[Federal Register Volume 87, Number 71 (Wednesday, April 13, 2022)]
[Notices]
[Pages 21990-21993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07854]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94631; File No. SR-Phlx-2022-16]
Self-Regulatory Organizations; Nasdaq PHLX 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 1/100 the Value
of the Nasdaq-100 Index and the Nonstandard Expirations Pilot
April 7, 2022.
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 March 31, 2022, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to
[[Page 21991]]
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 1/100 the value of the Nasdaq-100 Index
(``Nasdaq-100') and the Exchange's nonstandard expirations pilot
program, both currently set to expire on May 4, 2022.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/phlx/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
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
Phlx proposes to extend 2 pilots, which are both set to expire on
May 4, 2022. The Exchange proposes to extend (1) pilot to permit the
listing and trading of options based on 1/100 the value of the Nasdaq-
100 Index (``XND Pilot''), and (2) the Exchange's nonstandard
expirations pilot program (``Nonstandard Pilot'').
XND Pilot
Phlx filed a rule change to permit the listing and trading of index
options on the Nasdaq 100 Micro Index Options (``XND'') on a pilot
basis.\3\ XND options trade independently of and in addition to NDX
options, and the XND options are subject to the same rules that
presently govern the trading of index options based on the Nasdaq-100
Index, including sales practice rules, margin requirements, trading
rules, and position and exercise limits. Similar to NDX, XND options
are European-style and cash-settled, and have a contract multiplier of
100. The contract specifications for XND options mirror in all respects
those of the NDX options contract already listed on the Exchange,
except that XND options are based on 1/100th of the value of the
Nasdaq-100 Index, and are P.M.-settled pursuant to Options 4A, Section
12(a)(5).
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\3\ See Securities Exchange Act Release No. 91524 (April 9,
2021), 86 FR 19909 (April 15, 2021) (SR-Phlx-2021-07) (Approval
Order).
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The Exchange proposes to amend Phlx Options 4A, Section 12(a)(6) to
extend the current XND Pilot period to November 4, 2022. This pilot was
previously extended with the last extension through May 4, 2022.\4\ The
Exchange continues to have sufficient capacity to handle additional
quotations and message traffic associated with the listing and trading
of XND 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 XND 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 XND Pilot. The Exchange believes that the proposed
extension of the XND Pilot will not have an adverse impact on capacity.
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\4\ See Securities Exchange Act Release No. 93447 (October 28,
2021), 86 FR 60719 (November 3, 2021) (SR-Phlx-2021-66).
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XND Pilot Report
The Exchange currently makes public on its website the data and
analysis previously submitted to the Commission on the XND Pilot and
will continue to make public any data or analysis it submits under the
XND Pilot in the future. The Exchange intends to submit a rule change
proposing permanency of the XND Pilot and would either provide
additional data in such proposal or in an annual report. The Exchange
would continue to provide the Commission with ongoing data unless and
until the XND Pilot is made permanent or discontinued.
Nonstandard Pilot
On December 15, 2017, the Commission approved a rule change for the
listing and trading on the Exchange, on a twelve month pilot basis, of
p.m.-settled options on broad-based indexes with nonstandard
expirations dates (``Nonstandard Pilot'').\5\ The Nonstandard Pilot
permits both Weekly Expirations and End of Month (``EOM'') expirations
similar to those of the a.m.-settled broad-based index options, except
that the exercise settlement value of the options subject to the pilot
are based on the index value derived from the closing prices of
component stocks. The Nonstandard Pilot was extended various times and
is currently extended through May 4, 2022.\6\
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\5\ See Securities Exchange Act Release No. 82341 (December 15,
2017), 82 FR 60651 (December 21, 2017) (approving SR-Phlx-2017-79)
(Order Approving a Proposed Rule Change, as Modified by Amendment
No. 1 and Granting Accelerated Approval of Amendment No. 2, of a
Proposed Rule Change To Establish a Nonstandard Expirations Pilot
Program).
\6\ See Securities Exchange Act Release Nos. 84835 (December 17,
2018), 83 FR 65773 (December 21, 2018) (SR-Phlx-2018-80); 85669
(April 17, 2019), 84 FR 16913 (April 23, 2019) (SR-Phlx-2019-13);
87381 (October 22, 2019), 84 FR 57788 (October 28, 2019) (SR-Phlx-
2019-43); 88684 (April 17, 2020), 85 FR 22781 (April 23, 2020) (SR-
Phlx-2020-24); 90256 (October 22, 2020), 85 FR 68393 (October 28,
2020) (SR-Phlx-2020-48); 91484 (April 6, 2021), 86 FR 19050 (April
12, 2021) (SR-Phlx-2021-21); and 93464 (October 29, 2021), 86 FR
60952 (November 4, 2021) (SR-Phlx-2021-65).
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Pursuant to Phlx Options 4A, Section 12(b)(5)(A) the Exchange may
open for trading Weekly Expirations on any broad-based index eligible
for standard options trading to expire on any Monday, Wednesday, or
Friday (other than the third Friday-of-the-month or days that coincide
with an EOM expiration). Weekly Expirations are subject to all
provisions of Options 4A, Section 12 and are treated the same as
options on the same underlying index that expire on the third Friday of
the expiration month. Unlike the standard monthly options, however,
Weekly Expirations are P.M.-settled.
Similarly, pursuant to Options 4A, Section 12(b)(5)(B) the Exchange
may open for trading EOM expirations on any broad-based index eligible
for standard options trading to expire on the last trading day of the
month. EOM expirations are subject to all provisions of Options 4A,
Section 12 and treated the same as options on the same underlying index
that expire on the third Friday of the expiration month. However, the
EOM expirations are P.M.-settled.
The Exchange now proposes to amend Options 4A, Section 12(b)(5)(C)
so that the duration of the Nonstandard Pilot for these nonstandard
expirations will be through November 4, 2022. The Exchange continues to
have sufficient systems capacity to handle P.M.-settled options on
broad-based indexes with nonstandard expirations dates and has not
encountered any issues or adverse market effects as a result of listing
them. Additionally, there is continued investor interest in these
products. The Exchange will continue to make public
[[Page 21992]]
on its website any data and analysis it submits to the Commission under
the Nonstandard Pilot. The Exchange believes that the proposed
extension of the Nonstandard Pilot will not have an adverse impact on
capacity.
Nonstandard Pilot Report
The Exchange intends to submit a rule change proposing permanency
of the Nonstandard Pilot and would either provide additional data in
such proposal or in an annual report. The Exchange would continue to
provide the Commission with ongoing data unless and until the
Nonstandard Pilot is made permanent or discontinued.
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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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XND Pilot
In particular, the Exchange believes that the XND Pilot has been
successful to date. The Exchange has not encountered any problems with
the XND Pilot. By extending the XND 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 XND 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
XND options, including on the underlying component stocks.
Nonstandard Pilot
The Exchange believes the proposed rule change will protect
investors and the public interest by providing the Exchange, the
Commission and investors the benefit of additional time to analyze
nonstandard expiration options. In particular, the Exchange believes
that the Nonstandard Pilot has been successful to date. The Exchange
has not encountered any problems with the Nonstandard Pilot. By
extending the Nonstandard Pilot, investors may continue to benefit from
a wider array of investment opportunities. Additionally, both the
Exchange and the Commission may continue to monitor the potential for
adverse market effects of p.m.-settlement on the market, including the
underlying cash equities market, at the expiration of these options.
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 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 new option products that will enhance
competition among market participants, to the benefit of investors and
the marketplace. Furthermore, these products could offer a competitive
alternative to other existing investment products. Finally, it is
possible for other exchanges to develop or license the use of a new or
different index to compete with these products and seek Commission
approval to list and trade options on such an index.
XND Pilot
XND options would be available for trading to all market
participants and therefore would not impose an undue burden on intra-
market competition. The continued listing of XND 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.
Nonstandard Pilot
Options with nonstandard expirations would be available for trading
to all market participants. The continued listing of the Nonstandard
Pilot 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.
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)(iii) 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)(iii).
\10\ 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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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 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-Phlx-2022-16 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-Phlx-2022-16. 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/
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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-Phlx-2022-16 and should be
submitted on or before May 4, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-07854 Filed 4-12-22; 8:45 am]
BILLING CODE 8011-01-P