Document ID: SEC-2021-0598-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-04-29T04:00Z

[Federal Register Volume 86, Number 81 (Thursday, April 29, 2021)]
[Notices]
[Pages 22744-22747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08904]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91659; File No. SR-CBOE-2021-028]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 4.5(d) To Allow Monday and Wednesday Expirations for Options 
Listed Pursuant to the Short Term Option Series Program on the Invesco 
QQQ Trust (``QQQ'')

April 23, 2021.
    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 April 21, 2021, 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 Rule 4.5(d) to allow Monday and Wednesday expirations for 
options listed pursuant to the Short Term Option Series Program on the 
Invesco QQQ Trust (``QQQ''). 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 amend Rule 4.5(d) to allow Monday and 
Wednesday expirations for options listed pursuant to the Short Term 
Option Series Program on QQQ. The Exchange notes that this proposed 
rule change is substantively identical to a rule change recently 
adopted by Nasdaq Phlx LLC. (``Phlx''), filed with the Securities and 
Exchange Commission (``Commission'').\5\
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    \5\ See Securities Exchange Release No. 91238 (March 2, 2021), 
86 FR 13404 (March 8, 2021) (SR-Phlx-2021-10) (Notice of Filing of 
Proposed Rule Change To Permit Monday and Wednesday Expirations for 
Options Listed Pursuant to the Short Term Option Series Program on 
the Invesco QQQ TrustSM).
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    Rule 4.5(d) currently governs the Exchange's Short Term Option 
Series Program. Short Term Option Series are weekly series in an option 
class that is approved for listing and trading on the Exchange, which 
may be opened for trading on any Thursday or Friday that is a business 
day and expires that expire at the close of business on each of the 
next five Fridays that are business days and are not Fridays on which 
monthly options series or Quarterly Options Series expire. Rule 4.5(d) 
also provides that the Exchange may open weekly series for options on 
the SPDR S&P 500 ETF Trust (``SPY'') with Monday and Wednesday 
expirations. The proposed rule change amends Rule 4.5(d) to also allow 
Monday and Wednesday expiations for options on QQQ. Specifically, the 
proposed rule change amends Rule 4.5(d) to provide that the Exchange 
may open for trading on any Friday or Monday that is a business day 
series of options on the SPDR S&P 500 ETF Trust (``SPY'') (``Monday SPY 
Expiration Opening Date'') \6\ and series of options on the Invesco QQQ 
Trust (``QQQ'') (``Monday QQQ Expiration Opening Date'') that expire at 
the close of business each of the next five Mondays that are business 
days and are no Mondays on which Quarterly Options Series expire 
(``Monday SPY Expirations'' and ``Monday QQQ Expirations''), provided 
that any Monday SPY and QQQ Expiration Opening Date that is a Friday is 
one business week and one business day prior to expiration. The 
Exchange may also open for trading on any Tuesday or Wednesday that is 
a business day series of SPY options (``Wednesday SPY Expiration 
Opening Date'') and series of QQQ options (``Wednesday QQQ Expiration 
Opening Date'') that expire at the close of business on each of the 
next five Wednesdays that are business days and are not Wednesdays on 
which Quarterly Options Series expire (``Wednesday SPY Expirations'' 
and ``Wednesday QQQ Expirations''). The Exchange may have no more than 
a total of five of each Monday SPY and QQQ Expirations and no more than 
a total of

[[Page 22745]]

five of each Wednesday SPY and QQQ Expirations. Non-Monday and non-
Wednesday SPY and QQQ Expirations are not included as part of this 
count. If the Exchange is not open for business on the respective 
Friday or Monday, the Monday SPY and QQQ Expiration Opening Date will 
be the first business day immediately prior to that respective Friday 
or Monday. If the Exchange is not open for business on a Monday, the 
expiration date for a Monday SPY and QQQ Expiration will be the first 
business day immediately following that Monday. If the Exchange is not 
open for business on the respective Tuesday or Wednesday, the Wednesday 
SPY and QQQ Expiration Opening Date will be the first business day 
immediately prior to that respective Tuesday or Wednesday. Similarly, 
if the Exchange is not open for business on a Wednesday, the expiration 
date for a Wednesday SPY and QQQ Expiration will be the first business 
day immediately prior to that Wednesday. Additionally, the proposed 
rule change amends Rule 4.5(d)(2), which currently excepts Monday and 
Wednesday SPY Expirations from the prohibition on Short Term Option 
Series expiring in the same week in which monthly option series on the 
same class expire, to provide that no Short Term Option Series 
(excluding Monday and Wednesday SPY and QQQ Expirations) may expire in 
the same week in which monthly option series on the same class expire.
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    \6\ The proposed rule change also relocates certain defined 
terms within Rule 4.5(d) for additional clarity and ease of 
understanding.
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    The Exchange believes that the introduction of QQQ Monday and 
Wednesday Expirations will expand hedging tools available to market 
participants and assist in reducing the premium cost of buying 
protection. By offering Monday and Wednesday QQQ Expirations, the 
proposed rule change will allow market participants to purchase QQQ 
based on their timing needs and allow them to more effectively tailor 
their investment and hedging strategies.
    The Exchange notes that, pursuant to the proposed rule change, if 
the Exchange is not open for business on a Wednesday, then a Wednesday 
QQQ Expiration will expire on the first business day immediately prior 
to that Wednesday (e.g., Tuesday of that week). However, regarding 
Monday QQQ Expirations, if the Exchange is not open for business on a 
Monday, then a Monday QQQ Expiration will expire on the first business 
day following that Monday (e.g., Tuesday of that week). This is the 
same expiration process currently in place for Monday and Wednesday SPY 
Expirations. The Exchange believes that it is appropriate to require 
Monday expiration series to expire on the Tuesday of that week, rather 
than the previous business day (e.g., the previous Friday), when 
expiration Monday does not fall on a business day because the 
immediately following Tuesday is closer in time to the scheduled 
expiration date of the series than the previous Friday. Therefore, the 
following business day in this case may be more representative of 
anticipated market conditions than the previous business day. The 
Exchange notes that, not only are Monday SPY Expirations treated in the 
same manner today, but the same applies to weekly index options listed 
pursuant to the Nonstandard Expiration Program.\7\ The Exchange also 
notes that permitting Monday and Wednesday QQQ Expirations to expire in 
the same week as monthly options series on the same class, like that of 
Monday and Wednesday SPY Expirations, is appropriate because Monday and 
Wednesday QQQ Expirations and standard monthly options will not expire 
on the same trading day, as standard monthly options expire on Fridays. 
Additionally, the Exchange believes that listing Monday and Wednesday 
QQQ Expirations each week of the month will provide consistency for 
investors and mitigate any potential confusion regarding weekly 
listings.
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    \7\ See Rule 4.13(e)(1).
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    The Exchange notes that the interval between strike prices for the 
proposed Monday and Wednesday QQQ Expirations are the same as those for 
the Monday and Wednesday SPY Expirations and the Short Term Option 
Series with Wednesday and Friday expirations.\8\ Specifically, the 
proposed Monday and Wednesday QQQ Expirations have a $0.50 strike 
interval minimum.\9\ As is the case with other equity options series 
listed pursuant to the Short Term Option Series Program, Monday and 
Wednesday QQQ Expirations are P.M.-settled. Also, pursuant to Rule 
4.5(d)(1), the Exchange may open up to 30 Short Term Option Series for 
each expiration date in each option class eligible for participation in 
the Short Term Option Series Program. This includes Monday and 
Wednesday QQQ Expirations for QQQ options. In addition to the 30 series 
per class, the Exchange may open Short Term Option Series, including 
Monday and Wednesday QQQ Expirations, that are opened by other 
securities exchanges in option classes selected by such exchanges under 
their respective short term option rules.
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    \8\ See Rule 4.5(d)(5).
    \9\ See id.
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    The Exchange does not believe that listing series of P.M.-settled 
Monday and Wednesday expirations for options on QQQ will have any 
adverse impact on fair and orderly markets as the Exchange already 
lists weekly series with the same settlement and expirations for 
options on SPY, as well as for weekly index options pursuant to the 
Nonstandard Pilot Program,\10\ and has not experienced any issues 
regarding adverse market impact in connection with the listing of these 
series. The Exchange represents that it has the necessary capacity and 
surveillance programs in place to support and properly monitor trading 
in the proposed Monday and Wednesday QQQ Expirations. The Exchange 
currently deploys such surveillance programs to monitor Monday and 
Wednesday SPY Expirations and has not experienced any issues with 
capacity in connection with listing Monday and Wednesday SPY 
Expirations. The Exchange intends to begin implementation of the 
proposed rule change on April 23, 2021, as Phlx intends to begin 
listing weekly Monday QQQ Expirations on this date.\11\ The Exchange 
will issue a notice of the planned implementation date to its Trading 
Permit Holders (``TPHs'') in advance.\12\
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    \10\ See supra note 7.
    \11\ See Options Trader Alert #2021-23, Nasdaq PHLX Introduces 
Monday and Wednesday Weekly Expirations For QQQ Options (April 12, 
2021) available at: http://www.nasdaqtrader.com/MicroNews.aspx?id=23. Phlx anticipates listing weekly Wednesday QQQ 
Expirations on April 27, 2021.
    \12\ See Rule 1.5, which provides that the Exchange announces to 
Trading Permit Holders all determinations it makes pursuant to the 
Rules via: (1) Specifications, Notices, or Regulatory Circulars with 
appropriate advanced notice, which are posted on the Exchange's 
website, or as otherwise provided in the Rules; (2) electronic 
message; or (3) other communication method as provided in the Rules.
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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.\13\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \14\ 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

[[Page 22746]]

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) \15\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
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    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that listing Monday and 
Wednesday QQQ Expirations, like Monday and Wednesday SPY Expirations 
already listed for trading, will expand the ability of investors to 
effectively hedge risk against market movements stemming from economic 
releases or market events that occur throughout the month. The Exchange 
believes that offering Monday and Wednesday QQQ Expirations will create 
greater trading and hedging opportunities and flexibility for 
investors, allowing them to use QQQ options listed pursuant to the 
Short Term Option Series Program in a manner more effectively tailored 
their investment and hedging objectives. As already noted, the Exchange 
currently offers series with the same settlement (P.M.) and expirations 
(Monday and Wednesday) for options on SPY and for weekly index options 
pursuant to the Nonstandard Pilot Program.\16\ The Exchange again notes 
that the proposed rule change is substantively identical to a rule 
recently adopted by Phlx and filed with the Commission.\17\
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    \16\ See supra note 7.
    \17\ See supra note 5.
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    The manner in which Monday QQQ Expirations will expire when 
expiration Monday lands on a holiday is consistent with the manner in 
which Monday SPY Expirations currently expire under the same 
circumstances. The Exchange believes that allowing Monday QQQ 
Expirations that expire on a holiday to fall on the following business 
day, as opposed to the prior business day (as applicable to Wednesday 
and Friday expirations that expire on a holiday), removes impediments 
to and perfects the mechanism of a free and open market and national by 
permitting such Monday expirations to occur closer in time to the 
scheduled expiration date of the series, which may be more 
representative of anticipated market conditions. Additionally, the 
proposed rule change to except Monday and Wednesday QQQ Expirations 
from the prohibition on Short Term Option Series expiring in the same 
week in which monthly option series on the same class expire is 
consistent with the same exception that currently applies to Monday and 
Wednesday SPY Expirations.\18\ The proposed rule change is designed to 
provide consistency for investors and mitigate any potential confusion 
regarding weekly listings each week of the month.
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    \18\ As stated herein, because monthly options expire on 
Fridays, Monday and Wednesday weekly options will not land on the 
same day.
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    The Exchange does not believe that listing series of P.M.-settled 
Monday and Wednesday expirations for options on QQQ will have any 
adverse impact on fair and orderly markets as the Exchange already 
lists series with the same settlement and expirations for options on 
SPY, as well as for weekly index options pursuant to the Nonstandard 
Pilot Program,\19\ and has not observed any adverse market impact in 
connection with the listing of these series. The Exchange represents 
that it already has an adequate surveillance program in place to detect 
and deter any manipulative trading in Monday and Wednesday expirations, 
including Monday and Wednesday QQQ Expirations, and that it has the 
necessary systems capacity to support the listing and trading of the 
new series.
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    \19\ See supra note 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act as Monday and Wednesday QQQ 
Expirations will be available for quoting and trading on the Exchange 
for all market participants. Therefore, all market participants will 
equally be able to transact in QQQ series listed with Monday and 
Wednesday expirations for trading on the Exchange.
    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 it only 
impacts the permissible expirations for an option series listed on the 
Exchange. As stated, another options exchange has recently implemented 
a substantively identical rule to permit Monday and Wednesday QQQ 
expirations on its exchange.\20\ As such, this proposal is a 
competitive response that will permit the Exchange to list the same 
expirations for series in a multiply-listed option as another options 
exchange.
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    \20\ See supra note 5.
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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 \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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 Commission has waived that requirement in this case.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the five-day prefiling requirement 
and the 30-day operative delay so that the proposal may become 
operative immediately upon filing. The Commission notes that it 
recently approved Phlx's substantially similar proposal to list and 
trade Monday QQQ Expirations and Wednesday QQQ Expirations.\24\ The 
Exchange has stated that waiver of the five-day prefiling requirement 
and the 30-day operative delay will allow the Exchange to implement the 
proposal as a competitive response, permitting the Exchange to list the 
same expirations for series in a multiply-listed option as another 
options exchange, at the same time that such options exchange intends

[[Page 22747]]

to list such series. For these reasons, the Commission believes that 
the proposed rule change presents no novel issues and that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest, and will allow the Exchange to 
remain competitive with other exchanges. Accordingly, the Commission 
hereby waives the prefiling requirement and the operative delay and 
designates the proposed rule change operative upon filing.\25\
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    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ See Securities Exchange Act Release No. 91614 (April 20, 
2021).
    \25\ 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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    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 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-2021-028 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-2021-028. 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-2021-028 and should be submitted on 
or before May 20, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-08904 Filed 4-28-21; 8:45 am]
BILLING CODE 8011-01-P