84 FR 7958 - Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Terms of Index Option Contracts

[Federal Register Volume 84, Number 43 (Tuesday, March 5, 2019)]
[Notices]
[Pages 7958-7960]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2019-03893]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85210; File No. SR-Phlx-2019-02]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change to Terms of Index 
Option Contracts

February 27, 2019.
    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 February 21, 2019, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``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 Phlx Rule 1101A, ``Terms of Index 
Option Contracts,'' to amend certain expiration timeframes and make 
technical corrections to this rule.
    The Exchange requests that the Commission waive the 30-day 
operative delay period contained in Exchange Act Rule 19b-
4(f)(6)(iii).\3\
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    \3\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqphlx.cchwallstreet.com/, 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 Rule 1101A, ``Terms of Index Options 
Contracts,'' to amend expirations for Phlx index options. The Exchange 
also proposes to amend expirations related to the listing and trading, 
on a pilot basis, of p.m.-settled options on broad-based indexes with 
nonstandard expiration dates (``Nonstandard Program''). Finally, the 
Exchange proposes technical amendments within Phlx Rule 1101A. Each 
rule change will be discussed below.
Expirations of Index Options and Technical Amendments
    The Exchange proposes to add titles and re-number/re-letter Rule 
1101A. The Exchange proposes to add the title ``General'' to the 
beginning of the rule. The Exchange proposes to add the title 
``Exercise Prices'' in front of current Rule 1101A and the title 
``Strike Prices'' before the paragraph after the list of sector 
indexes. The Exchange proposes to add these titles and re-number/re-
letter this rule to make the rule more clear and add the various 
sections to provide ease of reference as to the content of the rule. 
The Exchange proposes to relocate current Rule 1033A to new section 
Rule 1101A(a)(1).
    The Exchange proposes a new section Rule 1101A(a)(4) with a title 
``Expiration Months and Weeks.'' The Exchange proposes to amend Rule 
1101A to add specific expiration months and weeks to Rule 1101A similar 
to expiration months and weeks at Cboe Exchange, Inc. (``Cboe''). Cboe 
Rule 24.9(a)(2) provides for expiration months and weeks for its index 
products.\4\ Today, Phlx Rule 1101A

[[Page 7959]]

contains no expiration language. The proposed rule text provides that 
index options contracts may expire at three (3)-month intervals or in 
consecutive weeks or months. Further, the Exchange may list: (i) Up to 
six (6) standard monthly expirations at any one time in a class, but 
will not list index options that expire more than twelve (12) months 
out; (ii) up to 12 standard monthly expirations at any one time for any 
class that the Exchange (as the Reporting Authority) uses to calculate 
a volatility index; and (iii) up to 12 standard (monthly) expirations 
in NDX options.\5\ The Exchange is proposing similar expiration 
language on Nasdaq ISE, LLC in a separate rule change. The Exchange 
notes that the proposed new rule text would govern the listing of all 
index options and the new proposed text regarding 12 standard (monthly) 
expirations will govern the listing of NDX options.
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    \4\ Cboe Rule 24.9(a)(2) provides, ``Expiration Months and 
Weeks. Index option contracts may expire at three-month intervals, 
in consecutive months or in consecutive weeks (as specified by class 
below). The Exchange may:
     List up to six standard monthly expirations at any one 
time in a class, but will not list index options that expire more 
than 12 months out;
     list up to 12 standard monthly expirations at any one 
time for any class that the Exchange (as the Reporting Authority) 
uses to calculate a volatility index and for CBOE S&P 500 a.m./PM 
Basis, EAFE, EM, FTSE Emerging, FTSE Developed, FTSE 100, China 50, 
and S&P Select Sector Index (SIXM, SIXE, SIXT, SIXV, SIXU, SIXR, 
SIXI, SIXY, SIXB, and SIXRE, and SIXC) options;
     list up to 12 consecutive weekly expirations in VXST 
options; and,
     list up to six weekly expirations and up to 12 standard 
(monthly) expirations in VIX options. The six weekly expirations 
shall be for the nearest weekly expirations from the actual listing 
date and weekly expirations may not expire in the same week in which 
standard (monthly) VIX options expire. Standard (monthly) 
expirations in VIX options are not counted as part of the maximum 
six weekly expirations permitted for VIX options.''
    \5\ This provision is similar to a provision that Cboe notes for 
its VIX options at Rule 24.9(a)(2).
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Nonstandard Expirations Pilot Program
    The Exchange proposes to amend current Rule 1101A(b)(vii)(1) which 
is proposed to be re-numbered Rule 1101A(b)(5)(A) to modify the maximum 
number of expirations that may be listed for each Weekly expiration in 
the Nonstandard Program. Today, current Rule 1101A(b)(vii)(1) provides, 
``The maximum number of expirations that may be listed for each Weekly 
Expiration (i.e., a Monday expiration, Wednesday expiration, or Friday 
expiration, as applicable) in a given class is the same as the maximum 
number of expirations permitted for standard options on the same broad-
based index.'' The Exchange proposes to instead provide, ``The maximum 
number of expirations that may be listed for each Weekly Expiration 
(i.e., a Monday expiration, Wednesday expiration, or Friday expiration, 
as applicable) in a given class is the maximum number of expirations 
permitted for standard index options in Rule 1101A(a)(4).'' This 
provision would be modified to reference the new rule text proposed 
within Rule 1101A(a)(4).
    The Exchange notes that Cboe Rule 24.9(e)(1) references Cboe Rule 
24.9(a)(2) for the maximum number of expirations for weekly expirations 
in the nonstandard expirations pilot program. This proposed amendment 
to Phlx's Nonstandard Program would amend the maximum expirations so 
they would be similar to expirations on Cboe.
Technical Amendment
    The Exchange proposes to amend a sentence [sic] current Rule 
1101A(b)(vii)(1) which is proposed to be re-numbered Rule 
1101A(b)(5)(A) which currently provides, ``Weekly Expirations that are 
first listed in a given class may expire up to four weeks from the 
actual listing date.'' The Exchange proposes to amend this sentence to 
replace the word ``first'' with ``initially.'' The Exchange is not 
proposing to amend the meaning of this sentence, rather the Exchange 
proposes to make clear that the word ``initially'' applies to the four 
week expiration period for listing initial weeklies in the Nonstandard 
Program.
    Finally, the Exchange proposes to renumber parts of Rule 1101A to 
conform the lettering/numbering to the proposed new rule text and 
remove a hyphen between Market and Maker within current Rule 
1101A(b)(vi)(D).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ 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, 
by clearly indicating the permissible expirations periods for index 
options and the Nonstandard Program to permit the listing of additional 
expirations. This proposal will conform Phlx's ability to list index 
options expirations similar to Cboe.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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Expirations of Index Options
    Today, Rule 1101A does not provide specific expirations for broad-
based indexes. With this proposal the Exchange would be permitted to 
list index options contracts that expire at three (3)-month intervals 
or in consecutive weeks or months. Further, the Exchange may list: (i) 
Up to six (6) standard monthly expirations at any one time in a class, 
but will not list index options that expire more than twelve (12) 
months out; (ii) up to 12 standard monthly expirations at any one time 
for any class that the Exchange (as the Reporting Authority) uses to 
calculate a volatility index; and (iii) up to 12 standard (monthly) 
expirations in NDX options. The Exchange believes that this rule text 
is consistent with the Act because it brings clarity to the manner in 
which Phlx may list expirations on index options. Further, this 
proposal will permit the Exchange to list similar index options as are 
listed by Cboe today, including in the Nonstandard Program.
Nonstandard Expirations Pilot Program
    The Exchange's proposal to amend current Rule 1101A(b)(vii)(1) 
which is proposed to be re-numbered Rule 1101A(b)(5)(A) to modify the 
maximum number of expirations that may be listed for each weekly 
expiration in the Nonstandard Program to the proposed new expiration 
timeframes is consistent with the Act because today those timeframes 
refer to the timeframes for standard listed options. Providing for the 
maximum numbers of expirations permitted under the Nonstandard Program 
within the standard index options rule will clarify the timeframes and 
eliminate any potential ambiguity about the maximum numbers of 
expirations permitted under the Nonstandard Program. Additionally, this 
amendment will align the Exchange's Nonstandard Program to Cboe's 
nonstandard program.
Technical Amendment
    The Exchange's proposal amend [sic] a sentence within current Rule 
1101A(b)(vii)(1) which is proposed to be re-numbered Rule 
1101A(b)(5)(A) by replacing the word ``first'' with ``initially'' is 
consistent with the Act because it will make clear the meaning of the 
term and the meaning. The Exchange is not proposing to amend the 
meaning of this sentence, rather the Exchange proposes to make clear 
that the word ``initially'' applies to the four week expiration period 
for listing initial weeklies in the Nonstandard Program.
    Finally, the Exchange believes that adding [sic] title to Rule 
1101A as well as memorializing the meaning of bids and offers and re-
numbering/re-lettering this rule will bring greater clarity to the 
index rule and align the rule with a similar proposal on Nasdaq ISE, 
LLC.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. Specifically, the Exchange does 
not believe the proposal will impose any burden on intramarket 
competition as all market participants will be treated in the same 
manner with respect to expirations of index options. Additionally, the

[[Page 7960]]

Exchange does not believe the proposal will impose any burden on 
intermarket competition as market participants are welcome to become 
Phlx Members and trade at Phlx if they determine that this proposed 
rule change has made Phlx more attractive or favorable. Finally, all 
options exchanges are free to compete by listing and trading their own 
broad-based index options with similar expirations. This proposal will 
permit Phlx to compete with Cboe with respect to listing expirations on 
index 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

    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, it has become 
effective pursuant to Section 19(b)(3)(A) 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).
    \9\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change, along with a brief description and the 
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.
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    A proposed rule change filed under Rule 19b-4(f)(6) of the Act \10\ 
normally does not become operative for 30 days after the date of 
filing. However, Rule 19b-4(f)(6)(iii) \11\ permits the Commission to 
designate a shorter time if the 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 
represents that the proposed rule change will add clarity to Rule 1101A 
and allow the Exchange to list expirations on index options and in its 
Nonstandard Program in a manner similar to another exchange. Because 
the proposed rule change does not present any new or novel issues, the 
Commission believes that waiving the 30-day operative delay period is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission designates the proposed rule change to be 
operative upon filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2019-02 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-Phlx-2019-02. 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 (http://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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-Phlx-2019-02, and should be submitted on 
or before March 26, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03893 Filed 3-4-19; 8:45 am]
 BILLING CODE 8011-01-P