[Federal Register Volume 89, Number 157 (Wednesday, August 14, 2024)]
[Notices]
[Pages 66156-66158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18070]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100672; File No. SR-SAPPHIRE-2024-06]


Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 404, Series of Option Contracts Open for Trading, To 
Modify the Strike Interval for Options on SPDR[supreg] Gold Shares

August 8, 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 August 1, 2024, MIAX Sapphire, LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') a 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 Exchange 404, Series of Option 
Contracts Open for Trading.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/miax-sapphire/rule-filings, at the Exchange's principal office, 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 Exchange Rule 404, Series of Options 
Contracts Open for Trading.
Proposal
    The Exchange proposes to amend Exchange Rule 404, Series of Options 
Contracts Open for Trading. Specifically, the Exchange proposes to 
amend Interpretations and Policies .10 to allow for the interval 
between strike prices of series of options on Exchange-Traded Fund 
Shares \3\ of SPDR[supreg] Gold Trust or ``GLD'' to be $1 or greater 
where the strike price is greater than $200. The Exchange also proposes 
to amend paragraph (g) 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.\4\ Today, 
the Exchange 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. The Exchange 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\ Exchange-Traded Fund Shares include shares or other 
securities that are traded on a national securities exchange and are 
defined as an ``NMS stock'' under Rule 600 of Regulation NMS. See 
Exchange Rule 402(i).
    \4\ See Interpretation and Policy .07(a) of Cboe Rule 4.5.
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    Further, Policy .10 of Rule 404 allows for the interval between the 
strike prices of series of options on Exchange-Traded Fund Shares of 
the SPDR S&P 500 ETF (``SPY''), iShares S&P 500 Index ETF (``IVV''), 
Invesco 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 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.

[[Page 66157]]

    Accordingly, the Exchange believes that offering a wider base of 
GLD options affords traders and investors 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 prices 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 \5\ 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.
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    \5\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of MIAX 
Sapphire Rules for purposes of trading on the Exchange as an 
``Electronic Exchange Member'' or ``Market Maker.'' Members are 
deemed ``members'' under the Exchange Act. See Exchange Rule 100.
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\6\ Specifically, the Exchange believes that its proposed rule 
change is consistent with Section 6(b)(5) \7\ requirements in that it 
is 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed 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 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 GraniteShares 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

[[Page 66158]]

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 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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A)(iii) of the 
Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \10\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposal may become operative immediately upon filing. The 
Exchange states that its proposal is substantively identical to a 
proposal filed by another exchange that the Commission recently 
approved,\12\ and that a waiver of the operative delay would permit the 
Exchange to implement the proposal immediately, thus fostering 
competition among GLD options throughout the industry. The Commission 
believes that the proposed rule change presents no novel issues and 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission hereby waives the 30-day operative delay and designates the 
proposed rule change operative upon filing.\13\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ See Securities Exchange Act Release No. 100447 (June 28, 
2024), 89 FR 55293 (July 3, 2024) (SR-ISE-2024-17).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(2)(B).
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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-SAPPHIRE-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-SAPPHIRE-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-SAPPHIRE-2024-06 and should 
be submitted on or before September 4, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18070 Filed 8-13-24; 8:45 am]
BILLING CODE 8011-01-P