[Federal Register Volume 84, Number 115 (Friday, June 14, 2019)]
[Notices]
[Pages 27822-27824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12541]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86071; File No. SR-ISE-2019-18]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot
To Permit the Listing and Trading of Options Based on \1/5\ the Value
of the Nasdaq-100 Index
June 10, 2019.
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 June 6, 2019, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the pilot to permit the listing and
trading of options based on \1/5\ the value of the Nasdaq-100 Index
(``Nasdaq-100'') currently set to expire on June 26, 2019.
The text of the proposed rule change is available on the Exchange's
website at http://ise.cchwallstreet.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 Exchange included statements
[[Page 27823]]
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
ISE filed a proposed rule change to permit the listing and trading
of index options on the Nasdaq 100 Reduced Value Index (``NQX'') on a
twelve month pilot basis.\3\
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\3\ See Securities Exchange Act Release No. 82911 (March 20,
2018), 83 FR 12966 (March 26, 2018) (SR-ISE-2017-106) (Approval
Order).
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NQX options trade independently of and in addition to NDX options,
and the NQX options are subject to the same rules that presently govern
the trading of index options based on the Nasdaq-100, including sales
practice rules, margin requirements, trading rules, and position and
exercise limits. Similar to NDX, NQX options are European-style and
cash-settled, and have a contract multiplier of 100. The contract
specifications for NQX options mirror in all respects those of the NDX
options contract listed on the Exchange, except that NQX options are
based on \1/5\ of the value of the Nasdaq-100, and are P.M.-settled
pursuant to Options 4A, Section 12(a)(6).
The Exchange proposes to amend ISE Options 4A, Section 12(a)(6) to
extend the current NQX pilot period which ends on the earlier of (1) 12
months following the date of the first listing of the option, which was
June 26, 2018,\4\ or (2) June 30, 2019 to November 4, 2019. The
Exchange continues to have sufficient capacity to handle additional
quotations and message traffic associated with the proposed listing and
trading of NQX options. In addition, index options are integrated into
the Exchange's existing surveillance system architecture and are thus
subject to the relevant surveillance processes. The Exchange also
continues to have adequate surveillance procedures to monitor trading
in NQX options thereby aiding in the maintenance of a fair and orderly
market. Additionally, there is continued investor interest in these
products and provide additional time to collect data related to the
pilot.
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\4\ See Options Trader Alert #2018-22.
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Pilot Report
The Exchange is in the process of making public on its website data
and analysis previously submitted to the Commission on the Pilot
Program and will make public any data or analysis it submits under the
Pilot Program in the future. If in the future the Exchange proposes an
additional extension of the Pilot Program or proposes to make the Pilot
Program permanent, the Exchange will submit an annual report to the
Commission consistent with the order approving the establishment of the
Pilot Program at least two months prior to the expiration date of the
Pilot Program. Conditional on the findings in the Pilot Report, the
Exchange will file with the Commission a proposal to extend the pilot
program, adopt the pilot program on a permanent basis or terminate the
pilot.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\6\ 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 extending the pilot, the Exchange
believes it will attract order flow to the Exchange, increase the
variety of listed options, and provide a valuable hedge tool to retail
and other investors. Specifically, the Exchange believes that the pilot
will provide additional trading and hedging opportunities for investors
while providing the Commission with data to monitor for and assess any
potential for adverse market effects of allowing P.M.-settlement for
NQX options, including on the underlying component stocks.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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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 that is not necessary or appropriate
in furtherance of the purposes of the Act. NQX options would be
available for trading to all market participants and therefore would
not impose an undue burden on intra-market competition. The Exchange
believes that the proposed rule change will not impose an undue burden
on inter-market competition as this rule change will continue to
facilitate the listing and trading of a new option product that will
enhance competition among market participants, to the benefit of
investors and the marketplace. The listing of NQX will enhance
competition by providing investors with an additional investment
vehicle, in a fully-electronic trading environment, through which
investors can gain and hedge exposure to the Nasdaq-100. Furthermore,
this product could offer a competitive alternative to other existing
investment products that seek to allow investors to gain broad market
exposure. Finally, it is possible for other exchanges to develop or
license the use of a new or different index to compete with the Nasdaq-
100 and seek Commission approval to list and trade options on such an
index.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
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 \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \9\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \10\ 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 asked
the Commission to waive the 30-day operative delay so that investors
may continue to trade NQX options listed by the Exchange as part of the
pilot program on an uninterrupted basis. For this reason, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest as
it
[[Page 27824]]
would thereby avoid any investor confusion that could result from a
temporary interruption in the pilot program. Accordingly, the
Commission hereby waives the 30-day operative delay requirement and
designates the proposed rule change as operative upon filing.\11\
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\9\ 17 CFR 240.19b-4(f)(6).
\10\ 17 CFR 240.19b-4(f)(6)(iii).
\11\ For purposes only of waiving the 30-day operative delay,
the Commission also has 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 change 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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ISE-2019-18 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-2019-18. 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-ISE-2019-18 and should be submitted on
or before July 5, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12541 Filed 6-13-19; 8:45 am]
BILLING CODE 8011-01-P