[Federal Register Volume 89, Number 128 (Wednesday, July 3, 2024)]
[Notices]
[Pages 55293-55294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-14646]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100447; File No. SR-ISE-2024-17]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Approving a 
Proposed Rule Change To Amend the Strike Interval for Options on 
Exchange-Traded Fund Shares and To Allow $1 Strike Price Intervals 
Above $200 for Options on SPDR Gold Shares (GLD)

June 28, 2024.

I. Introduction

    On May 3, 2024, Nasdaq ISE, LLC (``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 amend Options 
4, Section 5 of the Exchange's rules to (i) permit options on exchange-
traded fund shares to have an interval of $1 or greater where the 
strike price is $200 or less and $5.00 or greater where the strike 
price is greater than $200 and (ii) list options on SPDR[supreg] Gold 
Shares (``GLD'') with $1 strike price intervals instead of $5 strike 
price intervals when the strike price of the option is greater than 
$200. The proposed rule change was published for comment in the Federal 
Register on May 20, 2024.\3\ The Commission did not receive any comment 
letters on the proposed rule change. This order approves 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. 100133 (May 14, 
2024), 89 FR 43936 (``Notice'').
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II. Description of the Proposal

    Currently, Options 4, Section 5 of the Exchange's rules provides 
that the interval between strike prices of series of options on 
exchange-traded fund shares (``ETFs'') \4\ will 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,\5\ 
except that the interval between strike prices of series of options on 
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'') may 
be $1 or greater.\6\
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    \4\ See Exchange Rule Options 4, Section 3(h).
    \5\ See Exchange Rule Options 4, Section 5(d).
    \6\ See Exchange Rule Options 4, Section 5(e).
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    The Exchange proposes to establish an alternative to the strike 
price interval regime described above. Specifically, ISE would also 
allow the interval for options on ETFs 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.\7\ As described above, the Exchange may fix 
the interval between strike prices of series of options on ETFs at such 
intervals as may have been established on another options exchange 
prior to the initiation of trading on the Exchange.\8\ The Exchange 
states that today, Cboe Exchange, Inc. (``Cboe'') \9\ permits the 
interval between strike prices of series of options on ETFs 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.\10\ The Exchange states 
that its proposal adopts Cboe's language.\11\
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    \7\ See proposed Exchange Rule Options 4, Section 5(d).
    \8\ See supra note 5.
    \9\ See Cboe Rule 4.5, Interpretation and Policy .07(a).
    \10\ See Notice, supra note 3, at 43936.
    \11\ See id.
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    The Exchange also proposes to permit strike intervals to be $1 or 
greater where the strike price is greater than $200 for options on 
GLD,\12\ similar to options on SPY, IVV, QQQ, IWM, and DIA.\13\ The 
Exchange states that $1 strike price intervals already exist below the 
$200 price point and that GLD has consistently inclined in price toward 
the $200 level.\14\ In light of this, the Exchange believes that 
continuing to maintain the current $5 strike intervals above $200 may 
have a negative effect on investing, trading and hedging opportunities, 
and volume, particularly to the extent it impacts the ability of market 
participants to roll their positions once strike prices pass $200.\15\ 
The Exchange states that the proposed strike setting regime will 
``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.'' \16\
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    \12\ According to the Exchange, GLD is an ETF whose shares are 
designed to closely track the price and performance of the price of 
gold bullion. See id. The Exchange states: ``GLD is widely quoted as 
an indicator of gold stock prices'' and the ``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.'' Id.
    \13\ See proposed Exchange Rule Options 4, Section 5(e).
    \14\ See Notice, supra note 3, at 43937.
    \15\ See id. For example, the Exchange states that ``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%'' 
whereas rolling an open position from a $200 to a $201 strike 
represents ``only a 0.5% move from the underlying.'' Id.
    \16\ Id.
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    The Exchange acknowledges that the proposal would increase the 
total number of options series available on the Exchange, but 
represents that it and the Options Price Reporting Authority (``OPRA'') 
have the necessary system capacity to handle any potential additional 
traffic associated with the proposal.\17\ The Exchange also states that 
its members would not have a capacity issue as a result of the 
proposal.\18\ Further, the Exchange represents that the proposal would 
not cause fragmentation of liquidity but, by providing more trading 
opportunities to market participants, instead would increase both 
available liquidity as well as price efficiency.\19\
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    \17\ See id.
    \18\ See id.
    \19\ See id.
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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.\20\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\21\ 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

[[Page 55294]]

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. Permitting $1 strike price 
intervals above $200 in options on GLD will provide the investing 
public and other market participants with more flexibility in their 
investment and hedging decisions using options on GLD. The proposal is 
also consistent with past precedent for options on other similar 
ETFs.\22\ Moreover, the proposal to specify the interval between strike 
prices of series of options on ETFs where the strike price is less than 
$200 and where the strike price is greater than $200 is consistent with 
the intervals of another options exchange.\23\
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    \20\ 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).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ See Securities Exchange Act Release No. 85754 (Apr. 30, 
2019), 84 FR 19823 (May 6, 2019) (allowing $1 Strike Price intervals 
above $200 on options on QQQ and IWM).
    \23\ See supra note 11.
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    In approving this proposal, the Commission notes that the Exchange 
has represented that it and OPRA have the necessary systems capacity to 
handle the potential additional traffic associated with this proposed 
rule change.\24\ The Exchange further stated that it believes its 
members will not have a capacity issue because of the proposal and that 
it does not believe this expansion will cause fragmentation of 
liquidity.\25\
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    \24\ See supra note 17.
    \25\ See supra notes 18 and 19.
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IV. Conclusion

    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-ISE-2024-17), be, and hereby 
is, approved.
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    \26\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-14646 Filed 7-2-24; 8:45 am]
BILLING CODE 8011-01-P