Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Allow Certain Flexible Equity Options To Be Cash Settled, 7806-7811 [2020-02631]
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7806
Federal Register / Vol. 85, No. 28 / Tuesday, February 11, 2020 / Notices
amendment adds LTSE as a Participant 4
to the LULD Plan. The Commission is
publishing this notice to solicit
comments on the amendment from
interested persons.
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I. Description and Purpose of the
Amendment
On May 10, 2019, the Commission
issued an order granting LTSE’s
application for registration as a national
securities exchange.5 As noted above,
the proposed amendment adds LTSE as
a Participant to the LULD Plan.
Under Section II(C) of the LULD Plan,
any entity registered as a national
securities exchange or national
securities association under the
Exchange Act may become a Participant
by: (1) Becoming a participant in the
applicable Market Data Plans; (2)
executing a copy of the Plan, as then in
effect; (3) providing each then-current
Participant with a copy of such
executed Plan; and (4) effecting an
amendment to the Plan as specified in
Section III (B) of the Plan. Section III(B)
of the LULD Plan sets forth the process
for a prospective new Participant to
effect an amendment of the Plan.
Specifically, the LULD Plan provides
that such an amendment to the Plan
may be effected by the new national
securities exchange or national
securities association by executing a
copy of the Plan as then in effect (with
the only changes being the addition of
the new Participant’s name in Section
II(A) of the Plan); and submitting such
executed Plan to the Commission. The
amendment will be effective when it is
approved by the Commission in
accordance with Rule 608 of Regulation
NMS, or otherwise becomes effective
pursuant to Rule 608 of Regulation
NMS.
LTSE has become a participant in the
applicable Market Data Plans,6 executed
Order’’). See Securities Exchange Act Release No.
67091 (May 31, 2012), 77 FR 33498 (June 6, 2012).
The Commission approved the LULD Plan on a
permanent basis on April 11, 2019. See Securities
Exchange Act Release No. 85623, 84 FR 16079
(April 17, 2019).
4 Defined in Section I(K) of the Plan as follows:
‘‘Participant’’ means a Party to the Plan.
5 See Securities Exchange Act Release No. 85828
(May 10, 2019), 84 FR 21841 (May 15, 2019).
6 See Letter from Robert Books, Chairman,
Operating Committee, CTA/CQ Plans, to Vanessa
Countryman, Secretary, Commission, dated October
23, 2018 [sic]to Vanessa Countryman, Secretary,
SEC, from Robert Books (relating to Thirty-Second
Substantive Amendment to the Second Restatement
of the CTA Plan and Twenty-Third Substantive
Amendment to the Restated CQ Plan adding LTSE
as a participant) and letter from Robert Books,
Chairman, Operating Committee, UTP Plan, to
Vanessa Countryman, Secretary, Commission, dated
October 23, 2019 (relating to Forty-Sixth
Amendment to the UTP Plan adding LTSE as a
participant).
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18:19 Feb 10, 2020
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a copy of the Plan currently in effect,
with the only change being the addition
of its name in Section II(A) of the Plan,
and has provided a copy of the Plan
executed by LTSE to each of the other
Participants. LTSE has also submitted
the executed Plan to the Commission.
Accordingly, all of the Plan
requirements for effecting an
amendment to the Plan to add LTSE as
a Participant have been satisfied.
II. Effectiveness of the Proposed
Amendment
The foregoing Plan amendment has
become effective pursuant to Rule
608(b)(3)(iii) 7 because it involves solely
technical or ministerial matters.
III. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the amendment 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 4–
631 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 4–631. 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
plan amendment that are filed with the
Commission, and all written
communications relating to the
proposed plan amendment 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 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
7 17
PO 00000
CFR 242.608(b)(3)(iii).
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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 4–631and should be submitted
on or before March 3, 2020.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02633 Filed 2–10–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88131; File No. SR–
NYSEAMER–2019–38]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, To Allow Certain
Flexible Equity Options To Be Cash
Settled
February 5, 2020.
I. Introduction
On October 17, 2019, NYSE American
LLC (‘‘NYSE American’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend Rules 903G and 906G
to allow certain Flexible Exchange
(‘‘FLEX’’) Equity Options to be cash
settled.3 The proposal, as modified by
Amendment No. 1, would allow FLEX
Equity Options to be cash settled where
the underlying security is an ExchangeTraded Fund (‘‘ETF’’) that meets
prescribed criteria (‘‘FLEX ETF
Option’’).
The proposed rule change was
published for comment in the Federal
Register on November 7, 2019.4 On
December 18, 2019, the Commission
extended the time period within which
to approve the proposed rule changes,
disapprove the proposed rule changes,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 For the definition of ‘‘FLEX Equity Option,’’ see
infra note 7.
4 See Securities Exchange Act Release No. 87444
(November 1, 2019), 84 FR 60120 (November 7,
2019) (‘‘Notice’’).
2 17
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Federal Register / Vol. 85, No. 28 / Tuesday, February 11, 2020 / Notices
or institute proceedings to determine
whether to approve or disapprove the
proposed rule changes, to February 5,
2020.5 On February 4, 2020, the
Exchange filed Amendment No. 1 to the
proposed rule change, which supersedes
the original filing in its entirety.6 The
Commission has received no comments
on the proposed rule change. The
Commission is publishing this notice to
solicit comments on Amendment No. 1
from interested persons, and is
approving the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.
khammond on DSKJM1Z7X2PROD with NOTICES
II. Description of the Proposal, as
Modified by Amendment No. 1
The Exchange has proposed to amend
NYSE American Rule 903G(c) to allow
for cash settlement of certain FLEX
Equity Options.7 FLEX Equity Options
permit investors to specify certain
options contract terms, within
parameters set forth in the Exchange’s
FLEX rules, such as exercise style,
expiration date, and exercise prices.8
Currently, FLEX Equity Options are
settled by physical delivery of the
underlying security.9 The Exchange
proposed, in the case of a FLEX Equity
Option with an underlying security that
is an Exchange-Traded Fund (i.e., a
FLEX ETF Option) and that meets
prescribed criteria, to allow settlement
either by delivery in cash or, as
currently permitted under the Exchange
5 See Securities Exchange Act Release No. 87792
(December 18, 2019), 84 FR 71053 (December 26,
2019).
6 In Amendment No. 1, the Exchange: (1) Limited
cash settlement as a contract term to those FLEX
Equity Options whose underlying security is an
ETF; (ii) proposed to aggregate positions in cashsettled FLEX ETF Options with positions in
physically-settled options on the same underlying
ETF for purposes of position and exercise limits; (3)
proposed to limit the number of ETFs that could
underlie cash-settled FLEX ETF Options to no more
than 50 underlying ETFs and set a tiebreaker if
there are more than 50; (4) specified that the
Exchange will provide the Commission with annual
reports for five years that include, at a minimum,
certain trading information and analysis, and, if
any, recommendations, regarding the trading of
cash-settled FLEX ETF Options; and (5) proposed
some clarifying changes to its original proposal.
Amendment No. 1 replaces and supersedes the
original filing in its entirety and is available at:
https://www.nyse.com/publicdocs/nyse/markets/
nyse-american/rule-filings/filings/2020/
NYSEAmex-2019-38,%20Am.%201.pdf.
7 A ‘‘FLEX Option’’ is a customized options
contract that is subject to the rules of Section 15,
Flexible Exchange Options. See NYSE American
Rule 900G(b)(1). A ‘‘FLEX Equity Option’’ is an
option on a specified underlying equity security
that is subject to the rules of Section 15. See NYSE
American Rule 900G(b)(10).
8 See NYSE American Rule 903G.
9 See NYSE American Rule 903G(c)(3)(i). There is
one exception for a specific type of option called
FLEX Binary Return Derivatives (‘‘ByRDs’’). See
NYSE American Rules 900G(b)(17), 903G(c)(3)(ii),
and 910ByRDs.
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rules, by physical delivery of the
underlying security.10
As proposed, the Exchange would
allow for the cash settlement of a FLEX
ETF Option if the underlying ETF,
measured over the prior six-month
period, has (1) an average daily notional
value of at least $500 Million; and (2) a
national average daily volume (‘‘ADV’’)
of at least 4,680,000 shares.11 The
Exchange proposed to determine biannually the underlying ETFs that
satisfy these notional value and trading
volume requirements by using trading
statistics for the previous six-months.12
The Exchange also proposed to permit
cash settlement as a contract term on no
more than 50 underlying ETFs, and that
if more than 50 underlying ETFs satisfy
the notional value and trading volume
requirements, to select the top 50
securities based on the ETFs with the
highest ADV after meeting the initial
requirements.13 Further, the Exchange’s
proposed rule states that if the Exchange
determines pursuant to the bi-annual
review that an underlying ETF ceases to
satisfy the specified criteria, any new
position overlying such security entered
into would be required to have exercise
settlement by physical delivery and any
open positions overlying such security
would be able to be traded only to close
the position.14
10 See proposed NYSE American Rule
903G(c)(3)(ii). The Exchange proposed conforming
changes to NYSE American Rule 903G(c)(3) to
reflect that the proposed rule change would add a
second exception to the general requirement for
physical settlement for FLEX Equity Options on an
eligible ETF. See proposed NYSE American Rule
903G(c)(3)(i) and (iii).
11 See proposed NYSE American Rule
903G(c)(3)(ii).
12 See proposed NYSE American Rule
903G(c)(3)(ii)(A). The Exchange stated that it plans
to conduct the bi-annual review on January 1 and
July 1 of each year, announce the results via a
Trader Update, and permit FLEX ETF Options any
new ETFs that qualify to have cash settlement as
a contract term beginning on February 1 and August
1 of each year. See Amendment No. 1, supra note
6, at n.8.
13 See proposed NYSE American Rule
903G(c)(3)(ii)(A).
14 See proposed NYSE American Rule
903G(c)(3)(ii)(B). The Exchange represented that it
will provide guidance to reflect that an Exchange
member acting as a market maker in cash-settled
FLEX ETF Options can enter into an opening
transaction to facilitate closing only transactions of
another market participant when such orders are
restricted to closing only transactions. See
Amendment No. 1, supra note 6, at 5. The Exchange
noted in its proposal that this is consistent with
how it addresses other situations when transactions
in certain options series are restricted to closingonly transactions and represented that this
interpretation is consistent with a market maker’s
duty to maintain fair and orderly markets as set
forth in NYSE American Rule 920NY. See
Amendment No. 1, supra note 6, at n.10 (citing
https://www.nyse.com/publicdocs/nyse/markets/
arca-options/rule-interpretations/2017/
NYSE%20Arca%20Options%20RB%2017-01.pdf).
PO 00000
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7807
In support of its proposal, the
Exchange stated that it believes it is
appropriate to introduce cash settlement
as an alternative contract term to the
select group of ETFs because they are
‘‘among the most highly liquid and
actively-traded securities,’’ 15 and that
the deep liquidity and robust trading
activity in these ETFs, in the Exchange’s
view, mitigate against historic concerns
regarding susceptibility to
manipulation.16 The Exchange stated
that it believes that average daily
notional value is an appropriate proxy
for selecting underlying ETFs that are
not readily susceptible to manipulation
because it believes that as a general
matter, the more expensive an
underlying ETF’s price, the less costeffective manipulation could become,
and that manipulation of the price of an
ETF encounters greater difficulty the
more volume that is traded.17 In
addition, the Exchange stated that it
believes an ADV requirement of
4,680,000 shares a day is appropriate
because it represents average trading in
the underlying ETF of 200 shares per
second.18 The Exchange stated that it
believes that while no security is
immune from all manipulation, the
combination of average daily notional
value and ADV as prerequisite
requirements would limit cash
settlement of FLEX ETF Options to
those underlying securities that would
be less susceptible to manipulation in
order to establish a settlement price.19
The Exchange further stated that it
believes that permitting cash settlement
as a contract term for FLEX ETF Options
would broaden the base of investors that
use FLEX Options to manage their
trading and investment risk, including
investors that currently trade in the OTC
market for customized options, where
settlement restrictions do not apply.20
The Exchange represented that the
table below provides the list of the 26
securities that, as of December 31, 2019,
would be eligible to have cash
settlement as a contract term.21
15 See
Amendment No. 1, supra note 6, at 5.
Amendment No. 1, supra note 6, at 5.
17 See Notice, supra note 4, 84 FR at 60120. See
also Amendment No. 1, supra note 6, at 6–7. To
calculate average daily notional value, the Exchange
summed the notional value of each trade for each
symbol (i.e., the number of shares times the price
for each execution in the security) and divided that
total by the number of trading days in the six-month
period (from July 1, 2019 through December 31,
2019) reviewed by the Exchange. See Amendment
No. 1, supra note 6, at 6–7.
18 See Notice, supra note 4, 84 FR at 60120. See
also Amendment No. 1, supra note 6, at 7.
19 See Amendment No. 1, supra note 6, at 7.
20 See Amendment No. 1, supra note 6, at 8.
21 See Amendment No. 1, supra note 6, at 7–8.
16 See
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Federal Register / Vol. 85, No. 28 / Tuesday, February 11, 2020 / Notices
Symbol
Security name
SPY ..........
GDX .........
EEM .........
XLF ...........
VXX ..........
XOP ..........
QQQ .........
EWZ .........
EFA ..........
FXI ............
IWM ..........
HYG .........
GDXJ ........
TQQQ .......
XLU ..........
XLE ..........
IEMG ........
XLP ..........
TLT ...........
XLK ..........
XLI ............
LQD ..........
GLD ..........
XLV ..........
IYR ...........
JNK ..........
SPDR S&P 500 ETF Trust ...................................................................................................
VanEck Vectors Gold Miners ETF ........................................................................................
iShares MSCI Emerging Markets ETF .................................................................................
Financial Select Sector SPDR Fund .....................................................................................
iPath Series B S&P 500 VIX Short-Term Futures ETN .......................................................
SPDR S&P Oil & Gas Exploration & Production ETF ..........................................................
Invesco QQQ Trust ...............................................................................................................
iShares MSCI Brazil ETF ......................................................................................................
iShares MSCI EAFE ETF .....................................................................................................
iShares China Large-Cap ETF .............................................................................................
iShares Russell 2000 ETF ....................................................................................................
iShares iBoxx High Yield Corporate Bond ETF ....................................................................
VanEck Vectors Junior Gold Miners ETF .............................................................................
ProShares UltraPro QQQ .....................................................................................................
Utilities Select Sector SPDR Fund .......................................................................................
Energy Select Sector SPDR Fund ........................................................................................
iShares Core MSCI Emerging Markets ETF ........................................................................
Consumer Staples Select Sector SPDR Fund .....................................................................
iShares 20+ Year Treasury Bond ETF .................................................................................
Technology Select Sector SPDR Fund ................................................................................
Industrial Select Sector SPDR Fund ....................................................................................
iShares iBoxx Investment Grade Corporate Bond ETF .......................................................
SPDR Gold Trust ..................................................................................................................
Health Care Select Sector SPDR Fund ................................................................................
iShares U.S. Real Estate ETF ..............................................................................................
SPDR Bloomberg Barclays High Yield Bond ETF ...............................................................
khammond on DSKJM1Z7X2PROD with NOTICES
The Exchange proposed that cashsettled FLEX ETF Options would be
subject to the position limits set forth in
NYSE American Rule 904 and the
exercise limits set forth in NYSE
American Rule 905, which rules also
apply to the standardized options
market.22 In addition, the Exchange
proposed that positions in cash-settled
options will be aggregated with all
positions in physically-settled options
on the same underlying ETF for the
purpose of calculating the position
limits set forth in Rule 904, and the
exercise limits set forth in Rule 905.23
22 See proposed NYSE American Rule 906G(b)(ii).
The Exchange represented that, out of the 26
underlying ETFs that would currently be eligible to
have cash settlement as a contract term, 18 would
have a position limit of 250,000 contracts (see
NYSE American Rule 904, Commentary .07(a)) and
the position limit for the other eight underlying
securities would be as follows: For QQQ and SPY,
1,800,000 contracts; for IWM and EEM, 1,000,000
contracts; and for FXI, EFA, EWZ and TLT, 500,000
contracts (see NYSE American Rule 904,
Commentary .07(f)). See Amendment No. 1, supra
note 6, at 9–10. The Commission notes that, under
the Exchange’s rules, the applicable exercise limits
will be the same as the position limits.
23 See proposed NYSE American Rule 906G(b)(ii).
The Exchange also proposes a non-substantive
amendment to Rule 906G to renumber current
NYSE American Rule 906G(b)(ii) as new NYSE
American Rule 906G(b)(iii). The Exchange stated
that, given that each of the underlying securities
that would currently be eligible to have cashsettlement as a contract term have established
position and exercise limits applicable to
physically-settled options, the Exchange believes it
is appropriate for the same position and exercise
limits to also apply to cash-settled options. See
Notice, supra note 4, 84 FR at 60122. See also
Amendment No. 1, supra note 6, at 9.
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The Exchange noted in its filing that
cash-settled FLEX ETF Options would
not be available for trading until The
Options Clearing Corporation (‘‘OCC’’)
represents to the Exchange that it is
fully able to clear and settle such
options.24 The Exchange stated that it
represents that it and The Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
the additional traffic associated with the
listing of cash-settled FLEX ETF
Options, and that it believes that its
members will not have a capacity issue
as a result of the proposed rule
change.25 The Exchange also
represented that it does not believe the
proposed rule change will cause
fragmentation of liquidity.26 The
Exchange further represented that it will
monitor for any effects additional
trading volume from the proposal may
have on both market fragmentation and
capacity of the Exchange’s automated
systems.27
The Exchange stated that it believes
that it has an adequate surveillance
program in place for cash-settled FLEX
ETF Options and intends to apply the
same program procedures that it applies
to the Exchange’s other options
24 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 10.
25 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 10.
26 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 10.
27 See Notice, supra note 4, 84 FR at 60123. See
also, Amendment No. 1, supra note 6, at 10.
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
Average daily
notional value
(7/1/19–12/31/19)
Average daily
volume
(7/1/19–12/31/19)
$19,348,446,943
1,642,832,369
2,452,054,515
1,326,369,702
771,760,803
634,221,618
4,881,991,635
1,021,953,287
1,547,095,600
962,138,508
2,850,264,638
1,596,947,580
644,620,425
1,107,279,835
1,037,188,333
857,120,647
690,635,496
740,499,207
1,482,683,513
846,007,077
771,117,183
1,215,543,560
1,335,356,112
776,822,924
641,445,902
632,969,484
64,473,579
59,224,665
58,392,976
51,114,805
34,481,358
28,045,372
25,290,206
23,573,072
23,547,995
23,499,870
18,418,308
18,385,570
16,792,343
16,739,207
16,587,526
14,338,385
13,711,914
12,203,155
10,608,009
10,319,276
9,884,799
9,602,402
9,569,458
8,333,845
6,981,265
5,845,332
products.28 The Exchange represented,
among other things, that its existing
trading surveillances are adequate to
monitor the trading in the underlying
securities and subsequent trading of
options on those securities on the
Exchange, including cash-settled FLEX
ETF Options.29 The Exchange noted that
the regulatory program operated by and
overseen by NYSE Regulation includes
cross-market surveillance designed to
identify manipulative and other
improper trading that may occur on the
Exchange and other markets.30 The
Exchange also represented, among other
things, that it believes its existing
surveillance technologies and
procedures adequately address potential
concerns regarding possible
manipulation of the settlement value at
or near the close of the market.31 In
addition, the Exchange stated that it
believes that improvements in audit
trails, recordkeeping practices, and
inter-exchange cooperation over the last
two decades have greatly increased the
28 See
Amendment No. 1, supra note 6, at 11.
Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 11.
30 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 11.
31 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 11. The
Commission notes that the Exchange’s surveillance
procedures are described in more detail in the
Notice and in Amendment No. 1 and that these
descriptions are substantively identical. See Notice,
supra note 4, 84 FR 60123–24; Amendment No. 1,
supra note 6, at 11–12.
29 See
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Exchange’s ability to detect and punish
attempted manipulative activities.32
The Exchange represented that it is a
member of the Intermarket Surveillance
Group (‘‘ISG’’) under the Intermarket
Surveillance Group Agreement dated
June 20, 1994.33 The ISG members work
together to coordinate surveillance and
investigative information sharing in the
stock and options markets.34 For
surveillance purposes, the Exchange
stated that it would have access to
information regarding trading activity in
the pertinent underlying securities.35
Finally, the Exchange represented
that, given the novel characteristics of
cash-settled FLEX ETF Options, the
Exchange will conduct a review of the
trading in cash-settled FLEX ETF
Options over an initial five-year period
and furnish annual reports to the SEC
based on this review.36 At a minimum,
the reports will provide a comparison
between the trading volume of all cashsettled FLEX ETF Options listed under
the proposed rule and physically-settled
options on the same underlying
security, the liquidity of the market for
such options products and the
underlying ETFs, and any manipulation
concerns arising in connection with the
trading of cash-settled FLEX ETF
Options under the proposed rule, and
will also discuss any recommendations
the Exchange may have for
enhancements to the listing standards
based on its review.37
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III. Discussion and Commission
Findings
After careful review of the proposal,
as modified by Amendment No. 1, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.38 In
particular, the Commission finds that
the proposed rule change, as modified
32 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 12.
33 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 12.
34 See Notice, supra note 4, 84 FR at 60123. See
also Amendment No. 1, supra note 6, at 12.
35 See Notice, supra note 4, 84 FR at 60124. See
also Amendment No. 1, supra note 6, at 12.
36 See Amendment No. 1, supra note 6, at 13. The
Exchange stated that it would provide the first
report within 60 days after the first anniversary of
the initial listing date of the first cash-settled FLEX
ETF Option under the proposal and that each
subsequent report will be provided within 60 days
of the anniversary of the initial listing date on an
annual basis up until and including year five. Id.
37 See Amendment No. 1, supra note 6, at 13.
38 In approving this proposed rule change, 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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by Amendment No. 1, is consistent with
Section 6(b)(5) of the Act,39 which
requires, among other things, that the
rules of a national securities exchange
be designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, 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.
The Commission notes that the
Exchange’s modified proposal would
allow cash settlement for FLEX Equity
Options only on ETFs, and only where
the underlying ETF, as measured over
the prior six-month period, has (1) an
average daily notional value of at least
$500 Million; and (2) a national ADV of
at least 4,680,000 shares.40 The
Commission notes, and the Exchange
has represented, that the 26 ETFs
currently eligible using the proposed
criteria appear to be among some of the
most liquid and actively-traded ETFs
based on their average daily volume and
average notional value. The Commission
believes that, by limiting the trading of
options permitted to have cash
settlement to those with underlying
ETFs and only where these ETFs are
liquid and actively traded, along with
the other proposed requirements,
appears to be reasonably designed to
mitigate concerns about the
susceptibility to manipulation of such
cash-settled FLEX ETF Options and
their underlying ETFs and the potential
for market disruption. Additionally, the
proposed aggregated position and
exercise limits and surveillance
procedures discussed below, taken
together with the liquid and active
markets in the underlying eligible ETFs,
also appears reasonably designed to
address and mitigate concerns about the
potential for manipulation and market
disruption in markets for the options
and the underlying securities.
The Commission also notes that the
Exchange has proposed to use the same
position limits and exercise limits for
cash-settled FLEX ETF Options that are
applicable to the non-FLEX
standardized options market, and to
aggregate the positions in cash-settled
FLEX ETF Options with all positions in
physically-settled options on the same
underlying ETF for purposes of
calculating the position and exercise
limits.41 The Commission has
39 15
U.S.C. 78f(b)(5).
supra note 11 and accompanying text.
41 See supra notes 22–23 and accompanying text.
40 See
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7809
previously recognized that position and
exercise limits serve as a regulatory tool
designed to address manipulative
schemes and adverse market impact
surrounding the use of options and that
the limits can be useful to prevent
investors from disrupting the market in
securities underlying the options as well
as the options market itself.42 The
Commission believes therefore that
establishing position and exercise limits
at the same levels as those in the nonFLEX standardized options market and
aggregating those positions with all
physically-settled options on the same
underlying ETFs 43 can further help
mitigate the concerns that the limits are
designed to address about the potential
for manipulation and market disruption
in the options and the underlying
securities.
The Commission notes that the
Exchange will conduct a biannual
review of the underlying ETFs to
determine whether they no longer meet
the requirements for cash-settled FLEX
ETF Options on those ETFs.44 The
Commission believes that this
requirement is a reasonable means to
limit cash settlement to those FLEX ETF
Options that only overlie ETFs that
continue to meet the specified liquidity
and trading volume standards. The
Commission also believes that while, as
part of the biannual review, the
Exchange can identify new underlying
ETFs that meet the requirements and are
thus eligible for cash-settled FLEX ETF
Options, limiting the number of
qualifying underlying ETFs to 50 will
prevent the scope of cash settlement on
FLEX ETF Options from growing
considerably without an evaluation
about whether the level of the
requirements remains reasonable.45 The
Commission further believes that
selecting the top 50 securities based on
ETFs with the highest ADV, if more
than 50 ETFs otherwise meet the
requirements in Rule 903(G)(c)(3)(ii),
appears to be a reasonable tiebreaker. In
addition, the Commission notes that,
should the Exchange determine,
pursuant to the bi-annual review that an
underlying ETF ceases to satisfy the
42 See Securities Exchange Act Release No. 82770
(February 23, 2018), 83 FR 8907, 8910 (March 1,
2018) (SR–CBOE–2017–057).
43 The aggregation of position and exercise limits
would include all positions on physically-settled
FLEX and non-FLEX options on the same
underlying ETFs.
44 See supra note 12 and accompanying text.
45 See supra note 13 and accompanying text. At
the same time, the overall limit of 50 ETFs that can
underlie cash settled FLEX ETF Options should
also provide the Exchange with flexibility to add
additional ETFs that meet the Exchange’s
requirements given that the current eligible list of
ETFs as of December 31, 2019 contains 26 ETFs.
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requirements under Rule
903(G)(c)(3)(ii), any new options
position overlying such ETF would be
required to have exercise settlement by
physical delivery and any open cashsettled FLEX ETF Option positions may
be traded only to close the position.46
The Commission believes that this
provision is a reasonable means to
address how to wind down an
outstanding cash-settled FLEX ETF
Option where the underlying ETF no
longer qualifies under the liquidity and
volume criteria, thereby addressing
manipulation concerns, while still
allowing market participants to close
out positions.
The Commission recognizes that the
proposal is unique in that it would
allow options on ETFs that currently are
only available to be traded on a national
securities exchange with physical
settlement to now have a cashsettlement alternative. The Exchange,
acknowledging the ‘‘novel
characteristics’’ of its proposal has
committed to perform periodic data
analyses with written assessments and
to make such analyses and assessments
available to the Commission on an
annual basis for the first five years of
trading in the subject options.47 As
noted above, the Exchange has also
stated that the reports will discuss any
recommendations it has on
enhancements to its proposed listing
standards based on these reviews. The
Commission notes that the annual
reports will allow the Commission and
the Exchange to evaluate, among other
things, the impact such options have,
and any potential adverse effects, on
price volatility and the market for the
underlying ETFs, the component
securities underlying the ETFs, and the
options on the same underlying ETFs
and make appropriate
recommendations, if any, in response to
the reports.
The Commission notes that
surveillance is important, among other
things, to detect and deter fraudulent
and manipulative trading activity as
well as other violations of Exchange
rules and the federal securities laws.
The Exchange has represented that it
has adequate surveillance procedures in
place to monitor trading in these
options and the underlying securities,
including to detect manipulative trading
activity in both the options and the
underlying ETF.48 The Exchange further
46 See
supra note 14 and accompanying text.
supra notes 36–37 and accompanying text.
48 See supra notes 28–35 and accompanying text.
Among other things, the Exchange noted that its
regulatory program included cross-market
surveillance designed to identify manipulative and
other improper trading, including spoofing,
47 See
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asserted that the liquidity and active
markets in the underlying ETFs, and the
high number of market participants in
both the underlying ETFs and existing
options on the ETFs, helps to minimize
the possibility of manipulation. The
Commission notes that the proposed
surveillance, along with the liquidity
criteria and position and exercise limits
requirements, appear to be reasonably
designed to mitigate manipulation
concerns. The Commission further notes
that under Section 19(g) of the Act, the
Exchange, as a self-regulatory
organization, is required to enforce
compliance by its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the rules of the
Exchange.49 The Commission
understands that the Exchange performs
ongoing evaluations of its surveillance
program to ensure its continued
effectiveness and the Commission
would, therefore, expect the Exchange
to continue to review its surveillance
procedures on an ongoing basis and
make any necessary enhancements
and/or modifications that may be
needed for the cash settlement of FLEX
ETF Options.
In approving the proposed rule
change, the Commission notes that cashsettled FLEX ETF Options will be
subject to the same trading rules and
procedures that currently govern the
trading of other FLEX Options on the
Exchange, with the exception of the
rules to accommodate the cash
settlement feature being approved
herein. The Commission also notes that
the Exchange has represented that it
will monitor any effect additional
options series listed under the proposal
have on market fragmentation and the
capacity of the Exchange’s automated
systems. The Commission notes that
FLEX ETF Options, as the Exchange
represented, cannot be traded until OCC
represents to the Exchange that it is
fully able to clear and settle such
options.50 Finally, the Commission
expects that the Exchange will take
prompt action, including timely
communication with the Commission
algorithm gaming, marking the close and open, as
well as more general abusive behavior related to
front running, wash sales, quoting/routing, and Reg
SHO violations, that may occur on the Exchange
and other markets. Furthermore, the Exchange
stated that it has access to information regarding
trading activity in the pertinent underlying
securities as a member of ISG. See Amendment No.
1, supra note 6, at 11–12. See also id. at n.15.
49 15 U.S.C. 78s(g).
50 See supra note 24 and accompanying text. The
Commission understands that, as of the date of this
Order, OCC has not yet made the necessary
representations for the Exchange to be able to
commence trading.
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and with other self-regulatory
organizations responsible for oversight
of trading in options, the underlying
ETFs, and the ETFs’ component
securities, should any unanticipated
adverse market effects develop.
Based on the Exchange’s
representations with respect to the
proposed cash-settlement of FLEX
Equity Options, whose underlying
security is an ETF, and for the foregoing
reasons, the Commission finds that the
proposed rule change, as modified by
Amendment No. 1, is consistent with
the Act.
IV. Accelerated Approval of Proposed
Rule Change, as Modified By
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 1 in the Federal
Register. As discussed above,
Amendment No. 1 modified the original
proposed rule change to limit the cash
settlement of FLEX Equity Options to
underlying ETFs, with a maximum cap
of 50 such ETFs, that have met the
originally proposed average daily
notional value and national average
daily volume requirements, using
average daily volume as a tiebreaker if
more than 50 ETFs otherwise qualify.
Amendment No 1 also modified the
original proposal to require that the
proposed position and exercise limits
for cash-settled FLEX ETF Options be
aggregated with all physically-settled
options on the same underlying ETF.
Amendment No. 1 stated that the
Exchange would provide a report to the
Commission annually for five years
providing an analysis, along with any
recommendations, concerning the
trading of cash-settled FLEX ETF
Options. Finally, Amendment No. 1
made some additional clarifying
changes to the original proposal.
The Commission notes that the
changes made to the original proposal in
Amendment No. 1 narrows the scope of
the proposed rule change and limits its
applicability to ETFs, which should
help to mitigate potential risks of
manipulation and market disruption.
The amendment to aggregate position
and exercise limits also addressed
similar concerns. Furthermore, the
Commission notes that the original,
broader proposal, including the
proposed numerical eligibility criteria
applied to the underlying ETFs, was
published for comment in the Federal
Register and no comments were
received. The Exchange’s annual report
requirement also supplements the
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proposal and should help the Exchange
and the Commission in assessing any
potential market impacts, including on
price volatility, from the trading of the
cash-settled FLEX ETF Options under
the proposal. In addition, Amendment
No. 1 clarifies and provides additional
explanation relating to the proposed
rule change. The changes and additional
information in Amendment No. 1 have
also assisted the Commission in
evaluating the proposal and finding that
the proposal is consistent with the Act.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,51 to approve the proposed
rule change, SR–NYSEAMER–2019–38,
as modified by Amendment No. 1, on an
accelerated basis.
V. Solicitation of Comments on
Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 1 to
the proposed rule change is consistent
with the Act. Comments may be
submitted by any of the following
methods:
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEAMER–2019–38 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to: Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEAMER–2019–38. 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–NYSEAMER–2019–38 and
should be submitted on or before March
3, 2020.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,52 that the
proposed rule change (SR–NYSEAMER–
2019–38), as modified by Amendment
No. 1, be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.53
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–02631 Filed 2–10–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Securities Act of 1933, Release No.
10753/February 6, 2020; Securities
Exchange Act of 1934, Release No.
88137/February 6, 2020; Order
Regarding Review of FASB Accounting
Support Fee for 2020 Under Section
109 of The Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 (the
‘‘Act’’) provides that the Securities and
Exchange Commission (the
‘‘Commission’’) may recognize, as
generally accepted for purposes of the
securities laws, any accounting
principles established by a standard
setting body that meets certain criteria.
Consequently, Section 109 of the Act
provides that all of the budget of such
a standard setting body shall be payable
from an annual accounting support fee
assessed and collected against each
issuer, as may be necessary or
appropriate to pay for the budget and
provide for the expenses of the standard
setting body, and to provide for an
independent, stable source of funding,
subject to review by the Commission.
52 15
51 15
U.S.C. 78s(b)(2).
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CFR 200.30–3(a)(12).
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7811
Under Section 109(f) of the Act, the
amount of fees collected for a fiscal year
shall not exceed the ‘‘recoverable budget
expenses’’ of the standard setting body.
Section 109(h) amends Section 13(b)(2)
of the Securities Exchange Act of 1934
to require issuers to pay the allocable
share of a reasonable annual accounting
support fee or fees, determined in
accordance with Section 109 of the Act.
On April 25, 2003, the Commission
issued a policy statement concluding
that the Financial Accounting Standards
Board (‘‘FASB’’) and its parent
organization, the Financial Accounting
Foundation (‘‘FAF’’), satisfied the
criteria for an accounting standardsetting body under the Act, and
recognizing the FASB’s financial
accounting and reporting standards as
‘‘generally accepted’’ under Section 108
of the Act.1 As a consequence of that
recognition, the Commission undertook
a review of the FASB’s accounting
support fee for calendar year 2020.2 In
connection with its review, the
Commission also reviewed the budget
for the FAF and the FASB for calendar
year 2020.
Section 109 of the Act also provides
that the standard setting body can have
additional sources of revenue for its
activities, such as earnings from sales of
publications, provided that each
additional source of revenue shall not
jeopardize, in the judgment of the
Commission, the actual or perceived
independence of the standard setter. In
this regard, the Commission also
considered the interrelation of the
operating budgets of the FAF, the FASB,
and the Governmental Accounting
Standards Board (‘‘GASB’’), the FASB’s
sister organization, which sets
accounting standards used by state and
local government entities. The
Commission has been advised by the
FAF that neither the FAF, the FASB, nor
the GASB accept contributions from the
accounting profession.
The Commission understands that the
Office of Management and Budget
(‘‘OMB’’) has determined the FASB’s
spending of the 2020 accounting
support fee is sequestrable under the
Budget Control Act of 2011.3 So long as
sequestration is applicable, we
anticipate that the FAF will work with
the Commission and Commission staff
1 Financial
Reporting Release No. 70.
Financial Accounting Foundation’s Board
of Trustees approved the FASB’s budget on
November 19, 2019. The FAF submitted the
approved budget to the Commission on November
20, 2019.
3 See ‘‘OMB Report Pursuant to the Sequestration
Transparency Act of 2012’’ (P.L. 112–155), page 222
of 224 at: https://www.whitehouse.gov/sites/default/
files/omb/assets/legislative_reports/stareport.pdf.
2 The
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]]>Agencies
[Federal Register Volume 85, Number 28 (Tuesday, February 11, 2020)]
[Notices]
[Pages 7806-7811]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02631]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88131; File No. SR-NYSEAMER-2019-38]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To Allow Certain
Flexible Equity Options To Be Cash Settled
February 5, 2020.
I. Introduction
On October 17, 2019, NYSE American LLC (``NYSE American'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Rules 903G and 906G to allow certain
Flexible Exchange (``FLEX'') Equity Options to be cash settled.\3\ The
proposal, as modified by Amendment No. 1, would allow FLEX Equity
Options to be cash settled where the underlying security is an
Exchange-Traded Fund (``ETF'') that meets prescribed criteria (``FLEX
ETF Option'').
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ For the definition of ``FLEX Equity Option,'' see infra note
7.
---------------------------------------------------------------------------
The proposed rule change was published for comment in the Federal
Register on November 7, 2019.\4\ On December 18, 2019, the Commission
extended the time period within which to approve the proposed rule
changes, disapprove the proposed rule changes,
[[Page 7807]]
or institute proceedings to determine whether to approve or disapprove
the proposed rule changes, to February 5, 2020.\5\ On February 4, 2020,
the Exchange filed Amendment No. 1 to the proposed rule change, which
supersedes the original filing in its entirety.\6\ The Commission has
received no comments on the proposed rule change. The Commission is
publishing this notice to solicit comments on Amendment No. 1 from
interested persons, and is approving the proposed rule change, as
modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 87444 (November 1,
2019), 84 FR 60120 (November 7, 2019) (``Notice'').
\5\ See Securities Exchange Act Release No. 87792 (December 18,
2019), 84 FR 71053 (December 26, 2019).
\6\ In Amendment No. 1, the Exchange: (1) Limited cash
settlement as a contract term to those FLEX Equity Options whose
underlying security is an ETF; (ii) proposed to aggregate positions
in cash-settled FLEX ETF Options with positions in physically-
settled options on the same underlying ETF for purposes of position
and exercise limits; (3) proposed to limit the number of ETFs that
could underlie cash-settled FLEX ETF Options to no more than 50
underlying ETFs and set a tiebreaker if there are more than 50; (4)
specified that the Exchange will provide the Commission with annual
reports for five years that include, at a minimum, certain trading
information and analysis, and, if any, recommendations, regarding
the trading of cash-settled FLEX ETF Options; and (5) proposed some
clarifying changes to its original proposal. Amendment No. 1
replaces and supersedes the original filing in its entirety and is
available at: https://www.nyse.com/publicdocs/nyse/markets/nyse-american/rule-filings/filings/2020/NYSEAmex-2019-38,%20Am.%201.pdf.
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II. Description of the Proposal, as Modified by Amendment No. 1
The Exchange has proposed to amend NYSE American Rule 903G(c) to
allow for cash settlement of certain FLEX Equity Options.\7\ FLEX
Equity Options permit investors to specify certain options contract
terms, within parameters set forth in the Exchange's FLEX rules, such
as exercise style, expiration date, and exercise prices.\8\ Currently,
FLEX Equity Options are settled by physical delivery of the underlying
security.\9\ The Exchange proposed, in the case of a FLEX Equity Option
with an underlying security that is an Exchange-Traded Fund (i.e., a
FLEX ETF Option) and that meets prescribed criteria, to allow
settlement either by delivery in cash or, as currently permitted under
the Exchange rules, by physical delivery of the underlying
security.\10\
---------------------------------------------------------------------------
\7\ A ``FLEX Option'' is a customized options contract that is
subject to the rules of Section 15, Flexible Exchange Options. See
NYSE American Rule 900G(b)(1). A ``FLEX Equity Option'' is an option
on a specified underlying equity security that is subject to the
rules of Section 15. See NYSE American Rule 900G(b)(10).
\8\ See NYSE American Rule 903G.
\9\ See NYSE American Rule 903G(c)(3)(i). There is one exception
for a specific type of option called FLEX Binary Return Derivatives
(``ByRDs''). See NYSE American Rules 900G(b)(17), 903G(c)(3)(ii),
and 910ByRDs.
\10\ See proposed NYSE American Rule 903G(c)(3)(ii). The
Exchange proposed conforming changes to NYSE American Rule
903G(c)(3) to reflect that the proposed rule change would add a
second exception to the general requirement for physical settlement
for FLEX Equity Options on an eligible ETF. See proposed NYSE
American Rule 903G(c)(3)(i) and (iii).
---------------------------------------------------------------------------
As proposed, the Exchange would allow for the cash settlement of a
FLEX ETF Option if the underlying ETF, measured over the prior six-
month period, has (1) an average daily notional value of at least $500
Million; and (2) a national average daily volume (``ADV'') of at least
4,680,000 shares.\11\ The Exchange proposed to determine bi-annually
the underlying ETFs that satisfy these notional value and trading
volume requirements by using trading statistics for the previous six-
months.\12\ The Exchange also proposed to permit cash settlement as a
contract term on no more than 50 underlying ETFs, and that if more than
50 underlying ETFs satisfy the notional value and trading volume
requirements, to select the top 50 securities based on the ETFs with
the highest ADV after meeting the initial requirements.\13\ Further,
the Exchange's proposed rule states that if the Exchange determines
pursuant to the bi-annual review that an underlying ETF ceases to
satisfy the specified criteria, any new position overlying such
security entered into would be required to have exercise settlement by
physical delivery and any open positions overlying such security would
be able to be traded only to close the position.\14\
---------------------------------------------------------------------------
\11\ See proposed NYSE American Rule 903G(c)(3)(ii).
\12\ See proposed NYSE American Rule 903G(c)(3)(ii)(A). The
Exchange stated that it plans to conduct the bi-annual review on
January 1 and July 1 of each year, announce the results via a Trader
Update, and permit FLEX ETF Options any new ETFs that qualify to
have cash settlement as a contract term beginning on February 1 and
August 1 of each year. See Amendment No. 1, supra note 6, at n.8.
\13\ See proposed NYSE American Rule 903G(c)(3)(ii)(A).
\14\ See proposed NYSE American Rule 903G(c)(3)(ii)(B). The
Exchange represented that it will provide guidance to reflect that
an Exchange member acting as a market maker in cash-settled FLEX ETF
Options can enter into an opening transaction to facilitate closing
only transactions of another market participant when such orders are
restricted to closing only transactions. See Amendment No. 1, supra
note 6, at 5. The Exchange noted in its proposal that this is
consistent with how it addresses other situations when transactions
in certain options series are restricted to closing-only
transactions and represented that this interpretation is consistent
with a market maker's duty to maintain fair and orderly markets as
set forth in NYSE American Rule 920NY. See Amendment No. 1, supra
note 6, at n.10 (citing https://www.nyse.com/publicdocs/nyse/markets/arca-options/rule-interpretations/2017/NYSE%20Arca%20Options%20RB%2017-01.pdf).
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In support of its proposal, the Exchange stated that it believes it
is appropriate to introduce cash settlement as an alternative contract
term to the select group of ETFs because they are ``among the most
highly liquid and actively-traded securities,'' \15\ and that the deep
liquidity and robust trading activity in these ETFs, in the Exchange's
view, mitigate against historic concerns regarding susceptibility to
manipulation.\16\ The Exchange stated that it believes that average
daily notional value is an appropriate proxy for selecting underlying
ETFs that are not readily susceptible to manipulation because it
believes that as a general matter, the more expensive an underlying
ETF's price, the less cost-effective manipulation could become, and
that manipulation of the price of an ETF encounters greater difficulty
the more volume that is traded.\17\ In addition, the Exchange stated
that it believes an ADV requirement of 4,680,000 shares a day is
appropriate because it represents average trading in the underlying ETF
of 200 shares per second.\18\ The Exchange stated that it believes that
while no security is immune from all manipulation, the combination of
average daily notional value and ADV as prerequisite requirements would
limit cash settlement of FLEX ETF Options to those underlying
securities that would be less susceptible to manipulation in order to
establish a settlement price.\19\ The Exchange further stated that it
believes that permitting cash settlement as a contract term for FLEX
ETF Options would broaden the base of investors that use FLEX Options
to manage their trading and investment risk, including investors that
currently trade in the OTC market for customized options, where
settlement restrictions do not apply.\20\
---------------------------------------------------------------------------
\15\ See Amendment No. 1, supra note 6, at 5.
\16\ See Amendment No. 1, supra note 6, at 5.
\17\ See Notice, supra note 4, 84 FR at 60120. See also
Amendment No. 1, supra note 6, at 6-7. To calculate average daily
notional value, the Exchange summed the notional value of each trade
for each symbol (i.e., the number of shares times the price for each
execution in the security) and divided that total by the number of
trading days in the six-month period (from July 1, 2019 through
December 31, 2019) reviewed by the Exchange. See Amendment No. 1,
supra note 6, at 6-7.
\18\ See Notice, supra note 4, 84 FR at 60120. See also
Amendment No. 1, supra note 6, at 7.
\19\ See Amendment No. 1, supra note 6, at 7.
\20\ See Amendment No. 1, supra note 6, at 8.
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The Exchange represented that the table below provides the list of
the 26 securities that, as of December 31, 2019, would be eligible to
have cash settlement as a contract term.\21\
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\21\ See Amendment No. 1, supra note 6, at 7-8.
[[Page 7808]]
----------------------------------------------------------------------------------------------------------------
Average daily Average daily
Symbol Security name notional value volume (7/1/19-
(7/1/19-12/31/19) 12/31/19)
----------------------------------------------------------------------------------------------------------------
SPY.............................. SPDR S&P 500 ETF Trust................. $19,348,446,943 64,473,579
GDX.............................. VanEck Vectors Gold Miners ETF......... 1,642,832,369 59,224,665
EEM.............................. iShares MSCI Emerging Markets ETF...... 2,452,054,515 58,392,976
XLF.............................. Financial Select Sector SPDR Fund...... 1,326,369,702 51,114,805
VXX.............................. iPath Series B S&P 500 VIX Short-Term 771,760,803 34,481,358
Futures ETN.
XOP.............................. SPDR S&P Oil & Gas Exploration & 634,221,618 28,045,372
Production ETF.
QQQ.............................. Invesco QQQ Trust...................... 4,881,991,635 25,290,206
EWZ.............................. iShares MSCI Brazil ETF................ 1,021,953,287 23,573,072
EFA.............................. iShares MSCI EAFE ETF.................. 1,547,095,600 23,547,995
FXI.............................. iShares China Large-Cap ETF............ 962,138,508 23,499,870
IWM.............................. iShares Russell 2000 ETF............... 2,850,264,638 18,418,308
HYG.............................. iShares iBoxx High Yield Corporate Bond 1,596,947,580 18,385,570
ETF.
GDXJ............................. VanEck Vectors Junior Gold Miners ETF.. 644,620,425 16,792,343
TQQQ............................. ProShares UltraPro QQQ................. 1,107,279,835 16,739,207
XLU.............................. Utilities Select Sector SPDR Fund...... 1,037,188,333 16,587,526
XLE.............................. Energy Select Sector SPDR Fund......... 857,120,647 14,338,385
IEMG............................. iShares Core MSCI Emerging Markets ETF. 690,635,496 13,711,914
XLP.............................. Consumer Staples Select Sector SPDR 740,499,207 12,203,155
Fund.
TLT.............................. iShares 20+ Year Treasury Bond ETF..... 1,482,683,513 10,608,009
XLK.............................. Technology Select Sector SPDR Fund..... 846,007,077 10,319,276
XLI.............................. Industrial Select Sector SPDR Fund..... 771,117,183 9,884,799
LQD.............................. iShares iBoxx Investment Grade 1,215,543,560 9,602,402
Corporate Bond ETF.
GLD.............................. SPDR Gold Trust........................ 1,335,356,112 9,569,458
XLV.............................. Health Care Select Sector SPDR Fund.... 776,822,924 8,333,845
IYR.............................. iShares U.S. Real Estate ETF........... 641,445,902 6,981,265
JNK.............................. SPDR Bloomberg Barclays High Yield Bond 632,969,484 5,845,332
ETF.
----------------------------------------------------------------------------------------------------------------
The Exchange proposed that cash-settled FLEX ETF Options would be
subject to the position limits set forth in NYSE American Rule 904 and
the exercise limits set forth in NYSE American Rule 905, which rules
also apply to the standardized options market.\22\ In addition, the
Exchange proposed that positions in cash-settled options will be
aggregated with all positions in physically-settled options on the same
underlying ETF for the purpose of calculating the position limits set
forth in Rule 904, and the exercise limits set forth in Rule 905.\23\
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\22\ See proposed NYSE American Rule 906G(b)(ii). The Exchange
represented that, out of the 26 underlying ETFs that would currently
be eligible to have cash settlement as a contract term, 18 would
have a position limit of 250,000 contracts (see NYSE American Rule
904, Commentary .07(a)) and the position limit for the other eight
underlying securities would be as follows: For QQQ and SPY,
1,800,000 contracts; for IWM and EEM, 1,000,000 contracts; and for
FXI, EFA, EWZ and TLT, 500,000 contracts (see NYSE American Rule
904, Commentary .07(f)). See Amendment No. 1, supra note 6, at 9-10.
The Commission notes that, under the Exchange's rules, the
applicable exercise limits will be the same as the position limits.
\23\ See proposed NYSE American Rule 906G(b)(ii). The Exchange
also proposes a non-substantive amendment to Rule 906G to renumber
current NYSE American Rule 906G(b)(ii) as new NYSE American Rule
906G(b)(iii). The Exchange stated that, given that each of the
underlying securities that would currently be eligible to have cash-
settlement as a contract term have established position and exercise
limits applicable to physically-settled options, the Exchange
believes it is appropriate for the same position and exercise limits
to also apply to cash-settled options. See Notice, supra note 4, 84
FR at 60122. See also Amendment No. 1, supra note 6, at 9.
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The Exchange noted in its filing that cash-settled FLEX ETF Options
would not be available for trading until The Options Clearing
Corporation (``OCC'') represents to the Exchange that it is fully able
to clear and settle such options.\24\ The Exchange stated that it
represents that it and The Options Price Reporting Authority (``OPRA'')
have the necessary systems capacity to handle the additional traffic
associated with the listing of cash-settled FLEX ETF Options, and that
it believes that its members will not have a capacity issue as a result
of the proposed rule change.\25\ The Exchange also represented that it
does not believe the proposed rule change will cause fragmentation of
liquidity.\26\ The Exchange further represented that it will monitor
for any effects additional trading volume from the proposal may have on
both market fragmentation and capacity of the Exchange's automated
systems.\27\
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\24\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 10.
\25\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 10.
\26\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 10.
\27\ See Notice, supra note 4, 84 FR at 60123. See also,
Amendment No. 1, supra note 6, at 10.
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The Exchange stated that it believes that it has an adequate
surveillance program in place for cash-settled FLEX ETF Options and
intends to apply the same program procedures that it applies to the
Exchange's other options products.\28\ The Exchange represented, among
other things, that its existing trading surveillances are adequate to
monitor the trading in the underlying securities and subsequent trading
of options on those securities on the Exchange, including cash-settled
FLEX ETF Options.\29\ The Exchange noted that the regulatory program
operated by and overseen by NYSE Regulation includes cross-market
surveillance designed to identify manipulative and other improper
trading that may occur on the Exchange and other markets.\30\ The
Exchange also represented, among other things, that it believes its
existing surveillance technologies and procedures adequately address
potential concerns regarding possible manipulation of the settlement
value at or near the close of the market.\31\ In addition, the Exchange
stated that it believes that improvements in audit trails,
recordkeeping practices, and inter-exchange cooperation over the last
two decades have greatly increased the
[[Page 7809]]
Exchange's ability to detect and punish attempted manipulative
activities.\32\
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\28\ See Amendment No. 1, supra note 6, at 11.
\29\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 11.
\30\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 11.
\31\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 11. The Commission notes that the
Exchange's surveillance procedures are described in more detail in
the Notice and in Amendment No. 1 and that these descriptions are
substantively identical. See Notice, supra note 4, 84 FR 60123-24;
Amendment No. 1, supra note 6, at 11-12.
\32\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 12.
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The Exchange represented that it is a member of the Intermarket
Surveillance Group (``ISG'') under the Intermarket Surveillance Group
Agreement dated June 20, 1994.\33\ The ISG members work together to
coordinate surveillance and investigative information sharing in the
stock and options markets.\34\ For surveillance purposes, the Exchange
stated that it would have access to information regarding trading
activity in the pertinent underlying securities.\35\
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\33\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 12.
\34\ See Notice, supra note 4, 84 FR at 60123. See also
Amendment No. 1, supra note 6, at 12.
\35\ See Notice, supra note 4, 84 FR at 60124. See also
Amendment No. 1, supra note 6, at 12.
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Finally, the Exchange represented that, given the novel
characteristics of cash-settled FLEX ETF Options, the Exchange will
conduct a review of the trading in cash-settled FLEX ETF Options over
an initial five-year period and furnish annual reports to the SEC based
on this review.\36\ At a minimum, the reports will provide a comparison
between the trading volume of all cash-settled FLEX ETF Options listed
under the proposed rule and physically-settled options on the same
underlying security, the liquidity of the market for such options
products and the underlying ETFs, and any manipulation concerns arising
in connection with the trading of cash-settled FLEX ETF Options under
the proposed rule, and will also discuss any recommendations the
Exchange may have for enhancements to the listing standards based on
its review.\37\
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\36\ See Amendment No. 1, supra note 6, at 13. The Exchange
stated that it would provide the first report within 60 days after
the first anniversary of the initial listing date of the first cash-
settled FLEX ETF Option under the proposal and that each subsequent
report will be provided within 60 days of the anniversary of the
initial listing date on an annual basis up until and including year
five. Id.
\37\ See Amendment No. 1, supra note 6, at 13.
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III. Discussion and Commission Findings
After careful review of the proposal, as modified by Amendment No.
1, the Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\38\ In particular, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with Section
6(b)(5) of the Act,\39\ which requires, among other things, that the
rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, 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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\38\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\39\ 15 U.S.C. 78f(b)(5).
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The Commission notes that the Exchange's modified proposal would
allow cash settlement for FLEX Equity Options only on ETFs, and only
where the underlying ETF, as measured over the prior six-month period,
has (1) an average daily notional value of at least $500 Million; and
(2) a national ADV of at least 4,680,000 shares.\40\ The Commission
notes, and the Exchange has represented, that the 26 ETFs currently
eligible using the proposed criteria appear to be among some of the
most liquid and actively-traded ETFs based on their average daily
volume and average notional value. The Commission believes that, by
limiting the trading of options permitted to have cash settlement to
those with underlying ETFs and only where these ETFs are liquid and
actively traded, along with the other proposed requirements, appears to
be reasonably designed to mitigate concerns about the susceptibility to
manipulation of such cash-settled FLEX ETF Options and their underlying
ETFs and the potential for market disruption. Additionally, the
proposed aggregated position and exercise limits and surveillance
procedures discussed below, taken together with the liquid and active
markets in the underlying eligible ETFs, also appears reasonably
designed to address and mitigate concerns about the potential for
manipulation and market disruption in markets for the options and the
underlying securities.
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\40\ See supra note 11 and accompanying text.
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The Commission also notes that the Exchange has proposed to use the
same position limits and exercise limits for cash-settled FLEX ETF
Options that are applicable to the non-FLEX standardized options
market, and to aggregate the positions in cash-settled FLEX ETF Options
with all positions in physically-settled options on the same underlying
ETF for purposes of calculating the position and exercise limits.\41\
The Commission has previously recognized that position and exercise
limits serve as a regulatory tool designed to address manipulative
schemes and adverse market impact surrounding the use of options and
that the limits can be useful to prevent investors from disrupting the
market in securities underlying the options as well as the options
market itself.\42\ The Commission believes therefore that establishing
position and exercise limits at the same levels as those in the non-
FLEX standardized options market and aggregating those positions with
all physically-settled options on the same underlying ETFs \43\ can
further help mitigate the concerns that the limits are designed to
address about the potential for manipulation and market disruption in
the options and the underlying securities.
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\41\ See supra notes 22-23 and accompanying text.
\42\ See Securities Exchange Act Release No. 82770 (February 23,
2018), 83 FR 8907, 8910 (March 1, 2018) (SR-CBOE-2017-057).
\43\ The aggregation of position and exercise limits would
include all positions on physically-settled FLEX and non-FLEX
options on the same underlying ETFs.
---------------------------------------------------------------------------
The Commission notes that the Exchange will conduct a biannual
review of the underlying ETFs to determine whether they no longer meet
the requirements for cash-settled FLEX ETF Options on those ETFs.\44\
The Commission believes that this requirement is a reasonable means to
limit cash settlement to those FLEX ETF Options that only overlie ETFs
that continue to meet the specified liquidity and trading volume
standards. The Commission also believes that while, as part of the
biannual review, the Exchange can identify new underlying ETFs that
meet the requirements and are thus eligible for cash-settled FLEX ETF
Options, limiting the number of qualifying underlying ETFs to 50 will
prevent the scope of cash settlement on FLEX ETF Options from growing
considerably without an evaluation about whether the level of the
requirements remains reasonable.\45\ The Commission further believes
that selecting the top 50 securities based on ETFs with the highest
ADV, if more than 50 ETFs otherwise meet the requirements in Rule
903(G)(c)(3)(ii), appears to be a reasonable tiebreaker. In addition,
the Commission notes that, should the Exchange determine, pursuant to
the bi-annual review that an underlying ETF ceases to satisfy the
[[Page 7810]]
requirements under Rule 903(G)(c)(3)(ii), any new options position
overlying such ETF would be required to have exercise settlement by
physical delivery and any open cash-settled FLEX ETF Option positions
may be traded only to close the position.\46\ The Commission believes
that this provision is a reasonable means to address how to wind down
an outstanding cash-settled FLEX ETF Option where the underlying ETF no
longer qualifies under the liquidity and volume criteria, thereby
addressing manipulation concerns, while still allowing market
participants to close out positions.
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\44\ See supra note 12 and accompanying text.
\45\ See supra note 13 and accompanying text. At the same time,
the overall limit of 50 ETFs that can underlie cash settled FLEX ETF
Options should also provide the Exchange with flexibility to add
additional ETFs that meet the Exchange's requirements given that the
current eligible list of ETFs as of December 31, 2019 contains 26
ETFs.
\46\ See supra note 14 and accompanying text.
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The Commission recognizes that the proposal is unique in that it
would allow options on ETFs that currently are only available to be
traded on a national securities exchange with physical settlement to
now have a cash-settlement alternative. The Exchange, acknowledging the
``novel characteristics'' of its proposal has committed to perform
periodic data analyses with written assessments and to make such
analyses and assessments available to the Commission on an annual basis
for the first five years of trading in the subject options.\47\ As
noted above, the Exchange has also stated that the reports will discuss
any recommendations it has on enhancements to its proposed listing
standards based on these reviews. The Commission notes that the annual
reports will allow the Commission and the Exchange to evaluate, among
other things, the impact such options have, and any potential adverse
effects, on price volatility and the market for the underlying ETFs,
the component securities underlying the ETFs, and the options on the
same underlying ETFs and make appropriate recommendations, if any, in
response to the reports.
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\47\ See supra notes 36-37 and accompanying text.
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The Commission notes that surveillance is important, among other
things, to detect and deter fraudulent and manipulative trading
activity as well as other violations of Exchange rules and the federal
securities laws. The Exchange has represented that it has adequate
surveillance procedures in place to monitor trading in these options
and the underlying securities, including to detect manipulative trading
activity in both the options and the underlying ETF.\48\ The Exchange
further asserted that the liquidity and active markets in the
underlying ETFs, and the high number of market participants in both the
underlying ETFs and existing options on the ETFs, helps to minimize the
possibility of manipulation. The Commission notes that the proposed
surveillance, along with the liquidity criteria and position and
exercise limits requirements, appear to be reasonably designed to
mitigate manipulation concerns. The Commission further notes that under
Section 19(g) of the Act, the Exchange, as a self-regulatory
organization, is required to enforce compliance by its members and
persons associated with its members with the Act, the rules and
regulations thereunder, and the rules of the Exchange.\49\ The
Commission understands that the Exchange performs ongoing evaluations
of its surveillance program to ensure its continued effectiveness and
the Commission would, therefore, expect the Exchange to continue to
review its surveillance procedures on an ongoing basis and make any
necessary enhancements and/or modifications that may be needed for the
cash settlement of FLEX ETF Options.
---------------------------------------------------------------------------
\48\ See supra notes 28-35 and accompanying text. Among other
things, the Exchange noted that its regulatory program included
cross-market surveillance designed to identify manipulative and
other improper trading, including spoofing, algorithm gaming,
marking the close and open, as well as more general abusive behavior
related to front running, wash sales, quoting/routing, and Reg SHO
violations, that may occur on the Exchange and other markets.
Furthermore, the Exchange stated that it has access to information
regarding trading activity in the pertinent underlying securities as
a member of ISG. See Amendment No. 1, supra note 6, at 11-12. See
also id. at n.15.
\49\ 15 U.S.C. 78s(g).
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In approving the proposed rule change, the Commission notes that
cash-settled FLEX ETF Options will be subject to the same trading rules
and procedures that currently govern the trading of other FLEX Options
on the Exchange, with the exception of the rules to accommodate the
cash settlement feature being approved herein. The Commission also
notes that the Exchange has represented that it will monitor any effect
additional options series listed under the proposal have on market
fragmentation and the capacity of the Exchange's automated systems. The
Commission notes that FLEX ETF Options, as the Exchange represented,
cannot be traded until OCC represents to the Exchange that it is fully
able to clear and settle such options.\50\ Finally, the Commission
expects that the Exchange will take prompt action, including timely
communication with the Commission and with other self-regulatory
organizations responsible for oversight of trading in options, the
underlying ETFs, and the ETFs' component securities, should any
unanticipated adverse market effects develop.
---------------------------------------------------------------------------
\50\ See supra note 24 and accompanying text. The Commission
understands that, as of the date of this Order, OCC has not yet made
the necessary representations for the Exchange to be able to
commence trading.
---------------------------------------------------------------------------
Based on the Exchange's representations with respect to the
proposed cash-settlement of FLEX Equity Options, whose underlying
security is an ETF, and for the foregoing reasons, the Commission finds
that the proposed rule change, as modified by Amendment No. 1, is
consistent with the Act.
IV. Accelerated Approval of Proposed Rule Change, as Modified By
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. As discussed above, Amendment No. 1 modified
the original proposed rule change to limit the cash settlement of FLEX
Equity Options to underlying ETFs, with a maximum cap of 50 such ETFs,
that have met the originally proposed average daily notional value and
national average daily volume requirements, using average daily volume
as a tiebreaker if more than 50 ETFs otherwise qualify. Amendment No 1
also modified the original proposal to require that the proposed
position and exercise limits for cash-settled FLEX ETF Options be
aggregated with all physically-settled options on the same underlying
ETF. Amendment No. 1 stated that the Exchange would provide a report to
the Commission annually for five years providing an analysis, along
with any recommendations, concerning the trading of cash-settled FLEX
ETF Options. Finally, Amendment No. 1 made some additional clarifying
changes to the original proposal.
The Commission notes that the changes made to the original proposal
in Amendment No. 1 narrows the scope of the proposed rule change and
limits its applicability to ETFs, which should help to mitigate
potential risks of manipulation and market disruption. The amendment to
aggregate position and exercise limits also addressed similar concerns.
Furthermore, the Commission notes that the original, broader proposal,
including the proposed numerical eligibility criteria applied to the
underlying ETFs, was published for comment in the Federal Register and
no comments were received. The Exchange's annual report requirement
also supplements the
[[Page 7811]]
proposal and should help the Exchange and the Commission in assessing
any potential market impacts, including on price volatility, from the
trading of the cash-settled FLEX ETF Options under the proposal. In
addition, Amendment No. 1 clarifies and provides additional explanation
relating to the proposed rule change. The changes and additional
information in Amendment No. 1 have also assisted the Commission in
evaluating the proposal and finding that the proposal is consistent
with the Act.
Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\51\ to approve the proposed rule change, SR-
NYSEAMER-2019-38, as modified by Amendment No. 1, on an accelerated
basis.
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\51\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
V. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to 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-NYSEAMER-2019-38 on the subject line.
Paper Comments
Send paper comments in triplicate to: Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number SR-NYSEAMER-2019-38. 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-NYSEAMER-2019-38 and should be submitted
on or before March 3, 2020.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\52\ that the proposed rule change (SR-NYSEAMER-2019-38), as
modified by Amendment No. 1, be, and hereby is, approved.
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\52\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\53\
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\53\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-02631 Filed 2-10-20; 8:45 am]
BILLING CODE 8011-01-P
