[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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\3\ See Cboe Rule 4.5 at Interpretation and Policy .07(a).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10949 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P