The Securities and Exchange Commission has approved a rule change proposed by the Chicago Board Options Exchange, Incorporated pertaining to its Hybrid Opening System (HOSS), as well as related rules concerning the obligations of designated primary market-makers, electronic designated primary market-makers and lead market-makers during opening rotations.
HOSS is the CBOE’s automated system for initiating trading at the beginning of each trading day. The approved change to CBOE Rule 6.2B modifies the HOSS procedures to allow the parameters to be configured so that an option series will open: (i) if at least one market maker has submitted an opening quote; or (ii) if a designated primary market-maker or lead market-maker has already submitted an opening quote. Determinations on the particular configuration will be made on a class-by-class basis by the appropriate Exchange Procedure Committee.
Moreover, the approved rule change amends the opening quote obligations of market makers to require them to ensure a timely initiation of an opening trading rotation of each allocated class by entering opening quotes as necessary (usually where no other market maker has entered an opening quote). Previously, market makers were under an obligation to enter opening quotes even where another market maker had already entered an opening quote.
The rule change is aimed at affording more flexibility towards how HOSS conducts opening rotations in order to allow for more competitive, efficient and orderly openings with sufficient liquidity in particular classes.