Document ID: SEC-2023-1117-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2023-10-04T04:00Z

[Federal Register Volume 88, Number 191 (Wednesday, October 4, 2023)]
[Notices]
[Pages 68896-68899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21953]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98621; File No. SR-CBOE-2023-054]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Amend Rule 4.13

September 28, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 28, 2023, Cboe Exchange, Inc. (``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 4.13. The text of the proposed rule change is provided 
below.

(additions are italicized; deletions are [bracketed])

* * * * *

Rules of Cboe Exchange, Inc.

* * * * *

Rule 4.13. Series of Index Options

* * * * *
    (e) Nonstandard Expirations Program.
    (1) Weekly Expirations. The Exchange may open for trading Weekly 
Expirations on any broad-based index eligible for standard options 
trading to expire on any Monday, Tuesday, Wednesday, Thursday, or 
Friday (other than the third Friday-of-the-month or days that 
coincide with an EOM expiration). [In addition, the Exchange may 
also open for trading Weekly Expirations on S&P 500 Index and Mini-
S&P 500 Index options to expire on any Tuesday or Thursday (other 
than days that coincide with an EOM expiration).] Weekly Expirations 
shall be subject to all provisions of this Rule and treated the same 
as options on the same underlying index that expire on the third 
Friday of the expiration month; provided, however, that Weekly 
Expirations shall be P.M.-settled and new series in Weekly 
Expirations may be added up to and including on the expiration date 
for an expiring Weekly Expiration.
    The maximum number of expirations that may be listed for each 
Weekly Expiration (i.e., a Monday expiration, Tuesday expiration, 
Wednesday expiration, Thursday

[[Page 68897]]

expiration, or Friday expiration, as applicable) in a given class is 
the same as the maximum number of expirations permitted in Rule 
4.13(a)(2) for standard options on the same broad-based index. 
Weekly Expirations need not be for consecutive Monday, Tuesday, 
Wednesday, Thursday, or Friday expirations as applicable; however, 
the expiration date of a non-consecutive expiration may not be 
beyond what would be considered the last expiration date if the 
maximum number of expirations were listed consecutively. Weekly 
Expirations that are first listed in a given class may expire up to 
four weeks from the actual listing date. If the Exchange lists EOMs 
and Weekly Expirations as applicable in a given class, the Exchange 
will list an EOM instead of a Weekly Expiration that expires on the 
same day in the given class. Other expirations in the same class are 
not counted as part of the maximum number of Weekly Expirations for 
an applicable broad-based index class. 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. If the 
Exchange is not open for business on a respective Tuesday, 
Wednesday, Thursday, or Friday, the normally Tuesday, Wednesday, 
Thursday, or Friday expiring Weekly Expirations will expire on the 
previous business day. If two different Weekly Expirations [on S&P 
500 Index or Mini-S&P 500 Index options] would expire on the same 
day because the Exchange is not open for business on a certain 
weekday, the Exchange will list only one of such Weekly Expirations.
* * * * *
    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 4.13(e), which governs its 
Nonstandard Expirations Program (``Program''), to permit P.M.-settled 
options on any broad-based index eligible for standard options trading 
that expire on Tuesday or Thursday. Currently under the Program, the 
Exchange is permitted to list P.M.-settled options on any broad-based 
index eligible for standard trading that expire on: (1) any Monday, 
Wednesday, or Friday (other than the third Friday-of-the-month or days 
that coincide with an EOM expiration (as defined below) and, with 
respect to options on the S&P 500 Index (``SPX options'') and the Mini-
S&P 500 Index (``XSP options'') any Tuesday or Thursday (``Weekly 
Expirations'') and (2) the last trading day of the month (``End of 
Month Expirations'' or ``EOMs'').\3\ The Exchange notes that permitting 
Tuesday and Thursday expirations for all broad-based indexes, as 
proposed, would be in addition to the options with Monday, Wednesday 
and Friday expirations that the Exchange may (and does) already list on 
those indexes, as they are permissible Weekly Expirations for options 
on a broad-based index pursuant to Rule 4.13(e)(1). The proposal merely 
expands the availability of Tuesday and Thursday Weekly Expirations, 
and thus all Weekly Expirations available under the Program, to all 
broad-based indexes eligible for standard options trading, on which the 
Exchange may currently list Monday, Wednesday, and Friday Weekly 
expirations under the Program.
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    \3\ See Rule 4.13(e).
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    The Program for Weekly Expirations will apply to any broad-based 
index option with Tuesday and Thursday expirations in the same manner 
as it currently applies to all other P.M.-settled broad-based index 
options with Monday, Wednesday, and Friday expirations and to SPX and 
XSP options with Tuesday and Thursday expirations. Specifically, as set 
forth in Rule 4.13(e), Weekly Expirations, including the proposed 
Tuesday and Thursday expirations, are subject to all provisions of Rule 
4.13 and treated the same as options on the same underlying index that 
expire on the third Friday of the expiration month; provided, however, 
that Weekly Expirations are P.M.-settled, and new series in Weekly 
Expirations may be added up to and including on the expiration date for 
an expiring Weekly Expiration.
    The maximum number of expirations that may be listed for each 
Weekly Expiration (i.e., a Monday expiration, Tuesday expiration, 
Wednesday expiration, Thursday expiration, or Friday expiration, as 
applicable) in a given class is the same as the maximum number of 
expirations permitted in Rule 4.13(a)(2) for standard options on the 
same broad-based index. Weekly Expirations need not be for consecutive 
Monday, Tuesday, Wednesday, Thursday, or Friday expirations as 
applicable; however, the expiration date of a nonconsecutive expiration 
may not be beyond what would be considered the last expiration date if 
the maximum number of expirations were listed consecutively. Weekly 
Expirations that are first listed in a given class may expire up to 
four weeks from the actual listing date. If the Exchange lists EOMs and 
Weekly Expirations as applicable in a given class, the Exchange will 
list an EOM instead of a Weekly Expiration that expires on the same day 
in the given class. Other expirations in the same class are not counted 
as part of the maximum number of Weekly Expirations for an applicable 
broad-based index class. 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. If the Exchange is not open for 
business on a respective Tuesday, Wednesday, Thursday, or Friday, the 
normally Tuesday, Wednesday, Thursday, or Friday expiring Weekly 
Expirations will expire on the previous business day. If two different 
Weekly Expirations on a broad-based index would expire on the same day 
because the Exchange is not open for business on a certain weekday, the 
Exchange will list only one of such Weekly Expirations. In addition, 
like all Weekly Expirations, pursuant to Rule 4.13(e)(3), transactions 
in expiring broad-based index options with Tuesday and Thursday 
expirations may be effected on the Exchange between the hours of 9:30 
a.m. and 4:00 p.m. on their last trading day (Eastern Time).
    The Exchange believes that that the introduction of Tuesday and 
Thursday expirations for all broad-based index options (rather than 
offering those expirations for just two indexes) will expand hedging 
tools available to market participants while also providing greater 
trading opportunities, regardless of in which index option market they 
participate. By offering expanded Tuesday and Thursday expirations 
along with the current Monday, Wednesday and Friday expirations, the 
proposed rule change will allow market participants to purchase options 
on all broad-based index options available for trading on the Exchange 
in a manner more aligned with specific timing needs and more 
effectively tailor their investment and

[[Page 68898]]

hedging strategies and manage their portfolios. In particular, the 
proposed rule change will allow market participants to roll their 
positions on more trading days, thus with more precision, spread risk 
across more trading days and incorporate daily changes in the markets, 
which may reduce the premium cost of buying protection.
    The Exchange believes there is sufficient investor interest and 
demand in Tuesday and Thursday expirations for broad-based index 
options beyond SPX and XSP to warrant inclusion in the Program and that 
the Program, as amended, will continue to provide investors with 
additional means of managing their risk exposures and carrying out 
their investment objectives.\4\ With regard to the impact of this 
proposal on system capacity, the Exchange has analyzed its capacity and 
represents that it believes that the Exchange and OPRA have the 
necessary systems capacity to handle any potential additional traffic 
associated with trading of broad-based index options with Tuesday and 
Thursday expirations. The Exchange does not believe that its Trading 
Permit Holders (``TPHs'') will experience any capacity issues as a 
result of this proposal and represents that it will monitor the trading 
volume associated with any possible additional options series listed as 
a result of this proposal and the effect (if any) of these additional 
series on market fragmentation and on the capacity of the Exchange's 
automated systems.
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    \4\ The Exchange currently lists Tuesday and Thursday 
expirations in SPX and XSP options pursuant to the Program. The 
Exchange also already allows options on broad-based indexes to 
expire on Tuesdays for normally Monday or Wednesday expiring options 
when the Exchange is not open for business on a respective Monday or 
Wednesday (as applicable), and already allows options on broad-based 
indexes to expire on Thursdays for normally Friday expiring options 
when the Exchange is not open for business on a respective Friday. 
Also, EOM options in any broad-based indexes may currently be listed 
to expire on a Tuesday or Thursday.
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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.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ 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 facilitation 
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) \7\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
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    In particular, the Exchange believes that the proposed rule change 
will 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. The Exchange believes that that the 
introduction of Tuesday and Thursday expirations for all broad-based 
index options (rather than offering those expirations for just two 
indexes) will provide investors with expanded hedging tools and greater 
trading opportunities and flexibility, regardless of in which index 
option market they participate. As a result, investors will have 
additional means to manage their risk exposures and carry out their 
investment objectives. By offering expanded Tuesday and Thursday 
expirations along with the current Monday, Wednesday and Friday 
expirations, the proposed rule change will allow market participants to 
purchase options on all broad-based index options available for trading 
on the Exchange in a manner more aligned with specific timing needs and 
more effectively tailor their investment and hedging strategies and 
manage their portfolios. For example, the proposed rule change will 
allow market participants to roll their positions on more trading days, 
thus with more precision, spread risk across more trading days and 
incorporate daily changes in the markets, which may reduce the premium 
cost of buying protection. The Exchange represents that it believes 
that it has the necessary systems capacity to support any additional 
traffic associated with trading of options on all broad-based index 
options with Tuesday and Thursday expirations and does not believe that 
its TPHs will experience any capacity issues as a result of this 
proposal.
    The Commission previously recognized that listing Tuesday and 
Thursday expirations for SPX and XSP options was consistent with the 
Act.\8\ The Commission noted that Tuesday and Thursday expirations in 
these index options would ``offer additional investment options to 
investors and may be useful for their investment or hedging objectives 
. . . .'' \9\ The Exchange also notes it previously listed P.M.-settled 
broad-based index options with weekly expirations pursuant to a pilot 
program, so the Commission could monitor the impact of P.M. settlement 
of cash-settled index derivatives on the underlying cash markets (while 
recognizing that these risks may have been mitigated given enhanced 
closing procedures in use in the primary equity markets); however, the 
Commission recently approved a proposed rule change to make that pilot 
program permanent. The Commission noted that the data it reviewed in 
connection with the pilot demonstrated that these options (including 
SPX and XSP options with Tuesday and Thursday expirations) ``benefitted 
investors and other market participants by providing more flexible 
trading and hedging opportunities while also having no disruptive 
impact on the market'' and were thus consistent with the Act.\10\ The 
proposed rule change is consistent with these findings, as it will 
benefit investors and other market participants that participate in the 
markets for broad-based index options other than SPX and XSP options in 
the same manner by providing them with more flexible trading and 
hedging opportunities. Additionally, the Exchange does not believe the 
listing of additional P.M.-settled options on other broad-based indexes 
will have any significant economic impact on the underlying component 
securities surrounding the close as a result of expiring p.m.-settled 
options or impact market quality, based on the data provided to and 
reviewed by the Commission (and the Commission's own conclusions based 
on that review, as noted above) and due to the significant changes in 
closing procedures in the decades since index options moved to a.m.-
settlement.\11\
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    \8\ See Securities Exchange Act Release Nos. 94682 (April 12, 
2022), 87 FR 22993, 22994 (April 18, 2022) (SR-CBOE-2022-005) 
(approval of proposed rule change to list P.M.-settled SPX options 
that expire on Tuesdays and Thursdays) (``Daily SPX Option 
Approval''); and 95795 (September 15, 2022), 87 FR 57745, 57746 
(September 21, 2022) (SR-CBOE-2022-039) (approval of proposed rule 
change to list P.M.-settled XSP options that expire on Tuesdays and 
Thursdays) (``Daily XSP Option Approval'').
    \9\ See Daily SPX Option Approval at 22995; and Daily XSP Option 
Approval at 57746.
    \10\ See Securities Exchange Act Release No. 98456 at 10-11 
(September 20, 2023) (SR-CBOE-2023-020).
    \11\ See id.

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[[Page 68899]]

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 because options on broad-based 
indexes with Tuesday and Thursday expirations will be available to all 
market participants. By listing options on all available broad-based 
indexes that expire on Tuesdays and Thursdays, the proposed rule change 
will provide all investors that participate in the markets for options 
on all broad-based indexes available for trading on the Exchange with 
greater trading and hedging opportunities and flexibility to meet their 
investment and hedging needs, which are already available for SPX and 
XSP options. Additionally, Tuesday and Thursday expiring broad-based 
index options will trade in the same manner as Weekly Expirations 
currently trade, including Tuesday and Thursday expiring SPX and XSP 
options.
    The Exchange does not believe that the proposal to list options on 
all broad-based indexes with Tuesday and Thursday expirations will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because these 
options are proprietary Exchange products. Other exchanges offer 
nonstandard expiration programs for index options as well as short-term 
options programs for certain equity options (including options on 
certain exchange-traded funds that track broad-based indexes) that 
expire on Tuesdays and Thursdays \12\ and are welcome to similarly 
propose to list Tuesday and Thursday options on those index or equity 
products. To the extent that the addition of options on additional 
broad-based indexes that expire on Tuesdays and Thursdays being 
available for trading on the Exchange makes the Exchange a more 
attractive marketplace to market participants at other exchanges, such 
market participants are free to elect to become market participants on 
the Exchange.
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    \12\ See, e.g., Nasdaq PHLX, LLC Options 4A, Section 12 
(permitting nonstandard expirations, including expirations on 
Tuesdays and Thursdays, for Nasdaq-100 index options and Nasdaq 100-
Micro index options); and Nasdaq ISE, LLC Options 4, Section 5, 
Supplementary Material .03 (permitting short-term options series 
with daily expirations for SPY and QQQ options).
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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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. by order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2023-054 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-CBOE-2023-054. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CBOE-2023-054 and should be 
submitted on or before October 25, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21953 Filed 10-3-23; 8:45 am]
BILLING CODE 8011-01-P