Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Operation of Its Flexible Exchange Options Pilot Program Regarding Permissible Exercise Settlement Values for Flexible Exchange Index Options, 56113-56116 [2018-24524]
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Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–24509 Filed 11–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84537; File No. SR–CBOE–
2018–071]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Operation
of Its Flexible Exchange Options Pilot
Program Regarding Permissible
Exercise Settlement Values for Flexible
Exchange Index Options
November 5, 2018.
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Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
2, 2018, 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 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
Cboe Options proposes to extend the
operation of its Flexible Exchange
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
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Options (‘‘FLEX Options’’) pilot
program regarding permissible exercise
settlement values for FLEX Index
Options.5
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
(additions are italicized; deletions are
[bracketed])
1. Purpose
On January 28, 2010, the Exchange
received approval of a rule change that,
among other things, established a pilot
program regarding permissible exercise
settlement values for FLEX Index
Options.6 The Exchange has extended
the pilot period seven times, which is
currently set to expire on the earlier of
November 5, 2018 or the date on which
the pilot program is approved on a
permanent basis.7 The purpose of this
rule change filing is to extend the pilot
program through the earlier of May 6,
2019 or the date on which the pilot
program is approved on a permanent
basis. This filing simply seeks to extend
the operation of the pilot program and
*
*
*
*
*
Rules of Cboe Exchange, Inc.
*
*
*
*
*
Rule 24A.4. Terms of FLEX Options
(a)–(c) (No change).
. . . Interpretations and Policies:
.01 FLEX Index Option PM
Settlements Pilot Program:
Notwithstanding subparagraph (a)(2)(iv)
above, for a pilot period ending the
earlier of [November 5, 2018] May 6,
2019 or the date on which the pilot
program is approved on a permanent
basis, a FLEX Index Option that expires
on an Expiration Friday may have any
exercise settlement value that is
permissible pursuant to subparagraph
(b)(3) above.
.02 (No change).
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.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.
5 FLEX Options provide investors with the ability
to customize basic option features including size,
expiration date, exercise style, and certain exercise
prices. FLEX Options can be FLEX Index Options
or FLEX Equity Options. In addition, other products
are permitted to be traded pursuant to the FLEX
trading procedures. For example, credit options are
eligible for trading as FLEX Options pursuant to the
FLEX rules in Chapter XXIVA. See Cboe Options
Rules 24A.1(e) and (f), 24A.4(b)(1) and (c)(1), and
29.18. The rules governing the trading of FLEX
Options on the FLEX Hybrid Trading System
platform are contained in Chapter XXIVA.
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6 Securities Exchange Act Release No. 61439
(January 28, 2010), 75 FR 5831 (February 4, 2010)
(SR–CBOE–2009–087) (‘‘Approval Order’’). The
initial pilot period was set to expire on March 28,
2011, which date was added to the rules in 2010.
See Securities Exchange Act Release No. 61676
(March 9, 2010), 75 FR 13191 (March 18, 2010) (SR–
CBOE–2010–026).
7 See Securities Exchange Act Release Nos. 64110
(March 23, 2011), 76 FR 17463 (March 29, 2011)
(SR–CBOE–2011–024) (extending the pilot program
through the earlier of March 30, 2012 or the date
on which the pilot program is approved on the
permanent basis); 66701 (March 30, 2012), 77 FR
20673 (April 5, 2012) (SR–CBOE–2012–027)
(extending the pilot through the earlier of
November 2, 2012 or the date on which the pilot
program is approved on a permanent basis); 68145
(November 2, 2012), 77 FR 67044 (November 8,
2012) (SR–CBOE–2012–102) (extending the pilot
program through the earlier of November 2, 2013 or
the date on which the pilot program is approved on
a permanent basis); 70752 (October 24, 2013), 78 FR
65023 (October 30, 2013) (SR–CBOE–2013–099)
(extending the pilot program through the earlier of
November 3, 2014 or the date on which the pilot
program is approved on a permanent basis); 73460
(October 29, 2014), 79 FR 65464 (November 4, 2014)
(SR–CBOE–2014–080) (extending the pilot program
through the earlier of May 3, 2016 or the date on
which the pilot program is approved on a
permanent basis); 77742 (April 29, 2016), 81 FR
26857 (May 4, 2016) (SR–CBOE–2016–032)
(extending the pilot program through the earlier of
May 3, 2017 or the date on which the pilot program
is approved on a permanent basis); 80443 (April 12,
2017), 82 FR 18331 (April 18, 2017) (SR–CBOE–
2017–032), 83 FR 21808 (May 10, 2018) (extending
the pilot program through the earlier of May 3, 2018
or the date on which the pilot program is approved
on a permanent basis); and 83175 (May 4, 2018), 83
FR 21808 (May 10, 2018) (SR–CBOE–2018–037). At
the same time the permissible exercise settlement
values pilot was established for FLEX Index
Options, the Exchange also established a pilot
program eliminating the minimum value size
requirements for all FLEX Options. See Approval
Order, supra note 6. The pilot program eliminating
the minimum value size requirements was extended
twice pursuant to the same rule filings that
extended the permissible exercise settlement values
(for the same extended periods) and was approved
on a permanent basis in a separate rule change
filing. See id. and Securities Exchange Act Release
No. 67624 (August 8, 2012), 77 FR 48580 (August
14, 2012) (SR–CBOE–2012–040).
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does not propose any substantive
changes to the pilot program.
Under Rule 24A.4, Terms of FLEX
Options, a FLEX Option may expire on
any business day specified as to day,
month and year, not to exceed a
maximum term of fifteen years. In
addition, the exercise settlement value
for a FLEX Index Option can be
specified as the index value determined
by reference to the reported level of the
index as derived from the opening or
closing prices of the component
securities (‘‘a.m. settlement’’ or ‘‘p.m.
settlement,’’ respectively) or as a
specified average, provided that the
average index value must conform to the
averaging parameters established by the
Exchange.8 However, prior to the
initiation of the exercise settlement
values pilot, only a.m. settlements were
permitted if a FLEX Index Option
expired on, or within two business days
of, a third Friday-of-the-month
expiration (‘‘Expiration Friday’’).9
Under the exercise settlement values
pilot, this restriction on p.m. and
specified average price settlements in
FLEX Index Options was eliminated.10
The exercise settlement values pilot is
currently set to expire on the earlier of
November 5, 2018 or the date on which
the pilot program is approved on a
permanent basis.
Cboe Options is proposing to extend
the pilot program through the earlier of
May 6, 2019 or the date on which the
pilot program is approved on a
permanent basis. Cboe Options believes
the pilot program has been successful
and well received by its Trading Permit
Holders and the investing public for the
period that it has been in operation as
a pilot. In support of the proposed
extension of the pilot program, and as
required by the pilot program’s
Approval Order, the Exchange has
8 See Rule 24A.4(b)(3); see also Securities
Exchange Act Release No. 31920 (February 24,
1993), 58 FR 12280 (March 3, 1993) (SR–CBOE–92–
017). The Exchange has determined to limit the
averaging parameters to three alternatives: The
average of the opening and closing index values on
the expiration date; the average of intra-day high
and low index values on the expiration date; and
the average of the opening, closing, and intra-day
high and low index values on the expiration date.
Any changes to the averaging parameters
established by the Exchange would be announced
to Trading Permit Holders via circular.
9 For example, prior to the pilot, the exercise
settlement value of a FLEX Index Option that
expires on the Tuesday before Expiration Friday
could have an a.m., p.m. or specified average
settlement. However, the exercise settlement value
of a FLEX Index Option that expires on the
Wednesday before Expiration Friday could only
have an a.m. settlement.
10 No change was necessary or requested with
respect to FLEX Equity Options. Regardless of the
expiration date, FLEX Equity Options are settled by
physical delivery of the underlying.
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submitted to the Securities and
Exchange Commission (the
‘‘Commission’’) pilot program reports
regarding the pilot, which detail the
Exchange’s experience with the
program. Specifically, the Exchange
provided the Commission with annual
reports analyzing volume and open
interest for each broad-based FLEX
Index Options class overlying an
Expiration Friday, p.m.-settled FLEX
Index Options series.11 The annual
reports also contained information and
analysis of FLEX Index Options trading
patterns. The Exchange also provided
the Commission, on a periodic basis,
interim reports of volume and open
interest. In providing the pilot reports to
the Commission, the Exchange has
previously requested confidential
treatment of the pilot reports under the
Freedom of Information Act (‘‘FOIA’’).12
The Exchange believes there is
sufficient investor interest and demand
in the pilot program to warrant its
extension. The Exchange believes that,
for the period that the pilot has been in
operation, the program has provided
investors with additional means of
managing their risk exposures and
carrying out their investment objectives.
Furthermore, the Exchange believes that
it has not experienced any adverse
market effects with respect to the pilot
program, including any adverse market
volatility effects that might occur as a
result of large FLEX exercises in FLEX
Option series that expire near NonFLEX expirations and use a p.m.
settlement (as discussed below).
In that regard, based on the
Exchange’s experience in trading FLEX
Options to date and over the pilot
period, Cboe Options continues to
believe that the restrictions on exercise
settlement values are no longer
necessary to insulate Non-FLEX
expirations from the potential adverse
market impacts of FLEX expirations.13
11 The annual reports also contained certain pilot
period and pre-pilot period analyses of volume and
open interest for Expiration Friday, a.m.-settled
FLEX Index series and Expiration Friday Non-FLEX
Index series overlying the same index as an
Expiration Friday, p.m.-settled FLEX Index option.
12 5 U.S.C. 552.
13 In further support, the Exchange also notes that
the p.m. and specified average price settlements are
already permitted for FLEX Index Options on any
other business day except on, or within two
business days of, Expiration Friday. The Exchange
is not aware of any market disruptions or problems
caused by the use of these settlement methodologies
on these expiration dates (or on the expiration dates
addressed under the pilot program). The Exchange
is also not aware of any market disruptions or
problems caused by the use of customized options
in the over-the-counter (‘‘OTC’’) markets that expire
on or near Expiration Friday and have a p.m. or
specified average exercise settlement value. In
addition, the Exchange believes the reasons for
limiting expirations to a.m. settlement, which is
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To the contrary, Cboe Options believes
that the restriction actually places the
Exchange at a competitive disadvantage
to its OTC counterparts in the market for
customized options, and unnecessarily
limits market participants’ ability to
trade in an exchange environment that
offers the added benefits of
transparency, price discovery, liquidity,
and financial stability.
The Exchange also notes that certain
position limit, aggregation and exercise
limit requirements continue to apply to
FLEX Index Options in accordance with
Rules 24A.7, Position Limits and
Reporting Requirements and 24A.8,
Exercise Limits. Additionally, all FLEX
Options remain subject to the position
reporting requirements in paragraph (a)
of Cboe Options Rule 4.13, Reports
Related to Position Limits.14 Moreover,
something the SEC has imposed since the early
1990s for Non-FLEX Options, revolved around a
concern about expiration pressure on the New York
Stock Exchange (‘‘NYSE’’) at the close that are no
longer relevant in today’s market. Today, the
Exchange believes stock exchanges are able to better
handle volume. There are multiple primary listing
and unlisted trading privilege (‘‘UTP’’) markets, and
trading is dispersed among several exchanges and
alternative trading systems. In addition, the
Exchange believes that surveillance techniques are
much more robust and automated. In the early
1990s, it was also thought by some that opening
procedures allow more time to attract contra-side
interest to reduce imbalances. The Exchange
believes, however, that today, order flow is
predominantly electronic and the ability to smooth
out openings and closes is greatly reduced (e.g.,
market-on-close procedures work just as well as
openings). Also, other markets, such as the
NASDAQ Stock Exchange, do not have the same
type of pre-opening imbalance disseminations as
NYSE, so many stocks are not subject to the same
procedures on Expiration Friday. In addition, the
Exchange believes that NYSE has reduced the
required time a specialist has to wait after
disseminating a pre-opening indication. So, in this
respect, the Exchange believes there is less time to
react in the opening than in the close. Moreover, to
the extent there may be a risk of adverse market
effects attributable to p.m. settled options (or
certain average price settled options related to the
closing price) that would otherwise be traded in a
non-transparent fashion in the OTC market, the
Exchange continues to believe that such risk would
be lessened by making these customized options
eligible for trading in an exchange environment
because of the added transparency, price discovery,
liquidity, and financial stability available.
14 Cboe Options Rule 4.13(a) provides that ‘‘[i]n
a manner and form prescribed by the Exchange,
each Trading Permit Holder shall report to the
Exchange, the name, address, and social security or
tax identification number of any customer who,
acting alone, or in concert with others, on the
previous business day maintained aggregate long or
short positions on the same side of the market of
200 or more contracts of any single class of option
contracts dealt in on the Exchange. The report shall
indicate for each such class of options, the number
of option contracts comprising each such position
and, in the case of short positions, whether covered
or uncovered.’’ For purposes of Rule 4.13, the term
‘‘customer’’ in respect of any Trading Permit Holder
includes ‘‘the Trading Permit Holder, any general
or special partner of the Trading Permit Holder, any
officer or director of the Trading Permit Holder, or
any participant, as such, in any joint, group or
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the Exchange and its Trading Permit
Holder organizations each have the
authority, pursuant to Cboe Options
Rule 12.10, Margin Required is
Minimum, to impose additional margin
as deemed advisable. Cboe Options
continues to believe these existing
safeguards serve sufficiently to help
monitor open interest in FLEX Option
series and significantly reduce any risk
of adverse market effects that might
occur as a result of large FLEX exercises
in FLEX Option series that expire near
Non-FLEX expirations and use a p.m.
settlement.
Cboe Options is also cognizant of the
OTC market, in which similar
restrictions on exercise settlement
values do not apply. Cboe Options
continues to believe that the pilot
program is appropriate and reasonable
and provides market participants with
additional flexibility in determining
whether to execute their customized
options in an exchange environment or
in the OTC market. Cboe Options
continues to believe that market
participants benefit from being able to
trade these customized options in an
exchange environment in several ways,
including, but not limited to, enhanced
efficiency in initiating and closing out
positions, increased market
transparency, and heightened contraparty creditworthiness due to the role of
the Options Clearing Corporation as
issuer and guarantor of FLEX Options.
If, in the future, the Exchange
proposes an additional extension of the
pilot program, or should the Exchange
propose to make the pilot program
permanent, the Exchange will submit,
along with any filing proposing such
amendments to the pilot program, an
annual report (addressing the same
areas referenced above and consistent
with the pilot program’s Approval
Order) to the Commission at least two
months prior to the expiration date of
the program. The Exchange will also
continue, on a periodic basis, to submit
interim reports of volume and open
interest consistent with the terms of the
exercise settlement values pilot program
as described in the pilot program’s
Approval Order. Additionally, the
Exchange will provide the Commission
with any additional data or analyses the
Commission requests because it deems
such data or analyses necessary to
determine whether the pilot program is
consistent with the Exchange Act. The
Exchange is in the process of making
public on its website data and analyses
syndicate account with the Trading Permit Holder
or with any partner, officer or director thereof.’’
Rule 4.13(d).
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17:36 Nov 08, 2018
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previously submitted to the Commission
under the pilot program, which it
expects to complete in the fourth
quarter of 2018, and will make public
any data and analyses it submits to the
Commission under the pilot program in
the future.
As noted in the pilot program’s
Approval Order, any positions
established under the pilot program
would not be impacted by the
expiration of the pilot program.15
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.16 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 17 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) 18 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 extension of the pilot
program, which permits additional
exercise settlement values, would
provide greater opportunities for
investors to manage risk through the use
of FLEX Options. Further, the Exchange
believes that it has not experienced any
adverse effects from the operation of the
pilot program, including any adverse
market volatility effects that might occur
as a result of large FLEX exercises in
15 For example, a position in a p.m.-settled FLEX
Index Option series that expires on Expiration
Friday in January 2019 could be established during
the exercise settlement values pilot. If the pilot
program were not extended (or made permanent),
then the position could continue to exist. However,
the Exchange notes that any further trading in the
series would be restricted to transactions where at
least one side of the trade is a closing transaction.
See Approval Order at footnotes 9 and 10, supra
note 6.
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
18 Id.
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56115
FLEX Option series that expire near
Non-FLEX expirations and use a p.m.
settlement. The Exchange also believes
that the extension of the exercise
settlement values pilot does not raise
any unique regulatory concerns. In
particular, although p.m. settlements
may raise questions with the
Commission, the Exchange believes
that, based on the Exchange’s
experience in trading FLEX Options to
date and over the pilot period, market
impact and investor protection concerns
will not be raised by this rule change.
The Exchange also believes that the
proposed rule change would continue to
provide Trading Permit Holders and
investors with additional opportunities
to trade customized options in an
exchange environment (which offers the
added benefits of transparency, price
discovery, liquidity, and financial
stability as compared to the over-thecounter market) and subject to
exchange-based rules, and investors
would benefit as a result.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Cboe Options does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange believes there is sufficient
investor interest and demand in the
pilot program to warrant its extension.
The Exchange believes that, for the
period that the pilot has been in
operation, the program has provided
investors with additional means of
managing their risk exposures and
carrying out their investment objectives.
Furthermore, the Exchange believes that
it has not experienced any adverse
market effects with respect to the pilot
program, including any adverse market
volatility effects that might occur as a
result of large FLEX exercises in FLEX
Option series that expire near Non-Flex
expirations and use a p.m. settlement.
Cboe Options believes that the
restriction actually places the Exchange
at a competitive disadvantage to its OTC
counterparts in the market for
customized options, and unnecessarily
limits market participants’ ability to
trade in an exchange environment that
offers the added benefits of
transparency, price discovery, liquidity,
and financial stability. Therefore, the
Exchange does not believe that the
proposed rule change will impose any
burden on competition.
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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 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 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 19 and Rule 19b–4(f)(6)
thereunder.20
A proposed rule change filed under
Rule 19b–4(f)(6) 21 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),22 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 Exchange
states that such waiver will allow the
Exchange to extend the pilot program
prior to its expiration on November 5,
2018, and maintain the status quo,
thereby reducing market disruption.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest, as it
will allow the pilot program to continue
uninterrupted, thereby avoiding
investor confusion that could result
from a temporary interruption in the
pilot program. For this reason, the
Commission designates the proposed
rule change to be operative upon
filing.23
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires the Exchange 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.
21 17 CFR 240.19b–4(f)(6).
22 17 CFR 240.19b–4(f)(6)(iii).
23 For purposes only of waiving the operative
delay for this proposal, the Commission has
considered the proposed rule’s impact on
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20 17
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At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
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–2018–071 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–2018–071. 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
a.m. and 3 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–
2018–071 and should be submitted on
or before November 30, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–24524 Filed 11–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84540; File No. SR–BX–
2018–049]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Chapter XIV,
Index Rules, Section 10(g), Pricing
When Primary Market Does Not Open
November 5, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
30, 2018, Nasdaq BX, Inc. (‘‘BX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. 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 Exchange proposes to amend
Chapter XIV, Index Rules, Section 10(g),
Pricing When Primary Market Does Not
Open.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
24 17
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12) and (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\09NON1.SGM
09NON1
]]>Agencies
[Federal Register Volume 83, Number 218 (Friday, November 9, 2018)]
[Notices]
[Pages 56113-56116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24524]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84537; File No. SR-CBOE-2018-071]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Extend
the Operation of Its Flexible Exchange Options Pilot Program Regarding
Permissible Exercise Settlement Values for Flexible Exchange Index
Options
November 5, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 2, 2018, 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
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Options proposes to extend the operation of its Flexible
Exchange Options (``FLEX Options'') pilot program regarding permissible
exercise settlement values for FLEX Index Options.\5\
---------------------------------------------------------------------------
\5\ FLEX Options provide investors with the ability to customize
basic option features including size, expiration date, exercise
style, and certain exercise prices. FLEX Options can be FLEX Index
Options or FLEX Equity Options. In addition, other products are
permitted to be traded pursuant to the FLEX trading procedures. For
example, credit options are eligible for trading as FLEX Options
pursuant to the FLEX rules in Chapter XXIVA. See Cboe Options Rules
24A.1(e) and (f), 24A.4(b)(1) and (c)(1), and 29.18. The rules
governing the trading of FLEX Options on the FLEX Hybrid Trading
System platform are contained in Chapter XXIVA.
---------------------------------------------------------------------------
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe Exchange, Inc.
* * * * *
Rule 24A.4. Terms of FLEX Options
(a)-(c) (No change).
. . . Interpretations and Policies:
.01 FLEX Index Option PM Settlements Pilot Program: Notwithstanding
subparagraph (a)(2)(iv) above, for a pilot period ending the earlier of
[November 5, 2018] May 6, 2019 or the date on which the pilot program
is approved on a permanent basis, a FLEX Index Option that expires on
an Expiration Friday may have any exercise settlement value that is
permissible pursuant to subparagraph (b)(3) above.
.02 (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
Statutory Basis for, the Proposed Rule Change
1. Purpose
On January 28, 2010, the Exchange received approval of a rule
change that, among other things, established a pilot program regarding
permissible exercise settlement values for FLEX Index Options.\6\ The
Exchange has extended the pilot period seven times, which is currently
set to expire on the earlier of November 5, 2018 or the date on which
the pilot program is approved on a permanent basis.\7\ The purpose of
this rule change filing is to extend the pilot program through the
earlier of May 6, 2019 or the date on which the pilot program is
approved on a permanent basis. This filing simply seeks to extend the
operation of the pilot program and
[[Page 56114]]
does not propose any substantive changes to the pilot program.
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\6\ Securities Exchange Act Release No. 61439 (January 28,
2010), 75 FR 5831 (February 4, 2010) (SR-CBOE-2009-087) (``Approval
Order''). The initial pilot period was set to expire on March 28,
2011, which date was added to the rules in 2010. See Securities
Exchange Act Release No. 61676 (March 9, 2010), 75 FR 13191 (March
18, 2010) (SR-CBOE-2010-026).
\7\ See Securities Exchange Act Release Nos. 64110 (March 23,
2011), 76 FR 17463 (March 29, 2011) (SR-CBOE-2011-024) (extending
the pilot program through the earlier of March 30, 2012 or the date
on which the pilot program is approved on the permanent basis);
66701 (March 30, 2012), 77 FR 20673 (April 5, 2012) (SR-CBOE-2012-
027) (extending the pilot through the earlier of November 2, 2012 or
the date on which the pilot program is approved on a permanent
basis); 68145 (November 2, 2012), 77 FR 67044 (November 8, 2012)
(SR-CBOE-2012-102) (extending the pilot program through the earlier
of November 2, 2013 or the date on which the pilot program is
approved on a permanent basis); 70752 (October 24, 2013), 78 FR
65023 (October 30, 2013) (SR-CBOE-2013-099) (extending the pilot
program through the earlier of November 3, 2014 or the date on which
the pilot program is approved on a permanent basis); 73460 (October
29, 2014), 79 FR 65464 (November 4, 2014) (SR-CBOE-2014-080)
(extending the pilot program through the earlier of May 3, 2016 or
the date on which the pilot program is approved on a permanent
basis); 77742 (April 29, 2016), 81 FR 26857 (May 4, 2016) (SR-CBOE-
2016-032) (extending the pilot program through the earlier of May 3,
2017 or the date on which the pilot program is approved on a
permanent basis); 80443 (April 12, 2017), 82 FR 18331 (April 18,
2017) (SR-CBOE-2017-032), 83 FR 21808 (May 10, 2018) (extending the
pilot program through the earlier of May 3, 2018 or the date on
which the pilot program is approved on a permanent basis); and 83175
(May 4, 2018), 83 FR 21808 (May 10, 2018) (SR-CBOE-2018-037). At the
same time the permissible exercise settlement values pilot was
established for FLEX Index Options, the Exchange also established a
pilot program eliminating the minimum value size requirements for
all FLEX Options. See Approval Order, supra note 6. The pilot
program eliminating the minimum value size requirements was extended
twice pursuant to the same rule filings that extended the
permissible exercise settlement values (for the same extended
periods) and was approved on a permanent basis in a separate rule
change filing. See id. and Securities Exchange Act Release No. 67624
(August 8, 2012), 77 FR 48580 (August 14, 2012) (SR-CBOE-2012-040).
---------------------------------------------------------------------------
Under Rule 24A.4, Terms of FLEX Options, a FLEX Option may expire
on any business day specified as to day, month and year, not to exceed
a maximum term of fifteen years. In addition, the exercise settlement
value for a FLEX Index Option can be specified as the index value
determined by reference to the reported level of the index as derived
from the opening or closing prices of the component securities (``a.m.
settlement'' or ``p.m. settlement,'' respectively) or as a specified
average, provided that the average index value must conform to the
averaging parameters established by the Exchange.\8\ However, prior to
the initiation of the exercise settlement values pilot, only a.m.
settlements were permitted if a FLEX Index Option expired on, or within
two business days of, a third Friday-of-the-month expiration
(``Expiration Friday'').\9\
---------------------------------------------------------------------------
\8\ See Rule 24A.4(b)(3); see also Securities Exchange Act
Release No. 31920 (February 24, 1993), 58 FR 12280 (March 3, 1993)
(SR-CBOE-92-017). The Exchange has determined to limit the averaging
parameters to three alternatives: The average of the opening and
closing index values on the expiration date; the average of intra-
day high and low index values on the expiration date; and the
average of the opening, closing, and intra-day high and low index
values on the expiration date. Any changes to the averaging
parameters established by the Exchange would be announced to Trading
Permit Holders via circular.
\9\ For example, prior to the pilot, the exercise settlement
value of a FLEX Index Option that expires on the Tuesday before
Expiration Friday could have an a.m., p.m. or specified average
settlement. However, the exercise settlement value of a FLEX Index
Option that expires on the Wednesday before Expiration Friday could
only have an a.m. settlement.
---------------------------------------------------------------------------
Under the exercise settlement values pilot, this restriction on
p.m. and specified average price settlements in FLEX Index Options was
eliminated.\10\ The exercise settlement values pilot is currently set
to expire on the earlier of November 5, 2018 or the date on which the
pilot program is approved on a permanent basis.
---------------------------------------------------------------------------
\10\ No change was necessary or requested with respect to FLEX
Equity Options. Regardless of the expiration date, FLEX Equity
Options are settled by physical delivery of the underlying.
---------------------------------------------------------------------------
Cboe Options is proposing to extend the pilot program through the
earlier of May 6, 2019 or the date on which the pilot program is
approved on a permanent basis. Cboe Options believes the pilot program
has been successful and well received by its Trading Permit Holders and
the investing public for the period that it has been in operation as a
pilot. In support of the proposed extension of the pilot program, and
as required by the pilot program's Approval Order, the Exchange has
submitted to the Securities and Exchange Commission (the
``Commission'') pilot program reports regarding the pilot, which detail
the Exchange's experience with the program. Specifically, the Exchange
provided the Commission with annual reports analyzing volume and open
interest for each broad-based FLEX Index Options class overlying an
Expiration Friday, p.m.-settled FLEX Index Options series.\11\ The
annual reports also contained information and analysis of FLEX Index
Options trading patterns. The Exchange also provided the Commission, on
a periodic basis, interim reports of volume and open interest. In
providing the pilot reports to the Commission, the Exchange has
previously requested confidential treatment of the pilot reports under
the Freedom of Information Act (``FOIA'').\12\
---------------------------------------------------------------------------
\11\ The annual reports also contained certain pilot period and
pre-pilot period analyses of volume and open interest for Expiration
Friday, a.m.-settled FLEX Index series and Expiration Friday Non-
FLEX Index series overlying the same index as an Expiration Friday,
p.m.-settled FLEX Index option.
\12\ 5 U.S.C. 552.
---------------------------------------------------------------------------
The Exchange believes there is sufficient investor interest and
demand in the pilot program to warrant its extension. The Exchange
believes that, for the period that the pilot has been in operation, the
program has provided investors with additional means of managing their
risk exposures and carrying out their investment objectives.
Furthermore, the Exchange believes that it has not experienced any
adverse market effects with respect to the pilot program, including any
adverse market volatility effects that might occur as a result of large
FLEX exercises in FLEX Option series that expire near Non-FLEX
expirations and use a p.m. settlement (as discussed below).
In that regard, based on the Exchange's experience in trading FLEX
Options to date and over the pilot period, Cboe Options continues to
believe that the restrictions on exercise settlement values are no
longer necessary to insulate Non-FLEX expirations from the potential
adverse market impacts of FLEX expirations.\13\ To the contrary, Cboe
Options believes that the restriction actually places the Exchange at a
competitive disadvantage to its OTC counterparts in the market for
customized options, and unnecessarily limits market participants'
ability to trade in an exchange environment that offers the added
benefits of transparency, price discovery, liquidity, and financial
stability.
---------------------------------------------------------------------------
\13\ In further support, the Exchange also notes that the p.m.
and specified average price settlements are already permitted for
FLEX Index Options on any other business day except on, or within
two business days of, Expiration Friday. The Exchange is not aware
of any market disruptions or problems caused by the use of these
settlement methodologies on these expiration dates (or on the
expiration dates addressed under the pilot program). The Exchange is
also not aware of any market disruptions or problems caused by the
use of customized options in the over-the-counter (``OTC'') markets
that expire on or near Expiration Friday and have a p.m. or
specified average exercise settlement value. In addition, the
Exchange believes the reasons for limiting expirations to a.m.
settlement, which is something the SEC has imposed since the early
1990s for Non-FLEX Options, revolved around a concern about
expiration pressure on the New York Stock Exchange (``NYSE'') at the
close that are no longer relevant in today's market. Today, the
Exchange believes stock exchanges are able to better handle volume.
There are multiple primary listing and unlisted trading privilege
(``UTP'') markets, and trading is dispersed among several exchanges
and alternative trading systems. In addition, the Exchange believes
that surveillance techniques are much more robust and automated. In
the early 1990s, it was also thought by some that opening procedures
allow more time to attract contra-side interest to reduce
imbalances. The Exchange believes, however, that today, order flow
is predominantly electronic and the ability to smooth out openings
and closes is greatly reduced (e.g., market-on-close procedures work
just as well as openings). Also, other markets, such as the NASDAQ
Stock Exchange, do not have the same type of pre-opening imbalance
disseminations as NYSE, so many stocks are not subject to the same
procedures on Expiration Friday. In addition, the Exchange believes
that NYSE has reduced the required time a specialist has to wait
after disseminating a pre-opening indication. So, in this respect,
the Exchange believes there is less time to react in the opening
than in the close. Moreover, to the extent there may be a risk of
adverse market effects attributable to p.m. settled options (or
certain average price settled options related to the closing price)
that would otherwise be traded in a non-transparent fashion in the
OTC market, the Exchange continues to believe that such risk would
be lessened by making these customized options eligible for trading
in an exchange environment because of the added transparency, price
discovery, liquidity, and financial stability available.
---------------------------------------------------------------------------
The Exchange also notes that certain position limit, aggregation
and exercise limit requirements continue to apply to FLEX Index Options
in accordance with Rules 24A.7, Position Limits and Reporting
Requirements and 24A.8, Exercise Limits. Additionally, all FLEX Options
remain subject to the position reporting requirements in paragraph (a)
of Cboe Options Rule 4.13, Reports Related to Position Limits.\14\
Moreover,
[[Page 56115]]
the Exchange and its Trading Permit Holder organizations each have the
authority, pursuant to Cboe Options Rule 12.10, Margin Required is
Minimum, to impose additional margin as deemed advisable. Cboe Options
continues to believe these existing safeguards serve sufficiently to
help monitor open interest in FLEX Option series and significantly
reduce any risk of adverse market effects that might occur as a result
of large FLEX exercises in FLEX Option series that expire near Non-FLEX
expirations and use a p.m. settlement.
---------------------------------------------------------------------------
\14\ Cboe Options Rule 4.13(a) provides that ``[i]n a manner and
form prescribed by the Exchange, each Trading Permit Holder shall
report to the Exchange, the name, address, and social security or
tax identification number of any customer who, acting alone, or in
concert with others, on the previous business day maintained
aggregate long or short positions on the same side of the market of
200 or more contracts of any single class of option contracts dealt
in on the Exchange. The report shall indicate for each such class of
options, the number of option contracts comprising each such
position and, in the case of short positions, whether covered or
uncovered.'' For purposes of Rule 4.13, the term ``customer'' in
respect of any Trading Permit Holder includes ``the Trading Permit
Holder, any general or special partner of the Trading Permit Holder,
any officer or director of the Trading Permit Holder, or any
participant, as such, in any joint, group or syndicate account with
the Trading Permit Holder or with any partner, officer or director
thereof.'' Rule 4.13(d).
---------------------------------------------------------------------------
Cboe Options is also cognizant of the OTC market, in which similar
restrictions on exercise settlement values do not apply. Cboe Options
continues to believe that the pilot program is appropriate and
reasonable and provides market participants with additional flexibility
in determining whether to execute their customized options in an
exchange environment or in the OTC market. Cboe Options continues to
believe that market participants benefit from being able to trade these
customized options in an exchange environment in several ways,
including, but not limited to, enhanced efficiency in initiating and
closing out positions, increased market transparency, and heightened
contra-party creditworthiness due to the role of the Options Clearing
Corporation as issuer and guarantor of FLEX Options.
If, in the future, the Exchange proposes an additional extension of
the pilot program, or should the Exchange propose to make the pilot
program permanent, the Exchange will submit, along with any filing
proposing such amendments to the pilot program, an annual report
(addressing the same areas referenced above and consistent with the
pilot program's Approval Order) to the Commission at least two months
prior to the expiration date of the program. The Exchange will also
continue, on a periodic basis, to submit interim reports of volume and
open interest consistent with the terms of the exercise settlement
values pilot program as described in the pilot program's Approval
Order. Additionally, the Exchange will provide the Commission with any
additional data or analyses the Commission requests because it deems
such data or analyses necessary to determine whether the pilot program
is consistent with the Exchange Act. The Exchange is in the process of
making public on its website data and analyses previously submitted to
the Commission under the pilot program, which it expects to complete in
the fourth quarter of 2018, and will make public any data and analyses
it submits to the Commission under the pilot program in the future.
As noted in the pilot program's Approval Order, any positions
established under the pilot program would not be impacted by the
expiration of the pilot program.\15\
---------------------------------------------------------------------------
\15\ For example, a position in a p.m.-settled FLEX Index Option
series that expires on Expiration Friday in January 2019 could be
established during the exercise settlement values pilot. If the
pilot program were not extended (or made permanent), then the
position could continue to exist. However, the Exchange notes that
any further trading in the series would be restricted to
transactions where at least one side of the trade is a closing
transaction. See Approval Order at footnotes 9 and 10, supra note 6.
---------------------------------------------------------------------------
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.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ 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) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposed extension of
the pilot program, which permits additional exercise settlement values,
would provide greater opportunities for investors to manage risk
through the use of FLEX Options. Further, the Exchange believes that it
has not experienced any adverse effects from the operation of the pilot
program, including any adverse market volatility effects that might
occur as a result of large FLEX exercises in FLEX Option series that
expire near Non-FLEX expirations and use a p.m. settlement. The
Exchange also believes that the extension of the exercise settlement
values pilot does not raise any unique regulatory concerns. In
particular, although p.m. settlements may raise questions with the
Commission, the Exchange believes that, based on the Exchange's
experience in trading FLEX Options to date and over the pilot period,
market impact and investor protection concerns will not be raised by
this rule change. The Exchange also believes that the proposed rule
change would continue to provide Trading Permit Holders and investors
with additional opportunities to trade customized options in an
exchange environment (which offers the added benefits of transparency,
price discovery, liquidity, and financial stability as compared to the
over-the-counter market) and subject to exchange-based rules, and
investors would benefit as a result.
B. Self-Regulatory Organization's Statement on Burden on Competition
Cboe Options does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes there
is sufficient investor interest and demand in the pilot program to
warrant its extension. The Exchange believes that, for the period that
the pilot has been in operation, the program has provided investors
with additional means of managing their risk exposures and carrying out
their investment objectives. Furthermore, the Exchange believes that it
has not experienced any adverse market effects with respect to the
pilot program, including any adverse market volatility effects that
might occur as a result of large FLEX exercises in FLEX Option series
that expire near Non-Flex expirations and use a p.m. settlement. Cboe
Options believes that the restriction actually places the Exchange at a
competitive disadvantage to its OTC counterparts in the market for
customized options, and unnecessarily limits market participants'
ability to trade in an exchange environment that offers the added
benefits of transparency, price discovery, liquidity, and financial
stability. Therefore, the Exchange does not believe that the proposed
rule change will impose any burden on competition.
[[Page 56116]]
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 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 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 \19\ and Rule 19b-4(f)(6)
thereunder.\20\
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\22\ 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 Exchange states that
such waiver will allow the Exchange to extend the pilot program prior
to its expiration on November 5, 2018, and maintain the status quo,
thereby reducing market disruption.
---------------------------------------------------------------------------
\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest, as
it will allow the pilot program to continue uninterrupted, thereby
avoiding investor confusion that could result from a temporary
interruption in the pilot program. For this reason, the Commission
designates the proposed rule change to be operative upon filing.\23\
---------------------------------------------------------------------------
\23\ 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).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule 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 [email protected]. Please include
File Number SR-CBOE-2018-071 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-2018-071. 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 a.m. and 3
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-2018-071 and should be submitted on
or before November 30, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12) and (59).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24524 Filed 11-8-18; 8:45 am]
BILLING CODE 8011-01-P
