Notice2026-09861
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Its Rules Relating to Designated Primary Market-Makers (“DPMs”) and DPM Appointments in Global Trading Hours and Curb Sessions
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
May 18, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 95 (Monday, May 18, 2026)</title>
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[Federal Register Volume 91, Number 95 (Monday, May 18, 2026)]
[Notices]
[Pages 28705-28711]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09861]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105479; File No. SR-CBOE-2026-016]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Amendment No. 1 and Order Instituting Proceedings To
Determine Whether To Approve or Disapprove a Proposed Rule Change, as
Modified by Amendment No. 1, To Amend Its Rules Relating to Designated
Primary Market-Makers (``DPMs'') and DPM Appointments in Global Trading
Hours and Curb Sessions
May 13, 2026.
I. Introduction
On January 30, 2026, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act''),\1\ and
Rule 19b-4 thereunder,\2\ a proposed rule change to modify rules
pertaining to Designated Primary Market-Makers (``DPMs'') to: (1)
clarify that the Exchange may appoint
[[Page 28706]]
DPMs to Global Trading Hours (``GTH'') and Curb Trading Hours
(``Curb'') sessions and that DPMs may be the same across multiple
trading sessions or different (or no DPM) for an option class in
Regular Trading Hours (``RTH''), GTH, and/or Curb sessions; (2) provide
that DPM obligations and participation entitlements will apply to GTH
and Curb sessions; and (3) make certain administrative changes. The
proposed rule change was published for comment in the Federal Register
on February 13, 2026.\3\ On March 25, 2026, pursuant to Section
19(b)(2) of the Exchange Act,\4\ 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
disapprove the proposed rule change.\5\ The Commission received no
comments regarding the proposed rule change. On April 13, 2026, the
Exchange filed Amendment No. 1 to the proposed rule change, which
replaced and superseded the original filing in its entirety. The
Commission is publishing this Notice and Order to solicit comment on
Amendment No. 1 in Sections II and III below, which sections are being
published verbatim as filed by the Exchange, and to institute
proceedings under Section 19(b)(2)(B) of the Exchange Act \6\ to
determine whether to approve or disapprove the proposed rule change, as
modified and superseded by Amendment No. 1.
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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. 104807 (Feb. 10,
2026), 91 FR 6966 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 105077, 90 FR 15659
(March 30, 2026). The Commission designated May 14, 2026 as the date
by which the Commission shall approve or disapprove, or institute
proceedings to determine whether to disapprove, the proposed rule
change.
\6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change
As described more fully in the Notice,\7\ the Exchange proposes to
modify rules pertaining to Designated Primary Market-Makers (``DPMs'')
to (1) clarify the Exchange may appoint DPMs to Global Trading Hours
(``GTH'') and Curb Trading Hours (``Curb'') sessions and that DPMs may
be the same across multiple trading sessions or different (or no DPM)
for an option class in Regular Trading Hours (``RTH''), GTH, and/or
Curb sessions; (2) provide that DPM obligations and participation
entitlements will apply to GTH and Curb sessions; and (3) make certain
administrative changes.\8\ The Exchange initially submitted this rule
filing as SR-CBOE-2026-016 to the Securities and Exchange Commission
(the ``Commission'') on January 30, 2026 (the ``Initial Rule Filing'').
Amendment No. 1 supersedes the Initial Rule Filing and replaces it in
its entirety. Amendment No. 1 provides additional support for the
proposal by (1) detailing the Exchange's authority to review DPM
compliance with quoting obligations and address occurrences of
noncompliance, and (2) adding minor clarifications regarding quoting
obligations. However, Amendment No. 1 makes no substantive changes to
the proposal. The text of the proposed rule change is provided in
Exhibit 5.
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\7\ See supra note 3.
\8\ See Notice, 91 FR 6966.
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The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</a>), and at the principal office of the Exchange.
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 IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
DPMs are Trading Permit Holders (``TPHs'') that are approved by the
Exchange to function in appointed securities as a Market-Maker.\9\ The
Exchange proposes to amend certain Cboe Rules regarding DPM
appointments. Specifically, the Exchange proposes to (1) clarify the
Exchange may appoint DPMs to GTH and Curb sessions and that DPM
appointments for an option class may differ by trading session \10\
while acknowledging that a trading session may not have a DPM \11\; (2)
provide that heightened DPM quoting obligations and participation
entitlements apply during GTH and Curb sessions; and (3) make certain
administrative changes.
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\9\ See Rule 1.1 (definition of DPM).
\10\ The term ``trading session'' means the hours during which
the Exchange is open for trading for Regular Trading Hours, Global
Trading Hours or Curb Trading Hours (each of which may be referred
to as a trading session), each as set forth in Rule 5.1. Unless
otherwise specified in the Rules or the context otherwise indicates,
all Rules apply in the same manner during each trading session. See
Rule 1.1 (Definitions).
\11\ See Rule 5.50(l), which states that the Exchange may
designate a class for trading without a DPM.
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First, the Exchange proposes to amend Cboe Rules 1.1 and 3.53 to
update requirements and administrative processes for DPMs to explicitly
state that the Exchange may appoint DPMs for all trading sessions
(i.e., RTH, GTH,\12\ and Curb \13\), and that DPMs may be the same or
different across trading sessions. Pursuant to the definition of DPM in
Cboe Rule 1.1 and the provisions of Cboe Rule 5.52(h), the Exchange may
determine DPM appointments for classes (including that a DPM may not be
appointed for a class). Pursuant to Cboe Rule 1.5, if Cboe Rules permit
the Exchange to make a determination (including on a class-by-class
basis), the Exchange may make that determination on a trading session-
by-trading session basis. Therefore, Cboe Rules permit the Exchange to
determine DPM appointments for all trading sessions, and the Exchange
may appoint the same DPM for all trading sessions or may appoint
different DPMs on a trading session-by-trading session basis. The
proposed rule change merely explicitly states this in Cboe Rules. The
Exchange proposes to update the definition of DPM in Cboe Rule 1.1 to
state that 1) the Exchange designates DPMs per trading session, 2) On-
Floor DPM is a term applicable to RTH sessions (as the floor operates
only during RTH), 3) a DPM's request to function as an Off-Floor DPM is
applicable to RTH sessions, and 4) DPMs that are appointed for a GTH or
Curb session are considered Off-Floor DPMs within Cboe Rules (since
those sessions are electronic only).
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\12\ Except under unusual conditions as may be determined by the
Exchange or the Holiday hours set forth in Rule 5.1(d), Global
Trading Hours are from 8:15 p.m. (previous day) to 9:25 a.m. on
Monday through Friday. See Rule 5.1(c).
\13\ Except under unusual conditions as may be determined by the
Exchange, or the Holiday hours set forth in Rule 5.1(e), Curb
Trading Hours are from 4:15 p.m. to 5:00 p.m. on Monday through
Friday. See Rule 5.1(d).
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To further codify that the Exchange may appoint DPMs by trading
session, the Exchange proposes to amend Cboe Rule 3.53, which
establishes certain processes for DPMs, including selection and
termination processes for DPMs. Specifically, the Exchange proposes to
amend Cboe Rule 3.53(d) to state that the Exchange has the authority to
specify the trading session(s) for a DPM appointment as a possible
condition on
[[Page 28707]]
an approval. Furthermore, since it may be necessary to facilitate
trading in a specified extended hours trading session without a DPM
when a DPM appointment is terminated, the Exchange proposes to amend
Cboe Rule 3.53(f) to confirm that a DPM may not be designated for a GTH
or Curb session when the existing DPM for such session is terminated.
This proposed change acknowledges and aligns with Cboe Rule 5.50(l),
which provides that a class may be designated for trading without a DPM
(during any or all trading sessions, as determined by the Exchange).
By amending these Cboe Rules to explicitly state the Exchange may
designate a DPM by trading session, the Exchange recognizes that a DPM
appointed for a class in RTH may not intend to participate in GTH or
Curb sessions. Consequently, the Exchange proposes to amend Cboe Rules
to clarify the Exchange's authority to designate different DPMs for
RTH, GTH, and/or Curb sessions. This addresses the possibility that a
DPM for a class in one trading session may not want the DPM role in
other trading sessions. The Exchange believes having the ability to
appoint different DPMs for different trading sessions may help bolster
market liquidity in each trading session in which the Exchange chooses
to appoint a DPM as it will not impose a DPM appointment to a TPH in a
trading session(s) during which it chooses not to operate. In other
words, a DPM in RTH, for example, will not be obligated to assume the
DPM role in another session only to maintain its DPM appointment in the
session it wants. Also, a DPM will not be required to relinquish its
DPM appointment in a class for one trading session because it does not
operate as the DPM in another trading session for the option class.
Second, the Exchange proposes to amend its Rules to address DPM
participation entitlements and quoting obligations during GTH and Curb
sessions. The Exchange proposes to amend Cboe Rule 5.54(a) to provide
that the obligations of DPMs that currently apply during RTH will also
apply during to GTH and Curb, and compliance with the heightened
continuous quoting obligations will be measured across all trading
sessions for which a DPM has an appointment. As the Exchange
historically has appointed LMMs to GTH (and Curb) but not DPMs, Cboe
Rule 5.54(a) limits application of a DPM's obligations to RTH. If the
Exchange determines to appoint a DPM to GTH and/or Curb, the Exchange
believes it is appropriate for these obligations in Cboe Rule 5.54(a),
including the continuous quoting obligation in subparagraph (1), to
apply to DPMs during those trading sessions in the same manner as they
do during RTH when the DPM has an appointment during those trading
sessions. With respect to how a DPM's compliance with continuous
quoting obligations is measured, the proposed rule change amends Cboe
Rule 5.54(a)(1) to provide that this will occur across trading sessions
for which the DPM has an appointment.
The Exchange notes this is consistent with existing Cboe EDGX
Exchange, Inc. (``EDGX'') Rules regarding DPMs. Specifically, pursuant
to EDGX Rule 22.3(a), if a Market Maker selects an appointment in an
option class, that appointment applies during both GTH and RTH and
thus, the Market-Maker would have an appointment to make markets in the
option class during both GTH and RTH on EDGX.\14\ Similarly, EDGX Rule
22.2(e) provides that a Market-Maker may request the Exchange appoint
it as DPM to a class for all trading sessions. As EDGX Rules do not
contain a heightened continuous quoting obligation for DPMs as the
Exchange's Rules do,\15\ the only continuous quoting obligation to
which DPMs are subject is the standard obligation applicable to all
Market-Makers.\16\ EDGX Rule 22.6(d) explicitly provides that Market-
Maker continuous quoting obligations (and thus DPM continuous quoting
obligations) apply to the class for an entire trading day, including
both trading sessions of RTH and GTH (there is no Curb session in the
EDGX Rules). Consequently, since the Market-Maker continuous quoting
obligation set forth in EDGX Rule 22.6(d) is the continuous quoting
obligation for DPMs on EDGX and is measured across all trading
sessions, and since EDGX Rules state that DPM appointments apply to all
trading sessions for a class, the continuous quoting obligations
applicable to a DPM on EDGX apply across all trading sessions. This
approach is also currently used for Market-Maker obligations in
extended trading hour sessions.\17\
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\14\ See also Securities Exchange Act Release No. 34-85797; (May
7, 2019), 84 FR 20920 (May 13, 2019) (SR-CboeEDGX-2019-027).
\15\ See Cboe Rule 5.54(a) which requires that a DPM provide
continuous electronic quotes 90% of the time as applicable.
\16\ See EDGX Rule 22.6(d) requires that a Market-Maker enter
continuous bids and offers 60% of the time as applicable.
\17\ See Rule 5.52(d)(2)(E), which states that Market-Maker
obligations will apply across trading sessions and that if a Market-
Maker has an appointment in a class that is open for trading during
multiple trading sessions, the Exchange will determine a Market-
Maker's compliance with the continuous electronic quoting
requirement across the trading day.
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Although measuring a DPM's continuous quoting obligation for the
entire trading day will increase the quoting requirement for the DPM
because of the increase of trading time for which quotes must be
provided, the DPM can meet the increased obligation through activity in
RTH, GTH, and Curb.\18\ Since Cboe Rule 5.54(a) provides that DPM
obligations require continuous quoting in a DPM's appointed classes,
the Exchange calculates DPM compliance with quoting obligations across
all of a DPM's option classes in totality rather than on a class-by-
class basis. To illustrate how the proposed rule change will apply the
quoting obligation across trading sessions, when applicable, the
following example assumes that a DPM is appointed to 10 classes, nine
of which are equity option classes that trade in RTH only and the
remaining option class is an index option that trades in RTH, GTH, and
Curb. Each option class has 100 series. For the nine equity option
classes, each one trades for 405 minutes (24,300 seconds) in RTH in a
trading day. To include this trading time in the calculation to
determine compliance, the RTH time is multiplied by the number of
series (in this case, 100), resulting in 40,500 minutes (2,430,000
seconds) per each class. The index option will trade for 790 minutes
(47,400 seconds) in GTH, 45 minutes (2700 seconds) in Curb, and 405
minutes (24,300 seconds) in RTH, for a total of 1,240 minutes (74,400
seconds). To include this trading time in the calculation to determine
compliance, the total time is multiplied by 100 series, resulting in
124,000 minutes (7,440,000 seconds). To determine compliance with the
90% continuous quoting obligation in Cboe Rule 5.54, the total trading
times will be combined, resulting in 29,310,000 seconds ((2,430,000
seconds x 9 classes) + 7,440,000 seconds) and multiplied by 90% to
equal 26,379,000 seconds that the DPM must provide continuous quoting.
To meet this quoting obligation, the DPM could quote 100% of the equity
classes (21,870,000 seconds) and would be required to quote the index
class for 4,509,000 seconds (which is 67% of all trading sessions) to
meet the overall 90% requirement obligation. Alternatively, if the DPM
only quoted 100% of the index class in GTH and Curb (5,010,000 seconds
combined), the DPM would still be required to quote the equity option
classes for 21,369,000 (which is 97.70% of the RTH trading session for
equities) to meet the 90% requirement overall.
[[Page 28708]]
Additionally, if the DPM quoted 100% of the index class in GTH, RTH,
and Curb (7,440,000 seconds total), the DPM would still be required to
quote the equity option classes for 18,939,000 (which is 72.84% of the
RTH trading session for equities) to meet the 90% requirement overall.
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\18\ See note 14 supra.
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As Cboe Rule 5.54 already provides that DPM quoting obligations
apply collectively to all of a DPM's appointed classes,\19\ the
Exchange believes that applying the continuous quoting requirements for
DPMs collectively across all classes and trading sessions is a fair and
efficient way for the Exchange and market participants to evaluate
compliance with the continuous quoting obligation. Applying the
continuous quoting requirements collectively across all classes and
trading sessions rather than on a class-by-class and trading session-
by-trading session basis is beneficial to DPMs by providing some
flexibility to choose which series in their appointed classes they will
continuously quote--increasing the continuous quoting in the series of
one class while allowing for a decrease in the continuous quoting in
the series of another class. This flexibility, however, does not
diminish the DPM's obligation to continuously quote in a significant
percentage of series for a significant part of the trading day. This
flexibility is especially important for classes that have relatively
few series and may prevent a DPM from reaching the continuous quoting
obligation when failing to quote 90% of the trading day in more than
one series in an appointed class. The Exchange believes that the
proposed rule change will not diminish, and may in fact increase,
market making activity on the Exchange, by applying continuous quoting
obligations in a reasonable manner, which is in alignment with rules
already in place on another options exchange. The Exchange does not
anticipate that DPM quoting will routinely decrease and notes that, as
illustrated in the examples above, that DPM obligation is expected to
remain above the standard Market-Maker obligation requiring continuous
quoting during 60% of the trading day. By requiring that a DPM meet its
continuous quoting obligations across all trading sessions in which it
is appointed as the DPM (and collectively across classes, as is the
case today), a DPM might meet its obligations on a given day even if it
falls below obligation requirements in one trading session if the DPM
surpasses obligations requirements in another session because the total
activity across trading sessions for a DPM will be used to determine
compliance with continuous quoting obligation requirements.
Additionally, this approach is intended to help reduce the rigidity of
quoting requirements for a DPM of multiple sessions if trading activity
is less in one of the sessions. The Exchange believes that applying the
existing DPM obligations for RTH trading to GTH and Curb trading
sessions will promote active markets in these extended trading hours
sessions. Furthermore, applying such obligations across multiple
trading sessions if a DPM is appointed to more than one trading session
for a class will help foster liquid markets while providing flexibility
to DPMs to meet their obligations. The Exchange does not believe that
determining compliance with quotation obligations across trading
sessions will result in less liquidity in RTH. To the contrary, the
Exchange anticipates that DPMs may utilize activity in RTH to meet any
shortfalls in 90% quoting obligations that a DPM may experience in GTH
or Curb. The Exchange has observed that trading characteristics during
RTH are typically different than those during extended hours trading
sessions in that extended sessions have lower trading levels, reduced
liquidity, and fewer participants. Therefore, the Exchange believes it
is appropriate to extend to DPMs this flexibility across trading
sessions to meet continuous quoting requirements. The Exchange notes
that DPMs must still satisfy obligations set forth in Rule 5.54 in all
trading sessions, including to make competitive markets. Further, to
the extent the Exchange applies the DPM participation entitlement or
small order entitlement during a trading session, the DPM must be
quoting at the top of the Book \20\ (i.e., has a quote at the highest
bid or lowest offer) to receive such entitlement, as set forth in Rule
5.32(a)(2)(B) and (C). Therefore, the Exchange does not believe DPMs
will be less likely to quote at the top of the Book if the DPM is a DPM
across multiple sessions.
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\19\ See Rule 5.54(a)(2), which states that compliance with DPM
quoting obligation applies to all of a DPM's appointed classes
collectively
\20\ See Rule 1(a), which defines ``Book'' as the electronic
book of simple orders and quotes maintained by the System.
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The Exchange also proposes to amend Cboe Rule 5.32 to permit the
Exchange to apply the DPM participation entitlement during GTH and
Curb. Cboe Rule 5.32(a) provides the Exchange with authority to
determine which allocation algorithm and priority overlays, including
the DPM participation entitlement, will apply on a class-by-class
basis. As noted above, pursuant to Cboe Rule 1.5, if Cboe Rules permit
the Exchange to make a determination (including on a class-by-class
basis), the Exchange may make that determination on a trading session-
by-trading session basis. Therefore, Cboe Rules currently permit the
Exchange to determine what allocation algorithm and priority overlays
it may apply to RTH, GTH, and Curb. However, Cboe Rules do not permit
the DPM participation entitlement to apply during GTH and Curb. As the
Exchange may determine to appoint DPMs during GTH and Curb going
forward, the Exchange proposes to allow DPM participation entitlements
to apply during those trading sessions in the same manner it can during
RTH. Given that a DPM will be subject to heightened continuous quoting
obligations during GTH and Curb, as discussed above, the Exchange
proposes to permit it to apply the DPM participation entitlement as a
priority overlay during those trading sessions, as it is able to do
during RTH. Specifically, the Exchange proposes to amend Cboe Rule
5.32(a)(2)(B)(iv) to state that DPM participation entitlements may
apply during GTH and Curb sessions. Pursuant to Cboe Rule
5.32(a)(2)(B), the Exchange may apply one or more of the participation
entitlements provided in the rule,\21\ and the proposed addition to
Cboe Rule 5.32(a)(2)(B)(iv) provides that the Exchange may apply
participation entitlements in the same manner during GTH and Curb. The
Exchange believes that having the ability to apply the existing
participation entitlements for RTH to GTH and Curb sessions will
appropriately incentivize DPM participation in the extended trading
hours sessions for which they are appointed to help provide market
liquidity during such sessions. Additionally, the Exchange does not
believe that applying the participation entitlements across trading
sessions will result in a reduction in DPM quoting activity during the
RTH session because liquidity and demand are expected to remain highest
during RTH. As noted above, DPMs will only receive an entitlement
during a trading session if they are quoting at the best price.
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\21\ See Rule 5.32(a)(2)(B), which states that if a DPM has a
quote at the highest bid or lowest offer, it will receive the
greater of (i) the number of contracts it would receive pursuant to
the applicable base allocation algorithm and (ii) 50% of the
contracts if there is one other non-Priority Customer, 40% of the
contracts if there are two non-Priority Customers, or 30% of the
contracts if there are three or more non-Priority Customers with
orders or quotes on the Book at that price.
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As is the case today, the Exchange will monitor DPM activity to
verify compliance with quoting obligations
[[Page 28709]]
and will determine a DPM's compliance with the 90% quoting obligation
contained in Rule 5.54(a)(1), which applies to all of a DPM's classes
collectively, on a monthly basis.\22\ Additionally, the Exchange may
conduct a review of a DPM's performance at any time.\23\ The Exchange
currently conducts regular reviews of DPM's performance, which reviews
the Exchange would expand to include GTH and Curb. The Exchange may
take action against a DPM that fails to comply with any of the
requirements under Rules 3.53, 3.54, or 5.54, and such action may
include terminating, placing conditions upon, or otherwise limiting a
TPH organization's DPM approval.\24\ If the Exchange determines to
limit a TPH's approval to act as a DPM, the Exchange may, in addition
to other actions, limit or withdraw the TPH organization's DPM
participation entitlement provided for under Rule 5.32, withdraw the
right of the TPH organization to act in the capacity of a DPM in a
particular security or securities which have been allocated to the TPH
organization, and/or require the relocation of the TPH organization's
DPM operation on the Exchange's trading floor.\25\ Furthermore,
pursuant to Rule 13.1(g)(9), the Exchange has the authority to impose
fines on a DPM for failure to meet continuous quoting obligations. The
Exchange intends to apply existing monitoring practices to DPM activity
in GTH and Curb sessions and, if warranted, impose penalties or issue
fines to DPMs that do not fulfill their obligations.
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\22\ See Rule 5.54(a)(1)(B).
\23\ See Rule 3.53(j).
\24\ See Rule 3.53(i).
\25\ Id.
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Finally, as an administrative change, the Exchange proposes to
amend Cboe Rule 5.50(b), which establishes cutoff times by trading
sessions for submission of Market-Maker appointment requests to remove
specific time requirements from the Rules. Although such cutoff times
were previously added to Cboe Rules, relocation of these time
requirements will enhance the Exchange's ability to react to future
advancements in technology that may allow the Exchange to provide more
time to Market-Makers to submit appointment requests. Consequently, the
Exchange believes this type of technical detail should be maintained in
the Exchange's technical specifications rather than Cboe Rules and
therefore proposes to replace these specific cutoff times currently
provided in Cboe Rules with a statement that such deadlines will be
specified in the Exchange's technical specifications.\26\ This change
aligns with Cboe Rule 1.5(a) which states that the Exchange will
announce determinations to TPHs via various means of communication,
including specifications. By relocating cutoff times from the Rules to
technical specifications documentations, the Exchange will have the
ability to adjust times more quickly in the future. Notice of these
cutoff times and any subsequent changes to them will be provided via
technical specification documentation as required by Cboe Rule 1.5(a).
In the event that technology advances allow the Exchange to process
requests with less notice, the Exchange may modify the cutoff times in
the technical specifications and provide Market-Makers more time to
meet deadlines. Furthermore, removing the specific time requirements in
Cboe Rule 5.50 will align the rule's structure to Cboe Rule 5.54(a)(6)
which provides that the Exchange may determine time requirements but
does not include the details of such time requirements within Cboe
Rules. The Exchange believes this proposed change will therefore
provide greater consistency within Cboe Rules.
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\26\ See Rule 1.5(a), which states that the Exchange will
announce determinations to TPHs via various means of communication,
including specifications.
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As an additional administrative change, the Exchange also proposes
to amend Cboe Rule 5.50(l) to return language to the provision that was
inadvertently removed from the Rules in a rule change connected to the
System migration that took place in 2019.\27\ The proposed rule change
merely adds back to the rule language that states that if the Exchange
determines to list SPX or VIX on a group basis, it will have the
authority to change the eligible categories of Market-Maker
participants for each group.
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\27\ See Securities Exchange Act Release No. 34-87024 (September
19, 2019), 84 FR 50545 (September 25, 2019) (SR-CBOE-2019-059).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\28\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \29\ 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) \30\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
\30\ Id.
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In particular, the Exchange believes the proposed rule change to
clarify in Cboe Rules that the Exchange may appoint DPMs to all trading
sessions and on a trading session-by-trading session basis will remove
impediments to and perfect the mechanism of a free and open market and
protect investors, as such changes add transparency and clarity to Cboe
Rules. In explicitly stating that DPM appointment designations may
apply to one or multiple trading session(s), the Exchange recognizes
that not all DPMs may intend to trade in all available trading sessions
for an option class, and designation of different DPMs for a class by
trading session may be appropriate to help provide market liquidity.
The Exchange may designate a DPM for RTH and another for GTH or Curb
based on DPM expressed interest in specific trading session(s), or, as
indicated in Cboe Rule 5.50(l), the Exchange may list for trading a
class without a DPM during a trading session. As noted above, this
flexibility is already permitted under Cboe Rules. The flexibility to
designate different DPMs provides the Exchange with the ability to
appoint dedicated liquidity providers in all trading sessions to make
active markets, which ultimately benefits investors.
Furthermore, the Exchange believes the proposed rule change to
apply DPM participation entitlements and obligations to GTH and Curb
sessions as well as measuring compliance with the heightened continuous
quoting obligations across trading sessions for DPMs with appointments
for more than one trading session in a class will 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. The proposed
rule change will ultimately apply the same obligations to DPMs during
GTH and Curb as are currently applied to DPMs during RTH. Additionally,
the proposed rule change
[[Page 28710]]
will provide the Exchange with the same flexibility to apply the DPM
participation entitlement during GTH and Curb in the same manner it is
applied during RTH. The Exchange believes being able to apply the DPM
participation entitlement during GTH and Curb may help incentivize
Market-Maker participation in GTH and Curb sessions, balanced with the
heightened continuous quoting obligations that will apply during those
trading sessions.
While the proposed rule change increases the total time a DPM must
quote if it is appointed to GTH and/or Curb, this increase is de
minimis given that a DPM's compliance with its continuous quoting
obligation is based on all classes in which it has an appointment in
the aggregate across trading sessions. A Market-Maker may choose to
express interest in becoming a DPM during GTH and/or Curb. The Exchange
believes that the slight additional burden of extending the continuous
quoting obligation to the GTH and Curb trading sessions for DPMs'
appointments in those trading sessions is outweighed by the benefits to
investors that may result from that liquidity. The proposed rule change
also continues to maintain a balance of DPM benefits and obligations,
as the continuous quoting obligation and DPM participation entitlement
that will apply during GTH and Curb are the same as those that apply
today during RTH. Ultimately, the proposed rule change is intended to
facilitate DPM involvement in GTH and Curb sessions and is intended to
facilitate tighter spreads, increase trading opportunities, and overall
enhanced market quality to the benefit of all market participants. As
discussed above, measuring compliance with DPM continuous quoting
obligations across trading sessions is consistent with current EDGX
Rules.
The Exchange notes if a DPM in a class during RTH does not seek to
become the DPM in that class during GTH or Curb, this proposed rule
change has no impact on that DPM's obligations, as the proposed change
would only require additional quoting time for DPMs appointed to a
class in multiple trading sessions. If a DPM in a class during RTH
wants to be DPM in that class during other trading sessions, and the
Exchange makes such appointment, the Exchange believes it is
appropriate for that DPM to be subject to the same obligations during
those additional trading sessions it is during RTH.
Last, the Exchange believes that the largely administrative changes
proposed for Cboe Rule 5.50 that would 1) remove specific time
requirements from the rules and 2) return inadvertently deleted rule
text are intended to remove impediments to and perfect the mechanism of
a free and open market and a national market system and protect
investors consistent with the Act. By moving Market-Maker application
cutoff times from the rules to the Exchange's technical specification
documentation, the Exchange will have the flexibility to change times
in response to technology advances or future changes in trading times.
By returning language inadvertently deleted regarding the Exchange's
authority to change the eligible categories of Market-Maker
participants for each group, the proposed change clarifies the manner
in which the Exchange may function.
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. The proposed rule change to
clarify the Exchange's ability to appoint DPMs to all trading sessions
and on a trading session-by-trading session basis explicitly state what
is permissible today under current Rules, as discussed above. These
Rules will continue to apply in the same manner to all TPHs. The
proposed rule change to apply DPM quoting obligations to GTH and Curb
(and measure compliance with the continuous quoting obligation across
trading sessions) and permit the Exchange to apply the DPM
participation entitlement in GTH and Curb, will apply equally to all
DPMs (and in the same manner as they do today to DPMs during RTH).
While the proposed rule change increases the total time a DPM must
quote if it is appointed to GTH and/or Curb, this increase is de
minimis given that a DPM's compliance with its continuous quoting
obligation is based on all classes in which it has an appointment in
the aggregate across trading sessions. A Market-Maker may choose to
express interest in becoming a DPM during GTH and/or Curb. As noted
above, if a DPM in a class during RTH does not want to be DPM (or is
not appointed as DPM) in that class during GTH or Curb, this proposed
rule change has no impact on the DPM. The Exchange believes that the
slight additional burden of extending the continuous quoting obligation
to the GTH and Curb trading sessions for DPMs' appointments in those
trading sessions is outweighed by the benefits to investors that may
result from that liquidity. The proposed rule change also continues to
maintain a balance of DPM benefits and obligations, as the continuous
quoting obligation and DPM participation entitlement that will apply
during GTH and Curb are the same as those that apply today during RTH.
Additionally, the proposed changes to move time requirements to
technical specification documents and add back inadvertently removed
content are not for competitive purposes and are generally
administrative changes to support market function. The Exchange does
not believe the proposed rule change will impose any burden on
intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as the proposed rule changes
apply only to DPMs at the Exchange.
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. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2026-016, as Modified by Amendment No. 1, and Grounds for Disapproval
Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act \31\ to determine whether the proposed
rule change, as modified by Amendment No. 1 (``Amended Proposal''),
should be approved or disapproved. Institution of such proceedings is
appropriate at this time in view of the legal and policy issues raised
by the proposed rule change. Institution of proceedings does not
indicate that the Commission has reached any conclusions with respect
to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the Amended Proposal, to inform the Commission's analysis of whether
to approve or disapprove the Amended Proposal.
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\31\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Exchange Act,\32\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of, and input from commenters with respect to,
[[Page 28711]]
the consistency of the Amended Proposal with Section 6(b)(5) of the
Act,\33\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, protect investors and the public interest; and not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\32\ Id.
\33\ 15 U.S.C. 78f(b)(5).
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The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the Amended Proposal, in addition
to any other comments they may wish to submit about the proposal. In
particular, under the Amended Proposal, the Exchange could appoint a
DPM (or not appoint any DPM) in a class for all trading sessions as
well as on a trading-session-by-trading-session basis.\34\ The Exchange
would apply during GTH and Curb sessions the DPM obligations that
currently apply during RTH, and the Exchange would measure compliance
with DPMs' continuous quoting requirement across all trading sessions
(and classes), in the aggregate, for which the DPM is appointed.\35\ In
addition, the Exchange could apply priority overlays, as set forth in
Rule 5.32(a)(2), to a DPM during any trading session for which the DPM
is appointed.\36\ The Commission seeks comment on whether the Amended
Proposal includes sufficient analysis of these proposed changes to
support a conclusion that it is consistent with the requirements of
Section 6(b)(5) of the Act.\37\
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\34\ See proposed Rules 1.1 and 3.53. The proposal also would
allow the Exchange to permit trading to occur in a GTH or Curb
session when there is no DPM for such session(s) due to resignation,
termination or otherwise. See proposed Rule 3.53(f).
\35\ See proposed Rule 5.54; see also supra Section III.
\36\ See proposed Rule 5.32(a)(2); see also supra Section III.
\37\ 15 U.S.C. 78f(b)(5).
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V. Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their data, views, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is consistent with the Act, and the rules and regulations thereunder.
Although there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of data,
views, and arguments, the Commission will consider, pursuant to Rule
19b-4 under the Act,\38\ any request for an opportunity to make an oral
presentation.\39\
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\38\ 17 CFR 240.19b-4.
\39\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975,
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75,
94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by June 8, 2026. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
June 22, 2026.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3b494e575e16585456565e554f487b485e58155c544d"><span class="__cf_email__" data-cfemail="3e4c4b525b135d5153535b504a4d7e4d5b5d10595148">[email protected]</span></a>. Please include
File Number SR-CBOE-2026-016 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-2026-016. 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="http://www.sec.gov/rules/sro.shtml">http://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-2026-016 and should be submitted by June
8, 2026. Rebuttal comments should be submitted by June 22, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(57).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-09861 Filed 5-15-26; 8:45 am]
BILLING CODE 8011-01-P
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