Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.4-O (Series of Options Open for Trading), 55686-55689 [2017-25229]
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Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices
existing rules. These provisions clarify
that amendments to the New Governing
Documents constitute proposed rule
changes within the meaning of Section
19(b)(2) of the Act and Rule 19b–4
thereunder, and are subject to the filing
requirements of Section 19 of the Act
and the rules and regulations
thereunder.
The Commission also finds that the
prohibition on the use of regulatory
fines, fees, or penalties to fund
dividends is consistent with Section
6(b)(1) of the Act, because it will further
the Exchange’s ability to effectively
comply with its statutory obligations
and is designed to ensure that the
regulatory authority of the Exchange is
not improperly used.113 This restriction
on the use of regulatory funds is
intended to preclude the Exchange from
using its authority to raise Regulatory
Funds for the purpose of benefiting its
shareholders.114
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C. Related Rule Amendments
The Exchange proposes to amend its
Rules to reflect the changes to its
constituent documents through the
adoption of the New Governing
Documents to replace the Current
Governing Documents. The Exchange
states that it is amending its Rules to: (i)
Clarify any Rules that cross-reference
the Current Governing Documents in the
rule text, since those documents are
being replaced by the New Governing
Documents; 115 or (ii) relocate in the
Rules the definitions for a number of
defined terms used in the Rules that
currently refer back to the Current LLC
Agreement or the Current Constitution
for their meanings.116
113 See, e.g., Securities Exchange Act Release No.
51029 (January 12, 2005), 70 FR 3233, 3241 (January
21, 2005) (SR–ISE–2004–29) (approving an ISE rule
interpretation that requires that revenues received
from regulatory fees or regulatory penalties be
segregated and applied to fund the legal, regulatory,
and surveillance operations of the Exchange and
not used to pay dividends to the holders of Class
A Common Stock).
114 See Notice, supra note 3, at 46853.
115 The Exchange states that all such changes are
non-substantive, primarily changing terminology,
such as changing the term ‘‘Constitution’’ to ‘‘ByLaws’’ and removing references to the ‘‘Current LLC
Agreement.’’ See id. at 46862.
116 See id. at 46851. The Exchange provides that
all the provisions governing the trading privileges
associated with the Exchange Rights in the Current
Governing Documents are substantially set forth in
the Rules. See id. The Commission notes that,
currently on MRX, the Exchange Rights do not
convey any ownership rights and only provide for
voting rights for representation, through Exchange
Directors, on the Board and the ability to transact
on the Exchange. The Exchange represents that,
under its Rules, the holders of Exchange Rights will
continue to have the same trading privileges they
currently hold as PMMs, CMMs, and EAMs, and the
new Board structure of the Exchange will not
change any trading privileges. Further, under the
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Specifically, the Exchange proposed
changes to its Rules to, among other
things:
• Relocate the concept of CMM Rights
from the Current LLC Agreement 117 to
New Rule 100(a)(12), which will state
that the term ‘‘CMM Rights’’ means the
non-transferable rights held by a
Competitive Market Maker.118
• Relocate to New Rule 100(a)(13) the
definition of ‘‘Competitive Market
Maker,’’ 119 which is currently only
defined in Section 13.1(f) of the Current
Constitution.
• Relocate the concept of EAM Rights
to New Rule 100(a)(16), which will state
that the term ‘‘EAM Rights’’ means the
non-transferable rights held by an
Electronic Access Member.120
• Relocate to New Rule 100(a)(17) the
definition of ‘‘Electronic Access
Member,’’ 121 which is currently only
defined in Article XIII, Section 13.1(j),
of the Current Constitution.
• Relocate the definitions for
‘‘Exchange Transaction,’’ ‘‘good
standing,’’ and ‘‘System’’ from the
Current Constitution to the Rules,122
and delete Rule 100(a)(22A), defining
‘‘LLC Agreement,’’ as that term would
no longer be used in the Rules, as
amended by the proposed rule change.
• Relocate the concept of PMM Rights
from Article VI of the Current LLC
Agreement to New Rule 100(a)(41),
which will state that the term ‘‘PMM
Rights’’ means the non-transferable
rights held by a Primary Market Maker.
• Relocate to New Rule 100(a)(42) the
definition for ‘‘Primary Market
Maker’’ 123 from Section 13.1(z) of the
Current Constitution.
The Commission believes that the
proposed changes to MRX’s Rules are
consistent with the Act and, in
particular Section 6(b)(1) of the Act,124
which requires among other things that
a national securities exchange be so
organized and have the capacity to carry
out the purposes of the Act. The
Commission notes that many of the
proposed changes to MRX’s Rules are
technical in nature, such as
renumbering of Rules or conforming
terminology to reflect the replacement
of the Current Governing Documents
with the New Governing Documents.
The Commission also notes that, as
described above, the Exchange proposes
to relocate definitions for a number of
defined terms used in the Rules from
the Current Governing Documents into
the Rules.
New Governing Documents, the holders of
Exchange Rights will continue to have voting rights
for representation on the Board through the election
of Member Representative Directors. See id. at
46850–51.
117 See Current LLC Agreement, Article VI,
Section 6.2(b).
118 CMM Rights are non-transferable rights. The
holders of CMM Rights may not lease or sell these
rights. As discussed above, all Exchange Rights (i.e.,
PMM, CMM, and EAM Rights) convey only voting
rights and trading privileges on the Exchange. See
Notice, supra note 3, at 46863 n.121.
119 The term ‘‘Competitive Market Maker’’
(referred to herein as ‘‘CMM’’) will be defined to
mean a Member that is approved to exercise trading
privileges associated with CMM Rights. See New
Rule 100(a)(13).
The term ‘‘Member’’ means an organization that
has been approved to exercise trading rights
associated with Exchange Rights. See current Rule
100(a)(23); New Rule 100(a)(28).
120 See supra note 118.
121 The term ‘‘Electronic Access Member’’
(referred to herein as ‘‘EAM’’) will be defined to
mean a Member that is approved to exercise trading
privileges associated with EAM Rights. See New
Rule 100(a)(17).
122 ‘‘Exchange Transaction’’ would be relocated
from Article XIII, Section 13.1(p), of the Current
Constitution to New Rule 100(a)(21), ‘‘good
standing’’ from Article XIII, Section 13.1(q), of the
Current Constitution to New Rule 100(a)(24), and
‘‘System’’ from Article XIII, Section 13.1(ee), of the
Current Constitution to New Rule 100(a)(55).
[Release No. 34–82094; File No. SR–
NYSEArca–2017–128]
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IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,125 that the
proposed rule change (SR–MRX–2017–
18) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.126
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–25232 Filed 11–21–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 6.4–O
(Series of Options Open for Trading)
November 16, 2017.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 2, 2017, NYSE Arca, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
123 The term ‘‘Primary Market Maker’’ (referred to
herein as ‘‘PMM’’) will be defined to mean a
Member that is approved to exercise trading
privileges associated with PMM Rights. See New
Rule 100(a)(42).
124 15 U.S.C. 78f(b)(1).
125 15 U.S.C. 78s(b)(2).
126 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
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Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. 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 Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 6.4–O (Series of Options Open for
Trading). The proposed rule change is
available on the Exchange’s Web site at
www.nyse.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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The purpose of the filing is to amend
Commentary .05 to Rule 6.4–O to
modify the strike price intervals for
certain Exchange Traded Funds (each an
‘‘ETF’’). Specifically, the Exchange
proposes to modify the interval setting
regime for options on SPDR® S&P 500®
ETF (‘‘SPY’’), iShares Core S&P 500 ETF
(‘‘IVV’’), and the SPDR® Dow Jones®
Industrial Average ETF (‘‘DIA’’) to allow
the Exchange to initiate $1 or greater
strike price intervals above $200.
Through this filing, the Exchange
intends to make SPY, IVV, and DIA
options more tailored and easier for
investors and traders to use, which is
consistent with the rules of other
options exchanges.4
4 See,
e.g., Chicago Board of Options Exchange
(‘‘CBOE’’) Rule 5.5, Interpretation and Policy .08;
NASDAQ PHLX LLC (‘‘PHLX’’) Rule 1012,
Commentary .05. CBOE and PHLX both amended
their rules regarding strike setting regimes for SPY
and DIA in 2014. See Securities Exchange Act
Release Nos. 72949 (August 29, 2014) 79 FR 53089
(September 5, 2014) (SR–Phlx–2014–46) and 72990
(September 4, 2014) 79 FR 53799 (September 10,
2014) (SR–CBOE–2014–068). Earlier this year,
CBOE and PHLX further modified their rules to
include IVV in the same strike setting regime as
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Currently, the S&P 500 Index is above
2000.5 The S&P 500 Index is widely
regarded as the best single gauge of large
cap U.S. equities and is widely quoted
as an indicator of stock prices and
investor confidence in the securities
market. As a result, individual investors
often use S&P 500 Index-related
products to diversify their portfolios
and benefit from market trends.
Accordingly, the Exchange believes that
offering a wide range of S&P 500 Indexbased options affords traders and
investors important hedging and trading
opportunities. SPY and IVV are
identical in all material respects and are
designed to track the performance of the
S&P 500 Index. Shares of SPY and IVV
are currently priced around 1/10th the
value of S&P 500 Index. The Dow Jones
Industrial Average (‘‘DJIA’’) is currently
above 20,000 and is one of the most
widely followed market indices.6 Shares
of DIA are currently priced around 1/
100th of the DJIA. Accordingly, SPY and
IVV strike prices—having a multiplier of
$100—reflect a value roughly equal to 1/
10th of the value of the S&P 500 Index.
For example, if the S&P 500 Index is at
1972.56, shares of SPY and IVV might
have a value of approximately 197.26
per share. Consequently, an at-themoney option on SPY or IVV, with a
strike price of $197.00 will have a
notional value of $19,700. In general,
SPY and IVV (and, to a lesser extent,
DIA) options provide retail investors
and traders with the benefit of trading
the broad market in a manageably sized
contract.
The Exchange notes that the
popularity of options on DIA and SPY
(and, to a lesser extent, IVV) is
evidenced by the existence of monthly,
quarterly, and weekly expiration cycles
in these ETFs.7 Currently, Commentary
.05(a) to Rule 6.4–O provides that the
SPY. See Securities Exchange Act Release Nos.
80913 (June 13, 2017), 82 FR 27907 (June 19, 2017)
(SR–CBOE–2017–048) and 81246 (July 28, 2017) 82
FR 36020 (August 2, 2017) (SR–Phlx–2017–57). The
Exchange is authorized to match (and has matched)
strikes in DIA, SPY, and IVV that are listed on other
exchanges such as CBOE and PHLX. See Rule 6.4A–
O(b)(vi) (providing that the Exchange ‘‘may list an
options series that is listed by another options
exchange, provided that at the time such series was
listed it was not prohibited under the provisions of
the [Options Listing Procedure Plan or OLPP] or the
rules of the exchange that initially listed the
series’’). The proposed rule change would allow the
Exchange to initially list strike price intervals of $1
or greater in options on DIA, SPY, or IVV when the
strike price is above $200 (regardless of whether
other exchanges similarly list such strikes).
5 On October 30, 2017, the S&P 500 Index closed
at 2,572.83.
6 On October 30, 2017, the DJIA closed at
23,348.74.
7 For rules regarding quarterly or weekly options
(also known as Short Term Options or STOS), see
Commentaries .07 and .08, respectively, to Rule
6.4–O.
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55687
‘‘interval of strike prices of series of
options on Exchange-Traded Fund
Shares will be $1 or greater where the
strike price is $200 or less and $5 or
greater where the strike price is greater
than $200.’’ 8 Thus, unless the Exchange
is able to match strikes listed on other
exchanges (see supra note 4), the current
rule limits the trading and hedging
possibilities for investors on the
Exchange—particularly those investors
that would like to execute strategies that
are effective in $1 intervals. The
Exchange therefore proposes to amend
Commentary .05 to Rule 6.4–O to allow
the Exchange to initiate $1 strike price
intervals in options on SPY, IVV, and
DIA. As proposed, the modified rule
would provide that ‘‘[n]otwithstanding
any other provision of this rule
regarding the interval of strike prices of
series of options on Exchange-Traded
Fund Shares, the interval of strike prices
on options on [SPY, IVV, and DIA] will
be $1 or greater.’’ 9
The Exchange believes that modifying
the Rule to allow the Exchange to
initiate finer—i.e., one dollar—strike
intervals in SPY, IVV, and DIA, would
provide investors more efficient hedging
and trading opportunities. In particular,
the proposed ability to initiate $1
intervals, particularly above a $200
strike price, will result in having at-themoney series based upon the underlying
SPY, IVV, or DIA moving less than 1%.
The Exchange believes this strike setting
regime is consistent with slower price
movements of broad-based indices.
Furthermore, the proposed ability to
initiate $1 intervals would allow
investors to continue to employ certain
option trading strategies (e.g., risk
reduction/hedging strategies using SPY
weekly options) without the Exchange
having to wait for another exchange to
list such strikes. Considering that $1
intervals already exist below the $200
price point, and that SPY, IVV, and DIA
are above the $200 level, the Exchange
believes it would be appropriate to
modify the existing $200 level (above
which intervals increase 500% to $5) for
options on these ETFs. The Exchange
believes that eliminating the existing
$200 level would allow investors to
continue investing, trading and utilizing
8 See Rule 6.4–O, Commentary 5(a). See also Rule
6.4–O, Commentary .07 (e) (providing, in relevant
part, that [i]f the class does not trade in $1 strike
price intervals, the strike price interval for Short
Term Option Series may be (i) $0.50 or greater
where the strike price is less than $100; (ii) $1.00
or greater where the strike price is between $100
and $150; or (iii) $2.50 or greater for strike prices
greater than $150. A non-Short Term Option that is
on a class that has been selected to participate in
the Short Term Option Series Program is referred
to as a ‘‘Related non-Short Term Option’’).
9 See proposed Rule 6.4–O, Commentary 5(d).
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Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices
hedging strategies on these highly-liquid
options.
Under the current rule, the Exchange
is limited in its ability to initiate strikes
in options on IVV, DIA, and SPY over
$200. Assuming no other exchange lists
the desired strike, investors and traders
on the Exchange are unable to roll open
positions from a lower strike to a higher
strike in conjunction with the price
movement of the underlying index
because the next (higher) available
series would be $5 away above a $200
strike price.10 Thus, to initiate a
position from $200 strike to a $205
strike under the current rule, an investor
would need for the underlying product
to move 2.5% and would not be able to
execute a roll up until such a large
movement occurred. With the proposed
rule change to allow the Exchange to
initiate finer strikes in options on IVV,
DIA, and SPY over the $200 level,
however, the investor would be in a
significantly safer position of being able
to roll his open options position from a
$200 to a $201 strike price, which is
only a 0.5% move for the underlying.11
The proposed rule change would
allow the Exchange to better respond to
customer demand for SPY, IVV, and
DIA strike prices more precisely aligned
with current S&P 500 Index and DJIA
values.12 The Exchange believes that the
proposed rule change, like the other
strike price programs currently offered
by the Exchange, would benefit
investors by continuing to provide
investors the flexibility to more closely
tailor their investment and hedging
decisions using options on SPY, IVV,
and DIA. By allowing the Exchange to
initiate the listing of series of options on
SPY, IVV, and DIA in $1 intervals
between strike prices over $200, the
proposal would moderately augment the
potential total number of options series
available on the Exchange.13 However,
the Exchange believes it and the
Options Price Reporting Authority
(‘‘OPRA’’) have the necessary systems
capacity to handle any potential
additional traffic associated with this
proposed rule change. The Exchange
also believes that members will not have
a capacity issue due to the proposed
rule change. Finally, the Exchange
represents that it does not believe that
this expansion will cause fragmentation
of liquidity.
10 See
Rule 6.4–O, Commentary 5(a).
proposed Rule 6.4–O, Commentary 5(d).
12 See supra notes 5, 6.
13 As noted herein (see supra note 4), the
Exchange has matched strikes listed by other
exchanges in options on IVV, DIA and SPY.
11 See
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2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 14 of the
Act, in general, and furthers the
objectives of Section 6(b)(5),15 in
particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 10 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the proposed rule
change would promote just and
equitable principles of trade by allowing
the Exchange to initiate strikes in
options on IVV, DIA, and SPY over
$200, which would result in continued
trading and hedging opportunities in
options on these ETFs. The proposed
change would likewise ensure that such
options investors are not at a
disadvantage simply because of the
strike price.
The Exchange also believes the
proposed rule change is consistent with
Section 6(b)(1) of the Act, which
provides that the Exchange be organized
and have the capacity to be able to carry
out the purposes of the Act and the
rules and regulations thereunder, and
the rules of the Exchange. The rule
change proposal allows the Exchange to
respond to customer demand to allow
options on SPY, IVV, and DIA to trade
in $1 intervals above a $200 strike price.
The Exchange does not believe that the
proposed rule would create additional
capacity issues or affect market
functionality.
As noted above, under the current
rule (absent another exchange listing
strikes that the Exchange could
match),16 ETF options trade in wider $5
intervals above a $200 strike price,
whereas options at or below a $200
strike price trade in $1 intervals. This
creates a situation where contracts on
the same option class effectively may
not be able to execute certain strategies
such as, for example, rolling to a higher
strike price, simply because of the
arbitrary $200 strike price above which
options intervals increase by $5. This
proposal establishes a clear exception to
the current ETF interval regime for
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
16 See supra note 4.
options on SPY, IVV, and DIA to allow
the Exchange to initiate the listing of
such options to trade in $1 or greater
intervals at all strike prices.
The Exchange believes that the
proposed rule change, like other strike
price programs currently offered by the
Exchange, would remove impediments
to and perfect the mechanisms of a free
and open market and a national market
system to the benefit of investors by
giving them increased flexibility to more
closely tailor their investment and
hedging decisions. Finally, the proposal
would foster cooperation and
coordination with persons engaged in
facilitating transactions in securities as
this proposal would align Exchange
rules with those of other exchanges—
including CBOE and PHLX—to permit
finer strikes in IVV, DIA, and SPY.17
With regard to the impact of this
proposal on system capacity, the
Exchange believes it and OPRA have the
necessary systems capacity to handle
any potential additional traffic
associated with this proposed rule
change. The Exchange believes that its
members will not have a capacity issue
as a result of this proposal.
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. Rather, the
proposed rule change would enable the
Exchange to better compete with other
options exchanges that have already
adopted the proposed strike setting
regime.13 Although the Exchange is able
to match strikes listed by other
exchanges, this proposal would allow
the [sic] initiate strikes in IVV, DIA, and
SPY regardless of strikes listed on other
exchanges, which should help level the
playing field for investors investing in,
trading and utilizing hedging strategies
on these options
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 18 and Rule
14 15
17 See
15 15
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supra note 4.
U.S.C. 78s(b)(3)(A)(iii).
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19b–4(f)(6) thereunder.19 Because the
foregoing proposed rule change does
not: (i) Significantly affect the
protection of investors or the public
interest, (ii) impose any significant
burden on competition, and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 20 and Rule 19b–
4(f)(6) thereunder.21
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii), the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. As noted
above, the proposal would allow the
Exchange to initiate $1 or greater strike
price intervals above $200 for options
on SPY, DIA, and IVV. Substantially
similar rules are already in place at
CBOE and PHLX, and the Exchange
currently has the ability to list, and does
list, these strike price intervals pursuant
to its matching authority in Rule
903A(b)(vi). The Commission therefore
believes that waiver of the operative
delay is consistent with the protection
of investors and the public interest.
Therefore, the Commission designates
the proposed rule change to be operative
upon filing.22
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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.
19 17
CFR 240.19b–4(f)(6).
U.S.C. 78s(b)(3)(A).
21 17 CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
55689
[Release No. 34–82097; File No. SR–
BatsBZX–2017–72]
• 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–
NYSEArca–2017–128 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2017–128. 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
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–NYSEArca–2017–128 and
should be submitted on or before
December 13, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–25229 Filed 11–21–17; 8:45 am]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing of
a Proposed Rule Change To List and
Trade Shares of the Innovator S&P 500
15% Shield Strategy ETF Series,
Innovator S&P 500 Ø5% to Ø35%
Shield Strategy ETF Series, Innovator
S&P 500 Enhance and 10% Shield
Strategy ETF Series, and Innovator
S&P 500 Ultra Strategy ETF Series
Under Rule 14.11(i)
November 16, 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 November
7, 2017, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) (formerly known
as Bats BZX Exchange, Inc.) filed with
the Securities and Exchange
Commission (‘‘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 Substance of
the Proposed Rule Change
The Exchange filed a proposed rule
change to list and trade shares of the
Innovator S&P 500 15% Shield Strategy
ETF Series, Innovator S&P 500 ¥5% to
¥35% Shield Strategy ETF Series,
Innovator S&P 500 Enhance and 10%
Shield Strategy ETF Series and
Innovator S&P 500 Ultra Strategy ETF
Series under the Innovator ETFs Trust
(formerly, Academy Funds Trust), under
Rule 14.11(i) (‘‘Managed Fund Shares’’).
The text of the proposed rule change
is available at the Exchange’s Web site
at www.markets.cboe.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
BILLING CODE 8011–01–P
1 15
23 17
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CFR 200.30–3(a)(12).
Frm 00137
Fmt 4703
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\22NON1.SGM
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]]>Agencies
[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)]
[Notices]
[Pages 55686-55689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25229]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82094; File No. SR-NYSEArca-2017-128]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.4-O
(Series of Options Open for Trading)
November 16, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 2, 2017, NYSE Arca, Inc. (``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule
[[Page 55687]]
change as described in Items I and II below, which Items have been
prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.4-O (Series of Options Open
for Trading). The proposed rule change is available on the Exchange's
Web site at www.nyse.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 self-regulatory organization
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 those 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 parts 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 the filing is to amend Commentary .05 to Rule 6.4-O
to modify the strike price intervals for certain Exchange Traded Funds
(each an ``ETF''). Specifically, the Exchange proposes to modify the
interval setting regime for options on SPDR[supreg] S&P 500[supreg] ETF
(``SPY''), iShares Core S&P 500 ETF (``IVV''), and the SPDR[supreg] Dow
Jones[supreg] Industrial Average ETF (``DIA'') to allow the Exchange to
initiate $1 or greater strike price intervals above $200. Through this
filing, the Exchange intends to make SPY, IVV, and DIA options more
tailored and easier for investors and traders to use, which is
consistent with the rules of other options exchanges.\4\
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\4\ See, e.g., Chicago Board of Options Exchange (``CBOE'') Rule
5.5, Interpretation and Policy .08; NASDAQ PHLX LLC (``PHLX'') Rule
1012, Commentary .05. CBOE and PHLX both amended their rules
regarding strike setting regimes for SPY and DIA in 2014. See
Securities Exchange Act Release Nos. 72949 (August 29, 2014) 79 FR
53089 (September 5, 2014) (SR-Phlx-2014-46) and 72990 (September 4,
2014) 79 FR 53799 (September 10, 2014) (SR-CBOE-2014-068). Earlier
this year, CBOE and PHLX further modified their rules to include IVV
in the same strike setting regime as SPY. See Securities Exchange
Act Release Nos. 80913 (June 13, 2017), 82 FR 27907 (June 19, 2017)
(SR-CBOE-2017-048) and 81246 (July 28, 2017) 82 FR 36020 (August 2,
2017) (SR-Phlx-2017-57). The Exchange is authorized to match (and
has matched) strikes in DIA, SPY, and IVV that are listed on other
exchanges such as CBOE and PHLX. See Rule 6.4A-O(b)(vi) (providing
that the Exchange ``may list an options series that is listed by
another options exchange, provided that at the time such series was
listed it was not prohibited under the provisions of the [Options
Listing Procedure Plan or OLPP] or the rules of the exchange that
initially listed the series''). The proposed rule change would allow
the Exchange to initially list strike price intervals of $1 or
greater in options on DIA, SPY, or IVV when the strike price is
above $200 (regardless of whether other exchanges similarly list
such strikes).
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Currently, the S&P 500 Index is above 2000.\5\ The S&P 500 Index is
widely regarded as the best single gauge of large cap U.S. equities and
is widely quoted as an indicator of stock prices and investor
confidence in the securities market. As a result, individual investors
often use S&P 500 Index-related products to diversify their portfolios
and benefit from market trends. Accordingly, the Exchange believes that
offering a wide range of S&P 500 Index-based options affords traders
and investors important hedging and trading opportunities. SPY and IVV
are identical in all material respects and are designed to track the
performance of the S&P 500 Index. Shares of SPY and IVV are currently
priced around 1/10th the value of S&P 500 Index. The Dow Jones
Industrial Average (``DJIA'') is currently above 20,000 and is one of
the most widely followed market indices.\6\ Shares of DIA are currently
priced around 1/100th of the DJIA. Accordingly, SPY and IVV strike
prices--having a multiplier of $100--reflect a value roughly equal to
1/10th of the value of the S&P 500 Index. For example, if the S&P 500
Index is at 1972.56, shares of SPY and IVV might have a value of
approximately 197.26 per share. Consequently, an at-the-money option on
SPY or IVV, with a strike price of $197.00 will have a notional value
of $19,700. In general, SPY and IVV (and, to a lesser extent, DIA)
options provide retail investors and traders with the benefit of
trading the broad market in a manageably sized contract.
---------------------------------------------------------------------------
\5\ On October 30, 2017, the S&P 500 Index closed at 2,572.83.
\6\ On October 30, 2017, the DJIA closed at 23,348.74.
---------------------------------------------------------------------------
The Exchange notes that the popularity of options on DIA and SPY
(and, to a lesser extent, IVV) is evidenced by the existence of
monthly, quarterly, and weekly expiration cycles in these ETFs.\7\
Currently, Commentary .05(a) to Rule 6.4-O provides that the ``interval
of strike prices of series of options on Exchange-Traded Fund Shares
will be $1 or greater where the strike price is $200 or less and $5 or
greater where the strike price is greater than $200.'' \8\ Thus, unless
the Exchange is able to match strikes listed on other exchanges (see
supra note 4), the current rule limits the trading and hedging
possibilities for investors on the Exchange--particularly those
investors that would like to execute strategies that are effective in
$1 intervals. The Exchange therefore proposes to amend Commentary .05
to Rule 6.4-O to allow the Exchange to initiate $1 strike price
intervals in options on SPY, IVV, and DIA. As proposed, the modified
rule would provide that ``[n]otwithstanding any other provision of this
rule regarding the interval of strike prices of series of options on
Exchange-Traded Fund Shares, the interval of strike prices on options
on [SPY, IVV, and DIA] will be $1 or greater.'' \9\
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\7\ For rules regarding quarterly or weekly options (also known
as Short Term Options or STOS), see Commentaries .07 and .08,
respectively, to Rule 6.4-O.
\8\ See Rule 6.4-O, Commentary 5(a). See also Rule 6.4-O,
Commentary .07 (e) (providing, in relevant part, that [i]f the class
does not trade in $1 strike price intervals, the strike price
interval for Short Term Option Series may be (i) $0.50 or greater
where the strike price is less than $100; (ii) $1.00 or greater
where the strike price is between $100 and $150; or (iii) $2.50 or
greater for strike prices greater than $150. A non-Short Term Option
that is on a class that has been selected to participate in the
Short Term Option Series Program is referred to as a ``Related non-
Short Term Option'').
\9\ See proposed Rule 6.4-O, Commentary 5(d).
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The Exchange believes that modifying the Rule to allow the Exchange
to initiate finer--i.e., one dollar--strike intervals in SPY, IVV, and
DIA, would provide investors more efficient hedging and trading
opportunities. In particular, the proposed ability to initiate $1
intervals, particularly above a $200 strike price, will result in
having at-the-money series based upon the underlying SPY, IVV, or DIA
moving less than 1%. The Exchange believes this strike setting regime
is consistent with slower price movements of broad-based indices.
Furthermore, the proposed ability to initiate $1 intervals would allow
investors to continue to employ certain option trading strategies
(e.g., risk reduction/hedging strategies using SPY weekly options)
without the Exchange having to wait for another exchange to list such
strikes. Considering that $1 intervals already exist below the $200
price point, and that SPY, IVV, and DIA are above the $200 level, the
Exchange believes it would be appropriate to modify the existing $200
level (above which intervals increase 500% to $5) for options on these
ETFs. The Exchange believes that eliminating the existing $200 level
would allow investors to continue investing, trading and utilizing
[[Page 55688]]
hedging strategies on these highly-liquid options.
Under the current rule, the Exchange is limited in its ability to
initiate strikes in options on IVV, DIA, and SPY over $200. Assuming no
other exchange lists the desired strike, investors and traders on the
Exchange are unable to roll open positions from a lower strike to a
higher strike in conjunction with the price movement of the underlying
index because the next (higher) available series would be $5 away above
a $200 strike price.\10\ Thus, to initiate a position from $200 strike
to a $205 strike under the current rule, an investor would need for the
underlying product to move 2.5% and would not be able to execute a roll
up until such a large movement occurred. With the proposed rule change
to allow the Exchange to initiate finer strikes in options on IVV, DIA,
and SPY over the $200 level, however, the investor would be in a
significantly safer position of being able to roll his open options
position from a $200 to a $201 strike price, which is only a 0.5% move
for the underlying.\11\
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\10\ See Rule 6.4-O, Commentary 5(a).
\11\ See proposed Rule 6.4-O, Commentary 5(d).
---------------------------------------------------------------------------
The proposed rule change would allow the Exchange to better respond
to customer demand for SPY, IVV, and DIA strike prices more precisely
aligned with current S&P 500 Index and DJIA values.\12\ The Exchange
believes that the proposed rule change, like the other strike price
programs currently offered by the Exchange, would benefit investors by
continuing to provide investors the flexibility to more closely tailor
their investment and hedging decisions using options on SPY, IVV, and
DIA. By allowing the Exchange to initiate the listing of series of
options on SPY, IVV, and DIA in $1 intervals between strike prices over
$200, the proposal would moderately augment the potential total number
of options series available on the Exchange.\13\ However, the Exchange
believes it and the Options Price Reporting Authority (``OPRA'') have
the necessary systems capacity to handle any potential additional
traffic associated with this proposed rule change. The Exchange also
believes that members will not have a capacity issue due to the
proposed rule change. Finally, the Exchange represents that it does not
believe that this expansion will cause fragmentation of liquidity.
---------------------------------------------------------------------------
\12\ See supra notes 5, 6.
\13\ As noted herein (see supra note 4), the Exchange has
matched strikes listed by other exchanges in options on IVV, DIA and
SPY.
---------------------------------------------------------------------------
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \14\ of
the Act, in general, and furthers the objectives of Section
6(b)(5),\15\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanisms of a free and open
market and a national market system. Additionally, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \10\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the proposed rule change would promote just and
equitable principles of trade by allowing the Exchange to initiate
strikes in options on IVV, DIA, and SPY over $200, which would result
in continued trading and hedging opportunities in options on these
ETFs. The proposed change would likewise ensure that such options
investors are not at a disadvantage simply because of the strike price.
The Exchange also believes the proposed rule change is consistent
with Section 6(b)(1) of the Act, which provides that the Exchange be
organized and have the capacity to be able to carry out the purposes of
the Act and the rules and regulations thereunder, and the rules of the
Exchange. The rule change proposal allows the Exchange to respond to
customer demand to allow options on SPY, IVV, and DIA to trade in $1
intervals above a $200 strike price. The Exchange does not believe that
the proposed rule would create additional capacity issues or affect
market functionality.
As noted above, under the current rule (absent another exchange
listing strikes that the Exchange could match),\16\ ETF options trade
in wider $5 intervals above a $200 strike price, whereas options at or
below a $200 strike price trade in $1 intervals. This creates a
situation where contracts on the same option class effectively may not
be able to execute certain strategies such as, for example, rolling to
a higher strike price, simply because of the arbitrary $200 strike
price above which options intervals increase by $5. This proposal
establishes a clear exception to the current ETF interval regime for
options on SPY, IVV, and DIA to allow the Exchange to initiate the
listing of such options to trade in $1 or greater intervals at all
strike prices.
---------------------------------------------------------------------------
\16\ See supra note 4.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change, like other
strike price programs currently offered by the Exchange, would remove
impediments to and perfect the mechanisms of a free and open market and
a national market system to the benefit of investors by giving them
increased flexibility to more closely tailor their investment and
hedging decisions. Finally, the proposal would foster cooperation and
coordination with persons engaged in facilitating transactions in
securities as this proposal would align Exchange rules with those of
other exchanges--including CBOE and PHLX--to permit finer strikes in
IVV, DIA, and SPY.\17\
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\17\ See supra note 4.
---------------------------------------------------------------------------
With regard to the impact of this proposal on system capacity, the
Exchange believes it and OPRA have the necessary systems capacity to
handle any potential additional traffic associated with this proposed
rule change. The Exchange believes that its members will not have a
capacity issue as a result of this proposal.
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. Rather, the proposed rule
change would enable the Exchange to better compete with other options
exchanges that have already adopted the proposed strike setting
regime.\13\ Although the Exchange is able to match strikes listed by
other exchanges, this proposal would allow the [sic] initiate strikes
in IVV, DIA, and SPY regardless of strikes listed on other exchanges,
which should help level the playing field for investors investing in,
trading and utilizing hedging strategies on these options
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \18\ and Rule
[[Page 55689]]
19b-4(f)(6) thereunder.\19\ Because the foregoing proposed rule change
does not: (i) Significantly affect the protection of investors or the
public interest, (ii) impose any significant burden on competition, and
(iii) become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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\18\ 15 U.S.C. 78s(b)(3)(A)(iii).
\19\ 17 CFR 240.19b-4(f)(6).
\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. As noted above, the
proposal would allow the Exchange to initiate $1 or greater strike
price intervals above $200 for options on SPY, DIA, and IVV.
Substantially similar rules are already in place at CBOE and PHLX, and
the Exchange currently has the ability to list, and does list, these
strike price intervals pursuant to its matching authority in Rule
903A(b)(vi). The Commission therefore believes that waiver of the
operative delay is consistent with the protection of investors and the
public interest. Therefore, the Commission designates the proposed rule
change to be operative upon filing.\22\
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\22\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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 [email protected]. Please include
File Number SR-NYSEArca-2017-128 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2017-128. 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
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-NYSEArca-2017-128 and should
be submitted on or before December 13, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------
\23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25229 Filed 11-21-17; 8:45 am]
BILLING CODE 8011-01-P
