[Federal Register Volume 87, Number 182 (Wednesday, September 21, 2022)]
[Notices]
[Pages 57745-57747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20377]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95795; File No. SR-CBOE-2022-039]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Order 
Approving a Proposed Rule Change To Expand the Nonstandard Expirations 
Pilot Program To Include P.M.-Settled Options on the Mini-S&P 500 Index 
That Expire on Tuesday or Thursday

September 15, 2022.

I. Introduction

    On July 21, 2022, Cboe Exchange, Inc. (``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to expand its Nonstandard Expirations Pilot 
Program to permit P.M.-settled options on the Mini-S&P 500 Index that 
expire on Tuesday or Thursday. The proposed rule change was published 
for comment in the Federal Register on August 4, 2022.\3\ The 
Commission received no comments on the proposal. The Commission is 
approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 95392 (July 29, 
2022), 87 FR 47803 (``Notice'').
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II. Description of the Proposal

    Cboe Options proposes to expand its existing Nonstandard 
Expirations Pilot (``Pilot Program'') \4\ to permit P.M.-settled 
options on the Mini-S&P 500 Index (``XSP options'') that expire on 
Tuesday or Thursday. Under the existing Pilot Program, the Exchange is 
permitted to list P.M.-settled options on broad-based indexes that 
expire on: (1) any Monday, Wednesday, or Friday and, with respect to 
options on the S&P 500 Index (``SPX options'') any Tuesday or Thursday 
(``Weekly Expirations'' or ``EOWs'') and (2) the last trading day of 
the month (``EOMs'').\5\ The Exchange notes that permitting XSP options 
with Tuesday and Thursday expirations, as proposed, would be in 
addition to the XSP options with Monday, Wednesday and Friday 
expirations that the Exchange may (and does) already list, as they are 
permissible Weekly Expirations for options on a broad-based index 
(e.g., the Mini-S&P 500 Index) pursuant to Rule 4.13(e)(1). The 
Exchange states that the Pilot Program for Weekly Expirations will 
apply to Tuesday and Thursday XSP options as it currently applies to 
all other P.M.-settled broad-based index options with Monday, 
Wednesday, and Friday expirations and to SPX options with Tuesday and 
Thursday expirations.\6\
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    \4\ See Securities Exchange Act Release No. 62911 (September 14, 
2010), 75 FR 57539 (September 21, 2010) (``Pilot Approval Order''). 
See also Securities Exchange Act Release No. 76909 (January 14, 
2016), 81 FR 3512 (January 21, 2016) (permitting P.M.-settled 
options on broad-based indexes that expire on any Wednesday); and 
Securities Exchange Act Release No. 78531 (August 10, 2016), 81 FR 
54643 (August 16, 2016) (permitting P.M.-settled options on broad-
based indexes that expire on any Monday). The Pilot is currently set 
to expire on November 7, 2022. See Securities Exchange Act Release 
No. 94800 (April 27, 2022), 87 FR 26248 (May 3, 2022).
    \5\ See Rule 4.13(e).
    \6\ See Notice, supra note 3, 87 FR at 47804.
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A. Tuesday and Thursday XSP Options

    The Exchange's proposed rule change will allow it to open for 
trading XSP options with Tuesday and Thursday expirations to expire on 
any Tuesday or Thursday of the month, other than days that coincide 
with an EOM expiration.\7\ The maximum number of expirations that may 
be listed for each Weekly Expiration (i.e., a Monday expiration, 
Tuesday expiration, Wednesday expiration, Thursday expiration, or 
Friday expiration, as applicable) in a given class (including XSP) is 
the same as the maximum number of expirations permitted in Rule 
4.13(a)(2) for standard options on the same broad-based index (which is 
12 for XSP options).\8\
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    \7\ If the Exchange lists EOMs and Weekly Expirations as 
applicable in a given class, the Exchange will list an EOM instead 
of a Weekly Expiration that expires on the same day in the given 
class. See Cboe Options Rule 4.13(e)(1).
    \8\ See Notice, supra note 3, 87 FR at 47803.
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    Weekly Expirations need not be for consecutive Monday, Tuesday, 
Wednesday, Thursday, or Friday expirations as applicable; however, the 
expiration date of a nonconsecutive expiration may not be beyond what 
would be considered the last expiration date if the maximum number of 
expirations were listed consecutively.\9\ Weekly Expirations that are 
first listed in a given class may expire up to four weeks from the 
actual listing date.\10\ If the Exchange lists EOMs and Weekly 
Expirations as applicable in a given class, the Exchange will list an 
EOM instead of a Weekly Expiration that

[[Page 57746]]

expires on the same day in the given class. Other expirations in the 
same class are not counted as part of the maximum number of Weekly 
Expirations for an applicable broad-based index class. If the Exchange 
is not open for business on a respective Monday, the normally Monday 
expiring Weekly Expirations will expire on the following business day. 
If the Exchange is not open for business on a respective Tuesday, 
Wednesday, Thursday, or Friday, the normally Tuesday, Wednesday, 
Thursday, or Friday expiring Weekly Expirations will expire on the 
previous business day.\11\ If two different Weekly Expirations on Mini-
S&P 500 Index options (as is the case of S&P 500 Index options) would 
expire on the same day because the Exchange is not open for business on 
a certain weekday, the Exchange will list only one of such Weekly 
Expirations.\12\
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    \9\ See Cboe Options Rule 4.13(e)(1).
    \10\ Id.
    \11\ Id.
    \12\ See proposed Cboe Options Rule 4.13(e)(1).
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B. Annual Pilot Program Report

    The Exchange has previously undertaken to submit a Pilot report to 
the Commission at least two months prior to the expiration date of the 
Pilot Program (``Annual Report'').\13\ The Exchange represents that it 
will abide by the same reporting requirements for the trading of XSP 
options that expire on any Tuesday or Thursday that it does for the 
trading of P.M.-settled options on broad-based indexes that expire on 
any Monday, Wednesday, or Friday and for SPX options that expire on 
Tuesday or Thursday pursuant to the Pilot Program.\14\ The Exchange 
states that it will include data regarding XSP options that expire on 
Tuesdays or Thursdays as it does for all other Weekly Expirations in 
the Pilot Program annual report that it submits to the Commission at 
least two months prior to the expiration date of the Pilot Program.\15\ 
The Exchange also proposes to include the following market quality 
data, over sample periods determined by the Exchange and the 
Commission, for XSP options as part of the annual report, as it does 
for SPX options:
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    \13\ See Pilot Approval Order, supra note 4.
    \14\ See Notice, supra note 3, 87 FR at 47804-47805. See also 
Pilot Approval Order, supra note 4, 75 FR at 57540 (stating, ``[i]n 
particular, the Commission notes that [the Exchange] will provide 
the Commission with the annual report analyzing volume and open 
interest of EOWs and EOMs, will also contain information and 
analysis of EOW and EOM trading patterns, and index price volatility 
and share trading activity for series that exceed minimum 
parameters.'').
    \15\ See Notice, supra note 3, 87 FR at 47804-47805.
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     time-weighted relative quoted spreads;
     relative effective spreads; and
     time-weighted bid and offer sizes.\16\
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    \16\ See id. at 47805.
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    The Exchange also will provide the Commission with any additional 
data or analyses the Commission requests because it deems such data or 
analyses necessary to determine whether the Pilot Program, including 
XSP options with Tuesday and Thursday expirations as proposed, is 
consistent with the Act.\17\ As it does for current Pilot Program 
products, the Exchange states it will make public on its website all 
data and analyses in connection with XSP options with Tuesday and 
Thursday expirations it submits to the Commission under the Pilot 
Program.\18\
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    \17\ See id.
    \18\ See id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, with Section 6(b) of the Act.\19\ In particular, 
the Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\20\ which requires, among other things, 
that a national securities exchange have rules 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.
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    \19\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \20\ 15 U.S.C. 78f(b)(5).
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    As the Commission noted in its recent order approving the listing 
and trading of P.M.-settled options on the S&P 500 Index that expire on 
Tuesday or Thursday, the Commission has had concerns about the 
potential adverse effects and impact of P.M. settlement upon market 
volatility and the operation of fair and orderly markets on the 
underlying cash markets at or near the close of trading, including for 
cash-settled derivatives contracts based on a broad-based index.\21\ 
The potential impact today remains unclear, given the significant 
changes in the closing procedures of the primary markets in recent 
decades. The Commission is mindful of the historical experience with 
the impact of P.M. settlement of cash-settled index derivatives on the 
underlying cash markets, but recognizes that these risks may be 
mitigated today by the enhanced closing procedures that are now in use 
at the primary equity markets.
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    \21\ See Securities Exchange Act Release No. 94682 (April 12, 
2022), 87 FR 22993 (April 18, 2022) (CBOE-2022-005).
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    The Exchange's proposal to add Tuesday and Thursday XSP expirations 
to the existing Pilot Program would offer additional investment options 
to investors and may be useful for their investment or hedging 
objectives while providing the Commission with data to monitor the 
effects of Tuesday and Thursday XSP expirations and the impact of P.M. 
settlement on the markets. To assist the Commission in assessing any 
potential impact of Tuesday and Thursday XSP expiration on the options 
markets as well as the underlying cash equities markets, the Exchange 
will be required to submit data to the Commission in connection with 
the Pilot Program.\22\ Further, including the proposed Tuesday and 
Thursday XSP expirations in the Pilot Program, together with the data 
and analysis that the Exchange will provide to the Commission, will 
allow the Exchange and the Commission to monitor for and assess any 
potential for adverse market effects of allowing Tuesday and Thursday 
XSP expirations, including on the underlying component stocks. In 
particular, the data collected from the Pilot Program will help inform 
the Commission's consideration of whether the Pilot Program, as amended 
to include Tuesday and Thursday XSP expirations, should be modified, 
discontinued, extended, or permanently approved. Furthermore, the 
Exchange's ongoing analysis of the Pilot Program should help it monitor 
any potential risks from large P.M.-settled positions and take 
appropriate action if warranted.
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    \22\ See Notice, supra note 3, 87 FR at 47804-47805 and Pilot 
Approval Order, supra note 4, 75 FR at 57540. See also supra notes 
15-18.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-CBOE-2022-039) be, and 
hereby is, approved.
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    \23\ 15 U.S.C. 78s(b)(2).


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20377 Filed 9-20-22; 8:45 am]
BILLING CODE 8011-01-P


