Document ID: SEC-2019-0364-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-04-01T04:00Z

[Federal Register Volume 84, Number 62 (Monday, April 1, 2019)]
[Notices]
[Pages 12308-12310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06177]

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SECURITIES AND EXCHANGE COMMISSION

Release No. 34-85419; File No. SR-CBOE-2019-016]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Cboe Options Rule 6.2

March 26, 2019.
    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 March 14, 2019, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend Cboe Options Rule 6.2. 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 update Interpretation and Policy .06 of 
Rule 6.2 (Hybrid Opening (and Sometimes Closing) System (``HOSS'')). By 
way of background, Interpretation and Policy .06(a) of Rule 6.2 
provides that on the last business day of each month, the

[[Page 12309]]

Exchange will conduct special end-of-month non-trading rotations for 
each series of SPX options in order to determine the theoretical ``fair 
value'' of such series as of [sic] SPX as of the time of close of 
trading in the underlying cash market.\5\ Rule 6.2(.06)(a) also 
provides during such special non-trading closing rotation (``closing 
rotation''), a Lead Market-Maker (``LMM'') in the SPX options 
designated by the Exchange in each series of SPX options will provide 
bid and offer quotations. The Exchange notes that in connection with 
recently retiring the Hybrid 3.0 platform and transitioning trading of 
SPX options onto the Hybrid trading platform, the Exchange determined 
to no longer appoint LMMs in SPX.\6\ In lieu of LMMs, the Exchange 
established a financial incentive program for SPX Select Market-Makers 
(``SMMs''), which provides that any appointed SPX SMM will receive a 
monthly waiver of the cost of one Market-Maker Trading Permit and one 
SPX Tier Appointment provided that the SMM satisfies the standard set 
forth in Footnote 49 of the Exchange's Fees Schedule. While SMMs must 
still comply with continuous quoting obligations of Market-Makers, they 
are not otherwise obligated from a regulatory standpoint to satisfy any 
heightened quoting standard or meet additional obligations. Rather, SPX 
SMMs only receive a financial benefit (i.e., waiver of fees otherwise 
assessed for one Market-Maker Trading Permit and one SPX Tier 
Appointment) if they satisfy the standard set forth in Footnote 49. 
Accordingly, the Exchange proposes to add references to SMMs in Rule 
6.2(.06)(a).
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    \5\ See Cboe Options Rule 6.2, Interpretation and Policy .06.(a) 
[sic]
    \6\ See Securities and Exchange Act Release No. 83089 (April 23, 
2018), 83 FR 18605 (April 27, 2018) (SR-CBOE-2018-029).
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    Additionally, the Exchange proposes to clarify that SMMs (and LMMs) 
\7\ ``may'', and not ``must'', participate in the closing rotation. 
Indeed, the Exchange notes that it recently submitted a rule change to 
amend the Fees Schedule to no longer require SMMs to meet the fourth 
prong of the standard set forth in Footnote 49 which provided that a 
designated SMM must provide quotes for the closing rotation on a 
rotating basis in order for SMMs to satisfy the fourth prong.\8\ In its 
place, the Exchange now requires that within 30 minutes from the 
initiation of the closing rotation, the Exchange must disseminate end-
of-month closing quotations pursuant to Cboe Options Rule 6.2(.06)(a). 
The Exchange proposed the amendment to encourage all SMMs to provide 
end-of-month non-trading settlement pricing quotations in SPX and SPXW, 
which would increase the probability that the Exchange would be able to 
disseminate fair value quotes pursuant to Rule 6.2(.06)(a).\9\ The 
Exchange believes the proposed changes to Rule 6.2(.06)(a) will make 
the rule text consistent with the current standard set forth in 
Footnote 49 of the Fees Schedule. The Exchange lastly notes that 
although it currently does not appoint LMMs in SPX, it proposes to 
leave references to LMMs in Rule 6.2(.06)(a) in the event it determines 
to appoint LMMs in the future.
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    \7\ As noted above, as there are no LMMs currently appointed in 
SPX during Regular Trading Hours, there is no requirement for LMMs 
to participate in the closing rotation. To the extent the Exchange 
determines to appoint LMMs in the future, it notes that LMMs would 
no longer be obligated to participate in the closing rotation.
    \8\ See Securities and Exchange Act Release No. 85018 (January 
31, 2019), 84 FR 1810 (February 5, 2019) (SR-CBOE-2018-075).
    \9\ Id.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\10\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes updating Rule 6.2(.06)(a) with respect to 
references to SMMs and eliminating the language which provides the 
Exchange will designate a particular LMM each month, alleviates 
potential confusion as it more accurately describes the Exchange's 
current end-of-month fair value closing rotation procedures. The 
proposed changes also make Rule 6.2(.06)(a) consistent with Footnote 49 
of the Fees Schedule, which as described above, governs the financial 
incentive program relating to SMMs. The alleviation of potential 
confusion removes impediments to and perfects the mechanism of a free 
and open market and a national market system, and, in general, protects 
investors and the public interest.

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

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition that are 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 because it merely updates 
outdated rule text and applies to all SPX SMMs (and potential LMMs). 
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 because SPX 
options are proprietary products that will only be traded on Cboe 
Options. To the extent that the proposed changes make Cboe Options a 
more attractive marketplace for market participants at other exchanges, 
such market participants are welcome to become Cboe Options 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 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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the

[[Page 12310]]

Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2019-016 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-2019-016. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CBOE-2019-016, and should be submitted 
on or before April 16, 2019.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06177 Filed 3-29-19; 8:45 am]
BILLING CODE 8011-01-P