[Federal Register Volume 86, Number 6 (Monday, January 11, 2021)]
[Notices]
[Pages 2006-2018]
[FR Doc No: 2021-00199]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90853; File No. SR-CBOE-2020-117]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To Amend Certain Rules To Accommodate
the Listing and Trading of Index Options With an Index Multiplier of
One

January 5, 2021.
    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 December 23, 2020, Cboe Exchange, Inc. (``Exchange'' or ``Cboe
Options'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The purpose of this proposed rule change is to amend certain rules
to accommodate the listing and trading of index options with an index
multiplier of one (``micro-options'').\3\
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    \3\ The Exchange intends to file a Form 19b-4(e) with the
Commission for any index option it lists for trading with an index
multiplier of one pursuant to Rule 19b-4(e) of the Act. As further
discussed below, the proposed rule change would also permit the
Exchange to list flexible index options (``FLEX Index Options'')
with an index multiplier of one (``FLEX Micro Options''). Unless the
context otherwise requires, the term ``micro-options'' as used in
this rule filing includes FLEX Micro Options.
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    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The purpose of this proposed rule change is to amend certain rules
to accommodate the listing and trading of index options with an index
multiplier of one (``micro-options'').\4\ The Exchange may list options
on indexes that satisfy the initial and maintenance criteria in Rule
4.10, and currently lists options on 19 indexes. The following table
lists the current indexes on which the Exchange currently lists
options, as well as the current value of the index as of the close of
trading on November 25, 2020, which indexes satisfy the initial and
maintenance criteria for broad-based, narrow-based indexes, or the
specific indexes in Rule 4.10:
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    \4\ The Exchange intends to file a Form 19b-4(e) with the
Commission for any index option it lists for trading with an index
multiplier of one pursuant to Rule 19b-4(e) of the Act. As further
discussed below, the proposed rule change would also permit the
Exchange to list flexible index options (``FLEX Index Options'')
with an index multiplier of one (``FLEX Micro Options''). Unless the
context otherwise requires, the term ``micro-options'' as used in
this rule filing includes FLEX Micro Options.

------------------------------------------------------------------------
                  Index (option symbol)                    Current value
------------------------------------------------------------------------
S&P 500 Index (SPX).....................................         3629.65
Mini-S&P 500 Index (XSP)................................          362.97
Russell 2000 Index (RUT)................................         1845.02
Cboe Volatility Index (VIX).............................           21.25
Dow Jones Industrial Average (DJX)......................    \5\ 29872.47
S&P 100 Index (OEX and XEO).............................         1662.28
S&P 500 ESG Index (SPESG)...............................          309.24
S&P Materials Select Sector Index (SIXB)................          754.63

S&P Industrials Select Sector Index (SIXI)..............          894.23
S&P Financial Select Sector Index (SIXM)................          350.98
S&P Real Estate Select Sector Index (SIXRE).............          178.53
S&P Utilities Select Sector Index (SIXU)................          649.19
S&P Health Care Select Sector Index (SIXV)..............        1,093.10
MSCI EAFE Index (MXEA)..................................        2,065.60
MSCI Emerging Markets Index (MXEF)......................        1,218.29
Russell 1000 Growth Index (RLG).........................        2,300.88
Russell 1000 Value Index (RLV)..........................        1,315.93
Russell 1000 Index (RUI)................................        2,040.23
FTSE 100 Mini-Index (UKXM)..............................          637.97
------------------------------------------------------------------------
\5\ Options are based on \1/100\\th\ of the index value.

    Pursuant to the definition of index multiplier \6\ in Rule 4.11,
the Exchange may determine the index multiplier of an option, which it
generally does in the specifications for an index option.\7\ Similarly,
Article I, Section 1, I(3) of the Options Clearing Corporation
(``OCC'') By-Laws defines ``index multiplier'' as the dollar amount (as
specified by the Exchange on which such contract is traded) by which
the current index value is to be multiplied to obtain the aggregate
current index value. Unlike the definition of a unit of trading for
stock options in the OCC By-Laws, which states the unit of trading in
is designated by OCC but is 100 shares if not otherwise specified, the
definition of index multiplier includes no such default.\8\ Therefore,
the Exchange believes the current index multiplier definition in the
OCC By-Laws (which would have previously been filed with the
Commission) permits any index multiplier specified by the listing
Exchange given the lack of a default index multiplier for index options
(and the inclusion of a default unit of trading for equity options).
This is consistent with the lack of default number in Exchange's
definition of index multiplier and the ability for the Exchange to
specify the index multiplier, as noted above. However, certain other
Rules reflect an index multiplier of 100, and the proposed rule change
updates those Rules to reflect the potential for an index multiplier of
one.
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    \6\ Rule 4.11 defines the term ``index multiplier'' as the
amount specified in the contract by which the current index value is
to be multiplied to arrive at the value required to be delivered to
the holder of a call or by the holder of a put upon valid exercise
of the contract. The Exchange included the proposed index multiplier
in rule filings for certain products.
    \7\ Option specifications are available on the Exchange's public
website, available at cboe.com/tradable_products/. Currently, the
Exchange has designated an index multiplier of 100 for indexes it
currently lists for trading.
    \8\ See OCC Bylaws Article I, Section 1, U(5).
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    Additionally, the Exchange believes micro-options are covered by
the disclosures in the Options Disclosure Document (``ODD''). The ODD
reflects the possibility of differing values of index multipliers when
describing features of index options.\9\ Specifically, the ODD states
the total exercise price for an index option is the exercise price
multiplied by the multiplier, and the aggregate premium is the premium
multiplied by the multiplier.\10\ As a result, the risk disclosures
regarding index options in the ODD currently cover any risks associated
with option index options with multipliers of one (and other amounts).
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    \9\ The ODD is available at https://www.theocc.com/about/publications/character-risks.jsp. The ODD states that the exercise
price of a stock option is multiplied by the number of shares
underlying the option to determine the aggregate exercise price and
aggregate premium of that option. See ODD at 18. Similarly, the ODD
states that the total exercise price for an index option is the
exercise price multiplied by the multiplier, and the aggregate
premium is the premium multiplied by the multiplier. See ODD at 8,
9, and 125.
    \10\ See ODD at 8, 9, and 125.
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    The Exchange believes micro-options will expand investors' choices
and flexibility by listing and trading option contracts on index
options, which provide investors with the ability to gain exposure to
the market or specific industries, with a notional value of \1/100\\th\
of the value of current index options. The Exchange believes lower-
valued micro-options may appeal to retail investors who currently may
not participate in the trading of index options, because index options
are generally higher-priced securities due to the high levels of the
indexes. The Exchange believes that investors, most notably the average
retail investor, will benefit from micro-options, which will make
options overlying indexes more readily available as investing and
hedging tools at more affordable and realistic prices, which would
ultimately reduce investment risk. For example, with SPX at a value of
3629.65 on November 25, 2020, the notional value of an SPX option with
an index multiplier of 100 was $362,965. On that date, the Dec 4 SPX
3630 call was traded at $32.05, making the cost of that option $3,205
given the index multiplier of 100. Proportionately equivalent SPX
micro-options would have provided investors with the ability to trade
at the much lower price of $32.05 per contract.
    Additionally, the Exchange believes the additional granularity
provided by micro-options with respect to the prices at which investors
may execute and exercise index options on the Exchange will appeal to
all investors by providing them with an additional exchange-traded tool
to manage the positions and associated risk in their portfolios more
precisely based on notional value, which currently may equal a fraction
of a standard contract. For example, suppose an investor holds a
security portfolio of $10,000,000 and desires to hedge its portfolio
with SPX options. In order to hedge the entire portfolio with SPX
options, the investor would need to trade 27.55 contracts ($10,000,000/
$362,965). The nearest whole number of contracts would be 28 contracts,
which would have a total notional value of $10,163,020. As a result,
the investor could only hedge within $163,020 of its portfolio value
with SPX options with an index multiplier of 100. However, with SPX
micro-options, the investor would need to trade 2,755.09 contracts
($10,000,000/$3629.65) or equivalently, 27 SPX and 55.09 SPX micro-
options. The nearest whole number of contracts would be 2,755 SPX
micro-options or 27 SPX and 55 SPX micro-options, which would have a
total notional value of $9,999,686.75. This will allow the investor to
hedge within $315 of its portfolio value. Therefore, the proposed rule
change would permit this investor to hedge its portfolio more
effectively with far greater precision.
    The Exchange notes investors may currently execute and exercise
options with this smaller contract multiplier in the unregulated over-
the-counter

(``OTC'') options market. The Exchange understands that investors may
prefer to trade such options in a listed environment to receive the
benefits of trading listing options, including (1) enhanced efficiency
in initiating and closing out position; (2) increased market
transparency; and (3) heightened contra-party creditworthiness due to
the role of OCC as issuer and guarantor of all listed options. The
Exchange believes the proposed rule change may shift liquidity from the
OTC market onto the Exchange, which the Exchange believes would
increase market transparency as well as enhance the process of price
discovery conducted on the Exchange through increased order flow.
Micro-Options
    Currently, the Exchange has designated an index multiplier of 100
for all index options it lists for trading. The proposed rule change
amends various rules regarding index options to permit the Exchange to
designate an index multiplier of one for indexes on which it may list
options. Micro-options will trade in the same manner as index
options.\11\ The table below demonstrates the differences between a
micro-option and a standard index option on the SPX Index:
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    \11\ The proposed rule change defines ``micro-options'' in Rule
4.11 as an index option with an index multiplier of one. The
proposed rule change adds that references to ``index option'' in the
Rules include ``micro-option'' unless the context otherwise
requires.

------------------------------------------------------------------------
                                             Standard
                                              (index       Micro (index
                  Term                     multiplier of   multiplier of
                                               100)             1)
------------------------------------------------------------------------
Strike Price............................            3630            3630
Bid or offer............................           32.05           32.05
Total Value of Deliverable..............        $363,000          $3,630
Total Value of Contract.................          $3,205          $32.05
------------------------------------------------------------------------

    To the extent the Exchange lists a micro-option on an index on
which it also lists a standard index option, it will be listed with a
different trading symbol than the standard index option with the same
underlying index to reduce any potential confusion.\12\ The Exchange
believes that the clarity of this approach is appropriate and
transparent. The Exchange recognizes the need to differentiate micro-
option contracts from standard option contracts and believes the
proposed rule change will provide the necessary differentiation.
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    \12\ For example, a standard index option for index ABC with an
index multiplier of 100 may have symbol ABC, while a micro-option
for index ABC with a multiplier of one may have symbol ABC9.
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FLEX Micro Options \13\
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    \13\ The Exchange notes that SR-CBOE-2020-034 is currently
pending with the Securities and Exchange Commission (the
``Commission'') and proposes nearly identical changes to FLEX
(except that rule filing applies to full-value indexes only). To the
extent the Commission approves that filing prior to this filing, the
Exchange will amend this filing to incorporate the approved changes.
If the Commission approves this filing prior to that filing, the
Exchange would withdraw SR-CBOE-2020-034.
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    Currently, Rule 4.21(b)(1) states the index multiplier for FLEX
Index Options is 100 (which as noted above is currently the index
multiplier designated by the Exchange for all non-FLEX Index Options).
The proposed rule change deletes the parenthetical with that provision
from current Rule 4.21(b)(1), and instead proposes to describe the
index multiplier for FLEX Index Options in proposed Rule 4.20(b).
Options with the same underlying but different units of trading or
index multipliers, as applicable, are different classes.\14\ An index
multiplier applies to all series in the class.\15\ The Exchange,
therefore, believes including the provision regarding the index
multiplier of FLEX Index Options in Rule 4.20, which describes which
classes the Exchange may authorize for trading, is more
appropriate.\16\
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    \14\ For example, the Exchange may list for trading on five
securities mini-options, which are options with a unit of trading of
ten shares, which is ten times lower than the standard-sized option
of 100 shares. See Rule 4.5, Interpretation and Policy .18. While a
mini-option has the same underlying as a standard-sized option, they
are separate products. See Securities Exchange Act Release No. 68656
(January 15, 2013), 78 FR 4526 (January 22, 2013) (SR-CBOE-2013-
001). As proposed, the Exchange may list for trading micro-options
and standard options on the same indexes, which will be separate
products (and thus separate classes).
    \15\ In other words, SPX micro-options would be a different
class than standard SPX options, just as SPX options are a different
class than XSP options.
    \16\ Current Rule 4.20 provides that the Exchange may authorize
for trading a FLEX Option class on any equity security or index if
it may authorize for trading a non-FLEX Option class on that equity
security or index pursuant to Rules 4.3 and 4.10, respectively, even
if the Exchange does not list that non-FLEX Option class for
trading. Therefore, if the proposed rule change to adopt micro-
options is approved, the Exchange may authorize FLEX Micro Options
on an index to be listed for trading even if the Exchange is not
listing a micro-option on that same index.
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    The provision in proposed Rule 4.20(b) that states the index
multiplier for FLEX Index Options may be 100 merely restates the
provision in the parenthetical from current Rule 4.21(b)(1) in a more
appropriate part of the Rules, and thus is a nonsubstantive change.
Proposed Rule 4.20(b) also provides that the index multiplier for FLEX
Index options may also be one (a ``FLEX Micro Option'') (in addition to
the current index multiplier of 100).\17\ Like non-FLEX Options (as
discussed above), 100 contracts for a FLEX Micro Option are
economically equivalent to one contract for a FLEX Index Option with a
multiplier of 100. FLEX Micro Options will be listed with different
trading symbols than FLEX Index Options with a multiplier of 100 with
the same underlying to reduce any potential confusion.\18\
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    \17\ Proposed Rule 4.20(b) also clarifies that references to
``FLEX Index Option'' in the Rules include ``FLEX Micro Option''
unless the context otherwise requires.
    \18\ For example, a FLEX ABC Index Option with a multiplier of
100 may have symbol 4ABC (the ``4'' is the designation generally
used for FLEX Options to distinguish from the non-FLEX Option with
the same underlying), while a FLEX ABC Micro Option may have symbol
4ABC9.
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    Additionally, proposed Rule 4.20(a) states that the unit of trading
for FLEX Equity Options is the same as the unit of trading for non-FLEX
Equity Options overlying the same equity security. The unit of trading
for equity options (both FLEX and non-FLEX) that may be listed on the
Exchange is 100,\19\ except for mini-options, which have a unit of
trading of 10.\20\ This is not a substantive change, but rather is
merely a clarification in the Rules regarding the current unit of
trading for FLEX Equity Options. Therefore, the proposed rule change
has no impact on which FLEX

Equity Options may be traded on the Exchange. The ``unit of trading''
in respect of any series of options means the number of units (i.e.,
shares in the case of equity options) of the underlying interest
subject to a single option contract in the series.\21\
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    \19\ See OCC By-Laws Article I, Section I(U)(5), which defines
``unit of trading'' in respect of any series of options as the
number of units of the underlying interest designated by OCC as the
minimum number to be the subject of a single option contract in such
series, and stating that in the absence of any such designation for
a series of options in which the underlying security is a common
stock, the unit of trading is 100 shares.
    \20\ See Rule 4.5, Interpretation and Policy .18(a).
    \21\ See Rule 4.21(b)(1); and OCC Bylaws Article I, Section 1,
U(5).
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    When submitting a FLEX Order, the submitting FLEX Trader \22\ must
include all required terms of a FLEX Option series.\23\ Pursuant to
current Rule 4.21(b)(1), the submitting FLEX Trader must include the
underlying equity security or index (i.e., the FLEX Option class) on
the FLEX Order. The proposed rule change amends Rule 4.21(b)(1) to
state that if a FLEX Trader specifies an index on a FLEX Order, the
FLEX Trader must also include whether the index option has an index
multiplier of 100 or 1 when identifying the class of FLEX Order. The
Exchange is specifying it may list FLEX Index Option classes with an
index multiplier of either one or 100. Therefore, each FLEX Index
Option series in a FLEX Micro Option class will include the same
flexible terms as any other FLEX Option series, including strike price,
settlement, expiration date, and exercise style as required by Rule
4.21(b).\24\
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    \22\ A ``FLEX Trader'' is a Trading Permit Holder the Exchange
has approved to trade FLEX Options on the Exchange.
    \23\ These terms include, in addition to the underlying equity
security or index, the type of options (put or call), exercise
style, expiration date, settlement type, and exercise price. See
Rule 4.21(b). A ``FLEX Order'' is an order submitted in FLEX
Options. The submission of a FLEX Order makes the FLEX Option series
in that order eligible for trading. See Rule 5.72(b).
    \24\ As discussed below, these are the terms designated by the
Commission as those that constitute standardized options, and
therefore, the Exchange believes the proposed rule change is
consistent with Section 9(b) of the Act. See Securities Exchange Act
Release No. 31910 (February 23, 1993), 58 FR 12056 (March 2, 1993)
(``1993 FLEX Approval Order'').
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    FLEX Micro Options will be traded in the same manner as all other
FLEX Options pursuant to Chapter 5, Section F of the Rules. Like micro-
options, as demonstrated above, there are two important distinctions
between FLEX Index Options with a multiplier of 100 and FLEX Micro
Options due to the difference in multipliers. The proposed rule change
amends certain Rules describing the exercise prices and bids and offers
of FLEX Options to reflect these distinctions, in a similar manner as
it proposes to do for non-FLEX Options (as further described below).
    The Rules permit trading in a put or call FLEX Option series only
if it does not have the same exercise style, same expiration date, and
same exercise price as a non-FLEX Option series on the same underlying
security or index that is already available for trading.\25\ In other
words, a FLEX Option series may not have identical terms as a non-FLEX
Option series listed for trading. Rule 1.1 defines the term ``series''
as all option contracts of the same class that are the same type of
option and have the same exercise price and expiration date. Therefore,
a FLEX Option series in one class may have the same exercise style,
same expiration date, settlement, and same exercise price as a non-FLEX
Option series in a different class, even if they are on the same
underlying security or index. For example, pursuant to the Exchange's
Rules, a FLEX Option overlying Apple stock that is a mini-option (i.e.
a multiplier of 10) may be listed with the same exercise style,
expiration date, settlement, and same exercise price as a non-FLEX
Option overlying Apple stock that is not a mini-option (i.e. a
multiplier of 100). The Exchange may also list a FLEX XSP Option with
the same exercise style, expiration date, settlement, and same exercise
price as a non-FLEX SPX Option. As these series are in different
classes, they are permissible under Rule 4.21(a)(1). Similarly,
pursuant to the proposed rule change, an SPX FLEX Micro Option may have
the same exercise style, expiration date, settlement, and same exercise
price as a standard SPX option with an index multiplier of 100 (which
is non-FLEX), as they would be in different classes.
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    \25\ See Rule 4.21(a)(1).
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    Pursuant to Rule 4.22(a), a FLEX Option position becomes fungible
with a non-FLEX option that becomes listed with identical terms. As
discussed above, options with different multipliers are different
classes, and an option series in one class cannot be fungible with an
option series in another classes, even if they are economically
equivalent. Fungibility is only possible for series with identical
terms. This is similar to how a FLEX XSP Index Option series is not
fungible with an economically equivalent non-FLEX SPX Option series.
Therefore, a FLEX Micro Option would become fungible with a non-FLEX
micro-option with the same terms pursuant to Rule 4.22(a), but would
not be fungible with a non-FLEX option overlying the same index with a
multiplier of 100 with the same expiration date, settlement, and
exercise price.
Trading Hours
    Micro-options will be available for trading during the same hours
as standard index options pursuant to Rule 5.1(b)(2).\26\ Therefore,
Regular Trading Hours for micro-options will generally be 9:30 a.m. to
4:15 p.m. Eastern time.\27\ To the extent an index option is authorized
for trading during Global Trading Hours, the Exchange may also list
micro-options during that trading session as well, the hours for which
trading session are 3:00 a.m. to 9:15 a.m. Eastern time.
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    \26\ Pursuant to Rule 5.1(b)(3)(A) and (c)(1), FLEX Micro
Options may trade at the same time as index options with the same
underlying index.
    \27\ Certain indexes close trading at 4:00 p.m. Eastern time.
See Rule 5.1.
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Expiration, Settlement, and Exercise Style
    The Exchange may list a micro-option on an index with the same
expirations, settlements, and exercise styles as the standard index
option overlying the same index.\28\ Consistent with existing rules for
index options, the Exchange will generally allow up to six standard
monthly expirations for micro-options \29\ as well as up to 10
expiration months for LEAPS.\30\ For certain specified index options
(including EAFE, EM, UKXM, the S&P Select Sector Indexes, and SPESG
options) and any class that the Exchange (as the Reporting Authority)
uses to calculate a volatility index (currently, only SPX options are
used by the Exchange to calculate a volatility index), the Exchange may
list up to 12 standard monthly expirations for micro-options on those
indexes, up to six weekly expirations and up to 12 standard (monthly)
expirations in VIX micro-options.\31\ The Exchange may also list up to
the same maximum number of expirations permitted in Rule 4.13(a)(2) for
micro-options on broad-based index options with nonstandard expirations
in accordance with the Nonstandard Expirations Pilot Program (as
further discussed below).\32\ Micro-options on broad-based and narrow-
based indexes will be cash-settled contracts with European-style
exercise in accordance with the listing criteria for those options.\33\
Micro-options, like standard index options, with third-Friday
expiration will also be A.M.-settled or P.M.-settled, as applicable, in

accordance with the applicable listing criteria.\34\
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    \28\ See Rule 4.13. In accordance with Rule 4.21(b), FLEX
Traders may designate the exercise style, expiration date, and
settlement type of FLEX Micro Options.
    \29\ See Rule 4.13(a)(2).
    \30\ See Rule 4.13(b). Index LEAPS may expire 12 to 180 months
from the date of issuance.
    \31\ See Rule 4.13(a).
    \32\ See Rule 4.13(e).
    \33\ See Rule 4.10(b) (narrow-based initial listing criteria),
(f) (broad-based initial listing criteria), (h) (EAFE, EM, FTSE
Emerging, and FTSE Developed), and (j) (FTSE 100); see also Rule
4.13(a)(3).
    \34\ See id.
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    As it does for certain standard index options, the Exchange may
list micro-options over the same indexes with P.M.-settlement in
certain instances (in addition to A.M.-settlement in accordance with
the generic listing terms). Specifically, pursuant to Rule 4.13(c), the
Exchange may open for trading Quarterly Index Expirations (``QIXs'') on
certain specified index options. QIXs are index option contracts that
expire on the last business day of a calendar quarter, and the Exchange
may list up to eight near-term quarterly expirations for trading.\35\
Currently, the index multiplier for QIXs may be 100 or 500. The
proposed rule change amends Rule 4.13(c) to permit the index multiplier
to also be one to accommodate the listing of QIX micro-options on the
specified indexes.
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    \35\ See Rule 4.13(c).
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    In addition, the Exchange's Nonstandard Expirations Pilot Program
currently allows it to list Weekly and End of Month (``EOM'')
Expirations on any broad-based index.\36\ Weekly and EOM options are
P.M.-settled and may expire on any Monday, Wednesday, or Friday (other
than the third Friday of the month or days that coincide with an EOM
expiration) or on the last trading day of the month. Like standard
index options with Weekly and EOM Expirations, micro-options on broad-
based indexes with Weekly and EOM Expirations will be P.M.-settled and
otherwise treated the same as options on the same underlying index that
expire on the third Friday of the month. The maximum number of
expirations that may be listed for each of Weeklys and EOMs in a micro-
option is the same as the maximum number of expirations permitted in
Rule 4.13(a)(2) (as described above) for micro-options on the same
broad-based index.\37\ The Exchange may currently list Weekly and EOM
Expirations on broad-based indexes as a pilot, which pilot period
currently expires on May 3, 2021. The Exchange currently submits
regular reports and data to the Commission regarding the Nonstandard
Expirations Pilot Program. To the extent the Exchange lists any micro-
options with Weekly or EOM Expirations pursuant to this pilot program,
the Exchange will include the same information with respect to micro-
options that it does for standard options in the reports it submits to
the Commission in accordance with the pilot program.
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    \36\ See Rule 4.13(e).
    \37\ See id.
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    Similarly, the Exchange also currently has in place a pilot program
under Rule 4.13, Interpretation and Policy .13 that allows the Exchange
to list options on specified indexes that expire on the third Friday of
the month that are P.M.-settled. The Exchange, therefore, may list
micro-options on those same indexes pursuant to this pilot program,
which pilot period currently expires on May 3, 2021 as well. As it will
for the Nonstandard Expirations Pilot Program, to the extent the
Exchange lists micro-options on the specified indexes pursuant to this
P.M.-settlement pilot program, the Exchange will include the same
information with respect to micro-options that it does for standard
options in the reports it submits to the Commission in accordance with
the pilot program.
    Each micro-option will be on an index that already satisfies
initial and maintenance listing criteria in Rule 4.10, and thus the
underlying index of each micro-option consists of the same components
as the underlying index of each standard index option. A micro-option
will merely have \1/100\\th\ the value of a standard option overlying
the same index. Because micro-options and standard index options may
overlie the same indexes, market participants may use micro-options as
a hedging vehicle to meet their investment needs in connection with
index-related products and cash positions in a similar manner as they
do with standard index options, but as a more manageably sized
contract. The smaller-sized contract will also provide market
participants with more precision to hedge their portfolios.
Additionally, the smaller size makes a micro-option a lower cost option
than a standard index option, making it a more affordable and lower
risk investment choice for investors, particularly retail investors.
Therefore, the Exchange believes it is appropriate to be able to list
the same expirations and settlements for micro-options as it may for
standard index options.
Exercise Prices
    The Exchange proposes to adopt Rule 4.13, Interpretation and Policy
.01(l) to provide that, notwithstanding any other provision regarding
strike price intervals in Rule 4.13, Interpretation and Policy .01, the
interval between strike prices of series of micro-options will be $0.50
or greater. Because of the smaller contract size of micro-options, the
Exchange believes it is appropriate to be able to list micro-options
with smaller strike price intervals than standard index options.\38\
The Exchange believes finer strike intervals will more closely align
micro-options with their purpose of being a lower-cost investment tool
to investors.\39\ The Exchange believes that smaller strike intervals
for micro-options will provide market participants with more efficient
hedging and trading opportunities. The proposed $0.50 strike setting
regime would permit strikes on a more refined scale, which the Exchange
believes will allow investors, particularly retail investors, to more
affordably and efficiently gain exposure to equity markets, hedge their
positions in instrument and cash positions in their portfolios, and
more precisely tailor their investment strategies.
---------------------------------------------------------------------------

    \38\ Pursuant to Rule 4.13, Interpretation and Policy .01, the
interval between strike prices of standard index options is
generally $5.00 except for lower-priced strikes, for which the
smallest interval is $2.50, subject to certain exceptions (including
reduced-value index options, which may have strike intervals of no
less than $0.50 or $1).
    \39\ This is consistent with lower permissible strike intervals
for certain reduced-value index options, which have the same
practical effect as index options with a smaller multiplier. See id.
---------------------------------------------------------------------------

    As demonstrated above, there are two important distinctions between
micro-options and standard options due to the difference in
multipliers, one of which is how the total deliverable value is
calculated (the other is the meaning of bids and offers, as further
discussed below). Proposed Rule 4.13, Interpretation and Policy .01(l)
describes the difference between the meaning of the exercise price of
micro-option and a standard index option. Specifically, the proposed
rule change states that strike prices for micro-options are set at the
same level as index options with an index multiplier of 100. For
example, a micro-option call series with a strike price of 3250 has a
total deliverable value of $3,250 (3250 x $1), while a standard option
call series with a strike price of 3250 has a total deliverable value
of $325,000 (3250 x $100).\40\
---------------------------------------------------------------------------

    \40\ This corresponds to the calculation of exercise prices for
other types of options with a reduced multiplier. For example, Rule
4.5, Interpretation and Policy .18(b) provides that strike prices
for mini-options (which have multipliers of 10 rather than 100, as
set forth in Rule 4.5, Interpretation and Policy .18(a)) are set at
the same level as for standard options. For example, a call series
strike price to deliver 10 shares of stock at $125 per share has a
total deliverable value of $1,250 (10 x 125) if the strike is 125,
while a call series strike price to deliver 100 shares of stock at
$125 per share has a total deliverable value of $12,500 (100 x 125).
---------------------------------------------------------------------------

    The proposed rule change amends Rule 4.21(b)(6) to describe the
difference between the meaning of the exercise price of a FLEX Index
Option with a multiplier of 100 and a FLEX Micro Option. Specifically,
the proposed rule

change states that the exercise price for a FLEX Micro Option series is
set at the same level as the exercise price for a FLEX Index Option
series in a class with a multiplier of 100. The proposed rule change
also adds the following examples to Rule 4.21(b)(6) regarding how the
deliverable for a FLEX Micro Option will be calculated (as well as for
a FLEX Index Option with a multiplier of 100 and a FLEX Equity Option,
for additional clarity and transparency): If the exercise price of a
FLEX Option series is a fixed price of 50, it will deliver: (A) 100
shares of the underlying security at $50 (with a total deliverable of
$5,000) if a FLEX Equity Option; (B) cash equal to 100 (i.e. the index
multiplier) times 50 (with a total deliverable value of $5,000) if a
FLEX Index Option with a multiplier of 100; and (C) cash equal to one
(i.e. the index multiplier) times 50 (with a total deliverable value of
$50) if a FLEX Micro Option. If the exercise price of a FLEX Option
series is 50% of the closing value of the underlying security or index,
as applicable, on the trade date, it will deliver: (A) 100 shares of
the underlying security at a price equal to 50% of the closing value of
the underlying security on the trade date (with a total deliverable of
100 times that percentage amount) if a FLEX Equity Option; (B) cash
equal to 100 (i.e. the index multiplier) times a value equal to 50% of
the closing value of the underlying index on the trade date (with a
total deliverable of 100 times that percentage amount) if a FLEX Index
Option with a multiplier of 100; and (C) cash equal to one (i.e. the
index multiplier) times a value equal to 50% of the closing value of
the underlying index on the trade date (with a total deliverable of one
times that percentage amount) if a FLEX Micro Option. The descriptions
of exercise prices for FLEX Equity Options and FLEX Index Options with
a multiplier of 100 are true today, and merely add for purposes of
clarity examples to the rule regarding the exercise price of a FLEX
Equity Option or a FLEX Index Option with a multiplier of 100, the
deliverables for which are equal to the exercise price times the 100
contract multiplier to determine the deliverable dollar value. Because
a FLEX Micro Option has a multiplier of \1/100\ of the multiplier of a
FLEX Index Option with a multiplier of 100, the value of the
deliverable of a FLEX Micro Option as a result is \1/100\ of the value
of the deliverable of a FLEX Index Option with a deliverable of 100.
Minimum Increments
    The Exchange proposes to amend Rule 5.4 to provide that a micro-
option will have the same minimum increment for bids and offers as the
minimum increment for a standard index option on the same index.\41\
Similar to the proposed rule change above to describe the difference
between the meaning of strike prices of micro-options and standard
index options, the proposed rule change amends the Rules to describe
the difference between the meaning of bids and offers for micro-options
and standard index options. Specifically, proposed Rule 5.3(c)(2)
provides that notwithstanding Rule 5.3(a),\42\ bids and offers for a
micro-option must be expressed in terms of dollars per \1/100\\th\ part
of the total value of the contract. For example, an offer of ``0.50''
represents an offer of $0.50 for a micro-option.\43\
---------------------------------------------------------------------------

    \41\ See Rule 5.4(a). This corresponds to the provision
regarding the minimum increment for mini-options.
    \42\ Rule 5.3(a) states that except as otherwise provided in
Rule 5.3, must be expressed in terms of dollar and decimals per unit
of the underlying security or index. The Exchange believes that the
proposed rule change is consistent with this provision, as a bid of
7 will represent a bid of 7 for an option contract having an index
multiplier (i.e., unit of trading) of one. However, the Exchange
proposes to add a specific provision regarding the meaning of bids
and offers for micro-options to provide complete clarity in the
Rules, and to maintain consistency in the Rules, which currently
contain a separate provision for mini-options, which as discussed
above, have a reduced multiplier compared to standard options as
micro-options do.
    \43\ An offer of ``0.50'' represents an offer of $50 for a
standard index option with an index multiplier of 100.
---------------------------------------------------------------------------

    Similarly, the proposed rule change amends Rule 5.3(e)(3) to
describe the difference between the meaning of bids and offers for FLEX
Equity Options, FLEX Index Options with a multiplier of 100, and FLEX
Micro Options. Currently, that rule states that bids and offers for
FLEX Options must be expressed in (a) U.S. dollars and decimals if the
exercise price for the FLEX Option series is a fixed price, or (b) a
percentage, if the exercise price for the FLEX Option series is a
percentage of the closing value of the underlying equity security or
index on the trade date, per unit.\44\ As noted above, a FLEX Option
contract unit consists of 100 shares of the underlying security or 100
times the value of the underlying index, as they currently have a 100
contract multiplier.\45\ The proposed rule change clarifies that bids
and offers are expressed per unit, if a FLEX Equity Option or a FLEX
Index Option with a multiplier of 100, and adds an example (as set
forth below). This is true today, and merely adds clarity to the Rules.
---------------------------------------------------------------------------

    \44\ The proposed rule change reorganizes the language in this
provision to make clear that the phrase ``if the exercise price for
the FLEX Option series is a percentage of the closing value of the
underlying equity security or index on the trade date'' applies to
the entire clause (B) of 5.4(e)(3).
    \45\ See current Rule 4.21(b)(1).
---------------------------------------------------------------------------

    The proposed rule change also adds to Rule 5.3(e)(3) the meaning of
bids and offers for FLEX Micro Options. Specifically, bids and offers
for FLEX Micro Options must be expressed in (a) U.S. dollars and
decimals if the exercise price for the FLEX Option series is a fixed
price, or (b) a percentage, if the exercise price for the FLEX Option
series is a percentage of the closing value of the underlying equity
security or index on the trade date, per 1/100\th\ unit. Additionally,
the proposed rule change adds examples of the meaning of bids and
offers of FLEX Options: If the exercise price of a FLEX Option series
is a fixed price, a bid of ``0.50'' represents a bid of (A) $50 (0.50
times 100 shares) for a FLEX Equity Option; (B) $50 (0.50 times an
index multiplier of 100) for a FLEX Index Option with a multiplier of
100; and (C) $0.50 (0.50 times an index multiplier of one) for a FLEX
Micro Option.
    If the exercise price of a FLEX Option series is a percentage of
the closing value of the underlying equity security, a bid of ``0.50''
represents a bid of (A) 50% (0.50 times 100 shares) of the closing
value of the underlying equity security on the trade date if a FLEX
Equity Option; (B) 50% (0.50 times an index multiplier of 100) of the
closing value of the underlying index on the trade date if a FLEX Index
Option with a multiplier of 100; and (C) 0.50% (0.50 times an index
multiplier of one) of the closing value of the underlying index on the
trade date if a FLEX Micro Option. The Exchange believes this approach
identifies a clear, transparent description of the differences between
FLEX Index Options with a multiplier of 100 and FLEX Micro Options. The
proposed rule change also provides additional clarity regarding the
meaning of bids and offers of FLEX Equity Options and FLEX Index
Options with a multiplier of 100.
    The proposed rule change also clarifies that the System rounds bids
and offers and offers of FLEX Options to the nearest minimum increment
following application of the designated percentage to the closing value
of the underlying security or index. This is consistent with current
functionality and is merely a clarification in the Rules. For example,
suppose a FLEX Trader enters a bid of 0.27 for a FLEX Equity Option,
and the underlying security has a closing value of 24.52 on the trade
date. Following the close on the trade date, the System calculates the
bid to be 6.6204 (0.27 x 24.52). Because the minimum increment for bids
and

offers in a FLEX Option class is $0.01, the System rounds 6.6204 to the
nearest penny, which would be a bid of $6.62.
Appointment Weights
    The Exchange proposes to add micro-options each as a Tier AA class
with a Market-Maker appointment weight of .001.\46\ This is the same
appointment weight as a majority of the other Tier AA options classes.
The Exchange determines appointment weights of Tier AA classes based on
several factors, including, but not limited to, competitive forces and
trading volume. The Exchange believes the proposed initial appointment
weight of .001 for each micro-option will foster competition by
incentivizing Market-Makers to obtain an appointment in these newly
listed options and provide increased liquidity in a newly listed class,
to the benefit of all investors.
---------------------------------------------------------------------------

    \46\ See Rule 5.50(g). While the appointment weights of Tier AA
classes are not subject to quarterly rebalancing under Rule
5.50(g)(1), the Exchange regularly reviews the appointment weights
of Tier AA classes to ensure that they continue to be appropriate.
The Exchange determines appointment weights of Tier AA classes based
on several factors, including, but not limited to, competitive
forces and trading volume.
---------------------------------------------------------------------------

Contract Size Limits
    The proposed rule change updates various other provisions in the
following Rules to reflect that one-hundred micro-contracts overlying
an index will be economically equivalent to one contract for a standard
index option overlying the same index:
     Rules 1.1 (definition of ``complex order'') and 5.65(d)
(definition of ``complex trade''): The definition of ``complex order''
in Rule 1.1 provides, among other things that for purposes of Rules
5.33 and 5.85(b)(1), the term ``complex order'' means a complex order
with any ratio equal to or greater than one-to-three (.333) and less
than or equal to three-to-one (3.00), an Index Combo order, a stock-
option order, or a security future-option order.\47\ Similarly, in Rule
5.65(d), the definition of ``complex trade'' (for purposes of the
options linkage plan) means the execution of an order in an option
series in conjunction with the execution of one or more related
order(s) in different option series in the same underlying security
occurring at or near the same time in a ratio that is equal to or
greater than one-to-three (.333) and less than or equal to three-to-one
(3.0) and for the purpose of executing a particular investment strategy
(for the purpose of applying the aforementioned ratios to complex
trades comprised of both mini-option contracts and standard option
contracts, ten (10) mini-option contracts will represent one (1)
standard option contract. The proposed rule change adds to the
definition in each of Rules 1.1 and 5.65(d) that for the purposes of
applying these ratios to complex orders comprised of legs for both
micro-options and standard options, 100 micro-option contracts
represent one standard option contract.\48\
---------------------------------------------------------------------------

    \47\ The proposed rule change also conforms the definition of
``complex order'' in Rule 1.1 to the definition of ``complex trade''
in Rule 5.65 to say that it may be comprised of different series in
the same ``underlying security'' rather than the same ``class.'' As
discussed above, micro-options will be a different class than
standard index options overlying the same index. This accommodates,
for example, the fact that a complex order could be comprised of
mini-options and standard options overlying the same stock (as
contemplated by the current definition) despite being in different
classes. The proposed rule change also expands the definitions of
complex order in Rule 1.1 and complex trade in Rule 5.65 to provide
that it may similarly be comprised of different series in the same
``underlying index.'' The Exchange notes that full-value indexes and
reduced-value indexes are separate indexes under the Exchange Rules,
so to the extent a multi-legged order whose legs overly different
indexes (such as one leg with a full-value index and one leg with a
reduced-value index) would not qualify for the definition of
``complex trade.''
    \48\ This corresponds to the provision in those definitions
regarding mini-options, which states that for the purpose of
applying these ratios to complex orders comprised of legs for both
mini-options and standard options, ten mini-option contracts
represent one standard option contract.
---------------------------------------------------------------------------

     Rules 5.37 and 5.38: Rules 5.37 and 5.38 describe the
Exchange's Automated Improvement Mechanism for simple (``AIM'') and
complex orders (``C-AIM''), respectively. There is no minimum size for
an order submitted into an AIM or C-AIM Auction. However, in an AIM
Auction for orders less than 50 standard option contracts (or 500 mini-
option contracts), the stop price must be at least one minimum
increment better than the then-current national best-bid or offer or
the order's limit price (if the order is a limit price), whichever is
better. For orders of 50 standard option contracts (or 500 mini-option
contracts) or more, the stop price must be at or better than the then-
current national best-bid or offer or the order's limit price (if the
order is a limit price), whichever is better.\49\ The proposed rule
change adds to Rule 5.37(b) that 5,000 micro-option contracts is the
corresponding size for these stop price restrictions. Additionally,
Rule 5.37(c) and 5.38(c) provide that no concurrent AIM or C-AIM
Auctions, respectively, are permitted for orders less than 50 standard
option contracts (or 500 mini-option contracts) (for C-AIM Auctions,
the size is determined by the smallest leg of the complex order), but
are permitted for orders of 50 standard option contracts (or 500 mini-
option contracts) or greater (for C-AIM Auctions, the size is
determined by the smallest leg of the complex order). The proposed rule
change adds that 5,000 micro-option contracts is the corresponding size
for determining whether concurrent auctions are permissible.
---------------------------------------------------------------------------

    \49\ See Rules 5.37(b).
---------------------------------------------------------------------------

     Rules 5.39, 5.40, and 5.74: Rules 5.39, 5.40, and 5.74
describe the Exchange's Solicitation Auction Mechanism for simple
(``SAM''), complex (``C-SAM''), and FLEX (``FLEX SAM'') orders,
respectively. An order, or the smallest leg of a complex order, must be
for at least the minimum size designated by the Exchange (which may not
be less than 500 standard option contracts or 5,000 mini-option
contracts). The proposed rule change adds that 50,000 micro-option
contracts or FLEX Micro Options, as applicable, is the corresponding
minimum size for orders submitted into SAM, C-SAM, or FLEX SAM
Auctions.
     Rule 5.87: Rule 5.87(f) describes when a Floor Broker is
entitled to cross a certain percentage of an order, subject to the
requirements in that paragraph. Under that Rule, the Exchange may
determine on a class-by-class basis the eligible size for an order that
may be transacted pursuant to this paragraph; however, the eligible
order size may not be less than 50 standard option contracts (or 500
mini-option contracts). The proposed rule change adds that 5,000 micro-
option contracts is the corresponding minimum size for orders that may
be crossed in accordance with this provision. Additionally, Rule 5.87,
Interpretation and Policy .07(a) provides that Rule 5.86(e) \50\ does
not prohibit a Trading Permit Holder (``TPH'') from buying or selling a
stock, security

futures or futures position following receipt of an order, including an
option order, but prior to announcing such order to the trading crowd,
provided that the option order is in a class designated as eligible for
``tied hedge'' transactions and within the eligibility size parameters,
which are determined by the Exchange and may not be smaller than 500
standard option contracts (or 5,000 mini-option contracts). The
proposed rule change adds that 50,000 micro-option contracts is the
corresponding minimum size for orders that may qualify as tied hedge
transactions and not be deemed a violation of Rule 5.86(e).
---------------------------------------------------------------------------

    \50\ Rule 5.86(e) provides that it will be considered conduct
inconsistent with just and equitable principles of trade for any TPH
or person associated with a TPH, who has knowledge of all material
terms and conditions of an original order and a solicited order,
including a facilitation order, that matches the original order's
limit, the execution of which are imminent, to enter, based on such
knowledge, an order to buy or sell an option of the same class as an
option that is the subject of the original order, or an order to buy
or sell the security underlying such class, or an order to buy or
sell any related instrument until either (1) all the terms and
conditions of the original order and any changes in the terms and
conditions of the original order of which that Trading Permit Holder
or associated person has knowledge are disclosed to the trading
crowd or (2) the solicited trade can no longer reasonably be
considered imminent in view of the passage of time since the
solicitation. An order to buy or sell a ``related instrument,''
means, in reference to an index option, an order to buy or sell
securities comprising ten percent or more of the component
securities in the index or an order to buy or sell a futures
contract on any economically equivalent index.
---------------------------------------------------------------------------

Position and Exercise Limits \51\
---------------------------------------------------------------------------

    \51\ This discussion focuses on position and exercise limits
with respect to indexes on which the Exchange currently lists
standard options and may also list micro-options. To the extent the
Exchange lists micro-options on other indexes in the future, they
would be subject to the same position and exercise limits set forth
in the applicable Rules, and similarly aggregated with standard
options on the same indexes, as proposed.
---------------------------------------------------------------------------

    Rule 8.31 governs position limits for broad-based index options,
and currently provides that there are no position limits for broad-
based index option contracts (including reduced-value option contracts)
on DJX, OEX, XEO, RUT, and SPX classes (among others). With respect to
the other broad-based index options that the Exchange currently lists
for trading, the Exchange fixes the position limits, which may not be
larger than the limits in the following table:

------------------------------------------------------------------------
                                           Standard limit  (on the same
           Broad-based index                   side of the market)
------------------------------------------------------------------------
Russell 1000 Russell 1000 Growth         50,000 contracts (no more than
 Russell 1000 Value.                      30,000 near-term).
MSCI Emerging Markets Index MSCI EAFE    50,000 contracts.
 Index.
Other..................................  25,000 contracts (no more than
                                          15,000 near-term).
------------------------------------------------------------------------

    The proposed rule change adds Rule 8.31(f) to provide that
positions in micro-options (with an index multiplier of one) will be
aggregated with positions in standard options (including reduced-value
option contracts) (with an index multiplier of 100) on the same broad-
based index and, for purposes of determining compliance with the
position limits under Rule 8.31, 100 micro-option contracts with an
index multiplier of one equal one standard option contract with an
index multiplier of 100. This is consistent with Rule 8.31(d), which
similarly provides that positions in reduced-value index options are
aggregated with positions in full-value index options based on economic
equivalent values of those options.\52\
---------------------------------------------------------------------------

    \52\ As noted above, an index option with a reduced multiplier
has the same practical effect as an index option on a reduced-value
index. A micro-option is the economic equivalent to a reduced-value
index that is \1/100\\th\ of the full-value index.
---------------------------------------------------------------------------

    Rule 8.32 governs position limits for industry index options, and
currently provides that industry index options are subject to the
following position limits:
    (1) 18,000 contracts if the Exchange determines, at the time of a
review conducted pursuant to Rule 8.32(b),\53\ that any single
underlying stock accounted, on average, for 30% or more of the index
value during the 30-day period immediately preceding the review; or
---------------------------------------------------------------------------

    \53\ Rule 8.32(b) provides the Exchange will make these
determinations with respect to options on each industry index at the
commencement of trading of such options on the Exchange and
thereafter review the determination semi-annually on January 1 and
July 1.
---------------------------------------------------------------------------

    (2) 24,000 contracts if the Exchange determines, at the time of a
review conducted pursuant to Rule 8.32(b), that any single underlying
stock accounted, on average, for 20% or more of the index value or that
any five underlying stocks together accounted, on average, for more
than 50% of the index value, but that no single stock in the group
accounted, on average, for 30% or more of the index value, during the
30-day period immediately preceding the review; or
    (3) 31,500 contracts if the Exchange determines that the conditions
specified above which would require the establishment of a lower limit
have not occurred.\54\
---------------------------------------------------------------------------

    \54\ These position limits are subject to Rule 8.32(c), which
provides that if the Exchange determines, at the time of a semi-
annual review, that the position limit in effect with respect to
options on a particular industry index is lower than the maximum
position limit permitted by the criteria set forth in Rule 8.32(a),
the Exchange may effect an appropriate position limit increase
immediately. If the Exchange determines, at the time of a semi-
annual review, that the position limit in effect with respect to
options on a particular industry index exceeds the maximum position
limit permitted by the criteria set forth in Rule 8.32(a), the
Exchange shall reduce the position limit applicable to such options
to a level consistent with such criteria; provided, however, that
such a reduction shall not become effective until after the
expiration date of the most distantly expiring option series
relating to the industry index, which is open for trading on the
date of the review; and provide further that such a reduction shall
not become effective if the Exchange determines, at the next
succeeding semi-annual review, that the existing position limit
applicable to such options is consistent with the criteria set forth
in Rule 8.32(a).
---------------------------------------------------------------------------

    The proposed rule change adds Rule 8.32(g) to provide that
positions in micro-options (with an index multiplier of one) will be
aggregated with positions in standard options (including reduced-value
option contracts) (with an index multiplier of 100) on the same
industry index and, for purposes of determining compliance with the
position limits under Rule 8.32, 100 micro-option contracts with an
index multiplier of one equal one standard option contract with an
index multiplier of 100. This is consistent with Rule 8.32(e), which
similarly provides that positions in reduced-value index options are
aggregated with positions in full-value index options based on economic
equivalent values of those options.\55\
---------------------------------------------------------------------------

    \55\ As noted above, an index option with a reduced multiplier
has the same practical effect as an index option on a reduced-value
index. A micro-option is the economic equivalent to a reduced-value
index that is \1/100\\th\ of the full-value index.
---------------------------------------------------------------------------

    Rule 8.42(b) governs exercise limits for index options, and
provides that exercise limits for index option contracts will be
equivalent to the position limits prescribed for option contracts with
the nearest expiration date in Rule 8.31, 8.32, or 8.34. As is the case
for certain broad-based index options as noted above, there will be no
exercise limits for broad-based index options (including reduced-value
option contracts). The proposed rule change adds to Rule 8.42(b) that
there will similarly be no exercise limits on micro-option contracts on
those same broad-based indexes.
    The proposed rule change amends Rule 8.35(a) regarding position
limits for FLEX Options to describe how FLEX Micro Options will be
counted for purposes of determining compliance with position
limits.\56\ Because 100 FLEX Micro Options are equivalent to one FLEX
Index Option with a multiplier of 100 overlying the same index due to
the difference in contract multipliers, proposed Rule 8.35(a)(7)

states that for purposes of determining compliance with the position
limits under Rule 8.35, 100 FLEX Micro Option contracts equal one FLEX
Index Option contract with a multiplier of 100 with the same underlying
index. The proposed rule change makes a corresponding change to Rule
8.35(b) to clarify that, like reduced-value FLEX contracts, FLEX Micro
Option contracts will be aggregated with full-value contracts and
counted by the amount by which they equal a full-value contract for
purposes of the reporting obligation in that provision (i.e., 100 FLEX
Micro Options will equal one FLEX Index Option contract with a
multiplier of 100 overlying the same index). This is consistent with
the current treatment of other reduced-value FLEX Index Options with
respect to position limits. The proposed rule change adds paragraph (g)
to Rule 8.42 to make a corresponding statement regarding the
application of exercise limits to FLEX Micro Options. The margin
requirements set forth in Chapter 10 of the Rules will apply to FLEX
Micro Options (as they currently do to all FLEX Options).\57\
---------------------------------------------------------------------------

    \56\ The proposed rule change also corrects an administrative
error in Rule 8.35(a). Currently, there are two subparagraphs
numbered as (a)(5). The proposed rule change amends paragraph (a) to
renumber the second subparagraph (a)(5) to be subparagraph (a)(6).
    \57\ Pursuant to Rule 8.43(j), FLEX Index Options with a
multiplier of one will be aggregated with non-FLEX Index Options on
the same underlying index in the same manner as all other FLEX Index
Options.
---------------------------------------------------------------------------

Capacity
    The Exchange has analyzed its capacity and represents that it
believes the Exchange and Options Price Reporting Authority (``OPRA'')
have the necessary systems capacity to handle the additional traffic
associated with the listing of new series that may result from the
introduction of the micro-options. Because the proposed rule change is
limited to equity index options, which currently represent only 19 of
the option classes listed on the Exchange, the Exchange believes any
additional traffic that may be generated from the introduction of
micro-options will be manageable. The Exchange also understands that
the OCC will be able to accommodate the listing and trading of micro-
options.
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.\58\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \59\ 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) \60\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78f(b).
    \59\ 15 U.S.C. 78f(b)(5).
    \60\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, protect investors
and the public interest. The Exchange believes the proposed rule change
will expand investor choice and flexibility by providing investors with
the ability to gain exposure to the market or specific industries using
index options with a notional value of \1/100\\th\ of the value of
current index options. The Exchange believes there is unmet market
demand from market participants for micro-options. The availability of
micro-options may broaden the base of investors that use options to
manage their trading and investment risk, as the Exchange believes they
will appeal to retail investors who currently may not participate in
the trading of index options. Due to the larger-value of indexes (which
generally result in options with five and six figure notional values,
as demonstrated above), the Exchange believes that investors, most
notably average retail investors, would benefit from the availability
of micro-options by making currently high-priced options more readily
available as an investing tool and at more affordable and realistic
prices and thus with reduced investment risk. Micro-options will make
available to investors a relatively low-cost method to hedge or
speculate on market risk and meet their investment needs associated
with index options. The lower cost of micro-options will allow
investors to trade index options and hedge their portfolios with a
smaller outlay of capital, and thus with less investment risk. This may
facilitate overall investor participation in the markets for index
options, which may increase the depth and liquidity of these markets,
to the benefit of all investors.
    Additionally, the Exchange will further remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest by
providing additional granularity with respect to the prices at which
investors may execute and exercise index options on the Exchange.
Micro-options will provide investors with an exchange-traded tool to
manage more precisely based on notional value the positions and
associated risk in their portfolios, which currently may equal a
fraction of a standard contract. Because micro-options and standard
index options will overlie the same indexes, market participants may
use them as hedging vehicles to meet their investment needs in
connection with index-related products and cash positions in a similar
manner as they currently do with standard index options, but as a more
manageably sized contract. The smaller-sized contract will provide all
market participants with more precision with respect to hedging their
portfolios more effectively with far greater precision. Given the
various trading and hedging strategies employed by investors, this
additional granularity may provide investors with more control over the
trading of their investment strategies and management of their
positions and risk associated with option positions in their
portfolios.
    Additionally, micro-options will provide investors with the ability
to execute and exercise options with a smaller index multiplier in a
listed market environment as opposed to in the unregulated OTC options
market. The proposed rule change may shift liquidity from the OTC
market onto the Exchange, which the Exchange believes would increase
market transparency as well as enhance the process of price discovery
conducted on the Exchange through increased order flow to the benefit
of all investors. By permitting index options to trade with the same
multiplier currently available to customized options in the OTC market,
the Exchange believes the proposed rule change will also promote
competition and remove impediments to and perfects the mechanism of a
free and open market and a national market system by further improving
a comparable alternative to the OTC market in customized options. By
enhancing our Exchange products to provide additional terms available
in the OTC market but not currently available in the listed options
market,

the Exchange believes it may be a more attractive alternative to the
OTC market. The Exchange believes market participants benefit from
being able to trade customized options in an exchange environment in
several ways, including but not limited to the following: (1) Enhanced
efficiency in initiating and closing out positions; (2) increased
market transparency; and (3) heightened contra-party creditworthiness
due to the role of the OCC as issuer and guarantor of all listed
options.
    The Exchange believes the ability to list micro-options is
consistent with several current rules. Particularly, the underlying
indexes on which micro-options (and FLEX Micro Options) would be listed
satisfied the initial listing standards for index in the Exchange's
current Rules and would need to continue to satisfy the maintenance
listing criteria in the Rules.\61\ Pursuant to the definition of index
multiplier \62\ in Rule 4.11, the Exchange may determine the index
multiplier of an option, which it generally does in the specifications
for an index option.\63\ Similarly, Article I, Section 1, I(3) of the
OCC By-Laws defines ``index multiplier'' as the dollar amount (as
specified by the Exchange on which such contract is traded) by which
the current index value is to be multiplied to obtain the aggregate
current index value. Unlike the definition of a unit of trading in the
OCC By-Laws, which states the unit of trading in is designated by OCC
but is 100 shares if not otherwise specified, the definition of index
multiplier includes no such default.\64\ Therefore, the Exchange
believes the current index multiplier definition in the OCC By-Laws
(which would have previously been filed with the Commission) permits
any index multiplier specified by the listing Exchange given the lack
of a default index multiplier for index options (and the inclusion of a
default unit of trading for equity options). This is consistent with
the lack of default number in Exchange's definition of index multiplier
and the ability for the Exchange to specify the index multiplier, as
noted above. Additionally, the Exchange believes any potential risks of
index options with a multiplier of one are covered by disclosures of
the ODD, as it considers the possibility of differing values of index
multipliers.\65\ However, certain other Rules reflect an index
multiplier of 100, and the proposed rule change updates those Rules to
reflect the potential listing of an index option with an index
multiplier of one.
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    \61\ See Rule 4.10.
    \62\ Rule 4.11 defines the term ``index multiplier'' as the
amount specified in the contract by which the current index value is
to be multiplied to arrive at the value required to be delivered to
the holder of a call or by the holder of a put upon valid exercise
of the contract.
    \63\ Option specifications are available on the Exchange's
public website, available at cboe.com/tradable_products/.
    \64\ See OCC Bylaws Article I, Section 1, U(5).
    \65\ The ODD is available at https://www.theocc.com/about/publications/character-risks.jsp. The ODD states that the exercise
price of a stock option is multiplied by the number of shares
underlying the option to determine the aggregate exercise price and
aggregate premium of that option. See ODD at 18. Similarly, the ODD
states that the total exercise price for an index option is the
exercise price multiplied by the multiplier, and the aggregate
premium is the premium multiplied by the multiplier. See ODD at 8,
9, and 125.
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    The listing of micro-options has the same practical effect as the
listing of reduced-index value options, which the Exchange (and other
options exchanges) currently has the authority to do with respect to
several indexes (in accordance with previously Commission-approved
rules). For example, the Exchange may list options on both the S&P 500
Index (SPX options) and the Mini-S&P 500 Index (XSP options), which is
\1/10\\th\ the value of the S&P 500 Index.\66\ This is economically
equivalent to if the Exchange listed an S&P 500 Index option with an
index multiplier of 100 and with an index multiplier of 10,
respectively. The proposed rule change will permit the Exchange to make
reduced-value options on all indexes available without relying on a
reporting authority to create and disseminate a reduced-value index at
a reduced-value level that the Exchange believes may be beneficial to
the marketplace. The Commission also previously approved a proposed
rule change of at least one other options exchange to list reduced-
value options on a ``micro-index''(which has \1/100\\th\ the value of
the full index) as well as the full-value index and ``mini-index''
(which has \1/10\\th\ the value of the full index).\67\ Similarly,
designated contract markets also list index futures (with which the
Exchange's options contracts compete) with varying multipliers. For
example, the Chicago Mercantile Exchange currently lists standard,
mini-, and micro- futures on the S&P 500 Index, the Russell 2000, and
the DJIA with multipliers of $250, $50 and $5 (which is \1/50\\th\ the
size of the full-size future), respectively.\68\ Therefore, the
Exchange believes the availability of micro-options will increase
investor choice and promote competition in the listed derivatives
markets.
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    \66\ The Exchange notes if it desired to list a reduced-value
index option on other indexes, or list an option on a micro-level
index (i.e., an index with \1/100\\th\ the value of the full-sized
index), it could do so without Commission approval if the underlying
index satisfied the generic listing criteria in Rule 4.12.
    \67\ See, e.g., Securities Exchange Act Release No. 53484 (March
14, 2006), 71 FR 14268 (March 21, 2006) (SR-ISE-2005-25) (order
approving proposed change to permit International Securities
Exchange (``ISE'') to list and trade options on the FTSE 100 Index
and FTSE 250 Index based on the full-value of the indexes, one-tenth
of the value of the indexes, and one-hundredth of the value of the
indexes.
    \68\ See CME contract specifications, available at https://www.cmegroup.com/trading/equity-index/us-index/e-mini-sandp500_contract_specifications.html. In addition to these indexes,
CME also lists index futures with multipliers of $250 and $50 on
several other indexes on which the Exchange also lists index options
(and on which the Exchange would be able to list micro-options
pursuant to the proposed rule change, including the FTSE Developed
Europe Index, the FTSE Emerging Markets Index, the S&P Select Sector
Indexes, the Russell 1000 Index, the Russell 1000 Growth Index, and
the Russell 1000 Value Index.
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    As described above, the proposal contains a number of features
designed to protect investors by reducing investor confusion. For
example, micro-options will be designated by different trading symbols
from their related standard contracts. Additionally, the proposed rule
change describes in the Rules the differences regarding the meanings of
bids and offers, exercise prices (and thus deliverables), and minimum
sizes of index options contracts with a multiplier of one and a
multiplier of 100, all of which are adjusted proportionately to reflect
the difference in multiplier, and thus the difference in the
deliverable value of the underlying.\69\ The Exchange believes the
transparency and clarity the proposed rule change adds to the Rules
regarding the distinctions between index options due to the different
multipliers will benefit investors. These proposed changes are not
novel, as they correspond to similar rule provisions regarding other
reduced-value options.\70\
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    \69\ These proposed changes correspond to similar provisions for
mini-options, which also have a smaller multiplier than standard-
sized options.
    \70\ See, e.g., Rules 4.5, Interpretation and Policy .18
(description of strike prices for mini-options, which have a
multiplier of 10), 5.3(c) (description of bids and offers for mini-
options), and 5.74(a)(4) (description of minimum size of FLEX Agency
Order for mini-options). Just as terms for mini-options, which have
a multiplier of \1/10\\th\ the size of standard options, equal \1/
10\\th\ of the same terms for standard options, the proposed terms
for FLEX Index Options with a multiplier of one, which have a
multiplier \1/100\\th\ the size of FLEX Index Options with a
multiplier of 100, equal \1/100\\th\ of the same terms as FLEX Index
Options with a multiplier of 100.
---------------------------------------------------------------------------

    Other than these differences, micro-options will trade in the same
manner as index options (and FLEX Micro Options will trade in the same
manner

as all other FLEX Index Options). Each micro-option will be on an index
consisting of the same components as the underlying index of standard
index options that may currently be listed on the Exchange, but with
\1/100\\th\ the value of those indexes. Because micro-options and
standard index options overlie the same indexes, market participants
may use micro-options as hedging vehicles to meet their investment
needs in connection with index-related products and cash positions in a
similar manner as they do with standard index options, but as a more
manageably sized contract. The smaller-sized contract may provide
market participants with more precision with respect to hedging their
portfolios. Additionally, the smaller size makes micro-options a lower
cost option, making it a more affordable and lower risk option for
investors, particularly retail investors. Therefore, the Exchange
believes it is reasonable and appropriate to be able to list the same
expirations and settlements for micro-options as it may for standard
index options.
    The Exchange believes the proposed rule change for the minimum
price increment for micro-options to be the same as the minimum price
increment for index options overlying the same index will benefit
investors, as it may lessen investor and marketplace confusion. While
price protection between micro-options and standard options on the same
index is not required, the Exchange believes that consistency between
micro-options and standard options as to the minimum price variation is
desirable and is designed to promote just and equitable principles of
trade. Matching the minimum price increment between micro-options and
standard options on the same index would help to eliminate any
unnecessary arbitrage opportunities that could result from having
contracts on the same underlying index traded in different minimum
price increments. Similarly, the Exchange believes matched minimum
pricing may generate enhanced competition among liquidity providers.
The Exchange believes that matched pricing for micro-options and
standard options on the same index would attract additional liquidity
providers who would make markets in micro-options and standard options
on the same index. In addition to the possibility of more liquidity
providers, the Exchange believes that the ability to quote micro-
options and standard options on the same index in the same minimum
increments would hopefully result in more efficient pricing via
arbitrage and possible price improvement in both contracts on the same
index. Finally, having the same minimum increment for micro-options and
standard options would be beneficial from a logistical perspective
since firms' existing systems are generally configured using the ``root
symbol'' of an underlying index, and it may be difficult and resource-
intensive for firms to assign different minimum pricing to micro-
options and standard options on the same index.
    The Exchange believes the proposed rule change regarding the
treatment of micro-options with respect to determining compliance with
position and exercise limits is designed to prevent fraudulent and
manipulative acts and practices and promote just and equitable
principles of trade. Index options with a multiplier of one will be
counted for purposes of those limits in a proportional manner to index
options (including reduced-value indexes) with a multiplier of 100 and
aggregated with options overlying the same index (including reduced-
value indexes) in the same manner as index options currently are. This
is equivalent to current limits imposed on reduced-value options. As
noted above, while the multipliers of reduced-value indexes are $100, a
reduced-value index option has an economically equivalent effect to an
index option with a smaller multiplier. An index option with a
multiplier of one corresponds to an option overlying a reduced-valued
index that is \1/100\\th\ the value of the full-value index. It just
uses a different multiplier rather than a different value of the
underlying index.\71\ The Exchange believes its surveillances continue
to be designed to deter and detect violations of Exchange Rules,
including position and exercise limits and possible manipulative
behavior, and those surveillance will apply to index options with a
multiplier of one that the Exchange determines to list for trading.
Ultimately, the Exchange does not believe that this proposed rule
change raises any unique regulatory concerns because existing
safeguards--such as position and exercise limits (and the aggregation
of options overlying the same index (including reduced-value indexes))
and reporting requirements--would continue to apply.
---------------------------------------------------------------------------

    \71\ This is also similar to position limits for other options
with multipliers less than 100. See, e.g., Rule 8.30, Interpretation
and Policy .08 (describing position limits for mini-options).
---------------------------------------------------------------------------

    The Exchange also believes the proposed initial low appointment
weight for micro-options will promote competition and efficiency by
incentivizing more Market-Makers to obtain an appointment in each
micro-option the Exchange lists. The Exchange believes this may result
in liquidity and competitive pricing in this class, which ultimately
benefits investors. The Exchange does not believe that the proposed
rule change is unfairly discriminatory, as the appointment weight will
apply to all Market-Makers in the class. Additionally, the proposed
appointment weight is the same as the appointment weight for a majority
of other Tier AA options classes, as well as a recently listed index
option classes to likewise promote Market-Maker appointment, liquidity
and competitive
    Finally, the Exchange represents that it has the necessary systems
capacity to support the new option series given these proposed
specifications. The Exchange believes that its existing surveillance
and reporting safeguards are designed to deter and detect possible
manipulative behavior which might arise from listing and trading micro-
options. The Exchange further notes that current Exchange Rules that
apply to the trading of other index options traded on the Exchange will
also apply to the trading of micro-options, such as Exchange Rules
governing customer accounts, margin requirements and trading halt
procedures. The Exchange understands that market participants may
currently, and currently do, execute orders in options like the ones
being proposed in the unregulated OTC options market, where neither the
Exchange nor the Commission has oversight over market participants that
may be purposely trading at prices through the listed market. As
discussed below, the proposed rule change may encourage these orders to
be submitted to the Exchange, which could bring these orders into a
regulated market and be subject to surveillance and oversight to which
they are currently not subject with respect to execution of these
option orders.
    A robust and competitive market requires that exchanges respond to
investors' evolving needs by constantly improving their offerings. When
Congress charged the Commission with supervising the development of a
``national market system'' for securities, Congress stated its intent
that the ``national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.\72\ Consistent with this purpose, Congress and the Commission
have repeatedly stated their preference for competition, rather than
regulatory intervention to determine products and

services in the securities markets.\73\ This consistent and considered
judgment of Congress and the Commission is correct, particularly in
light of evidence of robust competition in the options trading
industry. The fact that an exchange proposed something new is a reason
to be receptive, not skeptical--innovation is the life-blood of a
vibrant competitive market--and that is particularly so given the
continued internalization of the securities markets, as exchanges
continue to implement new products and services to compete not only in
the United States but throughout the world. Options exchanges
continuously adopt new and different products and trading services in
response to industry demands in order to attract order flow and
liquidity to increase their trading volume. This competition has led to
a growth in investment choices, which ultimately benefits the
marketplace and the public. The Exchange believes that the proposed
rule change will help further competition by providing market
participants with yet another investment option for the listed options
market.
---------------------------------------------------------------------------

    \72\ See H.R. Rep. No. 94-229, at 92 (1975) (Conf. Rep.).
    \73\ See S. Rep. No. 94-75, 94th Cong., 1st Sess. 8 (1975)
(``The objective [in enacting the 1975 amendments to the Exchange
Act] would be to enhance competition and to allow economic forces,
interacting within a fair regulatory field, to arrive at appropriate
variations in practices and services.''); Order Approving Proposed
Rule Change Relating to NYSE Arca Data, Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR 74770 (December 9, 2008)
(``The Exchange Act and its legislative history strongly support the
Commission's reliance on competition, whenever possible, in meeting
its regulatory responsibilities for overseeing the [self-regulatory
organizations] and the national market system. Indeed, competition
among multiple markets and market participants trading the same
products is the hallmark of the national market system.''); and
Regulation NMS, 70 FR at 37499 (observing that NMS regulation ``has
been remarkably successful in promoting market competition in [the]
forms that are most important to investors and listed companies'').
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act as any micro-options the
Exchange lists for trading will be available for all market
participants in the same manner who wish to trade such options. The
Exchange may list micro-options on all indexes currently authorized to
be listed on the Exchange, subject to the same listing criteria. These
options will trade in the same manner as index options and FLEX Index
Options, as applicable, with a multiplier of 100, with certain terms
proportionately adjusted to reflect the different contract multipliers.
Additionally, the Exchange believes that the proposed rule change will
enhance competition by allowing products on the same index to be priced
in the same minimum price increments. The Exchange also believes the
proposed initial low Market-Maker appointment cost for micro-options
will apply equally to all Market-Makers with an appointment in micro-
options and will promote competition by incentivizing more Market-
Makers to obtain an appointment in the newly listed class, resulting in
liquidity and competitive pricing within the class.
    The Exchange does not believe the proposed rule change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because micro-
options may only be listed for trading on the Exchange. To the extent
that the availability of these products makes the Exchange a more
attractive marketplace to market participants at other exchanges,
market participants are free to elect to become market participants on
the Exchange. As noted above, other derivative products related to
these indexes are listed for trading on other exchanges. Additionally,
the Exchange notes that listing and trading micro-options on the
Exchange will subject such options to transparent exchange-based rules
as well as price discovery and liquidity, as opposed to alternatively
trading these products in the OTC market.
    The Exchange believes that the proposed rule change may relieve any
burden on, or otherwise promote, competition. The proposal is designed
to increase competition for order flow on the Exchange in a manner that
is beneficial to investors by providing them with a lower-cost option
to hedge their investment portfolios. The Exchange notes that it
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues who offer similar
products. The Exchange believes the proposed rule change encourages
competition amongst market participants to provide lower-priced (and
thus lower risk) and more granular option products, which may appeal to
all market participants, including retail investors.
    Additionally, the Exchange believes this is an enhancement to a
comparable alternative to the OTC market in customized options. By
enhancing our trading platform to provide additional contract
granularity that available in the OTC market but not currently
available in the listed options market, the Exchange believes it may be
a more attractive alternative to the OTC market. The Exchange believes
market participants will benefit from being able to trade customized
options in an exchange environment in several ways, including but not
limited to the following: (1) Enhanced efficiency in initiating and
closing out position; (2) increased market transparency; and (3)
heightened contra-party creditworthiness due to the role of OCC as
issuer and guarantor of all listed options.
    The proposed nonsubstantive changes (to move and clarify the
current contract multiplier for FLEX Equity Options and FLEX Index
Options with a multiplier of 100 in Rule 4.21(b) and to correct the
numbering of subparagraphs in Rule 8.35(a), as well as examples of the
exercise prices and the meanings of bids and offers) will have no
impact on competition, as they merely clarify or correct, as
applicable, information in the Rules and make no changes to how FLEX
Options trade.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

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

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-CBOE-2020-117 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CBOE-2020-117. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2020-117, and should be submitted
on or before February 1, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\74\
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    \74\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00199 Filed 1-8-21; 8:45 am]
BILLING CODE 8011-01-P