CBOE Temporarily Moves to Fully Electronic Trading in Response to COVID-19 | Practical Law

CBOE Temporarily Moves to Fully Electronic Trading in Response to COVID-19 | Practical Law

The CBOE Exchange, Inc. (CBOE) has temporarily closed open-outcry trading on its Chicago trading floor as a precautionary method to prevent the spread of 2019 novel coronavirus disease (COVID-19), and the SEC approved a corresponding rule proposal by CBOE designed to facilitate the continued operation of CBOE's option exchange.

CBOE Temporarily Moves to Fully Electronic Trading in Response to COVID-19

Practical Law Legal Update w-024-5169 (Approx. 3 pages)

CBOE Temporarily Moves to Fully Electronic Trading in Response to COVID-19

by Practical Law Finance
Published on 17 Mar 2020 • USA (National/Federal)
The CBOE Exchange, Inc. (CBOE) has temporarily closed open-outcry trading on its Chicago trading floor as a precautionary method to prevent the spread of 2019 novel coronavirus disease (COVID-19), and the SEC approved a corresponding rule proposal by CBOE designed to facilitate the continued operation of CBOE's option exchange.
As of March 16, 2020, the CBOE Exchange, Inc. (CBOE) has temporarily closed open-outcry trading on its Chicago trading floor as a precautionary method to prevent the spread of 2019 novel coronavirus disease (COVID-19), and the SEC approved a corresponding rule proposal by CBOE designed to facilitate the continued operation of CBOE's options exchange.
The SEC rule modifies three trading rules relating to CBOE's exclusively listed index options to more fully replicate in an electronic-trading environment the trading that occurs on the CBOE's physical trading floor. The modifications are temporary until May 15, 2020 (or sooner if the floor becomes operable).
The rule lists three modifications that are designed to assist an orderly transition from the electronic and floor trading environment to all-electronic trading including:
  • Permitting market makers with an appointment in an options class to be solicited for the initiating order submitted for execution to trade against an agency order submitted to CBOE's price improvement auction in order to more closely replicate the sourcing of liquidity that occurs on the floor today and to ensure minimal disruption to the existing liquidity sources available via floor-based trading.
  • Exempt market makers that would not be subject to certain continuous quoting obligations in the trading-floor environment from those requirements as a result of their participation the all-electronic trading environment.
  • Permitting CBOE to better enable certain complex strategies with multiple option components to function in an all-electronic trading environment.
The SEC announced that it will continue to work with CBOE to help implement these changes.