Notice2026-07257
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified and Superseded by Amendment No. 3, To Amend Rules 4.13 and 5.1 To Permit Options on the Dow Jones Industrial Average Index To Be P.M.-Settled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
April 15, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 72 (Wednesday, April 15, 2026)</title>
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[Federal Register Volume 91, Number 72 (Wednesday, April 15, 2026)]
[Notices]
[Pages 20238-20246]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-07257]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105196; File No. SR-CBOE-2026-005]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Amendment No. 3 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified and Superseded by Amendment No. 3, To
Amend Rules 4.13 and 5.1 To Permit Options on the Dow Jones Industrial
Average Index To Be P.M.-Settled
April 10, 2026.
I. Introduction
On January 8, 2026, Cboe Exchange, Inc. (``Cboe'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
permit options on the Dow Jones Industrial Average index (``DJX'' or
``DJX index'') to be P.M.-settled. The proposed rule change was
published for comment in the Federal Register on January 26, 2026.\3\
On February 19, 2026, the Exchange filed Amendment No. 1 to the
proposed rule change, which amended and superseded the proposed rule
change as originally filed.\4\ On March 5, 2026, the Exchange filed
Amendment No. 2 to the proposed rule change, and on March 6, 2026, the
Exchange withdrew Amendment No. 2. On March 6, 2026, the Exchange filed
Amendment No. 3 to the proposed rule change, which amended and
superseded Amendment No. 1 in its entirety.\5\ On March 9, 2026, the
Commission designated a longer period within which to take action on
the proposed rule change.\6\ The Commission received no comments on the
proposed rule change. The Commission is publishing this Notice and
Order to solicit comment on Amendment No. 3 in Sections II and III
below, which sections are being published verbatim as filed by the
[[Page 20239]]
Exchange, and to approve the proposed rule change, as modified and
superseded by Amendment No. 3, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 104644 (Jan. 21,
2026), 91 FR 3284.
\4\ The full text of Amendment No. 1 is available on the
Commission's website at: <a href="https://www.sec.gov/comments/sr-cboe-2026-005/srcboe2026005-706448-2224034.pdf">https://www.sec.gov/comments/sr-cboe-2026-005/srcboe2026005-706448-2224034.pdf</a>.
\5\ The full text of Amendment No. 3 is available on the
Commission's website at: <a href="https://www.sec.gov/comments/sr-cboe-2026-005/srcboe2026005-719767-2253315.pdf">https://www.sec.gov/comments/sr-cboe-2026-005/srcboe2026005-719767-2253315.pdf</a>.
\6\ See Securities Exchange Act Release No. 104953, 91 FR 12251
(Mar. 12, 2026). The Commission designated April 26, 2006, as the
date by which Commission shall approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change.
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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 Rules 4.13 and 5.1 to permit options on the Dow Jones
Industrial Average (``DJX options'') to be P.M.-settled. The Exchange
initially submitted this rule filing SR-CBOE-2026-005 to the Securities
and Exchange Commission (the ``Commission'') on January 8, 2026 (the
``Initial Rule Filing''). The Exchange submitted Amendment No. 1 to
this rule filing SR-CBOE-2026-005 to the Commission on February 19,
2026. The Exchange submitted Amendment No. 2 on March 5, 2026, but
withdrew it on March 6, 2026. This Amendment No. 3 supersedes the
Initial Rule Filing and Amendment No. 1 and replaces them in their
entirety. This Amendment No. 3 provides additional support for the
proposal, 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
This proposed rule change amends certain rules to permit the
Exchange to list P.M.-settled \7\ 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''); \8\ (2)
amend Rule 4.13(c) to permit the listing of DJX options with Quarterly
Index Expirations (``QIXs''); \9\ (3) permit the Exchange to list DJX
options with Nonstandard Expirations pursuant to Rule 4.13(e).\10\
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\7\ An option with P.M.-settlement has its exercise settlement
value derived from the closing prices on the expiration date.
\8\ Rule 4.13, Interpretation and Policy .13 permits the
Exchange to list P.M.-settled options on the, 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) (``SPEQX 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'').that
expire on the third Friday-of-the-month.
\9\ Rule 4.13(c) permits the Exchange to list QIXs on options on
the S&P 100 Index (``OEX options''), SPX options, XSP options, SPEQF
options, SPEQX options, RUT options, MRUT options, CBTX options,
MBTX options, and MGTN options.
\10\ 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 Fridays, 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.\11\ The proposal expands the availability of
Weekly and EOM expirations to DJX options, which are broad-based index
options eligible for standard options trading.\12\
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\11\ See Rule 4.13(e).
\12\ 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 has not
previously listed DJX options with Monthly expirations under this
program). 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)
[[Page 20240]]
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 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.\13\
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\13\ See Rule 4.13(e)(1) (regarding Weekly expirations) and (2)
(regarding EOM expirations).
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If the Exchange is not open for business on a respective Monday,
the normally Monday expiring Weekly Expirations will expire on the
following business day. If the Exchange is not open for business on a
respective Tuesday, Wednesday, Thursday, or Friday, the normally
Tuesday, Wednesday, Thursday, or Friday expiring Weekly Expirations
will expire on the previous business day. If two different Weekly
Expirations on an index would expire on the same day because the
Exchange is not open for business on a certain weekday, the Exchange
will list only one of such Weekly Expirations.\14\ 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).
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\14\ See id.
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Second, the Exchange proposes to amend Rule 4.13(c) to permit the
Exchange to list P.M.-settled QIXs on DJX options.\15\ 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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\15\ 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 has not previously
listed DJX options with Quarterly expirations under this program).
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, SPEQX,
SPEQF, 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 \16\ (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.\17\ 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, SPEQX, SPEQF, 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.\18\ 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).\19\
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\16\ See Rule 1.6, which states that unless otherwise specified,
all times in the Rules are Eastern Time.
\17\ 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.
\18\ 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'').
\19\ 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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[[Page 20241]]
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.\20\ 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 permits 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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\20\ 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
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.\21\ The Exchange has observed a preference for
P.M.-settled index options based on trading volumes in other index
options listed on the Exchange. In fact, the majority of trading volume
in index options listed on the Exchange for which P.M.-settlement is
available is in options that are P.M.-settled. The following table
shows the approximate percentage of total volume executed on the
Exchange in each of the following broad-based index options \22\ from
August 1, 2025 through January 31, 2026 that was P.M.-settled:
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\21\ 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.
\22\ The Exchange notes it currently lists no A.M.-settled XSP
or MRUT options.
----------------------------------------------------------------------------------------------------------------
P.M.-settled volume (% of total
Index option Total volume (8/1/2025 through volume) (8/1/2025 through 1/31/
1/31/2026) 2026)
----------------------------------------------------------------------------------------------------------------
SPX......................................... 534614737 87.01
XSP......................................... 16128330 100
RUT......................................... 10205709 69.95
MRUT........................................ 39109 100
SPEQ........................................ 293 83.62
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Total volume of DJX options (A.M.-settled) executed on the Exchange
during this same time period was 945,173 contracts, which was among the
top 10% of options during that time period. Given the demand for P.M.-
settlement in other broad-based index option products as demonstrated
in the table above, as well as the level of trading activity in the
A.M.-settled DJX options, the Exchange believes offering investors the
option of P.M.-settlement, and the flexibility of the proposed
expirations, will drive further demand in DJX options.
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.\23\
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\23\ 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
[[Page 20242]]
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.\24\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \25\ 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) \26\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\24\ 15 U.S.C. 78f(b).
\25\ 15 U.S.C. 78f(b)(5).
\26\ 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.\27\ 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 risk across more trading days and incorporate daily
changes in the markets, which may reduce the premium cost of buying
protection. The Exchange represents that it believes that it has the
necessary systems capacity to support any additional traffic associated
with trading of options on the Dow Jones Industrial Average with Weekly
and Expiration Friday (P.M.-settled) expirations and does not believe
that its TPHs will experience any capacity issues as a result of this
proposal.
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\27\ 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 (which, as noted above, current Rules already permit the
Exchange to do).
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.\28\ 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.
---------------------------------------------------------------------------
\28\ 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.
---------------------------------------------------------------------------
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.\29\ The
[[Page 20243]]
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. . . .'' \30\ 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.\31\ 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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\29\ See 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'').
\30\ See Daily SPX Option Approval at 22995; and Daily XSP
Option Approval at 57746.
\31\ 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.\32\ 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.\33\ 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. 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.'' \34\
---------------------------------------------------------------------------
\32\ 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.
\33\ See XSPPM and MRUTPM Permanent Approval at 66075; and
Nonstandard Permanent Approval Order at 66093-66094.
\34\ See XSPPM and MRUTPM Permanent Approval at 66076; and
Nonstandard Permanent Approval Order at 66094.
---------------------------------------------------------------------------
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,\35\ and ETFs designed to track the same index,\36\ 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.
---------------------------------------------------------------------------
\35\ E-mini Dow futures currently trade on the Chicago
Mercantile Exchange.
\36\ For example, the SPDR Dow Jones Industrial Average ETF
Trust (``DIA'').
---------------------------------------------------------------------------
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),\37\ and are components of the S&P
500 Index. The size of the markets of the underlying components makes
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.
---------------------------------------------------------------------------
\37\ 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.
---------------------------------------------------------------------------
As is the case for options on other indexes eligible for P.M.-
settlement, the Exchange does not believe the listing of
[[Page 20244]]
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.\38\ The Exchange believes
the potential for any such impact with respect to DJX options may be
less likely compared to SPX options given the relatively fewer
component securities in the Dow Jones Industrial Average (30) compared
to the S&P 500 Index (at least 500). While the Dow Jones Industrial
Average is broad-based and thus does represent the broad market, its
scope is significantly smaller than the S&P 500 Index. Therefore, any
potential impact may be limited in scope (as noted above, the
Commission found no material impact with respect to P.M.-settled broad-
based index options). 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 reduces the potential for manipulation of
the index.
---------------------------------------------------------------------------
\38\ See SPXPM Permanent Approval Order at 66106; and XSPPM and
MRUTPM Permanent Approval Order at 66076.
---------------------------------------------------------------------------
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.\39\
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.
---------------------------------------------------------------------------
\39\ See Rule 8.31(b).
---------------------------------------------------------------------------
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.\40\ 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
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.\41\ 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 DJX
options, such as, for example, Exchange Rules governing customer
accounts, margin requirements, position and exercise limits,\42\ and
trading halt procedures, which are designed to prevent fraudulent and
manipulative acts.
---------------------------------------------------------------------------
\40\ 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).
\41\ 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.
\42\ 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.
---------------------------------------------------------------------------
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
[[Page 20245]]
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.-
settled 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 \43\ 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.
---------------------------------------------------------------------------
\43\ 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).
---------------------------------------------------------------------------
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.
IV. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified and superseded by Amendment No. 3 (``Amended
Proposal''), is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\44\ In
particular, the Commission finds that the Amended Proposal is
consistent with Section 6(b)(1) of the Act,\45\ which requires, among
other things, that the Exchange be so organized and have the capacity
to be able to carry out the purposes of the Act and to enforce
compliance by its members and persons associated with its members with
the provisions of the Act, Commission rules and regulations thereunder,
and its own rules; and Section 6(b)(5) of the Act,\46\ which requires,
among other things, that the Exchange's rules be designed to prevent
fraudulent and manipulative acts and practices, promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, protect investors and the public interest.
---------------------------------------------------------------------------
\44\ 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).
\45\ 15 U.S.C. 78f(b)(1).
\46\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Amended Proposal does not raise unique regulatory concerns.
Options on broad-based indexes with p.m. settlement and third Friday-
of-the-month, nonstandard, and quarterly expirations are not novel. The
Exchange's rules already permit, for certain broad-based index options,
the listing of p.m.-settled series with third Friday-of-the-month,
nonstandard, and quarterly expirations.\47\ P.M.-settled DJX options
with third Friday-of-the-month, nonstandard, and quarterly expirations
also would be subject to the same rules that presently govern the
trading of all index options on the Exchange, including, among others,
rules governing customer accounts, sales practices, margin
requirements, and trading practices, which are designed to protect
investors and prevent fraudulent and manipulative acts.\48\ Moreover,
other options exchanges permit the listing and trading of certain
broad-based index options with p.m. settlement and third Friday-of-the-
month, nonstandard, and quarterly expirations.\49\
---------------------------------------------------------------------------
\47\ See supra Section III.
\48\ Id.
\49\ See, e.g., Nasdaq ISE, LLC Options 4A, Section 12 and
Supplementary Material (Nasdaq-100 Index options); MIAX Rule 1809
and Interpretation and Policies (Bloomberg 500 Index options).
---------------------------------------------------------------------------
The availability of p.m.-settled DJX options with third Friday-of-
the-month, nonstandard, and quarterly expirations could benefit
investors and remove impediments to a free and open market by providing
market participants with more flexible trading and hedging
opportunities. The proposal could allow market participants to
establish DJX option positions in a manner more aligned with their
specific timing needs and roll their positions in DJX options with
regularity and more precision, spread risk across more trading days,
and incorporate daily, weekly, monthly, and quarterly changes in the
markets. In addition, because the proposed p.m. settlement feature
would permit trading in DJX options throughout the expiration day,
market participants should be able to trade out of their positions up
until the time the contract settles, which could permit market
participants to more effectively manage overnight risk and reduce
residual risk on the day of expiration.
The Commission has considered the potential for adverse market
impact presented by the Amended Proposal in the underlying cash
equities markets. The Commission believes that the significant
liquidity of the DJX index constituent securities, which must be
sufficiently liquid to satisfy the Exchange's listing and maintenance
criteria in Rule 4.10(f) and (g), should help mitigate against such
potential for adverse market impact. The satisfaction of these
requirements helps demonstrate that the constituent securities would
not be materially impacted by potential additive derivative pressure
resulting from the listing of p.m.-settled series of DJX options.\50\
---------------------------------------------------------------------------
\50\ Further, the Commission has stated that 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. See e.g.,
XSPPM and MRUTPM Permanent Approval Order, supra note 19, 88 FR at
66076.
---------------------------------------------------------------------------
In this regard, the Exchange states that the components of the DJX
index are thirty large, established, blue-chip U.S. companies with
substantial market capitalizations, and they are
[[Page 20246]]
components of the S&P 500 Index.\51\ In addition, the Exchange states
that the majority of trading volume in index options listed on the
Exchange for which both a.m.- and p-m.-settlement is available is in
p.m.-settled series.\52\ Moreover, the Exchange states that DJX options
will trade within a complex of other correlated instruments that track
the performance of the underlying components--such as equity options on
the individual underlying components, ETFs that trade the most active
stocks (including the components), and futures on the Dow Jones
Industrial Average--and that this reduces the risk that listing these
options would strain liquidity providers or materially impact the
component markets, the index value, or the broader market.\53\ Given
the significant market capitalization and liquidity of these options,
the Exchange believes the constituents would not be materially impacted
by any additional pressure resulting from the listing of these
options.\54\ The Exchange also states that it does not believe that the
proposal would adversely impact fair and orderly markets on expiration
days.\55\ The Exchange represents that it has not experienced any
meaningful regulatory concerns, nor adverse impact on fair and orderly
markets, in connection with its third Friday-of-the-month, nonstandard,
or quarterly expirations.\56\
---------------------------------------------------------------------------
\51\ See supra Section III.
\52\ Id.
\53\ Id.
\54\ Id.
\55\ Id.
\56\ Id.
---------------------------------------------------------------------------
The Commission believes that the potential risks of trading p.m.-
settled DJX options with third Friday-of-the-month, nonstandard, and
quarterly expirations also are mitigated by the Exchange's surveillance
mechanisms, consistent with Sections 6(b)(1) and 6(b)(5) of the
Act.\57\ The Exchange represents that its existing surveillance and
reporting safeguards (including with respect to p.m.-settled index
option series) 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.\58\ Additionally, the Exchange is a member of ISG, whose
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets.\59\ The
Exchange also has a Regulatory Services Agreement with FINRA for
certain market surveillance, investigation and examinations
functions.\60\ Further, pursuant to a multi-party Rule 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.\61\ The Commission
expects the Exchange to continue to monitor for any potential risks
from large p.m.-settled positions in DJX options and take appropriate
action on a timely basis, if warranted.
---------------------------------------------------------------------------
\57\ 15 U.S.C. 78f(b)(1), 78f(b)(5).
\58\ See supra Section III.
\59\ Id.
\60\ Id.
\61\ Id.
---------------------------------------------------------------------------
For the foregoing reasons, the Commission finds that the Amended
Proposal is consistent with Sections 6(b)(1) and 6(b)(5) of the Act
\62\ and the rules and regulations thereunder applicable to a national
securities exchange.
---------------------------------------------------------------------------
\62\ 15 U.S.C. 78f(b)(1), 78f(b)(5).
---------------------------------------------------------------------------
V. Solicitation of Comments on Amendment No. 3 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 3 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#d6a4a3bab3fbb5b9bbbbb3b8a2a596a5b3b5f8b1b9a0"><span class="__cf_email__" data-cfemail="f587809990d8969a9898909b8186b5869096db929a83">[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 on the
subject line. 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-2026-005 on the
subject line, and should be submitted on or before May 6, 2026.
VI. Accelerated Approval of Proposed Rule Change, as Modified and
Superseded by Amendment No. 3
The Commission finds good cause to approve the Amended Proposal
prior to the thirtieth day after the date of publication of notice of
the filing of Amendment No. 3 in the Federal Register. In Amendment No.
3, the Exchange provides total trading volume ranges for several broad-
based p.m.-settled index options and compares this data with total
trading volume for DJX index options, which are currently a.m.-
settled.\63\ The Commission believes that Amendment No. 3, without
altering the purpose of the Initial Rule Filing, strengthens the
Initial Rule Filing by providing additional clarity, support, and data,
as explained above and set forth fully in Section III above.
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\63\ See supra Section III.
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The Commission therefore finds that Amendment No. 3 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, promote just and equitable principles of trade, and, in
general, protect investors and the public interest. Accordingly,
pursuant to Section 19(b)(2) of the Act,\64\ 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.
3 in the Federal Register.
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\64\ 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,\65\ that the proposed rule change (SR-CBOE-2026-005), as modified
and superseded by Amendment No. 3, be and hereby is approved on an
accelerated basis.
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\65\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\66\
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\66\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-07257 Filed 4-14-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on April 15, 2026.
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