Document ID: SEC-2019-1563-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2019-10-23T04:00Z

[Federal Register Volume 84, Number 205 (Wednesday, October 23, 2019)]
[Notices]
[Pages 56879-56882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23056]

[[Page 56879]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87337; File No. SR-CBOE-2019-092]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Make 
Minor Amendments to and Relocate Certain Rules Related to the Listing 
of Index Options (Including Binary and Range Options) From the 
Currently Effective Rulebook to Proposed Chapter 4, Section B of the 
Shell Structure for the Exchange's Rulebook That Will Become Effective 
Upon the Migration of the Exchange's Trading Platform to the Same 
System Used by the Cboe Affiliated Exchanges

October 17, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 4, 2019, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the Exchange. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to make minor amendments to and relocate certain rules related to the 
listing of index options (including binary and range options) from the 
currently effective Rulebook (``current Rulebook'') to proposed Chapter 
4, Section B of the shell structure for the Exchange's Rulebook that 
will become effective upon the migration of the Exchange's trading 
platform to the same system used by the Cboe Affiliated Exchanges (as 
defined below) (``shell Rulebook''). 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
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc. 
(formerly named CBOE Holdings, Inc.) (``Cboe Global''), which is also 
the parent company of Cboe C2 Exchange, Inc. (``C2''), acquired Cboe 
EDGA Exchange, Inc. (``EDGA''), Cboe EDGX Exchange, Inc. (``EDGX'' or 
``EDGX Options''), Cboe BZX Exchange, Inc. (``BZX'' or ``BZX 
Options''), and Cboe BYX Exchange, Inc. (``BYX'' and, together with 
Cboe Options, C2, EDGX, EDGA, and BZX, the ``Cboe Affiliated 
Exchanges''). The Cboe Affiliated Exchanges are working to align 
certain system functionality, retaining only intended differences, 
between the Cboe Affiliated Exchanges, in the context of a technology 
migration. Cboe Options intends to migrate its trading platform to the 
same system used by the Cboe Affiliated Exchanges, which the Exchange 
expects to complete on October 7, 2019. In connection with this 
technology migration and the related reorganization of its Rulebook, 
the Exchange has a shell Rulebook that resides alongside its current 
Rulebook, which shell Rulebook will contain the Rules that will be in 
place upon completion of the Cboe Options technology migration.
    The Exchange proposes to make minor amendments to and relocate 
certain rules related to the listing of index options (including binary 
options and range options) into proposed Chapter 4, Section B of the 
shell Rulebook.\5\ The Exchange notes that in addition to making these 
amendments and reorganizing the current rules, the proposed rule change 
deletes these rules from the current Rulebook. The proposed rule change 
relocates and, where applicable, reorganizes the rules as follows:
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    \5\ The Exchange notes it moved certain rules related to index 
options from the current Rulebook to the shell Rulebook (such as 
rules related to trading hours and position and exercise limits) in 
other rule filings. See, e.g., Securities Exchange Act Release No. 
86173 (June 20, 2019), 84 FR 30267 (June 26, 2019) (SR-CBOE-2019-
027); and SR-CBOE-2019-088.

------------------------------------------------------------------------
          Shell rule                          Current rule
------------------------------------------------------------------------
Chapter 4, Section B           Chapter XXIV Introduction.
 Introduction.                 In addition to nonsubstantive changes,
                                the proposed rule change adds that other
                                Rules may not apply if the context
                                otherwise requires (for example, a rule
                                that refers to the stock underlying an
                                option would be inapplicable to an index
                                option, which has an underlying index).
4.10 Designation of the Index  24.2 Designation of the Index.\6\
4.11 Definitions.............  24.1 Definitions (except Interpretation
                                and Policy .01).
                               The proposed rule change deletes the
                                definitions of ``underlying security''
                                and ``reporting authority,'' as those
                                terms are already defined in Rule 1.1 of
                                the shell Rulebook, and therefore the
                                definitions in Rule 24.1 are
                                redundant.\7\
4.12(a)--(b) Dissemination of  24.3 Dissemination of Information.
 Information..                 24.1, Interpretation and Policy .01
4.12(c) Reporting Authorities   Reporting Authorities.\8\
4.13 Series of Index Options   24.9 Terms of Index Option Contracts.
 Open.                          8.14, Interpretation and Policy .01.\9\
4.14 Debit Put Spread Cash     24.11A Debit Put Spread Cash Account
 Account Transactions.          Transactions.
4.15 Range Options:

[[Page 56880]]

 
                               Chapter XX, Introduction.\10\
    (a) General..............  20.1 Definitions.
    (b) Definitions..........  20.3 Designation of Range Option
                                Contracts.
    (c) Designation of Range   20.4 Maintenance Listing Standards.
     Option Contracts.
    (d) Maintenance Listing    20.9 Determination of the Settlement
     Standards.                 Value of the Underlying Index.
    (e) Determination of the
     Settlement Value of the
     Underlying Index.
4.16 Binary Options:
    (a) General..............  Chapter XXII, Introduction.\11\
    (b) Definitions..........  22.1 Definitions.\12\
    (c) Designation of Binary  22.3 Designation of Binary Option
     Option Contracts.          Contracts.
    (d) Maintenance Listing    22.4 Maintenance Listing Standards.
     Standards.
    (e) Determination of the   22.10 Determination of the Settlement
     Settlement Value of the    Value of the Underlying Index.
     Underlying Index.
    (f) Adjustment...........  22.13(c) Premium Bids and Offers; Minimum
                                Increments; Priority and Allocation.
    (g) FLEX Trading.........  22.16 FLEX Trading.
                               The proposed rule change deletes the
                                language from this provision regarding
                                the inapplicability of minimum quote
                                widths (in current Rule 24A.9) to binary
                                options, as there is no longer a quote
                                width obligation, so there is no longer
                                a need to exclude its applicability to
                                binary options.\13\ Since this quote
                                width obligation did not apply to binary
                                options, deletion of that provision, and
                                thus deletion of its reference in this
                                proposed paragraph (g), would have no
                                impact on the trading of FLEX binary
                                options. [sic].
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    \6\ The proposed rule change moves current Rule 24.2, 
Interpretation and Policy .01 into proposed Rule 4.10(h) and (i), 
current Rule 24.2, Interpretation and Policy .02 into proposed Rule 
4.10(j) and (k), and current Rule 24.2, Interpretation and Policy 
.03 into proposed Rule 4.10(l) and (m).
    \7\ The proposed rule change also deletes reserved paragraphs 
that contain no substantive rule text from current Rule 24.1.
    \8\ The proposed rule change updates the name of certain 
reporting authorities to their current legal names.
    \9\ The Exchange previously deleted the rule text from current 
Rule 8.14. See Securities Exchange Act Release No. 87024 (September 
19, 2019), 84 FR 50545 (September 25, 2019) (SR-CBOE-2019-059). The 
Exchange is not adding to the shell Rulebook the language from Rule 
8.14, Interpretation and Policy .01 that states the Exchange will 
have authority to change the eligible categories of Market-Maker 
participants for each group, as that authority is covered by other 
rules. See Rules 3.55(a) (which states the Exchange may designate 
one or more Market-Makers in good standing with an appointment in a 
class for which a designated primary market-maker (``DPM'') has not 
been appointed as a Lead Market-Maker (``LMM'')), 5.50(h) (which 
permits the Exchange to determine for each class traded on the 
Exchange whether a DPM should be appointed to the class), and 
5.50(l) (which permits the Exchange to designate a class for trading 
without a DPM or LMM). Additionally, the language in current Rule 
8.14, Interpretation and Policy .01(a) was previously moved to Rule 
5.5(l)(1) of the shell Rulebook, .01(b) was previously moved to 
5.50(l)(2) of the shell Rulebook, and .01(c) was previously moved to 
Rule 1.5(b) [sic] of the shell Rulebook.
    \10\ The proposed rule change simplifies the current language, 
but makes no substantive changes.
    \11\ The proposed rule change simplifies the current language, 
but makes no substantive changes.
    \12\ The proposed rule change deletes the definition of 
``reporting authority,'' as that term is already defined in Rule 1.1 
of the shell Rulebook, and therefore the definition in Rule 22.1 is 
redundant.
    \13\ See Securities Exchange Act Release No. 87024 (September 
19, 2019), 84 FR 50545 (September 25, 2019) (SR-CBOE-2019-059) (in 
which filing the Exchange deleted the quote width obligation from 
current Rule 24A.9 [sic]).
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    The proposed rule change deletes current Rules 22.11 and 22.13(d), 
as those rules merely point to other rules as applying to binary 
options. Pursuant to proposed Rule 4.16(a), all rules apply to binary 
options unless otherwise provided or unless the context provides 
otherwise. Therefore, these rules are redundant and unnecessary.
    The proposed rule change deletes the introduction to current 
Chapter XXIV. It is clear from the Chapter and Section headings that 
the rules being moved into the shell Rulebook relate to index options. 
Any rules that apply differently to index options specify that in the 
rules in the shell Rulebook. [sic]
    The proposed rule change deletes indexes currently listed in 
current Rules 24.1, Interpretation and Policy .01 and 24.9(a)(3), 
(a)(4), (b)(2) and Interpretation and Policy .01 \14\ (proposed Rules 
4.12(c) and 4.13(a)(3), (a)(4), and Interpretation and Policy .01, 
respectively) on which the Exchange is authorized to list options, but 
on which the Exchange does not currently, and does not intend, to list 
options. Because there are currently no options listed on any of these 
indexes, the proposed rule change has no impact on how options are 
listed on the Exchange or the requirements for listing options on the 
Exchange.
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    \14\ The proposed rule change also deletes a reference to one of 
the indexes being deleted from current Rule 24.9(c), and deletes 
current Rule 24.9, Interpretation and Policy .01(f) and (g), which 
relate to indexes being deleted from the rules.
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    The proposed rule change deletes a reference to Rule 8.14 from 
current Rule 24.9(d)(6) (proposed Rule 4.13(d)(6), as that provision 
was deleted as unnecessary.\15\ The Exchange may determine eligible 
categories of Market-Maker participants for a class pursuant to other 
rules.\16\ Additionally, the proposed rule change deletes the 
parenthetical that references public customers whose orders would be 
eligible to be placed on the book under current Rule 7.4(a) from the 
introductory paragraph of Rule 24.11A (proposed Rule 4.14), as the 
orders of all public customers are eligible to be placed on the book in 
all classes, and there no longer is a Rule 7.4 in the current Rulebook.
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    \15\ See Securities Exchange Act Release No. 87024 (September 
19, 2019), 84 FR 50545 (September 25, 2019) (SR-CBOE-2019-059).
    \16\ See, e.g., Rules 3.55 and 5.50 in the shell Rulebook.
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    The proposed rule change updates references in current Rule 24.9, 
Interpretations and Policies .01(b) and .11(c) (proposed Rule 4.13, 
Interpretations and Policies .01(b) and .10(c)) to the EOW/EOM Pilot 
Program in current Rule 24.9(e) (which the proposed rule change moves 
to proposed Rule 4.13(e)), to the Nonstandard Expirations Pilot 
Program, which is the current name of that program.
    The proposed rule changes make also makes nonsubstantive changes to 
the rules in order to add section headings, update cross-references to 
other rules and chapters that will be implemented upon migration, 
update certain technical text formatting that will be used in the rules 
upon migration (e.g., using words for numbers below 10 in the rule text 
and numerals for numbers above 10 in the rule text), update times from 
Chicago time to Eastern time (see

[[Page 56881]]

Rule 1.6 of the shell Rulebook), delete empty reserved rules, correct 
punctuation, alphabetize definitions, refer to Standard & Poor's as 
S&P, incorporate defined terms, and reformat the paragraph lettering 
and numbering to conform to that used in the shell Rulebook.
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.\17\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \18\ 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) \19\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
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    The proposed rule change only deletes redundant rules, deletes 
references to indexes on which the Exchange does not list (and does not 
intend to list) options, and makes nonsubstantive changes to the rules 
and is merely intended to simplify, consolidate, and reorganize the 
Exchange's Rules in anticipation of the technology migration on October 
7, 2019. The Exchange believes that these proposed change will foster 
cooperation and coordination with those facilitating transactions in 
securities and remove impediments to and perfect the mechanism of a 
free and open market and national market system by simplifying the 
Rules and Rulebook as a whole, and making its Rules easier to follow 
and understand, which will also result in less burdensome and more 
efficient regulatory compliance.

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 reiterates that 
the proposed rule change is being proposed in the context of a 
technology migration of the Exchange's trading platform to the same 
system as the Cboe Affiliated Exchanges and the related reorganization 
of the Rulebook, and not as a competitive filing. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition because it only deletes redundant rules, 
deletes references to indexes on which the Exchange does not list (and 
does not intend to list) options, and makes nonsubstantive changes to 
the rules and is merely intended to simplify, consolidate, reorganize 
the Exchange's Rules in the shell Rulebook that will be in place come 
October 7, 2019. The Exchange does not believe that the proposed rule 
change will impose any burden on intermarket competition because the 
proposed rules are substantially the same as the Exchange's current 
rules, all of which have all been previously filed with the Commission.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) \21\ thereunder. 
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 \22\ and Rule 19b-4(f)(6) \23\ 
thereunder.
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    \20\ 15 U.S.C. 78(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \24\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\25\ the Commission 
may designate a shorter time if such action is consistent with 
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 prior to the Exchange's proposed 
system migration on October 7, 2019, in order to permit the Exchange to 
provide a complete Rulebook upon the completion of the migration. 
According to the Exchange, the proposed rule change simplifies, 
consolidates, and updates its rule text and does not substantively 
alter any of its rules. Moreover, the Exchange has represented that the 
proposed rule change has no impact on how options are listed on the 
Exchange or the requirements for listing options on the Exchange. The 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposal does not raise any new or novel issues. Further, 
notwithstanding the introduction to Chapter 4, Section B, that all 
rules apply unless the context may otherwise require, the Commission 
expects any rules that were previously applicable will continue to 
apply in the same manner. Therefore, the Commission designates the 
proposed rule change to be operative on upon filing.\26\
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    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ 17 CFR 240.19b-4(f)(6).
    \26\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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 will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

[[Page 56882]]

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-2019-092 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2019-092. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CBOE-2019-092 and should be submitted on 
or before November 13, 2019.
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    \27\ 17 CFR 200.30-3(a)(12)

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-23056 Filed 10-22-19; 8:45 am]
 BILLING CODE 8011-01-P