[Federal Register Volume 85, Number 78 (Wednesday, April 22, 2020)]
[Notices]
[Pages 22479-22482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08495]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88674; File No. SR-CBOE-2020-036]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend
the Operation of Its SPXPM Pilot Program
April 16, 2020.
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 April 13, 2020, 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 extend the operation of its SPXPM pilot program. 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
* * * * *
Interpretations and Policies
.01-.12 No change.
.13 In addition to A.M.-settled S&P 500 Stock Index options
approved for trading on the Exchange pursuant to Rule 4.13, the
Exchange may also list options on the S&P 500 Index whose exercise
settlement value is derived from closing prices on the last trading
day prior to expiration (P.M.-settled third Friday-of-the-month SPX
options series). The Exchange may also list options on the Mini-SPX
Index (``XSP'') whose exercise settlement value is derived from
closing prices on the last trading day prior to expiration (``P.M.-
settled''). P.M.-settled third Friday-of-the-month SPX options
series and P.M.-settled XSP options will be listed for trading for a
pilot period ending [May 4]November 2, 2020.
* * * * *
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
[[Page 22480]]
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
On February 8, 2013, the Securities and Exchange Commission (the
``Commission'') approved a rule change that established a Pilot Program
that allows the Exchange to list options on the S&P 500 Index whose
exercise settlement value is derived from closing prices on the last
trading day prior to expiration (``SPXPM'').\5\ On July 31, 2013, the
Commission approved a rule change that amended the Pilot Program that
allows the Exchange to list options on the Mini-SPX Index (``XSP'')
whose exercise settlement value is derived from closing prices on the
last trading day prior to expiration (``P.M.-settled XSP'') \6\
(together, SPXPM and P.M.-settled XSP to be referred to herein as the
``Pilot Products'').\7\ The Exchange has extended the pilot period
numerous times, which, pursuant to Rule 4.13.13,\8\ is currently set to
expire on the earlier of May 4, 2020 or the date on which the pilot
program is approved on a permanent basis.\9\ The Exchange hereby
proposes to further extend the end date of the pilot period to November
2, 2020.
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\5\ See Securities Exchange Act Release No. 68888 (February 8,
2013), 78 FR 10668 (February 14, 2013) (SR-CBOE-2012-120) (the
``SPXPM Approval Order''). Pursuant to Securities Exchange Act
Release No. 80060 (February 17, 2017), 82 FR 11673 (February 24,
2017) (SR-CBOE-2016-091), the Exchange moved third-Friday P.M.-
settled options into the S&P 500 Index options class, and as a
result, the trading symbol for P.M.-settled S&P 500 Index options
that have standard third Friday-of-the-month expirations changed
from ``SPXPM'' to ``SPXW.'' This change went into effect on May 1,
2017, pursuant to Cboe Options Regulatory Circular RG17-054.
\6\ See Securities Exchange Act Release No. 70087 (July 31,
2013), 78 FR 47809 (August 6, 2013) (SR-CBOE-2013-055) (the ``P.M.-
settled XSP Approval Order'').
\7\ For more information on the Pilot Products or the Pilot
Program, see the SPXPM Approval Order and the P.M.-settled XSP
Approval Order.
\8\ The Exchange recently relocated prior Rule 24.9, containing
the provision which governs the Pilot Program, to current Rule 4.13.
See SR-CBOE-2019-092 (October 4, 2019), which did not make any
substantive changes to prior Rule 24.9 and merely relocated it to
Rule 4.13.
\9\ See Securities Exchange Act Release Nos. 71424 (January 28,
2014), 79 FR 6249 (February 3, 2014) (SR-CBOE-2014-004); 73338
(October 10, 2014), 79 FR 62502 (October 17, 2014) (SR-CBOE-2014-
076); 77573 (April 8, 2016), 81 FR 22148 (April 14, 2016) (SR-CBOE-
2016-036); 80386 (April 6, 2017), 82 FR 17704 (April 12, 2017) (SR-
CBOE-2017-025); 83166 (May 3, 2018), 83 FR 21324 (May 9, 2018) (SR-
CBOE-2018-036); 84535 (November 5, 2018), 83 FR 56129 (November 9,
2018) (SR-CBOE-2018-069); 85688 (April 18, 2019), 84 FR 17214 (April
24, 2019) (SR-CBOE-2019-023); and 87464 (November 5, 2019), 84 FR
61099 (November 12, 2019) (SR-CBOE-2019-107).
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During the course of the Pilot Program and in support of the
extensions of the Pilot Program, the Exchange submits reports to the
Commission regarding the Pilot Program that detail the Exchange's
experience with the Pilot Program, pursuant to the SPXPM Approval Order
\10\ and the P.M.-settled XSP Approval Order.\11\ Specifically, the
Exchange submits annual Pilot Program reports to the Commission that
contain an analysis of volume, open interest, and trading patterns. The
analysis examines trading in Pilot Products as well as trading in the
securities that comprise the underlying index. Additionally, for series
that exceed certain minimum open interest parameters, the annual
reports provide analysis of index price volatility and share trading
activity. The Exchange also submits periodic interim reports that
contain some, but not all, of the information contained in the annual
reports. In providing the annual and periodic interim reports (the
``pilot reports'') to the Commission, the Exchange has previously
requested confidential treatment of the pilot reports under the Freedom
of Information Act (``FOIA'').\12\
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\10\ See supra note 5.
\11\ See supra note 6.
\12\ 5 U.S.C. 552.
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The pilot reports both contain the following volume and open
interest data:
(1) Monthly volume aggregated for all trades;
(2) monthly volume aggregated by expiration date;
(3) monthly volume for each individual series;
(4) month-end open interest aggregated for all series;
(5) month-end open interest for all series aggregated by expiration
date; and
(6) month-end open interest for each individual series.
The annual reports also contain the information noted in Items (1)
through (6) above for Expiration Friday, A.M.-settled, S&P 500 index
options traded on Cboe Options, as well as the following analysis of
trading patterns in the Pilot Products options series in the Pilot
Program:
(1) A time series analysis of open interest; and
(2) an analysis of the distribution of trade sizes.
Finally, for series that exceed certain minimum parameters, the
annual reports contain the following analysis related to index price
changes and underlying share trading volume at the close on Expiration
Fridays:
(1) A comparison of index price changes at the close of trading on
a given Expiration Friday with comparable price changes from a control
sample. The data includes a calculation of percentage price changes for
various time intervals and compare that information to the respective
control sample. Raw percentage price change data as well as percentage
price change data normalized for prevailing market volatility, as
measured by the Cboe Volatility Index (VIX), is provided; and
(2) a calculation of share volume for a sample set of the component
securities representing an upper limit on share trading that could be
attributable to expiring in-the-money series. The data includes a
comparison of the calculated share volume for securities in the sample
set to the average daily trading volumes of those securities over a
sample period.
The minimum open interest parameters, control sample, time
intervals, method for randomly selecting the component securities, and
sample periods are determined by the Exchange and the Commission. In
proposing to extend the Pilot Program, the Exchange will continue to
abide by the reporting requirements described herein, as well as in the
SPXPM Approval Order and the P.M.-settled XSP Approval Order.\13\
Additionally, the Exchange will provide the Commission with any
additional data or analyses the Commission requests because it deems
such data or analyses necessary to determine whether the Pilot Program
is consistent with the Exchange Act. The Exchange is in the process of
making public on its website all data and analyses previously submitted
to the Commission under the Pilot Program,\14\ and will make public any
data and analyses it submits to the Commission under the Pilot Program
in the future.
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\13\ Pursuant to Securities Exchange Act Release No. 75914
(September 14, 2015), 80 FR 56522 (September 18, 2015) (SR-CBOE-
2015-079), the Exchange added SPXPM and P.M.-settled XSP options to
the list of products approved for trading during Extended Trading
Hours (``ETH''). The Exchange will also include the applicable
information regarding SPXPM and P.M.-settled XSP options that trade
during ETH in its annual and interim reports.
\14\ Available at https://www.cboe.com/aboutcboe/legal-regulatory/national-market-system-plans/pm-settlement-spxpm-data.
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The Exchange proposes the extension of the Pilot Program in order
to continue to give the Commission more time to
[[Page 22481]]
consider the impact of the Pilot Program. To this point, Cboe Options
believes that the Pilot Program has been well-received by its Trading
Permit Holders and the investing public, and the Exchange would like to
continue to provide investors with the ability to trade SPXPM and P.M.-
settled XSP options. All terms regarding the trading of the Pilot
Products shall continue to operate as described in the SPXPM Approval
Order and the P.M.-settled XSP Approval Order. The Exchange merely
proposes herein to extend the term of the Pilot Program to November 2,
2020.
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.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \16\ 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) \17\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ Id.
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In particular, the Exchange believes that the proposed extension of
the Pilot Program will continue to provide greater opportunities for
investors. Further, the Exchange believes that it has not experienced
any adverse effects or meaningful regulatory concerns from the
operation of the Pilot Program. As such, the Exchange believes that the
extension of the Pilot Program does not raise any unique or prohibitive
regulatory concerns. Also, the Exchange believes that such trading has
not, and will not, adversely impact fair and orderly markets on
Expiration Fridays for the underlying stocks comprising the S&P 500
index. The extension of the Pilot Program will continue to provide
investors with the opportunity to trade the desirable products of SPXPM
and P.M.-settled XSP, while also providing the Commission further
opportunity to observe such trading of the Pilot Products.
B. Self-Regulatory Organization's Statement on Burden on Competition
Cboe Options does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe the continuation of the Pilot Program will impose any
unnecessary or inappropriate burden on intramarket competition because
it will continue to apply equally to all Cboe Options market
participants, and the Pilot Products will be available to all Cboe
Options market participants. The Exchange believes there is sufficient
investor interest and demand in the Pilot Program to warrant its
extension. The Exchange believes that, for the period that the Pilot
Program has been in operation, it has provided investors with desirable
products with which to trade. Furthermore, the Exchange believes that
it has not experienced any adverse market effects or regulatory
concerns with respect to the Pilot Program. The Exchange further does
not believe that the proposed extension of the Pilot Program will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because it only
applies to trading on Cboe Options. To the extent that the continued
trading of the Pilot Products may make Cboe Options a more attractive
marketplace to market participants at other exchanges, such market
participants may elect to become Cboe Options market participants.
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 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 \18\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its 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 pursuant to Rule 19b-4(f)(6) under the
Act \20\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \21\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
states that waiver of the 30-day operative delay will allow it to
extend the Pilot Program prior to its expiration on May 4, 2020, and
maintain the status quo, thereby reducing market disruption. The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest as
it will allow the Pilot Program to continue uninterrupted, thereby
avoiding investor confusion that could result from a temporary
interruption in the Pilot Program. Accordingly, the Commission hereby
waives the operative delay and designates the proposed rule change
operative upon filing.\22\
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ 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 shall 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.
[[Page 22482]]
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2020-036 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-2020-036. 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-2020-036, and should be submitted
on or before May 13, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08495 Filed 4-21-20; 8:45 am]
BILLING CODE 8011-01-P