Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Certain Rules To Accommodate the Listing and Trading of Index Options With an Index Multiplier of One, 19933-19938 [2021-07674]
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Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices
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–NASDAQ–2021–018 and
should be submitted on or before May
6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–07678 Filed 4–14–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91528; File No. SR–CBOE–
2020–117]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, To Amend Certain
Rules To Accommodate the Listing
and Trading of Index Options With an
Index Multiplier of One
April 9, 2021.
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I. Introduction
On December 23, 2020, Cboe
Exchange, Inc. (‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to allow the Exchange to list and
trade certain index options with an
index multiplier of one (‘‘microoptions’’). The proposed rule change
was published for comment in the
12 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register on January 11, 2021.3
On February 24, 2021, the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to disapprove the proposed
rule change.4 On March 30, 2021, the
Exchange filed Amendment No. 1 to the
proposed rule change, which replaced
and superseded the proposed rule
change in its entirety.5 The Commission
is publishing this notice to solicit
comments on the Exchange’s proposal,
as modified by Amendment No. 1, from
interested persons and is approving the
Exchange’s proposal, as modified by
Amendment No. 1, on an accelerated
basis.
II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1
The Exchange proposes to amend its
rules to allow the listing and trading of
micro-options on broad-based indexes
that have an index value of at least 100.6
Currently, the Exchange may list
options on broad-based indexes that
satisfy the initial and maintenance
criteria in Rule 4.10, and, according to
the Exchange, it presently lists options
on 12 broad-based indexes with an
underlying index value of at least 100.
These 12 broad-based indexes are listed
below, along with their closing values as
of March 30, 2021, as provided by the
Exchange.7
3 See Securities Exchange Act Release No. 90853
(January 5, 2021), 86 FR 2006. Comments on the
proposed rule change can be found on the
Commission’s website at: https://www.sec.gov/
comments/sr-cboe-2020-117/srcboe2020117.htm.
4 See Securities Exchange Act Release No. 91194,
86 FR 12244 (March 2, 2021). The Commission
designated April 11, 2021, as the date by which it
should approve, disapprove, or institute
proceedings to determine whether to disapprove the
proposed rule change.
5 In Amendment No. 1, the Exchange: (i)
Narrowed the scope of the proposed rule change to
permit the listing and trading of micro-options only
on broad-based index options that have index
values of at least 100, rather than all indexes; (ii)
narrowed the scope of the proposal to remove all
aspects of the proposal that would have permitted
the trading of flexible index options (‘‘FLEX Index
Options’’) with an index multiplier of one (‘‘FLEX
micro-index options’’); and (iii) provided additional
rationale and support for the proposed rule change.
Amendment No. 1 is available on the Commission’s
website at: https://www.sec.gov/comments/sr-cboe2020-117/srcboe2020117-8566514-230802.pdf.
6 The Exchange states that it intends to file a Form
19b–4(e) with the Commission for any index option
it lists for trading with an index multiplier of one
pursuant to Rule 19b–4(e) of the Act.
7 The Exchange states that it intends to initially
list micro-options on only a single index and may
expand the listing of micro-options in the future in
response to customer demand for such additional
products.
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Index
(option symbol)
S&P 500 Index (SPX) ...........
Mini-S&P 500 Index (XSP) ...
Russell 2000 Index (RUT) ....
Mini-Russell 200 Index
(MRUT) .............................
Dow Jones Industrial Average (DJX) ..........................
S&P 100 Index (OEX and
XEO) .................................
S&P 500 ESG Index
(SPESG) ...........................
MSCI EAFE Index (MXEA) ..
MSCI Emerging Markets
Index (MXEF) ....................
Russell 1000 Growth Index
(RLG) ................................
Russell 1000 Value Index
(RLV) .................................
Russell 1000 Index (RUI) .....
19933
Current value
3,958.55
395.86
2,195.80
219.58
8 330.67
1,792.63
336.30
2,216.07
1,319.50
2,412.94
1,500.12
2,228.28
8 Options are based on 1/100th of the full
value of the Dow Jones Industrial Average
(‘‘DJIA’’).
Currently, the Exchange has
designated an index multiplier of 100
for indexes it lists for trading. Pursuant
to Rule 4.11, the Exchange may
determine the index multiplier of an
option, which is the amount specified in
the contract by which the current index
value is multiplied to arrive at the value
required to be delivered upon valid
exercise of the contract.9 The Exchange
generally specifies the index multiplier
in the specifications for an index
option.10 Similarly, Article I, Section 1,
I(3) of the Options Clearing Corporation
(‘‘OCC’’) By-Laws defines ‘‘index
multiplier’’ as the dollar amount (as
specified by the Exchange on which
such contract is traded) by which the
current index value is to be multiplied
to obtain the aggregate current index
value. The Exchange states that, while
the OCC’s By-Laws define a unit of
trading for equity options as 100 shares
if not otherwise specified, the definition
of index multiplier does not include a
default unit.11 The Exchange therefore
believes the current index multiplier
definition in the OCC By-Laws permits
any index multiplier specified by the
listing exchange.
Additionally, the Exchange believes
micro-options are covered by the
disclosures in the Options Disclosure
Document (‘‘ODD’’). The Exchange
states that the ODD reflects the
possibility of differing values of index
multipliers when describing features of
9 However, certain other Exchange Rules reflect
an index multiplier of 100, and the Exchange
proposes to update those rules to reflect the
potential for an index multiplier of one.
10 Option specifications are available at:
cboe.com/tradable_products/.
11 See OCC By-Laws Article I, Section 1, U(5).
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Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices
index options.12 Specifically, the ODD
states the total exercise price for an
index option is the exercise price
multiplied by the multiplier, and the
aggregate premium is the premium
multiplied by the multiplier.13 As a
result, the Exchange believes that the
risk disclosures regarding index options
in the ODD currently cover any risks
associated with option index options
with multipliers of one (and other
amounts).
The proposed rule change amends
various rules regarding index options to
permit the Exchange to designate an
index multiplier of one for broad-based
indexes that have an index value of at
least 100 on which it may list options.14
As proposed, micro-options would trade
in the same manner as other index
options.15 The table below demonstrates
the differences between a micro-option
and a standard index option on the SPX
Index:
Standard (index
multiplier of 100)
Term
Strike Price ..................................................................................................................................................
Bid or offer ...................................................................................................................................................
Total Value of Deliverable ...........................................................................................................................
Total Value of Contract ................................................................................................................................
3930
32.05
$3,930
$32.05
Expiration, Settlement, and Exercise
Style
As proposed, the Exchange may list a
micro-option on an index with the same
expirations, settlements, and exercise
styles as the standard index option
overlying the same index. Consistent
with existing rules for index options,
the Exchange will generally allow up to
six standard monthly expirations for
micro-options 19 as well as up to 10
expiration months for Long-Term Equity
Option Series (‘‘LEAPS’’).20 For certain
specified index options (including
MXEA, MXEF, and SPESG options) and
any class that the Exchange (as the
Reporting Authority) uses to calculate a
volatility index (currently, only SPX
options are used by the Exchange to
calculate a volatility index), the
Exchange may list up to 12 standard
monthly expirations for micro-options
on those indexes.21 The Exchange may
also list up to the same maximum
number of expirations permitted in Rule
4.13(a)(2) for micro-options on broadbased index options with nonstandard
expirations in accordance with the
Nonstandard Expirations Pilot
Program.22 Micro-options will be cashsettled contracts with European-style
exercise in accordance with the listing
criteria for those options.23 Microoptions, like standard index options,
with third-Friday expiration will also be
A.M.-settled or P.M.-settled, as
applicable, in accordance with the
applicable listing criteria.24
As proposed, the Exchange may list
micro-options over the same indexes
with P.M.-settlement in certain
instances (in addition to A.M.settlement in accordance with the
generic listing terms). Specifically,
pursuant to Rule 4.13(c), the Exchange
may open for trading Quarterly Index
Expirations (‘‘QIXs’’) on certain
specified index options. QIXs are index
option contracts that expire on the last
business day of a calendar quarter, and
the Exchange may list up to eight nearterm quarterly expirations for trading.25
Currently, the index multiplier for QIXs
may be 100 or 500. The proposed rule
change amends Rule 4.13(c) to permit
the index multiplier to also be one to
accommodate the listing of QIX microoptions on the specified indexes.
In addition, the Exchange’s
Nonstandard Expirations Pilot Program
currently allows it to list Weekly and
End of Month (‘‘EOM’’) Expirations on
any broad-based index.26 Like standard
index options with Weekly and EOM
Expirations, micro-options on broadbased indexes with Weekly and EOM
Expirations will be P.M.-settled and
otherwise treated the same as options on
the same underlying index that expire
on the third Friday of the month. The
maximum number of expirations that
may be listed for each of the Weeklys
and EOMs in a micro-option is the same
as the maximum number of expirations
permitted in Rule 4.13(a)(2) for microoptions on the same broad-based
index.27 The Exchange may currently
list Weekly and EOM Expirations on
broad-based indexes as a pilot, which
pilot period currently expires on May 3,
2021.28 The Exchange currently submits
regular reports and data to the
Commission regarding the Nonstandard
Expirations Pilot Program. To the extent
the Exchange lists any micro-options
with Weekly or EOM Expirations
pursuant to this pilot program, the
Exchange states that it will include the
same information with respect to microoptions that it does for standard options
12 The ODD is available at https://
www.theocc.com/about/publications/characterrisks.jsp. The ODD states that the exercise price of
a stock option is multiplied by the number of shares
underlying the option to determine the aggregate
exercise price and aggregate premium of that
option. See ODD at 18. Similarly, the ODD states
that the total exercise price for an index option is
the exercise price multiplied by the multiplier, and
the aggregate premium is the premium multiplied
by the multiplier. See ODD at 8, 9, and 125.
13 See ODD at 8, 9, and 125.
14 The proposed rule change, as amended by
Amendment No. 1, will not permit the trading of
FLEX micro-index options.
15 The proposed rule change defines ‘‘microoptions’’ in Rule 4.11 as a broad-based index option
for which the value of the underlying index is at
least 100 with an index multiplier of one. The
proposed rule change adds that references to ‘‘index
option’’ in the Rules include ‘‘micro-option’’ unless
the context otherwise requires.
16 For example, a standard index option for index
ABC with an index multiplier of 100 may have
symbol ABC, while a micro-option for index ABC
with a multiplier of one may have symbol ABC9.
17 Certain indexes close trading at 4:00 p.m. ET.
See Rule 5.1.
18 See id.
19 See Rule 4.13(a)(2).
20 See Rule 4.13(b). Index LEAPS may expire 12
to 180 months from the date of issuance.
21 See Rule 4.13(a).
22 See Rule 4.13(e).
23 See Rule 4.10(f) (broad-based initial listing
criteria) and (h) (MXEA and MXEF); see also Rule
4.13(a)(3).
24 See id.
25 See Rule 4.13(c).
26 See Rule 4.13(e).
27 See id.
28 See Securities Exchange Act Release No. 90262
(October 23, 2020), 85 FR 68616 (October 29, 2020).
To differentiate a micro-option on an
index from a standard index option, the
Exchange would list micro-options with
a different trading symbol than the
standard index option with the same
underlying index to reduce any
potential confusion.16
Trading Hours
As proposed, micro-options will be
available for trading during the same
hours as standard index options
pursuant to Rule 5.1(b)(2), which will
generally be 9:30 a.m. to 4:15 p.m. ET.17
To the extent an index option is
authorized for trading during Global
Trading Hours,18 the Exchange may also
list micro-options during that trading
session as well, the hours for which
trading session are 3:00 a.m. to 9:15 a.m.
ET.
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3930
32.05
$393,000
$3,205
Micro (index
multiplier of 1)
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in the reports it submits to the
Commission in accordance with the
pilot program.
Similarly, the Exchange also currently
has a pilot program under Rule 4.13,
Interpretation and Policy .13, that
allows the Exchange to list options on
specified indexes (SPX, XSP, and
MRUT) that expire on the third Friday
of the month that are P.M.-settled.
Under the Exchange’s proposal, the
Exchange may list micro-options on
those same indexes pursuant to this
pilot program, which pilot period
currently expires on May 3, 2021.29 As
it will for the Nonstandard Expirations
Pilot Program, to the extent the
Exchange lists micro-options on the
specified indexes pursuant to this P.M.settlement pilot program, the Exchange
states that it will include the same
information with respect to microoptions that it does for standard options
in the reports it submits to the
Commission in accordance with the
pilot program.
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Exercise Prices
The Exchange proposes to adopt Rule
4.13, Interpretation and Policy .01(l) to
provide that the interval between strike
prices of series of micro-options will be
$0.50 or greater.30 The Exchange states
that there are two important distinctions
between micro-options and standard
options due to the difference in
multipliers, one of which is how the
total deliverable value is calculated (the
other is the meaning of bids and offers,
as further discussed below).
Specifically, proposed Rule 4.13,
Interpretation and Policy .01(l) states
that strike prices for micro-options are
set at the same level as index options
with an index multiplier of 100. For
example, a micro-option call series with
a strike price of 3,250 has a total
deliverable value of $3,250 (3,250 × $1),
while a standard option call series with
a strike price of 3,250 has a total
deliverable value of $325,000 (3,250 ×
$100).31
29 See Securities Exchange Act Release Nos.
90263 (October 23, 2020), 85 FR 68611 (October 29,
202), and 91067 (February 5, 2021), 86 FR 9108
(February 11, 2021).
30 Pursuant to Rule 4.13, Interpretation and Policy
.01, the interval between strike prices of standard
index options is generally $5.00 except for lowerpriced strikes, for which the smallest interval is
$2.50, subject to certain exceptions (including
reduced-value index options, which may have
strike intervals of no less than $0.50 or $1). The
Exchange states that this is consistent with lower
permissible strike intervals for certain reducedvalue index options, which have the same practical
effect as index options with a smaller multiplier.
31 The Exchange states that this corresponds to
the calculation of exercise prices for other types of
options with a reduced multiplier. For example,
Rule 4.5, Interpretation and Policy .18(b) provides
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Minimum Increments
The Exchange proposes to amend
Rule 5.4 to provide that a micro-option
will have the same minimum increment
for bids and offers as the minimum
increment for a standard index option
on the same index.32 Specifically,
proposed Rule 5.3(c)(2) provides that
notwithstanding Rule 5.3(a),33 bids and
offers for a micro-option must be
expressed in terms of dollars per
1/100th part of the total value of the
contract. For example, an offer of ‘‘0.50’’
represents an offer of $0.50 for a microoption.34
Appointment Weights
The Exchange proposes to add microoptions each as a Tier AA class with a
Market-Maker appointment weight of
.001.35 The Exchange states that this is
the same appointment weight as a
majority of the other Tier AA options
classes. The Exchange determines
appointment weights of Tier AA classes
based on several factors, including, but
not limited to, competitive forces and
trading volume.
Contract Size Limits
The proposed rule change will update
various other provisions in the
following rules to reflect that onehundred micro-contracts overlying an
index will be economically equivalent
to one contract for a standard index
option overlying the same index:
that strike prices for mini-options (which have
multipliers of 10 rather than 100, as set forth in
Rule 4.5, Interpretation and Policy .18(a)) are set at
the same level as for standard options. For example,
a call series strike price to deliver 10 shares of stock
at $125 per share has a total deliverable value of
$1,250 (10 × 125) if the strike is 125, while a call
series strike price to deliver 100 shares of stock at
$125 per share has a total deliverable value of
$12,500 (100 × 125).
32 See Rule 5.4(a). The Exchange states that this
corresponds to the provision regarding the
minimum increment for mini-options.
33 Rule 5.3(a) states that except as otherwise
provided in Rule 5.3, bids and offers must be
expressed in terms of dollar and decimals per unit
of the underlying security or index. The Exchange
believes that the proposed rule change is consistent
with this provision, as a bid of 7 will represent a
bid of 7 for an option contract having an index
multiplier (i.e., unit of trading) of one. However, the
Exchange proposes to add a specific provision
regarding the meaning of bids and offers for microoptions to provide clarity in its rules, and to
maintain consistency in its rules, which currently
contain a separate provision for mini-options,
which as discussed above, have a reduced
multiplier compared to standard options as microoptions do.
34 An offer of ‘‘0.50’’ represents an offer of $50 for
a standard index option with an index multiplier
of 100.
35 See Rule 5.50(g). While the appointment
weights of Tier AA classes are not subject to
quarterly rebalancing under Rule 5.50(g)(1), the
Exchange represents that it regularly reviews the
appointment weights of Tier AA classes to ensure
that they continue to be appropriate.
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19935
• Rules 1.1 (definition of ‘‘complex
order’’) and 5.65(d) (definition of
‘‘complex trade’’): The proposed rule
change adds to the definitions in each
of Rules 1.1 (definition of ‘‘complex
order’’) and 5.65(d) (definition of
‘‘complex trade’’) that for the purposes
of applying the ratios set forth in the
definitions to complex orders comprised
of legs for both micro-options and
standard options, 100 micro-option
contracts represent one standard option
contract.36
• Rules 5.37 and 5.38: Rules 5.37 and
5.38 describe the Exchange’s Automated
Improvement Mechanism for simple
(‘‘AIM’’) and complex orders (‘‘C–
AIM’’), respectively. There is no
minimum size for an order submitted
into an AIM or C–AIM Auction.37
However, in an AIM Auction for orders
less than 50 standard option contracts
(or 500 mini-option contracts), the stop
price must be at least one minimum
increment better than the then-current
national best-bid or offer or the order’s
limit price (if the order is a limit order),
whichever is better. For orders of 50
standard option contracts (or 500 minioption contracts) or more, the stop price
must be at or better than the thencurrent national best-bid or offer or the
order’s limit price (if the order is a limit
order), whichever is better.38 The
proposed rule change will add to Rule
5.37(b) that 5,000 micro-option
36 The Exchange states that this corresponds to
the provision in those definitions regarding minioptions, which states that for the purpose of
applying these ratios to complex orders comprised
of legs for both mini-options and standard options,
ten mini-option contracts represent one standard
option contract. The proposed rule change also
conforms the definition of ‘‘complex order’’ in Rule
1.1 to the definition of ‘‘complex trade’’ in Rule
5.65 to say that it may be comprised of different
series in the same ‘‘underlying security’’ rather than
the same ‘‘class.’’ As discussed above, microoptions will be a different class than standard index
options overlying the same index. This
accommodates, for example, the fact that a complex
order could be comprised of mini-options and
standard options overlying the same stock (as
contemplated by the current definition) despite
being in different classes. The proposed rule change
also expands the definitions of complex order in
Rule 1.1 and complex trade in Rule 5.65 to provide
that it may similarly be comprised of different
series in the same ‘‘underlying index.’’ The
Exchange states that full-value indexes and
reduced-value indexes are separate indexes under
the Exchange Rules, so to the extent a multi-legged
order whose legs overly different indexes (such as
one leg with a full-value index and one leg with a
reduced-value index) would not qualify for the
definition of ‘‘complex trade.’’
37 The Exchange states that in SPX during Regular
Trading Hours, there is a maximum size of 10
contracts for orders submitted into AIM and C–AIM
Auctions (in C–AIM, the maximum size is based on
the smallest leg of the complex order). See Rules
5.37(a)(3) and 5.38(a)(3). The Exchange is not
proposing any changes to Rules 5.37(a)(3) and
5.38(a)(3).
38 See Rule 5.37(b).
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contracts is the corresponding size for
these stop price restrictions.
Additionally, Rule 5.37(c) and 5.38(c)
provide that no concurrent AIM or C–
AIM Auctions, respectively, are
permitted for orders less than 50
standard option contracts (or 500 minioption contracts) (for C–AIM Auctions,
the size is determined by the smallest
leg of the complex order), but are
permitted for orders of 50 standard
option contracts (or 500 mini-option
contracts) or greater (for C–AIM
Auctions, the size is determined by the
smallest leg of the complex order). The
proposed rule change will add that
5,000 micro-option contracts is the
corresponding size for determining
whether concurrent auctions are
permissible.
• Rules 5.39 and 5.40: Rules 5.39 and
5.40 describe the Exchange’s
Solicitation Auction Mechanism for
simple (‘‘SAM’’) and complex (‘‘C–
SAM’’), orders, respectively. An order,
or the smallest leg of a complex order,
must be for at least the minimum size
designated by the Exchange (which may
not be less than 500 standard option
contracts or 5,000 mini-option
contracts). The proposed rule change
will add that 50,000 micro-option
contracts is the corresponding minimum
size for orders submitted into SAM or
C–SAM Auctions.
• Rule 5.87: Rule 5.87(f) describes
when a Floor Broker is entitled to cross
a certain percentage of an order, subject
to the requirements in that paragraph.
Under that Rule, the Exchange may
determine on a class-by-class basis the
eligible size for an order that may be
transacted pursuant to this paragraph;
however, the eligible order size may not
be less than 50 standard option
contracts (or 500 mini-option contracts).
The proposed rule change will add that
5,000 micro-option contracts is the
corresponding minimum size for orders
that may be crossed in accordance with
this provision. Additionally, Rule 5.87,
Interpretation and Policy .07(a) provides
that Rule 5.86(e) does not prohibit a
Trading Permit Holder (‘‘TPH’’) from
buying or selling a stock, security
futures or futures position following
receipt of an order, including an option
order, but prior to announcing such
Broad-Based index
Position and Exercise Limits 39
Rule 8.31 governs position limits for
broad-based index options, and
currently provides that there are no
position limits for broad-based index
option contracts (including reducedvalue option contracts) on DJX, OEX,
XEO, RUT, and SPX classes (among
others). The position limits on other
broad-based index options that the
Exchange currently lists for trading are
below:
Standard limit (on the same side of the market)
Russell 1000, Russell 1000 Growth, Russell 1000 Value .......................
MSCI Emerging Markets Index, MSCI EAFE Index ................................
Other .........................................................................................................
jbell on DSKJLSW7X2PROD with NOTICES
order to the trading crowd, provided
that the option order is in a class
designated as eligible for ‘‘tied hedge’’
transactions and within the eligibility
size parameters, which are determined
by the Exchange and may not be smaller
than 500 standard option contracts (or
5,000 mini-option contracts). The
proposed rule change adds that 50,000
micro-option contracts is the
corresponding minimum size for orders
that may qualify as tied hedge
transactions and not be deemed a
violation of Rule 5.86(e).
50,000 contracts (no more than 30,000 near-term).
50,000 contracts.
25,000 contracts (no more than 15,000 near-term).
Exchange further states that current
Exchange Rules that apply to the trading
of other index options traded on the
Exchange will also apply to the trading
of micro-options, such as Exchange
Rules governing customer accounts,
margin requirements and trading halt
procedures. The Exchange also states
that TPHs that enter micro-option orders
on behalf of customers, including retail
customers, will continue to be subject to
all Exchange Rules regarding doing
business with the public.
The proposed rule change adds Rule
8.31(f) to provide that positions in
micro-options (with an index multiplier
of one) will be aggregated with positions
in standard options (including reducedvalue option contracts) (with an index
multiplier of 100) on the same broadbased index and, for purposes of
determining compliance with the
position limits under Rule 8.31, 100
micro-option contracts with an index
multiplier of one equal one standard
option contract with an index multiplier
of 100. The Exchange states that this is
consistent with Rule 8.31(d), which
similarly provides that positions in
reduced-value index options are
aggregated with positions in full-value
index options based on economic
equivalent values of those options.
Rule 8.42(b) governs exercise limits
for index options and provides that
exercise limits for index option
contracts will be equivalent to the
position limits prescribed for option
contracts with the nearest expiration
date in Rule 8.31, 8.32, or 8.34. As is the
case for certain broad-based index
options as noted above, there are no
exercise limits for certain broad-based
index options (including reduced-value
option contracts). The proposed rule
change adds to Rule 8.42(b) that there
will similarly be no exercise limits on
micro-option contracts on those same
broad-based indexes.
Capacity and Regulation
The Exchange represents that it
believes the Exchange and Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
the additional traffic associated with the
listing of new series that may result
from the introduction of the microoptions. The Exchange states that it also
understands that the OCC will be able
to accommodate the listing and trading
of micro-options. The Exchange believes
that its existing surveillance and
reporting safeguards are designed to
deter and detect possible manipulative
behavior which might arise from listing
and trading micro-options. The
III. Discussion and Commission
Findings
After careful review of the proposal
and the comments received, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.40 In particular, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section 6(b)(5)
39 This discussion focuses on position and
exercise limits with respect to indexes on which the
Exchange currently lists standard options and may
also list micro-options. To the extent the Exchange
lists micro-options on other indexes in the future,
the Exchange states that they would be subject to
the same position and exercise limits set forth in
the applicable Rules, and similarly aggregated with
standard options on the same indexes, as proposed.
40 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
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of the Act,41 which requires, among
other things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, 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.
In support of its proposal, the
Exchange states that the listing and
trading of micro-options could benefit
investors, particularly retail investors,
by expanding investor choice and
flexibility by providing them with the
ability to trade certain index options
and hedge their portfolios with a
smaller outlay of capital. Similarly, one
commenter expressed support for the
proposal,42 asserting that the listing and
trading of micro-options could benefit
investors by providing a more precise
hedging tool. The Exchange explains
that micro-options may appeal to
investors who currently may not
participate in the trading of certain
index options because index options are
generally higher-priced securities due to
the high levels of the indexes. The
Exchange believes micro-options could
provide these investors with a point of
entry into the index options market,
which will make options overlying
larger-valued broad-based indexes 43
more readily available as investing and
hedging tools. The Exchange believes
this may facilitate overall investor
participation in the markets for index
options, which may increase the depth
and liquidity to the benefit of all
investors. The Exchange states that it
does not believe the proposed rule
change will result in fragmentation of
liquidity. In particular, the Exchange
states that it has observed no
fragmentation of liquidity in the markets
for economically equivalent products
that are listed today. The Exchange
further states that it expects microoptions to generate new order flow to
the Exchange, rather than diverting
41 15
U.S.C. 78f(b)(5).
Letter to Vanessa Countryman, Secretary,
Commission, from Milliman Financial Risk
Management LLC, dated April 5, 2021. A second
commenter expressed support for listing and
trading FLEX micro-index options for similar
reasons; however, the Exchange removed aspects of
the proposal that would permit the Exchange to list
FLEX micro-index options in Amendment No. 1.
See Letter to Vanessa Countryman, Secretary,
Commission, from Biju Kulathakal, Chief Executive
Officer, Halo Investing, Inc., dated March 31, 2021.
43 The Exchange also believes it is reasonable to
limit micro-options to broad-based indexes with
values of at least 100, as indexes with smaller
values would have smaller notional values.
jbell on DSKJLSW7X2PROD with NOTICES
42 See
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current order flow from standard
options to micro-options.
The Commission believes that the
listing and trading of micro-options on
broad-based indexes that have a value of
at least 100 could benefit investors by
providing them with additional
investment alternatives.44 The
Commission believes that, as stated by
the Exchange, the listing and trading of
micro-options could make options
overlying higher-valued broad-based
indexes more readily available to
investors, thereby providing investors
with an additional trading and hedging
mechanism.45 The Commission believes
this proposal, as amended to include
only higher-value broad-based indexes,
strikes a reasonable balance between the
Exchange’s desire to offer a wider array
of investment opportunities and the
need to avoid unnecessary proliferation
of options series. However, the
Commission expects the Exchange to
monitor the trading of micro-options to
evaluate whether any issues develop.
The Commission also believes that the
proposal is consistent with the Act, in
particular the protection of investors
and the public interest, as it includes
several aspects designed to reduce
potential investor confusion. In
particular, the Commission believes that
the aspects of the proposal related to the
quoting and trading of micro-options
provide clarity about the application of
certain of the Exchange’s rules to microoptions. The Commission believes that
the proposed treatment of strike prices,
minimum size of index options
contracts, bids and offers, and position
and exercise limits for micro-options is
consistent with the Act, as these
proposed changes should make clear
how micro-options would be quoted
and traded and are consistent with the
treatment of certain reduced-value
index options.46 The Commission also
44 The Commission has previously approved the
listing and trading of options based on a reduced
value of broad-based indexes, including 1/100th the
value of the FTSE 100 Index and FTSE 250
Index,44 and 1/10th the value of the Nasdaq 100
Index. See Securities Exchange Act Release Nos.
57654 (April 11, 2008), 73 FR 21003 (April 17,
2008). See also Securities Exchange Act Release No.
51121 (February 1, 2005), 70 FR 6476 (February 7,
2005).
45 In Amendment No. 1, the Exchange provided
examples of the trading of a micro-option as
compared to a standard option on a broad-based
index and the potential benefits for investors. See
Amendment No. 1 at 7–11.
46 In addition, the Exchange has made changes to
various provisions in its rules to reflect that one
hundred micro-option contracts overlying an index
will be economically equivalent to one contract for
a standard index option. See Rule 1.1 (definition of
‘‘complex order’’), Rules 5.37–5.40 (governing
various auction mechanisms), Rule 5.65(d)
(definition of ‘‘complex trade’’), and Rule 5.87
(crossing orders).
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19937
believes that the use of different trading
symbols for micro-options should help
investors and other market participants
to distinguish those options from the
related standard options, reducing
potential investor confusion. Lastly, the
Exchange has stated that it plans to
provide investor education on the uses
and risks of micro-options through its
current and expanded education
platforms.
Additionally, the Commission
believes that the proposed appointment
weight for micro-options is consistent
with the Act, as the initial appointment
weight is designed to incentivize more
Market-Makers to obtain an
appointment in each micro-option that
the Exchange will list, which may result
in more liquidity and competitive
pricing.
The Commission believes it is
appropriate and consistent with the Act
for the Exchange to list the same
expirations, settlements, and exercise
styles for micro-options as it may for
standard index options.47 In addition,
the Exchange states that it and OPRA
have the necessary systems capacity to
handle the additional traffic associated
with the listing of new series that may
result from the introduction of the
micro-options. The Exchange also states
that the OCC will be able to
accommodate the listing and trading of
micro-options.
As a national securities exchange, the
Exchange is required, under Section
6(b)(1) of the Act,48 to enforce
compliance by its members and persons
associated with its members with the
provisions of the Act, Commission rules
and regulations thereunder, and its own
rules. The Exchange states that its
existing surveillance and reporting
safeguards are designed to deter and
detect possible manipulative behavior
that might arise from listing and trading
micro-options. In addition, microoptions will be traded under the
Exchange’s existing regulatory regime
for index options, which includes,
among other things, the Exchange’s
existing rules regarding customer
protection. In particular, the Exchange
states that TPHs that enter micro-option
orders on behalf of customers, including
retail customers, will continue to be
subject to all Exchange rules regarding
doing business with the public,
47 As described above, to the extent the Exchange
lists micro-options pursuant to the Nonstandard
Expirations Pilot Program or its pilot regarding
certain P.M.-settled index options, the Exchange
states that it will include the same information with
respect to micro-options that it does for standard
options in the reports and data it provides to the
Commission.
48 15 U.S.C. 78f(b)(1).
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Federal Register / Vol. 86, No. 71 / Thursday, April 15, 2021 / Notices
including those within Chapter 9 of the
Exchange Rulebook.49 The Commission
believes that it is consistent with the
Act to apply Exchange rules governing,
among other things, customer accounts,
margin requirements, and trading halt
procedures to the proposed microoptions that are otherwise applicable to
other index options. The Commission
believes that the Exchange’s rules
governing the trading of the index
options on the Exchange help to ensure
the maintenance of fair and orderly
markets for micro-options, which is
consistent with the protection of
investors and the public interest.
Accordingly, the Commission finds
that the proposed rule change, as
modified by Amendment No. 1, is
consistent with Section 6(b)(5) of the
Act 50 and the rules and regulations
thereunder applicable to a national
securities exchange.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as modified by Amendment No.
1, 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–2020–117 on the subject line.
jbell on DSKJLSW7X2PROD with NOTICES
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–2020–117. 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
49 The Exchange states these rules require, among
other things, that: (i) A TPH may not accept an
option order, including a micro-option order, from
a customer unless that customer’s account has been
approved for options transactions in accordance
with Rule 9.1; (ii) TPHs that conduct customer
business, including retail customer business, must
ensure they provide for appropriate supervisory
control over that business and maintain customer
records in accordance with Rule 9.2; and (iii) TPHs
will also need to provide customers that trade
micro-options (and any other option) with a copy
of the ODD and amendments to the ODD in
accordance with Rule 9.9 so that customers are
informed of any risks associated with trading
options, including micro-options.
50 15 U.S.C. 78f(b)(5).
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post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2020–117, and
should be submitted on or before May
6, 2021.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the 30th day after the date of
publication of notice of the filing of
Amendment No. 1 in the Federal
Register. Amendment No. 1 narrowed
the scope of the proposed rule change,
as well as provided additional rationale
and support for the proposed rule
change. Specifically, the Exchange (i)
narrowed the scope of the proposed rule
change to permit the listing and trading
of micro-options only on broad-based
index options that have index values of
at least 100, rather than all indexes; (ii)
narrowed the scope of the proposal to
remove all aspects of the proposal that
would have permitted the trading of
FLEX micro-index options; and (iii)
provided additional rationale and
support for the proposed rule change. In
support of the proposed rule change, the
Exchange: Provided additional
examples of how retail investors may
use micro-options; emphasized that
TPHs, in entering micro-option orders
on behalf of customers, will continue to
be subject to all Exchange Rules
regarding doing business with the
public; and represented that it will
PO 00000
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expand education offerings to inform
investors of the benefits and risks of
trading micro-options. The changes to
the proposal and additional information
in Amendment No. 1 do not raise any
novel regulatory issues and assist the
Commission in evaluating the
Exchange’s proposal and in determining
that it is consistent with the Act.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,51 to approve the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,52 that the
proposed rule change (SR–CBOE–2020–
117), as modified by Amendment No. 1,
be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.53
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–07674 Filed 4–14–21; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16920 and #16921;
Washington Disaster Number WA–00092]
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of Washington
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Washington (FEMA–4593–
DR), dated 04/08/2021.
Incident: Severe Winter Storm,
Straight-line Winds, Flooding,
Landslides, and Mudslides.
Incident Period: 12/29/2020 through
01/16/2021.
DATES: Issued on 04/08/2021.
Physical Loan Application Deadline
Date: 06/07/2021.
Economic Injury (EIDL) Loan
Application Deadline Date: 01/10/2022.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
SUMMARY:
51 15
U.S.C. 78s(b)(2).
52 Id.
53 17
E:\FR\FM\15APN1.SGM
CFR 200.30–3(a)(12).
15APN1
]]>Agencies
[Federal Register Volume 86, Number 71 (Thursday, April 15, 2021)]
[Notices]
[Pages 19933-19938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07674]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91528; File No. SR-CBOE-2020-117]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Certain
Rules To Accommodate the Listing and Trading of Index Options With an
Index Multiplier of One
April 9, 2021.
I. Introduction
On December 23, 2020, Cboe Exchange, Inc. (``Exchange'') filed with
the Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to allow the
Exchange to list and trade certain index options with an index
multiplier of one (``micro-options''). The proposed rule change was
published for comment in the Federal Register on January 11, 2021.\3\
On February 24, 2021, the Commission designated a longer period within
which to approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether to disapprove the
proposed rule change.\4\ On March 30, 2021, the Exchange filed
Amendment No. 1 to the proposed rule change, which replaced and
superseded the proposed rule change in its entirety.\5\ The Commission
is publishing this notice to solicit comments on the Exchange's
proposal, as modified by Amendment No. 1, from interested persons and
is approving the Exchange's proposal, as modified by Amendment No. 1,
on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 90853 (January 5,
2021), 86 FR 2006. Comments on the proposed rule change can be found
on the Commission's website at: https://www.sec.gov/comments/sr-cboe-2020-117/srcboe2020117.htm.
\4\ See Securities Exchange Act Release No. 91194, 86 FR 12244
(March 2, 2021). The Commission designated April 11, 2021, as the
date by which it should approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change.
\5\ In Amendment No. 1, the Exchange: (i) Narrowed the scope of
the proposed rule change to permit the listing and trading of micro-
options only on broad-based index options that have index values of
at least 100, rather than all indexes; (ii) narrowed the scope of
the proposal to remove all aspects of the proposal that would have
permitted the trading of flexible index options (``FLEX Index
Options'') with an index multiplier of one (``FLEX micro-index
options''); and (iii) provided additional rationale and support for
the proposed rule change. Amendment No. 1 is available on the
Commission's website at: https://www.sec.gov/comments/sr-cboe-2020-117/srcboe2020117-8566514-230802.pdf.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change, as Modified by Amendment
No. 1
The Exchange proposes to amend its rules to allow the listing and
trading of micro-options on broad-based indexes that have an index
value of at least 100.\6\ Currently, the Exchange may list options on
broad-based indexes that satisfy the initial and maintenance criteria
in Rule 4.10, and, according to the Exchange, it presently lists
options on 12 broad-based indexes with an underlying index value of at
least 100. These 12 broad-based indexes are listed below, along with
their closing values as of March 30, 2021, as provided by the
Exchange.\7\
---------------------------------------------------------------------------
\6\ The Exchange states that it intends to file a Form 19b-4(e)
with the Commission for any index option it lists for trading with
an index multiplier of one pursuant to Rule 19b-4(e) of the Act.
\7\ The Exchange states that it intends to initially list micro-
options on only a single index and may expand the listing of micro-
options in the future in response to customer demand for such
additional products.
------------------------------------------------------------------------
Index (option symbol) Current value
------------------------------------------------------------------------
S&P 500 Index (SPX)..................................... 3,958.55
Mini-S&P 500 Index (XSP)................................ 395.86
Russell 2000 Index (RUT)................................ 2,195.80
Mini-Russell 200 Index (MRUT)........................... 219.58
Dow Jones Industrial Average (DJX)...................... \8\ 330.67
S&P 100 Index (OEX and XEO)............................. 1,792.63
S&P 500 ESG Index (SPESG)............................... 336.30
MSCI EAFE Index (MXEA).................................. 2,216.07
MSCI Emerging Markets Index (MXEF)...................... 1,319.50
Russell 1000 Growth Index (RLG)......................... 2,412.94
Russell 1000 Value Index (RLV).......................... 1,500.12
Russell 1000 Index (RUI)................................ 2,228.28
------------------------------------------------------------------------
\8\ Options are based on 1/100th of the full value of the Dow Jones
Industrial Average (``DJIA'').
Currently, the Exchange has designated an index multiplier of 100
for indexes it lists for trading. Pursuant to Rule 4.11, the Exchange
may determine the index multiplier of an option, which is the amount
specified in the contract by which the current index value is
multiplied to arrive at the value required to be delivered upon valid
exercise of the contract.\9\ The Exchange generally specifies the index
multiplier in the specifications for an index option.\10\ Similarly,
Article I, Section 1, I(3) of the Options Clearing Corporation
(``OCC'') By-Laws defines ``index multiplier'' as the dollar amount (as
specified by the Exchange on which such contract is traded) by which
the current index value is to be multiplied to obtain the aggregate
current index value. The Exchange states that, while the OCC's By-Laws
define a unit of trading for equity options as 100 shares if not
otherwise specified, the definition of index multiplier does not
include a default unit.\11\ The Exchange therefore believes the current
index multiplier definition in the OCC By-Laws permits any index
multiplier specified by the listing exchange.
---------------------------------------------------------------------------
\9\ However, certain other Exchange Rules reflect an index
multiplier of 100, and the Exchange proposes to update those rules
to reflect the potential for an index multiplier of one.
\10\ Option specifications are available at: cboe.com/tradable_products/.
\11\ See OCC By-Laws Article I, Section 1, U(5).
---------------------------------------------------------------------------
Additionally, the Exchange believes micro-options are covered by
the disclosures in the Options Disclosure Document (``ODD''). The
Exchange states that the ODD reflects the possibility of differing
values of index multipliers when describing features of
[[Page 19934]]
index options.\12\ Specifically, the ODD states the total exercise
price for an index option is the exercise price multiplied by the
multiplier, and the aggregate premium is the premium multiplied by the
multiplier.\13\ As a result, the Exchange believes that the risk
disclosures regarding index options in the ODD currently cover any
risks associated with option index options with multipliers of one (and
other amounts).
---------------------------------------------------------------------------
\12\ The ODD is available at https://www.theocc.com/about/publications/character-risks.jsp. The ODD states that the exercise
price of a stock option is multiplied by the number of shares
underlying the option to determine the aggregate exercise price and
aggregate premium of that option. See ODD at 18. Similarly, the ODD
states that the total exercise price for an index option is the
exercise price multiplied by the multiplier, and the aggregate
premium is the premium multiplied by the multiplier. See ODD at 8,
9, and 125.
\13\ See ODD at 8, 9, and 125.
---------------------------------------------------------------------------
The proposed rule change amends various rules regarding index
options to permit the Exchange to designate an index multiplier of one
for broad-based indexes that have an index value of at least 100 on
which it may list options.\14\ As proposed, micro-options would trade
in the same manner as other index options.\15\ The table below
demonstrates the differences between a micro-option and a standard
index option on the SPX Index:
---------------------------------------------------------------------------
\14\ The proposed rule change, as amended by Amendment No. 1,
will not permit the trading of FLEX micro-index options.
\15\ The proposed rule change defines ``micro-options'' in Rule
4.11 as a broad-based index option for which the value of the
underlying index is at least 100 with an index multiplier of one.
The proposed rule change adds that references to ``index option'' in
the Rules include ``micro-option'' unless the context otherwise
requires.
------------------------------------------------------------------------
Standard (index
Term multiplier of Micro (index
100) multiplier of 1)
------------------------------------------------------------------------
Strike Price...................... 3930 3930
Bid or offer...................... 32.05 32.05
Total Value of Deliverable........ $393,000 $3,930
Total Value of Contract........... $3,205 $32.05
------------------------------------------------------------------------
To differentiate a micro-option on an index from a standard index
option, the Exchange would list micro-options with a different trading
symbol than the standard index option with the same underlying index to
reduce any potential confusion.\16\
---------------------------------------------------------------------------
\16\ For example, a standard index option for index ABC with an
index multiplier of 100 may have symbol ABC, while a micro-option
for index ABC with a multiplier of one may have symbol ABC9.
---------------------------------------------------------------------------
Trading Hours
As proposed, micro-options will be available for trading during the
same hours as standard index options pursuant to Rule 5.1(b)(2), which
will generally be 9:30 a.m. to 4:15 p.m. ET.\17\ To the extent an index
option is authorized for trading during Global Trading Hours,\18\ the
Exchange may also list micro-options during that trading session as
well, the hours for which trading session are 3:00 a.m. to 9:15 a.m.
ET.
---------------------------------------------------------------------------
\17\ Certain indexes close trading at 4:00 p.m. ET. See Rule
5.1.
\18\ See id.
---------------------------------------------------------------------------
Expiration, Settlement, and Exercise Style
As proposed, the Exchange may list a micro-option on an index with
the same expirations, settlements, and exercise styles as the standard
index option overlying the same index. Consistent with existing rules
for index options, the Exchange will generally allow up to six standard
monthly expirations for micro-options \19\ as well as up to 10
expiration months for Long-Term Equity Option Series (``LEAPS'').\20\
For certain specified index options (including MXEA, MXEF, and SPESG
options) and any class that the Exchange (as the Reporting Authority)
uses to calculate a volatility index (currently, only SPX options are
used by the Exchange to calculate a volatility index), the Exchange may
list up to 12 standard monthly expirations for micro-options on those
indexes.\21\ The Exchange may also list up to the same maximum number
of expirations permitted in Rule 4.13(a)(2) for micro-options on broad-
based index options with nonstandard expirations in accordance with the
Nonstandard Expirations Pilot Program.\22\ Micro-options will be cash-
settled contracts with European-style exercise in accordance with the
listing criteria for those options.\23\ Micro-options, like standard
index options, with third-Friday expiration will also be A.M.-settled
or P.M.-settled, as applicable, in accordance with the applicable
listing criteria.\24\
---------------------------------------------------------------------------
\19\ See Rule 4.13(a)(2).
\20\ See Rule 4.13(b). Index LEAPS may expire 12 to 180 months
from the date of issuance.
\21\ See Rule 4.13(a).
\22\ See Rule 4.13(e).
\23\ See Rule 4.10(f) (broad-based initial listing criteria) and
(h) (MXEA and MXEF); see also Rule 4.13(a)(3).
\24\ See id.
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As proposed, the Exchange may list micro-options over the same
indexes with P.M.-settlement in certain instances (in addition to A.M.-
settlement in accordance with the generic listing terms). Specifically,
pursuant to Rule 4.13(c), the Exchange may open for trading Quarterly
Index Expirations (``QIXs'') on certain specified index options. QIXs
are index option contracts that expire on the last business day of a
calendar quarter, and the Exchange may list up to eight near-term
quarterly expirations for trading.\25\ Currently, the index multiplier
for QIXs may be 100 or 500. The proposed rule change amends Rule
4.13(c) to permit the index multiplier to also be one to accommodate
the listing of QIX micro-options on the specified indexes.
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\25\ See Rule 4.13(c).
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In addition, the Exchange's Nonstandard Expirations Pilot Program
currently allows it to list Weekly and End of Month (``EOM'')
Expirations on any broad-based index.\26\ Like standard index options
with Weekly and EOM Expirations, micro-options on broad-based indexes
with Weekly and EOM Expirations will be P.M.-settled and otherwise
treated the same as options on the same underlying index that expire on
the third Friday of the month. The maximum number of expirations that
may be listed for each of the Weeklys and EOMs in a micro-option is the
same as the maximum number of expirations permitted in Rule 4.13(a)(2)
for micro-options on the same broad-based index.\27\ The Exchange may
currently list Weekly and EOM Expirations on broad-based indexes as a
pilot, which pilot period currently expires on May 3, 2021.\28\ The
Exchange currently submits regular reports and data to the Commission
regarding the Nonstandard Expirations Pilot Program. To the extent the
Exchange lists any micro-options with Weekly or EOM Expirations
pursuant to this pilot program, the Exchange states that it will
include the same information with respect to micro-options that it does
for standard options
[[Page 19935]]
in the reports it submits to the Commission in accordance with the
pilot program.
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\26\ See Rule 4.13(e).
\27\ See id.
\28\ See Securities Exchange Act Release No. 90262 (October 23,
2020), 85 FR 68616 (October 29, 2020).
---------------------------------------------------------------------------
Similarly, the Exchange also currently has a pilot program under
Rule 4.13, Interpretation and Policy .13, that allows the Exchange to
list options on specified indexes (SPX, XSP, and MRUT) that expire on
the third Friday of the month that are P.M.-settled. Under the
Exchange's proposal, the Exchange may list micro-options on those same
indexes pursuant to this pilot program, which pilot period currently
expires on May 3, 2021.\29\ As it will for the Nonstandard Expirations
Pilot Program, to the extent the Exchange lists micro-options on the
specified indexes pursuant to this P.M.-settlement pilot program, the
Exchange states that it will include the same information with respect
to micro-options that it does for standard options in the reports it
submits to the Commission in accordance with the pilot program.
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\29\ See Securities Exchange Act Release Nos. 90263 (October 23,
2020), 85 FR 68611 (October 29, 202), and 91067 (February 5, 2021),
86 FR 9108 (February 11, 2021).
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Exercise Prices
The Exchange proposes to adopt Rule 4.13, Interpretation and Policy
.01(l) to provide that the interval between strike prices of series of
micro-options will be $0.50 or greater.\30\ The Exchange states that
there are two important distinctions between micro-options and standard
options due to the difference in multipliers, one of which is how the
total deliverable value is calculated (the other is the meaning of bids
and offers, as further discussed below). Specifically, proposed Rule
4.13, Interpretation and Policy .01(l) states that strike prices for
micro-options are set at the same level as index options with an index
multiplier of 100. For example, a micro-option call series with a
strike price of 3,250 has a total deliverable value of $3,250 (3,250 x
$1), while a standard option call series with a strike price of 3,250
has a total deliverable value of $325,000 (3,250 x $100).\31\
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\30\ Pursuant to Rule 4.13, Interpretation and Policy .01, the
interval between strike prices of standard index options is
generally $5.00 except for lower-priced strikes, for which the
smallest interval is $2.50, subject to certain exceptions (including
reduced-value index options, which may have strike intervals of no
less than $0.50 or $1). The Exchange states that this is consistent
with lower permissible strike intervals for certain reduced-value
index options, which have the same practical effect as index options
with a smaller multiplier.
\31\ The Exchange states that this corresponds to the
calculation of exercise prices for other types of options with a
reduced multiplier. For example, Rule 4.5, Interpretation and Policy
.18(b) provides that strike prices for mini-options (which have
multipliers of 10 rather than 100, as set forth in Rule 4.5,
Interpretation and Policy .18(a)) are set at the same level as for
standard options. For example, a call series strike price to deliver
10 shares of stock at $125 per share has a total deliverable value
of $1,250 (10 x 125) if the strike is 125, while a call series
strike price to deliver 100 shares of stock at $125 per share has a
total deliverable value of $12,500 (100 x 125).
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Minimum Increments
The Exchange proposes to amend Rule 5.4 to provide that a micro-
option will have the same minimum increment for bids and offers as the
minimum increment for a standard index option on the same index.\32\
Specifically, proposed Rule 5.3(c)(2) provides that notwithstanding
Rule 5.3(a),\33\ bids and offers for a micro-option must be expressed
in terms of dollars per 1/100th part of the total value of the
contract. For example, an offer of ``0.50'' represents an offer of
$0.50 for a micro-option.\34\
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\32\ See Rule 5.4(a). The Exchange states that this corresponds
to the provision regarding the minimum increment for mini-options.
\33\ Rule 5.3(a) states that except as otherwise provided in
Rule 5.3, bids and offers must be expressed in terms of dollar and
decimals per unit of the underlying security or index. The Exchange
believes that the proposed rule change is consistent with this
provision, as a bid of 7 will represent a bid of 7 for an option
contract having an index multiplier (i.e., unit of trading) of one.
However, the Exchange proposes to add a specific provision regarding
the meaning of bids and offers for micro-options to provide clarity
in its rules, and to maintain consistency in its rules, which
currently contain a separate provision for mini-options, which as
discussed above, have a reduced multiplier compared to standard
options as micro-options do.
\34\ An offer of ``0.50'' represents an offer of $50 for a
standard index option with an index multiplier of 100.
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Appointment Weights
The Exchange proposes to add micro-options each as a Tier AA class
with a Market-Maker appointment weight of .001.\35\ The Exchange states
that this is the same appointment weight as a majority of the other
Tier AA options classes. The Exchange determines appointment weights of
Tier AA classes based on several factors, including, but not limited
to, competitive forces and trading volume.
---------------------------------------------------------------------------
\35\ See Rule 5.50(g). While the appointment weights of Tier AA
classes are not subject to quarterly rebalancing under Rule
5.50(g)(1), the Exchange represents that it regularly reviews the
appointment weights of Tier AA classes to ensure that they continue
to be appropriate.
---------------------------------------------------------------------------
Contract Size Limits
The proposed rule change will update various other provisions in
the following rules to reflect that one-hundred micro-contracts
overlying an index will be economically equivalent to one contract for
a standard index option overlying the same index:
Rules 1.1 (definition of ``complex order'') and 5.65(d)
(definition of ``complex trade''): The proposed rule change adds to the
definitions in each of Rules 1.1 (definition of ``complex order'') and
5.65(d) (definition of ``complex trade'') that for the purposes of
applying the ratios set forth in the definitions to complex orders
comprised of legs for both micro-options and standard options, 100
micro-option contracts represent one standard option contract.\36\
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\36\ The Exchange states that this corresponds to the provision
in those definitions regarding mini-options, which states that for
the purpose of applying these ratios to complex orders comprised of
legs for both mini-options and standard options, ten mini-option
contracts represent one standard option contract. The proposed rule
change also conforms the definition of ``complex order'' in Rule 1.1
to the definition of ``complex trade'' in Rule 5.65 to say that it
may be comprised of different series in the same ``underlying
security'' rather than the same ``class.'' As discussed above,
micro-options will be a different class than standard index options
overlying the same index. This accommodates, for example, the fact
that a complex order could be comprised of mini-options and standard
options overlying the same stock (as contemplated by the current
definition) despite being in different classes. The proposed rule
change also expands the definitions of complex order in Rule 1.1 and
complex trade in Rule 5.65 to provide that it may similarly be
comprised of different series in the same ``underlying index.'' The
Exchange states that full-value indexes and reduced-value indexes
are separate indexes under the Exchange Rules, so to the extent a
multi-legged order whose legs overly different indexes (such as one
leg with a full-value index and one leg with a reduced-value index)
would not qualify for the definition of ``complex trade.''
---------------------------------------------------------------------------
Rules 5.37 and 5.38: Rules 5.37 and 5.38 describe the
Exchange's Automated Improvement Mechanism for simple (``AIM'') and
complex orders (``C-AIM''), respectively. There is no minimum size for
an order submitted into an AIM or C-AIM Auction.\37\ However, in an AIM
Auction for orders less than 50 standard option contracts (or 500 mini-
option contracts), the stop price must be at least one minimum
increment better than the then-current national best-bid or offer or
the order's limit price (if the order is a limit order), whichever is
better. For orders of 50 standard option contracts (or 500 mini-option
contracts) or more, the stop price must be at or better than the then-
current national best-bid or offer or the order's limit price (if the
order is a limit order), whichever is better.\38\ The proposed rule
change will add to Rule 5.37(b) that 5,000 micro-option
[[Page 19936]]
contracts is the corresponding size for these stop price restrictions.
Additionally, Rule 5.37(c) and 5.38(c) provide that no concurrent AIM
or C-AIM Auctions, respectively, are permitted for orders less than 50
standard option contracts (or 500 mini-option contracts) (for C-AIM
Auctions, the size is determined by the smallest leg of the complex
order), but are permitted for orders of 50 standard option contracts
(or 500 mini-option contracts) or greater (for C-AIM Auctions, the size
is determined by the smallest leg of the complex order). The proposed
rule change will add that 5,000 micro-option contracts is the
corresponding size for determining whether concurrent auctions are
permissible.
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\37\ The Exchange states that in SPX during Regular Trading
Hours, there is a maximum size of 10 contracts for orders submitted
into AIM and C-AIM Auctions (in C-AIM, the maximum size is based on
the smallest leg of the complex order). See Rules 5.37(a)(3) and
5.38(a)(3). The Exchange is not proposing any changes to Rules
5.37(a)(3) and 5.38(a)(3).
\38\ See Rule 5.37(b).
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Rules 5.39 and 5.40: Rules 5.39 and 5.40 describe the
Exchange's Solicitation Auction Mechanism for simple (``SAM'') and
complex (``C-SAM''), orders, respectively. An order, or the smallest
leg of a complex order, must be for at least the minimum size
designated by the Exchange (which may not be less than 500 standard
option contracts or 5,000 mini-option contracts). The proposed rule
change will add that 50,000 micro-option contracts is the corresponding
minimum size for orders submitted into SAM or C-SAM Auctions.
Rule 5.87: Rule 5.87(f) describes when a Floor Broker is
entitled to cross a certain percentage of an order, subject to the
requirements in that paragraph. Under that Rule, the Exchange may
determine on a class-by-class basis the eligible size for an order that
may be transacted pursuant to this paragraph; however, the eligible
order size may not be less than 50 standard option contracts (or 500
mini-option contracts). The proposed rule change will add that 5,000
micro-option contracts is the corresponding minimum size for orders
that may be crossed in accordance with this provision. Additionally,
Rule 5.87, Interpretation and Policy .07(a) provides that Rule 5.86(e)
does not prohibit a Trading Permit Holder (``TPH'') from buying or
selling a stock, security futures or futures position following receipt
of an order, including an option order, but prior to announcing such
order to the trading crowd, provided that the option order is in a
class designated as eligible for ``tied hedge'' transactions and within
the eligibility size parameters, which are determined by the Exchange
and may not be smaller than 500 standard option contracts (or 5,000
mini-option contracts). The proposed rule change adds that 50,000
micro-option contracts is the corresponding minimum size for orders
that may qualify as tied hedge transactions and not be deemed a
violation of Rule 5.86(e).
Position and Exercise Limits 39
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\39\ This discussion focuses on position and exercise limits
with respect to indexes on which the Exchange currently lists
standard options and may also list micro-options. To the extent the
Exchange lists micro-options on other indexes in the future, the
Exchange states that they would be subject to the same position and
exercise limits set forth in the applicable Rules, and similarly
aggregated with standard options on the same indexes, as proposed.
---------------------------------------------------------------------------
Rule 8.31 governs position limits for broad-based index options,
and currently provides that there are no position limits for broad-
based index option contracts (including reduced-value option contracts)
on DJX, OEX, XEO, RUT, and SPX classes (among others). The position
limits on other broad-based index options that the Exchange currently
lists for trading are below:
------------------------------------------------------------------------
Standard limit (on the same
Broad-Based index side of the market)
------------------------------------------------------------------------
Russell 1000, Russell 1000 Growth, 50,000 contracts (no more than
Russell 1000 Value. 30,000 near-term).
MSCI Emerging Markets Index, MSCI EAFE 50,000 contracts.
Index.
Other.................................. 25,000 contracts (no more than
15,000 near-term).
------------------------------------------------------------------------
The proposed rule change adds Rule 8.31(f) to provide that
positions in micro-options (with an index multiplier of one) will be
aggregated with positions in standard options (including reduced-value
option contracts) (with an index multiplier of 100) on the same broad-
based index and, for purposes of determining compliance with the
position limits under Rule 8.31, 100 micro-option contracts with an
index multiplier of one equal one standard option contract with an
index multiplier of 100. The Exchange states that this is consistent
with Rule 8.31(d), which similarly provides that positions in reduced-
value index options are aggregated with positions in full-value index
options based on economic equivalent values of those options.
Rule 8.42(b) governs exercise limits for index options and provides
that exercise limits for index option contracts will be equivalent to
the position limits prescribed for option contracts with the nearest
expiration date in Rule 8.31, 8.32, or 8.34. As is the case for certain
broad-based index options as noted above, there are no exercise limits
for certain broad-based index options (including reduced-value option
contracts). The proposed rule change adds to Rule 8.42(b) that there
will similarly be no exercise limits on micro-option contracts on those
same broad-based indexes.
Capacity and Regulation
The Exchange represents that it believes the Exchange and Options
Price Reporting Authority (``OPRA'') have the necessary systems
capacity to handle the additional traffic associated with the listing
of new series that may result from the introduction of the micro-
options. The Exchange states that it also understands that the OCC will
be able to accommodate the listing and trading of micro-options. The
Exchange believes that its existing surveillance and reporting
safeguards are designed to deter and detect possible manipulative
behavior which might arise from listing and trading micro-options. The
Exchange further states that current Exchange Rules that apply to the
trading of other index options traded on the Exchange will also apply
to the trading of micro-options, such as Exchange Rules governing
customer accounts, margin requirements and trading halt procedures. The
Exchange also states that TPHs that enter micro-option orders on behalf
of customers, including retail customers, will continue to be subject
to all Exchange Rules regarding doing business with the public.
III. Discussion and Commission Findings
After careful review of the proposal and the comments received, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\40\ In particular, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with Section
6(b)(5)
[[Page 19937]]
of the Act,\41\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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.
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\40\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\41\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In support of its proposal, the Exchange states that the listing
and trading of micro-options could benefit investors, particularly
retail investors, by expanding investor choice and flexibility by
providing them with the ability to trade certain index options and
hedge their portfolios with a smaller outlay of capital. Similarly, one
commenter expressed support for the proposal,\42\ asserting that the
listing and trading of micro-options could benefit investors by
providing a more precise hedging tool. The Exchange explains that
micro-options may appeal to investors who currently may not participate
in the trading of certain index options because index options are
generally higher-priced securities due to the high levels of the
indexes. The Exchange believes micro-options could provide these
investors with a point of entry into the index options market, which
will make options overlying larger-valued broad-based indexes \43\ more
readily available as investing and hedging tools. The Exchange believes
this may facilitate overall investor participation in the markets for
index options, which may increase the depth and liquidity to the
benefit of all investors. The Exchange states that it does not believe
the proposed rule change will result in fragmentation of liquidity. In
particular, the Exchange states that it has observed no fragmentation
of liquidity in the markets for economically equivalent products that
are listed today. The Exchange further states that it expects micro-
options to generate new order flow to the Exchange, rather than
diverting current order flow from standard options to micro-options.
---------------------------------------------------------------------------
\42\ See Letter to Vanessa Countryman, Secretary, Commission,
from Milliman Financial Risk Management LLC, dated April 5, 2021. A
second commenter expressed support for listing and trading FLEX
micro-index options for similar reasons; however, the Exchange
removed aspects of the proposal that would permit the Exchange to
list FLEX micro-index options in Amendment No. 1. See Letter to
Vanessa Countryman, Secretary, Commission, from Biju Kulathakal,
Chief Executive Officer, Halo Investing, Inc., dated March 31, 2021.
\43\ The Exchange also believes it is reasonable to limit micro-
options to broad-based indexes with values of at least 100, as
indexes with smaller values would have smaller notional values.
---------------------------------------------------------------------------
The Commission believes that the listing and trading of micro-
options on broad-based indexes that have a value of at least 100 could
benefit investors by providing them with additional investment
alternatives.\44\ The Commission believes that, as stated by the
Exchange, the listing and trading of micro-options could make options
overlying higher-valued broad-based indexes more readily available to
investors, thereby providing investors with an additional trading and
hedging mechanism.\45\ The Commission believes this proposal, as
amended to include only higher-value broad-based indexes, strikes a
reasonable balance between the Exchange's desire to offer a wider array
of investment opportunities and the need to avoid unnecessary
proliferation of options series. However, the Commission expects the
Exchange to monitor the trading of micro-options to evaluate whether
any issues develop.
---------------------------------------------------------------------------
\44\ The Commission has previously approved the listing and
trading of options based on a reduced value of broad-based indexes,
including 1/100th the value of the FTSE 100 Index and FTSE 250
Index,44 and 1/10th the value of the Nasdaq 100 Index.
See Securities Exchange Act Release Nos. 57654 (April 11, 2008), 73
FR 21003 (April 17, 2008). See also Securities Exchange Act Release
No. 51121 (February 1, 2005), 70 FR 6476 (February 7, 2005).
\45\ In Amendment No. 1, the Exchange provided examples of the
trading of a micro-option as compared to a standard option on a
broad-based index and the potential benefits for investors. See
Amendment No. 1 at 7-11.
---------------------------------------------------------------------------
The Commission also believes that the proposal is consistent with
the Act, in particular the protection of investors and the public
interest, as it includes several aspects designed to reduce potential
investor confusion. In particular, the Commission believes that the
aspects of the proposal related to the quoting and trading of micro-
options provide clarity about the application of certain of the
Exchange's rules to micro-options. The Commission believes that the
proposed treatment of strike prices, minimum size of index options
contracts, bids and offers, and position and exercise limits for micro-
options is consistent with the Act, as these proposed changes should
make clear how micro-options would be quoted and traded and are
consistent with the treatment of certain reduced-value index
options.\46\ The Commission also believes that the use of different
trading symbols for micro-options should help investors and other
market participants to distinguish those options from the related
standard options, reducing potential investor confusion. Lastly, the
Exchange has stated that it plans to provide investor education on the
uses and risks of micro-options through its current and expanded
education platforms.
---------------------------------------------------------------------------
\46\ In addition, the Exchange has made changes to various
provisions in its rules to reflect that one hundred micro-option
contracts overlying an index will be economically equivalent to one
contract for a standard index option. See Rule 1.1 (definition of
``complex order''), Rules 5.37-5.40 (governing various auction
mechanisms), Rule 5.65(d) (definition of ``complex trade''), and
Rule 5.87 (crossing orders).
---------------------------------------------------------------------------
Additionally, the Commission believes that the proposed appointment
weight for micro-options is consistent with the Act, as the initial
appointment weight is designed to incentivize more Market-Makers to
obtain an appointment in each micro-option that the Exchange will list,
which may result in more liquidity and competitive pricing.
The Commission believes it is appropriate and consistent with the
Act for the Exchange to list the same expirations, settlements, and
exercise styles for micro-options as it may for standard index
options.\47\ In addition, the Exchange states that it and OPRA have the
necessary systems capacity to handle the additional traffic associated
with the listing of new series that may result from the introduction of
the micro-options. The Exchange also states that the OCC will be able
to accommodate the listing and trading of micro-options.
---------------------------------------------------------------------------
\47\ As described above, to the extent the Exchange lists micro-
options pursuant to the Nonstandard Expirations Pilot Program or its
pilot regarding certain P.M.-settled index options, the Exchange
states that it will include the same information with respect to
micro-options that it does for standard options in the reports and
data it provides to the Commission.
---------------------------------------------------------------------------
As a national securities exchange, the Exchange is required, under
Section 6(b)(1) of the Act,\48\ to enforce compliance by its members
and persons associated with its members with the provisions of the Act,
Commission rules and regulations thereunder, and its own rules. The
Exchange states that its existing surveillance and reporting safeguards
are designed to deter and detect possible manipulative behavior that
might arise from listing and trading micro-options. In addition, micro-
options will be traded under the Exchange's existing regulatory regime
for index options, which includes, among other things, the Exchange's
existing rules regarding customer protection. In particular, the
Exchange states that TPHs that enter micro-option orders on behalf of
customers, including retail customers, will continue to be subject to
all Exchange rules regarding doing business with the public,
[[Page 19938]]
including those within Chapter 9 of the Exchange Rulebook.\49\ The
Commission believes that it is consistent with the Act to apply
Exchange rules governing, among other things, customer accounts, margin
requirements, and trading halt procedures to the proposed micro-options
that are otherwise applicable to other index options. The Commission
believes that the Exchange's rules governing the trading of the index
options on the Exchange help to ensure the maintenance of fair and
orderly markets for micro-options, which is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\48\ 15 U.S.C. 78f(b)(1).
\49\ The Exchange states these rules require, among other
things, that: (i) A TPH may not accept an option order, including a
micro-option order, from a customer unless that customer's account
has been approved for options transactions in accordance with Rule
9.1; (ii) TPHs that conduct customer business, including retail
customer business, must ensure they provide for appropriate
supervisory control over that business and maintain customer records
in accordance with Rule 9.2; and (iii) TPHs will also need to
provide customers that trade micro-options (and any other option)
with a copy of the ODD and amendments to the ODD in accordance with
Rule 9.9 so that customers are informed of any risks associated with
trading options, including micro-options.
---------------------------------------------------------------------------
Accordingly, the Commission finds that the proposed rule change, as
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the
Act \50\ and the rules and regulations thereunder applicable to a
national securities exchange.
---------------------------------------------------------------------------
\50\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Amendment No. 1, 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-2020-117 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-2020-117. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2020-117, and should be submitted
on or before May 6, 2021.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the 30th day after the
date of publication of notice of the filing of Amendment No. 1 in the
Federal Register. Amendment No. 1 narrowed the scope of the proposed
rule change, as well as provided additional rationale and support for
the proposed rule change. Specifically, the Exchange (i) narrowed the
scope of the proposed rule change to permit the listing and trading of
micro-options only on broad-based index options that have index values
of at least 100, rather than all indexes; (ii) narrowed the scope of
the proposal to remove all aspects of the proposal that would have
permitted the trading of FLEX micro-index options; and (iii) provided
additional rationale and support for the proposed rule change. In
support of the proposed rule change, the Exchange: Provided additional
examples of how retail investors may use micro-options; emphasized that
TPHs, in entering micro-option orders on behalf of customers, will
continue to be subject to all Exchange Rules regarding doing business
with the public; and represented that it will expand education
offerings to inform investors of the benefits and risks of trading
micro-options. The changes to the proposal and additional information
in Amendment No. 1 do not raise any novel regulatory issues and assist
the Commission in evaluating the Exchange's proposal and in determining
that it is consistent with the Act. Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2) of the Act,\51\ to approve the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.
---------------------------------------------------------------------------
\51\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\52\ that the proposed rule change (SR-CBOE-2020-117), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
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\52\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\53\
---------------------------------------------------------------------------
\53\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07674 Filed 4-14-21; 8:45 am]
BILLING CODE 8011-01-P
