Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to List and Trade Options That Overlie the S&P Communication Services Select Sector Index, 54796-54800 [2018-23734]

Download as PDF 54796 Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Notices 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–NYSEArca–2018–75, and should be submitted on or before November 21, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–23730 Filed 10–30–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84490; File No. SR–CBOE– 2018–067] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to List and Trade Options That Overlie the S&P Communication Services Select Sector Index October 25, 2018. amozie on DSK3GDR082PROD with NOTICES1 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 15, 2018, 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 ‘‘noncontroversial’’ 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The text of the proposed rule change is provided below in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s 17 CFR 200.30–3(a)(12). 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). 12 1 15 VerDate Sep<11>2014 18:06 Oct 30, 2018 Jkt 247001 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is currently authorized to list for trading options on ten S&P Select Sector Indexes.5 The purpose of this proposed rule change is to amend certain rules to authorize the Exchange to list for trading options on a recently added eleventh S&P Select Sector Index—the S&P Communication Services Select Sector Index. Each S&P Select Sector Index represents the performance of companies that are components of the Standard & Poor’s 500 Index (‘‘S&P 500’’) within a specific sector (each of which is referred to as an ‘‘S&P Select Sector Index’’). Each constituent of an S&P Select Sector Index is a constituent of the S&P 500, and each S&P Select Sector Index is a subindex of the S&P 500. S&P Dow Jones Indices 6 assigns each constituent to a S&P Select Sector Index(es) based on the constituent’s classification under a global industry classification standard. S&P Dow Jones Indices monitors and maintains each Select Sector Index and rebalances each S&P Select Sector Index quarterly. S&P Dow Jones Indices recently added an eleventh sector. As a result, the following represents the current breakdown of the sectors and the components of each sector: 5 See Rule 24.9(a); see also Securities Exchange Act Release No. 34–81879 (October 16, 2017), 82 FR 48858 (October 20, 2017) (SR–CBOE–2017–065). 6 S&P Dow Jones Indices is the reporting authority for the S&P Select Sector Indexes, including the S&P Communication Services Select Sector Index. See proposed Rule 24.1, Interpretation and Policy .01. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 Sector Financial ............... Energy .................. Technology ........... Health Care .......... Utilities .................. Consumer Staples Industrials ............. Consumer Discretionary. Materials ............... Real Estate ........... Communication Services. Symbol 7 Number of components IXM IXE IXT IXV IXU IXR IXI IXY 68 31 76 63 29 32 70 80 IXB IXRE IXC 24 32 26 Initial and Maintenance Listing Criteria The S&P Communication Services Select Sector Index meets the definition of a narrow-based index as set forth in Rule 24.1(i)(2) (an index designed to be representative of a particular industry or a group of related industries and include indices having component securities that are all headquartered with in a single country). Additionally, the S&P Communication Services Select Sector Index satisfies the initial listing criteria of a narrow-based index, as set forth in Rule 24.2(b): (1) Options will be A.M.-settled; (2) the index is capitalizationweighted, price-weighted, equal dollarweighted, or modified capitalizationweighted, and consists of ten or more component securities (the S&P Communication Services Select Sector Index is modified capitalizationweighted); (3) each component security has a market capitalization of at least $75 million, except that for each of the lowest weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index, the market capitalization is at least $50 million; (4) trading volume of each component security has been at least one million shares for each of the last six months, except that for each of the lowest weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index, trading volume has been at least 500,000 shares for each of the last six months; (5) in a capitalization-weighted index or a modified capitalization-weighted index, the lesser of the five highest weighted component securities in the index or the highest weighted component securities in the index that in the aggregate represent at least 30% 7 These symbols represent the index. The corresponding option symbols are SIXM, SIXE, SIXT, SIXV, SIXU, SIXR, SIXI, SIXY, SIXB, SIXRE, and SIXC respectively. E:\FR\FM\31OCN1.SGM 31OCN1 amozie on DSK3GDR082PROD with NOTICES1 Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Notices of the total number of component securities in the index each have had an average monthly trading volume of at least 2,000,000 shares over the past six months; (6) no single component security represents more than 25% of the weight of the index, and the five highest weighted component securities in the index do not in the aggregate account for more than 50% (60% for an index consisting of fewer than 25 component securities) of the weight of the index; (7) component securities that account for at least 90% of the weight of the index and at least 80% of the total number of component securities in the index satisfy the requirements of Rule 5.3 applicable to individual underlying securities; (8) all component securities are ‘‘reported securities’’ as defined in Rule 11A a3–1 under the Exchange Act; (9) non-U.S. component securities (stocks or ADRs) that are not subject to comprehensive surveillance agreements do not in the aggregate represent more than 20% of the weight of the index; (10) the current underlying index value will be reported at least once every fifteen seconds during the time the index options are traded on the Exchange; (11) an equal dollar-weighted index will be rebalanced at least once every calendar quarter; and (12) if an underlying index is maintained by a broker-dealer, the index is calculated by a third party who is not a broker-dealer, and the broker-dealer has erected a ‘‘Chinese Wall’’ around its personnel who have access to information concerning changes in and adjustments to the index. The S&P Select Sector Index options will be subject to the maintenance listing standards set forth in Rule 24.2(c): (1) The conditions stated in (1), (3), (6), (7), (8), (9), (10), (11) and (12) above must continue to be satisfied, provided that the conditions stated in (6) above must be satisfied only as of the first day of January and July in each year; (2) the total number of component securities in the index may not increase or decrease by more than 33 1⁄3% from the number of component securities in the index at the time of its initial listing, and in no event may be less than nine component securities; (3) trading volume of each component security in the index must be at least 500,000 shares for each of the last six months, except that for each of the lowest weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index, trading volume VerDate Sep<11>2014 18:06 Oct 30, 2018 Jkt 247001 must be at least 400,000 shares for each of the last six months; and (4) in a capitalization-weighted index or a modified capitalization-weighted index, the lesser of the five highest weighted component securities in the index or the highest weighted component securities in the index that in the aggregate represent at least 30% of the total number of stocks in the index each have had an average monthly trading volume of at least 1,000,000 shares over the past six months.8 Expiration Months, Settlement, and Exercise Style Consistent with existing rules for certain index options, the Exchange will allow up to twelve near-term expiration months for the S&P Communication Services Select Sector Index options.9 The Exchange elects to have the ability to list up to twelve near-term expiration months, as that is the same amount the Rules permit for options on the S&P 500 (‘‘SPX options’’) and the other S&P Select Sector Indexes. The S&P Select Sector Indexes consist of the same components as the S&P 500, as discussed above. Because of the relation between the S&P Communication Services Select Sector Index, the other S&P Select Sector Indexes, and the S&P 500, which will likely result in market participants’ investment and hedging strategies consisting of options over all, the Exchange believes it is appropriate to permit the same number of monthly expirations for the S&P Communication Services Select Sector Index options as SPX options and the other S&P Select Sector Index options. The S&P Communication Services Select Sector Index options will be A.M., cash-settled contracts with European-style exercise.10 A.M.settlement is consistent with the generic listing criteria for industry-based indexes 11 (as well as broad-based indexes 12), and thus it is common for index options to be A.M.-settled. The 8 As is the case with other index options authorized for listing and trading on Cboe Options, in the event the S&P Communication Services Select Sector Index fails to satisfy the maintenance listing standards, the Exchange will not open for trading any additional series of options of that class unless such failure is determined by the Exchange not to be significant and the Commission concurs in that determination, or unless the continued listing of that class of index options has been approved by the Securities and Exchange Commission (the ‘‘Commission’’) under Section 19(b)(2) of the Securities and Exchange Act (the ‘‘Act’’). 9 See proposed Rule 24.9(a)(2). 10 See proposed Rule 24.9(a)(3)(cxxiv) and (4)(xcxix). 11 See Rule 24.2(b)(1). 12 See Rule 24.2(f)(2). PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 54797 Exchange proposes to amend Rule 24.9(a)(4) to add the S&P Communication Services Select Sector Index options to the list of other A.M.settled options. Standard third-Friday SPX options and the other S&P Select Sector Index options are A.M.-settled. European-style exercise is consistent with many index options, as set forth in Rule 24.9(a)(3). Standard third-Friday SPX options and the other S&P Select Sector Index options are A.M.-settled with European-style exercise. The Exchange proposes to amend Rule 24.9(a)(3) to add the S&P Communication Services Select Sector Index options to the list of other European-style index options. Because of the relation between the S&P Communication Services Select Sector Index, the other S&P Select Sector Indexes, and the S&P 500, which will likely result in market participants’ investment and hedging strategies consisting of options over both, the Exchange believes it is appropriate to list the S&P Communication Services Select Sector Index options with the same settlement and exercise style as the other S&P Select Sector Index options and SPX options. Trading Hours The Exchange proposes to amend Rule 24.6(b) to add the S&P Communication Services Select Sector Index options to the list of index options that may trade on the Exchange from 8:30 a.m. until 3:00 p.m. Chicago time.13 The Exchange understands that investors who plan to trade options on the S&P Communication Services Select Sector Index would often use the prices of the stock components of the Index to price options rather than futures on the Index (which are often used to price index options, such as options on the S&P 500). Investors similarly use pricing of underlying stocks to price shares of exchange-traded funds (‘‘ETFs’’) derived from the S&P Communication Services Select Sector Index (e.g., Communication Services Select Sector SPDR ETF), the components of which are stocks that are components of the S&P Communication Services Select Sector Index. The underlying stocks end regular trading at 3:00 p.m. Chicago time each day. Closing trading in the S&P Communication Services Select Sector Index options at the same time the stocks end regular trading 14 will 13 See proposed Rule 24.6(b)(lii). The proposed rule change also corrects a numbering error in other subparagraphs of Rule 24.6(b). 14 While the stocks may continue to trade in an aftermarket trading session on the listing exchanges, there is less liquidity in aftermarket trading, which E:\FR\FM\31OCN1.SGM Continued 31OCN1 54798 Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Notices ensure investors have access to robust pricing of the underlying stock components they use to price the options, thus reducing investors’ price risk. Various other index options, including the other S&P Select Sector Index options and other narrow-based index options, may trade from 8:30 a.m. to 3:00 p.m. Chicago time.15 Appointment Costs The Exchange proposes a MarketMaker appointment cost of .001 for the S&P Communication Services Select Sector Index options, and each will have a Market-Maker appointment cost of .001.16 This is the same appointment cost as the other S&P Select Sector Index options. The Exchange determines appointment costs of Tier AA classes based on several factors, including, but not limited to, competitive forces and trading volume. The Exchange believes the proposed initial appointment cost for the S&P Communication Services Select Sector Index options will foster competition by incentivizing Market-Makers to obtain an appointment in these newly listed options, which may increase liquidity in the new class. Capacity amozie on DSK3GDR082PROD with NOTICES1 The Exchange has analyzed its capacity and represents that it believes the Exchange and OPRA have the necessary systems capacity to handle the additional traffic associated with the listing of new series that would result from the introduction of the S&P Communication Services Select Sector Index options up to the proposed number of possible expirations. Because the proposal is limited to one class, the Exchange believes any additional traffic that would be generated from the introduction of the S&P Communication Services Sector Index options would be manageable. generally leads to wider spreads and more volatile pricing. 15 See Rule 24.6(b) (for example, options on the S&P transportation, retail, health care, banking, insurance, and chemical indices, and the Cboe PowerPacks SM bank, biotechnology, gold, internet, iron & steel, oil, oil services, pharmaceuticals, retail, semiconductor, technology, and telecom indices). 16 See proposed Rule 8.3(c)(i). S&P Communication Services Select Sector Index options will be in Tier AA (as are other S&P index options, including the other S&P Select Sector Index options). While the appointment costs of Tier AA classes are not subject to quarterly rebalancing under Rule 8.3(c)(iv), the Exchange regularly reviews the appointment costs of Tier AA classes to ensure that they continue to be appropriate. The Exchange determines appointment costs of Tier AA classes based on several factors, including, but not limited to, competitive forces and trading volume. VerDate Sep<11>2014 18:06 Oct 30, 2018 Jkt 247001 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. In particular, the Exchange believes that the proposed rule change will protect investors, as the Exchange believes there is unmet market demand for exchange-listed security options listed on this new sector index. Sector SPDRs and E-mini S&P future products for the S&P Communication Services Select Sector are listed and traded on other exchanges.20 As a result, the Exchange believes that the S&P Communication Services Select Sector Index options are designed to provide different and additional opportunities for investors to hedge or speculate on the market risk associated with this index by listing an option directly on this index. Because of the relation between the S&P Communication Services Select Sector, the other S&P Select Sector Indexes, and the S&P 500, the Exchange believes the proposed rule change will benefit investors, as it will 17 15 18 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 19 Id. 20 The primary listing exchange for the Communication Services Select Sector SPDR Fund (and the other Select Sector SPDR Funds) is NYSE Arca (trading under symbol XLC). See the Fund’s prospectus, available at https://us.spdrs.com/ public/SPDR_SELECT%20SECTOR_ PROSPECTUS.pdf. The contract specifications for the E-mini Communication Services Select Sector Futures Contract, which trades on the Chicago Mercantile Exchange (‘‘CME’’), is available at https://www.cmegroup.com/trading/equity-index/ select-sector-index/e-mini-communication-servicesselect-sector-index_contract_specifications.html; see also Chapter 369 of the CME Rulebook. PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 provide market participants’ with additional investment and hedging strategies consisting of options over each of these indexes. The Exchange notes it is currently authorized to list options on ten S&P Select Sector Indexes (subject to the same terms as those proposed for the S&P Communication Services Select Sector Index options). The Exchange believes the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and a national market system, because the proposed rule change is consistent with current Rules, which were previously filed with approved as consistent with the Exchange Act by the Commission. The S&P Communication Services Select Sector Index options satisfy the initial listing standards for narrow-based indexes in the Exchange’s current Rules, which the Commission previously deemed consistent with Act.21 The proposed rule change merely adds the S&P Communication Services Select Sector Index to the table regarding reporting authorities for indexes, to the rule regarding number of permissible expirations, to the list of European-style exercise index options, and to the list of A.M.-settled index options. These changes are consistent with existing Rules and index options currently authorized and listed for trading on the Exchange, including the other S&P Select Sector Index options. The Exchange notes, with respect to these changes, standard third-Friday SPX options (which overly the S&P 500, which consist of the same components as the S&P Select Sector Indexes, including the S&P Communication Services Select Sector Index) and the other S&P Select Sector Index options currently have the same reporting authority, the same number of permissible expirations, the same settlement, and the same exercise style.22 The Exchange has observed no trading or capacity issues in SPX trading given the number of permissible expirations, a.m. settlement, and European-style exercise. Because of the relation between the S&P Communication Services Select Sector, the other S&P Select Sector Indexes, and the S&P 500, which will likely result in market participants’ investment and hedging strategies consisting of options over each of these indexes, the 21 See Securities Exchange Act Release No. 34– 34157 (June 3, 1994), Federal Register Volume 59, Issue 111 (June 10, 1994) (SR–CBOE–93–59) (order approving generic listing standards for options on narrow-based indexes). 22 See Rules 24.1, Interpretation and Policy .01 and 24.9(a)(2) through (4). E:\FR\FM\31OCN1.SGM 31OCN1 Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 Exchange believes it is appropriate to have the same number of expiration, settlement, and exercise style for options on each of these indexes. The Exchange also represents that it has the necessary systems capacity to support the new option series given these proposed specifications. The Exchange believes the proposed trading hours for the S&P Communication Services Select Sector Index options are reasonable and will protect investors, as closing trading in these options at the same time the stocks end regular trading will ensure investors have access to robust pricing of the underlying stock components they use to price the options, which protects investors by reducing their price risk. Various other index options, including the other S&P Select Sector Index options and other narrow-based index options, may trade from 8:30 a.m. to 3:00 p.m. Chicago time.23 The Exchange believes the proposed initial low appointment cost for the S&P Communication Services Select Sector Index options promotes competition and efficiency by incentivizing more Market-Makers to obtain an appointment in the newly listed class. The Exchange believes this may result in liquidity and competitive pricing in this class, which ultimately benefits investors. The proposed rule change does not result in unfair discrimination, as the appointment cost will apply to all Market-Makers in this class. Additionally, the proposed appointment cost is the same as the appointment cost for each of the other S&P Select Sector Index options.24 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. The S&P Communication Services Select Sector Index satisfies initial listing standards set forth in the Rules, and the proposed number of expirations, settlement, and exercise style are consistent with current rules applicable to index options, including the other S&P Select Sector Index options and standard thirdFriday SPX options. Because of the relation between the S&P Communication Services Select Sector Index, the other S&P Select Sector Indexes, and the S&P 500, which will likely result in market participants’ investment and hedging strategies consisting of options over each of these 23 See 24 See supra note 15. Rule 8.3(c)(i). VerDate Sep<11>2014 18:06 Oct 30, 2018 indexes, the Exchange believes it is appropriate to have the same number of expirations, settlement, and exercise style for options on each index. The S&P Communication Services Select Sector Index options will provide investors with different and additional opportunities to hedge or speculate on the market associated with the this index. With respect to the proposed trading hours, all market participants will be able to trade options on the S&P Communication Select Services Sector Index during the same trading hours. Various other index options, including the other S&P Select Sector Index options and other narrow-based index options, may trade from 8:30 a.m. to 3:00 p.m. Chicago time.25 The Exchange believes the proposed rule change will promote competition, as it brings the trading hours for the S&P Communication Services Select Sector Index options in line with those of the other S&P Select Sector Index options as well as competitive products trading on other exchanges. Additionally, the S&P Communication Services Select Sector Index options will trade exclusively on Cboe Options. To the extent that the proposed changes make Cboe Options a more attractive marketplace for market participants at other exchanges, such market participants are welcome to become Cboe Options market participants. The Exchange believes the proposed initial low appointment cost for the S&P Communication Services Select Sector Index options promotes competition and efficiency by incentivizing more Market-Makers to obtain an appointment in the newly listed class. The Exchange believes this may result in liquidity and competitive pricing in this class, which ultimately benefits investors. The proposed rule change does not result in unfair discrimination, as the appointment cost will apply to all Market-Makers in this class. Additionally, as discussed above, the proposed appointment cost for the S&P Communication Services Select Sector Index options is the same as the appointment cost for the other S&P Select Sector Index options. 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. 25 See Jkt 247001 PO 00000 supra note 15. Frm 00099 Fmt 4703 Sfmt 4703 54799 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 26 and Rule 19b– 4(f)(6) thereunder.27 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. 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–2018–067 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–2018–067. 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 26 15 U.S.C. 78s(b)(3)(A). 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. 27 17 E:\FR\FM\31OCN1.SGM 31OCN1 54800 Federal Register / Vol. 83, No. 211 / Wednesday, October 31, 2018 / Notices 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–2018–067 and should be submitted on or before November 21, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–23734 Filed 10–30–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–84489; File No. SR– NYSEARCA–2018–76] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NYSE Arca Options Fee Schedule amozie on DSK3GDR082PROD with NOTICES1 October 25, 2018. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on October 17, 2018, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The Commission is publishing this notice to 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:06 Oct 30, 2018 Jkt 247001 solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify the NYSE Arca Options Fee Schedule (‘‘Fee Schedule’’). The Exchange proposes to implement the fee change effective October 17, 2018. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization 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 those 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 parts 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 purpose of this filing is to modify the Fee Schedule, effective October 17, 2018, to eliminate obsolete charges. Specifically, the Exchange proposes to remove Royalty fees for products the Exchange no longer trades. Pursuant to the current Fee Schedule, the Exchange charges Royalty Fees on certain trades in proprietary products for which the Exchange has a license, namely: NDX, MNX, KBW Bank Index (BKK) and the Russell Index (RUT).4 The Exchange proposes to modify the Fee Schedule to remove NDX, MNX, and the Russell Index (RUT), as these products are no longer licensed to the 4 See Fee Schedule, NYSE Arca OPTIONS: TRADE–RELATED CHARGES FOR STANDARD OPTIONS, Royalty Fees, available at, https:// www.nyse.com/publicdocs/nyse/markets/arcaoptions/NYSE_Arca_Options_Fee_Schedule.pdf. Royalty Fees will be assessed on a per contract basis for firm, broker/dealer, and Market Maker transactions. For electronic executions in issues included in the Penny Pilot, Royalty Fees will be passed through to the trading participant on the ‘‘Take’’ side of the transaction. See id. Royalty Fees are not assessed on the customer side of transactions and information about Royalty Fees as associated with Options Strategy Transactions are set forth in the ‘‘Limit of Fees on Options Strategy Executions’’ section of this schedule. See id., fn. 11. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 Exchange. As proposed, the Royalty Fees section will only include reference to KBW Bank Index (BKK), as this product continues to be licensed to the Exchange. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, in general, and furthers the objectives of Sections 6(b)(4) and (5) of the Act, in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange believes that the proposal to remove references to products that the Exchange is no longer licensed to trade is reasonable, equitable, and not unfairly discriminatory because it provides clarity and transparency to the Fee Schedule as it relates to Royalty Fees. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,5 the Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, the proposed change is meant to add clarity and transparency to the Fee Schedule to the benefit of all market participants that trade on the Exchange. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 6 of the Act and subparagraph (f)(2) of Rule 19b–4 7 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such 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 5 15 U.S.C. 78f(b)(8). U.S.C. 78s(b)(3)(A). 7 17 CFR 240.19b–4(f)(2). 6 15 E:\FR\FM\31OCN1.SGM 31OCN1

Agencies

[Federal Register Volume 83, Number 211 (Wednesday, October 31, 2018)]
[Notices]
[Pages 54796-54800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23734]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84490; File No. SR-CBOE-2018-067]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to List and Trade Options That Overlie the S&P Communication Services 
Select Sector Index

October 25, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on October 15, 2018, 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

    The text of the proposed rule change is provided below in Exhibit 
5.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is currently authorized to list for trading options on 
ten S&P Select Sector Indexes.\5\ The purpose of this proposed rule 
change is to amend certain rules to authorize the Exchange to list for 
trading options on a recently added eleventh S&P Select Sector Index--
the S&P Communication Services Select Sector Index. Each S&P Select 
Sector Index represents the performance of companies that are 
components of the Standard & Poor's 500 Index (``S&P 500'') within a 
specific sector (each of which is referred to as an ``S&P Select Sector 
Index''). Each constituent of an S&P Select Sector Index is a 
constituent of the S&P 500, and each S&P Select Sector Index is a 
subindex of the S&P 500. S&P Dow Jones Indices \6\ assigns each 
constituent to a S&P Select Sector Index(es) based on the constituent's 
classification under a global industry classification standard. S&P Dow 
Jones Indices monitors and maintains each Select Sector Index and 
rebalances each S&P Select Sector Index quarterly. S&P Dow Jones 
Indices recently added an eleventh sector. As a result, the following 
represents the current breakdown of the sectors and the components of 
each sector:
---------------------------------------------------------------------------

    \5\ See Rule 24.9(a); see also Securities Exchange Act Release 
No. 34-81879 (October 16, 2017), 82 FR 48858 (October 20, 2017) (SR-
CBOE-2017-065).
    \6\ S&P Dow Jones Indices is the reporting authority for the S&P 
Select Sector Indexes, including the S&P Communication Services 
Select Sector Index. See proposed Rule 24.1, Interpretation and 
Policy .01.

------------------------------------------------------------------------
                                                              Number of
                Sector                      Symbol \7\        components
------------------------------------------------------------------------
Financial............................  IXM                            68
Energy...............................  IXE                            31
Technology...........................  IXT                            76
Health Care..........................  IXV                            63
Utilities............................  IXU                            29
Consumer Staples.....................  IXR                            32
Industrials..........................  IXI                            70
Consumer Discretionary...............  IXY                            80
Materials............................  IXB                            24
Real Estate..........................  IXRE                           32
Communication Services...............  IXC                            26
------------------------------------------------------------------------

Initial and Maintenance Listing Criteria
    The S&P Communication Services Select Sector Index meets the 
definition of a narrow-based index as set forth in Rule 24.1(i)(2) (an 
index designed to be representative of a particular industry or a group 
of related industries and include indices having component securities 
that are all headquartered with in a single country). Additionally, the 
S&P Communication Services Select Sector Index satisfies the initial 
listing criteria of a narrow-based index, as set forth in Rule 24.2(b):
---------------------------------------------------------------------------

    \7\ These symbols represent the index. The corresponding option 
symbols are SIXM, SIXE, SIXT, SIXV, SIXU, SIXR, SIXI, SIXY, SIXB, 
SIXRE, and SIXC respectively.
---------------------------------------------------------------------------

    (1) Options will be A.M.-settled;
    (2) the index is capitalization-weighted, price-weighted, equal 
dollar-weighted, or modified capitalization-weighted, and consists of 
ten or more component securities (the S&P Communication Services Select 
Sector Index is modified capitalization-weighted);
    (3) each component security has a market capitalization of at least 
$75 million, except that for each of the lowest weighted component 
securities in the index that in the aggregate account for no more than 
10% of the weight of the index, the market capitalization is at least 
$50 million;
    (4) trading volume of each component security has been at least one 
million shares for each of the last six months, except that for each of 
the lowest weighted component securities in the index that in the 
aggregate account for no more than 10% of the weight of the index, 
trading volume has been at least 500,000 shares for each of the last 
six months;
    (5) in a capitalization-weighted index or a modified 
capitalization-weighted index, the lesser of the five highest weighted 
component securities in the index or the highest weighted component 
securities in the index that in the aggregate represent at least 30%

[[Page 54797]]

of the total number of component securities in the index each have had 
an average monthly trading volume of at least 2,000,000 shares over the 
past six months;
    (6) no single component security represents more than 25% of the 
weight of the index, and the five highest weighted component securities 
in the index do not in the aggregate account for more than 50% (60% for 
an index consisting of fewer than 25 component securities) of the 
weight of the index;
    (7) component securities that account for at least 90% of the 
weight of the index and at least 80% of the total number of component 
securities in the index satisfy the requirements of Rule 5.3 applicable 
to individual underlying securities;
    (8) all component securities are ``reported securities'' as defined 
in Rule 11A a3-1 under the Exchange Act;
    (9) non-U.S. component securities (stocks or ADRs) that are not 
subject to comprehensive surveillance agreements do not in the 
aggregate represent more than 20% of the weight of the index;
    (10) the current underlying index value will be reported at least 
once every fifteen seconds during the time the index options are traded 
on the Exchange;
    (11) an equal dollar-weighted index will be rebalanced at least 
once every calendar quarter; and
    (12) if an underlying index is maintained by a broker-dealer, the 
index is calculated by a third party who is not a broker-dealer, and 
the broker-dealer has erected a ``Chinese Wall'' around its personnel 
who have access to information concerning changes in and adjustments to 
the index.
    The S&P Select Sector Index options will be subject to the 
maintenance listing standards set forth in Rule 24.2(c):
    (1) The conditions stated in (1), (3), (6), (7), (8), (9), (10), 
(11) and (12) above must continue to be satisfied, provided that the 
conditions stated in (6) above must be satisfied only as of the first 
day of January and July in each year;
    (2) the total number of component securities in the index may not 
increase or decrease by more than 33 \1/3\% from the number of 
component securities in the index at the time of its initial listing, 
and in no event may be less than nine component securities;
    (3) trading volume of each component security in the index must be 
at least 500,000 shares for each of the last six months, except that 
for each of the lowest weighted component securities in the index that 
in the aggregate account for no more than 10% of the weight of the 
index, trading volume must be at least 400,000 shares for each of the 
last six months; and
    (4) in a capitalization-weighted index or a modified 
capitalization-weighted index, the lesser of the five highest weighted 
component securities in the index or the highest weighted component 
securities in the index that in the aggregate represent at least 30% of 
the total number of stocks in the index each have had an average 
monthly trading volume of at least 1,000,000 shares over the past six 
months.\8\
---------------------------------------------------------------------------

    \8\ As is the case with other index options authorized for 
listing and trading on Cboe Options, in the event the S&P 
Communication Services Select Sector Index fails to satisfy the 
maintenance listing standards, the Exchange will not open for 
trading any additional series of options of that class unless such 
failure is determined by the Exchange not to be significant and the 
Commission concurs in that determination, or unless the continued 
listing of that class of index options has been approved by the 
Securities and Exchange Commission (the ``Commission'') under 
Section 19(b)(2) of the Securities and Exchange Act (the ``Act'').
---------------------------------------------------------------------------

Expiration Months, Settlement, and Exercise Style
    Consistent with existing rules for certain index options, the 
Exchange will allow up to twelve near-term expiration months for the 
S&P Communication Services Select Sector Index options.\9\ The Exchange 
elects to have the ability to list up to twelve near-term expiration 
months, as that is the same amount the Rules permit for options on the 
S&P 500 (``SPX options'') and the other S&P Select Sector Indexes. The 
S&P Select Sector Indexes consist of the same components as the S&P 
500, as discussed above. Because of the relation between the S&P 
Communication Services Select Sector Index, the other S&P Select Sector 
Indexes, and the S&P 500, which will likely result in market 
participants' investment and hedging strategies consisting of options 
over all, the Exchange believes it is appropriate to permit the same 
number of monthly expirations for the S&P Communication Services Select 
Sector Index options as SPX options and the other S&P Select Sector 
Index options.
---------------------------------------------------------------------------

    \9\ See proposed Rule 24.9(a)(2).
---------------------------------------------------------------------------

    The S&P Communication Services Select Sector Index options will be 
A.M., cash-settled contracts with European-style exercise.\10\ A.M.-
settlement is consistent with the generic listing criteria for 
industry-based indexes \11\ (as well as broad-based indexes \12\), and 
thus it is common for index options to be A.M.-settled. The Exchange 
proposes to amend Rule 24.9(a)(4) to add the S&P Communication Services 
Select Sector Index options to the list of other A.M.-settled options. 
Standard third-Friday SPX options and the other S&P Select Sector Index 
options are A.M.-settled. European-style exercise is consistent with 
many index options, as set forth in Rule 24.9(a)(3). Standard third-
Friday SPX options and the other S&P Select Sector Index options are 
A.M.-settled with European-style exercise. The Exchange proposes to 
amend Rule 24.9(a)(3) to add the S&P Communication Services Select 
Sector Index options to the list of other European-style index options. 
Because of the relation between the S&P Communication Services Select 
Sector Index, the other S&P Select Sector Indexes, and the S&P 500, 
which will likely result in market participants' investment and hedging 
strategies consisting of options over both, the Exchange believes it is 
appropriate to list the S&P Communication Services Select Sector Index 
options with the same settlement and exercise style as the other S&P 
Select Sector Index options and SPX options.
---------------------------------------------------------------------------

    \10\ See proposed Rule 24.9(a)(3)(cxxiv) and (4)(xcxix).
    \11\ See Rule 24.2(b)(1).
    \12\ See Rule 24.2(f)(2).
---------------------------------------------------------------------------

Trading Hours
    The Exchange proposes to amend Rule 24.6(b) to add the S&P 
Communication Services Select Sector Index options to the list of index 
options that may trade on the Exchange from 8:30 a.m. until 3:00 p.m. 
Chicago time.\13\ The Exchange understands that investors who plan to 
trade options on the S&P Communication Services Select Sector Index 
would often use the prices of the stock components of the Index to 
price options rather than futures on the Index (which are often used to 
price index options, such as options on the S&P 500). Investors 
similarly use pricing of underlying stocks to price shares of exchange-
traded funds (``ETFs'') derived from the S&P Communication Services 
Select Sector Index (e.g., Communication Services Select Sector SPDR 
ETF), the components of which are stocks that are components of the S&P 
Communication Services Select Sector Index. The underlying stocks end 
regular trading at 3:00 p.m. Chicago time each day. Closing trading in 
the S&P Communication Services Select Sector Index options at the same 
time the stocks end regular trading \14\ will

[[Page 54798]]

ensure investors have access to robust pricing of the underlying stock 
components they use to price the options, thus reducing investors' 
price risk. Various other index options, including the other S&P Select 
Sector Index options and other narrow-based index options, may trade 
from 8:30 a.m. to 3:00 p.m. Chicago time.\15\
---------------------------------------------------------------------------

    \13\ See proposed Rule 24.6(b)(lii). The proposed rule change 
also corrects a numbering error in other subparagraphs of Rule 
24.6(b).
    \14\ While the stocks may continue to trade in an aftermarket 
trading session on the listing exchanges, there is less liquidity in 
aftermarket trading, which generally leads to wider spreads and more 
volatile pricing.
    \15\ See Rule 24.6(b) (for example, options on the S&P 
transportation, retail, health care, banking, insurance, and 
chemical indices, and the Cboe PowerPacks SM bank, biotechnology, 
gold, internet, iron & steel, oil, oil services, pharmaceuticals, 
retail, semiconductor, technology, and telecom indices).
---------------------------------------------------------------------------

Appointment Costs
    The Exchange proposes a Market-Maker appointment cost of .001 for 
the S&P Communication Services Select Sector Index options, and each 
will have a Market-Maker appointment cost of .001.\16\ This is the same 
appointment cost as the other S&P Select Sector Index options. The 
Exchange determines appointment costs of Tier AA classes based on 
several factors, including, but not limited to, competitive forces and 
trading volume. The Exchange believes the proposed initial appointment 
cost for the S&P Communication Services Select Sector Index options 
will foster competition by incentivizing Market-Makers to obtain an 
appointment in these newly listed options, which may increase liquidity 
in the new class.
---------------------------------------------------------------------------

    \16\ See proposed Rule 8.3(c)(i). S&P Communication Services 
Select Sector Index options will be in Tier AA (as are other S&P 
index options, including the other S&P Select Sector Index options). 
While the appointment costs of Tier AA classes are not subject to 
quarterly rebalancing under Rule 8.3(c)(iv), the Exchange regularly 
reviews the appointment costs of Tier AA classes to ensure that they 
continue to be appropriate. The Exchange determines appointment 
costs of Tier AA classes based on several factors, including, but 
not limited to, competitive forces and trading volume.
---------------------------------------------------------------------------

Capacity
    The Exchange has analyzed its capacity and represents that it 
believes the Exchange and OPRA have the necessary systems capacity to 
handle the additional traffic associated with the listing of new series 
that would result from the introduction of the S&P Communication 
Services Select Sector Index options up to the proposed number of 
possible expirations. Because the proposal is limited to one class, the 
Exchange believes any additional traffic that would be generated from 
the introduction of the S&P Communication Services Sector Index options 
would be manageable.
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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes that the proposed rule change 
will protect investors, as the Exchange believes there is unmet market 
demand for exchange-listed security options listed on this new sector 
index. Sector SPDRs and E-mini S&P future products for the S&P 
Communication Services Select Sector are listed and traded on other 
exchanges.\20\ As a result, the Exchange believes that the S&P 
Communication Services Select Sector Index options are designed to 
provide different and additional opportunities for investors to hedge 
or speculate on the market risk associated with this index by listing 
an option directly on this index. Because of the relation between the 
S&P Communication Services Select Sector, the other S&P Select Sector 
Indexes, and the S&P 500, the Exchange believes the proposed rule 
change will benefit investors, as it will provide market participants' 
with additional investment and hedging strategies consisting of options 
over each of these indexes. The Exchange notes it is currently 
authorized to list options on ten S&P Select Sector Indexes (subject to 
the same terms as those proposed for the S&P Communication Services 
Select Sector Index options).
---------------------------------------------------------------------------

    \20\ The primary listing exchange for the Communication Services 
Select Sector SPDR Fund (and the other Select Sector SPDR Funds) is 
NYSE Arca (trading under symbol XLC). See the Fund's prospectus, 
available at https://us.spdrs.com/public/SPDR_SELECT%20SECTOR_PROSPECTUS.pdf. The contract specifications for 
the E-mini Communication Services Select Sector Futures Contract, 
which trades on the Chicago Mercantile Exchange (``CME''), is 
available at https://www.cmegroup.com/trading/equity-index/select-sector-index/e-mini-communication-services-select-sector-index_contract_specifications.html; see also Chapter 369 of the CME 
Rulebook.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change will remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, because the proposed rule change is 
consistent with current Rules, which were previously filed with 
approved as consistent with the Exchange Act by the Commission. The S&P 
Communication Services Select Sector Index options satisfy the initial 
listing standards for narrow-based indexes in the Exchange's current 
Rules, which the Commission previously deemed consistent with Act.\21\ 
The proposed rule change merely adds the S&P Communication Services 
Select Sector Index to the table regarding reporting authorities for 
indexes, to the rule regarding number of permissible expirations, to 
the list of European-style exercise index options, and to the list of 
A.M.-settled index options. These changes are consistent with existing 
Rules and index options currently authorized and listed for trading on 
the Exchange, including the other S&P Select Sector Index options. The 
Exchange notes, with respect to these changes, standard third-Friday 
SPX options (which overly the S&P 500, which consist of the same 
components as the S&P Select Sector Indexes, including the S&P 
Communication Services Select Sector Index) and the other S&P Select 
Sector Index options currently have the same reporting authority, the 
same number of permissible expirations, the same settlement, and the 
same exercise style.\22\ The Exchange has observed no trading or 
capacity issues in SPX trading given the number of permissible 
expirations, a.m. settlement, and European-style exercise. Because of 
the relation between the S&P Communication Services Select Sector, the 
other S&P Select Sector Indexes, and the S&P 500, which will likely 
result in market participants' investment and hedging strategies 
consisting of options over each of these indexes, the

[[Page 54799]]

Exchange believes it is appropriate to have the same number of 
expiration, settlement, and exercise style for options on each of these 
indexes. The Exchange also represents that it has the necessary systems 
capacity to support the new option series given these proposed 
specifications.
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release No. 34-34157 (June 3, 
1994), Federal Register Volume 59, Issue 111 (June 10, 1994) (SR-
CBOE-93-59) (order approving generic listing standards for options 
on narrow-based indexes).
    \22\ See Rules 24.1, Interpretation and Policy .01 and 
24.9(a)(2) through (4).
---------------------------------------------------------------------------

    The Exchange believes the proposed trading hours for the S&P 
Communication Services Select Sector Index options are reasonable and 
will protect investors, as closing trading in these options at the same 
time the stocks end regular trading will ensure investors have access 
to robust pricing of the underlying stock components they use to price 
the options, which protects investors by reducing their price risk. 
Various other index options, including the other S&P Select Sector 
Index options and other narrow-based index options, may trade from 8:30 
a.m. to 3:00 p.m. Chicago time.\23\
---------------------------------------------------------------------------

    \23\ See supra note 15.
---------------------------------------------------------------------------

    The Exchange believes the proposed initial low appointment cost for 
the S&P Communication Services Select Sector Index options promotes 
competition and efficiency by incentivizing more Market-Makers to 
obtain an appointment in the newly listed class. The Exchange believes 
this may result in liquidity and competitive pricing in this class, 
which ultimately benefits investors. The proposed rule change does not 
result in unfair discrimination, as the appointment cost will apply to 
all Market-Makers in this class. Additionally, the proposed appointment 
cost is the same as the appointment cost for each of the other S&P 
Select Sector Index options.\24\
---------------------------------------------------------------------------

    \24\ See Rule 8.3(c)(i).
---------------------------------------------------------------------------

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. The S&P Communication 
Services Select Sector Index satisfies initial listing standards set 
forth in the Rules, and the proposed number of expirations, settlement, 
and exercise style are consistent with current rules applicable to 
index options, including the other S&P Select Sector Index options and 
standard third-Friday SPX options. Because of the relation between the 
S&P Communication Services Select Sector Index, the other S&P Select 
Sector Indexes, and the S&P 500, which will likely result in market 
participants' investment and hedging strategies consisting of options 
over each of these indexes, the Exchange believes it is appropriate to 
have the same number of expirations, settlement, and exercise style for 
options on each index. The S&P Communication Services Select Sector 
Index options will provide investors with different and additional 
opportunities to hedge or speculate on the market associated with the 
this index.
    With respect to the proposed trading hours, all market participants 
will be able to trade options on the S&P Communication Select Services 
Sector Index during the same trading hours. Various other index 
options, including the other S&P Select Sector Index options and other 
narrow-based index options, may trade from 8:30 a.m. to 3:00 p.m. 
Chicago time.\25\ The Exchange believes the proposed rule change will 
promote competition, as it brings the trading hours for the S&P 
Communication Services Select Sector Index options in line with those 
of the other S&P Select Sector Index options as well as competitive 
products trading on other exchanges. Additionally, the S&P 
Communication Services Select Sector Index options will trade 
exclusively on Cboe Options. To the extent that the proposed changes 
make Cboe Options a more attractive marketplace for market participants 
at other exchanges, such market participants are welcome to become Cboe 
Options market participants.
---------------------------------------------------------------------------

    \25\ See supra note 15.
---------------------------------------------------------------------------

    The Exchange believes the proposed initial low appointment cost for 
the S&P Communication Services Select Sector Index options promotes 
competition and efficiency by incentivizing more Market-Makers to 
obtain an appointment in the newly listed class. The Exchange believes 
this may result in liquidity and competitive pricing in this class, 
which ultimately benefits investors. The proposed rule change does not 
result in unfair discrimination, as the appointment cost will apply to 
all Market-Makers in this class. Additionally, as discussed above, the 
proposed appointment cost for the S&P Communication Services Select 
Sector Index options is the same as the appointment cost for the other 
S&P Select Sector Index options.

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 \26\ and Rule 19b-
4(f)(6) thereunder.\27\
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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.
---------------------------------------------------------------------------

    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.

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-2018-067 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-2018-067. 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

[[Page 54800]]

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-2018-067 and should be submitted on or before November 21, 2018.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-23734 Filed 10-30-18; 8:45 am]
 BILLING CODE 8011-01-P
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