82 FR 36017 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options Market Rules at Chapter IV, Section 6

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 147 (August 2, 2017)

Page Range		36017-36020
FR Document		2017-16265

Federal Register, Volume 82 Issue 147 (Wednesday, August 2, 2017)

[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Notices]
[Pages 36017-36020]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-16265]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81245; File No. SR-NASDAQ-2017-073]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Options Market Rules at Chapter IV, Section 6

July 28, 2017.
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 27, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission (the
``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 amend The NASDAQ Options Market LLC
(``NOM'') Rules at Chapter IV, Section 6, entitled ``Series of Options
Contracts Open for Trading.''
The text of the proposed rule change is set forth below. Proposed
new language is italicized; deleted text is in brackets.
* * * * *

NASDAQ Stock Market Rules

* * * * *
Options Rules
* * * * *
Chapter IV Securities Traded on NOM
* * * * *
Sec. 6 Series of Options Contracts Open for Trading
(a)-(g) No change.
Supplementary Material to Section 6
.01
(a) and (b) No change.
(c) Notwithstanding 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[supreg] S&P
500[supreg] ETF (``SPY''), iShares Core S&P 500 ETF (``IVV''), and the
SPDR[supreg] Dow Jones[supreg] Industrial Average ETF (``DIA'') options
will be $1 or greater.
(d)-(f) No change.
.02-.09 No change.
* * * * *

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 NOM Rules at Chapter IV, Section 6,
entitled ``Series of Options Contracts Open for Trading'' by modifying
the strike setting regime for the iShares Core S&P 500 ETF (``IVV'')
options. 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 Depository

[[Page 36018]]

Receipts Trust (``SPY''),\3\ which is an exchange-traded fund (``ETF'')
that is identical in all material respects to the IVV ETF.
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\3\ See Supplementary Material .01(c) to Chapter IV, Section 6.
See also Securities Exchange Act Release No. 80913 (June 13, 2017),
82 FR 27907 (June 19, 2017) (SR-CBOE-2017-048) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change Related to Rule
5.5).
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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 ETP underlying, SPY and IVV options are listed in
the same manner as equity options under the Rules.
However, pursuant to current Supplementary Material .01 to Chapter
IV, Section 6, the interval between strike prices in series of options
on ETPs, including IVV options will be $1 or greater where the strike
price is $200 or less and $5.00 or greater where the strike price is
greater than $200. In addition, pursuant to Supplementary Material
.07(e) to Chapter IV, Section 6,

The interval between strike prices on Short Term Option Series
may be (i) $0.50 or greater where the strike price is less than
$100, and $1 or greater where the strike price is between $100 and
$150 for all classes that participate in the Short Term Options
Series Program; (ii) $0.50 for classes that trade in one dollar
increments in Related non-Short Term Options and that participate in
the Short Term Option Series Program; or (iii) $2.50 or greater
where the strike price is above $150. Related non-Short Term Option
series shall be opened during the month prior to expiration of such
Related non-Short Term Option series in the same manner as permitted
in Supplementary Material to Section 6 at .07 and in the same strike
price intervals that are permitted in Supplementary Material to
Section 6 at .07.

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 wide range of S&P 500 Index-based options 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 Supplementary Material .01(c) of
Chapter IV, Section 6 to allow IVV options to trade in $1 increments
above a strike price of $200. Specifically, the Exchange proposes to
amend Supplementary Material .01(c) of Chapter IV, Section 6 to state
that notwithstanding other provisions limiting the ability of the
Exchange to list $1 increment strike prices on equity and ETF options
above $200, the interval between strike prices of series of options on
Units of IVV 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 IVV 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 by $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.
Pursuant to Chapter IV, Section 6, 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 pursuant to 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 options series
available on the Exchange. However, the Exchange believes it and the
Options Price Reporting Authority (``OPRA'') have the necessary systems
capacity to handle any potential additional traffic associated with
this proposed rule change. The Exchange also believes that Participants
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. In addition, the
interval setting regime the Exchange proposes to apply to IVV options
is currently applied to options on SPY,\4\ which is an ETF that is
identical in all material respects to the IVV ETF.
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\4\ See note 4 above [sic].
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\6\ in particular.\7\ Specifically, the Exchange
believes the proposed rule change is consistent with the Section

[[Page 36019]]

6(b)(5) \8\ 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) \9\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
\9\ Id.
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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, ETF options trade in wider $5 intervals above a
$200 strike price, whereas 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 $5. This proposal remedies the situation by
establishing an exception to the current ETF 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 a prior rule change on NASDAQ PHLX LLC.\10\
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\10\ See Securities and Exchange Act Release 34-72664 (July 24,
2014), 79 FR 44231 (July 30, 2014) (Notice of Filing of Proposed
Rule Change, as Modified by Amendment No. 1, Relating to SPY and DIA
Options) (SR-Phlx-2014-046).
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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,\11\ which
is an ETF that is identical in all material respects to the IVV ETF.
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\11\ See note 4 above [sic].
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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. 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,\12\ 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.
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\12\ See note 4 above [sic].
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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

The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) \13\ of the Act and Rule 19b-4(f)(6) \14\
thereunder. Because the proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\15\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
\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.
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after the date of the
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 because this
proposal permits listing IVV options in a manner permitted by the
Chicago Board Options Exchange, Incorporated,\18\ and will provide
investors with an alternative venue for trading IVV options. The
Commission believes that waiver of the 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.\19\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ See Securities Exchange Act Release No. 80913 (June 13,
2017), 82 FR 27907 (June 19, 2017) (SR-CBOE-2017-048).
\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).
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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

[[Page 36020]]

Commission takes such action, the Commission shall institute
proceedings under Section 19(b)(2)(B) \20\ of the Act to determine
whether the proposed rule change should be approved or disapproved.
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\20\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2017-073 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-NASDAQ-2017-073. 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 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-2017-073, and should
be submitted on or before August 23, 2017.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16265 Filed 8-1-17; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices 36017

fee, or other charge imposed by the filing also will be available for Options Rules
Exchange. inspection and copying at the principal * * * * *
At any time within 60 days of the office of the Exchange. All comments
filing of such proposed rule change, the received will be posted without change; Chapter IV Securities Traded on NOM
Commission summarily may the Commission does not edit personal * * * * *
temporarily suspend such rule change if identifying information from
it appears to the Commission that such submissions. You should submit only Sec. 6 Series of Options Contracts Open
action is necessary or appropriate in the information that you wish to make for Trading
public interest, for the protection of available publicly. All submissions (a)–(g) No change.
investors, or otherwise in furtherance of should refer to File Number SR–
the purposes of the Act. If the NYSEMKT–2017–43 and should be Supplementary Material to Section 6
Commission takes such action, the submitted on or before August 23, 2017. .01
Commission shall institute proceedings For the Commission, by the Division of
under Section 19(b)(2)(B) 29 of the Act to (a) and (b) No change.
Trading and Markets, pursuant to delegated
determine whether the proposed rule authority.30
(c) Notwithstanding any other
change should be approved or provision regarding the interval of strike
Eduardo A. Aleman,
disapproved. prices of series of options on Exchange-
Assistant Secretary.
Traded Fund Shares in this rule, the
IV. Solicitation of Comments [FR Doc. 2017–16208 Filed 8–1–17; 8:45 am] interval of strike prices on SPDR® S&P
Interested persons are invited to BILLING CODE 8011–01–P 500® ETF (‘‘SPY’’), iShares Core S&P
submit written data, views, and 500 ETF (‘‘IVV’’), and the SPDR® Dow
arguments concerning the foregoing, Jones® Industrial Average ETF (‘‘DIA’’)
SECURITIES AND EXCHANGE options will be $1 or greater.
including whether the proposed rule
COMMISSION (d)–(f) No change.
change is consistent with the Act.
Comments may be submitted by any of [Release No. 34–81245; File No. SR– .02–.09 No change.
the following methods: NASDAQ–2017–073] * * * * *
Electronic Comments Self-Regulatory Organizations; The II. Self-Regulatory Organization’s
• Use the Commission’s Internet NASDAQ Stock Market LLC; Notice of Statement of the Purpose of, and
comment form (http://www.sec.gov/ Filing and Immediate Effectiveness of Statutory Basis for, the Proposed Rule
rules/sro.shtml); or Proposed Rule Change To Amend Change
• Send an email to rule-comments@ Options Market Rules at Chapter IV,
In its filing with the Commission, the
sec.gov. Please include File Number SR– Section 6
Exchange included statements
NYSEMKT–2017–43 on the subject line. July 28, 2017. concerning the purpose of and basis for
Paper Comments Pursuant to Section 19(b)(1) of the the proposed rule change and discussed
Securities Exchange Act of 1934 (the any comments it received on the
• Send paper comments in triplicate
‘‘Act’’),1 and Rule 19b–4 thereunder,2 proposed rule change. The text of these
to Brent J. Fields, Secretary, Securities
notice is hereby given that on July 27, statements may be examined at the
and Exchange Commission, 100 F Street
2017, The NASDAQ Stock Market LLC places specified in Item IV below. The
NE., Washington, DC 20549–1090.
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Exchange has prepared summaries, set
All submissions should refer to File Securities and Exchange Commission forth in sections A, B, and C below, of
Number SR–NYSEMKT–2017–43. This (the ‘‘Commission’’) the proposed rule the most significant aspects of such
file number should be included on the change as described in Items I and II statements.
subject line if email is used. To help the below, which Items have been prepared
Commission process and review your A. Self-Regulatory Organization’s
by the Exchange. The Commission is Statement of the Purpose of, and
comments more efficiently, please use publishing this notice to solicit
only one method. The Commission will Statutory Basis for, the Proposed Rule
comments on the proposed rule change Change
post all comments on the Commission’s from interested persons.
Internet Web site (http://www.sec.gov/ 1. Purpose
rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s
submission, all subsequent Statement of the Terms of the Substance The Exchange proposes to amend
amendments, all written statements of the Proposed Rule Change NOM Rules at Chapter IV, Section 6,
with respect to the proposed rule entitled ‘‘Series of Options Contracts
The Exchange proposes to amend The
change that are filed with the Open for Trading’’ by modifying the
NASDAQ Options Market LLC (‘‘NOM’’)
Commission, and all written strike setting regime for the iShares Core
Rules at Chapter IV, Section 6, entitled
communications relating to the S&P 500 ETF (‘‘IVV’’) options.
‘‘Series of Options Contracts Open for
proposed rule change between the Specifically, the Exchange proposes to
Trading.’’
Commission and any person, other than The text of the proposed rule change modify the interval setting regime for
those that may be withheld from the is set forth below. Proposed new IVV options to allow $1 strike price
public in accordance with the language is italicized; deleted text is in intervals above $200.
provisions of 5 U.S.C. 552, will be brackets. The Exchange believes that the
proposed rule change would make IVV
sradovich on DSKBCFCHB2PROD with NOTICES

available for Web site viewing and * * * * *
printing in the Commission’s Public options easier for investors and traders
Reference Room, 100 F Street NE., NASDAQ Stock Market Rules to use and more tailored to their
Washington, DC 20549 on official * * * * * investment needs. Additionally, the
business days between the hours of interval setting regime the Exchange
10:00 a.m. and 3:00 p.m. Copies of the 30 17 CFR 200.30–3(a)(12).
proposes to apply to IVV options is
1 15 U.S.C. 78s(b)(1). currently applied to options on units of
29 15 U.S.C. 78s(b)(2)(B). 2 17 CFR 240.19b–4. the Standard & Poor’s Depository

VerDate Sep<11>2014 19:43 Aug 01, 2017 Jkt 241001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 E:\FR\FM\02AUN1.SGM 02AUN1

36018 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices

Receipts Trust (‘‘SPY’’),3 which is an regarded as the best single gauge of large roll open positions from a lower strike
exchange-traded fund (‘‘ETF’’) that is cap U.S. equities and is widely quoted to a higher strike in conjunction with
identical in all material respects to the as an indicator of stock prices and the price movement of the underlying.
IVV ETF. investor confidence in the securities Pursuant to Chapter IV, Section 6,
The SPY and IVV ETFs are identical market. As a result, individual investors where the next higher available series
in all material respects. The SPY and often use S&P 500 Index-related would be $5 away above a $200 strike
IVV ETFs are designed to roughly track products to diversify their portfolios price, the ability to roll such positions
the performance of the S&P 500 Index and benefit from market trends. is effectively negated. Accordingly, to
with the price of SPY and IVV designed Accordingly, the Exchange believes that move a position from a $200 strike to a
to roughly approximate 1/10th of the offering a wide range of S&P 500 Index- $205 strike pursuant to the current rule,
price of the S&P 500 Index. based options affords traders and an investor would need for the
Accordingly, SPY and IVV strike investors important hedging and trading underlying product to move 2.5%, and
prices—having a multiplier of $100— opportunities. The Exchange believes would not be able to execute a roll up
reflect a value roughly equal to 1/10th that not having the proposed $1 strike until such a large movement occurred.
of the value of the S&P 500 Index. For price intervals above $200 in IVV With the proposed rule change,
example, if the S&P 500 Index is at significantly constricts investors’ however, the investor would be in a
1972.56, SPY and IVV options might hedging and trading possibilities. significantly safer position of being able
have a value of approximately 197.26 The Exchange proposes to amend to roll his open options position from a
with a notional value of $19,726. In Supplementary Material .01(c) of $200 to a $201 strike price, which is
general, SPY and IVV options provide Chapter IV, Section 6 to allow IVV only a 0.5% move for the underlying.
retail investors and traders with the options to trade in $1 increments above
The proposed rule change will allow
benefit of trading the broad market in a a strike price of $200. Specifically, the
the Exchange to better respond to
manageably sized contract. As options Exchange proposes to amend
Supplementary Material .01(c) of customer demand for IVV strike prices
with an ETP underlying, SPY and IVV more precisely aligned with current S&P
options are listed in the same manner as Chapter IV, Section 6 to state that
notwithstanding other provisions 500 Index values. The Exchange
equity options under the Rules. believes that the proposed rule change,
However, pursuant to current limiting the ability of the Exchange to
list $1 increment strike prices on equity like the other strike price programs
Supplementary Material .01 to Chapter currently offered by the Exchange, will
IV, Section 6, the interval between strike and ETF options above $200, the
interval between strike prices of series benefit investors by providing investors
prices in series of options on ETPs, the flexibility to more closely tailor their
including IVV options will be $1 or of options on Units of IVV will be $1 or
greater. The Exchange believes that by investment and hedging decisions using
greater where the strike price is $200 or IVV options. By allowing series of IVV
less and $5.00 or greater where the having smaller strike intervals in IVV,
investors would have more efficient options to be listed in $1 intervals
strike price is greater than $200. In between strike prices over $200, the
addition, pursuant to Supplementary hedging and trading opportunities due
to the lower $1 interval ascension. The proposal will moderately augment the
Material .07(e) to Chapter IV, Section 6, potential total number of options series
proposed $1 intervals, particularly
The interval between strike prices on Short available on the Exchange. However, the
Term Option Series may be (i) $0.50 or
above the $200 strike price, will result
in having at-the-money series based Exchange believes it and the Options
greater where the strike price is less than Price Reporting Authority (‘‘OPRA’’)
$100, and $1 or greater where the strike price upon the underlying IVV moving less
is between $100 and $150 for all classes that than 1%. have the necessary systems capacity to
participate in the Short Term Options Series The Exchange believes that the handle any potential additional traffic
Program; (ii) $0.50 for classes that trade in proposed strike setting regime is in line associated with this proposed rule
one dollar increments in Related non-Short with the slower movements of broad- change. The Exchange also believes that
Term Options and that participate in the based indices. Furthermore, the Participants will not have a capacity
Short Term Option Series Program; or (iii) proposed $1 intervals would allow issue due to the proposed rule change.
$2.50 or greater where the strike price is
above $150. Related non-Short Term Option
option trading strategies (such as, for In addition, the Exchange represents
series shall be opened during the month prior example, risk reduction/hedging that it does not believe that this
to expiration of such Related non-Short Term strategies using IVV weekly options), to expansion will cause fragmentation of
Option series in the same manner as remain viable. Considering the fact that liquidity. In addition, the interval
permitted in Supplementary Material to $1 intervals already exist below the setting regime the Exchange proposes to
Section 6 at .07 and in the same strike price $200 price point and that IVV is above apply to IVV options is currently
intervals that are permitted in the $200 level, the Exchange believes applied to options on SPY,4 which is an
Supplementary Material to Section 6 at .07. that continuing to maintain the artificial ETF that is identical in all material
The Exchange’s proposal seeks to $200 level (above which intervals respects to the IVV ETF.
narrow the strike price intervals to $1 increase by $5), would have a negative
for IVV options above $200, in effect effect on investing, trading and hedging 2. Statutory Basis
matching the strike setting regime for opportunities, and volume. The Exchange believes that its
strike intervals in IVV options below The Exchange believes that the proposal is consistent with Section 6(b)
$200 and matching the strike setting investing, trading, and hedging of the Act,5 in general, and furthers the
regime applied to SPY options. opportunities available with IVV objectives of Section 6(b)(5) of the Act,6
options far outweighs any potential
sradovich on DSKBCFCHB2PROD with NOTICES

Currently, the S&P 500 Index is above in particular.7 Specifically, the
2000. The S&P 500 Index is widely negative impact of allowing IVV options Exchange believes the proposed rule
to trade in more finely tailored intervals change is consistent with the Section
3 See Supplementary Material .01(c) to Chapter above the $200 price point. The
IV, Section 6. See also Securities Exchange Act proposed strike setting regime would 4 See
Release No. 80913 (June 13, 2017), 82 FR 27907 note 4 above [sic].
(June 19, 2017) (SR–CBOE–2017–048) (Notice of
permit strikes to be set to more closely 5 15 U.S.C. 78f(b).
Filing and Immediate Effectiveness of a Proposed reflect values in the underlying S&P 500 6 15 U.S.C. 78f(b)(5).

Rule Change Related to Rule 5.5). Index and allow investors and traders to 7 15 U.S.C. 78f(b).

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Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices 36019

6(b)(5) 8 requirements that the rules of closely tailor their investment and III. Date of Effectiveness of the
an exchange be designed to prevent hedging decisions. Moreover, the Proposed Rule Change and Timing for
fraudulent and manipulative acts and proposed rule change is consistent with Commission Action
practices, to promote just and equitable a prior rule change on NASDAQ PHLX The Exchange has designated this rule
principles of trade, to foster cooperation LLC.10 filing as non-controversial under
and coordination with persons engaged Section 19(b)(3)(A) 13 of the Act and
With regard to the impact of this
in regulating, clearing, settling, Rule 19b–4(f)(6) 14 thereunder. Because
processing information with respect to, proposal on system capacity, the
Exchange believes it and OPRA have the the proposed rule change does not: (i)
and facilitating transactions in Significantly affect the protection of
securities, to remove impediments to necessary systems capacity to handle
any potential additional traffic investors or the public interest; (ii)
and perfect the mechanism of a free and impose any significant burden on
open market and a national market associated with this proposed rule
competition; and (iii) become operative
system, and, in general, to protect change. The Exchange believes that its
for 30 days from the date on which it
investors and the public interest. members will not have a capacity issue was filed, or such shorter time as the
Additionally, the Exchange believes the as a result of this proposal. Commission may designate if consistent
proposed rule change is consistent with In addition, the interval setting regime with the protection of investors and the
the Section 6(b)(5) 9 requirement that the Exchange proposes to apply to IVV public interest, it has become effective
the rules of an exchange not be designed options is currently applied to options pursuant to Section 19(b)(3)(A) of the
to permit unfair discrimination between on SPY,11 which is an ETF that is Act and Rule 19b–4(f)(6) thereunder.15
customers, issuers, brokers, or dealers. A proposed rule change filed under
In particular, the proposed rule identical in all material respects to the
IVV ETF. Rule 19b–4(f)(6) 16 normally does not
change will allow investors to more become operative prior to 30 days after
easily use IVV options. Moreover, the B. Self-Regulatory Organization’s the date of the filing. However, pursuant
proposed rule change would allow Statement on Burden on Competition to Rule 19b–4(f)(6)(iii),17 the
investors to better trade and hedge Commission may designate a shorter
positions in IVV options where the The Exchange does not believe that time if such action is consistent with the
strike price is greater than $200, and the proposed rule change will impose protection of investors and the public
ensure that IVV options investors are any burden on competition not interest. The Exchange has asked the
not at a disadvantage simply because of necessary or appropriate in furtherance Commission to waive the 30-day
the strike price. of the purposes of the Act. Rather, the operative delay because this proposal
The Exchange also believes the Exchange believes that the proposed permits listing IVV options in a manner
proposed rule change is consistent with rule change will result in additional permitted by the Chicago Board Options
Section 6(b)(1) of the Act, which investment options and opportunities to Exchange, Incorporated,18 and will
provides that the Exchange be organized provide investors with an alternative
achieve the investment and trading
and have the capacity to be able to carry venue for trading IVV options. The
objectives of market participants seeking
out the purposes of the Act and the Commission believes that waiver of the
rules and regulations thereunder, and efficient trading and hedging vehicles,
to the benefit of investors, market operative delay is consistent with the
the rules of the Exchange. The rule protection of investors and the public
change proposal allows the Exchange to participants, and the marketplace in
general. Specifically, the Exchange interest. Therefore, the Commission
respond to customer demand to allow hereby waives the operative delay and
IVV options to trade in $1 intervals believes that IVV options investors and
traders will significantly benefit from designates the proposed rule change
above a $200 strike price. The Exchange operative upon filing.19
does not believe that the proposed rule the availability of finer strike price
At any time within 60 days of the
would create additional capacity issues intervals above a $200 price point. In filing of the proposed rule change, the
or affect market functionality. addition, the interval setting regime the Commission summarily may
As noted above, ETF options trade in Exchange proposes to apply to IVV temporarily suspend such rule change if
wider $5 intervals above a $200 strike options is currently applied to options it appears to the Commission that such
price, whereas options at or below a on SPY,12 which is an ETF that is action is necessary or appropriate in the
$200 strike price trade in $1 intervals. identical in all material respects to the public interest, for the protection of
This creates a situation where contracts IVV ETF. Thus, applying the same strike investors, or otherwise in furtherance of
on the same option class effectively may setting regime to SPY and IVV options the purposes of the Act. If the
not be able to execute certain strategies will help level the playing field for
such as, for example, rolling to a higher options on similar, competing ETFs. 13 15 U.S.C. 78s(b)(3)(A).
strike price, simply because of the 14 17 CFR 240.19b–4(f)(6).
arbitrary $200 strike price above which C. Self-Regulatory Organization’s 15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–

options intervals increase by $5. This Statement on Comments on the 4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
proposal remedies the situation by Proposed Rule Change Received From the proposed rule change at least five business days
establishing an exception to the current Members, Participants, or Others prior to the date of filing of the proposed rule
ETF interval regime for IVV options to change, or such shorter time as designated by the
allow such options to trade in $1 or No written comments were either Commission. The Exchange has satisfied this
solicited or received. requirement.
greater intervals at all strike prices. 16 17 CFR 240.19b–4(f)(6).
sradovich on DSKBCFCHB2PROD with NOTICES

The Exchange believes that the 17 17 CFR 240.19b–4(f)(6)(iii).
proposed rule change, like other strike 10 See Securities and Exchange Act Release 34– 18 See Securities Exchange Act Release No. 80913

price programs currently offered by the 72664 (July 24, 2014), 79 FR 44231 (July 30, 2014) (June 13, 2017), 82 FR 27907 (June 19, 2017) (SR–
Exchange, will benefit investors by (Notice of Filing of Proposed Rule Change, as CBOE–2017–048).
19 For purposes only of waiving the 30-day
giving them increased flexibility to more Modified by Amendment No. 1, Relating to SPY
operative delay, the Commission has also
and DIA Options) (SR–Phlx–2014–046).
considered the proposed rule’s impact on
8 15 11 See note 4 above [sic].
U.S.C. 78f(b)(5). efficiency, competition, and capital formation. See
9 Id. 12 See note 4 above [sic]. 15 U.S.C. 78c(f).

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36020 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices

Commission takes such action, the NASDAQ–2017–073, and should be (C) Notwithstanding any other
Commission shall institute proceedings submitted on or before August 23, 2017. provision regarding the interval of strike
under Section 19(b)(2)(B) 20 of the Act to For the Commission, by the Division of prices of series of options on Exchange-
determine whether the proposed rule Trading and Markets, pursuant to delegated Traded Fund Shares in this rule, the
change should be approved or authority.21 interval of strike prices on SPDR® S&P
disapproved. Eduardo A. Aleman, 500® ETF (‘‘SPY’’), iShares Core S&P
Assistant Secretary. 500 ETF (‘‘IVV’’), and the SPDR® Dow
IV. Solicitation of Comments
[FR Doc. 2017–16265 Filed 8–1–17; 8:45 am]
Jones® Industrial Average ETF (‘‘DIA’’)
Interested persons are invited to options will be $1 or greater.
BILLING CODE 8011–01–P
submit written data, views, and (v)–(vii) No change.
arguments concerning the foregoing, (b) and (c) No change.
including whether the proposed rule SECURITIES AND EXCHANGE .06–.13 No change.
change is consistent with the Act. COMMISSION * * * * *
Comments may be submitted by any of
the following methods: [Release No. 34–81246; File No. SR–Phlx– II. Self-Regulatory Organization’s
2017–57] Statement of the Purpose of, and
Electronic Comments Statutory Basis for, the Proposed Rule
• Use the Commission’s Internet Self-Regulatory Organizations; Change
comment form (http://www.sec.gov/ NASDAQ PHLX LLC; Notice of Filing
In its filing with the Commission, the
rules/sro.shtml); or and Immediate Effectiveness of
Exchange included statements
Proposed Rule Change To Amend Rule
• Send an email to rule-comments@ concerning the purpose of and basis for
1012
sec.gov. Please include File Number SR– the proposed rule change and discussed
NASDAQ–2017–073 on the subject line. July 28, 2017. any comments it received on the
Pursuant to Section 19(b)(1) of the proposed rule change. The text of these
Paper Comments
Securities Exchange Act of 1934 (the statements may be examined at the
• Send paper comments in triplicate ‘‘Act’’),1 and Rule 19b–4 thereunder,2 places specified in Item IV below. The
to Secretary, Securities and Exchange notice is hereby given that on July 21, Exchange has prepared summaries, set
Commission, 100 F Street NE., 2017, NASDAQ PHLX LLC (‘‘Phlx’’ or forth in sections A, B, and C below, of
Washington, DC 20549–1090. the ‘‘Exchange’’) filed with the the most significant aspects of such
All submissions should refer to File Securities and Exchange Commission statements.
Number SR–NASDAQ–2017–073. This (the ‘‘Commission’’) the proposed rule A. Self-Regulatory Organization’s
file number should be included on the change as described in Items I and II Statement of the Purpose of, and
subject line if email is used. To help the below, which Items have been prepared Statutory Basis for, the Proposed Rule
Commission process and review your by the Exchange. The Commission is Change
comments more efficiently, please use publishing this notice to solicit
only one method. The Commission will comments on the proposed rule change 1. Purpose
post all comments on the Commission’s from interested persons. The Exchange proposes to amend
Internet Web site (http://www.sec.gov/ Rule 1012, entitled ‘‘Series of Options
I. Self-Regulatory Organization’s
rules/sro.shtml). Copies of the Open for Trading’’ by modifying the
Statement of the Terms of the Substance
submission, all subsequent strike setting regime for the iShares Core
of the Proposed Rule Change
amendments, all written statements S&P 500 ETF (‘‘IVV’’) options.
with respect to the proposed rule The Exchange proposes to amend Specifically, the Exchange proposes to
change that are filed with the Rule 1012, entitled ‘‘Series of Options modify the interval setting regime for
Commission, and all written Open for Trading.’’ IVV options to allow $1 strike price
communications relating to the The text of the proposed rule change intervals above $200.
proposed rule change between the is set forth below. Proposed new The Exchange believes that the
Commission and any person, other than language is italicized; deleted text is in proposed rule change would make IVV
those that may be withheld from the brackets. options easier for investors and traders
public in accordance with the * * * * * to use and more tailored to their
provisions of 5 U.S.C. 552, will be investment needs. Additionally, the
NASDAQ PHLX Rules
available for Web site viewing and interval setting regime the Exchange
printing in the Commission’s Public * * * * * proposes to apply to IVV options is
Reference Room, 100 F Street NE., Options Rules currently applied to options on units of
Washington, DC 20549 on official the Standard & Poor’s Depository
business days between the hours of * * * * * Receipts Trust (‘‘SPY’’),3 which is an
10:00 a.m. and 3:00 p.m. Copies of such Rule 1012. Series of Options Open for exchange-traded fund (‘‘ETF’’) that is
filing also will be available for Trading identical in all material respects to the
inspection and copying at the principal IVV ETF.
office of the Exchange. All comments (a)–(d) No change.
The SPY and IVV ETFs are identical
received will be posted without change; • • • Commentary: ------------------
.01–.04 No change in all material respects. The SPY and
the Commission does not edit personal
sradovich on DSKBCFCHB2PROD with NOTICES

.05 IVV ETFs are designed to roughly track
identifying information from the performance of the S&P 500 Index
(a)
submissions. You should submit only (i)–(iii) No change.
information that you wish to make (iv) (A) and (B) No change. 3 See Commentary .05(a)(iv)(C) to Rule 1012. See

available publicly. All submissions also Securities Exchange Act Release No. 80913
should refer to File Number SR– (June 13, 2017), 82 FR 27907 (June 19, 2017) (SR–
21 17 CFR 200.30–3(a)(12). CBOE–2017–048) (Notice of Filing and Immediate
1 15 U.S.C. 78s(b)(1). Effectiveness of a Proposed Rule Change Related to
20 15 U.S.C. 78s(b)(2)(B). 2 17 CFR 240.19b–4. Rule 5.5).

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Document Created: 2017-08-02 07:09:19
Document Modified: 2017-08-02 07:09:19

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 36017