Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Certain Rules Related to Stock-Option Orders, 67388-67393 [2023-21346]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 188 (Friday, September 29, 2023)]
[Notices]
[Pages 67388-67393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21346]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98509; File No. SR-CBOE-2023-052]


Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Certain Rules Related to Stock-Option Orders

September 25, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 15, 2023, Cboe Exchange, Inc. (``Exchange'' or ``Cboe 
Options'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ 
and

[[Page 67389]]

Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes 
to amend certain Rules related to stock-option orders. The text of the 
proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to update certain of its Rules regarding the 
definition and execution of stock-option orders. Rule 1.1 defines a 
``stock-option order'' as an order to buy or sell a stated number of 
units of an underlying or a related security coupled with either (a) 
the purchase or sale of option contract(s) on the opposite side of the 
market representing either the same number of units of the underlying 
or related security or the number of units of the underlying security 
necessary to create a delta neutral position or (b) the purchase or 
sale of an equal number of put and call option contracts, each having 
the same exercise price and expiration date, and each representing the 
same number of units of stock as, and on the opposite side of the 
market from, the underlying or related security portion of the order. 
It also provides that for purposes of electronic trading, the term 
stock-option order has the meaning set forth in Rule 5.33. Therefore, 
this definition of stock-option order in Rule 1.1 applies to open 
outcry trading on the Exchange.
    Rule 5.33(b)(5) currently defines a ``stock-option order'' for 
purposes of electronic trading as the purchase or sale of a stated 
number of units of an underlying stock or a security convertible into 
the underlying stock (``convertible security'') coupled with the 
purchase or sale of an option contract(s) on the opposite side of the 
market representing either (a) the same number of units of the 
underlying stock or convertible security or (b) the number of units of 
the underlying stock necessary to create a delta neutral position, but 
in no case in a ratio greater than eight-to-one (8.00), where the ratio 
represents the total number of units of the underlying stock or 
convertible security in the option leg(s) to the total number of units 
of the underlying stock or convertible security in the stock leg.\5\
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    \5\ Only those stock-option orders in the classes designated by 
the Exchange with no more than the applicable number of legs are 
eligible for processing. Stock-option orders execute in the same 
manner as other complex orders, except as otherwise specified in 
Rule 5.33.
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    Rule 5.33(f)(2)(B) and Rule 5.85(b)(3) currently describe certain 
restrictions on electronic and open outcry, respectively, executions of 
stock-option orders. Current Rule 5.33(f)(2)(B) provides that stock-
option orders that execute electronically are subject to the following:
     For a stock-option order with one option leg, the option 
leg may not trade at a price worse than the individual component price 
on the Simple Book or at the same price as a Priority Customer Order on 
the Simple Book.
     For a stock-option order with more than one option leg, 
the option legs must trade at prices pursuant Rule 5.33(f)(2)(A).\6\
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    \6\ Rule 5.33(f)(2)(A) states the System does not execute a 
complex order pursuant to Rule 5.33 at a net price: (i) that would 
cause any component of the complex strategy to be executed at a 
price of zero; (ii) that would cause any component of the complex 
strategy to be executed at a price worse than the individual 
component prices on the Simple Book; (iii) worse than the price that 
would be available if the complex order Legged into the Simple Book; 
or (iv) worse than the SBBO or equal to the SBBO when there is a 
Priority Customer order on any leg comprising the SBBO and: (a) if a 
complex order has a ratio equal to or greater than one-to-three 
(.333) and less than or equal to three-to-one (3.00), or is an Index 
Combo order, at least one component of the complex order must 
execute at a price that improves the BBO for that component by at 
least one minimum increment; or (b) if the complex order has a ratio 
less than one-to-three (.333) or greater than three-to-one (3.00), 
the component(s) of the complex order for the leg(s) with a Priority 
Customer order at the BBO must execute at a price that improves the 
price of that Priority Customer order(s) on the Simple Book by at 
least one minimum increment, except AON complex orders may only 
execute at prices better than the SBBO.
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     A stock-option order may only execute if the stock leg is 
executable at the price(s) necessary to achieve the desired net 
price.\7\
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    \7\ To facilitate the execution of the stock leg and options 
leg(s) of an executable stock-option order at valid increments 
pursuant to Rule 5.33(f)(1)(B), the legs may trade outside of their 
expected notional trade value by a specified amount (which the 
Exchange determines), unless the order has a capacity of ``C''.
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     The System executes the buy (sell) stock leg of a stock-
option order pursuant to Rule 5.33 up to a buffer amount above (below) 
the NBO (NBB) for the stock leg.\8\
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    \8\ See Rule 5.33(f)(2)(B)(i)-(iii). The rule further provides 
that the execution price of the buy (sell) stock leg of a QCC with 
Stock Order may be any price (including outside the NBBO for the 
stock leg), except the price must be permitted by Regulation SHO and 
the Limit Up-Limit Down Plan. Rule 5.33(f)(2)(B)(iv).
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    Rule 5.85(b)(3) provides that stock-option orders and security 
future-option orders have priority over bids (offers) of in-crowd 
market participants but not over Priority Customer bids (offers) in the 
Book.
    The Exchange previously amended its rules to permit complex orders 
of all ratios to be executed on the Exchange, both electronically and 
in open outcry, subject to certain execution restrictions.\9\ Rule 1.1 
currently defines ``complex order'' as an order involving the 
concurrent execution of two or more different series in the same 
underlying security or index (the ``legs'' or ``components'' of the 
complex order), for the same account, occurring at or near the same 
time and for the purpose of executing a particular investment strategy 
with no more than the applicable number of legs (which number the 
Exchange determines on a class-by-class basis). The Exchange determines 
in which classes complex orders are eligible for processing. The 
Exchange determines on a class-by-class basis whether complex orders 
with ratios less than one-to-three (.333) or greater than three-to-one 
(3.00) (except for Index Combo orders) are eligible for electronic 
processing. Unless the context otherwise requires, the term complex 
order includes Index Combo orders, stock-option orders and security 
future-option orders.\10\
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    \9\ See Securities Exchange Release No. 94204 (February 9, 
2022), 87 FR 8625 (February 15, 2022) (SR-CBOE-2021-046).
    \10\ The proposed definition of conforming complex order 
provides 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.

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[[Page 67390]]

    The Exchange first proposes to adopt definitions of ``conforming'' 
and ``nonconforming'' complex orders in Rule 1.1. The Exchange notes 
these proposed definitions are consistent with definitions used by 
another options exchange.\11\ Specifically, the Exchange proposes to 
define a ``conforming complex order'' as (a) a complex order with a 
ratio on the options legs greater than or equal to one-to-three (.333) 
or less than or equal to three-to-one (3.00), (b) an Index Combo 
order,\12\ and (c) a stock-option order with a ratio less than or equal 
to eight-to-one (8.00), where the ratio represents the total number of 
units of the underlying stock or convertible security in the option 
leg(s) to the total number of units of the underlying stock or 
convertible security in the stock leg. The Exchange proposes to define 
a ``nonconforming complex order'' as (a) a complex order with a ratio 
on the options legs less than one-to-three (.333) or greater than 
three-to-one (3.00) (except for Index Combo orders) and (b) a stock-
option order with a ratio greater than eight-to-one (8.00), where the 
ratio represents the total number of units of the underlying stock or 
convertible security in the option leg(s) to the total number of units 
of the underlying stock or convertible security in the stock leg. The 
proposed definitions of conforming and nonconforming complex orders 
each provide 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 definitions of conforming and nonconforming complex orders 
also provide that, for or the purpose of applying these ratios to 
complex orders comprised of legs for both micro-options and standard 
options, 100 micro-option contracts represent one standard option 
contract. These proposed ratio applications are consistent with the 
current definition of complex order and stock-option order.
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    \11\ See Miami International Securities Exchange, LLC (``MIAX'') 
Rule 518(a)(8) and (16) (defining ``conforming ratio'' and 
``nonconforming ratio'').
    \12\ See Rule 5.33(b)(5) (definition of Index Combo order).
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    The inclusion of an Index Combo as a conforming complex order is 
consistent with the definition of Index Combo order \13\ and the rule 
filing to adopt an Index Combo order.\14\ As noted in the rule filing 
to adopt an Index Combo order, the release further stated that the 
proposed eight-to-one ratio was selected because it was a ``defined 
conforming ratio . . . used for stock-option orders . . . .'' \15\ The 
purpose of an Index Combo order is to allow investors to trade an index 
option with a synthetic underlying position, making it a functional 
equivalent to a stock-option order.\16\ As noted in that rule filing, 
and in the definition of an Index Combo order in Rule 5.33, an Index 
Combo order is subject to all provisions applicable to complex orders 
(excluding the one-to-three/three-to-one ratio) in the Rules, which 
included permissible execution prices set forth in Rule 
5.33(f)(2)(A).\17\ Therefore, it is consistent with current Rules to 
include an Index Combo order as a ``conforming complex order.''
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    \13\ See id. (defining an ``Index Combo'' order is an order to 
purchase or sell one or more index option series and the offsetting 
number of Index Combinations defined by the delta. For purposes of 
an Index Combo order, the following terms have the following 
meanings: (1) An ``Index Combination'' is a purchase (sale) of an 
index option call and sale (purchase) of an index option put with 
the same underlying index, expiration date, and strike price. (2) A 
``delta'' is the positive (negative) number of Index Combinations 
that must be sold (purchased) to establish a market neutral hedge 
with one or more series of the same index option. (3) An Index Combo 
order may not have a ratio greater than eight options to one Index 
Combination (8.00), and will be subject to all provisions applicable 
to complex orders (excluding the one-to-three/three-to-one ratio) in 
the Rules.)
    \14\ See Securities Exchange Act Release No. 87883 (January 2, 
2020), 85 FR 942 (January 8, 2020) (SR-CBOE-2019-126).
    \15\ See id. at 945.
    \16\ See id. At the time the Index Combo order type was adopted, 
Rule 5.33(f)(2)(A) included permissible pricing for conforming 
complex orders only, which as a result would have applied to Index 
Combos.
    \17\ See id. and Rule 5.33(b)(5) (subparagraph (3) of definition 
of Index Combo).
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    The proposed rule change amends Rules 1.1 (definitions of ``complex 
order'' and ``stock-option order''); 5.6(c) (definition of ``complex 
order''); 5.30(a)(4), (b)(4), and (c)(4); 5.33(a) (definition of 
``complex order''), (b)(5) (definition of ``stock-option order''), and 
(f)(A)(iv); 5.83(b); and 5.85(b)(1) and (2) to incorporate the proposed 
definitions of conforming and nonconforming complex orders but make no 
other substantive changes to these rules. These proposed changes are 
consistent with industry terminology regarding complex orders with 
these ratios.
    Based on the definition in Rule 1.1 of complex orders, which 
includes stock-option orders, the Exchange's previous rule change was 
intended to apply to stock-option orders (i.e., to permit stock-option 
orders of any ratio to be processed, including (in permitted classes) 
electronically.\18\ The reasons set forth in that rule change for 
expanding electronic processing of nonconforming complex orders applies 
to all complex orders, including stock-option orders. However, the 
Exchange inadvertently did not update certain provisions specific to 
stock-option orders. Therefore, in addition to adding the proposed 
definitions of conforming and nonconforming complex orders, the 
proposed rule change clarifies that the Exchange may permit stock-
option orders of any ratio to be processed, including (in permitted 
classes) electronically. Specifically, the Exchange proposes to update 
the definition of stock-option order in Rule 5.33(b)(5) to state in 
classes determined by the Exchange, a nonconforming stock-option order 
is not eligible for electronic processing, including the complex order 
auction (``COA''), complex order book (``COB''), complex automated 
improvement mechanism (``C-AIM''), and complex solicited auction 
mechanism (``C-SAM''). This proposed language is the same as language 
currently included in the definition of ``complex order'' in Rule 
5.33(a), the intent of which is to permit the Exchange to determine in 
which classes nonconforming complex orders (including stock-option 
orders) may be submitted for electronic processing on the Exchange 
pursuant to Rule 5.33.
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    \18\ See supra note 9; and Exchange Notice, Cboe Options 
Introduces New Net Price Increments and Enhanced Electronic and Open 
Outcry Handling for Complex Orders with Non-Conforming Ratios, dated 
March 21, 2022 (available at Cboe Options Introduces New Net Price 
Increments and Enhanced Electronic and Open Outcry Handling for 
Complex Orders with Non-Conforming Ratios). The Exchange notes 
another options exchange interprets current Rule 5.33 to permit the 
electronic processing of nonconforming stock-option orders.
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    The proposed rule change also adds Rule 5.33(f)(2)(B)(v) to state 
the System does not execute a stock-option order pursuant to Rule 5.33 
at a net price worse than the SBBO or equal to the synthetic best bid 
or offer (``SBBO'') when there is a Priority Customer order on any leg 
comprising the SBBO and: (a) if a conforming stock-option order, at 
least one option component of the stock-option order must execute at a 
price that improves the BBO for that component by at least one minimum 
increment; or (b) if a nonconforming stock-option order, the option 
components of the stock-option order for the leg(s) with a Priority 
Customer order at the BBO must execute at a price that improves the 
price of that Priority Customer order(s) on the Simple Book by at least 
one minimum increment, except AON stock-option orders may only execute 
at prices better than the SBBO. This is consistent with the permissible 
execution prices of conforming and nonconforming complex orders with 
only option components submitted for electronic processing.\19\ 
Similarly, the proposed

[[Page 67391]]

rule change adds Rule 5.85(b)(4) and (5) to state:
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    \19\ See Rule 5.33(f)(2)(A)(iv).
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     A conforming stock-option order may be executed at a net 
debit or credit price without giving priority to equivalent bids 
(offers) in the individual series legs that are represented in the 
trading crowd or in the Book if the price of at least one option leg of 
the order improves the corresponding bid (offer) of a Priority Customer 
order(s) in the Book by at least one minimum trading increment as set 
forth in Rule 5.4(b). In other words, if there is a Priority Customer 
order on every leg comprising the SBBO, at least one option leg of the 
stock-option order must execute at a price that improves the price of 
the Priority Customer order on the Simple Book for that leg by at least 
one minimum increment.
     A nonconforming stock-option order may be executed at a 
net debit or credit price without giving priority to equivalent bids 
(offers) in the individual series legs that are represented in the 
trading crowd or in the Book if each option leg of the order betters 
the corresponding bid (offer) of a Priority Customer order(s) in the 
Book on each leg by at least one minimum trading increment as set forth 
in Rule 5.4(b). In other words, if there is a Priority Customer order 
on any leg(s) comprising the SBBO, the component(s) of the stock-option 
for the option leg(s) with a Priority Customer order at the BBO must 
execute at a price that improves the price of that Priority Customer 
order(s) on the Simple Book by at least one minimum increment.
    This is consistent with the permissible execution prices of 
conforming and nonconforming complex orders with only option components 
submitted for open outcry processing.\20\
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    \20\ See Rule 5.85(b)(1) and (2).
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    Therefore, execution of all conforming and nonconforming complex 
orders, including stock-option orders, continues to protect Priority 
Customer interest on the Exchange.\21\
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    \21\ To avoid potential confusion, the proposed rule change 
deletes from Rule 5.85(b)(3) that stock-option orders do not have 
priority over Priority Customer bids (offers) in the simple book, as 
proposed subparagraphs (4) and (5) more explicitly describe stock-
option order priority with respect to bids and offers in the simple 
book.
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    The proposed rule change has no impact on the requirements for 
stock-option orders or how they may be executed. For example, all 
stock-option orders (both conforming and nonconforming) must satisfy 
the criteria set forth in the definitions of stock-option orders in 
Rule 1.1 (for open outcry processing) and 5.33(b) (for electronic 
processing), as set forth above. Additionally, all stock-option orders 
must comply with the Qualified Contingent Trade (``QCT'') 
exemption.\22\ The Exchange represents that its surveillances 
incorporate stock-option orders with all ratios, including 
nonconforming ratios.
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    \22\ See Rule 5.33, Interpretation and Policy .04.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\23\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \24\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \25\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ Id.
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    In particular, the Exchange believes the proposed rule change to 
adopt definitions of conforming and nonconforming complex orders 
(including stock-option orders) in Rule 1.1, and to incorporate these 
proposed definitions into Rules 1.1 (definitions of ``complex order'' 
and ``stock-option order''), 5.6(c) (definition of ``complex order''); 
5.30(a)(4), (b)(4), and (c)(4), 5.33(a) (definition of ``complex 
order''), (b)(5) (definition of ``stock-option order''), and 
(f)(A)(iv), 5.83(b), and 5.85(b)(1) and (2), will protect investors, as 
it incorporates into the Exchange's Rules terminology generally used in 
the industry to refer to complex orders with ratios equal to and 
greater than 0.33, including Index Combos (conforming) and less than 
0.33 [sic] and greater than 3.00 (nonconforming), and stock-option 
orders with ratios less than or equal to 8.00 (conforming) and greater 
than 8.00 (nonconforming). As discussed above, inclusion of Index 
Combos within the definition of a conforming complex order is 
consistent with the definition of Index Combos and the rule filing to 
adopt Index Combos.\26\ Therefore, the Exchange believes this proposed 
rule change adds transparency and reduces potential confusion within 
the Exchange's Rules. These definitions ultimately make no substantive 
changes to the rules and relate merely to terminology. The Exchange 
notes these definitions are substantially similar to definitions used 
in at least one other options exchanges' [sic] rulebook.\27\
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    \26\ See Securities Exchange Act Release No. 87883 (January 2, 
2020), 85 FR 942, 945 (January 8, 2020) (SR-CBOE-2019-126); and Rule 
5.33(b)(5) (definition of Index Combo).
    \27\ See MIAX Rule 518(a)(8) and (16) (defining ``conforming 
ratio'' and ``nonconforming ratio'').
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    Additionally, the Exchange believes the proposed rule change to 
provide for the electronic processing of stock-option orders with any 
ratio will remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and, in general, to [sic] 
protect investors and the public interest, as it will eliminate 
confusion regarding what types of stock-option orders are permissible 
for electronic processing. As noted above, when the Exchange amended 
its Rules to permit the electronic processing of nonconforming complex 
orders, the intent of that amended was to permit the electronic 
processing of all nonconforming complex orders, including nonconforming 
stock-option orders.\28\ The reasons set forth in the Exchange's prior 
rule filing regarding expansion of electronic processing of 
nonconforming complex orders applies to all complex orders, including 
stock-option orders; the Exchange inadvertently omitted updates to 
certain provision regarding stock-option orders to incorporate that 
change.\29\ The proposed rule change merely updates the definition of 
stock-option order to incorporate the same change that was made to the 
definition of complex order with respect to electronic processing to 
provide consistency and transparency in the Exchange's Rules. As noted 
above, the proposed rule changes regarding execution of conforming and 
nonconforming stock-option orders are consistent with the Exchange's 
previously adopted rules regarding

[[Page 67392]]

execution of other conforming and nonconforming complex orders. This 
proposed change is also consistent with the rules of at least one other 
options exchange.\30\
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    \28\ The current definition of stock-option order in Rule 1.1 
applicable to open outcry trading has no ratio restriction. 
Therefore, current Rules do not currently restrict submission of 
stock-option orders for open outcry trading to conforming stock-
option orders (as discussed, the Exchange proposes to add clarity 
regarding permissible open outcry execution prices of nonconforming 
stock-option orders, which are consistent with those of other 
nonconforming complex orders).
    \29\ See supra note 9.
    \30\ See MIAX Rule 518, Interpretation and Policy .01(c).
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    The proposed rule change also adds provisions in Rules 
5.33(f)(2)(B) and 5.85(b) (and deletes the current provision in Rule 
5.85(b)(3) describing stock-option order priority with respect to 
Priority Customer bids (offers) in the Book) regarding the specific 
permissible execution prices for conforming and nonconforming stock-
option orders, consistent with the execution pricing for other 
conforming and nonconforming complex orders, which further adds 
transparency regarding the execution of these orders on the Exchange 
(both electronically and in open outcry). The Exchange believes the 
proposed rule change will add clarity, transparency, and consistency to 
its Rules, thus eliminating potential confusion about the permissible 
execution prices of conforming and nonconforming complex orders, which 
will ultimately remove impediments to and perfect the mechanisms of a 
free and open market and national market system, and in general protect 
investors.
    The proposed rule change will permit the electronic trading of 
nonconforming stock-option orders but has no impact on the requirements 
for stock-option orders or how they may be executed. Execution of all 
conforming and nonconforming complex orders, including stock-option 
orders, will continue to protect Priority Customer interest on the 
Exchange. All stock-option orders (both conforming and nonconforming) 
must satisfy the criteria set forth in the definitions of stock-option 
orders in Rule 1.1 (for open outcry processing) and 5.33(b) (for 
electronic processing), which are described above. Additionally, all 
stock-option orders must comply with the Qualified Contingent Trade 
(``QCT'') exemption.\31\ The Exchange represents that its surveillances 
incorporate stock-option orders with all ratios, including 
nonconforming ratios.
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    \31\ See Rule 5.33, Interpretation and Policy .04.
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    The proposed rule change will further remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, as it is similar to the Rules of at least one other options 
exchange.\32\
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    \32\ See MIAX Rules 518(a)(5), (8), and (16) and Interpretation 
and Policy .01(c).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as the proposed 
rule change applies equally to all Trading Permit Holders (``TPHs''). 
Therefore, any TPH may submit conforming and nonconforming stock-option 
orders for open outcry or electronic processing, which will all be 
handled by the Exchange in a uniform manner. Further, the Exchange's 
proposal will continue to protect Priority Customer interest on the 
Exchange.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as it has no 
impact on the requirements for stock-option orders or how they may be 
executed. As discussed above, the proposed rule change merely updates 
certain rule provisions it inadvertently did not update in connection 
with a previous rule change. Additionally, the proposed rule change is 
consistent with the offering of at least one other options 
exchange.\33\ The Exchange believes availability of conforming and 
nonconforming complex orders, including stock-option orders, may 
promote competition, as it provides investors with multiple venues at 
which to electronically execute these orders, giving investors greater 
flexibility and choice of where to send their orders.
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    \33\ See id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \34\ and Rule 19b-
4(f)(6) thereunder.\35\
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    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \36\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \37\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to allow the 
Exchange to make clear in its rules that non-conforming ratio stock-
option orders in classes determined by the Exchange are eligible for 
electronic processing. The Exchange notes that another options exchange 
currently allows non-conforming ratio stock-option orders to trade 
electronically.\38\ Accordingly, the proposal will provide investors 
with an additional venue for trading non-conforming ratio stock-option 
orders electronically. The proposal also adopts definitions of 
``conforming complex order'' and ``non-conforming complex order'' and 
incorporates these definitions into the Exchange's rules. The ratio 
requirements in the proposed definitions of conforming complex order 
and non-conforming complex order are consistent with the requirements 
in defined terms used by another options exchange.\39\ As discussed 
above, the Exchange states that the permissible execution prices for 
stock-option orders with conforming and nonconforming ratios are 
consistent with the permissible execution prices for conforming and 
nonconforming complex orders with only option components, and will 
continue to protect Priority Customer interest on the Exchange.
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    \36\ 17 CFR 240.19b-4(f)(6).
    \37\ 17 CFR 240.19b-4(f)(6)(iii).
    \38\ See MIAX Rule 518(a)(5).
    \39\ See MIAX Rules 518(a)(8) and (a)(16) (defining ``conforming 
ratio'' and ``non-conforming ratio,'' respectively).
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    The Commission finds that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The proposal will provide investors with an additional venue for the 
electronic trading of nonconforming, as well as conforming, stock-
option orders. In addition, the proposal adds to the Exchange's rules

[[Page 67393]]

definitions of conforming complex order and nonconforming complex order 
that are consistent with defined terms used on another options 
exchange.\40\ The proposal incorporates the proposed definitions of 
conforming and nonconforming complex order into the Exchange's rules, 
including Exchange Rules 5.33(f)(2) and 5.85(b), and adds new Exchange 
Rules 5.33(f)(2)(b)(v) and 5.85(b)(4) and (5) to specifically address 
the permissible execution prices for stock-option orders, but makes no 
substantive changes to the permissible execution prices for complex 
order or stock-option orders.\41\ Accordingly, the proposal raises no 
new or novel regulatory issues. For these reasons, the Commission 
designates the proposal operative upon filing.\42\
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    \40\ See MIAX Rules 518(a)(8) and (a)(16).
    \41\ The permissible execution prices for stock-options orders 
currently are addressed in Cboe Rules 5.33(f)(2)(B)(ii) and 
5.85(b)(3).
    \42\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CBOE-2023-052 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-2023-052. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CBOE-2023-052 and should be 
submitted on or before October 20, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21346 Filed 9-28-23; 8:45 am]
BILLING CODE 8011-01-P