Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Certain Pilot Programs, 27545-27548 [2023-09210]

Download as PDF Federal Register / Vol. 88, No. 84 / Tuesday, May 2, 2023 / Notices believes that the degree to which credit or fee changes in this market may impose any burden on competition is extremely limited. The proposals are reflective of this competition. Even as one of the largest U.S. equities exchanges by volume, the Exchange has less than 20% market share, which in most markets could hardly be categorized as having enough market power to burden competition. Moreover, as noted above, price competition between exchanges is fierce, with liquidity and market share moving freely between exchanges in reaction to fee and credit changes. This is in addition to free flow of order flow to and among off-exchange venues, which comprises upwards of 50% of industry volume. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 8 and paragraph (f) of Rule 19b–4 thereunder.9 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: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. ddrumheller on DSK120RN23PROD with NOTICES1 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: 8 15 9 17 18:14 May 01, 2023 • 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–2023–11 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–2023–11. 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. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–Phlx–2023–11 and should be submitted on or before May 23, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–09208 Filed 5–1–23; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97386; File No. SR–ISE– 2023–09] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Certain Pilot Programs April 26, 2023. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 14, 2023, Nasdaq ISE, LLC (‘‘ISE’’ 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 extend the pilot to permit the listing and trading of options based on 1⁄5 the value of the Nasdaq-100 Index (‘‘Nasdaq-100’’) and the Exchange’s nonstandard expirations pilot program, both currently set to expire on May 4, 2023. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/ise/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 forth in sections A, B, and C below, of the most significant aspects of such statements. BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 Electronic Comments 10 17 Jkt 259001 PO 00000 CFR 200.30–3(a)(12). Frm 00115 Fmt 4703 Sfmt 4703 27545 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. E:\FR\FM\02MYN1.SGM 02MYN1 27546 Federal Register / Vol. 88, No. 84 / Tuesday, May 2, 2023 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose ISE proposes to extend 2 pilots, which are both set to expire on May 4, 2023. The Exchange proposes to extend (1) its pilot to permit the listing and trading of options based on 1⁄5 the value of the Nasdaq-100 Index (‘‘NQX Pilot’’), and (2) the Exchange’s nonstandard expirations pilot program (‘‘Nonstandard Pilot’’). ddrumheller on DSK120RN23PROD with NOTICES1 NQX Pilot ISE filed a rule change to permit the listing and trading of index options on the Nasdaq 100 Reduced Value Index (‘‘NQX’’) on a twelve month pilot basis.3 NQX options trade independently of and in addition to NDX options, and the NQX options are subject to the same rules that presently govern the trading of index options based on the Nasdaq100, including sales practice rules, margin requirements, trading rules, and position and exercise limits. Similar to NDX, NQX options are European-style and cash-settled, and have a contract multiplier of 100. The contract specifications for NQX options mirror in all respects those of the NDX options contract listed on the Exchange, except that NQX options are based on 1⁄5 of the value of the Nasdaq-100, and are P.M.settled pursuant to Options 4A, Section 12(a)(6). The Exchange proposes to amend ISE Options 4A, Section 12(a)(6)(i) to extend the current NQX Pilot period to November 6, 2023. The NQX Pilot was previously extended with the last extension through May 4, 2023.4 The Exchange continues to have sufficient capacity to handle additional quotations and message traffic associated with the listing and trading of NQX options. In addition, index options are integrated into the Exchange’s existing surveillance system architecture and are thus subject to the relevant surveillance processes. The Exchange also continues to have adequate surveillance 3 See Securities Exchange Act Release No. 82911 (March 20, 2018), 83 FR 12966 (March 26, 2018) (SR–ISE–2017–106) (Approval Order). 4 See Securities Exchange Act Release Nos.86071 (June 10, 2019), 84 FR 27822 (June 14, 2019) (SR– ISE–2019–18); 87379 (October 22, 2019), 84 FR 57793 (October 28, 2019) (SR–ISE–2019–27); 88683 (April 17, 2020), 85 FR 22768 (April 23, 2020) (SR– ISE–2020–18); 90257 (October 22, 2020), 85 FR 68387 (October 28, 2020) (SR–ISE–2020–33); 91485 (April 6, 2021), 86 FR 19052 (April 12, 2021) (SR– ISE–2021–05); 93448 (October 28, 2021), 86 FR 60717 (November 3, 2021) (SR–ISE–2021–22); 94632 (April 7, 2022), 87 FR 21940 (SR–ISE–2022– 09); and 95992 (October 6, 2022), 87 FR 62163 (October 13, 2022) (SR–ISE–2022–20). VerDate Sep<11>2014 18:14 May 01, 2023 Jkt 259001 procedures to monitor trading in NQX options thereby aiding in the maintenance of a fair and orderly market. Additionally, there is continued investor interest in these products and this extension will provide additional time to collect data related to the NQX Pilot. The Exchange believes that the proposed extension of the NQX Pilot will not have an adverse impact on capacity. NQX Pilot Report The Exchange currently makes public on its website the data and analysis previously submitted to the Commission on the NQX Pilot and will continue to make public any data or analysis it submits under the NQX Pilot in the future. The Exchange has filed a rule change proposing permanency of the NQX Pilot.5 The Exchange continues to provide monthly data and has provided additional data in the permanency filing. The Exchange would continue to provide the Commission with ongoing data unless and until the NQX Pilot is made permanent or discontinued. Nonstandard Pilot ISE filed a rule change for the listing and trading on the Exchange, on a twelve month pilot basis, of p.m.-settled options on broad-based indexes with nonstandard expirations dates.6 The Nonstandard Pilot permits both Weekly Expirations and End of Month (‘‘EOM’’) expirations similar to those of the a.m.settled broad-based index options, except that the exercise settlement value of the options subject to the pilot are based on the index value derived from the closing prices of component stocks. On July 29, 2022, the Commission approved a Proposed Rule Change To Permit the Listing and Trading of P.M.Settled Nasdaq-100 Index Options That Expire on Tuesday or Thursday Under Its Nonstandard Expirations Pilot Program.7 The Nonstandard Pilot was extended various times with the last extension through May 4, 2023.8 5 See Securities Exchange Act Release No. 96979 (February 24, 2023), 88 FR 13182 (March 2, 2023) (SR–ISE–2023–08). 6 See Securities Exchange Act Release No. 82612 (February 1, 2018), 83 FR 5470 (February 7, 2018) (approving SR–ISE–2017–111) (Order Approving a Proposed Rule Change To Establish a Nonstandard Expirations Pilot Program). 7 See Securities Exchange Act Release No. 95393 (July 29, 2022), 87 FR 47807 (August 4, 2022) (SR– ISE–2022–13) (Order Granting Approval of a Proposed Rule Change To Permit the Listing and Trading of P.M.-Settled Nasdaq-100 Index Options That Expire on Tuesday or Thursday Under Its Nonstandard Expirations Pilot Program). 8 See Securities Exchange Act Release Nos. 85030 (February 1, 2019), 84 FR 2633 (February 7, 2019) (SR–ISE–2019–01); 85672 (April 17, 2019), 84 FR 16899 (April 23, 2019) (SR–ISE–2019–11); 87380 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 Supplementary Material .07(a) to Options 4A, Section 12 provides that the Exchange may open for trading Weekly Expirations on any broad-based index eligible for standard options trading to expire on any Monday, Wednesday, or Friday (other than the third Friday-of- the-month or days that coincide with an EOM expiration). In addition, the Exchange may also open for trading Weekly Expirations on Nasdaq-100 Index options to expire on any Tuesday or Thursday (other than days that coincide with the third Fridayof-the-month or an EOM expiration). Weekly Expirations are subject to all provisions of Options 4A, Section 12 and are treated the same as options on the same underlying index that expire on the third Friday of the expiration month. Unlike the standard monthly options, however, Weekly Expirations are p.m.-settled. Pursuant to Supplementary Material .07(b) to Options 4A, Section 12 the Exchange may open for trading EOM expirations on any broad-based index eligible for standard options trading to expire on the last trading day of the month. EOM expirations are subject to all provisions of Options 4A, Section 12 and treated the same as options on the same underlying index that expire on the third Friday of the expiration month. However, the EOM expirations are p.m.-settled. The Exchange now proposes to amend Supplementary Material .07(c) to Options 4A, Section 12 so that the duration of the Nonstandard Pilot for these nonstandard expirations will be through November 6, 2023. The Exchange continues to have sufficient systems capacity to handle p.m.-settled options on broad-based indexes with nonstandard expirations dates and has not encountered any issues or adverse market effects as a result of listing them. Additionally, there is continued investor interest in these products. The Exchange will continue to make public on its website any data and analysis it submits to the Commission under the Nonstandard Pilot. The Exchange believes that the proposed extension of the Nonstandard Pilot will not have an adverse impact on capacity. (October 22, 2019), 84 FR 57786 (October 28, 2019) (SR–ISE–2019–28); 88681 (April 17, 2020), 85 FR 22775 (April 23, 2020) (SR–ISE–2020–17); 90265 (October 23, 2020), 85 FR 68605 (October 29, 2020) (SR–ISE–2020–34); 91486 (April 6, 2021), 86 FR 19048 (April 12, 2021) (SR–ISE–2021–06); 93449 (October 28, 2021), 86 FR 60679 (November 3, 2021) (SR–ISE–2021–23); 94632 (April 7, 2022), 87 FR 21940 (SR–ISE–2022–09); and 95992 (October 6, 2022), 87 FR 62163 (October 13, 2022) (SR–ISE– 2022–20). E:\FR\FM\02MYN1.SGM 02MYN1 Federal Register / Vol. 88, No. 84 / Tuesday, May 2, 2023 / Notices Nonstandard Pilot Report The Exchange submitted a rule change proposing permanency of the Nonstandard Pilot.9 The Exchange continues to provide monthly data and has provided additional data in the permanency filing. The Exchange would continue to provide the Commission with ongoing data unless and until the Nonstandard Pilot is made permanent or discontinued. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,10 in general, and furthers the objectives of Section 6(b)(5) of the Act,11 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. ddrumheller on DSK120RN23PROD with NOTICES1 NQX Pilot In particular, the Exchange believes that the NQX Pilot has been successful to date. The Exchange has not encountered any problems with the NQX Pilot. By extending the NQX Pilot, the Exchange believes it will attract order flow to the Exchange, increase the variety of listed options, and provide a valuable hedge tool to retail and other investors. Specifically, the Exchange believes that the NQX Pilot will provide additional trading and hedging opportunities for investors while providing the Commission with data to monitor for and assess any potential for adverse market effects of allowing P.M.settlement for NQX options, including on the underlying component stocks. Nonstandard Pilot The Exchange believes the proposed rule change will protect investors and the public interest by providing the Exchange, the Commission and investors the benefit of additional time to analyze nonstandard expiration options. In particular, the Exchange believes that the Nonstandard Pilot has been successful to date. The Exchange has not encountered any problems with the Nonstandard Pilot. By extending the Nonstandard Pilot, investors may continue to benefit from a wider array of investment opportunities. Additionally, both the Exchange and the Commission may continue to monitor 9 See Securities Exchange Act Release No. 96979 (February 24, 2023), 88 FR 13182 (March 2, 2023) (SR–ISE–2023–08). 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:14 May 01, 2023 Jkt 259001 the pilot for potential adverse market effects of p.m.-settlement on the market, including the underlying cash equities market, at the expiration of these options. 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 Exchange believes that the proposed rule change will not impose an undue burden on inter-market competition as this rule change will continue to facilitate the listing and trading of new option products that will enhance competition among market participants, to the benefit of investors and the marketplace. Furthermore, these products could offer a competitive alternative to other existing investment products. Finally, it is possible for other exchanges to develop or license the use of a new or different index to compete with these products and seek Commission approval to list and trade options on such an index. NQX Pilot NQX options would be available for trading to all market participants and therefore would not impose an undue burden on intra-market competition. The continued listing of the NQX Pilot will enhance competition by providing investors with an additional investment vehicle, in a fully-electronic trading environment, through which investors can gain and hedge exposure to the Nasdaq-100. Nonstandard Pilot Options with nonstandard expirations would be available for trading to all market participants. The continued listing of the Nonstandard Pilot will enhance competition by providing investors with an additional investment vehicle, in a fully-electronic trading environment, through which investors can gain and hedge exposure to the Nasdaq-100. 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 proposed rule change does not: (i) significantly affect the protection of investors or the public PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 27547 interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and subparagraph (f)(6) of Rule 19b–4 thereunder.13 A proposed rule change filed under Rule 19b–4(f)(6) 14 normally does not become operative prior to 30 days after the date of the filing. However, Rule 19b–4(f)(6)(iii) 15 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange states that waiver of the 30-day operative delay will allow it to extend the pilot programs prior to their expiration on May 4, 2023, permitting the pilot programs to continue uninterrupted. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the proposed rule change does not raise any new or novel issues. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change as operative upon filing.16 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 change should be approved or disapproved. 12 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 14 17 CFR 240.19b–4(f)(6). 15 17 CFR 240.19b–4(f)(6)(iii). 16 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 13 17 E:\FR\FM\02MYN1.SGM 02MYN1 27548 Federal Register / Vol. 88, No. 84 / Tuesday, May 2, 2023 / Notices 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– ISE–2023–09 on the subject line. Paper Comments ddrumheller on DSK120RN23PROD with NOTICES1 • 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–ISE–2023–09. 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. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–ISE–2023–09, and should be submitted on or before May 23, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–09210 Filed 5–1–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–540, OMB Control No. 3235–0600] Proposed Collection; Comment Request; Extension: Rule 611 Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 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’’) is soliciting comments on the existing collection of information provided for in Rule 611 (17 CFR 242.611) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (‘‘Exchange Act’’). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. On June 9, 2005, effective August 29, 2005 (see 70 FR 37496, June 29, 2005), the Commission adopted Rule 611 of Regulation NMS under the Exchange Act to require any national securities exchange, national securities association, alternative trading system, exchange market maker, over-thecounter market maker, and any other broker-dealer that executes orders internally by trading as principal or crossing orders as agent, to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the execution of a transaction in its market at a price that is inferior to a bid or offer displayed in another market at the time of execution (a ‘‘trade-though’’), absent an applicable exception and, if relying on an exception, that are reasonably designed to assure compliance with the terms of the exception. Without this collection of information, respondents would not have a means to enforce compliance with the Commission’s intention to prevent trade-throughs pursuant to the rule. 17 17 VerDate Sep<11>2014 18:14 May 01, 2023 Jkt 259001 PO 00000 CFR 200.30–3(a)(12), (59). Frm 00118 Fmt 4703 Sfmt 4703 There are approximately 235 respondents 1 per year that will require an aggregate total of approximately 14,100 hours to comply with this Rule. It is anticipated that each respondent will continue to expend approximately 60 hours annually: two hours per month of internal legal time and three hours per month of internal compliance time to ensure that its written policies and procedures are up-to-date and remain in compliance with Rule 611. The estimated cost for an in-house attorney is $489 per hour and the estimated cost for an assistant compliance director in the securities industry is $432 per hour. Therefore the estimated total internal cost of compliance for the annual hour burden is as follows: [(2 legal hours × 12 months × $489) × 235] + [(3 compliance hours × 12 months × $432) × 235] = $6,412,680.2 Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by July 3, 2023. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Please direct your written comments to: David Bottom, Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549, or send an email to: PRA_ Mailbox@sec.gov. 1 This estimate includes 16 national securities exchanges that are equity securities exchanges. The estimate also includes an estimated 187 firms that are over-the-counter market makers or exchange market makers, as well as an estimated 32 alternative trading systems that trade NMS stocks. 2 The total cost of compliance for the annual hour burden has been revised to reflect updated estimated cost figures for an in-house attorney and an assistant compliance director. These figures are from SIFMA’s Management & Professional Earnings in the Securities Industry 2013, modified by Commission staff to account for an 1800-hour workyear and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead, and then adjusted for inflation. E:\FR\FM\02MYN1.SGM 02MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 84 (Tuesday, May 2, 2023)]
[Notices]
[Pages 27545-27548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97386; File No. SR-ISE-2023-09]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend Certain 
Pilot Programs

April 26, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 14, 2023, Nasdaq ISE, LLC (``ISE'' 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the pilot to permit the listing and 
trading of options based on \1/5\ the value of the Nasdaq-100 Index 
(``Nasdaq-100'') and the Exchange's nonstandard expirations pilot 
program, both currently set to expire on May 4, 2023.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/ise/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 forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 27546]]

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

1. Purpose
    ISE proposes to extend 2 pilots, which are both set to expire on 
May 4, 2023. The Exchange proposes to extend (1) its pilot to permit 
the listing and trading of options based on \1/5\ the value of the 
Nasdaq-100 Index (``NQX Pilot''), and (2) the Exchange's nonstandard 
expirations pilot program (``Nonstandard Pilot'').
NQX Pilot
    ISE filed a rule change to permit the listing and trading of index 
options on the Nasdaq 100 Reduced Value Index (``NQX'') on a twelve 
month pilot basis.\3\ NQX options trade independently of and in 
addition to NDX options, and the NQX options are subject to the same 
rules that presently govern the trading of index options based on the 
Nasdaq-100, including sales practice rules, margin requirements, 
trading rules, and position and exercise limits. Similar to NDX, NQX 
options are European-style and cash-settled, and have a contract 
multiplier of 100. The contract specifications for NQX options mirror 
in all respects those of the NDX options contract listed on the 
Exchange, except that NQX options are based on \1/5\ of the value of 
the Nasdaq-100, and are P.M.-settled pursuant to Options 4A, Section 
12(a)(6).
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    \3\ See Securities Exchange Act Release No. 82911 (March 20, 
2018), 83 FR 12966 (March 26, 2018) (SR-ISE-2017-106) (Approval 
Order).
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    The Exchange proposes to amend ISE Options 4A, Section 12(a)(6)(i) 
to extend the current NQX Pilot period to November 6, 2023. The NQX 
Pilot was previously extended with the last extension through May 4, 
2023.\4\ The Exchange continues to have sufficient capacity to handle 
additional quotations and message traffic associated with the listing 
and trading of NQX options. In addition, index options are integrated 
into the Exchange's existing surveillance system architecture and are 
thus subject to the relevant surveillance processes. The Exchange also 
continues to have adequate surveillance procedures to monitor trading 
in NQX options thereby aiding in the maintenance of a fair and orderly 
market. Additionally, there is continued investor interest in these 
products and this extension will provide additional time to collect 
data related to the NQX Pilot. The Exchange believes that the proposed 
extension of the NQX Pilot will not have an adverse impact on capacity.
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    \4\ See Securities Exchange Act Release Nos.86071 (June 10, 
2019), 84 FR 27822 (June 14, 2019) (SR-ISE-2019-18); 87379 (October 
22, 2019), 84 FR 57793 (October 28, 2019) (SR-ISE-2019-27); 88683 
(April 17, 2020), 85 FR 22768 (April 23, 2020) (SR-ISE-2020-18); 
90257 (October 22, 2020), 85 FR 68387 (October 28, 2020) (SR-ISE-
2020-33); 91485 (April 6, 2021), 86 FR 19052 (April 12, 2021) (SR-
ISE-2021-05); 93448 (October 28, 2021), 86 FR 60717 (November 3, 
2021) (SR-ISE-2021-22); 94632 (April 7, 2022), 87 FR 21940 (SR-ISE-
2022-09); and 95992 (October 6, 2022), 87 FR 62163 (October 13, 
2022) (SR-ISE-2022-20).
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NQX Pilot Report
    The Exchange currently makes public on its website the data and 
analysis previously submitted to the Commission on the NQX Pilot and 
will continue to make public any data or analysis it submits under the 
NQX Pilot in the future. The Exchange has filed a rule change proposing 
permanency of the NQX Pilot.\5\ The Exchange continues to provide 
monthly data and has provided additional data in the permanency filing. 
The Exchange would continue to provide the Commission with ongoing data 
unless and until the NQX Pilot is made permanent or discontinued.
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    \5\ See Securities Exchange Act Release No. 96979 (February 24, 
2023), 88 FR 13182 (March 2, 2023) (SR-ISE-2023-08).
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Nonstandard Pilot
    ISE filed a rule change for the listing and trading on the 
Exchange, on a twelve month pilot basis, of p.m.-settled options on 
broad-based indexes with nonstandard expirations dates.\6\ The 
Nonstandard Pilot permits both Weekly Expirations and End of Month 
(``EOM'') expirations similar to those of the a.m.-settled broad-based 
index options, except that the exercise settlement value of the options 
subject to the pilot are based on the index value derived from the 
closing prices of component stocks. On July 29, 2022, the Commission 
approved a Proposed Rule Change To Permit the Listing and Trading of 
P.M.-Settled Nasdaq-100 Index Options That Expire on Tuesday or 
Thursday Under Its Nonstandard Expirations Pilot Program.\7\ The 
Nonstandard Pilot was extended various times with the last extension 
through May 4, 2023.\8\
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    \6\ See Securities Exchange Act Release No. 82612 (February 1, 
2018), 83 FR 5470 (February 7, 2018) (approving SR-ISE-2017-111) 
(Order Approving a Proposed Rule Change To Establish a Nonstandard 
Expirations Pilot Program).
    \7\ See Securities Exchange Act Release No. 95393 (July 29, 
2022), 87 FR 47807 (August 4, 2022) (SR-ISE-2022-13) (Order Granting 
Approval of a Proposed Rule Change To Permit the Listing and Trading 
of P.M.-Settled Nasdaq-100 Index Options That Expire on Tuesday or 
Thursday Under Its Nonstandard Expirations Pilot Program).
    \8\ See Securities Exchange Act Release Nos. 85030 (February 1, 
2019), 84 FR 2633 (February 7, 2019) (SR-ISE-2019-01); 85672 (April 
17, 2019), 84 FR 16899 (April 23, 2019) (SR-ISE-2019-11); 87380 
(October 22, 2019), 84 FR 57786 (October 28, 2019) (SR-ISE-2019-28); 
88681 (April 17, 2020), 85 FR 22775 (April 23, 2020) (SR-ISE-2020-
17); 90265 (October 23, 2020), 85 FR 68605 (October 29, 2020) (SR-
ISE-2020-34); 91486 (April 6, 2021), 86 FR 19048 (April 12, 2021) 
(SR-ISE-2021-06); 93449 (October 28, 2021), 86 FR 60679 (November 3, 
2021) (SR-ISE-2021-23); 94632 (April 7, 2022), 87 FR 21940 (SR-ISE-
2022-09); and 95992 (October 6, 2022), 87 FR 62163 (October 13, 
2022) (SR-ISE-2022-20).
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    Supplementary Material .07(a) to Options 4A, Section 12 provides 
that the Exchange may open for trading Weekly Expirations on any broad-
based index eligible for standard options trading to expire on any 
Monday, Wednesday, or Friday (other than the third Friday-of- the-month 
or days that coincide with an EOM expiration). In addition, the 
Exchange may also open for trading Weekly Expirations on Nasdaq-100 
Index options to expire on any Tuesday or Thursday (other than days 
that coincide with the third Friday-of-the-month or an EOM expiration). 
Weekly Expirations are subject to all provisions of Options 4A, Section 
12 and are treated the same as options on the same underlying index 
that expire on the third Friday of the expiration month. Unlike the 
standard monthly options, however, Weekly Expirations are p.m.-settled.
    Pursuant to Supplementary Material .07(b) to Options 4A, Section 12 
the Exchange may open for trading EOM expirations on any broad-based 
index eligible for standard options trading to expire on the last 
trading day of the month. EOM expirations are subject to all provisions 
of Options 4A, Section 12 and treated the same as options on the same 
underlying index that expire on the third Friday of the expiration 
month. However, the EOM expirations are p.m.-settled.
    The Exchange now proposes to amend Supplementary Material .07(c) to 
Options 4A, Section 12 so that the duration of the Nonstandard Pilot 
for these nonstandard expirations will be through November 6, 2023. The 
Exchange continues to have sufficient systems capacity to handle p.m.-
settled options on broad-based indexes with nonstandard expirations 
dates and has not encountered any issues or adverse market effects as a 
result of listing them. Additionally, there is continued investor 
interest in these products. The Exchange will continue to make public 
on its website any data and analysis it submits to the Commission under 
the Nonstandard Pilot. The Exchange believes that the proposed 
extension of the Nonstandard Pilot will not have an adverse impact on 
capacity.

[[Page 27547]]

Nonstandard Pilot Report
    The Exchange submitted a rule change proposing permanency of the 
Nonstandard Pilot.\9\ The Exchange continues to provide monthly data 
and has provided additional data in the permanency filing. The Exchange 
would continue to provide the Commission with ongoing data unless and 
until the Nonstandard Pilot is made permanent or discontinued.
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    \9\ See Securities Exchange Act Release No. 96979 (February 24, 
2023), 88 FR 13182 (March 2, 2023) (SR-ISE-2023-08).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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NQX Pilot
    In particular, the Exchange believes that the NQX Pilot has been 
successful to date. The Exchange has not encountered any problems with 
the NQX Pilot. By extending the NQX Pilot, the Exchange believes it 
will attract order flow to the Exchange, increase the variety of listed 
options, and provide a valuable hedge tool to retail and other 
investors. Specifically, the Exchange believes that the NQX Pilot will 
provide additional trading and hedging opportunities for investors 
while providing the Commission with data to monitor for and assess any 
potential for adverse market effects of allowing P.M.-settlement for 
NQX options, including on the underlying component stocks.
Nonstandard Pilot
    The Exchange believes the proposed rule change will protect 
investors and the public interest by providing the Exchange, the 
Commission and investors the benefit of additional time to analyze 
nonstandard expiration options. In particular, the Exchange believes 
that the Nonstandard Pilot has been successful to date. The Exchange 
has not encountered any problems with the Nonstandard Pilot. By 
extending the Nonstandard Pilot, investors may continue to benefit from 
a wider array of investment opportunities. Additionally, both the 
Exchange and the Commission may continue to monitor the pilot for 
potential adverse market effects of p.m.-settlement on the market, 
including the underlying cash equities market, at the expiration of 
these options.

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 Exchange believes that 
the proposed rule change will not impose an undue burden on inter-
market competition as this rule change will continue to facilitate the 
listing and trading of new option products that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. Furthermore, these products could offer a competitive 
alternative to other existing investment products. Finally, it is 
possible for other exchanges to develop or license the use of a new or 
different index to compete with these products and seek Commission 
approval to list and trade options on such an index.
NQX Pilot
    NQX options would be available for trading to all market 
participants and therefore would not impose an undue burden on intra-
market competition. The continued listing of the NQX Pilot will enhance 
competition by providing investors with an additional investment 
vehicle, in a fully-electronic trading environment, through which 
investors can gain and hedge exposure to the Nasdaq-100.
Nonstandard Pilot
    Options with nonstandard expirations would be available for trading 
to all market participants. The continued listing of the Nonstandard 
Pilot will enhance competition by providing investors with an 
additional investment vehicle, in a fully-electronic trading 
environment, through which investors can gain and hedge exposure to the 
Nasdaq-100.

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 proposed rule change does not: (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the 30-day operative delay will allow it to extend the pilot 
programs prior to their expiration on May 4, 2023, permitting the pilot 
programs to continue uninterrupted. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest because the proposed rule change does 
not raise any new or novel issues. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change as operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 change should be approved or 
disapproved.

[[Page 27548]]

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-ISE-2023-09 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-ISE-2023-09. 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. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-ISE-2023-09, and should 
be submitted on or before May 23, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09210 Filed 5-1-23; 8:45 am]
BILLING CODE 8011-01-P

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