[Federal Register Volume 84, Number 91 (Friday, May 10, 2019)]
[Notices]
[Pages 20673-20689]
[FR Doc No: 2019-09634]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85788; File No. SR-C2-2019-009]

Self-Regulatory Organizations; Cboe C2 Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Exchange's Opening Process and Add a Global Trading Hours Session
for DJX Options

May 6, 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 24, 2019, Cboe C2 Exchange, Inc. (the ``Exchange'' or
``C2'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Cboe C2 Exchange, Inc. (the ``Exchange'' or ``C2'') proposes to
amend the Exchange's opening process, add a global trading hours
session (``Global Trading Hours'' or ``GTH'') for options on the Dow
Jones Industrial Average (``DJX options'') and make corresponding
changes, update its rule related to trading hours for index options
that may be listed for trading on the Exchange, 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/ctwo/), 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''), acquired Cboe EDGX Exchange, Inc. (``EDGX''),
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, EDGX, 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, BZX Options, and EDGX 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 the proposed rule
change clarifies includes options on individual stocks, exchange-traded
funds (``Units'' or ``ETFs''), exchange-traded notes (``Index-Linked
Exchangeable Notes'' or ``ETNs''), and other securities) may occur from
9:30 a.m. to 4:00 p.m.,\5\ except for options on ETFs, ETNs, Index
Portfolio Shares, Index Portfolio Receipts, and Trust Issued Receipts
the Exchange designates to remain open for trading beyond 4:00 p.m. but
no later than 4:15 p.m.\6\ Transactions in index options may occur from
9:30 a.m. to 4:15 p.m.\7\ As proposed, these hours are referred to as
``Regular Trading Hours.'' \8\ Regular Trading Hours are consistent
with the regular trading hours of 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.\9\ 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.\10\
---------------------------------------------------------------------------

    \5\ All times are Eastern time unless otherwise noted.
    \6\ See proposed Rule 6.1(b)(1). The proposed rule changes makes
nonsubstantive changes to proposed Rule 6.1(b)(1), including adding
defined terms and moving the provision from current paragraph (b)
regarding the Exchange's ability to determine that options on
individual stocks will trade during different hours under unusual
conditions or as otherwise set forth in the Rules to proposed
subparagraph (b)(1). The proposed rule change also adds an
applicable heading to proposed paragraphs (a) and (d). Additional
changes to Rule 6.1 are discussed below.
    \7\ See proposed Rule 6.1(b)(2).
    \8\ See also proposed Rule 1.1, 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 6.1); and Cboe Options Rule 1.1
(definition of Regular Trading Hours).
    \9\ See Cboe Options Rule 6.1.
    \10\ 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).

---------------------------------------------------------------------------

    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 DJX, which may be exclusively listed \11\ 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 DJX 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 DJX options from 8:30 a.m. to 9:15 a.m. Monday through
Friday (``Global Trading Hours'' or ``GTH'').
---------------------------------------------------------------------------

    \11\ 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.
---------------------------------------------------------------------------

    Proposed Rule 6.1(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.\12\ 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 Trading Permit
Holders 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 DJX options
and in conjunction with part of regular European trading hours. The
proposed rule change also adds to Rule 1.1 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 6.1. Unless otherwise specified in the Rules or the
context indicates otherwise, all Rules apply in the same manner during
each trading session.\13\ As discussed below, the Exchange may not
permit certain order types or Order Instructions to be applied to
orders during Global Trading Hours that it does permit during Regular
Trading Hours.
---------------------------------------------------------------------------

    \12\ See also proposed Rule 1.1, 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).
    \13\ This includes business conduct rules in Chapter 4 and rules
related to doing business with the public in Chapter 9. Additionally
a broker-dealer's due diligence and best execution obligations apply
during Global Trading Hours. See also Cboe Options Rule 6.1A(a).
---------------------------------------------------------------------------

    Proposed Rule 6.1(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 Cboe
Options Rule 24.2.\14\ If the Exchange so designates a class, then
transactions in options in that class may be made on the Exchange
during Global Trading Hours.\15\ As indicated above, the Exchange has
approved DJX 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 Cboe
Options Rule 24.9.\16\ 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 6.11 (as proposed to be amended, as discussed below), which sets
forth procedures for the opening of trading).\17\
---------------------------------------------------------------------------

    \14\ Chapter 24 incorporates by reference Cboe Options Rule 24.2
into the Exchange's rules. 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 1.1, proposed
definitions of ``All Sessions classes'' and ``RTH classes.''
    \15\ 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).
    \16\ Chapter 24 incorporates by reference Cboe Options Rule 24.9
into the Exchange's rules. See also Cboe Options Rule 6.1A(c).
    \17\ See also Cboe Options Rule 6.1A(c).
---------------------------------------------------------------------------

    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).\18\ 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.\19\
---------------------------------------------------------------------------

    \18\ The proposed rule change makes corresponding changes to the
definitions of market open and market close in Rule 1.1 to provide
that each term specifies the start or end, respectively, of a
trading session.
    \19\ See Cboe Options Rule 1.1.
---------------------------------------------------------------------------

    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.\20\ All Trading Permit Holders
may participate in Global Trading Hours. Trading Permit Holders 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, Trading Permit Holders may use the same ports and
connections to the Exchange for all trading sessions.\21\ The Book used
during Regular Trading Hours will be the same Book used during Global
Trading Hours.\22\
---------------------------------------------------------------------------

    \20\ This is different than the trading sessions on Cboe
Options, which uses different servers and hardware for each trading
session.
    \21\ Only Trading Permit Holders 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).
    \22\ See proposed Rule 1.1, which amends the definition of 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 6.13(a) (definition of COB). This is different than
Cboe Options, which uses separate books for each trading session,
which are not connected.

---------------------------------------------------------------------------

    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).\23\ 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.\24\
---------------------------------------------------------------------------

    \23\ See Rule 6.10, proposed definition of All Sessions order.
    \24\ See Rule 6.10, proposed definition of RTH Only order. The
RTH Only and All Sessions order instructions will also be available
for complex orders. See proposed Rule 6.13(b).
---------------------------------------------------------------------------

    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 1.2(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.\25\ 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 6.12(a)(2) allows the Exchange to
determine electronic allocation algorithms on a class-by-class basis;
\26\ and Rule 6.10(a) allows the Exchange to make certain order types,
Order Instructions, and Times-in-Force not available for all Exchange
systems or classes (and unless stated in the Rules or the context
indicates otherwise, as proposed).\27\ 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).
---------------------------------------------------------------------------

    \25\ The proposed rule change modifies paragraph numbering and
lettering in current Rule 1.2, and provides that Exchange
determinations may be provided for in the Rules, in addition to
specifications, Notices, and Regulatory Circulars.
    \26\ Therefore, the allocation algorithm 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 Rule 6.10(a) 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 6.13 sets forth the order types, Order Instructions, and
Times-in-Force the Exchange may make available for complex orders.
---------------------------------------------------------------------------

    The proposed rule change amends Rule 8.2(a) to provide that a
Market-Maker's selected class appointment applies to classes during all
trading sessions. In order words, if a Market-Maker selects an
appointment in DJX options, that appointment would apply during both
GTH and RTH (and thus, the Market-Maker would have an appointment to
make markets in DJX during both GTH and RTH). As a result, a Market-
Maker continuous quoting obligations set forth in Rule 8.6(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
8.6(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 DJX options \30\ will be included in the
denominator of this calculation. The Exchange expects to list 720
series of DJX options, 300 of which with expirations of greater than
270 days. Therefore, 420 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.
---------------------------------------------------------------------------

    \28\ See proposed Rule 8.6(d). The appointment cost in Rule 8.3
will apply to a class for all trading sessions. Therefore, to have
an appointment during GTH, a Market-Maker will not have to select a
separate appointment or obtain a new Trading Permit to be able to
quote in a class during GTH. 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 DJX series currently listed on Cboe
Options.
---------------------------------------------------------------------------

    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 DJX options on the Exchange for both
GTH and RTH, the Market-Maker selects a DJX appointment, and the
Exchange lists 420 series of DJX options that do not have quarterly
expirations or expirations of greater than 270 days. Assume all series
in DJX 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
1,121,400 seconds during GTH and 10,193,400 seconds during RTH, for a
total of 11,314,800 seconds, for DJX during the trading day). If DJX
were only listed during RTH, the total eligible quoting time would be
477,593,400 seconds across the eleven classes, and a Market-Maker would
be required to quote 286,556,040 seconds in series across those
classes. If DJX were listed in both RTH and GTH, the total eligible
quoting time would be 478,714,000 seconds during a trading day across
all eleven classes, and the Market-Maker would be required to quote
287,228,880 seconds across series in the eleven classes. Therefore,
extending the DJX continuous quoting obligation for a Market-Maker with
appointments in a total of eleven classes, including DJX, would
increase a Market-Maker's required quoting time by 672,840 seconds, or
0.23%. 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 a DJX 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 20,420 series across its 11 appointed classes, the
Market-Maker could quote an additional 67.25 seconds (just over 1
minute) in each of 10,000 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 DJX 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 a DJX
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 DJX 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 obtaining an additional Trading
Permit or creating additional connections to the Exchange (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 DJX options during Global Trading Hours
given the significance of the Dow Jones Industrial Average 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 market orders,
stop (stop-loss) orders, and stop-limit orders to state that those
order types and order instructions may not be applied to orders
designated as All Sessions order (i.e., market orders, 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\
---------------------------------------------------------------------------

    \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 Instructions 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.
---------------------------------------------------------------------------

    Proposed Rule 6.1(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 Trading Permit Holders that
trade during Global Trading Hours. However, the Exchange does not
believe it would be useful or efficient to disseminate to Trading
Permit Holders the same value repeatedly at frequent intervals, as it
does during Regular Trading Hours (when that index value is being
updated).\33\
---------------------------------------------------------------------------

    \33\ Cboe Options Rules 24.2(b)(10), (d)(8), (e)(7), and (f)(11)
(which are incorporated by reference into the Exchange's Rules
pursuant to Chapter 24) provide that underlying index values will be
disseminated at least once every 15 seconds. Proposed Rule 6.1(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.
---------------------------------------------------------------------------

    Proposed Rule 3.19 requires Trading Permit Holders 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 3.19 provides that no Trading Permit Holder
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
Trading Permit Holders to disclose these risks to non-TPH customers
will facilitate informed participation in Global Trading Hours.
    The Exchange also intends to distribute to Trading Permit Holders
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
Trading Permit Holders 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 Trading Permit Holders 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 Trading Permit Holders that want
trading during GTH to have minimal preparation. The Exchange will use
the same connection lines, message formats, and feeds during RTH and
GTH.\34\ Trading Permit Holders may use the same ports and EFIDs for
each trading session.\35\
---------------------------------------------------------------------------

    \34\ The same telecommunications lines used by Trading Permit
Holders 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\ A Trading Permit Holder 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 Trading
Permit Holders 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 Trading Permit Holders 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 Trading Permit Holder will not be required to
take any additional action to comply with this requirement, regardless
of whether the Trading Permit Holder chooses to trade during Global
Trading Hours.
---------------------------------------------------------------------------

    \38\ Currently, Trading Permit Holders 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 C2 Options Regulatory Circular 18-011 (July 3, 2018);
and Rule 6.34.
---------------------------------------------------------------------------

     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 6.32 (as proposed to be
amended, as described below). The proposed rule change amends Rule
6.32(a) to provide that when the hours of trading of the underlying
primary securities market for an index option do not overlap or
coincide with those of the Exchange, and during Global Trading Hours,
Rule 6.32(a)(1) and (2) (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 Rule 6.32(a) (as proposed to be amended) 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.
---------------------------------------------------------------------------

    \39\ See supra note 10.
---------------------------------------------------------------------------

    Pursuant to Interpretation and Policy .01, the Exchange will halt
trading in all options when a market-wide trading halt known as a
circuit breaker is initiated in response to extraordinary market
conditions. Pursuant to the proposed rule change, Interpretation and
Policy .01 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.\40\
---------------------------------------------------------------------------

    \40\ 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 6.9(e),\41\ 6.10(d) (definition of ``Day''), and
6.13(c) and (i) to incorporate the terminology included in this
proposed rule change to specify the appropriate trading session(s)
being referenced in those rules.
---------------------------------------------------------------------------

    \41\ The proposed rule change makes an additional nonsubtantive
change to Rule 6.9, as well as modifies the name of Rule 6.9 to
account for the fact that Rule 6.9 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.\42\ 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 Trading Permit Holders that
trade during Global Trading Hours will have access to quote and last
sale information during that trading session.
---------------------------------------------------------------------------

    \42\ 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.\43\ The Exchange is also committee 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 DJX
options during Global Trading Hours.
---------------------------------------------------------------------------

    \43\ The Exchange notes that, to conduct trading during global
Trading Hours, persons that are not Trading Permit Holders, such as
employees of affiliates of Trading Permit Holders located outside of
the United States, may be transmitting orders and quotes during
Global Trading Hours (such non-Trading Permit Holders would not have
direct access to the Exchange, and thus those orders and quotes
would be submitted to the Exchange through Trading Permit Holders'
systems subject to applicable laws, rule, and regulations). Trading
Permit Holders may authorize (in a form and manner determined by the
Exchange) individuals at these non-Trading Permit Holder entities to
contact the Exchange during Global Trading Hours to address any
issues.
---------------------------------------------------------------------------

Opening Process
    Rule 6.11 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 \44\ 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.\45\ 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.\46\
---------------------------------------------------------------------------

    \44\ 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 Rule 6.11(a)(2) and (3).
    \45\ See Cboe Options Rule 6.2.
    \46\ 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 6.11(a) sets forth the definitions of the following
terms for purposes of the opening auction process in proposed Rule
6.11: \47\
---------------------------------------------------------------------------

    \47\ A term defined elsewhere in the Rules has the same meaning
with respect to Rule 6.11, unless otherwise defined in Rule 6.11.
---------------------------------------------------------------------------

     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.\48\
---------------------------------------------------------------------------

    \48\ 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. While the Exchange does not
have a step-up mechanism that corresponds to HAL, 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).\49\
---------------------------------------------------------------------------

    \49\ 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,\50\ 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).
---------------------------------------------------------------------------

    \50\ 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.\51\
---------------------------------------------------------------------------

    \51\ 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.\52\
---------------------------------------------------------------------------

    \52\ See current Rule 6.11(a)(2).
---------------------------------------------------------------------------

     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.\53\ 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.''
---------------------------------------------------------------------------

    \53\ 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.\54\
---------------------------------------------------------------------------

    \54\ See current Rule 6.11(a)(1) (the current rule does not use
the term ``Queuing Period''; however, it does provide for a time
prior to the opening of a series during which the System accepts
orders and quotes).
---------------------------------------------------------------------------

    Proposed paragraph (b) describes the Queuing Period. The Queuing
Period begins at 7:30 a.m. for all class.\55\ 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.\56\
---------------------------------------------------------------------------

    \55\ See proposed Rule 6.11(b)(1).
    \56\ 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.\57\
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 subparagraph
(a)(3). The System accepts all orders and quotes that are available for
a class and trading session pursuant to Rule 6.10(a) during the Queuing
Period, which are eligible for execution during the opening rotation,
except as follows:
---------------------------------------------------------------------------

    \57\ The proposed rule change moves the provision that states
that GTC and GTD orders remaining on the Book from the previous
trading day may participate in the opening process from current
paragraph (b) to the definition of Queuing Book in proposed
paragraph (a).
---------------------------------------------------------------------------

     The System rejects IOC and FOK orders during the Queuing
Period; \58\
---------------------------------------------------------------------------

    \58\ See current subparagraph (a)(1) 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 current subparagraph (a)(1) and proposed subparagraph
(a)(2)(B). 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 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 6.10(b), 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.
    \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 subparagraph (a)(1) 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 6.11 and instead may participate in the COB Opening
Process pursuant to Rule 6.13(c).\63\
---------------------------------------------------------------------------

    \63\ See current subparagraph (a)(1) 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 subparagraph (a)(1),
the System will open series in random order, staggered over regular
intervals of time after a time period following the first transaction
in the securities underlying the options on the primary market that is
disseminated after 9:30 a.m. (with respect to equity options) or
following 9:30 a.m. (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\ See current subparagraph (a)(1), pursuant to which the
opening will be triggered upon the occurrence of similar events
after a time period determined by the Exchange.
    \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 Rule 1.1 (definition
of Capacity).
---------------------------------------------------------------------------

     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
(c) (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). The Exchange will continue to 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.

---------------------------------------------------------------------------

    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 6.11(a)(2)(A).
---------------------------------------------------------------------------

    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 6.12), unless the
Exchange determines to apply a different allocation algorithm from Rule
6.12 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 6.11(a)(3) (which states the System will
prioritize orders and quotes that are price 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 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 6.12. 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.
    The proposed rule change makes nonsubstantive changes to current
paragraphs (b) and (d) (proposed paragraphs (g) and (i), respectively)
to reflect the proposed defined terms and to make the provision more
plain English.
    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 6.14(a)(4), 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 6.14(a)(4)(A)
provides that if an order that enters the 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.\76\ 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.
---------------------------------------------------------------------------

    \76\ The proposed rule change makes corresponding changes to
proposed Rule 6.14(a)(4)(B).
---------------------------------------------------------------------------

Trading Hours and Halts for Index Options
    Currently, the Exchange lists for trading options on the Russell
2000 Index (``RUT options''), and as noted above, the Exchange intends
to list DJX options in connection with the launch of the GTH trading
session. Pursuant to current Rule 6.1(a), the Exchange has determined
that Regular Trading Hours for these index options are (or will be,
with respect to DJX options) from 9:30 a.m. to 4:15 p.m. Proposed Rule
6.1(b)(2) provides that Regular Trading Hours for index options will be
from 9:30 a.m. to 4:15 p.m., except for index options the Exchange
designates to remain open for trading until 4:00 p.m. This is
consistent with the current rule, pursuant to which trading for index
options will end at 4:00 p.m. or 4:15 p.m. However, as proposed,
Regular Trading Hours for an index option will default to a closing
time of 9:30 a.m. to 4:15 p.m. (rather than until 4:00 p.m.), as the
Exchange expects most index options to have a closing time of 4:15
p.m., and the Exchange will have authority to determine to have trading
for an index option stop at 4:00 p.m.
    Pursuant to Chapter 24, the Exchange may list for trading options
on indexes that satisfy the criteria in Cboe Options Rule 24.2.\77\
However, pursuant to Chapter 24, Cboe Options Rule 24.6, which sets
forth the trading days and hours for index options that may be listed
pursuant to Cboe Options Rule 24.2, does not apply to the Exchange.
Because the Exchange may determine to list other index options pursuant
to Cboe Options Rule 24.2, the Exchange proposes to add the trading
hours for all index options the Exchange may determine to list for
trading on its Exchange in the future, even though it currently only
lists one index option, and plans to list another index option in the
near future, for trading during the hours set forth in current Rule
6.1(a).\78\ The proposed trading hours for index options in proposed
Rule 6.1(b)(2) correspond to the same trading hours for those index
options in Cboe Options Rule 24.6.
---------------------------------------------------------------------------

    \77\ Pursuant to Chapter 24, the Exchange incorporates by
reference Cboe Options Rule 24.2.
    \78\ The Exchange has no current plans to list additional index
options for trading.
---------------------------------------------------------------------------

    Proposed Rule 6.1(b)(2)(A) states the last trading day for A.M.-
settled index options is the business day prior to the expiration date
of the specific series. This will ensure trading in these options do
not continue for an entire trading day after the settlement value has
been determined. This is consistent with current trading hours for
A.M.-settled index options on the Exchange (currently, the Exchange
lists A.M.-settled options on the Russell 2000 Index (``RUT'') for
trading and intends to list A.M.-settled DJX options for trading), and
is consistent with the last trading day for expiring A.M.-settled index
options on Cboe Options.\79\
---------------------------------------------------------------------------

    \79\ See Cboe Options Rule 24.9(a)(4).
---------------------------------------------------------------------------

    Proposed Rule 6.1(b)(2)(B) states on their last trading day,
Regular Trading Hours for the following options are from 9:30 a.m. to
4:00 p.m.:

 Cboe S&P 500 AM/PM Basis options
 Index Options with Nonstandard Expirations (i.e., Weeklys and
EOMs) and Quarterly Expirations (i.e., QIXs)
 SPX options (p.m.-settled)
 XSP options (p.m.-settled)

    Generally, these options are priced in the market based on
corresponding futures values. On the last day of trading, the closing
prices of the component stocks (which are used to derive the exercise
settlement value) are known at 4:00 p.m. (or soon after) when the
equity markets close. Despite the fact that the exercise settlement
value is fixed at or soon after 4:00 p.m., if the Exchange did not
close trading in these expiring options on their last trading day,
trading in these options would continue for an additional fifteen
minutes until 4:15 p.m. and would not be priced on corresponding
futures values, but rather the known cash value. At the same time, the
prices of non-expiring series continue to move and be priced in
response to changes in corresponding futures prices.
    Because of the potential pricing divergence that could occur
between 4:00 and 4:15 p.m. on the final trading day of these expiring
options (e.g., switch from pricing off of futures to cash), the
Exchange believes that, in order to mitigate potential investor
confusion, it is appropriate to cease trading in these expiring options
at 4:00 p.m. on the last day of trading. The proposed change to the
close of trading hours will apply to all outstanding expiring
expirations for the above classes or series types listed on or before
the effective date of this proposal.
    Additionally, these are the same Regular Trading Hours for these
options on their last trading day on Cboe Options.\80\
---------------------------------------------------------------------------

    \80\ See Cboe Options Rules 24.6, Interpretations and Policies
.01 (QIXs), .03 (Cboe S&P 500 AM/PM Basis options), and .04 (P.M.-
settled SPX and XSP options), and 24.9(e)(4) (Nonstandard
Expirations).
---------------------------------------------------------------------------

    Proposed Rule 6.1(b)(2)(C) states on their last trading day,
Regular Trading Hours for expiring FTSE Developed Europe Index options
are from 9:30 a.m. to the closing time of the London Stock Exchange,
which is usually 11:30 a.m. The Exchange is proposing that expiring
FTSE Developed Europe Index options trade only during a portion of the
day on their expiration date to align the trading hours of expiring
FTSE Developed Europe Index options with expiring FTSE Developed Europe
Index futures. FTSE Developed Europe Index futures trade on CME and
stop trading at 10:30 a.m. (Chicago time) on the third Friday of the
futures contract month.\81\ Additionally, these are the same Regular
Trading Hours for these options on their last trading day on Cboe
Options.\82\
---------------------------------------------------------------------------

    \81\ See CME Rule 39002.G, available at: http://www.cmegroup.com/rulebook/CME/IV/350/390.pdf.
    \82\ See Cboe Options Rule 24.6, Interpretation and Policy .05.
---------------------------------------------------------------------------

    Proposed Rule 6.1(b)(2)(D) provides that the last trading day for
MSCI EAFE Index options and MSCI Emerging

Markets Index options will be the business day prior to the expiration
date of the specific series. MSCI EAFE and MSCI Emerging Markets Index
options are p.m.-settled, which means the exercise settlement value of
an expiring option is derived from the closing prices of the underlying
components on the series expiration date. Each of these indexes
consists of components from over 20 countries. Because the components
of each of these indexes encompass multiple markets around the world,
the components are subject to varying trading hours. For the MSCI EAFE
Index, the first components open trading at approximately 6:00 p.m.
Eastern time on the prior trading day, and the last components end
trading at approximately 12:30 a.m. Eastern time. Similarly, for the
MSCI Emerging Markets Index, the first components open trading at
approximately 7:00 p.m. Eastern time on the prior trading day, and the
last components end trading at approximately 4:30 p.m. Eastern time.
    Because trading in various components would end prior to the
beginning of MSCI EAFE and Emerging Market Index options Regular
Trading Hours (i.e., 9:30 a.m. Eastern time),\83\ the closing prices of
those components, which would be used to determine the exercise
settlement value, would be determined prior to the time when the
expiring options may begin trading on the expiration date. This
increases the risk of providing liquidity in these products on that
date. Generally, the prices of futures on these indexes can be a proxy
for the current level of the applicable index when options on those
indexes are trading on the Exchange while the index level is not being
disseminated. However, that is not the case on options' expiration
dates, as the prices that will be used to determine the exercise
settlement value are fixed once trading in the components ends, and
thus futures trading prices after trading in those components end have
no bearing on the exercise settlement value. Therefore, the Exchange
believes it is appropriate to stop trading in expiring MSCI EAFE and
Emerging Markets Index options on the business day prior to the
expiration date. As proposed, on their last day of trading (the trading
day prior to the expiration date), MSCI EAFE and Emerging Markets Index
options would trade from 9:30 a.m. through 4:15 p.m. Eastern time. The
proposed trading hours for these index options on their last trading
day is also the same as the trading hours for those index options on
Cboe Options.\84\
---------------------------------------------------------------------------

    \83\ Trading in the other components ends at various times
throughout the trading day.
    \84\ See Cboe Options Rule 24.6, Interpretation and Policy .05.
---------------------------------------------------------------------------

    Proposed Rule 6.1(b)(2)(E) states with respect to options on a
foreign index that is comprised of component securities trading in a
single country, the Exchange may determine to not open the options for
trading when the component securities of the foreign index are not
trading due to a holiday for the foreign exchange(s) on which the
component securities trade. The Exchange announces the days on which
options on a particular foreign index will be closed at least once a
year in January. Current Rule 6.1(c) (proposed Rule 6.1(d)) identifies
the days on which the Exchange is not open due to a holiday.\85\
Exchanges in foreign countries also have their own holiday
schedules.\86\ If the Exchange determines to list for trading options
that overlie various foreign indexes,\87\ the components of which trade
on foreign exchanges, the Exchange proposes to specify in its Rules
that the Exchange may determine to not open options on foreign indexes
when the component securities of the foreign index are not open for
trading due to a holiday on the foreign exchange; however, the Exchange
proposes to limit the application of this proposal to options on
foreign indexes that are comprised of component securities trading in a
single country.\88\
---------------------------------------------------------------------------

    \85\ The Exchange is not open for business on New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, or Christmas
Day. When any holiday observed by the Exchange falls on a Saturday,
the Exchange will not be open for business on the preceding Friday,
and when any holiday observed by the Exchange falls on a Sunday, the
Exchange will not be open for business on the following Monday,
unless unusual business conditions exist at the time.
    \86\ See, e.g., Stock Exchange of Hong Kong Holiday Schedule,
available at: https://www.hkex.com.hk/eng/market/sec_tradinfo/tradcal/nont10.htm and London Stock Exchange Holiday Schedule,
available at: http://www.lseg.com/areas-expertise/our-markets/london-stock-exchange/equities-markets/trading-services/business-days.
    \87\ Pursuant to Cboe Options Rule 24.2, Interpretations .01
through .03, the Exchange may list options on the following foreign
indexes: MSCI EAFE Index, MSCI Emerging Markets Index, FTSE Emerging
Index, FTSE Developed Europe Index, FTSE 100 Index, and FTSE China
50 Index. As noted above, the Exchange does not currently list
options on any of these indexes.
    \88\ When there are multiple exchanges in a single country
trading the component securities of a foreign index, the holiday
schedule for exchanges within that country are likely to be the same
or similar.
---------------------------------------------------------------------------

    The Exchange may trade options on various foreign indexes after
trading in all component securities has closed for the day and the
index level is no longer widely disseminated at least once every
fifteen seconds, provided that futures on the applicable indexes are
trading and prices for those contracts may be used as a proxy for the
current index value.\89\ For example, the component securities of the
FTSE China 50 Index open with the start of trading on the Stock
Exchange of Hong Kong (``SEHK'') at approximately 9:30 p.m. Eastern
time (prior day) and close with the end of trading on the SEHK at
approximately 4:00 a.m. Eastern time (next day). Thus, between 9:30
a.m. and 4:15 p.m. Eastern time, the FTSE China 50 Index level is a
static value that market participants can access via data vendors.
However, if the Exchange has FTSE China 50 options listed, the Exchange
would continue to trade options on the FTSE China 50 Index (``China 50
options'') from 9:30 a.m. to 4:15 a.m. Eastern time because prices of
the E-Mini FTSE China 50 Index futures trading at the CME may be used
as a proxy for the current index value.\90\ When SEHK is closed because
of a holiday, E-Mini FTSE China 50 Index futures remain open and may
still be used as a proxy for the current index value. However, the
Exchange may determine to keep China 50 Options (as well as other
options on other foreign indexes) closed because of a holiday on SEHK
(or the applicable foreign exchange on which the index constituents
trade).
---------------------------------------------------------------------------

    \89\ See Rules 24.2.01(a)(8), 24.2.02(a)(8), and 24.2.03(a)(8).
    \90\ The trading hours for E-Mini FTSE China 50 Index Futures
are from 6:00 p.m. to 5:00 p.m. Eastern time the following day,
Sunday through Friday. See E-Mini FTSE China 50 Index Future
Contract specifications located at: http://www.cmegroup.com/education/files/e-mini-ftse-china-50-index-futures.pdf. The Exchange
believes E-Mini FTSE China 50 Index Futures are an appropriate proxy
for China 50 options.
---------------------------------------------------------------------------

    For example, SEHK was closed February 5 through 7 of 2019 for the
Lunar New York. Although E-Mini FTSE China 50 Index futures can be used
as a proxy, the Exchange may have determined that options participants
would be better served by keeping China 50 options closed because the
holiday caused the underlying index value to be unavailable for an
extended period of time.
    The Exchange has authority to determine trading hours for index
options, and to change them if it determines there are unusual
conditions.\91\ This proposed rule change simply seeks to add a rule
provision to notify market participants that the Exchange may determine
not to open options on foreign indexes because of a holiday on a
foreign exchange. Furthermore, as proposed, the Exchange

will announce to market participants via Exchange Notice in January of
every year (and more frequently if the Exchange determines that to be
necessary) the particular days on which options on particular foreign
indexes will not be open due to a holiday on a foreign exchange or
exchanges.
---------------------------------------------------------------------------

    \91\ See current Rule 6.1(b) (proposed Rule 6.1(b)(2)).
---------------------------------------------------------------------------

    Although keeping options trading closed because of a foreign
exchange's holidays will cause users of these particular options to not
be able to trade when the U.S. market is otherwise open, the closures
will only occur a few times a year. Furthermore, users will have
sufficient notice of such closures via Exchange Notice that will be
published every January. Finally, this proposal may potentially allow
users to receive better executions because for certain holidays, such
as during the Lunar New Year described above, the closing of the
component securities may not allow Market-Makers to quote as tightly
and aggressively as they would otherwise. In effect, limiting users'
ability to trade particular index options to days on which there is not
a holiday on a foreign exchange may better serve users because they
will be trading on days in which Market-Makers may potentially provide
tighter markets. Additionally, Cboe Options has the same rule.\92\
---------------------------------------------------------------------------

    \92\ See Cboe Options Rules 24.6, Interpretation and Policy .06.
---------------------------------------------------------------------------

    Pursuant to Chapter 24, Cboe Options Rule 24.7, which sets forth
the trading days and hours for index options that may be listed
pursuant to Cboe Options Rule 24.2, does not apply to the Exchange.
Current Rule 6.32(a) states the Exchange may halt trading in any class
in the interests of a fair and orderly market. It also lists factors,
among others, the Exchange may consider when determining whether to
halt trading in a class. Several factors would apply to any class
(i.e., equity or index), such as:
     Occurrence of an act of God or other event outside the
Exchange's control;
     occurrence of a System technical failure or failures
including, but not limited to, the failure of a part of the central
processing system, a number of Trading Permit Holder trading
applications, or the electrical power supply to the System itself or
any related system; or
     other unusual conditions or circumstances are present.\93\
---------------------------------------------------------------------------

    \93\ See Rule 6.32(a)(3)-(5) and.

Current Rule 6.32(a)(1) and (2) (proposed Rule 6.32(a)(1)(A) and (B))
provides factors the Exchange may consider when determining whether to
halt trading in an equity option class. However, there are specific
factors the Exchange may consider when determining whether to halt
trading in an index option class, and the proposed rule change adds
those to proposed Rule 6.32(a)(2):
     The extent to which trading in the stocks or options
underlying the index is not occurring;
     the current calculation of the index derived from the
current market prices of the stock;
     the ``current index level'' (which is the implied forward
level based on volatility index (security) futures prices) for a
volatility is not available or the cash (spot) value for a volatility
index is not available; \94\ or
---------------------------------------------------------------------------

    \94\ The Exchange does not currently list, and has no current
plans to list, options on a volatility index.
---------------------------------------------------------------------------

     the activation of price limits on futures exchanges or the
halt of trading in related futures.
    Rule 6.32 does not restrict the factors the Exchange may consider
when determining whether to halt trading in a class; the factors listed
in paragraph (a) (currently and as proposed) are examples of factors
the Exchange may consider. Therefore, the Exchange already has
authority to consider these factors when determining whether to halt
trading in an index option class, as changes in these factors would
likely be considered unusual circumstances and would likely be
considered to determine whether these changes have an impact on a fair
and orderly market for the index options. The proposed rule change
provides transparency to investors regarding the factors the Exchange
may consider when determining to halt trading in an index option class,
as Rule 6.32 currently does for equity option classes. Additionally,
these factors are listed as factors Cboe Options may consider when
determining whether to halt trading in an index option class.\95\
---------------------------------------------------------------------------

    \95\ See Cboe Options Rule 24.7(a)(ii) and (iii), and
Interpretations and Policies .01 and .03.
---------------------------------------------------------------------------

    Additionally, proposed Rule 6.32(e) states that when the primary
market for a security underlying the current index value of an index
option does not open for trading, halts trading prematurely, or
otherwise experiences a disruption of normal trading on a given day, or
if a particular security underlying the current index option does not
open for trading, halts trading prematurely, or otherwise experiences a
disruption of normal trading on a given day in its primary market, the
price of that security is determined, for the purposes of calculating
the current index value at expiration, in accordance with the Rules and
By-Laws of The Options Clearing Corporation (``OCC''). Investors who
trade index options against the underlying stocks as well as those who
trade the index options against index futures generally rely upon the
final settlement value of index options converging with the
corresponding values of the underlying index or index future. Without
this convergence, investors may face significant unexpected exposure to
market risk. Many public customers and market-makers use index options
to hedge ``cash'' positions they hold in the stocks which make up the
index. The Exchange's Rules are currently silent regarding the
calculation of the settlement value for an index option if the above
circumstances exist. The Exchange believes the proposed rule change
provides transparency with the respect to the process the Exchange will
use in the event the above circumstances transpire and assures
convergence at settlement between the value of index options and index
futures and thus minimizes these risks. OCC's Rules and By-Laws provide
OCC with broad discretionary authority to adjust settlement values for
OCC-cleared index options and futures whenever, and in whatever manner,
OCC deems appropriate to avoid a disconnect between the futures and
options markets or among the futures markets.\96\ Cboe Options has the
same provision in its rules.\97\
---------------------------------------------------------------------------

    \96\ See OCC By-Laws Articles XII, Section 5 and XVII, Section
4; see also Securities Exchange Act Release No. 46561 (September 26,
2002), 67 FR 61943 (October 2, 2002) (SR-OCC-2002-09).
    \97\ See Cboe Options Rule 24.7(e).
---------------------------------------------------------------------------

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.\98\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \99\ 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) \100\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \98\ 15 U.S.C. 78f(b).
    \99\ 15 U.S.C. 78f(b)(5).
    \100\ 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 Trading Permit
Holders, 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 DJX 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 Trading Permit Holders 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. Trading Permit Holders 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 a DJX 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 DJX 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 obtaining an additional Trading

Permit or creating additional connections to the Exchange (as is
required on Cboe Options). The Exchange believes Market-Makers will
have an incentive to quote in DJX options during Global Trading Hours
given the significance of the Dow Jones Industrial Average 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.\101\
---------------------------------------------------------------------------

    \101\ 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 DJX 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 DJX options outside of Regular Trading
Hours, trading of DJX 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.\102\ 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.
---------------------------------------------------------------------------

    \102\ 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.\103\
---------------------------------------------------------------------------

    \103\ 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 be 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 message, 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.\104\
---------------------------------------------------------------------------

    \104\ 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.\105\ As described above and below, the differences between
proposed Rule 6.11 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.
---------------------------------------------------------------------------

    \105\ See Cboe Options Rule 6.2.
---------------------------------------------------------------------------

    The proposed rule change to add trading hours for certain index
options will protect investors by providing transparency to the Rules
regarding the trading hours of these index options in the event the
Exchange determines to list them for trading. As noted above, the
Exchange has the authority to list these options pursuant to Chapter
24, but currently does not and has no current plans to do so.
Therefore, the proposed rule change has no impact on current trading of
index options.
    The proposed rule change regarding the last trading day for A.M.-
settled index options will remove impediments to and perfect the
mechanism of a free and open market and a national market system,
because it clarifies current trading hours for these options and are
the same trading hours for A.M.-settled index options on Cboe
Options.\106\
---------------------------------------------------------------------------

    \106\ See Cboe Options Rule 24.9(a)(4).
---------------------------------------------------------------------------

    The proposed trading hours for Cboe S&P 500 AM/PM Basis options,
index options with Nonstandard Expirations and Quarterly Expirations,
SPX options that are p.m.-settled, and XSP options that are p.m.-
settled protects investors by preventing continue trading on a product
after the exercise settlement value has been fixed, thus eliminating
potential confusion. Additionally, these are the same trading hours for
these series of options on Cboe Options.\107\
---------------------------------------------------------------------------

    \107\ See Cboe Options Rules 24.6, Interpretations and Policies
.01 (QIXs), .03 (Cboe S&P 500 AM/PM Basis options), and .04 (P.M.-
settled SPX and XSP options), and 24.9(e)(4) (Nonstandard
Expirations).
---------------------------------------------------------------------------

    The proposed rule change regarding the trading hours for FTSE
Developed Europe Index Options on their last trading day will protect
investors, because it will eliminate pricing risk for liquidity
providers on the last day of trading of expiring options in these
products. The proposed hours align the trading hours of expiring FTSE
Developed Europe Index options with expiring FTSE Developed Europe
Index futures. FTSE Developed Europe Index futures trade on CME and
stop trading at 10:30 a.m. (Chicago time) on the third Friday of the
futures contract month.\108\ Additionally, these are the same Regular
Trading Hours for these options on their last trading day on Cboe
Options.\109\