[Federal Register Volume 83, Number 168 (Wednesday, August 29, 2018)]
[Notices]
[Pages 44098-44101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18675]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83923; File No. SR-CBOE-2018-059]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Delay
the Implementation Date of Changes to Cboe Options Rule 24A.4,
Interpretation and Policy .02, Concerning FLEX Options
August 23, 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 August 14, 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 delay the implementation date of rule
change SR-CBOE-2018-008 to permit all FLEX series to be fungible with
the corresponding non-FLEX series once an identical non-FLEX series
becomes listed.
(additions are in italics; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 24A.4. Terms of FLEX Options
* * * * *
. . . Interpretations and Policies:
.01 No change.
.02
The below version of Interpretation and Policy .02 will remain in
effect until [an effective date specified by the Exchange in a
Regulatory Circular. The effective date shall be no later than July 31,
2018, and the Regulatory Circular announcing the effective date shall
be
[[Page 44099]]
issued at least 30 days prior to the effective date] August 21, 2018.
Provided the options on an underlying security or index are
otherwise eligible for FLEX trading, FLEX Options shall be permitted in
puts and calls that do not have the same exercise style, same
expiration date and same exercise price as Non-FLEX Options that are
already available for trading on the same underlying security or index.
FLEX Options shall also be permitted before the options are listed for
trading as Non-FLEX Options. Once and if the option series are listed
for trading as Non-FLEX Options, (i) all existing open positions
established under the FLEX trading procedures shall be fully fungible
with transactions in the respective Non-FLEX Option series and (ii) any
further trading in the series would be as Non-FLEX Options subject to
the Non-FLEX trading procedures and rules. However, in the event the
Non-FLEX series is added intra-day, a position established under the
FLEX trading procedures would be permitted to be closed using the FLEX
trading procedures for the balance of the trading day on which the Non-
FLEX series is added against another closing only FLEX position. For
such FLEX series, the FLEX Official will make an announcement that the
FLEX series is now restricted to closing transactions; a FLEX Request
for Quotes may not be disseminated for any order representing a FLEX
series having the same terms as a Non-FLEX series, unless such FLEX
Order is a closing order (and it is the day the Non-FLEX series has
been added); and only responses that close out an existing FLEX
position are permitted. Any transactions in a restricted series that
occur that do not conform to these requirements will be nullified by
the FLEX Official pursuant to Rule 24A.14.
The below version of Interpretation and Policy .02 shall be in
effect on [the effective date specified by the Exchange in a Regulatory
Circular. The effective date shall be no later than July 31, 2018, and
the Regulatory Circular announcing the effective date shall be issued
at least 30 days prior to the effective date]August 21, 2018.
* * * * *
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
On May 9, 2018, the Securities and Exchange Commission (the
``Commission'') approved certain changes to Rule 24A.4, Interpretation
and Policy .02 (SR-CBOE-2018-008), which changes allowed flexibility
structured options (``FLEX Options'') with quarterly expirations,
short-term expirations, weekly expirations, and End-of-Month
expirations to be fungible with Non-FLEX Options that have identical
terms.\5\ Pursuant to SR-CBOE-2018-008, the proposed changes would not
take effect until a date specified by the Exchange in a Regulatory
Circular, which date would be no later than July 31, 2018. The
Regulatory Circular announcing the effective date was required to be
issued at least 30 days prior to the effective date.
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\5\ Securities Exchange Act Release No. 83205 (May 9, 2018), 83
FR 22550 (May 15, 2018) (SR-CBOE-2018-008).
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As noted in SR-CBOE-2018-008, to give effect to the Cboe Options
rule change, the Options Clearing Corporation (``OCC'') would need to
amend its By-Laws after Cboe Options amended its Rules.\6\ However, OCC
did not submit proposed changes to its By-Laws until July 16, 2018, on
which date those changes became effective.\7\ Cboe Options understands
that OCC does not intend to implement those changes as to Cboe Options
until the implementation date Cboe Options announced for the proposed
rule change in SR-CBOE-2018-008. Because Cboe Options was unable to
determine an implementation date for the proposed changes until it knew
the effective time of OCC's By-Law amendments, Cboe Options was unable
to announce an implementation date until after OCC amended its By-Laws
(and thus not until after July 16, 2018). On July 20, 2018, after the
OCC By-Law amendment was filed, Cboe Options announced an
implementation date of August 21, 2018, which was more than 30 days
after the notice to Trading Permit Holders.\8\ Because this
implementation date is past July 31, 2018, the Exchange proposes to
extend the implementation date of the rule changes in SR-CBOE-2018-008
to August 21, 2018.
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\6\ See id.
\7\ Securities Exchange Act Release No. 83724 (July 27, 2018),
83 FR 37875 (August 2, 2018) (SR-OCC-2018-010).
\8\ Exchange Notice C2018072002 announcing the implementation
date of rule change SR-CBOE-2018-008 is available at: http://cdn.batstrading.com/resources/release_notes/2018/Exchange-Notice-on-Open-Interest-Consolidation-for-Quarterly-and-Short-term-FLEX-products.pdf, which can be accessed through the markets.cboe.com
website. Cboe Options previously informed market participants of its
change in company practice to announce information such as the
proposed rule change in SR-CBOE-2018-008 by Exchange Notice rather
than Regulatory Circular: https://www.cboe.com/publish/RegCir/RG17-191.pdf.
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Historically, Cboe Options would have announced this information
pursuant to a Regulatory Circular as required by the rule text.
However, Cboe Options announced the implementation date pursuant to an
Exchange Notice in accordance with new company practice.\9\ This is
merely a change in the name of the document issued to market
participants to announce this information. The substance of the
announcement in the Exchange Notice was the same as it would have been
if announced in a Regulatory Circular. Exchange Notices are distributed
to the same group of market participants to which Regulatory Circulars
were distributed before this change in company practice. Additionally,
Exchange Notices are posted to Cboe Options' website, just as
Regulatory Circulars are posted. As a result, the Exchange believes
announcement of the implementation date by Exchange Notice provided
market participants with sufficient notice of the proposed rule change
in SR-CBOE-2018-008. The Exchange plans to issue a reminder of the
implementation date to market participants by Regulatory Circular.
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\9\ Id.
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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.\10\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section
[[Page 44100]]
6(b)(5) \11\ 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) \12\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
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The proposed rule change is merely delaying the implementation date
of a proposed rule change, the rule filing for which addressed why that
change and the need for at least 30 days' notice of implementation of
that change was consistent with the Act and was previously approved by
the Commission. This will ensure market participants receive sufficient
notice of the implementation date of the proposed rule change.
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 proposed rule change is
merely delaying the implementation date of a proposed rule change, the
rule filing for which addressed any potential competitive impact that
change and the need for at least 30 days' notice of implementation of
that change may have and was previously approved by the Commission. The
proposed delay to the implementation date ensures market participants
receive sufficient notice of the implementation date of the proposed
rule change, which ultimately protects investors. The Exchange believes
the proposed delay to the implementation date will have no impact on
competition.
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 \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires Cboe Options 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. Cboe
Options has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally
does not become operative prior to 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay. The
Commission is waiving the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission believes
that waiver of the operative delay is consistent with the protection of
investors and the public interest because such waiver will allow the
rule change to be implemented as detailed in the Exchange Notice
whereas keeping the 30-day operative delay in place could create
confusion. Therefore, the Commission designates the proposal operative
upon filing.\17\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ For purposes only of waiving the 30-day operative delay,
the Commission 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 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-2018-059 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-2018-059. 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-2018-059 and should be submitted on
or before September 19, 2018.
[[Page 44101]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18675 Filed 8-28-18; 8:45 am]
BILLING CODE 8011-01-P