Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx Rules at Options 8, Section 34, FLEX Index, Equity, and Currency Options, To Extend the Maximum Expiration Term for FLEX Index and Equity Options, 47339-47343 [2021-18117]

Download as PDF Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices Date: August 18, 2021; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Kenneth R. Moeller; Comments Due: August 26, 2021. 3. Docket No(s).: MC2021–128 and CP2021–133; Filing Title: USPS Request to Add First-Class Package Service Contract 116 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: August 18, 2021; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Kenneth R. Moeller; Comments Due: August 26, 2021. This Notice will be published in the Federal Register. Erica A. Barker, Secretary. [FR Doc. 2021–18204 Filed 8–23–21; 8:45 am] BILLING CODE 7710–FW–P POSTAL SERVICE International Product Change—Priority Mail Express International, Priority Mail International, First-Class Package International Service & Commercial ePacket Agreement: Postal ServiceTM. ACTION: Notice. The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a Priority Mail Express International, Priority Mail International, First-Class Package International Service & Commercial ePacket contract to the list of Negotiated Service Agreements in the Competitive Product List in the Mail Classification Schedule. SUMMARY: DATES: Date of notice: August 24, 2021. FOR FURTHER INFORMATION CONTACT: Christopher C. Meyerson, (202) 268– 7820. The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on August 18, 2021, it filed with the Postal Regulatory Commission a USPS Request to Add Priority Mail Express International, Priority Mail International, First-Class Package International Service & Commercial ePacket Contract 10 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2021–127 and CP2021–132. lotter on DSK11XQN23PROD with NOTICES1 SUPPLEMENTARY INFORMATION: Joshua J. Hofer, Attorney, Ethics & Legal Compliance. [FR Doc. 2021–18171 Filed 8–23–21; 8:45 am] BILLING CODE 7710–12–P VerDate Sep<11>2014 16:43 Aug 23, 2021 Jkt 253001 47339 SECURITIES AND EXCHANGE COMMISSION Dated: August 18, 2021. Jill M. Peterson, Assistant Secretary. [SEC File No. 270–205; OMB Control No. 3235–0194] [FR Doc. 2021–18106 Filed 8–23–21; 8:45 am] Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Extension: Rule 24b–1 Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Rule 24b–1 (17 CFR 240.24b–1) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). Rule 24b–1 requires a national securities exchange to keep and make available for public inspection a copy of its registration statement and exhibits filed with the Commission, along with any amendments thereto. There are 24 national securities exchanges that spend approximately one-half hour each per year complying with this rule, for an aggregate total time burden of approximately 12 hours per year. The staff estimates that the average cost per respondent is approximately $65.18 per year ($13.97 for copying plus $51.21 for storage), resulting in a total cost burden for all respondents of approximately $1,564.32 per year. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following website: www.reginfo.gov. Find this particular information collection by selecting ‘‘Currently under 30-day Review—Open for Public Comments’’ or by using the search function. Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to (i) www.reginfo.gov/public/do/ PRAMain and (ii) David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/ o Cynthia Roscoe, 100 F Street NE, Washington, DC 20549, or by sending an email to: PRA_Mailbox@sec.gov. PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92699; File No. SR–Phlx– 2021–45] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Phlx Rules at Options 8, Section 34, FLEX Index, Equity, and Currency Options, To Extend the Maximum Expiration Term for FLEX Index and Equity Options August 18, 2021. 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 August 13, 2021, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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 Phlx Rules at Options 8, Section 34, ‘‘FLEX Index, Equity and Currency Options,’’ to extend the expiration term for FLEX index and equity options to a maximum expiration term of 15 years. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/phlx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set 1 15 2 17 E:\FR\FM\24AUN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 24AUN1 47340 Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices 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 Phlx Rules at Options 8, Section 34, ‘‘FLEX Index, Equity, and Currency Options.’’ Today, Phlx permits members and member organizations to transact FLEX options on its Trading Floor. FLEX options provide investors with the ability to customize basic option features including expiration date, exercise style, and certain exercise prices. FLEX options may be FLEX index, equity, or currency options. The Exchange proposes to amend the expiration term for FLEX index and equity options to remain competitive with other options exchanges as described below in greater detail. Currently, the expiration date for a FLEX index option is any month, business day and year within 5 years. The expiration date for FLEX equity and currency options is any month, business day and year within 3 years.3 Further, with respect to FLEX equity options, a member or member organization may request a longer term up to a maximum of five years, and upon the assessment of the Regulatory staff that sufficient liquidity exists among FLEX equity participants, such a request may be granted. Regulatory staff are Exchange employees responsible for, among other things, assessing that sufficient liquidity exists among FLEX equity participants requesting a term exceeding three years to a maximum of five years.4 The Exchange proposes to increase the maximum term for FLEX index and equity options to 15 years similar to Cboe Exchange, Inc. (‘‘Cboe’’), NYSE Arca, Inc. (‘‘NYSE Arca’’), and NYSE American LLC (‘‘NYSE American’’). Today, Cboe, NYSE Arca, and NYSE American permit a maximum term of fifteen years for FLEX equity and index options.5 With this amendment, the Exchange would eliminate the requirement applicable to equity 3 See Options 8, Section 34(b)(6)(A). Exchange may also designate other qualified Exchange employees to assist the Regulatory staff as the need arises. See Options 8, Section 34(b)(6)(B). 5 See Cboe Rule 4.21(b)(4). See Securities Exchange Act Release No. 58890 (October 30, 2008), 73 FR 66085 (November 6, 2008) (SR–CBOE–2008– 98) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Increase the Maximum Term for FLEX Options). See also NYSE Arca 5.32– O and NYSE American Rule 903G. lotter on DSK11XQN23PROD with NOTICES1 4 The VerDate Sep<11>2014 16:43 Aug 23, 2021 Jkt 253001 options that Regulatory staff make a liquidity assessment. The expiration date for FLEX currency options will remain within 3 years. The amendment is proposed for the below reasons. First, the proposal is intended to simplify the process and permit Phlx members and member organizations to transact FLEX index and equity options with the same expiration terms as Cboe, NYSE Arca, and NYSE American members. This amendment would permit all FLEX equity and index options to have the same maximum 15 year term as other options markets that offer FLEX.6 Second, expanding the maximum expiration terms to 15 years uniformly for FLEX index and equity options will permit transactions which currently trade over-the-counter (‘‘OTC’’) to be conducted within an exchange environment. Phlx believes that expanding the eligible term for FLEX equity and index options, as proposed, is important and necessary to the Exchange’s efforts to create products and markets that provide members, member organizations, and investors interested in FLEX-type options with an improved but comparable alternative to the OTC market in customized options, which can take on contract characteristics similar to FLEX options, but are not subject to the same maximum term restriction. By expanding the eligible term for FLEX index and equity options, market participants will now have greater flexibility in determining whether to execute their customized options in an exchange environment or in the OTC market, similar to Cboe, NYSE Arca, and NYSE American. The Exchange believes market participants benefit from being able to trade these customized options in an exchange environment in several ways, including, but not limited to the following: (1) Enhanced efficiency in initiating and closing out positions; (2) increased market transparency; and (3) heightened contra-party creditworthiness due to the role of The Options Clearing Corporation (‘‘OCC’’) as issuer and guarantor of FLEX options. Third, the Exchange believes that the proposed rule change will allow investors to use longer expiration FLEX equity and index options to hedge longer-term issuances of structured products linked to returns of an individual stock. Specifically, the proposal will allow institutions to use longer-term FLEX index options to protect portfolios from long-term market moves with a known and limited cost. 6 See Cboe’s Rule 4.21(b)(4), NYSE Arca 5.32–O and NYSE American Rule 903G. PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 The proposal will better serve the longterm hedging needs of institutional investors and provide those investors with an alternative to hedging their portfolios with off-exchange customized options and warrants. Fourth, the Exchange proposes to eliminate rule text that describes Regulatory staff’s discretionary authority to extend the maximum term of FLEX options that expire within three years pursuant to Options 8, Section 34(b)(6)(B) after having performed a liquidity assessment, and also renumber current Options 8, Section 34(b)(6)(C) to new ‘‘B’’ because the process by which FLEX options are transacted already requires floor members to seek liquidity in open outcry. Today, FLEX options transactions are exposed in open outcry on the Trading Floor similar to other options. Specifically, today, a Requesting Member 7 initiates a Request-For-Quote (‘‘RFQ’’) 8 by announcing certain contracts terms 9 in open outcry and submitting an RFQ ticket, which includes the open outcry BBO as identified in accordance with the price and time priority principles set forth by the Exchange, to the Market Operations post on the Trading Floor. On receipt of an RFQ in proper form, Market Operations disseminates the terms of the RFQ along with the open outcry BBO as an administrative message through the Options Price Reporting Authority (‘‘OPRA’’).10 At the expiration of the Request Response Time, the Requesting Member may reenter the trading crowd and proceed with announcing his FLEX order and negotiating the terms of the execution in open outcry. Once the FLEX order is executed in open outcry, the FLEX trade is disseminated to OPRA by the Exchange.11 Requesting Members may 7 A Requesting Member is a member of the Exchange qualified to trade FLEX options pursuant to Options 3, Section 34(d) who initiates an RFQ for a FLEX option. See Options 3, Section 34(b)(11). 8 The term ‘‘Request for Quotes’’ means the initial request supplied by a Requesting Member to initiate FLEX bidding and offering. See Options 3, Section 34(b)(10). 9 A Request Member must announce: (1) Underlying index, security or foreign currency; (2) type, size, and crossing intention; (3) in the case of FLEX index options and FLEX equity options, exercise style; (4) expiration date; (5) exercise price; and (6) respecting index options, the settlement value. See Options 8, Section 34(c)(1). See Options 3, Section 34(c)(1). 10 FLEX Quotes must be entered during the Request Response Time of 15 seconds. All FLEX Quotes may be entered, modified or withdrawn at any point during the request response time. See Options 8, Section 34(c)(2). 11 If the Requesting Member has not indicated an intention to cross or act as principal with respect to any part of the FLEX trade, the member shall promptly accept or reject the displayed BBO: Provided, however, that if such a Requesting E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices lotter on DSK11XQN23PROD with NOTICES1 indicate an intention to cross,12 permitting participation with all other FLEX-participating members in attempting to improve or match the BBO during the BBO Improvement Interval.13 At expiration of the BBO Improvement Interval, the Requesting Member must promptly accept or reject the BBO(s); the Requesting Member has no obligation to accept any FLEX bid or offer.14 RFQs, responsive quotes and completed trades are promptly reported to OPRA and disseminated as an administrative message by the Exchange. As the foregoing process demonstrates, Phlx seeks to maintain a competitive Trading Floor through the administration of its rules which contain processes to ensure that options transactions are exposed in such a way as to permit other floor members an opportunity to participate in price discovery by requiring floor members to seek liquidity in open outcry. For example, the Options 8 rules require one Floor Market Maker to be present in the trading crowd prior to representing an order for execution as a means to expose orders to potential liquidity. As such, separate liquidity assessments by Regulatory staff are not needed. Fifth, similar to Cboe, the proposed rule change incorporates the concept Member either rejects the BBO or is given a BBO for less than the entire size requested, all FLEX participating members other than the Requesting Member will have an opportunity during the BBO Improvement Interval in which to match, or improve, (as applicable), the BBO. At the expiration of any such BBO Improvement Interval, the Requesting Member must promptly accept or reject the BBO(s). See Options 8, Section 34(c)(3). 12 If the Requesting Member has indicated an intention to cross or act as principal with respect to any part of the FLEX trade, acceptance of the displayed BBO shall be automatically delayed until the expiration of the BBO Improvement Interval. Prior to the BBO Improvement Interval, the Requesting Member must indicate at the post the price at which the member expects to trade. In the case of FLEX equity options only whenever the Requesting Member has indicated an intention to cross or act as principal on the trade and has matched or improved the BBO during the BBO Improvement Interval, the Requesting Member will be permitted to execute the contra side of the trade that is the subject of the RFQs, to the extent of at least 40% of the trade, provided the order is a Public Customer order or an order respecting the Requesting Member’s firm proprietary account. Notwithstanding the foregoing, all market participants may effect crossing transactions. See Options 8, Section 34(c)(5). 13 The BBO Improvement Interval means the minimum period of time, to be established by the Exchange, during which members may submit FLEX Quotes to meet or improve the BBO established during the Request Response Time. See Options 8, Section 34(b)(15). 14 Whenever, following the completion of FLEX bidding and offering responsive to a given RFQs, the Requesting Member rejects the BBO or the BBO size exceeds the FLEX transaction size indicated in the RFQs, members may accept the entire order or the unfilled balance of the BBO. See Options 8, Section 34(c)(3). VerDate Sep<11>2014 16:43 Aug 23, 2021 Jkt 253001 that the expiration date is the date on which an executed FLEX option is submitted to the System, which, on Phlx, is the date the FLEX option is reported to OPRA and disseminated as an administrative message through the System 15 by Market Operations staff. A FLEX option series is available for trading only when exposed in open outcry and, after completion of the RFQ process, thereafter, Exchange staff manually submits the executed FLEX option to the System through which it is promptly reported to OPRA and disseminated as an administrative message. For purposes of the definition of the System pursuant to Phlx Rules, the date of submission to the Phlx System is the date on which the executed FLEX option is reported to OPRA. Technical Amendments The Exchange proposes to amend the rule text utilized to describe the maximum expiration for a FLEX currency option to conform that language to the terminology proposed herein to describe maximum expirations for FLEX index and equity options. The Exchange would delete the rule text which states, ‘‘within three years for FLEX currency options,’’ and replace that rule text with the phrase ‘‘no more than 3 years from the date on which a FLEX currency option is submitted to the System.’’ The Exchange is not amending the term for FLEX currency options. The Exchange also proposes to add a ‘‘,’’ after the word ‘‘Equity’’ in the title of Options 8, Section 34 and amend the term ‘‘FLEX Order’’ within Options 8, Section 34(b)(6)(B) to ‘‘FLEX option order’’ to conform the usage of the term throughout Options 8, Section 34. The Exchange proposes to remove ‘‘; or’’ within Options 8, Section 34(b)(6)(A). Finally, the Exchange proposes two amendments within Options 8, Section 34(c) to update the name of the post and identify the message sent by the 15 The term ‘‘System’’ shall mean the automated system for order execution and trade reporting owned and operated by the Exchange which comprises: (i) An order execution service that enables members to automatically execute transactions in option series; and provides members with sufficient monitoring and updating capability to participate in an automated execution environment; (ii) a trade reporting service that submits ‘‘locked-in’’ trades for clearing to a registered clearing agency for clearance and settlement; transmits last-sale reports of transactions automatically to the Options Price Reporting Authority (‘‘OPRA’’) for dissemination to the public and industry; and provides participants with monitoring and risk management capabilities to facilitate participation in a ‘‘locked-in’’ trading environment; and (iii) the data feeds described at Options 3, Section 23. See Options 1, Section 1(b)(57). PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 47341 Exchange. To that end, the term ‘‘FLEX post’’ is proposed to be changed to ‘‘Market Operations post’’ and the phrase ‘‘administrative text message’’ is proposed to be change to ‘‘administrative message.’’ These proposed changes will update the rule to the current terminology. These proposed amendments do not represent substantive changes to the current FLEX option process, rather these changes are merely wording changes which continue to reflect the current process without substantive change. Implementation The Exchange intends to begin implementation of the proposed rule change no earlier than September 13, 2021 and no later than September 30, 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) of the Act,16 in general, and furthers the objectives of Section 6(b)(5) of the Act,17 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. This proposal is intended to simplify the process and permit Phlx members and member organizations to transact FLEX index and equity options with the same expiration terms as Cboe, NYSE Arca, and NYSE American members. This amendment would permit all FLEX equity and index options to have the same maximum 15 year term as other options markets that offer FLEX.18 For the reasons Phlx has articulated below, the Exchange believes this proposal is consistent with the Act. Expanding the maximum expiration terms to 15 years uniformly for FLEX index and equity options is consistent with the Act as it will permit transactions which currently trade OTC to be conducted within an exchange environment. Phlx believes that expanding the eligible term for FLEX equity and index options, as proposed, is important and necessary to the Exchange’s efforts to create products and markets that provide members, member organizations, and investors interested in FLEX-type options with an 16 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 18 See Cboe’s Rule 4.21(b)(4), NYSE Arca 5.32–O and NYSE American Rule 903G. 17 15 E:\FR\FM\24AUN1.SGM 24AUN1 lotter on DSK11XQN23PROD with NOTICES1 47342 Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices improved but comparable alternative to the OTC market in customized options, which can take on contract characteristics similar to FLEX options, but are not subject to the same maximum term restriction. By expanding the eligible term for FLEX index and equity options, market participants will now have greater flexibility in determining whether to execute their customized options in an exchange environment or in the OTC market, similar to Cboe, NYSE Arca, and NYSE American. Specifically, Market participants benefit from being able to trade these customized options in an exchange environment in several ways, including, but not limited to the following: (1) Enhanced efficiency in initiating and closing out positions; (2) increased market transparency; and (3) heightened contra-party creditworthiness due to the role of OCC as issuer and guarantor of FLEX options. The proposal will allow investors to use longer expiration FLEX equity and index options to hedge longer-term issuances of structured products linked to returns of an individual stock. Specifically, the proposal is consistent with the Act because it will allow institutions to use longer-term FLEX index options to protect portfolios from long-term market moves with a known and limited cost, thereby better serving the long-term hedging needs of institutional investors and provide those investors with an alternative to hedging their portfolios with off-exchange customized options and warrants. The Exchange’s proposal to eliminate rule text that describes Regulatory staff’s discretionary authority to extend the maximum term of FLEX options that expire within three years pursuant to Options 8, Section 34(b)(6)(B) after having performed a liquidity assessment and also renumber current Options 8, Section 34(b)(6)(C) to new ‘‘B’’ is consistent with the Act because the process by which the FLEX options are transacted already require floor members to seek liquidity in open outcry. The Exchange details its process above for seeking liquidity in open outcry when transacting FLEX options today on the Trading Floor. As the above-referenced process demonstrates, Phlx seeks to maintain a competitive Trading Floor through the administration of its rules which contain processes to ensure that options transactions are exposed in such a way as to permit other floor members an opportunity to participate in price discovery by requiring floor members to seek liquidity in open outcry. For example, the Options 8 rules require one Floor Market Maker to be present in VerDate Sep<11>2014 16:43 Aug 23, 2021 Jkt 253001 the trading crowd prior to representing an order for execution as a means to expose orders to potential liquidity. As such, separate liquidity assessments by Regulatory staff are not needed. Similar to Cboe, the proposed rule change incorporates the concept that the expiration date is the date on which an executed FLEX option is submitted to the System, which, on Phlx, is the date the FLEX option is reported to OPRA and disseminated as an administrative message through the System by Market Operations staff. A FLEX option series is available for trading only when exposed in open outcry and, after completion of the RFQ process, thereafter, Exchange staff manually submits the executed FLEX option to the System through which it is promptly reported to OPRA and disseminated as an administrative message. For purposes of the definition of the System pursuant to Phlx Rules, the date of submission to the Phlx System is the date on which the executed FLEX option is reported to OPRA. Technical Amendments The Exchange’s proposal to amend the rule text utilized to describe the maximum expiration for a FLEX currency option is consistent with the Act because it conforms that language to the terminology proposed herein to describe maximum expirations for FLEX index and equity options. The proposal to delete the rule text which states, ‘‘within three years for FLEX currency options,’’ and replace that rule text with the phrase ‘‘no more than 3 years from the date on which a FLEX currency option is submitted to the System’’ is non-substantive. The Exchange’s proposals to add a ‘‘,’’ after the word ‘‘Equity’’ in the title of Options 8, Section 34, amend the term ‘‘FLEX Order’’ within Options 8, Section 34(b)(6)(B) to ‘‘FLEX option order,’’ and remove ‘‘; or’’ within Options 8, Section 34(b)(6)(A) are nonsubstantive rule changes. Finally, the proposals to update the name of the post and identify the message sent by the Exchange are also non-substantive rule changes. These proposed amendments do not represent substantive changes to the current FLEX option process, rather these changes are merely wording changes which continue to reflect the current process without substantive change. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 of the purposes of the Act. All floor participants are able to transact FLEX options. As noted herein, this amendment will provide Phlx with a comparable alternative to the OTC market in customized options. Finally, Cboe, NYSE Arca, and NYSE American permit expirations of up to 15 years for FLEX index and equity options.19 Technical Amendments The Exchange’s proposal to amend the rule text utilized to describe the maximum expiration for a FLEX currency option does not impose an undue burden on competition because it conforms that language to the terminology proposed herein to describe maximum expirations for FLEX index and equity options. The proposal to delete the rule text which states, ‘‘within three years for FLEX currency options,’’ and replace that rule text with the phrase ‘‘no more than 3 years from the date on which a FLEX currency option is submitted to the System’’ is non-substantive. The Exchange’s proposals to add a ‘‘,’’ after the word ‘‘Equity’’ in the title of Options 8, Section 34, amend the term ‘‘FLEX Order’’ within Options 8, Section 34(b)(6)(B) to ‘‘FLEX option order,’’ and remove ‘‘; or’’ within Options 8, Section 34(b)(6)(A) are nonsubstantive rule changes. Finally, the proposals to update the name of the post and identify the message sent by the Exchange are also non-substantive rule changes. These proposed amendments do not represent substantive changes to the current FLEX option process, rather these changes are merely wording changes which continue to reflect the current process without substantive change. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19 See Cboe’s Rule 4.21(b)(4), NYSE Arca 5.32–O and NYSE American Rule 903G. E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 86, No. 161 / Tuesday, August 24, 2021 / Notices 19(b)(3)(A)(iii) of the Act 20 and subparagraph (f)(6) of Rule 19b–4 thereunder.21 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Jill M. Peterson, Assistant Secretary. Electronic Comments [FR Doc. 2021–18117 Filed 8–23–21; 8:45 am] • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– Phlx–2021–45 on the subject line. BILLING CODE 8011–01–P Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2021–45. 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 lotter on DSK11XQN23PROD with NOTICES1 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–Phlx–2021–45 and should be submitted on or before September 14, 2021. 20 15 U.S.C. 78s(b)(3)(A)(iii). 21 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. VerDate Sep<11>2014 16:43 Aug 23, 2021 Jkt 253001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92697; File No. SR– NASDAQ–2021–063] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 3, Section 17 (Kill Switch) August 18, 2021. 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 August 9, 2021, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to decommission the Exchange’s quote removal Kill Switch functionality at Options 3, Section 17. 22 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 PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 47343 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 3, Section 17 to decommission the Exchange’s quote removal Kill Switch functionality, which is an optional tool that allows Market Makers to initiate a message (or messages) 4 to the System 5 to promptly remove their quotes from the market. Market Makers may submit a request to the System to remove quotes based on certain identifier(s) on either a user or group level (‘‘Identifier’’).6 If quotes are cancelled by the Market Maker using Kill Switch, it will result in the removal of all quotes requested for the Identifier(s). The Market Maker will be unable to enter any additional quotes for the affected Identifier(s) until the Market Maker sends a re-entry request to the Exchange.7 Due to the lack of demand for the quote removal Kill Switch by Market Makers, the Exchange proposes to decommission this optional tool by the end of Q4 2021.8 The Exchange will provide market participants with prior notice of the decommission. With the 4 Today, Market Makers can log into an interface to send a message to the Exchange to initiate the Kill Switch. 5 The term ‘‘System’’ means the automated system for order execution and trade reporting owned and operated by The Nasdaq Options Market LLC (‘‘NOM’’). See Options 1, Section 1(a)(59). 6 Identifiers include Exchange accounts, ports, and/or badges or mnemonics. Thus, a Market Maker using Kill Switch may elect to remove quotes for an individual Identifier (e.g., badge) or any group of Identifiers (e.g., all badges within one Market Maker firm). Permissible groups must reside within a single member firm. 7 See Options 3, Section 17. The Kill Switch tool also currently allows NOM Participants to cancel open orders and prevent new order submission. The Exchange is not proposing to decommission the order cancellation portion of the Kill Switch tool at this time. 8 No Market Makers have used the Kill Switch for quote removal in 2021. E:\FR\FM\24AUN1.SGM 24AUN1

Agencies

[Federal Register Volume 86, Number 161 (Tuesday, August 24, 2021)]
[Notices]
[Pages 47339-47343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18117]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92699; File No. SR-Phlx-2021-45]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Phlx Rules 
at Options 8, Section 34, FLEX Index, Equity, and Currency Options, To 
Extend the Maximum Expiration Term for FLEX Index and Equity Options

August 18, 2021.
    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 August 13, 2021, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``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 Phlx Rules at Options 8, Section 34, 
``FLEX Index, Equity and Currency Options,'' to extend the expiration 
term for FLEX index and equity options to a maximum expiration term of 
15 years.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set

[[Page 47340]]

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 Phlx Rules at Options 8, Section 34, 
``FLEX Index, Equity, and Currency Options.'' Today, Phlx permits 
members and member organizations to transact FLEX options on its 
Trading Floor. FLEX options provide investors with the ability to 
customize basic option features including expiration date, exercise 
style, and certain exercise prices. FLEX options may be FLEX index, 
equity, or currency options. The Exchange proposes to amend the 
expiration term for FLEX index and equity options to remain competitive 
with other options exchanges as described below in greater detail.
    Currently, the expiration date for a FLEX index option is any 
month, business day and year within 5 years. The expiration date for 
FLEX equity and currency options is any month, business day and year 
within 3 years.\3\ Further, with respect to FLEX equity options, a 
member or member organization may request a longer term up to a maximum 
of five years, and upon the assessment of the Regulatory staff that 
sufficient liquidity exists among FLEX equity participants, such a 
request may be granted. Regulatory staff are Exchange employees 
responsible for, among other things, assessing that sufficient 
liquidity exists among FLEX equity participants requesting a term 
exceeding three years to a maximum of five years.\4\
---------------------------------------------------------------------------

    \3\ See Options 8, Section 34(b)(6)(A).
    \4\ The Exchange may also designate other qualified Exchange 
employees to assist the Regulatory staff as the need arises. See 
Options 8, Section 34(b)(6)(B).
---------------------------------------------------------------------------

    The Exchange proposes to increase the maximum term for FLEX index 
and equity options to 15 years similar to Cboe Exchange, Inc. 
(``Cboe''), NYSE Arca, Inc. (``NYSE Arca''), and NYSE American LLC 
(``NYSE American''). Today, Cboe, NYSE Arca, and NYSE American permit a 
maximum term of fifteen years for FLEX equity and index options.\5\ 
With this amendment, the Exchange would eliminate the requirement 
applicable to equity options that Regulatory staff make a liquidity 
assessment. The expiration date for FLEX currency options will remain 
within 3 years. The amendment is proposed for the below reasons.
---------------------------------------------------------------------------

    \5\ See Cboe Rule 4.21(b)(4). See Securities Exchange Act 
Release No. 58890 (October 30, 2008), 73 FR 66085 (November 6, 2008) 
(SR-CBOE-2008-98) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Increase the Maximum Term for FLEX Options). 
See also NYSE Arca 5.32-O and NYSE American Rule 903G.
---------------------------------------------------------------------------

    First, the proposal is intended to simplify the process and permit 
Phlx members and member organizations to transact FLEX index and equity 
options with the same expiration terms as Cboe, NYSE Arca, and NYSE 
American members. This amendment would permit all FLEX equity and index 
options to have the same maximum 15 year term as other options markets 
that offer FLEX.\6\
---------------------------------------------------------------------------

    \6\ See Cboe's Rule 4.21(b)(4), NYSE Arca 5.32-O and NYSE 
American Rule 903G.
---------------------------------------------------------------------------

    Second, expanding the maximum expiration terms to 15 years 
uniformly for FLEX index and equity options will permit transactions 
which currently trade over-the-counter (``OTC'') to be conducted within 
an exchange environment. Phlx believes that expanding the eligible term 
for FLEX equity and index options, as proposed, is important and 
necessary to the Exchange's efforts to create products and markets that 
provide members, member organizations, and investors interested in 
FLEX-type options with an improved but comparable alternative to the 
OTC market in customized options, which can take on contract 
characteristics similar to FLEX options, but are not subject to the 
same maximum term restriction. By expanding the eligible term for FLEX 
index and equity options, market participants will now have greater 
flexibility in determining whether to execute their customized options 
in an exchange environment or in the OTC market, similar to Cboe, NYSE 
Arca, and NYSE American. The Exchange believes market participants 
benefit from being able to trade these customized options in an 
exchange environment in several ways, including, but not limited to the 
following: (1) Enhanced efficiency in initiating and closing out 
positions; (2) increased market transparency; and (3) heightened 
contra-party creditworthiness due to the role of The Options Clearing 
Corporation (``OCC'') as issuer and guarantor of FLEX options.
    Third, the Exchange believes that the proposed rule change will 
allow investors to use longer expiration FLEX equity and index options 
to hedge longer-term issuances of structured products linked to returns 
of an individual stock. Specifically, the proposal will allow 
institutions to use longer-term FLEX index options to protect 
portfolios from long-term market moves with a known and limited cost. 
The proposal will better serve the long-term hedging needs of 
institutional investors and provide those investors with an alternative 
to hedging their portfolios with off-exchange customized options and 
warrants.
    Fourth, the Exchange proposes to eliminate rule text that describes 
Regulatory staff's discretionary authority to extend the maximum term 
of FLEX options that expire within three years pursuant to Options 8, 
Section 34(b)(6)(B) after having performed a liquidity assessment, and 
also renumber current Options 8, Section 34(b)(6)(C) to new ``B'' 
because the process by which FLEX options are transacted already 
requires floor members to seek liquidity in open outcry. Today, FLEX 
options transactions are exposed in open outcry on the Trading Floor 
similar to other options. Specifically, today, a Requesting Member \7\ 
initiates a Request-For-Quote (``RFQ'') \8\ by announcing certain 
contracts terms \9\ in open outcry and submitting an RFQ ticket, which 
includes the open outcry BBO as identified in accordance with the price 
and time priority principles set forth by the Exchange, to the Market 
Operations post on the Trading Floor. On receipt of an RFQ in proper 
form, Market Operations disseminates the terms of the RFQ along with 
the open outcry BBO as an administrative message through the Options 
Price Reporting Authority (``OPRA'').\10\ At the expiration of the 
Request Response Time, the Requesting Member may re-enter the trading 
crowd and proceed with announcing his FLEX order and negotiating the 
terms of the execution in open outcry. Once the FLEX order is executed 
in open outcry, the FLEX trade is disseminated to OPRA by the 
Exchange.\11\ Requesting Members may

[[Page 47341]]

indicate an intention to cross,\12\ permitting participation with all 
other FLEX-participating members in attempting to improve or match the 
BBO during the BBO Improvement Interval.\13\ At expiration of the BBO 
Improvement Interval, the Requesting Member must promptly accept or 
reject the BBO(s); the Requesting Member has no obligation to accept 
any FLEX bid or offer.\14\ RFQs, responsive quotes and completed trades 
are promptly reported to OPRA and disseminated as an administrative 
message by the Exchange. As the foregoing process demonstrates, Phlx 
seeks to maintain a competitive Trading Floor through the 
administration of its rules which contain processes to ensure that 
options transactions are exposed in such a way as to permit other floor 
members an opportunity to participate in price discovery by requiring 
floor members to seek liquidity in open outcry. For example, the 
Options 8 rules require one Floor Market Maker to be present in the 
trading crowd prior to representing an order for execution as a means 
to expose orders to potential liquidity. As such, separate liquidity 
assessments by Regulatory staff are not needed.
---------------------------------------------------------------------------

    \7\ A Requesting Member is a member of the Exchange qualified to 
trade FLEX options pursuant to Options 3, Section 34(d) who 
initiates an RFQ for a FLEX option. See Options 3, Section 
34(b)(11).
    \8\ The term ``Request for Quotes'' means the initial request 
supplied by a Requesting Member to initiate FLEX bidding and 
offering. See Options 3, Section 34(b)(10).
    \9\ A Request Member must announce: (1) Underlying index, 
security or foreign currency; (2) type, size, and crossing 
intention; (3) in the case of FLEX index options and FLEX equity 
options, exercise style; (4) expiration date; (5) exercise price; 
and (6) respecting index options, the settlement value. See Options 
8, Section 34(c)(1). See Options 3, Section 34(c)(1).
    \10\ FLEX Quotes must be entered during the Request Response 
Time of 15 seconds. All FLEX Quotes may be entered, modified or 
withdrawn at any point during the request response time. See Options 
8, Section 34(c)(2).
    \11\ If the Requesting Member has not indicated an intention to 
cross or act as principal with respect to any part of the FLEX 
trade, the member shall promptly accept or reject the displayed BBO: 
Provided, however, that if such a Requesting Member either rejects 
the BBO or is given a BBO for less than the entire size requested, 
all FLEX participating members other than the Requesting Member will 
have an opportunity during the BBO Improvement Interval in which to 
match, or improve, (as applicable), the BBO. At the expiration of 
any such BBO Improvement Interval, the Requesting Member must 
promptly accept or reject the BBO(s). See Options 8, Section 
34(c)(3).
    \12\ If the Requesting Member has indicated an intention to 
cross or act as principal with respect to any part of the FLEX 
trade, acceptance of the displayed BBO shall be automatically 
delayed until the expiration of the BBO Improvement Interval. Prior 
to the BBO Improvement Interval, the Requesting Member must indicate 
at the post the price at which the member expects to trade. In the 
case of FLEX equity options only whenever the Requesting Member has 
indicated an intention to cross or act as principal on the trade and 
has matched or improved the BBO during the BBO Improvement Interval, 
the Requesting Member will be permitted to execute the contra side 
of the trade that is the subject of the RFQs, to the extent of at 
least 40% of the trade, provided the order is a Public Customer 
order or an order respecting the Requesting Member's firm 
proprietary account. Notwithstanding the foregoing, all market 
participants may effect crossing transactions. See Options 8, 
Section 34(c)(5).
    \13\ The BBO Improvement Interval means the minimum period of 
time, to be established by the Exchange, during which members may 
submit FLEX Quotes to meet or improve the BBO established during the 
Request Response Time. See Options 8, Section 34(b)(15).
    \14\ Whenever, following the completion of FLEX bidding and 
offering responsive to a given RFQs, the Requesting Member rejects 
the BBO or the BBO size exceeds the FLEX transaction size indicated 
in the RFQs, members may accept the entire order or the unfilled 
balance of the BBO. See Options 8, Section 34(c)(3).
---------------------------------------------------------------------------

    Fifth, similar to Cboe, the proposed rule change incorporates the 
concept that the expiration date is the date on which an executed FLEX 
option is submitted to the System, which, on Phlx, is the date the FLEX 
option is reported to OPRA and disseminated as an administrative 
message through the System \15\ by Market Operations staff. A FLEX 
option series is available for trading only when exposed in open outcry 
and, after completion of the RFQ process, thereafter, Exchange staff 
manually submits the executed FLEX option to the System through which 
it is promptly reported to OPRA and disseminated as an administrative 
message. For purposes of the definition of the System pursuant to Phlx 
Rules, the date of submission to the Phlx System is the date on which 
the executed FLEX option is reported to OPRA.
---------------------------------------------------------------------------

    \15\ The term ``System'' shall mean the automated system for 
order execution and trade reporting owned and operated by the 
Exchange which comprises: (i) An order execution service that 
enables members to automatically execute transactions in option 
series; and provides members with sufficient monitoring and updating 
capability to participate in an automated execution environment; 
(ii) a trade reporting service that submits ``locked-in'' trades for 
clearing to a registered clearing agency for clearance and 
settlement; transmits last-sale reports of transactions 
automatically to the Options Price Reporting Authority (``OPRA'') 
for dissemination to the public and industry; and provides 
participants with monitoring and risk management capabilities to 
facilitate participation in a ``locked-in'' trading environment; and 
(iii) the data feeds described at Options 3, Section 23. See Options 
1, Section 1(b)(57).
---------------------------------------------------------------------------

Technical Amendments
    The Exchange proposes to amend the rule text utilized to describe 
the maximum expiration for a FLEX currency option to conform that 
language to the terminology proposed herein to describe maximum 
expirations for FLEX index and equity options. The Exchange would 
delete the rule text which states, ``within three years for FLEX 
currency options,'' and replace that rule text with the phrase ``no 
more than 3 years from the date on which a FLEX currency option is 
submitted to the System.'' The Exchange is not amending the term for 
FLEX currency options.
    The Exchange also proposes to add a ``,'' after the word ``Equity'' 
in the title of Options 8, Section 34 and amend the term ``FLEX Order'' 
within Options 8, Section 34(b)(6)(B) to ``FLEX option order'' to 
conform the usage of the term throughout Options 8, Section 34. The 
Exchange proposes to remove ``; or'' within Options 8, Section 
34(b)(6)(A).
    Finally, the Exchange proposes two amendments within Options 8, 
Section 34(c) to update the name of the post and identify the message 
sent by the Exchange. To that end, the term ``FLEX post'' is proposed 
to be changed to ``Market Operations post'' and the phrase 
``administrative text message'' is proposed to be change to 
``administrative message.'' These proposed changes will update the rule 
to the current terminology. These proposed amendments do not represent 
substantive changes to the current FLEX option process, rather these 
changes are merely wording changes which continue to reflect the 
current process without substantive change.
Implementation
    The Exchange intends to begin implementation of the proposed rule 
change no earlier than September 13, 2021 and no later than September 
30, 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) of the Act,\16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\17\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    This proposal is intended to simplify the process and permit Phlx 
members and member organizations to transact FLEX index and equity 
options with the same expiration terms as Cboe, NYSE Arca, and NYSE 
American members. This amendment would permit all FLEX equity and index 
options to have the same maximum 15 year term as other options markets 
that offer FLEX.\18\ For the reasons Phlx has articulated below, the 
Exchange believes this proposal is consistent with the Act.
---------------------------------------------------------------------------

    \18\ See Cboe's Rule 4.21(b)(4), NYSE Arca 5.32-O and NYSE 
American Rule 903G.
---------------------------------------------------------------------------

    Expanding the maximum expiration terms to 15 years uniformly for 
FLEX index and equity options is consistent with the Act as it will 
permit transactions which currently trade OTC to be conducted within an 
exchange environment. Phlx believes that expanding the eligible term 
for FLEX equity and index options, as proposed, is important and 
necessary to the Exchange's efforts to create products and markets that 
provide members, member organizations, and investors interested in 
FLEX-type options with an

[[Page 47342]]

improved but comparable alternative to the OTC market in customized 
options, which can take on contract characteristics similar to FLEX 
options, but are not subject to the same maximum term restriction. By 
expanding the eligible term for FLEX index and equity options, market 
participants will now have greater flexibility in determining whether 
to execute their customized options in an exchange environment or in 
the OTC market, similar to Cboe, NYSE Arca, and NYSE American. 
Specifically, Market participants benefit from being able to trade 
these customized options in an exchange environment in several ways, 
including, but not limited to the following: (1) Enhanced efficiency in 
initiating and closing out positions; (2) increased market 
transparency; and (3) heightened contra-party creditworthiness due to 
the role of OCC as issuer and guarantor of FLEX options.
    The proposal will allow investors to use longer expiration FLEX 
equity and index options to hedge longer-term issuances of structured 
products linked to returns of an individual stock. Specifically, the 
proposal is consistent with the Act because it will allow institutions 
to use longer-term FLEX index options to protect portfolios from long-
term market moves with a known and limited cost, thereby better serving 
the long-term hedging needs of institutional investors and provide 
those investors with an alternative to hedging their portfolios with 
off-exchange customized options and warrants.
    The Exchange's proposal to eliminate rule text that describes 
Regulatory staff's discretionary authority to extend the maximum term 
of FLEX options that expire within three years pursuant to Options 8, 
Section 34(b)(6)(B) after having performed a liquidity assessment and 
also renumber current Options 8, Section 34(b)(6)(C) to new ``B'' is 
consistent with the Act because the process by which the FLEX options 
are transacted already require floor members to seek liquidity in open 
outcry. The Exchange details its process above for seeking liquidity in 
open outcry when transacting FLEX options today on the Trading Floor. 
As the above-referenced process demonstrates, Phlx seeks to maintain a 
competitive Trading Floor through the administration of its rules which 
contain processes to ensure that options transactions are exposed in 
such a way as to permit other floor members an opportunity to 
participate in price discovery by requiring floor members to seek 
liquidity in open outcry. For example, the Options 8 rules require one 
Floor Market Maker to be present in the trading crowd prior to 
representing an order for execution as a means to expose orders to 
potential liquidity. As such, separate liquidity assessments by 
Regulatory staff are not needed.
    Similar to Cboe, the proposed rule change incorporates the concept 
that the expiration date is the date on which an executed FLEX option 
is submitted to the System, which, on Phlx, is the date the FLEX option 
is reported to OPRA and disseminated as an administrative message 
through the System by Market Operations staff. A FLEX option series is 
available for trading only when exposed in open outcry and, after 
completion of the RFQ process, thereafter, Exchange staff manually 
submits the executed FLEX option to the System through which it is 
promptly reported to OPRA and disseminated as an administrative 
message. For purposes of the definition of the System pursuant to Phlx 
Rules, the date of submission to the Phlx System is the date on which 
the executed FLEX option is reported to OPRA.
Technical Amendments
    The Exchange's proposal to amend the rule text utilized to describe 
the maximum expiration for a FLEX currency option is consistent with 
the Act because it conforms that language to the terminology proposed 
herein to describe maximum expirations for FLEX index and equity 
options. The proposal to delete the rule text which states, ``within 
three years for FLEX currency options,'' and replace that rule text 
with the phrase ``no more than 3 years from the date on which a FLEX 
currency option is submitted to the System'' is non-substantive.
    The Exchange's proposals to add a ``,'' after the word ``Equity'' 
in the title of Options 8, Section 34, amend the term ``FLEX Order'' 
within Options 8, Section 34(b)(6)(B) to ``FLEX option order,'' and 
remove ``; or'' within Options 8, Section 34(b)(6)(A) are non-
substantive rule changes. Finally, the proposals to update the name of 
the post and identify the message sent by the Exchange are also non-
substantive rule changes. These proposed amendments do not represent 
substantive changes to the current FLEX option process, rather these 
changes are merely wording changes which continue to reflect the 
current process without substantive change.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. All floor participants are able 
to transact FLEX options. As noted herein, this amendment will provide 
Phlx with a comparable alternative to the OTC market in customized 
options. Finally, Cboe, NYSE Arca, and NYSE American permit expirations 
of up to 15 years for FLEX index and equity options.\19\
---------------------------------------------------------------------------

    \19\ See Cboe's Rule 4.21(b)(4), NYSE Arca 5.32-O and NYSE 
American Rule 903G.
---------------------------------------------------------------------------

Technical Amendments
    The Exchange's proposal to amend the rule text utilized to describe 
the maximum expiration for a FLEX currency option does not impose an 
undue burden on competition because it conforms that language to the 
terminology proposed herein to describe maximum expirations for FLEX 
index and equity options. The proposal to delete the rule text which 
states, ``within three years for FLEX currency options,'' and replace 
that rule text with the phrase ``no more than 3 years from the date on 
which a FLEX currency option is submitted to the System'' is non-
substantive.
    The Exchange's proposals to add a ``,'' after the word ``Equity'' 
in the title of Options 8, Section 34, amend the term ``FLEX Order'' 
within Options 8, Section 34(b)(6)(B) to ``FLEX option order,'' and 
remove ``; or'' within Options 8, Section 34(b)(6)(A) are non-
substantive rule changes. Finally, the proposals to update the name of 
the post and identify the message sent by the Exchange are also non-
substantive rule changes. These proposed amendments do not represent 
substantive changes to the current FLEX option process, rather these 
changes are merely wording changes which continue to reflect the 
current process without substantive change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section

[[Page 47343]]

19(b)(3)(A)(iii) of the Act \20\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\21\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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-Phlx-2021-45 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-Phlx-2021-45. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2021-45 and should be submitted on 
or before September 14, 2021.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18117 Filed 8-23-21; 8:45 am]
BILLING CODE 8011-01-P
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