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###### Securities and Exchange Commission

          - [Release No. 34-95102; File No. SR-CBOE-2022-027]

                    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 June 3, 2022, Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I and II, below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act [3]                                          and Rule 19b-4(f)(6) thereunder.[4]                                          The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.                

## 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 Rule 5.4. The text of the proposed rule change is provided below.

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

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                    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 amend Rule 5.4(a) to change the minimum increment for all series of options on the Cboe Volatility Index (“VIX options”) (if the Exchange does not list VIX options on a group basis) and series of VIX options not listed under the Nonstandard Expirations Pilot Program (if the Exchange lists VIX options on a group basis) to $0.01 for series trading lower than $3.00 and $0.05 for series trading at $3.00 or higher. Currently, the Exchange lists VIX options on a group basis, so series of VIX options listed under the Nonstandard Expirations Pilot Program (“VIXW options”) currently trade with a minimum increment of $0.01 for all series trading prices. The proposed rule change will permit the other group of VIX option series (those not listed under the Nonstandard Expirations Pilot Program, which are comprised of VIX options series that expire on the third Friday of the month) to trade in smaller increments.[5] 

                    The Exchange believes market demand (including by retail investors, who generally prefer lower trading increments) supports a lower trading increment for these series. The Exchange expects this more granular pricing to lead to narrowing of the bid-ask spread for these options and increase the possible number of price points available to investors for these series. The Exchange believes tighter spreads will increase order flow in VIX options, which additional liquidity ultimately benefits all investors. Finer increments also permit more precise pricing in line with the theoretical value of these options. Additionally, penny pricing is available in weekly options on competitor products such as the iPath S&P 500 VIX Short-Term Futures exchange-traded note (“VXX”). As a result, the Exchange believes penny pricing for VIX options is necessary for competitive reasons to allow the Exchange to price these weekly options at the same level of granularity as permitted for competitor products.[6] 

                    The Exchange also notes that, while the Penny Interval Program relates to multiply listed classes only, VIX options would be eligible for that program, and thus for the same minimum trading increments as being proposed in this rule filing. Specifically, pursuant to the Penny Interval Program, option classes among the 300 most actively traded multiply listed option classes overlying securities priced below $200, or any index at any index level below $200, may be added to the Penny Interval Program each year.[7]                                          Currently, the class with the lowest cleared volume over the six-month period ending May 3, 2022 has a total volume of 988,078 contracts. During that same six-month period, VIX volume was 113,617,404 contracts, which would put it among the top five classes currently eligible for the Penny Interval Program. Additionally, the value of the VIX Index as of the close of regular trading hours on May 3, 2022, was under 30 (and thus well under 200). Therefore, VIX options have similar trading properties as other option classes that are otherwise eligible for penny and nickel pricing.                

                    Further, the Exchange notes that a majority of VIX options already execute in penny increments. Specifically, in the first four months of 2022, approximately 62% of VIX option contract volume executed as part of complex orders, which may execute in penny increments.[8]                                          In addition, during that same time period, nearly 5% of VIX option contract volume executed through an automated improvement mechanism (“AIM”) auction for simple orders, which also permits penny executions.[9]                                          Therefore, the proposed rule change will impact the trading increment of approximately one-third of VIX options.                

With regard to the impact of this proposed rule change on system capacity, the Exchange has analyzed its capacity and represents that it and the Options Price Reporting Authority have the necessary systems capacity to handle any potential additional traffic associated with this proposal. The Exchange does not believe any potential increased traffic will become unmanageable since this proposed rule change with respect to minimum trading increments is limited to a single class of options. The proposed rule change does not impact the number of expirations for VIX options the Exchange may list pursuant to Rule 4.13.

#### 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.                

                    In particular, the proposed rule change will permit more granular pricing in VIX options, which may lead to narrowing of the bid-ask spread for these options and increase the possible number of price points available to investors for these series, which ultimately increases liquidity to the                           ( print page 36901)                        benefit of all investors. Additionally, as discussed above, at least one competitive product participates in the Penny Interval Program and thus may currently trade in penny and nickel increments. Therefore, the proposed will and promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market by allowing VIX options to trade at the same level of granularity as permitted for competitor products.[13]                                          The Exchange notes that VIX options have a volume and an underlying index price consistent with option classes eligible for the Penny Interval Program (and thus are able to trade in penny and nickel increments). Additionally, as noted above, VIXW options and the majority of VIX options already execute in penny increments.                

### 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 proposed rule change will not impose any burden on intramarket competition that is not necessary or appropriate, because all Trading Permit Holders will be able to trade VIX options in the proposed minimum trading increments. Additionally, all VIXW options may currently trade in penny increments, and approximately two-thirds of VIX options volume execute in penny increments as part of simple AIM or complex trading. The proposed rule change will not impose any burden on intermarket competition that is not necessary or appropriate, because it will permit VIX options to have pricing consistent with the pricing of a competitive product that is part of the Penny Interval Program and may currently trade in increments of $0.01 or $0.05. The Exchange reiterates that VIX options have a volume and an underlying index price consistent with option classes eligible for the Penny Interval Program (and thus are able to trade in penny and nickel increments).

                    Additionally, the proposed rule change to permit VIX options to be listed in penny and nickel increments may relieve any burden on, or otherwise promote, competition, as it will allow market participants to trade these options at the same level of granularity as permitted for competitor products. The Exchange notes that other options that trade on the Exchange are currently permitted to trade in penny increments because competitive products are able to trade in penny increments.[14]                                          The Exchange also expects the more granular pricing to lead to narrowing of the bid-ask spread for these options, which the Exchange believes will increase order flow and price competition in VIX options.                

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

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

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

                    Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act [15]                                          and Rule 19b-4(f)(6) [16]                                          thereunder.                

                    A proposed rule change filed under Rule 19b-4(f)(6) [17]                                          normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii),[18]                                          the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the filing may become operative immediately upon filing. As discussed above, the proposal will permit pricing of VIX options in an increment at the same level of granularity as currently is permitted for at least one competitor product and other products with similar volumes and underlying prices that are eligible for the Penny Interval Program. The Commission finds that waiving the operative delay is consistent with the protection of investors and the public interest because it will allow the Exchange to make this pricing option available to investors without delay. Therefore, the Commission waives the 30-day operative delay and designates the proposed rule change as operative upon filing.[19] 

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.

## IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:

### Electronic Comments

    - Use the Commission's internet comment form ( http://www.sec.gov/​rules/​sro.shtml ); or                
    - Send an email to rule-comments@sec.gov . Please include File Number SR-CBOE-2022-027 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-2022-027. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (                    *http://www.sec.gov/​rules/​sro.shtml*). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the                           ( print page 36902)                        public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2022-027 and should be submitted on or before July 12, 2022.                

                        For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[20] 

J. Matthew DeLesDernier,

Assistant Secretary.

# Footnotes

1.                             15 U.S.C. 78s(b)(1).                    
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2.                             17 CFR 240.19b-4.                    
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3.                             15 U.S.C. 78s(b)(3)(A)(iii).                    
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4.                             17 CFR 240.19b-4(f)(6).                    
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5.                             As proposed, if the Exchange were to stop listing VIX series on a group basis, then the proposed increments of $0.01 for series trading below $3.00 and $0.05 for series trade at or above $3.00 would apply to all VIX options series.                    
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6.                             The Exchange notes that other options that trade on the Exchange are currently permitted to trade in penny increments because competitive products are able to trade in penny increments, including VIXW options.                         *See*                         Rule 5.4 (the minimum for XSP options is $0.01 because that is the minimum increment for SPY options, and the minimum increment for DJX options is $0.01 for series below $3 and $0.05 for series $3 and above because that is the minimum increment for DIA options).                    
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7.                                                     *See*                         Rule 5.4(d).                    
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8.                                                     *See*                         Rule 5.4(b).                    
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9.                                                     *See*                         Rule 5.37(a)(4).                    
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10.                             15 U.S.C. 78f(b).                    
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11.                             15 U.S.C. 78f(b)(5).                    
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12.                                                     *Id.*
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13.                             The Exchange notes that other options that trade on the Exchange are currently permitted to trade in penny increments because competitive products are able to trade in penny increments.                         *See*                         5.4 (the minimum for XSP options is $0.01 because that is the minimum increment for SPY options, and the minimum increment for DJX options is $0.01 for series below $3 and $0.05 for series $3 and above because that is the minimum increment for DIA options).                    
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14.                                                     *See*                         Rule 5.4(a) (the minimum for XSP options is $0.01 because that is the minimum increment for SPY options, and the minimum increment for DJX options is $0.01 for series below $3 and $0.05 for series $3 and above because that is the minimum increment for DIA options).                    
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15.                             15 U.S.C. 78s(b)(3)(A).                    
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16.                             17 CFR 240.19b-4(f)(6).                    
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17.                             17 CFR 240.19b-4(f)(6).                    
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18.                             17 CFR 240.19b-4(f)(6)(iii).                    
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19.                             For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation.                         *See*15 U.S.C. 78c(f).                    
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20.                                 17 CFR 200.30-3(a)(12).                        
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BILLING CODE 8011-01-P

BILLING CODE 8011-01-C

[FR Doc. 2022-13150 Filed 6-17-22; 8:45 am]