Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change Related to Rule 24.9(e), 17708-17710 [2017-07305]
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17708
Federal Register / Vol. 82, No. 69 / Wednesday, April 12, 2017 / Notices
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 facilitation 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) 12 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the Program has been successful to
date and states that it has not
encountered any problems with the
Program. The proposed rule change
allows for an extension of the Program
for the benefit of market participants.
Additionally, the Exchange believes that
there is demand for the expirations
offered under the Program and believes
that that Weekly Expirations and EOMs
will continue to provide the investing
public and other market participants
increased opportunities to better
manage their risk exposure.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE 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. Specifically,
the Exchange believes that, by extending
the expiration of the Program, the
proposed rule change will allow for
further analysis of the Program and a
determination of how the Program shall
be structured in the future. In doing so,
the proposed rule change will also serve
to promote regulatory clarity and
consistency, thereby reducing burdens
on the marketplace and facilitating
investor protection.
mstockstill on DSK30JT082PROD with NOTICES
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:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. 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 13 and Rule 19b–4(f)(6) 14
thereunder. 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 will 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.
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 rule-comments@
sec.gov. Please include File Number SR–
CBOE–2017–026 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2017–026. 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 Web site (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
13 15
12 Id.
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14 17
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
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available for Web site 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–
2017–026 and should be submitted on
or before May 3, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–07307 Filed 4–11–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80385; File No. SR–CBOE–
2017–014]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving
Proposed Rule Change Related to Rule
24.9(e)
April 6, 2017.
I. Introduction
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
Chicago Board Options Exchange,
Incorporated (the ‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
a proposed rule change to amend the
operation of its nonstandard expirations
pilot program on February 13, 2017. The
proposed rule change was published for
comment in the Federal Register on
February 21, 2017.3 No comment letters
were received in response to this
proposal. This order approves the
proposed rule changes.
II. Description of the Proposed Rule
Change
The proposed rule change amended
the nonstandard expirations pilot
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 80037
(Feb. 14, 2017), 82 FR 11290 (SR–CBOE–2017–014)
(‘‘Notice’’).
1 15
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program set forth in CBOE Rule 24.9(e)
(the ‘‘Pilot Program’’) to permit the
Exchange to list weekly and monthly
expirations non-consecutively.
In its filing, the Exchange explained
that the Pilot Program initially
permitted CBOE to list P.M.-settled
‘‘end-of-week’’ options on broad-based
indexes that expire on any Friday of the
month, other than the third Friday of
the month (‘‘EOWs’’), and ‘‘end of
month’’ options that expire on the last
trading day of the month (‘‘EOMs’’).4
The Pilot Program was later expanded to
allow CBOE to list P.M.-settled options
on broad-based indexes that expire on
any Wednesday of the month (‘‘WEDs’’)
and any Monday of the month
(‘‘MONs’’).5 The Pilot Program permits
the Exchange to list, for any given class,
the maximum number of expirations
permitted by CBOE Rule 24.9(a)(2) for
standard options on the same broadbased index.6 For example, the
Exchange stated that MONs, WEDs,
EOWs and EOMS in the S&P 500 Index
options class (‘‘SPX’’) may each have up
to twelve expirations under the Pilot
Program (i.e., a total of 48 expirations),7
although the Exchange represented that
it does not currently choose to list all
such expirations.8 Rather, the Exchange
explained that it introduces expirations
as customer demand dictates and
typically lists four MONs, six WEDs,
and seven EOWs in SPX options at a
time.9
The Exchange noted, however, that
MONs, WEDs, and EOWs (collectively,
‘‘Weekly Expirations’’) currently must
be listed for consecutive Monday,
Wednesday, or Friday expirations, as
applicable.10 Similarly, EOM
expirations currently must be listed for
consecutive month-end dates.11 The
Exchange indicated that it had received
repeated customer interest to list
4 See Notice, supra note 3, at 11290; see also
Securities Exchange Act Release No. 62911 (Sept.
14, 2010), 75 FR 57539 (Sept. 21, 2010) (SR–CBOE–
2009–075) (order approving the establishment of
the nonstandard expirations pilot program).
5 See Notice, supra note 3, at 11290–91. See also
Securities Exchange Act Release No. 76909 (Jan. 14,
2016), 81 FR 3512 (Jan. 21, 2016) (SR–CBOE–2015–
106) (order approving the inclusion of WEDs in the
Pilot Program); Securities Exchange Act Release No.
78531 (Aug. 10, 2016), 81 FR 54643 (Aug. 16, 2016)
(SR–CBOE–2016–046) (order approving the
inclusion of MONs in the Pilot Program).
6 See Notice, supra note 3, at 11291; CBOE Rule
24.9(e)(1)–(2).
7 See Notice, supra note 3, at 11291; see also
CBOE Rule 24.9(a)(2) (specifying that the Exchange
may list up to twelve standard monthly expirations
at any one time for any class—like SPX—that the
Exchange uses to calculate a volatility index).
8 See Notice, supra note 3, at 11291.
9 See id.
10 See id.; see also CBOE Rule 24.9(e)(1).
11 See Notice, supra note 3, at 11291; see also
CBOE Rule 24.9(e)(2).
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18:45 Apr 11, 2017
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Weekly Expirations and EOMs that
expire in the mid-term—as opposed to
the short-term expirations set forth in
the Exchange’s current listing
schedule 12—in order to provide a
potential financial hedge for impactful
economic events.13 The Exchange
therefore proposed to amend its Pilot
Program to eliminate the consecutive
expiration restriction for the listing of
Weekly Expirations and EOMs.14
While CBOE could currently add
more consecutive expirations to its
listing schedule in order to provide
some amount of mid-term coverage, the
Exchange represented that customer
demand is for expirations near a certain
future economically impactful event
(e.g., a national election)—not for every
expiration between the current date and
that particular event.15 For that reason,
the Exchange believed the marketplace
would be better served by allowing
CBOE to list Weekly Expirations or
EOMs non-consecutively, instead of
listing all Weekly Expirations or EOMs
consecutively in order to reach a certain
date.16 The Exchange indicated that this
approach would allow CBOE to list
fewer expirations because it could
exclude those with less customer
demand, which it believed would limit
potential burdens on liquidity providers
to quote in the relevant option classes.17
The Exchange also asserted that nonconsecutive expirations would expand
the hedging tools available to market
participants, allowing them to tailor
their investment or hedging needs more
effectively.18
The Exchange highlighted the limited
scope of the proposed rule change. It
pointed out that CBOE currently only
lists nonstandard expirations in three
classes: S&P 500 Index options under
symbol SPXW, CBOE Mini S&P 500
Index options under symbol XSP, and
Russell 2000 Index options under
symbol RUTW.19 Furthermore, the
Exchange noted that CBOE only lists
MONs and WEDs in SPXW; EOWs in
SPXW, RUTW, and XSP; and EOMs in
SPXW and RUTW.20 The Exchange
therefore believed the proposed rule
change would not affect most options
12 See supra note 9 and accompanying text. The
Exchange pointed out that it separately provides
long-term expirations through its Long-Term Index
Option Series program (‘‘LEAPS’’). See Notice,
supra note 3, at 11291; CBOE Rule 24.9(b)(1)
(providing that LEAPS may expire twelve to 180
months from the date of issuance).
13 See Notice, supra note 3, at 11291.
14 See id.
15 Id.
16 Id.
17 Id.
18 Id.
19 Id.
20 Id.
PO 00000
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17709
classes.21 Moreover, the Exchange
anticipated that the proposed rule
change would have a limited effect on
the three classes that are listed under
the Pilot Program. The Exchange
expressed its belief that the vast
majority of expirations would continue
to be listed consecutively because the
majority of trading interest is in the
short-term weeks.22 The Exchange also
explained that even non-consecutively
listed expirations would eventually fall
in line with CBOE’s regular listing
schedule as consecutive weekly or
monthly expirations are added.23
The Exchange further noted that the
proposed rule change would not affect
the number of expirations permitted
under the Pilot Program, as it would
still limit the maximum number of
expirations that may be listed for each
Weekly Expiration and EOMs in a given
class to the maximum number of
expirations permitted by CBOE Rule
24.9(a)(2) for standard options on the
same broad-based index.24 Similarly,
the Exchange clarified that the proposed
rule change would not affect the
maximum duration (i.e., the maximum
time from listing to expiration) of
Weekly Expirations or EOMs, and it
proposed to specify in CBOE Rule
24.9(e)(1) and (2) that the expiration
date of a non-consecutive expiration
may not be beyond what would be
considered the last expiration date if the
maximum number of expirations were
listed consecutively.25 By way of
example, the Exchange explained that
listing all twelve WEDs consecutively in
SPXW would result in the twelfth WED
expiration occurring 11 weeks from the
nearest-term expiration.26 Assuming
that the nearest-term WED expiration
occurred on February 8, 2017, the
Exchange stated that the twelfth
expiration would occur on April 26,
2017.27 It then explained that, under the
proposed rule, a non-consecutively
listed WED could not have an expiration
date later than April 26, 2017 in that
example.28 Thus, the only difference
identified by the Exchange between the
current rule and the proposed rule is
that the current rule would require
CBOE to list all twelve expirations in
order to list the April 26, 2017
expiration; under the proposed rule,
21 Id.
22 Id.
23 Id.
24 Id.;
see CBOE Rule 24.9(e)(1)–(2).
Notice, supra note 3, at 11291–92.
26 The Exchange noted that its example assumes
that there are no EOMs that coincide with the WEDs
in SPXW, in which case CBOE would list an EOM
instead of a WED. See id.
27 See Notice, supra note 3, at 11292.
28 Id.
25 See
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CBOE could list the April 26, 2017
expiration without listing any or only
some of the other WEDs expirations.29
Finally, the Exchange assured the
Commission that its annual Pilot
Program report will include any Weekly
Expirations and EOMs, regardless of
whether the expirations are listed
consecutively or non-consecutively.30
mstockstill on DSK30JT082PROD with NOTICES
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of
Section 6 of the Act 31 and rules and
regulations thereunder applicable to a
national securities exchange.32 In
particular, the Commission finds that
the proposed rule change is consistent
with the requirements of Section 6(b)(5)
of the Act, 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 mechanisms of a free
and open market and a national market
system, and, in general, to protect
investors and the public interest.33
As an initial matter, the Commission
notes that the proposed rule change
does not expand the scope of P.M.
settlement under the Pilot Program; the
Exchange has confirmed that the
maximum number of expirations
permitted and the maximum duration of
Weekly Expirations and EOMs under
the Pilot Program would remain the
same. The Exchange further explained
that its proposal to eliminate the
requirement to list Weekly Expirations
and EOMs consecutively is consistent
with Section 6(b)(5) of the Act for a
number of reasons. First, the proposal
helps protect investors and the public
interest because it will expand the
ability of investors to hedge risks against
market movements that may arise from
future economic events.34 Similarly, the
Exchange noted the proposal will create
greater trading and hedging
opportunities and flexibility and will
provide customers with the ability to
29 Id.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,37 that the
proposed rule change (SR–CBOE–2017–
014) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–07305 Filed 4–11–17; 8:45 am]
30 Id.
31 15
U.S.C. 78f(b).
32 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).
33 15 U.S.C. 78f(b)(5).
34 See Notice, supra note 3, at 11292.
VerDate Sep<11>2014
more closely tailor their investment
objectives.35 Finally, the Exchange
noted that this proposal will allow the
Exchange to provide these enhanced
hedging opportunities in manner that
also limits the potential burden on
liquidity providers quoting the affected
classes, which helps remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.36
The Commission notes that CBOE will
continue to provide the Commission
with the Annual Report analyzing
volume and open interest of EOMs and
Weekly Expirations (including any nonconsecutively listed expirations), which
will also contain information and
analysis of EOMs and Weekly
Expiration trading patterns and index
price volatility and share trading
activity for series that exceed minimum
parameters. This information should be
useful to the Commission as it evaluates
whether allowing P.M. settlement for
EOMs and Weekly Expirations has
resulted in increased market and price
volatility in the underlying component
stocks, particularly at expiration. This
information should help the
Commission and CBOE assess the
impact on the markets and determine
whether changes to the Pilot Program
are necessary or appropriate.
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.
For the foregoing reasons, the
Commission finds that the proposed
rule changes are consistent with the
requirements of Section 6 of the Act
including Section 6(b)(5) and rules and
regulations thereunder applicable to a
national securities exchange.
18:45 Apr 11, 2017
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BILLING CODE 8011–01–P
35 Id.
36 Id.
37 15
38 17
PO 00000
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
Frm 00086
Fmt 4703
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SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736
Extension:
Form F–4 OMB Control No. 3235–0325,
SEC File No. 270–288
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Form F–4 (17 CFR 239.34) is used by
foreign issuers to register securities in
business combinations, reorganizations
and exchange offers pursuant to the
Securities Act of 1933 (15 U.S.C. 77a et
seq.). The information collected is
intended to ensure that the information
required to be filed by the Commission
permits verification of compliance with
securities law requirements and assures
the public availability of such
information. Form F–4 takes
approximately 1,457 hours per response
and is filed by approximately 39
respondents. We estimate that 25% of
the 1,457 hours per response (364.25
hours) is prepared by the registrant for
a total annual reporting burden of
14,206 hours (364.25 hours per response
× 39 responses).
Written comments are invited on: (a)
Whether this proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden imposed by the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
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]]>Agencies
[Federal Register Volume 82, Number 69 (Wednesday, April 12, 2017)]
[Notices]
[Pages 17708-17710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07305]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80385; File No. SR-CBOE-2017-014]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving Proposed Rule Change Related to Rule
24.9(e)
April 6, 2017.
I. Introduction
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ Chicago Board Options
Exchange, Incorporated (the ``Exchange'' or ``CBOE'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change to amend the operation of its nonstandard expirations pilot
program on February 13, 2017. The proposed rule change was published
for comment in the Federal Register on February 21, 2017.\3\ No comment
letters were received in response to this proposal. This order approves
the proposed rule changes.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 80037 (Feb. 14,
2017), 82 FR 11290 (SR-CBOE-2017-014) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The proposed rule change amended the nonstandard expirations pilot
[[Page 17709]]
program set forth in CBOE Rule 24.9(e) (the ``Pilot Program'') to
permit the Exchange to list weekly and monthly expirations non-
consecutively.
In its filing, the Exchange explained that the Pilot Program
initially permitted CBOE to list P.M.-settled ``end-of-week'' options
on broad-based indexes that expire on any Friday of the month, other
than the third Friday of the month (``EOWs''), and ``end of month''
options that expire on the last trading day of the month (``EOMs'').\4\
The Pilot Program was later expanded to allow CBOE to list P.M.-settled
options on broad-based indexes that expire on any Wednesday of the
month (``WEDs'') and any Monday of the month (``MONs'').\5\ The Pilot
Program permits the Exchange to list, for any given class, the maximum
number of expirations permitted by CBOE Rule 24.9(a)(2) for standard
options on the same broad-based index.\6\ For example, the Exchange
stated that MONs, WEDs, EOWs and EOMS in the S&P 500 Index options
class (``SPX'') may each have up to twelve expirations under the Pilot
Program (i.e., a total of 48 expirations),\7\ although the Exchange
represented that it does not currently choose to list all such
expirations.\8\ Rather, the Exchange explained that it introduces
expirations as customer demand dictates and typically lists four MONs,
six WEDs, and seven EOWs in SPX options at a time.\9\
---------------------------------------------------------------------------
\4\ See Notice, supra note 3, at 11290; see also Securities
Exchange Act Release No. 62911 (Sept. 14, 2010), 75 FR 57539 (Sept.
21, 2010) (SR-CBOE-2009-075) (order approving the establishment of
the nonstandard expirations pilot program).
\5\ See Notice, supra note 3, at 11290-91. See also Securities
Exchange Act Release No. 76909 (Jan. 14, 2016), 81 FR 3512 (Jan. 21,
2016) (SR-CBOE-2015-106) (order approving the inclusion of WEDs in
the Pilot Program); Securities Exchange Act Release No. 78531 (Aug.
10, 2016), 81 FR 54643 (Aug. 16, 2016) (SR-CBOE-2016-046) (order
approving the inclusion of MONs in the Pilot Program).
\6\ See Notice, supra note 3, at 11291; CBOE Rule 24.9(e)(1)-
(2).
\7\ See Notice, supra note 3, at 11291; see also CBOE Rule
24.9(a)(2) (specifying that the Exchange may list up to twelve
standard monthly expirations at any one time for any class--like
SPX--that the Exchange uses to calculate a volatility index).
\8\ See Notice, supra note 3, at 11291.
\9\ See id.
---------------------------------------------------------------------------
The Exchange noted, however, that MONs, WEDs, and EOWs
(collectively, ``Weekly Expirations'') currently must be listed for
consecutive Monday, Wednesday, or Friday expirations, as
applicable.\10\ Similarly, EOM expirations currently must be listed for
consecutive month-end dates.\11\ The Exchange indicated that it had
received repeated customer interest to list Weekly Expirations and EOMs
that expire in the mid-term--as opposed to the short-term expirations
set forth in the Exchange's current listing schedule \12\--in order to
provide a potential financial hedge for impactful economic events.\13\
The Exchange therefore proposed to amend its Pilot Program to eliminate
the consecutive expiration restriction for the listing of Weekly
Expirations and EOMs.\14\
---------------------------------------------------------------------------
\10\ See id.; see also CBOE Rule 24.9(e)(1).
\11\ See Notice, supra note 3, at 11291; see also CBOE Rule
24.9(e)(2).
\12\ See supra note 9 and accompanying text. The Exchange
pointed out that it separately provides long-term expirations
through its Long-Term Index Option Series program (``LEAPS''). See
Notice, supra note 3, at 11291; CBOE Rule 24.9(b)(1) (providing that
LEAPS may expire twelve to 180 months from the date of issuance).
\13\ See Notice, supra note 3, at 11291.
\14\ See id.
---------------------------------------------------------------------------
While CBOE could currently add more consecutive expirations to its
listing schedule in order to provide some amount of mid-term coverage,
the Exchange represented that customer demand is for expirations near a
certain future economically impactful event (e.g., a national
election)--not for every expiration between the current date and that
particular event.\15\ For that reason, the Exchange believed the
marketplace would be better served by allowing CBOE to list Weekly
Expirations or EOMs non-consecutively, instead of listing all Weekly
Expirations or EOMs consecutively in order to reach a certain date.\16\
The Exchange indicated that this approach would allow CBOE to list
fewer expirations because it could exclude those with less customer
demand, which it believed would limit potential burdens on liquidity
providers to quote in the relevant option classes.\17\ The Exchange
also asserted that non-consecutive expirations would expand the hedging
tools available to market participants, allowing them to tailor their
investment or hedging needs more effectively.\18\
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\15\ Id.
\16\ Id.
\17\ Id.
\18\ Id.
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The Exchange highlighted the limited scope of the proposed rule
change. It pointed out that CBOE currently only lists nonstandard
expirations in three classes: S&P 500 Index options under symbol SPXW,
CBOE Mini S&P 500 Index options under symbol XSP, and Russell 2000
Index options under symbol RUTW.\19\ Furthermore, the Exchange noted
that CBOE only lists MONs and WEDs in SPXW; EOWs in SPXW, RUTW, and
XSP; and EOMs in SPXW and RUTW.\20\ The Exchange therefore believed the
proposed rule change would not affect most options classes.\21\
Moreover, the Exchange anticipated that the proposed rule change would
have a limited effect on the three classes that are listed under the
Pilot Program. The Exchange expressed its belief that the vast majority
of expirations would continue to be listed consecutively because the
majority of trading interest is in the short-term weeks.\22\ The
Exchange also explained that even non-consecutively listed expirations
would eventually fall in line with CBOE's regular listing schedule as
consecutive weekly or monthly expirations are added.\23\
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\19\ Id.
\20\ Id.
\21\ Id.
\22\ Id.
\23\ Id.
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The Exchange further noted that the proposed rule change would not
affect the number of expirations permitted under the Pilot Program, as
it would still limit the maximum number of expirations that may be
listed for each Weekly Expiration and EOMs in a given class to the
maximum number of expirations permitted by CBOE Rule 24.9(a)(2) for
standard options on the same broad-based index.\24\ Similarly, the
Exchange clarified that the proposed rule change would not affect the
maximum duration (i.e., the maximum time from listing to expiration) of
Weekly Expirations or EOMs, and it proposed to specify in CBOE Rule
24.9(e)(1) and (2) that the expiration date of a non-consecutive
expiration may not be beyond what would be considered the last
expiration date if the maximum number of expirations were listed
consecutively.\25\ By way of example, the Exchange explained that
listing all twelve WEDs consecutively in SPXW would result in the
twelfth WED expiration occurring 11 weeks from the nearest-term
expiration.\26\ Assuming that the nearest-term WED expiration occurred
on February 8, 2017, the Exchange stated that the twelfth expiration
would occur on April 26, 2017.\27\ It then explained that, under the
proposed rule, a non-consecutively listed WED could not have an
expiration date later than April 26, 2017 in that example.\28\ Thus,
the only difference identified by the Exchange between the current rule
and the proposed rule is that the current rule would require CBOE to
list all twelve expirations in order to list the April 26, 2017
expiration; under the proposed rule,
[[Page 17710]]
CBOE could list the April 26, 2017 expiration without listing any or
only some of the other WEDs expirations.\29\
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\24\ Id.; see CBOE Rule 24.9(e)(1)-(2).
\25\ See Notice, supra note 3, at 11291-92.
\26\ The Exchange noted that its example assumes that there are
no EOMs that coincide with the WEDs in SPXW, in which case CBOE
would list an EOM instead of a WED. See id.
\27\ See Notice, supra note 3, at 11292.
\28\ Id.
\29\ Id.
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Finally, the Exchange assured the Commission that its annual Pilot
Program report will include any Weekly Expirations and EOMs, regardless
of whether the expirations are listed consecutively or non-
consecutively.\30\
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\30\ 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 Section 6 of the Act \31\
and rules and regulations thereunder applicable to a national
securities exchange.\32\ In particular, the Commission finds that the
proposed rule change is consistent with the requirements of Section
6(b)(5) of the Act, 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 mechanisms of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.\33\
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\31\ 15 U.S.C. 78f(b).
\32\ 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).
\33\ 15 U.S.C. 78f(b)(5).
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As an initial matter, the Commission notes that the proposed rule
change does not expand the scope of P.M. settlement under the Pilot
Program; the Exchange has confirmed that the maximum number of
expirations permitted and the maximum duration of Weekly Expirations
and EOMs under the Pilot Program would remain the same. The Exchange
further explained that its proposal to eliminate the requirement to
list Weekly Expirations and EOMs consecutively is consistent with
Section 6(b)(5) of the Act for a number of reasons. First, the proposal
helps protect investors and the public interest because it will expand
the ability of investors to hedge risks against market movements that
may arise from future economic events.\34\ Similarly, the Exchange
noted the proposal will create greater trading and hedging
opportunities and flexibility and will provide customers with the
ability to more closely tailor their investment objectives.\35\
Finally, the Exchange noted that this proposal will allow the Exchange
to provide these enhanced hedging opportunities in manner that also
limits the potential burden on liquidity providers quoting the affected
classes, which helps remove impediments to and perfect the mechanism of
a free and open market and a national market system.\36\
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\34\ See Notice, supra note 3, at 11292.
\35\ Id.
\36\ Id.
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The Commission notes that CBOE will continue to provide the
Commission with the Annual Report analyzing volume and open interest of
EOMs and Weekly Expirations (including any non-consecutively listed
expirations), which will also contain information and analysis of EOMs
and Weekly Expiration trading patterns and index price volatility and
share trading activity for series that exceed minimum parameters. This
information should be useful to the Commission as it evaluates whether
allowing P.M. settlement for EOMs and Weekly Expirations has resulted
in increased market and price volatility in the underlying component
stocks, particularly at expiration. This information should help the
Commission and CBOE assess the impact on the markets and determine
whether changes to the Pilot Program are necessary or appropriate.
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.
For the foregoing reasons, the Commission finds that the proposed
rule changes are consistent with the requirements of Section 6 of the
Act including Section 6(b)(5) and rules and regulations thereunder
applicable to a national securities exchange.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\37\ that the proposed rule change (SR-CBOE-2017-014) be, and
hereby is, approved.
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\37\ 15 U.S.C. 78s(b)(2).
\38\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07305 Filed 4-11-17; 8:45 am]
BILLING CODE 8011-01-P
