[Federal Register Volume 90, Number 103 (Friday, May 30, 2025)]
[Notices]
[Pages 23084-23086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-09760]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103116; File No. SR-ISE-2025-08]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change To Amend Options 4, Section 3, Criteria for Underlying
Securities
May 23, 2025.
I. Introduction
On February 7, 2025, 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 its
listing rules at ISE Options 4, Section 3, Criteria for Underlying
Securities to allow the listing and trading of options on units that
represent interests in a trust that is a Commodity-Based Trust.\3\ The
proposed rule change was published for comment in the Federal Register
on February 26, 2025.\4\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See, infra, note 9 and accompanying text.
\4\ See Securities Exchange Act Release No. 102465 (Feb. 20,
2025), 90 FR 10740 (``Notice'').
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On March 12, 2025, pursuant to Section 19(b)(2) of the Act,\5\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\6\ This order institutes proceedings under Section 19(b)(2)(B)
of the Act \7\ to determine whether to approve or disapprove the
proposed rule change.
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\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 102628 (Mar. 12,
2025), 90 FR 12587 (Mar. 18, 2025) (designating May 27, 2025, as the
date by which the Commission shall either approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change).
\7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change
As described more fully in the Notice, the Exchange proposes to
amend Options 4, Section 3, Criteria for Underlying Securities to allow
the listing and trading of options on units that represent interests in
a trust that is a Commodity-Based Trust.\8\
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\8\ See Notice, supra note 4.
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Specifically, the Exchange proposes to remove references in Options
4, Section 3(h) to the SPDR[supreg] Gold Trust, the iShares COMEX Gold
Trust, the iShares Silver Trust, the Aberdeen Standard Physical Gold
Trust, the iShares Bitcoin Trust, the Fidelity Wise Origin Bitcoin
Fund, the ARK21Shares Bitcoin ETF, the Grayscale Bitcoin Trust (BTC),
the Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF,
which are all Commodity-Based Trust Shares, and update the provision to
state that securities deemed appropriate for options trading shall
include shares or other securities (``Exchange-Traded Fund Shares'')
that ``represent interests in (a) a security issued by a trust that
holds (1) a specified commodity deposited with the trust, or (2) a
specified commodity and, in addition to such specified commodity, cash;
(b) that is issued by such trust in a specified aggregate minimum
number in return for a deposit of a quantity of the underlying
commodity and/or cash; and (c) that, when aggregated in the same
specified minimum number, may be redeemed at a holder's request by such
trust which will deliver to the redeeming holder the quantity of the
underlying commodity and/or cash (`Commodity-Based Trust Share').'' \9\
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\9\ See Notice, supra note 4, at 10740.
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As a result of this amendment, the listing criteria would permit
any Exchange-Traded Fund Shares (``ETFs'') that are approved to list on
the primary market as a Commodity-Based Trust Share to qualify for the
listing of options on that Commodity-Based Trust Share, provided other
listing criteria have been met, without any additional approvals from
the Commission. The Exchange states that offering options on Commodity-
Based Trust Shares provides investors with the ability to hedge
exposure to the underlying security similar to options on any other
securities. Additionally, the Exchange states that options on a
Commodity-Based Trust Share provide investors with the ability to
transact in such options in a listed market environment, which
increases market transparency and enhances the process of price
discovery conducted on the Exchange
[[Page 23085]]
through increased order flow to the benefit of all investors.\10\
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\10\ Id. at 10742.
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The Exchange states that options on a Commodity-Based Trust Share
will trade in the same manner as options on other ETFs on the
Exchange.\11\ The Exchange rules that currently apply to the listing
and trading of all options on ETFs on the Exchange, including, for
example, rules that govern listing criteria,\12\ including continued
listing standards,\13\ expirations,\14\ exercise/strike prices,\15\
minimum increments,\16\ position and exercise limits,\17\ margin
requirements,\18\ customer accounts,\19\ and trading halt procedures
\20\ would apply to the listing and trading of options on a Commodity-
Based Trust Share on the Exchange in the same manner as they apply to
other options on all other ETFs that are listed and traded on the
Exchange.
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\11\ Id. See also ISE Rule Options 4, Section 3(h)(1) (regarding
certain criteria and guidelines for ETFs).
\12\ See Notice, supra note 4, at 10741-42. See also ISE Rule
Options 4, Section 3(a), (h).
\13\ See Notice, supra note 4, at 10741, 10743. The Exchange
states that the options approved for trading pursuant to Options 4,
Section 3(h) will not be deemed to meet the requirements for
continued approval, and the Exchange shall not open for trading any
additional series of option contracts of the class covering such
ETFs, if the ETFs are delisted from trading as provided in
subparagraph (b)(5) of Options 4, Section 4 or the ETFs are halted
or suspended from trading on their primary market. Id. Additionally,
options on ETFs may be subject to the suspension of opening
transactions in any series of options of the class covering ETFs in
certain other circumstances pursuant to Exchange rules. Id. at
10741.
\14\ See Notice, supra note 4, at 10741. The Exchange states
that the Exchange would open at least one expiration month for
options on a Commodity-Based Trust Share and may also list series of
options on a Commodity-Based Trust Share for trading on a weekly or
quarterly basis. Id. The Exchange states that it may also list long-
term equity option series (``LEAPS'') that expire from twelve to
thirty-nine months from the time they are listed. Id.
\15\ See Notice, supra note 4, at 10741-42. See also ISE Rule
Options 4, Section 5(b) (relating to exercise price of options upon
commencement of trading of a particular class of options on the
Exchange); ISE Rule Options 4, Section 5(d) (relating to strike
prices of series of options on ETFs).
\16\ See Notice, supra note 4, at 10741-42. See also ISE Rule
Options 4, Section 5 and Options 3, Section 3.
\17\ See Notice, supra note 4, at 10742. The Exchange states
that position and exercise limits for options on a Commodity-Based
Trust Share would be determined pursuant to ISE Rule Options 9,
Sections 13 and 15, respectively, and that position and exercise
limits for ETFs options vary according to the number of outstanding
shares and the trading volumes of the underlying ETF over the past
six months. Id.
\18\ See Notice, supra note 4, at 10742. See also ISE Rule
Options 6C, Section 3.
\19\ See Notice, supra note 4, at 10742.
\20\ See Notice, supra note 4, at 10741-42.
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In addition, the Exchange states that the same surveillance
procedures applicable to all other options on other ETFs currently
listed and traded on the Exchange will apply to options on a Commodity-
Based Trust Share, and that it and the Options Price Reporting
Authority or ``OPRA'' has the necessary systems capacity to support the
new option series.\21\ Also, the Exchange states that it may obtain
information from CME Group Inc.'s designated contract markets that are
members of the Intermarket Surveillance Group related to a financial
instrument that is based, in whole or in part, upon an interest in or
performance of a commodity, as applicable.\22\ The Exchange states that
it has not identified any issues with the continued listing and trading
of any ETF options, including ETFs that hold commodities (i.e.,
precious metals) that it currently lists and trades on the
Exchange.\23\
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\21\ See Notice, supra note 4, at 10742.
\22\ Id.
\23\ Id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-ISE-
2025-08 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \24\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change.
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\24\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\25\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act,\26\ which requires, among other things, that the rules of a
national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and protect 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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\25\ See id.
\26\ 15 U.S.C. 78f(b)(5).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the self-
regulatory organization that proposed the rule change.'' \27\ The
description of a proposed rule change, its purpose and operation, its
effect, and a legal analysis of its consistency with applicable
requirements must all be sufficiently detailed and specific to support
an affirmative Commission finding,\28\ and any failure of a self-
regulatory organization to provide this information may result in the
Commission not having a sufficient basis to make an affirmative finding
that a proposed rule change is consistent with the Act and the
applicable rules and regulations.\29\ The Commission is instituting
proceedings to allow for additional consideration and comment on the
issues raised herein, including as to whether the proposal is
consistent with the Act. In particular, the Commission asks commenters
to address the potential market impacts of allowing the listing and
trading of options on Commodity-Based Trust Shares.
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\27\ 17 CFR 201.700(b)(3).
\28\ See id.
\29\ See id.
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 6(b)(5) or any other provision of the Act, and
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4 under the Act,\30\ any
request for an opportunity to make an oral presentation.\31\
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\30\ 17 CFR 240.19b-4.
\31\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Acts Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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[[Page 23086]]
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by June 20, 2025. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
July 7, 2025.
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-2025-08 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-2025-08. 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-2025-08 and should be
submitted on or before June 20, 2025. Rebuttal comments should be
submitted by July 7, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-09760 Filed 5-29-25; 8:45 am]
BILLING CODE 8011-01-P