82 FR 57305 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 19.6, Series of Options Contracts Open for Trading

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 231 (December 4, 2017)

[Federal Register Volume 82, Number 231 (Monday, December 4, 2017)]
[Notices]
[Pages 57305-57306]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-25988]



[[Page 57305]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82160; File No. SR-CboeBZX-2017-002]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
19.6, Series of Options Contracts Open for Trading

November 28, 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 November 15, 2017, Cboe BZX Exchange, Inc. (``BZX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. 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).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend Rule 19.6, Series of Options 
Contracts Open for Trading.
    The text of the proposed rule change is available at the Exchange's 
Web site at www.markets.cboe.com, at the principal office of the 
Exchange, 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 parts of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend Rule 19.6 to modify the 
strike setting regime for IVV, SPY, and DIA options. Specifically, for 
IVV, SPY, and DIA options the Exchange proposes to explicitly allow $1 
strike price intervals. The Exchange believes that the proposed rule 
change would make IVV, SPY, and DIA options easier for investors and 
traders to use and more tailored to their investment needs, as well as 
to better align BZX's strike regime with other options exchange. The 
Exchange notes that this proposal is based on the rules of BOX Options 
Exchange LLC (``Box'') and the Cboe Exchange, Inc. (f/k/a Chicago Board 
Options Exchange, Inc.) (``Cboe'').\5\
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    \5\ See Box Rule IM-5050-1 and Cboe Rule 5.5.08(b).
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    Rule 19.6(d)(4) provides that:

    The interval between strike prices of series of options on Fund 
Shares approved for options trading pursuant to Rule 19.3(i) shall 
be fixed at a price per share which is reasonably close to the price 
per share at which the underlying security is traded in the primary 
market at or about the same time such series of options is first 
open for trading on BZX Options, or at such intervals as may have 
been established on another options exchange prior to the initiation 
of trading on BZX Options.\6\
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    \6\ See Rule 19.6(d)(4).
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    Rule 19.6.02(a) provides:
    BZX Options may list $1 Strike Prices on any other option 
classes if those classes are specifically designated by other 
national securities exchanges that employ a similar $1 Strike Price 
Program under their respective rules.\7\
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    \7\ See Rule 19.6.02(a).

Pursuant to Rule 19.6.02(a) and the last clause in Rule 19.6(d)(4), 
IVV, SPY, and DIA options may be listed in $1 strike price intervals 
when another options exchange lists $1 strikes. The Exchange seeks to 
amend Rule 19.6(d)(4) to explicitly allow $1 strike price intervals 
regardless of whether another exchange has already listed series of 
IVV, SPY, and DIA options.
    The SPY and IVV exchange-traded funds (``ETFs'') are designed to 
roughly track the performance of the S&P 500 Index. The DIA ETF is 
designed to roughly track the performance of the Dow Jones Industrial 
Average (``DJIA'') with the price of SPY and IVV designed to roughly 
approximate 1/10th of the price of the S&P 500 Index and the price of 
DIA designed to roughly approximate 1/100th of the price of the DJIA. 
Accordingly, SPY and IVV strike prices reflect a value roughly equal to 
1/10th of the value of the S&P 500 Index and DIA strike prices reflect 
a value roughly equal to 1/100th of the value of the DJIA with each 
having a multiplier of $100. For example, if the S&P 500 Index is at 
1972.56, SPY options might have a value of approximately 197.26 with a 
notional value of $19,726. If the DJIA is at 16,569.98, DIA options may 
have a value of 165.70 with a notional value of $16,570. In general, 
SPY, IVV, and DIA options provide retail investors and traders with the 
benefit of trading the broad market in a manageably sized contract. As 
options with an ETP underlying, SPY, IVV, and DIA options are listed in 
the same manner as equity options under the Rules.
    Unlike other options exchanges, BZX rules do not specifically 
identify the strike price interval for IVV, SPY, and DIA options. This 
proposed rule change seeks to match the strike setting regime for IVV, 
SPY, and DIA options available on other options exchanges.\8\
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    \8\ See Box Rule IM-5050-1 and Cboe Rule 5.5.08(b).
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    Due to the Exchange's current ability to list $1 strikes in IVV, 
SPY, and DIA options when another options exchange lists such strikes, 
this proposed rule change is unlikely to augment the potential total 
number of options series available on the Exchange. However, the 
Exchange believes it and the Options Price Reporting Authority 
(``OPRA'') have the necessary systems capacity to handle any potential 
additional traffic associated with this proposed rule change. The 
Exchange also believes that Trading Permit Holders will not have a 
capacity issue due to the proposed rule change. In addition, the 
Exchange represents that it does not believe that this expansion will 
cause fragmentation of liquidity.
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. Specifically, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) 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

[[Page 57306]]

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) requirement that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
    In particular, the proposed rule change will allow investors to 
more easily use SPY, IVV, DIA options, which protects investors and the 
public interest. The Exchange also believes the proposed rule change is 
consistent with Section 6(b)(1) of the Act, which provides that the 
Exchange be organized and have the capacity to be able to carry out the 
purposes of the Act and the rules and regulations thereunder, and the 
rules of the Exchange. The Exchange does not believe that the proposed 
rule would create additional capacity issues or affect market 
functionality. The Exchange believes that the proposed rule change, 
like other strike price programs currently offered by the Exchange, 
will benefit investors by giving them increased flexibility to more 
closely tailor their investment and hedging decisions. Moreover, the 
proposed rule change is consistent with the rules of other 
exchanges.\9\
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    \9\ See Box Rule IM-5050-1 and Cboe Rule 5.5.08(b).
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(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. Rather, the Exchange 
believes that the proposed rule change will result in additional 
investment options and opportunities to achieve the investment and 
trading objectives of market participants seeking efficient trading and 
hedging vehicles, to the benefit of investors, market participants, and 
the marketplace in general. Additionally, this proposed rule change 
seeks to match the strike setting regime for IVV, SPY, and DIA options 
available on other options exchanges; thus, the proposed rule change 
may alleviate any potential burden on competition.\10\
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    \10\ Id.
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(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (A) 
Significantly affect the protection of investors or the public 
interest; (B) impose any significant burden on competition; and (C) by 
its terms, 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 
paragraph (f)(6) of Rule 19b-4 thereunder,\12\ the Exchange has 
designated this rule filing as non-controversial. The Exchange has 
given 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4.
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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: (1) 
Necessary or appropriate in the public interest; (2) for the protection 
of investors; or (3) 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 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-CboeBZX-2017-002 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CboeBZX-2017-002. 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 Web site (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 Web site 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-CboeBZX-2017-002 and should 
be submitted on or before December 26, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25988 Filed 12-1-17; 8:45 am]
BILLING CODE 8011-01-P