Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing of Proposed Rule Change To Amend Options 4, Section 5, To Limit Short Term Options Series Intervals Between Strikes Which are Available for Quoting and Trading on BX, 73113-73121 [2020-25179]
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Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices
furtherance of the purposes of the Act
because the propose fees assessed and
rebates offered apply to an Exchange
proprietary product, which are traded
exclusively on the Exchange and the
Exchange’s affiliated options exchange,
Cboe Options.22
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 23 and paragraph (f) of Rule
19b–4 24 thereunder. 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2020–080 on the subject line.
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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–CboeBZX–2020–080. 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
supra note 4.
U.S.C. 78s(b)(3)(A).
24 17 CFR 240.19b–4(f).
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–CboeBZX–2020–080 and
should be submitted on or before
December 7, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–25181 Filed 11–13–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90384; File No. SR–BX–
2020–032]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing of Proposed
Rule Change To Amend Options 4,
Section 5, To Limit Short Term Options
Series Intervals Between Strikes Which
are Available for Quoting and Trading
on BX
November 9, 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 November
6, 2020, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
25 17
23 15
1 15
20:13 Nov 13, 2020
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Options 4, Section 5, ‘‘Series of Options
Contracts Open for Trading.’’ This
proposal seeks to limit Short Term
Options Series intervals between strikes
which are available for quoting and
trading on BX.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
22 See
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The Exchange proposes to amend
Options 4, Section 5, ‘‘Series of Options
Contracts Open for Trading.’’
Specifically, this proposal seeks to limit
the intervals between strikes for
multiply listed equity options classes
within the Short Term Options Series
program that have an expiration date
more than twenty-one days from the
listing date.
Background
Today, BX’s listing rules within
Options 4, Section 5 permits the
Exchange, after a particular class of
options (call option contracts or put
option contracts relating to a specific
underlying stock, Exchange-Traded
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices
Fund Share,3 or ETN 4) has been
approved for listing and trading on the
Exchange, to open for trading series of
options therein. The Exchange may list
series of options for trading on a
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3 Exchange-Traded
Fund Share shall include
shares or other securities that are traded on a
national securities exchange and are defined as an
‘‘NMS stock’’ under Rule 600 of Regulation NMS,
and that (i) represent interests in registered
investment companies (or series thereof) organized
as open-end management investment companies,
unit investment trusts or similar entities, that hold
portfolios of securities and/or financial instruments
including, but not limited to, stock index futures
contracts, options on futures, options on securities
and indexes, equity caps, collars and floors, swap
agreements, forward contracts, repurchase
agreements and reverse repurchase agreements
comprising or otherwise based on or representing
investments in broad-based indexes or portfolios of
securities and/or Financial Instruments and Money
Market Instruments (the ‘‘Money Market
Instruments’’) (or that hold securities in one or
more other registered investment companies that
themselves hold such portfolios of securities and/
or Financial Instruments and Money Market
Instruments (ii) represent interests in a trust or
similar entity that holds a specified non-U.S.
currency or currencies deposited with the trust or
similar entity when aggregated in some specified
minimum number may be surrendered to the trust
by the beneficial owner to receive the specified
non-U.S. currency or currencies and pays the
beneficial owner interest and other distributions on
the deposited non-U.S. currency or currencies, if
any, declared and paid by the trust (‘‘Currency
Trust Shares’’), (iii) represent commodity pool
interests principally engaged, directly or indirectly,
in holding and/or managing portfolios or baskets of
securities, commodity futures contracts, options on
commodity futures contracts, swaps, forward
contracts and/or options on physical commodities
and/or non-U.S. currency (‘‘Commodity Pool
ETFs’’), (iv) represent interests in the SPDR® Gold
Trust, the iShares COMEX Gold Trust, the iShares
Silver Trust, the ETFS Gold Trust, the ETFS Silver
Trust, the ETFS Palladium Trust, the ETFS
Platinum Trust or the Sprott Physical Gold Trust or
(v) represents an interest in a registered investment
company (‘‘Investment Company’’) organized as an
open-end management company or similar entity,
that invests in a portfolio of securities selected by
the Investment Company’s investment adviser
consistent with the Investment Company’s
investment objectives and policies, which is issued
in a specified aggregate minimum number in return
for a deposit of a specified portfolio of securities
and/or a cash amount with a value equal to the next
determined net asset value (‘‘NAV’’), and when
aggregated in the same specified minimum number,
may be redeemed at a holder’s request, which
holder will be paid a specified portfolio of
securities and/or cash with a value equal to the next
determined NAV (‘‘Managed Fund Share’’);
provided the conditions within Options 4, Section
3(i)(A) and (B) are met. See Options 4, Section 3(i).
4 Securities deemed appropriate for options
trading shall include shares or other securities
(‘‘Equity Index-Linked Securities,’’ ‘‘CommodityLinked Securities,’’ ‘‘Currency-Linked Securities,’’
‘‘Fixed Income Index-Linked Securities,’’ ‘‘FuturesLinked Securities,’’ and ‘‘Multifactor Index-Linked
Securities,’’ collectively known as ‘‘Index-Linked
Securities’’ or ‘‘ETNs’’) that are principally traded
on a national securities exchange and an ‘‘NMS
Stock’’ (as defined in Rule 600 of Regulation NMS
under the Securities Exchange Act of 1934), and
represent ownership of a security that provides for
the payment at maturity, as described within
Options 4, Section 3(l)(i)(1)–(6). See Options 4,
Section 3(l)(i).
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weekly,5 monthly 6 or quarterly 7 basis.
Options 4, Section 5(d) sets forth the
intervals between strike prices of series
of options on individual stocks.8 In
5 The weekly listing program is known as the
Short Term Options Series Program and is
described within Supplementary Material .03 of
Options 4, Section 5.
6 The Exchange will open at least one expiration
month for each class of options open for trading on
the Exchange. See Options 4, Section 5(g). The
monthly expirations are subject to certain listing
criteria for underlying securities described within
Options 4, Section 3. Monthly listings expire the
third Friday of the month. The term ‘‘expiration
date’’ when used in respect of a series of binary
options other than event options means the last day
on which the options may be automatically
exercised. In the case of a series of event options
(other than credit default options or credit default
basket options) that are be automatically exercised
prior to their expiration date upon receipt by the
Corporation of an event confirmation, the
expiration date is the date specified by the listing
Exchange; provided, however, that when an event
confirmation is deemed to have been received by
the Corporation with respect to such series of
options, the expiration date will be accelerated to
the date on which such event confirmation is
deemed to have been received by the Corporation
or such later date as the Corporation may specify.
In the case of a series of credit default options or
credit default basket options, the expiration date is
the fourth business day after the last trading day for
such series as such trading day is specified by the
Exchange on which the series of options is listed;
provided, however, that when an event
confirmation is deemed to have been received by
the Corporation with respect to a series of credit
default options or single payout credit default
basket options prior to the last trading day for such
series, the expiration date for options of that series
will be accelerated to the second business day
following the day on which such event
confirmation is deemed to have been received by
the Corporation. ‘‘Expiration date’’ means, in
respect of a series of range options expiring prior
to February 1, 2015, the Saturday immediately
following the third Friday of the expiration month
of such series, and, in respect of a series of range
options expiring on or after February 1, 2015 means
the third Friday of the expiration month of such
series, or if such Friday is a day on which the
Exchange on which such series is listed is not open
for business, the preceding day on which such
Exchange is open for business. See The Options
Clearing Corporation (‘‘OCC’’) By-Laws at Section 1.
7 The quarterly listing program is known as the
Quarterly Options Series Program and is described
within Supplementary Material .04 of Options 4,
Section 5.
8 Except as otherwise provided in the
Supplementary Material of Options 4, Section 5, the
interval between strike prices of series of options
on individual stocks will be: (1) $2.50 or greater
where the strike price is $25.00 or less; (2) $5.00
or greater where the strike price is greater than
$25.00; and (3) $10.00 or greater where the strike
price is greater than $200.00.
The interval between strike prices of series of
options on Exchange-Traded Fund Shares approved
for options trading pursuant to Section 3(i) of this
Options 4 shall be fixed at a price per share which
is reasonably close to the price per share at which
the underlying security is traded in the primary
market at or about the same time such series of
options is first open for trading on the Exchange,
or at such intervals as may have been established
on another options exchange prior to the initiation
of trading on the Exchange.
Pursuant to Options 4, Section 5(e),
notwithstanding any other provision regarding the
interval of strike prices of series of options on
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addition to those intervals, the
Exchange may list series of options
pursuant to the $1 Strike Price Interval
Program,9 the $0.50 Strike Program,10
the $2.50 Strike Price Program,11 and
the $5 Strike Program.12
The Exchange’s proposal seeks to
amend the listing of weekly series of
options as proposed within new
Supplementary Material .03(f) of
Options 4, Section 5, by limiting the
intervals between strikes in multiply
listed equity options, excluding
Exchange-Traded Fund Shares and
ETNs, that have an expiration date more
than twenty-one days from the listing
date. This proposal does not amend
monthly or quarterly listing rules nor
does it amend the $1 Strike Price
Interval Program, the $0.50 Strike
Program, the $2.50 Strike Price Program,
or the $5 Strike Program.
Short Term Options Series Program
Today, Supplementary Material .03 of
Options 4, Section 5 permits BX to open
for trading on any Thursday or Friday
that is a business day (‘‘Short Term
Option Opening Date’’) series of options
on an option class that expires at the
close of business on each of the next
five Fridays that are business days and
are not Fridays in which monthly
options series or Quarterly Options
Series expire (‘‘Short Term Option
Expiration Dates’’), provided an option
class has been approved for listing and
trading on the Exchange.13 Today, the
Exchange-Traded Fund Shares in this rule, the
interval of strike prices on SPDR® S&P 500® ETF
(‘‘SPY’’), iShares Core S&P 500 ETF (‘‘IVV’’),
PowerShares QQQ Trust (‘‘QQQ’’), iShares Russell
2000 Index Fund (‘‘IWM’’), and the SPDR® Dow
Jones® Industrial Average ETF (‘‘DIA’’) options will
be $1 or greater.
9 The $1 Strike Interval Program is described
within Supplementary Material .01 of Options 4,
Section 5.
10 The $0.50 Strike Interval Program is described
within Supplementary Material .05 of Options 4,
Section 5.
11 The $2.50 Strike Interval Program is described
within Supplementary Material .02 of Options 4,
Section 5.
12 The $5.00 Strike Interval Program is described
within Supplementary Material .06 of Options 4,
Section 5.
13 The Exchange may have no more than a total
of five Short Term Option Expiration Dates, not
including any Monday or Wednesday SPY
Expirations as provided below. If the Exchange is
not open for business on the respective Thursday
or Friday, the Short Term Option Opening Date will
be the first business day immediately prior to that
respective Thursday or Friday. Similarly, if the
Exchange is not open for business on a Friday, the
Short Term Option Expiration Date will be the first
business day immediately prior to that Friday. With
respect to Wednesday SPY Expirations, the
Exchange may open for trading on any Tuesday or
Wednesday that is a business day series of options
on the SPDR S&P 500 ETF Trust (SPY) to expire on
any Wednesday of the month that is a business day
and is not a Wednesday in which Quarterly Options
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Exchange may open up to thirty initial
series for each option class that
participates in the Short Term Option
Series Program.14 Further, if the
Exchange opens less than thirty (30)
Short Term Option Series for a Short
Term Option Expiration Date, additional
series may be opened for trading on the
Exchange when the Exchange deems it
necessary to maintain an orderly
market, to meet customer demand or
when the market price of the underlying
security moves substantially from the
exercise price or prices of the series
already opened.15
The Exchange may open for trading
Short Term Option Series on the Short
Term Option Opening Date that expire
on the Short Term Option Expiration
Date at strike price intervals of (i) $0.50
or greater where the strike price is less
than $100, and $1 or greater where the
strike price is between $100 and $150
for all option classes that participate in
the Short Term Options Series Program;
(ii) $0.50 for option classes that trade in
one dollar increments and are in the
Short Term Option Series Program; or
(iii) $2.50 or greater where the strike
price is above $150. During the month
prior to expiration of an option class
that is selected for the Short Term
Option Series Program (‘‘Short Term
Option’’), the strike price intervals for
the related non-Short Term Option
(‘‘Related non-Short Term Option’’)
shall be the same as the strike price
intervals for the Short Term Option.16
The Exchange may select up to fifty
currently listed option classes on which
Short Term Option Series may be
opened on any Short Term Option
Opening Date. In addition to the fifty
option class restriction, the Exchange
may also list Short Term Option Series
on any option classes that are selected
by other securities exchanges that
employ a similar program under their
respective rules. For each option class
eligible for participation in the Short
Term Option Series Program, the
Exchange may open up to thirty Short
Term Option Series for each expiration
date in that class. The Exchange may
also open Short Term Option Series that
are opened by other securities
exchanges in option classes selected by
such exchanges under their respective
short term option rules.17
BX notes that listings in the weekly
program comprise a significant part of
the standard listing in options markets.
The below diagrams demonstrate the
percentage of weekly listings as
compared to Long-Term Option Series
or LEAPs and quarterly listings in 2015
as compared to 2020. The weekly strikes
increased 8.9% compound annual
growth rate (‘‘CAGR’’) from 2015 as
compared to a 4.3% CAGR for standard
expirations using 3rd 2015 Friday
expirations.
Series expire (‘‘Wednesday SPY Expirations’’). With
respect to Monday SPY Expirations, the Exchange
may open for trading on any Friday or Monday that
is a business day series of options on the SPY to
expire on any Monday of the month that is a
business day and is not a Monday in which
Quarterly Options Series expire (‘‘Monday SPY
Expirations’’), provided that Monday SPY
Expirations that are listed on a Friday must be
listed at least one business week and one business
day prior to the expiration. The Exchange may list
up to five consecutive Wednesday SPY Expirations
and five consecutive Monday SPY Expirations at
one time; the Exchange may have no more than a
total of five Wednesday SPY Expirations and a total
of five Monday SPY Expirations. Monday and
Wednesday SPY Expirations will be subject to the
provisions of this Rule. See Supplementary Material
.03 of Options 4, Section 5.
14 See Supplementary Material .03 of Options 4,
Section 5(c).
15 See Supplementary Material .03 of Options 4,
Section 5(d).
16 See Options 4, Section 5(e).
17 See Supplementary Material .03(a) of Options
4, Section 5.
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Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices
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Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices
Proposal
BX proposes to limit the intervals
between strikes in options listed as part
of the Short Term Option Series
Program that have an expiration date
more than twenty-one days from the
listing date, by adopting proposed
Supplementary Material .03(f) of
Options 4, Section 5 as well as proposed
Supplementary Material .07 of Options
4, Section 5, with respect to listing
Short Term Option Series in equity
options, excluding Exchange-Traded
Fund Shares and ETNs) (collectively
‘‘Strike Interval Proposal’’). BX’s Strike
Interval Proposal would limit the
intervals between strikes by utilizing the
table proposed within Supplementary
Material .07 of Options 4, Section 5.
With the Strike Interval Proposal, BX
would limit intervals between strikes for
expiration dates of option series beyond
twenty-one days utilizing the below
three-tiered table which considers both
the share price and average daily
volume for the option series.18
Tier
Average daily volume
Less than $25
1 ........................
2 ........................
3 ........................
greater than 5,000 ................................
1,000 to 5,000 .......................................
0 to 1,000 ..............................................
$25 to less
than $75
$0.50
1.00
2.50
$75 to less
than $150
$1.00
1.00
5.00
$1.00
1.00
5.00
$150 to less
than $500
$500 or
greater
$5.00
5.00
5.00
$5.00
10.00
10.00
The Share Price would be the closing
price on the primary market on the last
day of the calendar quarter. This value
would be used to derive the column
from which to apply strike intervals
throughout the next calendar quarter.
The Average Daily Volume would be the
total number of options contracts traded
in a given security for the applicable
calendar quarter divided by the number
of trading days in the applicable
calendar quarter. Beginning on the
second trading day in the first month of
each calendar quarter, the Average Daily
Volume shall be calculated by utilizing
data from the prior calendar quarter
based on Customer-cleared volume at
OCC. For options listed on the first
trading day of a given calendar quarter,
the Average Daily Volume shall be
calculated using the calendar quarter
prior to the last trading calendar
quarter.19 In the event of a corporate
action, the Share Price of the surviving
company would be utilized. These
metrics are intended to align
expectations for determining which
strike intervals will be utilized. Finally,
notwithstanding the limitations
imposed by Options 4, Section 5 at
proposed Supplementary Material .07,
this Strike Interval Proposal does not
amend the range of strikes that may be
listed pursuant to Options 4, Section 5
at Supplementary Material .03,
regarding the Short Term Option Series
Program.
By way of example, if the Share Price
for a symbol was $142 at the end of a
calendar quarter, with an Average Daily
Volume greater than 5,000, thereby,
requiring strike intervals to be listed
$1.00 apart, that strike interval would
apply for the calendar quarter,
regardless of whether the Share Price
changed to greater than $150 during that
calendar quarter.20
The proposed table within
Supplementary Material .07 of Options
4, Section 5 takes into account the
notional value of a security, as well as
Average Daily Volume in the underlying
stock, in order to limit the intervals
between strikes in the Short Term
Options listing program. The Exchange
utilizes OCC Customer-cleared volume,
as customer volume is an appropriate
proxy for demand. The OCC Customercleared volume represents the majority
of options volume executed on the
Exchange that, in turn, reflects the
demand in the marketplace. The options
series listed on BX are intended to meet
customer demand by offering an
appropriate number of strikes. NonCustomer cleared OCC volume
represents the supply side. The strike
intervals for listing strikes in certain
18 Additional information comparing the current
listing program to this proposal is available at:
https://www.nasdaq.com/solutions/bx-optionsstrike-proliferation-proposal.
19 For example, options listed as of January 4,
2021 would be calculated on January 5, 2021 using
the Average Daily Volume from July 1, 2020 to
September 30, 2020.
20 The Exchange notes that any limits on intervals
imposed by the Exchange’s Rules will continue to
apply. In this example, the strikes would be in $1
intervals up to $150, which is the upper limit
imposed by Supplementary Material .03(e) of
Options 4, Section 5.
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Share price
73117
options are intended to remove
repetitive and unnecessary strike
listings across the weekly expiries. BX’s
Strike Interval Proposal seeks to reduce
the number of strikes in the furthest
weeklies, where there exist wider
markets and therefore lower market
quality. Below are two tables which
focus on data for 10 of the most and
least actively traded symbols 21 and
demonstrate average spreads in weekly
options during the month of August
2020.
The proposed table within
Supplementary Material .07 of Options
4, Section 5 is intended to distribute
strike intervals in multiply listed equity
options where there is less volume as
measured by the Average Daily Volume
tiers. Therefore, the lower the Average
Daily Volume, the greater the proposed
spread between strike intervals. Options
classes with higher volume contain the
most liquid symbols and strikes,
therefore the finer the proposed spread
between strike intervals. Additionally,
lower-priced shares have finer strike
intervals than higher-priced shares
when comparing the proposed spread
between strike intervals.22
Today, weeklies are available on 16%
of underlying products. The Exchange’s
Strike Interval Proposal curtails the
density of strike intervals listed in series
of options, without reducing the classes
of options available for trading on BX.
The Exchange’s Strike Interval Proposal
would reduce 2% of the total number of
strikes that equates to 81,000 strikes.23
21 The table represents stock in the following
securities: Apple, Tesla, Microsoft Corporation,
Advanced Micro Devices, Inc., Bank of America
Corp., NRG Energy Inc., Ferrari NV, Community
Health Systems Inc., Navistar International Corp,
and Jabil Inc.
22 The Exchange notes that is has discussed the
proposed strike intervals with various members.
The Exchange has gathered information regarding
where trading in weeklies generally occurs to arrive
at the proposed strike intervals.
23 The Exchange notes that this proposal is an
initial attempt at reducing strikes and anticipates
filing additional proposals to continue reducing
strikes. The above-referenced data, specifically the
percentage of underlying products and percentage
of and total number of strikes, are approximations
and may vary slightly at the time of this filing.
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options, and excludes Exchange-Traded
Fund Shares and ETNs, as the majority
of strikes reside within equity options.
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options beyond twenty-one calendar
days.
BX’s Strike Interval Proposal focuses
on strikes in multiply listed equity
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The above table represents the
inconsistency of demand for series of
While the current listing rules permit
BX to list a number of weekly strikes on
its market, in an effort to encourage
Market Makers to deploy capital more
efficiently, as well as improve displayed
market quality, BX’s Strike Interval
Proposal reduces the number of listed
weekly options. As BX’s Strike Interval
Proposal seeks to reduce the number of
weekly options that would be listed on
its market in later weeks, Market Makers
would be required to quote in fewer
weekly strikes as a result of the Strike
Interval Proposal. Specifically, the
Strike Interval Proposal aims to reduce
the density of strike intervals that would
be listed in later weeks, by creating
limitations for intervals between strikes
which have an expiration date more
than twenty-one days from the listing
date. The table takes into account
customer demand for certain options
classes, by considering both the Share
Price and the Average Daily Volume, to
arrive at the manner which weekly
strike intervals may be listed. The
intervals for listing strikes in equity
options is intended to remove certain
strike intervals where there exist
clusters of strikes whose characteristics
closely resemble one another and,
therefore, do not serve different trading
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73119
needs,24 rendering these strikes less
useful.
This Strike Interval Proposal serves to
respond to comments received from
industry members with respect to the
increasing number of strikes that are
required to be quoted by market makers
in the options industry. BX requires
Lead Market Makers and Market Makers
to quote a certain amount of time in the
trading day in their assigned options
series to maintain liquidity in the
market.25 With an increasing number of
strikes being listed across options
exchanges, Market Makers must expend
their capital to ensure that they have the
appropriate infrastructure to meet their
quoting obligations on all options
markets in which they are assigned in
options series. The Exchange believes
that this Strike Interval Proposal would
limit the intervals between strikes,
reducing the number of strikes listed on
BX, and thereby allow Lead Market
Makers and Market Makers to expend
their capital in the options market in a
more efficient manner. Due to this
increased efficiency, the Exchange
believes that this Strike Interval
Proposal would improve overall market
quality on BX by limiting the intervals
between strikes in multiply listed equity
options that have an expiration date
more than twenty-one days, from the
listing date.
This Strike Interval Proposal is
intended to be the first in a series of
proposals to limit the number of listed
options series listed on BX and other
Nasdaq affiliated markets. The Exchange
intends to decrease the overall number
of strikes listed on Nasdaq exchanges in
a methodical fashion, so that it may
monitor progress and feedback from its
membership. While limiting the
intervals between listed strikes is the
goal of this rule change, BX’s Strike
Interval Proposal is intended to balance
that goal with the needs of market
participants. BX believes that various
strike intervals continue to offer market
participants the ability to select the
appropriate strike interval to meet that
market participant’s investment
objective.
24 For example, two strikes that are densely
clustered may have the same risk properties and
may also be the same percentage out-of-the money.
25 See Options 2, Sections 4(j) and 5.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
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Sfmt 4703
Implementation
The Exchange intends to begin
implementation of the proposed rule
change prior to March 31, 2021. The
Exchange will issue an Options Trader
Alert to Participants to provide
notification of the implementation date.
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of the Act,26 in general, and furthers the
objectives of Section 6(b)(5) of the Act,27
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest. The
Strike Proposal seeks to limit the
intervals between strikes listed in the
Short Term Options Series program that
have an expiration date more than
twenty-one days. While the current
listing rules permit BX to list a number
of weekly strikes on its market, the
Exchange’s Strike Interval Proposal
removes impediments to and perfects
the mechanism of a free and open
market and a national market system by
encouraging Market Makers to deploy
capital more efficiently and improving
market quality overall on BX through
limiting the intervals between strikes
when applying the strike interval table
to multiply listed equity options that
have an expiration date more than
twenty-one days from the listing date.
Also, as BX’s Strike Interval Proposal
seeks to reduce the number of weekly
options that would be listed on its
market in later weeks, Market Makers
would be required to quote in fewer
weekly strikes as a result of the Strike
Interval Proposal. Amending BX’s
listing rules to limit the intervals
between strikes for multiply listed
equity options that have an expiration
date more than twenty-one days causes
less disruption in the market as the
majority of the volume traded in weekly
options exists in options series which
have an expiration date of twenty-one
days or less. The Exchange’s Strike
Interval Proposal curtails the number of
strike intervals listed in series of options
without reducing the number of classes
of options available for trading on BX.
The Strike Interval Proposal takes into
account customer demand for certain
options classes by considering both the
Share Price and the Average Daily
Volume in the underlying security to
arrive at the manner in which weekly
strike intervals would be listed in the
later weeks for each multiply listed
equity options class. The Exchange
utilizes OCC Customer-cleared volume,
as customer volume is an appropriate
proxy for demand. The OCC Customercleared volume represents the majority
of options volume executed on the
Exchange that, in turn, reflects the
demands in the marketplace. The
options series listed on BX is intended
to meet customer demand by offering an
26 15
27 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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20:13 Nov 13, 2020
Jkt 253001
appropriate number of strikes. NonCustomer cleared OCC volume
represents the supply side.
The Strike Interval Proposal for listing
strikes in certain multiply listed equity
options is intended to remove certain
strikes where there exist clusters of
strikes whose characteristics closely
resemble one another and, therefore, do
not serve different trading needs that
renders the strikes less useful and
thereby protects investors and the
general public by removing an
abundance of unnecessary choices for
an options series, while also improving
market quality. BX’s Strike Interval
Proposal seeks to reduce the number of
strikes in the furthest weeklies, where
there exist wider markets, and,
therefore, lower market quality. The
implementation of the proposed table is
intended to spread strike intervals in
multiply listed equity options, where
there is less volume that is measured by
the average daily volume tiers.
Therefore, the lower the average daily
volume, the greater the proposed spread
between strike intervals. Options classes
with higher volume contain the most
liquid symbols and strikes, therefore the
finer the proposed spread between
strike intervals. Additionally, lowerpriced shares have finer strike intervals
than higher-priced shares when
comparing the proposed spread between
strike intervals.28
Beginning on the second trading day
in the first month of each calendar
quarter, the Average Daily Volume shall
be calculated by utilizing data from the
prior calendar quarter based on OCC
Customer-cleared volume. Utilizing the
second trading day allows the Exchange
to accumulate data regarding OCC
Customer-cleared volume from the
entire prior quarter. Beginning on the
second trading day would allow trades
executed on the last day of the previous
calendar quarter to have settled 29 and
be accounted for in the calculation of
Average Daily Volume. Utilizing the
previous three months is appropriate
because this time period would help
reduce the impact of unusual trading
activity as a result of unique market
events, such as a corporate action (i.e.,
it would result in a more reliable
measure of average daily trading volume
than would a shorter period).
This Strike Interval Proposal serves to
respond to comments received from
28 The Exchange notes that is has discussed the
proposed strike intervals with various members.
The Exchange has gathered information regarding
where trading in weeklies generally occurs to arrive
at the proposed strike intervals.
29 Options contracts settle one business day after
trade date. Strike listing determinations are made
the day prior to the start of trading in each series.
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
industry members with respect to the
increasing number of strikes that are
required to be quoted by market makers
in the options industry. Today, BX
requires Lead Market Makers and
Market Makers to quote a certain
amount of time in the trading day in
their assigned due options series to
maintain liquidity in the market.30 With
an increasing number of strikes due to
tighter intervals being listed across
options exchanges, Market Makers must
expend their capital to ensure that they
have the appropriate infrastructure to
meet their quoting obligations on all
options markets in which they are
assigned in options series. The
Exchange believes that this Strike
Interval Proposal would limit the
intervals between strikes listed on BX
and thereby allow Lead Market Makers
and Market Makers to expend their
capital in the options market in a more
efficient manner that removes
impediments to and perfect the
mechanism of a free and open market
and a national market system. The
Exchange also believes that this Strike
Interval Proposal would improve overall
market quality on BX for the protection
of investors and the general public by
limiting the intervals between strikes
when applying the strike interval table
to multiply listed equity options which
have an expiration date more than
twenty-one days from the listing date.
This Strike Interval Proposal is
intended to be the first in a series of
proposals to limit the number of listed
options series listed on BX and other
Nasdaq affiliated markets. The Exchange
intends to decrease the overall number
of strikes listed on Nasdaq exchanges in
a methodical fashion in order that it
may monitor progress and feedback
from its membership. While limiting the
intervals between strikes listed is the
goal of this rule change, BX’s Strike
Interval Proposal is intended to balance
that goal with the needs of market
participants. The Exchange believes that
varied strike intervals continue to offer
market participants the ability to select
the appropriate strike interval to meet
that market participant’s investment
objective.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The Strike
Interval Proposal limits the number of
Short Term Options Series strike
intervals available for quoting and
30 See
E:\FR\FM\16NON1.SGM
Options 2, Sections 4(j) and 5.
16NON1
Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices
trading on BX for all BX Participants.
While the current listing rules permit
BX to list a number of weekly strikes on
its market, in an effort to encourage
Market Makers to deploy capital more
efficiently, as well as improve displayed
market quality, BX’s Strike Interval
Proposal seeks to reduce the number of
weekly options that would be listed on
its market in later weeks, without
reducing the number of series or classes
of options available for trading on BX.
As BX’s Strike Interval Proposal seeks to
reduce the number of weekly options
that would be listed on its market in
later weeks, Market Makers would be
required to quote in fewer weekly
strikes as a result of the Strike Interval
Proposal.
The Exchange’s Strike Interval
Proposal, which is intended to decrease
the overall number of strikes listed on
BX, does not impose an undue burden
on intra-market competition as all
Participants may only transact options
in the strike intervals listed for trading
on BX. While limiting the intervals of
strikes listed on BX is the goal of this
Strike Interval Proposal, the goal
continues to balance the needs of
market participants by continuing to
offer a number of strikes to meet a
market participant’s investment
objective.
The Exchange’s Strike Interval
Proposal does not impose an undue
burden on inter-market competition as
this Strike Interval Proposal does not
impact the listings available at another
self-regulatory organization. In fact, BX
is proposing to list a smaller amount of
weekly equity options in an effort to
curtail the increasing number of strikes
that are required to be quoted by market
makers in the options industry. Other
options markets may choose to replicate
the Exchange’s Strike Interval Proposal
and, thereby, further decrease the
overall number of strikes within the
options industry.
jbell on DSKJLSW7X2PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
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20:13 Nov 13, 2020
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73121
the Commission shall: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
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:
[FR Doc. 2020–25179 Filed 11–13–20; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BX–2020–032 on the subject line.
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Amend the Requirement Applicable to
Special Purpose Acquisition
Companies Upon Consummation of a
Business Combination Concerning
Compliance With the Round Lot
Shareholder Requirement
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BX–2020–032. 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 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BX–2020–032, and should
be submitted on or before December 7,
2020.
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90382; File No. SR–NYSE–
2020–90]
November 9, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on October
27, 2020, New York Stock Exchange
LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
certain of the requirements of the NYSE
Listed Company Manual (‘‘Manual’’)
that are applicable to special purpose
acquisition companies upon
consummation of a business
combination. The proposed rule change
is available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
31 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
E:\FR\FM\16NON1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 221 (Monday, November 16, 2020)]
[Notices]
[Pages 73113-73121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25179]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90384; File No. SR-BX-2020-032]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
of Proposed Rule Change To Amend Options 4, Section 5, To Limit Short
Term Options Series Intervals Between Strikes Which are Available for
Quoting and Trading on BX
November 9, 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 November 6, 2020, Nasdaq BX, Inc. (``BX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Options 4, Section 5, ``Series of
Options Contracts Open for Trading.'' This proposal seeks to limit
Short Term Options Series intervals between strikes which are available
for quoting and trading on BX.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 4, Section 5, ``Series of
Options Contracts Open for Trading.'' Specifically, this proposal seeks
to limit the intervals between strikes for multiply listed equity
options classes within the Short Term Options Series program that have
an expiration date more than twenty-one days from the listing date.
Background
Today, BX's listing rules within Options 4, Section 5 permits the
Exchange, after a particular class of options (call option contracts or
put option contracts relating to a specific underlying stock, Exchange-
Traded
[[Page 73114]]
Fund Share,\3\ or ETN \4\) has been approved for listing and trading on
the Exchange, to open for trading series of options therein. The
Exchange may list series of options for trading on a weekly,\5\ monthly
\6\ or quarterly \7\ basis. Options 4, Section 5(d) sets forth the
intervals between strike prices of series of options on individual
stocks.\8\ In addition to those intervals, the Exchange may list series
of options pursuant to the $1 Strike Price Interval Program,\9\ the
$0.50 Strike Program,\10\ the $2.50 Strike Price Program,\11\ and the
$5 Strike Program.\12\
---------------------------------------------------------------------------
\3\ Exchange-Traded Fund Share shall include shares or other
securities that are traded on a national securities exchange and are
defined as an ``NMS stock'' under Rule 600 of Regulation NMS, and
that (i) represent interests in registered investment companies (or
series thereof) organized as open-end management investment
companies, unit investment trusts or similar entities, that hold
portfolios of securities and/or financial instruments including, but
not limited to, stock index futures contracts, options on futures,
options on securities and indexes, equity caps, collars and floors,
swap agreements, forward contracts, repurchase agreements and
reverse repurchase agreements comprising or otherwise based on or
representing investments in broad-based indexes or portfolios of
securities and/or Financial Instruments and Money Market Instruments
(the ``Money Market Instruments'') (or that hold securities in one
or more other registered investment companies that themselves hold
such portfolios of securities and/or Financial Instruments and Money
Market Instruments (ii) represent interests in a trust or similar
entity that holds a specified non-U.S. currency or currencies
deposited with the trust or similar entity when aggregated in some
specified minimum number may be surrendered to the trust by the
beneficial owner to receive the specified non-U.S. currency or
currencies and pays the beneficial owner interest and other
distributions on the deposited non-U.S. currency or currencies, if
any, declared and paid by the trust (``Currency Trust Shares''),
(iii) represent commodity pool interests principally engaged,
directly or indirectly, in holding and/or managing portfolios or
baskets of securities, commodity futures contracts, options on
commodity futures contracts, swaps, forward contracts and/or options
on physical commodities and/or non-U.S. currency (``Commodity Pool
ETFs''), (iv) represent interests in the SPDR[supreg] Gold Trust,
the iShares COMEX Gold Trust, the iShares Silver Trust, the ETFS
Gold Trust, the ETFS Silver Trust, the ETFS Palladium Trust, the
ETFS Platinum Trust or the Sprott Physical Gold Trust or (v)
represents an interest in a registered investment company
(``Investment Company'') organized as an open-end management company
or similar entity, that invests in a portfolio of securities
selected by the Investment Company's investment adviser consistent
with the Investment Company's investment objectives and policies,
which is issued in a specified aggregate minimum number in return
for a deposit of a specified portfolio of securities and/or a cash
amount with a value equal to the next determined net asset value
(``NAV''), and when aggregated in the same specified minimum number,
may be redeemed at a holder's request, which holder will be paid a
specified portfolio of securities and/or cash with a value equal to
the next determined NAV (``Managed Fund Share''); provided the
conditions within Options 4, Section 3(i)(A) and (B) are met. See
Options 4, Section 3(i).
\4\ Securities deemed appropriate for options trading shall
include shares or other securities (``Equity Index-Linked
Securities,'' ``Commodity-Linked Securities,'' ``Currency-Linked
Securities,'' ``Fixed Income Index-Linked Securities,'' ``Futures-
Linked Securities,'' and ``Multifactor Index-Linked Securities,''
collectively known as ``Index-Linked Securities'' or ``ETNs'') that
are principally traded on a national securities exchange and an
``NMS Stock'' (as defined in Rule 600 of Regulation NMS under the
Securities Exchange Act of 1934), and represent ownership of a
security that provides for the payment at maturity, as described
within Options 4, Section 3(l)(i)(1)-(6). See Options 4, Section
3(l)(i).
\5\ The weekly listing program is known as the Short Term
Options Series Program and is described within Supplementary
Material .03 of Options 4, Section 5.
\6\ The Exchange will open at least one expiration month for
each class of options open for trading on the Exchange. See Options
4, Section 5(g). The monthly expirations are subject to certain
listing criteria for underlying securities described within Options
4, Section 3. Monthly listings expire the third Friday of the month.
The term ``expiration date'' when used in respect of a series of
binary options other than event options means the last day on which
the options may be automatically exercised. In the case of a series
of event options (other than credit default options or credit
default basket options) that are be automatically exercised prior to
their expiration date upon receipt by the Corporation of an event
confirmation, the expiration date is the date specified by the
listing Exchange; provided, however, that when an event confirmation
is deemed to have been received by the Corporation with respect to
such series of options, the expiration date will be accelerated to
the date on which such event confirmation is deemed to have been
received by the Corporation or such later date as the Corporation
may specify. In the case of a series of credit default options or
credit default basket options, the expiration date is the fourth
business day after the last trading day for such series as such
trading day is specified by the Exchange on which the series of
options is listed; provided, however, that when an event
confirmation is deemed to have been received by the Corporation with
respect to a series of credit default options or single payout
credit default basket options prior to the last trading day for such
series, the expiration date for options of that series will be
accelerated to the second business day following the day on which
such event confirmation is deemed to have been received by the
Corporation. ``Expiration date'' means, in respect of a series of
range options expiring prior to February 1, 2015, the Saturday
immediately following the third Friday of the expiration month of
such series, and, in respect of a series of range options expiring
on or after February 1, 2015 means the third Friday of the
expiration month of such series, or if such Friday is a day on which
the Exchange on which such series is listed is not open for
business, the preceding day on which such Exchange is open for
business. See The Options Clearing Corporation (``OCC'') By-Laws at
Section 1.
\7\ The quarterly listing program is known as the Quarterly
Options Series Program and is described within Supplementary
Material .04 of Options 4, Section 5.
\8\ Except as otherwise provided in the Supplementary Material
of Options 4, Section 5, the interval between strike prices of
series of options on individual stocks will be: (1) $2.50 or greater
where the strike price is $25.00 or less; (2) $5.00 or greater where
the strike price is greater than $25.00; and (3) $10.00 or greater
where the strike price is greater than $200.00.
The interval between strike prices of series of options on
Exchange-Traded Fund Shares approved for options trading pursuant to
Section 3(i) of this Options 4 shall be fixed at a price per share
which is reasonably close to the price per share at which the
underlying security is traded in the primary market at or about the
same time such series of options is first open for trading on the
Exchange, or at such intervals as may have been established on
another options exchange prior to the initiation of trading on the
Exchange.
Pursuant to Options 4, Section 5(e), notwithstanding any other
provision regarding the interval of strike prices of series of
options on Exchange-Traded Fund Shares in this rule, the interval of
strike prices on SPDR[supreg] S&P 500[supreg] ETF (``SPY''), iShares
Core S&P 500 ETF (``IVV''), PowerShares QQQ Trust (``QQQ''), iShares
Russell 2000 Index Fund (``IWM''), and the SPDR[supreg] Dow
Jones[supreg] Industrial Average ETF (``DIA'') options will be $1 or
greater.
\9\ The $1 Strike Interval Program is described within
Supplementary Material .01 of Options 4, Section 5.
\10\ The $0.50 Strike Interval Program is described within
Supplementary Material .05 of Options 4, Section 5.
\11\ The $2.50 Strike Interval Program is described within
Supplementary Material .02 of Options 4, Section 5.
\12\ The $5.00 Strike Interval Program is described within
Supplementary Material .06 of Options 4, Section 5.
---------------------------------------------------------------------------
The Exchange's proposal seeks to amend the listing of weekly series
of options as proposed within new Supplementary Material .03(f) of
Options 4, Section 5, by limiting the intervals between strikes in
multiply listed equity options, excluding Exchange-Traded Fund Shares
and ETNs, that have an expiration date more than twenty-one days from
the listing date. This proposal does not amend monthly or quarterly
listing rules nor does it amend the $1 Strike Price Interval Program,
the $0.50 Strike Program, the $2.50 Strike Price Program, or the $5
Strike Program.
Short Term Options Series Program
Today, Supplementary Material .03 of Options 4, Section 5 permits
BX to open for trading on any Thursday or Friday that is a business day
(``Short Term Option Opening Date'') series of options on an option
class that expires at the close of business on each of the next five
Fridays that are business days and are not Fridays in which monthly
options series or Quarterly Options Series expire (``Short Term Option
Expiration Dates''), provided an option class has been approved for
listing and trading on the Exchange.\13\ Today, the
[[Page 73115]]
Exchange may open up to thirty initial series for each option class
that participates in the Short Term Option Series Program.\14\ Further,
if the Exchange opens less than thirty (30) Short Term Option Series
for a Short Term Option Expiration Date, additional series may be
opened for trading on the Exchange when the Exchange deems it necessary
to maintain an orderly market, to meet customer demand or when the
market price of the underlying security moves substantially from the
exercise price or prices of the series already opened.\15\
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\13\ The Exchange may have no more than a total of five Short
Term Option Expiration Dates, not including any Monday or Wednesday
SPY Expirations as provided below. If the Exchange is not open for
business on the respective Thursday or Friday, the Short Term Option
Opening Date will be the first business day immediately prior to
that respective Thursday or Friday. Similarly, if the Exchange is
not open for business on a Friday, the Short Term Option Expiration
Date will be the first business day immediately prior to that
Friday. With respect to Wednesday SPY Expirations, the Exchange may
open for trading on any Tuesday or Wednesday that is a business day
series of options on the SPDR S&P 500 ETF Trust (SPY) to expire on
any Wednesday of the month that is a business day and is not a
Wednesday in which Quarterly Options Series expire (``Wednesday SPY
Expirations''). With respect to Monday SPY Expirations, the Exchange
may open for trading on any Friday or Monday that is a business day
series of options on the SPY to expire on any Monday of the month
that is a business day and is not a Monday in which Quarterly
Options Series expire (``Monday SPY Expirations''), provided that
Monday SPY Expirations that are listed on a Friday must be listed at
least one business week and one business day prior to the
expiration. The Exchange may list up to five consecutive Wednesday
SPY Expirations and five consecutive Monday SPY Expirations at one
time; the Exchange may have no more than a total of five Wednesday
SPY Expirations and a total of five Monday SPY Expirations. Monday
and Wednesday SPY Expirations will be subject to the provisions of
this Rule. See Supplementary Material .03 of Options 4, Section 5.
\14\ See Supplementary Material .03 of Options 4, Section 5(c).
\15\ See Supplementary Material .03 of Options 4, Section 5(d).
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The Exchange may open for trading Short Term Option Series on the
Short Term Option Opening Date that expire on the Short Term Option
Expiration Date at strike price intervals of (i) $0.50 or greater where
the strike price is less than $100, and $1 or greater where the strike
price is between $100 and $150 for all option classes that participate
in the Short Term Options Series Program; (ii) $0.50 for option classes
that trade in one dollar increments and are in the Short Term Option
Series Program; or (iii) $2.50 or greater where the strike price is
above $150. During the month prior to expiration of an option class
that is selected for the Short Term Option Series Program (``Short Term
Option''), the strike price intervals for the related non-Short Term
Option (``Related non-Short Term Option'') shall be the same as the
strike price intervals for the Short Term Option.\16\
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\16\ See Options 4, Section 5(e).
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The Exchange may select up to fifty currently listed option classes
on which Short Term Option Series may be opened on any Short Term
Option Opening Date. In addition to the fifty option class restriction,
the Exchange may also list Short Term Option Series on any option
classes that are selected by other securities exchanges that employ a
similar program under their respective rules. For each option class
eligible for participation in the Short Term Option Series Program, the
Exchange may open up to thirty Short Term Option Series for each
expiration date in that class. The Exchange may also open Short Term
Option Series that are opened by other securities exchanges in option
classes selected by such exchanges under their respective short term
option rules.\17\
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\17\ See Supplementary Material .03(a) of Options 4, Section 5.
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BX notes that listings in the weekly program comprise a significant
part of the standard listing in options markets. The below diagrams
demonstrate the percentage of weekly listings as compared to Long-Term
Option Series or LEAPs and quarterly listings in 2015 as compared to
2020. The weekly strikes increased 8.9% compound annual growth rate
(``CAGR'') from 2015 as compared to a 4.3% CAGR for standard
expirations using 3rd 2015 Friday expirations.
[GRAPHIC] [TIFF OMITTED] TN16NO20.022
[[Page 73116]]
[GRAPHIC] [TIFF OMITTED] TN16NO20.023
Proposal
BX proposes to limit the intervals between strikes in options
listed as part of the Short Term Option Series Program that have an
expiration date more than twenty-one days from the listing date, by
adopting proposed Supplementary Material .03(f) of Options 4, Section 5
as well as proposed Supplementary Material .07 of Options 4, Section 5,
with respect to listing Short Term Option Series in equity options,
excluding Exchange-Traded Fund Shares and ETNs) (collectively ``Strike
Interval Proposal''). BX's Strike Interval Proposal would limit the
intervals between strikes by utilizing the table proposed within
Supplementary Material .07 of Options 4, Section 5. With the Strike
Interval Proposal, BX would limit intervals between strikes for
expiration dates of option series beyond twenty-one days utilizing the
below three-tiered table which considers both the share price and
average daily volume for the option series.\18\
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\18\ Additional information comparing the current listing
program to this proposal is available at: https://www.nasdaq.com/solutions/bx-options-strike-proliferation-proposal.
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Share price
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$25 to less $75 to less $150 to less $500 or
Tier Average daily volume Less than $25 than $75 than $150 than $500 greater
--------------------------------------------------------------------------------------------------------------------------------------------------------
1..................................... greater than 5,000.............. $0.50 $1.00 $1.00 $5.00 $5.00
2..................................... 1,000 to 5,000.................. 1.00 1.00 1.00 5.00 10.00
3..................................... 0 to 1,000...................... 2.50 5.00 5.00 5.00 10.00
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The Share Price would be the closing price on the primary market on
the last day of the calendar quarter. This value would be used to
derive the column from which to apply strike intervals throughout the
next calendar quarter. The Average Daily Volume would be the total
number of options contracts traded in a given security for the
applicable calendar quarter divided by the number of trading days in
the applicable calendar quarter. Beginning on the second trading day in
the first month of each calendar quarter, the Average Daily Volume
shall be calculated by utilizing data from the prior calendar quarter
based on Customer-cleared volume at OCC. For options listed on the
first trading day of a given calendar quarter, the Average Daily Volume
shall be calculated using the calendar quarter prior to the last
trading calendar quarter.\19\ In the event of a corporate action, the
Share Price of the surviving company would be utilized. These metrics
are intended to align expectations for determining which strike
intervals will be utilized. Finally, notwithstanding the limitations
imposed by Options 4, Section 5 at proposed Supplementary Material .07,
this Strike Interval Proposal does not amend the range of strikes that
may be listed pursuant to Options 4, Section 5 at Supplementary
Material .03, regarding the Short Term Option Series Program.
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\19\ For example, options listed as of January 4, 2021 would be
calculated on January 5, 2021 using the Average Daily Volume from
July 1, 2020 to September 30, 2020.
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By way of example, if the Share Price for a symbol was $142 at the
end of a calendar quarter, with an Average Daily Volume greater than
5,000, thereby, requiring strike intervals to be listed $1.00 apart,
that strike interval would apply for the calendar quarter, regardless
of whether the Share Price changed to greater than $150 during that
calendar quarter.\20\
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\20\ The Exchange notes that any limits on intervals imposed by
the Exchange's Rules will continue to apply. In this example, the
strikes would be in $1 intervals up to $150, which is the upper
limit imposed by Supplementary Material .03(e) of Options 4, Section
5.
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The proposed table within Supplementary Material .07 of Options 4,
Section 5 takes into account the notional value of a security, as well
as Average Daily Volume in the underlying stock, in order to limit the
intervals between strikes in the Short Term Options listing program.
The Exchange utilizes OCC Customer-cleared volume, as customer volume
is an appropriate proxy for demand. The OCC Customer-cleared volume
represents the majority of options volume executed on the Exchange
that, in turn, reflects the demand in the marketplace. The options
series listed on BX are intended to meet customer demand by offering an
appropriate number of strikes. Non-Customer cleared OCC volume
represents the supply side. The strike intervals for listing strikes in
certain
[[Page 73117]]
options are intended to remove repetitive and unnecessary strike
listings across the weekly expiries. BX's Strike Interval Proposal
seeks to reduce the number of strikes in the furthest weeklies, where
there exist wider markets and therefore lower market quality. Below are
two tables which focus on data for 10 of the most and least actively
traded symbols \21\ and demonstrate average spreads in weekly options
during the month of August 2020.
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\21\ The table represents stock in the following securities:
Apple, Tesla, Microsoft Corporation, Advanced Micro Devices, Inc.,
Bank of America Corp., NRG Energy Inc., Ferrari NV, Community Health
Systems Inc., Navistar International Corp, and Jabil Inc.
[GRAPHIC] [TIFF OMITTED] TN16NO20.024
The proposed table within Supplementary Material .07 of Options 4,
Section 5 is intended to distribute strike intervals in multiply listed
equity options where there is less volume as measured by the Average
Daily Volume tiers. Therefore, the lower the Average Daily Volume, the
greater the proposed spread between strike intervals. Options classes
with higher volume contain the most liquid symbols and strikes,
therefore the finer the proposed spread between strike intervals.
Additionally, lower-priced shares have finer strike intervals than
higher-priced shares when comparing the proposed spread between strike
intervals.\22\
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\22\ The Exchange notes that is has discussed the proposed
strike intervals with various members. The Exchange has gathered
information regarding where trading in weeklies generally occurs to
arrive at the proposed strike intervals.
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Today, weeklies are available on 16% of underlying products. The
Exchange's Strike Interval Proposal curtails the density of strike
intervals listed in series of options, without reducing the classes of
options available for trading on BX. The Exchange's Strike Interval
Proposal would reduce 2% of the total number of strikes that equates to
81,000 strikes.\23\
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\23\ The Exchange notes that this proposal is an initial attempt
at reducing strikes and anticipates filing additional proposals to
continue reducing strikes. The above-referenced data, specifically
the percentage of underlying products and percentage of and total
number of strikes, are approximations and may vary slightly at the
time of this filing.
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[[Page 73118]]
[GRAPHIC] [TIFF OMITTED] TN16NO20.025
[GRAPHIC] [TIFF OMITTED] TN16NO20.026
The above table represents the inconsistency of demand for series
of options beyond twenty-one calendar days.
BX's Strike Interval Proposal focuses on strikes in multiply listed
equity options, and excludes Exchange-Traded Fund Shares and ETNs, as
the majority of strikes reside within equity options.
[[Page 73119]]
[GRAPHIC] [TIFF OMITTED] TN16NO20.027
While the current listing rules permit BX to list a number of
weekly strikes on its market, in an effort to encourage Market Makers
to deploy capital more efficiently, as well as improve displayed market
quality, BX's Strike Interval Proposal reduces the number of listed
weekly options. As BX's Strike Interval Proposal seeks to reduce the
number of weekly options that would be listed on its market in later
weeks, Market Makers would be required to quote in fewer weekly strikes
as a result of the Strike Interval Proposal. Specifically, the Strike
Interval Proposal aims to reduce the density of strike intervals that
would be listed in later weeks, by creating limitations for intervals
between strikes which have an expiration date more than twenty-one days
from the listing date. The table takes into account customer demand for
certain options classes, by considering both the Share Price and the
Average Daily Volume, to arrive at the manner which weekly strike
intervals may be listed. The intervals for listing strikes in equity
options is intended to remove certain strike intervals where there
exist clusters of strikes whose characteristics closely resemble one
another and, therefore, do not serve different trading needs,\24\
rendering these strikes less useful.
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\24\ For example, two strikes that are densely clustered may
have the same risk properties and may also be the same percentage
out-of-the money.
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This Strike Interval Proposal serves to respond to comments
received from industry members with respect to the increasing number of
strikes that are required to be quoted by market makers in the options
industry. BX requires Lead Market Makers and Market Makers to quote a
certain amount of time in the trading day in their assigned options
series to maintain liquidity in the market.\25\ With an increasing
number of strikes being listed across options exchanges, Market Makers
must expend their capital to ensure that they have the appropriate
infrastructure to meet their quoting obligations on all options markets
in which they are assigned in options series. The Exchange believes
that this Strike Interval Proposal would limit the intervals between
strikes, reducing the number of strikes listed on BX, and thereby allow
Lead Market Makers and Market Makers to expend their capital in the
options market in a more efficient manner. Due to this increased
efficiency, the Exchange believes that this Strike Interval Proposal
would improve overall market quality on BX by limiting the intervals
between strikes in multiply listed equity options that have an
expiration date more than twenty-one days, from the listing date.
---------------------------------------------------------------------------
\25\ See Options 2, Sections 4(j) and 5.
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This Strike Interval Proposal is intended to be the first in a
series of proposals to limit the number of listed options series listed
on BX and other Nasdaq affiliated markets. The Exchange intends to
decrease the overall number of strikes listed on Nasdaq exchanges in a
methodical fashion, so that it may monitor progress and feedback from
its membership. While limiting the intervals between listed strikes is
the goal of this rule change, BX's Strike Interval Proposal is intended
to balance that goal with the needs of market participants. BX believes
that various strike intervals continue to offer market participants the
ability to select the appropriate strike interval to meet that market
participant's investment objective.
Implementation
The Exchange intends to begin implementation of the proposed rule
change prior to March 31, 2021. The Exchange will issue an Options
Trader Alert to Participants to provide notification of the
implementation date.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b)
[[Page 73120]]
of the Act,\26\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\27\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest. The Strike Proposal seeks to limit the intervals between
strikes listed in the Short Term Options Series program that have an
expiration date more than twenty-one days. While the current listing
rules permit BX to list a number of weekly strikes on its market, the
Exchange's Strike Interval Proposal removes impediments to and perfects
the mechanism of a free and open market and a national market system by
encouraging Market Makers to deploy capital more efficiently and
improving market quality overall on BX through limiting the intervals
between strikes when applying the strike interval table to multiply
listed equity options that have an expiration date more than twenty-one
days from the listing date. Also, as BX's Strike Interval Proposal
seeks to reduce the number of weekly options that would be listed on
its market in later weeks, Market Makers would be required to quote in
fewer weekly strikes as a result of the Strike Interval Proposal.
Amending BX's listing rules to limit the intervals between strikes for
multiply listed equity options that have an expiration date more than
twenty-one days causes less disruption in the market as the majority of
the volume traded in weekly options exists in options series which have
an expiration date of twenty-one days or less. The Exchange's Strike
Interval Proposal curtails the number of strike intervals listed in
series of options without reducing the number of classes of options
available for trading on BX.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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The Strike Interval Proposal takes into account customer demand for
certain options classes by considering both the Share Price and the
Average Daily Volume in the underlying security to arrive at the manner
in which weekly strike intervals would be listed in the later weeks for
each multiply listed equity options class. The Exchange utilizes OCC
Customer-cleared volume, as customer volume is an appropriate proxy for
demand. The OCC Customer-cleared volume represents the majority of
options volume executed on the Exchange that, in turn, reflects the
demands in the marketplace. The options series listed on BX is intended
to meet customer demand by offering an appropriate number of strikes.
Non-Customer cleared OCC volume represents the supply side.
The Strike Interval Proposal for listing strikes in certain
multiply listed equity options is intended to remove certain strikes
where there exist clusters of strikes whose characteristics closely
resemble one another and, therefore, do not serve different trading
needs that renders the strikes less useful and thereby protects
investors and the general public by removing an abundance of
unnecessary choices for an options series, while also improving market
quality. BX's Strike Interval Proposal seeks to reduce the number of
strikes in the furthest weeklies, where there exist wider markets, and,
therefore, lower market quality. The implementation of the proposed
table is intended to spread strike intervals in multiply listed equity
options, where there is less volume that is measured by the average
daily volume tiers. Therefore, the lower the average daily volume, the
greater the proposed spread between strike intervals. Options classes
with higher volume contain the most liquid symbols and strikes,
therefore the finer the proposed spread between strike intervals.
Additionally, lower-priced shares have finer strike intervals than
higher-priced shares when comparing the proposed spread between strike
intervals.\28\
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\28\ The Exchange notes that is has discussed the proposed
strike intervals with various members. The Exchange has gathered
information regarding where trading in weeklies generally occurs to
arrive at the proposed strike intervals.
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Beginning on the second trading day in the first month of each
calendar quarter, the Average Daily Volume shall be calculated by
utilizing data from the prior calendar quarter based on OCC Customer-
cleared volume. Utilizing the second trading day allows the Exchange to
accumulate data regarding OCC Customer-cleared volume from the entire
prior quarter. Beginning on the second trading day would allow trades
executed on the last day of the previous calendar quarter to have
settled \29\ and be accounted for in the calculation of Average Daily
Volume. Utilizing the previous three months is appropriate because this
time period would help reduce the impact of unusual trading activity as
a result of unique market events, such as a corporate action (i.e., it
would result in a more reliable measure of average daily trading volume
than would a shorter period).
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\29\ Options contracts settle one business day after trade date.
Strike listing determinations are made the day prior to the start of
trading in each series.
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This Strike Interval Proposal serves to respond to comments
received from industry members with respect to the increasing number of
strikes that are required to be quoted by market makers in the options
industry. Today, BX requires Lead Market Makers and Market Makers to
quote a certain amount of time in the trading day in their assigned due
options series to maintain liquidity in the market.\30\ With an
increasing number of strikes due to tighter intervals being listed
across options exchanges, Market Makers must expend their capital to
ensure that they have the appropriate infrastructure to meet their
quoting obligations on all options markets in which they are assigned
in options series. The Exchange believes that this Strike Interval
Proposal would limit the intervals between strikes listed on BX and
thereby allow Lead Market Makers and Market Makers to expend their
capital in the options market in a more efficient manner that removes
impediments to and perfect the mechanism of a free and open market and
a national market system. The Exchange also believes that this Strike
Interval Proposal would improve overall market quality on BX for the
protection of investors and the general public by limiting the
intervals between strikes when applying the strike interval table to
multiply listed equity options which have an expiration date more than
twenty-one days from the listing date.
---------------------------------------------------------------------------
\30\ See Options 2, Sections 4(j) and 5.
---------------------------------------------------------------------------
This Strike Interval Proposal is intended to be the first in a
series of proposals to limit the number of listed options series listed
on BX and other Nasdaq affiliated markets. The Exchange intends to
decrease the overall number of strikes listed on Nasdaq exchanges in a
methodical fashion in order that it may monitor progress and feedback
from its membership. While limiting the intervals between strikes
listed is the goal of this rule change, BX's Strike Interval Proposal
is intended to balance that goal with the needs of market participants.
The Exchange believes that varied strike intervals continue to offer
market participants the ability to select the appropriate strike
interval to meet that market participant's investment objective.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Strike Interval Proposal
limits the number of Short Term Options Series strike intervals
available for quoting and
[[Page 73121]]
trading on BX for all BX Participants. While the current listing rules
permit BX to list a number of weekly strikes on its market, in an
effort to encourage Market Makers to deploy capital more efficiently,
as well as improve displayed market quality, BX's Strike Interval
Proposal seeks to reduce the number of weekly options that would be
listed on its market in later weeks, without reducing the number of
series or classes of options available for trading on BX. As BX's
Strike Interval Proposal seeks to reduce the number of weekly options
that would be listed on its market in later weeks, Market Makers would
be required to quote in fewer weekly strikes as a result of the Strike
Interval Proposal.
The Exchange's Strike Interval Proposal, which is intended to
decrease the overall number of strikes listed on BX, does not impose an
undue burden on intra-market competition as all Participants may only
transact options in the strike intervals listed for trading on BX.
While limiting the intervals of strikes listed on BX is the goal of
this Strike Interval Proposal, the goal continues to balance the needs
of market participants by continuing to offer a number of strikes to
meet a market participant's investment objective.
The Exchange's Strike Interval Proposal does not impose an undue
burden on inter-market competition as this Strike Interval Proposal
does not impact the listings available at another self-regulatory
organization. In fact, BX is proposing to list a smaller amount of
weekly equity options in an effort to curtail the increasing number of
strikes that are required to be quoted by market makers in the options
industry. Other options markets may choose to replicate the Exchange's
Strike Interval Proposal and, thereby, further decrease the overall
number of strikes within the options industry.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2020-032 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-BX-2020-032. 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
20549-1090 on official business days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-BX-2020-032, and should be
submitted on or before December 7, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25179 Filed 11-13-20; 8:45 am]
BILLING CODE 8011-01-P
