Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Monthly Options Series and the Nonstandard Expirations Program, 86393-86399 [2023-27274]

Download as PDF Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices SECURITIES AND EXCHANGE COMMISSION Options 4A, Options Index Rules. Each change is discussed in detail below. [Release No. 34–99106; File No. SR–PHLX– 2023–54] Monthly Options Series The Exchange proposes to amend its Rules 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’’).3 Of note, Nasdaq ISE, LLC (‘‘ISE’’) will separately file a rule change to adopt a Monthly Options Series for ETFs. Phlx’s Options 4 rules, which govern the ability to transact options on ETFs, incorporate by reference ISE’s Options 4 rules. This rule change proposes to amend Phlx’s index options rules to adopt a Monthly Options Series program. Pursuant to proposed Options 4A, Section 12(b)(5), the Exchange may list Monthly Options Series for up to five currently listed option classes that are either index options or options on ETFs.4 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.5 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.6 Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Monthly Options Series and the Nonstandard Expirations 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, Nasdaq PHLX LLC (‘‘Phlx’’ 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 (i) adopt a Monthly Options Series and (ii) amend its Nonstandard Expirations Program. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/phlx/rules, at the principal office of the Exchange, and at the Commission’s Public Reference Room. khammond on DSKJM1Z7X2PROD with NOTICES 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 (i) adopt Monthly Options Series and (ii) amend its Nonstandard Expirations Program in 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 16:54 Dec 12, 2023 Jkt 262001 3 The Exchange proposes to define a ‘‘Monthly Options Series’’ in Options 4A, Section 2(a)(14) to mean, for the purposes of Options 4A, 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 renumber the subsequent definitions in Options 4A, Section 2. 4 As provided in proposed Options 4A, Section 12(b)(5)(a), the Exchange may list Monthly Options Series for up to five currently listed option classes that are either index options or options on ETFs; the five Monthly Options Series include both index options and options on ETFs. 5 See Securities Exchange Act Release No. 98915 (November 13, 2023), 88 FR 80356 (November 17, 2023) (SR–Cboe–2023–049) (Order Approving a Proposed Rule Change To Adopt Monthly Options Series) (‘‘Cboe Monthly Approval Order’’). 6 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 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 86393 Other expirations in the same class are not counted as part of the maximum numbers of Monthly Options Series expirations for a class.7 Monthly Options Series will be P.M.-settled.8 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 to the current price of the underlying security or index value of the underlying index’’ means that the exercise price is within 30% of the current underlying security price or index value.9 Additional Monthly Options Series of the same class may be open for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market, to meet customer demand, or when the market price of the underlying security moves substantially from the initial exercise price or prices. To the extent that any additional strike prices are listed by the Exchange, such additional strike prices will be within 30% above or below the closing price of the underlying index or security on the preceding day. The Exchange may also open additional strike prices of Monthly Options Series that are more than 30% above or below the current price of the underlying security, provided that demonstrated customer interest exists for such series, as expressed by institutional, corporate, or individual customers or their brokers. Market-Makers trading for their own account will not be considered when 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). 7 See proposed Options 4A, Section 12(b)(5)(b). 8 See proposed Options 4A, Section 12(b)(5)(c). 9 See proposed Options 4A, Section 12(b)(5)(d). The Exchange notes this proposed provision is consistent with the initial series provision for the Quarterly Options Series program in Options 4A, Section 12(b)(3)(C). E:\FR\FM\13DEN1.SGM 13DEN1 86394 Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices determining customer interest under this provision. The opening of the new Monthly Options Series will not affect the series of options of the same class previously opened.10 The interval between strike prices on Monthly Options Series will be the same as the interval for strike prices for series in that same options class that expire in accordance with the normal monthly expiration cycle.11 By definition, Monthly Options Series can never expire in the same week as a standard expiration series (which expire on the third Friday of a month) in the same class expires. The same, however, is not the case with regards to Short Term Option Series 12 or Quarterly Options Series. Therefore, to avoid any confusion in the marketplace, the Exchange proposes to amend Options 4A Section 12(b)(5)(b) to provide the Exchange will not list a Short Term Option Series in a class on a date on which a Monthly Options Series or Quarterly Options Series expires.13 Similarly, proposed Options 4A, Section 12(b)(5)(b) provide that no Monthly Options Series may expire on a date that coincides with an expiration date of a Quarterly Options Series in the same index. In other words, the Exchange will not list a Short Term Option Series on an index if a Monthly Options Series on that index were to expire on the same date, nor will the Exchange list a Monthly Options Series on an index if a Quarterly Options Series on that index were to expire on the same date to prevent the listing of series with concurrent expirations.14 10 See proposed Options 4A, Section 12(b)(5)(e). proposed Options 4A, Section 12(b)(5)(f) (permissible strike prices for index options). 12 Today, Options 4A, Section 12(a)(4) provides that index options may have expiration months and weeks, which expirations may occur in consecutive weeks. The Exchange proposes to add ‘‘as specified below’’ to this rule text. 13 The Exchange also proposes to make nonsubstantive changes to Options 4A, Section 12(b)(4) and Options 4A, Section 12(b)(4)(B) to reference standard options series and change current references to ‘‘monthly options series’’ to ‘‘standard expiration options series’’ (i.e., series that expire on the third Friday of a month), to eliminate potential confusion. The current references to ‘‘monthly options series’’ are intended to refer to those series that expire on the third Friday of a month, which are generally referred to in the industry as standard expirations. 14 The Exchange notes this would not prevent the Exchange from listing a P.M.-settled Monthly Options Series on an index with the same expiration date as an A.M.-settled Short Term Option Series on the same index, both of which may expire on a Friday. In other words, the Exchange may list a P.M-settled Monthly Options Series on an index concurrent with an A.M.-settled Short Term Option Series on that index and both of which expire on a Friday. The Exchange believes this concurrent listing would provide investors with yet another hedging mechanism and is khammond on DSKJM1Z7X2PROD with NOTICES 11 See VerDate Sep<11>2014 16:54 Dec 12, 2023 Jkt 262001 With respect to Monthly Options Series added pursuant to proposed Options 4A, Section 12(b)(5)(a) through (f), the Exchange will, on a monthly basis, review series that are outside a range of five strikes above and five strikes below the current price of the underlying index or security, and delist series with no open interest in both the put and the call series having a: (i) strike higher than the highest strike price with open interest in the put and/or call series for a given expiration month; and (ii) strike lower than the lowest strike price with open interest in the put and/ or call series for a given expiration month pursuant to Options 4A, Section 12(b)(5)(g)(1). Notwithstanding this delisting policy, customer requests to add strikes and/or maintain strikes in Monthly Options Series in series eligible for delisting will be granted. In connection with this delisting policy, if the Exchange identifies series for delisting, the Exchange will notify other options exchanges with similar delisting policies regarding eligible series for delisting and will work with such other exchanges to develop a uniform list of series to be delisted, so as to ensure uniform series delisting of multiply listed Monthly Options Series.15 The Exchange believes that Monthly Options Series will provide investors with another flexible and valuable tool to manage risk exposure, minimize capital outlays, and be more responsive to the timing of events affecting the securities that underlie option contracts. The Exchange believes limiting Monthly Options Series to five classes will ensure the addition of these new series will have a negligible impact on the Exchange’s and the Options Price Reporting Authority’s (‘‘OPRA’s’’) quoting capacity. The Exchange represents it has the necessary systems capacity to support new options series that will result from the introduction of Monthly Options Series. The Exchange notes that Options 4A, Section 6, Position Limits for BroadBased Index Options, will apply to Monthly Options Series. In Options 4A, Section 6(e), Monthly Options Series will be aggregated with positions in options contracts on the same underlying security or index.16 This is consistent with how position (and exercise) limits are currently imposed on series with other expirations (Short Term Option Series and Quarterly reasonable given these series would not be identical (unlike if they were both P.M-settled). 15 See Options 4A, Section 12(b)(5)(g)(3). 16 Pursuant to Options 4A, Section 10, exercise limits for index option contracts shall be equivalent to the position limits described in Options 4A, Section 6. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 Options Series). Therefore, positions in options within class of index, regardless of their expirations, would continue to be subject to existing position (and exercise) limits. The Exchange believes this will address potential manipulative schemes and adverse market impacts surrounding the use of options. The Exchange also represents its current surveillance programs will apply to Monthly Options Series and will properly monitor trading in the proposed Monthly Options Series. The Exchange currently lists Quarterly Options Series in certain ETF classes pursuant to Options 4, Section 5, which expire at the close of business at the end of four calendar months (i.e., the end of each calendar quarter), and has not experienced any market disruptions nor issues with capacity. The Exchange’s surveillance programs currently in place to support and properly monitor trading in these Quarterly Options Series, as well as Short Term Option Series and standard expiration series, will apply to the proposed Monthly Options Series. The Exchange believes its surveillances continue to be designed to deter and detect violations of its Rules, including position and exercise limits and possible manipulative behavior, and these surveillances will apply to Monthly Options Series that the Exchange determines to list for trading. Ultimately, the Exchange does not believe the proposed rule change raises any unique regulatory concerns because existing safeguards—such as position and exercise limits (and the aggregation of options overlying the same index) and reporting requirements—would continue to apply. Nonstandard Expirations Program The Exchange proposes to amend Options 4A, Section 12(b)(6), as renumbered in this proposal,17 which governs its Nonstandard Expirations Program (‘‘Program’’), to permit P.M.settled options on any broad-based index eligible for standard options trading that expire on Tuesday or Thursday.18 Currently under the 17 The Exchange proposes to renumber current Options 4A, Section 12(b)(5), titled Nonstandard Expiration Pilot Program, Options 4A, Section 12(b)(6). Additionally, the Exchange proposes to remove the word ‘‘Pilot’’ as the program is no longer a pilot. See Securities Exchange Act Release No. 98451 (September 20, 2023), 88 FR 66088 (September 26, 2023) (SR–Phlx–2023–07) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Make Permanent Certain P.M.-Settled Pilots). 18 The Exchange’s proposal is based on a recently approved rule change by Cboe Options. See Securities Exchange Act Release No. 98957 (November 15, 2023), 88 FR 81130 (November 21, 2023) (SR–CBOE–2023–054) (order Approving a Proposed Rule Change To Amend Rule 4.13 To E:\FR\FM\13DEN1.SGM 13DEN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices Program, the Exchange is permitted to list P.M.-settled options on any broadbased index eligible for standard trading that expire on: (1) any Monday, Wednesday, or Friday (other than the third Friday-of-the-month or days that coincide with an EOM expiration (as defined below) and, with respect to options on the Nasdaq–100 Index (‘‘NDX options’’) and the Nasdaq 100 Micro Index (‘‘XND options’’) any Tuesday or Thursday (‘‘Weekly Expirations’’) and (2) the last trading day of the month (‘‘End of Month Expirations’’ or ‘‘EOMs’’).19 The Exchange notes that permitting Tuesday and Thursday expirations for all broadbased indexes, as proposed, would be in addition to the options with Monday, Wednesday and Friday expirations that the Exchange may (and does) already list on those indexes, as they are permissible Weekly Expirations for options on a broad-based index pursuant to Options 4A, Section 12(b)(6). The proposal merely expands the availability of Tuesday and Thursday Weekly Expirations, and thus all Weekly Expirations available under the Program, to all broad-based indexes eligible for standard options trading, on which the Exchange may currently list Monday, Wednesday, and Friday Weekly expirations under the Program. The Program for Weekly Expirations will apply to any broad-based index option with Tuesday and Thursday expirations in the same manner as it currently applies to all other P.M.settled broad-based index options with Monday, Wednesday, and Friday expirations and to NDX and XND options with Tuesday and Thursday expirations. Specifically, as set forth in Options 4A, Section 12(b)(6), Weekly Expirations, including the proposed Tuesday and Thursday expirations, are subject to all provisions of Options 4A, Section 12 and treated the same as options on the same underlying index that expire on the third Friday of the expiration month; provided, however, that Weekly Expirations are P.M.settled, and new series in Weekly Expirations may be added up to and including on the expiration date for an expiring Weekly Expiration. The maximum number of expirations that may be listed for each Weekly Expiration (i.e., a Monday expiration, Tuesday expiration, Wednesday expiration, Thursday expiration, or Friday expiration, as applicable) in a Expand the Nonstandard Expirations Program To Include P.M.-Settled Options on Broad-Based Indexes That Expire on Tuesday or Thursday) (‘‘Cboe Nonstandard Approval Order’’). 19 See Supplementary Material .07 to Options 4A, Section 12. VerDate Sep<11>2014 16:54 Dec 12, 2023 Jkt 262001 given class is the same as the maximum number of expirations permitted in Options 4A, Section 12(a)(3) for standard options on the same broadbased index. Weekly Expirations need not be for consecutive Monday, Tuesday, Wednesday, Thursday, or Friday expirations as applicable; 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. Weekly Expirations that are first listed in a given class may expire up to four weeks from the actual listing date. If the Exchange lists EOMs and Weekly Expirations as applicable in a given class, the Exchange will list an EOM instead of a Weekly Expiration that expires on the same day in the given class. Other expirations in the same class are not counted as part of the maximum number of Weekly Expirations for an applicable broadbased index class. If the Exchange is not open for business on a respective Monday, the normally Monday expiring Weekly Expirations will expire on the following business day. If the Exchange is not open for business on a respective Tuesday, Wednesday, Thursday, or Friday, the normally Tuesday, Wednesday, Thursday, or Friday expiring Weekly Expirations will expire on the previous business day. If two different Weekly Expirations on a broadbased index would expire on the same day because the Exchange is not open for business on a certain weekday, the Exchange will list only one of such Weekly Expirations. In addition, like all Weekly Expirations, Options 4A, Section 12(b)(6), transactions in expiring broad-based index options with Tuesday and Thursday expirations may be effected on the Exchange between the hours of 9:30 a.m. and 4:00 p.m. on their last trading day (Eastern Time). The Exchange believes that that the introduction of Tuesday and Thursday expirations for all broad-based index options (rather than offering those expirations for just two indexes) will expand hedging tools available to market participants while also providing greater trading opportunities, regardless of in which index option market they participate. By offering expanded Tuesday and Thursday expirations along with the current Monday, Wednesday and Friday expirations, the proposed rule change will allow market participants to purchase options on all broad-based index options available for trading on the Exchange in a manner more aligned with specific timing needs and more PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 86395 effectively tailor their investment and hedging strategies and manage their portfolios. In particular, the proposed rule change will allow market participants to roll their positions on more trading days, thus with more precision, spread risk across more trading days and incorporate daily changes in the markets, which may reduce the premium cost of buying protection. The Exchange believes there is sufficient investor interest and demand in Tuesday and Thursday expirations for broad-based index options beyond NDX and XND to warrant inclusion in the Program and that the Program, as amended, will continue to provide investors with additional means of managing their risk exposures and carrying out their investment objectives.20 With regard to the impact of this proposal on system capacity, the Exchange has analyzed its capacity and represents that it believes that the Exchange and OPRA have the necessary systems capacity to handle any potential additional traffic associated with trading of broad-based index options with Tuesday and Thursday expirations. The Exchange does not believe that its Members will experience any capacity issues as a result of this proposal and represents that it will monitor the trading volume associated with any possible additional options series listed as a result of this proposal and the effect (if any) of these additional series on market fragmentation and on the capacity of the Exchange’s automated systems. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.21 Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) 22 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and 20 The Exchange currently lists Tuesday and Thursday expirations in NDX and XND options pursuant to the Program. The Exchange also already allows options on broad-based indexes to expire on Tuesdays for normally Monday or Wednesday expiring options when the Exchange is not open for business on a respective Monday or Wednesday (as applicable), and already allows options on broadbased indexes to expire on Thursdays for normally Friday expiring options when the Exchange is not open for business on a respective Friday. Also, EOM options in any broad-based indexes may currently be listed to expire on a Tuesday or Thursday. 21 15 U.S.C. 78f(b). 22 15 U.S.C. 78f(b)(5). E:\FR\FM\13DEN1.SGM 13DEN1 86396 Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES 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) 23 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Monthly Options Series In particular, the Exchange believes the introduction of Monthly Options Series will remove impediments to and perfect the mechanism of a free and open market and a national market system by expanding hedging tools available to market participants. The Exchange believes the proposed monthly expirations will allow market participants to transact in the index options listed pursuant to the proposed rule change based on their timing as needed and allow them to tailor their investment and hedging needs more effectively. Further, the Exchange believes the availability of Monthly Options Series would protect investors and the public interest by providing investors with more flexibility to closely tailor their investment and hedging decisions in these options, thus allowing them to better manage their risk exposure. The Exchange believes the Quarterly Options Series Program has been successful to date and the proposed Monthly Options Series program simply expands the ability of investors to hedge risk against market movements stemming from economic releases or market events that occur at months’ ends in the same way the Quarterly Options Series Program has expanded the landscape of hedging for quarter-end news. Monthly Options Series will also complement Short Term Option Series, which allow investors to hedge risk against events that occur throughout a month. The Exchange believes the availability of additional expirations should create greater trading and hedging opportunities for investors, as well as provide investors with the ability to tailor their investment objectives more effectively. The Exchange notes the proposed terms of Monthly Options Series, including the limitation to list up to five 23 Id. VerDate Sep<11>2014 16:54 Dec 12, 2023 Jkt 262001 options classes that are either index options or options on ETFs, are substantively the same as the current terms of Quarterly Options Series for ETF classes.24 Quarterly Options Series expire on the last business day of a calendar quarter, which is the last business day of every third month. The proposed Monthly Options Series would fill the gaps between Quarterly Options Series expirations by permitting series to expire on the last business day of every month, rather than every third month. The proposed Monthly Options Series may be listed in accordance with the same terms as Quarterly Options Series, including permissible strikes.25 As is the case with Quarterly Options Series, no Short Term Option Series may expire on the same day as a Monthly Options Series. Similarly, as proposed, no Monthly Options Series may expire on the same day as a Quarterly Options Series. The Exchange believes preventing listing series with concurrent expirations in a class will eliminate potential investors confusion and thus protect investors and the public interest. Given that the Exchange currently lists Quarterly Options Series in certain ETF classes pursuant to Options 4, Section 5, which expire at the close of business at the end of four calendar months (i.e., the end of each calendar quarter), the Exchange believes it is reasonable to list Monthly Options Series in accordance with the same terms, as it will promote just and equitable principles of trade. The Exchange believes limiting Monthly Options Series to five classes will ensure the addition of these new series will have a negligible impact on the Exchange’s and OPRA’s quoting capacity. The Exchange represents it has the necessary systems capacity to support new options series that will result from the introduction of Monthly Options Series. The Exchange further believes the proposed rule change regarding the treatment of Monthly Options Series with respect to determining compliance with position and exercise limits is designed to prevent fraudulent and manipulative acts and practices and 24 See Options 4, Section 5. As noted herein, ISE will file a rule change to amend Options 4, Section 5 and Phlx’s Options 4 rules are incorporated by reference to ISE’s Options 4 rules. 25 The Exchange notes the proposed maximum number of expirations is consistent with the maximum number of expirations permitted for endof-month series in index classes. See Options 4A, Section 12(a)(4) which permits up to 12 standard monthly expirations at any one time for any class that the Exchange (as the Reporting Authority) uses to calculate a volatility index; and (iii) up to 12 standard (monthly) expirations in NDX options, Nasdaq-100 ESG Index Options, and XND options). PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 promote just and equitable principles of trade. Monthly Options Series will be aggregated with options overlying the same index for purposes of compliance with position (and exercise) limits, which is consistent with how position (and exercise) limits are currently imposed on series with other expirations (Short Term Option Series, and Quarterly Options Series).26 Therefore, options positions within index option classes for which Monthly Options Series are listed, regardless of their expirations, would continue to be subject to existing position (and exercise) limits. The Exchange believes this will address potential manipulative schemes and adverse market impacts surrounding the use of options. The Exchange also represents its current surveillance programs will apply to Monthly Options Series and will properly monitor trading in the proposed Monthly Options Series. The Exchange currently trades Quarterly Options Series in certain index classes, which expire at the close of business at the end of four calendar months (i.e., the end of each calendar quarter), and has not experienced any market disruptions nor issues with capacity. The Exchange’s surveillance programs currently in place to support and properly monitor trading in these Quarterly Options Series, as well as Short Term Option Series and standard expiration series, will apply to the proposed Monthly Options Series. The Exchange believes its surveillances continue to be designed to deter and detect violations of its Rules, including position and exercise limits and possible manipulative behavior, and these surveillances will apply to Monthly Options Series that the Exchange determines to list for trading. Ultimately, the Exchange does not believe the proposed rule change raises any unique regulatory concerns because existing safeguards—such as position and exercise limits (and the aggregation of options overlying the same index) and reporting requirements—would continue to apply. Nonstandard Expirations Program The Exchange believes that the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes 26 See Cboe Monthly Approval Order; see also Options 4A, Section 6 regarding position limits for broad-based index options). Pursuant to Options 4A, Section 10, exercise limits for index option contracts shall be equivalent to the position limits described in Options 4A, Section 6. E:\FR\FM\13DEN1.SGM 13DEN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices that the introduction of Tuesday and Thursday expirations for all broad-based index options (rather than offering those expirations for just two indexes) will provide investors with expanded hedging tools and greater trading opportunities and flexibility, regardless of in which index option market they participate. As a result, investors will have additional means to manage their risk exposures and carry out their investment objectives. By offering expanded Tuesday and Thursday expirations along with the current Monday, Wednesday and Friday expirations, the proposed rule change will allow market participants to purchase options on all broad-based index options available for trading on the Exchange in a manner more aligned with specific timing needs and more effectively tailor their investment and hedging strategies and manage their portfolios. For example, the proposed rule change will allow market participants to roll their positions on more trading days, thus with more precision, spread risk across more trading days and incorporate daily changes in the markets, which may reduce the premium cost of buying protection. The Exchange represents that it believes that it has the necessary systems capacity to support any additional traffic associated with trading of options on all broad-based index options with Tuesday and Thursday expirations and does not believe that its Members will experience any capacity issues as a result of this proposal. The Commission previously recognized that listing Tuesday and Thursday expirations for NDX and XND options was consistent with the Act.27 The Exchange noted that Tuesday and Thursday expirations in these index options would offer additional investment options to investors and may be useful for their investment or hedging objectives.28 The Exchange also notes it previously listed P.M.-settled broad-based index options with weekly expirations pursuant to a pilot program, so the Commission could monitor the impact of P.M. settlement of cash-settled index derivatives on the underlying cash markets (while recognizing that these risks may have been mitigated given enhanced closing procedures in use in the primary equity markets); however, the Commission recently 27 See Securities Exchange Act Release Nos. 96411 (November 30, 2022), 87 FR 74688 (December 6, 2022) (SR–Phlx–2022–38) (‘‘XND Options Rule Change’’); and 95391 (July 29, 2022), 87 FR 47797 (August 4, 2022) (SR–Phlx–2022–22) (‘‘NDX Rule Change’’). 28 See XND Options Rule Change at 74689; and NDX Options Rule Change at 47798. VerDate Sep<11>2014 16:54 Dec 12, 2023 Jkt 262001 approved a proposed rule change to make that pilot program permanent.29 The Commission noted that the data it reviewed in connection with the pilot demonstrated that these options (including SPX and XSP options with Tuesday and Thursday expirations) ‘‘benefitted investors and other market participants by providing more flexible trading and hedging opportunities while also having no disruptive impact on the market’’ and were thus consistent with the Act.30 The proposed rule change is consistent with these findings, as it will benefit investors and other market participants that participate in the markets for broad-based index options other than NDX and XND options in the same manner by providing them with more flexible trading and hedging opportunities. Additionally, the Exchange does not believe the listing of additional P.M.-settled options on other broad-based indexes will have any significant economic impact on the underlying component securities surrounding the close as a result of expiring p.m.-settled options or impact market quality, based on the data provided to and reviewed by the Commission (and the Commission’s own conclusions based on that review, as noted above) and due to the significant changes in closing procedures in the decades since index options moved to a.m.-settlement.31 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. Monthly Options Series The Exchange does not believe the proposed rule change to list Monthly Options Series will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act, as any Monthly Options Series the Exchange lists for trading will be available in the same manner for all market participants who wish to trade such options. The Exchange notes the proposed terms of Monthly Options Series, including the limitation to list up to five options classes that are either index options or options on ETFs, are substantively the same as the current terms of Quarterly Options Series.32 Quarterly Options Series expire on the last business day of 29 See supra note 17. supra note 17. 31 See id. 32 See proposed Options 4A, Section 12(b)(5)(a). a calendar quarter, which is the last business day of every third month, making the concept of Monthly Options Series in a limited number of index options not novel. The proposed Monthly Options Series will fill the gaps between Quarterly Options Series expirations by permitting series to expire on the last business day of every month, rather than every third month. The proposed Monthly Options Series may be listed in accordance with the same terms as Quarterly Options Series, including permissible strikes.33 Monthly Options Series will trade on the Exchange in the same manner as other options in the same class. The Exchange does not believe the proposed rule change to list Monthly Options Series will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act, as nothing prevents other options exchanges from proposing similar rules.34 As discussed above, the proposed rule change would permit listing Monthly Options Series in up to five options classes that are either index options or options on ETFs, as well as any other classes that other exchanges may list under similar programs. To the extent that the availability of Monthly Options Series makes the Exchange a more attractive marketplace to market participants at other exchanges, market participants are free to elect to become market participants on the Exchange. The Exchange believes that the proposed rule change may relieve any burden on, or otherwise promote, competition. Similar to Short Term Option Series and Quarterly Options Series, the Exchange believes the introduction of Monthly Options Series will not impose an undue burden on competition. The Exchange believes that it will, among other things, expand hedging tools available to market participants. The Exchange believes Monthly Options Series will allow market participants to purchase options based on their timing as needed and allow them to tailor their investment and hedging needs more effectively. The Exchange does not believe the proposed rule change regarding aggregation of positions for purposes of determining compliance with position (and exercise) limits will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act, because it will apply in the same manner to all market participants. The Exchange proposes to apply position 30 See PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 86397 33 See 34 See E:\FR\FM\13DEN1.SGM supra note 25. Cboe Monthly Approval Order. 13DEN1 khammond on DSKJM1Z7X2PROD with NOTICES 86398 Federal Register / Vol. 88, No. 238 / Wednesday, December 13, 2023 / Notices (and exercise) limits to Monthly Options Series in the same manner it applies position limits to series with other expirations (Short Term Option Series and Quarterly Options Series). Therefore, positions in options in a class of index options, regardless of their expirations, would continue to be subject to existing position (and exercise) limits. Additionally, the Exchange does not believe this proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act, because it will address potential manipulative schemes and adverse market impacts surrounding the use of options. Thursday options on those index or equity products. To the extent that the addition of options on additional broadbased indexes that expire on Tuesdays and Thursdays being available for trading on the Exchange makes the Exchange a more attractive marketplace to market participants at other exchanges, such market participants are free to elect to become market participants on the Exchange. Nonstandard Expirations Program The Exchange does not believe that the proposed rule change will impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because options on broad-based indexes with Tuesday and Thursday expirations will be available to all market participants. By listing options on all available broad-based indexes that expire on Tuesdays and Thursdays, the proposed rule change will provide all investors that participate in the markets for options on all broad-based indexes available for trading on the Exchange with greater trading and hedging opportunities and flexibility to meet their investment and hedging needs, which are already available for NDX and XND options. Additionally, Tuesday and Thursday expiring broad-based index options will trade in the same manner as Weekly Expirations currently trade, including Tuesday and Thursday expiring NDX and XND options. The Exchange does not believe that the proposal to list options on all broadbased indexes with Tuesday and Thursday expirations will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because these options are proprietary Exchange products. Other exchanges offer nonstandard expiration programs for index options as well as short-term options programs for certain equity options (including options on certain exchange-traded funds that track broadbased indexes) that expire on Tuesdays and Thursdays 35 and are welcome to similarly propose to list Tuesday and 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 36 and Rule 19b–4(f)(6) thereunder.37 Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A)(iii) of the Act 38 and subparagraph (f)(6) of Rule 19b–4 thereunder.39 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 40 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 41 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the Exchange may list Monthly Options Series and options on all broad-based indexes with Tuesday and Thursday expirations close in time to Cboe Options, which the Exchange believes will benefit investors by promoting competition in both of these programs. 35 See, e.g., ISE Options 4A, Section 12 (permitting nonstandard expirations, including expirations on Tuesdays and Thursdays, for NDX and XND options). See also Cboe Nonstandard Approval Order (permitting nonstandard expirations, including expirations on Tuesdays and Thursdays, for SPX and XSP options). VerDate Sep<11>2014 16:54 Dec 12, 2023 Jkt 262001 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. 36 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 38 15 U.S.C. 78s(b)(3)(A)(iii). 39 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 40 17 CFR 240.19b–4(f)(6). 41 17 CFR 240.19b–4(f)(6)(iii). 37 17 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 The Exchange notes that its proposal is substantively identical to the proposals submitted by Cboe Options for its Monthly Options Series program 42 and Nonstandard Expirations Program.43 The Commission believes that the proposed rule change presents no novel issues and 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 operative delay and designates the proposed rule change operative upon filing.44 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– PHLX–2023–54 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–PHLX–2023–54. 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 42 See Cboe Monthly Approval Order, supra note 5. 43 See Cboe Nonstandard Approval Order, supra note 18. 44 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 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–PHLX–2023–54 and should be submitted on or before January 3, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.45 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–27274 Filed 12–12–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99115; File No. SR–ICC– 2023–014] Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the Clearance of Additional Credit Default Swap Contracts December 7, 2023. khammond on DSKJM1Z7X2PROD with NOTICES I. Introduction On October 25, 2023, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(2) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to clear additional credit default swap (‘‘CDS’’) contracts. The proposed rule change was published for comment in the Federal Register on November 7, 45 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 2023.3 The Commission did not receive comments regarding the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. II. Description of the Proposed Rule Change ICC is registered with the Commission as a clearing agency for the purpose of clearing CDS contracts. Chapter 26 of ICC’s Rulebook covers the CDS contracts that ICC clears, with each subchapter of Chapter 26 defining the characteristics and additional Rules applicable to the various specific categories of CDS contracts that ICC clears. Among other CDS contracts, ICC currently clears Standard Emerging Market Sovereign Single Name CDS (‘‘SES’’) contracts. The purpose of the proposed rule change is to amend ICC’s rules to permit ICC to clear additional SES contracts, specifically, SES contracts on the Kingdom of Morocco and the Federal Republic of Nigeria. To carry out this change, the proposed rule change would amend Subchapter 26D of Chapter 26. In Rule 26D–102 (Definitions), ‘‘Eligible SES Reference Entities,’’ the proposed rule change would add the Kingdom of Morocco and the Federal Republic of Nigeria to the list of specific Eligible SES Reference Entities to be cleared by ICC. As discussed below, these additional SES contracts have terms consistent with the other SES contracts that ICC is already clearing. Likewise, to clear these additional contracts, ICC will be able to rely on its existing Risk Management Framework and other policies and procedures without making any changes. III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act requires the Commission to approve a proposed rule change of a self-regulatory organization if it finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the organization.4 For the reasons given below, the proposed rule change is consistent with section 17A(b)(3)(F) of the Act 5 and Rule 17Ad–22(e)(1) thereunder.6 3 Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the Clearance of Additional Credit Default Swap Contracts; Exchange Act Release No. 98833 (Nov. 1, 2023), 88 FR 76870 (Nov. 7, 2023) (File No. SR–ICC–2023–014) (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2)(C). 5 15 U.S.C. 78q–1(b)(3)(F). 6 17 CFR 240.17Ad–22(e)(1). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 86399 a. Consistency With Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of ICC be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions.7 The proposed rule change is consistent with section 17A(b)(3)(F) of the Act.8 The terms and conditions of the additional SES contracts proposed for clearing are substantially similar to the terms and conditions of the other contracts listed in Subchapter 26D of ICC’s Rules, all of which ICC currently clears, with the key difference being the underlying reference obligations. The underlying reference obligations will be issuances by the Kingdom of Morocco and the Federal Republic of Nigeria. A review of the Notice and ICC’s Rules, policies, and procedures shows that ICC would be able to clear the additional SES contracts pursuant to its existing clearing arrangements and related financial safeguards, protections, and risk management procedures. Furthermore, a review of data on volume, open interest, and the number of ICC Clearing Participants (‘‘CPs’’) that currently trade in the SES contracts, as well as certain model parameters for the additional contracts, show that ICC’s rules, policies, and procedures are reasonably designed to price and measure the potential risk presented by the additional SES contracts, collect financial resources in proportion to such risk, and liquidate the additional contracts in the event of a CP default. This should help ensure ICC’s ability to maintain the financial resources it needs to provide its critical services and function as a central counterparty, thereby promoting the prompt and accurate settlement of the additional SES contracts and other credit default swap transactions. Therefore, clearance of the additional SES contracts would promote the prompt and accurate clearance and settlement of securities transactions, consistent with section 17A(b)(3)(F) of the Act.9 b. Consistency With Rule 17Ad–22(e)(1) Rule 17Ad–22(e)(1) requires ICC to establish, implement, maintain, and enforce written policies and procedures reasonably designed to provide for a well-founded, clear, transparent, and enforceable legal basis for each aspect of 7 15 U.S.C. 78q–1(b)(3)(F). U.S.C. 78q–1(b)(3)(F). 9 15 U.S.C. 78q–1(b)(3)(F). 8 15 E:\FR\FM\13DEN1.SGM 13DEN1

Agencies

[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86393-86399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27274]



[[Page 86393]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99106; File No. SR-PHLX-2023-54]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Related to Monthly 
Options Series and the Nonstandard Expirations 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, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to (i) adopt a Monthly Options Series and 
(ii) amend its Nonstandard Expirations Program.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set 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 (i) adopt Monthly Options Series and (ii) 
amend its Nonstandard Expirations Program in Options 4A, Options Index 
Rules. Each change is discussed in detail below.
Monthly Options Series
    The Exchange proposes to amend its Rules 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'').\3\ Of 
note, Nasdaq ISE, LLC (``ISE'') will separately file a rule change to 
adopt a Monthly Options Series for ETFs. Phlx's Options 4 rules, which 
govern the ability to transact options on ETFs, incorporate by 
reference ISE's Options 4 rules. This rule change proposes to amend 
Phlx's index options rules to adopt a Monthly Options Series program. 
Pursuant to proposed Options 4A, Section 12(b)(5), the Exchange may 
list Monthly Options Series for up to five currently listed option 
classes that are either index options or options on ETFs.\4\ 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.\5\ 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.\6\ Other expirations in the same 
class are not counted as part of the maximum numbers of Monthly Options 
Series expirations for a class.\7\ Monthly Options Series will be P.M.-
settled.\8\
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    \3\ The Exchange proposes to define a ``Monthly Options Series'' 
in Options 4A, Section 2(a)(14) to mean, for the purposes of Options 
4A, 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 
renumber the subsequent definitions in Options 4A, Section 2.
    \4\ As provided in proposed Options 4A, Section 12(b)(5)(a), the 
Exchange may list Monthly Options Series for up to five currently 
listed option classes that are either index options or options on 
ETFs; the five Monthly Options Series include both index options and 
options on ETFs.
    \5\ See Securities Exchange Act Release No. 98915 (November 13, 
2023), 88 FR 80356 (November 17, 2023) (SR-Cboe-2023-049) (Order 
Approving a Proposed Rule Change To Adopt Monthly Options Series) 
(``Cboe Monthly Approval Order'').
    \6\ 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).
    \7\ See proposed Options 4A, Section 12(b)(5)(b).
    \8\ See proposed Options 4A, Section 12(b)(5)(c).
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    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 to the current price of the underlying security or 
index value of the underlying index'' means that the exercise price is 
within 30% of the current underlying security price or index value.\9\ 
Additional Monthly Options Series of the same class may be open for 
trading on the Exchange when the Exchange deems it necessary to 
maintain an orderly market, to meet customer demand, or when the market 
price of the underlying security moves substantially from the initial 
exercise price or prices. To the extent that any additional strike 
prices are listed by the Exchange, such additional strike prices will 
be within 30% above or below the closing price of the underlying index 
or security on the preceding day. The Exchange may also open additional 
strike prices of Monthly Options Series that are more than 30% above or 
below the current price of the underlying security, provided that 
demonstrated customer interest exists for such series, as expressed by 
institutional, corporate, or individual customers or their brokers. 
Market-Makers trading for their own account will not be considered when

[[Page 86394]]

determining customer interest under this provision. The opening of the 
new Monthly Options Series will not affect the series of options of the 
same class previously opened.\10\ The interval between strike prices on 
Monthly Options Series will be the same as the interval for strike 
prices for series in that same options class that expire in accordance 
with the normal monthly expiration cycle.\11\
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    \9\ See proposed Options 4A, Section 12(b)(5)(d). The Exchange 
notes this proposed provision is consistent with the initial series 
provision for the Quarterly Options Series program in Options 4A, 
Section 12(b)(3)(C).
    \10\ See proposed Options 4A, Section 12(b)(5)(e).
    \11\ See proposed Options 4A, Section 12(b)(5)(f) (permissible 
strike prices for index options).
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    By definition, Monthly Options Series can never expire in the same 
week as a standard expiration series (which expire on the third Friday 
of a month) in the same class expires. The same, however, is not the 
case with regards to Short Term Option Series \12\ or Quarterly Options 
Series. Therefore, to avoid any confusion in the marketplace, the 
Exchange proposes to amend Options 4A Section 12(b)(5)(b) to provide 
the Exchange will not list a Short Term Option Series in a class on a 
date on which a Monthly Options Series or Quarterly Options Series 
expires.\13\ Similarly, proposed Options 4A, Section 12(b)(5)(b) 
provide that no Monthly Options Series may expire on a date that 
coincides with an expiration date of a Quarterly Options Series in the 
same index. In other words, the Exchange will not list a Short Term 
Option Series on an index if a Monthly Options Series on that index 
were to expire on the same date, nor will the Exchange list a Monthly 
Options Series on an index if a Quarterly Options Series on that index 
were to expire on the same date to prevent the listing of series with 
concurrent expirations.\14\
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    \12\ Today, Options 4A, Section 12(a)(4) provides that index 
options may have expiration months and weeks, which expirations may 
occur in consecutive weeks. The Exchange proposes to add ``as 
specified below'' to this rule text.
    \13\ The Exchange also proposes to make non-substantive changes 
to Options 4A, Section 12(b)(4) and Options 4A, Section 12(b)(4)(B) 
to reference standard options series and change current references 
to ``monthly options series'' to ``standard expiration options 
series'' (i.e., series that expire on the third Friday of a month), 
to eliminate potential confusion. The current references to 
``monthly options series'' are intended to refer to those series 
that expire on the third Friday of a month, which are generally 
referred to in the industry as standard expirations.
    \14\ The Exchange notes this would not prevent the Exchange from 
listing a P.M.-settled Monthly Options Series on an index with the 
same expiration date as an A.M.-settled Short Term Option Series on 
the same index, both of which may expire on a Friday. In other 
words, the Exchange may list a P.M-settled Monthly Options Series on 
an index concurrent with an A.M.-settled Short Term Option Series on 
that index and both of which expire on a Friday. The Exchange 
believes this concurrent listing would provide investors with yet 
another hedging mechanism and is reasonable given these series would 
not be identical (unlike if they were both P.M-settled).
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    With respect to Monthly Options Series added pursuant to proposed 
Options 4A, Section 12(b)(5)(a) through (f), the Exchange will, on a 
monthly basis, review series that are outside a range of five strikes 
above and five strikes below the current price of the underlying index 
or security, and delist series with no open interest in both the put 
and the call series having a: (i) strike higher than the highest strike 
price with open interest in the put and/or call series for a given 
expiration month; and (ii) strike lower than the lowest strike price 
with open interest in the put and/or call series for a given expiration 
month pursuant to Options 4A, Section 12(b)(5)(g)(1). Notwithstanding 
this delisting policy, customer requests to add strikes and/or maintain 
strikes in Monthly Options Series in series eligible for delisting will 
be granted. In connection with this delisting policy, if the Exchange 
identifies series for delisting, the Exchange will notify other options 
exchanges with similar delisting policies regarding eligible series for 
delisting and will work with such other exchanges to develop a uniform 
list of series to be delisted, so as to ensure uniform series delisting 
of multiply listed Monthly Options Series.\15\
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    \15\ See Options 4A, Section 12(b)(5)(g)(3).
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    The Exchange believes that Monthly Options Series will provide 
investors with another flexible and valuable tool to manage risk 
exposure, minimize capital outlays, and be more responsive to the 
timing of events affecting the securities that underlie option 
contracts. The Exchange believes limiting Monthly Options Series to 
five classes will ensure the addition of these new series will have a 
negligible impact on the Exchange's and the Options Price Reporting 
Authority's (``OPRA's'') quoting capacity. The Exchange represents it 
has the necessary systems capacity to support new options series that 
will result from the introduction of Monthly Options Series.
    The Exchange notes that Options 4A, Section 6, Position Limits for 
Broad-Based Index Options, will apply to Monthly Options Series. In 
Options 4A, Section 6(e), Monthly Options Series will be aggregated 
with positions in options contracts on the same underlying security or 
index.\16\ This is consistent with how position (and exercise) limits 
are currently imposed on series with other expirations (Short Term 
Option Series and Quarterly Options Series). Therefore, positions in 
options within class of index, regardless of their expirations, would 
continue to be subject to existing position (and exercise) limits. The 
Exchange believes this will address potential manipulative schemes and 
adverse market impacts surrounding the use of options.
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    \16\ Pursuant to Options 4A, Section 10, exercise limits for 
index option contracts shall be equivalent to the position limits 
described in Options 4A, Section 6.
---------------------------------------------------------------------------

    The Exchange also represents its current surveillance programs will 
apply to Monthly Options Series and will properly monitor trading in 
the proposed Monthly Options Series. The Exchange currently lists 
Quarterly Options Series in certain ETF classes pursuant to Options 4, 
Section 5, which expire at the close of business at the end of four 
calendar months (i.e., the end of each calendar quarter), and has not 
experienced any market disruptions nor issues with capacity. The 
Exchange's surveillance programs currently in place to support and 
properly monitor trading in these Quarterly Options Series, as well as 
Short Term Option Series and standard expiration series, will apply to 
the proposed Monthly Options Series. The Exchange believes its 
surveillances continue to be designed to deter and detect violations of 
its Rules, including position and exercise limits and possible 
manipulative behavior, and these surveillances will apply to Monthly 
Options Series that the Exchange determines to list for trading. 
Ultimately, the Exchange does not believe the proposed rule change 
raises any unique regulatory concerns because existing safeguards--such 
as position and exercise limits (and the aggregation of options 
overlying the same index) and reporting requirements--would continue to 
apply.
Nonstandard Expirations Program
    The Exchange proposes to amend Options 4A, Section 12(b)(6), as 
renumbered in this proposal,\17\ which governs its Nonstandard 
Expirations Program (``Program''), to permit P.M.-settled options on 
any broad-based index eligible for standard options trading that expire 
on Tuesday or Thursday.\18\ Currently under the

[[Page 86395]]

Program, the Exchange is permitted to list P.M.-settled options on any 
broad-based index eligible for standard trading that expire on: (1) any 
Monday, Wednesday, or Friday (other than the third Friday-of-the-month 
or days that coincide with an EOM expiration (as defined below) and, 
with respect to options on the Nasdaq-100 Index (``NDX options'') and 
the Nasdaq 100 Micro Index (``XND options'') any Tuesday or Thursday 
(``Weekly Expirations'') and (2) the last trading day of the month 
(``End of Month Expirations'' or ``EOMs'').\19\ The Exchange notes that 
permitting Tuesday and Thursday expirations for all broad-based 
indexes, as proposed, would be in addition to the options with Monday, 
Wednesday and Friday expirations that the Exchange may (and does) 
already list on those indexes, as they are permissible Weekly 
Expirations for options on a broad-based index pursuant to Options 4A, 
Section 12(b)(6). The proposal merely expands the availability of 
Tuesday and Thursday Weekly Expirations, and thus all Weekly 
Expirations available under the Program, to all broad-based indexes 
eligible for standard options trading, on which the Exchange may 
currently list Monday, Wednesday, and Friday Weekly expirations under 
the Program.
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    \17\ The Exchange proposes to renumber current Options 4A, 
Section 12(b)(5), titled Nonstandard Expiration Pilot Program, 
Options 4A, Section 12(b)(6). Additionally, the Exchange proposes to 
remove the word ``Pilot'' as the program is no longer a pilot. See 
Securities Exchange Act Release No. 98451 (September 20, 2023), 88 
FR 66088 (September 26, 2023) (SR-Phlx-2023-07) (Order Granting 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, 
To Make Permanent Certain P.M.-Settled Pilots).
    \18\ The Exchange's proposal is based on a recently approved 
rule change by Cboe Options. See Securities Exchange Act Release No. 
98957 (November 15, 2023), 88 FR 81130 (November 21, 2023) (SR-CBOE-
2023-054) (order Approving a Proposed Rule Change To Amend Rule 4.13 
To Expand the Nonstandard Expirations Program To Include P.M.-
Settled Options on Broad-Based Indexes That Expire on Tuesday or 
Thursday) (``Cboe Nonstandard Approval Order'').
    \19\ See Supplementary Material .07 to Options 4A, Section 12.
---------------------------------------------------------------------------

    The Program for Weekly Expirations will apply to any broad-based 
index option with Tuesday and Thursday expirations in the same manner 
as it currently applies to all other P.M.-settled broad-based index 
options with Monday, Wednesday, and Friday expirations and to NDX and 
XND options with Tuesday and Thursday expirations. Specifically, as set 
forth in Options 4A, Section 12(b)(6), Weekly Expirations, including 
the proposed Tuesday and Thursday expirations, are subject to all 
provisions of Options 4A, Section 12 and treated the same as options on 
the same underlying index that expire on the third Friday of the 
expiration month; provided, however, that Weekly Expirations are P.M.-
settled, and new series in Weekly Expirations may be added up to and 
including on the expiration date for an expiring Weekly Expiration.
    The maximum number of expirations that may be listed for each 
Weekly Expiration (i.e., a Monday expiration, Tuesday expiration, 
Wednesday expiration, Thursday expiration, or Friday expiration, as 
applicable) in a given class is the same as the maximum number of 
expirations permitted in Options 4A, Section 12(a)(3) for standard 
options on the same broad-based index. Weekly Expirations need not be 
for consecutive Monday, Tuesday, Wednesday, Thursday, or Friday 
expirations as applicable; 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. Weekly Expirations that are first listed in a 
given class may expire up to four weeks from the actual listing date. 
If the Exchange lists EOMs and Weekly Expirations as applicable in a 
given class, the Exchange will list an EOM instead of a Weekly 
Expiration that expires on the same day in the given class. Other 
expirations in the same class are not counted as part of the maximum 
number of Weekly Expirations for an applicable broad-based index class. 
If the Exchange is not open for business on a respective Monday, the 
normally Monday expiring Weekly Expirations will expire on the 
following business day. If the Exchange is not open for business on a 
respective Tuesday, Wednesday, Thursday, or Friday, the normally 
Tuesday, Wednesday, Thursday, or Friday expiring Weekly Expirations 
will expire on the previous business day. If two different Weekly 
Expirations on a broad-based index would expire on the same day because 
the Exchange is not open for business on a certain weekday, the 
Exchange will list only one of such Weekly Expirations. In addition, 
like all Weekly Expirations, Options 4A, Section 12(b)(6), transactions 
in expiring broad-based index options with Tuesday and Thursday 
expirations may be effected on the Exchange between the hours of 9:30 
a.m. and 4:00 p.m. on their last trading day (Eastern Time).
    The Exchange believes that that the introduction of Tuesday and 
Thursday expirations for all broad-based index options (rather than 
offering those expirations for just two indexes) will expand hedging 
tools available to market participants while also providing greater 
trading opportunities, regardless of in which index option market they 
participate. By offering expanded Tuesday and Thursday expirations 
along with the current Monday, Wednesday and Friday expirations, the 
proposed rule change will allow market participants to purchase options 
on all broad-based index options available for trading on the Exchange 
in a manner more aligned with specific timing needs and more 
effectively tailor their investment and hedging strategies and manage 
their portfolios. In particular, the proposed rule change will allow 
market participants to roll their positions on more trading days, thus 
with more precision, spread risk across more trading days and 
incorporate daily changes in the markets, which may reduce the premium 
cost of buying protection.
    The Exchange believes there is sufficient investor interest and 
demand in Tuesday and Thursday expirations for broad-based index 
options beyond NDX and XND to warrant inclusion in the Program and that 
the Program, as amended, will continue to provide investors with 
additional means of managing their risk exposures and carrying out 
their investment objectives.\20\ With regard to the impact of this 
proposal on system capacity, the Exchange has analyzed its capacity and 
represents that it believes that the Exchange and OPRA have the 
necessary systems capacity to handle any potential additional traffic 
associated with trading of broad-based index options with Tuesday and 
Thursday expirations. The Exchange does not believe that its Members 
will experience any capacity issues as a result of this proposal and 
represents that it will monitor the trading volume associated with any 
possible additional options series listed as a result of this proposal 
and the effect (if any) of these additional series on market 
fragmentation and on the capacity of the Exchange's automated systems.
---------------------------------------------------------------------------

    \20\ The Exchange currently lists Tuesday and Thursday 
expirations in NDX and XND options pursuant to the Program. The 
Exchange also already allows options on broad-based indexes to 
expire on Tuesdays for normally Monday or Wednesday expiring options 
when the Exchange is not open for business on a respective Monday or 
Wednesday (as applicable), and already allows options on broad-based 
indexes to expire on Thursdays for normally Friday expiring options 
when the Exchange is not open for business on a respective Friday. 
Also, EOM options in any broad-based indexes may currently be listed 
to expire on a Tuesday or Thursday.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of section 6(b) of the Act.\21\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \22\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and

[[Page 86396]]

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) \23\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
    \23\ Id.
---------------------------------------------------------------------------

Monthly Options Series
    In particular, the Exchange believes the introduction of Monthly 
Options Series will remove impediments to and perfect the mechanism of 
a free and open market and a national market system by expanding 
hedging tools available to market participants. The Exchange believes 
the proposed monthly expirations will allow market participants to 
transact in the index options listed pursuant to the proposed rule 
change based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively. Further, the Exchange 
believes the availability of Monthly Options Series would protect 
investors and the public interest by providing investors with more 
flexibility to closely tailor their investment and hedging decisions in 
these options, thus allowing them to better manage their risk exposure.
    The Exchange believes the Quarterly Options Series Program has been 
successful to date and the proposed Monthly Options Series program 
simply expands the ability of investors to hedge risk against market 
movements stemming from economic releases or market events that occur 
at months' ends in the same way the Quarterly Options Series Program 
has expanded the landscape of hedging for quarter-end news. Monthly 
Options Series will also complement Short Term Option Series, which 
allow investors to hedge risk against events that occur throughout a 
month. The Exchange believes the availability of additional expirations 
should create greater trading and hedging opportunities for investors, 
as well as provide investors with the ability to tailor their 
investment objectives more effectively.
    The Exchange notes the proposed terms of Monthly Options Series, 
including the limitation to list up to five options classes that are 
either index options or options on ETFs, are substantively the same as 
the current terms of Quarterly Options Series for ETF classes.\24\ 
Quarterly Options Series expire on the last business day of a calendar 
quarter, which is the last business day of every third month. The 
proposed Monthly Options Series would fill the gaps between Quarterly 
Options Series expirations by permitting series to expire on the last 
business day of every month, rather than every third month. The 
proposed Monthly Options Series may be listed in accordance with the 
same terms as Quarterly Options Series, including permissible 
strikes.\25\ As is the case with Quarterly Options Series, no Short 
Term Option Series may expire on the same day as a Monthly Options 
Series. Similarly, as proposed, no Monthly Options Series may expire on 
the same day as a Quarterly Options Series. The Exchange believes 
preventing listing series with concurrent expirations in a class will 
eliminate potential investors confusion and thus protect investors and 
the public interest. Given that the Exchange currently lists Quarterly 
Options Series in certain ETF classes pursuant to Options 4, Section 5, 
which expire at the close of business at the end of four calendar 
months (i.e., the end of each calendar quarter), the Exchange believes 
it is reasonable to list Monthly Options Series in accordance with the 
same terms, as it will promote just and equitable principles of trade. 
The Exchange believes limiting Monthly Options Series to five classes 
will ensure the addition of these new series will have a negligible 
impact on the Exchange's and OPRA's quoting capacity. The Exchange 
represents it has the necessary systems capacity to support new options 
series that will result from the introduction of Monthly Options 
Series.
---------------------------------------------------------------------------

    \24\ See Options 4, Section 5. As noted herein, ISE will file a 
rule change to amend Options 4, Section 5 and Phlx's Options 4 rules 
are incorporated by reference to ISE's Options 4 rules.
    \25\ The Exchange notes the proposed maximum number of 
expirations is consistent with the maximum number of expirations 
permitted for end-of-month series in index classes. See Options 4A, 
Section 12(a)(4) which permits up to 12 standard monthly expirations 
at any one time for any class that the Exchange (as the Reporting 
Authority) uses to calculate a volatility index; and (iii) up to 12 
standard (monthly) expirations in NDX options, Nasdaq-100 ESG Index 
Options, and XND options).
---------------------------------------------------------------------------

    The Exchange further believes the proposed rule change regarding 
the treatment of Monthly Options Series with respect to determining 
compliance with position and exercise limits is designed to prevent 
fraudulent and manipulative acts and practices and promote just and 
equitable principles of trade. Monthly Options Series will be 
aggregated with options overlying the same index for purposes of 
compliance with position (and exercise) limits, which is consistent 
with how position (and exercise) limits are currently imposed on series 
with other expirations (Short Term Option Series, and Quarterly Options 
Series).\26\ Therefore, options positions within index option classes 
for which Monthly Options Series are listed, regardless of their 
expirations, would continue to be subject to existing position (and 
exercise) limits. The Exchange believes this will address potential 
manipulative schemes and adverse market impacts surrounding the use of 
options. The Exchange also represents its current surveillance programs 
will apply to Monthly Options Series and will properly monitor trading 
in the proposed Monthly Options Series. The Exchange currently trades 
Quarterly Options Series in certain index classes, which expire at the 
close of business at the end of four calendar months (i.e., the end of 
each calendar quarter), and has not experienced any market disruptions 
nor issues with capacity. The Exchange's surveillance programs 
currently in place to support and properly monitor trading in these 
Quarterly Options Series, as well as Short Term Option Series and 
standard expiration series, will apply to the proposed Monthly Options 
Series. The Exchange believes its surveillances continue to be designed 
to deter and detect violations of its Rules, including position and 
exercise limits and possible manipulative behavior, and these 
surveillances will apply to Monthly Options Series that the Exchange 
determines to list for trading. Ultimately, the Exchange does not 
believe the proposed rule change raises any unique regulatory concerns 
because existing safeguards--such as position and exercise limits (and 
the aggregation of options overlying the same index) and reporting 
requirements--would continue to apply.
---------------------------------------------------------------------------

    \26\ See Cboe Monthly Approval Order; see also Options 4A, 
Section 6 regarding position limits for broad-based index options). 
Pursuant to Options 4A, Section 10, exercise limits for index option 
contracts shall be equivalent to the position limits described in 
Options 4A, Section 6.
---------------------------------------------------------------------------

Nonstandard Expirations Program
    The Exchange believes that the proposed rule change will remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Exchange believes

[[Page 86397]]

that the introduction of Tuesday and Thursday expirations for all 
broad-based index options (rather than offering those expirations for 
just two indexes) will provide investors with expanded hedging tools 
and greater trading opportunities and flexibility, regardless of in 
which index option market they participate. As a result, investors will 
have additional means to manage their risk exposures and carry out 
their investment objectives. By offering expanded Tuesday and Thursday 
expirations along with the current Monday, Wednesday and Friday 
expirations, the proposed rule change will allow market participants to 
purchase options on all broad-based index options available for trading 
on the Exchange in a manner more aligned with specific timing needs and 
more effectively tailor their investment and hedging strategies and 
manage their portfolios. For example, the proposed rule change will 
allow market participants to roll their positions on more trading days, 
thus with more precision, spread risk across more trading days and 
incorporate daily changes in the markets, which may reduce the premium 
cost of buying protection. The Exchange represents that it believes 
that it has the necessary systems capacity to support any additional 
traffic associated with trading of options on all broad-based index 
options with Tuesday and Thursday expirations and does not believe that 
its Members will experience any capacity issues as a result of this 
proposal.
    The Commission previously recognized that listing Tuesday and 
Thursday expirations for NDX and XND options was consistent with the 
Act.\27\ The Exchange noted that Tuesday and Thursday expirations in 
these index options would offer additional investment options to 
investors and may be useful for their investment or hedging 
objectives.\28\ The Exchange also notes it previously listed P.M.-
settled broad-based index options with weekly expirations pursuant to a 
pilot program, so the Commission could monitor the impact of P.M. 
settlement of cash-settled index derivatives on the underlying cash 
markets (while recognizing that these risks may have been mitigated 
given enhanced closing procedures in use in the primary equity 
markets); however, the Commission recently approved a proposed rule 
change to make that pilot program permanent.\29\ The Commission noted 
that the data it reviewed in connection with the pilot demonstrated 
that these options (including SPX and XSP options with Tuesday and 
Thursday expirations) ``benefitted investors and other market 
participants by providing more flexible trading and hedging 
opportunities while also having no disruptive impact on the market'' 
and were thus consistent with the Act.\30\ The proposed rule change is 
consistent with these findings, as it will benefit investors and other 
market participants that participate in the markets for broad-based 
index options other than NDX and XND options in the same manner by 
providing them with more flexible trading and hedging opportunities. 
Additionally, the Exchange does not believe the listing of additional 
P.M.-settled options on other broad-based indexes will have any 
significant economic impact on the underlying component securities 
surrounding the close as a result of expiring p.m.-settled options or 
impact market quality, based on the data provided to and reviewed by 
the Commission (and the Commission's own conclusions based on that 
review, as noted above) and due to the significant changes in closing 
procedures in the decades since index options moved to a.m.-
settlement.\31\
---------------------------------------------------------------------------

    \27\ See Securities Exchange Act Release Nos. 96411 (November 
30, 2022), 87 FR 74688 (December 6, 2022) (SR-Phlx-2022-38) (``XND 
Options Rule Change''); and 95391 (July 29, 2022), 87 FR 47797 
(August 4, 2022) (SR-Phlx-2022-22) (``NDX Rule Change'').
    \28\ See XND Options Rule Change at 74689; and NDX Options Rule 
Change at 47798.
    \29\ See supra note 17.
    \30\ See supra note 17.
    \31\ See id.
---------------------------------------------------------------------------

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.
Monthly Options Series
    The Exchange does not believe the proposed rule change to list 
Monthly Options Series will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act, as any Monthly Options Series the Exchange lists 
for trading will be available in the same manner for all market 
participants who wish to trade such options. The Exchange notes the 
proposed terms of Monthly Options Series, including the limitation to 
list up to five options classes that are either index options or 
options on ETFs, are substantively the same as the current terms of 
Quarterly Options Series.\32\ Quarterly Options Series expire on the 
last business day of a calendar quarter, which is the last business day 
of every third month, making the concept of Monthly Options Series in a 
limited number of index options not novel. The proposed Monthly Options 
Series will fill the gaps between Quarterly Options Series expirations 
by permitting series to expire on the last business day of every month, 
rather than every third month. The proposed Monthly Options Series may 
be listed in accordance with the same terms as Quarterly Options 
Series, including permissible strikes.\33\ Monthly Options Series will 
trade on the Exchange in the same manner as other options in the same 
class.
---------------------------------------------------------------------------

    \32\ See proposed Options 4A, Section 12(b)(5)(a).
    \33\ See supra note 25.
---------------------------------------------------------------------------

    The Exchange does not believe the proposed rule change to list 
Monthly Options Series will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act, as nothing prevents other options exchanges from 
proposing similar rules.\34\ As discussed above, the proposed rule 
change would permit listing Monthly Options Series in up to five 
options classes that are either index options or options on ETFs, as 
well as any other classes that other exchanges may list under similar 
programs. To the extent that the availability of Monthly Options Series 
makes the Exchange a more attractive marketplace to market participants 
at other exchanges, market participants are free to elect to become 
market participants on the Exchange.
---------------------------------------------------------------------------

    \34\ See Cboe Monthly Approval Order.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change may relieve any 
burden on, or otherwise promote, competition. Similar to Short Term 
Option Series and Quarterly Options Series, the Exchange believes the 
introduction of Monthly Options Series will not impose an undue burden 
on competition. The Exchange believes that it will, among other things, 
expand hedging tools available to market participants. The Exchange 
believes Monthly Options Series will allow market participants to 
purchase options based on their timing as needed and allow them to 
tailor their investment and hedging needs more effectively.
    The Exchange does not believe the proposed rule change regarding 
aggregation of positions for purposes of determining compliance with 
position (and exercise) limits will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act, because it will apply in the same manner to all 
market participants. The Exchange proposes to apply position

[[Page 86398]]

(and exercise) limits to Monthly Options Series in the same manner it 
applies position limits to series with other expirations (Short Term 
Option Series and Quarterly Options Series). Therefore, positions in 
options in a class of index options, regardless of their expirations, 
would continue to be subject to existing position (and exercise) 
limits. Additionally, the Exchange does not believe this proposed rule 
change will impose any burden on intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act, 
because it will address potential manipulative schemes and adverse 
market impacts surrounding the use of options.
Nonstandard Expirations Program
    The Exchange does not believe that the proposed rule change will 
impose any burden on intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because options 
on broad-based indexes with Tuesday and Thursday expirations will be 
available to all market participants. By listing options on all 
available broad-based indexes that expire on Tuesdays and Thursdays, 
the proposed rule change will provide all investors that participate in 
the markets for options on all broad-based indexes available for 
trading on the Exchange with greater trading and hedging opportunities 
and flexibility to meet their investment and hedging needs, which are 
already available for NDX and XND options. Additionally, Tuesday and 
Thursday expiring broad-based index options will trade in the same 
manner as Weekly Expirations currently trade, including Tuesday and 
Thursday expiring NDX and XND options.
    The Exchange does not believe that the proposal to list options on 
all broad-based indexes with Tuesday and Thursday expirations will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because these 
options are proprietary Exchange products. Other exchanges offer 
nonstandard expiration programs for index options as well as short-term 
options programs for certain equity options (including options on 
certain exchange-traded funds that track broad-based indexes) that 
expire on Tuesdays and Thursdays \35\ and are welcome to similarly 
propose to list Tuesday and Thursday options on those index or equity 
products. To the extent that the addition of options on additional 
broad-based indexes that expire on Tuesdays and Thursdays being 
available for trading on the Exchange makes the Exchange a more 
attractive marketplace to market participants at other exchanges, such 
market participants are free to elect to become market participants on 
the Exchange.
---------------------------------------------------------------------------

    \35\ See, e.g., ISE Options 4A, Section 12 (permitting 
nonstandard expirations, including expirations on Tuesdays and 
Thursdays, for NDX and XND options). See also Cboe Nonstandard 
Approval Order (permitting nonstandard expirations, including 
expirations on Tuesdays and Thursdays, for SPX and XSP options).
---------------------------------------------------------------------------

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

    No written comments were either solicited or received.

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

    The Exchange has filed the proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \36\ and Rule 19b-4(f)(6) thereunder.\37\ 
Because the foregoing proposed rule change does not: (i) significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, it has become effective pursuant to 
section 19(b)(3)(A)(iii) of the Act \38\ and subparagraph (f)(6) of 
Rule 19b-4 thereunder.\39\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \37\ 17 CFR 240.19b-4(f)(6).
    \38\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \39\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \40\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \41\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the Exchange may list Monthly Options Series and options on all 
broad-based indexes with Tuesday and Thursday expirations close in time 
to Cboe Options, which the Exchange believes will benefit investors by 
promoting competition in both of these programs. The Exchange notes 
that its proposal is substantively identical to the proposals submitted 
by Cboe Options for its Monthly Options Series program \42\ and 
Nonstandard Expirations Program.\43\ The Commission believes that the 
proposed rule change presents no novel issues and 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 
operative delay and designates the proposed rule change operative upon 
filing.\44\
---------------------------------------------------------------------------

    \40\ 17 CFR 240.19b-4(f)(6).
    \41\ 17 CFR 240.19b-4(f)(6)(iii).
    \42\ See Cboe Monthly Approval Order, supra note 5.
    \43\ See Cboe Nonstandard Approval Order, supra note 18.
    \44\ 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-PHLX-2023-54 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-PHLX-2023-54. 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

[[Page 86399]]

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-PHLX-2023-54 and should be submitted on 
or before January 3, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
---------------------------------------------------------------------------

    \45\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27274 Filed 12-12-23; 8:45 am]
BILLING CODE 8011-01-P
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