
[Federal Register Volume 88, Number 223 (Tuesday, November 21, 2023)]
[Notices]
[Pages 81130-81131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25670]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98957; File No. SR-CBOE-2023-054]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Order 
Approving a Proposed Rule Change To Amend Rule 4.13 To Expand the 
Nonstandard Expirations Program To Include P.M.-Settled Options on 
Broad-Based Indexes That Expire on Tuesday or Thursday

November 15, 2023.

I. Introduction

    On September 28, 2023, Cboe Exchange, Inc. (``Exchange'') 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 
amend Rule 4.13(e), which governs its Nonstandard Expirations Program 
(``Program''), to permit p.m.-settled options on any broad-based index 
eligible for standard options trading that expire on Tuesday or 
Thursday. The proposed rule change published for comment in the Federal 
Register on October 4, 2023.\3\ The Commission did not receive any 
comment letters and 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. 98621 (September 28, 
2023), 88 FR 68896 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to amend Rule 4.13(e), which governs its 
Program, to permit p.m.-settled options on any broad-based index 
eligible for standard options trading that expire on Tuesday or 
Thursday. Currently under the Program, the Exchange is permitted to 
list p.m.-settled options on any broad-based index eligible for 
standard trading that expire on: (1) any Monday, Wednesday, or Friday 
(other than the third Friday-of-the-month or days that coincide with an 
end-of-month expiration and, with respect to options on the S&P 500 
Index (``SPX options'') and the Mini-S&P 500 Index (``XSP options'') 
any Tuesday or Thursday (``Weekly Expirations'') and (2) the last 
trading day of the month (``End of Month Expirations'' or ``EOMs'').\4\ 
The proposal expands the availability of Tuesday and Thursday Weekly 
Expirations to all broad-based indexes eligible for standard options 
trading.\5\
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    \4\ See Rule 4.13(e).
    \5\ See Notice, supra note 3 at 68897.
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    The Program for Weekly Expirations will apply to any broad-based 
index option with Tuesday and Thursday expirations in the same manner 
as it currently applies to all other p.m.-settled broad-based index 
options with Monday, Wednesday, and Friday expirations and to SPX and 
XSP options with Tuesday and Thursday expirations.\6\ Specifically, as 
set forth in Rule 4.13(e), Weekly Expirations, including the proposed 
Tuesday and Thursday expirations, are subject to all provisions of Rule 
4.13 and treated the same as options on the same underlying index that 
expire on the third Friday of the expiration month; provided, however, 
that Weekly Expirations are p.m.-settled, and new series in Weekly 
Expirations may be added up to and including on the expiration date for 
an expiring Weekly Expiration.\7\
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    \6\ See id.
    \7\ See id.
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    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 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.\8\ 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\ In 
addition, like all Weekly Expirations, pursuant to Rule 4.13(e)(3), 
transactions in expiring broad-based index options with Tuesday and 
Thursday expirations may be effected on the Exchange between the hours 
of 9:30 a.m. and 4:00 p.m. eastern time on their last trading day.
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    \8\ See id.
    \9\ See id.
    \10\ For a more detailed description of the proposed Tuesday or 
Thursday expirations, see Notice, supra note 3.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\11\ In

[[Page 81131]]

particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\12\ which requires, among 
other things, that the Exchange's rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, 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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    \11\ 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).
    \12\ 15 U.S.C. 78f(b)(5).
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    In support of its proposal, the Exchange notes that the Commission 
recently approved the listing of Tuesday and Thursday expirations for 
SPX and XSP options in addition to Monday, Wednesday, and Friday 
expirations for options on any broad-based index eligible for standard 
options trading.\13\ The Exchange states that the introduction of 
Tuesday and Thursday expirations for all broad-based index options 
(rather than offering those expirations for just two indexes) will 
provide investors with expanded hedging tools and greater trading 
opportunities and flexibility, and will allow market participants to 
trade in a manner more aligned with specific timing needs and more 
effectively tailor their investment and hedging strategies and manage 
their portfolios.\14\ The Exchange further believes that the listing of 
additional p.m.-settled options on other broad-based indexes will not 
have any significant economic impact on the underlying component 
securities surrounding the close as a result of expiring p.m.-settled 
options or impact market quality.\15\ Finally, the Exchange represents 
it has sufficient capacity to handle additional traffic associated with 
trading of broad-based index options with Tuesday and Thursday 
expirations, and will monitor the trading volume associated with any 
possible additional options series listed as a result of this proposal 
and the effect (if any) of these additional series on market 
fragmentation and on the capacity of the Exchange's automated 
systems.\16\
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    \13\ See Securities Exchange Act Release No. 98456 (September 
20, 2023), 88 FR 66091 (September 26, 2023) (SR-CBOE-2023-020) 
(permanent approval of nonstandard expirations pilot program) 
(``Nonstandard Approval Order'').
    \14\ See Notice, supra note 3 at 68898.
    \15\ See id.
    \16\ See id.
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    The Commission has had concerns about the adverse effects and 
impact of p.m.-settlement upon market volatility and the operation of 
fair and orderly markets on the underlying cash market at or near the 
close of trading on expiration days.\17\ However, the Commission 
recently approved proposals from several exchanges, including the 
Exchange, to permanently establish programs permitting the listing and 
trading of certain p.m.-settled broad-based index options.\18\ In 
approving these proposals, the Commission reviewed data provided by the 
exchanges in their filings, the exchanges' pilot data and reports, as 
well as an analysis conducted at the direction of Staff from the 
Commission's Division of Economic and Risk Analysis and concluded that 
analysis of the pilot data did not identify any significant economic 
impact on the underlying component securities surrounding the close as 
a result of expiring p.m.-settled options nor did it indicate a 
deterioration in market quality for an existing product when a new 
p.m.-settled expiration was introduced.\19\ Further, the Commission 
stated that significant changes in closing procedures in the decades 
since index options moved to a.m. settlement may also serve to mitigate 
the potential impact of p.m.-settled index options on the underlying 
cash markets.\20\
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    \17\ See Securities Exchange Act Release No. 65256 (September 2, 
2011), 76 FR 55969, at 55972 (September 9, 2011) (SR-C2-2011-008) 
(Order approving proposed rule change to establish a pilot program 
to list and trade SPXPM options on the C2 Options Exchange, 
Incorporated).
    \18\ See, e.g., Securities Exchange Act Release Nos. 98454 
(September 20, 2023), 88 FR 66103 at 66103-04 (September 26, 2023) 
(SR-CBOE-2023-005) (Order approving p.m.-settled Third Friday SPX 
options); 98450 (September 20, 2023), 88 FR 66 111 (September 26, 
2023) (SR-ISE-2023-08) (Order Granting Approval of a Proposed Rule 
Change, as Modified by Amendment No. 1, to Make Permanent Certain 
P.M.-Settled Pilots); 98451 (September 20, 2023), 88 FR 66088 
(September 26, 2023) (SR-Phlx-203-07) (Order approving a nonstandard 
expirations pilot program and p.m.-settled XND options); and 
Nonstandard Approval Order.
    \19\ See e.g., Nonstandard Approval Order, 88 FR at 66094.
    \20\ See id.
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    As noted above, the Exchange currently may list Tuesday and 
Thursday expirations for SPX and XSP options in addition to Monday, 
Wednesday, and Friday expirations for options on any broad-based index 
eligible for standard options trading.\21\ The Exchange's proposal, 
which would permit Tuesday and Thursday expirations for options on any 
broad-based index, is reasonably designed as a limited expansion of 
existing p.m.-settled broad-based index option programs and may provide 
the investing public and other market participants more flexibility to 
closely tailor their investment and hedging decisions. The Exchange has 
represented that it has adequate systems capacity and that it will 
monitor trading of broad-based index options with Tuesday and Thursday 
expirations.\22\ The Commission expects the Exchange to continue to 
monitor any potential risks from large p.m.-settled positions and take 
appropriate action on a timely basis if warranted.
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    \21\ See supra note 13.
    \22\ See supra note 16 and accompanying text.
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    Accordingly, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \23\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \23\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\24\ that the proposed rule change (SR-CBOE-2023-054) be, and 
hereby is, approved.
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    \24\ 15 U.S.C. 78s(b)(2).

    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).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25670 Filed 11-20-23; 8:45 am]
BILLING CODE 8011-01-P


