Document ID: SEC-2021-1075-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2021-08-11T04:00Z

[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Notices]
[Pages 44118-44122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17086]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92581; File No. SR-CBOE-2021-029]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing of Amendment No. 1 and Order Instituting Proceedings To 
Determine Whether To Approve or Disapprove a Proposed Rule Change, as 
Modified by Amendment No. 1, To Increase Position Limits for Options on 
Certain Exchange-Traded Funds and an Exchange-Traded Note

August 5, 2021.

I. Introduction

    On April 21, 2021, Cboe Exchange, Inc. (``Exchange'') filed with 
the Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend 
Interpretation and Policy .07 of Exchange Rule 8.30, Position Limits, 
to increase the position limits for options on the following exchange 
traded funds (``ETFs'') and exchange traded note (``ETN'') 
(collectively, ``Exchange Traded Products'' or ``ETP(s)''): SPDR Gold 
Shares (``GLD''), iShares iBoxx $ Investment Grade Corporate Bond ETF 
(``LQD''), iShares Silver Trust (``SLV''), iPath S&P 500 VIX Short-Term 
Futures ETN (``VXX''), ProShares Ultra VIX Short-Term Futures ETF 
(``UVXY''), and VanEck Vectors Gold Miners ETF (``GDX''). The proposed 
rule change was published for comment in the Federal Register on May 
10, 2021.\3\ On June 17, 2021, pursuant to Section 19(b)(2) of the 
Act,\4\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to approve or disapprove 
the proposed rule change.\5\ On July 27, 2021, the Exchange submitted 
Amendment No. 1 to the proposed rule change, which replaced and 
superseded the proposed rule change as originally filed.\6\ The 
Commission is publishing this notice and order to solicit comments on 
the proposed rule change, as modified by Amendment No. 1, from 
interested persons and to institute proceedings pursuant to Section 
19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 91767 (May 4, 2021), 
86 FR 25026.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 92204, 86 FR 33395 
(June 24, 2021). The Commission designated August 8, 2021, as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to approve or disapprove, 
the proposed rule change.
    \6\ In Amendment No. 1, the Exchange: (1) Reduced the proposed 
position limit for GLD options from 1,000,000 contracts to 500,000 
contracts; and (2) provided additional justification and analysis in 
support of the proposal. The additional justification and analysis 
provided by Amendment No. 1 is included in the description below of 
the proposal as amended. The full text of Amendment No. 1 is 
available on the Commission's website at: https://www.sec.gov/comments/sr-cboe-2021-029/srcboe2021029-9094584-246812.pdf.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal, as Modified by Amendment No. 1

    Currently, position limits for options on ETFs and ETNs traded on 
the Exchange, such as those subject to this

[[Page 44119]]

proposal, as amended, are determined pursuant to Exchange Rule 8.30, 
and generally vary according to the number of outstanding shares and 
past six-month trading volume of the underlying security. Options on 
the securities with the largest numbers of outstanding shares and 
trading volume have a standard option position limit of 250,000 
contracts (with adjustments for splits, re-capitalizations, etc.) on 
the same side of the market.\8\ In addition, Interpretation and Policy 
.07 of Exchange Rule 8.30 currently sets forth separate position limits 
for options on certain ETFs that range from 300,000 to 3.6 million 
contracts.
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    \8\ See Interpretation and Policy .02(e) to Exchange Rule 8.30.
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    Options on GLD, SLV, LQD, GDX, VXX, and UVXY are currently subject 
to the standard position limit of 250,000 contracts as set forth in 
Exchange Rule 8.30.\9\ The purpose of the proposed rule change, as 
modified by Amendment No.1, is to amend Interpretation and Policy .07 
to Exchange Rule 8.30 to increase the position limits for options on 
GLD, SLV, LQD, GDX, VXX, and UVXY from 250,000 contracts to 500,000 
contracts.\10\ The Exchange believes that the proposed position limit 
increases will lead to a more liquid and competitive market environment 
for these options that will benefit customers interested in trading 
these products.\11\ The Exchange states that, to support the proposed 
position limit increases, it has considered, and provided statistics 
regarding, the liquidity of the underlying ETPs, the value of the 
underlying securities or index components and relevant marketplace, the 
share and option volume for the underlying ETPs, and, where applicable, 
the availability or comparison of economically equivalent products to 
options on the underlying ETPs.
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    \9\ See Amendment No. 1, supra note 6, at 6; see also id. at 10, 
12, 16, 17, 19, for descriptions provided by the Exchange regarding 
the composition, design, and investment objectives of the ETPs 
underlying each of the options subject to this proposal.
    \10\ Pursuant to Exchange Rule 8.42, Interpretation and Policy 
.02, the text of which is not being amended by this proposal, the 
exercise limits for GLD, SLV, LQD, GDX, VXX, and UVXY options would 
be similarly increased as a result of this proposal.
    \11\ See Amendment No. 1, supra note 6, at 24.
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    Specifically, in support of its proposal to increase the position 
limits for options on GLD and SLV from 250,000 contracts to 500,000 
contracts, the Exchange, among other things, compares the trading 
characteristics of GLD and SLV to those of the iShares MSCI Brazil 
Capped ETF (``EWZ''), the iShares 20+ Year Treasury Bond Fund ETF 
(``TLT''), the iShares MSCI Japan ETF (``EWJ''), and the iShares iBoxx 
High Yield Corporate Bond Fund (``HYG''), all of which currently have a 
position limit of 500,000 contracts.\12\ The Exchange states that the 
average daily trading volume (``ADV'') in calendar year 2020 for GLD 
was 12.3 million shares and SLV was 33.1 million shares compared to 
29.2 million shares for EWZ, 11.5 million shares for TLT, 8.2 million 
shares for EWJ, and 30.5 million shares for HYG; \13\ the total shares 
outstanding as of April 5, 2021 for GLD was 354.3 million and SLV was 
619.3 million compared to 173.8 million for EWZ, 103.7 million for TLT, 
185.3 million for EWJ, and 254.5 million for HYG; \14\ and the fund 
market cap as of January 14, 2021 for GLD was $70,195.7 and SLV was 
$14,228.4 million compared to $6,506.8 million for EWZ, $17,121.3 
million for TLT, $13,860.7 million for EWJ, and $24,067.5 million for 
HYG.\15\
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    \12\ See id. at 9-13. See also Exchange Rule 8.30, 
Interpretation and Policy .07. Prior to the submission of Amendment 
No. 1, the Exchange originally proposed to increase the position 
limit for options on GLD to 1,000,000 contracts.
    \13\ See Amendment No. 1, supra note 6, at 11-12.
    \14\ See id. at 9-10.
    \15\ See id. at 9-12. The Exchange also states that demand for 
trading GLD and SLV options has increased whereas the position 
limits for these products have remained the same, which may impact 
the ability of Trading Permit Holders (``TPHs'') to effectively 
hedge against exposure to physical gold and silver. See id. at 13.
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    In addition, the Exchange states that it recognizes that the spot 
metal markets underlying SLV and GLD differ from the equities markets 
underlying EWZ, EWJ, TLT, and HYG, but that it does not believe that 
position limit increases for options on GLD and SLV will have any 
adverse impact on the underlying spot gold and silver markets.\16\ 
Specifically, the Exchange states that gold futures currently have a 
value of approximately $93.2 billion in open interest, have experienced 
an ADV of approximately 264,000 contracts (equivalent to approximately 
264 million GLD contracts) from January through May 2021, and currently 
are subject to a position limit of 6,000 contracts, which is notionally 
equivalent to 6,000,000 GLD option contracts.\17\ The Exchange 
similarly states that silver futures currently have a value of 
approximately $25.7 billion in open interest, have experienced an ADV 
of approximately 93,000 contracts (equivalent to approximately 465 
million SLV contracts) from January through May 2021, and currently are 
subject to a position limit of 3,000 contracts, which is notionally 
equivalent to 15,000,000 SLV option contracts.\18\ The Exchange 
believes that the volume in and value of the gold and silver futures 
markets indicate that the underlying markets are sufficiently large and 
liquid enough to absorb potential price movements and large-sized 
trades as a result of position limit increases for options on GLD and 
SLV.\19\
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    \16\ See id. at 14.
    \17\ See id. The Exchange understands that its market-makers use 
both GLD and gold futures to hedge their GLD options positions, 
which the Exchange believes provides for a balance across the gold-
related marketplaces, mitigating potential concerns that either the 
underlying or the futures market might experience additional 
pressure as a result of an increase in activity in the GLD options 
space. See id.
    \18\ See id.
    \19\ See id. at 14-15.
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    The Exchange also provides data showing that the volume-weighted 
average of the absolute value of deltas for GLD and SLV options trades 
from March 2019 through June 2021 was approximately 0.34 per GLD 
options trade and approximately 0.28 per SLV options trade.\20\ The 
Exchange believes these low absolute value deltas indicate that 
increases in GLD and SLV options trading would have minimal impact on 
the ability of the underlying metals markets to absorb any additional 
volume related to increased position limits and hedging activity.\21\
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    \20\ See id. at 15.
    \21\ See id. at 15-16.
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    In support of its proposal to increase the position limits for 
options on VXX and UVXY from 250,000 contracts to 500,000 contracts, 
the Exchange, among other things, compares the trading characteristics 
of VXX and UVXY to those of EWZ, TLT, EWJ, and HYG, all of which 
currently have a position limit of 500,000 contracts.\22\ The Exchange 
states that the ADV in calendar year 2020 for VXX was 39.3 million 
shares and UVXY was 29.3 million shares compared to 29.2 million shares 
for EWZ, 11.5 million shares for TLT, 8.2 million shares for EWJ, and 
30.5 million shares for HYG; \23\ the total shares outstanding as of 
April 14, 2021 for VXX was 110.8 million and UVXY was 228.7 million 
compared to 173.8 million for EWZ, 103.7 million for TLT, 185.3 million 
for EWJ, and 254.5 million for HYG; \24\ and the fund market cap as of 
January 14, 2021 for VXX was $1,023 million and UVXY was $1,580.6 
million compared to $6,506.8 million for EWZ, $17,121.3 million for 
TLT, $13,860.7

[[Page 44120]]

million for EWJ, and $24,067.5 million for HYG.\25\ The Exchange also 
states that the 2020 ADV for trading in VIX futures was approximately 
192,000 contracts and VIX futures currently have a value of 
approximately $7.6 billion in open interest.\26\ The Exchange believes 
that its proffered data indicates that the market for VXX and UVXY is 
sufficiently large and liquid enough to absorb price movements and 
large-sized trades.\27\
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    \22\ See id. at 9-10, 19-20. See also Exchange Rule 8.30, 
Interpretation and Policy .07. The Exchange also states that, while 
VIX options share similar trading characteristics with options on 
VXX and UVXY, VIX options are not currently subject to position 
limits. See Amendment No. 1, supra note 6, at 20.
    \23\ See Amendment No. 1, supra note 6, at 19-20.
    \24\ See id. at 9-10.
    \25\ See id.
    \26\ See id. at 20.
    \27\ See id.
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    The Exchange further states that the VIX futures that comprise both 
VXX and UVXY are a perfect hedge to the underlying delta risk, but that 
such futures are not recognized as hedges for options contract 
equivalent of the net delta (``OCEND'') purposes.\28\ A TPH that is not 
delta neutral must be hedged to the extent that the OCEND stays within 
the applicable position limit.\29\ According to the Exchange, due to 
the OCEND limitations and current position limits for options on VXX 
and UVXY, heightened demand for liquidity in VXX and UVXY options can 
cause TPHs that are hedged via the component futures to approach 
position limits more rapidly.\30\ In order to stay within the 
applicable position limit, TPHs may shift out of futures hedges into 
hedges with options or may purchase or create shares of the underlying 
ETPs. As a result, TPHs may be unable to provide the most concise 
pricing to customers participating in these ETPs due to increased costs 
associated with transacting in additional or alternative hedging 
vehicles, and risk may concentrate in the ETP issuer rather than being 
spread across multiple market participants, which may exacerbate an 
already volatile market.\31\ The Exchange believes that increasing 
position limits for options on VXX and UVXY may assist in maintaining a 
fair and orderly market during times of higher market volatility, and 
may reduce any potential additional impact on the futures markets as a 
result of an increased demand (or, conversely, supply) for shares of 
the ETPs during periods of higher market volatility or illiquidity.\32\
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    \28\ See id.
    \29\ See id.
    \30\ See id. at 20-21.
    \31\ See id. at 21.
    \32\ See id. at 21-22. In contrast, the Exchange believes that 
the current position limits for VXX and UVXY options may, at times 
in which there is higher volatility and, thus, higher demand in 
connection with these options, reduce liquidity and create further 
volatility. See id. at 21.
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    The Exchange further believes that the VIX futures markets, 
including in the Trade at Settlement (``TAS'') VIX futures market, 
wherein VXX and UVXY are primarily rebalanced, maintain robust, liquid 
markets such that they can sufficiently handle any additional options 
delta exposure and resulting increase in volatility options trading, 
including during the rebalancing period.\33\ Specifically, the Exchange 
states that it has observed that the ADV in the VIX futures TAS market 
has grown from approximately 32,200 contracts in 2018 to approximately 
42,200 contracts in 2021.\34\
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    \33\ See id. at 22.
    \34\ See id.
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    In support of its proposal to increase the position limits for 
options on GDX from 250,000 contracts to 500,000 contracts, the 
Exchange, among other things, compares the trading characteristics of 
GDX to those of EWZ, TLT, EWJ, and HYG, all of which currently have a 
position limit of 500,000 contracts.\35\ The Exchange states that the 
ADV in calendar year 2020 for GDX was 39.4 million shares compared to 
29.2 million shares for EWZ, 11.5 million shares for TLT, 8.2 million 
shares for EWJ, and 30.5 million shares for HYG; \36\ the total shares 
outstanding as of April 5, 2021 for GDX was 419.8 million compared to 
173.8 million for EWZ, 103.7 million for TLT, 185.3 million for EWJ, 
and 254.5 million for HYG; \37\ and the fund market cap as of January 
14, 2021 for GDX was $16,170.5 million compared to $6,506.8 million for 
EWZ, $17,121.3 million for TLT, $13,860.7 million for EWJ, and 
$24,067.5 million for HYG.\38\ The Exchange also states that many of 
the Brazil-based gold mining constituents included in GDX are also 
included in EWZ, and that the Exchange has not identified any issues 
with the continued listing and trading of EWZ options or any adverse 
market impact on EWZ in connection with the current 500,000 position 
limit in place for EWZ options.\39\ Further, the Exchange states that 
the components of the NYSE Arca Gold Miners Index--the price and yield 
performance of which GDX seeks to replicate as closely as possible--can 
be used to create the GDX ETF, and currently must each have a market 
capitalization greater than $750 million, an ADV of at least 50,000 
shares, and an average daily value traded of at least $1 million in 
order to be eligible for inclusion in the index.\40\
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    \35\ See id. at 9-10, 18. See also Exchange Rule 8.30, 
Interpretation and Policy .07.
    \36\ See Amendment No. 1, supra note 6, at 18.
    \37\ See id. at 9-10.
    \38\ See id. at 9-10, 18.
    \39\ See id. at 18.
    \40\ See id. at 17-18.
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    In support of its proposal to increase the position limit for LQD 
from 250,000 contracts to 500,000 contracts, the Exchange, among other 
things, compared the trading characteristics of LQD to those of EWZ, 
TLT, and EWJ, all of which currently have a position limit of 500,000 
contracts.\41\ The Exchange provides data demonstrating that the ADV in 
calendar year 2020 for LQD was 14.1 million shares compared to 29.2 
million shares for EWZ, 11.5 million shares for TLT, and 8.2 million 
shares for EWJ; \42\ the total shares outstanding as of April 5, 2021 
for LQD was 308.1 million compared to 173.8 million for EWZ, 103.7 
million for TLT, and 185.3 million for EWJ; \43\ and the fund market 
cap as of January 14, 2021 for LQD was $54,113.7 million compared to 
$6,506.8 million for EWZ, $17,121.3 million for TLT, and $13,860.7 
million for EWJ.\44\ The Exchange also states that LQD tracks the 
performance of the Markit iBoxx USD Liquid Investment Grade Index, 
which is an index designed as a subset of the broader U.S. dollar-
denominated corporate bond market and can be used in creating a basket 
of securities that equate to the LQD ETF, and which is comprised of 
over 8,000 bonds for which the outstanding face value of each must be 
greater than or equal to $2 billion.\45\
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    \41\ See id. at 9-10, 16-17. See also Exchange Rule 8.30, 
Interpretation and Policy .07.
    \42\ See Amendment No. 1, supra note 6, at 16.
    \43\ See id. at 9-10.
    \44\ See id. at 9-10, 16.
    \45\ See id. at 16-17.
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    The Exchange states that the current position limits for the 
options subject to the proposal may have impeded the ability of market 
makers to make markets on the Exchange.\46\ Specifically, the Exchange 
avers, the proposal is designed to encourage liquidity providers to 
provide additional liquidity to the Exchange and other market 
participants to shift liquidity from over-the-counter markets onto the 
Exchange, which, it believes, would enhance the process of price 
discovery conducted on the Exchange through increased order flow.\47\ 
The proposal also would benefit market participants, the Exchange 
maintains, by providing them with the ability to more effectively 
execute their trading and hedging activities.\48\
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    \46\ See id. at 5.
    \47\ See id. at 5, 27-28.
    \48\ See id. at 5, 28.
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    With regard to the concerns that position limits generally are 
meant to address, the Exchange represents that the structure of the 
underlying ETPs subject to this proposal, the considerable market 
capitalization of the ETPs and their underlying

[[Page 44121]]

component securities, and the liquidity of the market for options on 
these ETPs and the underlying component securities mitigate concerns 
regarding potential manipulation of the products and disruption of the 
underlying markets due to the increased position limits.\49\ The 
Exchange also describes: (i) The creation and redemption process for 
ETFs (and a similar process for the ETN to which the proposal relates); 
\50\ (ii) the arbitrage activity that ensues when such instruments are 
overpriced or are trading at a discount to the securities on which they 
are based and helps to keep the instrument's price in line with the 
value of its underlying portfolio; and (iii) how these processes, in 
the Exchange's view, serve to mitigate the potential price impact of 
the ETF or ETN shares that might otherwise result from increased 
position limits.\51\
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    \49\ See id.
    \50\ With regard to the ETN option included in the proposal--
VXX--the Exchange stated that there is no direct analogue to ETF 
``creation,'' but observed that the ETN issuer may sell additional 
VXX shares from its inventory. Regardless of whether VXX shares are 
redeemed or new VXX shares are issued, the Exchange stated, an 
issuer may transact in VIX futures in order to hedge its exposure, 
resulting in an arbitrage process similar to the one described for 
ETFs described above, thereby helping to keep an ETN's price in line 
with the value of its underlying index. See id. at 23.
    \51\ See id. at 22-24.
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    In addition, the Exchange states that the options reporting 
requirements of Exchange Rule 8.43 would continue to be applicable to 
the options subject to this proposal.\52\ As set forth in Exchange Rule 
8.43(a), each TPH must report to the Exchange certain information in 
relation to any customer who, acting alone, or in concert with others, 
on the previous business day maintained aggregate long or short 
positions on the same side of the market of 200 or more contracts in 
any single class of option contracts dealt in on the Exchange.\53\ 
Further, Exchange Rule 8.43(b) requires each TPH (other than an 
Exchange market-maker or designated primary market-maker) \54\ that 
maintains a position in excess of 10,000 non-FLEX equity option 
contracts on the same side of the market, on behalf of its own account 
or for the account of a customer, to report to the Exchange information 
as to whether such positions are hedged, and provide documentation as 
to how such contracts are hedged.\55\
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    \52\ See id. at 24-25.
    \53\ The report must include, for each such class of options, 
the number of option contracts comprising each such position and, in 
the case of short positions, whether covered or uncovered. See 
Exchange Rule 8.43(a).
    \54\ According to the Exchange, market-makers (including 
designated primary market-makers) are exempt from the referenced 
reporting requirement because market-maker information can be 
accessed through the Exchange's market surveillance systems. See 
Amendment No. 1, supra note 6, at 25.
    \55\ According to the Exchange, this information would include, 
but would not be limited to, the option position, whether such 
position is hedged and, if so, a description of the hedge. See id. 
at 24-25.
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    The Exchange also represents that the existing surveillance 
procedures and reporting requirements at the Exchange and other self-
regulatory organizations are capable of properly identifying disruptive 
and/or manipulative trading activity.\56\ According to the Exchange, 
its surveillance procedures utilize daily monitoring of market activity 
via automated surveillance techniques to identify unusual activity in 
both options and the underlying products.\57\ In addition, the Exchange 
states that its surveillance procedures have been effective for the 
surveillance of trading in the options subject to this proposal, and 
will continue to be employed.\58\
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    \56\ See id. at 25.
    \57\ See id. at 25-26.
    \58\ See id. at 26 n.36. The Exchange represents that non-U.S. 
component securities that are not subject to a comprehensive 
surveillance agreement do not, in the aggregate, represent more than 
50% of the weight of any of the underlying ETPs that are ETFs. See 
id. at 7.
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    The Exchange further states its belief that the current financial 
requirements imposed by the Exchange and by the Commission adequately 
address concerns that a TPH or its customer may try to maintain an 
inordinately large unhedged position in the options subject to this 
proposal.\59\ Current margin and risk-based haircut methodologies, the 
Exchange states, serve to limit the size of positions maintained by any 
one account by increasing the margin and/or capital that a TPH must 
maintain for a large position held by itself or by its customer.\60\ In 
addition, the Exchange notes that the Commission's net capital rule, 
Rule 15c3-1 under the Act,\61\ imposes a capital charge on TPHs to the 
extent of any margin deficiency resulting from the higher margin 
requirement.\62\
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    \59\ See id. at 26.
    \60\ See id.
    \61\ 17 CFR 240.15c3-1.
    \62\ See Amendment No. 1, supra note 6, at 26.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2021-029, as Modified by Amendment No. 1, and Grounds for Disapproval 
Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \63\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of proceedings is appropriate at this time in 
view of the legal and policy issues raised by the proposal, as 
discussed below. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide comment on the proposed rule 
change, as modified by Amendment No. 1.
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    \63\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\64\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of, and input from commenters with respect to, the consistency 
of the proposed rule change, as modified by Amendment No. 1, with the 
Act and, in particular, Section 6(b)(5) of the Act,\65\ which requires 
that the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, 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, and not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \64\ Id.
    \65\ 15 U.S.C. 78f(b)(5).
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the self-
regulatory organization that proposed the rule change.'' \66\ The 
description of a proposed rule change, its purpose and operation, its 
effect, and a legal analysis of its consistency with applicable 
requirements must all be sufficiently detailed and specific to support 
an affirmative Commission finding,\67\ and any failure of a self-
regulatory organization to provide this information may result in the 
Commission not having a sufficient basis to make an affirmative finding 
that a proposed rule change is consistent with the Act and the 
applicable rules and regulations.\68\
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    \66\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR 
201.700(b)(3).
    \67\ See id.
    \68\ See id.
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    Position and exercise limits serve as a regulatory tool designed to 
address manipulative schemes and adverse

[[Page 44122]]

market impact surrounding the use of options.\69\ As discussed above, 
the Exchange has proposed to increase the position and exercise limits 
for options on GLD, SLV, LQD, GDX, VXX, and UVXY from 250,000 contracts 
to 500,000 contracts. The proposed doubling of the position and 
exercise limits for these options would be a substantial increase from 
current levels, and raises the potential for adverse impacts in the 
underlying markets implicated by this proposal. The initial proposal 
did not provide sufficient information to explain why all of these 
underlying markets are sufficiently comparable to the markets 
underlying the option products currently subject to a 500,000 contract 
position limit or sufficient information to independently support a 
finding that all of the proposed position limit increases would not 
have an adverse market impact. Accordingly, the initial proposal did 
not provide an adequate basis for the Commission to conclude that the 
proposal would be consistent with Section 6(b)(5) of the Act.
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    \69\ See, e.g., Securities Exchange Act Release No. 68086 
(October 23, 2012), 77 FR 65600 (October 29, 2012) (SR-CBOE-2012-
066).
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    The Exchange recently provided additional analysis and 
justification for its proposal in Amendment No. 1. Amendment No. 1 was 
submitted shortly before the expiration of the statutory deadline for 
the Commission to act on the Exchange's proposal, leaving the 
Commission, as well as any potential commenters, with insufficient time 
to carefully consider the new data and analysis before the deadline. In 
the proceedings that the Commission is instituting today, the 
Commission will be evaluating, among other things, the Exchange's 
amended statements, and invites comment on the extent to which they 
justify approval of the proposal.

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5), or any other provision of the Act, or the rules and 
regulations thereunder. Although there do not appear to be any issues 
relevant to approval or disapproval which would be facilitated by an 
oral presentation of data, views, and arguments, the Commission will 
consider, pursuant to Rule 19b-4 under the Act,\70\ any request for an 
opportunity to make an oral presentation.\71\
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    \70\ 17 CFR 240.19b-4.
    \71\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants to 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 
94th Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, as 
modified by Amendment No. 1, in addition to any other comments they may 
wish to submit about the proposed rule change. In particular, the 
Commission seeks comment on whether the position and exercise limit for 
each option as proposed could impact markets adversely.
    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change, as modified by 
Amendment No. 1, should be approved or disapproved by September 1, 
2021. Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by September 15, 2021. 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 No. SR-CBOE-2021-029 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 No. SR-CBOE-2021-029. The 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 No. SR-CBOE-2021-029 and should be submitted by 
September 1, 2021. Rebuttal comments should be submitted by September 
15, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\72\
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    \72\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-17086 Filed 8-10-21; 8:45 am]
BILLING CODE 8011-01-P