Opening Process

What is changing?

The filing states Cboe will replicate its current multi-list opening process and apply it to the new GTH session in the morning.Products currently trading in GTH are relatively liquid during that period. In the new GTH sessions, trading activity in the underlying securities may likely not be as liquid, potentially leading to more manual intervention from market makers to manage risk. This issue would be exacerbated if/when other exchanges also expand trading hours that overlap with Cboe's new GTH sessions.

Cboe intends to submit a rule filing to amend the GTH opening trigger. This change will modify the opening trigger for only the GTH opening from a bid/ask and print in the underlying from the primary listing exchange to a bid/ask and print in the underlying from any equities exchange.

Has Cboe considered allowing additional time for stocks to open, for example, 5 minutes beginning at 7:30 a.m.? How will Cboe open options if there is (a) no available quote or (b) a wide quote in the underlying?

Cboe's opening rotation process begins upon receipt of a bid/ask and print in the underlying security from the primary listing exchange after the session start time (7:30 a.m. ET). An option will not open for trading unless the composite market, comprising the best local appointed market maker quote, bound by the away BBO, is within a configured opening price collar. There is no provision to prevent the opening based on the width of the underlying market. We note that equity markets begin trading much earlier than the proposed start of the GTH session.

What will the market maker width requirements be in those instances?

Cboe plans to add maximum market maker quote width requirements to its rules, with expected implementation sometime after the initial SSO GTH implementation, date TBD. Those width requirements will generally be $5, with a multiplier for longer-dated LEAPS expirations (subject to regulatory review), and ITM (In The Money) series may be quoted as wide as the underlying if wider than $5. Beyond that, Cboe has systematically-enforced opening price collars. A series will not open if there are crossed non-Market Maker orders and the composite market is wider than the opening collar width (OCW) requirement.

If other exchanges also are open during the new GTH sessions, will Cboe route to those exchanges to fill orders at the open (as it currently has the ability to do today for multi-listed options, but does not for products listed only on Cboe)? And what will be the process to do so?

Yes, Cboe will route to better-priced away markets as part of its opening logic. This applies to trades at the open and any other time during the trading day, across all sessions.

Will the opening process change after accompany reports earnings, when there may be greater need to route orders to another exchange at the open of GTH due to elevated volatility levels?

No, the opening process will be the same on earnings days as any other day.

Will there be a pause between the RTH and Curb Sessions?

No, there will be no pause in between the RTH and Curb sessions. Order eligible to trade in Curb will remain on the book following the end of the RTH session. There will be no opening process for the Curb session.