[Federal Register Volume 88, Number 91 (Thursday, May 11, 2023)]
[Notices]
[Pages 30365-30368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10028]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97446; File No. SR-CBOE-2023-024]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend 
the Operation of Its SPXPM Pilot Program

May 5, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 3, 2023, Cboe Exchange, Inc. (``Exchange'' or ``Cboe Options'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to extend the operation of its SPXPM pilot program. The text of the 
proposed rule change is provided below. (additions are italicized; 
deletions are [bracketed])
* * * * *

Rules of Cboe Exchange, Inc.

* * * * *

Rule 4.13. Series of Index Options

* * * * *

Interpretations and Policies

    .01-.12 No change.
    .13 In addition to A.M.-settled S&P 500 Stock Index (``SPX'') 
options approved for trading on the Exchange pursuant to Rule 4.13, 
the Exchange may also list options on SPX whose exercise settlement 
value is derived from closing prices on the last trading day prior 
to expiration (P.M.-settled third Friday-of-the-month SPX options 
series). The Exchange may also list options on the Mini-SPX Index 
(``XSP'') and Mini-RUT Index (``MRUT'') whose exercise settlement 
value is derived from closing prices on the last trading day prior 
to expiration (``P.M.-settled''). P.M.-settled third Friday-of-the-
month SPX options series and P.M.-settled XSP and MRUT options will 
be listed for trading for a pilot period ending [May 8]November 6, 
2023.
* * * * *
    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
    On February 8, 2013, the Securities and Exchange Commission (the 
``Commission'') approved a rule change that established a Pilot Program 
that allows the Exchange to list options on the S&P 500 Index whose 
exercise settlement value is derived from closing prices on the last 
trading day prior to expiration (``SPXPM'').\5\ On July 31,

[[Page 30366]]

2013, the Commission approved a rule change that amended the Pilot 
Program to allow the Exchange to list options on the Mini-SPX Index 
(``XSP'') whose exercise settlement value is derived from closing 
prices on the last trading day prior to expiration (``P.M.-settled 
XSP'').\6\ On February 5, 2021, the Commission approved a rule change 
that amended the Pilot Program to allow the Exchange to list options on 
the Mini Russell 2000 Index (``MRUT'' or ``Mini-RUT'') whose exercise 
settlement value is derived from closing prices on the last trading day 
prior to expiration (``P.M.-settled MRUT'') \7\ (together, SPXPM, P.M.-
settled XSP, and P.M.-settled MRUT to be referred to herein as the 
``Pilot Products'').\8\ The Exchange has extended the pilot period 
numerous times, which, pursuant to Rule 4.13.13, is currently set to 
expire on the earlier of May 8, 2023 or the date on which the pilot 
program is approved on a permanent basis.\9\ The Exchange hereby 
proposes to further extend the end date of the pilot period to November 
6, 2023.\10\
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    \5\ See Securities Exchange Act Release No. 68888 (February 8, 
2013), 78 FR 10668 (February 14, 2013) (SR-CBOE-2012-120) (the 
``SPXPM Approval Order''). Pursuant to Securities Exchange Act 
Release No. 80060 (February 17, 2017), 82 FR 11673 (February 24, 
2017) (SR-CBOE-2016-091), the Exchange moved third-Friday P.M.-
settled options into the S&P 500 Index options class, and as a 
result, the trading symbol for P.M.-settled S&P 500 Index options 
that have standard third Friday-of-the-month expirations changed 
from ``SPXPM'' to ``SPXW.'' This change went into effect on May 1, 
2017, pursuant to Cboe Options Regulatory Circular RG17-054.
    \6\ See Securities Exchange Act Release No. 70087 (July 31, 
2013), 78 FR 47809 (August 6, 2013) (SR-CBOE-2013-055) (the ``P.M.-
settled XSP Approval Order'').
    \7\ See Securities Exchange Act Release No. 91067 (February 5, 
2021), 86 FR 9108 (SR-2020-CBOE-116) (the ``P.M.-settled MRUT 
Approval Order'').
    \8\ For more information on the Pilot Products or the Pilot 
Program, see the SPXPM Approval Order, the P.M.-settled XSP Approval 
Order, and the P.M.-settled MRUT Approval Order.
    \9\ See Securities Exchange Act Release Nos. 71424 (January 28, 
2014), 79 FR 6249 (February 3, 2014) (SR-CBOE-2014-004); 73338 
(October 10, 2014), 79 FR 62502 (October 17, 2014) (SR-CBOE-2014-
076); 77573 (April 8, 2016), 81 FR 22148 (April 14, 2016) (SR-CBOE-
2016-036); 80386 (April 6, 2017), 82 FR 17704 (April 12, 2017) (SR-
CBOE-2017-025); 83166 (May 3, 2018), 83 FR 21324 (May 9, 2018) (SR-
CBOE-2018-036); 84535 (November 5, 2018), 83 FR 56129 (November 9, 
2018) (SR-CBOE-2018-069); 85688 (April 18, 2019), 84 FR 17214 (April 
24, 2019) (SR-CBOE-2019-023); 87464 (November 5, 2019), 84 FR 61099 
(November 12, 2019) (SR-CBOE-2019-107); 88674 (April 16, 2020), 85 
FR 22479 (April 22, 2020) (SR-CBOE-2020-036); 90263 (October 23, 
2020), 85 FR 68611 (October 29, 2020) (SR-CBOE-2020-100); 91698 
(April 28, 2021), 86 FR 23761 (May 4, 2021) (SR-CBOE-2021-027); 
93455 (October 28, 2021), 86 FR 60660 (November 3, 2021) (SR-CBOE-
2021-062); 94799 (April 27, 2022), 87 FR 26244 (May 3, 2022) (SR-
CBOE-2022-019); and 96222 (November 3, 2023), 87 FR 67736 (November 
9, 2022) (SR-CBOE-2022-054).
    \10\ The Exchange recently proposed to make the pilot program 
permanent. See Securities Exchange Act Release Nos. 96703 (January 
18, 2023), 88 FR 4265 (January 24, 2023) (SR-CBOE-2023-005); and 
97366 (April 24, 2023) (SR-CBOE-2023-019).
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    During the course of the Pilot Program and in support of the 
extensions of the Pilot Program, the Exchange submits reports to the 
Commission regarding the Pilot Program that detail the Exchange's 
experience with the Pilot Program, pursuant to the SPXPM Approval 
Order,\11\ the P.M.-settled XSP Approval Order,\12\ and the P.M.-
settled MRUT Approval Order.\13\ Specifically, the Exchange submits 
annual Pilot Program reports to the Commission that contain an analysis 
of volume, open interest, and trading patterns. The analysis examines 
trading in Pilot Products as well as trading in the securities that 
comprise the underlying index. Additionally, for series that exceed 
certain minimum open interest parameters, the annual reports provide 
analysis of index price volatility and share trading activity. The 
Exchange also submits periodic interim reports that contain some, but 
not all, of the information contained in the annual reports. In 
providing the annual and periodic interim reports (the ``pilot 
reports'') to the Commission, the Exchange has previously requested 
confidential treatment of the pilot reports under the Freedom of 
Information Act (``FOIA'').\14\
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    \11\ See supra note 5.
    \12\ See supra note 6.
    \13\ See supra note 7.
    \14\ 5 U.S.C. 552.
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    The pilot reports both contain the following volume and open 
interest data:
    (1) monthly volume aggregated for all trades;
    (2) monthly volume aggregated by expiration date;
    (3) monthly volume for each individual series;
    (4) month-end open interest aggregated for all series;
    (5) month-end open interest for all series aggregated by expiration 
date; and
    (6) month-end open interest for each individual series.
    The annual reports also contain (or will contain) the information 
noted in Items (1) through (6) above for Expiration Friday, A.M.-
settled, S&P 500 and RUT index options traded on Cboe Options, as well 
as the following analysis of trading patterns in the Pilot Products 
options series in the Pilot Program:

    (1) a time series analysis of open interest; and
    (2) an analysis of the distribution of trade sizes.

    Finally, for series that exceed certain minimum parameters, the 
annual reports contain the following analysis related to index price 
changes and underlying share trading volume at the close on Expiration 
Fridays:

    (1) a comparison of index price changes at the close of trading 
on a given Expiration Friday with comparable price changes from a 
control sample. The data includes a calculation of percentage price 
changes for various time intervals and compare that information to 
the respective control sample. Raw percentage price change data as 
well as percentage price change data normalized for prevailing 
market volatility, as measured by the Cboe Volatility Index (VIX), 
is provided; and
    (2) a calculation of share volume for a sample set of the 
component securities representing an upper limit on share trading 
that could be attributable to expiring in-the-money series. The data 
includes a comparison of the calculated share volume for securities 
in the sample set to the average daily trading volumes of those 
securities over a sample period.

    The minimum open interest parameters, control sample, time 
intervals, method for randomly selecting the component securities, and 
sample periods are determined by the Exchange and the Commission. In 
proposing to extend the Pilot Program, the Exchange will continue to 
abide by the reporting requirements described herein, as well as in the 
SPXPM Approval Order, the P.M.-settled XSP Approval Order, and the 
P.M.-settled MRUT Approval Order.\15\ Additionally, the Exchange 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 is consistent with the Exchange 
Act. The Exchange is in the process of making public on its website all 
data and analyses previously submitted to the Commission under the 
Pilot Program,\16\ and will continue to make public any data and 
analyses it submits to the Commission under the Pilot Program in the 
future.
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    \15\ Pursuant to Securities Exchange Act Release No. 75914 
(September 14, 2015), 80 FR 56522 (September 18, 2015) (SR-CBOE-
2015-079), the Exchange added SPXPM and P.M.-settled XSP options to 
the list of products approved for trading during Extended Trading 
Hours (``ETH''). The Exchange will also include the applicable 
information regarding SPXPM and P.M.-settled XSP options that trade 
during ETH in its annual and interim reports.
    \16\ Available at https://www.cboe.com/aboutcboe/legal-regulatory/national-market-system-plans/pm-settlement-spxpm-data.
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    The Exchange proposes the extension of the Pilot Program in order 
to continue to give the Commission more time to consider the impact of 
the Pilot Program. To this point, Cboe Options believes that the Pilot 
Program has been

[[Page 30367]]

well-received by its Trading Permit Holders and the investing public, 
and the Exchange would like to continue to provide investors with the 
ability to trade SPXPM and P.M.-settled XSP and MRUT options. All terms 
regarding the trading of the Pilot Products shall continue to operate 
as described in the SPXPM Approval Order, the P.M.-settled XSP Approval 
Order, and the P.M.-settled MRUT Approval Order. The Exchange merely 
proposes herein to extend the term of the Pilot Program to November 6, 
2023.
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.\17\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \18\ 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) \19\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
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    In particular, the Exchange believes that the proposed extension of 
the Pilot Program will continue to provide greater opportunities for 
investors. Further, the Exchange believes that it has not experienced 
any adverse effects or meaningful regulatory concerns from the 
operation of the Pilot Program. As such, the Exchange believes that the 
extension of the Pilot Program does not raise any unique or prohibitive 
regulatory concerns. Also, the Exchange believes that such trading has 
not, and will not, adversely impact fair and orderly markets on 
Expiration Fridays for the underlying stocks comprising the S&P 500 
index and RUT index. The extension of the Pilot Program will continue 
to provide investors with the opportunity to trade the desirable 
products of SPXPM and P.M.-settled XSP and MRUT, while also providing 
the Commission further opportunity to observe such trading of the Pilot 
Products.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Cboe Options does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe the continuation of the Pilot Program will impose any 
unnecessary or inappropriate burden on intramarket competition because 
it will continue to apply equally to all Cboe Options market 
participants, and the Pilot Products will be available to all Cboe 
Options market participants. The Exchange believes there is sufficient 
investor interest and demand in the Pilot Program to warrant its 
extension. The Exchange believes that, for the period that the Pilot 
Program has been in operation, it has provided investors with desirable 
products with which to trade. Furthermore, the Exchange believes that 
it has not experienced any adverse market effects or regulatory 
concerns with respect to the Pilot Program. The Exchange further does 
not believe that the proposed extension of the Pilot Program will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because it only 
applies to trading on Cboe Options. To the extent that the continued 
trading of the Pilot Products may make Cboe Options a more attractive 
marketplace to market participants at other exchanges, such market 
participants may elect to become Cboe Options market participants.

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

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

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the 30-day operative delay will allow it to extend the Pilot 
Program prior to its expiration on May 8, 2023, and maintain the status 
quo, thereby reducing market disruption. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest as it will allow the Pilot Program to 
continue uninterrupted, thereby avoiding investor confusion that could 
result from a temporary interruption in the Pilot Program. Accordingly, 
the Commission hereby waives the 30-day operative delay and designates 
the proposed rule change as operative upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 30368]]

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2023-024 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-2023-024. 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 (https://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. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-CBOE-2023-024, and 
should be submitted on or before June 1, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-10028 Filed 5-10-23; 8:45 am]
BILLING CODE 8011-01-P


