Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of Proposed Rule Change To Amend ISE Options 4, Section 3 To List and Trade Options on Units That Represent Interests in a Trust That Holds Bitcoin, 20717-20720 [2024-06165]
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Federal Register / Vol. 89, No. 58 / Monday, March 25, 2024 / Notices
proposed rule change SR–FICC–2024–
003.
the most significant aspects of such
statements.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Sherry R. Haywood,
Assistant Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2024–06166 Filed 3–22–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99776; File No. SR–ISE–
2024–14]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing of Proposed
Rule Change To Amend ISE Options 4,
Section 3 To List and Trade Options on
Units That Represent Interests in a
Trust That Holds Bitcoin
March 19, 2024.
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 March 13,
2024, Nasdaq ISE, LLC (‘‘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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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange to [sic] amend Options
4, Section 3, Criteria for Underlying
Securities.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/ise/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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1. Purpose
The Exchange proposes to amend
Options 4, Section 3, Criteria for
Underlying Securities. Specifically, the
Exchange proposes to amend Options 4,
Section 3(h) to allow the Exchange to
list and trade options on units that
represent interests in a trust that hold
bitcoin (‘‘Bitcoin ETPs’’), designating
them as Exchange-Traded Fund Shares
(‘‘ETFs’’) deemed appropriate for
options trading on the Exchange.
Options 4, Section 3(h) provides that,
subject to certain other criteria set forth
in that Rule, securities deemed
appropriate for options trading include
ETFs that represent certain types of
interests,3 including interests in certain
specific trusts that hold financial
instruments, money market instruments,
or precious metals (which are deemed
commodities).
Bitcoin ETPs are bitcoin-backed
commodity ETPs structured as trusts.4
Similar to any ETF currently deemed
appropriate for options trading under
Options 4, Section 3(h), the investment
objective of a Bitcoin ETP trust is for its
shares to reflect the performance of
bitcoin (less the expenses of the trust’s
operations), offering investors an
opportunity to gain exposure to bitcoin
without the complexities of bitcoin
delivery. As is the case for ETFs
currently deemed appropriate for
options trading, a Bitcoin ETP’s shares
represent units of fractional undivided
beneficial interest in the trust, the assets
of which consist principally of bitcoin
and are designed to track bitcoin or the
performance of the price of bitcoin and
offer access to the bitcoin market.5
Bitcoin ETPs provide investors with
cost-efficient alternatives that allow a
level of participation in the bitcoin
market through the securities market.
3 Options 4, Section 3(h) provides that securities
deemed appropriate for options trading shall
include shares or other securities (‘‘ExchangeTraded Fund Shares’’ or ‘‘ETFs’’) that are traded on
a national securities exchange and are defined as an
‘‘NMS’’ stock under Rule 600 of Regulation NMS,
and that meet certain criteria specified in Options
4, Section 3(h), including that they: . . . (iv)
represent interests in the SPDR® Gold Trust, the
iShares COMEX Gold Trust, the iShares Silver
Trust, or the ETFS Gold Trust . . .’’. In addition to
the aforementioned requirements, Options 4,
Section 3(h)(1) and (2) must be met to list options
on ETFs.
4 Pursuant to Options 4, Section 3(a), the
Exchange would only have authority to list and
trade ETFs that are trading as NMS stocks.
5 The trust may include minimal cash.
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The primary substantive difference
between Bitcoin ETPs and ETFs
currently deemed appropriate for
options trading are that ETFs may hold
securities, certain financial instruments,
and specified precious metals (which
are commodities), while Bitcoin ETPs
hold bitcoin (which is also deemed a
commodity).
The Exchange’s initial listing
standards for ETFs on which options
may be listed and traded on the
Exchange will apply to the Bitcoin
ETPs. The Exchange expects Bitcoin
ETPs to satisfy the initial listing
standards as set forth in Options 4,
Section 3(a) and Options 4, Section 3(h).
Pursuant to Options 4, Section 3(a), a
security (which includes an ETF) on
which options may be listed and traded
on the Exchange must be a security
registered (with the Commission) and be
an NMS stock (as defined in Rule 600
of Regulation NMS under the Act, and
the security shall be characterized by a
substantial number of outstanding
shares that are widely held and actively
traded.6 Options 4, Section 3(h)(1)
requires that ETFs must either meet the
criteria and guidelines set forth in
Options 4, Section 3(a) and (b) 7 or the
ETFs are available for creation or
redemption each business day from or
through the issuing trust, investment
company, commodity pool or other
entity in cash or in kind at a price
related to net asset value, and the issuer
is obligated to issue ETFs in a specified
aggregate number even if some or all of
the investment assets and/or cash
required to be deposited have not been
received by the issuer, subject to the
condition that the person obligated to
deposit the investment assets has
undertaken to deliver them as soon as
possible and such undertaking is
secured by the delivery and
maintenance of collateral consisting of
cash or cash equivalents satisfactory to
the issuer of the ETFs, all as described
in the ETFs’ prospectus. The Exchange
expects that Bitcoin ETPs would satisfy
Options 4, Section 3(h)(1)(ii).8
Options on Bitcoin ETPs will also be
subject to the Exchange’s continued
6 The Exchange represents it would not list
options on a Bitcoin ETP unless it satisfied the
criteria in Options 4, Section 3(a), the proposed
listing criteria, and any other applicable listing
criteria.
7 Options 4, Section 3(h)(1) provides criteria and
guidelines when evaluating potential underlying
securities for the listing of options.
8 See e.g., Form S–1 Registration Statement filed
on November 29, 2023 (Registration No. 333–
275781) (pending registration statement for shares
of the Pando Asset Spot Bitcoin Trust); and Form
S–1 Registration Statement filed on September 12,
2023 (Registration No. 333–274474) (pending
registration statement for shares of the Franklin
Bitcoin ETF).
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listing standards for options on ETFs set
forth in Options 4, Section 4(g) for ETFs
deemed appropriate for options trading
pursuant to Options 4, Section 3(h).
Specifically, options approved for
trading pursuant to Options 4, Section
3(h) will not be deemed to meet the
requirements for continued approval,
and the Exchange shall not open for
trading any additional series of option
contracts of the class covering such
ETFs if the ETFs are delisted from
trading as provided in subparagraph
(b)(5) of Options 4, Section 4 9 or the
ETFs are halted or suspended from
trading on their primary market.10
Additionally, options on ETFs may be
subject to the suspension of opening
transactions in any series of options of
the class covering ETFs in any of the
following circumstances:
(1) in the case of options covering
Exchange-Traded Fund Shares approved
pursuant to Options 4, Section
3(h)(A)(i), in accordance with the terms
of subparagraphs (b)(1), (2), (3) and (4)
of Options 4, Section 4; 11
(2) in the case of options covering
Fund Shares approved pursuant to
Options 4, Section 3(h)(A)(ii),12
following the initial twelve-month
period beginning upon the
commencement of trading in the
Exchange-Traded Fund Shares on a
national securities exchange and are
defined as an ‘‘NMS stock’’ under Rule
600 of Regulation NMS, there were
fewer than 50 record and/or beneficial
holders of such Exchange-Traded Fund
Shares for 30 or more consecutive
trading days;
9 Options 4, Section 4(b)(5) provides, if an
underlying security is approved for options listing
and trading under the provisions of Options 4,
Section 3(c), the trading volume of the Original
Security (as therein defined) prior to but not after
the commencement of trading in the Restructure
Security (as therein defined), including ‘whenissued’ trading, may be taken into account in
determining whether the trading volume
requirement of (3) of this paragraph (b) is satisfied.
10 See Options 4, Section 4(g).
11 Options 4, Section 4(b)(5)(1) through (4)
provides, if: (1) there are fewer than 6,300,000
shares of the underlying security held by persons
other than those who are required to report their
security holdings under Section 16(a) of the Act, (2)
there are fewer than 1,600 holders of the underlying
security, (3) the trading volume (in all markets in
which the underlying security is traded) has been
less than 1,800,000 shares in the preceding twelve
(12) months, or (4) the underlying security ceases
to be an ‘NMS stock’ as defined in Rule 600 of
Regulation NMS under the Exchange Act. Options
4, Section 3(h)(i) refers to Financial Instruments
and Money Market Instruments. In addition, the
Exchange proposes to amend the citation to
‘‘Options 4, Section 3(h)(A)(i)’’ herein to ‘‘Options
4, Section 3(h)(i).’’
12 Options 4, Section 3(h)(ii) refers to Currency
Trust Shares. In addition, the Exchange proposes to
amend the citation to ‘‘Options 4, Section
3(h)(A)(ii)’’ herein to ‘‘Options 4, Section 3(h)(ii).’’
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(3) the value of the index or portfolio
of securities or non-U.S. currency,
portfolio of commodities including
commodity futures contracts, options on
commodity futures contracts, swaps,
forward contracts, options on physical
commodities and/or Financial
Instruments and Money Market
Instruments, on which the ExchangeTraded Fund Shares are based is no
longer calculated or available; or
(4) such other event occurs or
condition exists that in the opinion of
the Exchange makes further dealing in
such options on the Exchange
inadvisable.
Options on a Bitcoin ETP would be
physically settled contracts with
American-style exercise.13 Consistent
with current Options 4, Section 5,
which governs the opening of options
series on a specific underlying security
(including ETFs), the Exchange will
open at least one expiration month for
options on each Bitcoin ETP 14 and may
13 See Options 4, Section 2, Rights and
Obligations of Holders and Writers, which provides
that the rights and obligations of holders and
writers shall be as set forth in the Rules of the
Clearing Corporation. See also The Options
Clearing Corporation (‘‘OCC’’) Rules, Chapter VIII,
which governs exercise and assignment, and
Chapter IX, which governs the discharge of delivery
and payment obligations arising out of the exercise
of physically settled stock option contracts. OCC
Rules can be located at: https://www.theocc.com/
getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/
occ_rules.pdf.
14 See Options 4, Section 5(b). At the
commencement of trading on the Exchange of a
particular class of options, the Exchange will open
a minimum of one (1) series of options in that class.
The exercise price of that series will be fixed at a
price per share, relative to the underlying stock
price in the primary market at about the time that
class of options is first opened for trading on the
Exchange. The monthly expirations are subject to
certain listing criteria for underlying securities
described within Options 4, Section 5. Monthly
listings expire the third Friday of the month. The
term ‘‘expiration date’’ (unless separately defined
elsewhere in the OCC By-Laws), when used in
respect of an option contract (subject to certain
exceptions), means the third Friday of the
expiration month of such option contract, or if such
Friday is a day on which the exchange on which
such option is listed is not open for business, the
preceding day on which such exchange is open for
business. See OCC By-Laws Article I, Section 1.
Pursuant to Options 4, Section 5(c), additional
series of options of the same class may be opened
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 stock moves more than five strike
prices from the initial exercise price or prices. The
opening of a new series of options shall not affect
the series of options of the same class previously
opened. New series of options on an individual
stock may be added until the beginning of the
month in which the options contract will expire.
Due to unusual market conditions, the Exchange, in
its discretion, may add a new series of options on
an individual stock until the close of trading on the
business day prior to the business day of expiration,
or, in the case of an option contract expiring on a
day that is not a business day, on the second
business day prior to expiration.
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also list series of options on a Bitcoin
ETP for trading on a weekly 15 or
quarterly 16 basis. The Exchange may
also list long-term equity option series
(‘‘LEAPS’’) that expire from twelve to
thirty-nine months from the time they
are listed.17
Pursuant to Options 4, Section 5(d),
which governs strike prices of series of
options on ETFs, the interval between
strike prices of series of options on
Bitcoin ETPs will be $1 or greater when
the strike price is $200 or less and $5
or greater when the strike price is
greater than $200.18 Additionally, the
Exchange may list series of options
pursuant to the $1 Strike Price Interval
Program,19 the $0.50 Strike Program,20
the $2.50 Strike Price Program,21 and
the $5 Strike Program.22 Pursuant to
Options 3, Section 3, where the price of
a series of a Bitcoin ETP options is less
than $3.00, the minimum increment
will be $0.05, and where the price is
$3.00 or higher, the minimum
increment will be $0.10.23 Any and all
new series of Bitcoin ETP options that
the Exchange lists will be consistent and
comply with the expirations, strike
prices, and minimum increments set
forth in Options 4, Section 5 and
Options 3, Section 3, as applicable.
Bitcoin ETP options will trade in the
same manner as options on other ETFs
on the Exchange. Exchange Rules that
currently apply to the listing and
trading of all options on ETFs on the
Exchange, including, for example, Rules
that govern listing criteria, expirations,
exercise prices, minimum increments,
position and exercise limits, margin
requirements, customer accounts and
trading halt procedures will apply to the
listing and trading of Bitcoin ETPs on
the Exchange in the same manner as
15 See
Supplementary .03 to Options 4, Section 5.
Supplementary .04 to Options 4, Section 5.
17 See Options 4, Section 8.
18 See Options 4, Section 5(h). The Exchange
notes that for options listed pursuant to the Short
Term Option Series Program, the Quarterly Options
Series Program, and the Monthly Options Series
Program, Supplementary Material .03, .04 and .08
to Options 4, Section 5 specifically sets forth
intervals between strike prices on Short Term
Option Series, Quarterly Options Series, and
Monthly Options Series, respectively.
19 See Supplementary Material .01 to Options 4,
Section 5.
20 See Supplementary Material .05 to Options 4,
Section 5.
21 See Supplementary Material .02 to Options 4,
Section 5.
22 See Supplementary Material .06 to Options 4,
Section 5.
23 If options on a Bitcoin ETP are eligible to
participate in the Penny Interval Program, the
minimum increment will be $0.01 for series with
a price below $3.00 and $0.05 for series with a price
at or above $3.00. See Supplementary Material .01
to Options 3, Section 3 (which describes the
requirements for the Penny Interval Program).
16 See
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they apply to other options on all other
ETFs that are listed and traded on the
Exchange, including the precious-metal
backed commodity ETFs already
deemed appropriate for options trading
on the Exchange pursuant to pursuant to
Options 4, Section 3(h)(iv).
Position and exercise limits for
options on ETFs, including options on
Bitcoin ETPs, are determined pursuant
to Options 9, Sections 13 and 15,
respectively. Position and exercise
limits for ETFs options vary according
to the number of outstanding shares and
the trading volumes of the underlying
ETF over the past six months, where the
largest in capitalization and the most
frequently traded ETFs have an option
position and exercise limit of 250,000
contracts (with adjustments for splits,
re-capitalizations, etc.) on the same side
of the market; and smaller capitalization
ETFs have position and exercise limits
of 200,000, 75,000, 50,000 or 25,000
contracts (with adjustments for splits,
re-capitalizations, etc.) on the same side
of the market.24 Further, Options 6C,
Section 3, which governs margin
requirements applicable to the trading
of all options on the Exchange including
options on ETFs, will also apply to the
trading of the Bitcoin ETP options.
The Exchange represents that the
same surveillance procedures applicable
to all other options on other ETFs
currently listed and traded on the
Exchange will apply to options on
Bitcoin ETPs, and that it has the
necessary systems capacity to support
the new option series. The Exchange
believes that its existing surveillance
and reporting safeguards are designed to
deter and detect possible manipulative
behavior which might potentially arise
from listing and trading options on
ETFs, including precious metalcommodity backed ETF options, as
proposed. Also, the Exchange may
obtain information from CME Group
Inc.’s designated contract markets that
are members of the Intermarket
Surveillance Group related to any
financial instrument that is based, in
whole or in part, upon an interest in or
performance of bitcoin, as applicable.
The Exchange has also analyzed its
capacity and represents that it believes
the Exchange and the Options Price
Reporting Authority or ‘‘OPRA’’ have
the necessary systems capacity to
handle the additional traffic associated
with the listing of new series that may
result from the introduction of options
on Bitcoin ETPs up to the number of
expirations currently permissible under
24 As Bitcoin ETPs do not currently trade, options
on Bitcoin ETPs would be subject to the 25,000
option contract limit.
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the Exchange Rules. Because the
proposal is limited to ETFs on a single
commodity, the Exchange believes any
additional traffic that may be generated
from the introduction of Bitcoin ETP
options will be manageable.
The Exchange believes that offering
options on Bitcoin ETPs will benefit
investors by providing them with an
additional, relatively lower cost
investing tool to gain exposure to the
price of bitcoin and hedging vehicle to
meet their investment needs in
connection with bitcoin-related
products and positions. The Exchange
expects investors will transact in
options on Bitcoin ETPs in the
unregulated over-the-counter (‘‘OTC’’)
options market (if the Commission
approves Bitcoin ETPs for exchangetrading),25 but may prefer to trade such
options in a listed environment to
receive the benefits of trading listing
options, including (1) enhanced
efficiency in initiating and closing out
position; (2) increased market
transparency; and (3) heightened contraparty creditworthiness due to the role of
OCC as issuer and guarantor of all listed
options. The Exchange believes that
listing Bitcoin ETP options may cause
investors to bring this liquidity to the
Exchange, would increase market
transparency and enhance the process of
price discovery conducted on the
Exchange through increased order flow.
The ETFs that hold financial
instruments, money market instruments,
or precious metal commodities on
which the Exchange may already list
and trade options are trusts structured
in substantially the same manner as
Bitcoin ETPs and essentially offer the
same objectives and benefits to
investors, just with respect to different
assets. The Exchange notes that it has
not identified any issues with the
continued listing and trading of any ETF
options, including ETFS that hold
commodities (i.e., precious metals) that
it currently lists and trades on the
Exchange.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,26 in general, and furthers the
objectives of Section 6(b)(5) of the Act,27
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
25 The Exchange understands from customers that
investors have historically transacted in options on
units in the OTC options market if such options
were not available for trading in a listed
environment.
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(5).
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20719
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) 28 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the proposal to list and trade
options on Bitcoin ETPs will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors because
offering options on Bitcoin ETPs will
provide investors with a greater
opportunity to realize the benefits of
utilizing options on a bitcoin-based
ETP, including cost efficiencies and
increased hedging strategies. The
Exchange believes that offering Bitcoin
ETP options will benefit investors by
providing them with a relatively lowercost risk management tool, which will
allow them to manage their positions
and associated risk in their portfolios
more easily in connection with
exposure to the price of bitcoin and
with bitcoin-related products and
positions. Additionally, the Exchange’s
offering of Bitcoin ETP options will
provide investors with the ability to
transact in such options in a listed
market environment as opposed to in
the unregulated OTC options market,
which would increase market
transparency and enhance the process of
price discovery conducted on the
Exchange through increased order flow
to the benefit of all investors. The
Exchange also notes that it already lists
options on other commodity-based
ETFs,29 which, as described above, are
trusts structured in substantially the
same manner as Bitcoin ETPs and
essentially offer the same objectives and
benefits to investors, just with respect to
a different commodity (i.e., bitcoin
rather than precious metals) and for
which the Exchange has not identified
any issues with the continued listing
and trading of commodity-backed ETF
options it currently lists for trading.
The Exchange also believes the
proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, because
28 15
U.S.C. 78(f)(b)(5).
Options 4, Section 3(h)(iv).
29 See
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it is consistent with current Exchange
Rules, previously filed with the
Commission. Options on Bitcoin ETPs
must satisfy the initial listing standards
and continued listing standards
currently in the Exchange Rules,
applicable to options on all ETFs,
including ETFs that hold other
commodities already deemed
appropriate for options trading on the
Exchange. Bitcoin ETP options will
trade in the same manner as any other
ETF options—the same Exchange Rules
that currently govern the listing and
trading of all ETF options, including
permissible expirations, strike prices
and minimum increments, and
applicable position and exercise limits
and margin requirements, will govern
the listing and trading of options on
Bitcoin ETPs in the same manner.
The Exchange represents that it has
the necessary systems capacity to
support the new ETF option series. The
Exchange believes that its existing
surveillance and reporting safeguards
are designed to deter and detect possible
manipulative behavior which might
arise from listing and trading ETF
options, including Bitcoin ETP options.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange does not believe that
the proposed rule change will impose
any burden on intramarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
as Bitcoin ETPs would need to satisfy
the initial listing standards set forth in
the Exchange Rules in the same manner
as any other ETF before the Exchange
could list options on them.
Additionally, Bitcoin ETP options will
be equally available to all market
participants who wish to trade such
options. The Exchange Rules currently
applicable to the listing and trading of
options on ETFs on the Exchange will
apply in the same manner to the listing
and trading of all options on Bitcoin
ETPs. Also, and as stated above, the
Exchange already lists options on other
commodity-based ETFs.30
The Exchange does not believe that
the proposal to list and trade options on
Bitcoin ETPs will impose any burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. To the extent
that the advent of Bitcoin ETP options
trading on the Exchange may make the
30 See
Options 4, Section 3(h)(iv).
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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.
Additionally, other options exchanges
are free to amend their listing rules, as
applicable, to permit them to list and
trade options on Bitcoin ETPs.
Additionally, the Exchange notes that
listing and trading Bitcoin ETP options
on the Exchange will subject such
options to transparent exchange-based
rules as well as price discovery and
liquidity, as opposed to alternatively
trading such options in the OTC market.
The Exchange believes that the
proposed rule change may relieve any
burden on, or otherwise promote,
competition as it is designed to increase
competition for order flow on the
Exchange in a manner that is beneficial
to investors by providing them with a
lower-cost option to hedge their
investment portfolios. The Exchange
notes that it operates in a highly
competitive market in which market
participants can readily direct order
flow to competing venues that offer
similar products. Ultimately, the
Exchange believes that offering Bitcoin
ETP options for trading on the Exchange
will promote competition by providing
investors with an additional, relatively
low-cost means to hedge their portfolios
and meet their investment needs in
connection with bitcoin prices and
bitcoin-related products and positions
on a listed options exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
ISE–2024–14 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–ISE–2024–14. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–ISE–2024–14 and should be
submitted on or before April 15, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–06165 Filed 3–22–24; 8:45 am]
BILLING CODE 8011–01–P
31 17
E:\FR\FM\25MRN1.SGM
CFR 200.30–3(a)(12).
25MRN1
]]>Agencies
[Federal Register Volume 89, Number 58 (Monday, March 25, 2024)]
[Notices]
[Pages 20717-20720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06165]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99776; File No. SR-ISE-2024-14]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
of Proposed Rule Change To Amend ISE Options 4, Section 3 To List and
Trade Options on Units That Represent Interests in a Trust That Holds
Bitcoin
March 19, 2024.
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 March 13, 2024, Nasdaq ISE, LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange to [sic] amend Options 4, Section 3, Criteria for
Underlying Securities.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 4, Section 3, Criteria for
Underlying Securities. Specifically, the Exchange proposes to amend
Options 4, Section 3(h) to allow the Exchange to list and trade options
on units that represent interests in a trust that hold bitcoin
(``Bitcoin ETPs''), designating them as Exchange-Traded Fund Shares
(``ETFs'') deemed appropriate for options trading on the Exchange.
Options 4, Section 3(h) provides that, subject to certain other
criteria set forth in that Rule, securities deemed appropriate for
options trading include ETFs that represent certain types of
interests,\3\ including interests in certain specific trusts that hold
financial instruments, money market instruments, or precious metals
(which are deemed commodities).
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\3\ Options 4, Section 3(h) provides that securities deemed
appropriate for options trading shall include shares or other
securities (``Exchange-Traded Fund Shares'' or ``ETFs'') that are
traded on a national securities exchange and are defined as an
``NMS'' stock under Rule 600 of Regulation NMS, and that meet
certain criteria specified in Options 4, Section 3(h), including
that they: . . . (iv) represent interests in the SPDR[supreg] Gold
Trust, the iShares COMEX Gold Trust, the iShares Silver Trust, or
the ETFS Gold Trust . . .''. In addition to the aforementioned
requirements, Options 4, Section 3(h)(1) and (2) must be met to list
options on ETFs.
---------------------------------------------------------------------------
Bitcoin ETPs are bitcoin-backed commodity ETPs structured as
trusts.\4\ Similar to any ETF currently deemed appropriate for options
trading under Options 4, Section 3(h), the investment objective of a
Bitcoin ETP trust is for its shares to reflect the performance of
bitcoin (less the expenses of the trust's operations), offering
investors an opportunity to gain exposure to bitcoin without the
complexities of bitcoin delivery. As is the case for ETFs currently
deemed appropriate for options trading, a Bitcoin ETP's shares
represent units of fractional undivided beneficial interest in the
trust, the assets of which consist principally of bitcoin and are
designed to track bitcoin or the performance of the price of bitcoin
and offer access to the bitcoin market.\5\ Bitcoin ETPs provide
investors with cost-efficient alternatives that allow a level of
participation in the bitcoin market through the securities market. The
primary substantive difference between Bitcoin ETPs and ETFs currently
deemed appropriate for options trading are that ETFs may hold
securities, certain financial instruments, and specified precious
metals (which are commodities), while Bitcoin ETPs hold bitcoin (which
is also deemed a commodity).
---------------------------------------------------------------------------
\4\ Pursuant to Options 4, Section 3(a), the Exchange would only
have authority to list and trade ETFs that are trading as NMS
stocks.
\5\ The trust may include minimal cash.
---------------------------------------------------------------------------
The Exchange's initial listing standards for ETFs on which options
may be listed and traded on the Exchange will apply to the Bitcoin
ETPs. The Exchange expects Bitcoin ETPs to satisfy the initial listing
standards as set forth in Options 4, Section 3(a) and Options 4,
Section 3(h). Pursuant to Options 4, Section 3(a), a security (which
includes an ETF) on which options may be listed and traded on the
Exchange must be a security registered (with the Commission) and be an
NMS stock (as defined in Rule 600 of Regulation NMS under the Act, and
the security shall be characterized by a substantial number of
outstanding shares that are widely held and actively traded.\6\ Options
4, Section 3(h)(1) requires that ETFs must either meet the criteria and
guidelines set forth in Options 4, Section 3(a) and (b) \7\ or the ETFs
are available for creation or redemption each business day from or
through the issuing trust, investment company, commodity pool or other
entity in cash or in kind at a price related to net asset value, and
the issuer is obligated to issue ETFs in a specified aggregate number
even if some or all of the investment assets and/or cash required to be
deposited have not been received by the issuer, subject to the
condition that the person obligated to deposit the investment assets
has undertaken to deliver them as soon as possible and such undertaking
is secured by the delivery and maintenance of collateral consisting of
cash or cash equivalents satisfactory to the issuer of the ETFs, all as
described in the ETFs' prospectus. The Exchange expects that Bitcoin
ETPs would satisfy Options 4, Section 3(h)(1)(ii).\8\
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\6\ The Exchange represents it would not list options on a
Bitcoin ETP unless it satisfied the criteria in Options 4, Section
3(a), the proposed listing criteria, and any other applicable
listing criteria.
\7\ Options 4, Section 3(h)(1) provides criteria and guidelines
when evaluating potential underlying securities for the listing of
options.
\8\ See e.g., Form S-1 Registration Statement filed on November
29, 2023 (Registration No. 333-275781) (pending registration
statement for shares of the Pando Asset Spot Bitcoin Trust); and
Form S-1 Registration Statement filed on September 12, 2023
(Registration No. 333-274474) (pending registration statement for
shares of the Franklin Bitcoin ETF).
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Options on Bitcoin ETPs will also be subject to the Exchange's
continued
[[Page 20718]]
listing standards for options on ETFs set forth in Options 4, Section
4(g) for ETFs deemed appropriate for options trading pursuant to
Options 4, Section 3(h). Specifically, options approved for trading
pursuant to Options 4, Section 3(h) will not be deemed to meet the
requirements for continued approval, and the Exchange shall not open
for trading any additional series of option contracts of the class
covering such ETFs if the ETFs are delisted from trading as provided in
subparagraph (b)(5) of Options 4, Section 4 \9\ or the ETFs are halted
or suspended from trading on their primary market.\10\ Additionally,
options on ETFs may be subject to the suspension of opening
transactions in any series of options of the class covering ETFs in any
of the following circumstances:
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\9\ Options 4, Section 4(b)(5) provides, if an underlying
security is approved for options listing and trading under the
provisions of Options 4, Section 3(c), the trading volume of the
Original Security (as therein defined) prior to but not after the
commencement of trading in the Restructure Security (as therein
defined), including `when-issued' trading, may be taken into account
in determining whether the trading volume requirement of (3) of this
paragraph (b) is satisfied.
\10\ See Options 4, Section 4(g).
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(1) in the case of options covering Exchange-Traded Fund Shares
approved pursuant to Options 4, Section 3(h)(A)(i), in accordance with
the terms of subparagraphs (b)(1), (2), (3) and (4) of Options 4,
Section 4; \11\
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\11\ Options 4, Section 4(b)(5)(1) through (4) provides, if: (1)
there are fewer than 6,300,000 shares of the underlying security
held by persons other than those who are required to report their
security holdings under Section 16(a) of the Act, (2) there are
fewer than 1,600 holders of the underlying security, (3) the trading
volume (in all markets in which the underlying security is traded)
has been less than 1,800,000 shares in the preceding twelve (12)
months, or (4) the underlying security ceases to be an `NMS stock'
as defined in Rule 600 of Regulation NMS under the Exchange Act.
Options 4, Section 3(h)(i) refers to Financial Instruments and Money
Market Instruments. In addition, the Exchange proposes to amend the
citation to ``Options 4, Section 3(h)(A)(i)'' herein to ``Options 4,
Section 3(h)(i).''
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(2) in the case of options covering Fund Shares approved pursuant
to Options 4, Section 3(h)(A)(ii),\12\ following the initial twelve-
month period beginning upon the commencement of trading in the
Exchange-Traded Fund Shares on a national securities exchange and are
defined as an ``NMS stock'' under Rule 600 of Regulation NMS, there
were fewer than 50 record and/or beneficial holders of such Exchange-
Traded Fund Shares for 30 or more consecutive trading days;
---------------------------------------------------------------------------
\12\ Options 4, Section 3(h)(ii) refers to Currency Trust
Shares. In addition, the Exchange proposes to amend the citation to
``Options 4, Section 3(h)(A)(ii)'' herein to ``Options 4, Section
3(h)(ii).''
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(3) the value of the index or portfolio of securities or non-U.S.
currency, portfolio of commodities including commodity futures
contracts, options on commodity futures contracts, swaps, forward
contracts, options on physical commodities and/or Financial Instruments
and Money Market Instruments, on which the Exchange-Traded Fund Shares
are based is no longer calculated or available; or
(4) such other event occurs or condition exists that in the opinion
of the Exchange makes further dealing in such options on the Exchange
inadvisable.
Options on a Bitcoin ETP would be physically settled contracts with
American-style exercise.\13\ Consistent with current Options 4, Section
5, which governs the opening of options series on a specific underlying
security (including ETFs), the Exchange will open at least one
expiration month for options on each Bitcoin ETP \14\ and may also list
series of options on a Bitcoin ETP for trading on a weekly \15\ or
quarterly \16\ basis. The Exchange may also list long-term equity
option series (``LEAPS'') that expire from twelve to thirty-nine months
from the time they are listed.\17\
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\13\ See Options 4, Section 2, Rights and Obligations of Holders
and Writers, which provides that the rights and obligations of
holders and writers shall be as set forth in the Rules of the
Clearing Corporation. See also The Options Clearing Corporation
(``OCC'') Rules, Chapter VIII, which governs exercise and
assignment, and Chapter IX, which governs the discharge of delivery
and payment obligations arising out of the exercise of physically
settled stock option contracts. OCC Rules can be located at: https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf.
\14\ See Options 4, Section 5(b). At the commencement of trading
on the Exchange of a particular class of options, the Exchange will
open a minimum of one (1) series of options in that class. The
exercise price of that series will be fixed at a price per share,
relative to the underlying stock price in the primary market at
about the time that class of options is first opened for trading on
the Exchange. The monthly expirations are subject to certain listing
criteria for underlying securities described within Options 4,
Section 5. Monthly listings expire the third Friday of the month.
The term ``expiration date'' (unless separately defined elsewhere in
the OCC By-Laws), when used in respect of an option contract
(subject to certain exceptions), means the third Friday of the
expiration month of such option contract, or if such Friday is a day
on which the exchange on which such option is listed is not open for
business, the preceding day on which such exchange is open for
business. See OCC By-Laws Article I, Section 1. Pursuant to Options
4, Section 5(c), additional series of options of the same class may
be opened 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 stock moves more than five
strike prices from the initial exercise price or prices. The opening
of a new series of options shall not affect the series of options of
the same class previously opened. New series of options on an
individual stock may be added until the beginning of the month in
which the options contract will expire. Due to unusual market
conditions, the Exchange, in its discretion, may add a new series of
options on an individual stock until the close of trading on the
business day prior to the business day of expiration, or, in the
case of an option contract expiring on a day that is not a business
day, on the second business day prior to expiration.
\15\ See Supplementary .03 to Options 4, Section 5.
\16\ See Supplementary .04 to Options 4, Section 5.
\17\ See Options 4, Section 8.
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Pursuant to Options 4, Section 5(d), which governs strike prices of
series of options on ETFs, the interval between strike prices of series
of options on Bitcoin ETPs will be $1 or greater when the strike price
is $200 or less and $5 or greater when the strike price is greater than
$200.\18\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\19\ the $0.50 Strike
Program,\20\ the $2.50 Strike Price Program,\21\ and the $5 Strike
Program.\22\ Pursuant to Options 3, Section 3, where the price of a
series of a Bitcoin ETP options is less than $3.00, the minimum
increment will be $0.05, and where the price is $3.00 or higher, the
minimum increment will be $0.10.\23\ Any and all new series of Bitcoin
ETP options that the Exchange lists will be consistent and comply with
the expirations, strike prices, and minimum increments set forth in
Options 4, Section 5 and Options 3, Section 3, as applicable.
---------------------------------------------------------------------------
\18\ See Options 4, Section 5(h). The Exchange notes that for
options listed pursuant to the Short Term Option Series Program, the
Quarterly Options Series Program, and the Monthly Options Series
Program, Supplementary Material .03, .04 and .08 to Options 4,
Section 5 specifically sets forth intervals between strike prices on
Short Term Option Series, Quarterly Options Series, and Monthly
Options Series, respectively.
\19\ See Supplementary Material .01 to Options 4, Section 5.
\20\ See Supplementary Material .05 to Options 4, Section 5.
\21\ See Supplementary Material .02 to Options 4, Section 5.
\22\ See Supplementary Material .06 to Options 4, Section 5.
\23\ If options on a Bitcoin ETP are eligible to participate in
the Penny Interval Program, the minimum increment will be $0.01 for
series with a price below $3.00 and $0.05 for series with a price at
or above $3.00. See Supplementary Material .01 to Options 3, Section
3 (which describes the requirements for the Penny Interval Program).
---------------------------------------------------------------------------
Bitcoin ETP options will trade in the same manner as options on
other ETFs on the Exchange. Exchange Rules that currently apply to the
listing and trading of all options on ETFs on the Exchange, including,
for example, Rules that govern listing criteria, expirations, exercise
prices, minimum increments, position and exercise limits, margin
requirements, customer accounts and trading halt procedures will apply
to the listing and trading of Bitcoin ETPs on the Exchange in the same
manner as
[[Page 20719]]
they apply to other options on all other ETFs that are listed and
traded on the Exchange, including the precious-metal backed commodity
ETFs already deemed appropriate for options trading on the Exchange
pursuant to pursuant to Options 4, Section 3(h)(iv).
Position and exercise limits for options on ETFs, including options
on Bitcoin ETPs, are determined pursuant to Options 9, Sections 13 and
15, respectively. Position and exercise limits for ETFs options vary
according to the number of outstanding shares and the trading volumes
of the underlying ETF over the past six months, where the largest in
capitalization and the most frequently traded ETFs have an option
position and exercise limit of 250,000 contracts (with adjustments for
splits, re-capitalizations, etc.) on the same side of the market; and
smaller capitalization ETFs have position and exercise limits of
200,000, 75,000, 50,000 or 25,000 contracts (with adjustments for
splits, re-capitalizations, etc.) on the same side of the market.\24\
Further, Options 6C, Section 3, which governs margin requirements
applicable to the trading of all options on the Exchange including
options on ETFs, will also apply to the trading of the Bitcoin ETP
options.
---------------------------------------------------------------------------
\24\ As Bitcoin ETPs do not currently trade, options on Bitcoin
ETPs would be subject to the 25,000 option contract limit.
---------------------------------------------------------------------------
The Exchange represents that the same surveillance procedures
applicable to all other options on other ETFs currently listed and
traded on the Exchange will apply to options on Bitcoin ETPs, and that
it has the necessary systems capacity to support the new option series.
The Exchange believes that its existing surveillance and reporting
safeguards are designed to deter and detect possible manipulative
behavior which might potentially arise from listing and trading options
on ETFs, including precious metal-commodity backed ETF options, as
proposed. Also, the Exchange may obtain information from CME Group
Inc.'s designated contract markets that are members of the Intermarket
Surveillance Group related to any financial instrument that is based,
in whole or in part, upon an interest in or performance of bitcoin, as
applicable.
The Exchange has also analyzed its capacity and represents that it
believes the Exchange and the Options Price Reporting Authority or
``OPRA'' have the necessary systems capacity to handle the additional
traffic associated with the listing of new series that may result from
the introduction of options on Bitcoin ETPs up to the number of
expirations currently permissible under the Exchange Rules. Because the
proposal is limited to ETFs on a single commodity, the Exchange
believes any additional traffic that may be generated from the
introduction of Bitcoin ETP options will be manageable.
The Exchange believes that offering options on Bitcoin ETPs will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of bitcoin and
hedging vehicle to meet their investment needs in connection with
bitcoin-related products and positions. The Exchange expects investors
will transact in options on Bitcoin ETPs in the unregulated over-the-
counter (``OTC'') options market (if the Commission approves Bitcoin
ETPs for exchange-trading),\25\ but may prefer to trade such options in
a listed environment to receive the benefits of trading listing
options, including (1) enhanced efficiency in initiating and closing
out position; (2) increased market transparency; and (3) heightened
contra-party creditworthiness due to the role of OCC as issuer and
guarantor of all listed options. The Exchange believes that listing
Bitcoin ETP options may cause investors to bring this liquidity to the
Exchange, would increase market transparency and enhance the process of
price discovery conducted on the Exchange through increased order flow.
The ETFs that hold financial instruments, money market instruments, or
precious metal commodities on which the Exchange may already list and
trade options are trusts structured in substantially the same manner as
Bitcoin ETPs and essentially offer the same objectives and benefits to
investors, just with respect to different assets. The Exchange notes
that it has not identified any issues with the continued listing and
trading of any ETF options, including ETFS that hold commodities (i.e.,
precious metals) that it currently lists and trades on the Exchange.
---------------------------------------------------------------------------
\25\ The Exchange understands from customers that investors have
historically transacted in options on units in the OTC options
market if such options were not available for trading in a listed
environment.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\26\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\27\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Additionally, the Exchange
believes the proposed rule change is consistent with the Section
(6)(b)(5) \28\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
\28\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on Bitcoin ETPs will remove impediments to and perfect
the mechanism of a free and open market and a national market system
and, in general, protect investors because offering options on Bitcoin
ETPs will provide investors with a greater opportunity to realize the
benefits of utilizing options on a bitcoin-based ETP, including cost
efficiencies and increased hedging strategies. The Exchange believes
that offering Bitcoin ETP options will benefit investors by providing
them with a relatively lower-cost risk management tool, which will
allow them to manage their positions and associated risk in their
portfolios more easily in connection with exposure to the price of
bitcoin and with bitcoin-related products and positions. Additionally,
the Exchange's offering of Bitcoin ETP options will provide investors
with the ability to transact in such options in a listed market
environment as opposed to in the unregulated OTC options market, which
would increase market transparency and enhance the process of price
discovery conducted on the Exchange through increased order flow to the
benefit of all investors. The Exchange also notes that it already lists
options on other commodity-based ETFs,\29\ which, as described above,
are trusts structured in substantially the same manner as Bitcoin ETPs
and essentially offer the same objectives and benefits to investors,
just with respect to a different commodity (i.e., bitcoin rather than
precious metals) and for which the Exchange has not identified any
issues with the continued listing and trading of commodity-backed ETF
options it currently lists for trading.
---------------------------------------------------------------------------
\29\ See Options 4, Section 3(h)(iv).
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because
[[Page 20720]]
it is consistent with current Exchange Rules, previously filed with the
Commission. Options on Bitcoin ETPs must satisfy the initial listing
standards and continued listing standards currently in the Exchange
Rules, applicable to options on all ETFs, including ETFs that hold
other commodities already deemed appropriate for options trading on the
Exchange. Bitcoin ETP options will trade in the same manner as any
other ETF options--the same Exchange Rules that currently govern the
listing and trading of all ETF options, including permissible
expirations, strike prices and minimum increments, and applicable
position and exercise limits and margin requirements, will govern the
listing and trading of options on Bitcoin ETPs in the same manner.
The Exchange represents that it has the necessary systems capacity
to support the new ETF option series. The Exchange believes that its
existing surveillance and reporting safeguards are designed to deter
and detect possible manipulative behavior which might arise from
listing and trading ETF options, including Bitcoin ETP options.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act as Bitcoin ETPs
would need to satisfy the initial listing standards set forth in the
Exchange Rules in the same manner as any other ETF before the Exchange
could list options on them. Additionally, Bitcoin ETP options will be
equally available to all market participants who wish to trade such
options. The Exchange Rules currently applicable to the listing and
trading of options on ETFs on the Exchange will apply in the same
manner to the listing and trading of all options on Bitcoin ETPs. Also,
and as stated above, the Exchange already lists options on other
commodity-based ETFs.\30\
---------------------------------------------------------------------------
\30\ See Options 4, Section 3(h)(iv).
---------------------------------------------------------------------------
The Exchange does not believe that the proposal to list and trade
options on Bitcoin ETPs will impose any burden on intermarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. To the extent that the advent of Bitcoin ETP
options trading on the Exchange may make 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. Additionally, other options exchanges are free to amend their
listing rules, as applicable, to permit them to list and trade options
on Bitcoin ETPs. Additionally, the Exchange notes that listing and
trading Bitcoin ETP options on the Exchange will subject such options
to transparent exchange-based rules as well as price discovery and
liquidity, as opposed to alternatively trading such options in the OTC
market. The Exchange believes that the proposed rule change may relieve
any burden on, or otherwise promote, competition as it is designed to
increase competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios. The Exchange notes that it operates
in a highly competitive market in which market participants can readily
direct order flow to competing venues that offer similar products.
Ultimately, the Exchange believes that offering Bitcoin ETP options for
trading on the Exchange will promote competition by providing investors
with an additional, relatively low-cost means to hedge their portfolios
and meet their investment needs in connection with bitcoin prices and
bitcoin-related products and positions on a listed options exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-ISE-2024-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-ISE-2024-14. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-ISE-2024-14 and should be
submitted on or before April 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-06165 Filed 3-22-24; 8:45 am]
BILLING CODE 8011-01-P
