66088 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices 

52 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. 96980 

(February 24, 2023), 88 FR 13161 (‘‘Notice’’). 

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

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the Exchange consents, the Commission 

will: 

A. by order approve or disapprove 

such proposed rule change, or 

B. institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

CboeBZX–2023–069 on the subject line. 

Paper Comments 

• 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–CboeBZX–2023–069. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

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–CboeBZX–2023–069 and should be 

submitted on or before October 17, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.52

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–20813 Filed 9–25–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meetings 

TIME AND DATE: 1:00 p.m. on Thursday, 

September 28, 2023. 

PLACE: The meeting will be held via 

remote means and/or at the 

Commission’s headquarters, 100 F 

Street NE, Washington, DC 20549. 

STATUS: This meeting will be closed to 

the public. 

MATTERS TO BE CONSIDERED: 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the closed meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

In the event that the time, date, or 

location of this meeting changes, an 

announcement of the change, along with 

the new time, date, and/or place of the 

meeting will be posted on the 

Commission’s website at https://

www.sec.gov. 

The General Counsel of the 

Commission, or her designee, has 

certified that, in her opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) 

and (10) and 17 CFR 200.402(a)(3), 

(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and 

(a)(10), permit consideration of the 

scheduled matters at the closed meeting. 

The subject matter of the closed 

meeting will consist of the following 

topics: 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings; 

Resolution of litigation claims; and 

Other matters relating to examinations 

and enforcement proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting agenda items that 

may consist of adjudicatory, 

examination, litigation, or regulatory 

matters. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information; please contact 

Vanessa A. Countryman from the Office 

of the Secretary at (202) 551–5400. 

Authority: 5 U.S.C. 552b. 

Dated: September 21, 2023. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2023–20974 Filed 9–22–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98451; File No. SR–Phlx– 

2023–07] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Order Granting Approval of 

a Proposed Rule Change, as Modified 

by Amendment No. 1, To Make 

Permanent Certain P.M.-Settled Pilots 

September 20, 2023. 

I. Introduction 

On February 23, 2023, Nasdaq PHLX 

LLC (‘‘Phlx’’ 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 make permanent the pilot 

program to permit the listing and 

trading of options based on 1/100 the 

value of the Nasdaq–100 Index 

(‘‘Nasdaq–100’’) and the Exchange’s 

nonstandard expirations pilot program 

(collectively, the ‘‘Programs’’). The 

proposed rule change was published for 

comment in the Federal Register on 

March 2, 2023.3 On April 7, 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 


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Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices 66089 

5See Securities Exchange Act Release No. 97260, 

88 FR 22498 (April 13, 2023). The Commission 

designated May 31, 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. 

6 In Amendment No. 1, the Exchange inserts two 

footnotes and amends a sentence in order to further 

clarify parts of the empirical analysis performed by 

the Exchange. Amendment No. 1 is available at: 

https://www.sec.gov/comments/sr-phlx-2023-07/ 

srphlx202307.htm. 

7See Securities Exchange Act Release No. 97624, 

88 FR 37107 (June 6, 2023). 

8See Securities Exchange Act Release No. 98232, 

88 FR 60525 (September 1, 2023). The Commission 

designated October 28, 2023, as the date by which 

the Commission shall either approve or disapprove 

the proposed rule change. 

9The 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. 

10See 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 SPXPM options on the C2 

Options Exchange, Incorporated) (‘‘C2 SPXPM 

Approval’’). 

11See id. 

12See id. 

13See 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)). 

14The 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. 

15See 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). 

16See Securities Exchange Act Release No. 24367 

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

CBOE–87–11). 

17See 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). 

18See 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). 

19See 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). 

20See Securities Exchange Act Release Nos. 

68888 (February 8, 2013), 78 FR 10668 (February 

14, 2013) (SR–CBOE–2012–120); and 70087 (July 

31, 2013), 78 FR 47809 (August 6, 2013) (SR– 

CBOE–2013–055). 

21See Securities Exchange Act Release No. 82341 

(December 15, 2017), 82 FR 60651 (December 21, 

2017) (SR–Phlx–2017–79) (‘‘Nonstandard Approval 

Order’’). The Commission subsequently approved 

proposed rule changes to amend the Nonstandard 

Pilot to allow the Exchange to also list p.m.-settled 

options with Tuesday and Thursday expirations on 

the Nasdaq–100 and the Nasdaq–100 Micro Index. 

See Securities Exchange Act Release Nos. 95391 

(July 29, 2022), 87 FR 47797 (August 4, 2022) (SR– 

Phlx–2022–22); and 96411 (November 30, 2022), 87 

FR 74688 (December 6, 2022) (SR–Phlx–2022–38). 

22See Securities Exchange Act Release No. 91524 

(April 9, 2021), 86 FR 19909 (April 15, 2021) (SR– 

Phlx–2021–07) (‘‘XND Approval Order’’). 

23See Nonstandard Approval Order, 82 FR at 

60653 and XND Approval Order 86 FR at 19911. 

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); C2 SPXPM Approval, 76 FR at 55972–76; 

and 68888 (February 8, 2013), 78 FR 10668, 10669 

(February 14, 2013) (order approving the listing and 

trading of SPXPM on Cboe Options). 

24See XND Approval Order, 86 FR at 19909. 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.5

On May 11, 2023, the Exchange filed 

Amendment No. 1 to the proposed rule 

change (‘‘Amendment No. 1’’).6 On May 

31, 2023, the Commission instituted 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change and published Amendment 

No. 1 for notice and comment.7 On 

August 28, 2023, the Commission 

designated a longer period for 

Commission action on proceedings to 

determine whether to approve or 

disapprove the proposed rule change, as 

modified by Amendment No. 1.8 The 

Commission did not receive any 

comment letters and is approving the 

proposed rule change, as modified by 

Amendment No. 1. 

II. Background 

When cash-settled 9 index options 

were first introduced in the 1980s, they 

generally utilized closing-price 

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

settlement).10 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.11

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.12 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.13

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 14 for index 

futures, including futures on the S&P 

500 Index.15 The Commission 

subsequently approved a proposed rule 

change by Cboe Options Exchange 

(‘‘Cboe Options’’) to list and trade a.m.- 

settled options on the S&P 500 Index.16

In 1992, the Commission approved Cboe 

Options’ proposal to transition all of its 

European-style cash-settled options on 

the S&P 500 Index to a.m. settlement.17

However, in 1993, the Commission 

approved a proposed rule change 

allowing Cboe Options to list p.m.- 

settled options on certain broad-based 

indexes, including the S&P 500, 

expiring at the end of each calendar 

quarter (since approved as 

permanent).18 Starting in 2006, the 

Commission approved a number of 

proposals, on a pilot basis, permitting 

Cboe Options to introduce other index 

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,19

as well as p.m.-settled S&P 500 Index 

options and Mini-S&P 500 Index 

options expiring on the third Friday of 

the month.20

Subsequently, other exchanges, 

including Phlx, sought to permit the 

listing and trading of p.m.-settled 

options on certain broad-based indices. 

In December 2017, the Commission 

approved Phlx’s nonstandard 

expirations pilot program on a pilot 

basis (‘‘Nonstandard Pilot’’).21 In April 

2021, the Commission approved Phlx’s 

pilot to permit the listing and trading of 

options based on 1/100 the value of the 

Nasdaq–100 (‘‘XND’’ or ‘‘XND options’’) 

on a pilot basis (‘‘XND Pilot’’).22 In the 

course of approving both Programs, 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.23 However, 

the Commission also recognized the 

potential impact was unclear.24 The 


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66090 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices 

25See XND Approval Order, 86 FR at 19911 and 

Nonstandard Approval Order, 82 FR at 60653. 

26See XND Approval Order, 86 FR at 19910– 

19911 and Nonstandard Approval Order, 82 FR at 

60652–60653. 

27See, e.g., Securities Exchange Act Release Nos. 

84835 (December 17, 2018), 83 FR 65773, at 65773– 

74 (December 21, 2018) (SR–Phlx–2018–80) (stating 

the Exchange will make public on its website any 

data and analysis it submits to the Commission 

under the Nonstandard Pilot); and 93447 (October 

28, 2021) 86 FR 60719, at 60720 (November 3, 2021) 

(SR–Phlx–2021–66) (stating the Exchange makes 

public on its website data and analysis previously 

submitted to the Commission under the XND Pilot 

and committing to make public any data or analyses 

submitted in the future). 

28See Securities Exchange Act Release No. 97385 

(April 26, 2023), 88 FR 27549, at 27549–27550 (May 

2, 2023) (SR–Phlx–2023–13) (‘‘Programs 

Extension’’). 

29See id. 

30See Notice, 88 FR at 13175. The Exchange has 

made public on its website data and analyses 

previously submitted to the Commission under the 

Programs. See http://www.nasdaqtrader.com/

Trader.aspx?id=currentregulatory. 

31See Programs Extension, 88 FR at 27549– 

27550. 

32 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). 

33 15 U.S.C. 78f(b)(5). 

34See Notice, 88 FR at 13167. 35See id. at 13163. 36See Pilot Memo at 2. The Pilot Memo also 

examined options on the Russell 2000 Index and 

the Nasdaq–100. 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. In addition, because p.m.-settled 

NDX options were only introduced in 2018, the 

number of observations for NDX options was much 

smaller than for other indexes. See id. at 4. 

37See id. at 3. 

38See id. 

Commission approved the Programs on 

a pilot basis to allow the Exchange and 

the Commission to monitor for and 

assess any potential for adverse market 

effects.25 In order to facilitate this 

assessment, the Exchange committed to 

provide the Commission with data and 

analysis for each pilot 26 and to make 

such data publicly available.27 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, as 

Modified by Amendment No. 1 

The Exchange proposes to make 

permanent the Nonstandard Pilot and 

the XND pilot. The Nonstandard Pilot 

permits the Exchange to open p.m.- 

settled options on broad-based indexes 

that expire (1) on the last day of the 

trading month (‘‘EOM expirations’’) and 

(2) on any Monday, Wednesday, or 

Friday (other than the third Friday-ofthe-month or days that coincide with an 

EOM expiration) and, with respect to 

options on the Nasdaq–100 (‘‘NDX’’ or 

‘‘NDX options’’) and XND options, any 

Tuesday or Thursday (other than days 

that coincide with the third Friday-ofthe-month or an EOM expiration). The 

XND Pilot permits the listing of XND 

options, which are European-style and 

cash-settled, and have a contract 

multiplier of 100. The contract 

specifications for XND options mirror 

those of the NDX options contract listed 

on the Exchange, except that XND 

options are based on 1/100 of the value 

of the Nasdaq–100, and are p.m.-settled 

pursuant to Options 4A, Section 12(a)(5) 

of the Phlx Rules. 

The Nonstandard Pilot was extended 

on multiple occasions, including 

recently, and is set to expire on 

November 6, 2023.28 Similarly, the XND 

Pilot was extended on multiple 

occasions and is set to expire on 

November 6, 2023.29

The Exchange states it has provided 

pilot data to the Commission with 

respect to the Programs, pursuant to the 

Nonstandard Approval Order and the 

XND Approval order.30 The Exchange 

also states it provides ongoing monthly 

data in addition to the data provided in 

the Notice.31 Now, the Exchange 

proposes to make the Programs 

permanent. 

IV. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

modified by Amendment No. 1, is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.32 In 

particular, the Commission finds that 

the proposed rule change, as modified 

by Amendment No. 1, is consistent with 

section 6(b)(5) of the Act,33 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 Programs permanent, the Exchange 

addressed market capacity around the 

market close and provided an empirical 

assessment of the impact of its p.m.- 

settled index options on 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’s analysis presents data 

that the introduction of p.m.-settlement 

is correlated with an increase in options 

trading tied to the Nasdaq–100.34 The 

data shows an increase in trading 

volume and notional open interest for 

NDX and XND options during the 

sample period.35

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, in particular 

options on S&P 500 Index, has grown 

substantially since 2007.36 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.37 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).38

In order to analyze the effect of a very 

large increase in settlement volume for 

Nasdaq–100 p.m.-settled options 

contracts, the Exchange uses the 

estimated regression coefficients in the 

Pilot Memo to estimate the change in 

the volatility of index futures prices 

when settlement volume increased from 


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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 


lotter on DSK11XQN23PROD with NOTICES1