Cboe to offer SPX/RUT multi-class spreads

Effective August 21, 2020, Cboe Options Exchange (C1) is set to begin support for open outcry trading of all combinations of S&P 500 Index Options (SPX/SPXW) versus Russel 2000 Index options (RUT/RUTW) multi- class spreads (SPX/RUT; SPX/RUTW; SPXW/RUT; SPXW/RUTW).

In line with Rule5.6(c), a multi-class spread order is an order to buy a stated number of contracts of a Broad-Based Index Option and to sell an equal number, or an equivalent number, of contracts of a related Broad-Based Index Option. As with any multi-class spread, Rule 5.85(d) requires that an SPX/SPXW versus RUT/RUTW spread order must be entered on a single order ticket at time of systemization and must be represented at a trading station at which one of the applicable classes trades (i.e., a primary trading station).

Immediately after (or concurrent with) the announcement of the order at the primary trading station, the representing Trading Permit Holder (TPH) must contact the Designated Primary Market-Maker (DPM), Lead Market-Maker (LMM) or appropriate Exchange staff at the trading station where the other applicable class trades to announce the order to the other trading crowd.

Consistent with order handling for all multi-class spreads, SPX/SPXW versus RUT/RUTW spread orders will be routed to PAR and will not be eligible for electronic processing via COA, COB, AIM, or SAM. SPX/SPXW versus RUT/RUTW spread orders marked electronic-only will be rejected.

The only permitted ratio will be 1:1. Orders with any other ratio will be rejected.

Only one SPX/SPXW and one RUT/RUTW leg will be supported. Orders with more than one

SPX/SPXW leg or more than one RUT/RUTW leg will be rejected.

Let’s note that the minimum Price Increment for orders and executions will be $0.05. However, leg prices will be permitted in $0.01 increments.

Testing of the new SPX/RUT multi-class spreads is currently available in the C1 certification environment.