[Federal Register Volume 84, Number 92 (Monday, May 13, 2019)]
[Notices]
[Pages 20920-20933]
[FR Doc No: 2019-09729]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85797; File No. SR-CboeEDGX-2019-027]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating To Amend the Exchange's Opening Process and Add a Global
Trading Hours Session for XSP Options

May 7, 2019.
    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 April 26, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or EDGX Options'')
proposes to amend the Exchange's opening process, add a global trading
hours session (``Global Trading Hours'' or ``GTH'') for options on the
Mini-SPX Index (``XSP options'') and make corresponding changes, modify
trading hours for certain equity and index options, update its Rules
regarding order cancellation, clarify the manner in which the Exchange
announces determinations it makes under the Rules, and make other
conforming and nonsubstantive changes. 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/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.

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

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

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

1. Purpose
    In 2016, the Exchange's parent company, Cboe Global Markets, Inc.
(``Cboe Global''), which is also the parent company of Cboe Exchange,
Inc. (``Cboe Options'') and Cboe C2 Exchange, Inc. (``C2''), acquired
the Exchange, Cboe EDGA Exchange, Inc. (``EDGA''), Cboe BZX Exchange,
Inc. (``BZX or BZX Options''), and Cboe BYX Exchange, Inc. (``BYX''
and, together with C2, Cboe Options, EDGA, and BZX, the ``Cboe
Affiliated Exchanges''). The Cboe Affiliated Exchanges are working to
align certain system functionality, retaining only intended differences
between the Cboe Affiliated Exchanges, in the context of a technology
migration. Cboe Options intends to migrate its technology to the same
trading platform used by the Exchange, C2, and BZX Options in the
fourth quarter of 2019. The proposal set forth below is intended to add
certain functionality to the Exchange's System that is more similar to
functionality offered by Cboe Options in order to ultimately provide a
consistent technology offering for market participants who interact
with the Cboe Affiliated Exchanges. Although the Exchange intentionally
offers certain features that differ from those offered by its
affiliates and will continue to do so, the Exchange believes that
offering similar functionality to the extent practicable will reduce
potential confusion for Users.
Global Trading Hours
    The proposed rule change adds a GTH trading session to the Rules.
Currently, transactions in equity options, which includes options on
individual stocks, exchange-traded funds (``Fund Shares'' \5\),
exchange-traded notes

(``Index-Linked Securities'' \6\), and other securities) may occur from
9:30 a.m. to 4:00 p.m.\7\, except for options on Fund Shares, Index-
Linked Securities, and broad-based indexes, which will close at 4:15
p.m.\8\ As proposed, these hours are referred to as ``Regular Trading
Hours.'' \9\ Regular Trading Hours are consistent with the regular
trading hours of the most other U.S. options exchanges. Cboe Options
has a global trading hours session during which trading in certain
option classes, which trading session occurs from 3:00 a.m. to 9:15
a.m.\10\ Additionally, many U.S. stock and futures exchanges, which
allow for trading in some of their listed products for various periods
of time outside of Regular Trading Hours.\11\
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    \5\ See Rule 19.3(i).
    \6\ See Rule 19.3(l).
    \7\ All times are Eastern time unless otherwise noted.
    \8\ See current Rule 21.2(a). The proposed rule change moves the
rule provision in current Rule 21.2(b) into proposed Rule
21.2(b)(1), so that all rule provisions regarding Regular Trading
Hours of equity options are included in the same place.
    \9\ See also proposed Rule 16.1, definition of Regular Trading
Hours or RTH (the trading session consisting of the regular hours
during which transactions in options may be effected on the
Exchange, as set forth in Rule 21.2); and Cboe Options Rule 1.1
(definition of Regular Trading Hours). The proposed rule change
makes nonsubstantive changes to Rule 16.1 to alphabetize the
definitions in that rule, delete the paragraph heading ``(a)'' since
that is the only paragraph in the rule and delete subparagraph
numbering, and add headings for each defined term.
    \10\ See Cboe Options Rule 6.1.
    \11\ See, e.g., BZX Rule 1.5(c), (r), (w), and (ee) (regular
trading hours from 9:30 a.m. until 4:00 p.m. Eastern time, two early
trading sessions (Early Trading Session and Pre-Opening Session)
from 7:00 a.m. until 9:30 a.m. and an After Hours Trading Session
from 4:00 p.m. to 8:00 p.m. Eastern time); NASDAQ Stock Market LLC
Rule 4617 (regular trading hours from 9:30 a.m. until 4:00 p.m.
Eastern time and extended trading hours from 4:00 a.m. until 9:30
a.m. and 4:00 p.m. to 8:00 p.m. Eastern time); and New York Stock
Exchange LLC Series 900 (providing for an off-hours trading facility
to operate outside of the regular 9:30 a.m. to 4:00 p.m. Eastern
time trading session); see also, e.g., Chicago Board of Trade
Extended Trading Hours for Grain, Oilseeds and Ethanol--Frequently
Asked Questions (indicating that certain agricultural commodity
products are available for electronic trading 21 hours a day on the
CME Globex trading platform); and Intercontinental Exchange, Inc.
Regular Trading & Support Hours (indicating that many of its listed
products are available for trading for periods of time outside of
Regular Trading Hours, including overnight sessions).
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    As noted above, many U.S. stock exchanges allow for trading in
stocks before and after the regular trading hours of 9:30 a.m. to 4:00
p.m., including stocks that comprise the Dow Jones Industrial Average.
It is common for investors to engage in hedging and other investment
strategies that involve index options and some of the stocks that
comprise the underlying index. Currently, this investment activity on
the Exchange would be limited to Regular Trading Hours. Additionally,
securities trading is a global industry, and investors located outside
of the United States generally operate during hours outside of Regular
Trading Hours. The Exchange believes there may be global demand from
investors for options on XSP, which may be exclusively listed \12\ on
Cboe Affiliated Exchanges and which the Exchange plans to list during
the proposed Global Trading Hours (as defined below), as alternatives
for hedging and other investment purposes. Given that XSP options are
currently only eligible to trade during Regular Trading Hours, it is
difficult for non-U.S. investors to obtain the benefits of trading in
this option. It is also difficult for U.S. investors that trade in non-
U.S. markets to use these products as part of their global investment
strategies. To meet this demand, and to keep pace with the continuing
internationalization of securities markets, the Exchange proposes to
offer trading in XSP options from 8:30 a.m. to 9:15 a.m. Monday through
Friday (``Global Trading Hours'' or ``GTH'').
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    \12\ An ``exclusively listed option'' is an option that trades
exclusively on an exchange (or exchange group) because the exchange
has an exclusive license to list and trade the option or has the
proprietary rights in the interest underlying the option. An
exclusively listed option is different than a ``singly listed
option,'' which is an option that is not an ``exclusively listed
option'' but that is listed by one exchange and not by any other
national securities.
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    Proposed Rule 21.2(c) states except under unusual conditions as may
be determined by the Exchange, Global Trading Hours are from 8:30 a.m.
to 9:15 a.m. on Monday through Friday.\13\ While this trading session
will be shorter than the global trading hours session on Cboe Options
and various stock exchanges, the Exchange believes this proposed
trading session will increase the time during which Options Members may
implement these investment strategies. This GTH trading session will
allow market participants to engage in trading these options in
conjunction with extended trading hours on U.S. stock exchanges for
securities that comprise the index underlying XSP options and in
conjunction with part of regular European trading hours. The proposed
rule change also adds to Rule 16.1 a definition of trading session,
which means the hours during which the Exchange is open for trading for
Regular Trading Hours or Global Trading Hours (each of which may be
referred to as a trading session), each as defined in proposed Rule
21.2. Unless otherwise specified in the Rules or the context indicates
otherwise, all Rules apply in the same manner during each trading
session.\14\ As discussed below, the Exchange may not permit certain
order types to be applied to orders during Global Trading Hours that it
does permit during Regular Trading Hours.
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    \13\ See also proposed Rule 16.1, definition of Global Trading
Hours or GTH (the trading session consisting of the hours outside of
Regular Trading Hours during which transactions in options may be
effected on the Exchange and are set forth in Rule 6.1); and Cboe
Options Rule 1.1 (definition of Global Trading Hours).
    \14\ This includes business conduct rules in Chapter XVIII and
rules related to doing business with the public in Chapter XXVI.
Additionally a broker-dealer's due diligence and best execution
obligations apply during Global Trading Hours. See also Cboe Options
Rule 6.1A(a).
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    Proposed Rule 21.2(c)(1) provides the Exchange with authority to
designate as eligible for trading during Global Trading Hours any
exclusively listed index option designated for trading under Chapter
XXIX.\15\ If the Exchange so designates a class, then transactions in
options in that class may be made on the Exchange during Global Trading
Hours.\16\ As indicated above, the Exchange has approved XSP options
for trading on the Exchange during Global Trading Hours. The Exchange
may list for trading during Global Trading Hours any series in eligible
classes that it may list pursuant to Rule 19.6.\17\ Any series in
eligible classes that are expected to be open for trading during
Regular Trading Hours will be open for trading during Global Trading
Hours on the same trading day (subject to Rule 21.7 (as proposed to be
amended, as discussed below), which sets forth procedures for the
opening of trading).\18\
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    \15\ A class that the Exchange lists for trading during RTH only
will be referred to as an ``RTH class,'' and a class the Exchange
lists for trading during both GTH and RTH will be referred to as an
``All Sessions class.'' See Rule 16.1, proposed definitions of ``All
Sessions classes'' and ``RTH classes.''
    \16\ The Exchange believes it is appropriate to retain
flexibility to determine whether to operate during Global Trading
Hours so that it can complete all system work on other preparations
prior to implementing Global Trading Hours in a class, and so that
the Exchange can evaluate trading activity during Global Trading
Hours once implemented and determine whether to continue or modify
the trading session (subject to applicable rule filings).
    \17\ See also Cboe Options Rule 6.1A(c).
    \18\ See also Cboe Options Rule 6.1A(c).
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    The proposed rule change defines a ``business day'' or ``trading
day'' as a day on which the Exchange is open for trading during Regular
Trading Hours (this is consistent with the current concept of trading
day used but not defined in the Rules).\19\ A business day

or trading day will include both trading sessions on that day. In other
words, if the Exchange is not open for Regular Trading Hours on a day
(for example, because it is an Exchange holiday), then it will not be
open for Global Trading Hours on that day. Cboe Options has the same
definition of business day and trading day.\20\
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    \19\ The proposed rule change makes corresponding changes to the
definitions of market open and market close in Rule 16.1 to provide
that each term specifies the start or end, respectively, of a
trading session.
    \20\ See Cboe Options Rule 1.1.
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    Global Trading Hours will be a separate trading session from
Regular Trading Hours. However, GTH will use the same Exchange servers
and hardware as those used during RTH.\21\ All Options Members may
participate in Global Trading Hours. Options Members do not need to
apply or take any additional steps to participate in Global Trading
Hours. Additionally, because the Exchange will use the same servers and
hardware during Global Trading Hours as it uses for Regular Trading
Hours, Options Members may use the same ports and connections to the
Exchange for all trading sessions.\22\ The Book used during Regular
Trading Hours will be the same Book used during Global Trading
Hours.\23\
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    \21\ This is different than the trading sessions on Cboe
Options, which uses different servers and hardware for each trading
session.
    \22\ Only Options Members will be able to access the System
during any trading session. Cboe Options Trading Permit Holders must
obtain a separate permit and use different connections to
participate in global trading hours. See Cboe Options Rules 3.1 and
6.1A(d).
    \23\ See proposed Rule 16.1, which amends the definition of EDGX
Options Book to mean the electronic book of simple orders and quotes
maintained by the System on which orders and quotes may execute
during the applicable trading session. The Book during GTH may be
referred to as the ``GTH Book,'' and the Book during RTH may be
referred to as the ``RTH Book.'' The additional language regarding
the execution of orders and quotes is intended to distinguish the
Book from the Queuing Book, on which orders and quotes may not
execute, as discussed below. With respect to complex orders, the
same complex order book (``COB'') will be used for all trading
sessions. See proposed Rule 21.20(a) (definition of COB). This is
different than Cboe Options, which uses separate books for each
trading session, which are not connected.
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    As further discussed below, the Exchange expects there to be
reduced liquidity, higher volatility, and wider markets during Global
Trading Hours, and investors may not want their orders or quotes to
execute during Global Trading Hours given those trading conditions. To
provide investors with flexibility to have their orders and quotes
execute only during RTH, or both RTH and GTH, the proposed rule change
adds an All Sessions order and an RTH Only order. An ``All Sessions''
order is an order a User designates as eligible to trade during both
GTH and RTH. An unexecuted All Sessions order on the GTH Book at the
end of a GTH trading session enters the RTH Queuing Book and becomes
eligible for execution during the RTH opening rotation and trading
session on the same trading day, subject to a User's instructions (for
example, a User may cancel the order).\24\ An ``RTH Only'' order is an
order a User designates as eligible to trade only during RTH or not
designated as All Sessions. An unexecuted RTH Only order with a Time-
in-Force of GTC or GTD on the RTH Book at the end of an RTH trading
session enters the RTH Queuing Book and becomes eligible for execution
during the RTH opening rotation and trading session on the following
trading day (but not during the GTH trading session on the following
trading day), subject to a User's instructions.\25\
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    \24\ See proposed Rule 21.1(d)(13).
    \25\ See proposed Rule 21.1(d)(14). The RTH Only and All
Sessions order instructions will also be available for complex
orders. See proposed Rule 21.20(b)(7) and (8).
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    Because trading sessions are completely separate on Cboe Options,
there are not distinct order types corresponding to the proposed RTH
Only and All Sessions order instructions. An order or quote submitted
to GTH on Cboe Options may only execute during GTH, and an order or
quote submitted to RTH on Cboe Options may only execute during RTH. The
proposed RTH Only order is equivalent to any order submitted to RTH on
Cboe Options. While the Exchange is not proposing an equivalent to an
order submitted to GTH on Cboe Options, and instead is proposing an All
Sessions order, Users may still submit an equivalent to a ``GTH only''
order by submitting an All Sessions order with a good-til-date Time-in-
Force, with a time to cancel before the RTH market open. Therefore,
Users can submit orders to participate in either trading session, or
both, and thus the proposed rule change provides Users with additional
flexibility and control regarding in which trading sessions their
orders and quotes may be eligible to trade.
    Generally, trading during the GTH trading session will occur in the
same manner as it occurs during the RTH trading session. However,
because the GTH market may have different characteristics than the RTH
market (such as lower trading levels, reduced liquidity, and fewer
participants), the Exchange may deem it appropriate to make different
determinations for trading rules for each trading session. Proposed
Rule 16.3(b) states to the extent the Rules allow the Exchange to make
a determination, including on a class-by-class or series-by-series
basis, the Exchange may make a determination for GTH that differs from
the determination it makes for RTH. The Exchange maintains flexibility
with respect to certain rules so that it may apply different settings
and parameters to address the specific characteristics of that class
and its market. For example, Rule 21.8(d) allows the Exchange to apply
priority overlays to the pro-rata allocation method on a class-by-class
basis; and Rule 21.20(b) allows the Exchange to determine when complex
order types are available.\26\ Proposed rule 21.1(a) and (d) allow the
Exchange to make certain order types and Times-in-Force, respectively,
not available for all Exchange systems or classes (and unless stated in
the Rules or the context indicates otherwise, as proposed).\27\ This
proposed rule change will provide the Exchange with appropriate
flexibility to address different trading characteristics, market
models, and investor base of each class. Because trading
characteristics during RTH may be different than those during GTH (such
as lower trading levels, reduced liquidity, and fewer participants),
the Exchange believes it is appropriate to extend this flexibility to
each trading session. The Exchange represents that it will have
appropriate personnel available during GTH to make any determinations
that Rules provide the Exchange or Exchange personnel will make (such
as trading halts, opening series, and obvious errors).
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    \26\ Therefore, the priority overlays that applies to a class
during RTH may differ from the allocation algorithm that apply to
that class during GTH.
    \27\ The proposed rule change amends these rules to explicitly
state that the Exchange may make these determinations on a trading
session basis. The proposed rule change also clarifies in the Rules
that Rule 21.20 sets forth the order types the Exchange may make
available for complex orders.
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    The proposed rule change amends Rules 22.2 and 22.3 to provide that
a Designated Primary Market Maker's and Market Maker's, respectively,
selected class appointment applies to classes during all trading
sessions. In order words, if a Market Maker selects an appointment in
XSP options, that appointment would apply during both GTH and RTH (and
thus, the Market-Maker would have an appointment to make markets in XSP
during both GTH and RTH). As a result, a Market-Maker continuous
quoting obligations set forth in Rule 22.6(d) would apply to the class
for an entire trading day (including both trading sessions), which is
comprised of 7.5 hours.\28\ Pursuant to Rule 22.6(d), a

Market-Maker must enter continuous bids and offers in 60% of the
cumulative number of seconds, or such higher percentage as the Exchange
may announce in advance, for which that Market-Maker's appointed
classes are open for trading, excluding any adjusted series, any intra-
day add-on series on the day during which such series are added for
trading, any Quarterly Option Series, and any series with an expiration
of greater than 270 days. The Exchange calculates this requirement by
taking the total number of seconds the Market-Maker disseminates quotes
in each appointed class (excluding the series noted above), and
dividing that time by the eligible total number of seconds each
appointed class is open for trading that day.\29\ As proposed, the 45
minutes that comprise Global Trading Hours during which the Exchange
will list series of XSP options \30\ will be included in the
denominator of this calculation. The Exchange expects to list 4,302
series of XSP options, 312 of which with expirations of greater than
270 days and 660 with quarterly expirations. Therefore, 3,330 series
will be counted for purposes of determining a Market Maker's continuous
quoting obligation for the number of minutes the series are open during
Global Trading Hours.
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    \28\ See proposed Rule 22.6(d). This is different from Cboe
Options, which applies Market-Maker appointments separately to each
trading session. See Cboe Options Rules 6.1A(e) and 8.7(d).
    \29\ The proposed rule change clarifies that the time the
Exchange is open for trading on a trading day (including all trading
sessions) will be considered when determining a Market Maker's
satisfaction of this obligation.
    \30\ This is the number of XSP series currently listed on Cboe
Options.
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    For example, suppose a Market Maker has appointments in ten
classes. Assume there are 2,000 series (excluding series with quarterly
expirations and expirations of greater than 270 days) in each class,
for a total of 20,000 series, and all series in each of those ten
classes are open for trading from 9:30:30 to 4:00:00. That would create
an eligible total number of seconds for each series of 23,370 seconds
(and thus, a total of 467,400,000 seconds for all appointed classes in
the aggregate) each trading day. To satisfy its continuous quoting
obligation, the Market Maker would need to be quoting for 60% of that
time in any combination of series across those classes (or a total of
at least 280,440,000 seconds). Suppose when the Exchange begins listing
XSP options on the Exchange for both GTH and RTH, the Market-Maker
selects an XSP appointment, and the Exchange lists 3,330 series of XSP
options that do not have quarterly expirations or expirations of
greater than 270 days. Assume all series in XSP are open for trading
from 8:30:30 to 9:15:00 and 9:30:30 to 4:15:00. That would create an
eligible total number of seconds of 8,891,100 seconds during GTH and
80,819,100 seconds during RTH, for a total of 89,710,200 seconds, for
XSP during the trading day). If XSP were only listed during RTH, the
total eligible quoting time would be 548,219,100 seconds across the
eleven classes, and a Market Maker would be required to quote
328,931,460 seconds in series across those classes. If XSP were listed
in both RTH and GTH, the total eligible quoting time would be
557,110,200 seconds during a trading day across all eleven classes, and
the Market Maker would be required to quote 334,266,120 seconds across
series in the eleven classes. Therefore, extending the XSP continuous
quoting obligation for a Market Maker with appointments in a total of
eleven classes, including XSP, would increase a Market Maker's required
quoting time by 5,334,660 seconds, or 1.62%. The Market Maker could
determine to satisfy this increase during RTH or GTH in any of its
appointed classes. For example, if a Market Maker selects an XSP
appointment but does not want to participate during GTH, the Market
Maker could add this quoting time during RTH (e.g., given the total of
23,330 series across its 11 appointed classes, the Market Maker could
quote an additional 485 seconds (just over 8 minutes) in each of 11,000
of those series (fewer than half of its appointed series) on a trading
day, it could satisfy its continuous quoting obligation without quoting
in any XSP series during any portion of GTH.
    As the above example demonstrates, while the proposed rule change
will increase the total time during which a Market Maker with an XSP
appointment must quote, this increase is de minimis given that a Market
Maker's compliance with its continuous quoting obligation is based on
all classes in which it has an appointment in the aggregate. Selecting
an appointment in XSP options will be optional and within the
discretion of a Market Maker. Additionally, the Exchange is providing
Market Makers with the opportunity to quote during GTH (and receive the
benefits of acting as a Market Maker with respect to transactions it
effects during that time) without creating additional connections to
the Exchange or undertaking separate membership requirements (as is
required on Cboe Options). Given this ease of access to the GTH trading
session, the Exchange believes Market Makers may be encouraged to quote
during that trading session. The Exchange believes Market Makers will
have an incentive to quote in XSP options during Global Trading Hours
given the significance of the S&P 500 Index within the financial
markets, the expected demand, and given that the stocks underlying the
index are also trading during those hours (which may permit execution
of certain hedging strategies). Extending a Market Maker's appointment
to Global Trading Hours will enhance liquidity during that trading
session, which benefits all investors during those hours. Therefore,
the Exchange believes the proposed rule change provides customer
trading interest with a net benefit, and continues to maintain a
balance of Market Maker benefits and obligations.
    The proposed rule change amends the definitions of all-or-none
orders, market orders, stop orders, and stop-limit orders to state that
those order types may not be applied to orders designated as All
Sessions order (i.e., all-or-none, market, stop, and stop-limit orders
will not be eligible for trading during GTH).\31\ The Exchange expects
reduced liquidity, higher volatility, and wider spreads during GTH.
Therefore, the Exchange believes it is appropriate to not allow these
orders to participate in GTH trading in order to protect customers
should wide price fluctuations occur due to the potential illiquid and
volatile nature of the market or other factors that could impact market
activity.\32\
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    \31\ The proposed rule change also amends the introductory
language to Rule 6.10(c) to provide that certain restrictions on the
use of order types may be set forth in the Rules (such as the
proposed restrictions on the use of market orders, stop orders, and
stop-limit orders during GTH).
    \32\ Cboe Options Rule 6.1A(f) also prohibits these orders from
participating in GTH trading. Cboe Options Rule 6.1A(f) also
prohibits good-til-cancelled orders from participating during GTH.
However, because the Exchange will use the same Book for all trading
sessions, and thus any GTC orders that do not trade during GTH may
become eligible for trading during RTH, the Exchange does not
believe it is necessary to restrict use of this time-in-force.
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    Proposed Rule 21.1(c)(3) provides that no current index value
underlying an index option trading during Global Trading Hours will be
disseminated during or at the close of that trading session. The value
of the underlying index will not be recalculated during or at the close
of Global Trading Hours. The closing value of the index from the
previous trading day will be available for Options Members that trade
during Global Trading Hours. However, the Exchange does not believe it
would be useful or efficient to disseminate to Options Members the same
value repeatedly at frequent intervals, as it does during Regular
Trading Hours

(when that index value is being updated).\33\
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    \33\ Rules 29.3(b)(11), 29.6(b)(10), and 29.6(d)(8) provide that
underlying index values will be disseminated at least once every 15
seconds. Proposed Rule 21.2(c)(3) supersedes those provisions with
respect to Global Trading Hours. Cboe Options Rule 24.3 also states
that dissemination of the current index value will occur after the
close of Regular Trading Hours (and, thus, not after the close of
Global Trading Hours, as no new index value will have been
calculated during that trading session) and from time-to-time on
days on which transactions are made on the Exchange.
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    Proposed Rule 17.5 requires Options Members to make certain
disclosures to customers regarding material trading risks that exist
during Global Trading Hours. The Exchange expects overall lower levels
of trading during Global Trading Hours compared to Regular Trading
Hours. While trading processes during Global Trading Hours will be
substantially similar to trading processes during Regular Trading Hours
(as noted above), the Exchange believes it is important for investors,
particularly public customers, to be aware of any differences and risks
that may result from lower trading levels and thus requires these
disclosures. Proposed Rule 17.5 provides that no Options Member may
accept an order from a customer for execution during Global Trading
Hours without disclosing to that customer that trading during Global
Trading Hours involves material trading risks, including the
possibility of lower liquidity (including fewer Market-Makers quoting),
higher volatility, changing prices, an exaggerated effect from news
announcements, wider spreads, the absence of an updated underlying
index or portfolio value or intraday indicative value and lack of
regular trading in the securities underlying the index or portfolio and
any other relevant risk. The proposed rule provides an example of these
disclosures. The Exchange believes that requirement Options Members to
disclose these risks to non-TPH customers will facilitate informed
participation in Global Trading Hours.
    The Exchange also intends to distribute to Options Members and make
available on its website a Regulatory Circular regarding Global Trading
Hours that discloses, among other things, that (1) the current
underlying index value may not be updated during Global Trading Hours,
(2) that lower liquidity during Global Trading Hours may impact
pricing, (3) that higher volatility during Global Trading Hours may
occur, (4) that wider spreads may occur during Global Trading Hours,
(5) the circumstances that may trigger trading halts during Global
Trading Hours, (6) required customer disclosures (as described above),
and (7) suitability requirements. The Exchange believes that, with this
disclosure, Global Trading Hours are appropriate and beneficial
notwithstanding the absence of a disseminated updated index value
during those hours.
    As set forth above, the differences in the Rules between the
trading process during RTH and during GTH is that certain order types
and instructions will not be available during GTH, no values for
indexes underlying index options will be disseminated during GTH, and
Options Members that accept orders from customers during GTH will be
required to make certain disclosures to those customers. As noted
above, other rules will apply in the same manner, but the Exchange may
make different determinations between RTH and GTH. The Exchange
believes these differences are consistent with the differences between
the characteristics of each trading session. The Exchange also notes
the following:
     All Options Members may, but will not be required to,
participate during Global Trading Hours. As noted above, while a
Market-Maker's appointment to an All Sessions class will apply to that
class whether it quotes in series in that class or not during GTH, the
Exchange believes any additional burden related to the application of a
Market-Maker's quoting obligation to the additional 45 minutes will be
de minimis. The Exchange believes even if a Market-Maker elects to not
quote during GTH, its ability to satisfy its continuous quoting
obligation will not be substantially obligated given the short length
of GTH and the few series that will be listed for trading during GTH.
     The Exchange expects Options Members that want to trading
during GTH to have minimal preparation. The Exchange will use the same
connection lines, message formats, and feeds during RTH and GTH.\34\
Options Members may use the same ports and EFIDs for each trading
session.\35\
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    \34\ The same telecommunications lines used by Options Members
during Regular Trading Hours may be used during Global Trading
Hours, and these lines will be connected to the same application
serve at the Exchange during both trading sessions. This is
different from Cboe Options, which connects its telecommunications
lines to a separate application serve during each trading session.
    \35\ An Options Member may elect to have separate ports or EFID
for each trading session, but the Exchange will not require that.
This is different from Cboe Options, which requires Options Members
to use separate log-ins and acronyms (the equivalent of ports and
EFIDs) for each trading session.
---------------------------------------------------------------------------

     The same opening process (as amended below) will be used
to open each trading session.
     Order processing will operate in the same manner during
Global Trading Hours as it does during Regular Trading Hours. There
will be no changes to the ranking, display, or allocation algorithms
rules (as noted above, the Exchange will have authority to apply a
different allocation algorithm to a class during Global Trading Hours
than it applies to that class during Regular Trading Hours).
     There will be no changes to the processes for clearing,
settlement, exercise, and expiration.\36\
---------------------------------------------------------------------------

    \36\ The Exchange has held discussions with the Options Clearing
Corporation, which is responsible for clearance and settlement of
all listed options transactions and has informed the Exchange that
it will be able to clear and settle all transactions that occur on
the Exchange and handle exercises of options during Extended Trading
Hours.
---------------------------------------------------------------------------

     The Exchange will report the Exchange best bid and offer
and executed trades to the Options Price Reporting Authority (``OPRA'')
during Global Trading Hours in the same manner they are reported during
Regular Trading Hours. Exchange proprietary data feeds will also be
disseminated during Global Trading Hours using the same formats and
delivery mechanisms with which the Exchange disseminates them during
Regular Trading Hours. Use of these proprietary data wills during
Global Trading Hours will be optional (as they are during Regular
Trading Hours).\37\
---------------------------------------------------------------------------

    \37\ Any fees related to receipt of the OPRA data feed during
Global Trading Hours will be included on the OPRA fee schedule. Any
fees related to receipt of the Exchange's proprietary data feeds
during Global Trading Hours will be included on the Exchange's fee
schedule (and will be included in a separate rule filing) or the
Exchange's market data website, as applicable.
---------------------------------------------------------------------------

     The same Options Members that are required to maintain
connectivity to a backup trading facility during Regular Trading Hours
will be required to do so during Global Trading Hours.\38\ Because the
same connections and serves will be used for both trading sessions, a
Options Member will not be required to take any additional action to
comply with this requirement, regardless of whether the Options Member
chooses to trade during Global Trading Hours.
---------------------------------------------------------------------------

    \38\ Currently, Options Members with accounts for 5% or more of
the executed volume, measured on a quarterly basis, the Exchange
must connect to the Exchange's backup facilities and participate in
testing. The same test will be used for all trading sessions. See
EDGX Options Regulatory Circular 18-011 (July 3, 2018); and Rule
2.4.
---------------------------------------------------------------------------

     The Exchange will process all clearly erroneous trade
breaks during Global Trading Hours in the same manner it does during
Regular Trading Hours and will have Exchange officials

available to do so (the same officials that do so during Regular
Trading Hours).
     The Exchange will perform all necessary surveillance
coverage during Global Trading Hours.
     The Exchange may halt trading during Global Trading Hours
in the interests of a fair and orderly market in the same manner it may
during Regular Trading Hours pursuant to Rule 29.10 (as proposed to be
amended, as described below). The proposed rule change amends current
Rule 29.10(e) (proposed Rule 29.10(d)) to provide that during Global
Trading Hours, Rule 29.10(a)(1) through (3), (b), and (c) (as proposed)
do not apply. As discussed above, Global Trading Hours will not
coincide with the hours of trading of the underlying primary securities
market. Generally, the Exchange considers halting trading only in
response to unusual conditions or circumstances, as it wants to
interrupt trading as infrequently as possible and only if necessary to
maintain a fair and orderly market. During Regular Trading Hours, it
would be unusual, for example, for stocks or options underlying an
index to not be trading or the current calculation of the index to not
be available. However, as discussed above, there will be no calculation
of underlying indexes during Global Trading Hours, and Global Trading
Hours do not coincide with the regular trading hours of the underlying
stock or options (there may be some overlap with trading of certain
underlying stocks, as mentioned above \39\). Thus, the factors
described in proposed Rule 29.10(a) are not unusual for Global Trading
Hours, and thus the Exchange does not believe it is necessary to
consider these as reasons for halting trading during that trading
session. Exclusion of Global Trading Hours from those provisions will
allow trading during that trading session to occur despite the
existence of those conditions (if the Exchange considered the existence
of those conditions during Global Trading Hours, trading during Global
Trading Hours could be halted every day). It is appropriate for the
Exchange to consider any unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market during
Global Trading Hours, which may, for example, include whether the
underlying primary securities market was halted at the close of the
previous trading day (in which case the Exchange will evaluate whether
the condition that led to the halt has been resolved or would not
impact trading during Global Trading Hours) or significant events that
occur during Global Trading Hours.\40\
---------------------------------------------------------------------------

    \39\ See supra note 11.
    \40\ The proposed rule change adds reasons to proposed Rule
29.10(e) (current paragraph (f)) why pricing will be determined by
OCC. Currently, settlement values are determined by OCC when pricing
is not available in these circumstances. The proposed rule change
makes corresponding changes to the headings for Rule 29.10(d) and
(e).
---------------------------------------------------------------------------

    Pursuant to Rule 20.5(c), the Exchange will halt trading in all
options when a market-wide trading halt known as a circuit breaker is
initiated on the New York Stock Exchange in response to extraordinary
market conditions. Pursuant to the proposed rule change, Rule 20.5(c)
will not apply during Global Trading Hours. The Exchange believes that,
even if stock trading was halted at the close of the previous trading
day, the length of time between that time and the beginning of Global
Trading Hours is significant (over 16 hours), and the condition that
led to the halt is likely to have been resolved. The proposed rule
change allows the Exchange to consider unusual conditions or
circumstances when determining whether to halt trading during Global
Trading Hours. To the extent a circuit breaker caused a stock market to
be closed at the end of the prior trading day, the Exchange could
consider, for example, whether it received notice from stock exchanges
that trading was expected to resume (or not) the next trading day in
determining whether to halt trading during Global Trading Hours.
Because the stock markets would not begin trading until after Global
Trading Hours opens, the Exchange believes it should be able to open
Global Trading Hours rather than waiting to see whether stock markets
open to allow investors to participate in Global Trading Hours if the
Exchange believes such trading can occur in a fair and orderly manner
based on then-existing circumstances, not circumstances that existed
numerous hours earlier. Additionally, Cboe Options has the same rule
provision.\41\
---------------------------------------------------------------------------

    \41\ See Cboe Options Rule 24.7(d).
---------------------------------------------------------------------------

    Certain rules currently include general phrases related to a day or
trading, such as market close. The proposed rule change makes technical
changes to Rules 21.1(f)(3) (definition of ``Day''), 21.6(b),\42\ 21.9,
and 21.20(c)(2)(A) to incorporate the terminology included in this
proposed rule change to specify the appropriate trading session(s)
being referenced in those rules.
---------------------------------------------------------------------------

    \42\ The proposed rule change modifies the name of Rule 21.6 to
account for the fact that it applies to the cancellation, as well as
the entry, of orders.
---------------------------------------------------------------------------

    The Exchange will disseminate last sale and quotation information
during Global Trading Hours through OPRA pursuant to the Plan for
Reporting of Consolidated Options Last Sale Reports and Quotation
Information (the ``OPRA Plan''), as it does during Regular Trading
Hours.\43\ The Exchange will also disseminate an opening quote and
trade price through OPRA for Global Trading Hours (as it does for
Regular Trading Hours). Therefore, all Options Members that trade
during Global Trading Hours will have access to quote and last sale
information during that trading session.
---------------------------------------------------------------------------

    \43\ The OPRA Plan provides for the collection and dissemination
of last sale and quotation information on options that are trading
on the participant exchanges. The OPRA Plan is a national market
system plan approved by the Commission pursuant to Section 11A of
the Act and Rule 608 thereunder. See Securities Exchange Act Release
No. 17638 (March 18, 1981). The full text of the OPRA Plan is
available at http:www.opradata.com. All operating U.S. options
exchanges participate in the OPRA Plan. The operator of OPRA
informed the Exchange that it intends to add a modifier to the
information disseminated during Global Trading Hours (as it does for
Cboe Options).
---------------------------------------------------------------------------

    The Exchange understands that systems and other issues may arise
and is committed to resolving those issues as quickly as possible,
including during Global Trading Hours. Thus, the Exchange will have
appropriate staff on-site and otherwise available as necessary during
Global Trading Hours to handle any technical and support issues that
may arise during those hours. Additionally, the Exchange will have
personnel available to address any trading issues that may arise during
Global Trading Hours.\44\ The Exchange is also committed to fulfilling
its obligations as a self-regulatory organization at all times,
including during Global Trading Hours, and will have appropriately
trained, qualified regulatory staff in place during Global Trading
Hours to the extent it deems necessary to satisfy those obligations.
The Exchange's surveillance procedures will be revised as necessary to
incorporate transactions that occur and orders and quotations that are
submitted during Global Trading Hours. The Exchange believes its
surveillance procedures are adequate to properly

monitor trading of XSP options during Global Trading Hours.
---------------------------------------------------------------------------

    \44\ The Exchange notes that, to conduct trading during Global
Trading Hours, persons that are not Options Members, such as
employees of affiliates of Options Members located outside of the
United States, may be transmitting orders and quotes during Global
Trading Hours (such non-Options Members would not have direct access
to the Exchange, and thus those orders and quotes would be submitted
to the Exchange through Options Members' systems subject to
applicable laws, rules, and regulations). Options Members may
authorize (in a form and manner determined by the Exchange)
individuals at these non-Options Member entities to contact the
Exchange during Global Trading Hours to address any issues.
---------------------------------------------------------------------------

Opening Process
    Rule 21.7 sets forth the opening process the Exchange uses to open
series on the Exchange at the market open each trading day (and after
trading halts). Pursuant to the current opening process, the System
determines and opening price for a series based on the NBBO \45\ and
crosses any interest on the book that is marketable at that price. The
proposed rule change adopts an opening auction process, substantially
similar to the Cboe Options opening auction process.\46\ The Exchange
believes an opening auction process will enhance the openings of series
on the Exchange by providing an opportunity for price discovery based
on then-current market conditions. Pursuant to the proposed opening
auction process, the Exchange will have a Queuing Period, during which
the System will accept orders and quotes and disseminates expected
opening information; will initiate an opening rotation upon the
occurrence of certain triggers; will conduct an opening rotation during
which the System matches and executes orders and quotes against each
other in order to establish an opening Exchange best bid and offer and
trade price, if any, for each series, subject to certain price
protections; and will open series for trading.\47\
---------------------------------------------------------------------------

    \45\ The opening price (if not outside the NBBO and no more than
a specified minimum amount away from the NBBO) is either the
midpoint of the NBBO, the last disseminated transaction price after
9:30 a.m., or the last transaction price from the previous trading
day. See current 21.7(b).
    \46\ See Cboe Options Rule 6.2.
    \47\ The order of events that comprise this proposed opening
auction process corresponds to the opening auction process on Cboe
Options. See Cboe Options Rule 6.2.
---------------------------------------------------------------------------

    Proposed Rule 21.7(a) sets forth the definitions of the following
terms for purposes of the opening auction process in proposed Rule
21.7: \48\
---------------------------------------------------------------------------

    \48\ A term defined elsewhere in the Rules has the same meaning
with respect to Rule 21.7, unless otherwise defined in Rule 21.7.
---------------------------------------------------------------------------

     Composite Market: The term ``Composite Market'' means the
market for a series comprised of (1) the higher of the then-current
best appointed Market Maker bulk message bid on the Queuing Book and
the away best bid (``ABB'') (if there is an ABB) and (2) the lower of
the then-current best appointed Market Maker bulk message offer on the
Queuing Book and the away best offer (``ABO'') (if there is an ABO).
The term ``Composite Bid (Offer)'' means the bid (offer) used to
determine the Composite Market.\49\
---------------------------------------------------------------------------

    \49\ Cboe Options similarly considers the Exchange's best quote
bid and best quote offer when determining whether the Exchange's
market is too wide. On Cboe Options, the term ``quote'' corresponds
to the term ``bulk message'' on the Exchange. Cboe Options also
considers quotes from any away markets, if it has activated Hybrid
Agency Liaison (``HAL'') at the open. The Exchange has a Step-Up
Mechanism (``SUM'') that corresponds to HAL, but does not have it
activated at the open as Cboe Options does. However, the Exchange
believes considering any quotes from away markets in addition to
quotes on its own market when determining whether to open a series
will enhance the opening auction price by considering all available
pricing information.
---------------------------------------------------------------------------

     Composite Width: The term ``Composite Width'' means the
width of the Composite Market (i.e., the width between the Composite
Bid and the Composite Offer) of a series.
     Maximum Composite Width: The term ``Maximum Composite
Width'' means the amount that the Composite Width of a series may
generally not be greater than for the series to open (subject to
certain exceptions, as described below). The Exchange determines this
amount on a class and Composite Bid basis, which amount the Exchange
may modify during the opening auction process (which modifications the
Exchange disseminates to all subscribers to the Exchange's data feeds
that deliver opening auction updates).\50\
---------------------------------------------------------------------------

    \50\ The Maximum Composite Width corresponds to the opening
exchange prescribed width range (``OEPW'') on Cboe Options. See Cboe
Options Rule 6.2(d)(i)(A). The Exchange will determine the Maximum
Composite Width in a slightly different manner than Cboe Options
determines the OEPW; however, both are based on appointed Market-
Maker quotes and are intended to create a reasonable range to ensure
the market does not open at extreme prices. Additionally, as
proposed, the Maximum Composite Width will factor in away prices in
addition to quotes on the Exchange (unlike Cboe Options which
considers only quotes on the Exchange).
---------------------------------------------------------------------------

     Opening Auction Updates: The term ``opening auction
updates'' means Exchange-disseminated messages that contain information
regarding the expected opening of a series based on orders and quotes
in the Queuing Book for the applicable trading session and, if
applicable, the GTH Book,\51\ including the expected opening price, the
then-current cumulative size on each side at or more aggressive than
the expected opening price, and whether the series would open (and any
reason why a series would not open).
---------------------------------------------------------------------------

    \51\ In other words, for the RTH opening auction in an All
Sessions class, the expected opening information to be disseminated
in opening auction updates prior to the conclusion of the GTH
trading session will be based on orders and quotes in the RTH
Queuing Book (i.e., RTH Only orders) and in the GTH Book (i.e., All
Sessions orders).
---------------------------------------------------------------------------

     Opening Collar: The term ``Opening Collar'' means the
price range that establishes limits at or inside of which the System
determines the Opening Trade Price for a series. The Exchange
determines the width of this price range on a class and Composite Bid
basis, which range the Exchange may modify during the opening auction
process (which modifications the Exchange disseminates to all
subscribers to the Exchange's data feeds that deliver opening auction
updates.\52\
---------------------------------------------------------------------------

    \52\ Cboe Options uses the OEPW as the range within which the
opening price must be. See Cboe Options Rule 6.2(d)(i)(C). The
Exchange will determine the Opening Collar in a slightly different
manner than Cboe Options determines the OEPW; however, both are
based on appointed Market-Maker quotes and are intended to create a
reasonable range to ensure the market does not open at extreme
prices. Additionally, as proposed, the Opening Collar will factor in
away prices in addition to quotes on the Exchange (unlike Cboe
Options which considers only quotes on the Exchange).
---------------------------------------------------------------------------

     Opening Trade Price: The term ``Opening Trade Price''
means the price at which the System executes opening trades in a series
during the opening rotation.\53\
---------------------------------------------------------------------------

    \53\ See current Rule 21.7(c).
---------------------------------------------------------------------------

     Queuing Book: The term ``Queuing Book'' means the book
into which Users may submit orders and quotes (and onto which GTC and
GTD orders remaining on the Book from the previous trading session or
trading day, as applicable, are entered) during the Queuing Period for
participation in the application opening rotation.\54\ Orders and
quotes on the Queuing Book may not execute until the opening rotation.
The Queuing Book for the GTH opening auction process may be referred to
as the ``GTH Queuing Book,'' and the Queuing Book for the RTH opening
auction process may be referred to as the ``RTH Queuing Book.''
---------------------------------------------------------------------------

    \54\ In other words, at 7:30 a.m., All Sessions orders will rest
on the GTH Queuing Book and be eligible to participate in the GTH
opening auction process, and RTH Only orders will rest on the RTH
Queuing Book and be eligible to participate in the RTH opening
auction process.
---------------------------------------------------------------------------

     Queuing Period: The term ``Queueing Period'' means the
time period prior to the initiation of an opening rotation during which
the System accepts orders and quotes for participation in the opening
rotation for the applicable trading session.\55\
---------------------------------------------------------------------------

    \55\ See current Rule 21.7(a)(1) (the current rule does not use
the term ``Queuing Period''; however, it does provide for an order
entry period prior to the opening of a series during which the
System accepts orders and quotes). The proposed rule change moves
the rule provisions regarding the opening process following a halt
to proposed paragraph (g), with no substantive changes.
---------------------------------------------------------------------------

    Proposed paragraph (b) describes the Queuing Period. The Queuing
Period begins at 7:30 a.m. for all class.\56\ This is the same time at
which the System begins accepting orders and quotes today. Therefore,
Users will have the same amount of time to submit orders and quotes
prior to the RTH opening.

Additionally, Users will have one hour to submit orders and quotes in
GTH classes prior to the GTH opening. The Exchange believes this is
sufficient given that the Exchange will list fewer classes (one class,
as proposed) during GTH.\57\
---------------------------------------------------------------------------

    \56\ See proposed Rule 21.7(b)(1).
    \57\ Pursuant to Cboe Options Rule 6.2(a), the pre-opening
period (equivalent to the proposed Queuing Period) begins no earlier
than 2:00 a.m. Central time for regular trading hours and no later
than 4:00 p.m. on the previous day for global trading hours (as
global trading hours on Cboe Options begins at 2:00 a.m. Central
time). The Exchange does not propose to have flexibility as Cboe
Options has, and believes the proposed time period for the Queuing
Period is sufficient.
---------------------------------------------------------------------------

    Proposed subparagraph (b)(2) clarifies that orders and quotes on
the Queuing Book are not eligible for execution until the opening
rotation pursuant to proposed paragraph (e), as described below. This
is consistent with current order entry period, pursuant to which orders
and quotes entered for inclusion in the opening process do not execute
until the opening trade pursuant to current paragraph (d). The System
accepts all orders and quotes that are available for a class and
trading session pursuant to Rule 21.1 during the Queuing Period, which
are eligible for execution during the opening rotation, except as
follows:
     the System rejects IOC and FOK orders during the Queuing
Period; \58\
---------------------------------------------------------------------------

    \58\ See current paragraph (a) and proposed subparagraph
(a)(2)(A); see also Cboe Options Rule 6.2(a)(i).
---------------------------------------------------------------------------

     The System accepts orders and quotes with MTP Modifiers
during the Queuing Period, but does not enforce them during the opening
rotation; \59\
---------------------------------------------------------------------------

    \59\ See proposed subparagraph (a)(2)(B). This is consistent
with current functionality, and the detail is being added to the
Rules. See also C2 Rule 6.11(a)(1). Cboe Options has Market-Maker
trade prevention orders, which it does not accept prior to the
opening. See Cboe Options Rule 6.2(a)(i).
---------------------------------------------------------------------------

     the System accepts all-or-none, stop, and stop-limit
orders \60\ during the Queuing Period, but they do not participate
during the opening rotation. The System enters any of these orders it
receives during the Queuing Period into the Book following completion
of the opening rotation (in time priority); \61\
---------------------------------------------------------------------------

    \60\ Pursuant to Rule 21.1(d)(11) and (12), stop and stop-limit
orders are triggered based on the consolidated last sale price. Not
participating in the opening process is consistent with this
requirement, as the Exchange needs to be open (and thus have an
opening trade occur) in order for there to be a consolidated last
sale price that can trigger these orders. Current Rule 21.7(a)
provides that all-or-none orders do not participate in the opening
process.
    \61\ This is consistent with current functionality, and the
proposed rule change is adding this detail to the Rules. See also
Cboe Options Rule 6.2(c)(i)(B) (which states that order with a stop
contingency do not participate in the opening rotation).
---------------------------------------------------------------------------

     the System converts all ISOs received prior to the
completion of the opening rotation into non-ISOs; \62\ and
---------------------------------------------------------------------------

    \62\ See current paragraph (a) and proposed subparagraph
(a)(2)(D); see also Cboe Options Rule 6.2(a)(i) (which does not
permit ISOs to be entered during the Cboe Options pre-opening
period).
---------------------------------------------------------------------------

     complex orders do not participate in the opening auction
described in Rule 21.7 and instead may participate in the COB Opening
Process pursuant to Rule 21.20(c)(2)(A).\63\
---------------------------------------------------------------------------

    \63\ See Rule 21.20(c)(2)(A) and proposed subparagraph
(a)(2)(E); see also Cboe Options Rule 6.2(c)(i)(B).
---------------------------------------------------------------------------

    Proposed paragraph (c) describes the opening auction updates the
Exchange will disseminate as part of the opening auction process. As
noted above, opening auction updates contain information regarding the
expected opening of a series. These messages provide market
participants with information that may contribute to enhanced liquidity
and price discovery during the opening auction process. Beginning at a
time (determined by the Exchange) no earlier than one hour prior to the
expected initiation of the opening rotation for a trading session and
until the conclusion of the opening rotation for a series, the Exchange
disseminates opening auction updates for the series.\64\ The Exchange
disseminates opening auction updates at regular intervals of time (the
length of which the Exchange determines for each trading session), or
less frequently if there are no updates to the opening information
since the previously disseminated update, to all subscribers to the
Exchange's data feeds that deliver these messages until a series
opens.\65\ If there have been no changes since the previous update, the
Exchange does not believe it is necessary to disseminate duplicate
updates to market participants at the next interval of time.
---------------------------------------------------------------------------

    \64\ The Exchange only begins disseminating updates for series
with locked or crossed interest or if the series needs Market Maker
bulk messages. There can only be an expected opening price to
disseminate if these conditions have been met, and thus no updates
will be disseminated if these conditions do not exist. See also Cboe
Options Rule 6.2(a)(ii) (which provides that Cboe Options may begin
disseminated expected opening information (``EOIs'') messages (which
correspond to opening auction updates)). Cboe Options currently
begins disseminating EOIs at 7:30 a.m. or 8:00 a.m. Central time
(depending on the class), which is consistent with the proposed rule
change to begin dissemination of opening auction messages no earlier
than one hour prior to the expected initiation of the opening
rotation for a series. The Exchange believes market participants
generally want to receive this information closer to the opening of
trading.
    \65\ See also Cboe Options Rule 6.2(a)(ii) (Cboe Options will
similarly disseminate EOIs at regular intervals or less frequently
if there are no updates, and will not disseminate EOIs in certain
circumstances, including if there is no locked or crossed interest
(because there would be no expected opening price or size)).
---------------------------------------------------------------------------

    Proposed paragraph (d) describes the events that will trigger the
opening rotation for a class. Pursuant to current paragraph (b), the
System will automatically open a related equity option series after the
first transaction on the primary listing market after 9:30 a.m. in the
securities underlying the options as reported on the first print
disseminated pursuant to an effective national market system plan (with
respect to equity options). Pursuant to current paragraph (c), the
System automatically opens a related index option series after an away
options exchange(s) disseminates a quote in an index option series
(with respect to index options). As proposed for Regular Trading Hours,
after a time period (which the Exchange determines for all classes)
following the System's observation after 9:30 a.m. of the first
disseminated (1) transaction price for the security underlying an
equity option or (2) index value for the index underlying an index
option, the System will initiate the opening rotation for the series in
that class, and the Exchange disseminates message to market
participants indicating the initiation of the opening rotation.\66\ For
Global Trading Hours, the System will initiate the opening rotation at
8:30 a.m.\67\
---------------------------------------------------------------------------

    \66\ Pursuant to current paragraphs (b) and (c), the opening is
currently triggered upon the occurrence of similar events. While not
specified in the current Rules, pursuant to current functionality,
the System waits for a certain time period following the occurrence
of such an event to open a series. See also C2 Rule 6.11(a)(1).
    \67\ See also Cboe Options Rule 6.2(b). Unlike Cboe Options, the
opening rotation will be triggered in all equity classes by
observation of the first transaction in the underlying security
(rather than some classes being triggered by a timer), and the
opening rotation will be triggered in all index classes by
observation of the first index value (rather than some classes being
triggered by a timer). The Exchange does not believe it needs this
flexibility.
---------------------------------------------------------------------------

    Proposed paragraph (e) describes the opening rotation process,
during which the System will determine whether the Composite Market for
a series is not wider than a maximum width, will determine the opening
price, and open series.\68\ The Maximum Composite Width Check and
Opening Collar are intended to ensure that series open in a fair and
orderly manner and at prices consistent with the current market

conditions for the series and not at extreme prices, while taking into
consideration prices disseminated from other options exchanges that may
be better than the Exchange's at the open.
---------------------------------------------------------------------------

    \68\ See also Cboe Options Rule 6.2(d) (pursuant to which Cboe
Options will generally not open a series if the width is wider than
an acceptable price range or if the opening trade price is outside
of an acceptable price range). The Exchange will similarly have a
maximum quote width and acceptable opening price range, however,
they may be calculated differently. Cboe Options has additional
opening conditions that the Exchange does not propose to adopt.
---------------------------------------------------------------------------

    Proposed subparagraph (e)(1) describes the Maximum Composite Width
Check.
     If the Composite Width of a series is less than or equal
to the Maximum Composite Width, the series is eligible to open (and the
System determines the Opening Price as described below).
     If the Composite Width of a series is greater than the
Maximum Composite Width, but there are no non-M Capacity \69\ market
orders or buy (sell) limit orders with prices higher (lower) than the
Composite Bid (Offer) and there are no locked or crossed orders or
quotes, the series is eligible to open (and the System determines the
Opening Price as described below).
---------------------------------------------------------------------------

    \69\ Capacity M is used for orders for the account of a Market
Maker (with an appointment in the class). See U.S. Options Binary
Order Entry Specifications, at 28 (definition of Capacity),
available at http://cdn.cboe.com/resources/membership/US_Options_BOE_Specification.pdf.
---------------------------------------------------------------------------

     If neither of the conditions above are satisfied for a
series, the series is ineligible to open. The Queuing Period for the
series continues (including the dissemination of opening auction
updates) until one of the above conditions for the series is
satisfied.\70\
---------------------------------------------------------------------------

    \70\ See Cboe Options Rule 6.2(c)(iii) (pursuant to which the
opening rotation period on Cboe Options continues, including
dissemination of EOIs, until the opening conditions are satisfied).
The Exchange may also open a series pursuant to current paragraph
(f) (proposed paragraph (h)), which permits the Exchange to deviate
from the standard manner of the opening auction process, including
adjusting the timing of the opening rotation in any class, modifying
any time periods described in Rule 6.11, and delaying or compelling
the opening of a series if the opening width is wider than Maximum
Width, when it believes it is necessary in the interests of a fair
and orderly market. The proposed rule change specifies additional
ways in which the Exchange may deviate from the standard of opening
(which it has the authority to do under the current rule). See also
Cboe Options Rule 6.2(e) (pursuant to which Cboe Options may deviate
from the standard manner of the opening auction process for the same
reasons). Pursuant to the proposed rule change, the Exchange will
make and maintain records to document all determinations to deviate
from the standard manner of the opening auction process, and
periodically reviews these determinations for consistency with the
interests of a fair and orderly market (which, while not specified
in the current Rules, the Exchange does today).
---------------------------------------------------------------------------

    The Exchange will use the Maximum Composite Width Check as a price
protection measure to prevent orders from executing at extreme prices
at the open. If the width of the Composite Market (which represents the
best market, as it is comprised of the better of Market Maker bulk
messages on the Exchange or any away market quotes) is no greater than
the Maximum Composite Width, the Exchange believes it is appropriate to
open a series under these circumstances and provide marketable orders
with an opportunity to execute at a reasonable opening price (as
discussed below), because there is minimal risk of execution at an
extreme price. However, if the Composite Width is greater than the
Maximum Composite Width but there are no non-M Capacity orders \71\
that lock or cross the opposite-side widest point of the Composite
Market (and thus not marketable at a price at which the Exchange would
open, as described below), there is similarly no risk of an order
executing at an extreme price on the open. Because the risk that the
Maximum Composite Width Check is intended to address is not present in
this situation, the Exchange believes it is appropriate to open a
series in either of these conditions. However, if neither of these
conditions is satisfied, the Exchange believes there may be risk that
orders would execute at an extreme price if the series open, and
therefore the Exchange will not open a series.
---------------------------------------------------------------------------

    \71\ Market Maker bulk messages are considered when determining
the Composite Market. The Exchange believes it is appropriate to
consider Market-Maker bulk messages when determining an opening
quote to ensure there will be liquidity in a series when it opens.
Additionally, while it is possible for Market Makers to submit M
orders, the Exchange believes there is less risk of a Market Maker
inputting an order at an extreme price given that Market Makers are
generally responsible for pricing the market.
---------------------------------------------------------------------------

    Proposed subparagraph (e)(2) describes how the System determines
the Opening Trade Price for a series after it satisfies the Maximum
Composite Width Check described above.
     The Opening Trade Price is the price that is not outside
the Opening Collar and:
    [cir] The price at which the largest number of contracts can
execute (i.e., the volume-maximizing price);
    [cir] if there are multiple volume-maximizing prices, the price at
which the fewest number of contracts remain unexecuted (i.e., the
imbalance-minimizing price); or
    [cir] if there are multiple volume-maximizing, imbalance-minimizing
prices, (1) the highest (lowest) price, if there is a buy (sell)
imbalance, or (2) the price at or nearest to the midpoint of the
Opening Collar, if there is no imbalance.
     There is no Opening Trade Price if there are no locked or
crossed orders or quotes at a price not outside the Opening Collar.\72\
---------------------------------------------------------------------------

    \72\ See current Rule 21.7(e).
---------------------------------------------------------------------------

    The Exchange believes the proposed volume-maximizing, imbalance-
minimizing procedure is reasonable, as it will provide for the largest
number of contracts in the Queuing Book that can execute, leaving as
few as possible bids and offers in the Book that cannot execute.\73\
The Exchange will use the Opening Collar as a price protection measure
to prevent orders from executing at extreme prices at the open. If the
Opening Trade Price is not outside the Opening Collar (which will be
based on the best then-current market), the Exchange believes it is
appropriate to open a series at that price, because there is minimal
risk of execution at an extreme price. However, if the Opening Trade
Price would be outside of the Opening Collar, the Exchange believes
there may be risk that orders would execute at an extreme price if the
series open, and therefore the Exchange will not open a series.
---------------------------------------------------------------------------

    \73\ See also Cboe Options Rule 6.2(c)(i)(A) (pursuant to which
Cboe Options will open at the market-clearing price, and if there
are multiple prices at which the same number of contracts would
clear, Cboe Options will use similar tie-breakers).
---------------------------------------------------------------------------

    The following examples show the application of the Maximum
Composite Width Check:
Example #1
    Suppose the Maximum Composite Width for a class is 0.50, and the
Composite Market is 1.00 x 2.00, comprised of an appointed Market Maker
bulk message bid of 2.00 and an appointed Market Maker bulk message
offer of 1.00. There is no other interest in the Queuing Book. The
series is not eligible to open, because the width of the Composite
Market is greater than the Maximum Composite Width but there are locked
orders or quotes in the series. The Queuing Period for the series will
continue until the series satisfies the Maximum Composite Width Check.
Example #2
    Suppose the Maximum Composite Width for a class is 0.50, and the
Composite Market is 1.00 x 2.00, comprised of an appointed Market Maker
bulk message bid of 1.00 and an appointed Market Maker bulk message
offer of 2.00. There is no other interest in the Queuing Book. The
series is eligible to open, because the width of the Composite Market
is greater than the Maximum Composite Width and there are no locked
orders or quotes in the series or non-M Capacity orders. The System
will then determine the Opening Trade Price.
Example #3
    Suppose the Maximum Composite Width for a class is 0.50, and the

Composite Market is 1.00 x 2.00, comprised of an appointed Market Maker
bulk message bid of 1.00 and an appointed Market-Maker bulk message
offer of 2.00. There is a non-M Capacity limit order to buy for $1.99
in Queuing Book. The series is not eligible to open, because the width
of the Composite Market is greater than the Maximum Composite Width,
and there is a non-M Capacity order at a price inside of the Composite
Market. The Queuing Period for the series will continue until the
series satisfies the Maximum Composite Width Check.
    Pursuant to proposed subparagraph (e)(3), if the System establishes
an Opening Trade Price, the System will execute orders and quotes in
the Queuing Book at the Opening Trade Price. The System will prioritize
orders and quotes in the following order: Market orders, limit orders
and quotes with prices better than the Opening Trade Price, and orders
and quotes at the Opening Trade Price.\74\ The System allocates orders
and quotes at the same price pursuant to the allocation algorithm that
applies to a class intraday (in accordance with Rule 21.8), unless the
Exchange determines to apply a different allocation algorithm from Rule
21.8 to a class during the opening rotation.\75\ If there is no Opening
Trade Price, the System opens a series without a trade.
---------------------------------------------------------------------------

    \74\ See current Rule 21.7(d) (which states the System matches
(in accordance with Rule 21.8) orders and quotes in the System
priced equal to or more aggressively than the Opening Price); see
also Cboe Options Rule 6.2(c)(i)(C). The Exchange believes it is
appropriate to prioritize orders with the most aggressive prices, as
it provides market participants with incentive to submit their best-
priced orders.
    \75\ See Cboe Options Rule 6.2, Interpretation and Policy .04.
While the allocation algorithm used during the opening rotation for
a class will default to and generally be the same as the one used
for that class intraday, the Exchange believes the flexibility is
appropriate so that it can facilitate a robust opening with
sufficient liquidity in all classes. Cboe Options may apply a
different allocation algorithm for series that open at a minimum
price increment due to a sell market order imbalance. The Exchange
does not believe it needs this flexibility.
---------------------------------------------------------------------------

    Pursuant to proposed subparagraph (f), as is the case today,
following the conclusion of the opening rotation, the System enters any
unexecuted orders and quotes (or remaining portions) from the Queuing
Book into the EDGX Options Book in time sequence (subject to a User's
instructions--for example, a User may cancel an order), where they may
be processed in accordance with Rule 21.8.\76\ Consistent with the OPG
contingency (and current functionality), the System cancels any
unexecuted OPG orders (or remaining portions) following the conclusion
of the opening rotation.
---------------------------------------------------------------------------

    \76\ The proposed rule change corrects an error in the current
Rule, which references Rule 21.9 rather than Rule 21.8.
---------------------------------------------------------------------------

    The proposed rule change adds paragraph (i), which provides if the
underlying security for a class is in a limit up-limit down state when
the opening rotation begins for that class, then the System cancels or
rejects all market orders. In addition, if the opening rotation has
already begun for a class when a limit up-limit down state initiates
for the underlying security of that class, market and limit orders will
continue through the end of the opening rotation.\77\
---------------------------------------------------------------------------

    \77\ This is consistent with the definition of market orders in
Rule 21.1(d). See also C2 Rule 6.11(d); and Cboe Options Rule 6.2,
Interpretation and Policy .07.
---------------------------------------------------------------------------

    Currently, if an order enters the Book following the Opening
Process (which would include any GTC or GTD orders that reenter the
Book from the prior trading day) and becomes subject to the drill-
through protection pursuant to Rule 21.17(d), the NBO (NBB) that
existed at the time it enters (or reenters) the Book would be used when
determining the drill-through price. Proposed Rule 21.17(d)(1) provides
that if an order that enters the EDGX Options Book following the
Opening Auction Process and becomes subject to the drill-through
protection, the bid (offer) limit of the Opening Collar plus (minus)
the buffer amount will be the drill-through price.\78\ As discussed
above, the Opening Collar is a price protection, and the Exchange would
execute orders at the open at prices at or within the Opening Collar
(as it would execute orders at or within the NBBO). Therefore, the
Exchange believes the Opening Collar limit price points are reasonable
to use when determining the drill-through price for orders that are
unable to execute during the opening rotation.
---------------------------------------------------------------------------

    \78\ The proposed rule change makes corresponding changes to
proposed Rule 21.17(d)(2).
---------------------------------------------------------------------------

Other Changes
    Proposed Rule 16.3 states the Exchange announces to Trading Permit
Holders all determinations it makes pursuant to the Rules via (a)
specifications, Notices, or Regulatory Circulars with appropriate
advanced notice, which will be posted on the Exchange's website, or as
otherwise provided in the Rules, (b) electronic message, or (c) other
communication method as provided in the Rules. Current Rules state the
Exchange will generally announce determinations by Regulatory Circular,
and the proposed rule expands the different type of documents that may
be used to announce determinations, consistent with EDGX. Proposed Rule
16.3 makes clear this information will be available on the Exchange's
website in an easily accessible manner, regardless of the manner in
which the Exchange announces it. Additionally, certain determinations
are made more real-time pursuant to electronic message received by
Options Members. This single rule simplifies the Rules by eliminating
the need to repeatedly state in the rules how the Exchange will
announce determinations.\79\
---------------------------------------------------------------------------

    \79\ Proposed Rule 16.3 is the same as C2 Rule 1.2.
---------------------------------------------------------------------------

    The proposed rule change adds Rule 21.2(a), which states the System
accepts orders and quotes at the times set forth in Rule 21.6. This is
consistent with the provisions in current Rule 21.6, and will help
consolidate all rules regarding hours into a single rule.
    Current Rule 21.2(c) states the Exchange will not be open for
business on any holiday observed by the Exchange. Proposed Rule 21.2(d)
lists all of the holidays on which the Exchange will not be open for
business, and describes on which day the Exchange will not be open if a
holiday observed falls on a Saturday or Sunday.\80\
---------------------------------------------------------------------------

    \80\ Proposed Rule 21.2(c) is the same as C2 Rule 6.1(c).
---------------------------------------------------------------------------

    The proposed rule change permits the Exchange to designate certain
index options to end trading at 4:00 p.m.\81\ The Exchange believes
this flexibility is appropriate, for example, if it were to list for
trading an index option for which it expected investors to use the
prices of underlying stocks rather than corresponding index futures to
price the index options, and those stocks end trading at 4:00 p.m. The
proposed rule change moves rule provisions from current Rules 29.10(a)
\82\ and 29.11(j)(4) regarding index option trading hours into proposed
Rule 21.2(b)(2) so that all rule provisions regarding trading hours are
included in the same rule.\83\
---------------------------------------------------------------------------

    \81\ See proposed Rule 21.2(b)(2).
    \82\ The proposed rule change modifies the name of Rule 29.10,
as it only applies to trading halts as proposed.
    \83\ The proposed rule change makes corresponding changes to
paragraph lettering in Rule 29.10.
---------------------------------------------------------------------------

    The Exchange also proposes to clarify that only options on Fund
Shares and Index-Linked Securities designated by the Exchange would
remain open beyond 4:00 p.m. but no later than 4:15 p.m.\84\ Because
Fund Shares and Index-Linked Securities are often based on the same
indexes on which the Exchange lists options, and the rules permit index

options to trade until 4:00 p.m. or 4:15 p.m., the Exchange believes it
is appropriate to have similar flexibility with respect to the Regular
Trading Hours of options on Fund Shares and Index-Linked Securities.
Other options exchanges have similar flexibility regarding trading
hours.\85\
---------------------------------------------------------------------------

    \84\ See proposed Rule 21.2(b)(1).
    \85\ See, e.g., C2 Rule 6.1(a).
---------------------------------------------------------------------------

    Proposed Rule 21.6(f) states after the RTH market close, Users may
cancel orders with Time-in-Force of GTC or GTC that remain on the Book
until 4:45 p.m. This proposed change provides Users with additional
flexibility to manage their orders that remain in the Book following
the market close. Cancelling a GTC or GTD order at 4:30 p.m. has the
same effect as cancelling that order at 7:30 a.m. the following day--
ultimately, it accommodates the User's goal of cancelling an order
prior to it potentially executing during the Opening Auction Process
the following morning.
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.\86\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \87\ 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) \88\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78f(b).
    \87\ 15 U.S.C. 78f(b)(5).
    \88\ Id.
---------------------------------------------------------------------------

    In particular, the proposed rule change to adopt Global Trading
Hours will remove impediments to and perfect the mechanism of a free
and open market and a national market system. Global Trading Hours is a
competitive initiative designed to improve the Exchange's marketplace
for the benefit of investors. The proposed rule change provides a new
investment opportunity within the options trading industry that is
consistent with the continued globalization of the securities markets
and closer aligns the Exchange's trading hours with extended trading
hours of stock exchanges. The Exchange believes the proposed rule
change will enhance competition by providing a service to investors
that most other options exchanges currently are not providing. The
Exchange believes the competition among exchanges ultimately benefits
the entire marketplace. Given the robust competition among the options
exchanges, innovative trading mechanisms are consistent with the above-
mentioned goals of the Exchange Act.
    The proposed rule change also provides a mechanism for the Exchange
to more effectively compete with exchanges located outside of the
United States. Global markets have become increasingly interdepending
and linked, both psychologically and through improved communications
technology. This has been accompanied by an increased desire among
investors to have access to U.S.-listed exchange products outside of
Regular Trading Hours, and the Exchange believes this desire extends to
its exclusively listed products. The Exchange believes that the
proposed rule change is reasonably designed to provide an appropriate
mechanism for trading outside of Regular Trading Hours while providing
for appropriate Exchange oversight pursuant to the Act, trade
reporting, and surveillance.
    While only one other options exchange is currently open for trading
outside of Regular Trading Hours, the Commission has authorized stock
exchanges to be open for trading outside of these hours pursuant to the
Act. Additionally, futures exchanges also operate outside of those
hours. Thus, the proposed rule change to adopt Global Trading Hours is
not novel or unique. The Exchange has currently authorized one class to
list for trading during Global Trading Hours. As the proposed rule
change is a new Exchange initiative, the Exchange believes it is
reasonable to trade a limited number of classes upon implementation for
which demand is believed to be the highest during Global Trading Hours.
    The vast majority of the Exchange's trading rules will apply during
Global Trading Hours in the same manner as during Regular Trading
Hours, which rules have all be previously filed with the Commission as
being consistent with the goals of the Act. Rules that will apply
equally during Global Trading Hours include rules that protect public
customers, impose best execution requirements on Options Members, and
prohibit acts and practices that are inconsistent with just and
equitable principles of trade as well as fraudulent and manipulative
practices. The proposed rule change also provides opportunities for
price improvement during Global Trading Hours and applies the same
allocation and priority rules that are available to the Exchange during
Regular Trading Hours. The Exchange believes, therefore, that the rules
that will apply during Global Trading Hours will continue to promote
just and equitable principles of trade and prevent fraudulent and
manipulative acts.
    The proposed rule change clearly identifies the ways in which
trading during Regular Trading Hours will different from trading during
Global Trading Hours (such as identifying order types and instructions
that will not be available during Global Trading Hours). This ensures
that investors are aware of any differences among trading sessions. The
Exchange believes the differences are consistent with the expected
differences in liquidity, participation, and trading activity between
Regular Trading Hours and Global Trading Hours. The flexibility
provided to the Exchange to make determinations for each trading
session will allow the Exchange to apply settings and parameters to
address the different market conditions that may be present during each
trading session. Additionally, to further protect investors from any
additional risks related to trading during Global Trading Hours, the
proposed rule change requires that disclosures be made to customers
describing these potential risks. The proposed All Sessions order and
RTH Only order will protect investors by permitting investors who do
not wish to trade during Global Trading Hours from having orders or
quotes execute during those orders. Consistent with the goal of
investor protection, the Exchange will not allow market orders during
Global Trading Hours due to the expected increased volatility and
decreased liquidity during these hours.
    Additionally, the Exchange believes that the proposed rule change
will foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, as the Exchange will
ensure that adequate staffing is available during Global Trading Hours
to provide appropriate trading support during those hours, as well as
Exchange officials to make any necessary

determinations under the rules during Global Trading Hours (such as
trading halts and trade nullification for obvious errors). The Exchange
is also committed to fulfilling its obligations as a self-regulatory
organization at all times, including during Global Trading Hours. The
Exchange's surveillance procedures will also be revised to incorporate
transactions that occur and orders and quotations that are submitted
during Global Trading Hours. The Exchange believes its surveillance
procedures are adequate to properly monitor trading in XSP options
during Global Trading Hours. Clearing and settlement processes will be
the same for Global Trading Hours as they are for Regular Trading Hours
transactions.
    The proposed rule change further removes impediments to a free and
open market and does not unfairly discriminate among market
participants, as all Options Members with access to the Exchange may
trade during Global Trading Hours using the same connection lines,
message formats data feeds, and EFIDs they use during Regular Trading
Hours, minimizing any preparation efforts necessary to participate
during Global Trading Hours. Options Members will not be required to
trade during Global Trading Hours.
    As demonstrated above, while the proposed rule change increases the
total time during which a Market Maker with XSP appointment must quote,
this increase is de minimis given that a Market Maker's compliance with
its continuous quoting obligation is based on all classes in which it
has an appointment in the aggregate. Selecting an appointment in XSP
options will be optional and within the discretion of a Market Maker.
Additionally, the Exchange is providing Market Makers with the
opportunity to quote during GTH (and receive the benefits of acting as
a Market Maker with respect to transactions it effects during that
time) without creating additional connections to the Exchange or
undertaking separate membership requirements (as is required on Cboe
Options). The Exchange believes Market Makers will have an incentive to
quote in XSP options during Global Trading Hours given the significance
of the S&P 500 Index within the financial markets, the expected demand,
and given that the stocks underlying the index are also trading during
those hours (which may permit execution of certain hedging strategies).
Extending a Market Maker's appointment to Global Trading Hours will
enhance liquidity during that trading session, which benefits all
investors during those hours. The Exchange believes that the slight
additional burden of extending the continuous quoting obligation to the
GTH trading session in one class is outweighed by the Exchange's
efforts to add liquidity in All Sessions classes, the minimal
preparation a Market Maker may require to participate in the GTH
trading session, and the benefits to investors that may result from
that liquidity. Therefore, the Exchange believes the proposed rule
change provides customer trading interest with a net benefit, and
continues to maintain a balance of Market Maker benefits and
obligations.
    The proposed rule change is also consistent with Section 11A of the
Act and Regulation NMS thereunder, because it provides for the
dissemination of transaction and quotation information during Global
Trading Hours through OPRA, pursuant to the OPRA Plan, which Commission
approved and indicated to be consistent with the Act. While Section 11A
and Regulation NMS contemplate an integrated system for trading
securities, they also envision competition between markets, and
innovation that provides marketplace benefits to attract order flow to
an exchange does not result in unfair competition if other markets are
free to compete in the same manner.\89\
---------------------------------------------------------------------------

    \89\ See Exchange Act Release Nos. 73704 (November 28, 2014), 79
FR 72044 (December 4, 2014) (SR-CBOE-2014-062) (approval of proposed
rule change for Cboe Options to extend its trading hours outside of
Regular Trading Hours); and 29237 (May 24, 1991), 46 FR 24853 (May
31, 1991) (SR-NYSE-1990-052 and SR-NYSE-1990-053) (approval of
proposed rule change for NYSE to extend its trading hours outside of
Regular Trading Hours). The Exchange also notes that no other U.S.
options exchange provides for trading XSP options outside of Regular
Trading Hours, so there is currently no need for intermarket linkage
during Global Trading Hours. If another Cboe Affiliated Exchange
lists XSP options outside of Regular Trading Hours, trading of XSP
options on the Exchange would comply with linkage rules.
---------------------------------------------------------------------------

    The proposed rule change will remove impediments to and perfect the
mechanism of a free and open market and a national market system
because, as noted above, another options exchange currently offers a
Global Trading Hours session.\90\ While there are some differences
among the proposed rule change and the Cboe Options Global Trading
Hours session, such as the length of the session (Cboe Options GTH
trading session begins at 3:00 a.m. and the proposed Exchange GTH
trading session begins at 8:30 a.m.), the participation (while all TPHs
on Cboe Options will have the opportunity to participate, as all TPHs
on the Exchange will, Cboe Options requires TPHs to obtain a separate
GTH trading permit, log-ins, and Market Maker appointments to
participate in GTH while the Exchange will not), the proposed Exchange
GTH trading session is similar to the Cboe Options GTH trading session.
---------------------------------------------------------------------------

    \90\ See Cboe Options Rules 6.1 and 6.1A.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change to adopt an opening
auction will protect investors, because it will enhance the openings of
series on the Exchange by providing an opportunity for price discovery
based on then-current market conditions. The proposed Queuing Period is
substantively the same as the current Order Entry Period on the
Exchange. The proposed detail regarding the Queuing Period provide
additional transparency regarding the handling of orders and quotes
submitted during that time, and will thus benefit investors. The
proposed rule change, including orders that are not permitted during
the Queuing Period or orders that are not eligible to trade during the
opening rotation, is also similar to the pre-opening period on Cboe
Options.\91\
---------------------------------------------------------------------------

    \91\ See Cboe Options Rule 6.2(a). Cboe Options provides a
longer pre-opening period than the proposed rule change. However,
the Exchange is not proposing to change the time at which it begins
to accept orders and quotes, believes the time period is sufficient
for market participants to submit orders and quotes to participate
in the opening rotation.
---------------------------------------------------------------------------

    The proposed rule change will protect investors by ensuring they
have access to information regarding the opening of a series, which
will provide them with transparency that will permit them to
participate in the opening auction process and contribute to, and
benefit from, the price discovery the auction may provide. The proposed
opening auction updates are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers, as all
market participants may subscribe to the Exchange's data feeds that
deliver these messages, and thus all market participants may have
access to this information.
    The proposed opening rotation triggers are substantially similar to
the current events that will trigger series openings on the Exchange.
The proposed trigger events will remove impediments to and perfect the
mechanism of a free and open market and a national market system, as
they ensure that during Regular Trading Hours, the underlying
securities will have begun trading, or the underlying index values will
have begun being disseminated, before the System opens a series for
trading. As this information will not be available during Global
Trading Hours, the Exchange believes it is appropriate to begin the
opening

rotation for Global Trading Hours at a specified time (as Cboe Options
does).
    The proposed Maximum Composite Width Check and Opening Collar will
protect investors by providing price protection measures to prevent
orders from executing at extreme prices at the open. The Exchange
believes it is appropriate to open a series under the proposed
circumstances and provide marketable orders with an opportunity to
execute at a reasonable opening price (as discussed below), because
there is minimal risk of execution at an extreme price. These proposed
price protections incorporate all available pricing information,
including Market Maker bulk messages (which are generally used to price
markets for series) and any quotes disseminated from away markets, and
thus may lead to a more accurate Opening Trade Price based on then-
current market conditions. As noted above, Cboe Options applies similar
price protections during its opening rotation. Cboe Options similarly
considers Market Maker quotes (the equivalent of Market Maker bulk
message on the Exchange), and in certain classes, quotes of away
exchanges, and whether there are crossing orders or quotes when
determining whether the opening width and trade price are reasonable.
The Exchange proposes to calculate the maximum width and opening price
range in a different, but reasonable manner intended to ensure a fair
and orderly opening.
    The proposed priority with respect to trades during the opening
rotation are consistent with current priority principles that protect
investors, which are to provide priority to more aggressively priced
orders and quotes. Orders and quotes will be subject to the same
allocation algorithms that the Exchange may apply during the trading
day. The proposed priority and allocation of orders and quotes at the
opening trade is substantially similar to the priority and allocation
of orders and quotes at the opening of Cboe Options.\92\
---------------------------------------------------------------------------

    \92\ See Cboe Options Rule 6.2(c)(i)(C) and Interpretation and
Policy .04.
---------------------------------------------------------------------------

    The Exchange believes the proposed opening auction process is
designed to ensure sufficient liquidity in a series when it opens and
ensure series open at prices consistent with then-current market
conditions, and thus will ensure a fair and orderly opening process.
Additionally, as noted above, the proposed opening auction process is
substantially similar to the opening auction process of Cboe
Options.\93\ As described above and below, the differences between
proposed Rule 21.7 and Cboe Options Rule 6.2 primarily relate to
differences between the exchanges, including functionality Cboe Options
offers that the Exchange does not and products Cboe Options lists for
trading that the Exchange does not.
---------------------------------------------------------------------------

    \93\ See Cboe Options Rule 6.2.
---------------------------------------------------------------------------

    The proposed rule change to provide the Exchange with flexibility
regarding trading hours for index options, options on Fund Shares, and
options on Index-Linked Securities will 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.
This flexibility will permit the Exchange to modify trading hours to
ensure that options are trading when instruments that investors use to
price such options are also trading.
    The proposed rule change is generally intended to align system
functionality currently offered by the Exchange with Cboe Options
functionality in order to provide a consistent technology offering for
the Cboe Affiliated Exchanges. A consistent technology offering, in
turn, will simplify the technology implementation, changes, and
maintenance by Users of the Exchange that are also participants on Cboe
Affiliated Exchanges. The Exchange believes this consistency will
promote a fair and orderly national options market system. When Cboe
Options migrates to the same technology as that of the Exchange and
other Cboe Affiliated Exchanges, Users of the Exchange and other Cboe
Affiliated Exchanges will have access to similar functionality on all
Cboe Affiliated Exchanges. As such, the proposed rule change would
foster cooperation and coordination with persons engaged in
facilitating transactions in securities and would remove impediments to
and perfect the mechanism of a free and open market and a national
market system.

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 to adopt Global Trading Hours
will impose any burden on intramarket competition that is not necessary
or appropriate in furtherance of the purposes of the Act, because all
Options Members will be able, but not be required, to participate
during Global Trading Hours, and will be able to do so using the same
connectivity as they use during Regular Trading Hours. Participation in
GTH will be voluntary and within the discretion of Options Members.
While the proposed rule change increases the total time during which a
Market Maker with XSP appointment must quote, this increase is de
minimis given that a Market Maker's compliance with its continuous
quoting obligation is based on all classes in which it has an
appointment in the aggregate. Selecting an appointment in XSP options
will be optional and within the discretion of a Market Maker.
Additionally, the Exchange is providing Market Makers with the
opportunity to quote during GTH (and receive the benefits of acting as
a Market Maker with respect to transactions it effects during that
time) without creating additional connections to the Exchange or
undertaking separate membership requirements (as is required on Cboe
Options). Extending a Market Maker's appointment to Global Trading
Hours will enhance liquidity during that trading session, which
benefits all investors during those hours. The Exchange believes that
the slight additional burden of extending the continuous quoting
obligation to the GTH trading session in one class is outweighed by the
Exchange's efforts to add liquidity in All Sessions classes, the
minimal preparation a Market Maker may require to participate in the
GTH trading session, and the benefits to investors that may result from
that liquidity. Therefore, the Exchange believes the proposed rule
change provides customer trading interest with a net benefit, and
continues to maintain a balance of Market Maker benefits and
obligations.
    The Exchange does not believe that the proposed rule change to
adopt Global Trading Hours will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, because the proposed rule change is competitive
initiative that will benefit the marketplace and investors. The
Exchange believes the proposed rule change will enhance competition by
providing a service to investors that only one other options exchange
current provides. Additionally, all options exchanges are free to
compete in the same manner. The Exchange further believes that the same
level of competition among options exchanges will continue during
Regular Trading Hours. Because the Exchange proposes to make only
exclusively listed products available for trading during Global Trading
Hours, and because any All Sessions orders that do not trade during GTH
will be eligible to trade during the RTH trading session in the same
manner

as all other orders during Regular Trading Hours, the proposed rule
change will have no effect on the national best prices or trading
during Regular Trading Hours. The Exchange also believes the proposed
rule change could increase its competitive position outside of the
United States by providing investors with an additional investment
vehicle with respect to their global trading strategies during times
that correspond with parts of regular trading hours outside of the
United States.
    The Exchange does not believe that the proposed rule change to
adopt an opening auction process will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, because it will apply to orders and quotes of all
market participants in the same manner. The same order types that are
not currently accepted prior to the opening, and that do not
participate in the opening process, will similarly not be accepted
during the Queuing Period or be eligible for trading during the opening
rotation.
    The Exchange does not believe that the proposed rule change to
adopt an opening auction process will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act, because it is designed to open series on the
Exchange in a fair and orderly manner. The Exchange believes an opening
auction process will enhance the openings of series on the Exchange by
providing an opportunity for price discovery based on then-current
market conditions. The proposed auction process will provide an
opportunity for price discovery when a series opens ensure there
sufficient liquidity in a series when it opens, and ensure series open
at prices consistent with then-current market conditions (at the
Exchange and other exchanges) rather than extreme prices that could
result in unfavorable executions to market participants. Additionally,
as discussed above, the proposed opening auction process is
substantially similar to the Cboe Options opening auction process.\94\
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    \94\ See Cboe Options Rule 6.2.
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    The proposed rule change to provide the Exchange with flexibility
regarding trading hours for certain products will not impose any burden
on competition not necessary or appropriate under the Act, as another
options exchange has the same flexibility.\95\
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    \95\ See C2 Rule 6.1.
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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)(iii) of the Act \96\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\97\
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    \96\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \97\ 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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    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CboeEDGX-2019-027 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-CboeEDGX-2019-027. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeEDGX-2019-027 and should be
submitted on or before June 3, 2019.
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    \98\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\98\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09729 Filed 5-10-19; 8:45 am]
 BILLING CODE 8011-01-P