[Federal Register Volume 87, Number 85 (Tuesday, May 3, 2022)]
[Notices]
[Pages 26240-26244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09399]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94802; File No. SR-CboeBZX-2022-029]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend 
the Pilot Programs in Connection With the Listing and Trading of P.M.-
Settled Series on Certain Broad-Based Index Options

April 27, 2022.
    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 April 20, 2022, Cboe BZX Exchange, Inc. (the ``Exchange'') 
filed with the Securities

[[Page 26241]]

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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'') 
proposes to extend the pilot programs in connection with the listing 
and trading of P.M.-settled series on certain broad-based index 
options. 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://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 proposed rule change extends the listing and trading of P.M.-
settled series on certain broad-based index options on a pilot 
basis.\5\ Rule 29.11(a)(6) currently permits the listing and trading of 
XSP options with third-Friday-of-the-month expiration dates, whose 
exercise settlement value will be based on the closing index value on 
the expiration day (``P.M.-settled'') on a pilot basis set to expire on 
May 2, 2022 (the ``XSPPM Pilot Program''). Rule 29.11(j)(3) also 
permits the listing and trading of P.M.-settled options on broad-based 
indexes with weekly expirations (``Weeklys'') and end-of-month 
expirations (``EOMs'') on a pilot basis set to expire on May 2, 2022 
(the ``Nonstandard Expirations Pilot Program'', and together with the 
XSPPM Pilot Program, the ``Pilot Programs''). The Exchange proposes to 
extend the Pilot Programs through November 7, 2022.
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    \5\ The Exchange is authorized to list for trading options that 
overlie the Mini-SPX Index (``XSP'') and the Russell 2000 Index 
(``RUT''). See Rule 29.11(a). See also Securities Exchange Act 
Release Nos. 84480 (October 24, 2018), 83 FR 54635 (October 30, 
2018) (Notice of Filing of a Proposed Rule Change To Permit the 
Listing and Trading of P.M.-Settled Series on Certain Broad-Based 
Index Options on a Pilot Basis) (SR-CboeBZX-2018-066) (``Notice''); 
85181 (February 22, 2019), 84 FR 6842 (February 28, 2019) (Notice of 
Deemed Approval of a Proposed Rule Change To Permit the Listing and 
Trading of P.M.-Settled Series on Certain Broad-Based Index Options 
on a Pilot Basis) (SR-CboeBZX-2018-066); 88052 (January 27, 2020), 
85 FR 5753 (January 31, 2020) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Extend the Pilot Programs 
in Connection With the Listing and Trading of P.M.-Settled Series on 
Certain Broad-Based Index Options) (SR-CboeBZX-2020-004); 88788 
(April 30, 2020), 85 FR 27008 (May 6, 2020) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Extend the 
Pilot Programs in Connection With the Listing and Trading of P.M.-
Settled Series on Certain Broad-Based Index Options) (SR-CboeBZX-
2020-038); and 90255 (October 22, 2020), 85 FR 68378 (October 28, 
2020) (Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change To Extend the Pilot Programs in Connection With the 
Listing and Trading of P.M.-Settled Series on Certain Broad-Based 
Index Options) (SR-CboeBZX-2020-076); 91699 (April 28, 2021), 86 FR 
23767 (May 4, 2021) (Notice of Filing and Immediate Effectiveness of 
a Proposed Rule Change To Extend the Pilot Programs in Connection 
With the Listing and Trading of P.M.-Settled Series on Certain 
Broad-Based Index Options) (SR-CboeBZX-2021-031); and 93454 (October 
28, 2021), 86 FR 60727 (November 3, 2021) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Extend the 
Pilot Programs in Connection With the Listing and Trading of P.M.-
Settled Series on Certain Broad-Based Index Options) (SR-CboeBZX-
2021-072).
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XSPPM Pilot Program
    Rule 29.11(a)(6) permits the listing and trading, in addition to 
A.M.-settled XSP options, of P.M.-settled XSP options with third-
Friday-of-the-month expiration dates on a pilot basis. The Exchange 
believes that continuing to permit the trading of XSP options on a 
P.M.-settled basis will continue to encourage greater trading in XSP 
options. Other than settlement and closing time on the last trading day 
(pursuant to Rule 29.10(a)),\6\ contract terms for P.M.-settled XSP 
options are the same as the A.M.-settled XSP options. The contract uses 
a $100 multiplier and the minimum trading increments, strike price 
intervals, and expirations are the same as the A.M.-settled XSP option 
series. P.M.-settled XSP options have European-style exercise. The 
Exchange also has flexibility to open for trading additional series in 
response to customer demand.
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    \6\ Rule 29.10(a) permits transactions in P.M.-settled XSP 
options on their last trading day to be effected on the Exchange 
between the hours of 9:30 a.m. and 4:00 p.m. Eastern time. All other 
transactions in index options are effected on the Exchange between 
the hours of 9:30 a.m. and 4:15 p.m. Eastern time.
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    If the Exchange were to propose another extension of the XSPPM 
Pilot Program or should the Exchange propose to make the XSPPM Pilot 
Program permanent, the Exchange would submit a filing proposing such 
amendments to the XSPPM Pilot Program. Further, any positions 
established under the XSPPM Pilot Program would not be impacted by the 
expiration of the XSPPM Pilot Program. For example, if the Exchange 
lists a P.M.-settled XSP option that expires after the XSPPM Pilot 
Program expires (and is not extended), then those positions would 
continue to exist. If the pilot were not extended, then the positions 
could continue to exist. However, any further trading in those series 
would be restricted to transactions where at least one side of the 
trade is a closing transaction.
    As part of the XSPPM Pilot Program, the Exchange submits a pilot 
report to the Commission at least two months prior to the expiration 
date of the pilot.\7\ This annual report contains an analysis of 
volume, open interest, and trading patterns. In proposing to extend the 
XSPPM Pilot Program, the Exchange will continue to abide by the 
reporting requirements described in the Notice.\8\ Additionally, the 
Exchange will provide the Commission with any additional data or 
analyses the Commission requests because it deems such data or analyses 
necessary to determine whether the XSPPM Pilot Program is consistent 
with the Exchange Act. The Exchange makes its annual data and analyses 
previously submitted to the Commission under the Pilot Program public 
on its website and will continue to make public any data and analyses 
it submits to the Commission under the Pilot Program in the future. The 
Exchange also notes that its affiliated options exchange, Cboe 
Exchange, Inc. (``Cboe Options'') currently has pilots that permit 
P.M.-settled third Friday-of-the-month XSP options.\9\
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    \7\ The Exchange notes that the Pilot Programs currently run on 
a bi-annual pilot basis.
    \8\ See supra note 5.
    \9\ See Cboe Options Rule 4.13.13, which also permits P.M.-
settled third Friday-of-the-month SPX options on a pilot basis 
(``SPXPM Pilot Program''). The Exchange notes that, prior to the 
proposed November 7, 2022 Pilot Programs expiration date, Cboe 
Options intends to submit a proposal to make its SPXPM Pilot Program 
permanent. Following the Commission's review and approval of Cboe 
Options' proposal, the Exchange intends to file a similar proposal 
to make its XSPPM Pilot Program permanent.

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[[Page 26242]]

Nonstandard Expirations Pilot Program
    Rule 29.11(j)(1) permits the listing and trading, on a pilot basis, 
of P.M.-settled options on broad-based indexes with nonstandard 
expiration dates and is currently set to expire on May 2, 2022. The 
Nonstandard Expirations Pilot Program permits both Weeklys and EOMs as 
discussed below. Contract terms for the Weekly and EOM expirations are 
similar to those of the A.M.-settled broad-based index options, except 
that the Weekly and EOM expirations are P.M.-settled.
    In particular, Rule 29.11(j)(1) permits the Exchange to open for 
trading Weeklys on any broad-based index eligible for standard options 
trading to expire on any Monday, Wednesday, or Friday (other than the 
third Friday-of-the-month or days that coincide with an EOM). Weeklys 
are subject to all provisions of Rule 29.11 and are treated the same as 
options on the same underlying index that expire on the third Friday of 
the expiration month. However, under the Nonstandard Expirations Pilot 
Program, Weeklys are P.M.-settled, and new Weekly series may be added 
up to and including on the expiration date for an expiring Weekly.
    Rule 29.11(a)(2) permits the Exchange to open for trading EOMs on 
any broad-based index eligible for standard options trading to expire 
on the last trading day of the month. EOMs are subject to all 
provisions of Rule 29.11 and treated the same as options on the same 
underlying index that expire on the third Friday of the expiration 
month. However, under the Nonstandard Expirations Pilot Program, EOMs 
are P.M.-settled, and new series of EOMs may be added up to and 
including on the expiration date for an expiring EOM.
    As stated above, this proposed rule change extends the Nonstandard 
Expirations Pilot Program for broad-based index options on a pilot 
basis, for a period of six months. If the Exchange were to propose an 
additional extension of the Nonstandard Expirations Pilot Program or 
should the Exchange propose to make it permanent, the Exchange would 
submit additional filings proposing such amendments. Further, any 
positions established under the Nonstandard Expirations Pilot Program 
would not be impacted by the expiration of the pilot. For example, if 
the Exchange lists a Weekly or EOM that expires after the Nonstandard 
Expirations Pilot Program expires (and is not extended), then those 
positions would continue to exist. However, any further trading in 
those series would be restricted to transactions where at least one 
side of the trade is a closing transaction.
    As part of the Nonstandard Expirations Pilot Program, the Exchange 
submits a pilot report to the Commission at least two months prior to 
the expiration date of the pilot.\10\ This annual report contains an 
analysis of volume, open interest, and trading patterns. In proposing 
to extend the Nonstandard Expirations Pilot Program, the Exchange will 
continue to abide by the reporting requirements described in the 
Notice.\11\ Additionally, the Exchange will provide the Commission with 
any additional data or analyses the Commission requests because it 
deems such data or analyses necessary to determine whether the 
Nonstandard Expirations Pilot Program is consistent with the Exchange 
Act. The Exchange is in the process of making public on its website 
data and analyses previously submitted to the Commission under the 
Pilot Program, and will make public any data and analyses it submits to 
the Commission under the Pilot Program in the future. The Exchange 
notes that other exchanges, including its affiliated exchange, Cboe 
Options, currently have pilots that have weekly and end-of-month 
expirations.\12\
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    \10\ See supra note 7.
    \11\ See supra note 5.
    \12\ See Cboe Options Rule 4.13(e); and Phlx Rule 1101A(b)(5).
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Additional Information
    The Exchange believes there is sufficient investor interest and 
demand in the XSPPM and Nonstandard Expirations Pilot Programs to 
warrant their extension. The Exchange believes that the Programs have 
provided investors with additional means of managing their risk 
exposures and carrying out their investment objectives. The proposed 
extensions will continue to offer investors the benefit of added 
transparency, price discovery, and stability, as well as the continued 
expanded trading opportunities in connection with different expiration 
times. The Exchange proposes the extension of the Pilot Programs in 
order to continue to give the Commission more time to consider the 
impact of the Pilot Programs. To this point, the Exchange believes that 
the Pilot Programs have been well-received by its Members and the 
investing public, and the Exchange would like to continue to provide 
investors with the ability to trade P.M.-settled XSP options and 
contracts with nonstandard expirations. All terms regarding the trading 
of the Pilot Products shall continue to operate as described in the 
XSPPM and Nonstandard Expirations Notice.\13\ The Exchange merely 
proposes herein to extend the terms of the Pilot Programs to November 
7, 2022.
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    \13\ See supra note 5.
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    Furthermore, the Exchange has not experienced any adverse market 
effects with respect to the Programs. The Exchange will continue to 
monitor for any such disruptions or the development of any factors that 
would cause such disruptions. The Exchange represents it continues to 
have an adequate surveillance program in place for index options and 
that the proposed extension will not have an adverse impact on 
capacity.
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.\14\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \15\ 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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that the proposed extension of 
the Pilot Programs will continue to provide greater opportunities for 
investors. The Exchange believes that the Pilot Programs have been 
successful to date. The proposed rule change allows for an extension of 
the Program for the benefit of market participants. The Exchange 
believes that there is demand for the expirations offered under the 
Program and believes that P.M.-settled XSP, Weekly Expirations and EOMs 
will continue to provide the investing public and other market 
participants with the opportunities to trade desirable

[[Page 26243]]

products and to better manage their risk exposure. The proposed 
extension will also provide the Commission further opportunity to 
observe such trading of the Pilot Products. Further, the Exchange has 
not encountered any problems with the Programs; it has not experienced 
any adverse effects or meaningful regulatory or capacity concerns from 
the operation of the Pilot Programs. Also, the Exchange believes that 
such trading pursuant to the XSPPM Pilot Program has not, and will not, 
adversely impact fair and orderly markets on Expiration Fridays for the 
underlying stocks comprising the S&P 500 index.

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. Specifically, the Exchange 
believes that, by extending the expiration of the Pilot Programs, the 
proposed rule change will allow for further analysis of the Program and 
a determination of how the Program shall be structured in the future. 
In doing so, the proposed rule change will also serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection.
    Specifically, the Exchange does not believe the continuation of the 
Pilot Program will impose any unnecessary or inappropriate burden on 
intramarket competition because it will continue to apply equally to 
all BZX Options market participants, and the Pilot Products will 
continue to be available to all BZX Options market participants. The 
Exchange believes there is sufficient investor interest and demand in 
the Pilot Programs to warrant its extension. The Exchange believes 
that, for the period that the Pilot Programs has been in operation, it 
has provided investors with desirable products with which to trade. 
Furthermore, as stated above, the Exchange maintains that it has not 
experienced any adverse market effects or regulatory concerns with 
respect to the Pilot Programs. The Exchange further does not believe 
that the proposed extension of the Pilot Programs will impose any 
burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because it only applies to 
trading on BZX Options. To the extent that the continued trading of the 
Pilot Products may make BZX Options a more attractive marketplace to 
market participants at other exchanges, such market participants may 
elect to become BZX 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 \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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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    A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \19\ 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 so that the proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the 30-day operative delay will allow it to extend the Pilot 
Programs prior to their expiration on May 2, 2022, and maintain the 
status quo, thereby reducing market disruption. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest as it will allow the 
Pilot Programs to continue uninterrupted, thereby avoiding investor 
confusion that could result from a temporary interruption in the Pilot 
Programs. Accordingly, the Commission hereby waives the 30-day 
operative delay and designates the proposed rule change as operative 
upon filing.\20\
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ 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-CboeBZX-2022-029 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-2022-029. 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

[[Page 26244]]

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-2022-
029 and should be submitted on or before May 24, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-09399 Filed 5-2-22; 8:45 am]
BILLING CODE 8011-01-P