[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Notices]
[Pages 43936-43938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10949]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100133; File No. SR-ISE-2024-17]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
of Proposed Rule Change To Amend the Strike Interval for Options on 
SPDR[supreg] Gold Shares

May 14, 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 May 3, 2024, 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.
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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 amend the strike interval for options on 
SPDR[supreg] Gold Shares (``GLD'').
    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 Options 4, Section 5, ``Series of 
Options Contracts Open for Trading.'' Specifically, the Exchange 
proposes to amend Options 4, Section 5(e) to allow for the interval 
between strike prices of series of options on Exchange-Traded Fund 
Shares of SPDR[supreg] Gold Shares or ``GLD'' to be $1 or greater where 
the strike price is greater than $200.
    Currently Options 4, Section 5(d) provides that,

    Except as otherwise provided in the Supplementary Material 
hereto, the interval between strike prices of series of options on 
individual stocks will be:
    (1) $2.50 or greater where the strike price is $25.00 or less;
    (2) $5.00 or greater where the strike price is greater than 
$25.00; and
    (3) $10.00 or greater where the strike price is greater than 
$200.00.
The interval between strike prices of series of options on Exchange-
Traded Fund Shares approved for options trading pursuant to Section 
3(h) of this Options 4 shall be fixed at a price per share which is 
reasonably close to the price per share at which the underlying 
security is traded in the primary market at or about the same time 
such series of options is first open for trading on the Exchange, or 
at such intervals as may have been established on another options 
exchange prior to the initiation of trading on the Exchange.

    At this time, the Exchange proposes to amend Options 4, Section 
5(d) to add rule text related to the interval between strike prices of 
series of options on Exchange-Traded Fund Shares to provide that the 
interval will be $1 or greater where the strike price is $200 or less 
and $5.00 or greater where the strike price is greater than $200. 
Today, Cboe Exchange, Inc. (``Cboe'') permits the interval between 
strike prices of series of options on Exchange-Traded Fund Shares to be 
$1 or greater where the strike price is $200 or less and $5.00 or 
greater where the strike price is greater than $200.\3\ Today, ISE may 
fix the interval between strike prices of series of options on 
Exchange-Traded Fund Shares at such intervals as may have been 
established on another options exchange prior to the initiation of 
trading on the Exchange. ISE proposes to adopt Cboe's language to 
provide a strike interval for Exchange-Traded Fund Shares in the event 
a different interval is not elected at a price per share which is 
reasonably close to the price per share at which the underlying 
security is traded in the primary market at or about the same time such 
series of options is first open for trading on the Exchange, or at such 
intervals as may have been established on another options exchange 
prior to the initiation of trading on the Exchange.
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    \3\ See Cboe Rule 4.5 at Interpretation and Policy .07(a).
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    Further, current Options 4, Section 5(e) allows for the interval 
between strike prices of series of options on Exchange-Traded Fund 
Shares of the SPDR S&P 500 ETF (``SPY''), iShares Core S&P 500 ETF 
(``IVV''), PowerShares QQQ Trust (``QQQ''), iShares Russell 2000 Index 
Fund (``IWM''), and the SPDR Dow Jones Industrial Average ETF (``DIA'') 
to be $1 or greater where the strike price is greater than $200.
    At this time, the Exchange proposes to modify the interval setting 
regime to be $1 or greater where the strike price is greater than $200 
for GLD options, similar to SPY, IVV, QQQ, IWM and DIA. The Exchange 
believes that the proposed rule change would make GLD options easier 
for investors and traders to use and more tailored to their investment 
needs.
    GLD is an Exchange-Traded Fund Share designed to closely track the 
price and performance of the price of gold bullion. GLD is widely 
quoted as an indicator of gold stock prices and is a significant 
indicator of overall economic health. Investors use GLD to diversify 
their portfolios and benefit from market trends. Additionally, GLD is a 
leading product in its asset class that trades within a ``complex'' 
where, in addition to the underlying security, there are multiple 
instruments available for hedging such as, COMEX Gold Futures; Gold 
Daily Futures; iShares GOLD Trust; SPDR GOLD Minishares Trust; Aberdeen 
Physical Gold Trust; and GraniteShares Gold Shares.
    Accordingly, the Exchange believes that offering a wider base of 
GLD options affords traders and investors

[[Page 43937]]

important hedging and trading opportunities, particularly in the midst 
of current price trends. The Exchange believes that not having the 
proposed $1 strike price intervals above $200 in GLD significantly 
constricts investors' hedging and trading possibilities. The Exchange 
therefore believes that by having smaller strike intervals in GLD, 
investors would have more efficient hedging and trading opportunities 
due to the lower $1 interval ascension. The proposed $1 interval above 
the $200 strike price, will result in having at-the-money series based 
upon the underlying ETF moving less than 1%. The Exchange believes that 
the proposed strike setting regime is in line with the slower movements 
of broad-based indices. Considering the fact that $1 intervals already 
exist below the $200 price point and that GLD have consistently 
inclined in price toward the $200 level, the Exchange believes that 
continuing to maintain the current $200 level (above which intervals 
increase 500% to $5), may have a negative effect on investing, trading 
and hedging opportunities, and volume. The Exchange believes that the 
investing, trading, and hedging opportunities available with GLD 
options far outweighs any potential negative impact of allowing GLD 
options to trade in more finely tailored intervals above the $200 price 
point.
    The proposed strike setting regime would permit strikes to be set 
to more closely reflect the increasing value in the underlying and 
allows investors and traders to roll open positions from a lower strike 
to a higher strike in conjunction with the price movements of the 
underlying ETF. Under the current rule, where the next higher available 
series would be $5 away above a $200 strike price, the ability to roll 
such positions would be impaired. Accordingly, to move a position from 
a $200 strike to a $205 strike under the current rule, an investor 
would need for the underlying product to move 2.5%, and would not be 
able to execute a roll up until such a large movement occurred. The 
Exchange believes that with the proposed rule change, the investor 
would be in a significantly safer position of being able to roll his 
open options position from a $200 to a $201 strike price, which is only 
a 0.5% move for the underlying. As a result, the proposed rule change 
will allow the Exchange to better respond to customer demand for GLD 
strike price more precisely aligned with the smaller, longer-term 
incremental increases in the underlying ETF. The Exchange believes that 
the proposed rule change, like the other strike price programs 
currently offered by the Exchange, will benefit investors by providing 
investors the flexibility to more closely tailor their investment and 
hedging decisions using GLD options. Moreover, by allowing series of 
GLD options to be listed in $1 intervals between strike prices over 
$200, the proposal will moderately augment the potential total number 
of options series available on the Exchange. However, the Exchange 
believes it and the Options Price Reporting Authority (``OPRA'') have 
the necessary systems capacity to handle any potential additional 
traffic associated with this proposed rule change. The Exchange also 
believes that Members will not have a capacity issue due to the 
proposed rule change. In addition, the Exchange represents that it does 
not believe that this expansion will cause fragmentation of liquidity, 
but rather, believes that finer strike intervals will serve to increase 
liquidity available as well as price efficiency by providing more 
trading opportunities for all market participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\5\ 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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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change will allow investors to 
more easily use GLD options. Moreover, the proposed rule change would 
allow investors to better trade and hedge positions in GLD options 
where the strike price is greater than $200, and ensure that investors 
in both options are not at a disadvantage simply because of the strike 
price.
    The Exchange believes the proposed rule change is consistent with 
Section 6(b)(1) of the Act, which provides that the Exchange be 
organized and have the capacity to be able to carry out the purposes of 
the Act and the rules and regulations thereunder, and the rules of the 
Exchange. The proposal allows the Exchange to respond to customer 
demand to allow GLD options to trade in $1 intervals above a $200 
strike price. The Exchange does not believe that the proposed rule 
would create additional capacity issues or affect market functionality. 
As noted above, ETF options trade in wider $5 intervals above a $200 
strike price, whereby options at or below a $200 strike price trade in 
$1 intervals. This creates a situation where contracts on the same 
option class effectively may not be able to execute certain strategies 
such as, for example, rolling to a higher strike price, simply because 
of the $200 strike price above which options intervals increase by 
500%. This proposal remedies the situation by establishing an exception 
to the current ETF interval regime for GLD options to allow such 
options to trade in $1 or greater intervals at all strike prices.
    The Exchange believes that the proposed rule change, like other 
strike price programs currently offered by the Exchange, will benefit 
investors by giving them increased flexibility to more closely tailor 
their investment and hedging decisions. By way of example, GLD is a 
leading product in its asset class and it trades within a ``complex'' 
where, in addition to the underlying security, there are multiple 
instruments available for hedging such as, COMEX Gold Futures; Gold 
Daily Futures; iShares GOLD Trust; SPDR GOLD Minishares Trust; Aberdeen 
Physical Gold Trust; and Granite Shares Gold Shares.
    With regard to the impact of this proposal on system capacity, the 
Exchange believes it and OPRA have the necessary systems capacity to 
handle any potential additional traffic associated with this proposed 
rule change. The Exchange believes that its members will not have a 
capacity issue as a result of this proposal.

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. Rather, the Exchange 
believes that the proposed rule change will result in additional 
investment options and opportunities to achieve the investment and 
trading objectives of market participants seeking efficient trading and 
hedging vehicles, to the benefit of investors, market participants, and 
the marketplace in general. Specifically, the Exchange believes that 
GLD options investors and traders will significantly benefit from the 
availability of finer strike price intervals above a $200 price point. 
In addition, the interval setting regime the Exchange proposes to apply 
to GLD options is currently applied to SPY, IVV, QQQ, IWM and DIA 
options, which are similarly popular and widely traded ETF products and 
track indexes

[[Page 43938]]

at similarly high price levels. Thus, the proposed strike setting 
regime for GLD options will allow options on this an actively traded 
ETF with index levels at corresponding price levels to trade pursuant 
to the same strike setting regime. This will permit investors to employ 
similar investment and hedging strategies for each of these options.

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 up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the 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-2024-17 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-2024-17. 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-2024-17 and should be 
submitted on or before June 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10949 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P