[Federal Register Volume 83, Number 231 (Friday, November 30, 2018)]
[Notices]
[Pages 61687-61689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84647; File No. SR-NYSEArca-2018-84]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Amend Rule 6.4-
O, Series of Options Open for Trading
November 26, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 19, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') 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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 6.4-O. The proposed rule change
is available on the Exchange's website at www.nyse.com, 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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend Rule 6.4-O, Series of
Options Open for Trading, to permit the listing and trading of up to
ten expiration months for long term options on the SPDR[supreg] S&P
[[Page 61688]]
500[supreg] Exchange-Traded Fund (the ``SPY ETF'').
Rule 6.4-O(d) provides that the Exchange may list, with respect to
any class of stock or Exchange-Traded Fund Share options series,
options having from twelve up to thirty-nine months from the time they
are listed until expiration (``LEAPS''). Under the current Rule, the
Exchange may list up to six LEAPS expiration months.\4\ The Exchange
proposes to amend Rule 6.4-O(d) to permit up to ten LEAPS expiration
months for options on the SPY ETF.\5\ This proposal, which is
substantially the same as a recent rule amendment submitted by Nasdaq
PHLX LLC (``PHLX'') and driven by customer demand,\6\ would add
liquidity to the SPY ETF options market by allowing market participants
to hedge risks relating to SPY ETF positions over a potentially longer
time period with a known and limited cost.
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\4\ Strike price interval, bid/ask differential and continuity
rules shall not apply to equity options or Exchange-Traded Fund
Shares options until the time to expiration is less than nine
months. See Rule 6.4-O(d).
\5\ See proposed Rule 6.4-O(d) (providing in relevant part, that
``[t]he Exchange may open for trading up to ten expiration months
for options on the [SPY ETF] and up to six extended far term
expiration months for options on any Exchange-Trade Fund Share or
equity option class'').
\6\ See also Securities Exchange Act Release No. 84449 (October
18, 2018), 83 FR 53699 (October 24, 2018) (SR-Phlx-2018-64) (``PHLX
Rule Change''). Rule 5.19-O(b)(1) likewise provides for up to ten
expirations months in LEAPS on index options. Thus, the Exchange
proposes to delete reference [sic] to index options in proposed Rule
6.4-O to enhance internal consistency and reduced [sic] as relates
to the number of expiration months (i.e., ten) allowed for index
options. See proposed Rule 6.4-O(d).
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The SPY ETF options market today is characterized by its tremendous
daily and annual liquidity. As a consequence the Exchange believes that
the listing of additional SPY ETF LEAPS expiration months would be well
received by investors. This proposal to expand the number of permitted
SPY ETF LEAPS would not apply to LEAPS on any other class of stock or
Exchange-Traded Fund Share options.\7\
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\7\ Historically, SPY is the largest and most actively traded
ETF in the United States as measured by its assets under management
and the value of shares traded.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \8\ of the
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers
the objectives of Section 6(b)(5),\9\ in particular, in that it is
designed to promote just and equitable principles of trade, 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, by offering market participants additional LEAPS on
SPY options for their investment and risk management purposes. The
proposal is intended simply to provide additional trading opportunities
which have been requested by customers, thereby facilitating
transactions in options and contributing to the protection of investors
and the maintenance of fair and orderly markets. The proposed rule
change responds to the continuing needs of market participants,
particularly portfolio managers and other institutional customers, by
providing protection from long-term market moves and by offering an
alternative to hedging portfolios with futures positions or off-
exchange customized derivative instruments.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the addition today of four additional
expiration months for SPY ETF LEAPS does not represent a proliferation
of expiration months, but is instead a very modest expansion of LEAPS
options in response to stated customer demand. Significantly, the
proposal would feature new LEAPS expiration months in only a single
class of options--the SPY ETF--that are very liquid and heavily traded,
as discussed above. Additionally, the Exchange notes that ten
expiration months are already permitted for stock index LEAPS options
on the Exchange as well as on other markets.\10\ Further, the Exchange
has the necessary systems capacity to support the new SPY ETF LEAPS
expiration months.
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\10\ See Rule 5.19-O(b)(1) and PHLX Rule 1101A(b)(iii).
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The Exchange notes that this proposal is substantially the same as
a recent rule amendment submitted by PHLX.\11\
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\11\ See PHLX Rule Change, supra note 6.
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The Exchange respectfully requests that the Commission waive the
30-day operative delay so that the proposed rule change may become
effective and operative upon filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act \12\ and paragraph (f)(6) of Rule 19b-4
thereunder.\13\ The Exchange believes that waiving the operative delay
would be consistent with the protection of investors and the public
interest because the proposed rule change would allow the Exchange to
implement the modified rule, which aligns with the rules of another
options exchange, without delay.\14\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
\14\ See Phlx Rule Change, supra note 6.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposal merely provides
investors additional investment and risk management opportunities by
providing flexibility to the Exchange to list additional long term
options expiration series, expanding the number of SPY ETF LEAPS
offered on the Exchange from six expiration months to ten expiration
months.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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 under Rule 19b-4(f)(6) \17\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative upon filing. The Exchange's proposal would
eliminate an internal inconsistency in the Exchange's rules and also
conform the Exchange's rules relating to the permitted number
[[Page 61689]]
of SPY ETF LEAPS expiration months to those of PHLX.\19\ Accordingly,
the Commission believes that the proposal raises no new or novel
regulatory issues, and waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission therefore waives the 30-day operative delay and
designates the proposal operative upon filing.\20\
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\17\ Id.
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ See supra, note 6.
\20\ 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 such 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.
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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2018-84 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-NYSEArca-2018-84. 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 (http://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 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2018-84 and should be submitted
on or before December 21, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25994 Filed 11-29-18; 8:45 am]
BILLING CODE 8011-01-P