[Federal Register Volume 84, Number 208 (Monday, October 28, 2019)]
[Notices]
[Pages 57793-57795]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23425]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87379; File No. SR-ISE-2019-27)


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Extend the 
Pilot Period To Permit the Listing and Trading of Options Based on \1/
5\ the Value of the Nasdaq-100 Index

October 22, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 11, 2019, Nasdaq ISE, LLC (``ISE'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 November 4, 2019.

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.

[[Page 57794]]

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.\5\
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    \5\ 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 to May 4, 2020. This pilot was 
previously extended to November 4, 2019.\6\ 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 this extension will provide additional time to collect data related 
to the pilot.
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    \6\ See Securities Exchange Act Release No. 86071 (June 10, 
2019), 84 FR 27822 (June 14, 2019) (SR-ISE-2019-18) (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).
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Pilot Report
    The Exchange currently makes public on its website the data and 
analysis previously submitted to the Commission on the Pilot Program 
and will continue to 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,\7\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\8\ 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 continued 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 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 \9\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ 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. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest as it will allow the 
pilot program to continue uninterrupted, thereby avoiding investor 
confusion that could result from a temporary interruption in the pilot 
program. Accordingly, the Commission hereby waives the operative delay 
and

[[Page 57795]]

designates the proposed rule change operative upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ 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-2019-27 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-2019-27. 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-2019-27 and should be submitted on 
or before November 18, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-23425 Filed 10-25-19; 8:45 am]
BILLING CODE 8011-01-P