Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Proposed Rule Change To Permit the Listing and Trading of P.M.-Settled NASDAQ-100 Index® Options on a Pilot Basis, 9259-9263 [2017-02258]
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Federal Register / Vol. 82, No. 22 / Friday, February 3, 2017 / Notices
amendments would reflect the
Exchange’s proposed new ownership
and, in certain cases, align the
Exchange’s governance provisions to
those of other NYSE Exchanges.11
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III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of
Section 6 of the Act 12 and the rules and
regulations thereunder applicable to a
national securities exchange.13 In
particular, the Commission finds that
the proposed rule change is consistent
with Sections 6(b)(1) and (3) of the
Act,14 which, among other things,
require a national securities exchange to
be so organized and have the capacity
to be able to carry out the purposes of
the Act, and to enforce compliance by
its members and persons associated
with its members with the provisions of
the Act, the rules and regulations
thereunder, and the rules of the
exchange, and assure the fair
representation of its members in the
selection of its directors and
administration of its affairs, and provide
that one or more directors shall be
representative of issuers and investors
and not be associated with a member of
the exchange, broker, or dealer. The
Commission also finds that the proposal
is consistent with Section 6(b)(5) of the
Act,15 which requires that the rules of
an exchange be designed to promote just
and equitable principles of trade, 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.16
According to the Exchange, the
proposed rule change consists of (i) nonsubstantive changes that will conform
terminology of the Exchange to that of
the NYSE Exchanges, and (ii)
substantive and/or procedural changes
that are designed to conform the
Exchange’s rules and procedures to
11 See note 9. The proposed changes to the
governance documents, NSX Rules and fee
schedule are set forth in greater detail in the Notice.
See Notice, supra note 4, at 96553–63.
12 15 U.S.C. 78f.
13 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
14 15 U.S.C. 78f(b)(1) and (b)(3).
15 15 U.S.C. 78f(b)(5).
16 The text of the proposed rule change is
consistent with Sections 6(b)(1), (3) and (5) of the
Act. However, the Commission notes that the
Exchange must continue to comply with the
provisions of the Commission’s Cease and Desist
Order. See Securities Exchange Act Release No.
51714 (May 19, 2005).
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those of other NYSE Exchanges.17 The
Exchange has represented to the
Commission that the proposed rule
change presents no novel issues, as all
of the substantive and/or procedural
changes are derived from existing rules
of other NYSE Exchanges. Furthermore,
the Exchange has made the following
representations:
• The proposed rule change would
continue the requirement in the
Exchange’s Bylaws that an independent
board committee oversees the adequacy
and effectiveness of the performance of
the Exchange’s self-regulatory
responsibilities; 18
• The Regulatory Oversight
Committee would be similar in
composition and function to committees
of other self-regulatory organizations,
and would be similarly designed to (i)
ensure the adequacy and effectiveness
of the Exchange’s regulatory and selfregulatory responsibilities; and (ii) to
assist the Board and any other
committees of the Board in reviewing
the regulatory plan and the overall
effectiveness of the Exchange’s
regulatory functions.19
• The proposed rule change is not
inconsistent with the Order Instituting
Administrative and Cease-and-Desist
Proceedings Pursuant to Sections 19(h)
and 21C of the Securities Exchange Act
of 1934, Making Findings, and Imposing
Remedial Sanctions and Cease-andDesist Order, entered by the
Commission on May 19, 2005.20
• The changes to the corporate and
governance structure will place the
Exchange in a better position to improve
its technology and engage in valueenhancing transactions that will enable
the Exchange to more effectively
participate and compete in the
marketplace.21
• The Exchange’s proposed changes
to its corporate governance structure are
designed to align its structure with that
of the NYSE Exchanges to promote a
consistent approach to corporate
governance, and to simplify and create
greater consistency with the
organizational documents and
governance practices of the NYSE
Exchange.22
The Exchange has represented to the
Commission that it believes that the
benefits of aligning its corporate
documents to those of other NYSE
Exchanges outweigh the costs, if any, to
leaving its rules as is and being the sole
17 See
Notice, supra note 4, at 96563–64.
id. at 96563.
19 See id.
20 See id. at 96553. See also note 16.
21 See id. at 96554.
22 See id. at 96552–53.
outlier among the NYSE Exchanges. The
Commission also notes that it received
no comments on the proposed rule
change. Finally, the Commission
believes that uniformity of terminology
as well as corporate governance
structure among the wholly owned
subsidiaries of NYSE Group, including
the NYSE Exchanges and the Exchange,
to the extent possible, should allow for
a more streamlined, consistent, and
effective approach to both compliance
and surveillance in furtherance of the
rules of the Exchange and the federal
securities laws.
IV. Conclusion
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 23 that the
proposed rule change (SR–NSX–2016–
16), as modified by Amendment No.1,
be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–02263 Filed 2–2–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79894; File No. SR–Phlx–
2017–04]
Self-Regulatory Organizations;
NASDAQ PHLX LLC; Notice of Filing of
Proposed Rule Change To Permit the
Listing and Trading of P.M.-Settled
NASDAQ–100 Index® Options on a
Pilot Basis
January 30, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
18, 2017, NASDAQ PHLX LLC (‘‘Phlx’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘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
18 See
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9259
23 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
24 17
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Federal Register / Vol. 82, No. 22 / Friday, February 3, 2017 / Notices
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to permit the
listing and trading of P.M.-settled
NASDAQ–100 Index® options on a pilot
basis.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqphlx.cchwallstreet.
com/, at the principal office of the
Exchange, and at the Commission’s
Public Reference Room.
II. 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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
(i) New P.M.-Settled NASDAQ–100
Index Options
The purpose of this rule filing is to
permit the listing and trading, on a pilot
basis, of NASDAQ–100 Index®
(‘‘NASDAQ–100’’) options with thirdFriday-of-the-month (‘‘Expiration
Friday’’) expiration dates, whose
exercise settlement value will be based
on the closing index value, symbol
XQC, of the NASDAQ–100 on the
expiration day (‘‘P.M.- settled’’) for an
initial period of twelve months (the
‘‘Pilot Program’’) from the date of
approval of this proposed rule change.
The NASDAQ–100, a modified market
capitalization-weighted index, includes
100 of the largest non-financial
companies listed on The Nasdaq Stock
Market, based on market capitalization.
It does not contain securities of
financial companies including
investment companies. Security types
generally eligible for the NASDAQ–100
include common stocks, ordinary
shares, American Depository Receipts,
and tracking stocks. Security or
company types not included in the
NASDAQ–100 are closed-end funds,
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convertible debentures, exchange traded
funds, limited liability companies,
limited partnership interests, preferred
stocks, rights, shares or units of
beneficial interest, warrants, units and
other derivative securities.3
The conditions for listing the
proposed contract (‘‘NDXPM’’) on Phlx
will be similar to those for Full Value
Nasdaq 100 Options (‘‘NDX’’), which are
already listed and trading on Phlx,
except that NDXPM will be P.M.settled.4 The proposed contract would
use a $100 multiplier, and the minimum
trading increment would be $0.05 for
options trading below $3.00 and $0.10
for all other series.5 Strike price
intervals would be set at no less than
$5.00.6 Consistent with existing rules
for index options, the Exchange would
allow up to nine near-term expiration
months 7 as well as LEAPS.8 The
product would have European-style
exercise, and because it is based on the
NASDAQ–100, there would be no
position limits.9 The Exchange has the
flexibility to open for trading additional
series in response to customer demand.
As with NDX, in determining
compliance with Rule 1001A, Position
Limits, there will be no position limits
for broad-based index option contracts
in the NDXPM class.10 Each member or
member organization (other than
Registered Options Traders) that
maintains a position on the same side of
3 A description of the NASDAQ–100 is available
on Nasdaq’s Web site at https://
indexes.nasdaqomx.com/docs/methodology_
NDX.pdf.
4 The Exchange currently lists an A.M. Reduced
Value Nasdaq 100 Option, but does not at this time
propose to list a reduced value P.M. settled option
based on the NASDAQ–100.
5 See Rule 1034.
6 See Rule 1101A, Terms of Option Contracts,
section (a).
7 The Exchange wishes to give the same
expiration month options for NDXPM as are given
for NDX, since both options classes are derived
from the NASDAQ–100.
8 Exchange Rule 1101A(b)(i) provides that after a
particular class of stock index options has been
approved for listing and trading on the Exchange,
the Exchange shall from time to time open for
trading series of options therein. Within each
approved class of stock index options, the Exchange
shall open for trading a minimum of one expiration
month and series for each class of approved stock
index options and may also open for trading series
of options having not less than nine and up to 60
months to expiration (long-term options series) as
provided in Rule 1101A(b)(iii). Rule 1101A(b)(iii)
provides that The Exchange may list, with respect
to any class of stock index options, series of options
having not less than nine and up to 60 months to
expiration, adding up to ten expiration months.
Such series of options may be opened for trading
simultaneously with series of options trading
pursuant to Rule 1101A. Strike price interval, bid/
ask differential and continuity rules shall not apply
to such options series until the time to expiration
is less than nine months.
9 See proposed amendment to Rule 1001A(a)(ii).
10 See proposed amendment to Rule 1079(d).
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the market in excess of 100,000
contracts for its own account, or for the
account of a customer, in the aggregate
of (i) Full Value Nasdaq 100 Options
and (ii) NDXPM options, would be
required to file a report with the
Exchange that includes, but is not
limited to, data related to the option
positions, whether such positions are
hedged and if applicable, a description
of the hedge and information
concerning collateral used to carry the
positions.11 As with NDX, there would
be no exercise limits for NDXPM.12
As with NDX, whenever the Exchange
determines that additional margin is
warranted in light of the risks associated
with an under-hedged NDXPM option
position, the Exchange may consider
imposing additional margin upon the
account maintaining such under-hedged
position pursuant to its authority under
Exchange Rules 1003(b) (for non-FLEX
options) and 1079(d)(2) (for FLEX
options). The trading hours for NDXPM
will be from 9:30 a.m. ET to 4:00 p.m.
ET.13
Regarding NDXPM FLEX Options,
there would be no position limits (as
with NDX FLEX Options). As with NDX
FLEX Options, each member or member
organization (other than a Specialist or
Registered Options Trader) that
maintains a position on the same side of
the market in excess of 100,000
contracts for NDXPM FLEX Options, for
its own account or for the account of a
customer, would be required to report
information on the FLEX equity option
position, positions in any related
instrument, the purpose or strategy for
the position and the collateral used by
the account. The report would be
required to be in the form and manner
prescribed by the Exchange. Like NDX
FLEX Options, there would be no
exercise limits for NDXPM FLEX
Options (including reduced-value
option contracts).14
In addition, whenever the Exchange
determined that a higher margin
requirement was necessary in light of
the risks associated with a NDXPM
FLEX Option position in excess of the
standard limit for NDXPM non-FLEX
options of the same class, the Exchange
could consider imposing additional
margin upon the account maintaining
such under-hedged position.
Additionally, the clearing firm carrying
the account would be subject to capital
charges under SEC rule 15c3–1 to the
11 See
Rule 1001A(c) as proposed to be revised.
Rule 1002A which provides that exercise
limits for index option contracts are equivalent to
the position limits described in Rule 1001A.
13 Note that the trading hours for NDX end at 4:15
p.m. ET rather than at 4:00 p.m. ET.
14 See Rule 1079(d), as proposed to be revised.
12 See
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extent of any margin deficiency
resulting from the higher margin
requirement.15
To explain the basic adoption of
NDXPM, the Exchange proposes to add
Commentary .05 to Rule 1101A, Terms
of Options Contracts. This proposed
new Commentary would provide that in
addition to A.M.-settled Full Value
Nasdaq 100 Options approved for
trading on the Exchange pursuant to
Rule 1101A Commentary .01, the
Exchange may also list options on the
NASDAQ–100 Index whose exercise
settlement value is the closing value of
the NASDAQ–100 Index on the
expiration day.16 NDXPM options
would be listed for trading for an initial
pilot period ending twelve months from
the date of approval of the proposed
rule change.
Precedent exists for P.M. settlement of
broad-based index options. SPXPM (a
P.M. settled index option contract based
on the Standard & Poor’s 500 index) is
traded on the Chicago Board Options
Exchange (‘‘CBOE’’). Further, OEX (an
index option contract based on the
Standard & Poor’s 100 index) is also
traded on CBOE and has been P.M.settled since 1983. The Exchange does
not believe that any market disruptions
will be encountered with the
introduction of P.M.-settled NASDAQ–
100 index options. The Exchange will
monitor for any such disruptions or the
development of any factors that could
cause such disruptions.
The Exchange also notes that P.M.settled options predominate in the OTC
market, and Phlx is not aware of any
adverse effects in the stock market
attributable to the P.M.-settlement
feature. Phlx is merely proposing to
offer a P.M.-settled product in an
exchange environment which offers the
benefit of added transparency, price
discovery, and stability. In response to
any potential concerns that disruptive
trading conduct could occur as a result
of the concurrent listing and trading of
two index option products based on the
same index but for which different
settlement methodologies exist (i.e., one
is A.M.-settled and one is P.M.-settled),
the Exchange notes that CBOE lists and
trades both the A.M.-settled S&P 500
index option called SPX and a P.M.settled S&P 500 index option, SPXPM.
Phlx is not aware of any market
disruptions occurring as a result of
CBOE offering both products.
The adoption of trading of P.M.settled options on the NASDAQ–100
15 See
Rule 1079(d)(2).
that the closing value of the NASDAQ–
100 may change up until 17:15 ET due to
corrections to prices of the underlying component
securities.
16 Note
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Index on the same exchange that lists
A.M.-settled options on the NASDAQ–
100 Index would provide greater spread
opportunities. This manner of trading in
different products allows a market
participant to take advantage of the
different expiration times, providing
expanded trading opportunities. In the
options market currently, market
participants regularly trade similar or
related products in conjunction with
each other, which contributes to overall
market liquidity.
The Exchange represents that it has
sufficient capacity to handle additional
traffic associated with this new listing,
and that it has in place adequate
surveillance procedures to monitor
trading in these options thereby helping
to ensure the maintenance of a fair and
orderly market.
(ii) Pilot Program Reports
As proposed, the proposal would
become effective on a Pilot Program
basis for period of twelve months. If the
Exchange were to propose an extension
of the program or should the Exchange
propose to make the program
permanent, then the Exchange would
submit a filing proposing such
amendments to the program. The
Exchange notes that any positions
established under the pilot would not be
impacted by the expiration of the pilot.
For example, a position in a P.M.-settled
series that expires beyond the
conclusion of the pilot period could be
established during the 12-month pilot. If
the Pilot Program were not extended,
then the position could continue to
exist. However, the Exchange notes that
any further trading in the series would
be restricted to transactions where at
least one side of the trade is a closing
transaction.
The Exchange proposes to submit a
Pilot Program report to Commission at
least two months prior to the expiration
date of the Pilot Program (the ‘‘annual
report’’). The annual report would
contain an analysis of volume, open
interest, and trading patterns. The
analysis would examine trading in the
proposed option product as well as
trading in the securities that comprise
the NASDAQ–100 index. In addition,
for series that exceed certain minimum
open interest parameters, the annual
report would provide analysis of index
price volatility and share trading
activity. In addition to the annual
report, the Exchange would provide the
Commission with periodic interim
reports while the pilot is in effect that
would contain some, but not all, of the
information contained in the annual
report. The annual report would be
provided to the Commission on a
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9261
confidential basis. The annual report
would contain the following volume
and open interest data:
(1) Monthly volume aggregated for all
trades;
(2) monthly volume aggregated by
expiration date;
(3) monthly volume for each
individual series;
(4) month-end open interest
aggregated for all series;
(5) month-end open interest for all
series aggregated by expiration date; and
(6) month-end open interest for each
individual series.
In addition to the annual report, the
Exchange would provide the
Commission with interim reports of the
information listed in Items (1) through
(6) above periodically as required by the
Commission while the pilot is in effect.
These interim reports would also be
provided on a confidential basis. The
annual report would also contain the
information noted in Items (1) through
(6) above for Expiration Friday, A.M.settled NASDAQ–100 index options
traded on Phlx.
In addition, the annual report would
contain the following analysis of trading
patterns in Expiration Friday, P.M.settled NASDAQ–100 index option
series in the pilot: (1) A time series
analysis of open interest; and (2) an
analysis of the distribution of trade
sizes. Also, for series that exceed certain
minimum parameters, the annual report
would contain the following analysis
related to index price changes and
underlying share trading volume at the
close on Expiration Fridays: A
comparison of index price changes at
the close of trading on a given
Expiration Friday with comparable
price changes from a control sample.
The data would include a calculation of
percentage price changes for various
time intervals and compare that
information to the respective control
sample. The Exchange would provide a
calculation of share volume for a sample
set of the component securities
representing an upper limit on share
trading that could be attributable to
expiring in-the-money series. The data
would include a comparison of the
calculated share volume for securities in
the sample set to the average daily
trading volumes of those securities over
a sample period. The minimum open
interest parameters, control sample,
time intervals, method for randomly
selecting the component securities, and
sample periods would be determined by
the Exchange and the Commission.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
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the provisions of Section 6 of the Act,17
in general, and with Section 6(b)(5) of
the Act,18 in that it is designed 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; and is not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers,
or to regulate by virtue of any authority
conferred by the Act matters not related
to the purposes of the Act or the
administration of the Exchange. The
Exchange believes that the proposed
rule change is also consistent with
Section 6(b)(8) of the Act 19 in that it
does not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. Specifically, the
Exchange believes that the introduction
of NDXPM options will attract order
flow to the Exchange, increase the
variety of listed options to investors,
and provide a valuable hedge tool to
investors.
The Commission has previously
stated that when cash-settled index
options were first introduced in the
1980s, they generally utilized closingprice settlement procedures (i.e., P.M.
settlement). The Commission stated it
became concerned about the impact of
P.M. settlement on cash-settled index
options on the markets for the
underlying stocks at the close on
expiration Fridays especially during the
quarterly expirations of the third Friday
of March, June, September and
December when options, index futures,
and options on index futures all expire
simultaneously. The Commission
expressed concerns that p.m.-settlement
was believed to have contributed to
above-average volume and added
market volatility on those days, which
sometimes led to sharp price
movements during the last hour of
trading, as a consequence of which the
close of trading on the quarterly
expiration Friday became known as the
‘‘triple witching hour.’’ The
Commission observed that besides
contributing to investor anxiety,
heightened volatility during the
expiration periods created the
opportunity for manipulation and other
17 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
19 15 U.S.C. 78f(b)(8).
18 15
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abusive trading practices in anticipation
of the liquidity constraints.20
However, the Exchange believes that
the above concerns that have led to the
transition to a.m. settlement for index
derivatives have been largely mitigated.
It believes that expiration pressure in
the underlying cash markets at the close
has been greatly reduced with the
advent of multiple primary listing and
unlisted trading privilege markets, and
that trading is now widely dispersed
among many market centers.
Additionally, the Exchange notes that
opening procedures in the 1990s were
deemed acceptable to mitigate one-sided
order flow driven by index option
expiration and that Nasdaq uses an
automated closing cross procedure and
has a closing order type that facilitates
orderly closings. The Nasdaq closing
procedures are well-equipped to
mitigate imbalance pressure at the close.
In addition, after-hours trading now
provides market participants with an
alternative to help offset market-onclose imbalances.21
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. NDXPM
options would be available for trading to
all market participants. The proposed
rule change will facilitate the listing and
trading of a novel option product that
will enhance competition among market
participants, to the benefit of investors
and the marketplace. The listing of
NDXPM will enhance competition by
providing investors with an additional
investment vehicle, in a fully-electronic
trading environment, through which
investors can gain and hedge exposure
to NASDAQ–100 stocks. Further, this
product could offer a competitive
alternative to other existing investment
products that seek to allow investors to
gain broad market exposure. Also, the
Exchange notes that it is possible for
other exchanges to develop or license
the use of a new or different index to
compete with the NASDAQ–100 and
seek Commission approval to list and
trade options on such an index.
20 See Securities Exchange Act Release No. 65256
(September 2, 2011), 76 FR 55569 (September 9,
2011) (approving SR–C2–2011–008).
21 C2 made similar arguments to justify
Commission approval of listing of SPXPM. See id.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. 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 (i)
as the Commission may designate up to
90 days of such date 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 shall: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
IV. 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–
Phlx–2017–04 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2017–04. 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 Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
E:\FR\FM\03FEN1.SGM
03FEN1
Federal Register / Vol. 82, No. 22 / Friday, February 3, 2017 / Notices
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Phlx–
2017–04 and should be submitted on or
before February 24, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–02258 Filed 2–2–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79806; File No. SR–NSX–
2017–01]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change To Amend
Exchange Rule 11.26 Regarding the
Data Collection Requirements of the
Regulation NMS Plan To Implement a
Tick Size Pilot Program
January 17, 2017.
Correction
In notice document 2017–01461,
appearing on pages 8249–8252, in the
issue of Tuesday, January 24, 2017,
make the following correction:
On page 8249, in the second column,
the heading is corrected to read as set
forth above.
[FR Doc. C1–2017–01461 Filed 2–2–17; 8:45 am]
asabaliauskas on DSK3SPTVN1PROD with NOTICES
BILLING CODE 1301–00–D
22 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:26 Feb 02, 2017
Jkt 241001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79897; File No. 4–443]
Joint Industry Plan; Notice of Filing
and Immediate Effectiveness of
Amendment to the Plan for the
Purpose of Developing and
Implementing Procedures Designed To
Facilitate the Listing and Trading of
Standardized Options To Add MIAX
PEARL, LLC as a Plan Sponsor
January 30, 2017.
Pursuant to Section 11A(a)(3) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 608 thereunder,2
notice is hereby given that on January
17, 2017, MIAX PEARL, LLC (‘‘MIAX
PEARL’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) an amendment to the
Plan for the Purpose of Developing and
Implementing Procedures Designed to
Facilitate the Listing and Trading of
Standardized Options (‘‘OLPP’’).3 The
Commission approved the application
of MIAX PEARL to register as a national
securities exchange on December 13,
2016.4 One of the conditions of the
Commission’s approval was the
requirement for MIAX PEARL to join
the OLLP. The amendment adds MIAX
1 15
U.S.C. 78k–1(a)(3).
CFR 242.608.
3 On July 6, 2001, the Commission approved the
OLPP, which was proposed by the American Stock
Exchange LLC (‘‘Amex’’), Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’), International
Securities Exchange LLC (‘‘ISE’’), Options Clearing
Corporation (‘‘OCC’’), Philadelphia Stock Exchange,
Inc. (‘‘Phlx’’), and Pacific Exchange, Inc. (‘‘PCX’’)
(n/k/a NYSE Arca). See Securities Exchange Act
Release No. 44521, 66 FR 36809 (July 13, 2001). See
also Securities Exchange Act Release Nos. 49199
(February 5, 2004), 69 FR 7030 (February 12, 2004)
(adding Boston Stock Exchange, Inc. as a Sponsor
to the OLPP); 57546 (March 21, 2008), 73 FR 16393
(March 27, 2008) (adding Nasdaq Stock Market, LLC
(‘‘Nasdaq’’) as a Sponsor to the OLPP); 61528
(February 17, 2010), 75 FR 8415 (February 24, 2010)
(adding BATS Exchange, Inc. (‘‘BATS’’) as a
Sponsor to the OLPP); 63162 (October 22, 2010), 75
FR 66401 (October 28, 2010) (adding C2 Options
Exchange Incorporated (‘‘C2’’) as a sponsor to the
OLPP); 66952 (May 9, 2012), 77 FR 28641 (May 15,
2012) (adding BOX Options Exchange LLC (‘‘BOX’’)
as a Sponsor to the OLPP); 67327 (June 29, 2012),
77 FR 40125 (July 6, 2012) (adding Nasdaq OMX
BX, Inc. (‘‘BX’’) as a Sponsor to the OLPP); 70765
(October 28, 2013), 78 FR 65739 (November 1, 2013)
(adding Topaz Exchange, LLC as a Sponsor to the
OLPP (‘‘Topaz’’); 70764 (October 28, 2013), 78 FR
65733 (November 1, 2013) (adding Miami
International Securities Exchange, LLC (‘‘MIAX’’) as
a Sponsor to the OLPP); 76822 (January 1, 2016),
81 FR 1251 (January 11, 2016) (adding EDGX
Exchange, Inc. (‘‘EDGX’’) as a Sponsor to the OLPP);
77323 (March 8, 2016), 81 FR 13433 (March 14,
2016) (adding ISE Mercury, LLC (‘‘ISE Mercury’’) as
a Sponsor to the OLPP).
4 See Securities and Exchange Act Release No.
79543 (Dec. 13, 2016), 81 FR 92901 (Dec. 20, 2016)
(File No. 10–227).
2 17
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
9263
PEARL as a Sponsor 5 of the OLPP.6 The
Commission is publishing this notice to
solicit comments on the amendment
from interested persons.
I. Description and Purpose of the
Amendment
The OLPP establishes procedures
designed to facilitate the listing and
trading of standardized options
contracts on the options exchanges. The
amendment to the OLPP adds MIAX
PEARL as a Sponsor. The other OLPP
Sponsors are Amex, BATS, BOX, BX,
CBOE, C2, EDGX, ISE, ISE Mercury,
MIAX, Nasdaq, NYSE Arca, OCC, Phlx,
and Topaz. MIAX PEARL has submitted
an executed copy of the OLPP to the
Commission in accordance with the
procedures set forth in the OLPP
regarding new Sponsors. Section 7 of
the OLPP provides for the entry of new
Sponsors to the OLPP. Specifically,
Section 7 of the OLPP provides that an
Eligible Exchange 7 may become a
Sponsor of the OLPP by: (i) Executing a
copy of the OLPP, as then in effect; (ii)
providing each current Sponsor with a
copy of such executed OLPP; and (iii)
effecting an amendment to the OLPP, as
specified in Section 7(ii) of the OLPP.
Section 7(ii) of the OLPP sets forth the
process by which an Eligible Exchange
may effect an amendment to the OLPP.
Specifically, an Eligible Exchange must:
(a) Execute a copy of the OLPP with the
only change being the addition of the
new Sponsor’s name in Section 8 of the
OLPP; 8 and (b) submit the executed
OLPP to the Commission. The OLPP
then provides that such an amendment
will be effective when the amendment
is approved by the Commission or
otherwise becomes effective pursuant to
Section 11A of the Act and Rule 608
thereunder.
5 A ‘‘Sponsor’’ is an Eligible Exchange whose
participation in the OLPP has become effective
pursuant to Section 7 of the OLPP.
6 See Letter from Barbara J. Comly, EVP, General
Counsel and Corporate Secretary, MIAX PEARL, to
Brent J. Fields, Secretary, Commission, dated
January 13, 2017.
7 The OLPP defines an ‘‘Eligible Exchange’’ as a
national securities exchange registered with the
Commission pursuant to Section 6(a) of the Act, 15
U.S.C. 78f(a), that (1) has effective rules for the
trading of options contracts issued and cleared by
the OCC approved in accordance with the
provisions of the Act and the rules and regulations
thereunder and (2) is a party to the Plan for
Reporting Consolidated Options Last Sale Reports
and Quotation Information (the ‘‘OPRA Plan’’).
MIAX PEARL has represented that it has met both
the requirements for being considered an Eligible
Exchange. See supra note 5.
8 The Commission notes that the list of plan
sponsors is set forth in Section 9 of the OLPP.
E:\FR\FM\03FEN1.SGM
03FEN1
]]>Agencies
[Federal Register Volume 82, Number 22 (Friday, February 3, 2017)]
[Notices]
[Pages 9259-9263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02258]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79894; File No. SR-Phlx-2017-04]
Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
of Proposed Rule Change To Permit the Listing and Trading of P.M.-
Settled NASDAQ-100 Index[supreg] Options on a Pilot Basis
January 30, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 18, 2017, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``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
[[Page 9260]]
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to permit the listing and trading of P.M.-
settled NASDAQ-100 Index[supreg] options on a pilot basis.
The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaqphlx.cchwallstreet.com/ com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
(i) New P.M.-Settled NASDAQ-100 Index Options
The purpose of this rule filing is to permit the listing and
trading, on a pilot basis, of NASDAQ-100 Index[supreg] (``NASDAQ-100'')
options with third-Friday-of-the-month (``Expiration Friday'')
expiration dates, whose exercise settlement value will be based on the
closing index value, symbol XQC, of the NASDAQ-100 on the expiration
day (``P.M.- settled'') for an initial period of twelve months (the
``Pilot Program'') from the date of approval of this proposed rule
change.
The NASDAQ-100, a modified market capitalization-weighted index,
includes 100 of the largest non-financial companies listed on The
Nasdaq Stock Market, based on market capitalization. It does not
contain securities of financial companies including investment
companies. Security types generally eligible for the NASDAQ-100 include
common stocks, ordinary shares, American Depository Receipts, and
tracking stocks. Security or company types not included in the NASDAQ-
100 are closed-end funds, convertible debentures, exchange traded
funds, limited liability companies, limited partnership interests,
preferred stocks, rights, shares or units of beneficial interest,
warrants, units and other derivative securities.\3\
---------------------------------------------------------------------------
\3\ A description of the NASDAQ-100 is available on Nasdaq's Web
site at https://indexes.nasdaqomx.com/docs/methodology_NDX.pdf.
---------------------------------------------------------------------------
The conditions for listing the proposed contract (``NDXPM'') on
Phlx will be similar to those for Full Value Nasdaq 100 Options
(``NDX''), which are already listed and trading on Phlx, except that
NDXPM will be P.M.-settled.\4\ The proposed contract would use a $100
multiplier, and the minimum trading increment would be $0.05 for
options trading below $3.00 and $0.10 for all other series.\5\ Strike
price intervals would be set at no less than $5.00.\6\ Consistent with
existing rules for index options, the Exchange would allow up to nine
near-term expiration months \7\ as well as LEAPS.\8\ The product would
have European-style exercise, and because it is based on the NASDAQ-
100, there would be no position limits.\9\ The Exchange has the
flexibility to open for trading additional series in response to
customer demand.
---------------------------------------------------------------------------
\4\ The Exchange currently lists an A.M. Reduced Value Nasdaq
100 Option, but does not at this time propose to list a reduced
value P.M. settled option based on the NASDAQ-100.
\5\ See Rule 1034.
\6\ See Rule 1101A, Terms of Option Contracts, section (a).
\7\ The Exchange wishes to give the same expiration month
options for NDXPM as are given for NDX, since both options classes
are derived from the NASDAQ-100.
\8\ Exchange Rule 1101A(b)(i) provides that after a particular
class of stock index options has been approved for listing and
trading on the Exchange, the Exchange shall from time to time open
for trading series of options therein. Within each approved class of
stock index options, the Exchange shall open for trading a minimum
of one expiration month and series for each class of approved stock
index options and may also open for trading series of options having
not less than nine and up to 60 months to expiration (long-term
options series) as provided in Rule 1101A(b)(iii). Rule
1101A(b)(iii) provides that The Exchange may list, with respect to
any class of stock index options, series of options having not less
than nine and up to 60 months to expiration, adding up to ten
expiration months. Such series of options may be opened for trading
simultaneously with series of options trading pursuant to Rule
1101A. Strike price interval, bid/ask differential and continuity
rules shall not apply to such options series until the time to
expiration is less than nine months.
\9\ See proposed amendment to Rule 1001A(a)(ii).
---------------------------------------------------------------------------
As with NDX, in determining compliance with Rule 1001A, Position
Limits, there will be no position limits for broad-based index option
contracts in the NDXPM class.\10\ Each member or member organization
(other than Registered Options Traders) that maintains a position on
the same side of the market in excess of 100,000 contracts for its own
account, or for the account of a customer, in the aggregate of (i) Full
Value Nasdaq 100 Options and (ii) NDXPM options, would be required to
file a report with the Exchange that includes, but is not limited to,
data related to the option positions, whether such positions are hedged
and if applicable, a description of the hedge and information
concerning collateral used to carry the positions.\11\ As with NDX,
there would be no exercise limits for NDXPM.\12\
---------------------------------------------------------------------------
\10\ See proposed amendment to Rule 1079(d).
\11\ See Rule 1001A(c) as proposed to be revised.
\12\ See Rule 1002A which provides that exercise limits for
index option contracts are equivalent to the position limits
described in Rule 1001A.
---------------------------------------------------------------------------
As with NDX, whenever the Exchange determines that additional
margin is warranted in light of the risks associated with an under-
hedged NDXPM option position, the Exchange may consider imposing
additional margin upon the account maintaining such under-hedged
position pursuant to its authority under Exchange Rules 1003(b) (for
non-FLEX options) and 1079(d)(2) (for FLEX options). The trading hours
for NDXPM will be from 9:30 a.m. ET to 4:00 p.m. ET.\13\
---------------------------------------------------------------------------
\13\ Note that the trading hours for NDX end at 4:15 p.m. ET
rather than at 4:00 p.m. ET.
---------------------------------------------------------------------------
Regarding NDXPM FLEX Options, there would be no position limits (as
with NDX FLEX Options). As with NDX FLEX Options, each member or member
organization (other than a Specialist or Registered Options Trader)
that maintains a position on the same side of the market in excess of
100,000 contracts for NDXPM FLEX Options, for its own account or for
the account of a customer, would be required to report information on
the FLEX equity option position, positions in any related instrument,
the purpose or strategy for the position and the collateral used by the
account. The report would be required to be in the form and manner
prescribed by the Exchange. Like NDX FLEX Options, there would be no
exercise limits for NDXPM FLEX Options (including reduced-value option
contracts).\14\
---------------------------------------------------------------------------
\14\ See Rule 1079(d), as proposed to be revised.
---------------------------------------------------------------------------
In addition, whenever the Exchange determined that a higher margin
requirement was necessary in light of the risks associated with a NDXPM
FLEX Option position in excess of the standard limit for NDXPM non-FLEX
options of the same class, the Exchange could consider imposing
additional margin upon the account maintaining such under-hedged
position. Additionally, the clearing firm carrying the account would be
subject to capital charges under SEC rule 15c3-1 to the
[[Page 9261]]
extent of any margin deficiency resulting from the higher margin
requirement.\15\
---------------------------------------------------------------------------
\15\ See Rule 1079(d)(2).
---------------------------------------------------------------------------
To explain the basic adoption of NDXPM, the Exchange proposes to
add Commentary .05 to Rule 1101A, Terms of Options Contracts. This
proposed new Commentary would provide that in addition to A.M.-settled
Full Value Nasdaq 100 Options approved for trading on the Exchange
pursuant to Rule 1101A Commentary .01, the Exchange may also list
options on the NASDAQ-100 Index whose exercise settlement value is the
closing value of the NASDAQ-100 Index on the expiration day.\16\ NDXPM
options would be listed for trading for an initial pilot period ending
twelve months from the date of approval of the proposed rule change.
---------------------------------------------------------------------------
\16\ Note that the closing value of the NASDAQ-100 may change up
until 17:15 ET due to corrections to prices of the underlying
component securities.
---------------------------------------------------------------------------
Precedent exists for P.M. settlement of broad-based index options.
SPXPM (a P.M. settled index option contract based on the Standard &
Poor's 500 index) is traded on the Chicago Board Options Exchange
(``CBOE''). Further, OEX (an index option contract based on the
Standard & Poor's 100 index) is also traded on CBOE and has been P.M.-
settled since 1983. The Exchange does not believe that any market
disruptions will be encountered with the introduction of P.M.-settled
NASDAQ-100 index options. The Exchange will monitor for any such
disruptions or the development of any factors that could cause such
disruptions.
The Exchange also notes that P.M.-settled options predominate in
the OTC market, and Phlx is not aware of any adverse effects in the
stock market attributable to the P.M.-settlement feature. Phlx is
merely proposing to offer a P.M.-settled product in an exchange
environment which offers the benefit of added transparency, price
discovery, and stability. In response to any potential concerns that
disruptive trading conduct could occur as a result of the concurrent
listing and trading of two index option products based on the same
index but for which different settlement methodologies exist (i.e., one
is A.M.-settled and one is P.M.-settled), the Exchange notes that CBOE
lists and trades both the A.M.-settled S&P 500 index option called SPX
and a P.M.-settled S&P 500 index option, SPXPM. Phlx is not aware of
any market disruptions occurring as a result of CBOE offering both
products.
The adoption of trading of P.M.-settled options on the NASDAQ-100
Index on the same exchange that lists A.M.-settled options on the
NASDAQ-100 Index would provide greater spread opportunities. This
manner of trading in different products allows a market participant to
take advantage of the different expiration times, providing expanded
trading opportunities. In the options market currently, market
participants regularly trade similar or related products in conjunction
with each other, which contributes to overall market liquidity.
The Exchange represents that it has sufficient capacity to handle
additional traffic associated with this new listing, and that it has in
place adequate surveillance procedures to monitor trading in these
options thereby helping to ensure the maintenance of a fair and orderly
market.
(ii) Pilot Program Reports
As proposed, the proposal would become effective on a Pilot Program
basis for period of twelve months. If the Exchange were to propose an
extension of the program or should the Exchange propose to make the
program permanent, then the Exchange would submit a filing proposing
such amendments to the program. The Exchange notes that any positions
established under the pilot would not be impacted by the expiration of
the pilot. For example, a position in a P.M.-settled series that
expires beyond the conclusion of the pilot period could be established
during the 12-month pilot. If the Pilot Program were not extended, then
the position could continue to exist. However, the Exchange notes that
any further trading in the series would be restricted to transactions
where at least one side of the trade is a closing transaction.
The Exchange proposes to submit a Pilot Program report to
Commission at least two months prior to the expiration date of the
Pilot Program (the ``annual report''). The annual report would contain
an analysis of volume, open interest, and trading patterns. The
analysis would examine trading in the proposed option product as well
as trading in the securities that comprise the NASDAQ-100 index. In
addition, for series that exceed certain minimum open interest
parameters, the annual report would provide analysis of index price
volatility and share trading activity. In addition to the annual
report, the Exchange would provide the Commission with periodic interim
reports while the pilot is in effect that would contain some, but not
all, of the information contained in the annual report. The annual
report would be provided to the Commission on a confidential basis. The
annual report would contain the following volume and open interest
data:
(1) Monthly volume aggregated for all trades;
(2) monthly volume aggregated by expiration date;
(3) monthly volume for each individual series;
(4) month-end open interest aggregated for all series;
(5) month-end open interest for all series aggregated by expiration
date; and
(6) month-end open interest for each individual series.
In addition to the annual report, the Exchange would provide the
Commission with interim reports of the information listed in Items (1)
through (6) above periodically as required by the Commission while the
pilot is in effect. These interim reports would also be provided on a
confidential basis. The annual report would also contain the
information noted in Items (1) through (6) above for Expiration Friday,
A.M.-settled NASDAQ-100 index options traded on Phlx.
In addition, the annual report would contain the following analysis
of trading patterns in Expiration Friday, P.M.-settled NASDAQ-100 index
option series in the pilot: (1) A time series analysis of open
interest; and (2) an analysis of the distribution of trade sizes. Also,
for series that exceed certain minimum parameters, the annual report
would contain the following analysis related to index price changes and
underlying share trading volume at the close on Expiration Fridays: A
comparison of index price changes at the close of trading on a given
Expiration Friday with comparable price changes from a control sample.
The data would include a calculation of percentage price changes for
various time intervals and compare that information to the respective
control sample. The Exchange would provide a calculation of share
volume for a sample set of the component securities representing an
upper limit on share trading that could be attributable to expiring in-
the-money series. The data would include a comparison of the calculated
share volume for securities in the sample set to the average daily
trading volumes of those securities over a sample period. The minimum
open interest parameters, control sample, time intervals, method for
randomly selecting the component securities, and sample periods would
be determined by the Exchange and the Commission.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with
[[Page 9262]]
the provisions of Section 6 of the Act,\17\ in general, and with
Section 6(b)(5) of the Act,\18\ in that it is designed 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; and is not designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers, or to regulate by virtue of any authority conferred by the Act
matters not related to the purposes of the Act or the administration of
the Exchange. The Exchange believes that the proposed rule change is
also consistent with Section 6(b)(8) of the Act \19\ in that it does
not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Exchange
believes that the introduction of NDXPM options will attract order flow
to the Exchange, increase the variety of listed options to investors,
and provide a valuable hedge tool to investors.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f(b)(5).
\19\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
The Commission has previously stated that when cash-settled index
options were first introduced in the 1980s, they generally utilized
closing-price settlement procedures (i.e., P.M. settlement). The
Commission stated it became concerned about the impact of P.M.
settlement on cash-settled index options on the markets for the
underlying stocks at the close on expiration Fridays especially during
the quarterly expirations of the third Friday of March, June, September
and December when options, index futures, and options on index futures
all expire simultaneously. The Commission expressed concerns that p.m.-
settlement was believed to have contributed to above-average volume and
added market volatility on those days, which sometimes led to sharp
price movements during the last hour of trading, as a consequence of
which the close of trading on the quarterly expiration Friday became
known as the ``triple witching hour.'' The Commission observed that
besides contributing to investor anxiety, heightened volatility during
the expiration periods created the opportunity for manipulation and
other abusive trading practices in anticipation of the liquidity
constraints.\20\
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 65256 (September 2,
2011), 76 FR 55569 (September 9, 2011) (approving SR-C2-2011-008).
---------------------------------------------------------------------------
However, the Exchange believes that the above concerns that have
led to the transition to a.m. settlement for index derivatives have
been largely mitigated. It believes that expiration pressure in the
underlying cash markets at the close has been greatly reduced with the
advent of multiple primary listing and unlisted trading privilege
markets, and that trading is now widely dispersed among many market
centers. Additionally, the Exchange notes that opening procedures in
the 1990s were deemed acceptable to mitigate one-sided order flow
driven by index option expiration and that Nasdaq uses an automated
closing cross procedure and has a closing order type that facilitates
orderly closings. The Nasdaq closing procedures are well-equipped to
mitigate imbalance pressure at the close. In addition, after-hours
trading now provides market participants with an alternative to help
offset market-on-close imbalances.\21\
---------------------------------------------------------------------------
\21\ C2 made similar arguments to justify Commission approval of
listing of SPXPM. See id.
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. NDXPM options would be
available for trading to all market participants. The proposed rule
change will facilitate the listing and trading of a novel option
product that will enhance competition among market participants, to the
benefit of investors and the marketplace. The listing of NDXPM will
enhance competition by providing investors with an additional
investment vehicle, in a fully-electronic trading environment, through
which investors can gain and hedge exposure to NASDAQ-100 stocks.
Further, this product could offer a competitive alternative to other
existing investment products that seek to allow investors to gain broad
market exposure. Also, the Exchange notes that it is possible for other
exchanges to develop or license the use of a new or different index to
compete with the NASDAQ-100 and seek Commission approval to list and
trade options on such an index.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. 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 (i) as the Commission may
designate up to 90 days of such date 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 shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. 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-Phlx-2017-04 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2017-04. 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 Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
[[Page 9263]]
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2017-04 and should be
submitted on or before February 24, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02258 Filed 2-2-17; 8:45 am]
BILLING CODE 8011-01-P
