31592 Federal Register / Vol. 83, No. 130 / Friday, July 6, 2018 / Notices 

16 15 U.S.C. 78s(b)(2)(B). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 16 of the Act to 

determine whether the proposed rule 

change should be approved or 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

C2–2018–015 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–C2–2018–015. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–C2–2018–015 and should 

be submitted on or before July 27, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–14468 Filed 7–5–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83567; File No. SR–CBOE– 

2018–047] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to the Penny 

Pilot Program 

June 29, 2018. 

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 June 26, 

2018, Cboe Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘Cboe Options’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A)(iii) of 

the Act 3 and Rule 19b–4(f)(6) 

thereunder.4 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 extend the 

operation of Penny Pilot Program 

through December 31, 2018. The text of 

the proposed rule change is provided 

below. 

(additions are in italics; deletions are 

[bracketed]) 

* * * * * 

Cboe Exchange, Inc. 

Rules 

* * * * * 

Rule 6.42. Minimum Increments for 

Bids and Offers 

The Board of Directors may establish 

minimum increments for options traded 

on the Exchange. When the Board of 

Directors determines to change the 

minimum increments, the Exchange 

will designate such change as a stated 

policy, practice, or interpretation with 

respect to the administration of Rule 

6.42 within the meaning of 

subparagraph (3)(A) of subsection 19(b) 

of the Exchange Act and will file a rule 

change for effectiveness upon filing 

with the Commission. Until such time 

as the Board of Directors makes a 

change to the minimum increments, the 

following minimum increments shall 

apply to options traded on the 

Exchange: 

(1) (No change). 

(2) (No change). 

(3) The decimal increments for bids 

and offers for all series of the option 

classes participating in the Penny Pilot 

Program are: $0.01 for all option series 

quoted below $3 (including LEAPS), 

and $0.05 for all option series $3 and 

above (including LEAPS). For QQQQs, 

IWM, and SPY, the minimum increment 

is $0.01 for all option series. The 

Exchange may replace any option class 

participating in the Penny Pilot Program 

that has been delisted with the next 

most actively-traded, multiply-listed 

option class, based on national average 

daily volume in the preceding six 

calendar months that is not yet included 

in the Pilot Program. Any replacement 

class would be added on the second 

trading day following [January 1, 2018] 

July 1, 2018. The Penny Pilot shall 

expire on [June 30, 2018] December 31, 

2018. 

(4) (No change). 

. . . Interpretations and Policies: 

.01–.04 (No change). 

* * * * * 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/About

CBOE/CBOELegalRegulatoryHome.

aspx), at the Exchange’s Office of the 

Secretary, and at the Commission’s 

Public Reference Room. 

II. 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 


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Federal Register / Vol. 83, No. 130 / Friday, July 6, 2018 / Notices 31593 

5The month immediately preceding a 

replacement class’s addition to the Pilot Program 

(i.e., June) would not be used for purposes of the 

six-month analysis. Thus, a replacement class to be 

added on the second trading day following July 1, 

2018 would be identified based on The Option 

Clearing Corporation’s trading volume data from 

December 1, 2017 through May 31, 2018. 

6See Securities Exchange Act Release No. 60864 

(October 22, 2009), 74 FR 55876 (October 29, 2009) 

(SR–CBOE–2009–76). 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9 Id. 

10 15 U.S.C. 78s(b)(3)(A)(iii). 

11 17 CFR 240.19b–4(f)(6). 

12 17 CFR 240.19b–4(f)(6). 

13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change along with a brief 

description and the text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. The 

Exchange has satisfied this pre-filing requirement. 

14 17 CFR 240.19b–4(f)(6)(iii). 

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 

The Penny Pilot Program (the ‘‘Pilot 

Program’’) is scheduled to expire on 

June 30, 2018. The Exchange proposes 

to extend the Pilot Program until 

December 31, 2018. The Exchange 

believes that extending the Pilot 

Program will allow for further analysis 

of the Pilot Program and a 

determination of how the Pilot Program 

should be structured in the future. 

During this extension of the Pilot 

Program, the Exchange proposes that it 

may replace any option class that is 

currently included in the Pilot Program 

and that has been delisted with the next 

most actively traded, multiply listed 

option class that is not yet participating 

in the Pilot Program (‘‘replacement 

class’’). Any replacement class would be 

determined based on national average 

daily volume in the preceding six 

months,5 and would be added on the 

second trading day following July 1, 

2018. The Exchange will employ the 

same parameters to prospective 

replacement classes as approved and 

applicable in determining the existing 

classes in the Pilot Program, including 

excluding high-priced underlying 

securities.6 The Exchange will 

announce to its Trading Permit Holders 

by circular any replacement classes in 

the Pilot Program. 

The Exchange is specifically 

authorized to act jointly with the other 

options exchanges participating in the 

Pilot Program in identifying any 

replacement class. The Exchange lastly 

represents that the Exchange has the 

necessary system capacity to continue to 

support operation of the Penny Pilot. 

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.7 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 8 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitation transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Additionally, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 9 requirement that 

the rules of an exchange not be designed 

to permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

In particular, the proposed rule change 

allows for an extension of the Pilot 

Program for the benefit of market 

participants. The Exchange notes that 

this proposal does not propose any new 

policies or provisions that are unique or 

unproven, but instead relates to the 

continuation of an existing program that 

operates on a pilot basis. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE 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. Specifically, 

the Exchange believes that, by extending 

the expiration of the Pilot Program, the 

proposed rule change will allow for 

further analysis of the Pilot Program and 

a determination of how the Program 

shall be structured in the future. In 

doing so, the proposed rule change will 

also serve to promote regulatory clarity 

and consistency, thereby reducing 

burdens on the marketplace and 

facilitating investor protection. In 

addition, the Exchange has been 

authorized to act jointly in extending 

the Pilot Program and believes the other 

exchanges will be filing similar 

extensions. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 10 and Rule 

19b–4(f)(6) thereunder.11 Because the 

proposed rule change does not: (i) 

Significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

prior to 30 days from the date on which 

it was filed, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to 

Section 19(b)(3)(A) of the Act and 

Rule 19b–4(f)(6)(iii) thereunder. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 12 normally does not 

become operative prior to 30 days after 

the date of the filing.13 However, 

pursuant to Rule 19b–4(f)(6)(iii),14 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposal may 

become operative immediately upon 

filing. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because doing so will allow the Pilot 

Program to continue without 

interruption in a manner that is 

consistent with the Commission’s prior 

approval of the extension and expansion 

of the Pilot Program and will allow the 

Exchange and the Commission 

additional time to analyze the impact of 


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31594 Federal Register / Vol. 83, No. 130 / Friday, July 6, 2018 / Notices 

15See Securities Exchange Act Release No. 61061 

(November 24, 2009), 74 FR 62857 (December 1, 

2009) (SR–NYSEArca–2009–44). 

16For purposes only of waiving the operative 

delay for this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

17 15 U.S.C. 78s(b)(2)(B). 

18 17 CFR 200.30–3(a)(12). 

1 12 U.S.C. 5465(e)(1). 

2 17 CFR 240.19b–4(n)(1)(i). 

3 15 U.S.C. 78a et seq. 

4 In Amendment No. 1, OCC corrected formatting 

errors in Exhibits 5A and 5B without changing the 

substance of the advance notice. 

the Pilot Program.15 Accordingly, the 

Commission designates the proposed 

rule change as operative upon filing 

with the Commission.16

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 17 of the Act to 

determine whether the proposed rule 

change should be approved or 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CBOE–2018–047 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–CBOE–2018–047 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CBOE–2018–047 and 

should be submitted on or before July 

27, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–14467 Filed 7–5–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83561; File No. SR–OCC– 

2018–803] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Advance Notice, as 

Modified by Amendment No. 1, 

Concerning Proposed Changes to The 

Options Clearing Corporation’s Stress 

Testing and Clearing Fund 

Methodology 

June 29, 2018. 

Pursuant to Section 806(e)(1) of Title 

VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

entitled Payment, Clearing and 

Settlement Supervision Act of 2010 

(‘‘Clearing Supervision Act’’) 1 and Rule 

19b–4(n)(1)(i) 2 under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’ 

or ‘‘Act’’),3 notice is hereby given that 

on May 30, 2018, the Options Clearing 

Corporation (‘‘OCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) an advance notice as 

described in Items I, II and III below, 

which Items have been prepared by 

OCC. On June 7, 2018, OCC filed 

Amendment No. 1 to the advance 

notice.4 The Commission is publishing 

this notice to solicit comments on the 

advance notice from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Advance 

Notice 

This advance notice is filed in 

connection with proposed changes to 

OCC’s By-Laws and Rules, the 

formalization of a substantially new 

Clearing Fund Methodology Policy 

(‘‘Policy’’), and the adoption of a 

document describing OCC’s new 

Clearing Fund and stress testing 

methodology (‘‘Methodology 

Description’’). The proposed changes 

are primarily designed to enhance 

OCC’s overall resiliency, particularly 

with respect to the level of OCC’s prefunded financial resources. Specifically, 

the proposed changes would: 

(1) Reorganize, restate, and 

consolidate the provisions of OCC’s ByLaws and Rules relating to the Clearing 

Fund into a newly revised Chapter X of 

OCC’s Rules; 

(2) modify the coverage level of OCC’s 

Clearing Fund sizing requirement to 

protect OCC against losses stemming 

from the default of the two Clearing 

Member Groups that would potentially 

cause the largest aggregate credit 

exposure for OCC in extreme but 

plausible market conditions (i.e., adopt 

a ‘‘Cover 2 Standard’’ for sizing the 

Clearing Fund); 

(3) adopt a new risk tolerance for OCC 

to cover a 1-in-50 year hypothetical 

market event at a 99.5% confidence 

level over a two-year look-back period; 

(4) adopt a new Clearing Fund and 

stress testing methodology, which 

would be underpinned by a new 

scenario-based one-factor risk model 

stress testing approach, as detailed in 

the newly proposed Policy and 

Methodology Description; 

(5) document governance, monitoring, 

and review processes related to Clearing 

Fund and stress testing; 

(6) provide for certain anti-procyclical 

limitations on the reduction in Clearing 

Fund size from month to month; 

(7) increase the minimum Clearing 

Fund contribution requirement for 

Clearing Members to $500,000; 

(8) modify OCC’s allocation weighting 

methodology for Clearing Fund 

contributions; 

(9) reduce from five to two business 

days the timeframe within which 

Clearing Members are required to fund 

Clearing Fund deficits due to monthly 

or intra-month resizing or due to Rule 

amendments; 


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