Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 903 (Series of Options Open for Trading), 55676-55679 [2017-25230]

Download as PDF 55676 Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2017–070 on the subject line. asabaliauskas on DSKBBXCHB2PROD with NOTICES 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–CBOE–2017–070. 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–CBOE–2017–070 and should be submitted on or before December 13, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–25233 Filed 11–21–17; 8:45 am] BILLING CODE P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82095; File No. SR– NYSEAMER–2017–31] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 903 (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 American LLC (‘‘Exchange’’) 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 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 903 (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 903 to modify the strike price intervals for certain Exchange Traded Funds (each an ‘‘ETF’’). Specifically, the Exchange 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 13 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:57 Nov 21, 2017 Jkt 244001 PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 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 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 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 903A(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. E:\FR\FM\22NON1.SGM 22NON1 Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices asabaliauskas on DSKBBXCHB2PROD with NOTICES 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. 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 903 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 903 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-the7 For rules regarding quarterly or weekly options (also known as Short Term Options or STOS), see Commentaries .09 and .10, respectively, to Rule 903. 8 See Rule 903, Commentary .05(a). See also Rule 903, Commentary .10 (d) (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 903, Commentary .05(d). VerDate Sep<11>2014 18:57 Nov 21, 2017 Jkt 244001 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 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 10 See Rule 903, Commentary .05(a). proposed Rule 903, Commentary .05(d). 12 See supra notes 5, 6. 11 See PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 55677 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. 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 13 As noted herein (see supra note 4), the Exchange has matched strikes listed by other exchanges in options on IVV, DIA and SPY. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). E:\FR\FM\22NON1.SGM 22NON1 55678 Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices asabaliauskas on DSKBBXCHB2PROD with NOTICES 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. 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 16 See 17 See supra note 4. supra note 4. VerDate Sep<11>2014 18:57 Nov 21, 2017 Jkt 244001 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 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 18 15 U.S.C. 78s(b)(3)(A)(iii). 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. 19 17 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 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. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEAMER–2017–31 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–NYSEAMER–2017–31. 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 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). E:\FR\FM\22NON1.SGM 22NON1 Federal Register / Vol. 82, No. 224 / Wednesday, November 22, 2017 / Notices 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–NYSEAMER–2017–31 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. 2017–25230 Filed 11–21–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82101; File No. SR–MRX– 2017–18] Self-Regulatory Organizations; Nasdaq MRX, LLC; Order Granting Approval of a Proposed Rule Change To Adopt New Corporate Governance and Related Processes Similar to Those of the Nasdaq Exchanges November 16, 2017. asabaliauskas on DSKBBXCHB2PROD with NOTICES I. Introduction On September 19, 2017, Nasdaq MRX, LLC (‘‘MRX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 proposed rule changes to its corporate governance documents and trading rules to align its corporate governance framework to the structure of other exchanges owned by its ultimate parent company, Nasdaq, Inc. The proposed rule change was published for comment in the Federal Register on October 6, 2017.3 The Commission received no comments on the proposal. This order approves the proposed rule change. II. Background On June 21, 2016, the Commission approved a proposed rule change relating to a corporate transaction in which Nasdaq, Inc. would become the ultimate parent of MRX (the ‘‘Nasdaq Acquisition’’), Nasdaq ISE, LLC (‘‘ISE’’), and Nasdaq GEMX, LLC (‘‘GEMX,’’ and 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 81795 (October 2, 2017), 82 FR 46848 (‘‘Notice’’). 1 15 VerDate Sep<11>2014 18:57 Nov 21, 2017 Jkt 244001 together with MRX and ISE, the ‘‘ISE Exchanges’’).4 On June 30, 2016, pursuant to this transaction, Nasdaq, Inc. acquired all of the capital stock of U.S. Exchange Holdings, Inc. (‘‘Exchange Holdings’’), and thereby became the indirect, ultimate parent of the ISE Exchanges.5 Nasdaq, Inc. is also the ultimate parent of Nasdaq BX, Inc. (‘‘BX’’), The Nasdaq Stock Market LLC (‘‘Nasdaq’’), and Nasdaq PHLX LLC (‘‘Phlx’’ and, together with Nasdaq and BX, the ‘‘Nasdaq Exchanges’’).6 The Commission notes that the corporate governance documents of MRX, specifically its Limited Liability Company Agreement (‘‘Current LLC Agreement’’) and its Constitution (‘‘Current Constitution’’ and, together with the Current LLC Agreement, the ‘‘Current Governing Documents’’) are rules of the Exchange, as are the governing documents of MRX’s Upstream Owners,7 which include certain provisions that are designed to maintain the independence of MRX’s self-regulatory functions (as well as the self-regulatory functions of the Upstream Owners’ other self-regulatory subsidiaries, i.e., the Nasdaq Exchanges).8 The Exchange intends to effect a merger with a newly-formed Delaware limited liability company (‘‘Merger’’) under Nasdaq, Inc. that would result in MRX as the surviving entity with new corporate governance documents. In connection with that Merger, the Exchange proposes various changes to its corporate governance documents and rules (‘‘Rules’’).9 Specifically, the Exchange proposes to: (1) Delete the 4 See Securities Exchange Act Release No. 78119 (June 21, 2016), 81 FR 41611 (June 27, 2016) (SR– ISE–2016–11; SR–ISEGemini–2016–05; SR– ISEMercury–2016–10) (‘‘Nasdaq Acquisition Order’’) (order approving Nasdaq, Inc.’s acquisition of ISE (f/k/a International Securities Exchange, LLC), GEMX (f/k/a ISE Gemini, LLC), and MRX (f/k/a ISE Mercury, LLC)). 5 See Notice, supra note 3, at 46848 n.3. Exchange Holdings is the sole owner of ISE Holdings, Inc. (‘‘ISE Holdings,’’ and together with Exchange Holdings and Nasdaq, Inc., the ‘‘Upstream Owners’’), which is the sole owner of 100% of the Exchange’s limited liability company interests. See id. at 46849; see also Nasdaq Acquisition Order, supra note 4, at 41611. ISE Holdings is also the sole direct owner of ISE and GEMX. See Nasdaq Acquisition Order, supra note 4, at 41611. 6 See Notice, supra note 3, at 46848. See also Nasdaq Acquisition Order, supra note 4, at 41611. As a result of this transaction, the ISE Exchanges and the Nasdaq Exchanges became affiliates. See Nasdaq Acquisition Order, supra note 4, at 41611 n.8. 7 See Nasdaq Acquisition Order, supra note 4, at 41612. 8 See, e.g., Nasdaq Acquisition Order, supra note 4, at 41612–13. 9 The Rules as proposed to be amended pursuant to the proposed rule change are referred to herein as the ‘‘New Rules.’’ PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 55679 Exchange’s Current LLC Agreement in its entirety and replace it with the New LLC Agreement, which is based on the limited liability company agreement of Nasdaq; 10 (2) delete the Exchange’s Current Constitution in its entirety and replace it with the New By-Laws, which are based on the by-laws of Nasdaq; 11 and (3) amend certain of its Rules to reflect the replacement of the Current Governing Documents with the New Governing Documents.12 The Exchange represents that the proposed changes are designed to align the Exchange’s corporate governance framework with the existing structure of the Nasdaq Exchanges, particularly as it relates to the board and committee structure, nomination and election processes, and related governance practices.13 The Exchange also represents that it is not proposing any amendments to its ownership structure. The Exchange does not propose any amendments to the governing documents of its Upstream Owners.14 Thus, the provisions in the governing documents of these entities, which were designed to maintain the independence of MRX’s self-regulatory functions, would remain unchanged. The Exchange also represents that it is not proposing any amendments to its Rules at this time, other than minor clarifying changes and technical amendments to reflect the changes to its governing documents as described in more detail below.15 The Exchange states that it intends to implement its proposed rule change no later than by the end of the fourth quarter of 2017.16 III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.17 Specifically, as 10 See Notice, supra note 3, at 46849 n.5. 11 Id. 12 The Commission has approved nearly identical proposed rule changes submitted by the Exchange’s affiliates, ISE and GEMX. See Securities Exchange Act Release Nos. 81263 (July 31, 2017), 82 FR 36497 (August 4, 2017) (SR–ISE–2017–32) (‘‘ISE Governance Order’’) and 81802 (October 3, 2017), 82 FR 47055 (October 10, 2017) (SR–GEMX–2017– 37) (‘‘GEMX Governance Order’’). 13 See Notice, supra note 3, at 46848–49. 14 See generally id. 15 See id. at 46849 and 46862–63. 16 See id. at 46848. The Exchange also states that it will alert its members in the form of a regulatory alert to provide notification of the implementation date. Id. 17 In approving these proposed rule changes, the Commission has considered the proposed rules’ E:\FR\FM\22NON1.SGM Continued 22NON1

Agencies

[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)]
[Notices]
[Pages 55676-55679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25230]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82095; File No. SR-NYSEAMER-2017-31]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 903 (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 American LLC (``Exchange'') 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 self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \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 903 (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 903 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 903A(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

[[Page 55677]]

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.
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    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 903 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 903 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 .09 and .10, 
respectively, to Rule 903.
    \8\ See Rule 903, Commentary .05(a). See also Rule 903, 
Commentary .10 (d) (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 903, Commentary .05(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 
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 903, Commentary .05(a).
    \11\ See proposed Rule 903, Commentary .05(d).
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    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.
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    \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.
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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.
---------------------------------------------------------------------------

    \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

[[Page 55678]]

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.
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    \16\ See supra note 4.
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    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\
---------------------------------------------------------------------------

    \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 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).
---------------------------------------------------------------------------

    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 rule-comments@sec.gov. Please include 
File Number SR-NYSEAMER-2017-31 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-NYSEAMER-2017-31. 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

[[Page 55679]]

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-NYSEAMER-2017-
31 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).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25230 Filed 11-21-17; 8:45 am]
 BILLING CODE 8011-01-P
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