84 FR 7949 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Allow the Addition of New Series of Options on an Individual Stock Until the Close of Trading on the B

[Federal Register Volume 84, Number 43 (Tuesday, March 5, 2019)]
[Notices]
[Pages 7949-7951]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2019-03886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85205; File No. SR-CBOE-2019-013]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Allow the Addition of New Series of Options on an Individual Stock 
Until the Close of Trading on the Business Day Prior to Expiration in 
Unusual Market Conditions

February 27, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 21, 2019, Cboe Exchange, Inc. (the ``Exchange'' or 
``Cboe Options'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the Exchange. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to allow the addition of new series of options on an individual stock 
until the close of trading on the business day prior to expiration in 
unusual market conditions. The text of the proposed rule change is 
provided below and in Exhibit 1.
(deletions are [bracketed])
* * * * *

Rules of Cboe Exchange, Inc.

* * * * *
Rule 5.5. Series of Option Contracts Open for Trading
    (a)-(e) (No change).
. . . Interpretations and Policies:
    .01-.03 (No change).
    .04 New series of options on an individual stock may be added until 
the beginning of the month in which the option contract will expire. 
Due to unusual market conditions, the Exchange, in its discretion, may 
add new series of options on an individual stock until the close of 
trading on the [second] business day prior to expiration.
    .05-.23 (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 proposes to amend Interpretation and Policy .04 to 
Rule 5.5. to allow for the addition of new series of options on an 
individual stock until the close of trading on the business day prior 
to expiration in unusual market conditions. This is a competitive 
proposed rule change based on filings submitted by the International 
Securities Exchange, LLC (``ISE'') and NASDAQ OMX BX (``BX'') to the 
Securities and Exchange Commission (``Commission'').\5\
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    \5\ See Securities Exchange Act Release 34-70900 (November 19, 
2013), 78 FR 70382 (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Change the Expiration Date for Most Options 
Contracts to the Third Friday of the Expiration Month Instead of the 
Saturday Following the Third Friday) (SR-ISE-2013-58); Securities 
Exchange Act Release 34-70746 (October 23, 2013), 78 FR 64563 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change To Implement Transition to Friday Expiration for Most Options 
Contracts) (SR-BX-2013-055).
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    Currently, under Interpretation and Policy .04 to Rule 5.5, when 
faced with unusual market conditions, the Exchange may add new series 
of options on an individual stock until the close of trading on the 
second business day prior to expiration. In 2013, the Options Clearing 
Corporation (``OCC'') implemented a transition for standard option 
monthly expiration processing from Saturday to Friday. Accordingly, the 
Exchange, along with other exchanges, updated its rules to reflect the 
OCC change, referencing Friday expiration dates to replace Saturday 
expiration dates for all options expiring on or after February 1, 
2015.\6\ The Exchange also replaced any historic references to 
expiration dates with Friday expiration. At this time, other exchanges 
amended their rules to differentiate between Friday and Saturday or 
non-business day expirations during the transitional period. Other 
exchanges specified that additional series of individual stock options 
may be added during unusual market conditions until the close of 
trading on the business day prior to expiration in the case of an 
option contract expiring on a business day (i.e., Thursday for Friday 
expirations), or, in the case of an option contract expiring on a day 
that is not a business day until

[[Page 7950]]

the close of trading on the second business day prior to expiration 
(i.e., Thursday for Saturday expirations). Consistent with the OCC 
initiative and industry-wide definition, the Exchange currently no 
longer lists series of option contracts with Saturday or non-business 
day expirations. The Exchange thus proposes to amend Rule 5.5. 
Interpretation and Policy .04 to allow specifically for the addition of 
new series of options on an individual stock until the close of trading 
on the business day prior to expiration in unusual market conditions in 
line with other exchanges' timing requirements for listing series of 
options prior to expiration.
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    \6\ See Rule 1.1(mmm), Rule 23.5 & Rule 24.9.
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    The Exchange seeks to introduce this proposed change to 
Interpretation and Policy .04 to Rule 5.5 to create a uniform 
expiration date across exchanges for standard options on listed 
classes. The Exchange believes that keeping its rules consistent with 
those of the industry will protect all participants in the market by 
eliminating confusion, reducing the likelihood of rule violations due 
to discrepant industry rules, and by allowing for a more orderly 
market. In addition, the Exchange believes that keeping the proposed 
rule consistent with other exchange rules will foster better 
cooperation and coordination with persons engaged in regulating 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities by aligning a pivotal part of 
the options processing to be consistent industry-wide
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.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    In particular, the Exchange believes that keeping its rules 
consistent with those of other exchanges and industry practices will 
protect all participants in the market by eliminating confusion, thus, 
preventing investor vulnerability to violating different exchange 
rules. Additionally, the proposed change will foster cooperation and 
coordination with persons engaged in regulating clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities by aligning the timing of series of options listing 
during unusual market conditions to be consistent industry-wide. 
Further, as the industry-wide transition from Saturday (and non-
business day) expiration dates to Friday (or other business days) 
expiration dates was successful, the Exchange believes the proposed 
rule change will remove a discrepant industry impediment and allow for 
a more orderly market by permitting all options markets, including the 
clearing agencies, to have the same expiration date for series of 
options listed during periods of unusual market conditions. The 
proposed rule change also perfects the mechanism of a free and open 
market by allowing for the Exchange to list additional series of 
options on an individual stock closer to expiration during unusual 
market conditions thus better aligning the listed series of options 
with prices near expiration. Finally, the proposed rule change does not 
permit unfair discrimination between any Trading Permit Holders 
(``TPHs'') as it is applied to all TPHs equally.

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. In this regard and as 
indicated above, the Exchange notes that the rule change is being 
proposed as a competitive response to proposals previously filed by ISE 
and BX with the Commission.\10\ The proposed rule change will allow for 
the Exchange to list additional series of options on an individual 
stock closer to expiration during unusual market conditions thus better 
aligning the listed series of options with prices near expiration.
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    \10\ See supra note 5.
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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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-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 \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ 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. The 
Exchange believes that waiver of the operative delay is consistent with 
the protection of investors and the public interest because it is 
substantially similar in all material respects to a previous ISE and BX 
filing,\15\ and does not raise any new or novel issues. For this 
reason, the Commission believes that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Therefore, the Commission hereby waives the operative delay 
and designates the proposal as operative upon filing.\16\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See supra note 5.
    \16\ 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

[[Page 7951]]

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. 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-2019-013 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2019-013. 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CBOE-2019-013 and should be 
submitted on or before March 26, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03886 Filed 3-4-19; 8:45 am]
BILLING CODE 8011-01-P