[Federal Register Volume 84, Number 44 (Wednesday, March 6, 2019)]
[Notices]
[Pages 8148-8150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04006]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85218; File No. SR-CboeBZX-2019-013]
Self-Regulatory Organizations; Cboe BZX 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 28, 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 BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') 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.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe BZX Exchange, Inc.
* * * * *
Rule 19.6. Series of Options Contracts Open for Trading
* * * * *
(c) Additional series of options of the same class may be opened
for trading on BZX Options when the Exchange deems it necessary to
maintain an orderly market, to meet Customer demand or when the market
price of the underlying stock moves more than five strike prices from
the initial exercise price or prices. The opening of a new series of
options shall not affect the series of options of the same class
previously opened. New series of options on an individual stock may be
added until the beginning of the month in which the options contract
will expire. Due to unusual market conditions, the Exchange, in its
discretion, may add a new series of options on an individual stock
until the close of trading on the [five (5)] business day[s] prior to
expiration.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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 Rule 19.6(c) 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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
Currently, under Rule 19.6(c), when faced with unusual market
conditions,
[[Page 8149]]
the Exchange may add new series of options on an individual stock until
five business days prior to expiration. In 2013, the Options Clearing
Corporation (``OCC'') implemented a transition for standard option
monthly expiration processing from Saturday to Friday. At this time,
however, the Exchange did not list series of option contracts with
Saturday or non-business day expiration, and accordingly, did not need
to update its rules in line with the OCC initiative. Other exchanges
amended their rules to reflect the OCC change, differentiating between
Friday and Saturday or non-business day expirations during the
transitional period. Also at this time, 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 the close of trading on the second business day prior to
expiration (i.e., Thursday for Saturday expirations). The Exchange thus
proposes to amend Rule 19.6(c) 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.
The Exchange seeks to introduce this proposed change to Rule
19.6(c) 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.\6\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ 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) \8\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
---------------------------------------------------------------------------
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 Members as it is applied to
all Members 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.\9\ 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.
---------------------------------------------------------------------------
\9\ See supra note 5.
---------------------------------------------------------------------------
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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \12\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \13\ 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
[[Page 8150]]
material respects to prior filings submitted by ISE and BX,\14\ 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.\15\
---------------------------------------------------------------------------
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ See supra note 5.
\15\ 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).
---------------------------------------------------------------------------
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-CboeBZX-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-CboeBZX-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-CboeBZX-2019-013 and should
be submitted on or before March 27, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04006 Filed 3-5-19; 8:45 am]
BILLING CODE 8011-01-P