Notice2026-05561
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment Nos. 1 and 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified and Superseded by Amendment No. 2, To Amend Rule 5.4 To Change the Minimum Increment for Options on the Cboe Magnificent 10 Index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
March 23, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 91, Number 55 (Monday, March 23, 2026)]
[Notices]
[Pages 13907-13912]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05561]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105045; File No. SR-CBOE-2025-069]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Amendment Nos. 1 and 2 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified and Superseded by
Amendment No. 2, To Amend Rule 5.4 To Change the Minimum Increment for
Options on the Cboe Magnificent 10 Index
March 18, 2026.
I. Introduction
On September 24, 2025, Cboe Exchange, Inc. (``Exchange'' or
``Cboe'')
[[Page 13908]]
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934
(``Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to
change the minimum increment for all series of options on the Cboe
Magnificent 10 Index. The proposed rule change was published for
comment in the Federal Register on September 30, 2025.\4\ On November
3, 2025, pursuant to Section 19(b)(2)(A)(ii)(I) of the Act,\5\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to approve or disapprove the proposed
rule change.\6\ On December 17, 2025, the Commission instituted
proceedings under Section 19(b)(2)(B) of the Act \7\ to determine
whether to approve or disapprove the proposed rule change.\8\ On
February 18, 2026, the Exchange submitted Amendment No. 1 to the
proposed rule change, which amended and superseded the proposed rule
change as originally filed.\9\ On March 5, 2026, the Exchange submitted
Amendment No. 2 to the proposed rule change, which amended and
superseded the proposed rule change, as modified by Amendment No. 1, in
its entirety.\10\ The Commission received no comments on the proposed
rule change. The Commission is publishing this Notice and Order to
solicit comment on Amendment No. 2 in Sections II and III below, which
sections are being published verbatim as filed by the Exchange, and to
approve the proposed rule change, as modified and superseded by
Amendment No. 2, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 104076 (September
25, 2025), 90 FR 47000.
\5\ See 15 U.S.C. 78s(b)(2)(A)(ii)(I).
\6\ See Securities Exchange Act Release No. 104173, 90 FR 51424
(November 17, 2025). The Commission designated December 29, 2025, as
the date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\7\ 15 U.S.C. 78s(b)(2)(B).
\8\ See Securities Exchange Act Release No. 104439, 90 FR 59897
(December 22, 2025).
\9\ See Amendment No. 1, available at <a href="https://www.sec.gov/comments/sr-cboe-2025-069/srcboe2025069-705027-2220975.pdf">https://www.sec.gov/comments/sr-cboe-2025-069/srcboe2025069-705027-2220975.pdf</a>.
\10\ See Amendment No. 2, available at <a href="https://www.sec.gov/comments/sr-cboe-2025-069/srcboe2025069-719687-2253174.pdf">https://www.sec.gov/comments/sr-cboe-2025-069/srcboe2025069-719687-2253174.pdf</a>.
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II. 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 5.4 to change the minimum increment for all series of
options on the Cboe Magnificent 10 Index (``MGTN options'') to $0.01
for series trading lower than $3.00 and $0.05 for series trading at
$3.00 or higher. The Exchange initially submitted this rule filing SR-
CBOE-2025-069 to the Securities and Exchange Commission (the
``Commission'') on September 24, 2025 (the ``Initial Rule Filing'').
The Exchange submitted Amendment No. 1 to this rule filing SR-CBOE-
2025-069 to the Commission on February 18, 2026. This Amendment No. 2
supersedes the Initial Rule Filing and replaces it in its entirety.
This Amendment No. 2 provides additional support for the proposed rule
change, as well as makes minor changes to language in the rule filing,
but makes no changes to the proposal. 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.
III. 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 V 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 5.4(a) to change the minimum
increment for all series of options on the Cboe Magnificent 10 Index
(``MGTN options'') \11\ to $0.01 for series trading lower than $3.00
and $0.05 for series trading at $3.00 or higher (as long as options on
the Nasdaq 100 Micro Index (``XND options'') have a minimum increment
of $0.01).\12\ The Exchange believes market demand (including by retail
investors, who generally prefer lower trading increments) supports a
lower trading increment for MGTN options. Options overlying the
components of the Cboe Magnificent 10 Index are among the most actively
traded options (as are the underlying stocks), which options are
eligible for a lower trading increment, supporting the view that there
will be market demand for the proposed trading increments for MGTN
options. The Exchange offers MGTN options to provide investors with
opportunity to gain exposure to these dominant, highly liquid stocks in
a single trade with the benefits associated with index options and
without the concentration risk associated with trading in single stocks
and options on those single stocks.\13\ The proposed increments will
allow MGTN options to more effectively compete with other options that
currently trade in the proposed increments, primarily options on the
constituent stocks and options tracking the performance of the Nasdaq
100 Micro Index. The Exchange also expects this more granular pricing
to lead to narrowing of the bid-ask spread for these options and
increase the possible number of price points available to investors for
these series. The Exchange believes tighter spreads will increase order
flow in MGTN options, which additional liquidity ultimately benefits
all investors. Finer increments also permit more precise pricing in
line with the theoretical value of these options and thus more
efficient hedging opportunities, particularly with respect to related
products that may already trade in finer increments.
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\11\ The Exchange may list MGTN options pursuant to generic
listing criteria for narrow-based index options as set forth in Rule
4.11(b). The Exchange began listing MGTN options in the fourth
quarter of 2025.
\12\ If XND options no longer had a minimum increment of $0.01
(because options on the PowerShares QQQ Trust (``QQQ'') no longer
participated in the Penny Interval Program), then the minimum
increment for MGTN options would become $0.05 for series trading
lower than $3.00 and $0.05 for series trading at $3.00 or higher at
the same time as the minimum increment for XND changed.
\13\ See, e.g., Why Mag 10 Index Options, available at <a href="https://www.cboe.com/tradable-products/mag-10/mgtn-options/">https://www.cboe.com/tradable-products/mag-10/mgtn-options/</a>.
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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 proposed
rule change. The Options Price Reporting Authority (``OPRA'') also
informed the Exchange it believes it has the necessary systems capacity
to handle any additional traffic that may result from this proposed
rule change. The Exchange does not believe any potential increased
traffic will become unmanageable since this
[[Page 13909]]
proposed rule change with respect to minimum trading increments is
limited to a single class of options.
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.\14\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \15\ 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) \16\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
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In particular, the Exchange believes the proposed rule change will
protect investors and the public interest. As discussed above, the
Exchange believes market demand (including by retail investors, who
generally prefer lower trading increments) supports a lower trading
increment for MGTN options. Options overlying the components of the
Cboe Magnificent 10 Index are among the most actively traded options,
which options are eligible for a lower trading increment. As discussed
below, various other options with which MGTN options are designed to
compete (including XND options and QQQ options) and to create exposure
to some or all of the constituents of the Cboe Magnificent 10 Index may
also currently trade in lower trading increments. The Exchange believes
this supports the view that there will be market demand for the
proposed trading increments for MGTN options and that the proposed rule
change will promote competition among options providing exposure to the
performance of technology and growth-driven stocks, which competition
ultimately benefits investors. The Exchange believes the proposed rule
change will also benefit investors because it will permit more granular
pricing in MGTN options, which may lead to narrower bid-ask spreads for
these options and increase the possible number of price points (thus
increasing execution opportunities) available to investors for these
series, which ultimately increases liquidity to the benefit of all
investors. The Exchange believes tighter spreads will also increase
order flow in MGTN options, which additional liquidity ultimately
benefits all investors.
As noted above, the Exchange believes the proposed rule change will
promote just and equitable principles of trade and remove impediments
to and perfect the mechanism of a free and open market and a national
market system because it will permit MGTN options to trade at the same
level of granularity as permitted for options with which MGTN options
were designed to compete. The Cboe Magnificent 10 Index is comprised of
large-capitalization U.S.-listed technology and growth-oriented
companies, and MGTN options are designed to offer targeted exposure to
the performance of top tech- and growth-driven companies. As noted
above, the Exchange offers MGTN options to provide investors with an
alternative product to gain exposure to these companies as part of a
basket. MGTN options were designed to compete with options that also
provide exposure to these companies, including options on the
components of the Cboe Magnificent 10 Index. MGTN options provide
investors with opportunity to gain exposure to these popular products
with the benefits of index options (including European-style, cash
settlement) and without risks associated with trading in single stocks
and options on those stocks (including concentration risk and American-
style, physical settlement). Options on each component of the Cboe
Magnificent 10 Index are eligible for the Penny Interval Program, which
is unsurprising given the constituents of the Cboe Magnificent 10 Index
are among the most liquid and traded stocks in the market. The Exchange
understands investors tend to trade in some or all of these stocks (and
thus some or all of the options on these stocks) given their market
dominance. MGTN options provide investors with an efficient way to gain
exposure to the performance of these dominant stocks in a single trade
rather than multiple trades. As a result, the Exchange believes MGTN
options should be eligible for the same pricing increments for
competitive reasons to allow the Exchange to price these options at the
same level of granularity as permitted for competitor products to
promote competition and help level the competitive playing field among
options that provide exposure to some of the most dominant stocks in
the industry.\17\ Permitting MGTN options to trade in the same
increments as these competitive products will promote competition and
help level the competitive playing field, thus promoting just and
equitable principles of trade and removing impediments to and
perfecting the mechanism of a free and open market and a national
market system.
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\17\ The Exchange notes that other index options that trade on
the Exchange are currently permitted to trade in smaller increments
because competitive products are able to trade in those smaller
increments. See Rule 5.4 (the minimum increment for options on the
Mini-S&P 500 Index (``XSP options'') is $0.01 because that is the
minimum increment for options on the Standard & Poor's Depository
Receipts Trust (``SPY options''), and the minimum increment for DJX
options is $0.01 for series below $3 and $0.05 for series $3 and
above because that is the minimum increment for options on The
DIAMONDS Trust (``DIA options'')).
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MGTN options also provide investors with an alternative method to
gain exposure to the performance of technology and high-growth
companies (including some or all of the constituents of the Cboe
Magnificent 10 Index) that other products are also designed to provide,
many of which options are eligible for the Penny Interval Program or
penny increments.\18\ For example, the constituents of the Cboe
Magnificent 10 Index represent a subset of the constituents of the
Nasdaq-100 Index. Similar to the Cboe Magnificent 10 Index, the Nasdaq-
100 Index is designed to track performance of high-growth, market-
leading companies, the majority of which are in the technology sector.
While the 10 constituents of the Cboe Magnificent 10 Index represent
only about 10% of the number of constituents of the Nasdaq-100 Index,
these 10 constituents represent more than half of the market
capitalization (and thus weight) of the Nasdaq-100 Index and in fact
drive the movements of the Nasdaq-100 Index. This is evidenced by the
approximately 0.958 daily return correlation between the Cboe
Magnificent 10 Index and the Nasdaq-100 Index since the launch of the
Cboe Magnificent 10 Index in October 25 (and backcast to March 21,
2021).\19\ As a result, the Exchange
[[Page 13910]]
believes MGTN options compete for order flow with options on the
Nadsaq-100 Index, as well as options on ETFs tracking the performance
of that index (including QQQ options).\20\ Options on the Nasdaq 100
Micro Index \21\ (``XND options'') (which trade on Nasdaq PHLX LLC
(``PHLX'')) may trade in penny increments as long as QQQ options
participate in the Penny Interval Program (which they currently
do).\22\
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\18\ See Rule 5.4(d) (permits $0.01 and $0.05 trading increments
for equity options that satisfy certain volume requirements).
\19\ See Cboe Magnificent 10 Index Futures and Options: A New
Era for Trading Market Leadership (February 9, 2026), available at
<a href="https://www.cboe.com/insights/posts/cboe-magnificent-10-index-futures-and-options-a-new-era-for-trading-market-leadership">https://www.cboe.com/insights/posts/cboe-magnificent-10-index-futures-and-options-a-new-era-for-trading-market-leadership</a>.
\20\ It is for this reason the proposed rule change ties penny
and nickel increments for MGTN options to XND options having a
minimum increment of $0.01.
\21\ The value of the Nasdaq 100 Micro Index, which is 1/100th
the value of the Nadsaq-100 Index, is similar to the value of the
Cboe Magnificent 10 Index (as are values of other indexes on which
options may currently trade in penny increments, such as the Mini-
S&P 500 Index).
\22\ See PHLX Rulebook Options 3, Section 3, Supplementary
Material .04.
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Additionally, there are numerous exchange-traded funds that are
designed to create exposure to and be correlated with many of the
constituents of the Cboe Magnificent 10 Index. These include the
Invesco QQQ ETF, the State Street Technology Select Sector SPDR ETF,
the ARK Innovation ETF, the VanEck Semiconductor ETF, and the ProShares
UltraPro QQQ ETF. Options on these ETFs, as well as a number of other
ETFs, are eligible for the Penny Interval Program. While the holdings
of these ETFs are not exactly the same as the constituents of the Cboe
Magnificent 10 Index, they are similarly designed to provide investors
with opportunities for exposure to tech- and growth-driven stocks. For
these reasons, the Exchange believes MGTN options should be eligible
for the same pricing increments as these competitor products so that
MGTN options can more effectively compete for order flow with these
other options and thus provide investors with an alternative product
with similar pricing precision.
The Exchange also believes consistency in pricing across related
products may better facilitate cross-product trading strategies. For
example, market participants may use options overlying each component
of the Cboe Magnificent 10 Index to hedge MGTN options or as part of
other investment strategies involving MGTN options. The same is true
with respect to the products listed above that are designed to track
the performance of top U.S. technology and growth companies. Therefore,
having the pricing increments for MGTN options aligned with these
related products will permit investors to trade related products at
more granular prices that may be more aligned with their investment
objectives.
Further, finer increments also permit more precise pricing in line
with the theoretical value of these options, particularly short-dated
options. The Exchange may list MGTN options with nonstandard
expirations,\23\ and the Exchange has observed significant trading in
MGTN options with these nonstandard expirations near their expiration
dates. Approximately 98% of MGTN options traded in January 2026 were
traded with one week or less to expiration. Theoretical values of
options change in response to changes in the underlying more rapidly
closer to their expiration. Therefore, finer pricing permits investors
to price these options to more accurately reflect then-current market
conditions. A larger increment may create an artificially widespread
compared to the option's actual value, which may impact execution
quality. Similarly, premiums of shorter-dated options are often lower
than premiums of longer-dated options given the reduced time value that
exists in options closer to their expiration, so a lower trading
increment is more proportional to the value of these options and
further promotes tighter spreads. The value of the premium may
fluctuate more given the proximity to expiration, and the Exchange
believes providing investors with the ability to quote options nearing
expiration in a finer increment will result in more efficient and
accurate pricing for investors.
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\23\ See Rule 4.13(e) (permitting the Exchange to list MGTN
options with expirations on Mondays, Tuesdays, Wednesdays,
Thursdays, and Fridays).
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The same reasons supporting why finer trading increments are
appropriate for shorter-dated options provided the same support for why
more granular strikes are permitted for shorter-dated options.
Specifically, in prior rule filings, the Exchange explained that
smaller strike intervals for weekly expirations permit strikes on a
more refined scale that, at times, will more closely reflect values in
the underlying index and allow market participants to roll open
positions from a lower strike to a higher strike in conjunction with
the price movement of the underlying.\24\ The Exchange believes this
provides market participants with efficient hedging and trading
opportunities. The Exchange believes this same principle applies to
trading increments for MGTN options, for which (as noted above) nearly
all trading is in shorter-dated options. Shorter-dated options
experience more rapid time decay than longer-dated options because, as
options approach their expiration dates, even relatively small
movements in the underlying index can result in meaningful changes to
option values. Finer trading increments of $0.01 and $0.05 allow market
participants to price MGTN options with greater precision that more
accurately reflects the theoretical value of these options as they
approach expiration. This precision is particularly important for
retail investors and market makers who need to adjust positions
frequently in response to rapid changes in option values.
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\24\ See, e.g., Securities Exchange Act Release Nos. 90748
(December 21, 2020), 85 FR 85759, 85762 (December 29, 2020) (SR-
CBOE-2020-118); and 104390 (December 15, 2025), 90 FR 59234, 59235
(December 18, 2025) (SR-CBOE-025-087).
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Additionally, market participants trading shorter-dated options
typically roll or adjust their positions more frequently than those
trading longer-dated options. With weekly and nonstandard expirations,
investors may be rolling positions multiple times per month. Finer
trading increments facilitate these frequent adjustments by providing
more price points at which market participants can efficiently enter
and exit positions. This is analogous to the Exchange's justification
for smaller strike intervals.\25\
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\25\ Id.
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Further, just as the Exchange has determined that smaller strike
price intervals are appropriate for shorter-dated options to provide
more efficient hedging and trading opportunities,\26\ the Exchange
believes that finer trading increments serve the same purpose. As noted
above, the Cboe Magnificent 10 Index comprises highly liquid, actively
traded stocks that experience continuous price discovery throughout the
trading day. Shorter-dated MGTN options are more sensitive to these
underlying movements due to their higher gamma (rate of change in
delta). The proposed rule change to permit finer trading increments
would allow MGTN option prices to track these underlying movements more
closely, which the Exchange believes would provide market participants
with pricing that more closely reflects the value of the underlying
index. As a result, market participants would be able to execute their
hedging and investment strategies with greater precision. While strike
intervals determine the available price points for different option
contracts, trading increments determine the precision with which those
contracts can be priced. For shorter-dated MGTN options, both forms of
granularity would provide market participants with the tools they need
to manage their
[[Page 13911]]
positions more efficiently in a rapidly changing market environment.
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\26\ Id.
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The Exchange notes MGTN options may already trade in penny
increments in certain circumstances under the Rules. For example, MGTN
options are eligible for complex order trading, which permits the legs
to execute in penny increments. Additionally, the Exchange has
activated the automated improvement mechanism (``AIM'') auction for
MGTN simple orders, which also permits penny executions.\27\ Therefore,
current rules will allow MGTN options to trade in penny increments in
certain situations.
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\27\ See Rule 5.37(a)(4).
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While current trading volume in MGTN options would not qualify for
penny interval program, the average daily volume in MGTN options grew
approximately 30% from December to January.\28\ If this volume trend
were to continue during 2026, the volume of MGTN options would qualify
it (if it were eligible for that program) for the penny interval
program at the December 2026 rebalancing.
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\28\ The Exchange notes the volume of MRUT options, which are
currently eligible for penny increments pursuant to Rule 5.4, and
XND options, which are currently eligible for penny increments
pursuant to PHLX Rulebook Options 3, Section 3, Supplementary
Material .04, as of the December 2025 rebalancing of the Penny
Interval Program would not have qualified these options for the
Penny Interval Program (as these volumes are below the volumes of
the 300 most actively traded multiply listed options, and in fact
are outside the 425 most actively traded multiply listed options
volume).
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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 proposed rule change
will not impose any burden on intramarket competition that is not
necessary or appropriate, because all Trading Permit Holders will be
able to trade MGTN options in the proposed minimum trading increments.
The proposed rule change will not impose any burden on intermarket
competition that is not necessary or appropriate, because it will
permit MGTN options to have pricing consistent with the pricing of
competitive products that are part of the Penny Interval Program and
may currently trade in increments of $0.01 or $0.05, as well as other
products that may trade in penny increments (including XND options).
Additionally, the proposed rule change to permit MGTN options to be
listed in penny and nickel increments may relieve any burden on, or
otherwise promote, competition, as it will allow market participants to
trade these options at the same level of granularity as permitted for
competitor products, as discussed above. The Exchange also expects the
more granular pricing to lead to narrowing of the bid-ask spread for
these options, which the Exchange believes will increase order flow and
price competition in MGTN options.
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.
IV. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified and superseded by Amendment No. 2 (``Amended
Proposal''), is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\29\ In particular, the Commission finds that the Amended
Proposal is consistent with Section 6(b)(5) of the Act,\30\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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.
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\29\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\30\ 15 U.S.C. 78f(b)(5).
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As discussed above, the Exchange proposes to reduce the minimum
trading increment for all series of MGTN options to $0.01 for series
trading lower than $3.00 and to $0.05 for series trading at $3.00 or
higher, as long as XND options have a minimum trading increment of
$0.01. The Exchange states that the MGTN index that underlies MGTN
options, and the Nasdaq-100 Index that underlies XND options (which
specifically track the Nasdaq-100 Micro index, the reduced value
version of the Nasdaq-100 index) and is tracked by the QQQ ETF, both
seek to provide investors exposure to the performance of technology and
high-growth companies.\31\ Indeed, the Exchange states that the ten
constituents of the MGTN index are a subset of the constituents of the
Nasdaq-100 index, and while these same constituents represent only
about 10% of the number of constituents of the Nasdaq-100 index, they
represent more than half of the market capitalization (and thus weight)
of the Nasdaq-100 index and drive the movements of the Nasdaq-100
Index.\32\ That these two indexes are heavily correlated with each
other is evidenced, according to the Exchange, by an approximately
0.958 daily return correlation between the MGTN index and the Nasdaq-
100 index since the launch of the MGTN index.\33\
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\31\ See Amendment No. 2, supra note 10, at 6.
\32\ Id. at 8-9.
\33\ Id. at 9.
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As a result, the Exchange believes MGTN options compete for order
flow with XND options and QQQ options, which is why the Exchange has
proposed to tie the proposed minimum increment of $0.01 for MGTN
options to XND options having a minimum increment of $0.01. XND
options, in turn, may trade in penny increments as long as QQQ options
participate in the Penny Interval Program (which they currently
do).\34\ Accordingly, the proposal would align the minimum trading
increment for MGTN options with the minimum trading increment for
heavily correlated option products with which MGTN options are designed
to compete, namely XND options and QQQ options. According to the
Exchange, this alignment of the minimum trading increment will allow
MGTN options to more effectively compete for order flow. In addition,
the Exchange expects more granular pricing to lead to narrowing of the
bid-ask spread for MGTN options, more precise pricing in line with the
theoretical value of these options, and more efficient hedging
opportunities, particularly with respect to related products that may
already trade in finer increments.
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\34\ See PHLX Rulebook Options 3, Section 3, Supplementary
Material .04.
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The Commission believes that, by permitting MGTN options to trade
at the same minimum increment as option products with which they are
heavily correlated and against which they are designed to compete for
order flow, the proposal is designed to promote competition and be
consistent with just and equitable principles of trade. The Commission
also believes that the proposal is consistent with Section 6(b)(5) of
the Act insofar as it is designed to better facilitate cross-product
trading or hedging strategies, lead to narrower bid-ask spreads, and/or
permit more precise pricing for MGTN options consistent with their
theoretical values and prevailing market
[[Page 13912]]
conditions. In addition, consistent with the protection of investors
and the public interest, the Exchange represents that it has the
necessary systems capacity to handle any potential additional message
traffic associated with the proposed rule change, and that OPRA
informed the Exchange that it believes it has the necessary systems
capacity to handle any additional traffic that may result from this
proposed rule change.
For the foregoing reasons, the Commission finds that the Amended
Proposal is consistent with the requirements of the Act.
V. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 2 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#4a383f262f67292527272f243e390a392f29642d253c"><span class="__cf_email__" data-cfemail="96e4e3faf3bbf5f9fbfbf3f8e2e5d6e5f3f5b8f1f9e0">[email protected]</span></a>. Please include
file number SR-CBOE-2025-069 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-2025-069. 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-2025-069 and should be submitted on
or before April 13, 2026.
VI. Accelerated Approval of the Proposed Rule Change, as Modified and
Superseded by Amendment No. 2
The Commission finds good cause to approve the Amended Proposal
prior to the thirtieth day after the date of publication of Amendment
No. 2 in the Federal Register. Amendment No. 2 does not substantively
alter the Initial Rule Filing. The Initial Rule Filing provided that
the minimum trading increment for MGTN options would be $0.01 for
series trading lower than $3.00 and $0.05 for series trading at $3.00
or higher; Amendment No. 2 conditions these minimum increments for MGTN
options on XND options having a minimum increment of $0.01. Amendment
No. 2 also notes that the $0.01 minimum increment for XND options,
which trade on PHLX, is conditioned on QQQ options participating in the
Penny Interval Program. Further, Amendment No. 2 provides more detail
about the composition of the MGTN index and presents data that reflects
the correlation and competitive dynamic between MGTN options and other
option products, primarily XND options and QQQ options.
The Commission therefore finds that Amendment No. 2 raises no novel
regulatory issues that have not previously been subject to comment and
is reasonably designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and, in
general, to protect investors and the public interest. Accordingly,
pursuant to Section 19(b)(2) of the Act,\35\ the Commission finds good
cause to approve the Amended Proposal, on an accelerated basis, prior
to the 30th day after publication of notice of the filing of Amendment
No. 2 in the Federal Register.
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\35\ 15 U.S.C. 78s(b)(2).
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VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\36\ that the proposed rule change, as modified and superseded by
Amendment No. 2 (SR-CBOE-2025-069), be, and hereby is, approved on an
accelerated basis.
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\36\ Id.
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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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-05561 Filed 3-20-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 23, 2026.
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.