchange, such as a communications hub. See Rule 1.1.
\5\ The term ``EFID'' means an Executing Firm ID. See Rule 1.1.
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The Exchange proposes to amend Rule 5.34(c) to enhance the Risk
Monitor Mechanism to provide Users with additional flexibility in
[[Page 3764]]
establishing how their trading activity counts towards certain risk
parameters.
First, the Exchange proposes to add new Rule 5.34(c)(4)(B)(i) \6\
to allow Users the option to exclude certain options auction-executed
volume from certain of the Risk Monitor Mechanism risk parameters,
namely the volume parameter in Rule 5.34(c)(4)(A)(i) and the count
parameter in Rule 5.34(c)(4)(A)(iii). Under the proposed change, a User
may specify whether volume or executions in Automated Improvement
Mechanism Auctions (``AIM''), Complex-AIM (``C-AIM''), Solicitation
Auction Mechanism Auctions (``SAM''), Complex-SAM (``C-SAM''), Step Up
Mechanism Auctions (``SUM''), and Complex Order Auctions (``COA'')
count toward the User's class, EFID, or EFID Group limit (on both an
interval or absolute basis).
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\6\ As part of the proposed change, the Exchange proposes to
renumber current Rules 5.34(c)(4)(B), (C), (D), (E), and (F) as
Rules 5.34(c)(4)(C), (D), (E), (F), and (G), respectively.
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The Exchange also proposes to add new Rule 5.34(c)(4)(B)(ii) to
allow Users the option to establish the volume or count parameters on a
contra-party capacity basis. Under the proposed change, a User may
specify a percentage (up to 100%) of volume or executions to count
toward the User's class, EFID, or EFID Group limit based on contra-
party capacity (on both an interval or absolute basis). For example,
under the proposed rule change, a User could specify that only 20% of
the quantity on each trade with a Capacity ``C'' (i.e., Public
Customer) \7\ contra-party would be counted towards the User's class,
EFID, or EFID Group limit (on an interval or absolute basis).
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\7\ See Rule 1.1 (definition of ``Capacity'').
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The proposed changes allow the User to more precisely tailor the
volume and count parameters within the Risk Monitor Mechanism. The
Exchange notes that use of the proposed enhancements is optional, and
Users are free to utilize them or not, at their discretion.
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.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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In particular, the Exchange believes the proposed change would
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and protect investors and the
public interest by providing Users with enhanced abilities to manage
their risk with respect to orders on the Exchange. The Exchange
believes that allowing Users to tailor volume and count parameters
promotes risk management processes that better reflect the risks of
different types of trading activity. The Exchange believes that the
proposed rule change will protect investors and the public interest
because the proposed enhancements will assist Users in minimizing their
risk exposure, thereby reducing the potential for disruptive, market-
wide events.
The Exchange believes the proposed change to allow Users to specify
whether volume or executions in AIM, C-AIM, SAM, C-SAM, SUM and COA
count toward the User's class, EFID, or EFID Group limit (on both an
interval or absolute basis) is reasonable because orders executed
through these auction mechanisms are subject to different protections,
such as price improvement requirements or exposure periods, as compared
to other order types. As a result, these orders have different risk
considerations. Allowing Users to differentiate between these execution
types in their Risk Monitor Mechanism settings enables them to
establish risk parameters that more accurately reflect their risk
management tolerances. The Exchange again notes that this functionality
is optional, and Users may continue to include executions resulting
from these exchange auctions in their risk parameters (as is the case
today) if they prefer.
The Exchange also believes its proposal to allow Users to establish
volume or count parameters on a contra-party capacity basis is
reasonable, as different contra-party types present different risk
profiles. For example, this enhancement may be beneficial for Market-
Makers or other liquidity providers who may wish to establish lower
limits for when providing liquidity to Customer orders while
establishing stricter parameters for trades against other institutional
contra-parties which may involve different risk considerations. The
Exchange believes allowing Users the option to adjust their risk
tolerance based on contra-party capacity provides the opportunity for a
more precise risk management approach.
Finally, the Exchange believes the proposed changes are not
unfairly discriminatory, as the proposed enhancements are available to
all Users and apply uniformly to all Users who may choose to utilize
the enhanced risk parameter settings. As noted above, use of the
proposed enhancements is optional and Users are free to utilize them or
not, at their discretion.
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 the proposed
enhancements are available to all Users and apply uniformly to all
Users who may choose to utilize the enhanced risk parameter settings.
As noted above, use of the proposed enhancements is optional and Users
are free to utilize them or not, at their discretion.
Additionally, the Exchange does not believe that the proposed rule
change will impose any burden on intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act
because the proposed enhancements apply only to trading on the
Exchange. Again, the Exchange notes that it is voluntary for the Users
to determine whether to make use of the new enhancements of the Risk
Monitor Mechanism. To the extent that the proposed changes may make the
Exchange a more attractive trading venue for market participants on
other exchanges, such market participants may elect to become Exchange
market participants.
[[Page 3765]]
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) \12\ thereunder.
Because the foregoing proposed rule change does not: (i) significantly
affect the protection of investors or the public interest; (ii) impose
any significant burden on competition; and (iii) become operative for
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\
thereunder.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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#b8cacdd4dd95dbd7d5d5ddd6cccbf8cbdddb96dfd7ce"><span class="__cf_email__" data-cfemail="90e2e5fcf5bdf3fffdfdf5fee4e3d0e3f5f3bef7ffe6">[email protected]</span></a>. Please include
file number SR-CBOE-2026-006 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-2026-006. 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-2026-006 and should be submitted on
or before February 18, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-01630 Filed 1-27-26; 8:45 am]
BILLING CODE 8011-01-P
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