Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 2360 (Options) To Increase Position Limits on Options on Certain Exchange-Traded Funds, 45713-45718 [2020-16263]
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Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–16374 Filed 7–28–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89381; File No. SR–FINRA–
2020–021]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Rule 2360
(Options) To Increase Position Limits
on Options on Certain ExchangeTraded Funds
July 22, 2020.
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 July 14,
2020, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) 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 FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission. 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 the Substance
of the Proposed Rule Change
FINRA is proposing to amend Rule
2360 (Options) to increase the position
and exercise limits for conventional
options on certain exchange-traded
funds (‘‘ETFs’’).
Below is the text of the proposed rule
change. Proposed new language is in
italics; proposed deletions are in
brackets.
*
*
*
*
*
2360. Options
(a) No Change.
(b) Requirements
(1) through (2) No Change.
(3) Position Limits
(A) Stock Options—
(i) through (ii) No Change.
(iii) Conventional Equity Options.
a. For purposes of this paragraph (b),
standardized equity option contracts of
the put class and call class on the same
side of the market overlying the same
security shall not be aggregated with
conventional equity option contracts or
FLEX Equity Option contracts overlying
the same security on the same side of
the market. Conventional equity option
contracts of the put class and call class
on the same side of the market overlying
the same security shall be subject to a
position limit of:
1. through 5. No Change.
6. for selected conventional options
on exchange-traded funds (‘‘ETF’’), the
position limits are listed in the chart
below:
Position limit
(contracts)
Security underlying option
The DIAMONDS Trust (DIA) .....................................................................................................................................
The Standard and Poor’s Depositary Receipts Trust (SPY) .....................................................................................
The iShares Russell 2000 ETF (IWM) ......................................................................................................................
The PowerShares QQQ Trust (QQQ) .......................................................................................................................
The iShares MSCI Emerging Markets ETF (EEM) ...................................................................................................
iShares China Large-Cap ETF (FXI) .........................................................................................................................
iShares MSCI EAFE ETF (EFA) ...............................................................................................................................
iShares MSCI Brazil Capped ETF (EWZ) .................................................................................................................
iShares 20+ Year Treasury Bond Fund ETF (TLT) ..................................................................................................
iShares MSCI Japan ETF (EWJ) ..............................................................................................................................
iShares iBoxx High Yield Corporate Bond Fund (HYG) ...........................................................................................
Financial Select Sector SPDR Fund (XLF) ...............................................................................................................
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
b. No Change.
(B) through (D) No Change.
(4) through (24) No Change.
(c) No Change.
Supplementary Material
.01 through .03 No Change.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA 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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
18:21 Jul 28, 2020
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
FINRA Rule 2360(b)(3)(A) imposes a
position limit on the number of equity
options contracts in each class on the
same side of the market that can be held
or written by a member, a person
associated with a member, or a customer
or a group of customers acting in
3 17
CFR 240.19b–4(f)(6).
Securities Exchange Act Release No. 40969
(January 22, 1999), 64 FR 4911, 4912–4913
4 See
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Frm 00140
Fmt 4703
Sfmt 4703
300,000
[1,800,000]3,600,000
1,000,000
1,800,000
1,000,000
[500,000]1,000,000
[500,000]1,000,000
500,000
500,000
500,000
500,000
500,000
concert. Position limits are intended to
prevent the establishment of options
positions that can be used to manipulate
or disrupt the underlying market or
might create incentives to manipulate or
disrupt the underlying market so as to
benefit the options position. In addition,
position limits serve to reduce the
potential for disruption of the options
market itself, especially in illiquid
options classes.4 This consideration has
been balanced by the concern that the
limits ‘‘not be established at levels that
are so low as to discourage participation
in the options market by institutions
and other investors with substantial
hedging needs or to prevent specialists
and market makers from adequately
(February 1, 1999) (Order Approving File No. SR–
CBOE–98–23) (citing H.R. No. IFC–3, 96th Cong.,
1st Sess. at 189–91 (Comm. Print 1978)).
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Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Notices
meeting their obligations to maintain a
fair and orderly market.’’ 5
Rule 2360(b)(3)(A)(i) does not
independently establish a position limit
for standardized equity options. Rather,
the position limit established by the
rules of an options exchange for a
particular equity option is the
applicable position limit for purposes of
Rule 2360.6 Rule 2360(b)(3)(A)(iii)
provides that conventional equity
options 7 are subject to a basic position
limit of 25,000 contracts or a higher tier
for conventional option contracts on
securities that underlie exchange-traded
options qualifying for such higher tier as
determined by the rules of the options
exchanges. In addition, FINRA lists
position limits for options on securities
that have higher position limits—
currently, only the ETFs listed in Rule
2360(b)(3)(A)(iii)a.6.—that also
generally mirror the options exchange
position limits. At this time, FINRA
proposes to conform its conventional
options position limits to the Cboe
Exchange, Inc.’s (‘‘Cboe’’) recent
amendments that increased the position
limit options due to an ongoing increase
in demand in options on the following
ETFs: The Standard and Poor’s
Depositary Receipts Trust (‘‘SPY’’),
iShares MSCI EAFE ETF (‘‘EFA’’),
iShares China Large-Cap ETF (‘‘FXI’’),
iShares iBoxx High Yield Corporate
Bond Fund (‘‘HYG’’), and Financial
Select Sector SPDR Fund (‘‘XLF’’
collectively, with the aforementioned
ETFs, the ‘‘Underlying ETFs’’).8
The proposed rule change would
amend the table provided in Rule
2360(b)(3)(A)(iii)a.6. as follows:
• The position limits for options on
SPY would be increased from 1,800,000
contracts to 3,600,000 contracts;
ADV
(ETF
shares)
(in millions)
Product
SPY .....................
FXI ......................
EFA .....................
HYG ....................
XLF .....................
70.3
26.1
25.1
20.0
48.8
2.8 million .......................................
196,600 ..........................................
155,900 ..........................................
193,700 ..........................................
102,100 ..........................................
supra at 4913.
e.g., Cboe Rule 8.30; ISE Options 9 Section
13; NASDAQ PHLX Options 9 Section 13; NYSE
American Rule 904; NYSE Arca Rule 6.8–0; MIAX
Rule 307; BOX Rule 3120 and IM–3120–2;
NASDAQ Options 9 Section 13; BX Options 9
Section 13; and BZX Rule 18.7.
7 Conventional options are over-the-counter
options and are defined in Rule 2360(a)(9) as ‘‘(A)
any option contract not issued, or subject to
issuance, by The Options Clearing Corporation; or
(B) an OCC Cleared OTC Option.’’
6 See
18:26 Jul 28, 2020
Shares
outstanding
(ETFs)
(in millions)
ADV
(option
contracts)
5 See
VerDate Sep<11>2014
• The position limit for options on
EFA would be increased from 500,000
contracts to 1,000,000 contracts; and
• The position limit for options on
FXI would be increased from 500,000
contracts to 1,000,000 contracts.
In addition, the proposed rule change
would add to the table provided in Rule
2360(b)(3)(A)(iii)a.6. as follows, with the
effect of each ETF being increased from
the current position limit of 250,000
contracts:
• The position limit for options on
HYG would be increased to 500,000
contracts; and
• The position limit for options on
XLF would be increased to 500,000
contracts.
FINRA notes the proposed position
limits on EFA and FXI are consistent
with existing position limits for options
on the iShares Russell 2000 ETF
(‘‘IWM’’) and the iShares MSCI
Emerging Markets ETF (‘‘EEM’’), and the
proposed limits for options on XLF and
HYG are consistent with current
position limits for options on the
iShares MSCI Brazil Capped ETF
(‘‘EWZ’’), iShares 20+Year Treasury
Bond Fund ETF (‘‘TLT’’), and iShares
MSCI Japan ETF (‘‘EWJ’’).
In support of the proposed rule
change, as noted by Cboe, position
limits are determined by the option
exchange’s rules.9 The ETFs that
underlie options subject to the proposed
rule change are highly liquid, and are
based on a broad set of highly liquid
securities and other reference assets.
The above listed ETFs are listed on
various national securities exchanges
and meet their listing standards.
In supporting the proposed position
limit increases, FINRA considered both
liquidity of the Underlying ETFs and
Jkt 250001
Fund market
Cap (USD)
(billion)
968.7
106.8
928.2
216.6
793.6
8 See Securities Exchange Act Release No. 88768
(April 29, 2020), 85 FR 26736 (May 5, 2020) (Order
Granting Approval of File No. SR–CBOE–2020–
015). See also Securities Exchange Act Release No.
88893 (May 18, 2020), 85 FR 31239 (May 22, 2020)
(Notice of Filing and Immediate Effectiveness of
File No. SR–MIAX–2020–10) and Securities
Exchange Act Release No. 88894 (May 18, 2020), 85
FR 31267 (May 22, 2020) (Notice of Filing and
Immediate Effectiveness of File No. SR–BOX–2020–
13).
9 See e.g., Cboe Rule 8.30, Interpretation and
Policy .02.
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Fmt 4703
Sfmt 4703
the component securities of the
Underlying ETFs, as well as the
availability of economically equivalent
products to the overlying options and
their respective position limits. For
instance, some of the Underlying ETFs
are based upon broad-based indices that
underlie cash-settled options, and
therefore the options on the Underlying
ETFs are economically equivalent to the
options on those indices, which have no
position limits. Other Underlying ETFs
are based upon broad-based indices that
underlie cash-settled options with
position limits reflecting notional values
that are larger than current position
limits for options on the ETF analogues.
For indexes that are tracked by an
Underlying ETF but on which there are
no options listed, FINRA believes, based
on the liquidity, depth and breadth of
the underlying market of the
components of the indexes, that each of
the indexes referenced by the applicable
ETFs would be considered a broadbased index under options exchange
rules. Additionally, if in some cases
certain position limits are appropriate
for the options overlying comparable
indexes or basket of securities that the
Underlying ETFs track then those
economically equivalent position limits
should be appropriate for the options
overlying the Underlying ETFs.
FINRA notes that Cboe has compiled
the following trading statistics regarding
shares of and exchange-traded options
on the Underlying ETFs, as well as the
component securities or components
underlying the referenced index (as
applicable): 10
312.9
4.8
64.9
19.1
24.6
Total market cap of ETF
components
29.3 trillion
28.0 trillion
19.3 trillion
906.4 billion
3.8 trillion
10 See note 8. As noted above, the position limit
for standardized options under Rule 2360 is the
limit established by an exchange on which the
option trades. The position limit for conventional
options under Rule 2360 generally mirrors the
options exchange position. The proposed rule
change would maintain consistent position limits
between standardized and conventional options on
the same underlying security. FINRA believes that
the Cboe reasoning regarding the increase to
standardized options position limits applies equally
to increasing the position limit for conventional
options.
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Further, Cboe has collected the same
trading statistics, where applicable, as
above regarding a sample of other ETFs,
ADV
(ETF shares)
(in millions)
Product
QQQ .....................
EWZ .....................
TLT .......................
EWJ .....................
30.2
26.7
9.6
7.2
670,200
186,500
95,200
5,700
11 See SPDR® S&P 500® ETF Trust, available at
https://www.ssga.com/us/en/individual/etfs/funds/
spdr-sp-500-etf-trust-spy (January 21, 2020).
17:23 Jul 28, 2020
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Shares outstanding
(ETFs)
(in millions)
ADV
(option
contracts)
FINRA agrees with Cboe that, overall,
the liquidity in the shares of the
Underlying ETFs and in the component
securities of the Underlying ETFs, and
in their overlying options, as well as the
large market capitalizations and
structure of each of the Underlying
ETFs, support the proposal to increase
the position limits for each option class.
Given the robust liquidity and
capitalization in the Underlying ETFs
and in the component securities of the
Underlying ETFs, FINRA believes the
market capitalization of the underlying
component securities of the applicable
ETF is large enough to adequately
absorb potential price movements that
may be caused by large trades. The
following analyses for the Underlying
ETFs, which FINRA agrees with in
support of the proposed rule change, as
well as the statistics presented in
support thereof, were presented by Cboe
in their initial filing, which was
approved by the Commission.
Specifically, Cboe notes that SPY
tracks the performance of the S&P 500®
Index, which is an index of diversified
large cap U.S. companies.11 It is
composed of 505 selected stocks
spanning over approximately 24
separate industry groups. The S&P 500®
is one of the most commonly followed
equity indices, and is widely considered
to be the best indicator of stock market
performance as a whole. SPY is one of
the most actively traded ETFs, and,
since 2017, its ADV has increased from
approximately 64.6 million shares to
70.3 million shares by the end of 2019.
Similarly, its ADV in options contracts
has increased from 2.6 million to 2.8
million through 2019. As noted, the
demand for options trading on SPY has
continued to increase, however, the
position limits have remained the same,
which may have impacted growth in
SPY option volume from 2017 through
2019. SPY shares are more liquid than
PowerShares QQQ Trust (‘‘QQQ’’)
shares, which is also currently subject to
VerDate Sep<11>2014
as well as the current position limits for
options on such ETFs, to draw
comparisons in support of proposed
Fund
market cap
(USD)
(billion)
410.3
233
128.1
236.6
88.7
11.3
17.5
14.2
10.1 trillion .........................................
234.6 billion .......................................
N/A .....................................................
3 trillion ..............................................
12 See iShares MSCI EAFE ETF, available at
https://www.ishares.com/us/products/239623/
ishares-msci-eafe-etf (February 10, 2020).
13 See note 8. Cboe is proposing [sic] to raise the
position limit on certain indexes. FINRA
incorporates by reference the exchange position
limits on indexes in FINRA Rule 2360(b)(3)(B) and
accordingly does not need to propose any
corresponding FINRA rule change.
14 See note 8. The values were presented by Cboe
in their initial filing, which was approved by the
Commission.
PO 00000
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Fmt 4703
Sfmt 4703
position limit increases for options on a
number of the Underlying ETFs:
Total market cap of
ETF components
a position limit of 1,800,000 contracts.
Specifically, SPY currently experiences
over twice the ADV in shares and over
four times the ADV in options than that
of QQQ.
EFA tracks the performance of MSCI
EAFE Index, which is composed of over
900 large and mid-cap securities across
21 developed markets, including
countries in Europe, Australia and the
Far East, excluding the U.S. and
Canada.12 From 2017 through 2019,
ADV has grown significantly in shares
of EFA and in options on EFA, from
approximately 19.4 million shares in
2017 to 25.1 million through 2019, and
from approximately 98,800 options
contract in 2017 to 155,900 through
2019. Options are available on the MSCI
EAFE Index (‘‘MXEA’’), the analogue
index, which was previously subject to
a position limit of 25,000 contracts
(50,000 as proposed by Cboe and
approved the Commission).13 Using the
notional value comparison of EFA’s
share price of $69.44 and MXEA’s index
level of 2036.94, approximately 29 EFA
option contracts equal one MXEA
option contract.14 Based on the above
comparison of notional values, a
position limit for EFA options that
would be economically equivalent to
that of MXEA options equates to
725,000 contracts (previously) and
1,450,000 (for the Cboe proposed 50,000
contracts position limit increase for
MXEA options that was approved by the
Commission). Also, MXEA index
options have an ADV of 594 options
contracts, in which equate to an ADV of
17,226 EFA option contracts (as that is
29 times the size of 594). EFA options,
which are more actively traded and held
than MXEA options, are currently
45715
Current
position
limit
1,800,000
500,000
500,000
500,000
subject to a position limit of 500,000
options contracts despite their much
higher ADV of approximately 155,900
options contracts.
FXI tracks the performance of the
FTSE China 50 Index, which is
composed of the 50 largest Chinese
stocks.15 FXI shares and options have
also experienced increased liquidity
since 2017, as ADV has grown from
approximately 15.1 million shares in
2017 to 26.1 million through 2019, as
well as approximately 71,900 options
contracts in 2017 to 196,600 through
2019. Although there are currently no
options on the FTSE China 50 Index
listed for trading, the components of the
FTSE China 50 Index, which can be
used to create a basket of stocks that
equate to the FXI ETF, currently have a
market capitalization of approximately
$28 trillion and FXI has a market
capitalization of $4.8 billion (as
indicated above), which are both large
enough to absorb potential price
movements caused by a large trade in
FXI.
XLF invests in a wide array of
financial service firms with diversified
business lines ranging from investment
management to commercial and
investment banking. It generally
corresponds to the price and yield
performance of publicly traded equity
securities of companies in the SPDR
Financial Select Sector Index.16 XLF
experiences ADV in shares and in
exchange-traded options (48.8 million
shares and 102,100 options contracts)
that is significantly greater than the
ADV in shares and options for EWZ
(26.7 million shares and 186,500
options contracts), TLT (9.6 million
shares and 95,200 options contracts),
and EWJ (7.2 million shares and 5,700
options contracts), each of which
already have a position limit of 500,000
contracts—the proposed position limit
15 See iShares China Large-Cap ETF, available at
https://www.ishares.com/us/products/239536/
ishares-china-largecap-etf (February 10, 2020).
16 See Select Sector SPDR ETFs, XLF, available at
https://www.sectorspdr.com/sectorspdr/sector/xlf
(January 15, 2020).
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for XLF options. Although there are no
options on the SPDR Financial Select
Sector Index listed for trading, the
components of the index, which can be
used to create a basket of stocks that
equate to the XLF ETF, currently have
a market capitalization of $3.8 trillion
(indicated above). Additionally, XLF
has a market capitalization of $24.6
billion. Both of these are large enough
to absorb potential price movements
caused by a large trade in XLF.
Finally, HYG attempts to track the
investment results of Markit iBoxx USD
Liquid High Yield Index, which is
composed of U.S. dollar-denominated,
high-yield corporate bonds and is one of
the most widely used high-yield bond
ETFs.17 HYG experiences significantly
higher ADV in shares and exchangetraded options (20 million shares and
193,700 options contracts) than both
TLT (9.6 million shares and 95,200
options contracts), and EWJ (7.2 million
shares and 5,700 options contracts),
which are currently subject to a position
limit of 500,000 options contracts—the
proposed limit for options on HYG.
While HYG does not have an index
option analogue listed for trading,
FINRA agrees with Cboe’s belief that
HYG’s market capitalization of $19.1
billion, and of $906.4 billion in
component securities, is adequate to
absorb a potential price movement that
may be caused by large trades in HYG.
FINRA believes that increasing the
position limits for conventional options
subject to the proposed rule change
would lead to a more liquid and
competitive market for these options,
which will benefit customers interested
in these products.
Creation and Redemption for ETFs
FINRA believes that the creation and
redemption process for ETFs will lessen
the potential for manipulative activity
with options on the Underlying ETFs.
When an ETF provider wants to create
more shares, it looks to an Authorized
Participant (generally a market maker or
other large financial institution) to
acquire the securities the ETF is to hold.
For instance, when an ETF is designed
to track the performance of an index, the
Authorized Participant can purchase all
the constituent securities in the exact
same weight as the index, then deliver
those shares to the ETF provider. In
exchange, the ETF provider gives the
Authorized Participant a block of
equally valued ETF shares, on a one-forone fair value basis. The price is based
17 See iShares iBoxx $ High Yield Corporate Bond
ETF, available at https://www.ishares.com/us/
products/239565/ishares-iboxx-high-yieldcorporatebond-etf (January 15, 2020).
VerDate Sep<11>2014
17:23 Jul 28, 2020
Jkt 250001
on the net asset value, not the market
value at which the ETF is trading. The
creation of new ETF units can be
conducted during an entire trading day,
and is not subject to position limits.
This process works in reverse where the
ETF provider seeks to decrease the
number of shares that are available to
trade. The creation and redemption
process, therefore, creates a direct link
to the underlying components of the
ETF, and serves to mitigate potential
price impact of the ETF shares that
might otherwise result from increased
position limits for the ETF options.
FINRA understands that the ETF
creation and redemption process seeks
to keep an ETF’s share price trading in
line with the ETF’s underlying net asset
value. Because an ETF trades like a
stock, its share price will fluctuate
during the trading day, due to simple
supply and demand. If demand to buy
an ETF is high, for instance, the ETF’s
share price might rise above the value
of its underlying securities. When this
happens, the Authorized Participant
believes the ETF may now be
overpriced, so it may buy shares of the
component securities and then sell ETF
shares in the open market (i.e.,
creations). This may drive the ETF’s
share price back toward the underlying
net asset value. Likewise, if the ETF
share price starts trading at a discount
to the securities it holds, the Authorized
Participant can buy shares of the ETF
and redeem them for the underlying
securities (i.e., redemptions). Buying
undervalued ETF shares may drive the
share price of the ETF back toward fair
value. This arbitrage process helps to
keep an ETF’s share price in line with
the value of its underlying portfolio.
Surveillance and Reporting
FINRA believes that the increased
position limits provisions are
appropriate in light of the existing
surveillance procedures and reporting
requirements at FINRA,18 the options
exchanges, and at the several clearing
firms, which are capable of properly
identifying unusual or illegal trading
activity. These procedures use daily
monitoring of market movements by
automated surveillance techniques to
identify unusual activity in both options
and underlying stocks.19
In addition, large stock holdings must
be disclosed to the Commission by way
of Schedules 13D or 13G.20 Options
positions are part of any reportable
18 See Rule 2360(b)(5) for the options reporting
requirements.
19 These procedures have been effective for the
surveillance of options trading and will continue to
be employed.
20 17 CFR 240.13d–1.
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Fmt 4703
Sfmt 4703
positions and cannot legally be hidden.
Moreover, the previously noted Rule
2360(b)(5) requirement that members
must file reports with FINRA for any
customer that held aggregate large long
or short positions of any single class for
the previous day will continue to serve
as an important part of FINRA’s
surveillance efforts.
Finally, FINRA believes that the
current financial requirements imposed
by FINRA and by the Commission
adequately address financial
responsibility concerns that a member
or its customer will maintain an
inordinately large unhedged position in
any option with a higher position limit.
Current margin and risk-based haircut
methodologies serve to limit the size of
positions maintained by any one
account by increasing the margin or
capital that a member must maintain for
a large position. Under Rule
4210(f)(8)(A), FINRA also may impose a
higher margin requirement upon a
member when FINRA determines a
higher requirement is warranted. In
addition, the Commission’s net capital
rule 21 imposes a capital charge on
members to the extent of any margin
deficiency resulting from the higher
margin requirement.
FINRA has filed the proposed rule
change for immediate effectiveness and
has requested that the SEC waive the
requirement that the proposed rule
change not become operative for 30 days
after the date of the filing, so FINRA can
implement the proposed rule change
immediately.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,22 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. FINRA believes that the
proposed rule change promotes
consistent regulation by harmonizing
position limits with those of the other
self-regulatory organizations. FINRA
further believes that increasing the
position limit on conventional options
promotes consistent regulation by
harmonizing the position limit with its
standardized counterpart. In addition,
FINRA believes the proposed rule
change will be beneficial to large market
makers and institutions (which
generally have the greatest ability to
provide liquidity and depth in products
21 17
22 15
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that may be subject to higher position
limits as has been the case with recently
approved increased position limits),23
as well as retail traders and public
customers, by providing them with a
more effective trading and hedging
vehicle.
In addition, FINRA believes that the
structure of the Underlying ETFs, the
considerable market capitalization of
the funds, underlying component
securities, and the liquidity of the
markets for the applicable options and
underlying component securities will
mitigate concerns regarding potential
manipulation of the products or
disruption of the underlying markets
upon increasing the relevant position
limits. As a general principle, increases
in market capitalizations, active trading
volume, and deep liquidity of securities
tend to deter manipulation or
disruption. This general principle
applies to the recently observed
increased levels of market
capitalization, trading volume, and
liquidity in shares of the Underlying
ETFs, and the components of the
Underlying ETFs (as described above).
FINRA does not believe that the options
markets or underlying markets would
become susceptible to manipulation or
disruption as a result of the proposed
position limit increases.
Increased position limits for select
actively traded options, such as those
proposed herein, are not novel and have
been previously approved by the
Commission. For example, a position
limit of 1,800,000 contracts on options
on SPY has been established.24
Additionally, the Commission has
approved similar proposed rule changes
by the options exchanges to increase
position and exercise limits for options
on highly liquid, actively traded ETFs.25
23 See
note 8.
Securities Exchange Act Release No. 83349
(May 30, 2018), 83 FR 26123 (June 5, 2018) (Notice
of Filing and Immediate Effectiveness of File No.
SR–MIAX–2018–11). See also Securities Exchange
Act Release No. 83412 (June 12, 2018), 83 FR 28298
(June 18, 2018) (Notice of Filing and Immediate
Effectiveness of File No. SR–PHLX–2018–44);
Securities Exchange Act Release No. 83414 (June
12, 2018), 83 FR 28296 (June 18, 2018) (Notice of
Filing and Immediate Effectiveness of File No. SR–
BOX–2018–22); Securities Exchange Act Release
No. 83415 (June 12, 2018), 83 FR 28274 (June 18,
2018) (Notice of Filing and Immediate Effectiveness
of File No. SR–CBOE–2018–042); Securities
Exchange Act Release No. 83413 (June 12, 2018), 83
FR 28277 (June 18, 2018) (Notice of Filing and
Immediate Effectiveness of File No. SR–NYSEArca–
2018–44) and Securities Exchange Act Release No.
83417 (June 12, 2018), 83 FR 28279 (June 18, 2018)
(Notice of Filing and Immediate Effectiveness of
File No. SR–NYSEAMER–2018–26).
25 See note 6. See also Securities Exchange Act
Release No. 68086 (October 23, 2012), 77 FR 65600
(October 29, 2012) (Order Approving File No. SR–
CBOE–2012–66); Securities Exchange Act Release
No. 68478 (December 19, 2012), 77 FR 76132
24 See
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Furthermore, the proposed position
limits on EFA and FXI are consistent
with existing position limits for options
on IWM and EEM, and the proposed
limits for options on XLF and HYG are
consistent with current position limits
for options on EWZ, TLT and EWJ.
FINRA’s existing surveillance and
reporting safeguards are designed to
deter and detect possible manipulative
behavior that might arise from changing
position and exercise limits.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Economic Impact Analysis
FINRA has undertaken an economic
impact assessment, as set forth below, to
analyze the potential economic impacts,
including anticipated costs, benefits,
and distributional and competitive
effects transfers of wealth, relative to the
current baseline, and the alternatives
FINRA considered in assessing how to
best meet its regulatory objectives.
Regulatory Objective
FINRA is proposing to amend Rule
2360 to harmonize FINRA’s position
limits for conventional options with the
position limit for standardized
options.26
Economic Baseline
Per FINRA Rule 2360(b)(3)(A)(iii)
conventional equity options are subject
to a basic position limit of 25,000
contracts or higher for conventional
option contracts on securities that
underlie exchange-traded options
qualifying for a higher tier as
determined by option exchange rules.
The existing position limits for
conventional options on ETFs are:
1,800,000 contracts for SPY, 500,000
(December 26, 2012) (Notice of Filing and
Immediate Effectiveness of File No. SR–BOX–2012–
23); Securities Exchange Act Release No. 68398
(December 11, 2012), 77 FR 74700 (December 17,
2012) (Notice of Filing and Immediate Effectiveness
of File No. SR–ISE–2012–93); Securities Exchange
Act Release No. 68293 (November 27, 2012), 77 FR
71644 (December 3, 2012) (Notice of Filing and
Immediate Effectiveness of File No. SR–Phlx–2012–
132); Securities Exchange Act Release No. 68358
(December 5, 2012), 77 FR 73708 (December 11,
2012) (Notice of Filing and Immediate Effectiveness
of File No. SR–NYSE MKT–2012–71); Securities
Exchange Act Release No. 68359 (December 5,
2012), 77 FR 73716 (December 11, 2012) (Notice of
Filing and Immediate Effectiveness of File No. SR–
NYSEArca–2012–132) and Securities Exchange Act
Release No. 69457 (April 25, 2013), 78 FR 25502
(May 1, 2013) (Notice of Filing and Immediate
Effectiveness of File No. SR–MIAX–2013–17).
26 See note 8.
PO 00000
Frm 00144
Fmt 4703
Sfmt 4703
45717
contracts for EFA or FXI and 250,000
contracts for HYG or XLF. Cboe has
recently increased position limit options
on these ETFs.
Economic Impact
Benefits
As noted above, the proposed rule
change would amend Rule 2360 to
harmonize FINRA’s position limits for
conventional options with the position
limits for standardized options.27 If the
existing position limits for conventional
equity options on select ETFs constrains
trading in these ETFs, then investors
may be able to better manage risk and
trade on information when the position
limit is relaxed. In general, the
improvement in risk management and
informational efficiency may increase
more when position limits are
increased. FINRA acknowledges,
however, that the conventional options
on these ETFs, the ETFs themselves,
and the securities underlying these
ETFs are liquid, so improvements in
informational efficiency may be
relatively small.
For investors that trade conventional
equity options, there is likely to be a
natural size for an executed order that
minimizes fixed and variable
transaction costs, including but not
limited to, the bid-ask spread, price
impact, and transaction fees. If the
existing position limits for conventional
equity options on select ETFs constrains
the order size such that fixed and
variable transaction costs are higher
than optimal, then investors may benefit
if the new position limit is no less than
the natural size. In such an event, the
cost to hedge an ETF would decline,
thereby making it less costly to manage
downside risk.
In addition, if the existing position
limits serve as a constraint, then an
increase in the position limits for
conventional options on select ETFs
could permit investors to more easily
find a counterparty. If the number of
counterparties increases, then the cost
of hedging should decline as the halfspread narrows, thereby making it less
expensive to manage downside risk.
The extent of the constraint imposed
by the current limit on conventional
options is related to the ability of an
investor to achieve similar economic
exposure through other means. If there
are other securities, such as an option
on a closely related index, that exist and
provide similar economic exposure less
expensively, then the value of lessening
the position limits on conventional
options on ETFs is lower.
27 See
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Members may rely on information and
data feeds from the Options Clearing
Corporation to assist in their monitoring
position limits. Because position limits
on the standardized and conventional
side have traditionally been consistent,
members have relied on this feed for
both standardized and conventional
options. If the position limits between
standardized and conventional options
are conformed, then the cost from
monitoring position limits should
decline for member firms. Having the
same position limits on standardized
and conventional options, reduces the
potential for excess loss that may be
incurred when different limits are
applied to the standardized versus
conventional options on the same ETF.
The economic loss may arise from
building and maintaining trading and
compliance systems to support the
different regimes. Furthermore, the
harmonization of position limits on
standardized and conventional options
eliminates the potential risk and cost
arising from regulatory arbitrage.
Costs
The proposed rule change may
impose limited operational cost on
member firms that trade conventional
options on ETFs, as these same firms
would need to revise position limits that
are used in trading systems. However,
the proposed rule change should not
impose additional costs, because it is
difficult to disrupt or manipulate the
underlying market, create an incentive
to disrupt or manipulate the underlying
market for the purpose of profiting from
the options position, or disrupt or
manipulate the options market for
conventional options on ETFs affected
by this proposed rule. ETFs that
underlie options subject to the proposed
rule change are highly liquid and are
based on a broad set of highly liquid
securities, which makes the market
difficult to manipulate or disrupt. In
fact, options on certain broad-based
security indexes have no position limits.
Furthermore, the creation and
redemption process for these ETFs
reduces the potential for disruptive or
manipulative activity. New ETF units
may be created at any time during the
trading day and are not subject to
position limits. Consequently, there is a
direct link between the underlying
components of the ETF and the ETF,
which keeps the ETF’s share prices
trading in line with the ETF’s
underlying net asset value.
Alternatives
No further alternatives are under
consideration.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 28 and Rule 19b–4(f)(6) 29
thereunder.
FINRA has asked the Commission to
waive the 30-day operative delay so that
FINRA may immediately harmonize
position limits with those of other selfregulatory organizations to ensure
consistent regulation. For this reason,
the Commission believes that waiving
the 30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposal operative upon filing.30
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). 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, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
FINRA has satisfied this requirement.
30 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
PO 00000
28 15
29 17
Frm 00145
Fmt 4703
Sfmt 9990
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–
FINRA–2020–021 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–FINRA–2020–021. 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 such
filing also will be available for
inspection and copying at the principal
office of FINRA. 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–FINRA–
2020–021, and should be submitted on
or before August 19, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–16263 Filed 7–28–20; 8:45 am]
BILLING CODE 8011–01–P
31 17
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]]>Agencies
[Federal Register Volume 85, Number 146 (Wednesday, July 29, 2020)]
[Notices]
[Pages 45713-45718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16263]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89381; File No. SR-FINRA-2020-021]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule 2360 (Options) To Increase Position
Limits on Options on Certain Exchange-Traded Funds
July 22, 2020.
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 July 14, 2020, Financial Industry Regulatory Authority, Inc.
(``FINRA'') 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 FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. 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.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
FINRA is proposing to amend Rule 2360 (Options) to increase the
position and exercise limits for conventional options on certain
exchange-traded funds (``ETFs'').
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
2360. Options
(a) No Change.
(b) Requirements
(1) through (2) No Change.
(3) Position Limits
(A) Stock Options--
(i) through (ii) No Change.
(iii) Conventional Equity Options.
a. For purposes of this paragraph (b), standardized equity option
contracts of the put class and call class on the same side of the
market overlying the same security shall not be aggregated with
conventional equity option contracts or FLEX Equity Option contracts
overlying the same security on the same side of the market.
Conventional equity option contracts of the put class and call class on
the same side of the market overlying the same security shall be
subject to a position limit of:
1. through 5. No Change.
6. for selected conventional options on exchange-traded funds
(``ETF''), the position limits are listed in the chart below:
------------------------------------------------------------------------
Security underlying option Position limit (contracts)
------------------------------------------------------------------------
The DIAMONDS Trust (DIA).................. 300,000
The Standard and Poor's Depositary [1,800,000]3,600,000
Receipts Trust (SPY).....................
The iShares Russell 2000 ETF (IWM)........ 1,000,000
The PowerShares QQQ Trust (QQQ)........... 1,800,000
The iShares MSCI Emerging Markets ETF 1,000,000
(EEM)....................................
iShares China Large-Cap ETF (FXI)......... [500,000]1,000,000
iShares MSCI EAFE ETF (EFA)............... [500,000]1,000,000
iShares MSCI Brazil Capped ETF (EWZ)...... 500,000
iShares 20+ Year Treasury Bond Fund ETF 500,000
(TLT)....................................
iShares MSCI Japan ETF (EWJ).............. 500,000
iShares iBoxx High Yield Corporate Bond 500,000
Fund (HYG)...............................
Financial Select Sector SPDR Fund (XLF)... 500,000
------------------------------------------------------------------------
b. No Change.
(B) through (D) No Change.
(4) through (24) No Change.
(c) No Change.
Supplementary Material
.01 through .03 No Change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA 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. FINRA 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
FINRA Rule 2360(b)(3)(A) imposes a position limit on the number of
equity options contracts in each class on the same side of the market
that can be held or written by a member, a person associated with a
member, or a customer or a group of customers acting in concert.
Position limits are intended to prevent the establishment of options
positions that can be used to manipulate or disrupt the underlying
market or might create incentives to manipulate or disrupt the
underlying market so as to benefit the options position. In addition,
position limits serve to reduce the potential for disruption of the
options market itself, especially in illiquid options classes.\4\ This
consideration has been balanced by the concern that the limits ``not be
established at levels that are so low as to discourage participation in
the options market by institutions and other investors with substantial
hedging needs or to prevent specialists and market makers from
adequately
[[Page 45714]]
meeting their obligations to maintain a fair and orderly market.'' \5\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 40969 (January 22,
1999), 64 FR 4911, 4912-4913 (February 1, 1999) (Order Approving
File No. SR-CBOE-98-23) (citing H.R. No. IFC-3, 96th Cong., 1st
Sess. at 189-91 (Comm. Print 1978)).
\5\ See supra at 4913.
---------------------------------------------------------------------------
Rule 2360(b)(3)(A)(i) does not independently establish a position
limit for standardized equity options. Rather, the position limit
established by the rules of an options exchange for a particular equity
option is the applicable position limit for purposes of Rule 2360.\6\
Rule 2360(b)(3)(A)(iii) provides that conventional equity options \7\
are subject to a basic position limit of 25,000 contracts or a higher
tier for conventional option contracts on securities that underlie
exchange-traded options qualifying for such higher tier as determined
by the rules of the options exchanges. In addition, FINRA lists
position limits for options on securities that have higher position
limits--currently, only the ETFs listed in Rule
2360(b)(3)(A)(iii)a.6.--that also generally mirror the options exchange
position limits. At this time, FINRA proposes to conform its
conventional options position limits to the Cboe Exchange, Inc.'s
(``Cboe'') recent amendments that increased the position limit options
due to an ongoing increase in demand in options on the following ETFs:
The Standard and Poor's Depositary Receipts Trust (``SPY''), iShares
MSCI EAFE ETF (``EFA''), iShares China Large-Cap ETF (``FXI''), iShares
iBoxx High Yield Corporate Bond Fund (``HYG''), and Financial Select
Sector SPDR Fund (``XLF'' collectively, with the aforementioned ETFs,
the ``Underlying ETFs'').\8\
---------------------------------------------------------------------------
\6\ See e.g., Cboe Rule 8.30; ISE Options 9 Section 13; NASDAQ
PHLX Options 9 Section 13; NYSE American Rule 904; NYSE Arca Rule
6.8-0; MIAX Rule 307; BOX Rule 3120 and IM-3120-2; NASDAQ Options 9
Section 13; BX Options 9 Section 13; and BZX Rule 18.7.
\7\ Conventional options are over-the-counter options and are
defined in Rule 2360(a)(9) as ``(A) any option contract not issued,
or subject to issuance, by The Options Clearing Corporation; or (B)
an OCC Cleared OTC Option.''
\8\ See Securities Exchange Act Release No. 88768 (April 29,
2020), 85 FR 26736 (May 5, 2020) (Order Granting Approval of File
No. SR-CBOE-2020-015). See also Securities Exchange Act Release No.
88893 (May 18, 2020), 85 FR 31239 (May 22, 2020) (Notice of Filing
and Immediate Effectiveness of File No. SR-MIAX-2020-10) and
Securities Exchange Act Release No. 88894 (May 18, 2020), 85 FR
31267 (May 22, 2020) (Notice of Filing and Immediate Effectiveness
of File No. SR-BOX-2020-13).
---------------------------------------------------------------------------
The proposed rule change would amend the table provided in Rule
2360(b)(3)(A)(iii)a.6. as follows:
The position limits for options on SPY would be increased
from 1,800,000 contracts to 3,600,000 contracts;
The position limit for options on EFA would be increased
from 500,000 contracts to 1,000,000 contracts; and
The position limit for options on FXI would be increased
from 500,000 contracts to 1,000,000 contracts.
In addition, the proposed rule change would add to the table
provided in Rule 2360(b)(3)(A)(iii)a.6. as follows, with the effect of
each ETF being increased from the current position limit of 250,000
contracts:
The position limit for options on HYG would be increased
to 500,000 contracts; and
The position limit for options on XLF would be increased
to 500,000 contracts.
FINRA notes the proposed position limits on EFA and FXI are
consistent with existing position limits for options on the iShares
Russell 2000 ETF (``IWM'') and the iShares MSCI Emerging Markets ETF
(``EEM''), and the proposed limits for options on XLF and HYG are
consistent with current position limits for options on the iShares MSCI
Brazil Capped ETF (``EWZ''), iShares 20+Year Treasury Bond Fund ETF
(``TLT''), and iShares MSCI Japan ETF (``EWJ'').
In support of the proposed rule change, as noted by Cboe, position
limits are determined by the option exchange's rules.\9\ The ETFs that
underlie options subject to the proposed rule change are highly liquid,
and are based on a broad set of highly liquid securities and other
reference assets. The above listed ETFs are listed on various national
securities exchanges and meet their listing standards.
---------------------------------------------------------------------------
\9\ See e.g., Cboe Rule 8.30, Interpretation and Policy .02.
---------------------------------------------------------------------------
In supporting the proposed position limit increases, FINRA
considered both liquidity of the Underlying ETFs and the component
securities of the Underlying ETFs, as well as the availability of
economically equivalent products to the overlying options and their
respective position limits. For instance, some of the Underlying ETFs
are based upon broad-based indices that underlie cash-settled options,
and therefore the options on the Underlying ETFs are economically
equivalent to the options on those indices, which have no position
limits. Other Underlying ETFs are based upon broad-based indices that
underlie cash-settled options with position limits reflecting notional
values that are larger than current position limits for options on the
ETF analogues. For indexes that are tracked by an Underlying ETF but on
which there are no options listed, FINRA believes, based on the
liquidity, depth and breadth of the underlying market of the components
of the indexes, that each of the indexes referenced by the applicable
ETFs would be considered a broad-based index under options exchange
rules. Additionally, if in some cases certain position limits are
appropriate for the options overlying comparable indexes or basket of
securities that the Underlying ETFs track then those economically
equivalent position limits should be appropriate for the options
overlying the Underlying ETFs.
FINRA notes that Cboe has compiled the following trading statistics
regarding shares of and exchange-traded options on the Underlying ETFs,
as well as the component securities or components underlying the
referenced index (as applicable): \10\
---------------------------------------------------------------------------
\10\ See note 8. As noted above, the position limit for
standardized options under Rule 2360 is the limit established by an
exchange on which the option trades. The position limit for
conventional options under Rule 2360 generally mirrors the options
exchange position. The proposed rule change would maintain
consistent position limits between standardized and conventional
options on the same underlying security. FINRA believes that the
Cboe reasoning regarding the increase to standardized options
position limits applies equally to increasing the position limit for
conventional options.
----------------------------------------------------------------------------------------------------------------
Shares
ADV (ETF ADV (option outstanding Fund market Total market
Product shares) (in contracts) (ETFs) (in Cap (USD) cap of ETF
millions) millions) (billion) components
----------------------------------------------------------------------------------------------------------------
SPY.......................... 70.3 2.8 million..... 968.7 312.9 29.3 trillion
FXI.......................... 26.1 196,600......... 106.8 4.8 28.0 trillion
EFA.......................... 25.1 155,900......... 928.2 64.9 19.3 trillion
HYG.......................... 20.0 193,700......... 216.6 19.1 906.4 billion
XLF.......................... 48.8 102,100......... 793.6 24.6 3.8 trillion
----------------------------------------------------------------------------------------------------------------
[[Page 45715]]
Further, Cboe has collected the same trading statistics, where
applicable, as above regarding a sample of other ETFs, as well as the
current position limits for options on such ETFs, to draw comparisons
in support of proposed position limit increases for options on a number
of the Underlying ETFs:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Shares
ADV (ETF ADV (option outstanding Fund market Total market cap of ETF Current
Product shares) (in contracts) (ETFs) (in cap (USD) components position limit
millions) millions) (billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
QQQ....................................... 30.2 670,200 410.3 88.7 10.1 trillion............... 1,800,000
EWZ....................................... 26.7 186,500 233 11.3 234.6 billion............... 500,000
TLT....................................... 9.6 95,200 128.1 17.5 N/A......................... 500,000
EWJ....................................... 7.2 5,700 236.6 14.2 3 trillion.................. 500,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
FINRA agrees with Cboe that, overall, the liquidity in the shares
of the Underlying ETFs and in the component securities of the
Underlying ETFs, and in their overlying options, as well as the large
market capitalizations and structure of each of the Underlying ETFs,
support the proposal to increase the position limits for each option
class. Given the robust liquidity and capitalization in the Underlying
ETFs and in the component securities of the Underlying ETFs, FINRA
believes the market capitalization of the underlying component
securities of the applicable ETF is large enough to adequately absorb
potential price movements that may be caused by large trades. The
following analyses for the Underlying ETFs, which FINRA agrees with in
support of the proposed rule change, as well as the statistics
presented in support thereof, were presented by Cboe in their initial
filing, which was approved by the Commission.
Specifically, Cboe notes that SPY tracks the performance of the S&P
500[supreg] Index, which is an index of diversified large cap U.S.
companies.\11\ It is composed of 505 selected stocks spanning over
approximately 24 separate industry groups. The S&P 500[supreg] is one
of the most commonly followed equity indices, and is widely considered
to be the best indicator of stock market performance as a whole. SPY is
one of the most actively traded ETFs, and, since 2017, its ADV has
increased from approximately 64.6 million shares to 70.3 million shares
by the end of 2019. Similarly, its ADV in options contracts has
increased from 2.6 million to 2.8 million through 2019. As noted, the
demand for options trading on SPY has continued to increase, however,
the position limits have remained the same, which may have impacted
growth in SPY option volume from 2017 through 2019. SPY shares are more
liquid than PowerShares QQQ Trust (``QQQ'') shares, which is also
currently subject to a position limit of 1,800,000 contracts.
Specifically, SPY currently experiences over twice the ADV in shares
and over four times the ADV in options than that of QQQ.
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\11\ See SPDR[supreg] S&P 500[supreg] ETF Trust, available at
https://www.ssga.com/us/en/individual/etfs/funds/spdr-sp-500-etf-trust-spy (January 21, 2020).
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EFA tracks the performance of MSCI EAFE Index, which is composed of
over 900 large and mid-cap securities across 21 developed markets,
including countries in Europe, Australia and the Far East, excluding
the U.S. and Canada.\12\ From 2017 through 2019, ADV has grown
significantly in shares of EFA and in options on EFA, from
approximately 19.4 million shares in 2017 to 25.1 million through 2019,
and from approximately 98,800 options contract in 2017 to 155,900
through 2019. Options are available on the MSCI EAFE Index (``MXEA''),
the analogue index, which was previously subject to a position limit of
25,000 contracts (50,000 as proposed by Cboe and approved the
Commission).\13\ Using the notional value comparison of EFA's share
price of $69.44 and MXEA's index level of 2036.94, approximately 29 EFA
option contracts equal one MXEA option contract.\14\ Based on the above
comparison of notional values, a position limit for EFA options that
would be economically equivalent to that of MXEA options equates to
725,000 contracts (previously) and 1,450,000 (for the Cboe proposed
50,000 contracts position limit increase for MXEA options that was
approved by the Commission). Also, MXEA index options have an ADV of
594 options contracts, in which equate to an ADV of 17,226 EFA option
contracts (as that is 29 times the size of 594). EFA options, which are
more actively traded and held than MXEA options, are currently subject
to a position limit of 500,000 options contracts despite their much
higher ADV of approximately 155,900 options contracts.
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\12\ See iShares MSCI EAFE ETF, available at https://www.ishares.com/us/products/239623/ishares-msci-eafe-etf (February
10, 2020).
\13\ See note 8. Cboe is proposing [sic] to raise the position
limit on certain indexes. FINRA incorporates by reference the
exchange position limits on indexes in FINRA Rule 2360(b)(3)(B) and
accordingly does not need to propose any corresponding FINRA rule
change.
\14\ See note 8. The values were presented by Cboe in their
initial filing, which was approved by the Commission.
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FXI tracks the performance of the FTSE China 50 Index, which is
composed of the 50 largest Chinese stocks.\15\ FXI shares and options
have also experienced increased liquidity since 2017, as ADV has grown
from approximately 15.1 million shares in 2017 to 26.1 million through
2019, as well as approximately 71,900 options contracts in 2017 to
196,600 through 2019. Although there are currently no options on the
FTSE China 50 Index listed for trading, the components of the FTSE
China 50 Index, which can be used to create a basket of stocks that
equate to the FXI ETF, currently have a market capitalization of
approximately $28 trillion and FXI has a market capitalization of $4.8
billion (as indicated above), which are both large enough to absorb
potential price movements caused by a large trade in FXI.
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\15\ See iShares China Large-Cap ETF, available at https://www.ishares.com/us/products/239536/ishares-china-largecap-etf
(February 10, 2020).
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XLF invests in a wide array of financial service firms with
diversified business lines ranging from investment management to
commercial and investment banking. It generally corresponds to the
price and yield performance of publicly traded equity securities of
companies in the SPDR Financial Select Sector Index.\16\ XLF
experiences ADV in shares and in exchange-traded options (48.8 million
shares and 102,100 options contracts) that is significantly greater
than the ADV in shares and options for EWZ (26.7 million shares and
186,500 options contracts), TLT (9.6 million shares and 95,200 options
contracts), and EWJ (7.2 million shares and 5,700 options contracts),
each of which already have a position limit of 500,000 contracts--the
proposed position limit
[[Page 45716]]
for XLF options. Although there are no options on the SPDR Financial
Select Sector Index listed for trading, the components of the index,
which can be used to create a basket of stocks that equate to the XLF
ETF, currently have a market capitalization of $3.8 trillion (indicated
above). Additionally, XLF has a market capitalization of $24.6 billion.
Both of these are large enough to absorb potential price movements
caused by a large trade in XLF.
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\16\ See Select Sector SPDR ETFs, XLF, available at https://www.sectorspdr.com/sectorspdr/sector/xlf (January 15, 2020).
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Finally, HYG attempts to track the investment results of Markit
iBoxx USD Liquid High Yield Index, which is composed of U.S. dollar-
denominated, high-yield corporate bonds and is one of the most widely
used high-yield bond ETFs.\17\ HYG experiences significantly higher ADV
in shares and exchange-traded options (20 million shares and 193,700
options contracts) than both TLT (9.6 million shares and 95,200 options
contracts), and EWJ (7.2 million shares and 5,700 options contracts),
which are currently subject to a position limit of 500,000 options
contracts--the proposed limit for options on HYG. While HYG does not
have an index option analogue listed for trading, FINRA agrees with
Cboe's belief that HYG's market capitalization of $19.1 billion, and of
$906.4 billion in component securities, is adequate to absorb a
potential price movement that may be caused by large trades in HYG.
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\17\ See iShares iBoxx $ High Yield Corporate Bond ETF,
available at https://www.ishares.com/us/products/239565/ishares-iboxx-high-yield-corporatebond-etf (January 15, 2020).
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FINRA believes that increasing the position limits for conventional
options subject to the proposed rule change would lead to a more liquid
and competitive market for these options, which will benefit customers
interested in these products.
Creation and Redemption for ETFs
FINRA believes that the creation and redemption process for ETFs
will lessen the potential for manipulative activity with options on the
Underlying ETFs. When an ETF provider wants to create more shares, it
looks to an Authorized Participant (generally a market maker or other
large financial institution) to acquire the securities the ETF is to
hold. For instance, when an ETF is designed to track the performance of
an index, the Authorized Participant can purchase all the constituent
securities in the exact same weight as the index, then deliver those
shares to the ETF provider. In exchange, the ETF provider gives the
Authorized Participant a block of equally valued ETF shares, on a one-
for-one fair value basis. The price is based on the net asset value,
not the market value at which the ETF is trading. The creation of new
ETF units can be conducted during an entire trading day, and is not
subject to position limits. This process works in reverse where the ETF
provider seeks to decrease the number of shares that are available to
trade. The creation and redemption process, therefore, creates a direct
link to the underlying components of the ETF, and serves to mitigate
potential price impact of the ETF shares that might otherwise result
from increased position limits for the ETF options.
FINRA understands that the ETF creation and redemption process
seeks to keep an ETF's share price trading in line with the ETF's
underlying net asset value. Because an ETF trades like a stock, its
share price will fluctuate during the trading day, due to simple supply
and demand. If demand to buy an ETF is high, for instance, the ETF's
share price might rise above the value of its underlying securities.
When this happens, the Authorized Participant believes the ETF may now
be overpriced, so it may buy shares of the component securities and
then sell ETF shares in the open market (i.e., creations). This may
drive the ETF's share price back toward the underlying net asset value.
Likewise, if the ETF share price starts trading at a discount to the
securities it holds, the Authorized Participant can buy shares of the
ETF and redeem them for the underlying securities (i.e., redemptions).
Buying undervalued ETF shares may drive the share price of the ETF back
toward fair value. This arbitrage process helps to keep an ETF's share
price in line with the value of its underlying portfolio.
Surveillance and Reporting
FINRA believes that the increased position limits provisions are
appropriate in light of the existing surveillance procedures and
reporting requirements at FINRA,\18\ the options exchanges, and at the
several clearing firms, which are capable of properly identifying
unusual or illegal trading activity. These procedures use daily
monitoring of market movements by automated surveillance techniques to
identify unusual activity in both options and underlying stocks.\19\
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\18\ See Rule 2360(b)(5) for the options reporting requirements.
\19\ These procedures have been effective for the surveillance
of options trading and will continue to be employed.
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In addition, large stock holdings must be disclosed to the
Commission by way of Schedules 13D or 13G.\20\ Options positions are
part of any reportable positions and cannot legally be hidden.
Moreover, the previously noted Rule 2360(b)(5) requirement that members
must file reports with FINRA for any customer that held aggregate large
long or short positions of any single class for the previous day will
continue to serve as an important part of FINRA's surveillance efforts.
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\20\ 17 CFR 240.13d-1.
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Finally, FINRA believes that the current financial requirements
imposed by FINRA and by the Commission adequately address financial
responsibility concerns that a member or its customer will maintain an
inordinately large unhedged position in any option with a higher
position limit. Current margin and risk-based haircut methodologies
serve to limit the size of positions maintained by any one account by
increasing the margin or capital that a member must maintain for a
large position. Under Rule 4210(f)(8)(A), FINRA also may impose a
higher margin requirement upon a member when FINRA determines a higher
requirement is warranted. In addition, the Commission's net capital
rule \21\ imposes a capital charge on members to the extent of any
margin deficiency resulting from the higher margin requirement.
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\21\ 17 CFR 240.15c3-1.
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FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, so FINRA can implement the proposed rule change
immediately.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\22\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change promotes
consistent regulation by harmonizing position limits with those of the
other self-regulatory organizations. FINRA further believes that
increasing the position limit on conventional options promotes
consistent regulation by harmonizing the position limit with its
standardized counterpart. In addition, FINRA believes the proposed rule
change will be beneficial to large market makers and institutions
(which generally have the greatest ability to provide liquidity and
depth in products
[[Page 45717]]
that may be subject to higher position limits as has been the case with
recently approved increased position limits),\23\ as well as retail
traders and public customers, by providing them with a more effective
trading and hedging vehicle.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78o-3(b)(6).
\23\ See note 8.
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In addition, FINRA believes that the structure of the Underlying
ETFs, the considerable market capitalization of the funds, underlying
component securities, and the liquidity of the markets for the
applicable options and underlying component securities will mitigate
concerns regarding potential manipulation of the products or disruption
of the underlying markets upon increasing the relevant position limits.
As a general principle, increases in market capitalizations, active
trading volume, and deep liquidity of securities tend to deter
manipulation or disruption. This general principle applies to the
recently observed increased levels of market capitalization, trading
volume, and liquidity in shares of the Underlying ETFs, and the
components of the Underlying ETFs (as described above). FINRA does not
believe that the options markets or underlying markets would become
susceptible to manipulation or disruption as a result of the proposed
position limit increases.
Increased position limits for select actively traded options, such
as those proposed herein, are not novel and have been previously
approved by the Commission. For example, a position limit of 1,800,000
contracts on options on SPY has been established.\24\ Additionally, the
Commission has approved similar proposed rule changes by the options
exchanges to increase position and exercise limits for options on
highly liquid, actively traded ETFs.\25\ Furthermore, the proposed
position limits on EFA and FXI are consistent with existing position
limits for options on IWM and EEM, and the proposed limits for options
on XLF and HYG are consistent with current position limits for options
on EWZ, TLT and EWJ.
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\24\ See Securities Exchange Act Release No. 83349 (May 30,
2018), 83 FR 26123 (June 5, 2018) (Notice of Filing and Immediate
Effectiveness of File No. SR-MIAX-2018-11). See also Securities
Exchange Act Release No. 83412 (June 12, 2018), 83 FR 28298 (June
18, 2018) (Notice of Filing and Immediate Effectiveness of File No.
SR-PHLX-2018-44); Securities Exchange Act Release No. 83414 (June
12, 2018), 83 FR 28296 (June 18, 2018) (Notice of Filing and
Immediate Effectiveness of File No. SR-BOX-2018-22); Securities
Exchange Act Release No. 83415 (June 12, 2018), 83 FR 28274 (June
18, 2018) (Notice of Filing and Immediate Effectiveness of File No.
SR-CBOE-2018-042); Securities Exchange Act Release No. 83413 (June
12, 2018), 83 FR 28277 (June 18, 2018) (Notice of Filing and
Immediate Effectiveness of File No. SR-NYSEArca-2018-44) and
Securities Exchange Act Release No. 83417 (June 12, 2018), 83 FR
28279 (June 18, 2018) (Notice of Filing and Immediate Effectiveness
of File No. SR-NYSEAMER-2018-26).
\25\ See note 6. See also Securities Exchange Act Release No.
68086 (October 23, 2012), 77 FR 65600 (October 29, 2012) (Order
Approving File No. SR-CBOE-2012-66); Securities Exchange Act Release
No. 68478 (December 19, 2012), 77 FR 76132 (December 26, 2012)
(Notice of Filing and Immediate Effectiveness of File No. SR-BOX-
2012-23); Securities Exchange Act Release No. 68398 (December 11,
2012), 77 FR 74700 (December 17, 2012) (Notice of Filing and
Immediate Effectiveness of File No. SR-ISE-2012-93); Securities
Exchange Act Release No. 68293 (November 27, 2012), 77 FR 71644
(December 3, 2012) (Notice of Filing and Immediate Effectiveness of
File No. SR-Phlx-2012-132); Securities Exchange Act Release No.
68358 (December 5, 2012), 77 FR 73708 (December 11, 2012) (Notice of
Filing and Immediate Effectiveness of File No. SR-NYSE MKT-2012-71);
Securities Exchange Act Release No. 68359 (December 5, 2012), 77 FR
73716 (December 11, 2012) (Notice of Filing and Immediate
Effectiveness of File No. SR-NYSEArca-2012-132) and Securities
Exchange Act Release No. 69457 (April 25, 2013), 78 FR 25502 (May 1,
2013) (Notice of Filing and Immediate Effectiveness of File No. SR-
MIAX-2013-17).
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FINRA's existing surveillance and reporting safeguards are designed
to deter and detect possible manipulative behavior that might arise
from changing position and exercise limits.
B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Economic Impact Analysis
FINRA has undertaken an economic impact assessment, as set forth
below, to analyze the potential economic impacts, including anticipated
costs, benefits, and distributional and competitive effects transfers
of wealth, relative to the current baseline, and the alternatives FINRA
considered in assessing how to best meet its regulatory objectives.
Regulatory Objective
FINRA is proposing to amend Rule 2360 to harmonize FINRA's position
limits for conventional options with the position limit for
standardized options.\26\
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\26\ See note 8.
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Economic Baseline
Per FINRA Rule 2360(b)(3)(A)(iii) conventional equity options are
subject to a basic position limit of 25,000 contracts or higher for
conventional option contracts on securities that underlie exchange-
traded options qualifying for a higher tier as determined by option
exchange rules. The existing position limits for conventional options
on ETFs are: 1,800,000 contracts for SPY, 500,000 contracts for EFA or
FXI and 250,000 contracts for HYG or XLF. Cboe has recently increased
position limit options on these ETFs.
Economic Impact
Benefits
As noted above, the proposed rule change would amend Rule 2360 to
harmonize FINRA's position limits for conventional options with the
position limits for standardized options.\27\ If the existing position
limits for conventional equity options on select ETFs constrains
trading in these ETFs, then investors may be able to better manage risk
and trade on information when the position limit is relaxed. In
general, the improvement in risk management and informational
efficiency may increase more when position limits are increased. FINRA
acknowledges, however, that the conventional options on these ETFs, the
ETFs themselves, and the securities underlying these ETFs are liquid,
so improvements in informational efficiency may be relatively small.
---------------------------------------------------------------------------
\27\ See note 8.
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For investors that trade conventional equity options, there is
likely to be a natural size for an executed order that minimizes fixed
and variable transaction costs, including but not limited to, the bid-
ask spread, price impact, and transaction fees. If the existing
position limits for conventional equity options on select ETFs
constrains the order size such that fixed and variable transaction
costs are higher than optimal, then investors may benefit if the new
position limit is no less than the natural size. In such an event, the
cost to hedge an ETF would decline, thereby making it less costly to
manage downside risk.
In addition, if the existing position limits serve as a constraint,
then an increase in the position limits for conventional options on
select ETFs could permit investors to more easily find a counterparty.
If the number of counterparties increases, then the cost of hedging
should decline as the half-spread narrows, thereby making it less
expensive to manage downside risk.
The extent of the constraint imposed by the current limit on
conventional options is related to the ability of an investor to
achieve similar economic exposure through other means. If there are
other securities, such as an option on a closely related index, that
exist and provide similar economic exposure less expensively, then the
value of lessening the position limits on conventional options on ETFs
is lower.
[[Page 45718]]
Members may rely on information and data feeds from the Options
Clearing Corporation to assist in their monitoring position limits.
Because position limits on the standardized and conventional side have
traditionally been consistent, members have relied on this feed for
both standardized and conventional options. If the position limits
between standardized and conventional options are conformed, then the
cost from monitoring position limits should decline for member firms.
Having the same position limits on standardized and conventional
options, reduces the potential for excess loss that may be incurred
when different limits are applied to the standardized versus
conventional options on the same ETF. The economic loss may arise from
building and maintaining trading and compliance systems to support the
different regimes. Furthermore, the harmonization of position limits on
standardized and conventional options eliminates the potential risk and
cost arising from regulatory arbitrage.
Costs
The proposed rule change may impose limited operational cost on
member firms that trade conventional options on ETFs, as these same
firms would need to revise position limits that are used in trading
systems. However, the proposed rule change should not impose additional
costs, because it is difficult to disrupt or manipulate the underlying
market, create an incentive to disrupt or manipulate the underlying
market for the purpose of profiting from the options position, or
disrupt or manipulate the options market for conventional options on
ETFs affected by this proposed rule. ETFs that underlie options subject
to the proposed rule change are highly liquid and are based on a broad
set of highly liquid securities, which makes the market difficult to
manipulate or disrupt. In fact, options on certain broad-based security
indexes have no position limits. Furthermore, the creation and
redemption process for these ETFs reduces the potential for disruptive
or manipulative activity. New ETF units may be created at any time
during the trading day and are not subject to position limits.
Consequently, there is a direct link between the underlying components
of the ETF and the ETF, which keeps the ETF's share prices trading in
line with the ETF's underlying net asset value.
Alternatives
No further alternatives are under consideration.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \28\ and Rule 19b-
4(f)(6) \29\ thereunder.
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(6). 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, along
with a brief description and the text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. FINRA has satisfied this requirement.
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FINRA has asked the Commission to waive the 30-day operative delay
so that FINRA may immediately harmonize position limits with those of
other self-regulatory organizations to ensure consistent regulation.
For this reason, the Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest. Therefore, the Commission hereby waives the operative
delay and designates the proposal operative upon filing.\30\
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\30\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2020-021 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-FINRA-2020-021. 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 such filing also will be available for inspection
and copying at the principal office of FINRA. 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-FINRA-2020-021, and should be submitted
on or before August 19, 2020.
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\31\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-16263 Filed 7-28-20; 8:45 am]
BILLING CODE 8011-01-P
