82 FR 35002 - Self-Regulatory Organizations; MIAX PEARL, LLC ; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 404, Series of Option Contracts Open for Trading
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 143 (July 27, 2017)
Federal Register Volume 82, Issue 143 (July 27, 2017)
| Page Range | 35002-35005 | |
| FR Document | 2017-15772 |
[Federal Register Volume 82, Number 143 (Thursday, July 27, 2017)] [Notices] [Pages 35002-35005] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-15772] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81184; File No. SR-PEARL-2017-32] Self-Regulatory Organizations; MIAX PEARL, LLC ; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 404, Series of Option Contracts Open for Trading July 21, 2017. Pursuant to the provisions of 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 July 11, 2017, MIAX PEARL, LLC (``MIAX PEARL'' or ``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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend Exchange Rule 404, Series of Option Contracts Open for Trading, Interpretations and Policies .10, to include the iShares S&P 500 Index ETF (``IVV'') in the list of Exchange-Traded Funds (``ETFs'') that are eligible for $1 strike price intervals. The text of the proposed rule change is available on the Exchange's Web site at http://www.miaxoptions.com/rule-filings/pearl at MIAX PEARL'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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Exchange Rule 404, Series of Option Contracts Open for Trading, to modify the strike setting regime for IVV options by including IVV in the list of ETFs that are eligible for $1 strike price intervals under Interpretations and Policies .10. The Exchange notes that this is a competitive filing based on an immediately effective filing recently submitted by the Chicago Board Options Exchange, Incorporated (``CBOE'').\3\ --------------------------------------------------------------------------- \3\ See Securities Exchange Act Release No. 80913 (June 13, 2017), 82 FR 27907 (June 19, 2017) (SR-CBOE-2017-048). --------------------------------------------------------------------------- Specifically, the Exchange proposes to modify the interval setting regime for IVV options to allow $1 strike price intervals above $200. The Exchange believes that the proposed rule change would make IVV options easier for investors and traders to use and more tailored to their investment needs. Additionally, the interval setting regime the Exchange proposes to apply to IVV options is currently applied to options on units of the Standard & Poor's [[Page 35003]] Depository Receipts Trust (``SPY''),\4\ which is an ETF that is identical in all material respects to the IVV ETF. --------------------------------------------------------------------------- \4\ See Exchange Rule 404.10. --------------------------------------------------------------------------- The SPY and IVV ETFs are identical in all material respects. The SPY and IVV ETFs are designed to roughly track the performance of the S&P 500 Index with the price of SPY and IVV designed to roughly approximate 1/10th of the price of the S&P 500 Index. Accordingly, SPY and IVV strike prices--having a multiplier of $100--reflect a value roughly equal to 1/10th of the value of the S&P 500 Index. For example, if the S&P 500 Index is at 1972.56, SPY and IVV options might have a value of approximately 197.26 with a notional value of $19,726. In general, SPY and IVV options provide retail investors and traders with the benefit of trading the broad market in a manageably sized contract. As options with an ETF underlying, SPY and IVV options are listed in the same manner as equity options under the Rules. However, under current Interpretation and Policies .05 to Rule 404, the interval between strike prices in series of options on Index-Linked Securities,\5\ as defined in Rule 402(k)(1), will be $1 or greater where the strike price is $200 or less and $5 or greater where the strike price is greater than $200. In addition, under Exchange Rule 404, Interpretation and Policies .02(e), --------------------------------------------------------------------------- \5\ The Exchange notes that IVV is treated as an Index-Linked Security under current Exchange rules. Strike Price Interval. The strike price interval for Short Term Option series may be $0.50 or greater for option classes that trade in $1 strike price intervals and are in the Short Term Option Series Program. If the class does not trade in $1 strike price intervals, the strike price interval for Short Term Option series may be $0.50 or greater where the strike price is less than $100 and $1.00 or greater where the strike price is between $100 and $150, and $2.50 or greater for strike prices greater than $150. A non-Short Term Option Series that is included in a class that has been selected to participate in the Short Term Option Series Program is referred to as a ``Related non-Short Term Option.'' Notwithstanding any other provision regarding strike prices in this rule, Related non-Short Term Option series shall be opened during the month prior to expiration in the same manner as permitted in Rule 404, Interpretations and Policies .02 and in the same strike price intervals for the Short Term Option Series permitted in this Rule --------------------------------------------------------------------------- 404, Interpretations and Policies .02(e). The Exchange's proposal seeks to narrow the strike price intervals to $1 for IVV options above $200, in effect matching the strike setting regime for strike intervals in IVV options below $200 and matching the strike setting regime applied to SPY options. Currently, the S&P 500 Index is above 2000. The S&P 500 Index is widely regarded as the best single gauge of large cap U.S. equities and is widely quoted as an indicator of stock prices and investor confidence in the securities market. As a result, individual investors often use S&P 500 Index-related products to diversify their portfolios and benefit from market trends. Accordingly, the Exchange believes that offering a wider range of S&P 500 Index-based option strikes affords traders and investors important hedging and trading opportunities. The Exchange believes that not having the proposed $1 strike price intervals above $200 in IVV significantly constricts investors' hedging and trading possibilities. The Exchange proposes to amend Interpretations and Policies .10 to Rule 404 to allow IVV options to trade in $1 increments above a strike price of $200. Specifically, the Exchange proposes to amend Interpretations and Policies .10 to state that, ``[n]otwithstanding any other provision regarding the interval of strike prices of series of options on Exchange-Traded Fund Shares in this rule, the interval of strike prices on SPDR S&P 500 ETF (``SPY''), iShares S&P 500 Index ETF (``IVV''), and the SPDR Dow Jones Industrial Average ETF (``DIA'') options will be $1 or greater.'' The Exchange believes that by having smaller strike intervals in IVV, investors would have more efficient hedging and trading opportunities due to the lower $1 interval ascension. The proposed $1 intervals, particularly above the $200 strike price, will result in having at-the-money series based upon the underlying moving less than 1%. The Exchange believes that the proposed strike setting regime is in line with the slower movements of broad- based indices. Furthermore, the proposed $1 intervals would allow option trading strategies (such as, for example, risk reduction/hedging strategies using IVV weekly options), to remain viable. Considering the fact that $1 intervals already exist below the $200 price point and that IVV is above the $200 level, the Exchange believes that continuing to maintain the artificial $200 level (above which intervals increase 500% to $5), would have a negative effect on investing, trading and hedging opportunities, and volume. The Exchange believes that the investing, trading, and hedging opportunities available with IVV options far outweighs any potential negative impact of allowing IVV 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 values in the underlying S&P 500 Index and allow investors and traders to roll open positions from a lower strike to a higher strike in conjunction with the price movement of the underlying. 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 is effectively negated. 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. With the proposed rule change, however, 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. The proposed rule change will allow the Exchange to better respond to customer demand for IVV strike prices more precisely aligned with current S&P 500 Index values. 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 IVV options. By allowing series of IVV options to be listed in $1 intervals between strike prices over $200, the proposal will moderately augment the potential total number of option 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 \6\ 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. --------------------------------------------------------------------------- \6\ The term ``Member'' means an individual or organization approved to exercise the trading rights associated with a Trading Permit. Members are deemed ``members'' under the Exchange Act. See Exchange Rule 100. --------------------------------------------------------------------------- In addition, the interval setting regime the Exchange proposes to apply to IVV options is currently applied to options on SPY,\7\ which is an ETF that is identical in all material respects to the IVV ETF. --------------------------------------------------------------------------- \7\ See Exchange Rule 404.10. --------------------------------------------------------------------------- 2. Statutory Basis MIAX PEARL believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the [[Page 35004]] ``Act'') and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.\8\ Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \9\ requirements that the rules of an exchange be 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. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) \10\ requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78f(b). \9\ 15 U.S.C. 78f(b)(5). \10\ Id. --------------------------------------------------------------------------- In particular, the proposed rule change will allow investors to more easily use IVV options. Moreover, the proposed rule change would allow investors to better trade and hedge positions in IVV options where the strike price is greater than $200, and ensure that IVV options investors are not at a disadvantage simply because of the strike price. The Exchange also 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 rule change proposal allows the Exchange to respond to customer demand to allow IVV 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, some 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 arbitrary $200 strike price above which options intervals increase by 500%. This proposal remedies this situation by establishing an exception to the current interval regime for IVV options to allow such options to trade in $1 or greater intervals at all strike prices. The Exchange believes that 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. Moreover, the proposed rule change is consistent with the rules of other exchanges.\11\ --------------------------------------------------------------------------- \11\ See Nasdaq Phlx Rule 1012.05(a)(iv)(C) and CBOE Rule 5.5.08(b). --------------------------------------------------------------------------- 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. In addition, the interval setting regime the Exchange proposes to apply to IVV options is currently applied to options on SPY,\12\ which is an ETF that is identical in all material respects to the IVV ETF. --------------------------------------------------------------------------- \12\ See Exchange Rule 404.10 --------------------------------------------------------------------------- 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 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 IVV 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 IVV options is currently applied to options on SPY,\13\ which is an ETF that is identical in all material respects to the IVV ETF. Thus, applying the same strike setting regime to SPY and IVV options will help level the playing field for options on similar, competing ETFs. --------------------------------------------------------------------------- \13\ Id. --------------------------------------------------------------------------- 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 after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) \15\ thereunder. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78s(b)(3)(A). \15\ 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 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. --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally does not become operative for 30 days after the date of filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission may 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 Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest as it will immediately provide investors with additional flexibility in trading and hedging positions in IVV options on the Exchange. The Commission also notes that the proposed rule change is consistent with the strike price intervals in IVV options that is permitted on other exchanges and thus raises no new novel or substantive issues.\18\ Accordingly, the Commission hereby waives the 30-day operative delay requirement and designates the proposed rule change as operative upon filing.\19\ --------------------------------------------------------------------------- \16\ 17 CFR 240.19b-4(f)(6). \17\ 17 CFR 240.19b-4(f)(6)(iii). \18\ See supra note 11. \19\ 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). --------------------------------------------------------------------------- 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 [[Page 35005]] 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 CommentsUse 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-PEARL-2017-32 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-PEARL-2017-32. 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 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 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; 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-PEARL-2017-32, and should be submitted on or before August 17, 2017. --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-15772 Filed 7-26-17; 8:45 am] BILLING CODE 8011-01-P
![35002 Federal Register / Vol. 82, No. 143 / Thursday, July 27, 2017 / Notices
To ensure the provision of these types Therefore, the total annual reporting I. Self-Regulatory Organization’s
of notices to the Commission, Rule 17a– burden associated with Rule 17a–11 is Statement of the Terms of Substance of
11 requires every national securities approximately 335 hours.2 the Proposed Rule Change
exchange or national securities An agency may not conduct or The Exchange is filing a proposal to
association to notify the Commission sponsor, and a person is not required to amend Exchange Rule 404, Series of
when it learns that a member broker- respond to, a collection of information Option Contracts Open for Trading,
dealer has failed to send a notice or under the PRA unless it displays a Interpretations and Policies .10, to
transmit a report required under the current valid OMB control number. include the iShares S&P 500 Index ETF
Rule. (‘‘IVV’’) in the list of Exchange-Traded
The public may view background
Compliance with the Rule is documentation for this information Funds (‘‘ETFs’’) that are eligible for $1
mandatory. The Commission will collection at the following Web site, strike price intervals.
generally not publish or make available www.reginfo.gov. Comments should be The text of the proposed rule change
to any person notices or reports received directed to: (i) Desk Officer for the is available on the Exchange’s Web site
pursuant to Rule 17a–11. The Securities and Exchange Commission, at http://www.miaxoptions.com/rule-
Commission believes that information Office of Information and Regulatory filings/pearl at MIAX PEARL’s principal
obtained under Rule 17a–11 relates to a Affairs, Office of Management and office, and at the Commission’s Public
condition report prepared for the use of Budget, Room 10102, New Executive Reference Room.
the Commission, other federal Office Building, Washington, DC 20503
governmental authorities, and securities II. Self-Regulatory Organization’s
or by sending an email to: Shagufta_ Statement of the Purpose of, and
industry self-regulatory organizations Ahmed@omb.eop.gov; and (ii) Pamela
responsible for the regulation or Statutory Basis for, the Proposed Rule
Dyson, Director/Chief Information Change
supervision of financial institutions. Officer, Securities and Exchange
The Commission expects to receive Commission, c/o Remi Pavlik-Simon, In its filing with the Commission, the
253 notices from broker-dealers whose 100 F Street NE., Washington, DC Exchange included statements
capital declines below certain specified 20549, or by sending an email to: PRA_ concerning the purpose of and basis for
levels or who are otherwise Mailbox@sec.gov. Comments must be the proposed rule change and discussed
experiencing financial or operational submitted to OMB within 30 days of any comments it received on the
problems and ten notices each year from this notice. proposed rule change. The text of these
national securities exchange or national statements may be examined at the
Dated: July 21, 2017. places specified in Item IV below. The
securities association notifying it that a
Eduardo A. Aleman, Exchange has prepared summaries, set
member broker-dealer has failed to send
the Commission a notice or transmit a Assistant Secretary. forth in sections A, B, and C below, of
report required under the Rule. The [FR Doc. 2017–15779 Filed 7–26–17; 8:45 am] the most significant aspects of such
Commission expects that it will take BILLING CODE 8011–01–P statements.
approximately one hour to prepare and A. Self-Regulatory Organization’s
transmit each notice. Statement of the Purpose of, and the
SECURITIES AND EXCHANGE
Rule 17a–11 also requires broker- Statutory Basis for, the Proposed Rule
COMMISSION
dealers engaged in securities lending or Change
repurchase activities to either: (1) File a
[Release No. 34–81184; File No. SR– 1. Purpose
notice with the Commission and their
DEA whenever the total money payable PEARL–2017–32] The Exchange proposes to amend
against all securities loaned, subject to Exchange Rule 404, Series of Option
Self-Regulatory Organizations; MIAX Contracts Open for Trading, to modify
a reverse repurchase agreement or the PEARL, LLC ; Notice of Filing and
contract value of all securities borrowed the strike setting regime for IVV options
Immediate Effectiveness of a Proposed by including IVV in the list of ETFs that
or subject to a repurchase agreement, Rule Change To Amend Rule 404,
exceeds 2,500% of tentative net capital; are eligible for $1 strike price intervals
Series of Option Contracts Open for under Interpretations and Policies .10.
or, alternatively, (2) report monthly Trading
their securities lending and repurchase The Exchange notes that this is a
activities to their DEA in a form July 21, 2017. competitive filing based on an
acceptable to their DEA. immediately effective filing recently
Pursuant to the provisions of Section submitted by the Chicago Board Options
The Commission estimates that, 19(b)(1) of the Securities Exchange Act
annually, six broker-dealers will submit Exchange, Incorporated (‘‘CBOE’’).3
of 1934 (‘‘Act’’)1 and Rule 19b–4 Specifically, the Exchange proposes to
the monthly stock loan/borrow report. thereunder,2 notice is hereby given that
The Commission estimates each firm modify the interval setting regime for
on July 11, 2017, MIAX PEARL, LLC IVV options to allow $1 strike price
will spend, on average, approximately (‘‘MIAX PEARL’’ or ‘‘Exchange’’) filed
one hour per month (or twelve hours intervals above $200. The Exchange
with the Securities and Exchange believes that the proposed rule change
per year) of employee resources to Commission (‘‘Commission’’) a
prepare and send the report or to would make IVV options easier for
proposed rule change as described in investors and traders to use and more
prepare the information for the FOCUS Items I and II below, which Items have
report (as required by the firm’s DEA, if tailored to their investment needs.
been prepared by the Exchange. The
mstockstill on DSK30JT082PROD with NOTICES
applicable). Therefore, the Commission Additionally, the interval setting regime
Commission is publishing this notice to the Exchange proposes to apply to IVV
estimates the total annual reporting solicit comments on the proposed rule
burden arising from this section of the options is currently applied to options
change from interested persons. on units of the Standard & Poor’s
amendment will be approximately 72
hours.1 2 253 + 10 + 72. 3 See Securities Exchange Act Release No. 80913
1 15 U.S.C. 78s(b)(1). (June 13, 2017), 82 FR 27907 (June 19, 2017) (SR–
16 broker-dealers × 12 hours per year = 72 hours. 2 17 CFR 240.19b–4. CBOE–2017–048).
VerDate Sep<11>2014 19:17 Jul 26, 2017 Jkt 241001 PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 E:\FR\FM\27JYN1.SGM 27JYN1](https://thefederalregister.org/doc/82_FR_35145/page/1.svg)
![Federal Register / Vol. 82, No. 143 / Thursday, July 27, 2017 / Notices 35003
Depository Receipts Trust (‘‘SPY’’),4 $200 and matching the strike setting The proposed strike setting regime
which is an ETF that is identical in all regime applied to SPY options. would permit strikes to be set to more
material respects to the IVV ETF. Currently, the S&P 500 Index is above closely reflect values in the underlying
The SPY and IVV ETFs are identical 2000. The S&P 500 Index is widely S&P 500 Index and allow investors and
in all material respects. The SPY and regarded as the best single gauge of large traders to roll open positions from a
IVV ETFs are designed to roughly track cap U.S. equities and is widely quoted lower strike to a higher strike in
the performance of the S&P 500 Index as an indicator of stock prices and conjunction with the price movement of
with the price of SPY and IVV designed investor confidence in the securities the underlying. Under the current rule,
to roughly approximate 1/10th of the market. As a result, individual investors where the next higher available series
price of the S&P 500 Index. often use S&P 500 Index-related would be $5 away above a $200 strike
Accordingly, SPY and IVV strike products to diversify their portfolios price, the ability to roll such positions
prices—having a multiplier of $100— and benefit from market trends. is effectively negated. Accordingly, to
reflect a value roughly equal to 1/10th Accordingly, the Exchange believes that move a position from a $200 strike to a
of the value of the S&P 500 Index. For offering a wider range of S&P 500 Index- $205 strike under the current rule, an
example, if the S&P 500 Index is at based option strikes affords traders and investor would need for the underlying
1972.56, SPY and IVV options might investors important hedging and trading product to move 2.5%, and would not
have a value of approximately 197.26 opportunities. The Exchange believes be able to execute a roll up until such
with a notional value of $19,726. In that not having the proposed $1 strike a large movement occurred. With the
general, SPY and IVV options provide price intervals above $200 in IVV proposed rule change, however, the
retail investors and traders with the significantly constricts investors’ investor would be in a significantly
benefit of trading the broad market in a hedging and trading possibilities. safer position of being able to roll his
manageably sized contract. As options The Exchange proposes to amend open options position from a $200 to a
with an ETF underlying, SPY and IVV Interpretations and Policies .10 to Rule $201 strike price, which is only a 0.5%
options are listed in the same manner as 404 to allow IVV options to trade in $1 move for the underlying. The proposed
equity options under the Rules. increments above a strike price of $200. rule change will allow the Exchange to
better respond to customer demand for
However, under current Interpretation Specifically, the Exchange proposes to
IVV strike prices more precisely aligned
and Policies .05 to Rule 404, the interval amend Interpretations and Policies .10
with current S&P 500 Index values. The
between strike prices in series of to state that, ‘‘[n]otwithstanding any
Exchange believes that the proposed
options on Index-Linked Securities,5 as other provision regarding the interval of
rule change, like the other strike price
defined in Rule 402(k)(1), will be $1 or strike prices of series of options on
programs currently offered by the
greater where the strike price is $200 or Exchange-Traded Fund Shares in this
Exchange, will benefit investors by
less and $5 or greater where the strike rule, the interval of strike prices on
providing investors the flexibility to
price is greater than $200. In addition, SPDR S&P 500 ETF (‘‘SPY’’), iShares
more closely tailor their investment and
under Exchange Rule 404, Interpretation S&P 500 Index ETF (‘‘IVV’’), and the
hedging decisions using IVV options.
and Policies .02(e), SPDR Dow Jones Industrial Average ETF By allowing series of IVV options to
Strike Price Interval. The strike price (‘‘DIA’’) options will be $1 or greater.’’ be listed in $1 intervals between strike
interval for Short Term Option series may be The Exchange believes that by having prices over $200, the proposal will
$0.50 or greater for option classes that trade smaller strike intervals in IVV, investors moderately augment the potential total
in $1 strike price intervals and are in the would have more efficient hedging and number of option series available on the
Short Term Option Series Program. If the trading opportunities due to the lower Exchange. However, the Exchange
class does not trade in $1 strike price $1 interval ascension. The proposed $1
intervals, the strike price interval for Short believes it and the Options Price
intervals, particularly above the $200 Reporting Authority (‘‘OPRA’’) have the
Term Option series may be $0.50 or greater strike price, will result in having at-the-
where the strike price is less than $100 and necessary systems capacity to handle
$1.00 or greater where the strike price is
money series based upon the underlying any potential additional traffic
between $100 and $150, and $2.50 or greater moving less than 1%. The Exchange associated with this proposed rule
for strike prices greater than $150. A non- believes that the proposed strike setting change. The Exchange also believes that
Short Term Option Series that is included in regime is in line with the slower Members 6 will not have a capacity issue
a class that has been selected to participate movements of broad-based indices. due to the proposed rule change. In
in the Short Term Option Series Program is Furthermore, the proposed $1 intervals addition, the Exchange represents that it
referred to as a ‘‘Related non-Short Term would allow option trading strategies does not believe that this expansion will
Option.’’ Notwithstanding any other (such as, for example, risk reduction/
provision regarding strike prices in this rule, cause fragmentation of liquidity.
hedging strategies using IVV weekly In addition, the interval setting regime
Related non-Short Term Option series shall
be opened during the month prior to
options), to remain viable. Considering the Exchange proposes to apply to IVV
expiration in the same manner as permitted the fact that $1 intervals already exist options is currently applied to options
in Rule 404, Interpretations and Policies .02 below the $200 price point and that IVV on SPY,7 which is an ETF that is
and in the same strike price intervals for the is above the $200 level, the Exchange identical in all material respects to the
Short Term Option Series permitted in this believes that continuing to maintain the IVV ETF.
Rule 404, Interpretations and Policies .02(e). artificial $200 level (above which
intervals increase 500% to $5), would 2. Statutory Basis
The Exchange’s proposal seeks to
have a negative effect on investing, MIAX PEARL believes the proposed
narrow the strike price intervals to $1
trading and hedging opportunities, and rule change is consistent with the
mstockstill on DSK30JT082PROD with NOTICES
for IVV options above $200, in effect
volume. The Exchange believes that the Securities Exchange Act of 1934 (the
matching the strike setting regime for
strike intervals in IVV options below investing, trading, and hedging
opportunities available with IVV 6 The term ‘‘Member’’ means an individual or
options far outweighs any potential organization approved to exercise the trading rights
4 SeeExchange Rule 404.10. associated with a Trading Permit. Members are
5 TheExchange notes that IVV is treated as an
negative impact of allowing IVV options deemed ‘‘members’’ under the Exchange Act. See
Index-Linked Security under current Exchange to trade in more finely tailored intervals Exchange Rule 100.
rules. above the $200 price point. 7 See Exchange Rule 404.10.
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![Federal Register / Vol. 82, No. 143 / Thursday, July 27, 2017 / Notices 35005
Commission takes such action, the For the Commission, by the Division of amend the Plan (‘‘Amendment No. 2’’),5
Commission shall institute proceedings Trading and Markets, pursuant to delegated pursuant to Section 11A of the Act,6 and
to determine whether the proposed rule authority.20 Rule 608 thereunder.7 The Amendment,
should be approved or disapproved. Eduardo A. Aleman, which was effective upon filing
Assistant Secretary. pursuant to Rule 608(b)(3)(i) of
IV. Solicitation of Comments
[FR Doc. 2017–15772 Filed 7–26–17; 8:45 am] Regulation NMS,8 sets forth the
Interested persons are invited to BILLING CODE 8011–01–P Consolidated Audit Trail (‘‘CAT’’) fees
submit written data, views, and to be paid by the Participants.
arguments concerning the foregoing,
II. Description of the Amendment
including whether the proposed rule SECURITIES AND EXCHANGE
change is consistent with the Act. COMMISSION Prior to filing Amendment No. 2, the
Comments may be submitted by any of Participants filed the CAT NMS Plan
[Release No. 34-81189; File No. 4–698] with the Commission,9 pursuant to
the following methods:
Section 11A of the Act 10 and Rule 608
Electronic Comments Joint Industry Plan; Order of Summary
of Regulation NMS thereunder,11 to
Abrogation of Amendment No. 2 to the
• Use the Commission’s Internet National Market System Plan
create, implement and maintain the
comment form (http://www.sec.gov/ CAT. The Plan was published for
Governing the Consolidated Audit Trail
rules/sro.shtml); or comment in the Federal Register on
by Bats BYX Exchange, Inc., Bats BZX
• Send an email to rule-comments@ May 17, 2016,12 and approved by the
Exchange, Inc., Bats EDGA Exchange,
sec.gov. Please include File Number SR– Commission, as modified, on November
Inc., Bats EDGX Exchange, Inc., BOX
PEARL–2017–32 on the subject line. 15, 2016.13 Under the CAT NMS Plan,
Options Exchange LLC, C2 Options
the Operating Committee of a newly
Paper Comments Exchange, Incorporated, Chicago
formed company—CAT NMS, LLC (the
Board Options Exchange,
• Send paper comments in triplicate Incorporated, Chicago Stock
‘‘Company’’), of which each Participant
to Secretary, Securities and Exchange is a member—has the discretion to
Exchange, Inc., Financial Industry
Commission, 100 F Street NE., establish funding for the Company to
Regulatory Authority, Inc., Investors’
Washington, DC 20549–1090. operate the CAT, including establishing
Exchange LLC, Miami International
fees that the Participants and Industry
All submissions should refer to File Securities Exchange, LLC, MIAX
Members will pay (‘‘CAT Fees’’).14
Number SR–PEARL–2017–32. This file PEARL, LLC, NASDAQ BX, Inc., The Plan specified that, in
number should be included on the Nasdaq GEMX, LLC, Nasdaq ISE, LLC, establishing the funding of the
subject line if email is used. To help the Nasdaq MRX, LLC, NASDAQ PHLX Company, the Operating Committee
Commission process and review your LLC, The NASDAQ Stock Market LLC, shall establish ‘‘a tiered fee structure in
comments more efficiently, please use New York Stock Exchange LLC, NYSE which the fees charged to: (i) CAT
only one method. The Commission will Arca, Inc., NYSE MKT LLC and NYSE Reporters that are Execution Venues,
post all comments on the Commission’s National, Inc. including ATSs, are based upon the
Internet Web site (http://www.sec.gov/ level of market share; (ii) Industry
rules/sro.shtml). Copies of the July 21, 2017.
Members’ non-ATS activities are based
submission, all subsequent I. Introduction upon message traffic; and (iii) the CAT
amendments, all written statements Reporters with the most CAT-related
Notice is hereby given that the
with respect to the proposed rule activity (measured by market share and/
Securities and Exchange Commission
change that are filed with the or message traffic, as applicable) are
(‘‘Commission’’), pursuant to Section
Commission, and all written generally comparable (where, for these
11A of the Securities Exchange Act of
communications relating to the comparability purposes, the tiered fee
1934 (‘‘Act’’),1 and Rule 608
proposed rule change between the structure takes into consideration
thereunder,2 is summarily abrogating
Commission and any person, other than
Amendment No. 2 to the National
those that may be withheld from the
Market System Plan Governing the 5 See Letter from Michael Simon, Chair, CAT
public in accordance with the NMS Plan Operating Committee, to Brent J. Fields,
Consolidated Audit Trail (‘‘CAT NMS
provisions of 5 U.S.C. 552, will be Secretary, Commission, dated May 22, 2017
Plan’’ or ‘‘Plan’’). (‘‘Letter’’). See also Securities Exchange Act Release
available for Web site viewing and
On May 23, 2017 3 participants of the No. 80930 (June 14, 2017), 82 FR 28180 (June 20,
printing in the Commission’s Public
CAT NMS Plan (‘‘Participants’’) 4 filed 2017) (‘‘Notice’’), available at https://www.sec.gov/
Reference Room, 100 F Street NE., rules/sro/nms/2017/34-80930.pdf.
with the Commission a proposal to
Washington, DC 20549, on official 6 15 U.S.C. 78k–1.
business days between the hours of 1 15
U.S.C. 78k–1.
7 17 CFR 242.608.
10:00 a.m. and 3:00 p.m. Copies of the 2 17
CFR 242.608.
8 17 CFR 242.608(b)(3)(i).
9 See Letter from the Participants to Brent J.
filing also will be available for 3 The Participants initially submitted the
Fields, Secretary, Commission, dated September 30,
inspection and copying at the principal amendment on May 9, 2017, but subsequently
2014; and Letter from Participants to Brent J. Fields,
office of the Exchange. All comments withdrew the amendment and refiled the current
Secretary, Commission, dated February 27, 2015.
submission on May 23, 2017.
received will be posted without change; 4 The Participants are: Bats BYX Exchange, Inc.,
On December 23, 2015, the Participants submitted
the Commission does not edit personal an amendment to the CAT NMS Plan. See Letter
Bats BZX Exchange, Inc., Bats EDGA Exchange, from Participants to Brent J. Fields, Secretary,
identifying information from Inc., Bats EDGX Exchange, Inc., BOX Options Commission, dated December 23, 2015.
submissions. You should submit only Exchange LLC, C2 Options Exchange, Incorporated,
mstockstill on DSK30JT082PROD with NOTICES
10 15 U.S.C. 78k–1.
information that you wish to make Chicago Board Options Exchange, Incorporated, 11 17 CFR 242.608.
Chicago Stock Exchange, Inc., Financial Industry
available publicly. All submissions Regulatory Authority, Inc., Investors’ Exchange
12 Securities Exchange Act Release No. 77724
should refer to File Number SR– LLC, Miami International Securities Exchange, LLC, (April 27, 2016), 81 FR 30614 (May 17, 2016) (‘‘CAT
PEARL–2017–32, and should be MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq NMS Plan Notice’’).
13 Securities Exchange Act Release No. 79318
submitted on or before August 17, 2017. GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,
NASDAQ PHLX LLC, The NASDAQ Stock Market (November 15, 2016), 81 FR 84696 (November 23,
LLC, New York Stock Exchange LLC, NYSE Arca, 2016) (‘‘Approval Order’’).
20 17 CFR 200.30–3(a)(12). Inc., NYSE MKT LLC and NYSE National, Inc. 14 Section 11.1(b) of the CAT NMS Plan.
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Document Created: 2017-07-27 02:07:01
Document Modified: 2017-07-27 02:07:01
| 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 | 82 FR 35002 |
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