Document ID: SEC-2018-0322-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2018-02-23T05:00Z

[Federal Register Volume 83, Number 37 (Friday, February 23, 2018)]
[Notices]
[Pages 8142-8146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03695]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82733; File No. SR-CBOE-2018-018]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Expand the Short Term Options Series Program To Allow Monday 
Expirations for SPDR S&P 500 ETF Trust Options

February 16, 2018.
    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 February 15, 2018, 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

    The Exchange proposes to expand the Short Term Options Series 
Program to allow Monday expirations for SPDR S&P 500 ETF Trust 
(``SPY'') options.
(additions are italicized; deletions are [bracketed])
* * * * *

Cboe Exchange, Inc. Rules

* * * * *
Rule 5.5. Series of Options Contracts Open for Trading
    (a)-(c) (No change).
    (d) Short Term Option Series Program. After an option class has 
been approved for listing and trading on the Exchange, the Exchange may 
open for trading on any Thursday or Friday that is a business day 
(``Short Term Option Opening Date'') series of options on that class 
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 (``Short Term Option 
Expiration Dates''). The Exchange may have no more than a total of five 
Short Term Option Expiration Dates. Monday and Wednesday SPY 
Expirations (described in the paragraph below) are not included as part 
of this count. If the Exchange is not open for business on the 
respective Thursday or Friday, the Short Term Option Opening Date will 
be the first business day immediately prior to that respective Thursday 
or Friday. Similarly, if the Exchange is not open for business on a 
Friday, the Short Term Option Expiration Date will be the first 
business day immediately prior to that Friday.
    Monday and Wednesday SPY Expirations. The Exchange may open for 
trading on any Friday or Monday that is a business day (``Monday SPY 
Expiration Opening Date'') series of options on the SPDR S&P 500 ETF 
Trust (``SPY'') 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''), provided 
that any Monday SPY 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 (``Wednesday SPY Expiration Opening Date'') series of SPY 
options [on the SPDR S&P 500 ETF Trust (``SPY'')] 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''). The Exchange may have no more than a 
total of five Monday SPY Expirations and no more than a total of five 
Wednesday SPY Expirations. Non-

[[Page 8143]]

Monday and non-Wednesday SPY Expirations (described in the paragraph 
above) 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 
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 
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 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 Expiration will be 
the first business day immediately prior to that Wednesday.
    References to ``Short Term Option Series'' below shall be read to 
include ``Monday and Wednesday SPY Expirations,'' except where 
indicated otherwise.
    Regarding Short Term Option Series:
    (1) (No change).
    (2) No Short Term Option Series (excluding Monday and Wednesday SPY 
Expirations) may expire in the same week in which monthly option series 
on the same class expire and, in the case of Quarterly Options Series, 
no Short Term Option Series may expire on an expiration that coincides 
with an expiration of Quarterly Option Series on the same class.
    (3)-(6) (No change).
    Related non-Short Term Option series shall be opened during the 
month prior to expiration in the same manner as permitted in Rule 
5.5(d) and in the same strike price intervals that are permitted in 
this Rule 5.5(d)(5).
    (e) No change.
    . . . Interpretations and Policies:
    .01-.23 (No change).
* * * * *
    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 expand the Short Term Options Series 
Program described in Rule 5.5(d) to allow the listing and trading of 
SPY options with Monday expirations. This is a competitive filing based 
on a filing submitted by Nasdaq PHLX LLC (``Phlx''), which the 
Securities and Exchange Commission (``Commission'') recently 
approved.\5\
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    \5\ See Securities Exchange Act Release No. 82611, February 1, 
2018 (order approving SR-Phlx-2017-103.
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    Currently, under the Short Term Option Series Program, the Exchange 
may open for trading on Thursday or Friday that is a business day 
series of options on that class that expire on each of the next five 
Fridays, provided that such Friday is not a Friday on which monthly 
options series or Quarterly Options Series expire (``Short Term Option 
Series''). Additionally, the Exchange may open for trading on any 
Tuesday or Wednesday that is a business day (``Wednesday SPY Expiration 
Opening Date'') series of options on the SPDR S&P 500 ETF Trust 
(``SPY'') 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''). The 
Exchange now proposes to amend Rule 5.5(d) to permit the listing of SPY 
options expiring on Mondays. Specifically, Cboe Options is proposing 
that it may open for trading on any Friday or Monday that is a business 
day (``Monday SPY Expiration Opening Date''), provided that any Monday 
SPY Expiration Opening Date that is a Friday is one business week and 
one business day prior to expiration (i.e., two Fridays prior to 
expiration), series of SPY options that expire on any Monday that is a 
business day and is not a Monday on which Quarterly Options Series 
expire (``Monday SPY Expirations'').
    The proposed rule change also addresses the expiration of SPY 
Monday Expirations when the expiration Monday is not a business day. In 
that case, the rule provides the expiration date for a Monday SPY 
Expiration will be the first business day immediately following that 
Monday. This procedure differs from the expiration date of Wednesday 
SPY Expirations that are scheduled to expire on a holiday. In that 
case, the Wednesday SPY Expiration will expire on the first business 
day immediately prior to that Wednesday, e.g., Tuesday of that week.\6\ 
However, the Exchange believes it is preferable to require Monday SPY 
Expirations in this scenario to expire on the Tuesday of that week 
rather than the previous business day, e.g., the previous Friday, since 
the Tuesday is closer in time to the scheduled expiration date of the 
series than the previous Friday, and therefore may be more 
representative of anticipated market conditions. Monday expirations are 
not a novel proposal. Specifically, Cboe Options is currently able to 
list Monday expirations for broad-based index options.\7\ Additionally, 
Phlx recently received Commission approval to list Monday SPY 
Expirations.\8\
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    \6\ See Rule 5.5(d).
    \7\ See Rule 24.9(e) (describing the Exchange's nonstandard 
expirations pilot program). Pursuant to the nonstandard expirations 
pilot program, if the Exchange is not open for business on a 
respective Monday, the normally Monday expiring Weekly Expirations 
will expire on the following business day.
    \8\ See supra note 5.
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    As with Wednesday SPY Expirations, the proposed rule change states 
the Exchange may list up to five consecutive Monday SPY Expirations at 
one time, and may have no more than a total of five Monday SPY 
Expirations (in addition to a maximum of five Short Term Options Series 
expirations for SPY options expiring on Friday and five Wednesday SPY 
Expirations).
    The Exchange proposes to clarify that the five expirations limit in 
the current Short Term Option Series Program would not include any 
Monday SPY Expirations. The five expirations limit in the current Short 
Term Option Series Program currently excludes any Wednesday SPY 
Expirations. This means, under the proposed rule change, the Exchange 
may list five Short Term Option Series expirations for SPY expiring on 
Friday, five Wednesday SPY Expirations, and five Monday SPY 
Expirations. The proposed rule change also notes references to ``Short 
Term Option Series'' in Rule 5.5(d) will, with Wednesday SPY 
Expirations, be read to include Monday SPY Expirations, except where 
indicated otherwise.
    The proposed rule change also amends Rule 5.5(d)(2), which 
addresses the listing of Short Term Option Series

[[Page 8144]]

that expire in the same week as monthly or quarterly options series. 
Currently, the rule states no Short Term Option Series may expire in 
the same week in which monthly option series on the same class expire 
(with the exception of Wednesday SPY Expirations) or, in the case of 
Quarterly Option Series, on an expiration that coincides with an 
expiration of Quarterly Option Series on the same class. As with 
Wednesday SPY Expirations, the Exchange proposes to permit Monday SPY 
Expirations to expire in the same week as monthly option series on the 
same class. The Exchange believes it is reasonable to extend this 
exemption to Monday SPY Expirations because Monday SPY 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 not listing Monday SPY Expirations for one week every 
month because there was a monthly SPY expiration on the Friday of that 
week would create investor confusion.
    The interval between strike prices for the proposed Monday SPY 
Expirations will be the same as those for the current Short Term Option 
Series for Wednesday and Friday SPY Expirations, which is a $0.50 
strike interval minimum.\9\
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    \9\ See Cboe Options Rule 5.5(d)(5)(ii) (strike price intervals 
for Short Term Option Series may be $0.50 or greater for classes 
that trade in $1 strike price intervals for non-Short Term Option 
Series). Pursuant to Cboe Options Rule 5.5.08(b), SPY options have 
$1 strike price intervals for non-Short Term Option Program series.
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    Currently, for each option class eligible for participation in the 
Program, the Exchange is limited to opening 30 series for each 
expiration date for the specific class. The 30 series restriction does 
not include series that are opened by other securities exchanges under 
their respective short term option rules; the Exchange may list these 
additional series that are listed by other exchanges.\10\ This 30 
series restriction will apply to Monday SPY Expirations as well. In 
addition, the Exchange will be able to list series that are listed by 
other exchanges, assuming they file similar rules with the Commission 
to list SPY options expiring on Mondays.
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    \10\ See Cboe Options Rule 5.5(d)(1).
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    As is the case with other options series listed pursuant to the 
Short Term Option Series, the Monday SPY Expiration series will be 
p.m.-settled. The Exchange does not believe that any market disruptions 
will be encountered with the introduction of p.m.-settled Monday 
expirations. The Exchange has necessary capacity and surveillance 
programs in place to support and properly monitor trading in the 
proposed Monday expiration series, including Monday SPY Expirations. 
The Exchange currently trades p.m.-settled Short Term Option Series 
that expire almost every Wednesday and Friday, which provide market 
participants with a tool to hedge special events and to reduce the 
premium cost of buying protection. The Exchange notes it has been 
listing Wednesday expirations since 2016. With the exception of Monday 
expiration series that are scheduled to expire on a holiday, the 
Exchange does not believe there are any material differences between 
Monday SPY Expirations and Wednesday or Friday SPY Expirations.
    The Exchange seeks to introduce Monday SPY Expirations to, among 
other things, expand hedging tools available to market participants and 
to continue the reduction of the premium cost of buying protection. The 
Exchange believes Monday SPY Expirations, similar to Wednesday and 
Friday SPY Expirations, will allow market participants to purchase a 
SPY option based on their timing as needed and allow them to tailor 
their investment and hedging needs more effectively.
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.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Monday SPY Expirations 
simply expand the ability of investors to hedge risk against market 
movements stemming from economic releases or market events that occur 
throughout the month in the same way the Short Term Option Series 
Program has expanded the landscape of hedging. Similarly, the Exchange 
believes Monday SPY Expirations should create greater trading and 
hedging opportunities and flexibility, and will provide customers with 
the ability to tailor their investment objectives more effectively. 
With the exception of Monday expiration series that are scheduled to 
expire on a holiday, the Exchange does not believe there are any 
material differences between Monday SPY Expirations and Wednesday or 
Friday SPY Expirations. The Exchange has been listing Wednesday SPY 
Expirations pursuant to Rule 5.5(d) since 2016. The Exchange believes 
it is consistent with the Act to treat Monday SPY Expirations that 
expire on a holiday differently than Wednesday and Friday SPY 
Expirations, since the proposed treatment for Monday SPY Expirations 
will result in an expiration date that is closer in time to the 
scheduled expiration date of the series, and therefore may be more 
representative of anticipated market conditions. The Exchange uses the 
same procedure for broad-based index options with Monday expirations 
listed pursuant the Nonstandard Expirations Pilot Program that are 
scheduled to expire on a holiday.\14\
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    \14\ See Rule 24.9(e) (describing the Exchange's nonstandard 
expirations pilot program). Pursuant to the nonstandard expirations 
pilot program, if the Exchange is not open for business on a 
respective Monday, the normally Monday expiring Weekly Expirations 
will expire on the following business day.
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    Given the similarities between Monday SPY Expirations and Wednesday 
and Friday SPY Expirations, the Exchange believes applying the 
provisions in Rule 5.5(d)(2) that currently apply to Wednesday SPY 
Expirations to Monday SPY Expirations is justified. For example, the 
Exchange believes allowing Monday SPY Expirations and monthly SPY 
expirations in the same week will benefit investors and minimize 
investor confusion by providing Monday SPY Expirations in a continuous 
and uniform manner. Additionally, the Exchange believes it is 
appropriate to not permit Monday SPY Expirations to expire on the same 
day as an expiration of SPY Quarterly Option Series. This is consistent 
with treatment of Wednesday SPY Expirations, which may currently expire 
in the same week as a monthly

[[Page 8145]]

SPY expiration but may not expire on the same day as an expiration of 
SPY Quarterly Option Series.
    The Exchange represents it has an adequate surveillance program in 
place to detect manipulative trading in Monday SPY Expirations in the 
same way it monitors trading in the current Short Term Option Series. 
The Exchange also represents it has the necessary systems capacity to 
support the new options series.
    The proposed rule change is consistent with current Rules, pursuant 
to which Cboe Options currently lists Monday expirations for weekly 
broad-based index options.\15\ Additionally, the proposed rule change 
is consistent with rules of another options exchange, as Phlx recently 
received Commission approval to list Monday SPY Expirations.\16\
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    \15\ Id.
    \16\ See supra note 5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Cboe Options 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. Having Monday expirations is 
not a novel proposal, as Cboe Options currently lists weekly broad-
based index options with Monday expirations pursuant to the nonstandard 
expirations pilot program. Cboe Options does not believe the proposed 
rule change will impose any burden on intramarket competition, as all 
market participants will be treated in the same manner as they are with 
respect to existing Short Term Option Series. Cboe Options does not 
believe the proposed rule change will impose any burden on intermarket 
competition, as Phlx recently received Commission approval to list 
Monday SPY Expirations.\17\ Cboe Options believes this proposed rule 
change is necessary to ensure fair competition among the options 
exchanges. Additionally, nothing prevents other options exchange from 
proposing similar rules to list and trade short-term option series in 
SPY with Monday expirations.
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    \17\ Id.
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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, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\18\ and Rule 19b-4(f)(6) thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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 intention 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii) \20\ 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 asked the Commission to waive 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 SPY 
Expirations.\21\ The Exchange has stated that waiver of the operative 
delay will allow the Exchange to list and trade Monday SPY Expirations 
as soon as possible, and therefore, promote competition among the 
option exchanges. 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. Therefore, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\22\
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    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See supra note 5.
    \22\ 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 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-2018-018 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-2018-018. 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-2018-018 and

[[Page 8146]]

should be submitted on or before March 16, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03695 Filed 2-22-18; 8:45 am]
 BILLING CODE 8011-01-P