Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter XIV, Index Rules, Section 10(g), Pricing When Primary Market Does Not Open, 56127-56129 [2018-24525]
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Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices
be submitted on or before November 30,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–24526 Filed 11–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84538; File No. SR–
NASDAQ–2018–081]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Chapter XIV, Index Rules, Section
10(g), Pricing When Primary Market
Does Not Open
November 5, 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 October
23, 2018, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
khammond on DSK30JT082PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Chapter XIV, Index Rules, Section 10(g),
Pricing When Primary Market Does Not
Open.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.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
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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 its
rules at Chapter XIV, Index Rules,
Section 10(g) of the Exchange’s rulebook
regarding determination of the price of
component securities for purposes of
calculating the current index value at
expiration of Exchange index options on
days when the primary market for the
underlying security does not open.3 The
proposed amendment would apply to
both AM-settled and PM-settled index
options.4
Currently, Chapter XIV, Section 10(g)
provides that when the primary market
for a security underlying the current
index value of an index option does not
open for trading on a given day, the
price of that security shall be
determined, for purposes of calculating
the current index value at expiration,
based on the opening price of that
security on the next day that its primary
market is open for trading.5
The Exchange now proposes to delete
from the rule the language providing for
determination of the price of the
component security, for purposes of
calculating the current index value at
expiration, based on the opening price
of that security on the next day that its
primary market is open for trading. The
3 Three of the Exchange’s affiliated options
exchanges, Nasdaq ISE, LLC (‘‘ISE’’), Nasdaq BX
(‘‘BX’’) and Nasdaq PHLX LLC, will also be
proposing rule changes relating to the manner of
determining an underlying index component
security’s price for purposes of calculating the
current index value at expiration of an index option
under these circumstances. See SR–BX–2018–049,
SR–Phlx–2018–63, and SR–ISE–2018–88. The
Exchange desires its rules to be aligned with those
of the affiliated exchanges.
4 Currently, traditional index options expiring on
the third Friday of the month are A.M.-settled,
meaning that the index option’s settlement value is
calculated based upon opening prices of the index’s
component securities on the last day of trading in
the component securities prior to expiration,
normally on Friday morning. By contrast, the
settlement of P.M.-settled index options is based
upon the closing index value, defined as the last
index value reported on a business day, for the day
on which the index option is exercised. P.M.-settled
options expiring on the third Friday of the month
would therefore normally be settled on the basis of
Friday’s closing prices of component securities.
5 The rule provides, however, that this procedure
shall not be used if the current index value at
expiration is fixed in accordance with the Rules and
By-Laws of the options Clearing Corporation
(‘‘OCC’’).
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56127
Exchange proposes to amend Chapter
XIV, Section 10(g) so that it provides
that when the primary market for a
security underlying the current index
value of an index option does not open
for trading on a given day, which is an
expiration day, for purposes of
calculating the settlement price at
expiration, the last reported sale price of
the security from the previous trading
day shall be used.6 The revised
provision would permit market
participants the certainty of knowing
the settlement value on the day on
which the primary market fails to open.
Additionally, the amendment would
eliminate the potential difficulties that
could arise if the reporting authority for
the index were unwilling or unable to
calculate the settlement value using
prices for the relevant security(ies) on
the next day that its primary market is
open for trading.7
The rule would continue to provide
that this procedure shall not be used if
the current index value at expiration is
fixed in accordance with OCC rules and
by-laws. This language recognizes that
OCC is authorized under its rules and
by-laws to take certain actions relating
to settlement in the event of the
unavailability or inaccuracy of the
current underlying interest value.8 The
Exchange proposes to retain this
language in recognition of OCC’s
authority to establish settlement prices
and procedures in certain circumstances
where normal settlement procedures
cannot be followed due unforeseen
events, such as the unanticipated
closure of a primary market for a
component security on a day on which
it would normally be open for trading.
The Exchange would thus retain the last
sentence of Chapter XIV, Section 10(g)
which will make clear that the new
6 Chapter XIV, Section 10(g) would continue to
apply to both A.M.-settled and P.M.-settled index
options.
7 The index calculator for the NDX, MNX and
BKX indexes, which are products traded on Nasdaq
affiliated exchanges, uses the previous day’s closing
price if components of the index do not open.
8 See OCC By-Laws Article XVII, Section 4(a),
which provides in relevant part that if OCC shall
determine that the primary market for one or more
index components did not open or remain open for
trading (or that any such components did not open
or remain open for trading on such market(s)) on
a trading day at or before the time when the current
index value for that trading day would ordinarily
be determined, or that a current index value or
other value or price to be used as, or to determine,
the exercise settlement amount (a ‘‘required value’’)
for a trading day is otherwise unreported,
inaccurate, unreliable, unavailable or inappropriate
for purposes of calculating the exercise settlement
amount, then, in addition to any other actions that
OCC may be entitled to take under OCC’s bylaws
and rules, the, OCC is empowered to take any or
all of a range of permitted actions with respect to
any series of options on such index, including
fixing the exercise settlement amount.
E:\FR\FM\09NON1.SGM
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56128
Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices
procedure would not apply in the event
that OCC exercises its authority to
determine settlement prices. Rather, the
proposed new language would apply
only when a primary market does not
open and OCC elects not to exercise its
authority to intervene and take action to
establish a settlement price.
khammond on DSK30JT082PROD with NOTICES
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. As
noted above, the amendment to Chapter
XIV, Section 10(g) would establish
clearly the procedure for determination
of an index component security’s price
in the event that the primary market for
the security fails to open. By adopting
the proposed rule amendment, the
Exchange would provide certainty to the
market regarding the procedure it would
follow in the absence of action by OCC.
Additionally, it would provide market
participants with the certainty of
knowing the settlement value on the day
on which the primary market fails to
open, and eliminate the potential
difficulties that could arise if the
reporting authority for the index were
unwilling or unable to calculate the
settlement value using prices for the
relevant security(ies) on the next day
that its primary market is open for
trading.
It would also acknowledge clearly,
however, that OCC may, under its rules
and by-laws, establish settlement prices
for expiring index options that may
differ from the settlement prices that
would otherwise be provided for in
Exchange rules, thereby protecting
investors and the public interest by
reducing potential for confusion in that
regard.
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. On the
contrary, the Exchange believes that the
proposed amendment will benefit
investors, market participants, and the
marketplace in general by setting forth
clearly the manner in which index
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15
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option settlement values will be
determined if the primary market for a
security underlying the current index
value of an index option does not open
for trading, allowing market participants
the certainty of knowing the settlement
price on the day on which the primary
market fails to open, eliminating the
potential difficulties that could arise if
the reporting authority for the index
were unwilling or unable to calculate
the settlement value using prices for the
relevant security(ies) on the next day
that its primary market is open for
trading, and retaining the existing
provision stating that the Exchange will
defer to OCC in the determination of
settlement prices when and if OCC
exercises its authority under its own
settlement price procedures in
accordance with its rules and by-laws.
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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A) of the Act 11 and Rule 19b–
4(f)(6) thereunder.12 Because the
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 and Rule 19b–
4(f)(6) thereunder.13
A proposed rule change filed under
Rule 19b–4(f)(6) 14 normally does not
become operative for 30 days after the
date of the filing. However, pursuant to
Rule 19b–4(f)(6)(iii),15 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. In
its filing with the Commission, 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)(iii).
CFR 240.19b–4(f)(6).
13 In addition, Rule 19b–4(f)(6)(iii) requires a selfregulatory 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.
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii).
12 17
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immediately upon filing to provide
certainty regarding the determination of
settlement prices for index options
when the primary market for a security
underlying the current index value of an
index option does not does not open for
trading on an expiration day, including
in instances in which OCC exercises its
authority to determine the settlement
price. According to the Exchange, the
proposed rule change will allow
investors to know the settlement price
of an index option on the day on which
the primary market of an underlying
component fails to open and will avoid
potential difficulties that could arise if
the reporting authority for the index was
unwilling or unable to calculate the
settlement value using prices for the
relevant securities on the next day that
its primary market is open for trading.
As such, the Commission believes that
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest and
designates the proposed rule change
operative upon filing.16
At any time within 60 days of the
filing of such 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
under Section 19(b)(2)(B) 17 of the Act to
determine whether the proposed rule
change 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–
NASDAQ–2018–081 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
16 For purposes only of waiving the operative
delay, the Commission has considered the proposed
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
17 15 U.S.C. 78s(b)(2)(B).
E:\FR\FM\09NON1.SGM
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Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2018–081. 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
a.m. and 3 p.m. Copies of such 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–
NASDAQ–2018–081, and should be
submitted on or before November 30,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–24525 Filed 11–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
khammond on DSK30JT082PROD with NOTICES
[Release No. 34–84535; File No. SR–CBOE–
2018–069]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Operation
of its SPXPM Pilot Program
November 5, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
18 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:36 Nov 08, 2018
Jkt 247001
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
2, 2018, Cboe Exchange, Inc.
(‘‘Exchange’’ or ‘‘Cboe Options’’) 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
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 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 extend the
operation of its SPXPM pilot program.
The text of the proposed rule change
is provided below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Cboe Exchange, Inc. Rules [sic]
*
*
*
*
*
Rule 24.9. Terms of Index Option
Contracts
(No change).
. . . Interpretations and Policies:
.01–.13 (No change).
.14 In addition to A.M.-settled
Standard & Poor’s 500 Stock Index
options approved for trading on the
Exchange pursuant to Rule 24.9, the
Exchange may also list options on the
S&P 500 Index whose exercise
settlement value is derived from closing
prices on the last trading day prior to
expiration (P.M.-settled third Friday-ofthe-month SPX options series). The
Exchange may also list options on the
Mini-SPX Index (‘‘XSP’’) whose exercise
settlement value is derived from closing
prices on the last trading day prior to
expiration (‘‘P.M.-settled’’). P.M.-settled
third Friday-of-the-month SPX options
series and P.M.-settled XSP options will
be listed for trading for a pilot period
ending [November 5, 2018] May 6, 2019.
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, and
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
PO 00000
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56129
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
On February 8, 2013, the Exchange
received approval of a rule change that
established a Pilot Program that allows
the Exchange to list options on the S&P
500 Index whose exercise settlement
value is derived from closing prices on
the last trading day prior to expiration
(‘‘SPXPM’’).5 On July 31, 2013, the
Exchange received approval of a rule
change that amended the Pilot Program
to allow the Exchange to list options on
the Mini-SPX Index (‘‘XSP’’) whose
exercise settlement value is derived
from closing prices on the last trading
day prior to expiration (‘‘P.M.-settled’’) 6
(together, SPXPM and P.M.-settled XSP
to be referred to herein as the ‘‘Pilot
Products’’).7 The Exchange has
extended the pilot period five times,
which is currently set to expire on the
earlier of November 5, 2018 or the date
on which the pilot program is approved
on a permanent basis.8 The Exchange
5 See Securities Exchange Act Release No. 68888
(February 8, 2013), 78 FR 10668 (February 14, 2013)
(SR–CBOE–2012–120) (the ‘‘SPXPM Approval
Order’’). Pursuant to Securities Exchange Act
Release No. 80060 (February 17, 2017), 82 FR 11673
(February 24, 2017) (SR–CBOE–2016–091), the
Exchange moved third-Friday P.M.-settled options
into the S&P 500 Index options class, and as a
result, the trading symbol for P.M.-settled S&P 500
Index options that have standard third Friday-ofthe-month expirations changed from ‘‘SPXPM’’ to
‘‘SPXW.’’ This change went into effect on May 1,
2017, pursuant to Cboe Options Regulatory Circular
RG17–054.
6 See Securities Exchange Act Release No. 70087
(July 31, 2013), 78 FR 47809 (August 6, 2013) (SR–
CBOE–2013–055) (the ‘‘P.M.-settled XSP Approval
Order’’).
7 For more information on the Pilot Products or
the Pilot Program, see the SPXPM Approval Order
and the P.M.-settled XSP Approval Order.
8 See Securities Exchange Act Release Nos. 71424
(January 28, 2014), 79 FR 6249 (February 3, 2014)
Continued
E:\FR\FM\09NON1.SGM
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]]>Agencies
[Federal Register Volume 83, Number 218 (Friday, November 9, 2018)]
[Notices]
[Pages 56127-56129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24525]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84538; File No. SR-NASDAQ-2018-081]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Chapter XIV, Index Rules, Section 10(g), Pricing When Primary
Market Does Not Open
November 5, 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 October 23, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Chapter XIV, Index Rules, Section
10(g), Pricing When Primary Market Does Not Open.
The text of the proposed rule change is available on the Exchange's
website at https://nasdaq.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 its rules at Chapter XIV, Index
Rules, Section 10(g) of the Exchange's rulebook regarding determination
of the price of component securities for purposes of calculating the
current index value at expiration of Exchange index options on days
when the primary market for the underlying security does not open.\3\
The proposed amendment would apply to both AM-settled and PM-settled
index options.\4\
---------------------------------------------------------------------------
\3\ Three of the Exchange's affiliated options exchanges, Nasdaq
ISE, LLC (``ISE''), Nasdaq BX (``BX'') and Nasdaq PHLX LLC, will
also be proposing rule changes relating to the manner of determining
an underlying index component security's price for purposes of
calculating the current index value at expiration of an index option
under these circumstances. See SR-BX-2018-049, SR-Phlx-2018-63, and
SR-ISE-2018-88. The Exchange desires its rules to be aligned with
those of the affiliated exchanges.
\4\ Currently, traditional index options expiring on the third
Friday of the month are A.M.-settled, meaning that the index
option's settlement value is calculated based upon opening prices of
the index's component securities on the last day of trading in the
component securities prior to expiration, normally on Friday
morning. By contrast, the settlement of P.M.-settled index options
is based upon the closing index value, defined as the last index
value reported on a business day, for the day on which the index
option is exercised. P.M.-settled options expiring on the third
Friday of the month would therefore normally be settled on the basis
of Friday's closing prices of component securities.
---------------------------------------------------------------------------
Currently, Chapter XIV, Section 10(g) provides that when the
primary market for a security underlying the current index value of an
index option does not open for trading on a given day, the price of
that security shall be determined, for purposes of calculating the
current index value at expiration, based on the opening price of that
security on the next day that its primary market is open for
trading.\5\
---------------------------------------------------------------------------
\5\ The rule provides, however, that this procedure shall not be
used if the current index value at expiration is fixed in accordance
with the Rules and By-Laws of the options Clearing Corporation
(``OCC'').
---------------------------------------------------------------------------
The Exchange now proposes to delete from the rule the language
providing for determination of the price of the component security, for
purposes of calculating the current index value at expiration, based on
the opening price of that security on the next day that its primary
market is open for trading. The Exchange proposes to amend Chapter XIV,
Section 10(g) so that it provides that when the primary market for a
security underlying the current index value of an index option does not
open for trading on a given day, which is an expiration day, for
purposes of calculating the settlement price at expiration, the last
reported sale price of the security from the previous trading day shall
be used.\6\ The revised provision would permit market participants the
certainty of knowing the settlement value on the day on which the
primary market fails to open. Additionally, the amendment would
eliminate the potential difficulties that could arise if the reporting
authority for the index were unwilling or unable to calculate the
settlement value using prices for the relevant security(ies) on the
next day that its primary market is open for trading.\7\
---------------------------------------------------------------------------
\6\ Chapter XIV, Section 10(g) would continue to apply to both
A.M.-settled and P.M.-settled index options.
\7\ The index calculator for the NDX, MNX and BKX indexes, which
are products traded on Nasdaq affiliated exchanges, uses the
previous day's closing price if components of the index do not open.
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The rule would continue to provide that this procedure shall not be
used if the current index value at expiration is fixed in accordance
with OCC rules and by-laws. This language recognizes that OCC is
authorized under its rules and by-laws to take certain actions relating
to settlement in the event of the unavailability or inaccuracy of the
current underlying interest value.\8\ The Exchange proposes to retain
this language in recognition of OCC's authority to establish settlement
prices and procedures in certain circumstances where normal settlement
procedures cannot be followed due unforeseen events, such as the
unanticipated closure of a primary market for a component security on a
day on which it would normally be open for trading. The Exchange would
thus retain the last sentence of Chapter XIV, Section 10(g) which will
make clear that the new
[[Page 56128]]
procedure would not apply in the event that OCC exercises its authority
to determine settlement prices. Rather, the proposed new language would
apply only when a primary market does not open and OCC elects not to
exercise its authority to intervene and take action to establish a
settlement price.
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\8\ See OCC By-Laws Article XVII, Section 4(a), which provides
in relevant part that if OCC shall determine that the primary market
for one or more index components did not open or remain open for
trading (or that any such components did not open or remain open for
trading on such market(s)) on a trading day at or before the time
when the current index value for that trading day would ordinarily
be determined, or that a current index value or other value or price
to be used as, or to determine, the exercise settlement amount (a
``required value'') for a trading day is otherwise unreported,
inaccurate, unreliable, unavailable or inappropriate for purposes of
calculating the exercise settlement amount, then, in addition to any
other actions that OCC may be entitled to take under OCC's bylaws
and rules, the, OCC is empowered to take any or all of a range of
permitted actions with respect to any series of options on such
index, including fixing the exercise settlement amount.
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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. As noted above, the amendment to Chapter XIV, Section 10(g)
would establish clearly the procedure for determination of an index
component security's price in the event that the primary market for the
security fails to open. By adopting the proposed rule amendment, the
Exchange would provide certainty to the market regarding the procedure
it would follow in the absence of action by OCC. Additionally, it would
provide market participants with the certainty of knowing the
settlement value on the day on which the primary market fails to open,
and eliminate the potential difficulties that could arise if the
reporting authority for the index were unwilling or unable to calculate
the settlement value using prices for the relevant security(ies) on the
next day that its primary market is open for trading.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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It would also acknowledge clearly, however, that OCC may, under its
rules and by-laws, establish settlement prices for expiring index
options that may differ from the settlement prices that would otherwise
be provided for in Exchange rules, thereby protecting investors and the
public interest by reducing potential for confusion in that regard.
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. On the contrary, the Exchange
believes that the proposed amendment will benefit investors, market
participants, and the marketplace in general by setting forth clearly
the manner in which index option settlement values will be determined
if the primary market for a security underlying the current index value
of an index option does not open for trading, allowing market
participants the certainty of knowing the settlement price on the day
on which the primary market fails to open, eliminating the potential
difficulties that could arise if the reporting authority for the index
were unwilling or unable to calculate the settlement value using prices
for the relevant security(ies) on the next day that its primary market
is open for trading, and retaining the existing provision stating that
the Exchange will defer to OCC in the determination of settlement
prices when and if OCC exercises its authority under its own settlement
price procedures in accordance with its rules and by-laws.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
Because the 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 and Rule 19b-4(f)(6) thereunder.\13\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ In addition, Rule 19b-4(f)(6)(iii) 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. In its filing with the
Commission, the Exchange has asked the Commission to waive the 30-day
operative delay so that the proposal may become operative immediately
upon filing to provide certainty regarding the determination of
settlement prices for index options when the primary market for a
security underlying the current index value of an index option does not
does not open for trading on an expiration day, including in instances
in which OCC exercises its authority to determine the settlement price.
According to the Exchange, the proposed rule change will allow
investors to know the settlement price of an index option on the day on
which the primary market of an underlying component fails to open and
will avoid potential difficulties that could arise if the reporting
authority for the index was unwilling or unable to calculate the
settlement value using prices for the relevant securities on the next
day that its primary market is open for trading. As such, the
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest and
designates the proposed rule change operative upon filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the operative delay, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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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-NASDAQ-2018-081 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 56129]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2018-081. 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 a.m. and 3 p.m.
Copies of such 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-
NASDAQ-2018-081, and should be submitted on or before November 30,
2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24525 Filed 11-8-18; 8:45 am]
BILLING CODE 8011-01-P
