[Federal Register Volume 89, Number 210 (Wednesday, October 30, 2024)]
[Notices]
[Pages 86404-86408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25146]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101429; File No. SR-CboeBZX-2024-101]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Short Term Option Series Program in Rule 19.6, Interpretation and
Policy .05
October 24, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 16, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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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
BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'') proposes
to amend the Short Term Option Series Program in Rule 19.6,
Interpretation and Policy
[[Page 86405]]
.05. 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 (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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 amend the Short Term Option Series Program
in Rule 19.6, Interpretation and Policy .05 (Series of Options
Contracts Open for Trading). Specifically, the Exchange proposes to
expand the Short Term Option Series Program to permit the listing of
two Monday expirations for options on SPDR Gold Shares (``GLD''),
iShares Silver Trust (``SLV''), and iShares 20+ Year Treasury Bond ETF
(``TLT'') (collectively ``Exchange Traded Products'' or ``ETPs'').\5\
This is a competitive filing that is based on a proposal submitted by
Nasdaq ISE, LLC (``Nasdaq ISE'') and recently approved by the
Commission.\6\
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\5\ Today, the Exchange permits the listing of two Wednesday
expirations for options on United States Oil Fund, LP (``USO''),
United States Natural Gas Fund, LP (``UNG''), GLD, SLV, and TLT. See
Securities Exchange Act Release No. 99036 (November 29, 2023), 88 FR
84383 (December 5, 2023) (SR-CboeBZX-2023-096) (``Wednesday
Notice''). The Exchange began listing Wednesday expirations on these
five symbols on November 21, 2023. See Exchange Notice, Reference
ID: C2023111702.
\6\ See Securities Exchange Act Release No. 100837 (August 27,
2024) (SR-ISE-2024-21) (Notice of Filing of Amendment No. 1 and
Order Granting Accelerated Approval of a Proposed Rule Change, as
Modified by Amendment No. 1, to Adopt Rules to Permit the Listing of
Two Monday Expirations for Options on SPDR Gold Shares, iShares
Silver Trust, and iShares 20+ Year Treasury Bond ETF) (``Nasdaq ISE
Approval'').
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Currently, as set forth in Rule 19.6, Interpretation and Policy
.05, after an option class has been approved for listing and trading on
the Exchange as a Short Term Option Series, the Exchange may open for
trading on any Thursday or Friday that is a business day (``Short Term
Option Opening Date'') series of options on that class that expire at
the close of business on each of the next five Fridays that are
business days and are not Fridays in which standard expiration options
series, Monthly Options Series, or Quarterly Options Series expire
(``Friday Short Term Option Expiration Dates''). The Exchange may have
no more than a total of five Short Term Option Expiration Dates.
Further, if the Exchange is not open for business on the respective
Thursday or Friday, the Short Term Option Opening Date for Short Term
Option Weekly Expirations will be the first business day immediately
prior to that respective Thursday or Friday. Similarly, if the Exchange
is not open for business on a Friday, the Short Term Option Expiration
Date for Short Term Option Weekly Expirations will be the first
business day immediately prior to that Friday.
Additionally, the Exchange may open for trading series of options
on the symbols provided in Table 1 of Rule 19.6, Interpretation and
Policy .05(h) that expire at the close of business on each of the next
two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that
are business days and are not business days in which monthly options
series or Quarterly Options Series expire (``Short Term Option Daily
Expirations'').\7\ For those symbols listed in Table 1, the Exchange
may have no more than a total of two Short Term Option Daily
Expirations beyond the current week for each of Monday, Tuesday,
Wednesday, and Thursday expirations, as applicable, at one time.
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\7\ As set forth in Table 1, the Exchange currently only permits
Wednesday expirations for USO, UNG, GLD, SLV, and TLT.
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Proposal
At this time, the Exchange proposes to expand the Short Term Option
Daily Expirations to permit the listing and trading of options on GLD,
SLV, and TLT expiring on Mondays. The Exchange proposes to permit two
Short Term Option Expiration Dates beyond the current week for each
Monday expiration at one time, and would update Table 1 in Rule 19.6,
Interpretation and Policy .05(h) for each of those symbols accordingly.
The proposed Monday GLD, SLV, and TLT expirations will be similar
to the current Monday SPY, QQQ, and IWM Short Term Option Daily
Expirations set forth in Rule 19.6, Interpretation and Policy .05(h)
such that the Exchange may open for trading on any Friday or Monday
that is a business day (beyond the current week) series of options on
GLD, SLV, and TLT to expire on any Monday of the month that is a
business day and is not a Monday in which standard expiration options
series, Monthly Options Series, or Quarterly Options Series expire,
provided that Monday expirations that are listed on a Friday must be
listed at least one business week and one business day prior to the
expiration (``Monday GLD Expirations,'' ``Monday SLV Expirations,'' and
``Monday TLT Expirations'') (collectively, ``Monday ETP
Expirations'').\8\ In the event Short Term Option Daily Expirations
expire on a Monday and that Monday is the same day that a standard
expiration options series, Monthly Options Series, or Quarterly Options
Series expires, the Exchange would skip that week's listing and instead
list the following week; the two weeks would therefore not be
consecutive. Today, Monday expirations in SPY, QQQ, and IWM similarly
skip the weekly listing in the event the weekly listing expires on the
same day in the same class as a standard expiration options series,
Monthly Options Series, or Quarterly Options Series.
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\8\ Today, USO, UNG, GLD, SLV, and TLT may trade on Wednesdays.
See id. They may also trade on Fridays, as is the case for all
options series in the Short Term Option Series Program.
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The interval between strike prices for the proposed Monday ETP
Expirations will be the same as those currently applicable for SPY,
QQQ, and IWM Monday expirations in the Short Term Option Series
Program.\9\ Specifically, the Monday ETP Expirations will have a strike
interval of (i) $0.50 or greater for strike prices below $100, and $1
or greater for strike prices between $100 and $150 for all option
classes that participate in the Short Term Option Series Program, (ii)
$0.50 for option classes that trade in one dollar increments and are in
the Short Term Option Series Program, or (iii) $2.50 or greater for
strike prices above $150.\10\ As is the case with other equity options
series listed pursuant to the Short Term Option Series Program, the
Monday ETP Expirations series will be P.M.-settled.
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\9\ See Rule 19.6, Interpretation and Policy .05(e).
\10\ Id.
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Pursuant to Rule 19.6, Interpretation and Policy .05(h), with
respect to the Short Term Option Series Program, if a Monday is not a
business day, the series shall expire on the first business day
immediately following that Monday.
[[Page 86406]]
Currently, for each option class eligible for participation in the
Short Term Option Series Program, the Exchange is limited to opening
thirty (30) series for each expiration date for the specific class.\11\
The thirty (30) series restriction does not include series that are
open by other securities exchanges under their respective weekly rules;
the Exchange may list these additional series that are listed by other
options exchanges.\12\ With the proposed changes, this thirty (30)
series restriction would apply to Monday GLD, SLV, and TLT Short Term
Option Daily Expirations as well. In addition, the Exchange will be
able to list series that are listed by other exchanges, assuming they
file similar rules with the Commission to list Monday ETP Expirations.
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\11\ See Rule 19.6, Interpretation and Policy .05(a).
\12\ See Rule 19.6, Interpretation and Policy .05(a).
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With this proposal, Monday ETP Expirations would be treated
similarly to existing Monday SPY, QQQ, and IWM Expirations. With
respect to standard expiration option series, Short Term Option Daily
Expirations will be permitted to expire in the same week in which
standard expiration option series on the same class expire.\13\ Not
listing Short Term Option Daily Expirations for one week every month
because there was a standard options series on that same class on the
Friday of that week would create investor confusion.
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\13\ See Rule 19.6, Interpretation and Policy .05(b).
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Further, as with Monday SPY, QQQ, and IWM Expirations, the Exchange
would not permit Monday ETP Expirations to expire on a business day in
which standard expiration option series, Monthly Options Series, or
Quarterly Options Series expire.\14\ Therefore, all Short Term Option
Daily Expirations would expire at the close of business on each of the
next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively,
that are business days beyond the current week and are not business
days in which standard expiration option series, Monthly Options
Series, or Quarterly Options Series expire. The Exchange believes that
it is reasonable to not permit two expirations on the same day in which
a standard expiration option series, Monthly Options Series, a
Quarterly Options Series would expire because those options would be
duplicative of each other.
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\14\ See Rule 19.6, Interpretation and Policy .05(h).
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The Exchange does not believe that any market disruptions will be
encountered with the introduction of Monday ETP Expirations. The
Exchange currently trades P.M.-settled Short Term Option Series that
expire Monday for SPY, QQQ and IWM and has not experienced any market
disruptions nor issues with capacity. In addition, the Exchange has not
experienced any market disruptions or issues with capacity in expanding
the five ETPs to the Wednesday expirations.\15\ Today, the Exchange has
surveillance programs in place to support and properly monitor trading
in Short Term Option Series that expire Monday for SPY, QQQ and IWM.
Further, the Exchange has the necessary capacity and surveillance
programs in place to support and properly monitor trading in the
proposed Monday ETP Expirations.
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\15\ Today, the Exchange permits the listing of two Wednesday
expirations for options on USO, UNG, GLD, SLV, and TLT. See
Wednesday Notice. The Exchange began listing Wednesday expirations
on these five symbols on November 21, 2023. See Exchange Notice,
Reference ID: C2023111702.
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Because the Exchange proposes to limit the number of Monday
Expirations for options on GLD, SLV, and TLT to two expirations beyond
the current week, the Exchange believes that the addition of these
Monday ETP Expirations should encourage Market-Makers to continue to
deploy capital more efficiently and improve displayed market quality.
Similar to SPY, QQQ and IWM Monday Expirations, the introduction of
Monday ETP Expirations will, among other things, expand hedging tools
available to market participants and allow for a reduced premium cost
of buying portfolio protection. The Exchange believes that Monday ETP
Expirations will allow market participants to hedge their portfolios
with options on commodities (gold and silver) as well as treasury
securities, and tailor their investment and hedging needs more
effectively.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \18\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
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Similar to Monday expirations in SPY, QQQ, and IWM, the proposal to
permit Monday ETP Expirations, subject to the proposed limitation of
two expirations beyond the current week, would protect investors and
the public interest by providing the investing public and other market
participants more choice and flexibility to closely tailor their
investment and hedging decisions in these options and allow for a
reduced premium cost of buying portfolio protection, thus allowing them
to better manage their risk exposure. The Exchange believes that there
is general demand for alternative expirations in these symbols.
The Exchange represents that it has an adequate surveillance
program in place to detect manipulative trading in the proposed option
expirations, in the same way that it monitors trading in the current
Short Term Option Series for Monday SPY, QQQ and IWM expirations. The
Exchange also represents that it has the necessary system capacity to
support the new expirations. Finally, the Exchange does not believe
that any market disruptions will be encountered with the introduction
of these option expirations. As discussed above, the Exchange believes
that its proposal is a modest expansion of weekly expiration dates for
GLD, SLV, and TLT given that it will be limited to two Monday
expirations beyond the current week.
The Exchange believes that the proposal is consistent with the Act
as the proposal would overall add a small number of Monday ETP
Expirations by limiting the addition of two Monday expirations beyond
the current week. The addition of Monday ETP Expirations would remove
impediments to and perfect the mechanism of a free and open market by
encouraging Market Makers to continue to deploy capital more
efficiently and improve displayed market quality. The Exchange believes
that the proposal will allow Members to expand hedging tools and tailor
their investment and hedging needs more effectively in GLD, SLV, and
TLT as these funds are most likely to be utilized by market
participants to hedge the
[[Page 86407]]
underlying asset classes. The ETPs currently trade within ``complexes''
where, in addition to the underlying security, there are multiple
instruments available for hedging. Given the multi-asset class nature
of these products and available hedges in highly correlated
instruments, the Exchange believes that its proposal to add Monday
expirations on these products will provide market participants with
additional useful hedging tools for the underlying asset classes.
Similar to Monday SPY, QQQ, and IWM expirations, the introduction
of Monday ETP Expirations is consistent with the Act as it will, among
other things, expand hedging tools available to market participants and
allow for a reduced premium cost of buying portfolio protection. The
Exchange believes that Monday ETP Expirations will allow market
participants to purchase options on GLD, SLV, and TLT based on their
timing as needed and allow them to tailor their investment and hedging
needs more effectively, thus allowing them to better manage their risk
exposure. Today, the Exchange lists Monday SPY, QQQ, and IWM
Expirations.\19\
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\19\ See Rule 19.6, Interpretation and Policy .05(h).
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In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that Monday ETP Expirations
should simply expand the ability of investors to hedge risk against
market movements stemming from economic releases or market events that
occur throughout the month in the same way that the Short Term Option
Series Program has expanded the landscape of hedging.
There are no material differences in the treatment of Monday SPY,
QQQ and IWM expirations compared to the proposed Monday ETP
Expirations. Given the similarities between Monday SPY, QQQ and IWM
expirations and the proposed Monday ETP Expirations, the Exchange
believes that applying the provisions in Rule 19.6, Interpretation and
Policy .05 that currently apply to Monday SPY, QQQ and IWM expirations
is justified. For example, the Exchange believes that allowing Monday
ETP Expirations and monthly ETP expirations in the same week will
benefit investors and minimize investor confusion by providing Monday
ETP Expirations in a continuous and uniform manner.
Finally, the Exchange notes the proposed rule change is
substantively the same as a rule change proposed by ISE, which the
Commission recently approved.\20\
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\20\ See Nasdaq ISE Approval.
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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.
While the proposal will expand the Short Term Options Expirations
to allow Monday ETP Expirations to be listed on the Exchange, the
Exchange believes that this limited expansion for Monday expirations
for options on GLD, SLV, and TLT will not impose an undue burden on
competition; rather, it will meet customer demand. The Exchange
believes that Members will continue to be able to expand hedging tools
and tailor their investment and hedging needs more effectively in GLD,
SLV, and TLT.
Similar to Monday SPY, QQQ and IWM expirations, the introduction of
Monday ETP Expirations does not impose an undue burden on competition.
The Exchange believes that it will, among other things, expand hedging
tools available to market participants and allow for a reduced premium
cost of buying portfolio protection. The Exchange believes that Monday
ETP Expirations will allow market participants to purchase options on
GLD, SLV, and TLT based on their timing as needed and allow them to
tailor their investment and hedging needs more effectively.
The Exchange does not believe the proposal will impose any burden
on inter-market competition, as nothing prevents the other options
exchanges from proposing similar rules to list and trade Monday ETP
Expirations. As noted above, the Commission recently approved a
substantively identical proposal of another exchange.\21\ Further, the
Exchange does not believe the proposal will impose any burden on
intramarket competition, as all market participants will be treated in
the same manner under this proposal.
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\21\ See Nasdaq ISE Approval.
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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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \22\ and Rule 19b-4(f)(6) thereunder.\23\
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)(iii) of the Act \24\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\25\
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\22\ 15 U.S.C. 78s(b)(3)(A)(iii).
\23\ 17 CFR 240.19b-4(f)(6).
\24\ 15 U.S.C. 78s(b)(3)(A)(iii).
\25\ 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) \26\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\27\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. According to
the Exchange, the proposed rule change is a competitive response to a
substantively identical filing submitted by Nasdaq ISE that was
recently approved by the Commission.\28\ The Commission believes that
the proposed rule change presents no novel issues and that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the operative delay and designates the proposed rule change as
operative upon filing.\29\
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\26\ 17 CFR 240.19b-4(f)(6).
\27\ 17 CFR 240.19b-4(f)(6)(iii).
\28\ See supra note 6.
\29\ 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 should be approved or disapproved.
[[Page 86408]]
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-CboeBZX-2024-101 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-CboeBZX-2024-101. 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-CboeBZX-2024-101 and should
be submitted on or before November 20, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25146 Filed 10-29-24; 8:45 am]
BILLING CODE 8011-01-P