Proposed Amendment to Binary Options Rules on All Indexes

Item 1. Text of the Proposed Rule Change (a) Cboe Exchange, Inc. (the "Exchange" or "Cboe Options") proposes to amend its Rules related to binary options. The text of the proposed rule change is provided in Exhibit 5. (b) Not applicable. (c) Not applicable. Item 2. Procedures of the Self-Regulatory Organization (a) The Exchange's President (or designee) pursuant to delegated authority approved the proposed rule change on April 1, 2026. (b) Please refer questions and comments on the proposed rule change to Pat Sexton, Executive Vice President, General Counsel, and Corporate Secretary, (312) 786- 7467, or Laura G. Dickman, (312) 786-7572, Cboe Exchange, Inc., 433 West Van Buren Street, Chicago, Illinois 60607. Item 3. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (a) Purpose The Exchange proposes to amend its Rules related to binary options. Binary options are based on the same framework as traditional, standardized options traded on the Exchange, except the payout of a binary option is an amount contingent upon the occurrence of the option being in- or at-the-money rather than the degree to which the option is in-the-money. As a result, payout at expiration of a binary option is an all-or- nothing occurrence. Current Rule 4.16 permits the Exchange to list binary options on

Page 3 of 78

broad-based indexes. Current Rule 4.16(b) defines a binary option as a European-style 1 option contract having an exercise settlement amount that is established at the creation of 2 the option. Under current Rules, binary options are paid out if the settlement value of the 3 underlying broad-based index equals, exceeds, or is less than the exercise price, depending on the type of option (i.e., call or put). A call binary option is an option contract that returns an exercise settlement amount if the settlement value of the underlying broad-based index is at or above the exercise price at expiration (i.e., in- or at-the-money), while a put binary 4 option is an option contract that returns an exercise settlement amount if the settlement value of the underlying broad-based index is below the exercise price at expiration (i.e., in-

Pursuant to current Rule 4.16(a), Rule 4.16 applies to binary options only, and all Rules apply to the 1 trading of binary options, except as otherwise provided or the context otherwise requires. The exercise settlement amount for a binary option is the amount of cash that a holder will receive 2 upon exercise of the contract. The exercise settlement amount is a set amount equal to the exercise settlement value multiplied by the contract multiplier. The exercise settlement value will be an amount determined by the Exchange on a class-by-class basis and shall be equal to $10 or $1,000 or a value between those values, unless otherwise adjusted per Rule 4.6. See current Rule 4.16(b) (definition of "exercise settlement amount"). Pursuant to current Rule 4.16(f), binary option contracts are subject to adjustment only in accordance with and to the extent specified in the By- Laws and Rules of The Options Clearing Corporation ("OCC"). The contract multiplier is the multiple applied to the exercise settlement value to arrive at the total exercise settlement amount per contract, which is established on a class-by-class basis and shall be at least one. See current Rule 4.16(b) (definition of "contract multiplier"). The Exchange intends to amend the minimum exercise settlement value to be $1 (rather than $10) in a separate rule filing. The settlement value for a binary option is the value of the underlying broad-based index that is 3 used to determine whether a binary option is in, at, or out of the money. For binary options on a broad-based index on which traditional options on the same broad-based index are A.M.-settled, the "settlement value" is the reported opening level of such index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. For binary options on a broad-based index on which traditional options on the same broad-based index are P.M.-settled, the "settlement value" is the reported closing level of such index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. See current Rule 4.16(b) (definition of "settlement value"). Binary options that are "at- the-money," "in-the-money," or "out-of-the-money" are a function of the settlement value of the underlying broad-based index in relation to the type of binary option (i.e., put or call) and the exercise price. See current Rule 4.16(e). With respect to a binary option, the exercise price is the value to which the settlement value of the 4 underlying broad-based index is compared to determine whether the holder of a binary option is entitled to have the option be paid out. See current Rule 4.16(b) (definition of "exercise price").

Page 4 of 78

the-money). The Exchange designates binary options as to expiration date, exercise price, 5 exercise settlement amount, contract multiplier, and underlying broad-based index. 6 Currently, the Exchange may from time to time approve for listing and trading on the Exchange binary option contracts on a broad-based index that has been selected in accordance with Rule 4.10 and the Interpretations and Policies thereunder. The Exchange 7 may add new series of options of the same class as provided for in Rule 4.13 and the Interpretations and Policies thereunder. Additional series of the same binary option class may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market or to meet customer demand (the opening of a new series of

previously opened). After a particular binary option class has been approved for listing 8 and trading on the Exchange, the Exchange from time to time may open for trading series of options on that class. In order to afford investors maximum flexibility, binary option series may expire from one day up to 36 months from the time they are listed. Binary 9 options will be quoted based on the existing strike intervals utilized for traditional, non- binary index options with minimum price variations, established by class, to be no less 10 than $0.01. 11

See current Rule 4.16(b) (definitions of "call binary option" and "put binary option"). 5 See Rule 4.16(c)(2). 6 See current Rule 4.16(c)(1). Binary options are a separate class from other options overlying the 7 same broad-based index. The maintenance listing standards with respect to options on broad-based indexes set forth in Rule 4.10 and the Interpretations and Policies thereunder apply to binary options on broad-based indexes as well. See Rule 4.16(d). See current Rule 4.16(c)(4). 8 See current Rule 4.16(c)(3). 9 See Rule 4.13, including Interpretation and Policy .01. 10 See Rule 5.4(c)(1). 11

Page 5 of 78

The proposed rule change moves the Rule provisions regarding binary options from current Rule 4.16 to new Chapter 4, Section H, which section will relate specifically to binary options. Specifically, the proposed rule change : 12

• moves current Rule 4.16(a) to the introductory language for proposed
  Section H;

• moves the defined terms in current Rule 4.16(b) to proposed Rule 4.70;

• moves the provisions from current Rule 4.16(c)(1) and (d) regarding the
  listing and maintenance criteria for binary options to Rule 4.71(a);

• moves the provision regarding binary options being a separate class from
  the traditional options with the same underlying from current Rule 4.16(c)(1) to Rule 4.71(b);

• moves the provision regarding the designated terms of binary options from
  current Rule 4.16(c)(2) to the introductory language of proposed Rule 4.72 ; 13

• moves the provision regarding settlement of binary options from current
  Rule 4.16(c)(2) to proposed Rule 4.72(a);

• moves the provision regarding permissible expirations of binary options
  from current Rule 4.16(c)(3) to proposed Rule 4.72(b);

In addition to substantive changes to current Rule 4.16 described below, the proposed rule change 12 made nonsubstantive changes to simplify the current provisions (including eliminate redundancies) and make the provisions more plain English. The Exchange deleted from current Rule 4.16(c)(2) the provision stating only binary option 13 contracts approved by the Exchange and currently open for trading on the Exchange may be purchased or sold on the Exchange, as that is a general, true of all options approved for listing on the Exchange.

Page 6 of 78

• moves the provision regarding additional series of binary options from
  current Rule 4.16(c)(4) to proposed Rule 4.72(c);

• moves the provision regarding the determination of the settlement value
  from current Rule 4.16(e) to proposed Rule 4.73;

• moves the provision regarding adjustment of binary options from current
  Rule 4.16(f) to proposed Rule 4.74; and

• moves the provision regarding the availability of Flexible Exchange
  ("FLEX") options for binary options from current Rule 4.16(g) to proposed Rule 4.21(c). While there is no current definition of the term "market capitalization ratio" in the Rules, that term is effectively defined in current Rule 8.36(b) as the ratio of the market capitalization of a broad-based index underlying a binary to the market capitalization of the S&P 500 Index. The proposed rule change creates a defined term of "market capitalization ratio" in proposed Rule 4.70, which means the ratio of the market capitalization of an index to the market capitalization of the S&P 500 Index. This is equivalent to the meaning of that term in the current Rules but expanded to apply to any index rather than just broad-based index, as the proposed Rules regarding all binary options reference that term. In addition to the relocation of and nonsubstantive changes to the provisions of current Rule 4.16 regarding binary options as described above, the proposed rule change amends the current Rules regarding the availability of binary options to (1) expand the scope of binary options to any index (rather than just broad-based indexes); and (2) permit A.M.-settlement and P.M.-settlement for all binary options.

Page 7 of 78

First, the proposed rule change would make binary options available on all indexes that are otherwise eligible for traditional, non-binary options trading on the Exchange. Currently, the Exchange may list binary options only on broad-based index options. Proposed Rule 4.71(a) provides that the Exchange may from time to time approve for listing and trading on the Exchange binary option contracts on an index that satisfies the initial listing criteria in Rule 4.10 and the Interpretations and Policies thereunder. The maintenance listing criteria in Rule 4.10 and the Interpretations and Policies thereunder apply to binary index options. In other words, the Exchange may list binary options on any index on which the Exchange may list traditional (i.e., non-binary) options pursuant to Rule 4.10. Based on available competitive products (as further discussed below) and 14 demand from investors, the Exchange believes the proposed expansion of binary option classes will provide more investors with access to a securities exchange-listed product with the simplified, limited risk structure of binary options. Second, the Exchange proposes to amend the Rules regarding permissible settlements of binary options. Pursuant to proposed Rule 4.72(a), the Exchange may designate binary options as A.M.-settled or P.M.-settled. Current Rule 4.16(c)(2) provides that binary options on broad-based index options for which traditional (i.e., non-binary) options on the same broad-based index are A.M.-settled will be A.M.-settled, and binary options on broad-based indexes for which traditional options on the same broad-based

Pursuant to proposed Rule 4.21(c) (as is the case today for binary index options on broad-based 14 indexes pursuant to current Rule 4.16(g)), binary options on indexes that are eligible for trading on the Exchange will be eligible for trading as FLEX options (as provided for in Chapter 4, Section C), even if the Exchange does not list and trade non-FLEX binary options or non-FLEX traditional options on such index. For purposes of Rule 4.21, the applicable exercise settlement value is designed by the parties to the contract, the parties may not designate an exercise style other than European-style, and the term "index multiplier" refers to the contract multiplier.

Page 8 of 78

index are P.M.-settled will be P.M.-settled. Currently, nearly all of the traditional index (broad-based and narrow-based) options the Exchange lists for trading can be both A.M.- settled and P.M.-settled. Therefore, current Rule 4.16 would permit the Exchange to list 15 A.M.-settled and P.M.-settled binary options overlying most indexes on which the Exchange lists non-binary options. Permitting both A.M.- and P.M.-settlement for binary index options for all indexes will afford investors further flexibility (coupled with the flexibility of permissible expirations, as noted above) with respect to their investment strategies, regardless of the index option market in which investors participate. Additionally, the Exchange believes it is appropriate to be able to list A.M.- and P.M.- settled binary index to provide investors with the same flexibility currently available for alternative products (as further discussed below). In connection with the proposed rule change described above to permit P.M.- settlement for all binary index options, the Exchange proposes to amend Rule 5.1(b)(2)(C) to provide that on their last trading day, RTH for P.M.-settled binary index options may be effected on the Exchange between 9:30 a.m. and 4:00 p.m. (as opposed to the 9:30 a.m. 16 to 4:15 p.m. RTH for non-expiring binary index options). The primary listing markets for

See Rule 4.13(a)(4), (e), and Interpretation and Policy .13. Currently, the Exchange lists the 15 following index options: S&P 500 Index options ("SPX options"), Mini-S&P 500 Index options ("XSP options"), S&P 500 Scored and Screened Index ("SPESG options"), Mini-S&P 500 Equal Weight Index Options ("SPEQX options"), Cboe Volatility Index Options ("VIX options"), Dow Jones Industrial Average options ("DJX options"), S&P 100 Index options ("OEX options"), Russell 2000 Index options ("RUT options"), Mini-Russell 2000 Index options ("MRUT options"), Cboe Bitcoin U.S. ETF Index options ("CBTX options"), Cboe Mini Bitcoin U.S. ETF Index options ("MBTX options"), and the Cboe Magnificent 10 Index options ("MGTN options "). All of these index options may have A.M.-settled series and P.M.-settled series except OEX options (P.M.- settled only), VIX options (A.M.-settled only), and DJX options (A.M.-settled only, although the Exchange recently proposed to permit P.M.-settlement for DJX options, see Securities Exchange Act Release No. 104644 (January 21, 2026), 91 FR 3284 (January 26, 2026) (SR-CBOE-2026- 005)). All times set forth in this rule filing are Eastern Time. 16

Page 9 of 78

the component securities comprising the indexes underlying options listed on the Exchange close trading in those securities at 4:00 p.m. The primary listing exchanges for the component securities disseminate closing prices for the component securities, which are used to calculate the exercise settlement value of these indexes. The Exchange believes that, under normal trading circumstances, the primary listing markets have sufficient bandwidth to prevent any data queuing that may cause any trades that are executed prior to the closing time from being reported after 4:00 p.m. If trading in expiring P.M.-settled binary index options continued an additional fifteen minutes until 4:15 p.m. on their last trading day, these expiring options would be trading after the exercise settlement value for those expiring options was calculated. Therefore, in order to mitigate potential investor confusion and the potential for increased costs to investors as a result of potential pricing divergence at the end of the trading day, the Exchange believes it is appropriate to cease trading in the expiring P.M.-settled binary index options at 4:00 p.m., which is currently the case for P.M.-settled non-binary index options. The Exchange does not believe the proposed rule change will impact volatility on the underlying cash market comprising the indexes at the close on expiration days, as it already closes trading on the last trading day for expiring P.M.-settled non-binary index options overlying the same indexes at 4:00 p.m. The Exchange does not believe this has had an adverse impact on fair and orderly markets on expiration days for the underlying securities comprising the corresponding indexes. The Exchange also proposes to amend the position limits for binary options in Rule 8.36. Current Rule 8.36 provides that the position limit for binary options on a broad- based index will be 15,000 contracts (or 15,000 times the ratio of 10,000 to the exercise settlement amount) if traditional (i.e., non-binary) options on the same broad-based index

Page 10 of 78

have no position limit pursuant to Rule 8.31. For binary options on a broad-based index for which traditional options on the same broad-based index do have a position limit pursuant to Rule 8.31, the position limit for the binary option is:

• 10,000 contracts if the market capitalization ratio for the index is greater
  than or equal to 0.50;

• 5,000 contracts if the market capitalization ratio is less than 0.50 but greater
  than or equal to 0.25; or

• 2,500 contracts if the market capitalization ratio is less than 0.25 but greater
  17 For binary options that have an exercise settlement amount that is not equal to $10,000, the position limit is the ratio of 10,000 to the exercise settlement amount multiplied by the applicable amount set forth above. The proposed rule change expands the fixed and formulaic limits to all indexes that may underlie binary options as proposed and applies the proposed position limits on an expiration basis. Specifically, the proposed rule change amends Rule 8.36(a) to provide 18 that the position limit for binary options for which the traditional options on the same index have no position limit pursuant to Rules 8.30 through 8.33, as applicable, is the number 19 of contracts equal to 15,000 times the ratio of 10,000 to the exercise settlement amount per

The rule provides that the Exchange would need to seek approval from the Securities and Exchange 17 Commission (the "Commission") prior to establishing position limits for binary options on broad- based indexes that have a market capitalization ratio that is less than 0.10. The proposed rule change also makes nonsubstantive changes to simplify the rule language. 18 Rules 8.31 through 8.33 provide position limits for the various categories of indexes options the 19 Exchange may list for trading.

Page 11 of 78

The proposed rule change amends Rule 8.36(b) to provide that for binary 20 options for which traditional options on the same index have a position limit pursuant to Rules 8.30 through 8.33, as applicable, the position limit is the number of contracts equal to the ratio of 10,000 to the exercise settlement amount multiplied by the number of contracts set forth in the table below (based on the market capitalization ratio of the underlying index) per expiration : 21 For reference, the table below sets forth the approximate market capitalizations that would equate to the above ratios based on a market capitalization of the S&P 500 Index of $62.5 trillion as of February 20, 2026:

For example, if the binary option exercise settlement amount is $10,000, then the position limit is 20 15,000 contracts per expiration; if the binary option exercise settlement amount is $1,000, then the position limit is 150,000 contracts per expiration; and if the binary option exercise settlement amount is $12,000, then the position limit is 12,500 contracts per expiration. The proposed rule change does not include a provision regarding the need to seek Commission 21 approval prior to establishing position limits for binary options on broad-based indexes that have a Market Capitalization Ratio less than 0.10, as the proposed rule change seeks to establish position limits for all such indexes, rendering such a provision moot.

Market Capitalization Ratio of Range of Underlying Market Number of 10,000Less than 0.50 but greater than or equal to 0.255,000Less than 0.25 but greater than or equal to 0.102,500Less than 0.10 but greater than or equal to 0.0051,500Less than 0.005 but greater than or equal to 0.00251,000Market Capitalization Ratio of UnderlyingNumber of ContractsUnderlyingCapitalizationContracts Page 12 of 78

$15.6 trillion $6.3 trillion $312.5 billion $156.3 billion Pursuant to current Rule 8.36(c), positions in binary options on the same broad- based index with different exercise settlement amounts will be aggregated with each other but, pursuant to current Rule 8.36(d), will not be aggregated with non-binary option contracts on the same broad-based index. The proposed rule change amends these 22 provisions to apply to all binary options on all indexes. Current Rule 8.36(f) provides that binary options are not subject to the hedge exemption to the standard position limits in Rule 8.30 and instead exempt certain qualified hedge exemption strategies and positions from the position limits established in Rule 8.36(a) and (b). The proposed rule change amends Rule 8.36(f) to provide that notwithstanding Rules 8.36(a) and (b), position limits for the hedged positions and strategies defined below are equal to five times the position limit established under

Additionally, binary options on broad-based indexes will not be aggregated with non-binary option 22 contracts on an underlying stock or stocks (the Exchanges makes a nonsubstantive change to make this security or securities to be consistent with the first sentence of the subparagraph) included within such broad-based index or with binary index options on any other broad-based index. See current Rule 8.36(d) (proposed Rule 8.36(c)).

Less than 0.50 but greater than or Less than $31.3 trillion but greater 5,000Less than 0.25 but greater than or Less than $15.6 trillion2,500Less than 0.10 but greater than or Less than $6.3 trillion but greater than 1,500Less than 0.005 but greater than or Less than $312.5 billion but greater 1,000 but greater Greater than or equal to $31.3 trillion 10,000equal to 0.25than or equal to equal to 0.10than or equal to equal to 0.005or equal to equal to 0.0025than or equal to Less than $156.3 billion Page 13 of 78

proposed Rule 8.36(a) and (b)(5) (if the market capitalization ratio of the underlying index is greater than or equal to 0.005) or three times the position limit established under proposed Rule 8.36(b)(5) (if the market capitalization ratio of the underlying index is less than 0.005). The following strategies and positions would qualify for these increased position limits (which are the strategies and positions exempt from position limits for binary options established in current Rule 8.36):

• a binary option position "hedged" or "covered" by an appropriate amount
  of cash to meet the settlement obligation (e.g., $1,000 for a binary option with an exercise settlement amount of $1,000);

• a binary option position "hedged" or "covered" by a sufficient amount of a
  related or similar security to meet the settlement obligation; and

• a binary option position "hedged" or "covered" by a traditional option
  covering the same underlying index (which includes, among other strategies, a vertical spread with strikes reasonably close to the binary 23 option strike) sufficient to meet the settlement obligation. Pursuant to Rule 8.42(h), binary options are not subject to exercise limits. This is currently the case for binary index options on broad-based indexes and will be the case for binary index options on non-broad-based indexes. Binary options, as discussed above, are European-style and are automatically exercised at expiration if the settlement value of the

The Exchange will determine strikes that are "reasonably close" in the same manner it currently 23 does pursuant to Rule 4.13.

Page 14 of 78

underlying index is equal to or greater than the exercise price of a call binary option or less than the exercise price in the case of a put binary option. 24 With respect to reports related to position limits, proposed Rule 8.43(f) provides that in computing reportable binary options under Rule 8.43, as is the case today for binary index options on broad-based indexes: (1) positions in binary options on the same index that have different exercise settlement amounts are aggregated; (2) positions in binary options are not aggregated with non-binary option contracts on the same or similar underlying security or index; (3) positions in binary index options are not aggregated with non-binary option contracts on an underlying security or securities included within the underlying index; and (4) positions in binary options on one index are not aggregated with binary options on any other index. All binary options as proposed will not be subject to Rule 8.46(b) and Interpretation and Policy .01 regarding certain restrictions on options transactions and exercises. Rule 8.46(b) applies only to American-style options (as noted above, binary options are European-style), and Rule 8.46, Interpretation and Policy .01 applies only to options that are settled by delivery of an underlying security (as noted above, binary options are settled by delivery of a settlement value in cash).

See Rule 6.20(g). Because binary options are automatically exercised, Rule 6.21 regarding exercise 24 notices does not apply to binary options.

Page 15 of 78

The margin requirements in Rule 10.3(m) (currently applicable to binary index options on broad-based indexes) will apply to all binary options. Specifically, for a margin account, except as provided below, no binary option carried for a customer may be considered of any value for purposes of computing the margin required in the account of such customer. The initial and maintenance margin required on any binary option carried long in a customer's account is 100% of the purchase price of such binary option (i.e., the premium). The initial and maintenance margin required on any binary option carried short in a customer's account is the exercise settlement amount. With respect to spreads, no margin is required on a binary call option (put option) carried short in a customer's account that is offset by a long binary call option (put option) for the same underlying security or instrument that expires at the same time and has an exercise price that is less than (greater than) the exercise price of the short call (put). The long call (put) must be paid for in full. With respect to straddles and combinations, when a binary call option is carried short in a customer's account and there is also carried a short binary put option for the same underlying security or instrument that expires at the same time and has an exercise price that is less than or equal to the exercise price of the short call, the initial and maintenance margin required is the exercise settlement amount applicable to one contract. For a cash account, a binary option carried short in a customer's account is deemed a covered position, and eligible for the cash account, provided any one of the following either is held in the account at the time the option is written or is received into the account promptly thereafter: (1) cash or cash equivalents equal to 100% of the exercise settlement amount; or

Page 16 of 78

(2) a long binary option of the same type (put or call) for the same underlying security or instrument that is paid for in full and expires at the same time, and has an exercise price that is less than the exercise price of the short in the case of a call or greater than the exercise price of the short in the case of a put; or (3) an escrow agreement. The escrow agreement must certify that the bank holds for the account of the customer as security for the agreement (i) cash, (ii) cash equivalents, (iii) one or more qualified equity securities, or (iv) a combination thereof having an aggregate market value of not less than 100% of the exercise settlement amount and that the bank will promptly pay the TPH organization the exercise settlement amount in the event the account is assigned an exercise notice. The Exchange believes these proposed levels are appropriate because risk exposure is limited with binary options and the proposed customer initial and maintenance margin is equal to the maximum risk exposure. 25 Except as otherwise described above, all binary options will be listed and traded on the Exchange in a substantially similar manner as binary options are permitted to be listed and traded under current Rules. The Rules that apply to the listing and trading of non- binary options on the Exchange, including those related to priority and execution, Market- Makers (including Market-Maker obligations), obvious error, trading halt procedures, 26

Pursuant to Rule 10.9, the Exchange has the ability to impose higher margin requirements than those 25 described above in respect to any binary option position when it deems such higher margin requirements to be advisable. Because binary options must be fully funded pursuant to Rule 10.3(m), Rule 6.22 regarding delivery and payment does not apply to binary options. The Exchange notes Rule 6.5, Interpretation and Policy .04 states that for purposes of the obvious 26 error provisions in Rule 6.5(c), the adjusted price (including any applicable adjustment under subparagraph (c)(4)(A) for non-customer transactions) may not exceed the applicable exercise settlement amount for the binary option. The proposed rule change amends the term "exercise settlement amount" to "exercise settlement value," as that is the appropriate price comparison for the transaction price (which is generally considered prior to application of the contract multiplier).

Page 17 of 78

and clearing, will apply to the listing and trading of binary options. The Exchange has analyzed its capacity and represents that it believes the Exchange has the necessary systems capacity to handle any potential additional message traffic associated with the listing of binary options on indexes (including non-broad-based indexes). The Options Price Reporting Authority ("OPRA") also informed the Exchange it believes it has the necessary systems capacity to handle the additional traffic associated with the listing of new options that would result from this proposed rule change. The Exchange does not believe Trading Permit Holders ("TPHs") will experience any capacity issues as a result of this proposal and represents that it will monitor the trading volume associated with binary options and the effect (if any) of binary options on market fragmentation and the capacity of the Exchange's automated system. Today, the Exchange has an adequate surveillance program in place for options. The Exchange intends to apply the same program procedures to binary options the Exchange applies to its other options products (which overly the same indexes on which the proposed rule change would permit the Exchange to list binary options). Additionally, the Exchange is a member of the Intermarket Surveillance Group ("ISG") under the Intermarket Surveillance Group Agreement. ISG members work together to coordinate surveillance and investigative information sharing in the stock, options, and futures markets. In addition, the Exchange has a Regulatory Services Agreement with the Financial Industry Regulatory Authority ("FINRA") for certain market surveillance, investigation and examinations functions. Pursuant to a multi-party 17d-2 joint plan, all

The exercise settlement value is similar the value of settlement prior to application of the contract multiplier. This is a technical change to reflect the intended purpose of this provision.

Page 18 of 78

options exchanges allocate amongst themselves and FINRA responsibilities to conduct certain options-related market surveillance that are common to rules of all options exchanges. The Exchange believes its existing surveillance procedures are designed to 27 deter and detect possible manipulative behavior which might potentially arise from listing and trading the proposed binary options. Further, the Exchange will implement any new surveillance procedures it deems necessary to effectively monitor the trading of binary options. (b) Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. Specifically, the Exchange believes the proposed 28 rule change is consistent with the Section 6(b)(5) requirements that the rules of an 29 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

Section 19(g)(1) of the Securities Exchange Act of 1934 (the "Act"), among other things, requires 27 every self-regulatory organization ("SRO") registered as a national securities exchange or national securities association to comply with the Act, the rules and regulations thereunder, and the SRO's own rules, and, absent reasonable justification or excuse, enforce compliance by its members and persons associated with its members. See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows the Commission to relieve an SRO of certain responsibilities with respect to members of the SRO who are also members of another SRO ("common members"). Specifically, Section 17(d)(1) allows the Commission to relieve an SRO of its responsibilities to: (i) receive regulatory reports from such members; (ii) examine such members for compliance with the Act and the rules and regulations thereunder, and the rules of the SRO; or (iii) carry out other specified regulatory responsibilities with respect to such members. 15 U.S.C. 78f(b). 28 15 U.S.C. 78f(b)(5). 29

Page 19 of 78

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) requirement that the rules of an exchange not be 30 designed to permit unfair discrimination between customers, issuers, brokers, or dealers. In particular, the Exchange believes the proposed rule change will facilitate transactions in securities, 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, because it will provide investors with a securities exchange-listed investment choice for additional classes, and with additional settlements (A.M.- and P.M.-settlement for all binary index options). The proposed binary options are listed options with a simpler, all-or-none payout structure and limited risk profile compared to traditional listed options. Thus, the Exchange believes the proposed rule change will permit investors to 31 manage their risk exposures and carry out their investment objectives on a securities exchange with more flexibility and broader applicability. The Exchange also believes the proposed rule change will promote competition, as it will meet demands of investors that currently may trade products structured in substantively the same manner as the proposed binary options in other markets (as further discussed below). The Exchange believes expanding the universe of binary options to non-broad- based indexes will benefit investors, particularly retail investors and other investors who

Id. 30 The Commission has previously recognized the benefits of listing and trading binary options on a 31 securities exchange. See Securities Exchange Act Release No. 57850 (May 22, 2008), 73 FR 31169, 31172 (May 30, 2008) (SR-CBOE-2006-105) ("Binary BBI Option Approval") ("The Commission believes that binary options on broad-based indexes will provide investors with a potentially useful investment choice. The proposal will extend to these options the benefits of a listed exchange market, which include a centralized forum for price discovery, pre- and post-trade transparency, standardized contract specifications, and the guarantee of the OCC.").

Page 20 of 78

prefer simplicity, as a complementary offering to current exchange-traded options. Buyers and sellers of traditional, non-binary options listed on the Exchange do not know the return on those options at the time of the transaction, as the return cannot be determined until near the option's expiration given movements in the underlying. For example, suppose an investor buys a traditional index call option with an exercise price of 100. If the index value at expiration is 105, the investor gets a payout of $5 (times the multiplier for that option). If the index value at expiration is 110, the investor gets a payout of $10 (times the multiplier for that option). Therefore, the payout of a traditional index option is dependent on how in-the-money the option is at expiration, which is unknown until the time of

On the contrary, binary options offer a set payout if the underlying closes at, below, or above the exercise price (depending on the type of binary option). Buyers and sellers of binary options know the expected return at the time of purchase if the underlying performs as expected, as the return is a fixed, "all-or-none" amount. Using the example above, suppose an investor buys a binary index call option with an exercise price of 100 and an exercise settlement value) of $10. If the index value at expiration is 105, the investor receives a payout of $10 (times the multiplier for that option). In fact, if the index value at expiration is any value of 100 or greater, the investor receives that same payout. In addition, because the return on the binary option is a set amount, a buyer of a binary option need not determine the absolute magnitude of the underlying's value movement relative to the exercise price, as is the case with traditional, non-binary options. Instead, the buyer of a binary option needs only to determine whether the underlying value is expected to be above, at, or below the exercise price (as applicable).

Page 21 of 78

The Exchange believes expanding the availability of binary options will further protect investors because of the reduced risk of the seller compared to the seller of a traditional option. While sellers of traditional options have unlimited risk (as the payout amount increases the further in-the-money the option is at expiration), the maximum obligation for the seller of a binary option is known when the contract is written, which is the fixed payout amount. The structure of binary options offers investors pre- and post- trade transparency with respect to the risk associated with their binary options trades. Binary options on non-broad-based indexes will ultimately provide the same benefits to investors as binary options on broad-based indexes. The Exchange also believes the proposed rule change to expand available underlying indexes for binary options and permit listing of both A.M.- and P.M.-settled binary options will facilitate transactions in securities, 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 proposed rule change will permit the 32 Exchange to list binary options overlying securities indexes with similar terms on a national securities exchange as alternatives to products that are structured in substantially the same manner as binary options currently available in the OTC market and on other platforms. The Exchange understands investors have traded binary options similar to the proposed binary options in OTC markets for many years but may prefer to trade such options in a listed environment to receive the benefits of trading listing options. These benefits include:

Index options listed pursuant to generic listing criteria in Rule 4.10 are eligible for A.M.-settlement, 32 and thus pursuant to the current Rule, all binary options overlying indexes that satisfy that criteria would be eligible for A.M.-settlement. As noted above, nearly all index options are currently eligible for P.M.-settlement, so the proposed rule change provides for P.M.-settled binary options for only two additional index options that the Exchange currently lists for trading.

Page 22 of 78

(1) enhanced efficiency in initiating and closing out positions; (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 encourage liquidity to shift 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. The proposed rule change is intended to provide a market for binary options as a standardized product without the credit risk of an individual issuer. By providing a listed and standardized market for more classes of binary options, the Exchange seeks to attract investors who desire the simplicity of a binary option with the certainty and safeguards of a regulated and standardized marketplace. Additionally, unlike an OTC binary option, counter-party credit risk for Exchange-listed binary options is significantly reduced through the issuance and guarantee of the contracts by OCC. Further, as an exchange-traded option, binary options will have the advantage of liquidity provided by Market-Makers, which the Exchange believes may lead to tighter spreads than those in the OTC market. The Exchange also believes that standardization will enable more interested parties to become market participants. In addition to the OTC market, various market platforms that are not registered as national securities exchanges currently offer products structured in substantively the same manner as binary options the Exchange may list pursuant to current Rules and as proposed. These platforms offer binary option products overlying securities indexes, which may be settled at varying points of the day (not just at the open and close of the trading day). However, as these venues are not national securities exchanges, they do not offer investors

Page 23 of 78

the benefits of centralized liquidity, market transparency, or securities regulations intended to protect investors. The Exchange believes listing competitive products on a securities exchange may create a centralized and standardized marketplace for these products, which promotes price discovery and transparency, within a regulatory framework designed to protect investors in securities. In other words, the Exchange believes its proposal offers a more transparent platform than the OTC market and other market platforms offer and would contribute to leveling the playing field with these alternative markets. Additionally, the proposed rule change is consistent with the requirements of the Act because binary options on securities indexes are securities under the Act. The Act defines "security" as, among other things, a "put, call, straddle, option, or privilege on any security . . . or group or index of securities (including any interest therein or based on the value thereof)." Binary options on securities indexes, like non-binary options on 33 securities indexes, are puts and calls. The value of a binary option is based on the value of the underlying index. As securities, pursuant to Section 9(b)(1) of the Act, a person may effect any transaction in connection with a binary option only in accordance with Commission rules and regulations. Therefore, the Exchange believes transactions in 34

See 15 U.S.C. 78c(a)(10). The Exchange notes options on securities indexes (and thus binary 33 options on securities indexes) are not swaps. See Statement on Tokenized Securities, Commission Divisions of Corporation Finance, Investment Management, and Trading and Markets (January 28, 2026), available at https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement- tokenized-securities-012826?utmmedium=email&utmsource=govdelivery (". . . any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest therein or based on the value thereof, that is subject to the Securities Act [of 1933] and the Exchange Act, is excluded from the definition of swap. When assessing whether a financial instrument formatted as a crypto asset satisfies one of these exclusions, the economic reality of the instrument rather than the name given to the instrument determines whether it is excluded.") (cites excluded). See 15 U.S.C.78i(b). 34

Page 24 of 78

binary options on and securities indexes must occur on a national securities exchange, subject to Commission jurisdiction and oversight. As discussed above, the Exchange has current Rules that permit the listing of binary options on broad-based index options, which Rules were approved previously by the Commission as being consistent with the Act. This further indicates that binary options are securities under the Act, subject to Commission jurisdiction and oversight. When 35 approving the Exchange's prior proposed rule change regarding the listing and trading of binary options on broad-based security indexes, the Commission described the terms of these options, including listings standards, position limits, and margin, and found them to be consistent with the Act. In connection with the Commission's approval of trading 36 binary options on the Exchange, OCC adopted rules pursuant to which it could clear binary options. When approving OCC's proposed rule change related to the clearing of binary 37 options, the Commission noted it met the requirements of Section 17A(b)(3)(F) of the Act 38 because it would permit OCC to clear and settle binary options that had been approved to be listed and traded on Cboe, which would promote the "prompt and accurate clearance and settlement of such securities transactions." The Commission also approved updates 39 to the Options Disclosure Document ("ODD") in advance of the listing of binary options

See Binary BBI Option Approval. 35 See id. at 31171 - 31172. 36 See Securities Exchange Act Release No. 56875 (November 30, 2007), 72 FR 69274 (December 7, 37

1. (SR-OCC-2007-08) (which OCC rules explicitly related to clearing binary options within the definition of a "security" as determined by the Commission). 15 U.S.C. 78q-1(b)(3)(F). 38 Id. at 69276 (emphasis added). 39

Page 25 of 78

on Cboe, as required by the Act. Rule 9b-1 under the Act requires a broker-dealer to 40 furnish a customer a copy of the ODD prior to accepting an order from that customer for an option that is subject to the ODD. Rule 9b-1 defines standardized options as options 41 contracts traded on national securities exchanges that relate to options classes the terms of which are limited to specific expiration dates and exercise prices, as well as other securities as the Commission may, by order designate. The Commission's order approving the 42 ability of the Exchange to list binary options overlying certain securities signified that binary options are standardized options under the Act. As binary index options, as 43 currently available and as proposed, are standardized options to be traded on a national securities exchange, the Exchange believes the proposed rule change will benefit investors, as broker-dealers must provide the ODD to customers, which describes the characteristics and risks associated with trading binary options. Additionally, the Exchange believes the proposed position limits are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and thus to protect investors. The proposed position limits for binary options on non-broad-based indexes are the same as those for binary options on broad- based indexes under current Rules (subject to the per expiration change described below) for all indexes. As these position limits are already in the Rules (and thus previously approved by the Commission) and applicable to binary index options, the Exchange

See Securities Exchange Act Release No. 58043 (June 26, 2008), 73 FR 38260 (July 3, 2008) (SR-40 ODD-2008-02). See 17 CFR 240.9b-1(b). 41 See 17 CFR 240.9b-1(a)(4). 42 When describing the benefits of binary options, the Commission described them as having 43 "standardized contract specifications." See Binary BBI Option Approval at 31171.

Page 26 of 78

believes the proposed rule change reasonably balances the promotion of a free and open market for these securities with minimization of incentives for market manipulation. The Exchange believes it is appropriate to apply the same position limits currently applicable to binary options on broad-based indexes to binary options on all indexes because the position limits are tied to the market capitalization of the underlying index. Specifically, applying the same position limit to all binary index options for which traditional options on the same index have no position limit is appropriate because, for options on such indexes, the Commission has found that concerns regarding market manipulation or disruption in the underlying market are significantly reduced due to the capitalization and thus liquidity of the markets of the constituents of those indexes. With respect to binary 44 index options for which traditional options do have position limits, applying the same position limit to all binary index options (including non-broad-based index options) is appropriate because the proposed rule applies a position limit based on the market capitalization of the underlying index, with lower position limits corresponding to lower market capitalizations. The susceptibility of an index to manipulation or undue price influence is directly related to the depth and liquidity of the markets for the component securities that comprise it, regardless of the number of component securities. An index 45

See, e.g., See Securities Exchange Act Release No. 40969 (January 22, 1999), 64 FR 4911, 4913 44 (February 1, 1999) (SR-CBOE-98-23) (order approving elimination of position limits for SPX options). At present, no traditional option on a non-broad-based index option has no position limits, so the proposed rule change has no practical effect. Index listing criteria impose various requirements on the component securities related to market 45 capitalization and liquidity, which further reduces the risk that the markets for these index options or the components of the underlying indexes would be impacted by additional derivatives. For example, with respect to narrow-based indexes, pursuant to Rule 4.10(b): (1) the market capitalization for the lowest-weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index must be at least $50 million, and the market capitalization of all other components must be at least $75 million; (2) the trading volume in each component must be at least 1,000,000 shares for each of the last six months (from October 2024 through March 2025, the lowest monthly trading volume for a component was over 1.5 million

Page 27 of 78

representing a larger aggregate market capitalization reflects a deep, liquid pool of underlying securities, the collective pricing of which is substantially more difficult to influence through trading in the options market. By scaling position limits to market capitalization (which directly measures the economic depth of an index), the proposed rule change applies position limits appropriately sized to the actual manipulation risk presented by the specific index. While in general a non-broad-based index may have a lower market capitalization (and thus should have a lower position limit for options on that index) because it has fewer components, it is certainly possible for such an index to have a similar market capitalization to that of a broad-based index and thus have reduced susceptibility to manipulation in the same manner as a broad-based index with similar market capitalization. The proposed rule change would, in such a situation, would apply a position limit to the overlying options appropriate for such an index rather than an unnecessarily lower position limit to the options solely because of the classification of the index. The Exchange also believes the proposed rule change to apply position limits to binary options on a per expiration basis will prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and thus protect investors due to the unique risk profile of binary options that distinguish them from traditional (i.e., non- binary). Unlike traditional index options, for which associated risk is distributed across a range of strikes and expirations because investors may offset or hedge positions across expirations, binary options are fixed-payout, all-or-nothing contracts whose value is

shares), except that for each of the lowest-weighted component securities in the index that in the aggregate account for no more than 10% of the weight the index, the trading volume must be at least 500,000 shares for each of the last six months); and (3) no single component security may represent more than 25% of the weight of the index, and the five highest-weighted component securities in the index may not in the aggregate account for more than 50% (60% for an index consisting of fewer than 25 component securities) of the weight of the index.

Page 28 of 78

entirely dependent on the value of the underlying index at a single point in time. Therefore, risk concentrates at the expiration date itself since each expiration series represents an independent and self-contained risk event. This makes the expiration date the most economically meaningful unit for measuring and constraining accumulated exposure of binary options. Limiting positions in binary options across expirations (as is done for traditional options) would not address the actual risk associated with the settlement event specific to a binary option. As a result, the Exchange believes an individual expiration is the most economically meaningful time to limit positions in binary options, as obtaining positions in binary options for one expiration generally have no impact on the value of binary options for another expiration. 46 Further, the Exchange believes subjecting hedged binary option positions and strategies to higher position limits is consistent with the Act because such positions and strategies create offsetting exposure. As a result, a customer no longer has a directional interest in the underlying, reducing the manipulation risk associated with those positions that position limits are designed to address. Given the investor benefits gained from hedged positions, the Exchange believes applying higher position limits to these positions sufficiently protects against the reduced potential for manipulation while not artificially restricting bona fide activity intended to manage risk exposure. Position limits are designed to limit the number of options contracts overlying a security or index traded on the exchange that an investor, acting alone or in concert with others directly or indirectly, may control. These limits are intended to address potential manipulative schemes and adverse market impacts surrounding the use of options, such as

This is consistent with the lack of exercise limits for binary options. 46

Page 29 of 78

disrupting the market in the security or index underlying the options. Position limits must balance concerns regarding mitigating potential manipulation and the cost of inhibiting potential hedging activity that could be used for legitimate economic purposes. Position limits do not limit the total number of options that may be held, but rather they limit the number of positions a single customer may hold or exercise at one time. "Since the inception of standardized options trading, the options exchanges have had rules imposing limits on the aggregate number of options contracts that a member or customer could hold or exercise." Position limit rules are intended "to prevent the establishment of options 47 positions that can be used or might create incentives to manipulate or disrupt the underlying market so as to benefit the options position." The Exchange believes the proposed 48 position limits applied on a per expiration basis reasonably and appropriately balance the liquidity provisioning in the market against the prevention of manipulation without unnecessarily constraining investment activity. The Exchange believes these proposed 49 limits are effectively designed to prevent an individual customer or entity from establishing options positions that could be used to manipulate the market of the underlying. 50 The Exchange also believes the proposed margin requirements for binary index options (which are the current margin requirements for binary options on broad-based indexes) are reasonable and will protect investors, because they limit investors' risk

See id. 48 The proposed application of higher position limits to hedged positions and strategies contributes to 49 this balanced design

Page 30 of 78

exposure given that the initial and maintenance margin requirements are equal to the maximum risk exposure. As noted above, the Exchange may determine to impose higher 51 margin requirements than those proposed in respect of any binary option position when it deems such higher margin requirements are appropriate. 52 Ultimately, the Exchange believes the proposed rule change will provide investors with greater trading tools and opportunities and flexibility, resulting in investors having additional means to carry out their investment objectives and manage their risk exposures with the benefits of being listed and traded on a national securities exchange. The Exchange believes the proposed rule change will offer market participants a simplified, transparent, and limited risk investment choice overlying securities indexes, which may be more aligned with their specific timing needs and investment and hedging strategies and risk tolerances. The Exchange believes it benefits the investing public to continue to enhance its listed product offerings to respond to continuously changing needs of investors and to a continuously changing competitive environment. A robust and competitive market requires exchanges to respond to investors' evolving needs by regularly 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." 53 Consistent with this purpose, Congress and the Commission have repeatedly stated their

See Rule 10.3(m). 51 See Rule 10.9. 52 See H.R. Rep. No. 94-229, at 92 (1975) (Conf. Rep.). 53

Page 31 of 78

preference for competition, rather than regulatory intervention to determine products and services in the securities markets. This consistent and considered judgment of Congress 54 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 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 the proposed rule change will help further competition by providing market participants with yet another investment option for options listed on a national securities exchange. Item 4. Self-Regulatory Organization's Statement on Burden on Competition

on competition that is not necessary or appropriate in furtherance of the purposes of the

See S. Rep. No. 94-75, 94th Cong., 1st Sess. 8 (1975) ("The objective [in enacting the 1975 54 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").

Page 32 of 78

Act. The Exchange does not believe 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, because binary options will be available to all market participants who wish to trade such options on the same terms and in the same manner (including with respect to the payout terms and amount). All market participants will be subject to the same margin and position limits, as well as other rules applicable to binary options, as described in this proposed rule change. To qualify for listing as a binary option, an underlying index must meet the same initial and maintenance listing criteria it must meet to underlie a traditional, non-binary option. Except as set forth in the proposed rule change, binary options will trade in the same manner as other options on the Exchange.

on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act, because the Rules of at least one other options exchange permit the listing of similar products. Additionally, as noted above, substantively similar products 55 to binary index options, as currently available under the Rules and as proposed, are available in the OTC market and various other markets. Such products are based on the values of securities indexes (as the proposed binary options are), including at the opening and closing of trading (i.e., A.M.- and P.M.-settled) and other times throughout the day. The proposed rule change will permit the Exchange to list binary options on the same underlying indexes as these markets, and do so with certain similar terms (two permissible settlements) as the binary options listed on those markets. Ultimately, the proposal is designed to increase competition for order flow in binary options.

See NYSE American Options Rules, Section 17. 55

Page 33 of 78

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 will provide investors with a comparable alternative to the OTC market and other venues. The Exchange believes it may be a more attractive alternative to the OTC market and these other venues, as market participants will benefit from being able to trade these options in an exchange environment, which provides, among other things: (1) enhanced efficiency in initiating and closing out positions; (2) increased market transparency; and (3) heightened contra-party creditworthiness due to the role of OCC as issuer and guarantor of all listed options. As a result, the Exchange believes that the proposed rule change may relieve any burden on, or otherwise promote, competition, as it will allow the Exchange to offer a securities exchange-listed alternative to the products currently available in these other markets. Item 5. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others The Exchange neither solicited nor received written comments on the proposed rule change. Item 6. Extension of Time Period for Commission Action The Exchange does not consent to an extension of the time period for Commission action on the proposed rule change specified in Section 19(b)(2) of the Act. 56 Item 7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for Accelerated Effectiveness Pursuant to Section 19(b)(2) or Section 19(b)(7)(D) Not applicable.

15 U.S.C. 78s(b)(2). 56

Page 34 of 78

Item 8. Proposed Rule Change Based on Rules of Another Self-Regulatory Organization or of the Commission The proposed rule change is not based on a rule either of another self-regulatory organization or of the Commission. Item 9. Security-Based Swap Submissions Filed Pursuant to Section 3C of the Act Not applicable. Item 10. Advance Notices Filed Pursuant to Section 806(e) of the Payment, Clearing and Settlement Supervision Act Not applicable. Item 11. Exhibits Exhibit 1. Completed Notice of Proposed Rule Change for publication in the Federal Register. Exhibit 5. Proposed rule text.

Page 35 of 78

Page 36 of 78 EXHIBIT 1

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34- ; File No. SR-CBOE-2026-032] [Insert date] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of a Proposed Rule Change to Amend its Rules Related to Binary Options Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the "Act"), 1 and Rule 19b-4 thereunder, notice is hereby given that on [insert date], Cboe Exchange, 2 Inc. (the "Exchange" or "Cboe Options") filed with the Securities and Exchange Commission (the "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.

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

Cboe Exchange, Inc. (the "Exchange" or "Cboe Options") proposes to amend its Rules related to binary options. The text of the proposed rule change is provided in Exhibit

The text of the proposed rule change is also available on the Commission's website (https://www.sec.gov/rules/sro.shtml), the Exchange's website (https://www.cboe.com/us/options/regulation/rule_filings/bzx/), and at the principal office of the Exchange.

15 U.S.C. 78s(b)(1). 1 17 CFR 240.19b-4. 2

Page 37 of 78

1. 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.

1. Self-Regulatory Organization's Statement of the Purpose of, and Statutory

Basis for, the Proposed Rule Change

1. Purpose The Exchange proposes to amend its Rules related to binary options. Binary options are based on the same framework as traditional, standardized options traded on the Exchange, except the payout of a binary option is an amount contingent upon the occurrence of the option being in- or at-the-money rather than the degree to which the option is in-the-money. As a result, payout at expiration of a binary option is an all-or- nothing occurrence. Current Rule 4.16 permits the Exchange to list binary options on broad-based indexes. Current Rule 4.16(b) defines a binary option as a European-style 3 option contract having an exercise settlement amount that is established at the creation of 4

Pursuant to current Rule 4.16(a), Rule 4.16 applies to binary options only, and all Rules apply to the 3 trading of binary options, except as otherwise provided or the context otherwise requires. The exercise settlement amount for a binary option is the amount of cash that a holder will receive 4 upon exercise of the contract. The exercise settlement amount is a set amount equal to the exercise settlement value multiplied by the contract multiplier. The exercise settlement value will be an amount determined by the Exchange on a class-by-class basis and shall be equal to $10 or $1,000 or a value between those values, unless otherwise adjusted per Rule 4.6. See current Rule 4.16(b) (definition of "exercise settlement amount"). Pursuant to current Rule 4.16(f), binary option contracts are subject to adjustment only in accordance with and to the extent specified in the By- Laws and Rules of The Options Clearing Corporation ("OCC"). The contract multiplier is the multiple applied to the exercise settlement value to arrive at the total exercise settlement amount per contract, which is established on a class-by-class basis and shall be at least one. See current Rule 4.16(b) (definition of "contract multiplier"). The Exchange intends to amend the minimum exercise

Page 38 of 78 the option. Under current Rules, binary options are paid out if the settlement value of the 5 underlying broad-based index equals, exceeds, or is less than the exercise price, depending on the type of option (i.e., call or put). A call binary option is an option contract that returns an exercise settlement amount if the settlement value of the underlying broad-based index is at or above the exercise price at expiration (i.e., in- or at-the-money), while a put binary 6 option is an option contract that returns an exercise settlement amount if the settlement value of the underlying broad-based index is below the exercise price at expiration (i.e., in- the-money). The Exchange designates binary options as to expiration date, exercise price, 7 exercise settlement amount, contract multiplier, and underlying broad-based index. 8 Currently, the Exchange may from time to time approve for listing and trading on the Exchange binary option contracts on a broad-based index that has been selected in accordance with Rule 4.10 and the Interpretations and Policies thereunder. The Exchange 9

settlement value to be $1 (rather than $10) in a separate rule filing. The settlement value for a binary option is the value of the underlying broad-based index that is 5 used to determine whether a binary option is in, at, or out of the money. For binary options on a broad-based index on which traditional options on the same broad-based index are A.M.-settled, the "settlement value" is the reported opening level of such index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. For binary options on a broad-based index on which traditional options on the same broad-based index are P.M.-settled, the "settlement value" is the reported closing level of such index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. See current Rule 4.16(b) (definition of "settlement value"). Binary options that are "at- the-money," "in-the-money," or "out-of-the-money" are a function of the settlement value of the underlying broad-based index in relation to the type of binary option (i.e., put or call) and the exercise price. See current Rule 4.16(e). With respect to a binary option, the exercise price is the value to which the settlement value of the 6 underlying broad-based index is compared to determine whether the holder of a binary option is entitled to have the option be paid out. See current Rule 4.16(b) (definition of "exercise price"). See current Rule 4.16(b) (definitions of "call binary option" and "put binary option"). 7 See Rule 4.16(c)(2). 8 See current Rule 4.16(c)(1). Binary options are a separate class from other options overlying the 9 same broad-based index. The maintenance listing standards with respect to options on broad-based indexes set forth in Rule 4.10 and the Interpretations and Policies thereunder apply to binary options on broad-based indexes as well. See Rule 4.16(d).

Page 39 of 78 may add new series of options of the same class as provided for in Rule 4.13 and the Interpretations and Policies thereunder. Additional series of the same binary option class may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market or to meet customer demand (the opening of a new series of

previously opened). After a particular binary option class has been approved for listing 10 and trading on the Exchange, the Exchange from time to time may open for trading series of options on that class. In order to afford investors maximum flexibility, binary option series may expire from one day up to 36 months from the time they are listed. Binary 11 options will be quoted based on the existing strike intervals utilized for traditional, non- binary index options with minimum price variations, established by class, to be no less 12 than $0.01. 13 The proposed rule change moves the Rule provisions regarding binary options from current Rule 4.16 to new Chapter 4, Section H, which section will relate specifically to binary options. Specifically, the proposed rule change : 14

• moves current Rule 4.16(a) to the introductory language for proposed

Section H;

• moves the defined terms in current Rule 4.16(b) to proposed Rule 4.70; See current Rule 4.16(c)(4). 10 See current Rule 4.16(c)(3). 11 See Rule 4.13, including Interpretation and Policy .01. 12 See Rule 5.4(c)(1). 13 In addition to substantive changes to current Rule 4.16 described below, the proposed rule change 14 made nonsubstantive changes to simplify the current provisions (including eliminate redundancies) and make the provisions more plain English.

Page 40 of 78

• moves the provisions from current Rule 4.16(c)(1) and (d) regarding the
  listing and maintenance criteria for binary options to Rule 4.71(a);

• moves the provision regarding binary options being a separate class from
  the traditional options with the same underlying from current Rule 4.16(c)(1) to Rule 4.71(b);

• moves the provision regarding the designated terms of binary options from
  current Rule 4.16(c)(2) to the introductory language of proposed Rule 4.72 ; 15

• moves the provision regarding settlement of binary options from current

Rule 4.16(c)(2) to proposed Rule 4.72(a);

• moves the provision regarding permissible expirations of binary options
  from current Rule 4.16(c)(3) to proposed Rule 4.72(b);

• moves the provision regarding additional series of binary options from
  current Rule 4.16(c)(4) to proposed Rule 4.72(c);

• moves the provision regarding the determination of the settlement value
  from current Rule 4.16(e) to proposed Rule 4.73;

• moves the provision regarding adjustment of binary options from current

Rule 4.16(f) to proposed Rule 4.74; and

The Exchange deleted from current Rule 4.16(c)(2) the provision stating only binary option 15 contracts approved by the Exchange and currently open for trading on the Exchange may be purchased or sold on the Exchange, as that is a general, true of all options approved for listing on the Exchange.

Page 41 of 78

• moves the provision regarding the availability of Flexible Exchange ("FLEX") options for binary options from current Rule 4.16(g) to proposed Rule 4.21(c). While there is no current definition of the term "market capitalization ratio" in the Rules, that term is effectively defined in current Rule 8.36(b) as the ratio of the market capitalization of a broad-based index underlying a binary to the market capitalization of the S&P 500 Index. The proposed rule change creates a defined term of "market capitalization ratio" in proposed Rule 4.70, which means the ratio of the market capitalization of an index to the market capitalization of the S&P 500 Index. This is equivalent to the meaning of that term in the current Rules but expanded to apply to any index rather than just broad-based index, as the proposed Rules regarding all binary options reference that term. In addition to the relocation of and nonsubstantive changes to the provisions of current Rule 4.16 regarding binary options as described above, the proposed rule change amends the current Rules regarding the availability of binary options to (1) expand the scope of binary options to any index (rather than just broad-based indexes); and (2) permit A.M.-settlement and P.M.-settlement for all binary options. First, the proposed rule change would make binary options available on all indexes that are otherwise eligible for traditional, non-binary options trading on the Exchange. Currently, the Exchange may list binary options only on broad-based index options. Proposed Rule 4.71(a) provides that the Exchange may from time to time approve for listing and trading on the Exchange binary option contracts on an index that satisfies the initial listing criteria in Rule 4.10 and the Interpretations and Policies thereunder. The

Page 42 of 78 maintenance listing criteria in Rule 4.10 and the Interpretations and Policies thereunder apply to binary index options. In other words, the Exchange may list binary options on any index on which the Exchange may list traditional (i.e., non-binary) options pursuant to Rule 4.10. Based on available competitive products (as further discussed below) and 16 demand from investors, the Exchange believes the proposed expansion of binary option classes will provide more investors with access to a securities exchange-listed product with the simplified, limited risk structure of binary options. Second, the Exchange proposes to amend the Rules regarding permissible settlements of binary options. Pursuant to proposed Rule 4.72(a), the Exchange may designate binary options as A.M.-settled or P.M.-settled. Current Rule 4.16(c)(2) provides that binary options on broad-based index options for which traditional (i.e., non-binary) options on the same broad-based index are A.M.-settled will be A.M.-settled, and binary options on broad-based indexes for which traditional options on the same broad-based index are P.M.-settled will be P.M.-settled. Currently, nearly all of the traditional index (broad-based and narrow-based) options the Exchange lists for trading can be both A.M.- settled and P.M.-settled. Therefore, current Rule 4.16 would permit the Exchange to list 17

Pursuant to proposed Rule 4.21(c) (as is the case today for binary index options on broad-based 16 indexes pursuant to current Rule 4.16(g)), binary options on indexes that are eligible for trading on the Exchange will be eligible for trading as FLEX options (as provided for in Chapter 4, Section C), even if the Exchange does not list and trade non-FLEX binary options or non-FLEX traditional options on such index. For purposes of Rule 4.21, the applicable exercise settlement value is designed by the parties to the contract, the parties may not designate an exercise style other than European-style, and the term "index multiplier" refers to the contract multiplier. See Rule 4.13(a)(4), (e), and Interpretation and Policy .13. Currently, the Exchange lists the 17 following index options: S&P 500 Index options ("SPX options"), Mini-S&P 500 Index options ("XSP options"), S&P 500 Scored and Screened Index ("SPESG options"), Mini-S&P 500 Equal Weight Index Options ("SPEQX options"), Cboe Volatility Index Options ("VIX options"), Dow Jones Industrial Average options ("DJX options"), S&P 100 Index options ("OEX options"), Russell 2000 Index options ("RUT options"), Mini-Russell 2000 Index options ("MRUT options"), Cboe Bitcoin U.S. ETF Index options ("CBTX options"), Cboe Mini Bitcoin U.S. ETF Index options ("MBTX options"), and the Cboe Magnificent 10 Index options ("MGTN options "). All of these index options may have A.M.-settled series and P.M.-settled series except OEX options (P.M.-

Page 43 of 78 A.M.-settled and P.M.-settled binary options overlying most indexes on which the Exchange lists non-binary options. Permitting both A.M.- and P.M.-settlement for binary index options for all indexes will afford investors further flexibility (coupled with the flexibility of permissible expirations, as noted above) with respect to their investment strategies, regardless of the index option market in which investors participate. Additionally, the Exchange believes it is appropriate to be able to list A.M.- and P.M.- settled binary index to provide investors with the same flexibility currently available for alternative products (as further discussed below). In connection with the proposed rule change described above to permit P.M.- settlement for all binary index options, the Exchange proposes to amend Rule 5.1(b)(2)(C) to provide that on their last trading day, RTH for P.M.-settled binary index options may be effected on the Exchange between 9:30 a.m. and 4:00 p.m. (as opposed to the 9:30 a.m. 18 to 4:15 p.m. RTH for non-expiring binary index options). The primary listing markets for the component securities comprising the indexes underlying options listed on the Exchange close trading in those securities at 4:00 p.m. The primary listing exchanges for the component securities disseminate closing prices for the component securities, which are used to calculate the exercise settlement value of these indexes. The Exchange believes that, under normal trading circumstances, the primary listing markets have sufficient bandwidth to prevent any data queuing that may cause any trades that are executed prior to the closing time from being reported after 4:00 p.m. If trading in expiring P.M.-settled

settled only), VIX options (A.M.-settled only), and DJX options (A.M.-settled only, although the Exchange recently proposed to permit P.M.-settlement for DJX options, see Securities Exchange Act Release No. 104644 (January 21, 2026), 91 FR 3284 (January 26, 2026) (SR-CBOE-2026- 005)). All times set forth in this rule filing are Eastern Time. 18

Page 44 of 78 binary index options continued an additional fifteen minutes until 4:15 p.m. on their last trading day, these expiring options would be trading after the exercise settlement value for those expiring options was calculated. Therefore, in order to mitigate potential investor confusion and the potential for increased costs to investors as a result of potential pricing divergence at the end of the trading day, the Exchange believes it is appropriate to cease trading in the expiring P.M.-settled binary index options at 4:00 p.m., which is currently the case for P.M.-settled non-binary index options. The Exchange does not believe the proposed rule change will impact volatility on the underlying cash market comprising the indexes at the close on expiration days, as it already closes trading on the last trading day for expiring P.M.-settled non-binary index options overlying the same indexes at 4:00 p.m. The Exchange does not believe this has had an adverse impact on fair and orderly markets on expiration days for the underlying securities comprising the corresponding indexes. The Exchange also proposes to amend the position limits for binary options in Rule 8.36. Current Rule 8.36 provides that the position limit for binary options on a broad- based index will be 15,000 contracts (or 15,000 times the ratio of 10,000 to the exercise settlement amount) if traditional (i.e., non-binary) options on the same broad-based index have no position limit pursuant to Rule 8.31. For binary options on a broad-based index for which traditional options on the same broad-based index do have a position limit pursuant to Rule 8.31, the position limit for the binary option is:

• 10,000 contracts if the market capitalization ratio for the index is greater
  than or equal to 0.50;

• 5,000 contracts if the market capitalization ratio is less than 0.50 but greater
  than or equal to 0.25; or

Page 45 of 78

• 2,500 contracts if the market capitalization ratio is less than 0.25 but greater 19 For binary options that have an exercise settlement amount that is not equal to $10,000, the position limit is the ratio of 10,000 to the exercise settlement amount multiplied by the applicable amount set forth above. The proposed rule change expands the fixed and formulaic limits to all indexes that may underlie binary options as proposed and applies the proposed position limits on an expiration basis. Specifically, the proposed rule change amends Rule 8.36(a) to provide 20 that the position limit for binary options for which the traditional options on the same index have no position limit pursuant to Rules 8.30 through 8.33, as applicable, is the number 21 of contracts equal to 15,000 times the ratio of 10,000 to the exercise settlement amount per The proposed rule change amends Rule 8.36(b) to provide that for binary 22 options for which traditional options on the same index have a position limit pursuant to Rules 8.30 through 8.33, as applicable, the position limit is the number of contracts equal to the ratio of 10,000 to the exercise settlement amount multiplied by the number of contracts set forth in the table below (based on the market capitalization ratio of the underlying index) per expiration: 23

The rule provides that the Exchange would need to seek approval from the Securities and Exchange 19 Commission (the "Commission") prior to establishing position limits for binary options on broad- based indexes that have a market capitalization ratio that is less than 0.10. The proposed rule change also makes nonsubstantive changes to simplify the rule language. 20 Rules 8.31 through 8.33 provide position limits for the various categories of indexes options the 21 Exchange may list for trading. For example, if the binary option exercise settlement amount is $10,000, then the position limit is 22 15,000 contracts per expiration; if the binary option exercise settlement amount is $1,000, then the position limit is 150,000 contracts per expiration; and if the binary option exercise settlement amount is $12,000, then the position limit is 12,500 contracts per expiration. The proposed rule change does not include a provision regarding the need to seek Commission 23 approval prior to establishing position limits for binary options on broad-based indexes that have a

Page 46 of 78 For reference, the table below sets forth the approximate market capitalizations that would equate to the above ratios based on a market capitalization of the S&P 500 Index of $62.5 trillion as of February 20, 2026:

Market Capitalization Ratio less than 0.10, as the proposed rule change seeks to establish position limits for all such indexes, rendering such a provision moot.

Less than 0.50 but greater than or Less than $31.3 trillion but greater 5,000Less than 0.25 but greater than or Less than $15.6 trillion but greater 2,500Less than 0.10 but greater than or Less than $6.3 trillion but greater than 1,500Less than 0.005 but greater than or Less than $312.5 billion but greater 1,000Market Capitalization Ratio of Range of Underlying Market Number of

10,000Less than 0.50 but greater than or equal to 0.255,000Less than 0.25 but greater than or equal to 0.102,500Less than 0.10 but greater than or equal to 0.0051,500Less than 0.005 but greater than or equal to 0.00251,000Greater than or equal to $31.3 trillion 10,000equal to 0.25than or equal to $15.6 trillionequal to 0.10than or equal to $6.3 trillionequal to 0.005or equal to $312.5 billionequal to 0.0025than or equal to $156.3 billionLess than $156.3 billion Market Capitalization Ratio of UnderlyingNumber of ContractsUnderlyingCapitalizations Contracts

Page 47 of 78 Pursuant to current Rule 8.36(c), positions in binary options on the same broad- based index with different exercise settlement amounts will be aggregated with each other but, pursuant to current Rule 8.36(d), will not be aggregated with non-binary option contracts on the same broad-based index. The proposed rule change amends these 24 provisions to apply to all binary options on all indexes. Current Rule 8.36(f) provides that binary options are not subject to the hedge exemption to the standard position limits in Rule 8.30 and instead exempt certain qualified hedge exemption strategies and positions from the position limits established in Rule 8.36(a) and (b). The proposed rule change amends Rule 8.36(f) to provide that notwithstanding Rules 8.36(a) and (b), position limits for the hedged positions and strategies defined below are equal to five times the position limit established under proposed Rule 8.36(a) and (b)(5) (if the market capitalization ratio of the underlying index is greater than or equal to 0.005) or three times the position limit established under proposed Rule 8.36(b)(5) (if the market capitalization ratio of the underlying index is less than 0.005). The following strategies and positions would qualify for these increased position limits (which are the strategies and positions exempt from position limits for binary options established in current Rule 8.36):

• a binary option position "hedged" or "covered" by an appropriate amount of cash to meet the settlement obligation (e.g., $1,000 for a binary option with an exercise settlement amount of $1,000);

Additionally, binary options on broad-based indexes will not be aggregated with non-binary option 24 contracts on an underlying stock or stocks (the Exchanges makes a nonsubstantive change to make this security or securities to be consistent with the first sentence of the subparagraph) included within such broad-based index or with binary index options on any other broad-based index. See current Rule 8.36(d) (proposed Rule 8.36(c)).

Page 48 of 78

• a binary option position "hedged" or "covered" by a sufficient amount of a
  related or similar security to meet the settlement obligation; and

• a binary option position "hedged" or "covered" by a traditional option
  covering the same underlying index (which includes, among other strategies, a vertical spread with strikes reasonably close to the binary 25 option strike) sufficient to meet the settlement obligation. Pursuant to Rule 8.42(h), binary options are not subject to exercise limits. This is currently the case for binary index options on broad-based indexes and will be the case for binary index options on non-broad-based indexes. Binary options, as discussed above, are European-style and are automatically exercised at expiration if the settlement value of the underlying index is equal to or greater than the exercise price of a call binary option or less than the exercise price in the case of a put binary option. 26 With respect to reports related to position limits, proposed Rule 8.43(f) provides that in computing reportable binary options under Rule 8.43, as is the case today for binary index options on broad-based indexes: (1) positions in binary options on the same index that have different exercise settlement amounts are aggregated; (2) positions in binary options are not aggregated with non-binary option contracts on the same or similar underlying security or index;

The Exchange will determine strikes that are "reasonably close" in the same manner it currently 25 does pursuant to Rule 4.13. See Rule 6.20(g). Because binary options are automatically exercised, Rule 6.21 regarding exercise 26 notices does not apply to binary options.

Page 49 of 78 (3) positions in binary index options are not aggregated with non-binary option contracts on an underlying security or securities included within the underlying index; and (4) positions in binary options on one index are not aggregated with binary options on any other index. All binary options as proposed will not be subject to Rule 8.46(b) and Interpretation and Policy .01 regarding certain restrictions on options transactions and exercises. Rule 8.46(b) applies only to American-style options (as noted above, binary options are European-style), and Rule 8.46, Interpretation and Policy .01 applies only to options that are settled by delivery of an underlying security (as noted above, binary options are settled by delivery of a settlement value in cash). The margin requirements in Rule 10.3(m) (currently applicable to binary index options on broad-based indexes) will apply to all binary options. Specifically, for a margin account, except as provided below, no binary option carried for a customer may be considered of any value for purposes of computing the margin required in the account of such customer. The initial and maintenance margin required on any binary option carried long in a customer's account is 100% of the purchase price of such binary option (i.e., the premium). The initial and maintenance margin required on any binary option carried short in a customer's account is the exercise settlement amount. With respect to spreads, no margin is required on a binary call option (put option) carried short in a customer's account that is offset by a long binary call option (put option) for the same underlying security or instrument that expires at the same time and has an exercise price that is less than (greater than) the exercise price of the short call (put). The long call (put) must be paid for in full.

Page 50 of 78 With respect to straddles and combinations, when a binary call option is carried short in a customer's account and there is also carried a short binary put option for the same underlying security or instrument that expires at the same time and has an exercise price that is less than or equal to the exercise price of the short call, the initial and maintenance margin required is the exercise settlement amount applicable to one contract. For a cash account, a binary option carried short in a customer's account is deemed a covered position, and eligible for the cash account, provided any one of the following either is held in the account at the time the option is written or is received into the account promptly thereafter: (1) cash or cash equivalents equal to 100% of the exercise settlement amount; or (2) a long binary option of the same type (put or call) for the same underlying security or instrument that is paid for in full and expires at the same time, and has an exercise price that is less than the exercise price of the short in the case of a call or greater than the exercise price of the short in the case of a put; or (3) an escrow agreement. The escrow agreement must certify that the bank holds for the account of the customer as security for the agreement (i) cash, (ii) cash equivalents, (iii) one or more qualified equity securities, or (iv) a combination thereof having an aggregate market value of not less than 100% of the exercise settlement amount and that the bank will promptly pay the TPH organization the exercise settlement amount in the event the account is assigned an exercise notice.

Page 51 of 78 The Exchange believes these proposed levels are appropriate because risk exposure is limited with binary options and the proposed customer initial and maintenance margin is equal to the maximum risk exposure. 27 Except as otherwise described above, all binary options will be listed and traded on the Exchange in a substantially similar manner as binary options are permitted to be listed and traded under current Rules. The Rules that apply to the listing and trading of non- binary options on the Exchange, including those related to priority and execution, Market- Makers (including Market-Maker obligations), obvious error, trading halt procedures, 28 and clearing, will apply to the listing and trading of binary options. The Exchange has analyzed its capacity and represents that it believes the Exchange has the necessary systems capacity to handle any potential additional message traffic associated with the listing of binary options on indexes (including non-broad-based indexes). The Options Price Reporting Authority ("OPRA") also informed the Exchange it believes it has the necessary systems capacity to handle the additional traffic associated with the listing of new options that would result from this proposed rule change. The Exchange does not believe Trading Permit Holders ("TPHs") will experience any capacity issues as a result of this proposal and represents that it will monitor the trading volume associated with binary options and

Pursuant to Rule 10.9, the Exchange has the ability to impose higher margin requirements than those 27 described above in respect to any binary option position when it deems such higher margin requirements to be advisable. Because binary options must be fully funded pursuant to Rule 10.3(m), Rule 6.22 regarding delivery and payment does not apply to binary options. The Exchange notes Rule 6.5, Interpretation and Policy .04 states that for purposes of the obvious 28 error provisions in Rule 6.5(c), the adjusted price (including any applicable adjustment under subparagraph (c)(4)(A) for non-customer transactions) may not exceed the applicable exercise settlement amount for the binary option. The proposed rule change amends the term "exercise settlement amount" to "exercise settlement value," as that is the appropriate price comparison for the transaction price (which is generally considered prior to application of the contract multiplier). The exercise settlement value is similar the value of settlement prior to application of the contract multiplier. This is a technical change to reflect the intended purpose of this provision.

Page 52 of 78 the effect (if any) of binary options on market fragmentation and the capacity of the Exchange's automated system. Today, the Exchange has an adequate surveillance program in place for options. The Exchange intends to apply the same program procedures to binary options the Exchange applies to its other options products (which overly the same indexes on which the proposed rule change would permit the Exchange to list binary options). Additionally, the Exchange is a member of the Intermarket Surveillance Group ("ISG") under the Intermarket Surveillance Group Agreement. ISG members work together to coordinate surveillance and investigative information sharing in the stock, options, and futures markets. In addition, the Exchange has a Regulatory Services Agreement with the Financial Industry Regulatory Authority ("FINRA") for certain market surveillance, investigation and examinations functions. Pursuant to a multi-party 17d-2 joint plan, all options exchanges allocate amongst themselves and FINRA responsibilities to conduct certain options-related market surveillance that are common to rules of all options exchanges. The Exchange believes its existing surveillance procedures are designed to 29 deter and detect possible manipulative behavior which might potentially arise from listing and trading the proposed binary options. Further, the Exchange will implement any new

Section 19(g)(1) of the Securities Exchange Act of 1934 (the "Act"), among other things, requires 29 every self-regulatory organization ("SRO") registered as a national securities exchange or national securities association to comply with the Act, the rules and regulations thereunder, and the SRO's own rules, and, absent reasonable justification or excuse, enforce compliance by its members and persons associated with its members. See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows the Commission to relieve an SRO of certain responsibilities with respect to members of the SRO who are also members of another SRO ("common members"). Specifically, Section 17(d)(1) allows the Commission to relieve an SRO of its responsibilities to: (i) receive regulatory reports from such members; (ii) examine such members for compliance with the Act and the rules and regulations thereunder, and the rules of the SRO; or (iii) carry out other specified regulatory responsibilities with respect to such members.

Page 53 of 78 surveillance procedures it deems necessary to effectively monitor the trading of binary options.

1. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. Specifically, the Exchange believes the proposed 30 rule change is consistent with the Section 6(b)(5) requirements that the rules of an 31 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) requirement that the rules of an exchange not be 32 designed to permit unfair discrimination between customers, issuers, brokers, or dealers. In particular, the Exchange believes the proposed rule change will facilitate transactions in securities, 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, because it will provide investors with a securities exchange-listed investment choice for additional classes, and with additional settlements (A.M.- and P.M.-settlement for all binary index options). The proposed binary options are listed options with a simpler,

15 U.S.C. 78f(b). 30 15 U.S.C. 78f(b)(5). 31 Id. 32

Page 54 of 78 all-or-none payout structure and limited risk profile compared to traditional listed options. Thus, the Exchange believes the proposed rule change will permit investors to 33 manage their risk exposures and carry out their investment objectives on a securities exchange with more flexibility and broader applicability. The Exchange also believes the proposed rule change will promote competition, as it will meet demands of investors that currently may trade products structured in substantively the same manner as the proposed binary options in other markets (as further discussed below). The Exchange believes expanding the universe of binary options to non-broad- based indexes will benefit investors, particularly retail investors and other investors who prefer simplicity, as a complementary offering to current exchange-traded options. Buyers and sellers of traditional, non-binary options listed on the Exchange do not know the return on those options at the time of the transaction, as the return cannot be determined until near the option's expiration given movements in the underlying. For example, suppose an investor buys a traditional index call option with an exercise price of 100. If the index value at expiration is 105, the investor gets a payout of $5 (times the multiplier for that option). If the index value at expiration is 110, the investor gets a payout of $10 (times the multiplier for that option). Therefore, the payout of a traditional index option is dependent on how in-the-money the option is at expiration, which is unknown until the time of

The Commission has previously recognized the benefits of listing and trading binary options on a 33 securities exchange. See Securities Exchange Act Release No. 57850 (May 22, 2008), 73 FR 31169, 31172 (May 30, 2008) (SR-CBOE-2006-105) ("Binary BBI Option Approval") ("The Commission believes that binary options on broad-based indexes will provide investors with a potentially useful investment choice. The proposal will extend to these options the benefits of a listed exchange market, which include a centralized forum for price discovery, pre- and post-trade transparency, standardized contract specifications, and the guarantee of the OCC.").

Page 55 of 78 On the contrary, binary options offer a set payout if the underlying closes at, below, or above the exercise price (depending on the type of binary option). Buyers and sellers of binary options know the expected return at the time of purchase if the underlying performs as expected, as the return is a fixed, "all-or-none" amount. Using the example above, suppose an investor buys a binary index call option with an exercise price of 100 and an exercise settlement value) of $10. If the index value at expiration is 105, the investor receives a payout of $10 (times the multiplier for that option). In fact, if the index value at expiration is any value of 100 or greater, the investor receives that same payout. In addition, because the return on the binary option is a set amount, a buyer of a binary option need not determine the absolute magnitude of the underlying's value movement relative to the exercise price, as is the case with traditional, non-binary options. Instead, the buyer of a binary option needs only to determine whether the underlying value is expected to be above, at, or below the exercise price (as applicable). The Exchange believes expanding the availability of binary options will further protect investors because of the reduced risk of the seller compared to the seller of a traditional option. While sellers of traditional options have unlimited risk (as the payout amount increases the further in-the-money the option is at expiration), the maximum obligation for the seller of a binary option is known when the contract is written, which is the fixed payout amount. The structure of binary options offers investors pre- and post- trade transparency with respect to the risk associated with their binary options trades. Binary options on non-broad-based indexes will ultimately provide the same benefits to investors as binary options on broad-based indexes.

Page 56 of 78 The Exchange also believes the proposed rule change to expand available underlying indexes for binary options and permit listing of both A.M.- and P.M.-settled binary options will facilitate transactions in securities, 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 proposed rule change will permit the 34 Exchange to list binary options overlying securities indexes with similar terms on a national securities exchange as alternatives to products that are structured in substantially the same manner as binary options currently available in the OTC market and on other platforms. The Exchange understands investors have traded binary options similar to the proposed binary options in OTC markets for many years but may prefer to trade such options in a listed environment to receive the benefits of trading listing options. These benefits include: (1) enhanced efficiency in initiating and closing out positions; (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 encourage liquidity to shift 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. The proposed rule change is intended to provide a market for binary options as a standardized product without the credit risk of an individual issuer. By providing a listed and standardized market for more classes of binary options, the Exchange seeks to attract investors who

Index options listed pursuant to generic listing criteria in Rule 4.10 are eligible for A.M.-settlement, 34 and thus pursuant to the current Rule, all binary options overlying indexes that satisfy that criteria would be eligible for A.M.-settlement. As noted above, nearly all index options are currently eligible for P.M.-settlement, so the proposed rule change provides for P.M.-settled binary options for only two additional index options that the Exchange currently lists for trading.

Page 57 of 78 desire the simplicity of a binary option with the certainty and safeguards of a regulated and standardized marketplace. Additionally, unlike an OTC binary option, counter-party credit risk for Exchange-listed binary options is significantly reduced through the issuance and guarantee of the contracts by OCC. Further, as an exchange-traded option, binary options will have the advantage of liquidity provided by Market-Makers, which the Exchange believes may lead to tighter spreads than those in the OTC market. The Exchange also believes that standardization will enable more interested parties to become market participants. In addition to the OTC market, various market platforms that are not registered as national securities exchanges currently offer products structured in substantively the same manner as binary options the Exchange may list pursuant to current Rules and as proposed. These platforms offer binary option products overlying securities indexes, which may be settled at varying points of the day (not just at the open and close of the trading day). However, as these venues are not national securities exchanges, they do not offer investors the benefits of centralized liquidity, market transparency, or securities regulations intended to protect investors. The Exchange believes listing competitive products on a securities exchange may create a centralized and standardized marketplace for these products, which promotes price discovery and transparency, within a regulatory framework designed to protect investors in securities. In other words, the Exchange believes its proposal offers a more transparent platform than the OTC market and other market platforms offer and would contribute to leveling the playing field with these alternative markets. Additionally, the proposed rule change is consistent with the requirements of the Act because binary options on securities indexes are securities under the Act. The Act

Page 58 of 78 defines "security" as, among other things, a "put, call, straddle, option, or privilege on any security . . . or group or index of securities (including any interest therein or based on the value thereof)." Binary options on securities indexes, like non-binary options on 35 securities indexes, are puts and calls. The value of a binary option is based on the value of the underlying index. As securities, pursuant to Section 9(b)(1) of the Act, a person may effect any transaction in connection with a binary option only in accordance with Commission rules and regulations. Therefore, the Exchange believes transactions in 36 binary options on and securities indexes must occur on a national securities exchange, subject to Commission jurisdiction and oversight. As discussed above, the Exchange has current Rules that permit the listing of binary options on broad-based index options, which Rules were approved previously by the Commission as being consistent with the Act. This further indicates that binary options are securities under the Act, subject to Commission jurisdiction and oversight. When 37 approving the Exchange's prior proposed rule change regarding the listing and trading of binary options on broad-based security indexes, the Commission described the terms of these options, including listings standards, position limits, and margin, and found them to

See 15 U.S.C. 78c(a)(10). The Exchange notes options on securities indexes (and thus binary 35 options on securities indexes) are not swaps. See Statement on Tokenized Securities, Commission Divisions of Corporation Finance, Investment Management, and Trading and Markets (January 28, 2026), available at https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement- tokenized-securities-012826?utmmedium=email&utmsource=govdelivery (". . . any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest therein or based on the value thereof, that is subject to the Securities Act [of 1933] and the Exchange Act, is excluded from the definition of swap. When assessing whether a financial instrument formatted as a crypto asset satisfies one of these exclusions, the economic reality of the instrument rather than the name given to the instrument determines whether it is excluded.") (cites excluded). See 15 U.S.C.78i(b). 36 See Binary BBI Option Approval. 37

Page 59 of 78 be consistent with the Act. In connection with the Commission's approval of trading 38 binary options on the Exchange, OCC adopted rules pursuant to which it could clear binary options. When approving OCC's proposed rule change related to the clearing of binary 39 options, the Commission noted it met the requirements of Section 17A(b)(3)(F) of the Act 40 because it would permit OCC to clear and settle binary options that had been approved to be listed and traded on Cboe, which would promote the "prompt and accurate clearance and settlement of such securities transactions." The Commission also approved updates 41 to the Options Disclosure Document ("ODD") in advance of the listing of binary options on Cboe, as required by the Act. Rule 9b-1 under the Act requires a broker-dealer to 42 furnish a customer a copy of the ODD prior to accepting an order from that customer for an option that is subject to the ODD. Rule 9b-1 defines standardized options as options 43 contracts traded on national securities exchanges that relate to options classes the terms of which are limited to specific expiration dates and exercise prices, as well as other securities as the Commission may, by order designate. The Commission's order approving the 44 ability of the Exchange to list binary options overlying certain securities signified that binary options are standardized options under the Act. As binary index options, as 45

See id. at 31171 - 31172. 38 See Securities Exchange Act Release No. 56875 (November 30, 2007), 72 FR 69274 (December 7, 39

1. (SR-OCC-2007-08) (which OCC rules explicitly related to clearing binary options within the definition of a "security" as determined by the Commission). 15 U.S.C. 78q-1(b)(3)(F). 40 Id. at 69276 (emphasis added). 41 See Securities Exchange Act Release No. 58043 (June 26, 2008), 73 FR 38260 (July 3, 2008) (SR-42 ODD-2008-02). See 17 CFR 240.9b-1(b). 43 See 17 CFR 240.9b-1(a)(4). 44 When describing the benefits of binary options, the Commission described them as having 45 "standardized contract specifications." See Binary BBI Option Approval at 31171.

Page 60 of 78 currently available and as proposed, are standardized options to be traded on a national securities exchange, the Exchange believes the proposed rule change will benefit investors, as broker-dealers must provide the ODD to customers, which describes the characteristics and risks associated with trading binary options. Additionally, the Exchange believes the proposed position limits are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and thus to protect investors. The proposed position limits for binary options on non-broad-based indexes are the same as those for binary options on broad- based indexes under current Rules (subject to the per expiration change described below) for all indexes. As these position limits are already in the Rules (and thus previously approved by the Commission) and applicable to binary index options, the Exchange believes the proposed rule change reasonably balances the promotion of a free and open market for these securities with minimization of incentives for market manipulation. The Exchange believes it is appropriate to apply the same position limits currently applicable to binary options on broad-based indexes to binary options on all indexes because the position limits are tied to the market capitalization of the underlying index. Specifically, applying the same position limit to all binary index options for which traditional options on the same index have no position limit is appropriate because, for options on such indexes, the Commission has found that concerns regarding market manipulation or disruption in the underlying market are significantly reduced due to the capitalization and thus liquidity of the markets of the constituents of those indexes. With respect to binary 46

See, e.g., See Securities Exchange Act Release No. 40969 (January 22, 1999), 64 FR 4911, 4913 46 (February 1, 1999) (SR-CBOE-98-23) (order approving elimination of position limits for SPX options). At present, no traditional option on a non-broad-based index option has no position limits, so the proposed rule change has no practical effect.

Page 61 of 78 index options for which traditional options do have position limits, applying the same position limit to all binary index options (including non-broad-based index options) is appropriate because the proposed rule applies a position limit based on the market capitalization of the underlying index, with lower position limits corresponding to lower market capitalizations. The susceptibility of an index to manipulation or undue price influence is directly related to the depth and liquidity of the markets for the component securities that comprise it, regardless of the number of component securities. An index 47 representing a larger aggregate market capitalization reflects a deep, liquid pool of underlying securities, the collective pricing of which is substantially more difficult to influence through trading in the options market. By scaling position limits to market capitalization (which directly measures the economic depth of an index), the proposed rule change applies position limits appropriately sized to the actual manipulation risk presented by the specific index. While in general a non-broad-based index may have a lower market capitalization (and thus should have a lower position limit for options on that index) because it has fewer components, it is certainly possible for such an index to have a similar market capitalization to that of a broad-based index and thus have reduced susceptibility to

Index listing criteria impose various requirements on the component securities related to market 47 capitalization and liquidity, which further reduces the risk that the markets for these index options or the components of the underlying indexes would be impacted by additional derivatives. For example, with respect to narrow-based indexes, pursuant to Rule 4.10(b): (1) the market capitalization for the lowest-weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index must be at least $50 million, and the market capitalization of all other components must be at least $75 million; (2) the trading volume in each component must be at least 1,000,000 shares for each of the last six months (from October 2024 through March 2025, the lowest monthly trading volume for a component was over 1.5 million shares), except that for each of the lowest-weighted component securities in the index that in the aggregate account for no more than 10% of the weight the index, the trading volume must be at least 500,000 shares for each of the last six months); and (3) no single component security may represent more than 25% of the weight of the index, and the five highest-weighted component securities in the index may not in the aggregate account for more than 50% (60% for an index consisting of fewer than 25 component securities) of the weight of the index.

Page 62 of 78 manipulation in the same manner as a broad-based index with similar market capitalization. The proposed rule change would, in such a situation, would apply a position limit to the overlying options appropriate for such an index rather than an unnecessarily lower position limit to the options solely because of the classification of the index. The Exchange also believes the proposed rule change to apply position limits to binary options on a per expiration basis will prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and thus protect investors due to the unique risk profile of binary options that distinguish them from traditional (i.e., non- binary). Unlike traditional index options, for which associated risk is distributed across a range of strikes and expirations because investors may offset or hedge positions across expirations, binary options are fixed-payout, all-or-nothing contracts whose value is entirely dependent on the value of the underlying index at a single point in time. Therefore, risk concentrates at the expiration date itself since each expiration series represents an independent and self-contained risk event. This makes the expiration date the most economically meaningful unit for measuring and constraining accumulated exposure of binary options. Limiting positions in binary options across expirations (as is done for traditional options) would not address the actual risk associated with the settlement event specific to a binary option. As a result, the Exchange believes an individual expiration is the most economically meaningful time to limit positions in binary options, as obtaining positions in binary options for one expiration generally have no impact on the value of binary options for another expiration. 48

This is consistent with the lack of exercise limits for binary options. 48

Page 63 of 78 Further, the Exchange believes subjecting hedged binary option positions and strategies to higher position limits is consistent with the Act because such positions and strategies create offsetting exposure. As a result, a customer no longer has a directional interest in the underlying, reducing the manipulation risk associated with those positions that position limits are designed to address. Given the investor benefits gained from hedged positions, the Exchange believes applying higher position limits to these positions sufficiently protects against the reduced potential for manipulation while not artificially restricting bona fide activity intended to manage risk exposure. Position limits are designed to limit the number of options contracts overlying a security or index traded on the exchange that an investor, acting alone or in concert with others directly or indirectly, may control. These limits are intended to address potential manipulative schemes and adverse market impacts surrounding the use of options, such as disrupting the market in the security or index underlying the options. Position limits must balance concerns regarding mitigating potential manipulation and the cost of inhibiting potential hedging activity that could be used for legitimate economic purposes. Position limits do not limit the total number of options that may be held, but rather they limit the number of positions a single customer may hold or exercise at one time. "Since the inception of standardized options trading, the options exchanges have had rules imposing limits on the aggregate number of options contracts that a member or customer could hold or exercise." Position limit rules are intended "to prevent the establishment of options 49 positions that can be used or might create incentives to manipulate or disrupt the underlying

Page 64 of 78 market so as to benefit the options position." The Exchange believes the proposed 50 position limits applied on a per expiration basis reasonably and appropriately balance the liquidity provisioning in the market against the prevention of manipulation without unnecessarily constraining investment activity. The Exchange believes these proposed 51 limits are effectively designed to prevent an individual customer or entity from establishing options positions that could be used to manipulate the market of the underlying. 52 The Exchange also believes the proposed margin requirements for binary index options (which are the current margin requirements for binary options on broad-based indexes) are reasonable and will protect investors, because they limit investors' risk exposure given that the initial and maintenance margin requirements are equal to the maximum risk exposure. As noted above, the Exchange may determine to impose higher 53 margin requirements than those proposed in respect of any binary option position when it deems such higher margin requirements are appropriate. 54 Ultimately, the Exchange believes the proposed rule change will provide investors with greater trading tools and opportunities and flexibility, resulting in investors having additional means to carry out their investment objectives and manage their risk exposures with the benefits of being listed and traded on a national securities exchange. The Exchange believes the proposed rule change will offer market participants a simplified,

See id. 50 The proposed application of higher position limits to hedged positions and strategies contributes to 51 this balanced design

See Rule 10.3(m). 53 See Rule 10.9. 54

Page 65 of 78 transparent, and limited risk investment choice overlying securities indexes, which may be more aligned with their specific timing needs and investment and hedging strategies and risk tolerances. The Exchange believes it benefits the investing public to continue to enhance its listed product offerings to respond to continuously changing needs of investors and to a continuously changing competitive environment. A robust and competitive market requires exchanges to respond to investors' evolving needs by regularly 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." 55 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. This consistent and considered judgment of Congress 56 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,

See H.R. Rep. No. 94-229, at 92 (1975) (Conf. Rep.). 55 See S. Rep. No. 94-75, 94th Cong., 1st Sess. 8 (1975) ("The objective [in enacting the 1975 56 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").

Page 66 of 78 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 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 the proposed rule change will help further competition by providing market participants with yet another investment option for options listed on a national securities exchange.

1. Self-Regulatory Organization's Statement on Burden on Competition on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe 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, because binary options will be available to all market participants who wish to trade such options on the same terms and in the same manner (including with respect to the payout terms and amount). All market participants will be subject to the same margin and position limits, as well as other rules applicable to binary options, as described in this proposed rule change. To qualify for listing as a binary option, an underlying index must meet the same initial and maintenance listing criteria it must meet to underlie a traditional, non-binary option. Except as set forth in the proposed rule change, binary options will trade in the same manner as other options on the Exchange.

on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act, because the Rules of at least one other options exchange permit the

Page 67 of 78 listing of similar products. Additionally, as noted above, substantively similar products 57 to binary index options, as currently available under the Rules and as proposed, are available in the OTC market and various other markets. Such products are based on the values of securities indexes (as the proposed binary options are), including at the opening and closing of trading (i.e., A.M.- and P.M.-settled) and other times throughout the day. The proposed rule change will permit the Exchange to list binary options on the same underlying indexes as these markets, and do so with certain similar terms (two permissible settlements) as the binary options listed on those markets. Ultimately, the proposal is designed to increase competition for order flow in binary options. 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 will provide investors with a comparable alternative to the OTC market and other venues. The Exchange believes it may be a more attractive alternative to the OTC market and these other venues, as market participants will benefit from being able to trade these options in an exchange environment, which provides, among other things: (1) enhanced efficiency in initiating and closing out positions; (2) increased market transparency; and (3) heightened contra-party creditworthiness due to the role of OCC as issuer and guarantor of all listed options. As a result, the Exchange believes that the proposed rule change may relieve any burden on, or otherwise promote, competition, as it will allow the Exchange to offer a securities exchange-listed alternative to the products currently available in these other markets.

See NYSE American Options Rules, Section 17. 57

Page 68 of 78

1. Self-Regulatory Organization's Statement on Comments on the Proposed
   Rule Change Received from Members, Participants, or Others The Exchange neither solicited nor received written comments on the proposed rule change.

2. 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:

1. by order approve or disapprove such proposed rule change, or

2. institute proceedings to determine whether the proposed rule change should
   be disapproved.

3. 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
  (https://www.sec.gov/rules/sro.shtml); or

• Send an email to rule-comments@sec.gov. Please include file number

SR-CBOE-2026-032 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.

Page 69 of 78 All submissions should refer to file number SR-CBOE-2026-032. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the filing will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR-CBOE-2026-032 and should be submitted on or before [INSERT DATE 21 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 58

Sherry R. Haywood, Assistant Secretary.

17 CFR 200.30-3(a)(12). 58

Page 70 of 78 EXHIBIT 5 (additions are underlined; deletions are [bracketed])

• ---

  Rules of Cboe Exchange, Inc.

• ---

  Rule 4.16. [Binary Options] Reserved [(a) General. This Rule 4.16 applies only to Binary Options. All Rules apply to the trading of Binary Options, except as otherwise provided or the context otherwise requires. (b) Definitions. Binary Option The term "binary option" means a European-style option contract having an exercise settlement amount that is established at the creation of the option. Binary options are paid out if settlement value of the underlying broad-based index equals, exceeds or is less than the exercise price, depending on the type of option (i.e., call or put). Call Binary Option The term "call binary option" means an option contract which returns an exercise settlement amount if the settlement value of the underlying broad-based index is at or above the exercise price at expiration (i.e., in- or at-the-money). Contract Multiplier The term "contract multiplier" as used in reference to a binary option means the multiple applied to the exercise settlement value to arrive at the total exercise settlement amount per contract. The contract multiplier is established on a class-by-class basis and shall be at least one. Exercise Price The term "exercise price" as used in reference to a binary option means the value to which the settlement value of the underlying broad-based index is compared to determine whether the holder of a binary option is entitled to have the option be paid out. Exercise Settlement Amount The term "exercise settlement amount" as used in reference to a binary option means the amount of cash that a holder will receive upon exercise of the contract. The exercise settlement amount is a set amount equal to the exercise settlement value multiplied by the contract multiplier. The exercise

Page 71 of 78 settlement value will be an amount determined by the Exchange on a class-by-class basis and shall be equal to $10 or $1,000 or a value between those values, unless otherwise adjusted per Rule 4.6. Put Binary Option The term "put binary option" means an option contract which returns an exercise settlement amount if the settlement value of the underlying broad-based index is below the exercise price at expiration (i.e., in-the-money). Settlement Value The term "settlement value" is the value of the underlying broad-based index that is used to determine whether a binary option is in, at or out of the money. For binary options on a broad-based index on which traditional options on the same broad-based index are A.M.-settled, the "settlement value" is the reported opening level of such index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. For binary options on a broad- based index on which traditional options on the same broad-based index are P.M.-settled, the "settlement value" is the reported closing level of such index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. (c) Designation of Binary Option Contracts. (1) The Exchange may from time to time approve for listing and trading on the Exchange binary option contracts on a broad-based index which has been selected in accordance with Rule 4.10 and the Interpretations and Policies thereunder. Binary options are a separate class from other options overlying the same broad-based index. (2) Only binary option contracts approved by the Exchange and currently open for trading on the Exchange may be purchased or sold on the Exchange. Binary options dealt in on the Exchange are designated as to expiration date, exercise price, exercise settlement amount, contract multiplier and underlying broad-based index. Binary options on broad-based indexes for which traditional options on the same broad-based index are A.M.-settled will be A.M.- settled, and binary options on broad-based indexes for which traditional options on the same broad-based index are P.M.-settled (i.e., S&P 100 Index ("OEX")) will be P.M.-settled. (3) After a particular binary option class has been approved for listing and trading on the Exchange, the Exchange from time to time may open for trading series of options on that class. Binary option series may be designated to expire from one day up to 36 months from the time that they are listed. (4) The Exchange may add new series of options of the same class as provided for in Rule 4.13 and the Interpretations and Policies thereunder. Additional series of the same binary option class may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market or to meet customer demand. The opening of a new series of previously opened.

Page 72 of 78 (d) Maintenance Listing Standards. The maintenance listing standards with respect to options on broad-based indexes set forth in Rule 4.10 and the Interpretations and Policies thereunder shall be applicable to binary options on broad-based indexes. (e) Determination of Settlement Value. Binary options that are "at-the-money," "in-the-money," or "out-of-the-money" are a function of the settlement value of the underlying broad-based index in relation to the type of binary option (i.e., put or call) and the exercise price. (f) Adjustment. Binary option contracts are subject to adjustment only in accordance with and to the extent specified in the By-Laws and Rules of the Clearing Corporation. When any such adjustment has been determined, announcement thereof shall be made by the Exchange and shall become effective as of the time specified in such announcement. (g) FLEX Trading. Binary options on indexes that are eligible for options trading on the Exchange shall be eligible for trading as Flexible Exchange Options as provided for in Chapter 4, Section C, even if the Exchange does not list and trade Non-FLEX binary options or Non-FLEX traditional options on such indexes. For purposes of Rule 4.21, the applicable exercise settlement value shall be designated by the parties to the contract, the parties may not designate an exercise style other than European-style, and the term "index multiplier" shall refer to the contract multiplier. Rule 8.35 shall not apply to binary options and the position limit methodology set forth in Rule 8.36 shall apply.]

• ---

  Rule 4.21. Series of FLEX Options (a) - (b) No change. (c) FLEX Binary Options. Binary options on an index that are eligible for trading on the Exchange are eligible for trading as FLEX options, even if the Exchange does not list and trade Non-FLEX binary options or Non-FLEX traditional options on the same index. For purposes of this Rule, the applicable exercise settlement value is designated by the parties to the contract, the parties may not designate an exercise style other than European-style, and the term "index multiplier" refers to the contract multiplier.

• ---

  Page 73 of 78 SECTION H. BINARY OPTIONS The Rules in this Chapter 4, Section H apply only to binary options. All Rules apply to the trading of binary options, except as otherwise provided or the context otherwise requires. Rule 4.70. Definitions The following terms used in reference to binary options have, unless the context otherwise indicates, the meanings specified below. Binary Option The term "binary option" means a European-style option contract having an exercise settlement amount that is established at the creation of the option. Binary options are paid out if the settlement value of the underlying index (1) equals or is greater than the exercise price for a call binary index option or (2) is less than the exercise price for a put binary index option. Call Binary Option The term "call binary option" means an option contract that returns an exercise settlement amount if the settlement value of the underlying index is at or above the exercise price at expiration (i.e., in- or at-the-money). Contract Multiplier The term "contract multiplier" means the multiple applied to the exercise settlement value to arrive at the total exercise settlement amount per contract. The Exchange establishes the contract multiplier on a class-by-class basis, which multiplier must be at least one. Exercise Price The term "exercise price" means the value to which the settlement value of the underlying index is compared to determine whether the holder of a binary option is entitled to have the option be paid out. Exercise Settlement Amount The term "exercise settlement amount" means the amount of cash that a holder will receive upon exercise of the contract. The exercise settlement amount is a set amount equal to the exercise settlement value multiplied by the contract multiplier. The Exchange determines the exercise settlement value on a class-by-class basis, which may be an amount between $10 and $1,000 (unless otherwise adjusted per Rule 4.6). For example, if the exercise settlement value is $10 and the multiplier is 100 for a binary option, the exercise settlement amount is $1,000. Market Capitalization Ratio The term "market capitalization ratio" means the ratio of the market capitalization of an index to the market capitalization of the S&P 500 Index.

Page 74 of 78 Put Binary Option The term "put binary option" means an option contract that returns an exercise settlement amount if the settlement value of the underlying index is below the exercise price at expiration (i.e., in-the- money). Settlement Value The term "settlement value" means the value of the underlying index that is used to determine whether a binary option is in-, at-, or out-of-the-money. (a) For A.M.-settled binary options, the "settlement value" is the reported opening level of the underlying index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. (b) For P.M.-settled binary options, the "settlement value" is the reported closing level of the underlying index as derived from the prices of the underlying securities on such day and as reported by the Reporting Authority for the index. Rule 4.71. Designation of Binary Option Contracts (a) Listing Standards. The Exchange may from time to time approve for listing and trading on the Exchange binary option contracts on an index that satisfies the initial listing criteria in Rule 4.10 and the Interpretations and Policies thereunder. The maintenance listing criteria in Rule 4.10 and the Interpretations and Policies thereunder apply to binary index options. (b) Separate Class. Binary options are a separate class from other options overlying the same index. Rule 4.72. Terms of Binary Option Contracts Binary options listed and traded on the Exchange are designated as to expiration date, exercise price, exercise settlement amount, contract multiplier, and underlying index. (a) Settlement. The Exchange may designate binary options as A.M.-settled or P.M.-settled. (b) Expirations. After approving a particular binary option class for listing and trading on the Exchange, the Exchange from time to time may open for trading series of options in that class. The Exchange may designate binary option series to expire from one day up to 36 months from the time they are listed. (c) Additional Series. The Exchange may add new series of options of the same class as provided for in Rule 4.13 and the Interpretations and Policies thereunder. Additional series of the same binary option class may be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market or to meet customer demand. The opening of a new series of binary options on the Exchange will not affect any other series of options of the same class previously opened.

Page 75 of 78 Rule 4.73. Determination of Settlement Value Binary options that are "at-the-money," "in-the-money," or "out-of-the-money" are a function of the settlement value of the underlying index in relation to the type of binary option (i.e., put or call) and the exercise price. Rule 4.74. Adjustment Binary option contracts are subject to adjustment only in accordance with and to the extent specified in the By-Laws and Rules of the Clearing Corporation. When any such adjustment has been determined, the Exchange will announce this adjustment, which will become effective as of the time specified in that announcement.

• ---

  Rule 5.1. Trading Days and Hours (a) No change. (b) Regular Trading Hours. (1) No change. (2) Index Options. Except as otherwise set forth in the Rules or under unusual conditions as may be determined by the Exchange, Regular Trading Hours for transactions in index options are from 9:30 a.m. to 4:15 p.m., except as follows: (A) - (B) No change. (C) On their last trading day, Regular Trading Hours for the following options are from 9:30 a.m. to 4:00 p.m.: Cboe S&P 500 AM/PM Basis options Binary index options (p.m.-settled)

• ---

  (G) Regular Trading Hours for [B]binary [O]options are the same as the Regular Trading Hours for options with the same underlying index.

• ---

  Page 76 of 78 Rule 6.5. Nullification and Adjustment of Option Transactions Including Obvious Errors

• ---

  Interpretations and Policies .01 - .03 No change. .04 Binary Options. For purposes of the obvious error provisions in paragraph (c) of this Rule, the adjusted price (including any applicable adjustment under subparagraph (c)(4)(A) for non- customer transactions) shall not exceed the applicable exercise settlement [amount]value for the binary option.

• ---

  Rule 8.35. Position Limits for FLEX Options (a) - (d) No change. (e) This Rule does not apply to FLEX binary options. Position limits for FLEX binary options will be the same as the position limits for non-FLEX binary options as set forth in Rule 8.36.

• ---

  Rule 8.36. Position Limits for Binary Options (a) Fixed Limit. In determining compliance with Rule 8.30, the position limit for binary options [on a broad-based index] for which traditional options on the same [broad-based] index have no position limit[, as set forth in Rule 8.31,] pursuant to Rules 8.30 through 8.33, as applicable, [shall be]is the number of contracts equal to 15,000 [contracts, provided that the exercise settlement amount is $10,000. For binary options that have an exercise settlement amount that is not equal to $10,000, the position limit shall be 15,000] times the ratio of 10,000 to the exercise settlement amount per expiration (e.g., if the binary option exercise settlement amount is $10,000, then the position limit is 15,000 contracts per expiration; if the binary option exercise settlement amount is $1,000, then the position limit is 150,000 contracts[.] per expiration; and [I]if the binary option exercise settlement amount is $12,000, then the position limit is 12,500 contracts per expiration). (b) Formulaic Limit. For binary options on an [broad-based] index for which traditional options on the same [broad-based] index have a position limit[, as set forth in Rule 8.31,] pursuant to Rules 8.30 through 8.33, as applicable, the position limit [shall be calculated in accordance with the following methodology: (1) Determine the Market Capitalization of the S&P 500 Index. (2) Determine the Market Capitalization of the broad-based index underlying the binary option.

Page 77 of 78 (3) Calculate the Market Capitalization Ratio of the broad-based index underlying the binary option to the Market Capitalization of the S&P 500 Index. (4) The position limit for binary options subject to a formulaic limit with an exercise settlement amount of $10,000 shall be] is the number of contracts equal to the ratio of 10,000 to the exercise settlement amount multiplied by the number of contracts set forth in the table below (based on the market capitalization ratio of the underlying index) per expiration: [(A) 10,000 contracts if the Market Capitalization Ratio is greater than or equal to 0.50; (B) 5,000 contracts if the Market Capitalization Ratio is less than 0.50 but greater than or equal to 0.25; (C) 2,500 contracts if the Market Capitalization Ratio is less than 0.25 but greater

(D) The Exchange will seek Commission approval prior to establishing position limits for binary options on broad-based indexes that have a Market Capitalization Ratio that is less than 0.10. (5) For binary options that have an exercise settlement amount that is not equal to $10,000, the position limit shall be the ratio of 10,000 to the exercise settlement amount multiplied by the applicable formulaic limit.] Market Capitalization Ratio of Underlying Number of Contracts Greater than or equal to 0.50 10,000 Less than 0.50 but greater than or equal to 0.25 5,000 Less than 0.25 but greater than or equal to 0.10 2,500 Less than 0.10 but greater than or equal to 0.005 1,500 Less than 0.005 but greater than or equal to 0.0025 1,000 Less than 0.0025 500 (c) Aggregated Positions. Positions in binary options on the same [broad-based] index that have different exercise settlement amounts [shall be]are aggregated. (d) Non-binary. In determining compliance with the position limits set forth in this Rule 8.36, binary options [shall]are not [be] aggregated with non-binary option contracts on the same or similar underlying security or [broad-based] index. In addition, binary options on an [broad-based]

Page 78 of 78 index[es shall] are not [be] aggregated with non-binary option contracts on an underlying stock or stocks included within such [broad-based] index, and binary options on one [broad-based] index [shall]are not [be] aggregated with binary options on any other [broad-based] index. (e) Market Side. For purposes of the position limits established under this Rule 8.36, long positions in put binary options and short positions in call binary options [shall be]are considered to be on the same side of the market; and short positions in put binary options and long positions in call binary options [shall be]are considered to be on the same side of the market. (f) Hedge Exemption. Binary options [shall]are not [be] subject to the hedge exemption to the standard position limits found in Rule 8.30. Notwithstanding paragraphs (a) and (b) above, position limits for the hedged positions and strategies defined below are equal to five times the position limit established under paragraphs (a) and (b)(5) (if the market capitalization ratio of the underlying index is greater than or equal to 0.005) or three times the position limit established under paragraph (b)(5) (if the market capitalization ratio of the underlying index is less than 0.005): The following qualified hedge exemption strategies and positions shall be exempt from the established position limits as prescribed in the Rule above. For purposes of this Rule, qualified hedge strategies or positions are defined as follows: [A]a binary option position "hedged" or "covered" by an appropriate amount of cash to meet the settlement obligation (e.g., $1,000 for a binary option with an exercise settlement amount of $1,000)[.]; (2) [A]a binary option position "hedged" or "covered" by a sufficient amount of a related or similar security to meet the settlement obligation[.]; and (3) [A]a binary option position "hedged" or "covered" by a traditional option covering the same underlying [broad-based] index (which includes, among other strategies, a vertical spread with strikes reasonably close to the binary option strike) sufficient to meet the settlement obligation.

• ---

  Rule 8.43. Reports Related to Position Limits (a) - (e) No change. (f) Binary Options. In computing reportable binary options under this Rule 8.43: (1) positions in binary options on the same [broad-based] index that have different exercise settlement amounts [shall be]are aggregated[,]; (2) positions in binary options [shall]are not [be] aggregated with non- binary option contracts on the same or similar underlying security or [broad-based] index[,]; (3) positions in binary index options [on broad-based indexes shall]are not [be] aggregated with non-binary option contracts on an underlying [stock or stocks]security or securities included within [such broad-based]the underlying index[,]; and (4) positions in binary options on one [broad- based] index [shall]are not [be] aggregated with binary options on any other [broad-based] index.

• ---