Document ID: SEC-2023-0841-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2023-08-08T04:00Z

[Federal Register Volume 88, Number 151 (Tuesday, August 8, 2023)]
[Notices]
[Pages 53548-53555]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16885]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98044; File No. SR-CBOE-2023-036]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Allow 
Certain Flexible Exchange Equity Options To Be Cash Settled

August 2, 2023.
    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 August 1, 2023, Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rules 4.21 and 8.35 related to 
Flexible Exchange (``FLEX'') Options. The text of the proposed rule 
change is 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 Rules 4.21 and 8.35 related to FLEX 
Options. FLEX Options are customized equity or index contracts that 
allow investors to tailor contract terms for exchange-listed equity and 
index options. The Exchange proposes to amend Rule 4.21 to allow for 
cash settlement of certain FLEX Equity Options.\3\ Generally, FLEX 
Equity Options are settled by physical delivery of the underlying 
security,\4\ while all FLEX Index Options are currently settled by 
delivery in cash.\5\ As proposed, FLEX Equity Options where the 
underlying security is an Exchange-Traded Fund (``ETF'') would be 
permitted to be settled by delivery in cash if the underlying security 
meets prescribed criteria. The Exchange notes that cash-settled FLEX 
ETF Options will be subject to the same trading rules and procedures 
that currently govern the trading of other FLEX Options on the 
Exchange, with the exception of the rules to accommodate the cash-
settlement feature proposed in this rule filing.
---------------------------------------------------------------------------

    \3\ A ``FLEX Equity Option'' is an option on a specified 
underlying equity security. See Cboe Options Rule 1.1.
    \4\ See Rule 4.21(b)(5)(A)(i).
    \5\ See Rule 4.21(b)(5)(B). As discussed below, cash settlement 
is also permitted in the over-the-counter (``OTC'') market.
---------------------------------------------------------------------------

    To permit cash settlement of certain FLEX ETF Options, the Exchange 
proposes new subparagraph (ii) to Rule 4.21(b)(5)(A). Proposed Rule 
4.21(b)(5)(A)(ii) would provide that the exercise settlement for a FLEX 
ETF Option may be by physical delivery of the underlying ETF or by 
delivery in cash if the underlying security, measured over the prior 
six-month period, has an average daily notional value of $500 million 
or more and a national average daily volume (``ADV'') of at least 
4,680,000 shares.\6\
---------------------------------------------------------------------------

    \6\ See proposed Rule 4.21(b)(5)(A)(ii). The Exchange also 
proposes a corresponding nonsubstantive amendment to Rule 
4.21(b)(5)(A)(i) and a nonsubstantive amendment to Rule 4.21 to 
renumber current Rule 4.21(b)(5)(A)(ii) as new Rule 
4.21(b)(5)(A)(iii).
---------------------------------------------------------------------------

    The Exchange also proposes in the introductory paragraph of Rule 
4.21(b) that a FLEX Equity Option overlying an ETF (cash- or physically 
settled) may not be the same type (put or call) and may not have the 
same exercise style, expiration date, and exercise price as a non-FLEX 
Equity Option overlying the same ETF.\7\ In other words, regardless of 
whether a FLEX Equity Option overlying an ETF is cash- or physically 
settled, at least one of the exercise style (i.e., American-style or 
European-style), expiration date, and exercise price of that FLEX 
Option must differ from those terms of a non-FLEX Option overlying the 
same ETF in order to list such a FLEX Equity Option. For example, 
suppose a non-FLEX SPY option (which is physically settled, p.m.-
settled and American-style) with a September expiration and exercise 
price of 475 is listed for trading. A FLEX Trader could not submit an 
order to trade a FLEX SPY option (which is p.m.-settled) that is cash-
settled (or physically settled) and American-style with a September 
expiration and exercise price of 475.
---------------------------------------------------------------------------

    \7\ All non-FLEX Equity Options (including on ETFs) are 
physically settled. Note all FLEX and non-FLEX Equity Options 
(including ETFs) are p.m.-settled.
---------------------------------------------------------------------------

    In addition, the Exchange proposes new subparagraph (a) to Rule 
4.21(b)(5)(A)(ii), which would provide that the Exchange will determine 
bi-annually the underlying ETFs that satisfy the notional value and 
trading volume requirements in proposed Rule 4.21(b)(5)(A)(ii) by using 
trading statistics for the previous six-months.\8\ The proposed rule 
would further provide that the Exchange will permit cash settlement as 
a contract term on no

[[Page 53549]]

more than 50 underlying ETFs that meet the criteria in Rule 
4.21(b)(5)(A)(ii), and that if more than 50 underlying ETFs satisfy the 
notional value and trading volume requirements, then the Exchange would 
select the top 50 ETFs that have the highest average daily volume.\9\
---------------------------------------------------------------------------

    \8\ See proposed Rule 4.21(b)(5)(A)(ii)(a). The Exchange will 
announce the implementation date of the proposed rule change via 
Exchange Notice. The Exchange plans to conduct the bi-annual review 
on January 1 and July 1 of each year. The results of the bi-annual 
review will be announced via Exchange Notice and any new securities 
that qualify would be permitted to have cash settlement as a 
contract term beginning on February 1 and August 1 of each year. If 
the Exchange initially begins listing cash-settled FLEX Options on a 
different date (e.g., September 1), it would initially list 
securities that qualified as of the last bi-annual review (e.g., the 
one conducted on July 1).
    \9\ See proposed Rule 4.21(b)(5)(A)(ii)(a).
---------------------------------------------------------------------------

    Proposed new subparagraph (b) to Rule 4.21(b)(5)(A)(ii) would 
further provide that if the Exchange determines pursuant to the bi-
annual review that an underlying ETF ceases to satisfy the requirements 
under Rule 4.21(b)(5)(A)(ii), any new position overlying such ETF 
entered into will be required to have exercise settlement by physical 
delivery, and any open cash-settled FLEX ETF Option positions may be 
traded only to close the position.\10\
---------------------------------------------------------------------------

    \10\ See proposed Rule 4.21(b)(5)(A)(ii)(b). A TPH that is 
acting as a Market Maker may enter into an opening transaction in 
order to accommodate closing transactions of other market 
participants in option series that are restricted to closing-only 
transactions. See Cboe Options Rule 4.4; see also Cboe Options Rule 
8.46 (which authorizes the Exchange to impose, from time to time in 
its discretion, such restrictions on Exchange option transactions or 
the exercise of option contracts in one or more series of options of 
any class dealt on the Exchange as it deems advisable in the 
interests of maintaining a fair and orderly market). Consistent with 
a Market Maker's duty to maintain fair and orderly markets under 
Rule 5.51, the Exchange will provide guidance to reflect that a TPH 
acting as a Market Maker in cash-settled FLEX ETF Options can enter 
into an opening transaction to facilitate closing only transactions 
of another market participant in cash-settled FLEX ETF Option series 
that are restricted to closing-only transactions.
---------------------------------------------------------------------------

    The Exchange believes it is appropriate to introduce cash 
settlement as an alternative contract term to the select group of ETFs 
because they are among the most highly liquid and actively traded 
securities. As described more fully below, the Exchange believes that 
the deep liquidity and robust trading activity in the ETFs identified 
by the Exchange as meeting the criteria mitigate against historic 
concerns regarding susceptibility to manipulation.
Characteristics of ETFs
    ETFs are funds that have their value derived from assets owned. The 
net asset value (``NAV'') of an ETF is a daily calculation that is 
based off the most recent closing prices of the assets in the fund and 
an actual accounting of the total cash in the fund at the time of 
calculation. The NAV of an ETF is calculated by taking the sum of the 
assets in the fund, including any securities and cash, subtracting out 
any liabilities, and dividing that by the number of shares outstanding.
    Additionally, each ETF is subject to a creation and redemption 
mechanism to ensure the price of the ETF does not fluctuate too far 
away from its NAV, which mechanisms reduce the potential for 
manipulative activity. Each business day, ETFs are required to make 
publicly available a portfolio composition file that describes the 
makeup of their creation and redemption ``baskets'' (i.e., a specific 
list of names and quantities of securities or other assets designed to 
track the performance of the portfolio as a whole). ETF shares are 
created when an Authorized Participant, typically a market maker or 
other large institutional investor, deposits the daily creation basket 
or cash with the ETF issuer. In return for the creation basket or cash 
(or both), the ETF issues to the Authorized Participant a ``creation 
unit'' that consists of a specified number of ETF shares. For instance, 
IWM is designed to track the performance of the Russell 2000 Index. An 
Authorized Participant will purchase all the Russell 2000 constituent 
securities in the exact same weight as the index prescribes, then 
deliver those shares to the ETF issuer. In exchange, the ETF issuer 
gives the Authorized Participant a block of equally valued ETF shares, 
on a one-for-one fair value basis. This process can also work in 
reverse. A redemption is achieved when the Authorized Participant 
accumulates a sufficient number of shares of the ETF to constitute a 
creation unit and then exchanges these ETF shares with the ETF issuer, 
thereby decreasing the supply of ETF shares in the market.
    The principal, and perhaps most important, feature of ETFs is their 
reliance on an ``arbitrage function'' performed by market participants 
that influences the supply and demand of ETF shares and, thus, trading 
prices relative to NAV. As noted above, new ETF shares can be created 
and existing shares redeemed based on investor demand; thus, ETF supply 
is open-ended. This arbitrage function helps to keep an ETF's price in 
line with the value of its underlying portfolio, i.e., it minimizes 
deviation from NAV. Generally, in the Exchange's view, the higher the 
liquidity and trading volume of an ETF, the more likely the price of 
the ETF will not deviate from the value of its underlying portfolio, 
making such ETFs less susceptible to price manipulation.
Trading Data for the ETFs Proposed for Cash Settlement
    The Exchange believes that average daily notional value is an 
appropriate proxy for selecting underlying securities that are not 
readily susceptible to manipulation for purposes of establishing a 
settlement price. Average daily notional value considers both the 
trading activity and the price of an underlying security. As a general 
matter, the more expensive an underlying security's price, the less 
cost-effective manipulation could become. Further, manipulation of the 
price of a security encounters greater difficulty the more volume that 
is traded. To calculate average daily notional value (provided in the 
table below), the Exchange summed the notional value of each trade for 
each symbol (i.e., the number of shares times the price for each 
execution in the security) and divided that total by the number of 
trading days in the six-month period (from January 1, 2023 through June 
30, 2023) reviewed by the Exchange.
    Further, the Exchange proposes that qualifying ETFs also meet an 
ADV standard. The purpose for this second criteria is to prevent 
unusually expensive underlying securities from qualifying under the 
average daily notional value standard while not being one of the most 
actively traded securities. The Exchange believes an ADV requirement of 
4,680,000 shares a day is appropriate because it represents average 
trading in the underlying ETF of 200 shares per second. While no 
security is immune from all manipulation, the Exchange believes that 
the combination of average daily notional value and ADV as prerequisite 
requirements would limit cash settlement of FLEX ETF Options to those 
underlying ETFs that would be less susceptible to manipulation in order 
to establish a settlement price.
    The Exchange believes that the proposed objective criteria would 
ensure that only the most robustly traded and deeply liquid ETFs would 
qualify to have cash settlement as a contract term. As provided in the 
table below, as of June 30, 2023, the Exchange would be able to provide 
cash settlement as a contract term for FLEX ETF Options on 39 
underlying ETFs, as only this group of securities would currently meet 
the requirement of 500 Million or more average daily notional value and 
a minimum ADV of 4,680,000 shares. The table below provides the list of 
the 39 ETFs that, as of June 30, 2023, would be eligible to have cash 
settlement as a contract term.

[[Page 53550]]

----------------------------------------------------------------------------------------------------------------
                                                                              Average daily      Average daily
                                                                              notional value       volume (in
                 Symbol                             Security name           (in dollars) (1/1/ shares) (1/1/23-6/
                                                                               23-6/30/23)           30/23)
----------------------------------------------------------------------------------------------------------------
AGG.....................................  ISHARES TR CORE US AGGBD ET.....       $703,126,857          7,116,525
ARKK....................................  ARK ETF TR INNOVATION ETF.......        858,537,852         22,026,750
BIL.....................................  SPDR SER TR BLOOMBERG 1-3 MO....        691,090,219          7,543,846
EEM.....................................  ISHARES TR MSCI EMG MKT ETF.....      1,284,326,169         32,458,368
EFA.....................................  ISHARES TR MSCI EAFE ETF........      1,308,724,046         18,457,234
EMB.....................................  ISHARES TR JPMORGAN USD EMG.....        559,160,916          6,510,071
EWZ.....................................  ISHARES INC MSCI BRAZIL ETF.....        756,467,915         26,179,000
FXI.....................................  ISHARES TR CHINA LG-CAP ETF.....        953,344,257         32,659,170
GDX.....................................  VANECK ETF TRUST GOLD MINERS ETF        717,525,246         22,888,829
GLD.....................................  SPDR GOLD TR GOLD SHS...........      1,373,373,829          7,600,698
HYG.....................................  ISHARES TR IBOXX HI YD ETF......      3,038,710,673         40,690,044
IEF.....................................  ISHARES TR 7-10 YR TRSY BD......        833,776,310          8,506,605
IEFA....................................  ISHARES CORE MSCI EAFE ETF......        640,740,104          9,645,504
IEMG....................................  ISHARES INC CORE MSCI EMKT......        610,571,206         12,458,329
IWM.....................................  ISHARES TR RUSSELL 2000 ETF.....      5,402,906,722         29,985,329
IYR.....................................  ISHARES TR U.S. REAL ES ETF.....        575,694,782          6,749,049
JNK.....................................  SPDR SER TR BLOOMBERG HIGH Y....        809,645,750          8,834,914
KRE.....................................  SPDR S&P REGIONAL BANKING ETF...      1,020,754,439         22,996,273
KWEB....................................  KRANESHARES TR CSI CHI INTERNET.        556,570,098         18,594,683
LQD.....................................  ISHARES TR IBOXX INV CP ETF.....      2,209,277,519         20,444,446
QQQ.....................................  INVESCO QQQ TR UNIT SER 1.......     17,517,678,522         55,508,283
SMH.....................................  VANECK SEMICONDUCTOR ETF........        954,728,520          4,827,785
SOXL....................................  DIREXION SHS ETF TR DLY SCOND         1,240,910,219         76,587,443
                                           3XBU.
SOXS....................................  DIREXION SHS ETF TR DLY                 832,524,309         45,142,015
                                           SEMICNDTR BR.
SPXL....................................  DIREXION SHS ETF TR DRX                 946,357,247         13,134,890
                                           S&P500BULL.
SPY.....................................  SPDR S&P 500 ETF TR TR UNIT.....     34,975,824,706         85,701,074
SQQQ....................................  PROSHARES TR ULTRAPRO SHT QQQ...      4,273,866,273        130,095,374
TLT.....................................  ISHARES TR 20 YR TR BD ETF......      2,246,375,199         21,559,136
TQQQ....................................  PROSHARES TR ULTRAPRO QQQ.......      3,902,736,049        149,675,087
XBI.....................................  SPDR SER TR S&P BIOTECH.........        709,508,423          8,539,337
XLE.....................................  SELECT SECTOR SPDR TR ENERGY....      1,648,556,002         19,872,930
XLF.....................................  SELECT SECTOR SPDR TR FINANCIAL.      1,699,571,786         51,002,077
XLI.....................................  SELECT SECTOR SPDR TR SBI INT-        1,190,848,482         11,870,935
                                           INDS.
XLK.....................................  SELECT SECTOR SPDR TR TECHNOLOGY      1,006,555,659          6,839,312
XLP.....................................  SELECT SECTOR SPDR TR SBI CONS          855,296,387         11,569,373
                                           STPLS.
XLU.....................................  SELECT SECTOR SPDR TR SBI INT-          879,471,277         13,077,264
                                           UTILS.
XLV.....................................  SELECT SECTOR SPDR TR SBI             1,187,391,938          9,085,631
                                           HEALTHCARE.
XLY.....................................  SELECT SECTOR SPDR TR SBI CONS          742,561,935          5,018,636
                                           DISCR.
XOP.....................................  SPDR SER TR S&P OILGAS EXP......        619,413,460          4,826,441
----------------------------------------------------------------------------------------------------------------

    The Exchange believes that permitting cash settlement as a contract 
term for FLEX ETF Options for the ETFs in the above table would broaden 
the base of investors that use FLEX Options to manage their trading and 
investment risk, including investors that currently trade in the over-
the-counter (``OTC'') market for customized options, where settlement 
restrictions do not apply.
    Today, equity options are settled physically at The Options 
Clearing Corporation (``OCC''), i.e., upon exercise, shares of the 
underlying security must be assumed or delivered. Physical settlement 
may possess certain risks with respect to volatility and movement of 
the underlying security at expiration against which market participants 
may need to hedge. The Exchange believes cash settlement may be 
preferable to physical delivery in some circumstances as it does not 
present the same risk. If an issue with the delivery of the underlying 
security arises, it may become more expensive (and time consuming) to 
reverse the delivery because the price of the underlying security would 
almost certainly have changed. Reversing a cash payment, on the other 
hand, would not involve any such issue because reversing a cash 
delivery would simply involve the exchange of cash. Additionally, with 
physical settlement, market participants that have a need to generate 
cash would have to sell the underlying security while incurring the 
costs associated with liquidating their position as well as the risk of 
an adverse movement in the price of the underlying security.
    The Exchange notes that the Securities and Exchange Commission (the 
``Commission'') has previously approved a rule filing of another 
exchange that allowed for the trading of cash-settled options \11\ and, 
specifically, cash-settled FLEX ETF Options (which the Exchange 
proposes to list in the same manner as that exchange).\12\
---------------------------------------------------------------------------

    \11\ See, e.g., PHLX FX Options traded on Nasdaq PHLX and S&P 
500[supreg] Index Options traded on Cboe Options Exchange. The 
Commission approved, on a pilot basis, the listing and trading of 
RealDayTM Options on the SPDR S&P 500 Trust on the BOX 
Options Exchange LLC (``BOX''). See Securities Exchange Act Release 
No. 79936 (February 2, 2017), 82 FR 9886 (February 8, 2017) 
(``RealDay Pilot Program''). The RealDay Pilot Program was extended 
until February 2, 2019. See Securities Exchange Act Release No. 
82414 (December 28, 2017), 83 FR 577 (January 4, 2018) (SR-BOX-2017-
38). The RealDay Pilot Program was never implemented by BOX. See 
also Securities Exchange Act Release Nos. 56251 (August 14, 2007), 
72 FR 46523 (August 20, 2007) (SR-Amex-2004-27) (Order approving 
listing of cash-settled Fixed Return Options (``FROs'')); and 71957 
(April 16, 2014), 79 FR 22563 (April 22, 2014) (SR-NYSEMKT-2014-06) 
(Order approving name change from FROs to ByRDs and re-launch of 
these products, with certain modifications).
    \12\ See Securities Exchange Act Release Nos. 88131 (February 5, 
2020), 85 FR 7806 (February 11, 2020) (SR-NYSEAMER-2019-38) (Order 
Approving a Proposed Rule Change, as Modified by Amendment No. 1, to 
Allow Certain Flexible Equity Options To Be Cash Settled); and 97231 
(March 31, 2023), 88 FR 20587 (April 6, 2023) (SR-NYSEAMER-2023-22) 
(Notice of Filing and Immediate Effectiveness of Proposed Change to 
Make a Clarifying Change to the Term Settlement Style Applicable to 
Flexible Exchange Options).

---------------------------------------------------------------------------

[[Page 53551]]

    With respect to position and exercise limits, cash-settled FLEX ETF 
Options would be subject to the position limits set forth in Rule 8.35. 
Accordingly, the Exchange proposes new Rule 8.35(c)(1)(B), which would 
provide that a position in FLEX Equity Options where the underlying 
security is an ETF and that is settled in cash pursuant to Rule 
4.21(b)(5)(A)(ii) would be subject to the position limits set forth in 
Rule 8.30, and subject to the exercise limits set forth in Rule 
8.42.\13\ The proposed rule further states that positions in such cash-
settled FLEX Equity Options shall be aggregated with positions in 
physically settled options on the same underlying ETF for the purpose 
of calculating the position limits set forth in Rule 8.30, and the 
exercise limits set forth in Rule 8.42.\14\ Given that each of the 
underlying ETFs that would currently be eligible to have cash-
settlement as a contract term have established position and exercise 
limits applicable to physically settled options, the Exchange believes 
it is appropriate for the same position and exercise limits to also 
apply to cash-settled options. Accordingly, of the 39 underlying 
securities that would currently be eligible to have cash settlement as 
a FLEX contract term, 25 would have a position limit of 250,000 
contracts pursuant to Rule 8.30, Interpretation and Policy .02.\15\ 
Further, pursuant to Rule 8.30, Interpretation and Policy .07, eight 
would have a position limit of 500,000 contracts; four (EEM, FXI, IWM, 
and EFA) would have a position limit of 1,000,000 contracts; one (QQQ) 
would have a position limit of 1,800,000 contracts; and one (SPY) would 
have a position limit of 3,600,000.\16\
---------------------------------------------------------------------------

    \13\ The Exchange proposes to add to proposed Rule 8.35(c)(1)(A) 
a cross-reference to paragraph (d) of Rule 8.35, as Rule 8.35(d) 
also contains provisions about position limits for FLEX Equity 
Options that would be exceptions to the statement in Rule 8.35(c) 
that FLEX Equity Options have no position limits (in addition to the 
language in proposed Rule 8.35(c)(1)(B)). The Exchange also proposes 
to add to Rule 8.35(d) a cross-reference to proposed Rule 
8.35(c)(1)(B), as the proposed rule adds language regarding 
aggregation of positions for purposes of position limits, which is 
currently covered in paragraph (d). Further, the Exchange proposes 
other nonsubstantive changes to Rule 8.35(c) to add a corresponding 
change to proposed Rule 8.35(c)(1)(A) and to add paragraph numbering 
and lettering, add subheadings, and delete certain introductory 
words that are, as a result of the paragraph reorganization, no 
longer necessary.
    \14\ See proposed Rule 8.35(c)(1)(B). The aggregation of 
position and exercise limits would include all positions on 
physically settled FLEX and non-FLEX options on the same underlying 
ETFs.
    \15\ Rule 8.30, Interpretation and Policy .02(e) provides that 
the position limit shall be 250,000 contracts for options: (i) on an 
underlying security that had trading volume of at least 100,000,000 
shares during the most recent six-month trading period; or (ii) on 
an underlying security that had trading volume of at least 
75,000,000 shares during the most recent six-month trading period 
and has at least 300,000,000 shares currently outstanding. Twenty-
five of the thirty-nine underlying ETFs currently meet the 
requirements under Interpretation and Policy .02(e).
    \16\ These were based on position limits as of July 28, 2023. 
Position limits are available on at OCC--Position Limits 
(theocc.com). Position limits for ETFs are always determined in 
accordance with the Exchange's Rules regarding position limits.
---------------------------------------------------------------------------

    The Exchange understands that cash-settled ETF options are 
currently traded in the OTC market by a variety of market participants, 
e.g., hedge funds, proprietary trading firms, and pension funds.\17\ 
These options are not fungible with the exchange listed options. The 
Exchange believes some of these market participants would prefer to 
trade comparable instruments on an exchange, where they would be 
cleared and settled through a regulated clearing agency. The Exchange 
expects that users of these OTC products would be among the primary 
users of exchange-traded cash-settled FLEX ETF Options. The Exchange 
also believes that the trading of cash-settled FLEX ETF Options would 
allow these same market participants to better manage the risk 
associated with the volatility of underlying equity positions given the 
enhanced liquidity that an exchange-traded product would bring.
---------------------------------------------------------------------------

    \17\ As noted above, another option exchange received approval 
to list certain cash-settled FLEX ETF Options. See supra note 12.
---------------------------------------------------------------------------

    In the Exchange's view, cash-settled FLEX ETF Options traded on the 
Exchange would have three important advantages over the contracts that 
are traded in the OTC market. First, as a result of greater 
standardization of contract terms, exchange-traded contracts should 
develop more liquidity. Second, counter-party credit risk would be 
mitigated by the fact that the contracts are issued and guaranteed by 
OCC. Finally, the price discovery and dissemination provided by the 
Exchange and its members would lead to more transparent markets. The 
Exchange believes that its ability to offer cash-settled FLEX ETF 
Options would aid it in competing with the OTC market and at the same 
time expand the universe of products available to interested market 
participants. The Exchange believes that an exchange-traded alternative 
may provide a useful risk management and trading vehicle for market 
participants and their customers. Further, the Exchange believes 
listing cash-settled FLEX ETF Options would provide investors with 
competition on an exchange platform, as another exchange as received 
Commission approval to list the same options.\18\
---------------------------------------------------------------------------

    \18\ See supra note 12.
---------------------------------------------------------------------------

    The Exchange notes that OCC has received approval from the 
Commission for rule changes that will accommodate the clearance and 
settlement of cash-settled ETF Options.\19\ The Exchange has also 
analyzed its capacity and represents that it and The Options Price 
Reporting Authority (OPRA) have the necessary systems capacity to 
handle the additional traffic associated with the listing of cash-
settled FLEX ETF Options. The Exchange believes any additional traffic 
that would be generated from the introduction of cash-settled FLEX ETF 
Options would be manageable. The Exchange expects that Trading Permit 
Holders (``TPHs'') will not have a capacity issue as a result of this 
proposed rule change. The Exchange also does not believe this proposed 
rule change will cause fragmentation of liquidity. The Exchange will 
monitor the trading volume associated with the additional options 
series listed as a result of this proposed rule change and the effect 
(if any) of these additional series on market fragmentation and on the 
capacity of the Exchange's automated systems.
---------------------------------------------------------------------------

    \19\ See Securities Exchange Act Release No. 34-94910 (May 13, 
2022), 87 FR 30531 (May 19, 2022) (SR-OCC-2022-003).
---------------------------------------------------------------------------

    The Exchange does not believe that allowing cash settlement as a 
contract term would render the marketplace for equity options more 
susceptible to manipulative practices. The Exchange believes that 
manipulating the settlement price of cash-settled FLEX ETF Options 
would be difficult based on the size of the market for the underlying 
ETFs that are the subject of this proposed rule change. The Exchange 
notes that each underlying ETF in the table above is sufficiently 
active to alleviate concerns about potential manipulative activity. 
Further, in the Exchange's view, the vast liquidity in the 39 
underlying ETFs that would currently be eligible to be traded as cash-
settled FLEX options under the proposal ensures a multitude of market 
participants at any given time. Moreover, given the high level of 
participation among market participants that enter quotes and/or orders 
in physically settled options on these ETFs, the Exchange believes it 
would be very difficult for a single participant to alter the price of 
the underlying ETF or options overlying such ETF in any significant way 
without exposing the would-be manipulator to regulatory scrutiny. The 
Exchange further believes any attempt to manipulate the price of

[[Page 53552]]

the underlying ETF or options overlying such ETF would also be cost 
prohibitive. As a result, the Exchange believes there is significant 
participation among market participants to prevent manipulation of 
cash-settled FLEX ETF Options.
    Still, the Exchange believes it has an adequate surveillance 
program in place and intends to apply the same program procedures to 
cash-settled FLEX ETF Options that it applies to the Exchange's other 
options products.\20\ FLEX options products and their respective 
symbols are integrated into the Exchange's existing surveillance system 
architecture and are thus subject to the relevant surveillance 
processes. The Exchange believes that the existing surveillance 
procedures at the Exchange are capable of properly identifying unusual 
and/or illegal trading activity, which procedures the Exchange would 
utilize to surveil for aberrant trading in cash-settled FLEX ETF 
Options.
---------------------------------------------------------------------------

    \20\ For example, the regulatory program for the Exchange 
includes surveillance designed to identify manipulative and other 
improper options trading, including, spoofing, marking the close, 
front running, wash sales, etc.
---------------------------------------------------------------------------

    With respect to regulatory scrutiny, the Exchange believes its 
existing surveillance technologies and procedures adequately address 
potential concerns regarding possible manipulation of the settlement 
value at or near the close of the market. The Exchange notes that the 
regulatory program operated by and overseen by the Cboe Global Markets, 
the Exchange's parent company (``Cboe''), Regulatory Division (which 
regulates the Exchange and its affiliated national securities 
exchanges) \21\ includes cross-market surveillance designed to identify 
manipulative and other improper trading, including spoofing, algorithm 
gaming, marking the close and open, as well as more general, abusive 
behavior related to front running, wash sales, quoting/routing, and Reg 
SHO violations, that may occur on the Exchange or other markets. These 
cross-market patterns incorporate relevant data from various markets 
beyond the Exchange and its affiliates and from markets not affiliated 
with the Exchange. The Exchange represents that its existing trading 
surveillances and those of its affiliated markets are adequate to 
monitor trading in the underlying ETFs and subsequent trading of 
options on those securities on the Exchange, including cash-settled 
FLEX ETF Options.\22\
---------------------------------------------------------------------------

    \21\ Cboe and its affiliated securities exchanges maintain 
regulatory services agreements with Financial Industry Regulatory 
Authority, Inc. (``FINRA'') whereby FINRA provides certain 
regulatory services to the exchanges, including cross-market 
surveillance, investigation, and enforcement services.
    \22\ Such surveillance procedures generally focus on detecting 
securities trading subject to opening price manipulation, closing 
price manipulation, layering, spoofing or other unlawful activity 
impacting an underlying security, the option, or both. The Exchange 
has price movement alerts, unusual market activity and order book 
alerts active for all trading symbols.
---------------------------------------------------------------------------

    Additionally, for options, the Exchange utilizes an array of 
patterns that monitor manipulation of options, or manipulation of 
equity securities (regardless of venue) for the purpose of impacting 
options prices on the Exchange (i.e., mini-manipulation strategies). 
That surveillance coverage is initiated once options begin trading on 
the Exchange. Accordingly, the Exchange believes that the cross-market 
surveillance performed by the Exchange or FINRA, on behalf of the 
Exchange, coupled with the Cboe Regulatory Division's own monitoring 
for violative activity on the Exchange comprise a comprehensive 
surveillance program that is adequate to monitor for manipulation of 
the underlying ETF and overlying option. Furthermore, the Exchange 
believes that the existing surveillance procedures at the Exchange are 
capable of properly identifying unusual and/or illegal trading 
activity, which the Exchange would utilize to surveil for aberrant 
trading in cash-settled FLEX ETF Options.
    In addition to the surveillance procedures and processes described 
above, improvements in audit trails (i.e., the Consolidated Audit 
Trail), recordkeeping practices, and inter-exchange cooperation over 
the last two decades have greatly increased the Exchange's ability to 
detect and punish attempted manipulative activities. In addition, the 
Exchange is a member of the Intermarket Surveillance Group (``ISG''). 
The ISG members work together to coordinate surveillance and 
investigative information sharing in the stock and options markets.\23\ 
For surveillance purposes, the Exchange would therefore have access to 
information regarding trading activity in the pertinent underlying 
securities.
---------------------------------------------------------------------------

    \23\ See, e.g., Cboe Regulatory Circular 20-028, Establishment 
of the CMRWG. (April 8, 2020)
---------------------------------------------------------------------------

    The proposed rule change is designed to allow investors seeking to 
effect cash-settled FLEX ETF Options with the opportunity for a 
different method of settling option contracts at expiration if they 
choose to do so. As noted above, market participants may choose cash 
settlement because physical settlement possesses certain risks with 
respect to volatility and movement of the underlying security at 
expiration that market participants may need to hedge against. The 
Exchange believes that offering innovative products flows to the 
benefit of the investing public. A robust and competitive market 
requires that exchanges respond to members' evolving needs by 
constantly improving their offerings. Such efforts would be stymied if 
exchanges were prohibited from offering innovative products for reasons 
that are generally debated in academic literature. The Exchange 
believes that introducing cash-settled FLEX ETF Options would further 
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, where settlement restrictions 
do not apply. The proposed rule change is also designed to encourage 
market makers to shift liquidity from the OTC market onto the Exchange, 
which, it believes, would enhance the process of price discovery 
conducted on the Exchange through increased order flow. The Exchange 
also believes that this may open up cash-settled FLEX ETF Options to 
more retail investors. The Exchange does not believe that this proposed 
rule change raises any unique regulatory concerns because existing 
safeguards--such as position limits (and the aggregation of cash-
settled positions with physically-settled positions), exercise limits 
(and the aggregation of cash-settled positions with physically-settled 
positions), and reporting requirements--would continue to apply. The 
Exchange believes the proposed position and exercise limits may further 
help mitigate the concerns that the limits are designed to address 
about the potential for manipulation and market disruption in the 
options and the underlying securities.\24\
---------------------------------------------------------------------------

    \24\ See supra note 16.
---------------------------------------------------------------------------

    Given the novel characteristics of cash-settled FLEX ETF Options, 
the Exchange will conduct a review of the trading in cash-settled FLEX 
ETF Options over an initial five-year period. The Exchange will furnish 
five reports to the Commission based on this review, the first of which 
would be provided within 60 days after the first anniversary of the 
initial listing date of the first cash-settled FLEX ETF Option under 
the proposed rule and each subsequent annual report to be provided 
within 60 days after the second, third, fourth and fifth anniversary of 
such initial listing. At a minimum, each report will provide a 
comparison between the trading volume of all cash-settled FLEX ETF 
Options listed under the proposed rule and physically settled options 
on the

[[Page 53553]]

same underlying security, the liquidity of the market for such options 
products and the underlying ETF, and any manipulation concerns arising 
in connection with the trading of cash-settled FLEX ETF Options under 
the proposed rule. The Exchange will also provide additional data as 
requested by the Commission during this five-year period. The reports 
will also discuss any recommendations the Exchange may have for 
enhancements to the listing standards based on its review. The Exchange 
believes these reports will allow the Commission and the Exchange to 
evaluate, among other things, the impact such options have, and any 
potential adverse effects, on price volatility and the market for the 
underlying ETFs, the component securities underlying the ETFs, and the 
options on the same underlying ETFs and make appropriate 
recommendations, if any, in response to the reports.
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.\25\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \26\ 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. 
Specifically, the Exchange believes that introducing cash-settled FLEX 
ETF Options 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposal to permit cash settlement 
as a contract term for options on the specified group of equity 
securities would remove impediments to and perfect the mechanism of a 
free and open market as cash-settled FLEX ETF Options would enable 
market participants to receive cash in lieu of shares of the underlying 
security, which would, in turn, provide greater opportunities for 
market participants to manage risk through the use of a cash-settled 
product to the benefit of investors and the public interest. The 
Exchange does not believe that allowing cash settlement as a contract 
term for options on the specified group of equity securities would 
render the marketplace for equity options more susceptible to 
manipulative practices. As illustrated in the table above, each of the 
qualifying underlying securities is actively traded and highly liquid 
and thus would not be susceptible to manipulation because, over a six-
month period, each security had an average daily notional value of at 
least $500 million and an ADV of at least 4,680,000 shares, which 
indicates that there is substantial liquidity present in the trading of 
these securities, and that there is significant depth and breadth of 
market participants providing liquidity and of investor interest. The 
Exchange believes the proposed bi-annual review to determine 
eligibility for an underlying ETF to have cash settlement as a contract 
term would remove impediments to and perfect the mechanism of a free 
and open market as it would permit the Exchange to select only those 
underlying ETFs that are actively traded and have robust liquidity as 
each qualifying ETF would be required to meet the average daily 
notional value and average daily volume requirements, as well as to 
select the same underlying ETFs on which another exchange may list 
cash-settled FLEX ETF Options.\27\
---------------------------------------------------------------------------

    \27\ See supra note 12.
---------------------------------------------------------------------------

    The Exchange believes the proposed change that, for FLEX ETF 
Options, at least one of exercise style, expiration date, and exercise 
price must differ from options in the non-FLEX market will provide 
clarity and eliminate confusion regarding permissible terms of FLEX ETF 
Options, including the proposed cash-settled FLEX ETF Options.
    The Exchange believes that the data provided by the Exchange 
supports the supposition that permitting cash settlement as a FLEX term 
for the 39 underlying ETFs that would currently qualify to have cash 
settlement as a contract term would 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, where settlement restrictions do not apply.
    The Exchange believes that the proposal to permit cash settlement 
for certain FLEX ETF options would remove impediments to and perfect 
the mechanism of a free and open market because the proposed rule 
change would provide TPHs with enhanced methods to manage risk by 
receiving cash if they choose to do so instead of the underlying 
security. In addition, this proposal would promote just and equitable 
principles of trade and protect investors and the general public 
because cash settlement would provide investors with an additional tool 
to manage their risk. Further, the Exchange notes that other exchanges 
have previously received approval that allow for the trading of cash-
settled options \28\ and, specifically, cash-settled FLEX ETF Options 
in an identical manner as the Exchange proposes to list them pursuant 
to this rule filing.\29\ The proposed rule change therefore should not 
raise issues for the Commission that it has not previously addressed.
---------------------------------------------------------------------------

    \28\ See supra note 11.
    \29\ See supra note 12.
---------------------------------------------------------------------------

    The proposed rule change to permit cash settlement as a contract 
term for options on up to 50 ETFs is designed to promote just and 
equitable principles of trade in that the availability of cash 
settlement as a contract term would give market participants an 
alternative to trading similar products in the OTC market. By trading a 
product in an exchange-traded environment (that is currently traded in 
the OTC market), the Exchange would be able to compete more effectively 
with the OTC market. The Exchange believes the proposed rule change is 
designed to prevent fraudulent and manipulative acts and practices in 
that it would 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. Additionally, the Exchange believes the proposed rule 
change is designed to remove impediments to and to perfect the 
mechanism for a free and open market and a national market system, and, 
in general, to protect investors and the public interest in that it 
should create greater trading and hedging opportunities and 
flexibility. The proposed rule change should also result in enhanced 
efficiency in initiating and closing out positions and heightened 
contra-party creditworthiness due to the role of OCC as issuer and 
guarantor of the proposed cash-settled options. Further, the proposed 
rule change would result in increased competition by permitting the 
Exchange to offer products that are currently available for trading 
only in the OTC market and are approved to trade on another options 
exchange.

[[Page 53554]]

    The Exchange believes that establishing position limits for cash-
settled FLEX ETF Options to be the same as physically settled options 
on the same underlying security, and aggregating positions in cash-
settled FLEX ETF Options with physically settled options on the same 
underlying security for purposes of calculating position limits is 
reasonable and consistent with the Act. By establishing the same 
position limits for cash-settled FLEX ETF Options as for physically 
settled options on the same underlying security and, importantly, 
aggregating such positions, the Exchange believes that the position 
limit requirements for cash-settled FLEX ETF Options should help to 
ensure that the trading of cash-settled FLEX ETF Options would not 
increase the potential for manipulation or market disruption and could 
help to minimize such incentives. For the same reasons, the Exchange 
believes the proposed exercise limits are reasonable and consistent 
with the Act.
    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in cash-
settled FLEX ETF Options and the underlying ETFs. Regarding the 
proposed cash settlement, the Exchange would use the same surveillance 
procedures currently utilized for the Exchange's other FLEX Options. 
For surveillance purposes, the Exchange would have access to 
information regarding trading activity in the pertinent underlying 
ETFs. The Exchange believes that limiting cash settlement to no more 
than 50 underlying ETFs (currently, 39 ETFs would be eligible to have 
cash-settlement as a contract term) would minimize the possibility of 
manipulation due to the robust liquidity in both the equities and 
options markets.
    As a self-regulatory organization, the Exchange recognizes the 
importance of surveillance, among other things, to detect and deter 
fraudulent and manipulative trading activity as well as other 
violations of Exchange rules and the federal securities laws. As 
discussed above, the Cboe Regulatory Division has adequate surveillance 
procedures in place to monitor trading in cash-settled FLEX ETF Options 
and the underlying securities, including to detect manipulative trading 
activity in both the options and the underlying ETF.\30\ The Exchange 
further notes the liquidity and active markets in the underlying ETFs, 
and the high number of market participants in both the underlying ETFs 
and existing options on the ETFs, helps to minimize the possibility of 
manipulation. The Exchange further notes that under Section 19(g) of 
the Act, the Exchange, as a self-regulatory organization, is required 
to enforce compliance by its members and persons associated with its 
members with the Act, the rules and regulations thereunder, and the 
rules of the Exchange.\31\ The Exchange believes its surveillance, 
along with the liquidity criteria and position and exercise limits 
requirements, are reasonably designed to mitigate manipulation and 
market disruption concerns and will permit it to enforce compliance 
with the proposed rules and other Exchange rules in accordance with 
Section 19(g) of the Act. The Exchange performs ongoing evaluations of 
its surveillance program to ensure its continued effectiveness and will 
continue to review its surveillance procedures on an ongoing basis and 
make any necessary enhancements and/or modifications that may be needed 
for the cash settlement of FLEX ETF Options.
---------------------------------------------------------------------------

    \30\ Among other things, the Cboe Regulatory Division's 
regulatory program include cross-market surveillance designed to 
identify manipulative and other improper trading, including 
spoofing, algorithm gaming, marking the close and open, as well as 
more general abusive behavior related to front running, wash sales, 
quoting/routing, and Reg SHO violations, that may occur on the 
Exchange and other markets. Furthermore, the Exchange stated that it 
has access to information regarding trading activity in the 
pertinent underlying securities as a member of ISG.
    \31\ 15 U.S.C. 78s(g).
---------------------------------------------------------------------------

    Additionally, the Exchange will monitor any effect additional 
options series listed under the proposed rule change will have on 
market fragmentation and the capacity of the Exchange's automated 
systems. The Exchange will take prompt action, including timely 
communication with the Commission and with other self-regulatory 
organizations responsible for oversight of trading in options, the 
underlying ETFs, and the ETFs' component securities, should any 
unanticipated adverse market effects develop.

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 cash-settled FLEX ETF Options in the same manner. This includes 
the proposed change that, for FLEX ETF Options, at least one of 
exercise style, expiration date, and exercise price must differ from 
options in the non-FLEX market, which will provide clarity and 
eliminate confusion regarding permissible terms of FLEX ETF Options, 
including the proposed cash-settled FLEX ETF Options, with which all 
FLEX Traders must comply. Additionally, positions in cash-settled FLEX 
ETF Options of all FLEX Traders will be subject to the same position 
limits, and such positions will be aggregated with positions in 
physically settled options on the same underlying 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 transact in FLEX ETF Options with the 
opportunity for an alternative method of settling their option 
contracts at expiration. 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, where settlement restrictions do not apply. The 
proposed rule change would give market participants an alternative to 
trading similar products in the OTC market. By trading a product in an 
exchange-traded environment (that is currently traded in the OTC 
market), the Exchange would be able to compete more effectively with 
the OTC market. 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. The Exchange believes 
the proposed rule change encourages competition amongst market 
participants to provide tailored cash-settled FLEX ETF Option 
contracts, as another exchange has received approval to list these 
contracts (subject to the same position and

[[Page 53555]]

exercise limits as proposed).\32\ Therefore, the Exchange believes the 
proposed rule change will enhance intermarket competition by providing 
investors with a choice of exchange venues on which to trade cash-
settled FLEX ETF Options.
---------------------------------------------------------------------------

    \32\ See supra note 12.
---------------------------------------------------------------------------

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 \33\ and Rule 19b-
4(f)(6)(iii) thereunder.\34\
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(3)(A).
    \34\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \35\ normally 
does not become operative prior to 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\36\ 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 proposed 
rule change may become operative upon filing. The Exchange states, 
among other things, that waiver of the 30-day operative delay will 
protect investors by providing them with an immediate choice and an 
additional venue where they can trade cash-settled FLEX ETF Options. 
The Commission approved a substantially similar proposal by another 
exchange that was subject to notice and comment and found consistent 
with the Act.\37\ For these reasons, and because the proposed rule 
change does not raise any novel regulatory issues that have not been 
addressed, the Commission believes waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\38\
---------------------------------------------------------------------------

    \35\ 17 CFR 240.19b-4(f)(6).
    \36\ 17 CFR 240.19b-4(f)(6)(iii).
    \37\ See supra note 12.
    \38\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2023-036 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-2023-036. 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-2023-036 and should be 
submitted on or before August 29, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16885 Filed 8-7-23; 8:45 am]
BILLING CODE 8011-01-P