[Federal Register Volume 87, Number 220 (Wednesday, November 16, 2022)]
[Notices]
[Pages 68769-68771]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24888]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96281; File No. SR-ISE-2022-18]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Granting 
Approval of a Proposed Rule Change To Amend the Short Term Option 
Series Program

November 9, 2022.

I. Introduction

    On September 9, 2022, Nasdaq ISE, LLC (``ISE'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to: 
(1) limit the number of Monday and Wednesday expiration dates for 
options on SPDR S&P 500 ETF Trust (SPY), the INVESCO QQQ Trust\SM\, 
Series 1 (QQQ), and iShares Russell 2000 ETF (IWM); and (2) permit the 
listing and trading of options series with Tuesday and Thursday 
expirations for options on SPY and QQQ listed pursuant to the 
Exchange's short term option series program (``Short Term Options 
Series Program''). The proposed rule change was published for comment 
in the Federal Register on September 26, 2022.\3\ No comments were 
received. The Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 95841 (September 20, 
2022), 87 FR 58399 (``Notice'').
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II. Description of the Proposal 4
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    \4\ For a full description of the proposal, refer to the Notice, 
supra note 3.
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    The Exchange proposes to amend the Short Term Option Series Program 
rules to: (1) decrease the number of Monday and Wednesday short term 
option expiration dates for options on SPY, QQQ, and IWM from five to 
two expirations; and (2) expand the Short Term Option Series program to 
permit the listing and trading of options series with Tuesday and 
Thursday expirations for options on SPY and QQQ listed pursuant to the 
Short Term Option Series Program, subject to the same proposed 
limitation of two expirations.

Curtail Short Term Option Expiration Dates and Re-Organize Short Term 
Option Daily Expiration Rules

    Currently, the Exchange may open for trading on any Tuesday or 
Wednesday that is a business day series of options on SPY, QQQ, and IWM 
to expire on any Wednesday of the month that is a business day and is 
not a Wednesday in which Quarterly Options Series expire (``Wednesday 
Expirations''). The Exchange also may open for trading on any Friday or 
Monday that is a business day series of options on the SPY, QQQ, or IWM 
to expire on any Monday of the month that is a business day and is not 
a Monday in which Quarterly Options Series expire (``Monday 
Expirations''), provided that Monday Expirations that are listed on a 
Friday must be listed at least one business week and one business day 
prior to the expiration. Currently, the Exchange may list up to five 
consecutive Wednesday Expirations and five consecutive Monday 
Expirations on each of SPY, QQQ, and IWM. The Exchange proposes to 
curtail the number of Short Term Option Expiration Dates from five to 
two per symbol for Monday Expirations and Wednesday Expirations.
    Further, in conjunction with the proposal to add Tuesday and 
Thursday Expirations (as described below), the Exchange proposes to 
create a new category of Short Term Options called ``Short Term Option 
Daily Expirations,'' which will encompass the Monday, Tuesday, 
Wednesday, and Thursday

[[Page 68770]]

Expirations. The Exchange proposes to include a table, labelled ``Table 
1'', within Supplementary Material .03 to Options 4, Section 5 to 
specify each symbol that qualifies as a Short Term Option Daily 
Expiration as well the number of expirations for each symbol on each 
expiration day. The Exchange is also proposing to specify that Monday 
and Wednesday expirations may not expire on the same day in which 
monthly options series expire.\5\ Finally, the Exchange is amending 
Supplementary Material .03(b) to Options 4, Section 5, to replace the 
reference to Monday and Wednesday Expirations with ``Short Term Option 
Daily Expirations,'' which would permit Monday, Tuesday, Wednesday, and 
Thursday Expirations to expire in the same week in which monthly option 
series on the same class expire.
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    \5\ The Exchange notes that practically speaking, Monday and 
Wednesday Expirations would not expire on the same day as a monthly 
expiration. See Notice, supra note 3 at 58401. As is currently the 
case, Monday and Wednesday Expirations may not expire on the same 
day as a Quarterly Options Series. See Supplementary Material .03 of 
Options 4, Section 5.
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    Short Term Options Series with Friday expirations on SPY, QQQ, IWM, 
and other symbols will continue to have a total of five Short Term 
Option Expiration Dates. These Friday expirations would be referred to 
as ``Short Term Option Weekly Expirations'' to distinguish them from 
the proposed Short Term Option Daily Expirations.

Tuesday and Thursday Expirations

    The Exchange proposes to expand the Short Term Option Series 
Program to permit the Exchange to open for trading on any Monday or 
Tuesday that is a business day series of options on SPY and QQQ that 
expire at the close of business on each of the next two Tuesdays that 
are business days and are not business days in which monthly options 
series or Quarterly Options Series expire (``Tuesday Expirations''). If 
the Tuesday Expiration falls on a Tuesday that is not a business day, 
the series shall expire on the first business day immediately prior to 
that Tuesday.
    Similarly, the proposal would permit the Exchange to open for 
trading on any Wednesday or Thursday that is a business day series of 
options on SPY and QQQ that expire at the close of business on each of 
the next two Thursdays that are business days and are not business days 
in which monthly options series or Quarterly Options Series expire 
(``Thursday Expirations''). If the Thursday Expiration falls on a 
Thursday that is not a business day, the series shall expire on the 
first business day immediately prior to that Thursday.\6\
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    \6\ Further, in order to accommodate the listing of Tuesday and 
Thursday Expirations, the Exchange also proposes to amend the 
definition of Short Term Options Series at Options 1, Section 
1(a)(49) to add Tuesday and Thursdays to the permitted expiration 
days, which currently only include Monday, Wednesday, and Friday.
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    Tuesday and Thursday Expirations would be subject to Supplementary 
Material .03 of Options 4, Section 5, as proposed to be amended. As 
noted above, the Exchange proposes to amend Commentary .11(b) to 
Options 4, Section 5 to permit Tuesday Expirations and Thursday 
Expirations to expire in the same week in which monthly options series 
on the same class expire. Otherwise, Tuesday Expirations and Thursday 
Expirations will be subject to the same rules as other Short Term 
Option Series.\7\
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    \7\ For example, the Tuesday Expirations and Thursday 
Expirations would be subject to the same strike interval rules and 
series limitations as other Short Term Option Series. See Notice, 
supra note 3, at 58401.
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    The Exchange does not believe that any market disruptions would be 
encountered with the introduction of Tuesday and Thursday 
Expirations.\8\ The Exchange believes that it has the necessary 
capacity and surveillance programs in place to support and properly 
monitor trading in the proposed Tuesday and Thursday Expirations.\9\ 
The Exchange currently trades Short Term Option Series that expire 
Monday and Wednesday for SPY, QQQ and IWM and stated that it has not 
experienced any market disruptions nor issues with capacity.\10\
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    \8\ See id.
    \9\ See id.
    \10\ See id.
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Implementation

    The Exchange proposes to implement this rule change on or before 
November 14, 2022. The Exchange would issue an Options Trader Alert to 
notify Members of the implementation date. The Exchange states that 
Monday and Wednesday Expirations in SPY, QQQ, and IWM that were listed 
prior to the date of implementation would continue to be listed on the 
Exchange until those options expire pursuant to current Short Term 
Option Series rules within Supplementary Material .03 of Options 4, 
Section 5.\11\
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    \11\ See id. at 58403.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, with Section 6(b) of the Act.\12\ The Commission 
finds that the proposed rule change is consistent with Section 6(b)(5) 
of the Act,\13\ which requires, among other things, that a national 
securities exchange have rules designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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. The proposal reduces the 
number of Short Term Option Expirations to be listed on ISE.\14\ This 
reduction may remove impediments to and perfect the mechanism of a free 
and open market by encouraging market makers to deploy capital more 
efficiently and improve displayed market quality. The Exchange stated 
that it believes that despite the proposed curtailment of expirations, 
its members would continue to be able to expand hedging tools and 
tailor their investment and hedging needs more effectively in SPY, QQQ, 
and IWM.\15\ Therefore, the Commission believes that the proposal is 
reasonably designed to effectuate the Exchange's goal of balancing a 
reduction in the number of Short Term Option Expirations with the needs 
of market participants.
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    \12\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ See Notice, supra note 3 at 58400.
    \15\ See id. at 58403.
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    The Exchange's proposal to permit SPY and QQQ Tuesday and Thursday 
Expirations may provide the investing public and other market 
participants more flexibility to closely tailor their investment and 
hedging decisions in SPY and QQQ options, thus allowing them to better 
manage their risk exposure. In addition, the Tuesday and Thursday 
Expirations would be subject to rules similar to existing Exchange 
rules permitting the listing and trading of Monday and Wednesday 
Expirations in SPY and QQQ options.\16\ Further, the Exchange has 
represented that it has an adequate surveillance program in place to 
detect manipulative trading in SPY and QQQ Tuesday and Thursday 
Expirations and has the necessary

[[Page 68771]]

systems capacity to support the new options series.\17\
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    \16\ See id. at 58400.
    \17\ See id. at 58401.
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    Therefore, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \18\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \18\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-ISE-2022-18), be, and hereby 
is, approved.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24888 Filed 11-15-22; 8:45 am]
BILLING CODE 8011-01-P