[Federal Register Volume 85, Number 210 (Thursday, October 29, 2020)]
[Notices]
[Pages 68614-68616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23920]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90267; File No. SR-CBOE-2020-102]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
To Amend Rule 5.1

October 23, 2020.
    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 October 14, 2020, 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 Rule 5.1. The text of the proposed rule change is provided 
below.

(additions are italics; deletions are [bracketed])
* * * * *

Cboe Exchange, Inc. Rules

* * * * *

Rule 5.1. Trading Days and Hours

    (a) No change.
    (b) Regular Trading Hours.
    (1) No change.
    (2) Index Options. Except as otherwise set forth in the Rules or 
under unusual conditions as may be determined by the Exchange, Regular 
Trading Hours for transactions in index options are from 9:30 a.m. to 
4:15 p.m., except as follows:
    (A) Regular Trading Hours for the following index options are from 
9:30 a.m. to 4:00 p.m.:

MSCI EAFE Index (EAFE)
MSCI Emerging Markets Index (EM)
* * * * *
    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
    Currently, pursuant to Rule 5.1(b)(2), MSCI EAFE Index (``EAFE'') 
and MSCI Emerging Markets Index (``EM'') options trade on the Exchange 
from 9:30 a.m. until 4:15 p.m. Eastern time. The Exchange proposes to 
amend Rule 5.1(b)(2)(A) to add EAFE and EM options to the list of index 
options that may trade on the Exchange from 9:30 a.m. until 4:00 p.m. 
Eastern time.
    By way of background, the Exchange currently lists and trades EAFE 
and EM options (collectively, ``MSCI Index'' options). The EAFE Index 
is designed to captures large and mid-cap representation across 21 
developed markets countries (excluding the U.S. and Canada) with 902 
constituents, which cover approximately 85% of the free float-adjusted 
market capitalization in each country. The EM Index is designed to 
capture large and mid-cap representation across emerging market 
countries across 26 emerging markets country indexes with 1,388 
constituents, which cover approximately 85% of the free float-adjusted 
market capitalization in each country. The Exchange understands that 
investors trade options on MSCI Indexes often use the prices of the 
exchange-traded funds (``ETFs'') derived from the MSCI Indexes (e.g., 
iShares MSCI EAFE and EM ETFs), the components of which are stocks that 
are components of the MSCI Indexes, to price options rather than 
futures on the MSCI Indexes (which are often used to price index 
options, such as options on the S&P 500). The related ETFs end regular 
trading at 4:00 p.m. Eastern time each day. Closing trading in the MSCI 
Index options at the same time the correlated ETFs end regular trading 
\5\ will ensure investors have access to robust pricing of the ETFs, 
the underlying stock components of which are stocks that are components 
of the MSCI Indexes, they use to price the options, thus will reduce 
investors' price risk. Other index options may currently trade from 
9:30 a.m. to 4:00 p.m. Eastern time.\6\
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    \5\ While the stocks may continue to trade in an aftermarket 
trading session on the listing exchanges, there is less liquidity in 
aftermarket trading, which generally leads to wider spreads and more 
volatile pricing.
    \6\ See Rule 5.1(b)(2)(A), pursuant to which options on the 
various S&P Select Sector Indexes may trade. Investors similarly use 
pricing of the underlying stocks of the Sector Indexes to price 
options and shares of ETFs derived from the Sector Indexes. See also 
Securities Exchange Act Release No. 83112 (April 26, 2018), 83 FR 
19365 (May 5, 2018) (SR-CBOE-2018-030).
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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

[[Page 68615]]

Section 6(b) of the Act.\7\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \8\ 
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) \9\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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    In particular, closing trading in the MSCI Index options at the 
same time the related ETFs end regular trading will ensure investors 
have access to robust pricing of the correlated ETFs (the underlying 
stock components of which are also components of the MSCI Indexes) they 
use to price the options, which protects investors by reducing their 
price risk. Indeed, the Exchange notes that a number of Trading Permit 
Holders (``TPHs'') have expressed to the Exchange that aligning the 
close of trading in the MSCI Index options would reduce their pricing 
risk at the end of the trading day. Additionally, the Exchange believes 
lack of ETF pricing may cause Market-Makers to widen their quote 
spreads and reduce their quote sizes for the part of the options 
trading day during which ETF pricing is not available. The Exchange 
believes the proposed rule change will, therefore, help maintain 
meaningful liquidity in the MSCI Index options market, which liquidity 
may otherwise be impacted if appointed Market-Makers quote during times 
when pricing for the related ETFs is unavailable. Also, as noted above, 
other index options may trade from 9:30 a.m. to 4:00 p.m. Eastern 
time.\10\
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    \10\ See supra note 2.
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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. The Exchange does not 
believe 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 all market participants will be able to 
trade MSCI Index options during the same trading hours. Other index 
options may currently trade from 9:30 a.m. to 4:00 p.m. Eastern time, 
which close at 4:00 p.m. Eastern time to similarly align with the 
corresponding underlying stock prices.\11\ The Exchange does not 
believe 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, and may promote competition, because the proposed 
rule change will align the trading hours for options on the MSCI 
Indexes with the trading hours of correlated ETFs, which are comprised 
of the underlying shares that comprise these indexes. Additionally, 
MSCI Index options trade exclusively 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 participant.
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    \11\ See supra note 2.
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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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ 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 the 
proposed rule change does not raise any novel or unique issues not 
previously considered by the Commission. The Exchange notes that the 
proposed rule change applies to MSCI Index options trading hours 
currently applicable to other index options of which the components 
underlying such indexes and the related ETFs stop trading at 4:00 p.m. 
Eastern time. Accordingly, the Commission believes that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest. The Commission hereby waives the operative 
delay and designates the proposal as operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ 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).
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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 rule-comments@sec.gov. Please include 
File Number
    SR-CBOE-2020-102 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 68616]]

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2020-102. 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-2020-102 and should be submitted on 
or before November 19, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23920 Filed 10-28-20; 8:45 am]
BILLING CODE 8011-01-P


