Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of Proposed Rule Change To Amend the Short Term Option Series Program in Supplementary Material .03 of Options 4, Section 5, 39876-39885 [2023-13005]

Download as PDF 39876 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices services. The Exchange also believes the proposal would enhance competition because it would potentially enhance the performance of its order handling and execution of orders in equity securities by receiving market data directly from MEMX. Finally, the proposed rule change would not impact competition between market participants because it will affect all market participants equally. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 5 and Rule 19b–4(f)(6) thereunder.6 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 7 and Rule 19b–4(f)(6)(iii) thereunder.8 At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B) 9 of the Act to determine whether the proposed rule change should be approved or disapproved. 5 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 7 15 U.S.C. 78s(b)(3)(A). 8 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, 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. 9 15 U.S.C. 78s(b)(2)(B). lotter on DSK11XQN23PROD with NOTICES1 6 17 VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: [FR Doc. 2023–13000 Filed 6–16–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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– NYSE–2023–21 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–NYSE–2023–21. 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 a.m. and 3 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–NYSE–2023–21 and should be submitted on or before July 11, 2023. PO 00000 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Sherry R. Haywood, Assistant Secretary. [Release No. 34–97719; File No. SR–ISE– 2023–11] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of Proposed Rule Change To Amend the Short Term Option Series Program in Supplementary Material .03 of Options 4, Section 5 June 13, 2023. 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 May 31, 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 amend the Short Term Option Series Program in Supplementary Material .03 of Options 4, Section 5 (Series of Options Contracts Open for Trading). 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 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 Frm 00058 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / 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 lotter on DSK11XQN23PROD with NOTICES1 1. Purpose The Exchange proposes to amend Supplementary Material .03 of Options 4, Section 5, ‘‘Series of Options Contracts Open for Trading.’’ Specifically, the Exchange proposes to expand the Short Term Option Series Program to permit the listing of two Wednesday expirations for options on United States Oil Fund, LP (‘‘USO’’), United States Natural Gas Fund, LP (‘‘UNG’’), SPDR Gold Shares (‘‘GLD’’), iShares Silver Trust (‘‘SLV’’), and iShares 20+ Year Treasury Bond ETF (‘‘TLT’’) (collectively ‘‘Exchange Traded Products’’ or ‘‘ETPs’’). Currently, as set forth in Supplementary Material .03 to Options 4, Section 5, after an option class has been approved for listing and trading on the Exchange as a Short Term Option Series pursuant to Options 1, Section 1(a)(49),3 the Exchange may open for trading on any Thursday or Friday that is a business day (‘‘Short Term Option Opening Date’’) series of options on that class that expire at the close of business on each of the next five Fridays that are business days and are not Fridays in which monthly options series or Quarterly Options Series expire (‘‘Friday Short Term Option Expiration Dates’’). The Exchange may have no more than a total of five Short Term Option Expiration Dates. Further, if the Exchange is not open for business on the respective Thursday or Friday, the Short Term Option Opening Date for Short Term Option Weekly Expirations will be the first business day immediately prior to that respective Thursday or Friday. Similarly, if the Exchange is not open for business on a Friday, the Short Term Option 3 Options 1, Section 1(a)(49) provides that a Short Term Option Series means a series in an option class that is approved for listing and trading on the Exchange in which the series is opened for trading on any Monday, Tuesday, Wednesday, Thursday or Friday that is a business day and that expires on the Monday, Wednesday or Friday of the following business week that is a business day, or, in the case of a series that is listed on a Friday and expires on a Monday, is listed one business week and one business day prior to that expiration. If a Tuesday, Wednesday, Thursday or Friday is not a business day, the series may be opened (or shall expire) on the first business day immediately prior to that Tuesday, Wednesday, Thursday or Friday. For a series listed pursuant to this section for Monday expiration, if a Monday is not a business day, the series shall expire on the first business day immediately following that Monday. VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 Expiration Date for Short Term Option Weekly Expirations will be the first business day immediately prior to that Friday. Additionally, the Exchange may open for trading series of options on the symbols provided in Table 1 of Supplementary Material .03 to Options 4, Section 5 that expire at the close of business on each of the next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that are business days and are not business days in which monthly options series or Quarterly Options Series expire (‘‘Short Term Option Daily Expirations’’). For those symbols listed in Table 1, the Exchange may have no more than a total of two Short Term Option Daily Expirations for each of Monday, Tuesday, Wednesday, and Thursday expirations at one time. Proposal At this time, the Exchange proposes to expand the Short Term Option Daily Expirations to permit the listing and trading of options on USO, UNG, GLD, SLV, and TLT expiring on Wednesdays. The Exchange proposes to permit two Short Term Option Expiration Dates beyond the current week for each Wednesday expiration at one time.4 In order to effectuate the proposed changes, the Exchange would add USO, UNG, GLD, SLV, and TLT to Table 1 of Supplementary Material .03 to Options 4, Section 5, which specifies each symbol that qualifies as a Short Term Option Daily Expiration. The proposed Wednesday USO, UNG, GLD, SLV, and TLT expirations will be similar to the current Wednesday SPY, QQQ, and IWM Short Term Option Daily Expirations set forth in Supplementary Material .03 to Options 4, Section 5, such that the Exchange may open for trading on any Tuesday or Wednesday that is a business day (beyond the current week) series of options on USO, UNG, GLD, SLV, and TLT to expire on any Wednesday of the month that is a business day and is not a Wednesday in which Quarterly Options Series expire (‘‘Wednesday USO Expirations,’’ ‘‘Wednesday UNG Expirations,’’ ‘‘Wednesday GLD Expirations,’’ ‘‘Wednesday SLV Expirations,’’ and ‘‘Wednesday TLT Expirations’’) (collectively, ‘‘Wednesday 4 Consistent with the current operation of the rule, the Exchange notes that if it adds a Wednesday expiration on a Tuesday, it could technically list three outstanding Wednesday expirations at one time. The Exchange will therefore clarify the rule text in Supplementary Material .03 to Options 4, Section 5 to specify that it can list two Short Term Option Expiration Dates beyond the current week for each Monday, Tuesday, Wednesday, and Thursday expiration. PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 39877 ETP Expirations’’).5 In the event Short Term Option Daily Expirations expire on a Wednesday and that Wednesday is the same day that a Quarterly Options Series expires, the Exchange would skip that week’s listing and instead list the following week; the two weeks would therefore not be consecutive. Today, Wednesday expirations in SPY, QQQ, and IWM similarly skip the weekly listing in the event the weekly listing expires on the same day in the same class as a Quarterly Options Series. USO, UNG, GLD, SLV, and TLT Friday expirations would continue to have a total of five Short Term Option Expiration Dates provided those Friday expirations are not Fridays in which monthly options series or Quarterly Options Series expire (‘‘Friday Short Term Option Expiration Dates’’). Similar to Wednesday SPY, QQQ, and IWM Short Term Option Daily Expirations within Supplementary Material .03 to Options 4, Section 5, the Exchange proposes that it may open for trading on any Tuesday or Wednesday that is a business day series of options on USO, UNG, GLD, SLV, and TLT that expire at the close of business on each of the next two Wednesdays that are business days and are not business days in which Quarterly Options Series expire. The interval between strike prices for the proposed Wednesday ETP Expirations will be the same as those for the current Short Term Option Series for Friday expirations applicable to the Short Term Option Series Program.6 Specifically, the Wednesday ETP Expirations will have a strike interval of $0.50 or greater for strike prices below $100, $1 or greater for strike prices between $100 and $150, and $2.50 or greater for strike prices above $150.7 As is the case with other equity options series listed pursuant to the Short Term Option Series Program, the Wednesday ETP Expirations series will be P.M.settled. Pursuant to Options 1, Section 1(a)(49), with respect to the Short Term Option Series Program, a Wednesday expiration series shall expire on the first business day immediately prior to that Wednesday, e.g., Tuesday of that week if the Wednesday is not a business day. Currently, for each option class eligible for participation in the Short 5 While the relevant rule text in Supplementary Material .03 to Options 4, Section 5 also indicates that the Exchange will not list such expirations on a Wednesday that is a business day in which monthly options series expire, practically speaking this would not occur. 6 See Supplementary Material .03(e) to Options 4, Section 5. 7 Id. E:\FR\FM\20JNN1.SGM 20JNN1 39878 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices Term Option Series Program, the Exchange is limited to opening thirty (30) series for each expiration date for the specific class.8 The thirty (30) series restriction does not include series that are open by other securities exchanges under their respective weekly rules; the Exchange may list these additional series that are listed by other options exchanges.9 With the proposed changes, this thirty (30) series restriction would apply to Wednesday USO, UNG, GLD, SLV, and TLT Short Term Option Daily Expirations as well. In addition, the Exchange will be able to list series that are listed by other exchanges, assuming they file similar rules with the Commission to list Wednesday ETP Expirations. With this proposal, Wednesday ETP Expirations would be treated similarly to existing Wednesday SPY, QQQ, and IWM Expirations. With respect to monthly option series, Short Term Option Daily Expirations will be permitted to expire in the same week in which monthly option series on the same class expire. Not listing Short Supplementary Material .03(a) to Options 4, Section 5. 9 Id. lotter on DSK11XQN23PROD with NOTICES1 8 See VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 Term Option Daily Expirations for one week every month because there was a monthly on that same class on the Friday of that week would create investor confusion. Further, as with Wednesday SPY, QQQ, and IWM Expirations, the Exchange would not permit Wednesday ETP Expirations to expire on a business day in which monthly options series or Quarterly Options Series expire. Therefore, all Short Term Option Daily Expirations would expire at the close of business on each of the next two Wednesdays that are business days and are not business days in which monthly options series or Quarterly Options Series expire. The Exchange believes that it is reasonable to not permit two expirations on the same day in which a monthly options series or a Quarterly Options Series would expire because those options would be duplicative of each other. The Exchange does not believe that any market disruptions will be encountered with the introduction of Wednesday ETP Expirations. The Exchange has the necessary capacity and surveillance programs in place to support and properly monitor trading in the proposed Wednesday ETP PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 Expirations. The Exchange currently trades P.M.-settled Short Term Option Series that expire Wednesday for SPY, QQQ and IWM and has not experienced any market disruptions nor issues with capacity. Today, the Exchange has surveillance programs in place to support and properly monitor trading in Short Term Option Series that expire Wednesday for SPY, QQQ and IWM. Impact of Proposal The Exchange notes that listings in the Short Term Option Series Program comprise a significant part of the standard listings in options markets. The below diagrams demonstrate the percentage of weekly listings compared to monthly, quarterly, and Long-Term Option Series in 2020 and 2022 in the options industry.10 The weekly strikes decreased from 24% to 19% in these two years. The Exchange notes that during this timeframe all options exchanges mitigated weekly strike intervals. BILLING CODE 8011–01–P 10 The Exchange sourced this information from The Options Clearing Corporation (‘‘OCC’’). The information includes time averaged data for all 16 options markets up to August 18, 2022. E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices small number of weekly expiration dates because the Exchange will limit the number of Short Term Option Daily Expirations for these ETPs to two Wednesday expirations. The below chart displays average daily volume for options on USO, UNG, GLD, SLV, and TLT.11 11 Average daily volume data for options contracts are as of November 2022. VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 EN20JN23.000</GPH> lotter on DSK11XQN23PROD with NOTICES1 While the Exchange is expanding the Short Term Option Series Program to permit USO, UNG, GLD, SLV, and TLT Wednesday Expirations, the Exchange anticipates that it would overall add a 39879 39880 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices 12 AUM Exchange observed that Wednesday expiration volume in SPY, QQQ, and IWM consisted of approximately 23.3% (for SPY), 19.8% (for QQQ), and 10.9% (for IWM) of total volume for the respective symbols. Further, the Exchange believes that there is investor demand for additional Short Term Option Daily Expirations for USO, UNG, GLD, SLV, and TLT based on the total assets under management (‘‘AUM’’) for these Exchange Traded Products. As illustrated below, the ETPs are all leading products in their respective asset classes.12 data for ETPs are as of November 2022. VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 EN20JN23.001</GPH> lotter on DSK11XQN23PROD with NOTICES1 The Exchange believes that there is general investor demand for alternative expirations, including Wednesday expirations, as evidenced by the relatively significant percentage of volume in Wednesday SPY, QQQ, and IWM expirations. Notably, in 2022, the VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 PO 00000 Frm 00063 Fmt 4703 Sfmt 4725 E:\FR\FM\20JNN1.SGM 20JNN1 39881 EN20JN23.002</GPH> lotter on DSK11XQN23PROD with NOTICES1 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices In addition, the below chart shows post-close movements between 4:00– VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 5:30 p.m. Eastern Time, and indicates that GLD, SLV, TLT, UNG, and USO are PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 less volatile (strike-wise) than SPY, E:\FR\FM\20JNN1.SGM 20JNN1 EN20JN23.003</GPH> lotter on DSK11XQN23PROD with NOTICES1 39882 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices 39883 QQQ, and IWM, where alternative expirations exist today. which have alternative expirations today. EN20JN23.005</GPH> less volatile in the last 30 minutes of trading than SPY, QQQ, and IWM, VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 PO 00000 Frm 00065 Fmt 4703 Sfmt 4725 E:\FR\FM\20JNN1.SGM 20JNN1 EN20JN23.004</GPH> lotter on DSK11XQN23PROD with NOTICES1 Furthermore, the below chart shows that GLD, SLV, TLT, UNG, and USO are 39884 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 BILLING CODE 8011–01–C The Exchange also notes that GLD, SLV, TLT, USO, and UNG currently trade within ‘‘complexes’’ where, in addition to the underlying security, there are multiple instruments available for hedging. Specifically, the GLD complex includes: .GC—COMEX Gold Futures—CME .AUD—Gold Daily Futures—ICE $IAU—iShares Gold Trust $GLDM—SPDR Gold Minishares Trust $SGOL—Aberdeen Physical Gold Trust $BAR—GraniteShares Gold Shares The SLV complex includes: .SI—COMEX Silver Futures—CME .HIO—Silver Daily Futures—ICE $SIVR—Aberdeen Physical Silver Trust The USO complex includes: .CL—CME WTI Light Sweet Crude Futures .HIO—Brent Crude Futures—ICE $DBO—Invesco DB Oil Fund $BNO—United States Brent Oil Trust $OIL—iPath Pure Beta Crude Oil ETN The UNG complex includes: .NG—Henry Hub Natural Gas Futures ICE—Financial Gas Markets (multi)— ICE $FCG—First Trust Natural Gas ETF $UNL—United States 12 mo NG ETF $HUN—Horizons Natural Gas ETF Lastly, the TLT complex includes: CME—Multiple Interest Rate Futures ICE—Multiple Interest Rate Futures US Treasury Securities $IEF—iShares 7–10 Year Treasury Bond ETF $GOVT—iShares Barclays US Treasury Bond ETF Numerous highly correlated FICC ETPs Given the multi-asset class nature of these products and available hedges in highly-correlated instruments, the Exchange believes that its proposal to add Wednesday expirations on these products will not be a strain on liquidity providers. Because the Exchange proposes to limit the number of Wednesday Expirations for options on USO, UNG, GLD, SLV, and TLT to two expirations beyond the current week, the Exchange believes that the addition of these Wednesday ETP Expirations should encourage Market Makers to continue to deploy capital more efficiently and improve displayed market quality.13 Similar to SPY, QQQ and IWM Wednesday Expirations, the introduction of Wednesday ETP 13 Market Makers include Primary Market Makers and Competitive Market Makers. See ISE Options 1, Section 1(a)(21). Today, Primary Market Makers and Competitive Market Makers are required to quote a specified time in their assigned options series. See ISE Options 2, Section 5. VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 Expirations will, among other things, expand hedging tools available to market participants and allow for a reduced premium cost of buying portfolio protection. The Exchange believes that Wednesday ETP Expirations will allow market participants to hedge their portfolios with options on commodities (oil, natural gas, gold, and silver) as well as treasury securities, and tailor their investment and hedging needs more effectively. Implementation The Exchange proposes to implement this rule change within 30 days after Commission approval. The Exchange will issue an Options Trader Alert to notify Members of the implementation date. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,14 in general, and furthers the objectives of Section 6(b)(5) of the Act,15 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. Similar to Wednesday expirations in SPY, QQQ, and IWM, the proposal to permit Wednesday ETP Expirations, subject to the proposed limitation of two expirations beyond the current week, would protect investors and the public interest by providing the investing public and other market participants more choice and flexibility to closely tailor their investment and hedging decisions in these options and allow for a reduced premium cost of buying portfolio protection, thus allowing them to better manage their risk exposure. ISE represents that it has an adequate surveillance program in place to detect manipulative trading in the proposed option expirations, in the same way that it monitors trading in the current Short Term Option Series for Wednesday SPY, QQQ and IWM expirations. The Exchange also represents that it has the necessary system capacity to support the new expirations. Finally, the Exchange does not believe that any market disruptions will be encountered with the introduction of these option expirations. As discussed above, the Exchange believes that its proposal is a modest expansion of weekly expiration dates for GLD, SLV, USO, UNG, and TLT given that it will be limited to two 14 15 15 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00066 Fmt 4703 Sfmt 4703 Wednesday expirations beyond the current week. Furthermore, the above charts show less volatility in these five products (both in terms of post-close and during the last 30 minutes of trading) compared to SPY, QQQ, and IWM, which have alternative expirations (including Wednesday expirations) today. Lastly, the Exchange believes its proposal will not be a strain on liquidity provides because of the multi-class nature of GLD, SLV, USO, UNG, and TLT and the available hedges in highly-correlated instruments, as described above. The Exchange believes that the proposal is consistent with the Act as the proposal would overall add a small number of Wednesday ETP Expirations by limiting the addition of two Wednesday expirations beyond the current week. The addition of Wednesday ETP Expirations would remove impediments to and perfect the mechanism of a free and open market by encouraging Market Makers to continue to deploy capital more efficiently and improve displayed market quality.16 The Exchange believes that the proposal will allow Members to expand hedging tools and tailor their investment and hedging needs more effectively in USO, UNG, GLD, SLV, and TLT as these funds are most likely to be utilized by market participants to hedge the underlying asset classes. Similar to Wednesday SPY, QQQ, and IWM expirations, the introduction of Wednesday ETP Expirations is consistent with the Act as it will, among other things, expand hedging tools available to market participants and allow for a reduced premium cost of buying portfolio protection. The Exchange believes that Wednesday ETP Expirations will allow market participants to purchase options on USO, UNG, GLD, SLV, and TLT based on their timing as needed and allow them to tailor their investment and hedging needs more effectively, thus allowing them to better manage their risk exposure. Today, ISE lists Wednesday SPY, QQQ, and IWM Expirations.17 In particular, the Exchange believes the Short Term Option Series Program has been successful to date and that Wednesday ETP Expirations should simply expand the ability of investors to hedge risk against market movements stemming from economic releases or market events that occur throughout the 16 Today, Primary Market Makers and Market Makers are required to quote a specified time in their assigned options series. See ISE Options 2, Section 5. 17 See ISE Supplementary Material .03 at Options 4, Section 5. E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 88, No. 117 / Tuesday, June 20, 2023 / Notices month in the same way that the Short Term Option Series Program has expanded the landscape of hedging. There are no material differences in the treatment of Wednesday SPY, QQQ and IWM expirations compared to the proposed Wednesday ETP Expirations. Given the similarities between Wednesday SPY, QQQ and IWM expirations and the proposed Wednesday ETP Expirations, the Exchange believes that applying the provisions in Supplementary Material .03 to Options 4, Section 5 that currently apply to Wednesday SPY, QQQ and IWM expirations is justified. For example, the Exchange believes that allowing Wednesday ETP Expirations and monthly Exchange Traded Product expirations in the same week will benefit investors and minimize investor confusion by providing Wednesday ETP Expirations in a continuous and uniform manner. lotter on DSK11XQN23PROD with NOTICES1 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. While the proposal will expand the Short Term Options Expirations to allow Wednesday ETP Expirations to be listed on ISE,18 the Exchange believes that this limited expansion for Wednesday expirations for options on USO, UNG, GLD, SLV, and TLT will not impose an undue burden on competition; rather, it will meet customer demand. The Exchange believes that Members will continue to be able to expand hedging tools and tailor their investment and hedging needs more effectively in USO, UNG, GLD, SLV, and TLT given multi-class nature of these products and the available hedges in highly-correlated instruments, as described above. Similar to Wednesday SPY, QQQ and IWM expirations, the introduction of Wednesday ETP Expirations does not impose an undue burden on competition. The Exchange believes that it will, among other things, expand hedging tools available to market participants and allow for a reduced premium cost of buying portfolio protection. The Exchange believes that Wednesday ETP Expirations will allow market participants to purchase options on USO, UNG, GLD, SLV, and TLT based on their timing as needed and 18 As noted above, Nasdaq, Phlx, BX, GEMX and MRX incorporate ISE Options 4, Section 5 by reference, so the proposed changes herein will apply to those markets as well. VerDate Sep<11>2014 16:52 Jun 16, 2023 Jkt 259001 allow them to tailor their investment and hedging needs more effectively. The Exchange does not believe the proposal will impose any burden on inter-market competition, as nothing prevents the other options exchanges from proposing similar rules to list and trade Wednesday ETP Expirations.19 Further, the Exchange does not believe the proposal will impose any burden on intra-market competition, as all market participants will be treated in the same manner under this proposal. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments 39885 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 a.m. and 3 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–2023–11 and should be submitted on or before July 11, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–13005 Filed 6–16–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97708; File No. SR– NYSEARCA–2023–40] • 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–2023–11 on the subject line. Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.37–E To Specify the Exchange’s Source of Data Feeds From MEMX LLC Paper Comments June 13, 2023. • 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–2023–11. 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 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 May 31, 2023, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 19 See PO 00000 supra note 18. Frm 00067 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1

Agencies

[Federal Register Volume 88, Number 117 (Tuesday, June 20, 2023)]
[Notices]
[Pages 39876-39885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13005]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97719; File No. SR-ISE-2023-11]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
of Proposed Rule Change To Amend the Short Term Option Series Program 
in Supplementary Material .03 of Options 4, Section 5

June 13, 2023.
    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 May 31, 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.
---------------------------------------------------------------------------

    \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 the Short Term Option Series Program 
in Supplementary Material .03 of Options 4, Section 5 (Series of 
Options Contracts Open for Trading).
    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

[[Page 39877]]

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 Supplementary Material .03 of 
Options 4, Section 5, ``Series of Options Contracts Open for Trading.'' 
Specifically, the Exchange proposes to expand the Short Term Option 
Series Program to permit the listing of two Wednesday expirations for 
options on United States Oil Fund, LP (``USO''), United States Natural 
Gas Fund, LP (``UNG''), SPDR Gold Shares (``GLD''), iShares Silver 
Trust (``SLV''), and iShares 20+ Year Treasury Bond ETF (``TLT'') 
(collectively ``Exchange Traded Products'' or ``ETPs'').
    Currently, as set forth in Supplementary Material .03 to Options 4, 
Section 5, after an option class has been approved for listing and 
trading on the Exchange as a Short Term Option Series pursuant to 
Options 1, Section 1(a)(49),\3\ the Exchange may open for trading on 
any Thursday or Friday that is a business day (``Short Term Option 
Opening Date'') series of options on that class that expire at the 
close of business on each of the next five Fridays that are business 
days and are not Fridays in which monthly options series or Quarterly 
Options Series expire (``Friday Short Term Option Expiration Dates''). 
The Exchange may have no more than a total of five Short Term Option 
Expiration Dates. Further, if the Exchange is not open for business on 
the respective Thursday or Friday, the Short Term Option Opening Date 
for Short Term Option Weekly Expirations will be the first business day 
immediately prior to that respective Thursday or Friday. Similarly, if 
the Exchange is not open for business on a Friday, the Short Term 
Option Expiration Date for Short Term Option Weekly Expirations will be 
the first business day immediately prior to that Friday.
---------------------------------------------------------------------------

    \3\ Options 1, Section 1(a)(49) provides that a Short Term 
Option Series means a series in an option class that is approved for 
listing and trading on the Exchange in which the series is opened 
for trading on any Monday, Tuesday, Wednesday, Thursday or Friday 
that is a business day and that expires on the Monday, Wednesday or 
Friday of the following business week that is a business day, or, in 
the case of a series that is listed on a Friday and expires on a 
Monday, is listed one business week and one business day prior to 
that expiration. If a Tuesday, Wednesday, Thursday or Friday is not 
a business day, the series may be opened (or shall expire) on the 
first business day immediately prior to that Tuesday, Wednesday, 
Thursday or Friday. For a series listed pursuant to this section for 
Monday expiration, if a Monday is not a business day, the series 
shall expire on the first business day immediately following that 
Monday.
---------------------------------------------------------------------------

    Additionally, the Exchange may open for trading series of options 
on the symbols provided in Table 1 of Supplementary Material .03 to 
Options 4, Section 5 that expire at the close of business on each of 
the next two Mondays, Tuesdays, Wednesdays, and Thursdays, 
respectively, that are business days and are not business days in which 
monthly options series or Quarterly Options Series expire (``Short Term 
Option Daily Expirations''). For those symbols listed in Table 1, the 
Exchange may have no more than a total of two Short Term Option Daily 
Expirations for each of Monday, Tuesday, Wednesday, and Thursday 
expirations at one time.
Proposal
    At this time, the Exchange proposes to expand the Short Term Option 
Daily Expirations to permit the listing and trading of options on USO, 
UNG, GLD, SLV, and TLT expiring on Wednesdays. The Exchange proposes to 
permit two Short Term Option Expiration Dates beyond the current week 
for each Wednesday expiration at one time.\4\ In order to effectuate 
the proposed changes, the Exchange would add USO, UNG, GLD, SLV, and 
TLT to Table 1 of Supplementary Material .03 to Options 4, Section 5, 
which specifies each symbol that qualifies as a Short Term Option Daily 
Expiration.
---------------------------------------------------------------------------

    \4\ Consistent with the current operation of the rule, the 
Exchange notes that if it adds a Wednesday expiration on a Tuesday, 
it could technically list three outstanding Wednesday expirations at 
one time. The Exchange will therefore clarify the rule text in 
Supplementary Material .03 to Options 4, Section 5 to specify that 
it can list two Short Term Option Expiration Dates beyond the 
current week for each Monday, Tuesday, Wednesday, and Thursday 
expiration.
---------------------------------------------------------------------------

    The proposed Wednesday USO, UNG, GLD, SLV, and TLT expirations will 
be similar to the current Wednesday SPY, QQQ, and IWM Short Term Option 
Daily Expirations set forth in Supplementary Material .03 to Options 4, 
Section 5, such that the Exchange may open for trading on any Tuesday 
or Wednesday that is a business day (beyond the current week) series of 
options on USO, UNG, GLD, SLV, and TLT to expire on any Wednesday of 
the month that is a business day and is not a Wednesday in which 
Quarterly Options Series expire (``Wednesday USO Expirations,'' 
``Wednesday UNG Expirations,'' ``Wednesday GLD Expirations,'' 
``Wednesday SLV Expirations,'' and ``Wednesday TLT Expirations'') 
(collectively, ``Wednesday ETP Expirations'').\5\ In the event Short 
Term Option Daily Expirations expire on a Wednesday and that Wednesday 
is the same day that a Quarterly Options Series expires, the Exchange 
would skip that week's listing and instead list the following week; the 
two weeks would therefore not be consecutive. Today, Wednesday 
expirations in SPY, QQQ, and IWM similarly skip the weekly listing in 
the event the weekly listing expires on the same day in the same class 
as a Quarterly Options Series.
---------------------------------------------------------------------------

    \5\ While the relevant rule text in Supplementary Material .03 
to Options 4, Section 5 also indicates that the Exchange will not 
list such expirations on a Wednesday that is a business day in which 
monthly options series expire, practically speaking this would not 
occur.
---------------------------------------------------------------------------

    USO, UNG, GLD, SLV, and TLT Friday expirations would continue to 
have a total of five Short Term Option Expiration Dates provided those 
Friday expirations are not Fridays in which monthly options series or 
Quarterly Options Series expire (``Friday Short Term Option Expiration 
Dates'').
    Similar to Wednesday SPY, QQQ, and IWM Short Term Option Daily 
Expirations within Supplementary Material .03 to Options 4, Section 5, 
the Exchange proposes that it may open for trading on any Tuesday or 
Wednesday that is a business day series of options on USO, UNG, GLD, 
SLV, and TLT that expire at the close of business on each of the next 
two Wednesdays that are business days and are not business days in 
which Quarterly Options Series expire.
    The interval between strike prices for the proposed Wednesday ETP 
Expirations will be the same as those for the current Short Term Option 
Series for Friday expirations applicable to the Short Term Option 
Series Program.\6\ Specifically, the Wednesday ETP Expirations will 
have a strike interval of $0.50 or greater for strike prices below 
$100, $1 or greater for strike prices between $100 and $150, and $2.50 
or greater for strike prices above $150.\7\ As is the case with other 
equity options series listed pursuant to the Short Term Option Series 
Program, the Wednesday ETP Expirations series will be P.M.-settled.
---------------------------------------------------------------------------

    \6\ See Supplementary Material .03(e) to Options 4, Section 5.
    \7\ Id.
---------------------------------------------------------------------------

    Pursuant to Options 1, Section 1(a)(49), with respect to the Short 
Term Option Series Program, a Wednesday expiration series shall expire 
on the first business day immediately prior to that Wednesday, e.g., 
Tuesday of that week if the Wednesday is not a business day.
    Currently, for each option class eligible for participation in the 
Short

[[Page 39878]]

Term Option Series Program, the Exchange is limited to opening thirty 
(30) series for each expiration date for the specific class.\8\ The 
thirty (30) series restriction does not include series that are open by 
other securities exchanges under their respective weekly rules; the 
Exchange may list these additional series that are listed by other 
options exchanges.\9\ With the proposed changes, this thirty (30) 
series restriction would apply to Wednesday USO, UNG, GLD, SLV, and TLT 
Short Term Option Daily Expirations as well. In addition, the Exchange 
will be able to list series that are listed by other exchanges, 
assuming they file similar rules with the Commission to list Wednesday 
ETP Expirations.
---------------------------------------------------------------------------

    \8\ See Supplementary Material .03(a) to Options 4, Section 5.
    \9\ Id.
---------------------------------------------------------------------------

    With this proposal, Wednesday ETP Expirations would be treated 
similarly to existing Wednesday SPY, QQQ, and IWM Expirations. With 
respect to monthly option series, Short Term Option Daily Expirations 
will be permitted to expire in the same week in which monthly option 
series on the same class expire. Not listing Short Term Option Daily 
Expirations for one week every month because there was a monthly on 
that same class on the Friday of that week would create investor 
confusion.
    Further, as with Wednesday SPY, QQQ, and IWM Expirations, the 
Exchange would not permit Wednesday ETP Expirations to expire on a 
business day in which monthly options series or Quarterly Options 
Series expire. Therefore, all Short Term Option Daily Expirations would 
expire at the close of business on each of the next two Wednesdays that 
are business days and are not business days in which monthly options 
series or Quarterly Options Series expire. The Exchange believes that 
it is reasonable to not permit two expirations on the same day in which 
a monthly options series or a Quarterly Options Series would expire 
because those options would be duplicative of each other.
    The Exchange does not believe that any market disruptions will be 
encountered with the introduction of Wednesday ETP Expirations. The 
Exchange has the necessary capacity and surveillance programs in place 
to support and properly monitor trading in the proposed Wednesday ETP 
Expirations. The Exchange currently trades P.M.-settled Short Term 
Option Series that expire Wednesday for SPY, QQQ and IWM and has not 
experienced any market disruptions nor issues with capacity. Today, the 
Exchange has surveillance programs in place to support and properly 
monitor trading in Short Term Option Series that expire Wednesday for 
SPY, QQQ and IWM.
Impact of Proposal
    The Exchange notes that listings in the Short Term Option Series 
Program comprise a significant part of the standard listings in options 
markets. The below diagrams demonstrate the percentage of weekly 
listings compared to monthly, quarterly, and Long-Term Option Series in 
2020 and 2022 in the options industry.\10\ The weekly strikes decreased 
from 24% to 19% in these two years. The Exchange notes that during this 
timeframe all options exchanges mitigated weekly strike intervals.
---------------------------------------------------------------------------

    \10\ The Exchange sourced this information from The Options 
Clearing Corporation (``OCC''). The information includes time 
averaged data for all 16 options markets up to August 18, 2022.
---------------------------------------------------------------------------

BILLING CODE 8011-01-P

[[Page 39879]]

[GRAPHIC] [TIFF OMITTED] TN20JN23.000

    While the Exchange is expanding the Short Term Option Series 
Program to permit USO, UNG, GLD, SLV, and TLT Wednesday Expirations, 
the Exchange anticipates that it would overall add a small number of 
weekly expiration dates because the Exchange will limit the number of 
Short Term Option Daily Expirations for these ETPs to two Wednesday 
expirations. The below chart displays average daily volume for options 
on USO, UNG, GLD, SLV, and TLT.\11\
---------------------------------------------------------------------------

    \11\ Average daily volume data for options contracts are as of 
November 2022.

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

[[Page 39880]]

[GRAPHIC] [TIFF OMITTED] TN20JN23.001

    The Exchange believes that there is general investor demand for 
alternative expirations, including Wednesday expirations, as evidenced 
by the relatively significant percentage of volume in Wednesday SPY, 
QQQ, and IWM expirations. Notably, in 2022, the Exchange observed that 
Wednesday expiration volume in SPY, QQQ, and IWM consisted of 
approximately 23.3% (for SPY), 19.8% (for QQQ), and 10.9% (for IWM) of 
total volume for the respective symbols.
    Further, the Exchange believes that there is investor demand for 
additional Short Term Option Daily Expirations for USO, UNG, GLD, SLV, 
and TLT based on the total assets under management (``AUM'') for these 
Exchange Traded Products. As illustrated below, the ETPs are all 
leading products in their respective asset classes.\12\
---------------------------------------------------------------------------

    \12\ AUM data for ETPs are as of November 2022.

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

[[Page 39881]]

[GRAPHIC] [TIFF OMITTED] TN20JN23.002


[[Page 39882]]


[GRAPHIC] [TIFF OMITTED] TN20JN23.003

    In addition, the below chart shows post-close movements between 
4:00-5:30 p.m. Eastern Time, and indicates that GLD, SLV, TLT, UNG, and 
USO are less volatile (strike-wise) than SPY,

[[Page 39883]]

QQQ, and IWM, where alternative expirations exist today.
[GRAPHIC] [TIFF OMITTED] TN20JN23.004

    Furthermore, the below chart shows that GLD, SLV, TLT, UNG, and USO 
are less volatile in the last 30 minutes of trading than SPY, QQQ, and 
IWM, which have alternative expirations today.
[GRAPHIC] [TIFF OMITTED] TN20JN23.005


[[Page 39884]]


BILLING CODE 8011-01-C
    The Exchange also notes that GLD, SLV, TLT, USO, and UNG currently 
trade within ``complexes'' where, in addition to the underlying 
security, there are multiple instruments available for hedging. 
Specifically, the GLD complex includes:

.GC--COMEX Gold Futures--CME
.AUD--Gold Daily Futures--ICE
$IAU--iShares Gold Trust
$GLDM--SPDR Gold Minishares Trust
$SGOL--Aberdeen Physical Gold Trust
$BAR--GraniteShares Gold Shares

    The SLV complex includes:

.SI--COMEX Silver Futures--CME
.HIO--Silver Daily Futures--ICE
$SIVR--Aberdeen Physical Silver Trust

    The USO complex includes:

.CL--CME WTI Light Sweet Crude Futures
.HIO--Brent Crude Futures--ICE
$DBO--Invesco DB Oil Fund
$BNO--United States Brent Oil Trust
$OIL--iPath Pure Beta Crude Oil ETN

    The UNG complex includes:

.NG--Henry Hub Natural Gas Futures
ICE--Financial Gas Markets (multi)--ICE
$FCG--First Trust Natural Gas ETF
$UNL--United States 12 mo NG ETF
$HUN--Horizons Natural Gas ETF

    Lastly, the TLT complex includes:

CME--Multiple Interest Rate Futures
ICE--Multiple Interest Rate Futures
US Treasury Securities
$IEF--iShares 7-10 Year Treasury Bond ETF
$GOVT--iShares Barclays US Treasury Bond ETF
Numerous highly correlated FICC ETPs

    Given the multi-asset class nature of these products and available 
hedges in highly-correlated instruments, the Exchange believes that its 
proposal to add Wednesday expirations on these products will not be a 
strain on liquidity providers.
    Because the Exchange proposes to limit the number of Wednesday 
Expirations for options on USO, UNG, GLD, SLV, and TLT to two 
expirations beyond the current week, the Exchange believes that the 
addition of these Wednesday ETP Expirations should encourage Market 
Makers to continue to deploy capital more efficiently and improve 
displayed market quality.\13\
---------------------------------------------------------------------------

    \13\ Market Makers include Primary Market Makers and Competitive 
Market Makers. See ISE Options 1, Section 1(a)(21). Today, Primary 
Market Makers and Competitive Market Makers are required to quote a 
specified time in their assigned options series. See ISE Options 2, 
Section 5.
---------------------------------------------------------------------------

    Similar to SPY, QQQ and IWM Wednesday Expirations, the introduction 
of Wednesday ETP Expirations will, among other things, expand hedging 
tools available to market participants and allow for a reduced premium 
cost of buying portfolio protection. The Exchange believes that 
Wednesday ETP Expirations will allow market participants to hedge their 
portfolios with options on commodities (oil, natural gas, gold, and 
silver) as well as treasury securities, and tailor their investment and 
hedging needs more effectively.
Implementation
    The Exchange proposes to implement this rule change within 30 days 
after Commission approval. The Exchange will issue an Options Trader 
Alert to notify Members of the implementation date.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Similar to Wednesday expirations in SPY, QQQ, and IWM, the proposal 
to permit Wednesday ETP Expirations, subject to the proposed limitation 
of two expirations beyond the current week, would protect investors and 
the public interest by providing the investing public and other market 
participants more choice and flexibility to closely tailor their 
investment and hedging decisions in these options and allow for a 
reduced premium cost of buying portfolio protection, thus allowing them 
to better manage their risk exposure.
    ISE represents that it has an adequate surveillance program in 
place to detect manipulative trading in the proposed option 
expirations, in the same way that it monitors trading in the current 
Short Term Option Series for Wednesday SPY, QQQ and IWM expirations. 
The Exchange also represents that it has the necessary system capacity 
to support the new expirations. Finally, the Exchange does not believe 
that any market disruptions will be encountered with the introduction 
of these option expirations. As discussed above, the Exchange believes 
that its proposal is a modest expansion of weekly expiration dates for 
GLD, SLV, USO, UNG, and TLT given that it will be limited to two 
Wednesday expirations beyond the current week. Furthermore, the above 
charts show less volatility in these five products (both in terms of 
post-close and during the last 30 minutes of trading) compared to SPY, 
QQQ, and IWM, which have alternative expirations (including Wednesday 
expirations) today. Lastly, the Exchange believes its proposal will not 
be a strain on liquidity provides because of the multi-class nature of 
GLD, SLV, USO, UNG, and TLT and the available hedges in highly-
correlated instruments, as described above.
    The Exchange believes that the proposal is consistent with the Act 
as the proposal would overall add a small number of Wednesday ETP 
Expirations by limiting the addition of two Wednesday expirations 
beyond the current week. The addition of Wednesday ETP Expirations 
would remove impediments to and perfect the mechanism of a free and 
open market by encouraging Market Makers to continue to deploy capital 
more efficiently and improve displayed market quality.\16\ The Exchange 
believes that the proposal will allow Members to expand hedging tools 
and tailor their investment and hedging needs more effectively in USO, 
UNG, GLD, SLV, and TLT as these funds are most likely to be utilized by 
market participants to hedge the underlying asset classes.
---------------------------------------------------------------------------

    \16\ Today, Primary Market Makers and Market Makers are required 
to quote a specified time in their assigned options series. See ISE 
Options 2, Section 5.
---------------------------------------------------------------------------

    Similar to Wednesday SPY, QQQ, and IWM expirations, the 
introduction of Wednesday ETP Expirations is consistent with the Act as 
it will, among other things, expand hedging tools available to market 
participants and allow for a reduced premium cost of buying portfolio 
protection. The Exchange believes that Wednesday ETP Expirations will 
allow market participants to purchase options on USO, UNG, GLD, SLV, 
and TLT based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively, thus allowing them to 
better manage their risk exposure. Today, ISE lists Wednesday SPY, QQQ, 
and IWM Expirations.\17\
---------------------------------------------------------------------------

    \17\ See ISE Supplementary Material .03 at Options 4, Section 5.
---------------------------------------------------------------------------

    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Wednesday ETP Expirations 
should simply expand the ability of investors to hedge risk against 
market movements stemming from economic releases or market events that 
occur throughout the

[[Page 39885]]

month in the same way that the Short Term Option Series Program has 
expanded the landscape of hedging.
    There are no material differences in the treatment of Wednesday 
SPY, QQQ and IWM expirations compared to the proposed Wednesday ETP 
Expirations. Given the similarities between Wednesday SPY, QQQ and IWM 
expirations and the proposed Wednesday ETP Expirations, the Exchange 
believes that applying the provisions in Supplementary Material .03 to 
Options 4, Section 5 that currently apply to Wednesday SPY, QQQ and IWM 
expirations is justified. For example, the Exchange believes that 
allowing Wednesday ETP Expirations and monthly Exchange Traded Product 
expirations in the same week will benefit investors and minimize 
investor confusion by providing Wednesday ETP Expirations in a 
continuous and uniform manner.

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.
    While the proposal will expand the Short Term Options Expirations 
to allow Wednesday ETP Expirations to be listed on ISE,\18\ the 
Exchange believes that this limited expansion for Wednesday expirations 
for options on USO, UNG, GLD, SLV, and TLT will not impose an undue 
burden on competition; rather, it will meet customer demand. The 
Exchange believes that Members will continue to be able to expand 
hedging tools and tailor their investment and hedging needs more 
effectively in USO, UNG, GLD, SLV, and TLT given multi-class nature of 
these products and the available hedges in highly-correlated 
instruments, as described above.
---------------------------------------------------------------------------

    \18\ As noted above, Nasdaq, Phlx, BX, GEMX and MRX incorporate 
ISE Options 4, Section 5 by reference, so the proposed changes 
herein will apply to those markets as well.
---------------------------------------------------------------------------

    Similar to Wednesday SPY, QQQ and IWM expirations, the introduction 
of Wednesday ETP Expirations does not impose an undue burden on 
competition. The Exchange believes that it will, among other things, 
expand hedging tools available to market participants and allow for a 
reduced premium cost of buying portfolio protection. The Exchange 
believes that Wednesday ETP Expirations will allow market participants 
to purchase options on USO, UNG, GLD, SLV, and TLT based on their 
timing as needed and allow them to tailor their investment and hedging 
needs more effectively.
    The Exchange does not believe the proposal will impose any burden 
on inter-market competition, as nothing prevents the other options 
exchanges from proposing similar rules to list and trade Wednesday ETP 
Expirations.\19\ Further, the Exchange does not believe the proposal 
will impose any burden on intra-market competition, as all market 
participants will be treated in the same manner under this proposal.
---------------------------------------------------------------------------

    \19\ See supra note 18.
---------------------------------------------------------------------------

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

    No written comments were either solicited or received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-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-ISE-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 
a.m. and 3 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-2023-11 and should be 
submitted on or before July 11, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-13005 Filed 6-16-23; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.