80 FR 41519 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to SPY Position Limits

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 135 (July 15, 2015)

Page Range		41519-41521
FR Document		2015-17301
Federal Register, Volume 80 Issue 135 (Wednesday, July 15, 2015)
[Federal Register Volume 80, Number 135 (Wednesday, July 15, 2015)]
[Notices]
[Pages 41519-41521]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-17301]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75413; File No. SR-NASDAQ-2015-072]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
SPY Position Limits

July 9, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 8, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to extend for another twelve (12) month time 
period the pilot program to eliminate position limits for options on 
the SPDR[supreg] S&P 500[supreg] exchange-traded fund (``SPY ETF'' or 
``SPY''),\3\ which list and trade under the symbol SPY (``SPY Pilot 
Program'').
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    \3\ ``SPDR[supreg],'' ``Standard & Poor's[supreg],'' 
``S&P[supreg],'' ``S&P 500[supreg],'' and ``Standard & Poor's 500'' 
are registered trademarks of Standard & Poor's Financial Services 
LLC. The SPY ETF represents ownership in the SPDR S&P 500 Trust, a 
unit investment trust that generally corresponds to the price and 
yield performance of the SPDR S&P 500 Index.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.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 purpose of the proposed rule change is to amend the 
Supplementary Material at the end of Chapter III, Section 7 (Position 
Limits) to extend the current pilot which expires on July 12, 2015 for 
an additional twelve (12) month time period to July 12, 2016 
(``Extended Pilot''). This filing does not propose any substantive 
changes to the SPY Pilot Program. In proposing to extend the SPY Pilot 
Program, the Exchange reaffirms its consideration of several factors 
that supported the original proposal of the SPY Pilot Program, 
including (1) the availability of economically equivalent products and 
their respective position limits; (2) the liquidity of the option and 
the underlying security; (3) the market capitalization of the 
underlying security and the related index; (4) the reporting of large 
positions and requirements surrounding margin; and (5) the potential 
for market on close volatility.
    The Exchange submitted a report to the Commission on June 11, 2015, 
which report reflects, during the time period from May 2014 through May 
2015, the trading of standardized SPY options with no position limits 
consistent with option exchange provisions.\4\ The report was prepared 
in the manner specified in the Exchange's prior filing extending the 
SPY Pilot Program.\5\ The Exchange notes that it is unaware of any 
problems created by the SPY Pilot Program and does not foresee any as a 
result of the proposed extension. The proposed extension will allow the 
Exchange and the Commission additional time to further evaluate the 
pilot program and its effect on the market.
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    \4\ The report is attached as Exhibit 3.
    \5\ See Securities Exchange Act Release No. 72142 (May 9, 2014), 
79 FR 27961 (May 15, 2014) (SR-NASDAQ-2014-052).
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    As with the original proposal to establish the SPY Pilot Program, 
the Exchange represents that a SPY Pilot Report will be submitted at 
least thirty (30) days before the end of the Extended Pilot and would 
analyze that period.

[[Page 41520]]

The Pilot Report will detail the size and different types of strategies 
employed with respect to positions established as a result of the 
elimination of position limits in SPY. In addition, the report will 
note whether any problems resulted due to the no limit approach and any 
other information that may be useful in evaluating the effectiveness of 
the Extended Pilot. The Pilot Report will compare the impact of the SPY 
Pilot Program, if any, on the volumes of SPY options and the volatility 
in the price of the underlying SPY shares, particularly at expiration 
during the Extended Pilot. In preparing the report the Exchange will 
utilize various data elements such as volume and open interest. In 
addition the Exchange will make available to Commission staff data 
elements relating to the effectiveness of the SPY Pilot Program. 
Conditional on the findings in the Pilot Report, the Exchange will file 
with the Commission a proposal to extend the pilot program, adopt the 
pilot program on a permanent basis or terminate the pilot. If the SPY 
Pilot Program is not extended or adopted on a permanent basis by the 
expiration of the Extended Pilot, the position limits for SPY options 
would revert to limits in effect prior to the commencement of the SPY 
Pilot Program.
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 prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in 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 that the proposed rule change would be 
beneficial to market participants, including market makers, 
institutional investors and retail investors, by permitting them to 
establish greater positions when pursuing their investment goals and 
needs. The Exchange also believes that economically equivalent products 
should be treated in an equivalent manner so as to avoid regulatory 
arbitrage, especially with respect to position limits. Treating SPY and 
SPX options differently by virtue of imposing different position limits 
is inconsistent with the notion of promoting just and equitable 
principles of trade and removing impediments to perfect the mechanisms 
of a free and open market. At the same time, the Exchange believes that 
the elimination of position limits for SPY options would not increase 
market volatility or facilitate the ability to manipulate the market.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. In this regard, the Exchange notes that the rule change is 
being proposed as a competitive response to similar filings that the 
Exchange expects to be filed by other options exchanges. The Exchange 
believes this proposed rule change is necessary to permit fair 
competition among the options exchanges and to establish uniform 
position limits for a multiply listed options class.

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 and Rule 19b-
4(f)(6) thereunder.\8\
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    \8\ 17 CFR 240.19b-4(f)(6). 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 pursuant to Rule 19b-4(f)(6) under the 
Act \9\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii)\10\ 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 asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
believes that waiver of the operative delay is consistent with the 
protection of investors and the public interest because it will permit 
the SPY Pilot Program to continue without interruption. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposed rule change operative upon filing.\11\
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    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 to 
determine whether the proposed rule should be approved or 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2015-072 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-072. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule

[[Page 41521]]

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 Web site 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 
such filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NASDAQ-2015-072, and should be submitted on or before 
August 5, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-17301 Filed 7-14-15; 8:45 am]
 BILLING CODE 8011-01-P
41520 Federal Register / Vol. 80, No. 135 / Wednesday, July 15, 2015 / Notices

The Pilot Report will detail the size and different position limits is inconsistent become operative immediately upon
different types of strategies employed with the notion of promoting just and filing. The Exchange believes that
with respect to positions established as equitable principles of trade and waiver of the operative delay is
a result of the elimination of position removing impediments to perfect the consistent with the protection of
limits in SPY. In addition, the report mechanisms of a free and open market. investors and the public interest
will note whether any problems resulted At the same time, the Exchange believes because it will permit the SPY Pilot
due to the no limit approach and any that the elimination of position limits Program to continue without
other information that may be useful in for SPY options would not increase interruption. The Commission believes
evaluating the effectiveness of the market volatility or facilitate the ability that waiving the 30-day operative delay
Extended Pilot. The Pilot Report will to manipulate the market. is consistent with the protection of
compare the impact of the SPY Pilot investors and the public interest.
B. Self-Regulatory Organization’s
Program, if any, on the volumes of SPY Therefore, the Commission hereby
Statement on Burden on Competition
options and the volatility in the price of waives the operative delay and
the underlying SPY shares, particularly The proposed rule change does not designates the proposed rule change
at expiration during the Extended Pilot. impose any burden on competition that operative upon filing.11
In preparing the report the Exchange is not necessary or appropriate in At any time within 60 days of the
will utilize various data elements such furtherance of the purposes of the Act. filing of the proposed rule change, the
as volume and open interest. In addition In this regard, the Exchange notes that Commission summarily may
the Exchange will make available to the rule change is being proposed as a temporarily suspend such rule change if
Commission staff data elements relating competitive response to similar filings it appears to the Commission that such
to the effectiveness of the SPY Pilot that the Exchange expects to be filed by action is necessary or appropriate in the
Program. Conditional on the findings in other options exchanges. The Exchange public interest, for the protection of
the Pilot Report, the Exchange will file believes this proposed rule change is investors, or otherwise in furtherance of
with the Commission a proposal to necessary to permit fair competition the purposes of the Act. If the
extend the pilot program, adopt the among the options exchanges and to Commission takes such action, the
pilot program on a permanent basis or establish uniform position limits for a Commission shall institute proceedings
terminate the pilot. If the SPY Pilot multiply listed options class. to determine whether the proposed rule
Program is not extended or adopted on C. Self-Regulatory Organization’s should be approved or disapproved.
a permanent basis by the expiration of Statement on Comments on the
the Extended Pilot, the position limits IV. Solicitation of Comments
Proposed Rule Change Received From
for SPY options would revert to limits Members, Participants, or Others Interested persons are invited to
in effect prior to the commencement of submit written data, views, and
the SPY Pilot Program. No written comments were either
solicited or received. arguments concerning the foregoing,
2. Statutory Basis including whether the proposed rule
III. Date of Effectiveness of the change is consistent with the Act.
The Exchange believes that its Proposed Rule Change and Timing for Comments may be submitted by any of
proposal is consistent with Section 6(b) Commission Action the following methods:
of the Act 6 in general, and furthers the
objectives of Section 6(b)(5) of the Act 7 Because the foregoing proposed rule Electronic Comments
in particular, in that it is designed to change does not: (i) Significantly affect
the protection of investors or the public • Use the Commission’s Internet
prevent fraudulent and manipulative comment form (http://www.sec.gov/
acts and practices, to promote just and interest; (ii) impose any significant
burden on competition; and (iii) become rules/sro.shtml); or
equitable principles of trade, to foster • Send an email to rule-comments@
cooperation and coordination with operative for 30 days from the date on
which it was filed, or such shorter time sec.gov. Please include File Number SR–
persons engaged in facilitating NASDAQ–2015–072 on the subject line.
transactions in securities, to remove as the Commission may designate, it has
impediments to and perfect the become effective pursuant to Section Paper Comments
mechanism of a free and open market 19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) thereunder.8 • Send paper comments in triplicate
and a national market system and, in to Brent J. Fields, Secretary, Securities
A proposed rule change filed
general, to protect investors and the and Exchange Commission, 100 F Street
pursuant to Rule 19b–4(f)(6) under the
public interest. NE., Washington, DC 20549–1090.
The Exchange believes that the Act 9 normally does not become
proposed rule change would be operative for 30 days after the date of its All submissions should refer to File
filing. However, Rule 19b–4(f)(6)(iii)10 Number SR–NASDAQ–2015–072. This
beneficial to market participants,
permits the Commission to designate a file number should be included on the
including market makers, institutional
shorter time if such action is consistent subject line if email is used. To help the
investors and retail investors, by
with the protection of investors and the Commission process and review your
permitting them to establish greater
public interest. The Exchange has asked comments more efficiently, please use
positions when pursuing their
the Commission to waive the 30-day only one method. The Commission will
investment goals and needs. The
operative delay so that the proposal may post all comments on the Commission’s
Exchange also believes that
economically equivalent products Internet Web site (http://www.sec.gov/
8 17 CFR 240.19b–4(f)(6). As required under Rule
rules/sro.shtml). Copies of the
mstockstill on DSK4VPTVN1PROD with NOTICES

should be treated in an equivalent 19b–4(f)(6)(iii), the Exchange provided the
manner so as to avoid regulatory submission, all subsequent
Commission with written notice of its intent to file
arbitrage, especially with respect to the proposed rule change, along with a brief amendments, all written statements
position limits. Treating SPY and SPX description and the text of the proposed rule with respect to the proposed rule
change, at least five business days prior to the date
options differently by virtue of imposing of filing of the proposed rule change, or such 11 For purposes only of waiving the 30-day
shorter time as designated by the Commission. operative delay, the Commission has considered the
6 15 U.S.C. 78f(b). 9 17 CFR 240.19b–4(f)(6).
proposed rule’s impact on efficiency, competition,
7 15 U.S.C. 78f(b)(5). 10 17 CFR 240.19b–4(f)(6)(iii). and capital formation. See 15 U.S.C. 78c(f).

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Document Created: 2015-12-15 13:32:27
Document Modified: 2015-12-15 13:32:27
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 41519