[Federal Register Volume 89, Number 42 (Friday, March 1, 2024)]
[Notices]
[Pages 15235-15239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-04298]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99604; File No. SR-ISE-2024-06]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
of Proposed Rule Change To Amend the Short Term Option Series Program

February 26, 2024.
    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 February 15, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``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 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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[[Page 15236]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the Short Term Option Series 
Program.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/ise/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
    The Exchange proposes to amend Supplementary Material .03 of 
Options 4, Section 5, ``Series of Options Contracts Open for Trading.'' 
The Exchange proposes to expand the Short Term Option Series program to 
permit the listing and trading of options series with Tuesday and 
Thursday expirations for options on iShares Russell 2000 ETF (IWM), 
specifically permitting two expiration dates for the proposed Tuesday 
and Thursday expirations in IWM.
    Currently, Table 1 in Supplementary Material .03 to Options 4, 
Section 5 specifies each symbol that qualifies as a Short Term Option 
Daily Expiration.\3\ Today, Table 1 permits the listing and trading of 
Monday Short Term Option Daily Expirations and Wednesday Short Term 
Option Daily Expirations for IWM. At this time, the Exchange proposes 
to expand the Short Term Option Series Program to permit the listing 
and trading of no more than a total of two IWM Short Term Option Daily 
Expirations beyond the current week for each of Monday, Tuesday, 
Wednesday, and Thursday expirations at one time.\4\ The listing and 
trading of Tuesday and Thursday Short Term Option Daily Expirations 
would be subject to Supplementary Material .03 of Options 4, Section 5.
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    \3\ The Exchange may open for trading on any Thursday or Friday 
that is a business day series of options on that class that expire 
at the close of business on each of the next five Fridays that are 
business days and are not Fridays in which standard expiration 
options series, Monthly Options Series, or Quarterly Options Series. 
Of these series of options, the Exchange may have no more than a 
total of five Short Term Option Expiration Dates. In addition, the 
Exchange may open for trading series of options on certain symbols 
that expire at the close of business on each of the next two 
Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that are 
business days beyond the current week and are not business days in 
which standard expiration options series, Monthly Options Series, or 
Quarterly Options Series expire (``Short Term Option Daily 
Expirations''). See Supplementary .03 to Options 4, Section 5.
    \4\ The Exchange would amend the Tuesday and Thursday 
expirations for IWM in Table 1 in Supplementary Material .03 to 
Options 4, Section 5 from ``0'' to ``2'' to permit Tuesday and 
Thursday expirations for options on IWM listed pursuant to the Short 
Term Option Series. The Exchange notes that Cboe Exchange, Inc. 
(``Cboe'') began listing Tuesday and Thursday expirations in the 
Russell 2000 Index Weeklys[supreg] (``RUTW'') and Mini-Russell 2000 
Index Weeklys[supreg] (``MRUT'') on January 8, 2024.
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    Today, Tuesday Short Term Option Daily Expirations in SPDR S&P 500 
ETF Trust (SPY) and the INVESCO QQQ Trust\SM\, Series 1 (QQQ) may open 
for trading on any Monday or Tuesday that is a business day series of 
options on the symbols provided in Table 1 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 standard expiration options series, 
Monthly Options Series, or Quarterly Options Series expire (``Tuesday 
Short Term Option Expiration Date'').\5\ Also, today, Thursday Short 
Term Option Daily Expirations in SPY and QQQ may open for trading on 
any Tuesday or Wednesday that is a business day series of options on 
the symbols provided in Table 1 that expire at the close of business on 
each of the next two Wednesdays that are business days and are not 
business days in which standard expiration options series, Monthly 
Options Series, or Quarterly Options Series expire (``Wednesday Short 
Term Option Expiration Date'').
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    \5\ See Supplementary Material .03 to Options 4, Section 5.
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    In the event that options on IWM expire on a Tuesday or Thursday 
and that Tuesday or Thursday is a business day in which standard 
expiration options series, Monthly Options Series, or Quarterly Options 
Series expire, the Exchange would skip that week's listing and instead 
list the following week; the two weeks would therefore not be 
consecutive. With this proposal, the Exchange would be able to open for 
trading series of options on IWM that expire at the close of business 
on each of the next two Mondays, Tuesdays, Wednesdays, and Thursdays, 
respectively, that are business days beyond the current week and are 
not business days in which standard expiration options series, Monthly 
Options Series, or Quarterly Options Series expire.\6\
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    \6\ Today, IWM may trade on Mondays and Wednesdays, in addition 
to Fridays, as is the case for all options series.
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    The interval between strike prices for the proposed Tuesday and 
Thursday IWM Short Term Option Daily Expirations will be the same as 
those for Tuesday and Thursday IWM Short Term Option Daily Expirations 
in SPY and QQQ, applicable to the Short Term Option Series Program.\7\ 
Options 4, Section 5(e) provides that, notwithstanding any other 
provision regarding the interval of strike prices of series of options 
on Exchange-Traded Fund Shares in Options 4, Section 5, the interval of 
strike prices on options on IWM will be $1 or greater.\8\ Further, 
Options 4, Section 5(f) provides that, notwithstanding Section 5(e) of 
Options 4, the Exchange may open for trading series at $0.50 or greater 
strike price intervals where the strike price is less than $75 and 
$1.00. Specifically, the Tuesday and Thursday IWM Short Term Option 
Daily Expirations will have a $0.50 strike interval minimum. As is the 
case with other equity options series listed pursuant to the Short Term 
Option Series Program, the Tuesday and Thursday IWM Short Term Option 
Daily Expiration series will be P.M.-settled.
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    \7\ See ISE Supplementary Material .03(e) to Options 4, Section 
5.
    \8\ Options on SPY, iShares Core S&P 500 ETF (``IVV''), QQQ, 
IWM, and the SPDR Dow Jones Industrial Average ETF (``DIA'') are 
also subject to Options 4, Section 5(e) strike intervals.
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    Pursuant to Options 1, Section 1(a)(49),\9\ with respect to the 
Short Term Option Series Program, a Tuesday or Thursday expiration 
series shall expire on the first business day immediately prior to that 
Tuesday or Thursday, e.g., Monday or Wednesday of that week,

[[Page 15237]]

respectively, if the Tuesday or Thursday is not a business day.
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    \9\ Options 1, Section 1(a)(49) 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, 
Tuesday, Wednesday, Thursday, or Friday of the following business 
week that is a business day, 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. 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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    Currently, for each option class eligible for participation in the 
Short Term Option Series Program, the Exchange is limited to opening 
thirty (30) series for each expiration date for the specific class.\10\ 
The thirty (30) series restriction does not include series that are 
open by other securities exchanges under their respective weekly rules; 
the Exchange may list these additional series that are listed by other 
options exchanges.\11\ This thirty (30) series restriction would apply 
to Tuesday and Thursday IWM Short Term Option Daily Expiration series 
as well.
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    \10\ See ISE Supplementary Material .03(c) and (d) to Options 4, 
Section 5.
    \11\ See ISE Supplementary Material .03 to Options 4, Section 5.
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    With this proposal, Tuesday and Thursday IWM Expirations would be 
treated the same as Tuesday and Thursday Expirations in SPY and QQQ. 
With respect to monthly option series, Short Term Option Daily 
Expirations expire in the same week in which monthly option series on 
the same class expire.\12\ Further, as is the case today with other 
Tuesday and Thursday Short Term Option Daily Expirations, the Exchange 
would not permit Tuesday and Thursday Short Term Option Daily 
Expirations to expire on a business day in which monthly options series 
or Quarterly Options Series expire.\13\ Therefore, all Short Term 
Option Daily Expirations would expire at the close of business on each 
of the next two Mondays, Tuesdays, Wednesdays, and Thursdays, 
respectively, that are business days beyond the current week and are 
not business days in which standard expiration options series, Monthly 
Options Series, or Quarterly Options Series expire.
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    \12\ See ISE Supplementary Material .03(b) to Options 4, Section 
5.
    \13\ See ISE Supplementary Material .03 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 Tuesday and Thursday 
IWM Short Term Option Daily Expirations. The Exchange has the necessary 
capacity and surveillance programs in place to support and properly 
monitor trading in the proposed Tuesday and Thursday Short Term Option 
Daily Expirations. The Exchange currently trades P.M.-settled Short 
Term Option Series that expire Tuesday and Thursday for SPY and QQQ 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 
Tuesday and Thursday for SPY and QQQ.
Impact of Proposal
    The Exchange notes that listings in the Short Term Option Series 
Program comprise a significant part of the standard listing in options 
markets. The below diagram demonstrates the percentage of weekly 
listings as compared to monthly, quarterly, and Long-Term Option Series 
in 2023 in the options industry.\14\ The Exchange notes that during 
this time period all options exchanges mitigated weekly strike 
intervals.
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    \14\ The Exchange sourced this information from The Options 
Clearing Corporation (``OCC''). The information includes time 
averaged data (the number of strikes by maturity date divided from 
the number of trading days) for all 17 options markets through 
December 8, 2023.
[GRAPHIC] [TIFF OMITTED] TN01MR24.029

    Similar to SPY and QQQ, the Exchange would limit the number of 
Short Term Option Daily Expirations for IWM to two expirations for 
Tuesday and Thursday expirations while expanding the Short Term Option 
Series Program to permit Tuesday, and Thursday expirations for IWM. 
Expanding the Short Term Option Series Program to permit the listing of 
Tuesday and Thursday expirations in IWM will account for the addition 
of 6.77% of

[[Page 15238]]

strikes for IWM.\15\ With respect to the impact to the Short Term 
Option Series Program on IWM overall, the impact would be a 20% 
increase in strikes.\16\ With respect to the impact to the Short Term 
Options Series Program overall, the impact would be a 0.1% increase in 
strikes.\17\
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    \15\ The Exchange sourced this information, which are estimates, 
from LiveVol[supreg]. The information includes data for all 17 
options markets as of January 3, 2024.
    \16\ The Exchange sourced this information, which are estimates, 
from LiveVol[supreg]. The information includes data for all 17 
options markets as of January 3, 2024.
    \17\ The Exchange sourced this information, which are estimates, 
from LiveVol[supreg]. The information includes data for all 17 
options markets as of January 3, 2024.
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    Members will continue to be able to expand hedging tools because 
all days of the week would be available to permit Members to tailor 
their investment and hedging needs more effectively in IWM.
[GRAPHIC] [TIFF OMITTED] TN01MR24.030

    Weeklies comprise 48.30% of the total volume of options 
contracts.\18\ The Exchange believes that inner weeklies (first two 
weeks) represent high volume as compared to outer weeklies (the last 
three weeks) and would be more attractive to market participants.
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    \18\ The chart represents industry volume in terms of overall 
contracts. Weeklies comprise 48.30% of volume while only comprising 
17.22% of the strikes. The Exchange sourced this information from 
OCC. The information includes data for all 17 options markets 
through December 8, 2023.
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    The introduction of IWM Tuesday and Thursday 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 IWM Tuesday and Thursday 
expirations will allow market participants to purchase IWM options 
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 its proposal is consistent with Section 
6(b) of the Act,\19\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\20\ 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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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that IWM Tuesday and Thursday Short Term 
Daily Expirations will allow market participants to purchase IWM 
options based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively. Further, the proposal to 
permit Tuesday and Thursday Short Term Daily Expirations for options on 
IWM listed pursuant to the Short Term Option Series Program, subject to 
the proposed limitation of two nearest expirations, would 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 IWM options, thus allowing them to 
better manage their risk exposure.
    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Tuesday and Thursday IWM 
Short Term Daily 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 Short Term Option Series Program has expanded the 
landscape of hedging. Similarly, the Exchange believes Tuesday and 
Thursday IWM Short Term Daily Expirations should create greater trading 
and hedging opportunities and provide customers the flexibility to 
tailor their investment objectives more effectively. ISE currently 
lists SPY and QQQ Tuesday and Thursday Short Term Daily 
Expirations.\21\
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    \21\ See ISE Supplementary Material .03 at Options 4, Section 5.
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    With this proposal, Tuesday and Thursday IWM Expirations would be 
treated similar to existing Tuesday and Thursday SPY and QQQ 
Expirations and would expire in the same week that standard monthly 
options expire on

[[Page 15239]]

Fridays.\22\ Further, today, Tuesday and Thursday Short Term Option 
Daily Expirations do not expire on a business day in which monthly 
options series or Quarterly Options Series expire.\23\ Today, all Short 
Term Option Daily Expirations expire at the close of business on each 
of the next two Mondays, Tuesdays, Wednesdays, and Thursdays, 
respectively, that are business days and are not business days in which 
monthly options series or Quarterly Options Series expire. There are no 
material differences in the treatment of Tuesday and Thursday SPY and 
QQQ Short Term Daily Expirations as compared to the proposed Tuesday 
and Thursday IWM Short Term Daily Expirations.
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    \22\ See ISE Supplementary Material .03(b) at Options 4, Section 
5.
    \23\ See ISE Supplementary Material .03 at Options 4, Section 5
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    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in the 
proposed Tuesday and Thursday IWM Short Term Daily Expirations, in the 
same way that it monitors trading in the current Short Term Option 
Series and trading in Tuesday and Thursday SPY and QQQ 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 Tuesday and Thursday IWM Short Term Daily 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.
    Similar to SPY and QQQ Tuesday and Thursday Expirations, the 
introduction of IWM Tuesday and Thursday Short Term Daily Expirations 
does not impose an undue burden on competition. The Exchange believes 
that it 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 IWM Tuesday and Thursday 
Short Term Daily Expirations will allow market participants to purchase 
IWM options based on their timing as needed and allow them to tailor 
their investment and hedging needs more effectively. The Exchange notes 
that Cboe began listing Tuesday and Thursday expirations in RUTW and 
MRUT on January 8, 2024.
    The Exchange does not believe the proposal will impose any burden 
on inter-market competition, as nothing prevents other options 
exchanges from proposing similar rules to list and trade Short-Term 
Option Series with Tuesday and Thursday Short Term Daily Expirations. 
The Exchange notes that having Tuesday and Thursday IWM expirations is 
not a novel proposal, as SPY and QQQ Tuesday and Thursday Expirations 
are currently listed on ISE.\24\
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    \24\ See ISE Supplementary Material .03 at Options 4, Section 5.
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    Further, 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.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) by order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-2024-06 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-2024-06. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-ISE-2024-06 and should be 
submitted on or before March 22, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-04298 Filed 2-29-24; 8:45 am]
BILLING CODE 8011-01-P