[Federal Register Volume 87, Number 141 (Monday, July 25, 2022)]
[Notices]
[Pages 44163-44165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15775]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95314; File No. SR-CBOE-2022-015]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rule 
10.3 Regarding Margin Requirements

July 19, 2022.

I. Introduction

    On March 30, 2022, Cboe Exchange, Inc. (``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change SR-CBOE-2022-015 (``Proposed 
Rule Change'') pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 \2\ thereunder, to

[[Page 44164]]

amend Cboe Rule 10.3 regarding margin requirements that provide margin 
relief for a cash-settled index option written against a holding in an 
exchange-traded fund that tracks the same index as the index underlying 
the index option. On April 13, 2022, the Exchange filed Amendment No. 1 
to the Proposed Rule Change.\3\ The Proposed Rule Change was published 
for public comment in the Federal Register on April 20, 2022.\4\ On 
June 2, 2022 the Exchange consented to an extension of the time period 
in which the Commission must approve the Proposed Rule Change, 
disapprove the Proposed Rule Change, or institute proceedings to 
determine whether to approve or disapprove the Proposed Rule Change to 
July 19, 2022. The Commission is publishing this order to institute 
proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act \5\ to 
determine whether to approve or disapprove the Proposed Rule Change, as 
modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 is available on the Commission's website at 
https://www.sec.gov/comments/sr-cboe-2022-015/srcboe2022015-20123573-279781.pdf.
    \4\ See Exchange Act Release No. 94723 (Apr. 14, 2022), 87 FR 
23629 (Apr. 20, 2022) (File No. SR-CBOE-2022-015) (``Notice''). The 
Commission received one comment letter on the Proposed Rule Change. 
See letter from Andrew Robison, (Apr. 22, 2022), available at: 
https://www.sec.gov/comments/sr-cboe-2022-015/srcboe2022015.htm. The 
comments expressed by the commenter are not relevant to the Proposed 
Rule Change.
    \5\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    The Exchange is proposing to amend Rule 10.3 regarding margin 
requirements. Generally, the Proposed Rule Change would amend Rule 
10.3(c)(5)(C)(iii)(b) to update the exception to margin requirements 
applicable to cash-settled short option positions or warrants on 
indexes that are offset by positions in an underlying stock basket, 
non-leveraged index mutual fund, or non-leveraged exchange-traded fund 
(collectively referred to as ``ETFs'') that is based on the same index, 
as well as move it within Rule 10.3 to Rule 10.3(c)(5)(C)(iv).\6\
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    \6\ See Notice, 87 FR at 23630.
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    The Proposed Rule Change would amend the form of margin required to 
be held in an account for a short in-the-money index call (put) option 
if there is a long position in an ETF based on the same index to be the 
amount by which the value of an ETF is below (above) the aggregate 
index value. Rather than necessitating the purchase or deposit of 
additional ETF shares to address a deficiency in the value of the ETF 
compared to the aggregate index value (regardless of the amount of the 
deficiency), the Proposed Rule Change would enable excess maintenance 
margin equity in a margin account to support the requirement. If excess 
maintenance margin is insufficient or nonexistent, a deposit of 
additional margin would be required, which can be in any form (e.g., 
cash and/or marginable securities) from the account owner in an amount 
equal to any deficit.
    Additionally, the Proposed Rule Change will require no margin when 
an option is at- or out-of-the-money, regardless of whether the ETF 
market value is at least equal to the aggregate index value, and 
eliminates the requirement to mark the price of a long ETF with an 
index call option written against it at the lower of the ETF's market 
value or the index option strike price.\7\
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    \7\ Id., at FR 23631.
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    The Proposed Rule Change also makes clarifying, nonsubstantive 
changes to conform to the language used throughout Rule 10.3.

III. Proceedings To Determine Whether To Approve or Disapprove SR-CBOE-
2022-015 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule 
Change, as modified by Amendment No. 1, should be approved or 
disapproved.\8\ Institution of proceedings is appropriate at this time 
in view of the legal and policy issues raised by the Proposed Rule 
Change, as modified by Amendment No. 1. Institution of proceedings does 
not indicate that the Commission has reached any conclusions with 
respect to the Proposed Rule Change, as modified by Amendment No. 1.
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    \8\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\9\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis and input concerning whether the Proposed Rule 
Change, as modified by Amendment No. 1, is consistent with the Exchange 
Act and the rules thereunder.
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    \9\ Id.
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IV. Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the Proposed Rule Change, as modified by Amendment No. 1. In 
particular, the Commission invites the written views of interested 
persons concerning whether the Proposed Rule Change, as modified by 
Amendment No. 1, is consistent with the Exchange Act and the rules 
thereunder.
    Although there do not appear to be any issues relevant to approval 
or disapproval that would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4 any request for an opportunity to make an oral 
presentation.\10\
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    \10\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the Proposed Rule Change, as modified by 
Amendment No. 1, should be approved or disapproved by August 9, 2022. 
Any person who wishes to file a rebuttal to any other person's 
submission must file that rebuttal by August 15, 2022.
    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-2022-015 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-2022-015. 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, as modified by 
Amendment No. 1, that are filed with the Commission,

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and all written communications relating to the Proposed Rule Change, as 
modified by Amendment No. 1, 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; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly.
    All submissions should refer to File Number SR-CBOE-2022-015 and 
should be submitted on or before August 9, 2022. Rebuttal comments 
should be submitted by August 15, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-15775 Filed 7-22-22; 8:45 am]
BILLING CODE 8011-01-P


