[Federal Register Volume 83, Number 168 (Wednesday, August 29, 2018)]
[Notices]
[Pages 44098-44101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18675]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83923; File No. SR-CBOE-2018-059]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Delay 
the Implementation Date of Changes to Cboe Options Rule 24A.4, 
Interpretation and Policy .02, Concerning FLEX Options

August 23, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 14, 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 ``non-controversial'' 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.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delay the implementation date of rule 
change SR-CBOE-2018-008 to permit all FLEX series to be fungible with 
the corresponding non-FLEX series once an identical non-FLEX series 
becomes listed.

(additions are in italics; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *

Rule 24A.4. Terms of FLEX Options

* * * * *
    . . . Interpretations and Policies:
    .01 No change.
    .02
    The below version of Interpretation and Policy .02 will remain in 
effect until [an effective date specified by the Exchange in a 
Regulatory Circular. The effective date shall be no later than July 31, 
2018, and the Regulatory Circular announcing the effective date shall 
be

[[Page 44099]]

issued at least 30 days prior to the effective date] August 21, 2018.
    Provided the options on an underlying security or index are 
otherwise eligible for FLEX trading, FLEX Options shall be permitted in 
puts and calls that do not have the same exercise style, same 
expiration date and same exercise price as Non-FLEX Options that are 
already available for trading on the same underlying security or index. 
FLEX Options shall also be permitted before the options are listed for 
trading as Non-FLEX Options. Once and if the option series are listed 
for trading as Non-FLEX Options, (i) all existing open positions 
established under the FLEX trading procedures shall be fully fungible 
with transactions in the respective Non-FLEX Option series and (ii) any 
further trading in the series would be as Non-FLEX Options subject to 
the Non-FLEX trading procedures and rules. However, in the event the 
Non-FLEX series is added intra-day, a position established under the 
FLEX trading procedures would be permitted to be closed using the FLEX 
trading procedures for the balance of the trading day on which the Non-
FLEX series is added against another closing only FLEX position. For 
such FLEX series, the FLEX Official will make an announcement that the 
FLEX series is now restricted to closing transactions; a FLEX Request 
for Quotes may not be disseminated for any order representing a FLEX 
series having the same terms as a Non-FLEX series, unless such FLEX 
Order is a closing order (and it is the day the Non-FLEX series has 
been added); and only responses that close out an existing FLEX 
position are permitted. Any transactions in a restricted series that 
occur that do not conform to these requirements will be nullified by 
the FLEX Official pursuant to Rule 24A.14.
    The below version of Interpretation and Policy .02 shall be in 
effect on [the effective date specified by the Exchange in a Regulatory 
Circular. The effective date shall be no later than July 31, 2018, and 
the Regulatory Circular announcing the effective date shall be issued 
at least 30 days prior to the effective date]August 21, 2018.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/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 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
    On May 9, 2018, the Securities and Exchange Commission (the 
``Commission'') approved certain changes to Rule 24A.4, Interpretation 
and Policy .02 (SR-CBOE-2018-008), which changes allowed flexibility 
structured options (``FLEX Options'') with quarterly expirations, 
short-term expirations, weekly expirations, and End-of-Month 
expirations to be fungible with Non-FLEX Options that have identical 
terms.\5\ Pursuant to SR-CBOE-2018-008, the proposed changes would not 
take effect until a date specified by the Exchange in a Regulatory 
Circular, which date would be no later than July 31, 2018. The 
Regulatory Circular announcing the effective date was required to be 
issued at least 30 days prior to the effective date.
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    \5\ Securities Exchange Act Release No. 83205 (May 9, 2018), 83 
FR 22550 (May 15, 2018) (SR-CBOE-2018-008).
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    As noted in SR-CBOE-2018-008, to give effect to the Cboe Options 
rule change, the Options Clearing Corporation (``OCC'') would need to 
amend its By-Laws after Cboe Options amended its Rules.\6\ However, OCC 
did not submit proposed changes to its By-Laws until July 16, 2018, on 
which date those changes became effective.\7\ Cboe Options understands 
that OCC does not intend to implement those changes as to Cboe Options 
until the implementation date Cboe Options announced for the proposed 
rule change in SR-CBOE-2018-008. Because Cboe Options was unable to 
determine an implementation date for the proposed changes until it knew 
the effective time of OCC's By-Law amendments, Cboe Options was unable 
to announce an implementation date until after OCC amended its By-Laws 
(and thus not until after July 16, 2018). On July 20, 2018, after the 
OCC By-Law amendment was filed, Cboe Options announced an 
implementation date of August 21, 2018, which was more than 30 days 
after the notice to Trading Permit Holders.\8\ Because this 
implementation date is past July 31, 2018, the Exchange proposes to 
extend the implementation date of the rule changes in SR-CBOE-2018-008 
to August 21, 2018.
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    \6\ See id.
    \7\ Securities Exchange Act Release No. 83724 (July 27, 2018), 
83 FR 37875 (August 2, 2018) (SR-OCC-2018-010).
    \8\ Exchange Notice C2018072002 announcing the implementation 
date of rule change SR-CBOE-2018-008 is available at: http://cdn.batstrading.com/resources/release_notes/2018/Exchange-Notice-on-Open-Interest-Consolidation-for-Quarterly-and-Short-term-FLEX-products.pdf, which can be accessed through the markets.cboe.com 
website. Cboe Options previously informed market participants of its 
change in company practice to announce information such as the 
proposed rule change in SR-CBOE-2018-008 by Exchange Notice rather 
than Regulatory Circular: https://www.cboe.com/publish/RegCir/RG17-191.pdf.
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    Historically, Cboe Options would have announced this information 
pursuant to a Regulatory Circular as required by the rule text. 
However, Cboe Options announced the implementation date pursuant to an 
Exchange Notice in accordance with new company practice.\9\ This is 
merely a change in the name of the document issued to market 
participants to announce this information. The substance of the 
announcement in the Exchange Notice was the same as it would have been 
if announced in a Regulatory Circular. Exchange Notices are distributed 
to the same group of market participants to which Regulatory Circulars 
were distributed before this change in company practice. Additionally, 
Exchange Notices are posted to Cboe Options' website, just as 
Regulatory Circulars are posted. As a result, the Exchange believes 
announcement of the implementation date by Exchange Notice provided 
market participants with sufficient notice of the proposed rule change 
in SR-CBOE-2018-008. The Exchange plans to issue a reminder of the 
implementation date to market participants by Regulatory Circular.
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    \9\ Id.
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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.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section

[[Page 44100]]

6(b)(5) \11\ 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) \12\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
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    The proposed rule change is merely delaying the implementation date 
of a proposed rule change, the rule filing for which addressed why that 
change and the need for at least 30 days' notice of implementation of 
that change was consistent with the Act and was previously approved by 
the Commission. This will ensure market participants receive sufficient 
notice of the implementation date of the proposed rule change.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Cboe Options 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 proposed rule change is 
merely delaying the implementation date of a proposed rule change, the 
rule filing for which addressed any potential competitive impact that 
change and the need for at least 30 days' notice of implementation of 
that change may have and was previously approved by the Commission. The 
proposed delay to the implementation date ensures market participants 
receive sufficient notice of the implementation date of the proposed 
rule change, which ultimately protects investors. The Exchange believes 
the proposed delay to the implementation date will have no impact on 
competition.

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

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires Cboe Options to give the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and 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. Cboe 
Options has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay. The 
Commission is waiving the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiver of the operative delay is consistent with the protection of 
investors and the public interest because such waiver will allow the 
rule change to be implemented as detailed in the Exchange Notice 
whereas keeping the 30-day operative delay in place could create 
confusion. Therefore, the Commission designates the proposal operative 
upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule 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

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d1a3a4bdb4fcb2bebcbcb4bfa5a291a2b4b2ffb6bea7"><span class="__cf_email__" data-cfemail="e391968f86ce808c8e8e868d9790a3908680cd848c95">[email protected]</span></a>. Please include 
File Number SR-CBOE-2018-059 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-2018-059. 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-2018-059 and should be submitted on 
or before September 19, 2018.


[[Page 44101]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18675 Filed 8-28-18; 8:45 am]
 BILLING CODE 8011-01-P


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