Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices 66091 

39See Notice, 88 FR at 13173–13174. 

40See id. at 13174. 

41See id. 

42See id. 

43See id. 

44See Notice, 88 FR at 13176. 

45See id. 

46The Exchange states that given that the size of 

the market (measured in volume) for XND options 

volume is small compared to that of other p.m.- 

settled NDX options, the Exchange believes the 

introduction of XND option contracts is unlikely to 

adversely impact the market quality of a.m.-settled 

NDX options. See Amendment No. 1, supra note 6. 

47See Notice, 88 FR at 13171. 

48See id. at 13171–13172, 13175–13176. 

49See id. at 13169–13170. 

50See id. 

51See id. 

52See id. at 13170–13173. The Exchange used a 

regression analysis to test whether the spread of 

NDX contracts changed after the introduction of 

p.m.-settled index options. See Notice, 88 FR at 

13171. The regression model is meant to study the 

effect of the introduction of Friday p.m.-settled 

NDX options expirations (on all but the third Friday 

of the month) that occurred in January 2018. See 

Amendment No. 1, supra note 6. 

53See Notice, 88 FR at 13173. 

54See id. 

55 15 U.S.C. 78f(b)(5). 

56 15 U.S.C. 78s(b)(2). 

57 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 97371 

(April 25, 2023), 88 FR 26621 (‘‘Notice’’). 

4 15 U.S.C. 78s(b)(2). 

the 25th percentile to the 75th 

percentile.39 For both the S&P 500 Index 

and the Nasdaq–100, the Exchange 

estimates the relative impact would be 

small for both indexes.40

The Exchange also provides 

additional analysis on market capacity 

around the market close.41 Specifically, 

the Exchange presents data that the 

closing auction volume on the equity 

market have become much larger than 

the opening auction, which may 

indicate that there is sufficient liquidity 

in closing auctions to absorb liquidity 

demand associated with p.m.-settlement 

of NDX and XND options.42 In addition, 

the Exchange states that the liquidity 

available at or around the close would 

be able to mitigate any excess volatility 

created by the options settlement at the 

market close.43

Further, the Exchange represents that 

it has sufficient systems capacity to 

handle p.m.-settled options on broadbased indexes with nonstandard 

expirations dates and has not 

encountered any issues or adverse 

market effects as a result of listing 

them.44

Market Quality Considerations 

The Exchange also completed an 

analysis intended to evaluate whether 

the Programs impacted the quality of the 

NDX options market. Specifically, the 

Exchange presents findings on three 

market characteristics: trading volume, 

open interest, and spreads. The 

Exchange concludes that there is no 

evidence that NDX and XND options 

contracts, which are p.m.-settled, would 

result in reduced trading activity or 

degradation in market quality of the 

a.m.-settled index options.45 The 

Exchange notes within its analysis that 

it seems unlikely that the introduction 

of XND option contracts had a 

significant impact on the market quality 

of the full-sized NDX option contracts.46

Further, the Exchange observed a 

consistent decrease in relative quoted 

spread from 2017 to 2022 for NDX 

options.47 When the Exchange 

compared the spread trend of NDX 

monthly contracts to that of QQQ 

monthly contracts, the Exchange states 

that the results suggest that there is 

gradual decrease in both the NDX 

monthly contracts spread and the QQQ 

contracts spread during the sample 

period.48 The Exchange uses duration 

weighted relative quoted spread as a 

measure of the cost of trading and 

examines whether the introduction of 

p.m.-settled index options results in any 

deterioration of spreads for am-settled 

NDX options.49 The Exchange finds a 

consistent decrease in the relative 

quoted spread is prevalent from 2017 to 

2022 and no obvious change in the 

trend following the introduction of 

p.m.-settled index options.50 The 

analysis also considered whether the 

move from a.m. settlement to p.m. 

settlement for Friday weekly expirations 

(other than third-Friday-of-the-month) 

led to changes in spreads for those 

contracts.51 The sample timeframe was 

from July 2017 through August 2018.52

The relative quoted spread decreased 

during first part of 2018 and increase in 

May and June 2018; however, it 

remained comparable to the 2017 

average.53 Overall, the Exchange 

observes no evidence of deterioration of 

spreads associated with the introduction 

of p.m.-settled NDX options.54

The Commission believes that the 

evidence contained in the Exchange’s 

filing, the Exchange’s pilot data and 

reports, and the Pilot Memo analysis 

demonstrate that the Programs have 

benefitted investors and other market 

participants by providing more flexible 

trading and hedging opportunities while 

also having no disruptive impact on the 

market. The market for p.m.-settled 

options has grown in size over the 

course of the Programs, and analysis of 

the 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 (as measured by relative quoted 

spreads) 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. 

Accordingly, the Commission finds 

that the proposed rule change, as 

modified by Amendment No. 1, is 

consistent with section 6(b)(5) of the 

Act 55 and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

V. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,56 that the 

proposed rule change (SR–Phlx–2023– 

07), as modified by Amendment No. 1, 

be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.57

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–20809 Filed 9–25–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98456; File No. SR–CBOE– 

2023–020] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Order Granting 

Approval of a Proposed Rule Change 

To Make the Nonstandard Expirations 

Pilot Program Permanent 

September 20, 2023. 

I. Introduction 

On April 11, 2023, Cboe Exchange, 

Inc. (‘‘Exchange’’ or ‘‘Cboe Options’’) 

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 make permanent the 

operation of its pilot program 

(‘‘Program’’) that permits the Exchange 

to list broad-based index options with 

nonstandard expirations. The proposed 

rule change was published for comment 

in the Federal Register on May 1, 2023.3

On June 9, 2023, pursuant to section 

19(b)(2) of the 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 


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5See Securities Exchange Act Release No. 97679, 

88 FR 3931 (June 15, 2023). The Commission 

designated July 30, 2023, as the date by which the 

Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

approve or disapprove, the proposed rule change. 

6See Securities Exchange Act Release No. 98008, 

88 FR 50921 (August 2, 2023). 

7The seller of a ‘‘cash-settled’’ index option pays 

out the cash value of the applicable index on 

expiration or exercise. A ‘‘physical delivery’’ 

option, like equity and ETF options, involves the 

transfer of the underlying asset rather than cash. 

See Characteristics and Risks of Standardized 

Options, available at: https://www.theocc.com/ 

Company-Information/Documents-and-Archives/ 

Options-Disclosure-Document. 

8See Securities Exchange Act Release No. 65256 

(September 2, 2011), 76 FR 55969, at 55972 

(September 9, 2011) (SR–C2–2011–008) (Order 

approving proposed rule change to establish a pilot 

program to list and trade p.m.-settled third Fridayof-the-month S&P 500 stock index (‘‘SPX’’) options 

(‘‘SPXPM’’) on the C2 Options Exchange, 

Incorporated (‘‘C2’’)) (‘‘C2 SPXPM Approval’’). 

SPXPM was traded on a pilot basis on C2 until the 

introduction of SPXPM trading on Cboe Options. 

See Securities Exchange Act Release No. 68888 

(February 8, 2013), 78 FR 10668, at 10668 (February 

14, 2013) (SR–CBOE–2012–120) (‘‘SPXPM Approval 

Order’’). 

9See C2 SPXPM Approval, 76 FR at 55972. 

10See id. 

11See Securities and Exchange Commission, 

Division of Economic Risk and Analysis, 

Memorandum dated February 2, 2021 on 

Cornerstone Analysis of PM Cash-Settled Index 

Option Pilots (September 16, 2020) (‘‘Pilot Memo’’) 

at 5, available at: https://www.sec.gov/files/ 

Analysis_of_PM_Cash_Settled_Index_Option_

Pilots.pdf (citing, among other papers, Stoll, Hans 

R., and Robert E. Whaley, ‘‘Expiration day effects 

of index options and futures,’’ Monograph Series in 

Finance and Economics, no. 3 (1986)). 

12The exercise settlement value for an a.m.- 

settled index option is determined by reference to 

the reported level of the index as derived from the 

opening prices of the component securities on the 

business day before expiration. 

13See Proposed Amendments Relating to the 

Standard and Poor’s 500, the Standard and Poor’s 

100 and the Standard Poor’s OTC Stock Price Index 

Futures Contract, 51 FR 47053 (December 30, 1986) 

(notice of proposed rule change from the CME). See 

also Securities Exchange Act Release No. 24367 

(April 17, 1987), 52 FR 13890 (April 27, 1987) (SR– 

CBOE–87–11) (noting that the CME moved the S&P 

500 futures contract’s settlement value to opening 

prices on the delivery date). 

14See Securities Exchange Act Release No. 24367 

(April 17, 1987), 52 FR 13890 (April 27, 1987) (SR– 

CBOE–87–11). 

15See Securities Exchange Act Release No. 30944 

(July 21, 1992), 57 FR 33376 (July 28, 1992) (SR– 

CBOE–92–09). The Commission also approved 

proposals by other options markets to transfer most 

of their cash-settled index products to a.m. 

settlement. See, e.g., Securities Exchange Act 

Release No. 25804 (June 15, 1988), 53 FR 23475 

(June 22, 1988) (SR–NYSE–87–11 and 88–04). 

16See Securities Exchange Act Release No. 31800 

(February 1, 1993), 58 FR 7274 (February 5, 1993) 

(SR–CBOE–92–13). See also Securities Exchange 

Act Release Nos. 54123 (July 11, 2006), 71 FR 40558 

(July 17, 2006) (SR–CBOE–2006–65); and 60164 

(June 23, 2009), 74 FR 31333 (June 30, 2009) (SR– 

CBOE–2009–029). 

17See Securities Exchange Act Release Nos. 

62911 (September 14, 2010), 75 FR 57539 

(September 21, 2010) (SR–CBOE–2009–075); 76529 

(November 30, 2015), 80 FR 75695 (December 3, 

2015) (SR–CBOE–2015–106); and 78531 (August 10, 

2016), 81 FR 54643 (August 16, 2016) (SR–CBOE– 

2016–046). 

18See Securities Exchange Act Release Nos. 

70087 (July 31, 2013), 78 FR 47809 (August 6, 2013) 

(SR–CBOE–2013–055) (approving options on XSP); 

and 91067 (February 5, 2021) 86 FR 9108 (February 

11, 2021) (SR–CBOE–2020–116) (approving options 

on MRUT). 

19See, e.g., SPXPM Approval Order, 78 FR at 

10669. See also Securities Exchange Act Release 

Nos. 64599 (June 3, 2011), 76 FR 33798, 33801–02 

(June 9, 2011) (order instituting proceedings to 

determine whether to approve or disapprove a 

proposed rule change to allow the listing and 

trading of SPXPM options on the C2 Options 

Exchange, Incorporated); and C2 SPXPM Approval, 

76 FR at 55972–76. 

20See, e.g., SPXPM Approval Order, 78 FR at 

10669. 

21See e.g., Nonstandards Approval Order, 75 FR 

at 57549; and Securities Exchange Act Release No. 

94682 (April 12, 2022), 87 FR 22993 at 22995 (SR– 

CBOE-2022–005). 

22 Id. 

23See, e.g., Securities Exchange Act Release No. 

97446 (May 5, 2023), 88 FR 30365, at 30366 (May 

11, 2023) (SR–CBOE–2023–024) (stating the 

Exchange is making public on its website data and 

analyses previously submitted to the Commission 

under the Program and committing to make public 

any data or analyses submitted in the future). 

whether to disapprove the proposed 

rule change.5 On July 27, 2023, the 

Commission instituted proceedings to 

determine whether to approve or 

disapprove the proposed rule change.6

The Commission did not receive any 

comment letters and is approving the 

proposed rule change. 

II. Background 

When cash-settled 7 index options 

were first introduced in the 1980s, they 

generally utilized closing-price 

settlement procedures (i.e., p.m. 

settlement).8 The Commission became 

concerned with the impact of p.m.- 

settled, cash-settled index options on 

the underlying cash equities markets, 

and in particular, added market 

volatility and sharp price movements 

near the close on expiration days.9

These concerns were heightened during 

the ‘‘triple-witching’’ hour on the third 

Friday of March, June, September, and 

December when index options, index 

futures, and options on index futures 

expired concurrently.10 Academic 

research at the time provided at least 

some evidence suggesting that futures 

and options expirations contributed to 

excess volatility and reversals around 

the close on those days.11

In light of the concerns with p.m. 

settlement and to help ameliorate the 

price effects associated with expirations 

of p.m.-settled, cash-settled index 

products, in 1987, the Commodity 

Futures Trading Commission approved 

a proposed rule change by the Chicago 

Mercantile Exchange (‘‘CME’’) to 

provide for a.m. settlement 12 for index 

futures, including futures on the S&P 

500 Index (‘‘S&P 500’’).13 The 

Commission subsequently approved a 

proposed rule change by Cboe Options 

to list and trade a.m.-settled options on 

the S&P 500.14 In 1992, the Commission 

approved Cboe Options’ proposal to 

transition all of its European-style cashsettled options on the S&P 500 to a.m. 

settlement.15 However, in 1993, the 

Commission approved a proposed rule 

change allowing Cboe Options to list 

p.m.-settled options on certain broadbased indexes, including the S&P 500, 

expiring at the end of each calendar 

quarter (since approved as 

permanent).16 Starting in 2006, the 

Commission approved a number of 

proposals, on a pilot basis, permitting 

Cboe Options to introduce other index 

options, including SPX options, with 

p.m.-settlement. These include p.m.- 

settled index options expiring weekly 

(other than the third Friday) and at the 

end of each month,17 SPXPM, as well as 

p.m.-settled Mini-S&P 500 Index 

(‘‘XSP’’) and Mini-Russell 2000 Index 

(‘‘MRUT’’) options expiring on the third 

Friday of the month.18

In the course of approving the various 

pilots, the Commission reiterated its 

concern about the potential impact on 

the market at expiration for the 

underlying component stocks for a p.m.- 

settled, cash-settled index option.19

However, the Commission also 

recognized the potential impact was 

unclear.20 The Commission approved 

the Program on a pilot basis to allow the 

Exchange and the Commission to 

monitor for and assess any potential for 

adverse market effects.21 In order to 

facilitate this assessment, the Exchange 

committed to provide the Commission 

with data and analysis in connection 

with the Program 22 and to make such 

data publicly available.23 In addition to 

the Exchange’s data and analysis, 

Cornerstone Research also conducted an 

analysis at the direction of Staff from 

the Commission’s Division of Economic 

and Risk Analysis. The analysis utilizes 

the level of expiring p.m.-settled index 

options open interest and the measures 

of volatility and price reversals for the 

corresponding index futures, the 

underlying cash index, and index 

component securities in the minutes 

leading up to and immediately 

following the market close to study the 

effects of pilot programs allowing p.m.- 

settled index options. The Pilot Memo 

is discussed in more detail below. 

III. Description of the Proposal 

The Program permits the listing of 

p.m.-settled options on broad-based 

indexes that expire (1) on any Monday, 

Wednesday, or Friday (other than the 

third Friday-of-the-month or days that 


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24See Securities Exchange Act Release No. 62911 

(September 14, 2010), 75 FR 57539 (September 21, 

2010) (SR–CBOE–2009–075) (‘‘Nonstandards 

Approval Order’’). 25See Securities Exchange Act Release No. 78531 

(August 10, 2016), 81 FR 54643 (August 16, 2016) 

(SR–CBOE–2016–046). 26See Securities Exchange Act Release No. 76909 

(January 14, 2016), 81 FR 3512 (January 21, 2016) 

(SR–CBOE–2015–106). 27See Securities Exchange Act Release No. 94682 

(April 12, 2022), 87 FR 22993 (SR–CBOE–2022– 

005). 

28See Securities Exchange Act Release No. 95795 

(September 21, 2022) (order approving SR–CBOE– 

2022–039). 

29See, e.g., Securities Exchange Act Release Nos. 

65741 (November 14, 2011), 76 FR 72016 

(November 21, 2011); and 96223 (November 3, 

2022), 87 FR 67728 (November 9, 2022). 

30See Securities Exchange Act Release No. 97445 

(May 5, 2023), 88 FR 30368 (May 11, 2023). 

31See supra notes 24–28. The Exchange has made 

public on its website data and analyses previously 

submitted to the Commission under the Program. 

See https://www.cboe.com/aboutcboe/legalregulatory/national-market-system-plans/pmsettlement-spxpm-data. 

32See Notice, 88 FR at 26624. 

33 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). 

34 15 U.S.C. 78f(b)(5). 

35See Notice, 88 FR at 26624. 

36See id. at 26623–27. 

37See id. at 26626. The Exchange states that 

although this analysis specifically evaluated SPX 

options, the Exchange believes it is appropriate to 

extrapolate the data to apply to the Weekly and 

EOM options (which include SPX options). See 

Notice, 88 FR at 26627. The Commission agrees it 

is appropriate to extrapolate the data to Weekly and 

EOM 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. 

38See Pilot Memo at 2. 

39See Notice, 88 FR at 26624. Specifically, since 

2007, p.m.-settled SPX options grew from 0.1% of 

open interest to 30% of open interest in 2021. Id. 

40See Pilot Memo at 3. The Pilot Memo also 

examined options on the Russell 2000 Index and 

the Nasdaq-100 Index. However, during the time 

period covered by the study (2007–2018), the 

markets for both a.m.- and p.m.-settled options on 

these indexes were very small compared to the size 

of that for S&P 500 Index options. See id. at 4. 

41See id. at 3. 

42See Notice, 88 FR at 26625. 

43See id. 

coincide with an end-of-month (‘‘EOM’’) 

expiration) and, with respect to SPX and 

XSP options, on any Tuesday or 

Thursday (other than days that coincide 

with an EOM expiration) (‘‘Weekly 

Expirations’’) and (2) on the last day of 

the trading month. In September 2010, 

the Commission approved a rule change 

that established the Program under 

which the Exchange was permitted to 

list P.M.-settled options on broad-based 

indexes to expire on any Friday of the 

month, other than the third Friday-ofthe-month, and the last trading day of 

the month.24 The Commission 

subsequently approved proposed rule 

changes to amend the Program to allow 

the Exchange to also list: (1) p.m.-settled 

Monday 25 and Wednesday 26

expirations on broad-based indexes, and 

(2) p.m.-settled Tuesday and Thursday 

expirations on SPX 27 and XSP.28

The Exchange has filed to extend the 

operation of the pilot on multiple 

occasions 29 and it is currently set to 

expire on the earlier of November 6, 

2023, or the date on which the Program 

is approved on a permanent basis.30

Now, the Exchange proposes to make 

the Program permanent. 

Since the Program’s inception in 

2010, the Exchange has submitted 

reports to the Commission regarding the 

Program that detail the Exchange’s 

experience with the Program, pursuant 

to the various approval orders.31 The 

Exchange states that, during the course 

of the Program, it also provided the 

Commission with any additional data or 

analyses the Commission requested if 

the Commission deemed such data or 

analyses necessary to determine 

whether the Program was consistent 

with the Act.32

IV. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.33 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with section 6(b)(5) of the Act,34 which 

requires, among other things, that the 

Exchange’s rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. In its proposal to make 

the Program permanent, the Exchange 

addressed whether the Program 

negatively impacts markets or impacted 

options market quality. Each of these 

elements is discussed in greater detail 

below. As stated above, no comments 

were received on the proposed rule 

change. 

Market Impact Considerations 

The Exchange states it has not 

identified any evidence from the pilot 

data indicating that the trading of 

Weekly and EOM options has any 

adverse impact on fair and orderly 

markets on expiration Fridays for the 

underlying indexes or the underlying 

securities comprising the underlying 

indexes, nor have there been any 

observations of abnormal market 

movements attributable to Weekly and 

EOM options from any market 

participants that have come to the 

attention of the Exchange.35 In order to 

support its overall assessment of the 

Program, the Exchange included a 

review and analysis of pilot data.36

Among other things, the Exchange’s 

analysis includes end of day volatility 

as well as a comparison of the impact 

of quarterly index rebalancing versus 

p.m.-settled expirations.37

In addition to reviewing the data and 

analysis provided by the Exchange, the 

Commission reviewed the analysis in 

the Pilot Memo, which evaluates 

whether higher levels of expiring open 

interest in p.m.-settled index options 

results in increased volatility and price 

reversals around the close. The Pilot 

Memo shows that the market share for 

p.m.-settled options on the S&P 500 

(including quarterly, Weekly, EOM and 

third Friday expirations) has grown 

substantially since 2007.38 The 

Exchange’s review of pilot data also 

showed this trend continuing from 2019 

through 2021.39

The Pilot Memo examines whether 

and to what extent expiring open 

interest in p.m.-settled index options is 

empirically related with the tendency of 

the corresponding index futures, the 

underlying index, or index components 

to experience increased transitory 

volatility and price reversals around the 

time of market close on expiration dates. 

The Pilot Memo concludes that, 

although expiring p.m.-settled index 

option open interest may have a 

statistically significant relationship with 

volatility and price reversals of the 

underlying index, index futures, and 

index component securities around the 

market close, the magnitude of the effect 

is economically very small.40 For 

example, the largest settlement event 

that occurred during the time period 

studied in the Pilot Memo (a settlement 

of $100.4 billion of notional on 

December 29, 2017) had an estimated 

impact on the futures price of only 

approximately 0.02% (a predicted 

impact of $0.54 relative to a closing 

futures price of $2,677).41

The Exchange further reviewed a 

sample of pilot data from 2019 through 

2021, and measured the volatility of the 

S&P 500 over the final fifteen minutes 

of each trading day and compared 

expiration days to non-expiration 

days.42 Generally volatility was slightly 

higher on expiration days, but in cases 

where overall market volatility 

increased, the normalized impact on 

expiration days versus non-expiration 

days remained consistent.43 The 


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44See id. 

45See id. at 26625–26. 

46See id. at 26626. 

47See id. 

48See id. 

49See id. at 26627. 

50The Exchange calculated for each of SPXW 

options (with Monday, Wednesday, and Friday 

expirations) and SPY Weekly options (with 

Monday, Wednesday, and Friday expirations) the 

daily time-weighted bid-ask spread on the Exchange 

during its regular trading hours session, adjusted for 

the difference in size between SPXW options and 

SPY options (SPXW options are approximately ten 

times the value of SPY options). 

51The Exchange calculated the volume-weighted 

average daily effective spread for simple trades for 

each of SPXW options (with Monday, Wednesday, 

and Friday expirations) and SPY Weekly options 

(with Monday, Wednesday, and Friday expirations) 

as twice the amount of the absolute value of the 

difference between an order execution price and the 

midpoint of the national best bid and offer at the 

time of execution, adjusted for the difference in size 

between SPXW options and SPY options. 

52For purposes of comparison, the Exchange 

paired SPXW options and SPY options with the 

same moneyness and same days to expiration. 

53See Notice, 88 FR at 26626–27. 

54See id. at 26627. 

55See id. at 26626. 

56See id. at 26628. 

57 15 U.S.C. 78f(b)(5). 

58 15 U.S.C. 78s(b)(2). 

59 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

Exchange further analyzed volatility on 

days when the S&P 500 was rebalanced, 

and states its results suggest more 

closing volatility on rebalance dates 

compared to non-rebalance expiration 

dates, indicating that rebalancing of the 

S&P 500 may have a greater impact on 

S&P 500 volatility than p.m.-settled 

option expirations.44

The Exchange also reviewed a sample 

of post-2018 pilot data for potential 

correlation between excess market 

volatility and price reversals and the 

hedging activity of liquidity providers.45

To determine whether there is a 

correlation, the Exchange calculated an 

estimate of the amount of market-onclose (‘‘MOC’’) volume in the S&P 500 

component markets attributable to 

expected hedging activity as a result of 

expiring in-the-money options.46 The 

Exchange states its results indicate that 

other sources of MOC share volume 

generally exceed the volume resulting 

from hedging activity for p.m.-settled 

SPX options.47 Further, the Exchange 

also compared hedging futures positions 

that would correspond to expiring inthe-money p.m.-settled SPX options and 

concludes the data indicate negligible 

capacity for hedging activity to increase 

volatility in the underlying markets.48

Finally, the Exchange states that the 

significant changes in the closing 

procedures of the primary markets in 

recent decades, including considerable 

advances in trading systems and 

technology, have significantly 

minimized risks of any potential impact 

of Weekly and EOM options on the 

underlying cash markets.49

Market Quality Considerations 

The Exchange also completed an 

analysis intended to evaluate whether 

the Program impacted the quality of the 

a.m.-settled options market. 

Specifically, the Exchange compared 

values of key market quality indicators 

(specifically, the bid-ask spread 50 and 

effective spread 51) in p.m.-settled SPX 

weekly (‘‘SPXW’’) options both before 

and after the introduction of Tuesday 

expirations and Thursday expirations 

for SPXW options on April 18 and May 

11, 2022, respectively.52 The Exchange 

concludes from this analysis that the 

introduction of SPX options with 

Tuesday and Thursday options had no 

significant impact on the market quality 

of SPXW options with Monday, 

Wednesday, and Friday expirations.53

For a majority of the series analyzed, the 

Exchange observed no statistically 

significant difference in bid-ask spread 

or effective spread.54 The Exchange 

states that analyzing whether the 

introduction of new SPXW p.m.-settled 

expirations (i.e., SPXW options with 

Tuesday and Thursday expirations) 

impacted the market quality of thenexisting SPXW p.m.-settled expirations 

(i.e., SPXW options with Monday, 

Wednesday, and Friday expirations) 

provides a reasonable substitute to 

evaluate whether the introduction of 

Weekly and EOM options impacted the 

market quality of any corresponding 

a.m.-settled options when the Program 

began.55 Therefore, the Exchange 

believes the results of its analysis permit 

the Exchange to extrapolate that it is 

unlikely the introduction of any other 

Weekly or EOM options significantly 

impacted the market quality of 

corresponding a.m.-settled options 

when the Program began.56

The Commission believes that the 

evidence contained in the Exchange’s 

filing, the Exchange’s pilot data and 

reports, and the Pilot Memo analysis 

demonstrate that the Program has 

benefitted investors and other market 

participants by providing more flexible 

trading and hedging opportunities while 

also having no disruptive impact on the 

market. The market for the options in 

the Program has grown significantly in 

size over the course of the Program, and 

analysis of the 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 (as measured by bid-ask 

and effective spreads) 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. 

Accordingly, the Commission finds 

that the proposed rule change is 

consistent with section 6(b)(5) of the 

Act 57 and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

V. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,58 that the 

proposed rule change (SR–CBOE–2023– 

020) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.59

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–20812 Filed 9–25–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98445; File No. SR–MRX– 

2023–16] 

Self-Regulatory Organizations; Nasdaq 

MRX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Options 3, 

Section 13 Related to PIM 

September 20, 2023. 

Pursuant to section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on 

September 8, 2023, Nasdaq MRX, LLC 

(‘‘MRX’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Options 3, Section 7, Types of Orders 

and Order and Quote Protocols; Options 

3, Section 11, Auction Mechanisms; and 

Options 3, Section 13, Price 


lotter on DSK11XQN23PROD with NOTICES1