[Federal Register Volume 90, Number 115 (Tuesday, June 17, 2025)]
[Notices]
[Pages 25707-25709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11097]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103241; File Nos. SR-CBOE-2025-014, SR-CboeBZX-2025-
034, SR-CboeEDGX-2025-018]
Self-Regulatory Organizations; Cboe Exchange, Inc., Cboe BZX
Exchange, Inc., Cboe EDGX Exchange, Inc.; Order Instituting Proceedings
To Determine Whether To Approve or Disapprove Proposed Rule Changes To
Amend Rules To Permit the Listing of Options on Commodity-Based Trust
Shares
June 12, 2025.
I. Introduction
On March 5, 2025, Cboe Exchange, Inc. (``Cboe''), Cboe BZX
Exchange, Inc. (``BZX''), and Cboe EDGX Exchange, Inc. (``EDGX'') (each
an ``Exchange''; collectively, the ``Exchanges'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\
and Rule 19b-4 thereunder,\2\ proposed rule changes to amend their
respective listing rules to allow the Exchange to list and trade
options on Commodity-Based Trust Shares.\3\ The proposed rule changes
were published for comment in the Federal Register on March 19,
2025.\4\ The Commission has not received any comments on the proposed
rule changes.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See, infra, note 9 and accompanying text.
\4\ See Securities Exchange Act Release No. 102647 (Mar. 13,
2025), 90 FR 12865 (``Cboe Notice''); Securities Exchange Act
Release No. 102648 (March 13, 2025), 90 FR 12914 (``BZX Notice'');
Securities Exchange Act Release No. 102649 (March 13, 2025), 90 FR
12838 (``EDGX Notice'') (collectively, ``Notices'').
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On April 25, 2025, pursuant to Section 19(b)(2) of the Act,\5\ the
Commission designated a longer period within which to approve the
proposed rule changes, disapprove the proposed rule changes, or
institute proceedings to determine whether to disapprove the proposed
rule changes.\6\ This order institutes proceedings under Section
19(b)(2)(B) of the Act \7\ to determine whether to approve or
disapprove the proposed rule changes.
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\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 102935 (Apr. 25,
2025), 90 FR 18719 (May 1, 2025); Securities Exchange Act Release
No. 102934 (Apr. 25, 2025) (SR-Cboe-2025-014), 90 FR 18717 (May 1,
2025) (SR-CboeBZX-2025-034); Securities Exchange Act Release No.
102933 (Apr. 25, 2025), 90 FR 18715 (May 1, 2025) (SR-CboeEDGX-2025-
018) (all designating June 17, 2025, as the date by which the
Commission shall either approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change).
\7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Changes
As described more fully in the Notices, the Exchanges propose to
amend their listing rules to allow the listing and trading of options
on Units (or Fund Shares) \8\ that represent interests in a trust that
is a Commodity-Based Trust.\9\
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\8\ Cboe Rule 1.1 defines a ``Unit'' as ``a share or other
security traded on a national securities exchange and defined as an
NMS stock as set forth in Rule 4.3.'' See Cboe Notice, supra note 4,
at 12865. The BZX Notice and EDGX Notice each refers to ``Fund
Shares'' instead of ``Units,'' with Fund Shares defined in BZX Rule
19.3 and EDGX Rule 19.3, as certain shares or other securities
deemed appropriate for options trading that are principally traded
on a national securities exchange and are defined as an ``NMS
stock'' under Rule 600 of Regulation NMS. For purposes of this
order, ``Units'' will apply to Cboe (SR-Cboe-2025-014) and ``Fund
Shares'' will apply to BZX (SR-CboeBZX-2025-034) and EDGX (SR-
CboeEDGX-2025-018).
\9\ See Notices, supra note 4. See also proposed Cboe Rule
4.3(a)(4); proposed BZX Rule 19.3(i); proposed EDGX Rule 19.3(i).
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Specifically, the Exchanges propose, in their rules relating to the
criteria for underlying securities, to remove references to the SPDR
Gold Trust, the iShares COMEX Gold Trust, the iShares Silver Trust, the
Aberdeen Standard Physical Silver Trust, the Aberdeen Standard Physical
Gold Trust, the Aberdeen Standard Physical Palladium Trust, the
Aberdeen Standard Physical Platinum Trust, the Sprott Physical Gold
Trust, the Goldman Sachs Physical Gold ETF, the Fidelity Wise Origin
Bitcoin Fund, the ARK 21Shares Bitcoin ETF, the iShares Bitcoin Trust,
the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini Trust, or the
Bitwise Bitcoin ETF, which are all Commodity-
[[Page 25708]]
Based Trust Shares, and update the provision to state that securities
deemed appropriate for options trading shall include Units (or Fund
Shares) that represent interests in ``a security (A) issued by a trust
that holds (i) a specified commodity deposited with the trust, or (ii)
a specified commodity and, in addition to such specified commodity,
cash; (B) that is issued by such trust in a specified aggregate minimum
number in return for a deposit of a quantity of the underlying
commodity and/or cash; and (C) that, when aggregated in the same
specified minimum number, may be redeemed at a holder's request by such
trust which will deliver to the redeeming holder the quantity of the
underlying commodity and/or cash (`Commodity-Based Trust Share').''
\10\
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\10\ See Cboe Notice, supra note 4, at 12865; BZX Notice, supra
note 4, at 12915; EDGX Notice, supra note 4, at 12839. See also
proposed Cboe Rule 4.3(a)(4); proposed BZX Rule 19.3(i); proposed
EDGX Rule 19.3(i).
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As a result of these proposed rule changes, the Exchanges' listing
criteria would allow any exchange-traded fund (``ETF'') approved to
list on a primary equities market as a Commodity-Based Trust Share to
qualify as an underlying for options traded on the Exchanges, provided
other listing criteria have been met, without requiring additional
approvals from the Commission. The Exchanges state that offering
options on Commodity-Based Trust Shares provides investors with the
ability to hedge exposure to the underlying security. Additionally, the
Exchanges state that options on a Commodity-Based Trust Share provide
investors with the ability to transact in such options in a listed
market environment, which would increase market transparency and
enhance the process of price discovery conducted on the Exchanges
through increased order flow to the benefit of all investors.\11\
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\11\ See Cboe Notice, supra note 4, at 12868; BZX Notice, supra
note 4, at 12918; EDGX Notice, supra note 4, at 12842.
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The Exchanges state that options on a Commodity-Based Trust Share
will trade in the same manner as options on other ETFs on the
Exchanges.\12\ The Exchanges' rules that currently apply to the listing
and trading of all Unit (or Fund Share) options on each Exchange,
including, for example, rules that govern listing criteria,\13\
including continued listing standards,\14\ expirations,\15\ exercise/
strike prices,\16\ minimum increments,\17\ position and exercise
limits,\18\ margin requirements,\19\ customer accounts,\20\ and trading
halt procedures \21\ will apply to the listing and trading of options
on Commodity-Based Trust Shares on the Exchanges in the same manner as
they apply to other options on all other Units (or Fund Shares) that
are listed and traded on the Exchanges.
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\12\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12918; EDGX Notice, supra note 4, at 12842.
\13\ See Cboe Notice, supra note 4, at 12866; BZX Notice, supra
note 4, at 12915; EDGX Notice, supra note 4, at 12839. See also Cboe
Rule 4.3; BZX Rule 19.3; EDGX Rule 19.3.
\14\ See Cboe Notice, supra note 4, at 12866; BZX Notice, supra
note 4, at 12915; EDGX Notice, supra note 4, at 12839-40. The
Exchanges state that Units (or Fund Shares) that were initially
approved for options trading shall be deemed not to meet the
requirements for continued approval, and the Exchange shall not open
for trading any additional series of options contracts of the class
covering such Units (or Fund Shares), if the Units (or Fund Shares)
cease to be an NMS stock or the Units (or Fund Shares) are halted
from trading in their primary market. Id. Additionally, options on
Units (or Fund Shares) may be subject to the suspension of opening
transactions in certain other circumstances pursuant to Exchange
rules. Id.
\15\ See Cboe Notice, supra note 4, at 12866; BZX Notice, supra
note 4, at 12916; EDGX Notice, supra note 4, at 12840. The Exchanges
state that each Exchange will open at least one expiration month for
options on a Commodity-Based Trust Share at the commencement of
trading on the Exchange and may also list series of options on a
Commodity-Based Trust Share for trading on a weekly, monthly, or
quarterly basis. Id. Cboe states that it may also list long-term
equity option series (``LEAPS'') that expire from 12 to 180 (or 12
months from the time they are listed. See Cboe Notice, supra note 4,
at 12866. BZX and EDGX state that the Exchanges may also list long-
term options series that expire from 12 to 39 months from the time
they are listed. See BZX Notice, supra note 4, at 12916; EDGX
Notice, supra note 4, at 12840.
\16\ See Cboe Notice, supra note 4, at 12866-67; BZX Notice,
supra note 4, at 12916; EDGX Notice, supra note 4, at 12840. See
also Cboe Rule 4.5, Interpretation and Policy .07 (relating to
strike prices of series of options on Units); BZX Rule 19.6,
Interpretation and Policy .01 (relating to strike prices of series
of options on Fund Shares); EDGX Rule 19.6, Interpretation and
Policy .01 (relating to strike prices of series of options on Fund
Shares).
\17\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12916; EDGX Notice, supra note 4, at 12840. See also Cboe
Rule 5.4; BZX Rule 21.5; EDGX Rule 21.5.
\18\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12916; EDGX Notice, supra note 4, at 12840-41. The
Exchanges state that position and exercise limits for options on a
Commodity-Based Trust Share would be determined pursuant to Exchange
rules, and that position and exercise limits for options on ETFs
vary according to the number of outstanding shares and the trading
volumes of the underlying security over the past six months, where
the largest in capitalization and the most frequently traded funds
have an option position and exercise limit of 250,000 contracts
(with adjustments for splits, re-capitalizations, etc.) on the same
side of the market; and smaller capitalization funds have position
and exercise limits of 200,000, 75,000, 50,000 or 25,000 contracts
(with adjustments for splits, re-capitalizations, etc.) on the same
side of the market. Id. For BZX and EDGX the relevant rules refer to
position and exercise limits fixed by Cboe. See BZX Notice, supra
note 4, at 12916; EDGX Notice, supra note 4, at 12840.
\19\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12816; EDGX Notice, supra note 4, at 12841. See also Cboe
Rule 10.3; BZX Rule 28.3; EDGX Rule 28.3.
\20\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12816; EDGX Notice, supra note 4, at 12840.
\21\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12816; EDGX Notice, supra note 4, at 12840.
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In addition, the Exchanges state that they have an adequate
surveillance program in place for options and intend to apply those
same program procedures to options on Commodity-Based Fund Shares that
they apply to the Exchanges' other options products, and that the
Exchanges and the Options Price Reporting Authority (or ``OPRA'') have
the necessary systems capacity to handle the additional traffic
associated with the listing of new series of ETFs, including on
Commodity-Based Trust Shares, up to the number of expirations currently
permissible under the Exchanges' rules.\22\ Also, the Exchanges state
that they are members of the Intermarket Surveillance Group (``ISG'')
and that ISG members work together to coordinate surveillance and
investigative information sharing in the stock, options, and futures
markets.\23\ The Exchanges also state that they have a Regulatory
Services Agreement with the Financial Industry Regulatory Authority for
certain market surveillance, investigation and examinations
functions.\24\ The Exchanges state that they have not identified any
issues with the continued listing and trading of any ETF options,
including ETFs that hold commodities (i.e., precious metals and
cryptocurrencies) that they currently list and trade.\25\
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\22\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12916-17; EDGX Notice, supra note 4, at 12841.
\23\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12916; EDGX Notice, supra note 4, at 12841.
\24\ See Cboe Notice, supra note 4, at 12867; BZX Notice, supra
note 4, at 12916; EDGX Notice, supra note 4, at 12841.
\25\ See Cboe Notice, supra note 4, at 12868; BZX Notice, supra
note 4, at 12918; EDGX Notice, supra note 4, at 12842.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2025-014, CboeBZX-2025-034, and CboeEDGX-2025-018 and Grounds for
Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \26\ to determine whether the proposed rule
changes should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule changes. Institution of proceedings
does not indicate that the
[[Page 25709]]
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described below, the Commission seeks and
encourages interested persons to provide comments on the proposed rule
changes.
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\26\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\27\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule changes' consistency with Section 6(b)(5)
of the Act,\28\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and protect 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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\27\ See id.
\28\ 15 U.S.C. 78f(b)(5).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the self-
regulatory organization that proposed the rule change.'' \29\ The
description of a proposed rule change, its purpose and operation, its
effect, and a legal analysis of its consistency with applicable
requirements must all be sufficiently detailed and specific to support
an affirmative Commission finding,\30\ and any failure of a self-
regulatory organization to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\31\ The Commission is instituting
proceedings to allow for additional consideration and comment on the
issues raised herein, including as to whether the proposals are
consistent with the Act. In particular, the Commission asks commenters
to address the potential market impacts of allowing the listing and
trading of options on Commodity-Based Trust Shares.
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\29\ 17 CFR 201.700(b)(3).
\30\ See id.
\31\ See id.
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposals. In particular, the Commission invites the written
views of interested persons concerning whether the proposals are
consistent with Section 6(b)(5) or any other provision of the Act, and
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4 under the Act,\32\ any
request for an opportunity to make an oral presentation.\33\
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\32\ 17 CFR 240.19b-4.
\33\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Acts Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule changes should be
approved or disapproved by July 8, 2025. Any person who wishes to file
a rebuttal to any other person's submission must file that rebuttal by
July 22, 2025.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file numbers SR-CBOE-2025-014, CboeBZX-2025-034, and CboeEDGX-2025-018
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 numbers SR-CBOE-2025-014, CboeBZX-
2025-034, and CboeEDGX-2025-018. These file numbers 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 (https://www.sec.gov/rules/sro.shtml). Copies of the
submission, all subsequent amendments, all written statements with
respect to the proposed rule changes that are filed with the
Commission, and all written communications relating to the proposed
rule changes 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 a.m. and 3
p.m. Copies of the filings also will be available for inspection and
copying at the principal office of the Exchanges. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file numbers SR-CBOE-2025-014, CboeBZX-2025-034, and
CboeEDGX-2025-018 and should be submitted on or before July 8, 2025.
Rebuttal comments should be submitted by July 22, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(57).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2025-11097 Filed 6-16-25; 8:45 am]
BILLING CODE 8011-01-P