[Federal Register Volume 86, Number 81 (Thursday, April 29, 2021)]
[Notices]
[Pages 22750-22753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08906]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91664; File No. SR-NASDAQ-2021-028]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Permit Monday and Wednesday Expirations for Options Listed Pursuant to 
the Short Term Option Series Program on the Invesco QQQ Trust\SM\ 
Series (``QQQ'') ETF Trust

April 23, 2021.
    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 April 22, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' 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 permit Monday and Wednesday expirations 
for options listed pursuant to the Short Term Option Series Program on 
the Invesco QQQ Trust\SM\ Series (``QQQ'') ETF Trust.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/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

[[Page 22751]]

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 The Nasdaq Options Market LLC 
(``NOM'') rules at Options 4, Section 5 at Supplementary Material .03 
to permit Monday and Wednesday expirations for options listed pursuant 
to the Short Term Option Series Program (``Program'') on QQQ. This 
proposal is identical to a proposal by Nasdaq PHLX LLC (``Phlx'') that 
was recently approved by the Commission.\3\
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    \3\ See Securities Exchange Act. [sic] 91614 (April 20, 2021) 
(SR-Phlx-2021-10) (Order Approving a Proposed Rule Change to Permit 
Monday and Wednesday Expirations for Options Listed Pursuant to the 
Short Term Options Program on the Invesco QQQ Trust\SM\ Series ETF 
Trust).
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    A Short Term Option Series means a series in an option class that 
is approved for listing and trading on the Exchange in which the series 
is opened for trading on any Monday, Tuesday, Wednesday, Thursday or 
Friday that is a business day and that expires on the Monday, Wednesday 
or Friday of the next business week, or, in the case of a series that 
is listed on a Friday and expires on a Monday, is listed one business 
week and one business day prior to that expiration.\4\ The Exchange is 
proposing to amend NOM Options 4, Section 5 at Supplementary Material 
.03 to permit the listing of options series that expire on Mondays and 
Wednesdays in QQQ.
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    \4\ Options 1, Section 1(a)(57) provides the term ``Short Term 
Option Series'' means a series in an option class that is approved 
for listing and trading on the Exchange in which the series is 
opened for trading on any Monday, Tuesday, Wednesday, Thursday or 
Friday that is a business day and that expires on the Monday, 
Wednesday or Friday of the next business week, or, in the case of a 
series that is listed on a Friday and expires on a Monday, is listed 
one business week and one business day prior to that expiration. If 
a Tuesday, Wednesday, Thursday or Friday is not a business day, the 
series may be opened (or shall expire) on the first business day 
immediately prior to that Tuesday, Wednesday, Thursday or Friday, 
respectively. For a series listed pursuant to this section for 
Monday expiration, if a Monday is not a business day, the series 
shall expire on the first business day immediately following that 
Monday.
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Monday Expirations
    As proposed, with respect to Monday QQQ Expirations within 
Supplementary Material .03 to Options 4, Section 5, the Exchange may 
open for trading on any Friday or Monday that is a business day series 
of options on QQQ to expire on any Monday of the month that is a 
business day and is not a Monday in which Quarterly Options Series on 
the same class expire (``Monday QQQ Expirations''), provided that 
Monday QQQ Expirations that are listed on a Friday must be listed at 
least one business week and one business day prior to the expiration. 
The Exchange may list up to five consecutive Monday QQQ Expirations at 
one time; the Exchange may have no more than a total of five Monday QQQ 
Expirations.
Wednesday Expirations
    As proposed, with respect to Wednesday QQQ Expirations within 
Supplementary Material .03 to Options 4, Section 5, the Exchange may 
open for trading on any Tuesday or Wednesday that is a business day 
series of options on QQQ to expire on any Wednesday of the month that 
is a business day and is not a Wednesday in which Quarterly Options 
Series on the same class expire (``Wednesday QQQ Expirations''). The 
Exchange may list up to five consecutive Wednesday QQQ Expirations at 
one time; the Exchange may have no more than a total of five Wednesday 
QQQ Expirations.
Monday and Wednesday Expirations
    The interval between strike prices for the proposed Monday and 
Wednesday QQQ Expirations will be the same as those for the current 
Short Term Option Series for Wednesday and Friday expirations 
applicable to the Program.\5\ Specifically, the Monday and Wednesday 
QQQ Expirations will have a $0.50 strike interval minimum.\6\ As is the 
case with other equity options series listed pursuant to the Program, 
the Monday and Wednesday QQQ Expiration series will be P.M.-settled.
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    \5\ See Supplementary Material .03(e) to Options 4, Section 5.
    \6\ Id.
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    Pursuant to Options 1, Section 1(a)(57), with respect to the 
Program, if Monday is not a business day the series shall expire on the 
first business day immediately following that Monday. This procedure 
differs from the expiration date of Wednesday expiration series that 
are scheduled to expire on a holiday. Pursuant to Options 1, Section 
1(a)(57) a Wednesday expiration series shall expire on the first 
business day immediately prior to that Wednesday, e.g., Tuesday of that 
week, if the Wednesday is not a business day. For purposes of QQQ, 
however, the Exchange believes that it is preferable to require Monday 
expiration series in this scenario to expire on the Tuesday of that 
week rather than the previous business day, e.g., the previous Friday, 
since the Tuesday is closer in time to the scheduled expiration date of 
the series than the previous Friday, and therefore may be more 
representative of anticipated market conditions. Monday SPY expirations 
are treated in this manner today.\7\ Cboe Exchange, Inc. (``Cboe'') 
uses the same procedure for options on the S&P 500 index (``SPX'') with 
Monday expirations that are listed pursuant to its Nonstandard 
Expirations Pilot Program and that are scheduled to expire on a 
holiday.\8\ Also, Nasdaq Phlx LLC (``Phlx'') \9\ and Nasdaq ISE, LLC 
(``ISE'') \10\ use the same procedure for options on the Nasdaq-
100[supreg] (``NDX'') with Monday expirations that are listed pursuant 
to its Nonstandard Expirations Pilot Programs, respectively.
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    \7\ See Supplementary Material .03 at Options 4, Section 5.
    \8\ See Cboe Rule 4.13(e)(1) ``. . . If the Exchange is not open 
for business on a respective Monday, the normally Monday expiring 
Weekly Expirations will expire on the following business day. If the 
Exchange is not open for business on a respective Wednesday or 
Friday, the normally Wednesday or Friday expiring Weekly Expirations 
will expire on the previous business day.''
    \9\ See Phlx Options 4A, Section 12(b)(5).
    \10\ See ISE Supplementary Material .07 to Options 4A, Section 
12.
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    Currently, for each option class eligible for participation in the 
Program, the Exchange is limited to opening thirty (30) series for each 
expiration date for the specific class.\11\ The thirty (30) series 
restriction does not include series that are open by other securities 
exchanges under their respective short term option rules; the Exchange 
may list these additional series that are listed by other 
exchanges.\12\ This thirty (30) series restriction would apply to 
Monday and Wednesday QQQ Expiration series as well. In addition, the 
Exchange will be able to list series that are listed by other 
exchanges, assuming they file similar rules with the Commission to list 
QQQ options expiring on Mondays and Wednesdays.
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    \11\ See Supplementary Material .03(a) to Options 4, Section 5.
    \12\ Id.
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    Finally, the Exchange is amending Supplementary Material .03(b) to 
Options 4, Section 5, which addresses the listing of Short Term Options 
Series that expire in the same week as monthly or quarterly options 
series. Currently, that rule states that no Short Term Option Series 
may expire in the same

[[Page 22752]]

week in which monthly option series on the same class expire (with the 
exception of Monday and Wednesday SPY Expirations) or, in the case of 
Quarterly Options Series, on an expiration that coincides with an 
expiration of Quarterly Option Series on the same class.\13\ As with 
Monday and Wednesday SPY Expirations, the Exchange is proposing to 
permit Monday and Wednesday QQQ Expirations to expire in the same week 
as monthly options series on the same class. The Exchange believes that 
it is reasonable to extend this exemption to Monday and Wednesday QQQ 
Expirations because Monday and Wednesday QQQ Expirations and standard 
monthly options will not expire on the same trading day, as standard 
monthly options expire on Fridays. Additionally, the Exchange believes 
that not listing Monday and Wednesday QQQ Expirations for one week 
every month because there was a monthly QQQ expiration on the Friday of 
that week would create investor confusion.
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    \13\ See current Supplementary Material .03(b) to Options 4, 
Section 5.
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    The Exchange does not believe that any market disruptions will be 
encountered with the introduction of P.M.-settled Monday and Wednesday 
QQQ expirations. The Exchange has the necessary capacity and 
surveillance programs in place to support and properly monitor trading 
in the proposed Monday and Wednesday QQQ Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
Monday and Wednesday for SPY and has not experienced any market 
disruptions nor issues with capacity. Today, the Exchange has 
surveillance programs in place to support and properly monitor trading 
in Short Term Option Series that expire Monday and Wednesday for SPY.
    Similar to SPY, the introduction of QQQ Monday and Wednesday 
expirations will, among other things, expand hedging tools available to 
market participants and continue the reduction of the premium cost of 
buying protection. The Exchange believes that Monday and Wednesday QQQ 
expirations will allow market participants to purchase QQQ based on 
their timing as needed and allow them to tailor their investment and 
hedging needs more effectively.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\14\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\15\ 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 providing the investing public and 
other market participants more flexibility to closely tailor their 
investment and hedging decisions in QQQ options, thus allowing them to 
better manage their risk exposure.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes the Program has been 
successful to date and that Monday and Wednesday QQQ Expirations should 
simply expand the ability of investors to hedge risk against market 
movements stemming from economic releases or market events that occur 
throughout the month in the same way that the Program has expanded the 
landscape of hedging. Similarly, the Exchange believes Monday and 
Wednesday QQQ Expirations should create greater trading and hedging 
opportunities and flexibility, and will provide customers with the 
ability to tailor their investment objectives more effectively. NOM 
currently lists Monday and Wednesday SPY Expirations.\16\ Also, Cboe 
\17\ currently permits Monday and Wednesday expirations for other 
options with a weekly expiration, such as options on the SPX pursuant 
to its Nonstandard Expirations Pilot Program and Phlx \18\ and ISE \19\ 
currently permit Monday and Wednesday expirations for other options 
with a weekly expiration on NDX pursuant to its Nonstandard Expirations 
Pilot Programs, respectively.
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    \16\ See Supplementary Material .03 at Options 4, Section 5.
    \17\ See supra note 8.
    \18\ See supra note 9.
    \19\ See supra note 10.
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    With the exception of Monday expiration series that are scheduled 
to expire on a holiday, there are no material differences in the 
treatment of Monday and Wednesday QQQ expirations for Short Term Option 
Series. The Exchange believes that it is consistent with the Act to 
treat Monday expiration series that expire on a holiday differently 
than Wednesday or Friday expiration series, since the proposed 
treatment for Monday expiration series will result in an expiration 
date that is closer in time to the scheduled expiration date of the 
series, and therefore may be more representative of anticipated market 
conditions. Monday SPY expirations are treated in this manner 
today.\20\ Cboe \21\ uses the same procedure for SPX options with 
Monday expirations that are listed pursuant to its Nonstandard 
Expirations Pilot Program and that are scheduled to expire on a 
holiday, as do Phlx \22\ and ISE \23\ for NDX options with Monday 
expirations that are listed pursuant to their Nonstandard Expirations 
Pilot Programs, respectively.
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    \20\ See Supplementary Material .03 at Options 4, Section 5.
    \21\ See supra note 8.
    \22\ See supra note 9.
    \23\ See supra note 10.
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    Given the similarities between Monday and Wednesday SPY Expirations 
and the proposed Monday and Wednesday QQQ Expirations, the Exchange 
believes that applying the provisions in Supplementary Material .03 to 
Options 4, Section 5 that currently apply to Monday and Wednesday SPY 
Expirations to Monday and Wednesday QQQ Expirations is justified. For 
example, the Exchange believes that allowing Monday and Wednesday QQQ 
Expirations and monthly QQQ expirations in the same week will benefit 
investors and minimize investor confusion by providing Monday and 
Wednesday QQQ Expirations in a continuous and uniform manner. The 
Exchange also believes that it is appropriate to amend Supplementary 
Material .03(b) to Options 4, Section 5 to clarify that no Short Term 
Option Series may expire on the same day as an expiration of Quarterly 
Option Series on the same class, same as SPY.
    The Exchange represents that it has an adequate surveillance 
program in place to detect manipulative trading in Monday and Wednesday 
expirations, including Monday and Wednesday QQQ Expirations, in the 
same way that it monitors trading in the current Short Term Option 
Series and trading in Monday and Wednesday SPY Expirations. The 
Exchange also represents that it has the necessary systems capacity to 
support the new options series. Finally, the Exchange does not believe 
that any market disruptions will be encountered with the introduction 
of Monday and Wednesday QQQ expirations.

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 notes that 
having Monday and Wednesday QQQ expirations is not a

[[Page 22753]]

novel proposal, as Monday and Wednesday SPY Expirations are currently 
listed on NOM.\24\ Cboe \25\ uses the same procedure for SPX options 
with Monday expirations that are listed pursuant to its Nonstandard 
Expirations Pilot Program and that are scheduled to expire on a 
holiday, as do Phlx \26\ and ISE \27\ for NDX options with Monday 
expirations that are listed pursuant to their Nonstandard Expirations 
Pilot Programs, respectively.
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    \24\ See Supplementary Material .03 at Options 4, Section 5.
    \25\ See supra note 8.
    \26\ See supra note 9.
    \27\ See supra note 10.
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    The Exchange does not believe the proposal will impose any burden 
on intra-market competition, as all market participants will be treated 
in the same manner under this proposal. Additionally, the Exchange does 
not believe the proposal will impose any burden on inter-market 
competition, as nothing prevents the other options exchanges from 
proposing similar rules to list and trade Short-Term Option Series with 
Monday and Wednesday expirations.

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 \28\ and Rule 19b-
4(f)(6) thereunder.\29\
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    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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 normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \30\ 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 
requested that the Commission waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission notes that it recently approved Phlx's substantially similar 
proposal to list and trade Monday QQQ Expirations and Wednesday QQQ 
Expirations.\31\ The Exchange has stated that waiver of the operative 
delay will permit the Exchange to immediately amend Nasdaq Options 4, 
Section 5 at Supplementary Material .03 to permit the Exchange to offer 
Monday and Wednesday expirations for options listed pursuant to the 
Program on QQQ similar to Phlx. For these reasons, the Commission 
believes that the proposed rule change presents no novel issues and 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest, and will allow the 
Exchange to remain competitive with other exchanges. Accordingly, the 
Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\32\
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    \30\ 17 CFR 240.19b-4(f)(6)(iii).
    \31\ See Securities Exchange Act Release No. 91614 (April 20, 
2021).
    \32\ 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 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-NASDAQ-2021-028 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-NASDAQ-2021-028. 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-NASDAQ-2021-028 and should be submitted 
on or before May 20, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-08906 Filed 4-28-21; 8:45 am]
BILLING CODE 8011-01-P