[Federal Register Volume 89, Number 210 (Wednesday, October 30, 2024)]
[Notices]
[Pages 86393-86398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25145]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101428; File No. SR-CBOE-2024-047]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Amend Its Rules Regarding the Types 
of Complex Orders Available for Flexible Exchange Options (``FLEX'') 
Trading at the Exchange

October 24, 2024.
    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 October 11, 2024, 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, 
II, and III, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the

[[Page 86394]]

proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Rules regarding the types of complex orders available for 
flexible exchange options (``FLEX'') trading at the Exchange. The text 
of the proposed rule change is provided in Exhibit 5.
    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
    The Exchange proposes to adopt rules to govern a new type of 
complex FLEX Order. Specifically, the Exchange proposes to amend Rules 
4.21 (Series of FLEX Options), 5.70 (Availability of Orders), 5.72 
(FLEX Trading), and 6.5 (Nullification and Adjustment of Options 
Transactions Including Obvious Errors).
    FLEX Options are customized equity or index option contracts that 
allow investors to tailor contract terms for exchange-listed equity and 
index options. The Exchange may make simple FLEX Orders and complex 
FLEX Orders (see Rule 5.70(b)), including security future-option orders 
and stock-option orders, available for FLEX trading. Currently, the 
legs of a complex FLEX Order are limited to FLEX Option series only. An 
investor wishing to trade a complex strategy containing both FLEX 
Option series and non-FLEX Option series must execute such strategy 
using two or more separate orders. The Exchange now proposes to amend 
its rules to allow for the legs of a complex FLEX Order to include a 
combination of FLEX Option series and non-FLEX Option series (``FLEX v. 
Non-FLEX Order'').
    The Exchange notes that, with exception of the rules proposed in 
this rule filing, FLEX v. Non-FLEX Orders will be subject to the same 
trading rules and procedures that currently govern the trading of other 
complex FLEX Orders on the Exchange. There are no changes in regards to 
complex FLEX Orders with FLEX Option legs only as a result of the 
proposed rule change. To permit the trading of FLEX v. Non-FLEX Orders, 
the Exchange proposes to amend its rules as follows.
    First, the Exchange proposes to amend Rule 5.70 (Availability of 
Orders) to add FLEX v. Non-FLEX Orders to the types of complex orders 
available for FLEX trading.\3\ Specifically, the Exchange proposes to 
amend Rule 5.70(b) to state that the legs of a complex FLEX Order may 
be for FLEX Option series only or a combination of FLEX Option series 
and non-FLEX Option series (``FLEX v. Non-FLEX Order'').\4\ As noted 
above, FLEX v. Non-FLEX Orders will be considered complex FLEX 
instruments, which will be subject to the same trading rules and 
procedures that govern the trading of other FLEX Orders on the Exchange 
(unless otherwise noted herein). The Exchange also proposes to amend 
Rule 5.70(b) to remove the requirement that each leg(s) of a complex 
FLEX Order must be for a FLEX Option series authorized for FLEX trading 
with the same underlying equity security or index and must have the 
same exercise style. The proposed change will allow for the trading of 
the proposed FLEX v. Non-FLEX Orders and will, in general, provide FLEX 
Traders with more flexibility and opportunities for customization via 
FLEX trading.
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    \3\ As part of the proposed rule change, the Exchange proposes 
to amend Rule 5.70(b) to add a cite to the definition of complex 
order in Rule 1.1; this is not a substantive change, but rather 
merely adds a cross-reference to the defined term for purposes of 
clarity. Per Rule 1.1, the term ``complex order'' means an order 
involving the concurrent execution of two or more different series 
in the same underlying security or index (the ``legs'' or 
``components'' of the complex order), for the same account, 
occurring at or near the same time and for the purpose of executing 
a particular investment strategy with no more than the applicable 
number of legs (which number the Exchange determines on a class-by-
class basis).
    \4\ Under the proposed rule change, complex FLEX Orders could 
include both listed instruments as well as FLEX instruments (if at 
least one leg is for a FLEX Option series), with an optional stock 
leg. Per the definition of complex order, the legs of all complex 
FLEX Orders (including FLEX v. Non-FLEX options) must have the same 
underlying security or index. See Rule 1.1 (definition of complex 
order).
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    The Exchange also proposes to add Rule 5.70(d), which states that, 
in classes determined by the Exchange, a nonconforming FLEX v. Non-FLEX 
Order is not eligible for electronic processing, in which case the 
nonconforming FLEX v. Non-FLEX Order may only be submitted for manual 
handling and open outcry trading. For reference, a ``nonconforming 
complex order'' is defined as a complex order with a ratio on the 
options legs less than one-to-three (.333) or greater than three-to-one 
(3.00).\5\ The proposed language is the same as language currently 
included in the definition of ``complex order'' in Rule 5.33(a), the 
intent of which is to permit the Exchange to determine in which classes 
nonconforming complex orders (including stock-option orders) may be 
submitted for electronic processing on the Exchange pursuant to Rule 
5.33.
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    \5\ See Rule 1.1.
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    The Exchange also proposes to add Rule 5.70(e), which states that 
the non-FLEX Option leg(s) of a FLEX v. Non-FLEX Order may not Leg into 
the Simple Book, to provide for more efficient execution and processing 
of FLEX v. Non-FLEX Orders. The series that would comprise a FLEX v. 
Non-FLEX Order are parts of different classes and thus are subject to 
different trading setting and parameters pursuant to the Rules. 
Currently, electronic trading is not possible ``across'' classes given 
these different settings. Non-FLEX classes also have separate market 
data inputs, as the System must read market data for each class in 
connection with potential executions in non-FLEX classes. If the System 
receives a FLEX v. Non-FLEX Order, it would need to trade the Non-FLEX 
leg against the appropriate leg in the book; however, there is no book 
with resting simple FLEX orders against which the FLEX leg could 
execute. If this were to occur, execution opportunities for FLEX v. 
Non-FLEX Orders may be prevented. As discussed below, the Non-FLEX legs 
of FLEX v. Non-FLEX Orders will protect Priority Customer orders in the 
simple book for the Non-FLEX classes.\6\
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    \6\ This proposed change is consistent with current Rules that 
do not permit legging of complex orders consisting of legs in 
different groups of series in a class, as the System handles groups 
of series as different classes. See Rule 5.33(g)(6).
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    The Exchange proposes to amend Rule 5.72 (FLEX Trading) to 
distinguish criteria for a complex order with only FLEX Option legs and 
to add criteria for FLEX and non-FLEX Option legs of a FLEX v. Non-FLEX 
Order. First, the

[[Page 86395]]

Exchange proposes to amend Rule 5.72(b)(2) to specify that each FLEX 
Option leg of the FLEX Option complex strategy must include all terms 
for a FLEX Option series set forth in Rule 4.21 (including that a non-
FLEX Option series with identical terms is not listed for trading), 
subject to the order entry requirements set forth in Rule 5.7.
    Additionally, the Exchange proposes changes to distinguish the 
criteria for a complex order with only FLEX Option leg(s) from that 
proposed for FLEX v. Non-FLEX Orders, noting that there are no changes 
to the criteria to those FLEX Orders containing only FLEX Option leg(s) 
as a result of the proposed rule change. The Exchange proposes to amend 
Rule 5.72(b)(2)(A) to specifically reference the pricing requirements 
for complex FLEX Orders with FLEX Option legs only. As proposed Rule 
5.72(b)(2)(A)(i) contains the requirements for a complex FLEX Order 
with only FLEX Option legs submitted into the System for an electronic 
FLEX Auction pursuant to Rule 5.72(c) or Rules 5.73 or 5.74, which must 
include a bid or offer price for each leg, which leg prices must add 
together to equal the net price. Proposed Rule 5.72(b)(2)(A)(ii) sets 
forth the requirements for a complex FLEX Order with only FLEX Option 
legs submitted into the System prior to representation in an open 
outcry FLEX Auction pursuant to Rule 5.72 (d), namely that the order 
may include a bid or offer price on one or more of the legs (subject to 
a FLEX Trader's responsibilities pursuant to Rule 5.91 and Chapter 9). 
The execution leg prices must be entered or modified, as necessary, via 
PAR following execution of the order, which prices must add together to 
equal the net execution price.
    The Exchange proposes to add Rule 5.72(b)(2)(B) containing certain 
requirements for a FLEX v. Non-FLEX Order. Under the proposed rule, a 
FLEX v. Non-FLEX Order submitted in the System for an electronic FLEX 
Auction pursuant to Rule 5.72(c) must include a bid or offer price for 
each FLEX Option leg but no bid or offer price for each non-FLEX Option 
leg, and a net price. By allowing the System the ability to adjust the 
price of the legs, FLEX Traders may achieve their desired net price for 
the order, while ensuring the non-FLEX Option legs fit within pricing 
requirements of the non-FLEX markets. A FLEX v. Non-FLEX Order 
submitted into the System prior to representation in an open outcry 
FLEX Auction pursuant to Rule 5.72(d) below [sic] may include a bid or 
offer price for any FLEX Option leg but no bid or offer price for each 
non-FLEX Option leg, and a net price. By allowing flexibility in open 
outcry trading, FLEX Traders may achieve their desired net price for 
the order.
    To achieve the desired net execution price for a FLEX v. Non-FLEX 
Order (1) the execution leg price of each non-FLEX Option leg may not 
be worse than the NBBO,\7\ worse than the BBO,\8\ or equal to the BBO 
if there is a Priority Customer order(s) on the Simple Book; and (2) 
the execution leg price of each FLEX Option leg(s) may be adjusted so 
that the prices of the FLEX Option legs combined with the prices of the 
non-FLEX Option legs add together to equal the net price. If a non-FLEX 
Option leg of a FLEX v. Non-FLEX Order cannot execute at a price 
permissible that meets the requirements set forth in proposed Rule 
5.72(b)(2)(B)(i), the entire FLEX v. Non-FLEX Order will be cancelled.
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    \7\ See Rule 1.1. The term ``NBBO'' means the national best bid 
or offer the Exchange calculates based on market information it 
receives from OPRA.
    \8\ See Rule 1.1. The term ``BBO'' means the best bid or offer 
disseminated on the Exchange.
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    The below examples are designed to illustrate the pricing of a FLEX 
v. Non-FLEX Order. Assume for each example a FLEX Trader wishes to 
execute a complex FLEX Order with two legs (one FLEX Option leg and one 
non-FLEX Option leg).
    Example 1: Listed (i.e., non-FLEX) legs are adjusted to their NBBO 
first, FLEX Option leg is then adjusted residually to meet net 
execution price.

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         Instrument ID                 Legs              Symbol              Side           Ratio        Expiration         Strike            Type
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CI0001........................  Leg 1............  XYZ..............  Buy..............            1  December........              10  Call.
                                Leg 2............  1XYZ.............  Sell.............            1  November........           10.01  Call.
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    FLEX Order Auction (``FOA''): Buy 10 CI0001 @1.25.

Leg 1 (Non-FLEX Option Leg) Price:
    N/A
Leg 1 Market: (Exchange Market-Maker) 2.20 x 2.30 (Exchange Market-
Maker)
Leg 2 (FLEX Option Leg) Price: 1.00
Response 1: Sell 5 @1.19
Response 2: Sell 5 @1.25

    FOA trades 5 with Response 1 at 1.19. The legs print at 2.20 and 
1.01.
    FOA trades 5 with Response 2 at 1.25. The legs print at 2.25 and 
1.00.
    Example 2: Listed (i.e., Non-FLEX) legs are adjusted up/down to 
their NBBO first, FLEX Option leg retains specified price, as no 
further adjustment is needed to meet net price.

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         Instrument ID                 Legs              Symbol              Side           Ratio        Expiration         Strike            Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
CI0001........................  Leg 1............  XYZ..............  Buy..............            1  December........              10  Call.
                                Leg 2............  1XYZ.............  Sell.............            1  November........           10.01  Call.
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    FOA: Buy 10 CI0001 @1.25.

Leg 1 (Non-FLEX Option Leg) Price:
    N/A
Leg 1 Market: (Exchange Market-Maker) 2.15 x 2.30 (Exchange Market-
Maker)
Leg 2 (FLEX Option Leg) Price: 1.00
Response 1: Sell 5 @1.19
Response 2: Sell 5 @1.25

    FOA trades 5 with Response 1 at 1.19. The legs print at 2.19 and 
1.00.
    FOA trades 5 with Response 2 at 1.25. The legs print at 2.25 and 
1.00.
    The Exchange proposes to amend Rule 4.21 (Series of FLEX 
Options).\9\ The Exchange proposes to add Rule 4.21(a)(4) to state that 
the Exchange may halt trading in a FLEX complex strategy (whether 
comprised of all FLEX Option legs or FLEX and non-FLEX Option legs) if 
any leg of the strategy is halted. The System does not accept a FLEX 
complex order for a series while trading in the class is halted. A FLEX 
complex strategy may not execute until all legs are no longer halted.
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    \9\ As part of the proposed changes, the Exchange proposes to 
add a ``FLEX Option series'' as a defined term in Rule 4.21(a). 
Further, to enhance comprehension, the Exchange proposes to amend 
Rule 4.21(a)(2) to add a missing word (``be''), as well as clarify 
that a FLEX Order for a new FLEX Option series may be submitted on 
any trading day prior to the expiration date. Such changes are non-
substantive, clarifying changes.

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[[Page 86396]]

    Finally, the Exchange proposes to amend Rule 6.5 (Nullification and 
Adjustment of Option Transactions Including Obvious Errors), 
Interpretation and Policy .07. Specifically, the Exchange proposes to 
add Rule 6.5, Interpretation and Policy. 07(d), to state that if a non-
FLEX Option leg of a FLEX v. Non-FLEX Order qualifies as an Obvious 
Error under Rule 6.5(c)(1) or a Catastrophic Error under Rule 
6.5(d)(1), then the non-FLEX Option leg that is an Obvious or 
Catastrophic Error will be adjusted in accordance with Rules 
6.5(c)(4)(A) or (d)(3), respectively, regardless of whether one of the 
parties is a Customer. However, the non-FLEX Option leg of any Customer 
order subject to proposed Rule 6.5, Interpretation and Policy. 07(d) 
will be nullified if the adjustment would result in an execution price 
higher (for buy transactions) or lower (for sell transactions) than the 
Customer's net execution price of the non-FLEX Option leg. If any leg 
of a FLEX v. Non-FLEX Order is nullified, the entire transaction is 
nullified. This is consistent with the Exchange's handling of other 
complex orders, including stock-option orders, and ensures protections 
in the event of an Obvious or Catastrophic error.
    The Exchange believes that its existing surveillance and reporting 
safeguards in place are adequate to deter and detect possible 
manipulative behavior which might arise from trading FLEX v. Non-FLEX 
Orders and will support the protection of investors and the public 
interest. The Exchange also represents that it has the necessary system 
capacity to support the new complex FLEX Order type. Finally, the 
Exchange does not believe that any market disruptions will be 
encountered with the introduction of this complex FLEX Order type.
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 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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    Specifically, the Exchange believes the proposed rule change will 
benefit investors by expanding investors' choices and flexibility with 
respect to the trading of FLEX Options. The Exchange believes that 
introducing FLEX v. Non-FLEX Orders will increase order flow to the 
Exchange, increase the variety of options products available for 
trading, and provide a valuable tool for investors to manage risk.
    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market as 
FLEX v. Non-FLEX Orders would enable market participants to execute a 
complex strategy including a combination of FLEX Option series and non-
FLEX Option series, which would, in turn, provide greater opportunities 
for market participants to manage risk through the use of a complex 
FLEX Order to the benefit of investors and the public interest. The 
proposed rule change will benefit TPHs by providing a more efficient 
mechanism for TPHs to provide and seek liquidity for customized or 
complex FLEX strategies which include a non-FLEX Option leg(s).
    Further, trading FLEX Options, including FLEX v. Non-FLEX Orders, 
on an exchange is an alternative to trading customized options in OTC 
markets and carries with it the advantages of exchange markets such as 
transparency, parameters and procedures for clearance and settlement, 
and a centralized counterparty clearing agency. Therefore, the Exchange 
believes the proposed rule change will promote these same benefits for 
the market as a whole by providing an additional venue for market 
participants to seek liquidity for customized, large-sized, or complex 
FLEX option orders, including those with a non-FLEX Option leg(s). The 
Exchange believes that providing an additional venue for these FLEX 
orders, rather than potentially splitting the orders across OTC and 
exchange markets, will benefit investors by increasing competition for 
order flow and executions, and thereby potentially result in more 
competitive pricing related to FLEX Options.
    The Exchange believes that the proposed changes to Rule 5.70(b), to 
add FLEX v. Non-FLEX Orders to the list of complex orders available for 
FLEX trading, are consistent with the Act and remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system because the changes will allow investors to trade in a more 
efficient manner, allowing investors to better customize their trading 
strategies and implement more precise trading strategies which are not 
available under current rules. Currently, a market participant is 
unable to trade a FLEX Option and a listed option as part of the same 
complex strategy; such user must submit an order containing the FLEX 
Option(s) and an order containing the listed option. This may introduce 
additional complexities such as price and legging risk, which would be 
eliminated under the proposed rule change. These complexities may 
unnecessarily limit market participants' ability to trade in an 
exchange environment that offers the added benefits of transparency, 
price discovery, liquidity, and financial stability. These investors 
may have improved capability under the proposed rule change to execute 
strategies to meet their specific investment objectives by using a 
single order with customized FLEX Option legs with non-FLEX Option 
legs.
    Similarly, the Exchange also believes the proposed changes to Rule 
5.70(b), to remove the requirements that each leg of a complex FLEX 
Order must be for a FLEX Option series authorized for FLEX trading with 
the same underlying equity security or index and have the same exercise 
style, will remove impediments to and perfect the mechanism of a free 
and open market and benefit investors, because it will provide TPHs 
with additional flexibility and precision in their investment 
strategies, by allowing TPHs to trade complex strategies that would 
otherwise be required to split into multiple, separate orders.
    The proposed change to Rule 5.70(b) to add a cite to Rule 1.1 for 
the definition of complex orders provides further clarity within the 
Rules, to the benefit of investors.
    The Exchange believes the proposed changes to Rule 4.21(a), which 
address when the Exchange may halt trading in a FLEX complex strategy 
(whether comprised of all FLEX Option legs or FLEX and non-FLEX Option 
legs), are consistent with the Act and promotes the public interest and 
the protection of investors by clarifying the Exchange's

[[Page 86397]]

authority with respect to FLEX complex strategies comprised of all FLEX 
Option legs and providing a consistent and transparent procedure with 
respect to FLEX complex strategies comprised of FLEX and non-FLEX 
Option legs, that would be applied by the Exchange, similar to trading 
halt authority under current rules.\13\ Further, the proposed change to 
add the defined term ``FLEX Option series'' provides further clarity 
within the Rules and eliminates potential confusion by providing a 
definition of ``FLEX Option series'' to the benefit of investors.
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    \13\ See, e.g., Rule 4.21(a)(3).
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    The Exchange believes the proposed changes to Rule 5.72(b)(2)(A), 
which provide clarity with respect to the criteria required for complex 
FLEX Orders with FLEX Option legs only, helps [sic] will help promote a 
fair and orderly national options market system. As noted above, there 
are no changes in regards to complex FLEX Orders with FLEX Option legs 
only as a result of the proposed rule changes. As such, the changes 
proposed under Rule 5.72(b)(2)(A), to separate out the requirements for 
complex FLEX Orders with FLEX Option legs only, provide clarity 
regarding the requirements for complex FLEX Orders with FLEX Option 
legs only, as compared to the proposed requirements for complex FLEX 
Orders with FLEX and non-FLEX Option legs.
    Additionally, the Exchange believes the proposed rule change to add 
Rule 5.70(d) will 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, because it will provide 
market participants with the same flexibility with respect to all their 
complex trading strategies. The proposed rule change eliminates 
confusion regarding what types of FLEX v. Non-FLEX Orders are 
permissible for electronic processing. As noted above, the proposed 
rule changes regarding execution of nonconforming FLEX v. Non-FLEX 
Orders are consistent with the Exchange's previously adopted rules 
regarding execution of other nonconforming complex orders.
    The Exchange believes the proposed pricing requirements for FLEX v. 
Non-FLEX Orders, set forth in proposed Rule 5.72(b)(2)(B), would remove 
impediments to and perfect the mechanism of a free and open market, as 
the proposed trading process for FLEX v. Non-FLEX Orders will provide 
the ability for investors to achieve the desired net package price for 
those orders while protecting customers with resting interest in the 
non-FLEX Simple Book. By requiring a FLEX v. Non-FLEX Order submitted 
into a FLEX Auction (whether electronically or in open outcry) to 
include a bid or offer price for each FLEX Option leg, but no bid or 
offer for each non-FLEX Option leg, and a net price, the requirements 
ensure that the non-FLEX Option leg will be subject to the same pricing 
requirements as they would if not part of a FLEX v. Non-FLEX Order. 
Specifically, the price of any non-FLEX Option leg that is part of a 
FLEX v. Non-FLEX Order may not be outside of the BBO or NBBO. The 
Exchange's proposal will continue to protect Priority Customer interest 
on the Exchange, as the non-FLEX Option legs of a FLEX v. Non-FLEX 
Order will always trade at a price better than BBO if there is a 
customer on a leg.
    The Exchange believes this proposed trading process will ensure 
user who chooses to submit a listed (i.e., Non-FLEX) leg as part of a 
FLEX v. Non-FLEX Order is subject to the same pricing requirements as 
they would be if the listed leg was not submitted with FLEX Option legs 
for execution. Ultimately, FLEX v. Non-FLEX Orders will trade in the 
same manner as FLEX complex orders do today, and execution of the non-
FLEX Option legs of these orders will continue to comply with linkage 
requirements (by not permitting trade-throughs of the NBBO) and protect 
resting customer interest in the Simple Book. Further, the Exchange 
believes that the proposal to not permit the non-FLEX Option legs of a 
FLEX v. Non-FLEX Order to leg into the Simple Book is consistent with 
the Act and promotes the public interest and the protection of 
investors, because it will provide for more efficient execution and 
processing of FLEX v. Non-FLEX Orders, as legging would prevent 
execution opportunities for these orders (as discussed above).
    Finally, the Exchange believes that the proposed rule change is 
designed to not permit unfair discrimination among market participants 
as all TPHs may, but are not required to, trade FLEX v. Non-FLEX 
Orders.

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 the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as all TPHs that are registered 
as FLEX Traders in accordance with the Exchange's Rules will be able to 
trade FLEX v. Non-FLEX Orders in the same manner.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as the proposal 
is designed to increase competition for order flow on the Exchange in a 
manner that is beneficial to investors because it is designed to 
provide investors seeking to execute both a FLEX Option(s) and a listed 
option(s) with a more effective method of executing the trades, which 
may result in trade efficiencies (i.e., pricing or reporting 
efficiencies) and reduced risk (i.e., pricing and legging risk). The 
Exchange believes the proposed rule change will encourage competition, 
as it may broaden the base of investors that use FLEX Options to manage 
their trading and investment risk, including investors that currently 
trade in the OTC market for customized options. The Exchange believes 
the proposed rule change may increase competition as it may lead to the 
migration of options currently trading in the OTC market to trading on 
the Exchange. Also, any migration to the Exchange from the OTC market 
would result in increased market transparency and thus increased price 
competition.
    The Exchange further notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues who offer similar functionality. All TPHs may, but are 
not required to, trade FLEX v. Non-FLEX Orders at the Exchange.

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

    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

[[Page 86398]]

    (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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#88fafde4eda5ebe7e5e5ede6fcfbc8fbedeba6efe7fe"><span class="__cf_email__" data-cfemail="344641585119575b5959515a4047744751571a535b42">[email protected]</span></a>. Please include 
file number SR-CBOE-2024-047 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-2024-047. 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 (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-CBOE-2024-047 and should be 
submitted on or before November 20, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25145 Filed 10-29-24; 8:45 am]
BILLING CODE 8011-01-P


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