Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To Establish a Nonstandard Expirations Pilot Program on a Pilot Basis, for an Initial Period of Twelve Months From the Date of Approval of This Proposed Rule Change, 50921-50924 [2017-23831]

Download as PDF Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices 50921 Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION the most significant aspects of such statements. Electronic Comments [Release No. 34–81975; File No. SR–Phlx– 2017–79] A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MIAX–2017–44 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. asabaliauskas on DSKBBXCHB2PROD with NOTICES All submissions should refer to File Number SR–MIAX–2017–44. 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 (http://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 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MIAX–2017–44 and should be submitted on or before November 24, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.38 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–23825 Filed 11–1–17; 8:45 am] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To Establish a Nonstandard Expirations Pilot Program on a Pilot Basis, for an Initial Period of Twelve Months From the Date of Approval of This Proposed Rule Change October 27, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 12, 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. On October 26, 2017, the Exchange filed Amendment No.1 to the proposal to amend and replace the original filing of SR–Phlx–2017–79 in its entirety. The Commission is publishing this notice, as modified by Amendment No. 1, to 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 [sic] a [sic] proposal [sic] to establish a Nonstandard Expirations Pilot Program on a pilot basis, for an initial period of twelve months from the date of approval of this proposed rule change. The text of the proposed rule change is available on the Exchange’s Web site at http://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 BILLING CODE 8011–01–P 1 15 38 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 22:28 Nov 01, 2017 2 17 Jkt 244001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00067 Fmt 4703 Sfmt 4703 1. Purpose The purpose of this rule filing is to permit the listing and trading, on a pilot basis, of p.m.-settled options on broadbased indexes with nonstandard expiration dates for an initial period of twelve months (the ‘‘Nonstandard Expirations Pilot Program’’ or ‘‘Pilot Program’’) from the date of approval of this proposed rule change.3 The Pilot Program would permit both weekly expirations (‘‘Weekly Expirations’’) and end of month (‘‘EOM’’) expirations as explained below. Contract terms for the Weekly Expirations and EOM expirations will be similar to those of the a.m. settled broad-based index options, except that the exercise settlement value will be based on the index value derived from the closing prices of component stocks. Weekly Expirations The Exchange proposes to add new subsection (b)(vii)(1), Weekly Expirations, to Rule 1101A, Terms of Options Contracts. Under the proposed new rule the Exchange would be permitted to open for trading Weekly Expirations on any broad-based index eligible for standard options trading to expire on any Monday, Wednesday, or Friday (other than the third Friday-ofthe-month or days that coincide with an EOM expiration). Weekly Expirations would be subject to all provisions of Rule 1101A and would be treated the same as options on the same underlying index that expire on the third Friday of the expiration month. Unlike the standard monthly options, however, Weekly Expirations would be p.m.settled. New series in Weekly 3 P.M.-settled NASDAQ–100 index options with standard third Friday of the month expiration dates (‘‘NDXPM’’) have previously been approved for listing on the Exchange on a pilot basis. NDXPM and NDX are separate option classes. See Securities Exchange Act Release No. 81293 (August 2, 2017), 82 FR 37138 (August 8, 2017) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Permit the Listing and Trading of P.M.-Settled NASDAQ–100 Index(R) Options on a Pilot Basis). The Exchange anticipates that it will file a proposed rule change in the near future to move these NDXPM index options with standard third Friday of the month expiration dates to the NDX index option class. The Exchange notes that the Chicago Board Options Exchange (‘‘CBOE’’) recently did likewise with its P.M.-settled S&P 500 Index Options (‘‘SPXPM’’). See Securities Exchange Act Release No. 80060 (February 17, 2017), 82 FR 11673 (February 24, 2017) (approving SR–CBOE– 2016–091). E:\FR\FM\02NON1.SGM 02NON1 50922 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices asabaliauskas on DSKBBXCHB2PROD with NOTICES Expirations could be added up to and including on the expiration date for an expiring Weekly Expiration. The maximum number of expirations that could be listed for each Weekly Expiration (i.e., a Monday expiration, Wednesday expiration, or Friday expiration, as applicable) in a given class would be the same as the maximum number of expirations permitted for standard options on the same broad-based index. Weekly Expirations would not need to be for consecutive Monday, Wednesday, or Friday expirations as applicable. However, the expiration date of a nonconsecutive expiration would not be permitted beyond what would be considered the last expiration date if the maximum number of expirations were listed consecutively. Weekly Expirations that are first listed in a given class could expire up to four weeks from the actual listing date. If the last trading day of a month were a Monday, Wednesday, or Friday and the Exchange were to list EOMs and Weekly Expirations as applicable in a given class, the Exchange would list an EOM instead of a Weekly Expiration in the given class. Other expirations in the same class would not be counted as part of the maximum number of Weekly Expirations for a broad-based index class. If the Exchange were not open for business on a respective Monday, the normally Monday expiring Weekly Expirations would expire on the following business day. If the Exchange were not open for business on a respective Wednesday or Friday, the normally Wednesday or Friday expiring Weekly Expirations would expire on the previous business day. End of Month (‘‘EOM’’) Expirations Under the proposal, the Exchange could open for trading EOMs on any broad-based index eligible for standard options trading to expire on last trading day of the month. EOMs would be subject to all provisions of Rule 1101A and treated the same as options on the same underlying index that expire on the third Friday of the expiration month. However, the EOMs would be P.M.-settled and new series in EOMs could be added up to and including on the expiration date for an expiring EOM. The maximum number of expirations that could be listed for EOMs in a given class would be the same as the maximum number of expirations permitted for standard options on the same broad-based index. EOM expirations would not need to be for consecutive end of month expirations. However, the expiration date of a nonconsecutive expiration may not be VerDate Sep<11>2014 22:28 Nov 01, 2017 Jkt 244001 beyond what would be considered the last expiration date if the maximum number of expirations were listed consecutively. EOMs that are first listed in a given class could expire up to four weeks from the actual listing date. Other expirations would not be counted as part of the maximum numbers of EOM expirations for a broad-based index class. Contract Terms Trading Rules Weekly Expirations and EOMs would be subject to the same rules that currently govern the trading of standard monthly broad-based index options, including sales practice rules, margin requirements, and floor trading procedures. Contract terms for Weekly Expirations and EOMs would be the same as those for standard monthly broad-based index options. Since Weekly Expirations and EOMs will be a new type of series, and not a new class, the Exchange proposes that Weekly Expirations and EOMs shall be aggregated for any applicable reporting and other requirements.4 Pursuant to new subsection (b)(vii)(4) of Rule 1101A, transactions in Weekly Expirations and EOMs could be effected on the Exchange between the hours of 9:30 a.m. (Eastern Time) and 4:15 p.m. (Eastern Time). The Exchange has analyzed its capacity and represents that it believes the Exchange and the Options Price Reporting Authority (‘‘OPRA’’) have the necessary systems capacity to handle any additional traffic associated with the listing of the maximum number nonstandard expirations permitted under the Pilot. Pilot Program As stated above, this proposal is to establish a Nonstandard Expirations Pilot Program for broad-based index options on a pilot basis, for an initial period of twelve months from the date of approval of this proposed rule change. If the Exchange were to propose an extension of the Pilot or should the Exchange propose to make the Pilot permanent, the Exchange would submit a filing proposing such amendments to the Pilot. Further, any positions established under the Pilot would not be impacted 4 See Rule 1001A(d) which sets forth the reporting requirements for certain market indexes that do not have position limits, including NDX. The Exchange is adding Nonstandard Expirations to Rule 1001A(e), Aggregation, to reflect the aggregation requirement. The Exchange notes that the proposed aggregation is consistent with the aggregation requirements for other types of option series (e.g. quarterly expiring options) that are listed on the Exchange and which do not expires on the customary ‘‘third Friday’’. PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 by the expiration of the Pilot. For example, if the Exchange lists a Weekly Expiration or EOM that expires after the Pilot expires (and is not extended) then those positions would continue to exist. However, any further trading in those series would be restricted to transactions where at least one side of the trade is a closing transaction. As part of the Pilot, the Exchange will submit a Pilot report to the Commission at least two months prior to the expiration date of the Pilot (the ‘‘annual report’’). The annual report will contain an analysis of volume, open interest and trading patterns. In addition, for series that exceed certain minimum open interest parameters, the annual report will provide analysis of index price volatility and, if needed, share trading activity. The annual report will be provided to the Commission on a confidential basis. Analysis of Volume and Open Interest For all Weekly Expirations and EOM series, the annual report will contain the following volume and open interest data for each broad-based index overlying Weekly Expiration and EOM options: (1) Monthly volume aggregated for all Weekly Expiration and EOM series, (2) Volume in Weekly Expiration and EOM series aggregated by expiration date, (3) Month-end open interest aggregated for all Weekly Expiration and EOM series, (4) Month-end open interest for EOM series aggregated by expiration date and open interest for Weekly Expiration series aggregated by expiration date, (5) Ratio of monthly aggregate volume in Weekly Expiration and EOM series to total monthly class volume, and (6) Ratio of month-end open interest in EOM series to total month-end class open interest and ratio of open interest in each Weekly Expiration series to total class open interest. In addition, the annual report will contain the information noted above for standard Expiration Friday, AM-settled series, if applicable, for the period covered in the pilot report as well as for the six-month period prior to the initiation of the pilot. Upon request by the SEC, the Exchange will provide a data file containing: (1) Weekly Expiration and EOM option volume data aggregated by series, and (2) Weekly Expiration open interest for each expiring series and EOM month-end open interest for expiring series. E:\FR\FM\02NON1.SGM 02NON1 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices Monthly Analysis of Weekly Expiration and EOM Trading Patterns In the annual report, the Exchange also proposes to identify Weekly Expiration and EOM trading patterns by undertaking a time series analysis of open interest in Weekly Expiration and EOM series aggregated by expiration date compared to open interest in nearterm standard Expiration Friday A.M.settled series in order to determine whether users are shifting positions from standard series to Weekly Expiration and EOM series. Declining open interest in standard series accompanied by rising open interest in Weekly Expiration and EOM series would suggest that users are shifting positions. asabaliauskas on DSKBBXCHB2PROD with NOTICES Provisional Analysis of Index Price Volatility and Share Trading Activity For each Weekly Expiration and EOM expiration that has open interest that exceeds certain minimum thresholds, the annual report will contain the following analysis related to index price changes and, if needed, underlying share trading volume at the close on expiration dates: (1) a comparison of index price changes at the close of trading on a given expiration date with comparable price changes from a control sample. The data will include a calculation of percentage price changes for various time intervals and compare that information to the respective control sample. Raw percentage price change data as well as percentage price change data normalized for prevailing market volatility, as measured by an appropriate index agreed by the Commission and the Exchange, will be provided; and (2) if needed, 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 Weekly Expiration and EOM expirations. The data, if needed, will 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 selecting the component securities, and sample periods will be determined by the Exchange and the Commission. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) VerDate Sep<11>2014 22:28 Nov 01, 2017 Jkt 244001 of the Act,5 in general, and furthers the objectives of Section 6(b)(5) of the Act,6 in particular, in that it is 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, by expanding the ability of investors to hedge risks against market movements stemming from economic releases or market events that occur during the month and at the end of the month. Accordingly, the Exchange believes that weekly expirations and EOMs should create greater trading and hedging opportunities and flexibility, and provide customers with the ability to more closely tailor their investment objectives. 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. Specifically, the Exchange does not believe the proposal will impose any burden on intramarket competition as all market participants will be treated in the same manner with respect to Weekly Expirations and EOMs. Additionally, the Exchange does not believe the proposal will impose any burden on intermarket competition as market participants are welcome to become members and trade at Phlx if they determine that this proposed rule change has made Phlx more attractive or favorable. Finally, all options exchanges are free to compete by listing and trading their own broad-based index options with weekly or end of month expirations. 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, 5 15 6 15 PO 00000 Fmt 4703 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, as modified by Amendment No.1, is consistent with the Act. In particular, the Commission solicits comment on the following: • Will the pilot data contemplated in this notice allow the Commission to determine whether the weekly and monthly PM-settled options proposed in this filing have adverse effects on market volatility and the operation of fair and orderly markets in the underlying cash market? • Will the pilot data contemplated in this notice allow the Commission to determine whether the weekly and monthly PM-settled options proposed in this filing have adverse effects on liquidity, volume, open interest, trading patterns, and volatility in other option contracts with standard expirations? • Will the pilot data contemplated in this notice allow the Commission to determine whether the weekly and monthly PM-settled options proposed in this filing have adverse effects on index price volatility? • Will the weekly and monthly PMsettled options proposed in this filing affect the market for options contracts with nonstandard expirations offered by CBOE? If so, how? In addition, how would this proposal affect the data and information related to nonstandard expirations that are provided by CBOE? • What concerns do market participants have related to the proposed Nonstandard Expirations Pilot Program? If any, please be specific in describing your concerns. If any, will the pilot data contemplated in this notice allow the Commission to examine whether the concerns are valid? Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2017–79 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00069 50923 Sfmt 4703 E:\FR\FM\02NON1.SGM 02NON1 50924 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2017–79. 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 (http://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 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx–2017–79, and should be submitted on or before November 24, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–23831 Filed 11–1–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION asabaliauskas on DSKBBXCHB2PROD with NOTICES [Release No. 34–81969; File No. SR–MRX– 2017–23] Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to an Optional Kill Switch Protection October 27, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 7 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 22:28 Nov 01, 2017 Jkt 244001 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 18, 2017, Nasdaq MRX, LLC (‘‘MRX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II 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. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to memorialize an optional Kill Switch protection.3 The Kill Switch allows Members to cancel open orders and prevent new order submission. The text of the proposed rule change is available on the Exchange’s Web site at www.ise.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 The Exchange proposes to memorialize its Kill Switch risk protection which is applicable to all Members at MRX Rule 711(d). The Kill Switch allows Members to cancel open orders and prevent new order submission. This feature provides Members with a powerful risk management tool for immediate control of their order activity. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Today, this feature is offered to Members. MRX transitioned from its legacy trading system to INET, the current technology, in 2017. While MRX offered this feature on its legacy system, the feature was not codified in the MRX Rulebook. At this time, the Exchange is codifying the Kill Switch feature to reflect the functionality. 2 17 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 The Kill Switch is an optional tool that enables Members to initiate a message(s) 4 [sic] to the trading system (‘‘System’’) to promptly cancel orders and restrict entry of new orders until reentry has been enabled. Members may submit a request to the System to cancel orders for that Member. Members may not remove orders by symbol using the Kill Switch. The System will send an automated message to the Member when a Kill Switch request has been processed by the Exchange’s System.5 The Member must send a message to the Exchange to request the cancellation of all orders for the Member. The Member is unable to enter additional orders until re-entry has been enabled pursuant to subsection (d)(2) of Rule 711. Proposed subsection (d)(2) stipulates that after orders are cancelled by the Member utilizing the Kill Switch, the Member is unable to enter additional orders until the Member has made a request to the Exchange and Exchange staff has set a re-entry indicator to enable re-entry.6 Once enabled for reentry, the System will send a Re-entry Notification Message to the Member. The applicable Clearing Member for that Member also is notified of the re-entry into the System after orders are cancelled as a result of the Kill Switch, provided the Clearing Member has requested to receive such notification. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 7 in general, and furthers the objectives of Section 6(b)(5) of the Act 8 in particular, in that it is 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, by memorializing a risk protection available to Exchange Members. This risk feature promotes policy goals of the Commission which has encouraged execution venues, exchange and nonexchange alike, to offer risk protection tools and other mechanisms to decrease risk and increase stability. The 4 Members are able to send a message to the Exchange to initiate the Kill Switch or they may contact the Exchange directly. A message to remove orders may be sent through FIX, OTTO or Precise. 5 Opening Sweep Orders will also be cancelled. Consistent with current auction functionality, PIM auction orders and responses will not be cancelled. See MRX Rule 723. Other auctions orders and responses would cancel. Quotes are unaffected. 6 The Member must directly and verbally contact the Exchange to request the re-set. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). E:\FR\FM\02NON1.SGM 02NON1

Agencies

[Federal Register Volume 82, Number 211 (Thursday, November 2, 2017)]
[Notices]
[Pages 50921-50924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23831]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81975; File No. SR-Phlx-2017-79]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, To Establish a 
Nonstandard Expirations Pilot Program on a Pilot Basis, for an Initial 
Period of Twelve Months From the Date of Approval of This Proposed Rule 
Change

October 27, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 12, 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. On October 26, 2017, 
the Exchange filed Amendment No.1 to the proposal to amend and replace 
the original filing of SR-Phlx-2017-79 in its entirety. The Commission 
is publishing this notice, as modified by Amendment No. 1, to 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 [sic] a [sic] proposal [sic] to establish 
a Nonstandard Expirations Pilot Program on a pilot basis, for an 
initial period of twelve months from the date of approval of this 
proposed rule change.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this rule filing is to permit the listing and 
trading, on a pilot basis, of p.m.-settled options on broad-based 
indexes with nonstandard expiration dates for an initial period of 
twelve months (the ``Nonstandard Expirations Pilot Program'' or ``Pilot 
Program'') from the date of approval of this proposed rule change.\3\ 
The Pilot Program would permit both weekly expirations (``Weekly 
Expirations'') and end of month (``EOM'') expirations as explained 
below. Contract terms for the Weekly Expirations and EOM expirations 
will be similar to those of the a.m. settled broad-based index options, 
except that the exercise settlement value will be based on the index 
value derived from the closing prices of component stocks.
---------------------------------------------------------------------------

    \3\ P.M.-settled NASDAQ-100 index options with standard third 
Friday of the month expiration dates (``NDXPM'') have previously 
been approved for listing on the Exchange on a pilot basis. NDXPM 
and NDX are separate option classes. See Securities Exchange Act 
Release No. 81293 (August 2, 2017), 82 FR 37138 (August 8, 2017) 
(Order Granting Approval of a Proposed Rule Change, as Modified by 
Amendment Nos. 1 and 2, To Permit the Listing and Trading of P.M.-
Settled NASDAQ-100 Index(R) Options on a Pilot Basis). The Exchange 
anticipates that it will file a proposed rule change in the near 
future to move these NDXPM index options with standard third Friday 
of the month expiration dates to the NDX index option class. The 
Exchange notes that the Chicago Board Options Exchange (``CBOE'') 
recently did likewise with its P.M.-settled S&P 500 Index Options 
(``SPXPM''). See Securities Exchange Act Release No. 80060 (February 
17, 2017), 82 FR 11673 (February 24, 2017) (approving SR-CBOE-2016-
091).
---------------------------------------------------------------------------

Weekly Expirations
    The Exchange proposes to add new subsection (b)(vii)(1), Weekly 
Expirations, to Rule 1101A, Terms of Options Contracts. Under the 
proposed new rule the Exchange would be permitted to open for trading 
Weekly Expirations on any broad-based index eligible for standard 
options trading to expire on any Monday, Wednesday, or Friday (other 
than the third Friday-of-the-month or days that coincide with an EOM 
expiration). Weekly Expirations would be subject to all provisions of 
Rule 1101A and would be treated the same as options on the same 
underlying index that expire on the third Friday of the expiration 
month. Unlike the standard monthly options, however, Weekly Expirations 
would be p.m.-settled. New series in Weekly

[[Page 50922]]

Expirations could be added up to and including on the expiration date 
for an expiring Weekly Expiration.
    The maximum number of expirations that could be listed for each 
Weekly Expiration (i.e., a Monday expiration, Wednesday expiration, or 
Friday expiration, as applicable) in a given class would be the same as 
the maximum number of expirations permitted for standard options on the 
same broad-based index. Weekly Expirations would not need to be for 
consecutive Monday, Wednesday, or Friday expirations as applicable. 
However, the expiration date of a non-consecutive expiration would not 
be permitted beyond what would be considered the last expiration date 
if the maximum number of expirations were listed consecutively. Weekly 
Expirations that are first listed in a given class could expire up to 
four weeks from the actual listing date. If the last trading day of a 
month were a Monday, Wednesday, or Friday and the Exchange were to list 
EOMs and Weekly Expirations as applicable in a given class, the 
Exchange would list an EOM instead of a Weekly Expiration in the given 
class. Other expirations in the same class would not be counted as part 
of the maximum number of Weekly Expirations for a broad-based index 
class. If the Exchange were not open for business on a respective 
Monday, the normally Monday expiring Weekly Expirations would expire on 
the following business day. If the Exchange were not open for business 
on a respective Wednesday or Friday, the normally Wednesday or Friday 
expiring Weekly Expirations would expire on the previous business day.
End of Month (``EOM'') Expirations
    Under the proposal, the Exchange could open for trading EOMs on any 
broad-based index eligible for standard options trading to expire on 
last trading day of the month. EOMs would be subject to all provisions 
of Rule 1101A and treated the same as options on the same underlying 
index that expire on the third Friday of the expiration month. However, 
the EOMs would be P.M.-settled and new series in EOMs could be added up 
to and including on the expiration date for an expiring EOM.
    The maximum number of expirations that could be listed for EOMs in 
a given class would be the same as the maximum number of expirations 
permitted for standard options on the same broad-based index. EOM 
expirations would not need to be for consecutive end of month 
expirations. However, the expiration date of a non-consecutive 
expiration may not be beyond what would be considered the last 
expiration date if the maximum number of expirations were listed 
consecutively. EOMs that are first listed in a given class could expire 
up to four weeks from the actual listing date. Other expirations would 
not be counted as part of the maximum numbers of EOM expirations for a 
broad-based index class.
Contract Terms Trading Rules
    Weekly Expirations and EOMs would be subject to the same rules that 
currently govern the trading of standard monthly broad-based index 
options, including sales practice rules, margin requirements, and floor 
trading procedures. Contract terms for Weekly Expirations and EOMs 
would be the same as those for standard monthly broad-based index 
options. Since Weekly Expirations and EOMs will be a new type of 
series, and not a new class, the Exchange proposes that Weekly 
Expirations and EOMs shall be aggregated for any applicable reporting 
and other requirements.\4\ Pursuant to new subsection (b)(vii)(4) of 
Rule 1101A, transactions in Weekly Expirations and EOMs could be 
effected on the Exchange between the hours of 9:30 a.m. (Eastern Time) 
and 4:15 p.m. (Eastern Time).
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    \4\ See Rule 1001A(d) which sets forth the reporting 
requirements for certain market indexes that do not have position 
limits, including NDX. The Exchange is adding Nonstandard 
Expirations to Rule 1001A(e), Aggregation, to reflect the 
aggregation requirement. The Exchange notes that the proposed 
aggregation is consistent with the aggregation requirements for 
other types of option series (e.g. quarterly expiring options) that 
are listed on the Exchange and which do not expires on the customary 
``third Friday''.
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    The Exchange has analyzed its capacity and represents that it 
believes the Exchange and the Options Price Reporting Authority 
(``OPRA'') have the necessary systems capacity to handle any additional 
traffic associated with the listing of the maximum number nonstandard 
expirations permitted under the Pilot.
Pilot Program
    As stated above, this proposal is to establish a Nonstandard 
Expirations Pilot Program for broad-based index options on a pilot 
basis, for an initial period of twelve months from the date of approval 
of this proposed rule change. If the Exchange were to propose an 
extension of the Pilot or should the Exchange propose to make the Pilot 
permanent, the Exchange would submit a filing proposing such amendments 
to the Pilot.
    Further, any positions established under the Pilot would not be 
impacted by the expiration of the Pilot. For example, if the Exchange 
lists a Weekly Expiration or EOM that expires after the Pilot expires 
(and is not extended) then those positions would continue to exist.
    However, any further trading in those series would be restricted to 
transactions where at least one side of the trade is a closing 
transaction.
    As part of the Pilot, the Exchange will submit a Pilot report to 
the Commission at least two months prior to the expiration date of the 
Pilot (the ``annual report''). The annual report will contain an 
analysis of volume, open interest and trading patterns. In addition, 
for series that exceed certain minimum open interest parameters, the 
annual report will provide analysis of index price volatility and, if 
needed, share trading activity. The annual report will be provided to 
the Commission on a confidential basis.
Analysis of Volume and Open Interest
    For all Weekly Expirations and EOM series, the annual report will 
contain the following volume and open interest data for each broad-
based index overlying Weekly Expiration and EOM options:
    (1) Monthly volume aggregated for all Weekly Expiration and EOM 
series,
    (2) Volume in Weekly Expiration and EOM series aggregated by 
expiration date,
    (3) Month-end open interest aggregated for all Weekly Expiration 
and EOM series,
    (4) Month-end open interest for EOM series aggregated by expiration 
date and open interest for Weekly Expiration series aggregated by 
expiration date,
    (5) Ratio of monthly aggregate volume in Weekly Expiration and EOM 
series to total monthly class volume, and
    (6) Ratio of month-end open interest in EOM series to total month-
end class open interest and ratio of open interest in each Weekly 
Expiration series to total class open interest.
    In addition, the annual report will contain the information noted 
above for standard Expiration Friday, AM-settled series, if applicable, 
for the period covered in the pilot report as well as for the six-month 
period prior to the initiation of the pilot.
    Upon request by the SEC, the Exchange will provide a data file 
containing: (1) Weekly Expiration and EOM option volume data aggregated 
by series, and (2) Weekly Expiration open interest for each expiring 
series and EOM month-end open interest for expiring series.

[[Page 50923]]

Monthly Analysis of Weekly Expiration and EOM Trading Patterns
    In the annual report, the Exchange also proposes to identify Weekly 
Expiration and EOM trading patterns by undertaking a time series 
analysis of open interest in Weekly Expiration and EOM series 
aggregated by expiration date compared to open interest in near-term 
standard Expiration Friday A.M.-settled series in order to determine 
whether users are shifting positions from standard series to Weekly 
Expiration and EOM series. Declining open interest in standard series 
accompanied by rising open interest in Weekly Expiration and EOM series 
would suggest that users are shifting positions.
Provisional Analysis of Index Price Volatility and Share Trading 
Activity
    For each Weekly Expiration and EOM expiration that has open 
interest that exceeds certain minimum thresholds, the annual report 
will contain the following analysis related to index price changes and, 
if needed, underlying share trading volume at the close on expiration 
dates:
    (1) a comparison of index price changes at the close of trading on 
a given expiration date with comparable price changes from a control 
sample. The data will include a calculation of percentage price changes 
for various time intervals and compare that information to the 
respective control sample. Raw percentage price change data as well as 
percentage price change data normalized for prevailing market 
volatility, as measured by an appropriate index agreed by the 
Commission and the Exchange, will be provided; and
    (2) if needed, 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 Weekly Expiration 
and EOM expirations. The data, if needed, will 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 selecting the component securities, and sample 
periods will be determined by the Exchange and the Commission.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ in particular, in that it is 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, 
by expanding the ability of investors to hedge risks against market 
movements stemming from economic releases or market events that occur 
during the month and at the end of the month. Accordingly, the Exchange 
believes that weekly expirations and EOMs should create greater trading 
and hedging opportunities and flexibility, and provide customers with 
the ability to more closely tailor their investment objectives.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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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. Specifically, the Exchange does 
not believe the proposal will impose any burden on intramarket 
competition as all market participants will be treated in the same 
manner with respect to Weekly Expirations and EOMs. Additionally, the 
Exchange does not believe the proposal will impose any burden on 
intermarket competition as market participants are welcome to become 
members and trade at Phlx if they determine that this proposed rule 
change has made Phlx more attractive or favorable. Finally, all options 
exchanges are free to compete by listing and trading their own broad-
based index options with weekly or end of month expirations.

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, as modified by Amendment No.1, is consistent with the Act. In 
particular, the Commission solicits comment on the following:
     Will the pilot data contemplated in this notice allow the 
Commission to determine whether the weekly and monthly PM-settled 
options proposed in this filing have adverse effects on market 
volatility and the operation of fair and orderly markets in the 
underlying cash market?
     Will the pilot data contemplated in this notice allow the 
Commission to determine whether the weekly and monthly PM-settled 
options proposed in this filing have adverse effects on liquidity, 
volume, open interest, trading patterns, and volatility in other option 
contracts with standard expirations?
     Will the pilot data contemplated in this notice allow the 
Commission to determine whether the weekly and monthly PM-settled 
options proposed in this filing have adverse effects on index price 
volatility?
     Will the weekly and monthly PM-settled options proposed in 
this filing affect the market for options contracts with nonstandard 
expirations offered by CBOE? If so, how? In addition, how would this 
proposal affect the data and information related to nonstandard 
expirations that are provided by CBOE?
     What concerns do market participants have related to the 
proposed Nonstandard Expirations Pilot Program? If any, please be 
specific in describing your concerns. If any, will the pilot data 
contemplated in this notice allow the Commission to examine whether the 
concerns are valid?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2017-79 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 50924]]

Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2017-79. 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 (http://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 
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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2017-79, and should be 
submitted on or before November 24, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23831 Filed 11-1-17; 8:45 am]
 BILLING CODE 8011-01-P