Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Strike Interval for Options on SPDR® Gold Shares, 59775-59778 [2024-16110]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 141 (Tuesday, July 23, 2024)]
[Notices]
[Pages 59775-59778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16110]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100550; File No. SR-MEMX-2024-28]


Self-Regulatory Organizations; MEMX LLC; Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend the Strike 
Interval for Options on SPDR[supreg] Gold Shares

July 17, 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 July 16, 2024, MEMX, LLC (``Exchange'') filed with the Securities 
and Exchange Commission (``Commission'') a proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit

[[Page 59776]]

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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 is filing with the Commission a proposed rule change 
to amend the strike interval for options on SPDR[supreg] Gold Shares 
(``GLD''). The text of the proposed rule change is provided in Exhibit 
5.

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 purpose of the proposed rule change is to amend Rule 19.5, 
``Series of Options Contracts Open for Trading.'' Specifically, the 
Exchange proposes to amend Rule 19.5(d)(4) to allow for the interval 
between strike prices of series of options on Fund Shares of 
SPDR[supreg] Gold Shares or ``GLD'' to be $1 or greater, including 
where the strike price is greater than $200.
    Currently Rule 19.5, Interpretation and Policy .01 provides, in 
relevant part, that for series of options on Exchange-Traded Fund 
Shares that satisfy the criteria set forth in Rule 19.3(i), the 
interval of strike prices may be $1 or greater where the strike price 
is $200 or less or $5 or greater where the strike price is over $200, 
subject to certain exceptions set forth in Rule 19.5, Interpretations 
and Policies .02 and .03.
    Further, current Rule 19.5(d)(4) provides that notwithstanding any 
other provision regarding the interval between strike prices of series 
of options on Fund Shares in Rule 19.5, the interval between strike 
prices of series of options on Standard & Poor's Depository Receipts 
Trust (``SPY''), iShares S&P 500 Index ETF (``IVV''), and the DIAMONDS 
Trust (``DIA'') will be $1 or greater. At this time, the Exchange 
proposes to modify the interval setting regime to be $1 or greater for 
GLD options, similar to SPY, IVV, and DIA. The Exchange believes that 
the proposed rule change would make GLD options easier for investors 
and traders to use and more tailored to their investment needs. GLD is 
an Exchange-Traded Fund Share designed to closely track the price and 
performance of the price of gold bullion. GLD is widely quoted as an 
indicator of gold stock prices and is a significant indicator of 
overall economic health. Investors use GLD to diversify their 
portfolios and benefit from market trends. Additionally, GLD is a 
leading product in its asset class that trades within a ``complex'' 
where, in addition to the underlying security, there are multiple 
instruments available for hedging such as, COMEX Gold Futures; Gold 
Daily Futures; iShares GOLD Trust; SPDR GOLD Minishares Trust; Aberdeen 
Physical Gold Trust; and GraniteShares Gold Shares. Accordingly, the 
Exchange believes that offering a wider base of GLD options affords 
traders and investors important hedging and trading opportunities, 
particularly in the midst of current price trends. The Exchange 
believes that not having the proposed $1 strike price intervals above 
$200 in GLD significantly constricts investors' hedging and trading 
possibilities. The Exchange therefore believes that by having smaller 
strike intervals in GLD, investors would have more efficient hedging 
and trading opportunities due to the lower $1 interval ascension. The 
proposed $1 interval above the $200 strike price, will result in having 
at-the-money series based upon the underlying ETF moving less than 1%. 
Considering the fact that $1 intervals already exist below the $200 
price point and that GLD have consistently inclined in price toward the 
$200 level, the Exchange believes that continuing to maintain the 
current $200 level (above which intervals increase 500% to $5), may 
have a negative effect on investing, trading and hedging opportunities, 
and volume. The Exchange believes that the investing, trading, and 
hedging opportunities available with GLD options far outweighs any 
potential negative impact of allowing GLD options to trade in more 
finely tailored intervals above the $200 price point. The proposed 
strike setting regime would permit strikes to be set to more closely 
reflect the increasing value in the underlying and allows investors and 
traders to roll open positions from a lower strike to a higher strike 
in conjunction with the price movements of the underlying ETF. Under 
the current rule, where the next higher available series would be $5 
away above a $200 strike price, the ability to roll such positions 
would be impaired. Accordingly, to move a position from a $200 strike 
to a $205 strike under the current rule, an investor would need for the 
underlying product to move 2.5%, and would not be able to execute a 
roll up until such a large movement occurred. The Exchange believes 
that with the proposed rule change, the investor would be in a 
significantly safer position of being able to roll his open options 
position from a $200 to a $201 strike price, which is only a 0.5% move 
for the underlying. As a result, the proposed rule change will allow 
the Exchange to better respond to customer demand for GLD strike price 
more precisely aligned with the smaller, longer-term incremental 
increases in the underlying ETF. The Exchange believes that the 
proposed rule change, like the other strike price programs currently 
offered by the Exchange, will benefit investors by providing investors 
the flexibility to more closely tailor their investment and hedging 
decisions using GLD options. Moreover, by allowing series of GLD 
options to be listed in $1 intervals between strike prices over $200, 
the proposal will moderately augment the potential total number of 
options series available on the Exchange. However, the Exchange 
believes it and the Options Price Reporting Authority (``OPRA'') have 
the necessary systems capacity to handle any potential additional 
traffic associated with this proposed rule change. The Exchange also 
believes that Members will not have a capacity issue due to the 
proposed rule change. In addition, the Exchange represents that it does 
not believe that this expansion will cause fragmentation of liquidity, 
but rather, believes that finer strike intervals will serve to increase 
liquidity available as well as price efficiency by providing more 
trading opportunities for all market participants.
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.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable

[[Page 59777]]

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) \7\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Exchange also believes the proposed rule change is 
consistent with Section 6(b)(1) of the Act,\8\ which provides that the 
Exchange be organized and have the capacity to be able to carry out the 
purposes of the Act and to enforce compliance by the Exchange's Members 
and persons associated with its Members with the Act, the rules and 
regulations thereunder, and the rules of the Exchange.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
    \8\ 15 U.S.C 78f(b)(1).
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    In particular, the proposed rule change will allow investors to 
more easily use GLD options. Moreover, the proposed rule change would 
allow investors to better trade and hedge positions in GLD options 
where the strike price is greater than $200, and ensure that investors 
in both options are not at a disadvantage simply because of the strike 
price. The Exchange believes the proposed rule change is consistent 
with Section 6(b)(1) of the Act, which provides that the Exchange be 
organized and have the capacity to be able to carry out the purposes of 
the Act and the rules and regulations thereunder, and the rules of the 
Exchange. The proposal allows the Exchange to respond to customer 
demand to allow GLD options to trade in $1 intervals above a $200 
strike price. The Exchange does not believe that the proposed rule 
would create additional capacity issues or affect market functionality. 
As noted above, ETF options trade in wider $5 intervals above a $200 
strike price, whereby options at or below a $200 strike price trade in 
$1 intervals. This creates a situation where contracts on the same 
option class effectively may not be able to execute certain strategies 
such as, for example, rolling to a higher strike price, simply because 
of the $200 strike price above which options intervals increase by 
500%. This proposal remedies the situation by establishing an exception 
to the current ETF interval regime for GLD options to allow such 
options to trade in $1 or greater intervals at all strike prices.
    The Exchange believes that the proposed rule change, like other 
strike price programs currently offered by the Exchange, will benefit 
investors by giving them increased flexibility to more closely tailor 
their investment and hedging decisions. By way of example, GLD is a 
leading product in its asset class and it trades within a ``complex'' 
where, in addition to the underlying security, there are multiple 
instruments available for hedging such as, COMEX Gold Futures; Gold 
Daily Futures; iShares GOLD Trust; SPDR GOLD Minishares Trust; Aberdeen 
Physical Gold Trust; and GraniteShares Gold Shares.
    With regard to the impact of this proposal on system capacity, the 
Exchange believes it and OPRA have the necessary systems capacity to 
handle any potential additional traffic associated with this proposed 
rule change. The Exchange believes that its Members will not have a 
capacity issue as a result of this proposal. Further, the Exchange does 
not believe the proposal unfairly discriminates among market 
participants, as all market participants will be treated in the same 
manner under this proposal.
    Finally, the Exchange notes the proposed rule change is 
substantively the same as a rule change proposed by Nasdaq ISE, LLC 
(``ISE'') which the Commission recently approved.\9\
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    \9\ See Securities Exchange Act Release No. 100447 (June 28, 
2024), 89 FR 55293 (July 3, 2024) (SR-ISE-2024-17).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that that [sic] the proposed rule 
change will impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, the 
Exchange believes that the proposed rule change will result in 
additional investment options and opportunities to achieve the 
investment and trading objectives of market participants seeking 
efficient trading and hedging vehicles, to the benefit of investors, 
market participants, and the marketplace in general. Specifically, the 
Exchange believes that GLD options investors and traders will 
significantly benefit from the availability of finer strike price 
intervals above a $200 price point. In addition, the interval setting 
regime the Exchange proposes to apply to GLD options is currently 
applied to SPY, IVV, and DIA options, which are similarly popular and 
widely traded ETF products and track indexes at similarly high price 
levels. Thus, the proposed strike setting regime for GLD options will 
allow options on this an actively traded ETF with index levels at 
corresponding price levels to trade pursuant to the same strike setting 
regime. This will permit investors to employ similar investment and 
hedging strategies for each of these options.
    The Exchange does not believe the proposal will impose any burden 
on inter-market competition, as nothing prevents other options 
exchanges from proposing similar rules to make a finer strike price 
intervals above a $200 price point available for GLD options. The 
Exchange notes that the proposed rule change is not a novel proposal, 
as the Commission recently approved a substantively identical proposal 
of another exchange.\10\ Further, the Exchange does not believe the 
proposal will impose any burden on intramarket competition, as all 
market participants will be treated in the same manner under this 
proposal.
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    \10\ Id.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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 \13\ and subparagraph (f)(6) of 
Rule 19b-4 thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the

[[Page 59778]]

Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ 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 to 
permit the Exchange to implement the proposal at the same time as its 
competitors. The Exchange notes that its proposal is substantially 
similar in all material respects to a proposal submitted by ISE that 
was recently approved by the Commission.\17\ 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.\18\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ See supra note 9 and accompanying text.
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule 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-MEMX-2024-28 on the subject line.

Paper Comments

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

All submissions should refer to file number SR-MEMX-2024-28. 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-MEMX-2024-28 and should be 
submitted on or before August 13, 2024.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12), (59).

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-16110 Filed 7-22-24; 8:45 am]
BILLING CODE 8011-01-P