[Federal Register Volume 86, Number 244 (Thursday, December 23, 2021)]
[Notices]
[Pages 73038-73050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27822]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93819; File No. SR-CBOE-2021-071]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Adopt a New Trading Session That 
Will Operate After the Close of the Regular Trading Hours Session

December 17, 2021.
    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 December 15, 2021, 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, 
II, and III below, which Items have been prepared by the Exchange. 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.
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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 adopt a new trading session that will operate after the close of the 
Regular Trading Hours session. 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/CBOELegalRegulatory 
Home.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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Rules to allow trading on the 
Exchange during a new forty-five-minute trading session called the 
``Curb Trading Hours'' or ``Curb'' session. The proposed rule change to 
adopt a third trading session aims to increase the overlap in time that 
SPX, VIX and Mini-SPX Index (``XSP'') options are open alongside the 
related futures contracts.\3\
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    \3\ For example, related futures products such as Cboe 
Volatility Index (VX) Futures are currently available for trading on 
Cboe Futures Exchange, LLC (``CFE'') during an extended trading 
hours session from 4:00 p.m. to 5:00 p.m. Eastern Time (ET) Monday 
through Friday. See CFE Rule 1202, which sets forth the trading 
hours for VX futures (times referenced in CFE Rule 1202 are Central 
Standard Time (CT)). Related future contracts are also offered on 
the Chicago Mercantile Exchange (``CME'') during the proposed hours 
of Curb. See https://www.cmegroup.com/trading-hours.html#equityIndex 
and https://www.cmegroup.com/markets/equities/sp/e-mini-sandp500.html which reflects, among other things, that E-mini S&P 
500 Futures trade between 6:00 p.m. Sunday through 5:00 p.m. Friday 
ET (5:00 p.m.-4:00 p.m. CT) with a daily maintenance period from 
5:00 p.m.-6:00 p.m. ET (4:00 p.m.-5:00 p.m. CT).

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[[Page 73039]]

    By way of background, the Exchange currently offers two trading 
sessions.\4\ Regular Trading Hours (``RTH'') and Global Trading Hours 
(``GTH''). Rule 5.1 currently sets forth the trading hours for the 
Exchange's RTH and GTH trading sessions. Particularly, RTH for 
transactions in equity options (including options on individual stocks, 
ETFs, ETNs, and other securities) are the normal business days and 
hours set forth in the rules of the primary market currently trading 
the securities underlying the options, except for options on ETFs, 
ETNs, Index Portfolio Shares, Index Portfolio Receipts, and Trust 
Issued Receipts the Exchange designates to remain open for trading 
beyond 4:00 p.m.\5\ but in no case later than 4:15 p.m.\6\ RTH for 
transactions in index options are from 9:30 a.m. to 4:15 p.m., subject 
to certain exceptions.\7\ The GTH session currently begins at 8:15 p.m. 
(previous day) and goes until 9:15 a.m. on Monday through Friday.\8\ 
The Exchange's Rules provide that the Exchange may designate as 
eligible for trading during GTH any exclusively listed index option 
designated for trading under Chapter 4, Section B. Currently, SPX, VIX 
and XSP are approved for trading during GTH.\9\
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    \4\ The term ``trading session'' means the hours during which 
the Exchange is open for trading for Regular Trading Hours or Global 
Trading Hours (each of which may referred to as a trading session). 
Unless otherwise specified in the Rules or the context otherwise 
indicates, all Rules apply in the same manner during each trading 
session. See Rule 1.1 (Definitions).
    \5\ All times referenced herein are Eastern Time.
    \6\ See Rule 5.1(b)(1).
    \7\ See Rule 5.1(b)(2).
    \8\ See Rule 5.1(c).
    \9\ If the Exchange designates a class of index options as 
eligible for trading during GTH, FLEX Options with the same 
underlying index are also deemed eligible for trading during GTH. 
See Rule 5.1(c). The Exchange also notes that although eligible, XSP 
is not currently listed for trading during GTH.
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    By way of further background, the Exchange originally adopted the 
GTH trading session due to global demand from investors to trade SPX 
and VIX options, as alternatives for hedging and other investment 
purposes, particularly as a complementary investment tool to VIX 
futures.\10\ In response to customer demand for additional options to 
trade during the GTH trading session for similar purposes, the Exchange 
later designated XSP options to be eligible for trading during GTH.\11\ 
The current GTH session allows market participants to engage in trading 
SPX, XSP and VIX options in conjunction with trading VIX futures on CFE 
during extended hours, as VIX futures are open for trading on CFE 
nearly 23 hours a day, 5 days a week.\12\ The proposed rule change 
seeks to further maximize the overlap in time that SPX, XSP and VIX 
options may be open alongside the related futures contracts, as futures 
markets, including CFE, operate extended trading hours that overlap 
with the proposed Curb Trading Hours. The proposed rule change to adopt 
an additional trading session therefore provides market participants 
with expanded access to trade SPX, XSP and VIX options.
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    \10\ See Securities Exchange Act Release No. 34-73017 (September 
8, 2014), 79 FR 54758 (September 12, 2014) (SR-CBOE-2014-062).
    \11\ See Securities Exchange Act Release No. 34-914 (September 
14, 2015), 80 FR 522 (September 18, 2015) (SR-CBOE-2015-079).
    \12\ See CFE Rule 1202(b).
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    The proposed Curb session will provide an extra forty-five-minute 
electronic only session for trading between 4:15 p.m. and 5:00 p.m. for 
designated classes, which will be added Monday through Friday. Unlike 
the current RTH and GTH trading sessions, there will be no opening 
auction process that initiates the Curb trading session. Rather, RTH 
will seamlessly transition to the Curb trading session at 4:15 p.m., 
which is when RTH for index options products ends. Any unexecuted 
orders that are eligible to trade during the Curb trading session that 
remain on the Book at the end of the RTH trading session will remain on 
the Book and be eligible for execution during Curb. Transactions 
effected during the Curb session will have the same trade date as the 
immediately preceding RTH session (i.e., the day on which the 
transactions were effected). The Curb trading session will however 
still be a separate trading session from RTH and GTH and while most of 
the Exchange Rules apply to trading during all three trading sessions, 
certain differences will apply as further described below.\13\ For 
example, unlike the RTH session, there will be no open outcry trading 
on the floor during the Curb trading session and only designated index 
options will be available for trading (similar to GTH). As such, 
Chapter 4, Sections A, D, E, F and G will not apply as those cover 
Equity and ETP Options, Corporate Debt Securities Options, Credit 
Options, Government Security Options, and Interest Rate Options, 
respectively, which will be not available during Curb. Similarly, 
Chapter 5, Section G will not apply as such rules pertain to manual 
order handling and open-outcry trading. The Exchange also notes that 
all Trading Permit Holders (``TPHs'') may participate in Curb. TPHs 
will not need to apply or take any additional steps to participate in 
Curb. Additionally, because the Exchange will use the same servers and 
hardware during Curb as it uses for RTH and GTH, TPHs may use the same 
ports and connections to the Exchange for all trading sessions. The 
Book used during Curb will be the same Book used during RTH and GTH. 
The Exchange proposes to amend various rules to adopt provisions 
relating to the proposed Curb session and conform existing rules 
accordingly, as described more fully below.
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    \13\ For example, business conduct rules in Chapter 8 and rules 
related to doing business with the public in Chapter 9 will apply 
during the Curb trading session. Additionally, a broker-dealer's due 
diligence and best execution obligations apply during the Curb 
trading session.
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Curb Session
    As discussed above, Rule 5.1 (Trading Days and Hours) currently 
sets forth the trading hours for RTH and GTH. The Exchange proposes to 
adopt Rule 5.1(d),\14\ which will set forth the trading hours and rules 
applicable to trading during the proposed Curb trading session. 
Specifically, proposed Rule 5.1(d) will provide that except under 
unusual conditions as may be determined by the Exchange, Curb Trading 
Hours are from 4:15 p.m. to 5:00 p.m. on Monday through Friday.\15\ 
Proposed Rule 5.1(d)(1) provides that the Exchange may designate as 
eligible for trading during Curb Trading Hours any exclusively listed 
option that the Exchange has designated for trading under Chapter 4, 
Section B. The Exchange proposes to approve SPX, XSP and VIX for 
trading on the Exchange during Curb session, which are all classes that 
are currently approved for trading during GTH (i.e., an ``All Sessions 
Class'' \16\).\17\ FLEX Options with the same underlying index will 
also be deemed eligible for trading during the Curb session.\18\
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    \14\ Current Rule 5.1(d) (Holidays) will be renumbered to Rule 
5.1(e). In connection with the proposed numbering change, the 
Exchange also proposes to update a cross reference to Rule 5.1(d) in 
Rule 4.22 to reflect the new rule number of Rule 5.1(e).
    \15\ For example, the Exchange may modify its business days and 
trading hours to not be open for business or to have shortened 
trading hours due to unusual circumstances or in connection with 
terrorism, acts of war, loss or interruption of facilities utilized 
by the Exchange, or a period of mourning. The Exchange notes there 
will also be no Curb Trading Hours where the RTH session closes 
early due to a holiday (e.g., on Christmas Eve).
    \16\ See Proposed Rule 1.1 (All Sessions Class) which means an 
options class the Exchange lists for trading during all trading 
sessions.
    \17\ Although the Exchange is proposing to approve XSP as 
eligible to trade during Curb, it does not intend to initially list 
XSP during Curb, as it is also approved, but not currently listed, 
during GTH. The Exchange however anticipates listing XSP during Curb 
and GTH at some point in the future.
    \18\ Delta-Adjusted at Close (``DAC'') will not be available 
during the Curb trading session (nor are they available currently 
during GTH) as the adjustment calculation for DAC orders is linked 
to the RTH market close for the underlying securities and indexes. 
See Current Rule 5.6.(c) (``Delta-Adjusted at Close or DAC'' 
Definition), which provides a User may not designate a DAC order as 
All Sessions. See also proposed Rule 5.6(c) which will similarly 
provide a User may also not designate a DAC order as RTH and Curb.

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[[Page 73040]]

    Proposed Rule 5.1(d)(2) will provide that the Exchange may list for 
trading during the Curb trading session any series in eligible classes 
that it may list pursuant to Rule 4.13.\19\ Any series in eligible 
classes that were open for trading during RTH are expected to be open 
for trading during the Curb trading session on that same trading day 
(subject to Rule 5.31).\20\ The Exchange notes however that it will not 
list any p.m.-settled series during Curb on a series' expiration date 
as such series would continue to expire prior to the start of the Curb 
trading session at 4:00 p.m. on such date.\21\ A.M.-settled options 
will cease trading at the conclusion of the Curb session the business 
day preceding the last day of trading in the underlying securities 
prior to expiration.\22\
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    \19\ FLEX Options (that are not Cliquet-settled) with an 
exercise price that is a percentage of the closing value of the 
underlying index on the trade date will not be available during Curb 
(nor are they available currently during GTH), as the exercise price 
is linked to the RTH market close for the underlying index.
    \20\ Rule 5.31 describes the opening auction process. Although 
the Exchange does not intend to conduct an opening rotation under 
the normal course of business, an opening rotation may be utilized 
under certain circumstances as described further below and in such 
instances, the availability of a series being available for trading 
during Curb will be subject to Rule 5.31.
    \21\ See Rule 5.1(b)(2)(C).
    \22\ See Rule 4.13(a)(4) and 4.13(a)(5)(C). Pursuant to Rules 
4.13(a)(4) and 4.13(a)(5)(C), the last day of trading for A.M.-
settled index options (such as standard SPX and VIX, respectively) 
shall be the business day preceding the last day of trading in the 
underlying securities prior to expiration. Accordingly, for example, 
A.M.-settled SPX options that expire on a Friday will continue to 
cease trading at the close of the business day on the preceding 
Thursday (albeit now at 5:00 p.m. instead of 4:15 p.m. since the 
business day as proposed ends at the conclusion of Curb). Similarly, 
VIX options (which are A.M.-settled) that expire on a Wednesday will 
normally continue to cease trading at the close of the business day 
on the preceding Tuesday (albeit now at 5:00 p.m. instead of 4:15 
p.m. since, as noted above, the business day as proposed ends at the 
conclusion of Curb).
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    Proposed Rule 5.1(d)(3) will provide that the Exchange will not 
report a value of an index underlying an index option trading during 
Curb because the value of the underlying index will not be recalculated 
during or at the close of Curb. Pursuant to Rules 4.10(f) and (g), to 
list options on a broad-based index (currently, the only options that 
are proposed to trade during Curb), current indexes values must be 
widely disseminated at least once every 15 seconds. Because index 
reporting authorities do not currently plan to disseminate updated 
values during the proposed Curb Trading Hours, the Exchange proposes to 
address the lack of dissemination of index values during Curb under 
proposed Rule 5.1(d)(3), which will supersede the requirements under 
Rules 4.10(f) and (g). The Exchange notes authority to decide when and 
how frequently to calculate and disseminate index values lies solely 
with a reporting authority. The reporting authority for the S&P 500 
Index, S&P Dow Jones Indices LLC (``S&P''), does not intend to 
calculate or disseminate current values of the S&P 500 Index during the 
proposed Curb trading session. Similarly, Cboe Global Indices, LLC 
(``CGI''), the reporting authority for the Cboe Volatility Index (the 
``VIX Index'') \23\ does not intend to calculate or disseminate current 
values of the VIX Index during the proposed Curb trading session. 
Particularly, VIX is intended to represent the market's expectation of 
S&P 500 volatility over the next 30 days. The accuracy of the 
calculation for VIX indicative (or spot) values depends on the quality 
of bid and offer quotes for constituent SPX options series. As the 
proposed additional Curb trading session has yet to be implemented, CGI 
cannot currently know that the SPX option quotes displayed during those 
hours will be sufficient to calculate accurate and meaningful VIX 
indicative values in the same manner it does during RTH or the GTH 
session.\24\ Indeed, the Exchange expects that initially there will be 
overall lower levels of trading during the proposed Curb session as 
compared to both RTH and the GTH session (between 3:00 a.m. and 9:15 
a.m.). Therefore, CGI has determined to not calculate VIX spot values 
during the proposed Curb Trading Hours. Moreover, the Exchange notes 
that the proposed Curb Trading Hours is a significantly shorter trading 
session than RTH or GTH (only 45 minutes versus several hours) and the 
Exchange does not believe it is as meaningful or beneficial to 
disseminate the index for the session given the short length of the 
session. However, after the launch of the Curb Trading Hours, to the 
extent CGI as index calculator determines that SPX quotes during such 
session will support accurate VIX indicative values, CGI will 
reconsider whether to calculate and disseminate these values during 
Curb (and the Exchange would submit rule filings to amend the rules, as 
necessary). The Exchange notes that it similarly did not report a value 
of an index underlying an index option trading during GTH when the GTH 
session was first adopted.\25\ Moreover, the Exchange recently extended 
the GTH session and amended its rules to provide that it will not 
report a value of an index underlying an index option trading during 
those new additional hours.\26\ Additionally, as discussed further 
below, the Exchange proposes to amend Rule 9.20, to make clear that any 
TPH that accepts orders for customers for execution during Curb must 
disclose to those customers various risks related to trading during 
that trading session, including the risk that an updated underlying 
index or portfolio value or intraday indicative value may not be 
calculated or publicly disseminated during Curb.\27\ Further, the 
closing value of the index from the immediately preceding RTH session 
will still be available for TPHs that trade during Curb. Proposed Rule 
5.1(d)(3) (i.e., the lack of dissemination of index values during Curb) 
will also have no impact on trading during Curb.
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    \23\ CGI is an affiliate of the Exchange.
    \24\ The Exchange only disseminates VIX indicative values during 
GTH between 3:00 a.m.-9:15 a.m. The Exchange will not report a value 
of VIX during GTH from 8:15 p.m. (previous day) to 3:00 a.m., 
because the value of the underlying index will not be recalculated 
during this time. See Rule 5.1(c)(3).
    \25\ See Securities Exchange Act Release No. 34-73704 (November 
28, 2014), 79 FR 72044 (December 4, 2014) (SR-CBOE-2014-062) (order 
granting accelerated approval of proposed rule change, as modified 
by Amendments Nos 1 and 2, to adopt Extended Trading Hours for SPX 
and VIX). Particularly, the Exchange proposed to adopt Rule 6.1A(k), 
which provided ``[t]he Exchange will not report a value of an index 
underlying an index option trading during Extended Trading Hours, 
because the value of the underlying index will not be recalculated 
during or at the close of Extended Trading Hours.''
    \26\ See Securities Exchange Act Release No. 34-93403 (October 
22, 2021), 86 FR 59824 (October 28, 2021) (SR-CBOE-2021-061).
    \27\ The Exchange proposes to make a clarifying update to Rule 
9.20 to make clear that the underlying index or portfolio value and 
Intraday Indicative Value ``may not'' be (as opposed to ``will not'' 
be) calculated or widely disseminated during GTH or Curb. The 
Exchange believes the proposed change will reduce potential 
confusion given current values of VIX are in fact widely 
disseminated during GTH at least once 15 seconds for a portion of 
the GTH session (i.e., between 3:00 a.m. to 9:15 a.m.). See Rule 
5.1(c)(3).
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    Lastly proposed Rule 5.1(d)(4) provides trading during Curb Trading 
Hours is electronic only on the System. There will be no open outcry 
trading on the floor during Curb Trading Hours. If in accordance with 
the Rules and User's instructions an order would route to PAR, the 
System will return the order to the TPH during Curb Trading Hours. The 
Exchange notes that the provisions of proposed Rule 5.1(d) are 
substantively similar to the corresponding rules for GTH.

[[Page 73041]]

Definitions
    The Exchange proposes to adopt and amend various definitions under 
Rule 1.1 (Definitions) in connection with the proposed Curb trading 
session as follows:
     ``All Sessions Class.'' An ``All Sessions'' class is a 
class that is currently eligible to trade during both GTH and RTH. The 
Exchange proposes to amend the definition so that such term applies to 
an options class the Exchange lists for trading during all three 
trading sessions (i.e., RTH, GTH and Curb).\28\
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    \28\ At this time, SPX, XSP and VIX are the only classes that 
will be designated as eligible for trading during Curb. Because 
these classes are also eligible to trade during RTH and GTH, they 
will be considered ``All Sessions classes''.
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     ``Book and Simple Book.'' As noted above, the Book used 
during Curb will be the same Book used during RTH and GTH. The Exchange 
therefore proposes to amend this definition so that such terms mean the 
electronic book of simple orders and quotes maintained by the System, 
which single book will be used during all three trading sessions, 
including Curb.
     ``Business Day and Trading Day.'' The Exchange proposes to 
reflect that a business day or trading day includes all trading 
sessions on that day (which includes GTH, RTH and Curb). Further, the 
Exchange will clarify that if the Exchange is not open for RTH on a 
day, then it will not be open for either GTH or Curb trading sessions 
on that day.
     ``Curb Trading Hours and Curb.'' The Exchange proposes to 
adopt a new term and definition for the new trading session and 
specifically proposes to provide the terms ``Curb Trading Hours'' and 
``Curb'' mean the trading session consisting of the hours outside of 
RTH and GTH during which transactions in options may be effected on the 
Exchange and are set forth in Rule 5.1. Having a separate definition 
for each trading session allows the Exchange Rules to reflect these 
differences and the separation of the trading sessions.
     ``Global Trading Hours and GTH.'' The Exchange also 
proposes to update the definition to add a reference to the new Curb 
Trading Hours.
     ``Trading Session.'' The Exchange lastly proposes add a 
reference to Curb Trading Hours in this definition to provide that 
trading sessions will refer to the hours during which the Exchange is 
open for trading for RTH, GTH or Curb.
Exchange Determinations
    Generally, trading during the Curb trading session will occur in 
the same manner as it occurs during the RTH trading session. However, 
because the Curb market may have different characteristics than the RTH 
market (such as all electronic trading, lower trading levels, reduced 
liquidity, and fewer participants), the Exchange may deem it 
appropriate to make different determinations for trading rules for each 
trading session. For similar reasons as it relates to GTH, Rule 1.5(b) 
currently states to the extent the Rules allow the Exchange to make a 
determination, including on a class-by-class or series-by-series basis 
or a group basis, if the Exchange determines to list SPX or VIX on a 
group basis pursuant to Rule 4.13,\29\ the Exchange may make a 
determination for GTH that differs from the determination it makes for 
RTH. The Exchange proposes to amend Rule 1.5(b) to similarly allow the 
Exchange to make a determination for Curb that differs from the 
determination it makes for RTH or GTH (i.e., the Exchange will be 
allowed to make a determination on a trading session-by-trading session 
basis). The Exchange maintains flexibility with respect to certain 
rules so that it may apply different settings and parameters to address 
the specific characteristics of that class and its market.\30\ The 
Exchange represents that it will have appropriate personnel available 
during Curb to make any determinations that Rules provide the Exchange 
or Exchange personnel will make (such as trading halts, opening series, 
and obvious errors).
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    \29\ The Exchange may list SPX or VIX on a group basis. See Rule 
4.13(f). When determining whether to list a class on a group basis, 
the Exchange intends to generally select series with common 
expirations or classifications (e.g., end-of-week series or end-of-
month series, short-term option series, long-term option series, or 
series that expire on a particular expiration date) and trade them 
under individual listing symbols. For example, the Exchange 
currently lists SPX options in two groups. Particularly, the 
Exchange lists SPX options with A.M.-settled standard third-Friday 
expirations under symbol ``SPX'' and lists options on the S&P 500 
Index with P.M-settled standard third-Friday expirations and 
nonstandard expirations with all other expirations under symbol 
``SPXW.'' If the Exchange lists SPX or VIX on a group basis, the 
Exchange may apply different trading parameters (including different 
allocation algorithms) to each group. The Exchange may also 
determine the eligible categories of Market-Maker participants for 
each group (Designated Primary Market-Makers (``DPMs''), Lead 
Market-Makers (``LMMs''), or Market-Makers).
    \30\ For example, Rule 5.32(a) allows the Exchange to determine 
electronic allocation algorithms on a class-by-class basis; Rule 
5.52(e)(2) allows the Exchange to determine bid/ask differential 
requirements on a class-by-class basis; Rules 5.34(a)(2), 
5.34(a)(4)(C), 5.34(a)(5), 5.34(b)(6), and Rules 5.34(c)(1) and (10) 
allow the Exchange to set certain price reasonability checks on a 
class-by-class basis; and Rules 5.37(a)(1), 5.38(a)(1), 5.39(a)(1), 
and 5.40(a)(1), allow the Exchange to activate various auctions on a 
class-by-class basis. Because trading during Curb will be electronic 
only, and because trading during Curb may be different than RTH 
(such as lower trading levels, reduced liquidity and fewer 
participants), the Exchange believes it is appropriate to extend 
this flexibility to each trading session.
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Exchange Order Types, Order Instructions and Times-in-Force
    The Exchange next proposes to amend various exchange rules relating 
to available order types, order instructions and times-in-force the 
Exchange may make available during Curb. First, the Exchange proposes 
to amend Rule 5.6 (Order Types, Order Instructions and Times-in-Force) 
to make clear that all order types, order instructions, and times-in-
force the Exchange makes available in an All Sessions class for RTH 
electronic trading are available in that class for Curb electronic 
trading (just as it is for GTH electronic trading), except as otherwise 
specified in the Rules.\31\ The Exchange notes that it may not permit 
certain order types or order instructions to be applied to orders 
during Curb that it does permit during RTH and/or GTH (i.e., the 
Exchange has the discretion to not make available certain order types 
or Order Instructions otherwise listed under Rules 5.30(a) and (b) and 
proposed Rule 5.30(c)).
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    \31\ For example, market orders, stop, and stop-limit orders 
will not be eligible for trading during Curb, just as they are not 
eligible for trading during GTH. See Rules 5.6(b) and (c).
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Order Types
    The Exchange proposes to amend Rule 5.6(b) to provide that Users 
may not designate a market order as RTH and Curb.\32\ Currently, market 
orders are not eligible for trading during GTH and as such, any order 
designated as ``All Sessions'' cannot be designated a market order. 
Similar to GTH, the Exchange notes there may be reduced liquidity, 
higher volatility, and wider spreads during Curb. Therefore, the 
Exchange believes it is appropriate to not allow these orders to 
participate in Curb trading in order to protect customers should wide 
price fluctuations occur due to the potential illiquid and volatile 
nature of the market or other factors that could impact market 
activity.
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    \32\ The Exchange also proposes to correct an inadvertent 
marking error that resulted in an incorrect rule reference to Rule 
6.8(c) instead of Rule 5.5(c) in the definition of ``Market Order'' 
under Rule 5.6(b). See Securities Exchange Act Release No. 34-87320 
(October 16, 2019), 84 FR 56501 (October 22, 2019) (SR-CBOE-2019-
033).
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Order Instructions
    The Exchange first proposes to update the ``All Sessions'' order 
description under Rules 5.6(c) and 5.33(b)(5) to make clear that orders 
designated as ``All Sessions'' (simple and complex, respectively) are 
eligible to trade in all

[[Page 73042]]

trading sessions (i.e., RTH, GTH and Curb). The Exchange also proposes 
to update the ``All Sessions'' description under Rules 5.6(c) and 
5.33(b)(5) to further clarify what happens to unexecuted All Sessions 
orders at the end of the RTH and Curb trading sessions. Currently, Rule 
5.6(c) specifies that an unexecuted All Sessions order on the GTH Book 
\33\ at the end of a GTH session enters the RTH Queuing Book and 
becomes eligible for execution during the RTH opening rotation and 
trading session on that same trading day (subject to a User's 
instructions). The Exchange proposes to further amend Rule 5.6(c) to 
clarify that (i) an unexecuted All Sessions order on the Book at the 
end of the RTH trading session remains on the Book and becomes eligible 
for execution during the Curb trading session on that same trading day, 
subject to a User's instructions and (ii) an unexecuted All Sessions 
order on the Book at the end of the Curb trading session enters the GTH 
Queuing Book and becomes eligible for execution during the GTH opening 
rotation and trading session on the next day, subject to a User's 
instructions.\34\ The Exchange proposes to also add for clarity 
language providing that All Sessions ``Day'' orders on the Book at the 
conclusion of the Curb session will be canceled. Similar to Rule 
5.6(c), Rule 5.33(b)(5) provides that an unexecuted All Sessions 
complex order resting in the Complex Order Book (``COB'') at the end of 
a GTH trading session remains in the COB and becomes eligible for 
execution during the RTH COB Opening Process or trading session on that 
same trading day, subject to a User's instructions. Similar to the 
proposed changes to Rule 5.6(c), the Exchange proposes to update the 
``All Sessions'' description under Rule 5.33(b)(5) to make clear that 
(i) an unexecuted All Sessions complex order resting in the COB at the 
end of the RTH trading session remains in the COB and becomes eligible 
for execution during the Curb trading session on that same trading day, 
subject to a User's instructions and (ii) an unexecuted All Sessions 
complex order resting in the COB at the end of a Curb trading session 
remains in the COB and becomes eligible for execution during the GTH 
COB Opening Process or trading session on the next trading day, subject 
to a User's instructions.\35\ The Exchange also proposes to add for 
clarity language providing that All Sessions ``Day'' complex orders 
resting in the COB at the conclusion of the Curb session will be 
canceled.
---------------------------------------------------------------------------

    \33\ Since the term ``Book'' refers to a single book that is 
used during all trading sessions, the Exchange proposes to eliminate 
references to ``GTH'' or ``RTH'' preceding the term Book to avoid 
potential confusion.
    \34\ An unexecuted RTH Only simple order would not persist into 
the Curb or GTH sessions at the end of the RTH trading session as 
such orders are not eligible to trade during either of those 
sessions. Similarly, an unexecuted RTH and Curb simple order would 
not persist into the GTH session at the end of the Curb trading 
session as such orders will not be eligible to trade during GTH.
    \35\ An unexecuted RTH Only complex order on the COB would not 
persist into the Curb or GTH sessions at the end of the RTH trading 
session as such orders are also not eligible to trade during either 
of those sessions. Similarly, an unexecuted RTH and Curb complex 
order would not persist into the GTH session at the end of the Curb 
trading session as such orders will not be eligible to trade during 
GTH.
---------------------------------------------------------------------------

    The Exchange also proposes to amend certain other order 
descriptions under Rules 5.6(c). and Rule 5.33(b)(5) (Complex Orders). 
Particularly, the Exchange proposes to amend the descriptions of ``All-
or-None or AON'' under Rule 5.6(c), ``Delta-Adjusted at Close or DAC'' 
under Rules 5.6(c) and 5.33(b)(5), and ``Stop (Stop-Loss)'' and ``Stop-
Limit'' under Rule 5.6(b) to provide that Users may not designate the 
foregoing orders as RTH and Curb. Users similarly cannot designate such 
orders as All Sessions (i.e., they are not currently eligible for GTH). 
The Exchange also proposes to amend the description of ``RTH Only'' 
orders under Rules 5.6(c) and 5.33(b)(5) to clarify that such orders 
are those that a User designates as eligible to trade only during RTH, 
or that are not designated as All Sessions or RTH and Curb. 
Additionally, the Exchange proposes to clarify that unexecuted RTH Only 
orders with a Time-in-Force of GTC or GTD on the Book (or COB) at the 
end of an RTH trading session are not eligible for execution during the 
Curb trading session on the same trading day (in addition to the 
current reference to not being eligible for the GTH trading session on 
the following trading day).\36\
---------------------------------------------------------------------------

    \36\ The Exchange also proposes to make a clarifying change to 
the description of ``RTH Only'' orders under Rule 5.33(b)(5) to 
explicitly reference the ``COB Opening Process'' in order to make 
clear that any unexecuted RTH Only order with a Time-in-Force of GTC 
or GTD on the COB at the end of a RTH trading session remains on the 
COB and becomes eligible for execution during the RTH COB Opening 
Process, which is what happens today. The language is consistent 
with the definition of ``RTH Only'' for simple orders under Rule 
5.6(c).
---------------------------------------------------------------------------

    To provide investors with the flexibility to have their orders and 
quotes execute during (i) RTH, (ii) RTH, GTH and Curb or only (iii) RTH 
and Curb, the proposed rule change adds a ``RTH and Curb'' order to the 
rules. More specifically, the Exchange proposes to adopt a description 
of ``RTH and Curb'' orders under both Rule 5.6(c) and Rule 5.33(b)(5) 
which will describe orders that are designated to trade only during RTH 
and Curb trading sessions. Particularly, an RTH and Curb Order will be 
an order (including a bulk message) a User designates as eligible to 
trade only during RTH and Curb or not designated as All Sessions or RTH 
Only. An unexecuted RTH and Curb order with a Time-in-Force of GTC or 
GTD on the Book (or COB) at the end of an RTH trading session remains 
in the Book (or COB) and becomes eligible for execution during the Curb 
trading session on the same trading day (but not during the GTH trading 
session on the following trading day), subject to a User's 
instructions. An unexecuted RTH and Curb order with a Time-in-Force of 
GTC or GTD on the Book (or COB) at the end of a Curb trading session 
enters the RTH Queuing Book (or COB) and becomes eligible for execution 
during the RTH opening rotation (or COB Opening Process) and trading 
session on the following trading day (but not during the GTH trading 
session on the following trading day), subject to a User's 
instructions. Additionally, all RTH and Curb Day orders resting on the 
Book (or COB) at the conclusion of the Curb trading session will be 
canceled.
Times-in-Force
    The Exchange proposes to update the time times-in-force description 
of a ``Day'' order or quote under Rule 5.6(c) to make clear that any 
order or quote so designated, if not executed, will expire at the RTH 
market close for RTH Only orders (as such orders are not eligible for 
Curb or GTH) and expire at Curb market close for all All Sessions and 
RTH and Curb orders (as Curb is the last trading session of a given 
trading day).
    The Exchange lastly proposes to update the Limit-on-Close (``LOC'') 
definition to provide that a User may not designate an LOC order as All 
Sessions or RTH and Curb, as the execution of LOC orders is linked to 
the RTH market close.
Availability of Orders and Quotes for Electronic Processing
    The Exchange next proposes to amend Rule 5.30 (Availability of 
Orders and Quotes for Electronic Processing) to adopt new subparagraph 
(c), which will specify which order types, order instructions and 
times-in-force the Exchange may choose to make available during the 
Curb session. Specifically, the Exchange proposes to provide the 
Exchange may make the following available during Curb (the Exchange 
notes it also currently may make all these (other than RTH and Curb) 
available during GTH):


[[Page 73043]]


    (1) Order Types: Limit order.
    (2) Order Instructions: Attributable, Book Only, All Sessions, 
Cancel Back, Compression/PCC, Electronic Only, Match Trade 
Prevention (``MTP'') Modifier, Minimum Quantity, Non-Attributable, 
Post Only, Price Adjust, Reserve Order, and RTH and Curb.
    (3) Times-in-Force: Day, Fill-or-Kill (``FOK''), Good-til-
Cancelled (``GTC''), Good-til-Date (``GTD''), Immediate-or-Cancel 
(``IOC''), At the Open (``OPG'').\37\
---------------------------------------------------------------------------

    \37\ Orders designated as OPG for the Curb session will 
generally be rejected unless circumstances require an opening 
rotation to occur in which case, they will be accepted. As discussed 
more fully below, the Curb session does not normally have an opening 
rotation, however an opening rotation may occur if the Exchange 
determines to start Curb after 4:15 p.m. or after any trading halt 
during the Curb session.
---------------------------------------------------------------------------

    (4) Complex Orders: Complex orders (see Rule 5.33 for types of 
complex orders) with a ratio greater than or equal to one-to-three 
(.333) and less than or equal to three-to-one (3.00) (except for 
Index Combo orders).

    The Exchange also proposes to amend Rule 5.70, which sets forth 
order types, order instructions and times-in-force available for FLEX 
options, to add ``RTH and Curb'' to the list of available order 
instructions.
Entry of Orders and Quotes
    The Exchange proposes to amend Rule 5.7 (Entry of Orders and 
Quotes) to clarify that Users can enter orders and quotes into the 
system or cancel previously entered orders and quotes from 8:00 p.m. 
until Curb market close (instead of RTH market close). Further, the 
Exchange proposes to update the time under Rule 5.7(e) that Users may 
cancel orders and quotes with Time-in-Force of GTC or GTD that remain 
on the book from 4:45 p.m. to 5:15 p.m. The Exchange notes that the 
proposed rule change would allow Users to cancel any GTC and GTD orders 
until 5:15 p.m., not just orders in All Sessions classes. The Exchange 
believes the proposed rule change provides Users with additional 
flexibility to manage their orders in all classes that remain in the 
Book following the Curb market close. In particular, the proposed rule 
change will provide Users with All Sessions and RTH and Curb GTC and 
GTD orders with the same time period following the end of Curb to 
cancel orders and provide Users with RTH Only GTC and GTD orders with 
additional time to cancel orders. The Exchange notes that cancelling a 
RTH Only GTC or GTD order at 5:15 p.m. has the same effect as 
cancelling that order at 4:45 p.m.--ultimately it accommodates the 
User's goal of cancelling an order prior to it potentially executing 
during the RTH Opening Process the following morning (i.e., it merely 
provides 30 additional minutes to cancel a RTH Only GTC or GTH order).
Trading Halts
    The Exchange next proposes to amend Rule 5.20 (Trading Halts). By 
way of background, Rule 5.20(a) provides that any two Floor Officials, 
in consultation with a designated senior executive officer of the 
Exchange, may halt trading in any security in the interests of a fair 
and orderly market and to protect investors and sets forth several 
different factors that may be considered in making the foregoing 
determination. Rule 5.20(b) provides that trading in a security that 
has been the subject of a halt under paragraph (a) above may be resumed 
(as described in Rule 5.31(g) \38\) upon a determination by two Floor 
Officials, in consultation with a designated senior executive officer 
of the Exchange, that the interests of a fair and orderly market are 
best served by a resumption of trading. It also states that among the 
factors to be considered in making this determination are whether the 
conditions which led to the halt are no longer present. Rule 5.20(d) 
sets forth exceptions relating to trading halts and resumptions in 
index options. In particular, Rule 5.20(d) provides that when the hours 
of trading of the underlying primary securities market for an index 
option do not overlap or coincide with those of the Exchange, and 
during Global Trading Hours, Rule 5.22 (which describes market-wide 
trading halts due to extraordinary market volatility) and subparagraphs 
(a)(3) and (5) (the factors applicable to index options) and 
subparagraph (b) of Rule 5.20 do not apply, except for subparagraph 
(a)(6).\39\ By way of further background, Rule 5.20(a)(3) provides that 
in the case of an index option, the Exchange may consider: (A) The 
extent to which trading is not occurring in the stocks or options 
underlying the index; (B) the current calculation of the index derived 
from the current market prices of the stocks is not available; or (C) 
the ``current index level,'' which is the implied forward level based 
on volatility index (security) futures prices, for a volatility index 
is not available or the cash (spot) value for a volatility index is not 
available. Rule 5.20(a)(5) provides that the Exchange may consider the 
extent to which the opening process pursuant to Rule 5.31 has been 
completed or other factors regarding the status of the opening process.
---------------------------------------------------------------------------

    \38\ Rule 5.31(g) describes the opening auction process that 
takes place upon the resumption of trading following a trading halt 
and is applicable to all trading sessions.
    \39\ The Exchange proposes to eliminate the reference to Rule 
5.20(a)(6) in Rule 5.20(d). Pursuant to Rule 5.20(a)(6) the Exchange 
may consider whether other unusual conditions or circumstances are 
present, including the activation of price limits on futures 
exchanges or the halt of trading in related futures with respect to 
index options. The Exchange notes that Rule 5.20(a)(6) will continue 
to apply during GTH (and Curb) notwithstanding the proposed rule 
change. The Exchange believes the applicability of Rule 5.20(a)(6) 
is implied and otherwise clear and that it is not necessary to 
explicitly reference this provision under subparagraph (d) of Rule 
5.20.
---------------------------------------------------------------------------

    Generally, in connection with Rule 5.20, the Exchange considers 
halting trading only in response to unusual conditions or 
circumstances, as it wants to interrupt trading as infrequently as 
possible and only if necessary, to maintain a fair and orderly market. 
The proposed rule change amends Rule 5.20(d) to indicate that 
subparagraph (a)(3) of Rule 5.20 also does not apply to Curb (just as 
it does not apply during GTH). In particular at least one of the 
primary listing markets is not open during the proposed Curb 
session.\40\ Additionally, as discussed above, the index values 
(including the spot value for VIX) will not be calculated during 
Curb.\41\ Thus, the Exchange believes it is appropriate to exclude Curb 
from the application of Rule 5.20(a)(3) because the factors in that 
provision will always be true during Curb, whereas during RTH, it would 
be unusual, for example, for stocks or options underlying an index to 
not be trading or the current calculation of the index to not be 
available. Exclusion of Curb from this provision will allow trading 
during Curb to occur despite the existence of those conditions (if the 
Exchange considered the existence of those conditions during Curb, 
trading during Curb could be halted every day). It is appropriate for 
the Exchange to consider any unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market during 
Curb, which may, for example, include whether the underlying primary 
securities market was halted at the close of the preceding RTH session 
(in which case the Exchange will evaluate whether the condition that 
led to the halt has been resolved or would not impact trading

[[Page 73044]]

during Curb) or significant events that occur during Curb.
---------------------------------------------------------------------------

    \40\ For example, the New York Stock Exchange, LLC (``NYSE'') 
does not offer trading hours during the proposed hours of the Curb 
session. See NYSE Rules 1.1 and 7.34. Specifically, NYSE Rule 1.1 
defines ``Core Trading Hours'' as the hours between 9:30 a.m. 
through 4:00 p.m. ET and NYSE Rule 7.34 provides the Exchange has 
two trading sessions each day: (1) The ``Early Trading Session'' 
which begins at 7:00 a.m. and concludes at the commencement of the 
Core Trading Session and (2) the Core Trading Session, which as 
defined in NYSE Rule 1.1, begins at 9:30 a.m. and concludes at 4:00 
p.m. ET.
    \41\ See proposed Rule 5.1(d)(3).
---------------------------------------------------------------------------

    While the Exchange proposes to exclude application of Rule 
5.20(a)(3) from the Curb session, the Exchange does not believe there 
are any distinguishing factors between Curb (or GTH) and RTH that 
warrants subparagraph (a)(5) (the provision that allows the Exchange to 
consider the extent to which the opening process has been completed) or 
Rule 5.20(b) (i.e., the provision that allows the Exchange to resume 
trading) to not apply. Indeed, the Exchange sees no reason why it 
should not consider the extent to which the opening process has been 
completed or other factors regarding the status of the opening process 
during either GTH or Curb. Although there will be no opening process to 
initiate the Curb session, there may still be an opening process 
pursuant to Rule 5.31(g) that may occur should a trading halt be 
declared during Curb. As such, the Exchange believes it's appropriate 
to not preclude this factor from being considered during either GTH or 
Curb. The Exchange also sees no reason why it should not allow the 
resumption of a halted security during GTH or Curb if a determination 
is made by two Floor Officials, in consultation with a designated 
senior executive officer of the Exchange, that the interests of a fair 
and orderly market are best served by a resumption of trading.
    The Exchange next proposes to amend Rule 5.20(d) with respect to a 
reference to Rule 5.22. Under Rule 5.22 (Market-wide Trading Halts due 
to Extraordinary Market Volatility), the Exchange will halt trading in 
all classes whenever a market-wide trading halt (commonly known as a 
circuit breaker) is initiated in response to extraordinary market 
conditions. Rule 5.22(b)(1) states that the Exchange will halt trading 
for 15 minutes if a Level 1 or Level 2 Market Decline occurs after 9:30 
a.m. and up to and including 3:25 p.m. (or 12:25 p.m. for an early 
scheduled close). Additionally, the Exchange will not halt trading if a 
Level 1 or Level 2 Market Decline occurs after 3:25 p.m. (or 12:25 
p.m., if applicable). Rule 5.22(b)(2) states that the Exchange will 
halt trading until the next trading day if a Level 3 Market Decline 
occurs. As referenced under Rule 5.20(d), Rule 5.22 does not currently 
apply during the GTH session. Particularly, Rule 5.22(b)(1) does not 
apply, as the beginning of GTH occurs past the 15-minute halt window 
for a Level 1 or Level 2 Market Decline. Rule 5.22(b)(2) also does not 
apply during GTH, as the GTH session is considered the next trading day 
and Rule 5.22(b)(2) requires the Exchange to halt trading until the 
``next'' trading day if a Level 3 Market Decline occurs at any time 
during the trading day. Unlike GTH however, the Curb session is 
considered the same trading day as the preceding RTH session, and 
therefore, unlike GTH, Rule 5.22(b)(2) can and should apply. 
Accordingly, the Exchange proposes to amend Rule 5.20(d) to make clear 
that the only applicable trading halt provisions that do not apply 
during GTH and Curb are Rules 5.22 and 5.20(a)(3), with the exception 
of Rule 5.22(b)(2) which will apply during Curb.
Opening Auction Process
    As discussed above, the Exchange does not intend to adopt an 
opening auction process for either simple or complex orders to commence 
the Curb trading session as the proposed start time of Curb immediately 
follows the close of RTH. As such, there will be no Curb-specific 
queuing period or opening rotation trigger to initiate the Curb 
session. Instead, at 4:15 p.m., the RTH trading session will seamlessly 
transition directly into the Curb trading session, and any All Sessions 
orders resting on the Book will remain on the book and become eligible 
for execution during Curb subject to a User's instructions. In 
connection with the proposal, the Exchange proposes to amend Rules 5.31 
and 5.33 to make clear that under normal circumstances there will be no 
opening rotation at the start of Curb. Particularly, the Exchange 
proposes to amend Rule 5.31(d), which sets forth various triggers upon 
which the System will initiate an opening rotation for the series in a 
class, by adopting new subparagraph (3) to explicitly provide that the 
System will not initiate an opening rotation at the start of the Curb 
Trading Hours. The Exchange also proposes to address what happens in 
the event Curb does not start immediately at 4:15 p.m. As noted above, 
proposed Rule 5.1(d) will provide that Curb will operate from 4:15 p.m. 
to 5:00 p.m., except under unusual conditions as may be determined by 
the Exchange. If such conditions result in a determination to start 
Curb sometime after 4:15 p.m., the Exchange will need to initiate an 
opening rotation to start the Curb session as there would then be a 
``gap'' between RTH and Curb and the transition would no longer be 
seamless. As such, the Exchange proposes to also add language to 
proposed Rule 5.31(d)(3) which would provide that should the Exchange 
determine to start Curb after 4:15 p.m. due to unusual conditions as 
may be determined by the Exchange, the Exchange will utilize an opening 
rotation to initiate the session at a time to be announced by the 
Exchange. Proposed Rule 5.31(d)(3) would also clarify that the queuing 
period for any such opening rotation would begin at 4:15 p.m. The 
Exchange also proposes to make clear in Rule 5.31(d)(3) that the 
Exchange will follow the opening auction process described in Rule 
5.31(g) to resume trading following the declaration of a trading halt 
during Curb Trading Hours.
    Similarly, the Exchange proposes to amend Rule 5.33(c), which 
describes the COB Opening Process, to clarify that the System will not 
initiate the COB Opening Process at the start of Curb. More 
specifically, Rule 5.33(c) currently provides that the COB Opening 
Process occurs at the beginning of each trading session and after a 
trading halt. The Exchange proposes to update Rule 5.33(c) to make 
clear that the COB Opening Process occurs only at the beginning of RTH 
and GTH (instead of ``each'' trading session). The Exchange notes that 
should a trading halt be declared during Curb, the Exchange will 
utilize the COB Opening Process described under Rule 5.33(c) upon a 
resumption of trading. Similar to proposed Rule 5.31(d)(3), the 
Exchange proposes to adopt new Rule 5.33(c)(3) to explicitly provide 
that there will be no COB Opening Process at the start of the Curb 
Trading Hours. Proposed Rule 5.33(c)(3) will also address what happens 
in the event Curb does not start immediately at 4:15 p.m. That is, if 
such conditions result in a determination to start Curb sometime after 
4:15 p.m., the Exchange will initiate the COB Opening Process at a time 
to be announced by the Exchange. Proposed Rule 5.33(c)(3) would also 
clarify that the System will accept complex orders for inclusion in the 
COB Opening Process beginning at 4:15 p.m. The Exchange will also make 
clear in proposed Rule 5.33(c)(3) that the Exchange will follow the COB 
Opening Process described in Rule 5.33(c) to resume trading following 
the declaration of a trading halt during Curb Trading Hours. The 
Exchange believes the proposed rule changes relating to the opening 
processes for simple and complex orders (or lack thereof) provides 
transparency as to how the Exchange will initiate the Curb session 
under normal circumstances, as well as in the event unusual conditions 
result in the Curb session starting after 4:15 p.m.
Market-Maker Rules
    Current Rule 5.50(a) (Market-Maker Appointments) provides that a 
Market-Maker's selected class appointment applies to classes during all 
trading sessions. In other words, if a Market-

[[Page 73045]]

Maker selects an appointment in SPX options, for example, that 
appointment would apply during both GTH, RTH and Curb (and thus, the 
Market-Maker would have an appointment to make markets in SPX during 
GTH, RTH and Curb). As a result, the Market-Maker continuous quoting 
obligations set forth in Rule 5.52(d) applies to the class for an 
entire trading day (including all three trading sessions). Pursuant to 
Rule 5.52(d), a Market-Maker must enter continuous bids and offers in 
60% of the series of the Market-Maker's appointed classes, excluding 
any adjusted series, any intra-day add-on series on the day during 
which such series are added for trading, any Quarterly Option series, 
and any series with an expiration of greater than 270 days.\42\ The 
Exchange calculates this requirement by taking the total number of 
seconds the Market-Maker disseminates quotes in each appointed class 
(excluding the series noted above) and dividing that time by the 
eligible total number of seconds each appointed class is open for 
trading that day. The Exchange also notes however, that pursuant to 
Rule 5.52(d)(2)(E), the obligations apply only when the Market-Maker is 
quoting in a particular class during a given trading day and the 
obligations are not applicable to an appointed class if a Market-Maker 
is not quoting in that appointed class. Accordingly, if a Market-Maker 
does not wish to quote during the proposed new Curb trading session, 
but does quote the current RTH hours, then so long as the Market-Maker 
doesn't log in and quote starting at 4:15 p.m., the time between 4:15 
p.m. and 5:00 p.m. (the Curb session) won't be considered when 
determining a Market-Maker's compliance with the quoting obligations. 
Accordingly, the Exchange believes the addition of the proposed Curb 
Trading Hours session will have a de minimis, if any, impact on a 
Market-Maker's continuous quoting obligations, as they may continue to 
choose when to actively quote and have their obligations to their 
appointed classes apply.\43\ Moreover, selecting an appointment in SPX 
or VIX options will be optional and within the discretion of a Market-
Maker. Additionally, Market-Makers have the opportunity to quote during 
Curb (and receive the benefits of acting as a Market-Maker with respect 
to transactions it effects during that time) without obtaining an 
additional Trading Permit or creating additional connections to the 
Exchange. Given this ease of access to the Curb trading session, the 
Exchange believes Market-Makers may be encouraged to quote during the 
trading session. The Exchange believes Market-Makers will continue to 
have an incentive to quote during Curb given the significance of the 
SPX and VIX within the financial markets, the expected demand, and 
given that the related futures also trading during those hours (which 
may permit execution of certain hedging strategies). The Exchange 
believes continuing to extend a Market-Maker's appointment to Curb 
notwithstanding the proposed extension of the trading session will 
enhance liquidity during that trading session, which benefits all 
investors during those hours. Therefore, the Exchange believes the 
proposed rule change provides customer trading interest with a net 
benefit and continues to maintain a balance of Market-Maker benefits 
and obligations.
---------------------------------------------------------------------------

    \42\ See Rule 5.52(d)(2).
    \43\ See Proposed Rule 5.5(d)(2)(E).
---------------------------------------------------------------------------

    With respect to Lead-Market-Makers (``LMMs''), the Exchange plans 
to utilize the same LMM structure it uses today during GTH. More 
specifically, Rule 3.55 (LMMS) currently provides that the Exchange may 
approve one or more Market-Makers to act as LMMs in each class during 
GTH. Further, subparagraph (b) of Rule 5.55 (LMMs) provides that if a 
LMM is approved to act as an LMM during GTH, then the LMM must comply 
with the continuous quoting obligation and other obligations of Market-
Makers set forth in Rule 5.52(d)(2) but does not have to comply with 
the obligations under Rule 5.55(a). Additionally, subparagraph 
(a)(2)(B)(iv) of Rule 5.32 (Order and Quote Book Processing, Display, 
Priority and Execution) provides that the DPM/LMM/PMM participation 
entitlement does not apply during GTH. Similar to GTH, the Exchange 
expects lower trading liquidity and trading levels during Curb as 
compared to RTH, and thus fewer opportunities for an LMM to receive a 
participation entitlement. As such, the Exchange does not expect that 
the RTH obligation/benefit structure would provide a similar incentive 
during Curb. More specifically, without the possibility of receiving a 
participation entitlement on a sufficient volume of trades, the 
Exchange believes there would be insufficient incentive for LMMs to 
undertake an obligation to quote at heightened levels, which could 
result in even lower levels of liquidity. The Exchange therefore 
proposes to amend Rules 3.55, 5.55 and 5.32 to add references to Curb 
such that the same LMM rules that are used during GTH will also apply 
during Curb.\44\ Accordingly, LMMs appointed in the Curb session will 
not be obligated to satisfy heightened continuous quoting and opening 
quoting standards during Curb, nor will they receive a benefit in 
exchange for satisfying an obligation (i.e., LMMs will not receive a 
participation entitlement during Curb).\45\
---------------------------------------------------------------------------

    \44\ The Exchange notes that it may appoint LMMs in both GTH and 
Curb, neither GTH nor Curb or only GTH or Curb. The Exchange also 
notes that to the extent it determines to appoint LMMs in both GTH 
and Curb, such LMM may, but is not required to be, the same LMM for 
each trading session.
    \45\ The Exchange may determine in the future to adopt via a 
separate rule filing an incentive program that would provide 
appointed LMMs a rebate if they meet certain heightened continuous 
quoting standards during the proposed additional hours, if the 
Exchange believes it is necessary to encourage LMMs to provide 
significant liquidity during this time.
---------------------------------------------------------------------------

    The Exchange notes that to the extent the Exchange appoints a 
Designated Primary Market-Maker (``DPM'') or Preferred Market-Maker 
(``PMM'') to a class for the Curb trading session, the Exchange would 
similarly not use the obligation/benefit structure. As such, the 
Exchange also proposes to amend subparagraph (a)(2)(B)(iv) of Rule 5.32 
(Order and Quote Book Processing, Display, Priority and Execution) to 
provide that the DPM/LMM/PMM participation entitlement does not apply 
during GTH or Curb.
FLEX
    Subparagraph (b) of Rule 5.71 (Opening of FLEX Trading) currently 
sets forth the times that FLEX traders may begin submitting FLEX Orders 
into an electronic FLEX Auction, a FLEX AIM, or a FLEX SAM or initiate 
an open outcry FLEX Auction on the trading floor for the RTH and GTH 
sessions. The Exchange proposes to add the time FLEX traders may submit 
such orders during Curb, which is after 4:15 p.m. (which is the start 
time of the Curb trading session).
Catastrophic Errors
    The Exchange next proposes to amend Rule 6.5 (Nullification and 
Adjustment of Option Transactions Including Obvious) to specify the 
time deadline relating to catastrophic error \46\ notifications in 
subparagraph (d)(2) for Curb. First, Rule 6.5(d) provides that a party 
that believes that it participated in a transaction that was the result 
of a Catastrophic Error must notify the Exchange's Trade Desk. The 
Exchange proposes to update Rule 6.5(d) to clarify that like 
transactions occurring during

[[Page 73046]]

RTH,\47\ notification relating to trades executed during Curb must be 
received by the Exchange's Trade Desk by 8:30 a.m. on the first trading 
day following the execution. The Exchange also proposes to clarify in 
Rule 6.5(d)(2) the cutoff time for transactions in an expiring options 
series that take place on an expiration day. Currently Rule 6.5(d)(2) 
provides that for transactions in an expiring options series that take 
place on an expiration day, a party must notify the Exchange's Trade 
Desk within 45 minutes after the close of ``trading that same day''. In 
order to avoid confusion as to whether or not the close of trading 
refers to the close of the RTH session or the proposed Curb session, 
the Exchange proposes to clarify that such notification must be 
submitted by the close of the ``RTH session''. As discussed above, 
P.M.-settled options will continue to expire at 4:00 p.m. on the date 
of expiration. As such, the Exchange believes it's appropriate to 
continue to provide the same amount of time for notification as it does 
today.
---------------------------------------------------------------------------

    \46\ A catastrophic error is deemed to have occurred when the 
execution price of a transaction is higher or lower than the 
Theoretical Price for the series by an amount equal to at least the 
amounts set forth under Rule 6.5(d)(1).
    \47\ For consistency in the Rulebook, the Exchange proposes to 
capitalize the reference to ``regular trading hours'' in Rule 
6.5(d)(2).
---------------------------------------------------------------------------

Disclosure
    Current Rule 9.20 currently requires TPHs to make certain 
disclosures to customers regarding material trading risks that exist 
during GTH. The Exchange proposes to similarly require that TPHs make 
similar disclosures to customers regarding material trading risks that 
also exist during Curb. Similar to GTH, the Exchange expects overall 
lower levels of trading during Curb compared to RTH. While trading 
processes during Curb will be substantially similar to trading 
processes during RTH (as noted above), the Exchange believes it is 
important for investors, particularly public customers, to be aware of 
any differences and risks that may result from lower trading levels and 
thus requires these disclosures. Accordingly, Rule 9.20 will be amended 
to require the same customer disclosures during Curb as are required 
during GTH. Specifically, no Trading Permit Holder may accept an order 
from a customer for execution during Curb without disclosing to that 
customer that trading during Curb involves material trading risks, 
including the possibility of lower liquidity (including fewer Market-
Makers quoting), higher volatility, changing prices, an exaggerated 
effect from news announcements, wider spreads, the absence of an 
updated underlying index or portfolio value or intraday indicative 
value and lack of regular trading in the securities underlying the 
index or portfolio and any other relevant risk. Rule 9.20 currently 
provides an example of these disclosures, which the Exchange proposes 
to amend to add references to Curb Trading Hours in addition to Global 
Trading Hours references. The Exchange believes that requiring TPHs to 
disclose these risks to non-TPH customers will facilitate informed 
participation in Curb.
    The Exchange also intends to distribute to TPHs and make available 
on its website a Regulatory Circular regarding Curb that discloses, 
among other things, (1) that the current underlying index value may not 
be updated during Curb, (2) that lower liquidity during Curb may impact 
pricing, (3) that higher volatility during Curb may occur, (4) that 
wider spreads may occur during Curb, (5) the circumstances that may 
trigger trading halts during Curb, (6) required customer disclosures 
(as described above), and (7) suitability requirements. The Exchange 
believes that, with this disclosure, Curb Trading Hours are appropriate 
and beneficial to market participants that choose to participate in the 
session, notwithstanding the absence of a disseminated updated index 
value during those hours.
Discussion
    As set forth above, the differences in the Rules between the 
trading process during Curb and RTH is that, similar to GTH, certain 
order types and instructions will not be available during Curb, values 
for indexes underlying index options will not be disseminated during 
Curb, and TPHs that accept orders from customers during Curb will be 
required to make certain disclosures to those customers. Additionally, 
as discussed, unlike either RTH or GTH, the Exchange will not use an 
opening auction process at the start of the Curb session. Other rules 
however, will apply in the same manner, but the Exchange may make 
different determinations between RTH and Curb, just as the Exchange may 
do between RTH and GTH. The Exchange believes these differences are 
consistent with the differences between the characteristics of each 
trading session. The Exchange also notes the following:
     All TPHs may, but will not be required to, participate 
during Curb.\48\ As noted above, while a Market-Maker's appointment to 
an All Sessions class will apply to that class whether it quotes in 
series in that class or not during Curb, the Exchange believes the 
proposed Curb trading session will have a de minimis, if any, impact on 
a Market-Maker's continuous quoting obligations, as they may continue 
to choose when to actively quote and have their obligations to their 
appointed classes apply. Additionally, even if a Market-Maker elects to 
not quote during all or part of Curb, its ability to satisfy its 
continuous quoting obligation will not be substantially impacted given 
the short length of Curb as well as the few classes that will be listed 
for trading during Curb.
---------------------------------------------------------------------------

    \48\ Unlike GTH, Clearing TPHs do not need to be authorized by 
the Options Clearing Corporation (``OCC'') to operate during the 
Curb session. As such, TPHs do not need separate letters of 
guarantee (i.e., in addition to any letters of guarantee on file for 
RTH) to also operate during the Curb trading session.
---------------------------------------------------------------------------

     The Exchange will use the same connection lines, message 
formats, and feeds during RTH, GTH and Curb.\49\ TPHs may use the same 
ports and EFIDs \50\ for each trading session.\51\
---------------------------------------------------------------------------

    \49\ The same telecommunications lines used by TPHs during RTH 
and/or GTH may be used during Curb, and these lines will be 
connected to the same application server at the Exchange during all 
three trading sessions.
    \50\ The term ``EFID'' means an Executing Firm ID. The Exchange 
assigns an EFID to a TPH, which the System uses to identify the TPH 
and the clearing number for the execution of orders and quotes 
submitted to the System with that EFID.
    \51\ A TPH may elect to have separate ports or EFIDs for each 
trading session, but the Exchange will not require that.
---------------------------------------------------------------------------

     Order processing will operate in the same manner during 
Curb as it does during RTH or GTH. There will be no changes to the 
ranking, display, or allocation algorithms rules.
     There will be no changes to the processes for clearing, 
settlement, exercise, and expiration.\52\
---------------------------------------------------------------------------

    \52\ The Exchange has held discussions with the Options Clearing 
Corporation, which is responsible for clearance and settlement of 
all listed options transactions and has informed the Exchange that 
it will be able to clear and settle all transactions that occur on 
the Exchange and handle exercises of options during Curb.
---------------------------------------------------------------------------

     The Exchange will report Exchange quotation and last sale 
information to the Options Price Reporting Authority (``OPRA'') 
pursuant to the Plan for Reporting of Consolidated Options Last Sale 
Reports and Quotation Information (the ``OPRA Plan'') during the 
proposed Curb Trading Hours in the same manner it currently reports 
this information to OPRA during RTH and GTH today.\53\

[[Page 73047]]

Therefore, all TPHs that elect to trade during the proposed Curb 
session will have access to quote and last sale information during that 
trading session. Exchange proprietary data feeds will also be 
disseminated during Curb using the same formats and delivery mechanisms 
with which the Exchange disseminates them during RTH and GTH today. Use 
of these proprietary data feeds during Curb will be optional (as they 
are today during RTH and GTH).\54\
---------------------------------------------------------------------------

    \53\ The OPRA Plan provides for the collection and dissemination 
of last sale and quotation information on options that are trading 
on the participant exchanges. The OPRA Plan is a national market 
system plan approved by the Commission pursuant to Section 11A of 
the Act and Rule 608 thereunder. See Securities Exchange Act Release 
No. 17638 (March 18, 1981). The full text of the OPRA Plan is 
available at http://www.opraplan.com. All operating U.S. options 
exchanges participate in the OPRA Plan. The Exchange will report its 
best bid and offer and executed trades to OPRA during the proposed 
Curb Trading Hours in the same manner that they are reported during 
RTH and GTH today. The operator of OPRA has also informed the 
Exchange that it intends to add a modifier to the disseminated 
information during Curb. Specifically, OPRA will use Message Type = 
`v' between 4:15 p.m. ET and 5:00 p.m. ET.
    \54\ Any fees related to receipt of the OPRA data feed during 
Curb will be included on the OPRA fee schedule. Any fees related to 
receipt of the Exchange's proprietary data feeds during Curb will be 
included on the Exchange's fee schedule (and will be included in a 
separate rule filing) or the Exchange's market data website, as 
applicable.
---------------------------------------------------------------------------

     The same TPHs that are required to maintain connectivity 
to a backup trading facility during RTH and GTH will be required to do 
so during Curb.\55\ Because the same connections and servers will be 
used for both trading sessions, a TPH will not be required to take any 
additional action to comply with this requirement, regardless of 
whether the TPH chooses to trade during Curb.
---------------------------------------------------------------------------

    \55\ See Rule 5.24.
---------------------------------------------------------------------------

     The Exchange will process all clearly erroneous trade 
breaks during Curb in the same manner it does during RTH and GTH and 
will have Exchange officials available to do so.
     The Exchange will perform all necessary surveillance 
coverage during Curb.
     The Exchange may halt and resume trading during Curb 
pursuant to Rule 5.20(a) and (b), respectively, in the interests of a 
fair and orderly market in the same manner it may during RTH and GTH. 
The proposed rule change amends Rule 5.20(d) to provide that the 
factors set forth under Rule 5.20(a)(3) will not apply during Curb just 
as they do not apply during GTH. Among the factors that may be 
considered in making the foregoing determinations are whether there has 
been an activation of price limits on futures exchanges or the halt of 
trading in related futures with respect to index options.\56\ Further, 
the proposed rule change will amend Rule 5.20(d) such that when 
determining whether to halt trading during Curb or GTH, the Exchange 
will also be able to consider the extent to which the opening process 
pursuant to Rule 5.31 has been completed or other factors regarding the 
status of the opening process, just as it is able to do for the RTH 
session.
---------------------------------------------------------------------------

    \56\ See Rule 5.20(a)(6). As discussed above, futures markets 
operate an extended trading hours session that follows the regular 
trading hours session, with hours similar to what the Exchange is 
proposing. As such, should a halt of trading in related futures 
occur during Curb, then the Exchange may consider whether to halt 
during that session, just as it may do during regular GTH and RTH 
sessions.
---------------------------------------------------------------------------

     Under Rule 5.22 (Market-wide Trading Halts due to 
Extraordinary Market Volatility), the Exchange will halt trading in all 
classes whenever a market-wide trading halt (commonly known as a 
circuit breaker) is initiated in response to extraordinary market 
conditions. Rule 5.22(b)(1) states that the Exchange will halt trading 
for 15 minutes if a Level 1 or Level 2 Market Decline occurs after 9:30 
a.m. and up to and including 3:25 p.m. (or 12:25 p.m. for an early 
scheduled close). Additionally, the Exchange will not halt trading if a 
Level 1 or Level 2 Market Decline occurs after 3:25 p.m. (or 12:25 
p.m., if applicable). Rule 5.22(b)(2) states that the Exchange will 
halt trading until the next trading day if a Level 3 Market Decline 
occurs. The Exchange notes that Rule 5.22(b)(1) will not apply during 
the Curb session, just as it does not apply during GTH, as the 
beginning of Curb occurs past the 15-minute halt window for a Level 1 
or Level 2 Market Decline. Rule 5.22(b)(2) however will apply to the 
Curb session, as the Curb session is considered the same trading day as 
the RTH session. As such, if a Level 3 Market Decline occurs at any 
time during RTH or Curb, the Exchange will halt trading in SPX and VIX 
until the next trading day.
    The Exchange understands that systems and other issues may arise 
and is committed to resolving those issues as quickly as possible, 
including during the new Curb trading hours. Thus, the Exchange will 
have appropriate staff on-site and otherwise available as necessary 
during Curb to handle any technical and support issues that may arise 
during those hours. Additionally, the Exchange will have personnel 
available to address any trading issues that may arise during the 
additional Curb trading hours. The Exchange is also committed to 
fulfilling its obligations as a self-regulatory organization at all 
times, including during Curb, and will have appropriately trained, 
qualified regulatory staff in place during Curb to the extent it deems 
necessary to satisfy those obligations. The Exchange's surveillance 
procedures will be revised as necessary to incorporate transactions 
that occur, and orders and quotations that are submitted, during Curb. 
The Exchange believes its surveillance procedures are adequate to 
properly monitor trading during Curb.
Implementation Date
    The Exchange will announce the implementation date of the proposed 
rule change in accordance with Rule 1.5. The Exchange also notes that 
it first announced its proposal to adopt the proposed Curb Trading 
Hours session to market-participants via a Trade Desk notice back in 
January 2021.\57\ Since then, the Exchange has issued numerous updated 
notices, FAQs and detailed technical specifications.
---------------------------------------------------------------------------

    \57\ See Exchange Notice C2021012501 ``Cboe Options Exchange to 
Extended Global Trading Hours in Q4 2021''.
---------------------------------------------------------------------------

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.\58\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \59\ 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) \60\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78f(b).
    \59\ 15 U.S.C. 78f(b)(5).
    \60\ Id.
---------------------------------------------------------------------------

    In particular, the proposed rule change to adopt Curb Trading Hours 
will remove impediments to and perfect the mechanism of a free and open 
market and a national market system. Particularly, Curb is a 
competitive initiative designed to improve the Exchange's marketplace 
for the benefit of investors, and the proposed rule change will allow 
the Exchange to provide a competitive marketplace for market 
participants to trade certain products in an additional 45-minute 
trading session. More specifically, the adoption of the Curb trading 
session is designed to increase the overlap in time

[[Page 73048]]

that SPX, XSP and VIX options are open alongside the related futures 
contracts. Moreover, adopting an additional trading session during 
which market participants can trade SPX, XSP and VIX options is 
designed to better help meet growing investor demand for the ability to 
manage risk more efficiently, react to global macroeconomic events as 
they are happening and adjust SPX, XSP and VIX options positions 
outside of RTH. The Exchange believes that the proposed rule change is 
reasonably designed to provide an appropriate mechanism for trading 
outside of RTH and GTH while providing for appropriate Exchange 
oversight pursuant to the Act, trade reporting, and surveillance.
    The Exchange also notes that it, along with some of its affiliated 
options exchanges, already allow for trading outside of the hours of 
RTH (i.e., during the GTH trading session).\61\ Furthermore, the 
Commission has authorized stock exchanges to be open for trading 
outside of regular trading hours.\62\ Thus, the proposed rule change to 
adopt a trading session in addition to, and outside of, regular trading 
hours is not novel or unique. Additionally, as noted above, futures 
exchanges also operate outside of those hours and during the proposed 
Curb session, including the Exchange's affiliate, CFE, which has an 
extended trading hours session that overlaps with Exchange proposed 
Curb Trading Hours.\63\
---------------------------------------------------------------------------

    \61\ See Cboe Options Rule 5.1, Cboe C2 Exchange, Inc, Rule 5.1 
and Cboe EDGX Exchange, Inc. Rule 21.2.
    \62\ See e.g., Cboe BZX Exchange, Inc. Rule 1.5, which provides 
for an After Hours Trading Session which is a trading session from 
4:00 p.m.-8:00 p.m. and follows the Regular Trading Hours session 
which takes place between 9:30 a.m. and 4:00 p.m. See also Exchange 
Act Release No. 59963 (May 21, 2009), 74 FR 25787 (May 29, 2009) 
(SR-BATS-2009-012) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change to Amend BATS Rules to Offer an After Hours 
Trading Session).
    \63\ See, e.g., CFE Rule 1202, which outlines the trading 
schedule for futures on the Cboe Volatility Index and includes an 
extended trading session that operates from 4:00 p.m. to 5:00 p.m.
---------------------------------------------------------------------------

    As described in detail above, the vast majority of the Exchange's 
trading rules will apply during Curb in the same manner as during the 
Exchange's two other trading sessions (RTH and GTH), which rules have 
all be previously filed with the Commission as being consistent with 
the goals of the Act. Rules that will apply equally during Curb Trading 
Hours include rules that protect public customers, impose best 
execution requirements on TPHs, and prohibit acts and practices that 
are inconsistent with just and equitable principles of trade as well as 
fraudulent and manipulative practices. The proposed rule change also 
provides opportunities for price improvement during Curb and applies 
the same allocation and priority rules that are available to the 
Exchange during RTH and GTH. The Exchange believes, therefore, that the 
rules that will apply during Curb will continue to promote just and 
equitable principles of trade and prevent fraudulent and manipulative 
acts.
    The proposed rule change clearly identifies the ways in which 
trading during Curb will be different from trading during RTH and/or 
GTH (such as identifying order types and instructions that will not be 
available during Curb, clarifying that under the normal course of 
business there will be no opening auction process at the start of Curb, 
and the proposed absence of a disseminated updated index value during 
Curb). This ensures that investors are aware of any differences among 
trading sessions. The Exchange believes the differences are consistent 
with the expected differences in duration and timing of the trading 
session, liquidity, participation, and trading activity between RTH and 
Curb and GTH and Curb. For example, the Exchange believes it is 
reasonable to not adopt an opening auction process for Curb as the Curb 
session, unlike RTH and GTH, is proposed to start immediately following 
the trading session preceding it, and as such, the Exchange is able to 
seamlessly transition into Curb without a queuing period or opening 
rotation. The flexibility provided to the Exchange to make 
determinations for each trading session will allow the Exchange to 
apply settings and parameters to address the different market 
conditions that may be present during each trading session. 
Additionally, to further protect investors from any additional risks 
related to trading during Curb, the proposed rule change requires that 
disclosures be made to customers describing these potential risks, 
similar to the current requirement for such disclosures related to 
trading during GTH. The All Sessions order and RTH Only order, along 
with the proposed RTH and Curb order, will continue to protect 
investors by permitting investors who wish only to trade during RTH 
from having orders or quotes execute outside of the RTH session, 
including during the proposed Curb trading session. The RTH and Curb 
Order will provide investors with additional execution flexibility by 
providing them with an order that may execute during either daytime 
trading session but not carryover (if unexecuted) in the following 
overnight session. Consistent with the goal of investor protection, the 
Exchange will not allow market orders during Curb due to the expected 
increased volatility and decreased liquidity during these hours, just 
as it does not currently allow such orders during GTH for the same 
reasons. The proposed rule change also only authorizes the Exchange to 
list for trading two classes during Curb. As the proposed rule change 
is a new Exchange initiative, the Exchange believes it is reasonable to 
trade a limited number of classes upon implementation for which demand 
is believed to be the highest during Curb.
    Additionally, the Exchange believes that the proposed rule change 
will foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, as the Exchange will 
ensure that adequate staffing is available during Curb to provide 
appropriate trading support during those hours, as well as Exchange 
officials to make any necessary determinations under the rules during 
Curb (such as trading halts and trade nullification for obvious 
errors). The Exchange is also committed to fulfilling its obligations 
as a self-regulatory organization at all times, including during Curb. 
The Exchange's surveillance procedures will also be revised to 
incorporate transactions that occur and orders and quotations that are 
submitted during Curb Trading Hours. The Exchange believes its 
surveillance procedures are adequate to properly monitor trading during 
Curb. Clearing and settlement processes will be the same for Curb as 
they are for RTH or GTH transactions.
    The proposed rule change further removes impediments to a free and 
open market and does not unfairly discriminate among market 
participants, as all TPHs with access to the Exchange may trade during 
Curb using the same connection lines, message formats data feeds, and 
EFIDs they use during RTH and GTH, minimizing any preparation efforts 
necessary to participate during Curb. TPHs will not be required to 
trade during Curb.
    Additionally, as discussed above, while the proposed rule change 
increases the total time during which a Market-Maker with an 
appointment has the ability to quote in a selected class, the Exchange 
believes this increase has a de minimis, if any, impact on Market-
Makers given that a Market-Maker's compliance with its continuous 
quoting obligation is based on all classes in which it has an 
appointment in the

[[Page 73049]]

aggregate and based only when a Market-Maker is quoting it its 
appointed classes. Indeed, as noted above, if a Market-Maker who quotes 
during the RTH and/or GTH session today does not wish to quote during 
the proposed Curb Trading Hours, then so long as such Market-Maker does 
not log into the system and quote during that session (or whatever 
other time it wishes to begin quoting), there will be no impact with 
respect to the Market-Maker's ability to satisfy its continuous quoting 
obligations. Selecting an appointment in SPX and/or VIX options will 
continue to be optional and within the discretion of a Market-Maker. 
Additionally, Market-Makers continue to have the opportunity to quote 
during Curb (and receive the benefits of acting as a Market-Maker with 
respect to transactions it effects during that time) without obtaining 
an additional Trading Permit or creating additional connections to the 
Exchange. The Exchange believes Market-Makers will have an incentive to 
quote in SPX and VIX during the proposed Curb session given the 
significance of these products within the financial markets, the 
expected demand, and given that the related futures are also trading 
during those hours (which may permit execution of certain hedging 
strategies). The Exchange believes extending a Market-Maker's 
appointment to the Curb session will enhance liquidity during that 
trading session, which benefits all investors during those hours. The 
Exchange believes that any slight additional burden of extending the 
continuous quoting obligation to the proposed Curb trading session in 
the eligible classes would be outweighed by the Exchange's efforts to 
add liquidity during the Curb trading session in All Sessions classes, 
the minimal preparation a Market-Maker may require to participate in 
the Curb trading session, and the benefits to investors that may result 
from that liquidity. Therefore, the Exchange believes the proposed rule 
change provides customer trading interest with a net benefit and 
continues to maintain a balance of Market-Maker benefits and 
obligations.
    While LMMs will only be required to meet the same obligations as 
Market-Makers during Curb, the Exchange believes it may be unduly 
burdensome to impose a heightened standard during Curb given the 
expected lower participation and trading volume and higher liquidity. 
The Exchange believes LMMs should have the flexibility to determine 
whether satisfying any heightened quoting standard and opening quoting 
standard is appropriate for its business given the then-current market 
conditions during Curb. Because there are no additional obligations 
imposed on LMMs during Curb, they receive no additional benefits (i.e., 
no participation entitlement) during Curb. Without the possibility of 
receiving a participation entitlement on a sufficient volume of trades, 
the Exchange does not expect that the current RTH obligation/benefit 
structure for LMMs would provide a similar incentive during Curb and 
therefore does not proposes to implement it during Curb, just as it has 
not done so for GTH for similar reasons. As noted above, should the 
Exchange find it necessary in the future, it will submit a separate 
rule filing to adopt a rebate incentive program for Curb LMMs to 
encourage increased quoting to add liquidity during that session. LMMs 
that satisfy any proposed heightened continuous quoting standard under 
such an incentive program would receive a rebate pursuant to the Fees 
Schedule. Such a program would parallel the obligation/benefit 
structure that exists for LMMs during RTH (that is, LMMs that meet 
heightened quoting obligations during RTH receive a participation 
entitlement, which is merely a different form of financial benefit).
    The proposed rule change is also consistent with Section 11A of the 
Act and Regulation NMS thereunder, because it provides for the 
dissemination of transaction and quotation information during Curb 
through OPRA, pursuant to the OPRA Plan, which the Commission approved 
and indicated to be consistent with the Act. While Section 11A and 
Regulation NMS contemplate an integrated system for trading securities, 
they also envision competition between markets, and innovation that 
provides marketplace benefits to attract order flow to an exchange does 
not result in unfair competition if other markets are free to compete 
in the same manner.\64\
---------------------------------------------------------------------------

    \64\ See Exchange Act Release Nos. 73704 (November 28, 2014), 79 
FR 72044 (December 4, 2014) (SR-CBOE-2014-062) (approval of proposed 
rule change for Cboe Options to extend its trading hours outside of 
Regular Trading Hours); and 29237 (May 24, 1991), 46 FR 24853 (May 
31, 1991) (SR-NYSE-1990-052 and SR-NYSE-1990-053) (approval of 
proposed rule change for NYSE to extend its trading hours outside of 
Regular Trading Hours). The Exchange also notes that no other U.S. 
options exchange provides for trading SPX or VIX options outside of 
RTH, so there is currently no need for intermarket linkage during 
GTH. If another Cboe Affiliated Exchange lists any options 
authorized to trade during GTH outside of RTH, trading of such 
options on the Exchange would comply with linkage rules.
---------------------------------------------------------------------------

    As discussed, the Exchange, as well as other options exchanges, 
already offer trading sessions outside of regular trading hours.\65\ 
While there are some differences among the proposed Curb Trading Hours 
session and the Exchange's current GTH session, such as the length and 
time of the session and the absence of an opening auction process, the 
Exchange believes the proposed Curb trading session and proposed rules 
are still substantially similar to the current GTH trading session its 
corresponding rules, thereby providing consistency across all trading 
sessions with similar characteristics outside of RTH.
---------------------------------------------------------------------------

    \65\ See, e.g., Cboe Options Rule 5.1, C2 Rule 5.1 and Cboe 
EDGX. Rule 21.2.
---------------------------------------------------------------------------

    The Exchange also believes the proposed rule change to extend the 
time Users have to cancel all GTC and GTD orders, and not just those 
participating in Curb, is reasonable. In particular, it provides Users 
with RTH Only GTC and GTD orders with additional time to cancel orders. 
Further, the Exchange notes that cancelling a RTH Only GTC or GTD order 
at the proposed time of 5:15 p.m. has the same effect as cancelling 
that order at the current cutoff time of 4:45 p.m.--ultimately it 
accommodates the User's goal of cancelling an order prior to it 
potentially executing during the RTH Opening Process the following 
morning (i.e., it merely provides 30 additional minutes to cancel a RTH 
Only GTC or GTH order). As such, the Exchange believes the proposed 
rule change provides Users with additional flexibility to manage their 
orders in all classes that remain in the Book following the Curb market 
close, thereby removing impediments to and perfecting the mechanism of 
a free and open market and a national market system, and, in general, 
protecting investors and the public interest.
    Finally, the Exchange believes the proposed changes to Rule 5.20(d) 
eliminate unnecessary distinctions between RTH and GTH//Curb as it 
relates to trading halt exceptions for index options. Particularly, the 
Exchange sees no reason why it should not allow the resumption of a 
halted security during GTH or Curb if a determination is made by two 
Floor Officials, in consultation with a designated senior executive 
officer of the Exchange, that the interests of a fair and orderly 
market are best served by a resumption of trading. Similarly, the 
Exchange does not believe there are distinguishing factors between (i) 
GTH and Curb and (ii) RTH that warrants precluding the Exchange from 
considering the factors under Rule 5.20(a)(5) (relating to whether the 
opening process has been completed or

[[Page 73050]]

the status of the opening process) in making a determination whether 
declaring a trading halt is appropriate. As is the case today, the 
Exchange is not required to take into consideration any of the factors 
listed under Rule 5.20(a), including subparagraph (5), when making a 
determination whether to halt trading. Moreover, the Exchange will 
continue to consider halting trading only in response to unusual 
conditions or circumstances, as it wants to interrupt trading as 
infrequently as possible and only if necessary, to maintain a fair and 
orderly market. Indeed, notwithstanding the proposed changes to Rule 
5.20(d), the Exchange will continue to have the authority to manually 
halt trading during any trading session if it's determined to be in the 
interests of a fair and orderly market and to protect investors.

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 that the proposed rule change to adopt Curb Trading Hours will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, because all TPHs 
will be able, but not be required, to participate during Curb, and will 
be able to do so using the same connectivity as they use during RTH and 
GTH. As discussed, participation in Curb will be voluntary and within 
the discretion of TPHs. While the proposed rule change increases the 
total time during which a Market-Maker with either a SPX and/or VIX 
appointment may be able quote, the Exchange believes the proposal will 
have a de minimis, if any, impact on a Market-Maker's continuous 
quoting obligations, as they may continue to choose when to actively 
quote and have their obligations to their appointed classes apply. 
Furthermore, selecting an appointment in these options classes will be 
optional and within the discretion of a Market-Maker. Additionally, 
Market-Makers continue to have the opportunity to quote during Curb 
(and receive the benefits of acting as a Market-Maker with respect to 
transactions it effects during that time) without obtaining an 
additional Trading Permit or creating additional connections to the 
Exchange. The Exchange believes that extending the continuous quoting 
obligation to the Curb trading session in two classes is also 
outweighed by the Exchange's efforts to add liquidity during Curb in 
All Sessions classes, the minimal preparation a Market-Maker may 
require to participate in the Curb trading session, and the benefits to 
investors that may result from that liquidity. Therefore, the Exchange 
believes the proposed rule change provides customer trading interest 
with a net benefit and continues to maintain a balance of Market-Maker 
benefits and obligations.
    The Exchange does not believe that the proposed rule change to 
adopt Curb Trading Hours will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act, because the proposed rule change is a competitive 
initiative that will benefit the marketplace and investors. The 
Exchange believes the proposed rule change will enhance competition by 
providing a new service to investors that is not currently otherwise 
available for options. The Exchange further believes that the same 
level of competition among options exchanges will continue during RTH. 
Because the Exchange proposes to make only exclusively listed products 
available for trading during Curb, and because any All Sessions orders 
that do not trade during Curb will be eligible to trade during the RTH 
trading sessions in the same manner as all other orders during RTH, the 
proposed rule change will have no effect on the national best prices or 
trading during RTH.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be 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-2021-071 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-2021-071. 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-2021-071 and should be submitted on 
or before January 13, 2022.
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    \66\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\66\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27822 Filed 12-22-21; 8:45 am]
BILLING CODE 8011-01-P


