Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a Low Priced Stock Strike Price Interval Program, 86420-86425 [2023-27271]
Download as PDF
<![CDATA[
86420
Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
activity on behalf of Customers, but also
the Member’s relationship with its
Customers via more labor-intensive
exam-based programs. As a result, the
costs associated with administering the
customer component of the Exchange’s
overall regulatory program are
materially higher than the costs
associated with administering the noncustomer component (e.g., Member
proprietary transactions) of its
regulatory program. Thus, the Exchange
believes the Initial ORF Rate (like the
rate assessed for every other day since
the ORF was implemented), is not
unfairly discriminatory because it is
charged to all Members on all their
transactions that clear in the Customer
range at the OCC.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Intramarket Competition
The Exchange believes the proposed
change will change will not impose an
undue burden on competition as it is
charged to all Members on all their
transactions that clear in the Customer
range at the OCC; thus, the amount of
ORF imposed is based on the amount of
Customer volume transacted. The
Exchange believes that the proposed
ORF would not place certain market
participants at an unfair disadvantage
because all options transactions must
clear via a clearing firm. Such clearing
firms can then choose to pass through
all, a portion, or none of the cost of the
ORF to its customers, i.e., the entering
firms. In addition, because the ORF is
collected from Member clearing firms by
the OCC on behalf of the Exchange, the
Exchange believes that using options
transactions in the Customer range
serves as a proxy for how to apportion
regulatory costs among such Members.
khammond on DSKJM1Z7X2PROD with NOTICES
Intermarket Competition
The proposed fee change is not
designed to address any competitive
issues. Rather, the proposed change is
designed to help the Exchange
adequately fund its regulatory activities
while seeking to ensure that total
regulatory revenues do not exceed total
regulatory costs.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to section
19(b)(3)(A)(ii) of the Act 16 and Rule
19b–4(f)(2) 17 thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
MEMX–2023–31 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–MEMX–2023–31. 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
16 15
17 17
VerDate Sep<11>2014
16:54 Dec 12, 2023
Jkt 262001
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00106
Fmt 4703
Sfmt 4703
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–MEMX–2023–31 and should be
submitted on or before January 3, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27261 Filed 12–12–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99114; File No. SRCboeBZX–2023–100]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Adopt a
Low Priced Stock Strike Price Interval
Program
December 7, 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 December
4, 2023, Cboe BZX Exchange, Inc.
(‘‘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 Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
E:\FR\FM\13DEN1.SGM
13DEN1
Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
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
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX Options’’)
proposes to adopt a Low Priced Stock
Strike Price Interval Program. The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
khammond on DSKJM1Z7X2PROD with NOTICES
1. Purpose
The Exchange proposes to amend
Rule 19.6. Miami International
Securities Exchange, LLC (‘‘MIAX’’)
recently received approval to amend its
Rule 404 to implement a new strike
interval program for stocks that are
priced less than $2.50 and have an
average daily trading volume of at least
1,000,000 shares per day for the 3
preceding calendar months.5 At this
time, the Exchange proposes to adopt
rules substantively identical to MIAX in
proposed Rule 19.6, Interpretation and
Policy .08 and amend Rule 19.6,
Interpretation and Policy .05(f) to
harmonize the table within that Rule to
the proposed rule text.
Currently, Rule 19.6 describes the
process and procedures for listing and
trading series of options on the
5 See Securities Exchange Act Release No. 98917
(November 13, 2023), 88 FR 80361 (November 17,
2023) (SR–MIAX–2023–36) (Order Approving a
Proposed Rule Change To Amend Exchange Rule
404, Series of Option Contracts Open for Trading).
VerDate Sep<11>2014
16:54 Dec 12, 2023
Jkt 262001
Exchange. Rule 19.6 provides for a $2.50
Strike Price Program, where the
Exchange may select up to 200 option
classes on individual stocks for which
the interval of strike prices will be $2.50
where the strike price is greater than
$25 but less than $50.6 Rule 19.6,
Interpretation and Policy .02 also
provides for a $1 Strike Price Program,
where the interval between strike prices
of series of options on individual stocks
may be $1.00 or greater provided the
strike price is $50.00 or less, but not less
than $1.00.7 Additionally, Rule 19.6,
Interpretation and Policy .06 provides
for a ‘‘$0.50 Strike Program.’’ The
interval of strike prices of series of
options on individual stocks may be
$0.50 or greater beginning at $0.50
where the strike price is $5.50 or less,
but only for options classes whose
underlying security closed at or below
$5.00 in its primary market on the
previous trading day and which have
national average daily volume that
equals or exceeds 1,000 contracts per
day as determined by The Options
Clearing Corporation (‘‘OCC’’) during
the preceding three calendar months.
The listing of $0.50 strike prices is
limited to options classes overlying no
more than 20 individual stocks as
specifically designated by the Exchange.
The Exchange may list $0.50 strike
prices on any other option classes if
those classes are specifically designated
by other securities exchanges that
employ a similar $0.50 Strike Program
under their respective rules. A stock
shall remain in the $0.50 Strike Program
until otherwise designated by the
Exchange.8
The Exchange proposes to adopt a
new strike interval program for stocks
that are not in the aforementioned $0.50
Strike Program (or the Short Term
Option Series Program) 9 and that close
below $2.50 and have an average daily
trading volume of at least 1,000,000
shares per day for the three preceding
calendar months. The $0.50 Strike
Program considers stocks that have a
closing price at or below $5.00 whereas
the Exchange’s proposal will consider
stocks that have a closing price below
$2.50. Currently, there is a subset of
stocks that are not included in the $0.50
Strike Program as a result of the
limitations of that program which
provides that the listing of $0.50 strike
prices is limited to option classes
overlying no more than 20 individual
stocks as specifically designated by the
Exchange and requires a national
6 See
Rule 19.6, Interpretation and Policy .03(a).
Rule 19.6, Interpretation and Policy .02(a).
8 See Rule 19.6, Interpretation and Policy .06.
9 Rule 19.6, Interpretation and Policy .05.
7 See
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
86421
average daily volume that equals or
exceeds 1,000 contracts per day as
determined by OCC during the
preceding three calendar months.10
Therefore, the Exchange is proposing to
implement a new strike interval
program termed the ‘‘Low Priced Stock
Strike Price Interval Program.’’
To be eligible for the inclusion in the
Low Priced Stock Strike Price Interval
Program, an underlying stock must (1)
close below $2.50 in its primary market
on the previous trading day; and (2)
have an average daily trading volume of
at least 1,000,000 shares per day for the
three preceding calendar months. The
Exchange notes that there is no limit to
the number of classes that will be
eligible for inclusion in the proposed
program, provided, of course, that the
underlying stocks satisfy both the price
and average daily trading volume
requirements of the proposed program.
The Exchange also proposes that after
a stock is added to the Low Priced Stock
Strike Price Interval Program, the
Exchange may list $0.50 strike price
intervals from $0.50 up to $2.00.11 For
the purpose of adding strikes under the
Low Priced Stock Strike Price Interval
Program, the ‘‘price of the underlying
stock’’ is measured in the same way as
‘‘the price of the underlying security’’ is
measured as set forth in Section 3(g) of
the Options Listing Procedures Plan
(‘‘OLPP’’). Further, no additional series
in $0.50 intervals may be listed if the
underlying stock closes at or above
$2.50 in its primary market. Additional
series in $0.50 intervals may not be
added until the underlying stock again
closes below $2.50.
The Exchange’s proposal addresses a
gap in strike coverage for low priced
stocks. The $0.50 Strike Program
considers stocks that close below $5.00
and limits the number of option classes
listed to no more than 20 individual
stocks (provided that the open interest
criteria is also satisfied). Whereas, the
Exchange’s proposal has a narrower
focus, with respect to the underlying’s
stock price, and is targeted on those
stocks that close below $2.50 and does
not limit the number of stocks that may
participate in the program (provided
that the average daily trading volume is
also satisfied). The Exchange does not
believe that any market disruptions will
be encountered with the addition of
these new strikes. The Exchange
10 See
Rule 19.6, Interpretation and Policy .06.
the Exchange may list new strikes on
underlying stocks that meet the eligibility
requirements of the new program, the Exchange
will exercise its discretion and will not list strikes
on underlying stocks the Exchange believes are
subject to imminent delisting from their primary
exchange.
11 While
E:\FR\FM\13DEN1.SGM
13DEN1
khammond on DSKJM1Z7X2PROD with NOTICES
86422
Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
represents that it has the necessary
capacity and surveillance programs in
place to support and properly monitor
trading in the proposed Low Priced
Stock Strike Price Interval Program.
The Exchange believes that the
program’s average daily trading volume
requirement of 1,000,000 shares is a
reasonable threshold to ensure adequate
liquidity in eligible underlying stocks as
it is substantially greater than the
thresholds used for listing options on
equities, American Depository Receipts
(‘‘ADRs’’), and broad-based indexes.
Specifically, underlying securities with
respect to which put or call option
contracts are approved for listing and
trading on the Exchange must meet
certain criteria as determined by the
Exchange. One of those requirements is
that trading volume (in all markets in
which the underlying security is traded)
has been at least 2,400,000 shares in the
preceding 12 months.12 Rule 19.3(f)
provides the criteria for listing options
on ADRs if they meet certain criteria
and guidelines set forth in Rule 19.3.
One of the requirements is that the
average daily trading volume for the
security in the U.S. markets over the
three months preceding the selection of
the ADR for options trading is 100,000
or more shares.13 Finally, the Exchange
may trade options on a broad-based
index pursuant to Rule 19b–4(e) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) provided a number of conditions
are satisfied. One of those conditions is
that each component security that
accounts for at least 1% of the weight
of the index has an average daily trading
volume of at least 90,000 shares during
the last six-month period.14
Additionally, the Exchange proposes
to amend the table in Rule 19.6,
Interpretation and Policy .05(f) to insert
a new column to harmonize the
Exchange’s proposal to the strike
intervals for Short Term Options Series
as described in Rule 19.6, Interpretation
and Policy .05. The table in Rule 19.6,
Interpretation and Policy .05(f) is
intended to limit the intervals between
strikes for multiply listed equity options
within the Short Term Options Series
program that have an expiration date
more than twenty-one days from the
listing date. Specifically, the table
defines the applicable strike intervals
for options on underlying stocks given
the closing price on the primary market
on the last day of the calendar quarter,
and a corresponding average daily
volume of the total number of options
contracts traded in a given security for
12 See
Rule 19.3(b)(4).
Rule 19.3(f)(3)(B).
14 See Rule 29.3(b)(7).
13 See
VerDate Sep<11>2014
16:54 Dec 12, 2023
Jkt 262001
the applicable calendar quarter divided
by the number of trading days in the
applicable calendar quarter.15 However,
the lowest share price column is titled
‘‘less than $25.’’ The Exchange now
proposes to insert a column titled ‘‘Less
than $2.50’’ and to set the strike interval
at $0.50 for each average daily volume
tier represented in the table. Also, the
Exchange proposes to amend the
heading of the column currently titled
‘‘Less than $25,’’ to ‘‘$2.50 to less than
$25’’ as a result of the adoption of the
new proposed column, ‘‘Less than
$2.50.’’ The Exchange believes this
change will remove any potential
conflict between the strike intervals
under the Short Term Options Series
Program and those described herein
under the Exchange’s proposal.
The Exchange recognizes that its
proposal will introduce new strikes in
the marketplace and further
acknowledges that there has been
significant effort to curb strike
proliferation. For example, the
Exchange filed a proposal focused on
the removal, and prevention of the
listing, of strikes which are extraneous
and do not add value to the marketplace
(the ‘‘Strike Interval Proposal’’).16 The
Strike Interval Proposal was intended to
remove repetitive and unnecessary
strike listings across the weekly
expiries. Specifically, the Strike Interval
Proposal aimed to reduce the density of
strike intervals that would be listed in
the later weeks, by creating limitations
for intervals between strikes which have
an expiration date more than twentyone days from the listing date.17 The
Strike Interval Proposal took into
account OCC customer-cleared volume,
using it as an appropriate proxy for
demand. The Strike Interval Proposal
was designed to maintain strikes where
there was customer demand and
eliminate strikes where there was not
demand. At the time of its proposal, the
Exchange estimated that the Strike
Interval Proposal would reduce the
number of listed strikes in the options
market by approximately 81,000
strikes.18 The Exchange proposes to
amend the table to define the strike
interval at $0.50 for underlying stocks
with a share price of less than $2.50.
The Exchange believes this amendment
15 See Securities Exchange Release Act No. 91455
(April 1, 2021), 86 FR 18099 (April 7, 2021) (SR–
CboeBZX–2021–022) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Amend Rule 19.6 (Series of Options Contracts
Open for Trading) in Connection With Limiting the
Number of Strikes Listed for Short Term Option
Series Which Are Available for Quoting and
Trading on the Exchange).
16 Id.
17 Id.
18 Id.
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
will harmonize the Exchange’s proposal
with the Strike Interval Proposal
described above.
The Exchange recognizes that its
proposal will moderately increase the
total number of option series available
on the Exchange. However, the
Exchange’s proposal is designed to only
add strikes where there is investor
demand 19 which will improve market
quality. Under the requirements for the
Low Priced Stock Strike Price Interval
Program as described herein, the
Exchange determined that as of August
9, 2023, 106 symbols met the proposed
criteria. Of those symbols, the Exchange
notes that 36 were in the $1 Strike Price
Interval Program with $1.00 and $2.00
strikes listed. Under the Exchange’s
proposal, the $0.50 and $1.50 strikes for
these symbols would be added for the
current expiration terms. The remaining
70 symbols eligible under the proposal
would have $0.50, $1.00, $1.50 and
$2.00 strikes added to their current
expiration terms. Therefore, the
Exchange notes that for the 106 symbols
eligible for the Low Priced Stock Strike
Price Interval Program, a total of
approximately 3,250 options would be
added. As of August 9, 2023, the
Exchange listed 1,106,550 options, and
therefore, the additional options that
would be listed under this proposal
would represent a relatively minor
increase of 0.294% in the number of
options listed.
The Exchange does not believe that its
proposal contravenes any previous
efforts to curtail unnecessary strikes.
The Exchange’s proposal is targeted to
only underlying stocks that close at less
than $2.50 and that also meet the
average daily trading volume
requirement. Additionally, because the
strike increment is $0.50 there are only
a total of four strikes that may be listed
under the program ($0.50, $1.00, $1.50,
and $2.00) for an eligible underlying
stock. Finally, if an eligible underlying
stock is in another program (e.g., the
$0.50 Strike Program or the $1 Strike
Price Interval Program) the number of
strikes that may be added is further
reduced if there are pre-existing strikes
as part of another strike listing program.
Therefore, the Exchange does not
believe that it will list any unnecessary
or repetitive strikes as part of its
program, and that the strikes that will be
listed will improve market quality and
satisfy investor demand.
19 See proposed Rule 19.6, Interpretation and
Policy .08(a), which requires that an underlying
stock must (1) close below $2.50 in its primary
market on the previous trading day; and (2) have
an average daily trading volume of at least
1,000,000 shares per day for the three preceding
calendar months.
E:\FR\FM\13DEN1.SGM
13DEN1
Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
The Exchange further believes that the
Options Price Reporting Authority
(‘‘OPRA’’), has the necessary systems
capacity to handle any additional
messaging traffic associated with this
proposed rule change. The Exchange
also believes that Members will not
have a capacity issue as a result of the
proposed rule change. Finally, the
Exchange believes that the additional
options will serve to increase liquidity,
provide additional trading and hedging
opportunities for all market
participants, and improve market
quality.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.20 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 21 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, 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.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 22 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
its proposal promotes just and equitable
principles of trade and removes
impediments to and perfects the
mechanisms of a free and open market
and a national market system as the
Exchange has identified a subset of
stocks that are trading under $2.50 and
do not have meaningful strikes
available. For example, on August 9,
2023, symbol SOND closed at $0.50 and
had open interest of over 44,000
contracts and an average daily trading
volume in the underlying stock of over
1,900,000 shares for the three preceding
calendar months.23 Currently the lowest
strike listed is for $2.50, making the
lowest strike 400% away from the
20 15
21 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
22 Id.
23 See
Yahoo! Finance, https://finance.
yahoo.com/quote/SOND/history?p=SOND (last
visited August 10, 2023).
VerDate Sep<11>2014
16:54 Dec 12, 2023
Jkt 262001
closing stock price. Another symbol,
CTXR, closed at $0.92 on August 9,
2023, and had open interest of 63,000
contracts and an average daily trading
volume in the underlying stock of over
1,900,000 shares for the three preceding
calendar months.24 Similarly, the lowest
strike listed is for $2.50, making the
lowest strike more than 170% away
from the closing stock price. Currently,
such products have no at-the-money
options, as well as no in-the-money
calls or out-of-the-money puts. The
Exchange’s proposal will provide
additional strikes in $0.50 increments
from $0.50 up to $2.00 to provide more
meaningful trading and hedging
opportunities for this subset of stocks.
Given the increased granularity of
strikes as proposed under the
Exchange’s proposal out-of-the-money
puts and in-the-money calls will be
created. The Exchange believes this will
allow market participants to tailor their
investment and hedging needs more
effectively.
The Exchange believes its proposal
promotes just and equitable principles
of trade and removes impediments to
and perfects the mechanisms of a free
and open market and a national market
system and, in general, protects
investors and the public interest by
adding strikes that improves market
quality and satisfies investor demand.
The Exchange does not believe that the
number of strikes that will be added
under the program will negatively
impact the market. Additionally, the
proposal does not run counter to any
previous efforts to curb strike
proliferation as those efforts focused on
the removal and prevention of
extraneous strikes where there was no
investor demand. The Exchange’s
proposal requires the satisfaction of an
average daily trading volume threshold
in addition to the underlying stock
closing at a price below $2.50 to be
eligible for the program. The Exchange
believes that the average daily trading
volume threshold of the program
ensures that only strikes with investor
demand will be listed and fills a gap in
strike interval coverage as described
above. Further, being that the strike
interval is $0.50, there are only a
maximum of four strikes that may be
added ($0.50, $1.00, $1.50, and $2.00).
Therefore, the Exchange does not
believe that its proposal will undermine
any previous efforts to eliminate
repetitive and unnecessary strikes in
any fashion.
The Exchange believes that the
proposed program’s average daily
trading volume threshold promotes just
24 Id.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
86423
and equitable principles of trade and
removes impediments to and perfects
the mechanisms of a free and open
market and a national market system
and, in general, protects investors and
the public interest as it is designed to
permit only those stocks with
demonstrably high levels of trading
activity to participate in the program.
The Exchange notes that the proposed
program’s average daily trading volume
requirement is substantially greater than
the average daily trading requirement
currently in place on the Exchange for
options on equity underlyings,25
ADRs,26 and broad-based indexes.27
The Exchange also believes the
proposed rule change is consistent with
Section 6(b)(1) of the Act,28 which
provides that the Exchange be organized
and have the capacity to be able to carry
out the purposes of the Act and to
enforce compliance by the Exchange’s
Members and persons associated with
its Members with the Act, the rules and
regulations thereunder, and the rules of
the Exchange. The proposed rule change
allows the Exchange to respond to
customer demand to provide
meaningful strikes for low priced stocks.
The Exchange does not believe that the
proposed rule would create any capacity
issue or negatively affect market
functionality. Additionally, the
Exchange represents that it has the
necessary systems capacity to support
the new options series and handle
additional messaging traffic associated
with this proposed rule change. The
Exchange also believes that its Members
will not experience any capacity issues
as a result of this proposal. In addition,
the Exchange represents that it believes
that additional strikes for low priced
stocks will serve to increase liquidity
available as well as improve price
efficiency by providing more trading
opportunities for all market
participants. The Exchange believes that
the proposed rule change will benefit
investors by giving them increased
opportunities to execute their
investment and hedging decisions.
Finally, the Exchange believes its
proposal is designed to prevent
fraudulent and manipulative acts and
practices as options may only be listed
on underlyings that satisfy the listing
requirements of the Exchange as
described in 19.3. Specifically, Rule
19.3(a) requires that underlying
securities for which put or call option
contracts are approved for listing and
trading on the Exchange must meet the
25 See
supra note 12.
supra note 13.
27 See supra note 14.
28 15 U.S.C. 78f(b)(1).
26 See
E:\FR\FM\13DEN1.SGM
13DEN1
86424
Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
following criteria: (1) the security must
be registered with the Commission and
be an ‘‘NMS stock’’ as defined in Rule
600 of Regulation NMS under the Act;
(2) the security shall be characterized by
a substantial number of outstanding
shares that are widely held and actively
traded. Additionally, Rule 19.3(b)
provides that, subject to other factors
the Exchange may consider, an
underlying security will not be selected
for options transactions unless: (1) there
are a minimum of 7,000,000 shares of
the underlying security which are
owned by persons other than those
required to report their stock holdings
under Section 16(a) of the Act; (2) there
are a minimum of 2,000 holders of the
underlying security; (3) the issuer is in
compliance with any applicable
requirements of the Act; and (4) trading
volume (in all markets in which the
underlying security is traded) has been
at least 2,400,000 shares in the
preceding 12 months. The Exchange’s
proposal does not impact the eligibility
of an underlying stock to have options
listed on it, but rather addresses only
the listing of new additional option
classes on an underlying listed on the
Exchange in accordance with the
Exchange’s listings rules. As such, the
Exchange believes that the listing
requirements described in Rule 19.3
address potential concerns regarding
possible manipulation. Additionally, in
conjunction with the proposed average
daily volume requirement described
herein, the Exchange believes any
possible market manipulation is further
mitigated.
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 does not believe that its
proposed rule change will impose any
burden on intramarket competition as
the Rules of the Exchange apply equally
to all Members and all Members may
trade the new proposed strikes if they so
choose. Specifically, the Exchange
believes that investors and market
participants will significantly benefit
from the availability of finer strike price
intervals for stocks priced below $2.50,
which will allow them to tailor their
investment and hedging needs more
effectively. The Exchange’s proposal is
substantively identical to MIAX
Interpretations and Policies .11 and .12
to Rule 404.
The Exchange does not believe that its
proposed rule change will impose any
burden on intermarket competition, as
VerDate Sep<11>2014
16:54 Dec 12, 2023
Jkt 262001
nothing prevents other options
exchanges from proposing similar rules
to list and trade options on low priced
stocks. Rather the Exchange believes
that its proposal will promote
intermarket competition, as the
Exchange’s proposal will result in
additional opportunities for investors to
achieve their investment and trading
objectives, to the benefit of investors,
market participants, and the
marketplace in general.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A) of the
Act 29 and Rule 19b–4(f)(6) 30
thereunder, the Exchange has
designated this proposal as one that
effects a change that: (i) does not
significantly affect the protection of
investors or the public interest; (ii) does
not impose any significant burden on
competition; and (iii) by its terms, does
not become operative for 30 days after
the date of the filing, or such shorter
time as the Commission may designate
if consistent with the protection of
investors and the public interest.31
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act normally does not become operative
for 30 days after the date of its filing.
However, Rule 19b–4(f)(6)(iii) 32 permits
the Commission to designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange requested that
the Commission waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Commission notes it has
approved a proposed rule change
substantially identical to the one
proposed by the Exchange.33 The
proposed change raises no novel legal or
regulatory issues. Therefore, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
29 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
31 In addition, Rule 19b–4(f)(6) requires a selfregulatory organization to give the Commission
written notice of its intent to file the proposed rule
change at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
32 17 CFR 240.19b–4(f)(6)(iii).
33 See supra note 5.
30 17
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change operative upon
filing.34
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
CboeBZX–2023–100 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–CboeBZX–2023–100. 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
34 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).
E:\FR\FM\13DEN1.SGM
13DEN1
Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices
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–CboeBZX–2023–100 and should be
submitted on or before January 3, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–27271 Filed 12–12–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99102; File No. SR–
NASDAQ–2023–051]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Options 4A To Adopt Monthly Options
Series
December 7, 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 November
29, 2023, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
khammond on DSKJM1Z7X2PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Rules at Options 4A (Options Index
Rules) to adopt Monthly Options Series.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
35 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
16:54 Dec 12, 2023
Jkt 262001
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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Options 4A (Options Index Rules),
identical to the rules recently approved
for Cboe Exchange, Inc. (‘‘Cboe’’),3 to
accommodate the listing of option series
that would expire at the close of
business on the last business day of a
calendar month (‘‘Monthly Options
Series’’). Cboe’s recently approved rule
change 4 introduces Monthly Options
Series for indexes and exchange-traded
funds (‘‘ETFs’’). This rule change
proposes to adopt Monthly Options
Series for indexes in Options 4A.
Nasdaq ISE, LLC (‘‘ISE’’) will separately
file a rule change to proposes to adopt
Monthly Options Series for ETFs in ISE
Options 4. The Exchange’s Options 4
rules, which govern the ability to
transact options on ETFs, incorporate
ISE Options 4 by reference.
The Exchange proposes to define
‘‘Monthly Options Series’’ in Options
4A, Section 2(l) to mean a series in an
options class that is approved for listing
and trading on the Exchange in which
the series is opened for trading on any
business day and that expires at the
close of business on the last business
day of a calendar month. The Exchange
proposes to re-letter the subsequent
definitions in Options 4A, Section 2.5
Pursuant to proposed Options 4A,
Section 12(i)(1)(A), the Exchange may
list Monthly Options Series for up to
five currently listed option classes that
3 See Securities Exchange Act Release No. 98915
(November 13, 2023), 88 FR 80356 (November 17,
2023) (SR–Cboe–2023–049) (‘‘Cboe Approval
Order’’).
4 Id.
5 The Exchange also proposes to fix an incorrect
cross cite to the definition of broad-based index in
Options 4A, Section 3(b)(1).
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
86425
are index options or options on ETFs.6
In addition, the Exchange may also list
Monthly Options Series on any options
classes that are selected by other
securities exchanges that employ a
similar program under their respective
rules.7 The Exchange may list 12
expirations for Monthly Options Series.
Monthly Options Series need not be for
consecutive months; however, the
expiration date of a nonconsecutive
expiration may not be beyond what
would be considered the last expiration
date if the maximum number of
expirations were listed consecutively.8
Other expirations in the same class are
not counted as part of the maximum
numbers of Monthly Options Series
expirations for a class.9 Monthly
Options Series will be P.M.-settled.10
The strike price of each Monthly
Options Series will be fixed at a price
per share, with at least two, but no more
than five, strike prices above and at least
two, but no more than five, strike prices
below the value of the underlying index
or price of the underlying security at
about the time that a Monthly Options
Series is opened for trading on the
Exchange. The Exchange will list strike
prices for Monthly Options Series that
are reasonably related to the current
price of the underlying security or
current index value of the underlying
index to which such series relates at
about the time such series of options is
first opened for trading on the
Exchange. The term ‘‘reasonably related
6 As provided in the proposed Options 4A,
Section 12(i)(1)(A), the Exchange may list Monthly
Options Series for up to five currently listed option
classes that are index options or options on ETFs;
the five Monthly Options Series include both index
options and ETF options in the aggregate.
7 See Cboe Approval Order.
8 The Exchange notes this provision considers
consecutive monthly listings. In other words, as
other expirations (such as Quarterly Options Series)
are not counted as part of the maximum, those
expirations would not be considered when
considering when the last expiration date would be
if the maximum number were listed consecutively.
For example, if it is January 2024 and the Exchange
lists Quarterly Options Series in class ABC with
expirations in March, June, September, December,
and the following March, the Exchange could also
list Monthly Options Series in class ABC with
expirations in January, February, April, May, July,
August, October, and November 2024 and January
and February of 2025. This is because, if Quarterly
Options Series, for example, were counted, the
Exchange would otherwise never be able to list the
maximum number of Monthly Options Series. This
is consistent with the listing provisions for
Quarterly Options Series, which permit calendar
quarter expirations. The need to list series with the
same expiration in the current calendar year and
the following calendar year (whether Monthly or
Quarterly expiration) is to allow market participants
to execute one-year strategies pursuant to which
they may roll their exposures in the longer-dated
options (e.g., January 2025) prior to the expiration
of the nearer-dated option (e.g., January 2024).
9 See proposed Options 4A, Section 12(i)(1)(B).
10 See proposed Options 4A, Section 12(i)(1)(C).
E:\FR\FM\13DEN1.SGM
13DEN1
]]>Agencies
[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86420-86425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27271]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99114; File No. SR-CboeBZX-2023-100]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt a
Low Priced Stock Strike Price Interval Program
December 7, 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 December 4, 2023, Cboe BZX Exchange, Inc. (``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 Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
[[Page 86421]]
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'')
proposes to adopt a Low Priced Stock Strike Price Interval Program. The
text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, 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.
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 Rule 19.6. Miami International
Securities Exchange, LLC (``MIAX'') recently received approval to amend
its Rule 404 to implement a new strike interval program for stocks that
are priced less than $2.50 and have an average daily trading volume of
at least 1,000,000 shares per day for the 3 preceding calendar
months.\5\ At this time, the Exchange proposes to adopt rules
substantively identical to MIAX in proposed Rule 19.6, Interpretation
and Policy .08 and amend Rule 19.6, Interpretation and Policy .05(f) to
harmonize the table within that Rule to the proposed rule text.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 98917 (November 13,
2023), 88 FR 80361 (November 17, 2023) (SR-MIAX-2023-36) (Order
Approving a Proposed Rule Change To Amend Exchange Rule 404, Series
of Option Contracts Open for Trading).
---------------------------------------------------------------------------
Currently, Rule 19.6 describes the process and procedures for
listing and trading series of options on the Exchange. Rule 19.6
provides for a $2.50 Strike Price Program, where the Exchange may
select up to 200 option classes on individual stocks for which the
interval of strike prices will be $2.50 where the strike price is
greater than $25 but less than $50.\6\ Rule 19.6, Interpretation and
Policy .02 also provides for a $1 Strike Price Program, where the
interval between strike prices of series of options on individual
stocks may be $1.00 or greater provided the strike price is $50.00 or
less, but not less than $1.00.\7\ Additionally, Rule 19.6,
Interpretation and Policy .06 provides for a ``$0.50 Strike Program.''
The interval of strike prices of series of options on individual stocks
may be $0.50 or greater beginning at $0.50 where the strike price is
$5.50 or less, but only for options classes whose underlying security
closed at or below $5.00 in its primary market on the previous trading
day and which have national average daily volume that equals or exceeds
1,000 contracts per day as determined by The Options Clearing
Corporation (``OCC'') during the preceding three calendar months. The
listing of $0.50 strike prices is limited to options classes overlying
no more than 20 individual stocks as specifically designated by the
Exchange. The Exchange may list $0.50 strike prices on any other option
classes if those classes are specifically designated by other
securities exchanges that employ a similar $0.50 Strike Program under
their respective rules. A stock shall remain in the $0.50 Strike
Program until otherwise designated by the Exchange.\8\
---------------------------------------------------------------------------
\6\ See Rule 19.6, Interpretation and Policy .03(a).
\7\ See Rule 19.6, Interpretation and Policy .02(a).
\8\ See Rule 19.6, Interpretation and Policy .06.
---------------------------------------------------------------------------
The Exchange proposes to adopt a new strike interval program for
stocks that are not in the aforementioned $0.50 Strike Program (or the
Short Term Option Series Program) \9\ and that close below $2.50 and
have an average daily trading volume of at least 1,000,000 shares per
day for the three preceding calendar months. The $0.50 Strike Program
considers stocks that have a closing price at or below $5.00 whereas
the Exchange's proposal will consider stocks that have a closing price
below $2.50. Currently, there is a subset of stocks that are not
included in the $0.50 Strike Program as a result of the limitations of
that program which provides that the listing of $0.50 strike prices is
limited to option classes overlying no more than 20 individual stocks
as specifically designated by the Exchange and requires a national
average daily volume that equals or exceeds 1,000 contracts per day as
determined by OCC during the preceding three calendar months.\10\
Therefore, the Exchange is proposing to implement a new strike interval
program termed the ``Low Priced Stock Strike Price Interval Program.''
---------------------------------------------------------------------------
\9\ Rule 19.6, Interpretation and Policy .05.
\10\ See Rule 19.6, Interpretation and Policy .06.
---------------------------------------------------------------------------
To be eligible for the inclusion in the Low Priced Stock Strike
Price Interval Program, an underlying stock must (1) close below $2.50
in its primary market on the previous trading day; and (2) have an
average daily trading volume of at least 1,000,000 shares per day for
the three preceding calendar months. The Exchange notes that there is
no limit to the number of classes that will be eligible for inclusion
in the proposed program, provided, of course, that the underlying
stocks satisfy both the price and average daily trading volume
requirements of the proposed program.
The Exchange also proposes that after a stock is added to the Low
Priced Stock Strike Price Interval Program, the Exchange may list $0.50
strike price intervals from $0.50 up to $2.00.\11\ For the purpose of
adding strikes under the Low Priced Stock Strike Price Interval
Program, the ``price of the underlying stock'' is measured in the same
way as ``the price of the underlying security'' is measured as set
forth in Section 3(g) of the Options Listing Procedures Plan
(``OLPP''). Further, no additional series in $0.50 intervals may be
listed if the underlying stock closes at or above $2.50 in its primary
market. Additional series in $0.50 intervals may not be added until the
underlying stock again closes below $2.50.
---------------------------------------------------------------------------
\11\ While the Exchange may list new strikes on underlying
stocks that meet the eligibility requirements of the new program,
the Exchange will exercise its discretion and will not list strikes
on underlying stocks the Exchange believes are subject to imminent
delisting from their primary exchange.
---------------------------------------------------------------------------
The Exchange's proposal addresses a gap in strike coverage for low
priced stocks. The $0.50 Strike Program considers stocks that close
below $5.00 and limits the number of option classes listed to no more
than 20 individual stocks (provided that the open interest criteria is
also satisfied). Whereas, the Exchange's proposal has a narrower focus,
with respect to the underlying's stock price, and is targeted on those
stocks that close below $2.50 and does not limit the number of stocks
that may participate in the program (provided that the average daily
trading volume is also satisfied). The Exchange does not believe that
any market disruptions will be encountered with the addition of these
new strikes. The Exchange
[[Page 86422]]
represents that it has the necessary capacity and surveillance programs
in place to support and properly monitor trading in the proposed Low
Priced Stock Strike Price Interval Program.
The Exchange believes that the program's average daily trading
volume requirement of 1,000,000 shares is a reasonable threshold to
ensure adequate liquidity in eligible underlying stocks as it is
substantially greater than the thresholds used for listing options on
equities, American Depository Receipts (``ADRs''), and broad-based
indexes. Specifically, underlying securities with respect to which put
or call option contracts are approved for listing and trading on the
Exchange must meet certain criteria as determined by the Exchange. One
of those requirements is that trading volume (in all markets in which
the underlying security is traded) has been at least 2,400,000 shares
in the preceding 12 months.\12\ Rule 19.3(f) provides the criteria for
listing options on ADRs if they meet certain criteria and guidelines
set forth in Rule 19.3. One of the requirements is that the average
daily trading volume for the security in the U.S. markets over the
three months preceding the selection of the ADR for options trading is
100,000 or more shares.\13\ Finally, the Exchange may trade options on
a broad-based index pursuant to Rule 19b-4(e) of the Securities
Exchange Act of 1934 (the ``Act'') provided a number of conditions are
satisfied. One of those conditions is that each component security that
accounts for at least 1% of the weight of the index has an average
daily trading volume of at least 90,000 shares during the last six-
month period.\14\
---------------------------------------------------------------------------
\12\ See Rule 19.3(b)(4).
\13\ See Rule 19.3(f)(3)(B).
\14\ See Rule 29.3(b)(7).
---------------------------------------------------------------------------
Additionally, the Exchange proposes to amend the table in Rule
19.6, Interpretation and Policy .05(f) to insert a new column to
harmonize the Exchange's proposal to the strike intervals for Short
Term Options Series as described in Rule 19.6, Interpretation and
Policy .05. The table in Rule 19.6, Interpretation and Policy .05(f) is
intended to limit the intervals between strikes for multiply listed
equity options within the Short Term Options Series program that have
an expiration date more than twenty-one days from the listing date.
Specifically, the table defines the applicable strike intervals for
options on underlying stocks given the closing price on the primary
market on the last day of the calendar quarter, and a corresponding
average daily volume of the total number of options contracts traded in
a given security for the applicable calendar quarter divided by the
number of trading days in the applicable calendar quarter.\15\ However,
the lowest share price column is titled ``less than $25.'' The Exchange
now proposes to insert a column titled ``Less than $2.50'' and to set
the strike interval at $0.50 for each average daily volume tier
represented in the table. Also, the Exchange proposes to amend the
heading of the column currently titled ``Less than $25,'' to ``$2.50 to
less than $25'' as a result of the adoption of the new proposed column,
``Less than $2.50.'' The Exchange believes this change will remove any
potential conflict between the strike intervals under the Short Term
Options Series Program and those described herein under the Exchange's
proposal.
---------------------------------------------------------------------------
\15\ See Securities Exchange Release Act No. 91455 (April 1,
2021), 86 FR 18099 (April 7, 2021) (SR-CboeBZX-2021-022) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 19.6 (Series of Options Contracts Open for Trading) in
Connection With Limiting the Number of Strikes Listed for Short Term
Option Series Which Are Available for Quoting and Trading on the
Exchange).
---------------------------------------------------------------------------
The Exchange recognizes that its proposal will introduce new
strikes in the marketplace and further acknowledges that there has been
significant effort to curb strike proliferation. For example, the
Exchange filed a proposal focused on the removal, and prevention of the
listing, of strikes which are extraneous and do not add value to the
marketplace (the ``Strike Interval Proposal'').\16\ The Strike Interval
Proposal was intended to remove repetitive and unnecessary strike
listings across the weekly expiries. Specifically, the Strike Interval
Proposal aimed to reduce the density of strike intervals that would be
listed in the later weeks, by creating limitations for intervals
between strikes which have an expiration date more than twenty-one days
from the listing date.\17\ The Strike Interval Proposal took into
account OCC customer-cleared volume, using it as an appropriate proxy
for demand. The Strike Interval Proposal was designed to maintain
strikes where there was customer demand and eliminate strikes where
there was not demand. At the time of its proposal, the Exchange
estimated that the Strike Interval Proposal would reduce the number of
listed strikes in the options market by approximately 81,000
strikes.\18\ The Exchange proposes to amend the table to define the
strike interval at $0.50 for underlying stocks with a share price of
less than $2.50. The Exchange believes this amendment will harmonize
the Exchange's proposal with the Strike Interval Proposal described
above.
---------------------------------------------------------------------------
\16\ Id.
\17\ Id.
\18\ Id.
---------------------------------------------------------------------------
The Exchange recognizes that its proposal will moderately increase
the total number of option series available on the Exchange. However,
the Exchange's proposal is designed to only add strikes where there is
investor demand \19\ which will improve market quality. Under the
requirements for the Low Priced Stock Strike Price Interval Program as
described herein, the Exchange determined that as of August 9, 2023,
106 symbols met the proposed criteria. Of those symbols, the Exchange
notes that 36 were in the $1 Strike Price Interval Program with $1.00
and $2.00 strikes listed. Under the Exchange's proposal, the $0.50 and
$1.50 strikes for these symbols would be added for the current
expiration terms. The remaining 70 symbols eligible under the proposal
would have $0.50, $1.00, $1.50 and $2.00 strikes added to their current
expiration terms. Therefore, the Exchange notes that for the 106
symbols eligible for the Low Priced Stock Strike Price Interval
Program, a total of approximately 3,250 options would be added. As of
August 9, 2023, the Exchange listed 1,106,550 options, and therefore,
the additional options that would be listed under this proposal would
represent a relatively minor increase of 0.294% in the number of
options listed.
---------------------------------------------------------------------------
\19\ See proposed Rule 19.6, Interpretation and Policy .08(a),
which requires that an underlying stock must (1) close below $2.50
in its primary market on the previous trading day; and (2) have an
average daily trading volume of at least 1,000,000 shares per day
for the three preceding calendar months.
---------------------------------------------------------------------------
The Exchange does not believe that its proposal contravenes any
previous efforts to curtail unnecessary strikes. The Exchange's
proposal is targeted to only underlying stocks that close at less than
$2.50 and that also meet the average daily trading volume requirement.
Additionally, because the strike increment is $0.50 there are only a
total of four strikes that may be listed under the program ($0.50,
$1.00, $1.50, and $2.00) for an eligible underlying stock. Finally, if
an eligible underlying stock is in another program (e.g., the $0.50
Strike Program or the $1 Strike Price Interval Program) the number of
strikes that may be added is further reduced if there are pre-existing
strikes as part of another strike listing program. Therefore, the
Exchange does not believe that it will list any unnecessary or
repetitive strikes as part of its program, and that the strikes that
will be listed will improve market quality and satisfy investor demand.
[[Page 86423]]
The Exchange further believes that the Options Price Reporting
Authority (``OPRA''), has the necessary systems capacity to handle any
additional messaging traffic associated with this proposed rule change.
The Exchange also believes that Members will not have a capacity issue
as a result of the proposed rule change. Finally, the Exchange believes
that the additional options will serve to increase liquidity, provide
additional trading and hedging opportunities for all market
participants, and improve market quality.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\20\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \21\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \22\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
\22\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes its proposal promotes just and
equitable principles of trade and removes impediments to and perfects
the mechanisms of a free and open market and a national market system
as the Exchange has identified a subset of stocks that are trading
under $2.50 and do not have meaningful strikes available. For example,
on August 9, 2023, symbol SOND closed at $0.50 and had open interest of
over 44,000 contracts and an average daily trading volume in the
underlying stock of over 1,900,000 shares for the three preceding
calendar months.\23\ Currently the lowest strike listed is for $2.50,
making the lowest strike 400% away from the closing stock price.
Another symbol, CTXR, closed at $0.92 on August 9, 2023, and had open
interest of 63,000 contracts and an average daily trading volume in the
underlying stock of over 1,900,000 shares for the three preceding
calendar months.\24\ Similarly, the lowest strike listed is for $2.50,
making the lowest strike more than 170% away from the closing stock
price. Currently, such products have no at-the-money options, as well
as no in-the-money calls or out-of-the-money puts. The Exchange's
proposal will provide additional strikes in $0.50 increments from $0.50
up to $2.00 to provide more meaningful trading and hedging
opportunities for this subset of stocks. Given the increased
granularity of strikes as proposed under the Exchange's proposal out-
of-the-money puts and in-the-money calls will be created. The Exchange
believes this will allow market participants to tailor their investment
and hedging needs more effectively.
---------------------------------------------------------------------------
\23\ See Yahoo! Finance, https://finance.yahoo.com/quote/SOND/history?p=SOND (last visited August 10, 2023).
\24\ Id.
---------------------------------------------------------------------------
The Exchange believes its proposal promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanisms of a free and open market and a national market system and,
in general, protects investors and the public interest by adding
strikes that improves market quality and satisfies investor demand. The
Exchange does not believe that the number of strikes that will be added
under the program will negatively impact the market. Additionally, the
proposal does not run counter to any previous efforts to curb strike
proliferation as those efforts focused on the removal and prevention of
extraneous strikes where there was no investor demand. The Exchange's
proposal requires the satisfaction of an average daily trading volume
threshold in addition to the underlying stock closing at a price below
$2.50 to be eligible for the program. The Exchange believes that the
average daily trading volume threshold of the program ensures that only
strikes with investor demand will be listed and fills a gap in strike
interval coverage as described above. Further, being that the strike
interval is $0.50, there are only a maximum of four strikes that may be
added ($0.50, $1.00, $1.50, and $2.00). Therefore, the Exchange does
not believe that its proposal will undermine any previous efforts to
eliminate repetitive and unnecessary strikes in any fashion.
The Exchange believes that the proposed program's average daily
trading volume threshold promotes just and equitable principles of
trade and removes impediments to and perfects the mechanisms of a free
and open market and a national market system and, in general, protects
investors and the public interest as it is designed to permit only
those stocks with demonstrably high levels of trading activity to
participate in the program. The Exchange notes that the proposed
program's average daily trading volume requirement is substantially
greater than the average daily trading requirement currently in place
on the Exchange for options on equity underlyings,\25\ ADRs,\26\ and
broad-based indexes.\27\
---------------------------------------------------------------------------
\25\ See supra note 12.
\26\ See supra note 13.
\27\ See supra note 14.
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change is consistent
with Section 6(b)(1) of the Act,\28\ which provides that the Exchange
be organized and have the capacity to be able to carry out the purposes
of the Act and to enforce compliance by the Exchange's Members and
persons associated with its Members with the Act, the rules and
regulations thereunder, and the rules of the Exchange. The proposed
rule change allows the Exchange to respond to customer demand to
provide meaningful strikes for low priced stocks. The Exchange does not
believe that the proposed rule would create any capacity issue or
negatively affect market functionality. Additionally, the Exchange
represents that it has the necessary systems capacity to support the
new options series and handle additional messaging traffic associated
with this proposed rule change. The Exchange also believes that its
Members will not experience any capacity issues as a result of this
proposal. In addition, the Exchange represents that it believes that
additional strikes for low priced stocks will serve to increase
liquidity available as well as improve price efficiency by providing
more trading opportunities for all market participants. The Exchange
believes that the proposed rule change will benefit investors by giving
them increased opportunities to execute their investment and hedging
decisions.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------
Finally, the Exchange believes its proposal is designed to prevent
fraudulent and manipulative acts and practices as options may only be
listed on underlyings that satisfy the listing requirements of the
Exchange as described in 19.3. Specifically, Rule 19.3(a) requires that
underlying securities for which put or call option contracts are
approved for listing and trading on the Exchange must meet the
[[Page 86424]]
following criteria: (1) the security must be registered with the
Commission and be an ``NMS stock'' as defined in Rule 600 of Regulation
NMS under the Act; (2) the security shall be characterized by a
substantial number of outstanding shares that are widely held and
actively traded. Additionally, Rule 19.3(b) provides that, subject to
other factors the Exchange may consider, an underlying security will
not be selected for options transactions unless: (1) there are a
minimum of 7,000,000 shares of the underlying security which are owned
by persons other than those required to report their stock holdings
under Section 16(a) of the Act; (2) there are a minimum of 2,000
holders of the underlying security; (3) the issuer is in compliance
with any applicable requirements of the Act; and (4) trading volume (in
all markets in which the underlying security is traded) has been at
least 2,400,000 shares in the preceding 12 months. The Exchange's
proposal does not impact the eligibility of an underlying stock to have
options listed on it, but rather addresses only the listing of new
additional option classes on an underlying listed on the Exchange in
accordance with the Exchange's listings rules. As such, the Exchange
believes that the listing requirements described in Rule 19.3 address
potential concerns regarding possible manipulation. Additionally, in
conjunction with the proposed average daily volume requirement
described herein, the Exchange believes any possible market
manipulation is further mitigated.
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 does not
believe that its proposed rule change will impose any burden on
intramarket competition as the Rules of the Exchange apply equally to
all Members and all Members may trade the new proposed strikes if they
so choose. Specifically, the Exchange believes that investors and
market participants will significantly benefit from the availability of
finer strike price intervals for stocks priced below $2.50, which will
allow them to tailor their investment and hedging needs more
effectively. The Exchange's proposal is substantively identical to MIAX
Interpretations and Policies .11 and .12 to Rule 404.
The Exchange does not believe that its proposed rule change will
impose any burden on intermarket competition, as nothing prevents other
options exchanges from proposing similar rules to list and trade
options on low priced stocks. Rather the Exchange believes that its
proposal will promote intermarket competition, as the Exchange's
proposal will result in additional opportunities for investors to
achieve their investment and trading objectives, to the benefit of
investors, market participants, and the marketplace in general.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A) of the Act \29\ and Rule 19b-
4(f)(6) \30\ thereunder, the Exchange has designated this proposal as
one that effects a change that: (i) does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.\31\
---------------------------------------------------------------------------
\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 17 CFR 240.19b-4(f)(6).
\31\ In addition, Rule 19b-4(f)(6) requires a self-regulatory
organization to give the Commission written notice of its intent to
file the proposed rule change at least five business days prior to
the date of filing of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange has satisfied this
requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \32\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requested
that the Commission waive the 30-day operative delay so that the
proposal may become operative immediately upon filing. The Commission
notes it has approved a proposed rule change substantially identical to
the one proposed by the Exchange.\33\ The proposed change raises no
novel legal or regulatory issues. Therefore, the Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposed rule change operative upon filing.\34\
---------------------------------------------------------------------------
\32\ 17 CFR 240.19b-4(f)(6)(iii).
\33\ See supra note 5.
\34\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeBZX-2023-100 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-CboeBZX-2023-100. 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
[[Page 86425]]
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-CboeBZX-2023-100 and should be submitted on or before January 3,
2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
---------------------------------------------------------------------------
\35\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27271 Filed 12-12-23; 8:45 am]
BILLING CODE 8011-01-P
