Document ID: SEC-2017-2134-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe Exchange, Inc.
Posted Date: 2017-12-22T05:00Z

[Federal Register Volume 82, Number 245 (Friday, December 22, 2017)]
[Notices]
[Pages 60778-60781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27564]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82346; File No. SR-CBOE-2017-076]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 5.4, Withdrawal of Approval of Underlying Securities

December 18, 2017.
    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 December

[[Page 60779]]

4, 2017, 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 seeks to amend Rule 5.4 to allow the Exchange to 
restrict option series to closing transactions when an option class is 
open for trading solely on the Exchange and the underlying security 
continues to meet the requirements for approval. (additions are 
italicized; deletions are [bracketed])
* * * * *

Cboe Exchange, Inc.

Rules

* * * * *

Rule 5.4. Withdrawal of Approval of Underlying Securities.

    No change.

. . . Interpretations and Policies:

    .01-.12 No change.
    .13 If an option class is open for trading on another national 
securities exchange, the Exchange may delist such option class 
immediately. If an option class is open for trading solely on the 
Exchange, the Exchange may determine to not open for trading any 
additional series in that option class[,]; may restrict series with 
open interest to closing transactions, provided that, opening 
transactions by Market-Makers executed to accommodate closing 
transactions of other market participants and opening transactions by 
TPH organizations to facilitate the closing transactions of public 
customers executed as crosses pursuant to and in accordance with Rule 
6.74(b) or (d) may be permitted; and may delist the option class when 
all series within that class have expired. In all instances, delisting 
shall be preceded by a notice to TPH organizations concerning the 
delisting.
    .14-.16 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 seeks to amend Rule 5.4 to allow the Exchange to 
restrict option series to closing transactions when an option class is 
open for trading solely on the Exchange and the underlying security 
continues to meet the requirements for approval. The Exchange believes 
the ability to restrict option series to closing transactions when an 
option class is open for trading solely on the Exchange and the 
underlying security continues to meet the requirements for approval 
will allow the Exchange to delist option series in a timely and 
efficient manner.
    Currently, when an option class is trading on another exchange Cboe 
Options may delist such option class immediately, regardless of whether 
the option class continues to meet the requirements for approval.\5\ 
When an option class that no longer meets the requirements for approval 
is trading solely on the Exchange the Exchange may not add any 
additional series,\6\ may restrict series with open interest to closing 
transactions,\7\ and may delist any series without open interest.\8\ 
However, when an option class continues to meet the requirements for 
approval and is trading solely on the Exchange the Exchange may not 
restrict series with open interest to closing transactions; instead, 
the Exchange may only delist series with no open interest \9\ and 
``determine to not open for trading any additional series in that 
option class, and may delist the option class when all series within 
that class have expired.'' \10\
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    \5\ See Rule 5.4.13.
    \6\ See Rule 5.4 and 5.4.13.
    \7\ See Rule 5.4.12.
    \8\ See Rule 5.4.12.
    \9\ See Rule 5.4.12.
    \10\ See Rule 5.4.13.
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    The Exchange seeks to amend Interpretation and Policy .13 to Rule 
5.4 to allow the Exchange to restrict option series to closing 
transactions when an option class is open for trading solely on the 
Exchange and the underlying security continues to meet the requirements 
for approval.
    There are various business reasons why the Exchange may choose to 
no longer list an option class (e.g., lack of trading interest, lack of 
market-making interest, etc.). The Exchange believes restricting such 
classes to closing transactions will allow open interest to be closed 
in a timelier and more efficient manner. When seeking to delist an 
option class the Exchange believes that restricting series to closing 
transactions is a better way to transition the class to a delisted 
state than the current method of not adding additional series and 
allowing market participants to continue to add new positions in the 
existing series. Restricting trading to closing transactions encourages 
market participants to close transactions, which helps to limit any 
potential negative effects associated with delisting a class. For 
example, restricting trading to closing transactions helps prevent 
market participants from adding new positions that cannot be rolled 
into the following expiration (a common options strategy).
    The Exchange notes that this proposal is consistent with the manner 
in which Rule 5.4 operates in relation to option classes with 
underlying securities that no longer meet the requirements for 
approval--additional series are not added, series with open interest 
are restricted to closing only, and series without open interest are 
delisted. As proposed, when the Exchange seeks to delist an option 
class with an underlying security that continues to meet the 
requirements for approval the Exchange will not open additional series 
in the option class and will restrict trading to closing transactions. 
Also consistent with current Rule 5.4, opening transactions by Market-
Makers executed to accommodate closing transactions of other market 
participants and opening transactions by TPH organizations to 
facilitate the closing transactions of public customers executed as 
crosses pursuant to and in accordance with Cboe Rule 6.74(b) or

[[Page 60780]]

(d) may be permitted. Allowing Market-Makers and TPH organizations to 
facilitate closing transactions of public customers will help public 
customers close positions in classes that will be delisted by the 
Exchange, which helps to protect investors and the public interest. It 
is reasonable to restrict series to closing only pursuant to current 
Rule 5.4 when underlying securities no longer meet requirements for 
approval. The Exchange believes it is also reasonable to restrict 
series to closing when the options class no longer satisfies business 
justifications for listing the class.
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, when seeking to delist an option class--whether or 
not the underlying security continues to meet the requirements for 
approval--the Exchange believes that restricting series to closing 
transactions is a better way to transition the class to a delisted 
state than the current method of not adding additional series and 
allowing market participants to continue to add new positions in the 
existing series. Restricting trading to closing transactions encourages 
market participants to close transactions, which helps to limit any 
potential negative effects associated with delisting a class and helps 
to protect customers and the public interest.
    The Exchange notes that this proposal is consistent with the manner 
in which Rule 5.4 operates in relation to option classes with 
underlying securities that no longer meet the requirements for 
approval--additional series are not added, series with open interest 
are restricted to closing only, and series without open interest are 
delisted. As proposed, when the Exchange seeks to delist an option 
class with an underlying security that continues to meet the 
requirements for approval the Exchange will not open additional series 
in the option class and will restrict trading to closing transactions. 
Also consistent with current Rule 5.4, opening transactions by Market-
Makers executed to accommodate closing transactions of other market 
participants and opening transactions by TPH organizations to 
facilitate the closing transactions of public customers executed as 
crosses pursuant to and in accordance with Cboe Rule 6.74(b) or (d) may 
be permitted. Allowing Market-Makers and TPH organizations to 
facilitate closing transactions of public customers will help public 
customers close positions in classes that will be delisted by the 
Exchange, which helps to protect investors and the public interest. It 
is reasonable to restrict series to closing only pursuant to current 
Rule 5.4 when underlying securities no longer meet requirements for 
approval. The Exchange believes it is also reasonable to restrict 
series to closing when the option class no longer satisfies business 
justifications for listing the class.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Cboe 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. This proposed rule change is 
consistent with the manner in which Rule 5.4 operates in relation to 
option classes with underlying securities that no longer meet the 
requirements for approval--additional series are not added, series with 
open interest are restricted to closing only, and series without open 
interest are delisted. Also consistent with current Rule 5.4, opening 
transactions by Market-Makers executed to accommodate closing 
transactions of other market participants and opening transactions by 
TPH organizations to facilitate the closing transactions of public 
customers executed as crosses pursuant to and in accordance with Cboe 
Rule 6.74(b) or (d) may be permitted. Allowing Market-Makers and TPH 
organizations to facilitate closing transactions of public customers 
will help public customers close positions in classes that will be 
delisted by the Exchange, which helps to protect investors and the 
public interest and does not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \14\ and 
subparagraph (f)(6) Rule 19b-4 thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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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    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.

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:

[[Page 60781]]

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-2017-076 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-2017-076. 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-2017-076 and should be submitted on 
or before January 12, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-27564 Filed 12-21-17; 8:45 am]
 BILLING CODE 8011-01-P