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 Ether (“Ether ETPs”), 65685-65689 [2024-17843]
Download as PDF
<![CDATA[
Federal Register / Vol. 89, No. 155 / Monday, August 12, 2024 / Notices
Under Seal; Filing Acceptance Date:
August 6, 2024; Filing Authority: 39
U.S.C. 3642, 39 CFR 3040.130 through
3040.135, and 39 CFR 3035.105; Public
Representative: Jennaca D. Upperman;
Comments Due: August 14, 2024.
This Notice will be published in the
Federal Register.
[Release No. 34–100663; File No. SR–ISE–
2024–34]
Erica A. Barker,
Secretary.
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 Ether (‘‘Ether ETPs’’)
[FR Doc. 2024–17893 Filed 8–9–24; 8:45 am]
August 6, 2024.
BILLING CODE 7710–FW–P
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on July 22, 2024, Nasdaq ISE, LLC
(‘‘ISE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
POSTAL SERVICE
International Product Change—Priority
Mail Express International, Priority Mail
International & First-Class Package
International Service Agreement
AGENCY:
ACTION:
Postal ServiceTM.
Notice.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a Priority
Mail Express International, Priority Mail
International & First-Class Package
International Service contract to the list
of Negotiated Service Agreements in the
Competitive Product List in the Mail
Classification Schedule.
SUMMARY:
DATES:
Date of notice: August 12, 2024.
FOR FURTHER INFORMATION CONTACT:
Christopher C. Meyerson, (202) 268–
7820.
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on August 1, 2024,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express International,
Priority Mail International & First-Class
Package International Service Contract
41 to Competitive Product List.
Documents are available at
www.prc.gov, Docket Nos. MC2024–459
and CP2024–466.
SUPPLEMENTARY INFORMATION:
Christopher Doyle,
Attorney, Ethics and Legal Compliance.
[FR Doc. 2024–17835 Filed 8–9–24; 8:45 am]
khammond on DSKJM1Z7X2PROD with NOTICES
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 7710–12–P
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
1 15
2 17
VerDate Sep<11>2014
17:30 Aug 09, 2024
Jkt 262001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00105
Fmt 4703
Sfmt 4703
65685
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
ether (‘‘Ether 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).4
Ether ETPs are ether-backed
commodity ETPs structured as trusts.5
Similar to any ETF currently deemed
appropriate for options trading under
Options 4, Section 3(h), the investment
objective of an Ether ETP trust is to
reflect generally the performance of the
price of ether (before payment of the
trust’s expenses and liabilities), offering
investors an opportunity to gain
exposure to ether without the
complexities of ether delivery. As is the
case for ETFs currently deemed
appropriate for options trading, a [sic]
Ether ETP’s shares represent units of
fractional undivided beneficial interest
in the trust, the assets of which consist
principally of ether and are designed to
track ether or the performance of the
price of ether and offer access to the
ether market.6 Ether ETPs provide
investors with cost-efficient alternatives
that allow a level of participation in the
ether market through the securities
market. The primary substantive
difference between Ether ETPS and
ETFs currently deemed appropriate for
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 The Commission recently approved a rule
change to list and trade shares of the Trust pursuant
to Rule 5711(d) of The Nasdaq Stock Exchange LLC
(‘‘Commodity-Based Trust Shares’’). See Securities
Exchange Act Release No. 100224 (May 23, 2024),
89 FR 46937 (May 30, 2024) (SR–NASDAQ–2023–
045) (hereinafter ‘‘SR–NASDAQ–2023–045’’). The
Exchange represents it would not list options on a
trust unless it satisfied all applicable criteria in
Options 4, Section 3.
5 Pursuant to Options 4, Section 3(a), the
Exchange would only have authority to list and
trade ETFs that are trading as NMS stocks.
6 The trust may include minimal cash.
E:\FR\FM\12AUN1.SGM
12AUN1
khammond on DSKJM1Z7X2PROD with NOTICES
65686
Federal Register / Vol. 89, No. 155 / Monday, August 12, 2024 / Notices
options trading are that ETFs may hold
securities, certain financial instruments,
and specified precious metals (which
are commodities), while Ether ETPS
hold ether (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 Ether ETPS.
The Exchange expects Ether 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.7 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) 8 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 or the
Exchange-Traded Fund Shares must be
based on international or global indexes,
or portfolios that include non-U.S.
securities, and meet other criteria. The
Exchange expects that Ether ETPS
would satisfy Options 4, Section
3(h)(1)(ii).
Options on Ether ETPS will also be
subject to the Exchange’s continued
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).
7 The Exchange represents it would not list
options on a [sic] Ether ETP unless it satisfied the
criteria in Options 4, Section 3(a), the proposed
listing criteria, and any other applicable listing
criteria.
8 Options 4, Section 3(h)(1) provides criteria and
guidelines when evaluating potential underlying
securities for the listing of options.
VerDate Sep<11>2014
17:30 Aug 09, 2024
Jkt 262001
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 ExchangeTraded 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;
(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
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.
Options 4, Section 4(b)(3) provides, ‘‘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.’’
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.
12 Options 4, Section 3(h)(ii) refers to Currency
Trust Shares.
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
makes further dealing in such options on the
Exchange inadvisable.
Options on a [sic] Ether 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 Ether ETP 14 and may
also list series of options on a [sic] Ether
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
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.
E:\FR\FM\12AUN1.SGM
12AUN1
Federal Register / Vol. 89, No. 155 / Monday, August 12, 2024 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
Ether ETPS approved for options trading
pursuant to Section 3(h) of Options 4
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 With respect to the Short Term
Options Series or Weekly Program,
during the month prior to expiration of
an option class that is selected for the
Short Term Option Series Program, the
strike price intervals for the related nonShort Term Option (‘‘Related non-Short
Term Option’’) shall be the same as the
strike price intervals for the Short Term
Option.19 Specifically, the Exchange
may open for trading Short Term Option
Series at strike price intervals of (i)
$0.50 or greater where the strike price
is less than $100, and $1 or greater
where the strike price is between $100
and $150 for all option classes that
participate in the Short Term Options
Series Program; (ii) $0.50 for option
classes that trade in one dollar
increments and are in the Short Term
Option Series Program; or (iii) $2.50 or
greater where the strike price is above
$150.20 Additionally, the Exchange may
list series of options pursuant to the $1
Strike Price Interval Program,21 the
$0.50 Strike Program,22 the $2.50 Strike
Price Program,23 and the $5 Strike
Program.24 Pursuant to Options 3,
Section 3, where the price of a series of
a Ether 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 $0.10.25
18 See Options 5, Section 5(d). The interval
between strike prices of series of options on
Exchange-Traded Fund Shares approved for options
trading pursuant to Section 3(h) of this Options 4
may also be fixed at a price per share which is
reasonably close to the price per share at which the
underlying security is traded in the primary market
at or about the same time such series of options is
first open for trading on the Exchange, or at such
intervals as may have been established on another
options exchange prior to the initiation of trading
on the Exchange. See also 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 .03(e) to Options
4, Section 5.
20 Id.
21 See Supplementary Material .01 to Options 4,
Section 5.
22 See Supplementary Material .05 to Options 4,
Section 5.
23 See Supplementary Material .02 to Options 4,
Section 5.
24 See Supplementary Material .06 to Options 4,
Section 5.
25 If options on a [sic] Ether 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
VerDate Sep<11>2014
17:30 Aug 09, 2024
Jkt 262001
65687
Any and all new series of Ether 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.
Ether 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 Ether ETPS on the
Exchange in the same manner as 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
Ether 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.26 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 Ether 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 Ether
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 ether, 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 Ether 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 Ether ETP
options will be manageable.
The Exchange believes that offering
options on Ether ETPS will benefit
investors by providing them with an
additional, relatively lower cost
investing tool to gain exposure to the
price of ether and hedging vehicle to
meet their investment needs in
connection with ether-related products
and positions. The Exchange expects
investors will transact in options on
Ether ETPS in the unregulated over-thecounter (‘‘OTC’’) options market (if the
Commission approves Ether ETPS for
exchange-trading),27 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 [sic]; (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 Ether 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 Ether ETPS and
to Options 3, Section 3 (which describes the
requirements for the Penny Interval Program).
26 As Ether ETPs do not currently trade, options
on Ether ETPs would be subject to the 25,000
option contract limit.
27 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.
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
E:\FR\FM\12AUN1.SGM
12AUN1
65688
Federal Register / Vol. 89, No. 155 / Monday, August 12, 2024 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
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,28 in general, and furthers the
objectives of Section 6(b)(5) of the Act,29
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) 30 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 Ether 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 Ether ETPS will
provide investors with a greater
opportunity to realize the benefits of
utilizing options on a [sic] ether-based
ETP, including cost efficiencies and
increased hedging strategies. The
Exchange believes that offering Ether
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 ether and with
ether-related products and positions.
Additionally, the Exchange’s offering of
Ether 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
28 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
30 15 U.S.C. 78(f)(b)(5).
increased order flow to the benefit of all
investors. The Exchange also notes that
it already lists options on other
commodity-based ETFs,31 which, as
described above, are trusts structured in
substantially the same manner as Ether
ETPS and essentially offer the same
objectives and benefits to investors, just
with respect to a different commodity
(i.e., ether 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
it is consistent with current Exchange
Rules, previously filed with the
Commission. Options on Ether 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. Ether 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
Ether 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 Ether 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 Ether 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, Ether 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 Ether
ETPS. Also, and as stated above, the
Exchange already lists options on other
commodity-based ETFs.32
The Exchange does not believe that
the proposal to list and trade options on
Ether 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 Ether 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 Ether ETPS.
Additionally, the Exchange notes that
listing and trading Ether 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 Ether
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 ether prices and etherrelated 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.
29 15
VerDate Sep<11>2014
17:30 Aug 09, 2024
31 See
Jkt 262001
PO 00000
Options 4, Section 3(h)(iv).
Frm 00108
Fmt 4703
Sfmt 4703
32 See
E:\FR\FM\12AUN1.SGM
Options 4, Section 3(h)(iv).
12AUN1
Federal Register / Vol. 89, No. 155 / Monday, August 12, 2024 / Notices
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
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–2024–34 on the subject line.
khammond on DSKJM1Z7X2PROD with NOTICES
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–2024–34. 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
17:30 Aug 09, 2024
Jkt 262001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–17843 Filed 8–9–24; 8:45 am]
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:
VerDate Sep<11>2014
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–2024–34 and should be
submitted on or before September 3,
2024.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100665; File No. SR–
CboeEDGX–2024–009]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of
Designation of a Longer Period for
Commission Action on Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change
To Amend the Definition of Retail
Order, and Codify Interpretations and
Policies Regarding Permissible Uses
of Algorithms by RMOs
August 6, 2024.
On January 25, 2024, Cboe EDGX
Exchange, Inc. (‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend the definition of Retail
Order,3 and codify interpretations and
policies regarding permissible uses of
algorithms by Retail Member
Organizations.4. The proposed rule
change was published for comment in
the Federal Register on February 13,
2024.5 On March 20, 2024, pursuant to
Section 19(b)(2) of the Act,6 the
33 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The term ‘‘Retail Order’’ is defined in Exchange
Rule 11.21(a)(2).
4 The term ‘‘Retail Member Organization’’ (or
‘‘RMO’’) is defined in Exchange Rule 11.21(a)(1) to
mean a member of the Exchange (or a division
thereof) that has been approved by the Exchange
under Exchange Rule 11.21 to submit Retail Orders.
5 See Securities Exchange Act Release No. 99490
(February 7, 2024), 89 FR 10129 (‘‘Notice’’). The
Commission has not received any comments on the
proposed rule change.
6 15 U.S.C. 78s(b)(2).
1 15
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
65689
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.7 On May 13,
2024, the Commission instituted
proceedings under Section 19(b)(2)(B) of
the Act 8 to determine whether to
approve or disapprove the proposed
rule change.9 On July 10, 2024, the
Exchange submitted Amendment No. 1
to the proposed rule change, which
replaced and superseded the proposed
rule change as originally filed. On July
17, 2024, the Exchange withdrew
Amendment No. 1.
Section 19(b)(2) of the Act 10 provides
that, after initiating proceedings, the
Commission shall issue an order
approving or disapproving the proposed
rule change not later than 180 days after
the date of publication of the Notice of
filing of the proposed rule change. The
Commission may extend the period for
issuing an order approving or
disapproving the proposed rule change,
however, by not more than 60 days if
the Commission determines that a
longer period is appropriate and
publishes the reasons for such
determination. The proposed rule
change was published for comment in
the Federal Register on February 13,
2024.11 The 180th day after publication
of the Notice is August 11, 2024. The
Commission is extending the time
period for approving or disapproving
the proposed rule change for an
additional 60 days.
The Commission finds that it is
appropriate to designate a longer period
within which to issue an order
approving or disapproving the proposed
rule change so that it has sufficient time
to consider the proposed rule change
and the issues raised therein.
Accordingly, the Commission, pursuant
to Section 19(b)(2) of the Act,12
designates October 10, 2024, as the date
by which the Commission shall either
approve or disapprove the proposed
rule change (File No. SR–CboeEDGX–
2024–009).
7 See Securities Exchange Act Release No. 99811,
89 FR 21077 (March 26, 2024).
8 15 U.S.C. 78s(b)(2)(B).
9 See Securities Exchange Act Release No. 100114
(May 13, 2024), 89 FR 43462 (May 17, 2024).
10 15 U.S.C. 78s(b)(2).
11 See supra note 5.
12 15 U.S.C. 78s(b)(2).
E:\FR\FM\12AUN1.SGM
12AUN1
]]>Agencies
[Federal Register Volume 89, Number 155 (Monday, August 12, 2024)]
[Notices]
[Pages 65685-65689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17843]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100663; File No. SR-ISE-2024-34]
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
Ether (``Ether ETPs'')
August 6, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 22, 2024, Nasdaq ISE, LLC (``ISE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange 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 ether (``Ether
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).\4\
---------------------------------------------------------------------------
\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.
\4\ The Commission recently approved a rule change to list and
trade shares of the Trust pursuant to Rule 5711(d) of The Nasdaq
Stock Exchange LLC (``Commodity-Based Trust Shares''). See
Securities Exchange Act Release No. 100224 (May 23, 2024), 89 FR
46937 (May 30, 2024) (SR-NASDAQ-2023-045) (hereinafter ``SR-NASDAQ-
2023-045''). The Exchange represents it would not list options on a
trust unless it satisfied all applicable criteria in Options 4,
Section 3.
---------------------------------------------------------------------------
Ether ETPs are ether-backed commodity ETPs structured as trusts.\5\
Similar to any ETF currently deemed appropriate for options trading
under Options 4, Section 3(h), the investment objective of an Ether ETP
trust is to reflect generally the performance of the price of ether
(before payment of the trust's expenses and liabilities), offering
investors an opportunity to gain exposure to ether without the
complexities of ether delivery. As is the case for ETFs currently
deemed appropriate for options trading, a [sic] Ether ETP's shares
represent units of fractional undivided beneficial interest in the
trust, the assets of which consist principally of ether and are
designed to track ether or the performance of the price of ether and
offer access to the ether market.\6\ Ether ETPs provide investors with
cost-efficient alternatives that allow a level of participation in the
ether market through the securities market. The primary substantive
difference between Ether ETPS and ETFs currently deemed appropriate for
[[Page 65686]]
options trading are that ETFs may hold securities, certain financial
instruments, and specified precious metals (which are commodities),
while Ether ETPS hold ether (which is also deemed a commodity).
---------------------------------------------------------------------------
\5\ Pursuant to Options 4, Section 3(a), the Exchange would only
have authority to list and trade ETFs that are trading as NMS
stocks.
\6\ 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 Ether ETPS.
The Exchange expects Ether 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.\7\ 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) \8\ 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 or the Exchange-Traded Fund Shares
must be based on international or global indexes, or portfolios that
include non-U.S. securities, and meet other criteria. The Exchange
expects that Ether ETPS would satisfy Options 4, Section 3(h)(1)(ii).
---------------------------------------------------------------------------
\7\ The Exchange represents it would not list options on a [sic]
Ether ETP unless it satisfied the criteria in Options 4, Section
3(a), the proposed listing criteria, and any other applicable
listing criteria.
\8\ Options 4, Section 3(h)(1) provides criteria and guidelines
when evaluating potential underlying securities for the listing of
options.
---------------------------------------------------------------------------
Options on Ether ETPS will also be subject to the Exchange's
continued 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:
---------------------------------------------------------------------------
\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. Options 4, Section 4(b)(3) provides,
``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.''
\10\ See Options 4, Section 4(g).
(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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
(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.
---------------------------------------------------------------------------
(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 [sic] Ether 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 Ether ETP \14\ and may also
list series of options on a [sic] Ether 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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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
[[Page 65687]]
Ether ETPS approved for options trading pursuant to Section 3(h) of
Options 4 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\ With
respect to the Short Term Options Series or Weekly Program, during the
month prior to expiration of an option class that is selected for the
Short Term Option Series Program, the strike price intervals for the
related non-Short Term Option (``Related non-Short Term Option'') shall
be the same as the strike price intervals for the Short Term
Option.\19\ Specifically, the Exchange may open for trading Short Term
Option Series at strike price intervals of (i) $0.50 or greater where
the strike price is less than $100, and $1 or greater where the strike
price is between $100 and $150 for all option classes that participate
in the Short Term Options Series Program; (ii) $0.50 for option classes
that trade in one dollar increments and are in the Short Term Option
Series Program; or (iii) $2.50 or greater where the strike price is
above $150.\20\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\21\ the $0.50 Strike
Program,\22\ the $2.50 Strike Price Program,\23\ and the $5 Strike
Program.\24\ Pursuant to Options 3, Section 3, where the price of a
series of a Ether 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.\25\ Any and all new series of Ether 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 5, Section 5(d). The interval between strike
prices of series of options on Exchange-Traded Fund Shares approved
for options trading pursuant to Section 3(h) of this Options 4 may
also be fixed at a price per share which is reasonably close to the
price per share at which the underlying security is traded in the
primary market at or about the same time such series of options is
first open for trading on the Exchange, or at such intervals as may
have been established on another options exchange prior to the
initiation of trading on the Exchange. See also 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 .03(e) to Options 4, Section 5.
\20\ Id.
\21\ See Supplementary Material .01 to Options 4, Section 5.
\22\ See Supplementary Material .05 to Options 4, Section 5.
\23\ See Supplementary Material .02 to Options 4, Section 5.
\24\ See Supplementary Material .06 to Options 4, Section 5.
\25\ If options on a [sic] Ether 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).
---------------------------------------------------------------------------
Ether 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 Ether ETPS on the Exchange in the same
manner as 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 Ether 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.\26\
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 Ether ETP
options.
---------------------------------------------------------------------------
\26\ As Ether ETPs do not currently trade, options on Ether 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 Ether 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 ether, 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 Ether 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 Ether ETP options will be manageable.
The Exchange believes that offering options on Ether ETPS will
benefit investors by providing them with an additional, relatively
lower cost investing tool to gain exposure to the price of ether and
hedging vehicle to meet their investment needs in connection with
ether-related products and positions. The Exchange expects investors
will transact in options on Ether ETPS in the unregulated over-the-
counter (``OTC'') options market (if the Commission approves Ether ETPS
for exchange-trading),\27\ 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 [sic]; (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
Ether 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
Ether ETPS and
[[Page 65688]]
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.
---------------------------------------------------------------------------
\27\ 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.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\28\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\29\ 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) \30\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
\30\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposal to list and
trade options on Ether 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 Ether ETPS
will provide investors with a greater opportunity to realize the
benefits of utilizing options on a [sic] ether-based ETP, including
cost efficiencies and increased hedging strategies. The Exchange
believes that offering Ether 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
ether and with ether-related products and positions. Additionally, the
Exchange's offering of Ether 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,\31\ which, as described above, are
trusts structured in substantially the same manner as Ether ETPS and
essentially offer the same objectives and benefits to investors, just
with respect to a different commodity (i.e., ether 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.
---------------------------------------------------------------------------
\31\ 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 it is consistent with current
Exchange Rules, previously filed with the Commission. Options on Ether
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. Ether 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 Ether
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 Ether 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 Ether 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, Ether 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 Ether ETPS. Also,
and as stated above, the Exchange already lists options on other
commodity-based ETFs.\32\
---------------------------------------------------------------------------
\32\ See Options 4, Section 3(h)(iv).
---------------------------------------------------------------------------
The Exchange does not believe that the proposal to list and trade
options on Ether 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 Ether 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 Ether
ETPS. Additionally, the Exchange notes that listing and trading Ether
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 Ether 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 ether prices and
ether-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.
[[Page 65689]]
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-2024-34 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-2024-34. 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-2024-34 and should be
submitted on or before September 3, 2024.
---------------------------------------------------------------------------
\33\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17843 Filed 8-9-24; 8:45 am]
BILLING CODE 8011-01-P
