[Federal Register Volume 87, Number 172 (Wednesday, September 7, 2022)]
[Notices]
[Pages 54746-54748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19225]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95647; File No. SR-CBOE-2022-043]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Rule Relating to Minimum Market-Maker Quote Size

August 31, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 25, 2022, 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 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend its Rule relating to minimum Market-Maker quote size. The text 
of the proposed rule change is provided below.

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

Rules of Cboe Exchange, Inc.

* * * * *

Rule 5.52. Market-Maker Quotes

    (a) No change.
    (b) Size. A Market-Maker's bid (offer) for a series must be 
accompanied by the minimum number of contracts determined by the 
Exchange on a class-by-class basis, and if the Exchange determines 
on a premium basis and/or expiration basis for series with 
expirations (1) no more than one week, (2)

[[Page 54747]]

between one week and two weeks, (3) between two weeks and one month, 
(4) between one month and two months, (5) between two months and 
three months, (6) between three months and six months, (7) between 
six months and nine months, (8) between nine months and 15 months, 
and (9) 15 months or more, the minimum of which will be one contract 
at the price of the bid (offer) the Market-Maker is willing to buy 
(sell). The System rejects a Market-Maker's bid (offer) that does 
not meet the minimum initial quote size determined by the Exchange 
for that class.
    [(1) For SPX, the Exchange may also determine a minimum initial 
quote size on a premium basis and an expiration basis for series 
with expirations (1) no more than one week, (2) between one week and 
three months, (3) between three months and six months, (4) between 
six months and 15 months, and (5) 15 months or more.
    (2)] The obligation of Market-Makers to make competitive markets 
under Rule 5.51 does not preclude Trading Permit Holders in a 
trading crowd from discussing a request for a market that is greater 
than the disseminated size for that option class, for the purpose of 
making a single bid (offer) based upon the aggregate of individual 
bids (offers) by Trading Permit Holders in the trading crowd, but 
only when the Trading Permit Holder representing the order asks for 
a single bid (offer). Whenever a single bid (offer) pursuant to this 
paragraph is made, such bid (offer) is a firm quote, and each ICMP 
participating in the bid (offer) must fulfill his portion of the 
single bid (offer) at the single price.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Rule relating to minimum Market-
Maker quote size. Specifically, the Exchange proposes to amend Rule 
5.52(b) \5\ to permit the Exchange to determine a minimum initial quote 
size on a premium basis and/or an expiration basis for any option 
class, not just S&P 500 Index (``SPX'') options.\6\ Currently, Rule 
5.52 permits the Exchange to determine a minimum initial quote size on 
a class-by-class basis. Subparagraph (b)(1) of that rule also permits 
the Exchange, for SPX, to determine a minimum initial quote size on a 
premium and an expiration basis for series with expirations (1) no more 
than one week, (2) between one week and three months, (3) between three 
months and six months, (4) between six months and 15 months, and (5) 15 
months or more.
---------------------------------------------------------------------------

    \5\ The proposed rule change moves the language from Rule 
5.52(b)(1), as amended, into the main part of Rule 5.52(b). As a 
result, the proposed rule change deletes the numbering for 
subparagraph (2), as that would be the only subparagraph for Rule 
5.52(b) and thus will no longer require numbering.
    \6\ The Exchange will announce any minimum quote size 
requirements for any class with sufficient advance notice in 
accordance with Rule 1.5.
---------------------------------------------------------------------------

    While different classes may exhibit different trading 
characteristics, which make different minimum quote sizes appropriate 
as permitted by the current Rule, the same may be true of series with 
different premiums and expirations within a class to ensure the quote 
size is not burdensome on Market-Makers. For example, series with 
higher premiums or farther expirations generally have wider spreads and 
lower trading volumes, and positions in those series carry additional 
risk. These characteristics make lower minimum quote size requirements 
more appropriate and less burdensome on Market-Makers. This is 
generally true for all classes, not just SPX options.
    Therefore, the Exchange proposes to permit the Exchange to 
determine minimum initial quote size on a premium and/or expiration 
basis for all classes.\7\ Additionally, it proposes to amend the 
groupings of expirations to provide the Exchange with sufficient 
flexibility to determine minimum quote sizes appropriate for each 
class. Specifically, the proposed rule change will permit the Exchange 
to determine the minimum quote size for any class on a premium basis 
and/or expiration basis for series with expirations (1) no more than 
one week, (2) between one week and two weeks, (3) between two weeks and 
one month, (4) between one month and two months, (5) between two months 
and three months, (6) between three months and six months, (7) between 
six months and nine months, (8) between nine months and 15 months, and 
(9) 15 months or more.\8\ To the extent the Exchange determines the 
minimum quote size for a class will not be on a premium and/or 
expiration basis, the Exchange will determine the minimum quote size 
for that class as it does today, which is determining a minimum quote 
size for all series in that class.
---------------------------------------------------------------------------

    \7\ The minimum quote size must continue to be at least one 
contract at the price of the bid (offer) the Market-Maker is willing 
to buy (sell). The System rejects a Market-Maker's bid (offer) that 
does not meet the minimum initial quote size determined by the 
Exchange for that class.
    \8\ As noted above, Rule 5.52(b)(1) already permits the Exchange 
to set minimum quote sizes on a premium and expiration basis for SPX 
options. The proposed expiration groupings will permit the Exchange 
to determine minimum quote sizes for SPX options in the same manner 
as it does today, as it could determine the same minimum quote size 
for multiple expiration groupings to conform to the current 
expiration groupings (for example, the same minimum quote size for 
proposed expiration groups two through five is equivalent to having 
a minimum quote size equal to current expiration group two).
---------------------------------------------------------------------------

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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change will 
promote just and equitable principles of trade by permitting the 
Exchange to impose more effective and not overly burdensome minimum 
size requirements on Market-Makers in all classes, which the Exchange 
believes will lead to continued liquidity on the Exchange, ultimately 
benefiting investors. The

[[Page 54748]]

Exchange believes the proposed rule change maintains an appropriate 
balance of obligations and benefits. The Exchange believes it is 
appropriate to have authority to establish minimum quote sizes in a 
class on an expiration or premium basis to reflect the different 
trading characteristics of those series within that class. The Exchange 
believes these proposed changes will continue to incentivize Market-
Makers to have appointments in any class in which the Exchange may 
impose minimum quote size requirements on a premium or expiration 
basis, which increases liquidity and in general protects 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 will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the Act because any minimum size requirements the 
Exchange imposes in a class on a premium or expiration basis will apply 
in the same manner to all Market-Makers with appointments in that 
class. The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the Act because it relates solely to 
quoting obligations the Exchange imposes on Market-Makers on the 
Exchange. The Exchange believes the proposed rule change will maintain 
an appropriate balance of Market-Maker obligations and benefits and 
will permit the Exchange to impose more effective minimum size 
requirements in a class without being overly burdensome on Market-
Makers given the differing trade characteristics applicable to series 
with different expirations and premiums.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-2022-043 on the subject line.

Paper Comments

     Send paper comments in triplicate to the Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number SR-CBOE-2022-043. 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-2022-043 and should be submitted on 
or before September 28, 2022.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19225 Filed 9-6-22; 8:45 am]
BILLING CODE 8011-01-P


