Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 21.5 To Conform the Rule to Section 3.1 of the Plan for the Purpose of Developing and Implementing Procedures Designed To Facilitate the Listing and Trading of Standardized Options and Add New Rule 21.5(e), 37722-37726 [2020-13431]
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Federal Register / Vol. 85, No. 121 / Tuesday, June 23, 2020 / Notices
the Participants discussing the
feasibility and advisability of allowing
Industry Members to bulk download the
Raw Data that it has submitted to the
Central Repository; 13 (7) a one-time
assessment of the nature and extent of
errors in the Customer information
submitted to the Central Repository and
whether the correction of certain data
fields over others should be prioritized
from the Participants; 14 (8) a one-time
report on the impact of tiered fees on
market liquidity, including an analysis
of the impact of the tiered-fee structure
on Industry Members provision of
liquidity from the Participants; 15 (9) an
assessment of the projected impact of
any Material Systems Change on the
Maximum Error Rate, prior to the
implementation of such Material
Systems Change from the
Participants; 16 (10) an annual
requirement that that the CAT LLC
financials be (i) in compliance with
GAAP, (ii) be audited by an
independent public accounting firm,
and (iii) be made publicly available; 17
(11) a requirement that each Participant
conduct background checks for its
employees and contractors that will use
the CAT System.18
The Commission believes that the
CAT NMS Plan, once fully
implemented, will improve the quality
of the data available to regulators in four
areas that affect the ultimate
effectiveness of core regulatory efforts—
completeness, accuracy, accessibility
and timeliness.19 The improvements in
these data qualities would substantially
improve regulators’ ability to perform
analysis and reconstruction of market
events, and market analysis and
research to inform policy decisions, as
well as perform regulatory activities, in
particular market surveillance,
examinations, investigations, and other
enforcement functions.
The Commission estimates that 1524
respondents 20 will require an aggregate
13 Id.
at 84941.
14 Id.
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15 Id.
at 84941–84942.
16 Id. at 84942. The Commission believes that four
assessments would be filed annually.
17 Id.
18 Id. The Commission believes that these
background checks are necessary to ensure that
only authorized and qualified persons are using the
CAT System.
19 See CAT NMS Plan Order, supra note 3, at
45727 (discussing four ‘‘qualities’’ of trade and
order data that impact the effectiveness of core
Participant and Commission regulatory efforts:
accuracy, completeness, accessibility, and
timeliness).
20 The Commission notes that 24 Participants (the
23 national securities exchanges and one national
securities association) and 1,500 broker-dealers
subject to information collections requirements
pursuant to Rule 613 and the CAT NMS Plan.
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17:17 Jun 22, 2020
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total of approximately 7,572,610 hours
per year to comply with the collection
of information. The Commission further
estimates that the aggregate cost to
comply with the collection of
information will be approximately
$463,322,593 per year.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission,
c/o Cynthia Roscoe, 100 F Street NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: June 18, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–13512 Filed 6–22–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89080; File No. SR–
CboeEDGX–2020–028]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
21.5 To Conform the Rule to Section
3.1 of the Plan for the Purpose of
Developing and Implementing
Procedures Designed To Facilitate the
Listing and Trading of Standardized
Options and Add New Rule 21.5(e)
June 17, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 11,
2020, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II, below, which Items have
been prepared by the Exchange. The
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00101
Fmt 4703
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 EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX Options’’)
proposes to amend Rule 21.5 to conform
the rule to Section 3.1 of the Plan for the
Purpose of Developing and
Implementing Procedures Designed to
Facilitate the Listing and Trading of
Standardized Options (the ‘‘OLPP’’) and
add new Rule 21.5(e). The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
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 purpose of this rule change is to
amend Rule 21.5 (Minimum Increments)
to align the rule with the recently
approved amendment to the OLPP.
Background
On January 23, 2007, the Commission
approved on a limited basis a Penny
Pilot in option classes in certain issues
(‘‘Penny Pilot’’). The Penny Pilot was
designed to determine whether
investors would benefit from options
being quoted in penny increments, and
3 15
4 17
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U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
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in which classes the benefits were most
significant. The Penny Pilot was
expanded and extended numerous times
over the last 13 years.5 In each instance,
these approvals relied upon the
consideration of data periodically
provided by the Exchanges that
analyzed how quoting options in penny
increments affects spreads, liquidity,
quote traffic, and volume. Today, the
Penny Pilot includes 363 option classes,
which are among the most actively
traded, multiply listed option classes.
The Penny Pilot is scheduled to expire
by its own terms on June 30, 2020.6
In light of the imminent expiration of
the Penny Pilot on June 30, 2020, the
Exchange, together with other
participating exchanges, filed, on July
18, 2019 a proposal to amend the
OLPP.7 On April 1, 2020 the
Commission approved the amendment
to the OLPP to make permanent the
Pilot Program (the ‘‘OLPP Program’’).8
The OLPP Program replaces the
Penny Pilot by instituting a permanent
program that would permit quoting in
penny increments for certain option
classes. Under the terms of the OLPP
Program, designated option classes
would continue to be quoted in $0.01
and $0.05 increments according to the
same parameters for the Penny Pilot. In
addition, the OLPP Program would: (i)
Establish an annual review process to
add option classes to, or to remove
option classes from, the OLPP Program;
(ii) to allow an option class to be added
to the OLPP Program if it is a newly
listed option class and it meets certain
5 The Exchange notes that the rules of EDGX
Options, including rules applicable to EDGX
Options’ participation in the Penny Pilot, were
approved on August 7, 2015. See Securities
Exchange Act Release No. 75650 (August 7, 2015),
80 FR 48600 (August 13, 2015) (SR–EDGX–2015–
18). The rules applicable to EDGX Options’
participation in the Penny Pilot have been
expanded and extended accordingly numerous
times since the Exchange commenced operations.
See Securities Exchange Act Release Nos. 78052
(June 13, 2016), 81 FR 39731 (June 17, 2016) (SR–
BatsEDGX–2016–22); 79526 (December 12, 2016),
81 FR91235 (December 16, 2016) (SR–BatsEDGX–
2016–71); 80907 (June 12, 2017), 82 FR 27741 (June
16, 2017) (SR–BatsEDGX–2017–28); 82380
(December 21, 2017), 82 FR 61611 (December 28,
2017) (SR–CboeEDGX–2017–007); 83566 (June 29,
2018), 83 FR 31576 (July 6, 2018) (SR–CboeEDGX–
2018–021); 84946 (December 21, 2018), 83 FR
67757 (December 31, 2018) (SR–CboeEDGX–2018–
061); 86079 (June 10, 2019), 84 FR 27810 (June 14,
2019) (SR–CboeEDGX–2019–036); and 87741
(December 13, 2019), 84 FR 69805 (December 19,
2019) (SR–CboeEDGX–2019–074).
6 See Securities Exchange Act Release No. 87741
(December 13, 2019), 84 FR 69805 (December 19,
2019) (SR–CboeEDGX–2019–074).
7 See Securities Exchange Act Release No. 87681
(December 9, 2019), 84 FR 68960 (December 17,
2019) (‘‘Notice’’).
8 See Securities Exchange Act Release No. 88532
(April 1, 2020), 85 FR 19545 (April 7, 2020) (File
No. 4–443) (‘‘Approval Order’’).
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17:17 Jun 22, 2020
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criteria; (iii) to allow an option class to
be added to the OLPP Program if it is
an option class that has seen a
significant growth in activity; (iv) to
provide that if a corporate action
involves one or more option classes in
the OLPP Program, all adjusted and
unadjusted series and classes emerging
as a result of the corporate action will
be included in the OLPP Program; and
(v) to provide that any series in an
option class participating in the OLPP
Program that have been delisted, or are
identified by OCC as ineligible for
opening Customer transactions, will
continue to trade pursuant to the OLPP
Program until they expire.
To conform its Rules to the OLPP
Program, the Exchange proposes to
delete Interpretation and Policy .01 to
Rule 21.5 (the ‘‘Penny Pilot Rule’’) and
replace it with new Rule 21.5(e)
(Requirements for Penny Interval
Program), which is described below,
and to replace references to ‘‘Penny
Pilot’’ in the Exchange rules with
‘‘Penny Interval Program.’’ The
Exchange also proposes to delete the
superfluous operational language within
Rule 21.5 regarding the a change to the
minimum increment that may be
established by the Board and designated
as a stated policy, practice, or
interpretation within the meaning of the
Act and the process for modifying
trading differential by rule filing
because such meaning and requirement
remains the case today, as the Exchange
may determine to establish a change to
the Rules and the Exchange must submit
proposed rule changes—including for
Rule 21.5—to the Commission.9
9 See Rule 21.5(a), specifically, the current
language which provides that: ‘‘The Board may
establish minimum quoting increments for options
contracts traded on EDGX Options. Such minimum
increments established by the Board will be
designated as a stated policy, practice, or
interpretation with respect to the administration of
this Rule within the meaning of Section 19 of the
Exchange Act and will be filed with the SEC as a
rule change for effectiveness upon filing. Until such
time as the Board makes a change in the
increments, the following principles shall apply’’.
The Exchange notes that this proposed change is
also consistent with the corresponding minimum
increment rules of its affiliated options exchanges,
Cboe Options Exchange, Inc. (‘‘Cboe Options’’) and
Cboe C2 Exchange, Inc. (‘‘C2’’). See Cboe Options
Rule 5.4 and C2 Rule 6.4; see also Securities
Exchange Act Release Nos. 84470 (October 23,
2018), 83 FR 54395 (October 29, 2018) (SR–CBOE–
2018–066); and 83214 (May 11, 2018), 83 FR 22796
(May 16, 2018) (SR–C2–2018–005), which more
recently updated Cboe Options and C2 minimum
increments rules, respectively, in the same manner
as proposed in connection with language in the
Cboe Options and C2 rules that prior referred to
Board decisions to modify minimum increments.
The decision to change the minimum increments
relate to Exchange trading and operations, and thus
are made by Exchange management, rather than the
Board, which generally is not involved in
PO 00000
Frm 00102
Fmt 4703
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37723
Finally, the Exchange notes that this
proposal is based on and substantially
identical to a rule filing recently
submitted by NYSE Arca, Inc.10
Penny Interval Program
The Exchange proposes to codify the
OLPP Program in new paragraph (e) to
Rule 21.5 (Requirements for Penny
Interval Program) (the ‘‘Penny
Program’’), which will replace the
Penny Pilot Rule and permanently
permit the Exchange to quote certain
option classes in minimum increments
of one cents ($0.01) and five cents
($0.05) (‘‘penny increments’’). The
penny increments that currently apply
under the Penny Pilot will continue to
apply for option classes included in the
Penny Program. Specifically, (i) the
minimum quoting increment for all
series in the QQQ, SPY, and IWM
would continue to be $0.01, regardless
of price; 11 (ii) all series of an option
class included in the Penny Program
with a price of less than $3.00 would be
quoted in $0.01 increments; and (iii) all
series of an option class included in the
Penny Program with a price of $3.00 or
higher would be quoted in $0.05
increments.
The Penny Program would initially
apply to the 363 most actively traded
multiply listed option classes, based on
National Cleared Volume at The
Options Clearing Corporation (‘‘OCC’’)
in the six full calendar months ending
in the month of approval (i.e.,
November 2019–April 2020) that
currently quote in penny increments, or
overlie securities priced below $200, or
any index at an index level below $200.
Eligibility for inclusion in the Penny
Program will be determined at the close
of trading on the monthly Expiration
Friday of the second full month
following April 1, 2020 (i.e., June 19,
2020).
Once in the Penny Program, an option
class will remain included until it is no
longer among the 425 most actively
traded option classes at the time the
annual review is conducted (described
below), at which point it will be
removed from the Penny Program. As
described in more detail below, the
removed class will be replaced by the
next most actively traded multiply
listed option class overlying securities
priced below $200 per share, or any
index at an index level below $200, and
not yet in the Penny Program. Advanced
notice regarding the option classes
determinations related to day-to-day operations of
the Exchange.
10 See Securities Exchange Act Release No. 88943
(May 26, 2020), 85 FR 33255 (June 1, 2020) (SR–
NYSEArca–2020–50).
11 See Rule 21.5(a).
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Federal Register / Vol. 85, No. 121 / Tuesday, June 23, 2020 / Notices
included, added, or removed from the
Penny Program will be provided to the
Exchange’s Members pursuant to Rule
16.3 12 and published by the Exchange
on its website.
Annual Review
The Penny Program would include an
annual review process that applies
objective criteria to determine option
classes to be added to, or removed from,
the Penny Program. Specifically, on an
annual basis beginning in December
2020 and occurring ever December
thereafter, the Exchange will review and
rank all multiply listed option classes
based on National Cleared Volume at
OCC for the six full calendar months
from June 1st through November 30th
for determination of the most actively
traded option classes. Any option
classes not yet in the Penny Program
may be added to the Penny Program if
the class is among the 300 most actively
traded multiply listed option classes
and priced below $200 per share or any
index at an index level below $200.
Following the annual review, option
classes to be added to the Penny
Program would begin quoting in penny
increments (i.e., $0.01 if trading at less
than $3; and $0.05 if trading at $3 and
above) on the first trading day of
January.13 In addition, following the
annual review, any option class in the
Penny Program that falls outside of the
425 most actively traded option classes
would be removed from the Penny
Program. After the annual review,
option classes that are removed from the
Penny Program will be subject to the
minimum trading increments set forth
in Rule 21.5, effective on the first
trading day of April.
Changes to the Composition of the
Penny Program Outside of the Annual
Review
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Newly Listed Option Classes and
Option Classes With Significant Growth
in Activity
The Penny Program would specify a
process and parameters for including
option classes in the Program outside
the annual review process in two
circumstances. These provisions are
designed to provide objective criteria to
12 Rule 16.3 provides that the Exchange
announces to Options Members all determinations
it makes pursuant to the Rules via: (1)
Specifications, Notices, or Regulatory Circulars
with appropriate advanced notice, which will be
posted on the Exchange’s website, or as otherwise
provided in the Rules; (2) electronic message; or (3)
other communication method as provided in the
Rules.
13 See supra note 11. (providing that the
minimum quoting increment for all series in the
QQQ, SPY, and IWM would continue to be $0.01,
regardless of price).
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17:17 Jun 22, 2020
Jkt 250001
add to the Penny Program new option
classes in issues with the most
demonstrated trading interest from
market participants and investors on an
expedited basis prior to the annual
review, with the benefit that market
participants and investors will then be
able to trade these new option classes
based upon quotes expressed in finer
trading increments.
First, the Penny Program provides for
certain newly listed option classes to be
added to the Penny Program outside of
the annual review process, provided
that (i) the class is among the 300 most
actively traded, multiply listed option
classes, as ranked by National Cleared
Volume at OCC, in its first full calendar
month of trading; and (ii) the underlying
security is priced below $200 or the
underlying index is at an index level
below $200. Such newly listed option
classes added to the Penny Program
pursuant to this process would remain
in the Penny Program for one full
calendar year and then would be subject
to the annual review process.
Second, the Penny Program would
allow an option class to be added to the
Penny Program outside of the annual
review process if it is an option class
that meets certain specific criteria.
Specifically, new option classes may be
added to the Penny Program if: (i) The
option class is among the 75 most
actively traded multiply listed option
classes, as ranked by National Cleared
Volume at OCC, in the prior six full
calendar months of trading and (ii) the
underlying security is priced below
$200 or the underlying index is at an
index level below $200. Any option
class added under this provision will be
added on the first trading day of the
second full month after it qualifies and
will remain in the Penny Program for
the rest of the calendar year, after which
it will be subject to the annual review
process.
Corporate Actions
The Penny Program would also
specify a process to address option
classes in the Penny Program that
undergo a corporate action and is
designed to ensure continuous liquidity
in the affected option classes.
Specifically, if a corporate action
involves one or more option classes in
the Penny Program, all adjusted and
unadjusted series of an option class
would continue to be included in the
Penny Program.14 Furthermore, neither
14 For example, if Company A acquires Company
B and Company A is not in the Penny Program but
Company B is in the Penny Program, once the
merger is consummated and an options contract
adjustment is effective, then Company A would be
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Frm 00103
Fmt 4703
Sfmt 4703
the trading volume threshold, nor the
initial price test would apply to option
classes added to the Penny Program as
a result of the corporate action. Finally,
the newly added adjusted and
unadjusted series of the option class
would remain in the Penny Program for
one full calendar year and then would
become subject to the annual review
process.
Delisted or Ineligible Option Classes
Finally, the Penny Program would
provide a mechanism to address option
classes that have been delisted or those
that are no longer eligible for listing.
Specifically, any series in an option
class participating in the Penny Program
in which the underlying has been
delisted, or is identified by OCC as
ineligible for opening customer
transactions, would continue to quote
pursuant to the terms of the Penny
Program until all options series have
expired.
Technical Changes
The Exchange proposes to replace
reference to the Penny Pilot with
reference to the Penny Interval Program
in Rule 21.5(a), Interpretation and
Policy .02 to Rule 21.5,15 and
Interpretation and Policy .07(d) to Rule
19.6. The Exchange believes these
technical changes would add clarity,
transparency and internal consistency to
Exchange rules making them easier to
navigate.
Implementation
The Exchange proposes to implement
the Penny Program on July 1, 2020,
which is the first trading day of the
third month following the Approval
Order issued on April 1, 2020—i.e., July
1, 2020.
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
added to the Penny Program and remain in the
Penny Program for one calendar year.
15 The Exchange also updates this Interpretation
and Policy from .02 to .01 in light of the proposed
rule change to remove the Penny Pilot Rule in
current Interpretation and Policy .01, and updates
the reference to Interpretation and Policy .01
(Penny Pilot Rule) to proposed Rule 21.5(e)
(Requirements for Penny Interval Program).
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 85, No. 121 / Tuesday, June 23, 2020 / Notices
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 proposed rule
change, which conforms the Exchange
rules to the recently adopted OLPP
Program, allows the Exchange to
provide market participants with a
permanent Penny Program for quoting
options in penny increments, which
maximizes the benefit of quoting in a
finer quoting increment to investors
while minimizing the burden that a
finer quoting increment places on quote
traffic.
Accordingly, the Exchange believes
that the proposal is consistent with the
Act because, in conforming the
Exchange rules to the OLPP Program,
the Penny Program would employ
processes, based upon objective criteria,
that would rebalance the composition of
the Penny Program, thereby helping to
ensure that the most actively traded
option classes are included in the Penny
Program, which helps facilitate the
maintenance of a fair and orderly
market.
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Technical Changes
The Exchange notes that the proposed
change to Rule 21.5(a), Interpretation
and Policy .01 to Rule 21.5, and
Interpretation and Policy .07(d) to Rule
19.6 to replace references to the Penny
Pilot with references to the Penny
Interval Program would provide clarity
and transparency to the Exchange rules
and would promote just and equitable
principles of trade and remove
impediments to, and perfect the
mechanism of, a free and open market
and a national market system. The
proposed rule changes would also
provide internal consistency within
Exchange rules and operate to protect
investors and the investing public by
making the Exchange rules easier to
navigate and comprehend.
18 Id.
VerDate Sep<11>2014
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
proposed Penny Program, which
modifies the exchange’s rules to align
them with the Commission approved
OLPP Program, is not designed to be a
competitive filing nor does it impose an
undue burden on intermarket
competition as the Exchange anticipates
that the options exchanges will adopt
substantially identical rules. Moreover,
the Exchange believes that by
conforming Exchange rules to the OLPP
Program, the Exchange would promote
regulatory clarity and consistency,
thereby reducing burdens on the
marketplace and facilitating investor
protection. To the extent that there is a
competitive burden on those option
classes that do not qualify for the Penny
Program, the Exchange believes that it is
appropriate because the proposal should
benefit all market participants and
investors by maximizing the benefit of
a finer quoting increment in those
option classes with the most trading
interest while minimizing the burden of
greater quote traffic in option classes
with less trading interest. The Exchange
believes that adopting rules, which have
been adopted by another options
exchange 19 and, as the Exchange
anticipates, will likewise be adopted by
all option exchanges that are
participants in the OLPP, would allow
for continued competition between
Exchange market participants trading
similar products as their counterparts
on other exchanges, while at the same
time allowing the Exchange to continue
to compete for order flow with other
exchanges.
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 after the date of
the filing, or such shorter time as the
Commission may designate, it has
19 See
17:17 Jun 22, 2020
Jkt 250001
PO 00000
supra note 10.
Frm 00104
Fmt 4703
Sfmt 4703
37725
become effective pursuant to 19(b)(3)(A)
of the Act 20 and Rule 19b–4(f)(6) 21
thereunder. The Exchange has proposed
to implement the Penny Program on
July 1, 2020 and has asked the
Commission to waive the 30-day
operative delay for this filing. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest because it will allow the
Exchange to modify its rules to conform
to the OLPP Program and implement the
Penny Program on July 1, 2020,
consistent with the Commission’s
approval of the OLPP Amendment.
Accordingly, the Commission
designates the proposed rule change as
operative upon filing with the
Commission.22
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–
CboeEDGX–2020–028 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.
20 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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.
22 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).
21 17
E:\FR\FM\23JNN1.SGM
23JNN1
37726
Federal Register / Vol. 85, No. 121 / Tuesday, June 23, 2020 / Notices
All submissions should refer to File
Number SR–CboeEDGX–2020–028. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml).
Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
rule change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeEDGX–2020–028 and
should be submitted on or before July
14, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–13431 Filed 6–22–20; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16482 and #16483;
ARKANSAS Disaster Number AR–00113]
Administrative Declaration of a
Disaster for the State of Arkansas
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative declaration of a disaster
for the State of Arkansas dated 06/17/
2020.
Incident: Severe Storms and Straightline Winds.
jbell on DSKJLSW7X2PROD with NOTICES
SUMMARY:
23 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:17 Jun 22, 2020
Jkt 250001
Incident Period: 04/12/2020.
Issued on 06/17/2020.
Physical Loan Application Deadline
Date: 08/17/2020.
Economic Injury (EIDL) Loan
Application Deadline Date: 03/17/2021.
DATES:
DEPARTMENT OF TRANSPORTATION
Federal Railroad Administration
[Docket Number FRA–2020–0045]
Petition for Waiver of Compliance
Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
ADDRESSES:
Under part 211 of title 49 Code of
Federal Regulations (CFR), this
document provides the public notice
that on June 3, 2020, Long Island Rail
Road (LIRR) petitioned the Federal
Railroad Administration (FRA) for a
FOR FURTHER INFORMATION CONTACT: A.
waiver of compliance from certain
Escobar, Office of Disaster Assistance,
provisions of the Federal railroad safety
U.S. Small Business Administration,
regulations contained at 49 CFR part
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734. 239. FRA assigned the petition Docket
Number FRA–2020–0045.
SUPPLEMENTARY INFORMATION: Notice is
Specifically, LIRR requests relief from
hereby given that as a result of the
‘‘hands-on’’ instruction concerning the
Administrator’s disaster declaration,
location, function, and operation of onapplications for disaster loans may be
board emergency equipment as required
filed at the address listed above or other by 49 CFR 239.101(a)(2)(E). LIRR seeks
locally announced locations.
to provide alternative instructor-led
The following areas have been
video training, using Power Point or
determined to be adversely affected by
similar programs, during situations
the disaster:
when in-person training is unsafe or
impractical due to natural disaster, state
Primary Counties: Jefferson
of emergency, or other unforeseen
Contiguous Counties:
circumstances. LIRR states that by
Arkansas: Arkansas, Cleveland, Grant, providing instructor-led video training,
Lincoln, Lonoke, Pulaski
it can give additional classes to make up
for previously postponed classes and
The Interest Rates are:
reduced class size, while adhering to
Percent
social distancing guidelines.
A copy of the petition, as well as any
For Physical Damage:
written communications concerning the
Homeowners With Credit Availpetition, is available for review online at
able Elsewhere ......................
3.125
www.regulations.gov and in person at
Homeowners Without Credit
Available Elsewhere ..............
1.563 the U.S. Department of Transportation’s
(DOT) Docket Operations Facility, 1200
Businesses With Credit Available Elsewhere ......................
7.500 New Jersey Ave. SE, W12–140,
Businesses
Without
Credit
Washington, DC 20590. The Docket
Available Elsewhere ..............
3.750 Operations Facility is open from 9 a.m.
Non-Profit Organizations With
to 5 p.m., Monday through Friday,
Credit Available Elsewhere ...
2.750 except Federal Holidays.
Non-Profit Organizations WithInterested parties are invited to
out Credit Available Elsewhere .....................................
2.750 participate in these proceedings by
submitting written views, data, or
For Economic Injury:
comments. FRA does not anticipate
Businesses & Small Agricultural
scheduling a public hearing in
Cooperatives Without Credit
Available Elsewhere ..............
3.750 connection with these proceedings since
Non-Profit Organizations Withthe facts do not appear to warrant a
out Credit Available Elsehearing. If any interested parties desire
where .....................................
2.750 an opportunity for oral comment and a
public hearing, they should notify FRA,
The number assigned to this disaster
in writing, before the end of the
for physical damage is 16482 B and for
comment period and specify the basis
economic injury is 16483 0.
for their request.
The State which received an EIDL
All communications concerning these
Declaration # is Arkansas.
proceedings should identify the
appropriate docket number and may be
(Catalog of Federal Domestic Assistance
submitted by any of the following
Number 59008)
methods:
Jovita Carranza,
• Website: https://
Administrator.
www.regulations.gov. Follow the online
[FR Doc. 2020–13515 Filed 6–22–20; 8:45 am]
instructions for submitting comments.
BILLING CODE 8026–03–P
• Fax: 202–493–2251.
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
E:\FR\FM\23JNN1.SGM
23JNN1
]]>Agencies
[Federal Register Volume 85, Number 121 (Tuesday, June 23, 2020)]
[Notices]
[Pages 37722-37726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13431]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89080; File No. SR-CboeEDGX-2020-028]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 21.5 To Conform the Rule to Section 3.1 of the Plan for the
Purpose of Developing and Implementing Procedures Designed To
Facilitate the Listing and Trading of Standardized Options and Add New
Rule 21.5(e)
June 17, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 11, 2020, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX Options'') filed with the Securities and Exchange Commission
(the ``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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'')
proposes to amend Rule 21.5 to conform the rule to Section 3.1 of the
Plan for the Purpose of Developing and Implementing Procedures Designed
to Facilitate the Listing and Trading of Standardized Options (the
``OLPP'') and add new Rule 21.5(e). The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), 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 purpose of this rule change is to amend Rule 21.5 (Minimum
Increments) to align the rule with the recently approved amendment to
the OLPP.
Background
On January 23, 2007, the Commission approved on a limited basis a
Penny Pilot in option classes in certain issues (``Penny Pilot''). The
Penny Pilot was designed to determine whether investors would benefit
from options being quoted in penny increments, and
[[Page 37723]]
in which classes the benefits were most significant. The Penny Pilot
was expanded and extended numerous times over the last 13 years.\5\ In
each instance, these approvals relied upon the consideration of data
periodically provided by the Exchanges that analyzed how quoting
options in penny increments affects spreads, liquidity, quote traffic,
and volume. Today, the Penny Pilot includes 363 option classes, which
are among the most actively traded, multiply listed option classes. The
Penny Pilot is scheduled to expire by its own terms on June 30,
2020.\6\
---------------------------------------------------------------------------
\5\ The Exchange notes that the rules of EDGX Options, including
rules applicable to EDGX Options' participation in the Penny Pilot,
were approved on August 7, 2015. See Securities Exchange Act Release
No. 75650 (August 7, 2015), 80 FR 48600 (August 13, 2015) (SR-EDGX-
2015-18). The rules applicable to EDGX Options' participation in the
Penny Pilot have been expanded and extended accordingly numerous
times since the Exchange commenced operations. See Securities
Exchange Act Release Nos. 78052 (June 13, 2016), 81 FR 39731 (June
17, 2016) (SR-BatsEDGX-2016-22); 79526 (December 12, 2016), 81
FR91235 (December 16, 2016) (SR-BatsEDGX-2016-71); 80907 (June 12,
2017), 82 FR 27741 (June 16, 2017) (SR-BatsEDGX-2017-28); 82380
(December 21, 2017), 82 FR 61611 (December 28, 2017) (SR-CboeEDGX-
2017-007); 83566 (June 29, 2018), 83 FR 31576 (July 6, 2018) (SR-
CboeEDGX-2018-021); 84946 (December 21, 2018), 83 FR 67757 (December
31, 2018) (SR-CboeEDGX-2018-061); 86079 (June 10, 2019), 84 FR 27810
(June 14, 2019) (SR-CboeEDGX-2019-036); and 87741 (December 13,
2019), 84 FR 69805 (December 19, 2019) (SR-CboeEDGX-2019-074).
\6\ See Securities Exchange Act Release No. 87741 (December 13,
2019), 84 FR 69805 (December 19, 2019) (SR-CboeEDGX-2019-074).
---------------------------------------------------------------------------
In light of the imminent expiration of the Penny Pilot on June 30,
2020, the Exchange, together with other participating exchanges, filed,
on July 18, 2019 a proposal to amend the OLPP.\7\ On April 1, 2020 the
Commission approved the amendment to the OLPP to make permanent the
Pilot Program (the ``OLPP Program'').\8\
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 87681 (December 9,
2019), 84 FR 68960 (December 17, 2019) (``Notice'').
\8\ See Securities Exchange Act Release No. 88532 (April 1,
2020), 85 FR 19545 (April 7, 2020) (File No. 4-443) (``Approval
Order'').
---------------------------------------------------------------------------
The OLPP Program replaces the Penny Pilot by instituting a
permanent program that would permit quoting in penny increments for
certain option classes. Under the terms of the OLPP Program, designated
option classes would continue to be quoted in $0.01 and $0.05
increments according to the same parameters for the Penny Pilot. In
addition, the OLPP Program would: (i) Establish an annual review
process to add option classes to, or to remove option classes from, the
OLPP Program; (ii) to allow an option class to be added to the OLPP
Program if it is a newly listed option class and it meets certain
criteria; (iii) to allow an option class to be added to the OLPP
Program if it is an option class that has seen a significant growth in
activity; (iv) to provide that if a corporate action involves one or
more option classes in the OLPP Program, all adjusted and unadjusted
series and classes emerging as a result of the corporate action will be
included in the OLPP Program; and (v) to provide that any series in an
option class participating in the OLPP Program that have been delisted,
or are identified by OCC as ineligible for opening Customer
transactions, will continue to trade pursuant to the OLPP Program until
they expire.
To conform its Rules to the OLPP Program, the Exchange proposes to
delete Interpretation and Policy .01 to Rule 21.5 (the ``Penny Pilot
Rule'') and replace it with new Rule 21.5(e) (Requirements for Penny
Interval Program), which is described below, and to replace references
to ``Penny Pilot'' in the Exchange rules with ``Penny Interval
Program.'' The Exchange also proposes to delete the superfluous
operational language within Rule 21.5 regarding the a change to the
minimum increment that may be established by the Board and designated
as a stated policy, practice, or interpretation within the meaning of
the Act and the process for modifying trading differential by rule
filing because such meaning and requirement remains the case today, as
the Exchange may determine to establish a change to the Rules and the
Exchange must submit proposed rule changes--including for Rule 21.5--to
the Commission.\9\
---------------------------------------------------------------------------
\9\ See Rule 21.5(a), specifically, the current language which
provides that: ``The Board may establish minimum quoting increments
for options contracts traded on EDGX Options. Such minimum
increments established by the Board will be designated as a stated
policy, practice, or interpretation with respect to the
administration of this Rule within the meaning of Section 19 of the
Exchange Act and will be filed with the SEC as a rule change for
effectiveness upon filing. Until such time as the Board makes a
change in the increments, the following principles shall apply''.
The Exchange notes that this proposed change is also consistent with
the corresponding minimum increment rules of its affiliated options
exchanges, Cboe Options Exchange, Inc. (``Cboe Options'') and Cboe
C2 Exchange, Inc. (``C2''). See Cboe Options Rule 5.4 and C2 Rule
6.4; see also Securities Exchange Act Release Nos. 84470 (October
23, 2018), 83 FR 54395 (October 29, 2018) (SR-CBOE-2018-066); and
83214 (May 11, 2018), 83 FR 22796 (May 16, 2018) (SR-C2-2018-005),
which more recently updated Cboe Options and C2 minimum increments
rules, respectively, in the same manner as proposed in connection
with language in the Cboe Options and C2 rules that prior referred
to Board decisions to modify minimum increments. The decision to
change the minimum increments relate to Exchange trading and
operations, and thus are made by Exchange management, rather than
the Board, which generally is not involved in determinations related
to day-to-day operations of the Exchange.
---------------------------------------------------------------------------
Finally, the Exchange notes that this proposal is based on and
substantially identical to a rule filing recently submitted by NYSE
Arca, Inc.\10\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 88943 (May 26,
2020), 85 FR 33255 (June 1, 2020) (SR-NYSEArca-2020-50).
---------------------------------------------------------------------------
Penny Interval Program
The Exchange proposes to codify the OLPP Program in new paragraph
(e) to Rule 21.5 (Requirements for Penny Interval Program) (the ``Penny
Program''), which will replace the Penny Pilot Rule and permanently
permit the Exchange to quote certain option classes in minimum
increments of one cents ($0.01) and five cents ($0.05) (``penny
increments''). The penny increments that currently apply under the
Penny Pilot will continue to apply for option classes included in the
Penny Program. Specifically, (i) the minimum quoting increment for all
series in the QQQ, SPY, and IWM would continue to be $0.01, regardless
of price; \11\ (ii) all series of an option class included in the Penny
Program with a price of less than $3.00 would be quoted in $0.01
increments; and (iii) all series of an option class included in the
Penny Program with a price of $3.00 or higher would be quoted in $0.05
increments.
---------------------------------------------------------------------------
\11\ See Rule 21.5(a).
---------------------------------------------------------------------------
The Penny Program would initially apply to the 363 most actively
traded multiply listed option classes, based on National Cleared Volume
at The Options Clearing Corporation (``OCC'') in the six full calendar
months ending in the month of approval (i.e., November 2019-April 2020)
that currently quote in penny increments, or overlie securities priced
below $200, or any index at an index level below $200. Eligibility for
inclusion in the Penny Program will be determined at the close of
trading on the monthly Expiration Friday of the second full month
following April 1, 2020 (i.e., June 19, 2020).
Once in the Penny Program, an option class will remain included
until it is no longer among the 425 most actively traded option classes
at the time the annual review is conducted (described below), at which
point it will be removed from the Penny Program. As described in more
detail below, the removed class will be replaced by the next most
actively traded multiply listed option class overlying securities
priced below $200 per share, or any index at an index level below $200,
and not yet in the Penny Program. Advanced notice regarding the option
classes
[[Page 37724]]
included, added, or removed from the Penny Program will be provided to
the Exchange's Members pursuant to Rule 16.3 \12\ and published by the
Exchange on its website.
---------------------------------------------------------------------------
\12\ Rule 16.3 provides that the Exchange announces to Options
Members all determinations it makes pursuant to the Rules via: (1)
Specifications, Notices, or Regulatory Circulars with appropriate
advanced notice, which will be posted on the Exchange's website, or
as otherwise provided in the Rules; (2) electronic message; or (3)
other communication method as provided in the Rules.
---------------------------------------------------------------------------
Annual Review
The Penny Program would include an annual review process that
applies objective criteria to determine option classes to be added to,
or removed from, the Penny Program. Specifically, on an annual basis
beginning in December 2020 and occurring ever December thereafter, the
Exchange will review and rank all multiply listed option classes based
on National Cleared Volume at OCC for the six full calendar months from
June 1st through November 30th for determination of the most actively
traded option classes. Any option classes not yet in the Penny Program
may be added to the Penny Program if the class is among the 300 most
actively traded multiply listed option classes and priced below $200
per share or any index at an index level below $200.
Following the annual review, option classes to be added to the
Penny Program would begin quoting in penny increments (i.e., $0.01 if
trading at less than $3; and $0.05 if trading at $3 and above) on the
first trading day of January.\13\ In addition, following the annual
review, any option class in the Penny Program that falls outside of the
425 most actively traded option classes would be removed from the Penny
Program. After the annual review, option classes that are removed from
the Penny Program will be subject to the minimum trading increments set
forth in Rule 21.5, effective on the first trading day of April.
---------------------------------------------------------------------------
\13\ See supra note 11. (providing that the minimum quoting
increment for all series in the QQQ, SPY, and IWM would continue to
be $0.01, regardless of price).
---------------------------------------------------------------------------
Changes to the Composition of the Penny Program Outside of the Annual
Review
Newly Listed Option Classes and Option Classes With Significant Growth
in Activity
The Penny Program would specify a process and parameters for
including option classes in the Program outside the annual review
process in two circumstances. These provisions are designed to provide
objective criteria to add to the Penny Program new option classes in
issues with the most demonstrated trading interest from market
participants and investors on an expedited basis prior to the annual
review, with the benefit that market participants and investors will
then be able to trade these new option classes based upon quotes
expressed in finer trading increments.
First, the Penny Program provides for certain newly listed option
classes to be added to the Penny Program outside of the annual review
process, provided that (i) the class is among the 300 most actively
traded, multiply listed option classes, as ranked by National Cleared
Volume at OCC, in its first full calendar month of trading; and (ii)
the underlying security is priced below $200 or the underlying index is
at an index level below $200. Such newly listed option classes added to
the Penny Program pursuant to this process would remain in the Penny
Program for one full calendar year and then would be subject to the
annual review process.
Second, the Penny Program would allow an option class to be added
to the Penny Program outside of the annual review process if it is an
option class that meets certain specific criteria. Specifically, new
option classes may be added to the Penny Program if: (i) The option
class is among the 75 most actively traded multiply listed option
classes, as ranked by National Cleared Volume at OCC, in the prior six
full calendar months of trading and (ii) the underlying security is
priced below $200 or the underlying index is at an index level below
$200. Any option class added under this provision will be added on the
first trading day of the second full month after it qualifies and will
remain in the Penny Program for the rest of the calendar year, after
which it will be subject to the annual review process.
Corporate Actions
The Penny Program would also specify a process to address option
classes in the Penny Program that undergo a corporate action and is
designed to ensure continuous liquidity in the affected option classes.
Specifically, if a corporate action involves one or more option classes
in the Penny Program, all adjusted and unadjusted series of an option
class would continue to be included in the Penny Program.\14\
Furthermore, neither the trading volume threshold, nor the initial
price test would apply to option classes added to the Penny Program as
a result of the corporate action. Finally, the newly added adjusted and
unadjusted series of the option class would remain in the Penny Program
for one full calendar year and then would become subject to the annual
review process.
---------------------------------------------------------------------------
\14\ For example, if Company A acquires Company B and Company A
is not in the Penny Program but Company B is in the Penny Program,
once the merger is consummated and an options contract adjustment is
effective, then Company A would be added to the Penny Program and
remain in the Penny Program for one calendar year.
---------------------------------------------------------------------------
Delisted or Ineligible Option Classes
Finally, the Penny Program would provide a mechanism to address
option classes that have been delisted or those that are no longer
eligible for listing. Specifically, any series in an option class
participating in the Penny Program in which the underlying has been
delisted, or is identified by OCC as ineligible for opening customer
transactions, would continue to quote pursuant to the terms of the
Penny Program until all options series have expired.
Technical Changes
The Exchange proposes to replace reference to the Penny Pilot with
reference to the Penny Interval Program in Rule 21.5(a), Interpretation
and Policy .02 to Rule 21.5,\15\ and Interpretation and Policy .07(d)
to Rule 19.6. The Exchange believes these technical changes would add
clarity, transparency and internal consistency to Exchange rules making
them easier to navigate.
---------------------------------------------------------------------------
\15\ The Exchange also updates this Interpretation and Policy
from .02 to .01 in light of the proposed rule change to remove the
Penny Pilot Rule in current Interpretation and Policy .01, and
updates the reference to Interpretation and Policy .01 (Penny Pilot
Rule) to proposed Rule 21.5(e) (Requirements for Penny Interval
Program).
---------------------------------------------------------------------------
Implementation
The Exchange proposes to implement the Penny Program on July 1,
2020, which is the first trading day of the third month following the
Approval Order issued on April 1, 2020--i.e., July 1, 2020.
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
[[Page 37725]]
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 proposed rule change, which conforms the
Exchange rules to the recently adopted OLPP Program, allows the
Exchange to provide market participants with a permanent Penny Program
for quoting options in penny increments, which maximizes the benefit of
quoting in a finer quoting increment to investors while minimizing the
burden that a finer quoting increment places on quote traffic.
Accordingly, the Exchange believes that the proposal is consistent
with the Act because, in conforming the Exchange rules to the OLPP
Program, the Penny Program would employ processes, based upon objective
criteria, that would rebalance the composition of the Penny Program,
thereby helping to ensure that the most actively traded option classes
are included in the Penny Program, which helps facilitate the
maintenance of a fair and orderly market.
Technical Changes
The Exchange notes that the proposed change to Rule 21.5(a),
Interpretation and Policy .01 to Rule 21.5, and Interpretation and
Policy .07(d) to Rule 19.6 to replace references to the Penny Pilot
with references to the Penny Interval Program would provide clarity and
transparency to the Exchange rules and would promote just and equitable
principles of trade and remove impediments to, and perfect the
mechanism of, a free and open market and a national market system. The
proposed rule changes would also provide internal consistency within
Exchange rules and operate to protect investors and the investing
public by making the Exchange rules easier to navigate and comprehend.
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 proposed Penny Program,
which modifies the exchange's rules to align them with the Commission
approved OLPP Program, is not designed to be a competitive filing nor
does it impose an undue burden on intermarket competition as the
Exchange anticipates that the options exchanges will adopt
substantially identical rules. Moreover, the Exchange believes that by
conforming Exchange rules to the OLPP Program, the Exchange would
promote regulatory clarity and consistency, thereby reducing burdens on
the marketplace and facilitating investor protection. To the extent
that there is a competitive burden on those option classes that do not
qualify for the Penny Program, the Exchange believes that it is
appropriate because the proposal should benefit all market participants
and investors by maximizing the benefit of a finer quoting increment in
those option classes with the most trading interest while minimizing
the burden of greater quote traffic in option classes with less trading
interest. The Exchange believes that adopting rules, which have been
adopted by another options exchange \19\ and, as the Exchange
anticipates, will likewise be adopted by all option exchanges that are
participants in the OLPP, would allow for continued competition between
Exchange market participants trading similar products as their
counterparts on other exchanges, while at the same time allowing the
Exchange to continue to compete for order flow with other exchanges.
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\19\ See supra note 10.
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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 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 after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) \21\
thereunder. The Exchange has proposed to implement the Penny Program on
July 1, 2020 and has asked the Commission to waive the 30-day operative
delay for this filing. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because it will allow the Exchange to modify its rules
to conform to the OLPP Program and implement the Penny Program on July
1, 2020, consistent with the Commission's approval of the OLPP
Amendment. Accordingly, the Commission designates the proposed rule
change as operative upon filing with the Commission.\22\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
\22\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings 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-CboeEDGX-2020-028 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.
[[Page 37726]]
All submissions should refer to File Number SR-CboeEDGX-2020-028. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeEDGX-2020-028 and should be
submitted on or before July 14, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-13431 Filed 6-22-20; 8:45 am]
BILLING CODE 8011-01-P
