83 FR 29848 - Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify the SPX Select Market-Maker Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 123 (June 26, 2018)

[Federal Register Volume 83, Number 123 (Tuesday, June 26, 2018)]
[Notices]
[Pages 29848-29850]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-13615]



[[Page 29848]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83476; File No. SR-CBOE-2018-044]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify 
the SPX Select Market-Maker Program

June 20, 2018.
    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 June 8, 2018, 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 proposes to amend its Fees Schedule relating to the 
SPX Select Market-Maker Program.
    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 is proposing to clarify text in its Fees Schedule 
relating to the SPX Select Market-Maker (``SMM'') Program. By way of 
background, the Exchange recently established a financial incentive 
program for SPX SMMs, which provides that any appointed SPX SMM will 
receive a monthly waiver of the cost of one Market-Maker Trading Permit 
and one SPX Tier Appointment provided that the SMM satisfies a 
heightened quoting standard for that month, which standard is set forth 
in Footnote 49 of the Fees Schedule. Footnote 49 currently provides 
that an SMM will receive the monthly Trading Permit and SPX Tier 
Appointment waiver if it (1) provides continuous electronic quotes in 
95% of all SPX series 90% of the time in a given month, (2) submits 
opening quotes that are no wider than the Opening Exchange Prescribed 
Width (``OEPW'') within one minute of the initiation of an opening 
rotation in any series that is not open due to the lack of a qualifying 
quote, on all trading days, to ensure electronic quotes on the open 
that allow the series to open, (3) submits opening quotes that are no 
wider than the OEPW quote by 8:00 a.m. (CT) on volatility settlement 
days and (4) provides quotes for the end-of-month fair value closing 
rotation on a rotating basis.
    The Exchange proposes to clarify the criteria currently set forth 
in the third prong of the heightened quoting standard, described above. 
Specifically, the Exchange proposes to add text that explicitly 
provides that to satisfy the third prong, an SMM must submit opening 
quotes that are no wider than the OEPW quote by 8:00 a.m. CST on 
volatility ``index derivative'' settlement days ``in the SPX series 
that expire in the month used to calculate the settlement value for 
expiring volatility index derivatives.'' The Exchange notes that this 
prong was included as part of the heightened quoting standard to 
encourage SMM participation prior to the opening on volatility index 
derivative settlement days to increase liquidity in the SPX series used 
to calculate the settlement value, which is desirable to ensure these 
series open at competitive prices on expiration days for volatility 
index derivatives and thus ensure a fair and orderly opening and 
settlement process. While liquidity is important to open all series on 
the Exchange, given the potential impact on the exercise settlement 
value determined for expiring volatility index derivatives, the 
Exchange believes it is appropriate to ensure a fair and orderly 
opening of the series used to calculate the exercise settlement value. 
The Exchange calculates the settlement value for expiring volatility 
index derivatives using the opening pricings of SPX options that expire 
30 days later. All other SPX series are not used by the Exchange to 
determine the exercise settlement value. As such, the Exchange doesn't 
believe that it is appropriate to require SMMs to submit opening quotes 
that are no wider than the OEPW by 8:00 a.m. (CT) on volatility index 
derivative settlement days in all SPX options series, if only a subset 
of SPX options series are used in the settlement value calculation. In 
order to alleviate any confusion, the Exchange wishes to make clear 
that the third prong, as originally written, does not encompass all SPX 
options series. Rather, the third prong requires only the submission of 
opening quotes prior to 8:00 a.m. CT on volatility index derivative 
settlement days that are no wider than the OEPW in the series that 
expire in the month used to calculate the volatility index derivative 
settlement value. With respect to the remaining SPX options series, the 
Exchange notes that SMMs already are required pursuant to prong 2 to 
submit opening quotes that are no wider than the OEPW within one minute 
of the initiation of an opening rotation in any series that is not open 
due to the lack of a qualifying quote, on all trading days, to ensure 
electronic quotes on the open that allow the series to open.
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 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

[[Page 29849]]

investors and the public interest. Additionally, the Exchange believes 
the proposed rule change is consistent with Section 6(b)(4) of the 
Act,\7\ which requires that Exchange rules provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
Trading Permit Holders and other persons using its facilities.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes clarifying the third prong in Footnote 49 
helps avoid confusion by making clear which SPX series are subject to 
the quoting criteria in the third prong of the SMM heighted quoting 
standard. The alleviation of confusion removes impediments to, and 
perfects the mechanism of, a free and open market and a national market 
system and protects investors and the public interest. Additionally, 
the Exchange believes that the proposed clarification in Footnote 49 is 
reasonable because the third prong is meant to specifically address 
liquidity on volatility index derivative settlement days that ensure a 
fair and orderly opening and settlement process and not address 
liquidity in SPX options series generally.

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 intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
proposed clarification is intended to make clear in the Fees Schedule 
which SPX options series are subject to the criteria contained in the 
third prong of the heightened quoting standard in order to maintain 
transparency in the rules and alleviate confusion. The proposed change 
also applies to SPX, which is only traded on Cboe Options. The Exchange 
believes the proposed change therefore does not raise any competitive 
issues.

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 \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6)(iii) requires the 
Exchange to provide the Commission with written notice of its intent 
to file the proposed rule change, along with a brief description and 
the 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 asked 
the Commission to waive this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ 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 five-day prefiling requirement 
and the 30-day operative delay so that the proposal may become 
operative immediately upon filing. According to the Exchange, without 
the waivers, the Fees Schedule would reflect a quoting standard that 
may be confusing to SPX SMMs. The Commission hereby waives the 
prefiling requirement and finds that waiver of the operative delay is 
consistent with the protection of investors and the public interest. In 
particular, the proposal does not raise any new or novel issues, and 
waiver of the prefiling requirement and operative delay will allow to 
the Exchange to immediately clarify the operation of its SPX Select 
Market-Maker Program. Therefore, the Commission hereby waives the 
prefiling requirement and the operative delay and designates the 
proposal operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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. 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-2018-044 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-2018-044. 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-2018-044 and should be submitted on 
or before July 17, 2018.


[[Page 29850]]


    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. 2018-13615 Filed 6-25-18; 8:45 am]
 BILLING CODE 8011-01-P