Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Short Term Option Series Program, 7245-7248 [2018-03312]
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Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
Makers have quoting obligations 16 and
are more sensitive to price movements
as compared to other market
participants. GEMX Market Makers need
to remain vigilant of market conditions
and react more quickly to market
movements as compared to other
Members entering multiple orders into
the system. The proposal reflects this
sensitivity borne by GEMX Market
Makers and reflects the reaction time of
GEMX Market Makers as compared to
other Members entering orders. With
respect to other market participants that
enter orders, they have the option of
selecting either OTTO or FIX and
therefore are able to obtain a shortened
timeframe with OTTO if they desire.
Offering the removal feature to other
market participants on an optional basis
does not create an undue burden on
intra-market competition because unlike
GEMX Market Makers, other market
participants do not bear the same risks
of potential erroneous or unintended
executions. FIX and OTTO users have
the opportunity to disable the
cancellation feature and simply
disconnect from the Exchange. FIX and
OTTO users may also set a timeframe
that is appropriate for their business. It
is appropriate to offer this optional
cancellation functionality to other
market participants for open orders,
because those orders are subject to risks
of missed and/or unintended executions
due to a lack of connectivity which the
participants needs to weigh. Finally, the
Exchange does not believe that such
change will impose any burden on intermarket competition that is not necessary
or appropriate in furtherance of the
purposes of the Act. Other options
exchanges offer similar functionality.17
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
sradovich on DSK3GMQ082PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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
16 See
note 11 above.
Phlx Rule 1019(c), NOM Rules at Chapter
VI, Section 6(e) and BX Rules at Chapter VI, Section
6(e).
17 See
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19(b)(3)(A)(iii) of the Act 18 and
subparagraph (f)(6) of Rule 19b–4
thereunder.19
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: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
7245
available for website 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–GEMX–2018–05, and
should be submitted on or before March
13, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Assistant Secretary.
Electronic Comments
[FR Doc. 2018–03307 Filed 2–16–18; 8:45 am]
• 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–
GEMX–2018–05 on the subject line.
BILLING CODE 8011–01–P
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–GEMX–2018–05. 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 website (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
18 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
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. The Exchange has satisfied this
requirement.
19 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82704; File No. SR–BX–
2018–008]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Expand the Short
Term Option Series Program
February 13, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
8, 2018, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘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 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 proposes to expand the
Short Term Option Series Program to
allow Monday expirations for options
listed pursuant to the Short Term
Option Series Program, including
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\20FEN1.SGM
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Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
options on the SPDR S&P 500 ETF
Trust.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
sradovich on DSK3GMQ082PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
BX rules at Chapter I, Section 1 and
Chapter IV, Section 6 at Commentary
.07 to expand the Short Term Option
Series program (‘‘Program’’) to permit
the listing and trading of options series
with Monday expirations that are listed
pursuant to the Program, including
options on the SPDR S&P 500 ETF Trust
(‘‘SPY’’).
The Exchange notes that having
Monday expirations is not a novel
proposal. Specifically, Nasdaq PHLX
LLC (‘‘Phlx’’) recently received approval
to list Monday expirations for SPY
options pursuant to its Short Terms
Options Series program.3
As set forth in Chapter I, Section
1(a)(60), a Short Term Option Series is
a series in an option class that is
approved for listing and trading on the
Exchange in which the series is opened
for trading on any Tuesday, Wednesday,
Thursday or Friday that is a business
day and that expires on the Wednesday
or Friday of the next business week. The
Exchange is now proposing to amend
Chapter I, Section 1(a)(60) to permit the
listing of options series that expire on
Mondays. Specifically, the Exchange is
proposing that it may open for trading
series of options on any Monday that is
a business day and that expires on the
Monday of the next business week. The
3 See Securities Exchange Act Release No. 82611
(February 1, 2018), 83 FR 5473 (February 7, 2018)
(SR–Phlx–2017–103).
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Exchange is also proposing to list
Monday expirations series on Fridays
that precede the expiration Monday by
one business week plus one business
day. Since Chapter I, Section 1(a)(60)
already provides for the listing of short
term option series on Fridays, the
Exchange is not modifying this
provision to allow for Friday listing of
Monday expiration series. However, the
Exchange is amending Chapter I,
Section 1(a)(60) to clarify that, in the
case of a series that is listed on a Friday
and expires on a Monday, that series
must be listed one business week and
one business day prior to that expiration
(i.e., two Fridays prior to expiration).
As part of this proposal, the Exchange
is also amending Chapter I, Section
1(a)(60) to address the expiration of
Monday expiration series when the
Monday is not a business day. In that
case, the rule will provide that the series
shall expire on the first business day
immediately following that Monday.
This procedure differs from the
expiration date of Wednesday
expiration series that are scheduled to
expire on a holiday. In that case, the
Wednesday expiration series shall
expire on the first business day
immediately prior to that Wednesday,
e.g., Tuesday of that week.4 However,
the Exchange believes that it is
preferable to require Monday expiration
series in this scenario to expire on the
Tuesday of that week rather than the
previous business day, e.g., the previous
Friday, since the Tuesday is closer in
time to the scheduled expiration date of
the series than the previous Friday, and
therefore may be more representative of
anticipated market conditions. The
Exchange notes that this provision is
identical to the corresponding provision
recently adopted by Phlx in its proposal
to list options series with Monday
expirations pursuant to its Short Term
Option Series program. The Exchange
also notes that Cboe Exchange, Inc.
(‘‘Cboe’’) uses the same procedure for
options on the S&P 500 index (‘‘SPX’’)
with Monday expirations that listed
pursuant to its Nonstandard Expirations
Pilot Program and that are scheduled to
expire on a holiday.5
The Exchange also proposes to make
corresponding changes to Commentary
.07 to Chapter IV, Section 6, which sets
forth the requirements for SPY options
4 See
Chapter I, Section 1(a)(60).
CBOE Rule 24.9(e)(1) (‘‘If the Exchange is
not open for business on a respective Monday, the
normally Monday expiring Weekly Expirations will
expire on the following business day. If the
Exchange is not open for business on a respective
Wednesday or Friday, the normally Wednesday or
Friday expiring Weekly Expirations will expire on
the previous business day.’’)
5 See
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that are listed pursuant to the Short
Term Options Series Program, to permit
Monday SPY expirations (‘‘Monday SPY
Expirations’’). Accordingly, the
Exchange proposes to amend
Commentary .07 to state that, with
respect to Monday SPY Expirations, the
Exchange may open for trading on any
Friday or Monday that is a business day
series of options on the SPY to expire
on any Monday of the month that is a
business day and is not a Monday in
which Quarterly Options Series expire,
provided that Monday SPY Expirations
that are listed on a Friday must be listed
at least one business week and one
business day prior to the expiration. As
with the current rules for Wednesday
SPY Expirations, the Exchange will also
amend Commentary .07 to state that it
may list up to five consecutive Monday
SPY Expirations at one time, and may
have no more than a total of five
Monday SPY Expirations (in addition to
a maximum of five Short Term Option
Series expirations for SPY expiring on
Friday and five Wednesday SPY
Expirations). The Exchange will also
clarify that, as with Wednesday SPY
Expirations, Monday SPY Expirations
will be subject to the provisions of this
Rule.
The interval between strike prices for
the proposed Monday SPY Expirations
will be the same as those for the current
Short Term Option Series for
Wednesday and Friday SPY Expirations.
Specifically, the Monday SPY
Expirations will have a $0.50 strike
interval minimum. As is the case with
other options series listed pursuant to
the Short Term Option Series, the
Monday SPY Expiration series will be
P.M.-settled.
Currently, for each option class
eligible for participation in the Program,
the Exchange is limited to opening
thirty (30) series for each expiration date
for the specific class. The thirty (30)
series restriction does not include series
that are open by other securities
exchanges under their respective short
term option rules; the Exchange may list
these additional series that are listed by
other exchanges.6 This thirty (30) series
restriction shall apply to Monday SPY
Expiration series as well. In addition,
the Exchange will be able to list series
that are listed by other exchanges,
assuming they file similar rules with the
Commission to list SPY options expiring
on Mondays.
Finally, the Exchange is amending
Commentary .07(b) to Chapter IV,
Section 6, which addresses the listing of
Short Term Options Series that expire in
the same week as monthly or quarterly
6 See
E:\FR\FM\20FEN1.SGM
Chapter IV, Section 6 at Commentary .07(a).
20FEN1
sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
options series. Currently, that rule states
that no Short Term Option Series may
expire in the same week in which
monthly option series on the same class
expire (with the exception of
Wednesday SPY Expirations) or, in the
case of Quarterly Options Series, on an
expiration that coincides with an
expiration of Quarterly Option Series on
the same class. The Exchange is
proposing to extend this exemption to
Monday SPY Expirations. As with
Wednesday SPY Expirations, the
Exchange believes that it is reasonable
to extend this exemption to Monday
SPY Expirations because Monday SPY
Expirations and standard monthly
options will not expire on the same
trading day, as standard monthly
options expire on Fridays. Additionally,
the Exchange believes that not listing
Monday SPY Expirations for one week
every month because there was a
monthly SPY expiration on the Friday
of that week would create investor
confusion. As part of this proposal, the
Exchange is amending Commentary
.07(b) to Chapter IV, Section 6 to clarify
that Monday and Wednesday SPY
Expirations may expire in the same
week as monthly option series in the
same class expire, but that no Short
Term Option Series may expire on the
same day as an expiration of Quarterly
Option Series on the same class.
The Exchange does not believe that
any market disruptions will be
encountered with the introduction of
P.M.-settled Monday expirations. The
Exchange has the necessary capacity
and surveillance programs in place to
support and properly monitor trading in
the proposed Monday expiration series,
including Monday SPY Expirations. The
Exchange currently trades P.M.-settled
Short Term Option Series that expire
almost every Wednesday and Friday,
which provide market participants a
tool to hedge special events and to
reduce the premium cost of buying
protection. The Exchange notes that it
has been listing Wednesday expirations
pursuant to Chapter I, Section 1 and
Chapter IV, Section 6 since 2016.7 With
the exception of Monday expiration
series that are scheduled to expire on a
holiday, the Exchange does not believe
that there are any material differences
between Monday expirations and
Wednesday or Friday expirations for
Short Term Option Series.
The Exchange seeks to introduce
Monday expirations to, among other
things, expand hedging tools available
to market participants and to continue
7 See Securities Exchange Act Release No. 78694
(August 26, 2016), 81 FR 60049 (August 31, 2016)
(SR–BX–2016–047).
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the reduction of the premium cost of
buying protection. The Exchange
believes that Monday expirations,
similar to Wednesday and Friday
expirations, will allow market
participants to purchase an option based
on their timing as needed and allow
them to tailor their investment and
hedging needs more effectively.
As noted above, Phlx recently
received approval to list Monday
expirations for SPY options pursuant to
its Short Terms Options program. In
addition, other exchanges currently
permit Monday expirations for other
options. For example, Cboe lists options
on the SPX with a Monday expiration as
part of its Nonstandard Expirations Pilot
Program.8
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,9 in general, and furthers the
objectives of Section 6(b)(5) of the Act,10
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
In particular, the Exchange believes
the Short Term Option Series Program
has been successful to date and that
Monday expirations, including Monday
SPY Expirations, simply expand the
ability of investors to hedge risk against
market movements stemming from
economic releases or market events that
occur throughout the month in the same
way that the Short Term Option Series
Program has expanded the landscape of
hedging. Similarly, the Exchange
believes Monday expirations, including
Monday SPY Expirations, should create
greater trading and hedging
opportunities and flexibility, and will
provide customers with the ability to
tailor their investment objectives more
effectively. As noted above, Phlx
recently received approval to list
Monday expirations for SPY options
pursuant to its Short Terms Options
program. In addition, Cboe currently
permits Monday expirations for other
options with a weekly expiration, such
as options on the SPX.
With the exception of Monday
expiration series that are scheduled to
expire on a holiday, the Exchange does
8 See CBOE Rule 24.9(e)(1) (‘‘The Exchange may
open for trading Weekly Expirations on any broadbased index eligible for standard options trading to
expire on any Monday, Wednesday, or Friday (other
than the third Friday-of-the-month or days that
coincide with an EOM expiration.)’’).
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
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7247
not believe that there are any material
differences between Monday
expirations, including Monday SPY
expirations, and Wednesday or Friday
expirations, including Wednesday and
Friday SPY Expirations, for Short Term
Option Series. The Exchange notes that
it has been listing Wednesday
expirations pursuant to Chapter I,
Section 1 and Chapter IV, Section 6
since 2016. The Exchange believes that
it is consistent with the Act to treat
Monday expiration series that expire on
a holiday differently than Wednesday or
Friday expiration series, since the
proposed treatment for Monday
expiration series will result in an
expiration date that is closer in time to
the scheduled expiration date of the
series, and therefore may be more
representative of anticipated market
conditions. The Exchange also notes
that Cboe uses the same procedure for
SPX options with Monday expirations
that are listed pursuant to its
Nonstandard Expirations Pilot Program
and that are scheduled to expire on a
holiday.
Given the similarities between
Monday SPY Expiration series and
Wednesday and Friday SPY Expiration
series, the Exchange believes that
applying the provisions in Commentary
.07 to Chapter IV, Section 6 that
currently apply to Wednesday SPY
Expirations to Monday SPY Expirations
is justified. For example, the Exchange
believes that allowing Monday SPY
Expirations and monthly SPY
expirations in the same week will
benefit investors and minimize investor
confusion by providing Monday SPY
Expirations in a continuous and
uniform manner. The Exchange also
believes that is appropriate to amend
Commentary .07(b) to Chapter IV,
Section 6 to clarify that no Short Term
Option Series may expire on the same
day as an expiration of Quarterly Option
Series on the same class. This change
will make that provision more
consistent with the existing language in
Commentary .07 that prohibits
Wednesday SPY Expirations from
expiring on a Wednesday in which
Quarterly Options Series expire.
Finally, the Exchange represents that
it has an adequate surveillance program
in place to detect manipulative trading
in Monday expirations, including
Monday SPY Expirations, in the same
way that it monitors trading in the
current Short Term Option Series. The
Exchange also represents that it has the
necessary systems capacity to support
the new options series.
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Federal Register / Vol. 83, No. 34 / Tuesday, February 20, 2018 / Notices
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. The
Exchange notes that having Monday
expirations is not a novel proposal, as
Phlx has received approval to list
Monday expirations for SPY options,
and Cboe currently lists and trades
short-term SPX options with a Monday
expiration. The Exchange does not
believe the proposal will impose any
burden on intra-market competition, as
all market participants will be treated in
the same manner under this proposal.
Additionally, the Exchange does not
believe the proposal will impose any
burden on inter-market competition, as
nothing prevents the other options
exchanges from proposing similar rules
to list and trade short-term options
series with Monday expirations.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
sradovich on DSK3GMQ082PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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, the
proposed rule change has become
effective pursuant to Section
19(b)(3)(A)(iii) of the Act 11 and Rule
19b–4(f)(6) thereunder.12
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days from the
date of filing. However, Rule 19b–
4(f)(6)(iii) 13 permits the Commission to
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
11 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intention to
file 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. The Exchange has satisfied this
requirement.
13 17 CFR 240.19b–4(f)(6)(iii).
12 17
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immediately upon filing. The
Commission notes that it recently
approved Phlx’s substantially similar
proposal to list and trade Monday SPY
Expirations.14 The Exchange has stated
that waiver of the operative delay will
allow the Exchange to list and trade
Monday SPY Expirations as soon as
possible, and therefore, promote
competition among the option
exchanges. For these reasons, the
Commission believes that the proposed
rule change presents no novel issues
and that waiver of the 30-day operative
delay is consistent with the protection
of investors and the public interest, and
will allow the Exchange to remain
competitive with other exchanges.
Therefore, the Commission hereby
waives the 30-day operative delay and
designates the proposal effective upon
filing.15
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2018–008 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–BX–2018–008. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
14 See
supra note 3.
purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
15 For
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comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (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 website 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–BX–2018–008 and should
be submitted on or before March 13,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–03312 Filed 2–16–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82700; File No. SR–ISE–
2018–13]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Expand the Short
Term Option Series Program
February 13, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that, on February
7, 2018, Nasdaq ISE, LLC (‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\20FEN1.SGM
20FEN1
]]>Agencies
[Federal Register Volume 83, Number 34 (Tuesday, February 20, 2018)]
[Notices]
[Pages 7245-7248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03312]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82704; File No. SR-BX-2018-008]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Expand the Short
Term Option Series Program
February 13, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 8, 2018, Nasdaq BX, Inc. (``BX'' or ``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 Exchange. 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\ 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 expand the Short Term Option Series
Program to allow Monday expirations for options listed pursuant to the
Short Term Option Series Program, including
[[Page 7246]]
options on the SPDR S&P 500 ETF Trust.
The text of the proposed rule change is available on the Exchange's
website at https://nasdaqbx.cchwallstreet.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the BX rules at Chapter I, Section 1
and Chapter IV, Section 6 at Commentary .07 to expand the Short Term
Option Series program (``Program'') to permit the listing and trading
of options series with Monday expirations that are listed pursuant to
the Program, including options on the SPDR S&P 500 ETF Trust (``SPY'').
The Exchange notes that having Monday expirations is not a novel
proposal. Specifically, Nasdaq PHLX LLC (``Phlx'') recently received
approval to list Monday expirations for SPY options pursuant to its
Short Terms Options Series program.\3\
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\3\ See Securities Exchange Act Release No. 82611 (February 1,
2018), 83 FR 5473 (February 7, 2018) (SR-Phlx-2017-103).
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As set forth in Chapter I, Section 1(a)(60), a Short Term Option
Series is a series in an option class that is approved for listing and
trading on the Exchange in which the series is opened for trading on
any Tuesday, Wednesday, Thursday or Friday that is a business day and
that expires on the Wednesday or Friday of the next business week. The
Exchange is now proposing to amend Chapter I, Section 1(a)(60) to
permit the listing of options series that expire on Mondays.
Specifically, the Exchange is proposing that it may open for trading
series of options on any Monday that is a business day and that expires
on the Monday of the next business week. The Exchange is also proposing
to list Monday expirations series on Fridays that precede the
expiration Monday by one business week plus one business day. Since
Chapter I, Section 1(a)(60) already provides for the listing of short
term option series on Fridays, the Exchange is not modifying this
provision to allow for Friday listing of Monday expiration series.
However, the Exchange is amending Chapter I, Section 1(a)(60) to
clarify that, in the case of a series that is listed on a Friday and
expires on a Monday, that series must be listed one business week and
one business day prior to that expiration (i.e., two Fridays prior to
expiration).
As part of this proposal, the Exchange is also amending Chapter I,
Section 1(a)(60) to address the expiration of Monday expiration series
when the Monday is not a business day. In that case, the rule will
provide that the series shall expire on the first business day
immediately following that Monday. This procedure differs from the
expiration date of Wednesday expiration series that are scheduled to
expire on a holiday. In that case, the Wednesday expiration series
shall expire on the first business day immediately prior to that
Wednesday, e.g., Tuesday of that week.\4\ However, the Exchange
believes that it is preferable to require Monday expiration series in
this scenario to expire on the Tuesday of that week rather than the
previous business day, e.g., the previous Friday, since the Tuesday is
closer in time to the scheduled expiration date of the series than the
previous Friday, and therefore may be more representative of
anticipated market conditions. The Exchange notes that this provision
is identical to the corresponding provision recently adopted by Phlx in
its proposal to list options series with Monday expirations pursuant to
its Short Term Option Series program. The Exchange also notes that Cboe
Exchange, Inc. (``Cboe'') uses the same procedure for options on the
S&P 500 index (``SPX'') with Monday expirations that listed pursuant to
its Nonstandard Expirations Pilot Program and that are scheduled to
expire on a holiday.\5\
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\4\ See Chapter I, Section 1(a)(60).
\5\ See CBOE Rule 24.9(e)(1) (``If the Exchange is not open for
business on a respective Monday, the normally Monday expiring Weekly
Expirations will expire on the following business day. If the
Exchange is not open for business on a respective Wednesday or
Friday, the normally Wednesday or Friday expiring Weekly Expirations
will expire on the previous business day.'')
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The Exchange also proposes to make corresponding changes to
Commentary .07 to Chapter IV, Section 6, which sets forth the
requirements for SPY options that are listed pursuant to the Short Term
Options Series Program, to permit Monday SPY expirations (``Monday SPY
Expirations''). Accordingly, the Exchange proposes to amend Commentary
.07 to state that, with respect to Monday SPY Expirations, the Exchange
may open for trading on any Friday or Monday that is a business day
series of options on the SPY to expire on any Monday of the month that
is a business day and is not a Monday in which Quarterly Options Series
expire, provided that Monday SPY Expirations that are listed on a
Friday must be listed at least one business week and one business day
prior to the expiration. As with the current rules for Wednesday SPY
Expirations, the Exchange will also amend Commentary .07 to state that
it may list up to five consecutive Monday SPY Expirations at one time,
and may have no more than a total of five Monday SPY Expirations (in
addition to a maximum of five Short Term Option Series expirations for
SPY expiring on Friday and five Wednesday SPY Expirations). The
Exchange will also clarify that, as with Wednesday SPY Expirations,
Monday SPY Expirations will be subject to the provisions of this Rule.
The interval between strike prices for the proposed Monday SPY
Expirations will be the same as those for the current Short Term Option
Series for Wednesday and Friday SPY Expirations. Specifically, the
Monday SPY Expirations will have a $0.50 strike interval minimum. As is
the case with other options series listed pursuant to the Short Term
Option Series, the Monday SPY Expiration series will be P.M.-settled.
Currently, for each option class eligible for participation in the
Program, the Exchange is limited to opening thirty (30) series for each
expiration date for the specific class. The thirty (30) series
restriction does not include series that are open by other securities
exchanges under their respective short term option rules; the Exchange
may list these additional series that are listed by other exchanges.\6\
This thirty (30) series restriction shall apply to Monday SPY
Expiration series as well. In addition, the Exchange will be able to
list series that are listed by other exchanges, assuming they file
similar rules with the Commission to list SPY options expiring on
Mondays.
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\6\ See Chapter IV, Section 6 at Commentary .07(a).
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Finally, the Exchange is amending Commentary .07(b) to Chapter IV,
Section 6, which addresses the listing of Short Term Options Series
that expire in the same week as monthly or quarterly
[[Page 7247]]
options series. Currently, that rule states that no Short Term Option
Series may expire in the same week in which monthly option series on
the same class expire (with the exception of Wednesday SPY Expirations)
or, in the case of Quarterly Options Series, on an expiration that
coincides with an expiration of Quarterly Option Series on the same
class. The Exchange is proposing to extend this exemption to Monday SPY
Expirations. As with Wednesday SPY Expirations, the Exchange believes
that it is reasonable to extend this exemption to Monday SPY
Expirations because Monday SPY Expirations and standard monthly options
will not expire on the same trading day, as standard monthly options
expire on Fridays. Additionally, the Exchange believes that not listing
Monday SPY Expirations for one week every month because there was a
monthly SPY expiration on the Friday of that week would create investor
confusion. As part of this proposal, the Exchange is amending
Commentary .07(b) to Chapter IV, Section 6 to clarify that Monday and
Wednesday SPY Expirations may expire in the same week as monthly option
series in the same class expire, but that no Short Term Option Series
may expire on the same day as an expiration of Quarterly Option Series
on the same class.
The Exchange does not believe that any market disruptions will be
encountered with the introduction of P.M.-settled Monday expirations.
The Exchange has the necessary capacity and surveillance programs in
place to support and properly monitor trading in the proposed Monday
expiration series, including Monday SPY Expirations. The Exchange
currently trades P.M.-settled Short Term Option Series that expire
almost every Wednesday and Friday, which provide market participants a
tool to hedge special events and to reduce the premium cost of buying
protection. The Exchange notes that it has been listing Wednesday
expirations pursuant to Chapter I, Section 1 and Chapter IV, Section 6
since 2016.\7\ With the exception of Monday expiration series that are
scheduled to expire on a holiday, the Exchange does not believe that
there are any material differences between Monday expirations and
Wednesday or Friday expirations for Short Term Option Series.
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\7\ See Securities Exchange Act Release No. 78694 (August 26,
2016), 81 FR 60049 (August 31, 2016) (SR-BX-2016-047).
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The Exchange seeks to introduce Monday expirations to, among other
things, expand hedging tools available to market participants and to
continue the reduction of the premium cost of buying protection. The
Exchange believes that Monday expirations, similar to Wednesday and
Friday expirations, will allow market participants to purchase an
option based on their timing as needed and allow them to tailor their
investment and hedging needs more effectively.
As noted above, Phlx recently received approval to list Monday
expirations for SPY options pursuant to its Short Terms Options
program. In addition, other exchanges currently permit Monday
expirations for other options. For example, Cboe lists options on the
SPX with a Monday expiration as part of its Nonstandard Expirations
Pilot Program.\8\
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\8\ See CBOE Rule 24.9(e)(1) (``The Exchange may open for
trading Weekly Expirations on any broad-based index eligible for
standard options trading to expire on any Monday, Wednesday, or
Friday (other than the third Friday-of-the-month or days that
coincide with an EOM expiration.)'').
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\9\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\10\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that Monday expirations,
including Monday SPY Expirations, simply expand the ability of
investors to hedge risk against market movements stemming from economic
releases or market events that occur throughout the month in the same
way that the Short Term Option Series Program has expanded the
landscape of hedging. Similarly, the Exchange believes Monday
expirations, including Monday SPY Expirations, should create greater
trading and hedging opportunities and flexibility, and will provide
customers with the ability to tailor their investment objectives more
effectively. As noted above, Phlx recently received approval to list
Monday expirations for SPY options pursuant to its Short Terms Options
program. In addition, Cboe currently permits Monday expirations for
other options with a weekly expiration, such as options on the SPX.
With the exception of Monday expiration series that are scheduled
to expire on a holiday, the Exchange does not believe that there are
any material differences between Monday expirations, including Monday
SPY expirations, and Wednesday or Friday expirations, including
Wednesday and Friday SPY Expirations, for Short Term Option Series. The
Exchange notes that it has been listing Wednesday expirations pursuant
to Chapter I, Section 1 and Chapter IV, Section 6 since 2016. The
Exchange believes that it is consistent with the Act to treat Monday
expiration series that expire on a holiday differently than Wednesday
or Friday expiration series, since the proposed treatment for Monday
expiration series will result in an expiration date that is closer in
time to the scheduled expiration date of the series, and therefore may
be more representative of anticipated market conditions. The Exchange
also notes that Cboe uses the same procedure for SPX options with
Monday expirations that are listed pursuant to its Nonstandard
Expirations Pilot Program and that are scheduled to expire on a
holiday.
Given the similarities between Monday SPY Expiration series and
Wednesday and Friday SPY Expiration series, the Exchange believes that
applying the provisions in Commentary .07 to Chapter IV, Section 6 that
currently apply to Wednesday SPY Expirations to Monday SPY Expirations
is justified. For example, the Exchange believes that allowing Monday
SPY Expirations and monthly SPY expirations in the same week will
benefit investors and minimize investor confusion by providing Monday
SPY Expirations in a continuous and uniform manner. The Exchange also
believes that is appropriate to amend Commentary .07(b) to Chapter IV,
Section 6 to clarify that no Short Term Option Series may expire on the
same day as an expiration of Quarterly Option Series on the same class.
This change will make that provision more consistent with the existing
language in Commentary .07 that prohibits Wednesday SPY Expirations
from expiring on a Wednesday in which Quarterly Options Series expire.
Finally, the Exchange represents that it has an adequate
surveillance program in place to detect manipulative trading in Monday
expirations, including Monday SPY Expirations, in the same way that it
monitors trading in the current Short Term Option Series. The Exchange
also represents that it has the necessary systems capacity to support
the new options series.
[[Page 7248]]
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. The Exchange notes that having
Monday expirations is not a novel proposal, as Phlx has received
approval to list Monday expirations for SPY options, and Cboe currently
lists and trades short-term SPX options with a Monday expiration. The
Exchange does not believe the proposal will impose any burden on intra-
market competition, as all market participants will be treated in the
same manner under this proposal. Additionally, the Exchange does not
believe the proposal will impose any burden on inter-market
competition, as nothing prevents the other options exchanges from
proposing similar rules to list and trade short-term options series
with Monday expirations.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A)(iii) of the
Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intention to file 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.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days from the date of filing. However, Rule
19b-4(f)(6)(iii) \13\ permits the Commission to 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. The Commission notes that it recently approved
Phlx's substantially similar proposal to list and trade Monday SPY
Expirations.\14\ The Exchange has stated that waiver of the operative
delay will allow the Exchange to list and trade Monday SPY Expirations
as soon as possible, and therefore, promote competition among the
option exchanges. For these reasons, the Commission believes that the
proposed rule change presents no novel issues and that waiver of the
30-day operative delay is consistent with the protection of investors
and the public interest, and will allow the Exchange to remain
competitive with other exchanges. Therefore, the Commission hereby
waives the 30-day operative delay and designates the proposal effective
upon filing.\15\
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\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ See supra note 3.
\15\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR- BX-2018-008 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-BX-2018-008. 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 website (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 website 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-BX-2018-008 and should be submitted on
or before March 13, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03312 Filed 2-16-18; 8:45 am]
BILLING CODE 8011-01-P
