Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 6.42, Minimum Increments for Bids and Offers, To Extend the Penny Pilot Program, 61615-61617 [2017-27995]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 82, Number 248 (Thursday, December 28, 2017)]
[Notices]
[Pages 61615-61617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27995]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82375; File No. SR-CBOE-2017-078]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 
6.42, Minimum Increments for Bids and Offers, To Extend the Penny Pilot 
Program

December 21, 2017.
    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 December 14, 2017, Cboe Exchange, Inc. (the ``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 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. 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).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.42 by extending the Penny 
Pilot Program through June 30, 2018.
    (additions are underlined; deletions are [bracketed])
* * * * *

Cboe Exchange, Inc.

Rules

* * * * *

Rule 6.42. Minimum Increments for Bids and Offers

    The Board of Directors may establish minimum increments for options 
traded on the Exchange. When the Board of Directors determines to 
change the minimum increments, the Exchange will designate such change 
as a stated policy, practice, or interpretation with respect to the 
administration of Rule 6.42 within the meaning of subparagraph (3)(A) 
of subsection 19(b) of the Exchange Act and will file a rule change for 
effectiveness upon filing with the Commission. Until such time as the 
Board of Directors makes a change to the minimum increments, the 
following minimum increments shall apply to options traded on the 
Exchange:
    (1) No change.
    (2) No change.
    (3) The decimal increments for bids and offers for all series of 
the option classes participating in the Penny Pilot Program are: $0.01 
for all option series quoted below $3 (including LEAPS), and $0.05 for 
all option series $3 and above (including LEAPS). For QQQQs, IWM, and 
SPY, the minimum increment is $0.01 for all option series. The Exchange 
may replace any option class participating in the Penny Pilot Program 
that has been delisted with the next most actively-traded, multiply-
listed option class, based on national average daily volume in the 
preceding six calendar months, that is not yet included in the Pilot 
Program. Any replacement class would be added on the second trading day 
following [July 1, 2017]January 1, 2018. The Penny Pilot shall expire 
on [December 31, 2017]June 30, 2018.
    (4) No change.
    . . . Interpretations and Policies:
    .01-.04 No change.
* * * * *
    The text of the proposed rule change is also available on the 
Exchange's website (https://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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Penny Pilot Program (the ``Pilot Program'') is scheduled to 
expire on December 31, 2017. The Exchange proposes to extend the Pilot 
Program until June 30, 2017. The Exchange believes that extending the 
Pilot Program will allow for further analysis of the Pilot Program and 
a determination of how the Pilot Program should be structured in the 
future.
    During this extension of the Pilot Program, the Exchange proposes 
that it may replace any option class that is currently included in the 
Pilot Program and that has been delisted with the next most actively 
traded, multiply listed option class that is not yet participating in 
the Pilot Program (``replacement class''). Any replacement class would 
be determined based on national average daily volume in the preceding 
six months,\5\ and would be added on the second trading day following 
January 1, 2018. The Exchange will employ the same parameters to 
prospective replacement classes as approved and applicable in 
determining the existing classes in the Pilot Program, including 
excluding high-priced underlying securities.\6\ The Exchange will 
announce to its Trading Permit Holders by circular any replacement 
classes in the Pilot Program.
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    \5\ The month immediately preceding a replacement class's 
addition to the Pilot Program (i.e., December) would not be used for 
purposes of the six-month analysis. Thus, a replacement class to be 
added on the second trading day following January 1, 2018, would be 
identified based on The Option Clearing Corporation's trading volume 
data from June 1, 2017 through November 30, 2017.
    \6\ See Securities Exchange Act Release No. 60864 (October 22, 
2009), 74 FR 55876 (October 29, 2009) (SR-CBOE-2009-76).
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    The Exchange is specifically authorized to act jointly with the 
other options exchanges participating in the Pilot Program in 
identifying any replacement class.
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.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ requirements that the rules of

[[Page 61616]]

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 
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) \9\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. In particular, the proposed 
rule change allows for an extension of the Pilot Program for the 
benefit of market participants.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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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.
    Specifically, the Exchange believes that, by extending the 
expiration of the Pilot Program, the proposed rule change will allow 
for further analysis of the Pilot Program and a determination of how 
the Program should 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. In addition, the Exchange has been 
authorized to act jointly in extending the Pilot Program and believes 
the other exchanges will be filing similar extensions.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6)(iii) thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing.\13\ 
However, pursuant to Rule 19b-4(f)(6)(iii),\14\ the Commission may 
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 Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because doing so will 
allow the Pilot Program to continue without interruption in a manner 
that is consistent with the Commission's prior approval of the 
extension and expansion of the Pilot Program and will allow the 
Exchange and the Commission additional time to analyze the impact of 
the Pilot Program.\15\ Accordingly, the Commission designates the 
proposed rule change as operative upon filing with the Commission.\16\
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    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and the 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 pre-filing requirement.
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See Securities Exchange Act Release No. 61061 (November 24, 
2009), 74 FR 62857 (December 1, 2009) (SR-NYSEArca-2009-44). See 
also supra note 5.
    \16\ For purposes only of waiving the operative delay for this 
proposal, the Commission has 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 under 
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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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 [email protected]. Please 
include File Number SR-CBOE-2017-078 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-2017-078. 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. 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-2017-078 and

[[Page 61617]]

should be submitted on or before January 18, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-27995 Filed 12-27-17; 8:45 am]
 BILLING CODE 8011-01-P