[Federal Register Volume 84, Number 62 (Monday, April 1, 2019)]
[Notices]
[Pages 12308-12310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06177]
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SECURITIES AND EXCHANGE COMMISSION
Release No. 34-85419; File No. SR-CBOE-2019-016]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Cboe Options Rule 6.2
March 26, 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 March 14, 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 amend Cboe Options Rule 6.2. The text of the proposed rule change is
provided in Exhibit 5.
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 update Interpretation and Policy .06 of
Rule 6.2 (Hybrid Opening (and Sometimes Closing) System (``HOSS'')). By
way of background, Interpretation and Policy .06(a) of Rule 6.2
provides that on the last business day of each month, the
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Exchange will conduct special end-of-month non-trading rotations for
each series of SPX options in order to determine the theoretical ``fair
value'' of such series as of [sic] SPX as of the time of close of
trading in the underlying cash market.\5\ Rule 6.2(.06)(a) also
provides during such special non-trading closing rotation (``closing
rotation''), a Lead Market-Maker (``LMM'') in the SPX options
designated by the Exchange in each series of SPX options will provide
bid and offer quotations. The Exchange notes that in connection with
recently retiring the Hybrid 3.0 platform and transitioning trading of
SPX options onto the Hybrid trading platform, the Exchange determined
to no longer appoint LMMs in SPX.\6\ In lieu of LMMs, the Exchange
established a financial incentive program for SPX Select Market-Makers
(``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 the standard set
forth in Footnote 49 of the Exchange's Fees Schedule. While SMMs must
still comply with continuous quoting obligations of Market-Makers, they
are not otherwise obligated from a regulatory standpoint to satisfy any
heightened quoting standard or meet additional obligations. Rather, SPX
SMMs only receive a financial benefit (i.e., waiver of fees otherwise
assessed for one Market-Maker Trading Permit and one SPX Tier
Appointment) if they satisfy the standard set forth in Footnote 49.
Accordingly, the Exchange proposes to add references to SMMs in Rule
6.2(.06)(a).
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\5\ See Cboe Options Rule 6.2, Interpretation and Policy .06.(a)
[sic]
\6\ See Securities and Exchange Act Release No. 83089 (April 23,
2018), 83 FR 18605 (April 27, 2018) (SR-CBOE-2018-029).
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Additionally, the Exchange proposes to clarify that SMMs (and LMMs)
\7\ ``may'', and not ``must'', participate in the closing rotation.
Indeed, the Exchange notes that it recently submitted a rule change to
amend the Fees Schedule to no longer require SMMs to meet the fourth
prong of the standard set forth in Footnote 49 which provided that a
designated SMM must provide quotes for the closing rotation on a
rotating basis in order for SMMs to satisfy the fourth prong.\8\ In its
place, the Exchange now requires that within 30 minutes from the
initiation of the closing rotation, the Exchange must disseminate end-
of-month closing quotations pursuant to Cboe Options Rule 6.2(.06)(a).
The Exchange proposed the amendment to encourage all SMMs to provide
end-of-month non-trading settlement pricing quotations in SPX and SPXW,
which would increase the probability that the Exchange would be able to
disseminate fair value quotes pursuant to Rule 6.2(.06)(a).\9\ The
Exchange believes the proposed changes to Rule 6.2(.06)(a) will make
the rule text consistent with the current standard set forth in
Footnote 49 of the Fees Schedule. The Exchange lastly notes that
although it currently does not appoint LMMs in SPX, it proposes to
leave references to LMMs in Rule 6.2(.06)(a) in the event it determines
to appoint LMMs in the future.
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\7\ As noted above, as there are no LMMs currently appointed in
SPX during Regular Trading Hours, there is no requirement for LMMs
to participate in the closing rotation. To the extent the Exchange
determines to appoint LMMs in the future, it notes that LMMs would
no longer be obligated to participate in the closing rotation.
\8\ See Securities and Exchange Act Release No. 85018 (January
31, 2019), 84 FR 1810 (February 5, 2019) (SR-CBOE-2018-075).
\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 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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange believes updating Rule 6.2(.06)(a) with respect to
references to SMMs and eliminating the language which provides the
Exchange will designate a particular LMM each month, alleviates
potential confusion as it more accurately describes the Exchange's
current end-of-month fair value closing rotation procedures. The
proposed changes also make Rule 6.2(.06)(a) consistent with Footnote 49
of the Fees Schedule, which as described above, governs the financial
incentive program relating to SMMs. The alleviation of potential
confusion removes impediments to and perfects the mechanism of a free
and open market and a national market system, and, in general, protects
investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition that are not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because it merely updates
outdated rule text and applies to all SPX SMMs (and potential LMMs).
The Exchange does not believe that the proposed rule change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because SPX
options are proprietary products that will only be traded on Cboe
Options. To the extent that the proposed changes make Cboe Options a
more attractive marketplace for market participants at other exchanges,
such market participants are welcome to become Cboe Options market
participants.
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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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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At any time within 60 days of the filing of the proposed rule
change, the
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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-2019-016 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-2019-016. 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-2019-016, and should be submitted
on or before April 16, 2019.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06177 Filed 3-29-19; 8:45 am]
BILLING CODE 8011-01-P