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[Federal Register Volume 89, Number 240 (Friday, December 13, 2024)]
[Notices]
[Pages 101083-101085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29335]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101850; File No. SR-CBOE-2024-053]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Rule 5.1

December 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 November 27, 2024, Cboe Exchange, Inc. (``Exchange'' or ``Cboe 
Options'') 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.
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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

    The Exchange proposes to amend Rule 5.1. The text of the proposed 
rule change is provided below.

(additions are italicized; deletions are [bracketed])
* * * * *

Rules of Cboe Exchange, Inc.

* * * * *

Rule 5.1. Trading Days and Hours

    (a) No change.
    (b) Regular Trading Hours.
    (1) No change.
    (2) Index Options. Except as otherwise set forth in the Rules or 
under unusual conditions as may be determined by the Exchange, 
Regular Trading Hours for transactions in index options are from 
9:30 a.m. to 4:15 p.m., except as follows:
    (A)-(B) No change.
    (C) On their last trading day, Regular Trading Hours for the 
following options are from 9:30 a.m. to 4:00 p.m.

Cboe S&P 500 a.m./PM Basis options
Index Options with Nonstandard Expirations (i.e., Weeklys and EOMs), 
Monthly Options Series, Quarterly Options Series, and Quarterly 
Expirations (i.e., QIXs)
SPX options (p.m.-settled)
XSP options (p.m.-settled)
MRUT options (p.m.-settled)
RUT options (p.m.-settled)
* * * * *
    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

[[Page 101084]]

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 amend Rule 5.1. Specifically, the Exchange 
proposes to amend Rule 5.1(b)(2)(C) to provide that on their last 
trading day, Regular Trading Hours \3\ for index Monthly Options Series 
\4\ and Quarterly Options Series \5\ will be from 9:30 a.m. to 4:00 
p.m. (Eastern time).\6\ Monthly Options Series expire at the close of 
business on the last business day of a calendar month, and Quarterly 
Options Series expire at the close of business on the last business day 
of a calendar month.\7\ Pursuant to Rule 4.13(a)(2)(C)(iii) and 
(a)(2)(B)(iii), Monthly Options Series and Quarterly Options Series, 
respectively, are p.m.-settled. Pursuant to Rule 5.1(b)(2), Regular 
Trading Hours for index options (with certain specified exceptions) are 
9:30 a.m. to 4:15 p.m. (Eastern time). Rule 5.1(b)(2)(C) currently 
provides that certain p.m.-settled index options will end trading at 
4:00 p.m. (Eastern time) on their last trading day, including index 
options with End-of-Month (``EOM'') or Quarterly (``QIX'') expirations. 
Like index Monthly Options Series, EOM series expire on the last 
trading of the month.\8\ Like index Quarterly Options Series, QIX 
series expire on the last trading of the quarter.\9\ The Exchange 
proposes for index Monthly Option Series and Quarterly Option Series to 
similarly end trading at 4:00 p.m. (Eastern time) (rather than 4:15 
p.m. if in a class for which Regular Trading Hours end at 4:15 p.m.) on 
their last trading day.
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    \3\ Rule 1.1 defines ``Regular Trading Hours'' as the trading 
session consisting of the regular trading hours which transactions 
in potions may be effected on the Exchange and are set forth in Rule 
5.1.
    \4\ See Rule 4.13(a)(2)(C).
    \5\ See Rule 4.13(a)(2)(B).
    \6\ This proposed rule change applies to index options that 
participate in the Monthly Options Series and Quarterly Options 
Series program.
    \7\ See Rule 4.13(a)(2)(B) and (C).
    \8\ See Rule 4.13(e)(2).
    \9\ See Rule 4.11 (definition of QIX).
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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.\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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    In particular, the Exchange believes the proposed rule change 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. The Exchange understands that index 
Monthly and Quarterly Options Series would typically be priced in the 
market based on corresponding futures values. If trading expiring index 
Monthly and Quarterly Options Series continued until 4:15 p.m. on their 
last trading day, these expiring index options could not be priced on 
corresponding futures values, but rather would have to be priced on the 
known cash value. At the same time, the prices of non-expiring index 
Monthly or Quarterly Options Series would continue to move and likely 
be priced in response to changes in corresponding futures prices. As a 
result, a potential pricing divergence could occur between 4:00 p.m. 
and 4:15 p.m. on the final trading day in expiring index Monthly and 
Quarterly Options Series (e.g., a switch from pricing off of futures to 
cash). The Exchange understands that the switch from pricing off of 
futures to cash can be a difficult and risky crossover for liquidity 
providers. As a result, if expiring P.M.-settled contracts closed at 
4:15 p.m., Market-Makers may react by widening spreads in order to 
compensate for the additional risk. In order to mitigate the potential 
for a pricing divergence at the end of the trading day, the Exchange 
believes that it is appropriate to cease trading in the expiring index 
Monthly and Quarterly Options Series (which are p.m.-settled) at 4:00 
p.m., as it already does for expiring EOM and QIX options (which are 
also p.m.-settled index options and also have the same corresponding 
expirations) for the same aforementioned reasons.\13\ Therefore, the 
proposed rule change will prevent continued trading on a product after 
the exercise settlement value has been fixed.
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    \13\ See Securities Exchange Act Release Nos. 59676 (April 1, 
2009), 74 FR 16018 (April 8, 2009) (SR-CBOE-2009-020); and 64243 
(April 7, 2011), 76 FR 20771 (April 13, 2011) (SR-CBOE-2011-038).
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    The Exchange does not believe that the proposed rule change will 
impact volatility on the underlying cash market comprising the 
underlying indexes at the close on expiration days, as it already 
closes trading on the last trading day for expiring P.M.-settled 
options at 4:00 p.m. (such as EOM and QIX series), which the Exchange 
does not believe has had an adverse impact on fair and orderly markets 
for the underlying stocks comprising the corresponding indexes.\14\
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    \14\ See current Rule 5.1(b)(2)(C).
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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 under the 
Act, because it will apply in the same manner to all expiring index 
Monthly Option Series and Quarterly Options Series. Additionally, 
trading in expiring index Monthly Option Series and Quarterly Options 
Series will be available to all market participants during the same 
trading hours. Further, the Exchange does not believe that the proposed 
rule change will impose any burden on intermarket competition that is 
not necessary or appropriate under the Act, because the proposed rule 
change harmonizes the trading hours on the last trading day for index 
options that expire at the end of a month or the end of a quarter. 
Other exchanges with similar options programs may amend their rules to 
provide for similar trading hours on the last trading day of expiring 
index monthly and quarterly options. The proposed rule change is not 
intended to be competitive, but rather to prevent continued trading on 
a product after the exercise settlement value has been fixed, thereby 
mitigating potential investor confusion and the potential for pricing 
divergence at the end of the trading day.

[[Page 101085]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    A. significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \15\ and 
Rule 19b-4(f)(6) \16\ thereunder. At any time within 60 days of the 
filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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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 [email protected]. Please include 
file number SR-CBOE-2024-053 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CBOE-2024-053. 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-2024-053 and should be 
submitted on or before January 3, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29335 Filed 12-12-24; 8:45 am]
BILLING CODE 8011-01-P
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