[Federal Register Volume 85, Number 79 (Thursday, April 23, 2020)]
[Notices]
[Pages 22768-22770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08590]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88683; File No. SR-ISE-2020-18]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Extend a Pilot
on the Nasdaq 100 Reduced Value Index
April 17, 2020.
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 April 16, 2020, 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 proposes to a proposed rule 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 May 4,
2020.
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
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\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 82911 (March 20,
2018), 83 FR 12966 (March 26, 2018) (SR-ISE-2017-106) (Approval
Order).
---------------------------------------------------------------------------
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 November 2, 2020. This pilot was
previously extended with the last extension through May 4, 2020.\4\ 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.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release Nos.86071 (June 10,
2019), 84 FR 27822 (June 14, 2019) (SR-ISE-2019-18); 87379 (October
22, 2019), 84 FR 57793 (October 28, 2019) (SR-ISE-2019-27).
---------------------------------------------------------------------------
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
[[Page 22769]]
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.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 \7\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\8\
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 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.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \9\ normally does not become operative for 30 days after the date
of its 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. 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 designates the proposed rule change operative upon filing.\11\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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-2020-18 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-2020-18. 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
[[Page 22770]]
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-
2020-18, and should be submitted on or before May 14, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08590 Filed 4-22-20; 8:45 am]
BILLING CODE 8011-01-P