Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices 2695 

51 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In addition to proposing to delete the language 

in Rule 29.11(a)(6) and (j)(3) regarding the 

expiration date of the Pilot Programs, the Exchange 

proposes to delete the word ‘‘pilot’’ from the 

heading of Rule 29.11(j) and make a corresponding 

change to Rules 29.11(c)(5)(C). 

4See Securities Exchange Act Release No. 85182 

(February 22, 2019), 84 FR 6846 (February 28, 2019) 

(SR–CboeEDGX–2018–037) (‘‘Pilot Programs 

Approval Order’’). Under the terms of the 

Nonstandard Expirations Pilot Program, Weekly 

Expirations and EOMs are permitted on any broadbased index that is eligible for regular options 

trading. 

5See id. 

6See 88054 (January 27, 2020), 85 FR 5761 

(January 31, 2020) (Notice of Filing and Immediate 

Effectiveness of a Proposed Rule Change To Extend 

the Pilot Programs in Connection With the Listing 

and Trading of P.M.-Settled Series on Certain 

Broad-Based Index Options) (SR–CboeEDGX–2020– 

002); 88787 (April 30, 2020), 85 FR 26995 (May 6, 

2020) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change To Extend the Pilot 

Programs in Connection With the Listing and 

Trading of P.M.-Settled Series on Certain BroadBased Index Options) (SR–CboeEDGX–2020–019); 

90253 (October 22, 2020) 85 FR 68390 (October 28, 

2020) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change To Extend the Pilot 

Programs in Connection With the Listing and 

Trading of P.M.-Settled Series on Certain BroadBased Index Options) (SR–CboeEDGX–2020–050); 

91700 (April 28, 2021), 86 FR 23770 (May 4, 2021) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change To Extend the Pilot 

Programs in Connection With the Listing and 

Trading of P.M.-Settled Series on Certain BroadBased Index Options) (SR–CboeEDGX–2021–022); 

93453 (October 28, 2021), 86 FR 60667 (November 

3, 2021) (Notice of Filing and Immediate 

Effectiveness of a Proposed Rule Change To Extend 

the Pilot Programs in Connection With the Listing 

and Trading of P.M.-Settled Series on Certain 

Broad-Based Index Options) (SR–CboeEDGX–2021– 

047); 94803 (April 27, 2022), 87 FR 26237 (May 3, 

2022) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change To Extend the Pilot 

Programs in Connection With the Listing and 

Trading of P.M.-Settled Series on Certain BroadBased Index Options) (SR–CboeEDGX–2022–025); 

96209 (November 2, 2022), 87 FR 67520 (November 

8, 2022) (Notice of Filing and Immediate 

Effectiveness of a Proposed Rule Change to Extend 

the Pilot Programs in Connection with the Listing 

and Trading of P.M.-Settled Series on Certain 

Broad-Based Index Options) (SR–CboeEDGX–2022– 

047); 97443 (May 5, 2023) 88 FR 30356 (May 11, 

2023) (Notice of Filing and Immediate Effectiveness 

of a Proposed Rule Change To Extend the Pilot 

Programs in Connection With the Listing and 

Trading of P.M.-Settled Series on Certain BroadBased Index Options) (SR–CboeEDGX–2023–035); 

and 98640 (September 28, 2023), 88 FR 68846 

(October 4, 2023) (SR–CboeEDGX–2023–061) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change To Extend the Pilot 

Programs in Connection With the Listing and 

Trading of P.M.-Settled Series on Certain BroadBased Index Options). 

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–2023–107 and should be 

submitted on or before February 6, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.51

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–00637 Filed 1–12–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Release No. 34–99300; File No. SR– 

CboeEDGX–2023–083] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

of a Proposed Rule Change To Make 

Permanent Pilot Programs in 

Connection With the Listing and 

Trading of P.M.-Settled Series on 

Certain Broad-Based Index Options 

January 9, 2024. 

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 December 

26, 2023, Cboe EDGX Exchange, Inc. 

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

Securities and Exchange Commission 

(‘‘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 make 

permanent the operation of its programs 

that allow the Exchange to list options 

on the Mini-SPX Index (‘‘XSP options’’) 

with P.M.-settlement and to list broadbased index options with nonstandard 

expirations (‘‘Nonstandard Expirations 

Pilot Program’’). 

The text of the proposed rule change 

is available on the Exchange’s website 

(http://markets.cboe.com/us/equities/ 

regulation/rule_filings/EDGX/), 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 

The Exchange proposes to make 

permanent its XSPPM Pilot Program and 

its Nonstandard Expirations Pilot 

Program. Specifically, the Exchanges 

proposes to be permitted to list on a 

permanent basis (1) XSP options with 

third-Friday-of-the-month expiration 

dates whose exercise settlement value is 

derived from closing prices on the last 

trading day prior to expiration (‘‘P.M.- 

settled’’) (‘‘XSPPM options’’) and (2) 

options on broad-based indexes that are 

P.M.-settled and expire (a) on any 

Monday, Wednesday, or Friday (other 

than the third Friday-of-the-month or 

days that coincide with an end-ofmonth (‘‘EOM’’) expiration) (‘‘Weekly 

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

the trading month (‘‘EOM 

Expirations’’).3 The Securities and 

Exchange Commission (the 

‘‘Commission’’) approved a rule change 

that established a pilot program under 

which the Exchange is permitted to list 

(1) XSP options with third-Friday-ofthe-month expiration dates that are 

P.M.-settled (the ‘‘XSPPM Pilot 

Program’’) and (2) options on broadbased indexes with Weekly Expirations 

and Monthly Expirations (the 

‘‘Nonstandard Expirations Pilot 

Program’’ and, with the XSPPM Pilot 

Program, the ‘‘Pilot Programs’’).4

XSPPM Options, Weekly Expirations, 

and EOMs are cash-settled and have 

European-style exercise. The Pilot 

Programs became effective on a pilot 

basis for a period of twelve months from 

the date of the approval of the Pilot 

Programs 5 and were subsequently 

extended.6 Pursuant to Rule 29.11(a)(6) 

and (j)(3), the Pilot Programs are 

scheduled to expire on May 6, 2024. 


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

out the cash value of the applicable index on 

expiration or exercise. A ‘‘physically settled’’ 

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. 

8The close of trading on the quarterly expiration 

Friday (i.e., the third Friday of March, June, 

September and December), when options, index 

futures, and options on index futures all expire 

simultaneously, became known as the ‘‘triple 

witching hour.’’ 

9See Securities and Exchange Commission, 

Division of Economic Risk and Analysis, 

Memorandum, Cornerstone Analysis of PM CashSettled Index Option Pilots (February 2, 2021) 

(‘‘DERA Staff PM Pilot Memo’’) at 5, available at: 

https://www.sec.gov/files/Analysis_of_PM_Cash_

Settled_Index_Option_Pilots.pdf. 

10The 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. 

11See Securities Exchange Act Release No. 24367 

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

CBOE–87–11) (noting that CME moved S&P 500 

futures contract’s settlement value to opening prices 

on the delivery date). 

12See id. 

13See Securities Exchange Act Release No. 30944 

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

CBOE–92–09). Thereafter, the Commission 

approved proposals by the options markets to 

transfer most of their cash-settled index products to 

A.M. settlement. 

14See 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). 

15See 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); 78132 (June 22, 2016), 

81 FR 42018 (June 28, 2016) (SR–CBOE–2016–046); 

and 78531 (August 10, 2016), 81 FR 54643 (August 

16, 2016) (SR–CBOE–2016–046). 

16See Securities Exchange Act Release No. 68888 

(February 8, 2013), 78 FR 10668 (February 14, 2013) 

(SR–CBOE–2012–120). Pursuant to Securities 

Exchange Act Release No. 80060 (February 17, 

2017), 82 FR 11673 (February 24, 2017) (SR–CBOE– 

2016–091), the Exchange moved third-Friday P.M.- 

settled options into the S&P 500 Index options 

class, and as a result, the trading symbol for P.M.- 

settled S&P 500 Index options that have standard 

third Friday-of-the-month expirations changed from 

‘‘SPXPM’’ to ‘‘SPXW.’’ This change went into effect 

on May 1, 2017, pursuant to Cboe Options 

Regulatory Circular RG17–054. 

17See Securities Exchange Act Release Nos. 

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

(SR–CBOE–2013–055); and 91067 (February 5, 

2021) 86 FR 9108 (February 11, 2021) (SR–CBOE– 

2020–116). 

18See supra note 4. 

19See Securities Exchange Act Release Nos. 

98454 (September 20, 2023) (SR–CBOE–2023–005) 

(order approving proposed rule change to make 

permanent the operation of a program that allows 

the Exchange to list p.m.-settled third Friday-of-themonth SPX options series); 98455 (September 20, 

2023) (SR–CBOE–2023–019) (order approving 

proposed rule change to make permanent the 

operation of a program that allows the Exchange to 

list p.m.-settled third Friday-of-the-month XSP and 

MRUT options series); and 98456 (September 20, 

2023) (SR–CBOE–2023–020) (order approving 

proposed rule change to make the nonstandard 

expirations pilot program permanent). 

20See supra note 4. 

21 In providing the pilot reports to the 

Commission, the Exchange previously requested 

confidential treatment of the pilot reports under the 

Freedom of Information Act (‘‘FOIA’’). See 5 U.S.C. 

552. 

The Exchange hereby requests that the 

Commission approve the Pilot Programs 

on a permanent basis. 

By way of background, when cashsettled 7 index options were first 

introduced in the 1980s, settlement was 

based on the closing value of the 

underlying index on the option’s 

expiration date. The Commission later 

became concerned about the impact of 

P.M.-settled, cash-settled index options 

on the markets for the underlying stocks 

at the close on expiration Fridays. 

Specifically, certain episodes of price 

reversals around the close on quarterly 

expiration dates attracted the attention 

of regulators to the possibility that the 

simultaneous expiration of index 

futures, futures options, and options 

might be inducing abnormal volatility in 

the index value around the close.8

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.9 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 (‘‘CFTC’’) 

approved a rule change by the Chicago 

Mercantile Exchange (‘‘CME’’) to 

provide for A.M. settlement 10 for index 

futures, including futures on the S&P 

500.11 The Commission subsequently 

approved a rule change by Cboe 

Options, Inc. (‘‘Cboe Options’’) to list 

and trade A.M.-settled SPX options.12 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; 13

however, in 1993, the Commission 

approved a rule allowing Cboe Options 

to list P.M.-settled options on certain 

broad-based indices, including the S&P 

500, expiring at the end of each calendar 

quarter (‘‘Quarterly Index Expirations’’) 

(since adopted as permanent).14 Starting 

in 2006, the Commission approved 

numerous rule changes, on a pilot basis, 

permitting the 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 of the month) and 

at the end of each month (‘‘EOM’’),15

P.M.-settled options on the S&P 500 

Index that expire on the third Friday-ofthe-month (‘‘SPXPM’’),16 as well as 

P.M.-settled Mini-SPX Index (‘‘XSP’’) 

options and Mini-Russell 2000 Index 

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

Friday of the month.17 As noted above, 

the Commission approved a rule to 

allow the Exchange to list XSPPM 

options and broad-based index options 

with Weekly and EOM Expirations.18

The Commission recently approved 

proposed rule changes to make Cboe 

Options’ pilot programs to list P.M.- 

settled index options (including pilot 

programs substantively the same as the 

Pilot Programs) permanent.19

As stated above, since its inception in 

2019, the Exchange has continuously 

extended the Pilot Program periods and, 

during the course of the Pilot Programs 

and in support of the extensions of the 

Pilot Programs, the Exchange has 

submitted reports to the Commission 

regarding the Pilot Programs that detail 

the Exchange’s experience with the Pilot 

Programs, pursuant to the Pilot 

Programs Approval Order.20

Specifically, the Exchange has 

submitted annual Pilot Program reports 

to the Commission that contain an 

analysis of volume, open interest, and 

trading patterns. In addition, for series 

that exceed certain minimum open 

interest parameters, the annual report 

would provide analysis of index price 

volatility and, if needed, share trading 

activity. The Exchange has also 

submitted periodic interim reports that 

contain some, but not all, of the 

information contained in the annual 

reports (together with the periodic 

interim reports, the ‘‘pilot reports’’).21

The pilot reports for the XSPPM Pilot 

Program contained the following 

volume and open interest data: 

(1) monthly volume aggregated for all 

trades; 

(2) monthly volume aggregated by 

expiration date; 

(3) monthly volume for each 

individual series; 

(4) month-end open interest 

aggregated for all series; 

(5) month-end open interest for all 

series aggregated by expiration date; and 

(6) month-end open interest for each 

individual series. 

The pilot reports for the Nonstandard 

Expirations Pilot Program contained the 

following volume and open interest 

data: 

(1) monthly volume aggregated for all 

Weekly and EOM trades; 

(2) volume in Weekly and EOM series 

aggregated by expiration date; 


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22The Exchange and the Commission determined 

the minimum open interest parameters, control 

sample, time intervals, method for randomly 

selecting the component securities, and sample 

periods. 

23Available at https://www.cboe.com/aboutcboe/ 

legal-regulatory/national-market-system-plans/pmsettlement-spxpm-data. 

24See DERA Staff PM Pilot Memo, at 13 (‘‘Option 

settlement quantity data for A.M.- and P.M.-settled 

options were obtained from the Cboe, including the 

number of contracts that settled in-the-money for 

each exchange-traded option series on the S&P 500 

index . . . on expiration days from January 20, 

2006 through December 31, 2018. Daily open 

interest and volume data for [SPX] option series 

were also obtained from Cboe, including open 

interest data from January 3, 2006 through 

December 31, 2018 and trading volume data from 

January 3, 2006 through December 31, 2018.’’) 

25The DERA staff study reviewed and provided 

statistics for market share, median notional value of 

open interest and median volume in 2007 and in 

2018. The Exchange provides updated statistics for 

market share, median notional value of open 

interest and median volume in 2021, replacing the 

2018 statistics provided in the Commission staff 

study. 26See DERA Staff PM Pilot Memo, at 2. 27The Exchange notes that the DERA staff study 

used two-sided volume data for the median volume 

in 2007 and in 2018; therefore, the Exchange 

provides two-sided volume data for the median 

volume in 2021. 28Futures on the S&P 500 experience high 

volume and liquidity both before and after the close 

of the underlying market. Therefore, futures are a 

useful measure of abnormal volatility surrounding 

the close and the open. See DERA Staff PM Pilot 

Memo, at 14. The Exchange agrees with this 

approach. 

29Standard deviation applied to a rate of return 

(in this case, one-minute) of an instrument can 

indicate that instrument’s historical volatility. The 

greater the standard deviation, the greater the 

variance between price and the mean, which 

indicates a larger price range, i.e., higher volatility. 

(3) month-end open interest 

aggregated for all Weekly and EOM 

series; 

(4) month-end open interest for EOM 

series aggregated by expiration date and 

week-ending open interest for Weekly 

series aggregated by expiration date; 

(5) ratio of monthly aggregate volume 

in Weekly and EOM series to total 

monthly class volume; and 

(6) ratio of month-end open interest in 

EOM series to total month-end class 

open interest and ratio of week-ending 

open interest in EOW series to total 

week-ending open interest. 

The annual reports for the Pilot 

Programs also contained the information 

noted in respective Items (1) through (6) 

above for Expiration Friday, A.M.- 

settled series, if applicable, for the 

period covered in the pilot report. With 

respect to the Nonstandard Expirations 

Pilot Program, upon request by the 

Commission, the Exchange provided 

data files containing: (1) Weekly and 

EOM option volume data aggregated by 

series, and (2) Weekly week-ending 

open interest for expiring series and 

EOM month-end open interest for 

expiring series. In the annual reports, 

the Exchange also provided the 

following analyses of trading patterns in 

XSPPM options and index options with 

Weekly and EOM Expirations: 

• with respect to the XSPPM Pilot 

Program, a time series analysis of open 

interest and an analysis of the 

distribution of trade sizes; and 

• with respect to the Nonstandard 

Expirations Pilot Program, Weekly and 

EOM option volume data aggregated by 

series, and Weekly open interest for 

expiring series and EOM month-end 

open interest for expiring series. 

Finally, for series that exceed certain 

minimum parameters,22 the annual 

reports contained the following analysis 

related to index price changes and 

underlying share trading volume at the 

close on Expiration Fridays: 

(1) a comparison of index price 

changes at the close of trading on a 

given Expiration Friday with 

comparable price changes from a control 

sample. The data includes a calculation 

of percentage price changes for various 

time intervals and compare that 

information to the respective control 

sample. Raw percentage price change 

data as well as percentage price change 

data normalized for prevailing market 

volatility, as measured by the Cboe 

Volatility Index (VIX), is provided; and 

(2) a calculation of share volume for 

a sample set of the component securities 

representing an upper limit on share 

trading that could be attributable to 

expiring in-the-money series. The data 

includes a comparison of the calculated 

share volume for securities in the 

sample set to the average daily trading 

volumes of those securities over a 

sample period. 

Also, during the course of the Pilot 

Programs, the Exchange provided the 

Commission with any additional data or 

analyses the Commission requested if it 

deemed such data or analyses necessary 

to determine whether the Nonstandard 

Expirations Pilot Program was 

consistent with the Exchange Act. The 

Exchange has made public on its 

website all data and analyses previously 

submitted to the Commission under the 

Nonstandard Expirations Pilot 

Program,23 and will continue to make 

public any data and analyses it submits 

to the Commission while the Pilot 

Programs is still in effect. 

The Exchange has concluded that the 

Pilot Programs do not negatively impact 

market quality or raise any unique or 

prohibitive regulatory concerns. The 

Exchange has not identified any 

evidence from the pilot data indicating 

that the trading of XSPPM, Weekly 

options, and EOM options has any 

adverse impact on fair and orderly 

markets on Expiration Fridays for the 

underlying indexes or the underlying 

securities comprising those indexes, nor 

have there been any observations of 

abnormal market movements 

attributable to XSPPM, Weekly and 

EOM options from any market 

participants that have come to the 

attention of the Exchange. 

Based on a study conducted by the 

Commission’s Division of Economic and 

Risk Analysis (‘‘DERA’’) staff on the 

pilot data from 2006 through 2018,24

and the Exchange’s review of the pilot 

data from 2019 through 2021, the size of 

the market for P.M.-settled SPX options 

(including quarterly, weekly, EOM and 

third Friday expirations) since 2007 has 

grown from a trivial portion of the 

overall market to a substantial share 

(from around 0.1% of open interest in 

2007 to 30% in 2021).25 Notional value 

of open interest in P.M.-settled SPX 

options increased from approximately a 

median of $1.5 billion in 2007 to $1.9 

trillion in 2021, approximately 1260 

times its value in 2007. Notional open 

interest in A.M.-settled SPX options was 

already hovering around a median of 

$1.4 trillion in 2007, and it has since 

increased to approximately $4.4 trillion 

in 2021. It is also important to note that 

open interest on expiring P.M.-settled 

SPX options, as compared to A.M.- 

settled options, is spread out across a 

greater number of expiration dates, 

which results in a smaller percentage of 

open interest expiring on any one date, 

thus mitigating concerns that SPXPM 

option expiration may have a disruptive 

effect on the market.26 Daily trading 

volume in P.M.-settled SPX options has 

increased from a median of about 700 

contracts in 2007 to nearly 1.9 million 

contracts in 2021,27 and now exceeds 

trading volume in A.M.-settled SPX 

options. 

Moreover, the DERA staff study of the 

P.M.-settled SPX options pilot data 

(2006 through 2018) did not identify 

any significant economic impact on S&P 

500 futures,28 the S&P 500, or the 

underlying component securities of the 

S&P 500 surrounding the close. For 

purposes of the study, volatility was by 

and large measured by using the 

standard deviation 29 of one-minute 

returns of S&P 500 futures values and 

the index value during regular hours on 

each day reviewed (excluding the first 

and last 15 minutes of trading) and then 

compared with the standard deviation 

of one-minute returns (for S&P 500 

futures, the S&P 500, and the underlying 

component securities of the S&P 500) 

over the last 15 minutes of a trading 


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30For example, if on a particular day the standard 

deviation of one-minute returns between 3:45 p.m. 

ET and 4:00 p.m. ET is 0.004 and the standard 

deviation of returns from 9:45 a.m. ET to 3:45 p.m. 

ET is 0.002, this metric would take on a value of 

2 for that day, indicating that volatility during the 

last 15 minutes of the trading day was twice as high 

as it was during the rest of the trading day. See 

DERA Staff PM Pilot Memo, at 15; see also DERA 

Staff PM Pilot Memo, at Section V, which discusses 

in detail the metrics used to measure, for the 

purposes of the study, the extent to which the 

market may experience abnormal volatility 

surrounding SPXPM option settlement. 

31See DERA Staff PM Pilot Memo, at Section V, 

which discusses in detail the metrics used to 

measure, for the purposes of the study, the extent 

to which the market may experience abnormal 

volatility surrounding SPXPM option settlement. 

32See supra note 29. 

33The Exchange also notes that the study did not 

identify any evidence that less liquid S&P 500 

constituent securities experienced any greater 

impact from the settlement of P.M.-settled SPX 

options. 

34Total SPX open interest volumes were 

examined for expiration dates over a roughly twoyear period between October 2019 and November 

2021. 

35Calculated at every tick for the prior minute. 

36November 2015 through November 2021. 

37See S&P Dow Jones Indices, Equity Indices 

Policies & Practices, Methodology (August 2021), at 

15, available at https://www.spglobal.com/spdji/en/ 

day.30 Using this as a general measure,31

the DERA staff study then reviewed 

whether, and to what extent, the 

settlement quantity of SPXPM options 

and the levels of open interest in 

SPXPM options on expiration days (as 

compared to non-expiration days) may 

be associated with general price 

volatility and price reversals for S&P 

500 futures, the S&P 500, and the 

underlying component securities of the 

S&P 500 near the close. From its review 

of the study, the Exchange agrees that, 

although volatility before the market 

close is generally higher than during the 

rest of the trading day, there is no 

evidence of any significant adverse 

economic impact to the futures, index, 

or underlying index component 

securities markets as a result of the 

quantity of P.M.-settled SPX options 

that settle at the close or the amount of 

expiring open interest in P.M.-settled 

SPX options. For example, the largest 

settlement event that occurred during 

the time period of the study (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). 

In particular, the DERA staff study 

found that an additional P.M.-settled 

SPX options settlement quantity equal 

to $10 billion in notional value is 

associated with a marginal impact on 

futures prices during the last 15 minutes 

of the trading day of only about $0.06 

(where the hypothetical index level is 

2,500), additional expiring open interest 

in P.M.-settled SPX options equal to $10 

billion in notional value is associated 

with a marginal impact on futures prices 

during the last 15 minutes of the trading 

day of only about $0.05 (assumed index 

level is 2,500). Also, an additional 

increase in settlement quantity or in 

expiring open interest, each equal to $20 

million in notional value, did not result 

in any meaningful futures price 

reversals near the close (neither was 

found to cause a price reversal of over 

one standard deviation 32). 

Likewise, the study identified that an 

additional total P.M.-settled SPX 

options settlement quantity equal to $10 

billion in notional value corresponds to 

price movement in the S&P 500 of only 

about $0.08 (assuming an index level of 

2,500) during the last 15 minutes of the 

trading day, and that additional expiring 

open interest equal to $10 billion in 

notional value corresponds to a price 

movement in the S&P 500 of only about 

$0.06 (assuming an index level of 2,500) 

during the last 15 minutes of the trading 

day. The study also identified that it 

would take an increase of $34 billion in 

notional value of total settlement 

quantity and of expiring open interest 

for one additional S&P 500 price 

reversal of greater than two standard 

deviations to occur in the last 15 

minutes before the market close. Also, 

regarding potential impact to S&P 500 

component securities, it would take an 

increase in total P.M.-settled SPX 

options settlement quantity equal to $20 

billion to effect a price movement of 

only approximately $0.03 for a $200 

stock, an increase in expiring open 

interest in P.M.-settled SPX options 

equal to $10 billion to effect a price 

movement less than half a standard 

deviation, and an increase in total P.M.- 

settled SPX settlement quantity equal to 

$7 billion to achieve a price reversal 

greater two standard deviations. 

The study employed the same metrics 

to determine whether there is greater 

price volatility for S&P 500 futures, the 

S&P 500, and the component securities 

of the S&P 500 related to SPXPM option 

settlements during an environment of 

high market volatility (i.e., on days in 

which the VIX Index was in the top 

10% of closing index values) and did 

not identify indicators of any significant 

economic impact on these markets near 

the close as a result of the P.M.-settled 

SPX options settlement.33 In addition to 

this, the DERA staff study, applying the 

same metrics and analysis as for P.M.- 

settled SPX options to A.M.-settled SPX 

options, did not identify any evidence 

of a statistically significant relationship 

between settlement quantity or expiring 

open interest of A.M.-settled options 

and volatility near the open. 

Upon review of the results of the 

DERA staff study, the Exchange agrees 

that each of the above-described 

marginal price movements in S&P 500 

futures, the S&P 500, and the S&P 500 

component securities affected by 

increases in P.M.-settled SPX options 

settlement quantity and expiring open 

interest appear to be de minimis pricing 

changes from those that occur over 

regular trading hours (outside of the last 

15 minutes of the trading day). Further, 

the Exchange has not observed any 

significant economic impact or other 

adverse effects on the market from 

similar reviews of its pilot reports and 

data submitted after 2018.34 In its 

review of a sample of the pilot data from 

2019 through 2021, the Exchange 

similarly measured volatility over the 

final fifteen minutes of each trading day 

by taking the standard deviation of 

rolling one-minute returns of the S&P 

500 level (excluding the first and last 

fifteen minutes of trading) and 

comparing such with the standard 

deviation of one-minute returns 35 of the 

S&P 500 level, over the last 15 minutes 

of a trading day. The Exchange 

identified an average standard deviation 

ratio of 1.42 for the S&P 500 on nonexpiration days and an average standard 

deviation ratio of 1.54 for the S&P 500 

on expiration days (a ratio between 

expiration days and non-expiration days 

of 1.09). The Exchange also notes that, 

using the same methodology, it 

observed that, from 2015 through 

2019,36 the average standard deviation 

ratio for the S&P 500 on non-expiration 

days was 1.11 and the average standard 

deviation ratio for the S&P 500 on 

expiration days was 1.22 (a ratio 

between expiration days and nonexpiration days of 1.10). While the 

average standard deviation ratio on both 

expiration and non-expiration days was 

higher in 2019 through 2021 due to 

overall market volatility, the ratios 

between the standard deviation ratios 

on expiration days and non-expirations 

days remained nearly identical between 

the 2015 through 2019 timeframe and 

the 2019 through 2021. This shows that, 

in cases where overall market volatility 

may increase, the normalized impact on 

expiration days to non-expiration days 

generally remains consistent. 

In addition to this, the Exchange notes 

that the S&P 500 Index is rebalanced 

quarterly. The changes resulting from 

each rebalancing coincide with the 

third-Friday of the quarterly rebalancing 

month (i.e., March, June, September, 

October and December) 37 and generally 


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documents/methodologies/methodology-sp-equityindices-policies-practices.pdf. 

38See DERA Staff PM Pilot Memo, at 10–12. 

39MOC orders allow a market participant to trade 

at the closing price. Market participants generally 

utilize MOC orders to ensure they exit positions at 

the end of the trading day. 

40The 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). 

41The 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. 

42For purposes of comparison, the Exchange 

paired SPXW options and SPY options with the 

same moneyness and same days to expiration. 

43The Exchange observed comparable market 

volatility levels during the pre-intervention and 

post-intervention time ranges. 

drive an increase in trading activity 

from investors that seek to track the S&P 

500. As such, the Exchange measured 

volatility on quarterly rebalancing dates 

and found that the average standard 

deviation ratio was 1.62, which suggests 

more closing volatility on quarterly 

rebalance dates compared to nonquarterly expiration dates (for which the 

average standard deviation ratio was 

1.22), thus indicating that the impact 

rebalancing may have on the S&P 500 is 

greater than any impact that P.M.-settled 

SPX options may have on the S&P 500. 

The Exchange additionally focused its 

study of the post-2018 sample pilot data 

on reviewing for potential correlation 

between excess market volatility and 

price reversals and the hedging activity 

of liquidity providers. As explained in 

the DERA staff study, potential impact 

of P.M.-settled SPX options on the 

correlated equity markets is thought to 

stem from the hedging activity of 

liquidity providers in such options.38 To 

determine any such potential 

correlation, the Exchange studied the 

expected action of liquidity providers 

that are the primary source of the 

hedging on settlement days. These 

liquidity providers generally deltahedge their S&P 500 index exposure via 

S&P 500 futures and on settlement day 

unwind their futures positions that 

correspond with the delta of their inthe-money (ITM) expiring P.M.-settled 

SPX options. Assuming such behavior, 

the Exchange estimated the Market-OnClose (‘‘MOC’’) 39 volume for the shares 

of the S&P 500 component securities 

(i.e., ‘‘MOC share volume’’) that could 

ultimately result from the unwinding of 

the liquidity providers’ futures positions 

by equating the notional value of the 

futures positions that correspond to 

expiring ITM open interest to the 

number S&P 500 component security 

contracts (based on the weight of each 

S&P 500 component security). That is, 

the Exchange calculated (an estimate) of 

the amount of MOC volume in the S&P 

500 component markets attributable 

hedging activity as a result of expiring 

ITM P.M.-settled SPX options (i.e., 

‘‘hedging MOC’’). The Exchange then: 

(1) compared the hedging MOC share 

volume to all MOC share volume on 

expiration days and non-expiration 

trading days; and (2) compared the 

notional value of the hedging futures 

positions (i.e., that correspond to 

expiring ITM P.M.-settled SPX options 

open interest) to the notional value of 

expiring ITM P.M.-settled SPX options 

open interest, the notional value of all 

expiring P.M.-settled SPX options open 

interest and the notional value of all 

P.M.-settled SPX options open interest. 

The Exchange observed that, on 

average, there were approximately 25% 

more MOC shares executed on 

expiration days (332 expiration days) 

than non-expiration days (209 nonexpiration days). While, at first glance, 

the volume of MOC shares executed on 

expiration days seems much greater 

than the volume executed on nonexpiration days, the Exchange notes that 

much of this difference is attributable to 

just eight expiration days—the quarterly 

index rebalancing dates captured within 

the scope of the post-2018 sample pilot 

data. The average MOC share volume on 

the eight quarterly rebalancing dates 

was approximately 4.8 times the average 

MOC share volume on the non-quarterly 

rebalancing expiration dates; again, 

indicating that the impact rebalancing 

may have on the S&P 500 Index is 

greater than any impact that P.M.-settled 

SPX options may have on the S&P 500 

Index. That is, the Exchange observed 

that the majority of closing volume on 

quarterly rebalance dates is driven by 

rebalancing of shares in in the S&P 500, 

and not by P.M.-settled SPX options 

expiration-related hedging activity. 

Notwithstanding the MOC share volume 

on quarterly rebalancing dates, the 

volume of MOC shares executed on 

expiration days (324 expiration days) 

was only approximately 13% more than 

that on non-expiration days, 

substantially less than the increase in 

volume over non-expiration days 

wherein the eight index rebalancing 

dates are included in expiration day 

volume. In addition to this, the 

Exchange observed that the hedging 

MOC share volume (i.e., the expected 

MOC share volume resulting from 

hedging activity in connection with 

expiring ITM P.M.-settled SPX options) 

was, on average, less than the MOC 

share volume on non-expiration days, 

and was only approximately 20% of the 

total MOC share volume on expiration 

days, indicating that other sources of 

MOC share volume generally exceed the 

volume resulting from hedging activity 

of expiring ITM P.M.-settled SPX 

options and would more likely be a 

source of any potential market volatility. 

The Exchange also observed that, 

across all third-Friday expirations, the 

notional value of the hedging futures 

positions was approximately 25% of the 

notional value of expiring ITM P.M.- 

settled SPX options, approximately 

3.8% of the notional value of all 

expiring P.M.-settled SPX options, and 

approximately only 0.5% of the notional 

value of all P.M.-settled SPX options. As 

such, the estimated hedging activity 

from liquidity providers on expiration 

days is a fraction of the expiring open 

interest in P.M.-settled SPX options, 

which, the Exchange notes, is only 14% 

of the total open interest in P.M.-settled 

SPX options; thus, indicating negligible 

capacity for hedging activity to increase 

volatility in the underlying markets. 

While unrelated to the initial 

concerns of P.M.-settlement as 

described above, at the request of the 

Commission, the Exchange recently 

completed an analysis intended to 

evaluate whether the Pilot Programs 

impacted the quality of the A.M.-settled 

option market. Specifically, the 

Exchange compared values of key 

market quality indicators (specifically, 

the bid-ask spread 40 and effective 

spread) 41 in SPXW options (which trade 

on Cboe Options, an affiliated of the 

Exchange, pursuant to a nonstandard 

expiration program substantively 

similar to the Nonstandard Expiration 

Pilot Program) both before and after the 

introduction of Tuesday expirations and 

Thursday expirations for SPXW options 

on April 18 and May 11, 2022, 

respectively.42 Options on the Standard 

& Poor’s Depositary Receipts S&P 500 

ETF (‘‘SPY’’) were used as a control 

group to account for any market factors 

that might influence key market quality 

indicators. The Exchange used data 

from January 3, 2022 through March 4, 

2022 (the two-month period prior to the 

introduction of SPXW options with 

Tuesday expirations) and data from May 

11, 2022 to July 10, 2022 (the twomonth period following the 

introduction of SPXW options with 

Thursday expirations).43

Given the time that as passed since 

the implementation of the Pilot 


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44The full analysis is included in Exhibit 3 of this 

rule filing. 

45 In any series in which the Exchange observed 

an increase in the market quality indicators, the 

Exchange notes any such increase was also 

statistically insignificant. 

46 15 U.S.C. 78f(b). 

47 15 U.S.C. 78f(b)(5). 

48See supra notes 24–44. As described above, the 

Exchange’s conclusion is consistent with the 

analysis in the DERA Staff PM Pilot Memo. 

49See supra notes 24–44. 

Programs, as well as the fact that when 

the Exchange began offering XSPPM, 

Weekly and EOM options, XSPPM, 

Weekly, and EOM options had already 

been trading on other exchanges for 

nearly a decade, the Exchange is unable 

to analyze whether the introduction of 

those options significantly impacted the 

market quality of corresponding A.M.- 

settled options. The Exchange believes 

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 then-existing 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 XSPPM, 

Weekly and EOM options impacted the 

market quality of any corresponding 

A.M.-settled options when the pilot 

began.44

As a result of this analysis, the 

Exchange believes 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. With respect to the 

majority of series analyzed, the 

Exchange observed no statistically 

significant difference in the bid-ask 

spread or the effective spread of the 

series in the period prior to introduction 

of the Tuesday and Thursday 

expirations and the period following the 

introduction of the Tuesday and 

Thursday expirations. While 

statistically insignificant, the Exchange 

notes that in many series, particularly as 

they were closer to expiration, the 

Exchange observed that the values of 

these spreads decreased during the 

period following the introduction of the 

Tuesday and Thursday expirations.45

To further note, given the significant 

changes in the closing procedures of the 

primary markets in recent decades, 

including considerable advances in 

trading systems and technology, the 

Exchange believes that the risks of any 

potential impact of Weekly and EOM 

options on the underlying cash markets 

are also de minimis. 

The Exchange proposes to make the 

Pilot Programs permanent as P.M.- 

settled index products have become a 

part of the Exchange’s product offerings, 

providing investors with greater trading 

opportunities and flexibility. As 

indicated by the significant growth in 

the size of the market for P.M.-settled 

options, such options have been, and 

continue to be, well-received and 

widely used by market participants. 

Therefore, the Exchange wishes to be 

able to have the authority to continue to 

provide investors with the ability to 

trade XSPPM, Weekly, and EOM 

options on a permanent basis. The 

Exchange believes that the permanent 

continuation of the Pilot Programs will 

serve to maintain the status quo by 

continuing to offer a product to which 

investors have become accustomed and 

have incorporated into their business 

models and day-to-day trading 

methodologies for nearly 14 years (and 

for nearly 5 years on the Exchange). As 

such, the Exchange also believes that 

ceasing to have the authority to offer 

XSPPM, Weekly, and EOM options may 

result in market disruption and investor 

confusion. The Exchange has not 

identified any significant impact on 

market quality nor any unique or 

prohibitive regulatory concerns as a 

result of the Pilot Programs, and, as 

such, the Exchange believes that the 

continuation of the Pilot Programs as a 

pilot, including the use of time and 

resources to compile and analyze 

interim and annual pilot reports and 

pilot data, is no longer necessary and 

that making the Pilot Programs 

permanent will allow the Exchange to 

otherwise allocate time and resources to 

other industry initiatives. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.46 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 47 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. 

In particular, the Exchange believes 

that the making the Pilot Programs 

permanent will allow the Exchange to 

be able to have the authority to continue 

to offer XSPPM, Weekly, and EOM 

options—products that have become a 

part of the Exchange’s offerings—on a 

continuous and permanent basis. Since 

their reintroduction beginning in 

2006,48 P.M.-settled options have been, 

and continue to be, well-received and 

widely used by market participants, 

providing investors with greater trading 

opportunities and flexibility. The 

Exchange believes that the permanent 

continuation of the Pilot Programs will 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest by continuing to offer a product 

to which investors have become 

accustomed and have incorporated into 

their business models and day-to-day 

trading strategies for nearly 14 years 

(including nearly 5 years on the 

Exchange). As indicated by the 

significant growth in the size of the 

market for P.M.-settled options, such 

options have been, and continue to be, 

well-received and widely used by 

market participants. Conversely, the 

Exchange believes ceasing to offer the 

Pilot Programs may result in market 

disruption and investor confusion, as 

P.M.-settled index products have 

become a part of the Exchange’s product 

offerings, providing investors with 

greater trading opportunities and 

flexibility. 

The Exchange further believes that 

making the Pilot Programs permanent 

will remove impediments to and perfect 

the mechanism of a free and open 

market and a national market system 

and protect investors, while maintaining 

a fair and orderly market, as the 

Exchange believes that previous 

concerns (arising in the 1980s) regarding 

options expirations potentially 

contributing to excess volatility and 

reversals around the close have been 

adequately diminished. As described in 

detail above, the Exchange has observed 

no significant adverse market impact or 

identified any meaningful regulatory 

concerns during the approximately 5- 

year operation of the Pilot Programs as 

pilots nor during the nearly years since 

P.M.-settled SPX options were 

reintroduced to the marketplace.49

Notably, the Exchange did not identify 

any significant economic impact 

(including on pricing or volatility or in 


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50See, e.g., Cboe Options Rule 4.13(e) and 

Interpretation and Policy .13. 

connection with reversals) on related 

futures, the underlying indexes, or the 

underlying component securities of the 

underlying indexes surrounding the 

close as a result of the quantity of 

XSPPM, Weekly, and EOM options that 

settle at the close or the amount of 

expiring open interest in XSPPM, 

Weekly, and EOM options, nor any 

demonstrated capacity for options 

hedging activity to impact volatility in 

the underlying markets. While the 

DERA staff study and corresponding 

Exchange study described above 

specifically evaluated SPX options, 

because XSPPM, Weekly, and EOM 

options may only overly broad-based 

index options, the Exchange believes it 

is appropriate to extrapolate the data to 

apply to the XSPPM, Weekly, and EOM 

options, as SPX options also overlay a 

broad-based index. Additionally, with 

respect to XSP options, XSP options 

overly the same index comprised of the 

same securities (just one tenth the size). 

This is particularly true given that the 

reports submitted by the Exchange 

during the pilot period have similarly 

demonstrated no significant economic 

impact on the respective underlying 

indexes or other products. 

The Exchange also believes the 

introduction of XSPPM, Weekly, and 

EOM options had no significant impact 

on the market quality of corresponding 

A.M.-settled options (which the 

Exchange does not list) or other options. 

The Exchange believes this as a result of 

its analysis conducted after the 

introduction of SPXW options with 

Tuesday and Thursday expirations, 

which demonstrated no statistically 

significant impact on the bid-ask or 

effective spreads of SPXW options with 

Monday, Wednesday, and Friday 

expirations after trading in the SPXW 

options with Tuesday and Thursday 

expirations began. While SPXW options 

are P.M.-settled and SPX options are 

A.M.-settled, they are otherwise nearly 

identical products. As noted above, 

XSPPM options are nearly identical to 

P.M.-settled and A.M.-settled SPX 

options, as they are based on an index 

comprised of the same securities, just 1/ 

10th the size. Additionally, Weekly, and 

EOM options may only overly broadbased indexes, including the Mini-SPX 

Index. Therefore, the Exchange believes 

analyzing the impact of new SPXW 

options on then-existing SPXW options 

permit the Exchange to extrapolate from 

this data that it is unlikely the 

introduction of any other XSPPM, 

Weekly, or EOM options significantly 

impacted the market quality of A.M.- 

settled options when the pilots began. 

Additionally, the significant changes 

in the closing procedures of the primary 

markets in recent decades, including 

considerable advances in trading 

systems and technology, has 

significantly minimized risks of any 

potential impact of XSPPM, Weekly, or 

EOM options on the underlying cash 

markets. As such, the Exchange believes 

that permanent Pilot Programs do not 

raise any unique or prohibitive 

regulatory concerns and that such 

trading has not, and will not, adversely 

impact fair and orderly markets on 

Expiration Fridays for the underlying 

indexes and their component securities. 

Further, as the Exchange has not 

identified any significant impact on 

market quality or any unique or 

prohibitive regulatory concerns as a 

result of offering XSPPM, Weekly, and 

EOM options, the Exchange believes 

that the continuation of the Pilot 

Programs as pilots, including the 

gathering, submission and review of the 

pilot reports and data, is no longer 

necessary and that making the Pilot 

Programs permanent will allow the 

Exchange to otherwise allocate time and 

resources to other industry initiatives. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe that making 

the Pilot Programs permanent will 

impose any unnecessary or 

inappropriate burden on intramarket 

competition because XSPPM, Weekly, 

and EOM options will continue to be 

available to all market participants who 

wish to participate in the markets for 

those options. The Exchange believes 

that the growth the market of P.M.- 

settled options products, including 

XSPPM, Weekly, and EOM options, has 

experienced since their reintroduction 

through pilot programs indicates strong, 

continued investor interest and demand, 

warranting a permanent Pilot Program. 

The Exchange believes that, for the 

period that XSPPM, Weekly, and EOM 

options have been in operation as pilot 

programs, they have provided investors 

with a desirable product with which to 

trade and wishes to permanently offer 

this product to investors. Furthermore, 

during the pilot period, the Exchange 

has not observed any significant adverse 

market effects nor identified any 

regulatory concerns as a result of the 

Pilot Programs, and, as such, the 

continuation of the Pilot Programs as 

pilots, including the gathering, 

submission and review of the pilot 

reports and data, is no longer necessary. 

Permanent Pilot Programs will allow the 

Exchange to otherwise allocate time and 

resources to other industry initiatives. 

The Exchange further does not believe 

that making the Pilot Programs 

permanent will impose any burden on 

intermarket competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act because other 

exchanges are free to and do offer 

competing products.50 To the extent that 

the permanent offering and continued 

trading of XSPPM, Weekly, and EOM 

options may make the Exchange a more 

attractive marketplace to market 

participants at other exchanges, such 

market participants may elect to become 

Exchange market participants. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received written comments on the 

proposed rule change. 

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– 

CboeEDGX–2023–083 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. 


ddrumheller on DSK120RN23PROD with NOTICES1
2702 Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices 

51 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Terms not defined herein are defined in the 

NSCC Rules, as applicable, available at http://

dtcc.com/∼/media/Files/Downloads/legal/rules/ 

nscc_rules.pdf. 

4See Securities Exchange Act Release No. 99022 

(Nov. 27, 2023), 88 FR 83993 (Dec. 1, 2023) (File 

No. SR–NSCC–2023–011) (‘‘Notice of Filing’’). 

5See Rule 4 (Clearing Fund) and Procedure XV 

(Clearing Fund Formula and Other Matters) of the 

Rules, supra note 3. 

6The Rules identify when NSCC may cease to act 

for a Member and the types of actions NSCC may 

take. For example, NSCC may suspend a firm’s 

membership with NSCC or prohibit or limit a 

Member’s access to NSCC’s services in the event 

that Member defaults on a financial or other 

obligation to NSCC. See Rule 46 (Restrictions on 

Access to Services) of the Rules, supra note 3. 

7See Rule 4 (Clearing Fund), supra note 3. 

8See Securities Exchange Act Release Nos. 90181 

(Oct. 14, 2020), 85 FR 66646 (Oct. 20, 2020) (File 

No. SR–NSCC–2020–016) and 90034 (Sep. 28, 

2020), 85 FR 62342 (Oct. 2, 2020) (File No. SR– 

NSCC–2020–804) (introduced the MLA Charge). 

9The volatility charge is designed to capture the 

market price risk associated with liquidating each 

Member’s portfolio at a 99th percentile level of 

confidence. See Notice of Filing, supra note 4, at 

83994. 

10See id. 

11NSCC excludes long positions in Family-Issued 

Securities, as defined in Rule 1 (Definitions) of the 

All submissions should refer to file 

number SR–CboeEDGX–2023–083. 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–CboeEDGX–2023–083 and should be 

submitted on or before February 6, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.51

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–00638 Filed 1–12–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99303; File No. SR–NSCC– 

2023–011] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Order Granting Approval 

of a Proposed Rule Change To Refine 

the Margin Liquidity Adjustment 

(‘‘MLA’’) Charge Calculation and the 

Description of the MLA Charge 

January 9, 2024. 

I. Introduction 

On November 17, 2023, National 

Securities Clearing Corporation 

(‘‘NSCC’’) 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

proposed rule change SR–NSCC–2023– 

011 (‘‘Proposed Rule Change’’) to 

modify NSCC’s Rules & Procedures 

(‘‘Rules’’) 3 to refine the Margin 

Liquidity Adjustment (‘‘MLA’’) charge 

calculation and the description of the 

MLA Charge, as described in greater 

detail below. The Proposed Rule Change 

was published for public comment in 

the Federal Register on December 1, 

2023.4 The Commission has received no 

comments on the Proposed Rule 

Change. For the reasons discussed 

below, the Commission is approving the 

Proposed Rule Change. 

II. Background 

A. Overview of NSCC’s Margin 

Methodology 

NSCC provides central counterparty 

(‘‘CCP’’) services, including clearing, 

settlement, risk management, and a 

guarantee of completion for virtually all 

broker-to-broker trades involving equity 

securities, corporate and municipal debt 

securities, and certain other securities. 

As a CCP, NSCC interposes itself as the 

buyer to every seller and seller to every 

buyer for the financial transactions it 

clears. As such, NSCC is exposed to the 

risk that one or more of its members 

may fail to make a payment or to deliver 

securities. 

A key tool that NSCC uses to manage 

its credit exposure to its members is 

determining and collecting an 

appropriate Required Fund Deposit (i.e., 

margin) for each member.5 The objective 

of a Member’s margin is to mitigate 

potential losses to NSCC associated with 

liquidating a Member’s portfolio in the 

event NSCC ceases to act for that 

Member (hereinafter referred to as a 

‘‘default’’).6 The aggregated amount of 

all members’ margin constitutes the 

NSCC Clearing Fund. NSCC would 

access its Clearing Fund should a 

defaulting Member’s own margin be 

insufficient to satisfy losses to NSCC 

caused by the liquidation of that 

Member’s portfolio.7 Each member’s 

margin consists of several components, 

each of which is designed to address 

specific risks faced by NSCC arising out 

of its members’ trading activity. 

B. NSCC’s MLA Charge 

The MLA Charge 8 is a margin 

component designed to address the 

market impact costs of liquidating a 

defaulted Member’s portfolio that may 

increase when that portfolio includes 

large Net Unsettled Positions in a 

particular group of securities with a 

similar risk profile or in a particular 

asset type (referred to as ‘‘asset 

groups’’), thereby causing those costs to 

be higher than the amount collected for 

the Member’s volatility charge.9 A 

portfolio with large Net Unsettled 

Positions in a particular group of 

securities with a similar risk profile or 

in a particular asset type may be more 

difficult to liquidate in the market in the 

event the Member defaults because a 

concentration in that group of securities 

or in an asset type could reduce the 

marketability of those large positions. 

Therefore, such portfolios create a risk 

that NSCC may face increased market 

impact cost to liquidate that portfolio in 

the assumed margin period of risk of 

three business days at market prices. 

The MLA Charge is calculated to 

address this increased market impact 

cost by determining an amount of 

margin to mitigate this risk. The MLA 

Charge is calculated for different asset 

groups. Essentially, the calculation is 

designed to compare the total market 

value of a Net Unsettled Position in a 

particular asset group, which NSCC 

would be required to liquidate in the 

event of a Member default, to the 

available trading volume of that asset 

group or equities subgroup in the 

market.10

Specifically, when calculating the 

MLA Charge, NSCC currently 

categorizes securities into separate asset 

groups that have similar risk profiles— 

(1) equities 11 (excluding equities 


ddrumheller on DSK120RN23PROD with NOTICES1