82 FR 36020 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1012

SECURITIES AND EXCHANGE COMMISSION

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

Page Range		36020-36023
FR Document		2017-16266

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

[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Notices]
[Pages 36020-36023]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-16266]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81246; File No. SR-Phlx-2017-57]

Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 1012

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 21, 2017, NASDAQ PHLX LLC (``Phlx'' or the ``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 Rule 1012, entitled ``Series of
Options 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 PHLX Rules

* * * * *

Options Rules

* * * * *

Rule 1012. Series of Options Open for Trading

(a)-(d) No change.
Commentary: ------------------
.01-.04 No change
.05
(a)
(i)-(iii) No change.
(iv) (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.
(v)-(vii) No change.
(b) and (c) No change.
.06-.13 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 Rule 1012, entitled ``Series of
Options 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 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 Commentary .05(a)(iv)(C) to Rule 1012. 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

[[Page 36021]]

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 Commentary .05(a) to Rule 1012, 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 Commentary .11(e) to Rule 1012,

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 Commentary .11 to this Rule 1012 and in the same strike price
intervals that are permitted in Commentary .11 to this Rule 1012.

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 Commentary .05(a)(iv)(C) of Rule
1012 to allow IVV options to trade in $1 increments above a strike
price of $200. Specifically, the Exchange proposes to amend Commentary
.05(a)(iv)(C) of Rule 1012 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 500% [sic] 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 Rule 1012, 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 members 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 [sic] above.
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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, the requirements of Section 6(b)
of the Act [sic].\7\ Specifically, the Exchange believes the proposed
rule change is consistent with the Section 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

[[Page 36022]]

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.\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 [sic] above.
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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 [sic] above.
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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 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

[[Page 36023]]

Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2017-57 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2017-57. 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-Phlx-2017-57, 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. 2017-16266 Filed 8-1-17; 8:45 am]
BILLING CODE 8011-01-P

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).

VerDate Sep<11>2014 19:43 Aug 01, 2017 Jkt 241001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 E:\FR\FM\02AUN1.SGM 02AUN1

Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices 36021

with the price of SPY and IVV designed significantly constricts investors’ to roll his open options position from a
to roughly approximate 1/10th of the hedging and trading possibilities. $200 to a $201 strike price, which is
price of the S&P 500 Index. The Exchange proposes to amend only a 0.5% move for the underlying.
Accordingly, SPY and IVV strike Commentary .05(a)(iv)(C) of Rule 1012 The proposed rule change will allow
prices—having a multiplier of $100— to allow IVV options to trade in $1 the Exchange to better respond to
reflect a value roughly equal to 1/10th increments above a strike price of $200. customer demand for IVV strike prices
of the value of the S&P 500 Index. For Specifically, the Exchange proposes to more precisely aligned with current S&P
example, if the S&P 500 Index is at amend Commentary .05(a)(iv)(C) of Rule 500 Index values. The Exchange
1972.56, SPY and IVV options might 1012 to state that notwithstanding other believes that the proposed rule change,
have a value of approximately 197.26 provisions limiting the ability of the like the other strike price programs
with a notional value of $19,726. In Exchange to list $1 increment strike currently offered by the Exchange, will
general, SPY and IVV options provide prices on equity and ETF options above benefit investors by providing investors
retail investors and traders with the $200, the interval between strike prices the flexibility to more closely tailor their
benefit of trading the broad market in a of series of options on Units of IVV will investment and hedging decisions using
manageably sized contract. As options be $1 or greater. The Exchange believes IVV options. By allowing series of IVV
with an ETP underlying, SPY and IVV that by having smaller strike intervals in options to be listed in $1 intervals
options are listed in the same manner as IVV, investors would have more between strike prices over $200, the
equity options under the Rules. efficient hedging and trading proposal will moderately augment the
However, pursuant to current opportunities due to the lower $1 potential total number of options series
Commentary .05(a) to Rule 1012, the interval ascension. The proposed $1 available on the Exchange. However, the
interval between strike prices in series intervals, particularly above the $200 Exchange believes it and the Options
of options on ETPs, including IVV strike price, will result in having at-the- Price Reporting Authority (‘‘OPRA’’)
options will be $1 or greater where the money series based upon the underlying have the necessary systems capacity to
strike price is $200 or less and $5.00 or IVV moving less than 1%. handle any potential additional traffic
greater where the strike price is greater The Exchange believes that the associated with this proposed rule
than $200. In addition, pursuant to proposed strike setting regime is in line change. The Exchange also believes that
Commentary .11(e) to Rule 1012, with the slower movements of broad- members will not have a capacity issue
The interval between strike prices on Short
based indices. Furthermore, the due to the proposed rule change.
Term Option Series may be (i) $0.50 or proposed $1 intervals would allow In addition, the Exchange represents
greater where the strike price is less than option trading strategies (such as, for that it does not believe that this
$100, and $1 or greater where the strike price example, risk reduction/hedging expansion will cause fragmentation of
is between $100 and $150 for all classes that strategies using IVV weekly options), to liquidity. In addition, the interval
participate in the Short Term Options Series remain viable. Considering the fact that setting regime the Exchange proposes to
Program; (ii) $0.50 for classes that trade in $1 intervals already exist below the
one dollar increments in Related non-Short
apply to IVV options is currently
$200 price point and that IVV is above applied to options on SPY,4 which is an
Term Options and that participate in the the $200 level, the Exchange believes
Short Term Option Series Program; or (iii) ETF that is identical in all material
that continuing to maintain the artificial respects to the IVV ETF.
$2.50 or greater where the strike price is
above $150. Related non-Short Term Option $200 level (above which intervals
series shall be opened during the month prior increase 500% [sic] by $5), would have 2. Statutory Basis
to expiration of such Related non-Short Term a negative effect on investing, trading The Exchange believes that its
Option series in the same manner as and hedging opportunities, and volume. proposal is consistent with Section 6(b)
permitted in Commentary .11 to this Rule The Exchange believes that the of the Act,5 in general, and furthers the
1012 and in the same strike price intervals investing, trading, and hedging objectives of Section 6(b)(5) of the Act,6
that are permitted in Commentary .11 to this opportunities available with IVV in particular, the requirements of
Rule 1012. options far outweighs any potential Section 6(b) of the Act [sic].7
The Exchange’s proposal seeks to negative impact of allowing IVV options Specifically, the Exchange believes the
narrow the strike price intervals to $1 to trade in more finely tailored intervals proposed rule change is consistent with
for IVV options above $200, in effect above the $200 price point. The the Section 6(b)(5) 8 requirements that
matching the strike setting regime for proposed strike setting regime would the rules of an exchange be designed to
strike intervals in IVV options below permit strikes to be set to more closely prevent fraudulent and manipulative
$200 and matching the strike setting reflect values in the underlying S&P 500 acts and practices, to promote just and
regime applied to SPY options. Index and allow investors and traders to equitable principles of trade, to foster
Currently, the S&P 500 Index is above roll open positions from a lower strike cooperation and coordination with
2000. The S&P 500 Index is widely to a higher strike in conjunction with persons engaged in regulating, clearing,
regarded as the best single gauge of large the price movement of the underlying. settling, processing information with
cap U.S. equities and is widely quoted Pursuant to Rule 1012, where the next
respect to, and facilitating transactions
as an indicator of stock prices and higher available series would be $5
in securities, to remove impediments to
investor confidence in the securities away above a $200 strike price, the
and perfect the mechanism of a free and
market. As a result, individual investors ability to roll such positions is
open market and a national market
often use S&P 500 Index-related effectively negated. Accordingly, to
system, and, in general, to protect
products to diversify their portfolios move a position from a $200 strike to a
investors and the public interest.
and benefit from market trends. $205 strike pursuant to the current rule,
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Additionally, the Exchange believes the
Accordingly, the Exchange believes that an investor would need for the
proposed rule change is consistent with
offering a wide range of S&P 500 Index- underlying product to move 2.5%, and
based options affords traders and would not be able to execute a roll up 4 See note 4 [sic] above.
investors important hedging and trading until such a large movement occurred. 5 15 U.S.C. 78f(b).
opportunities. The Exchange believes With the proposed rule change, 6 15 U.S.C. 78f(b)(5).

that not having the proposed $1 strike however, the investor would be in a 7 15 U.S.C. 78f(b).

price intervals above $200 in IVV significantly safer position of being able 8 15 U.S.C. 78f(b)(5).

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36022 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices

the Section 6(b)(5) 9 requirement that In addition, the interval setting regime A proposed rule change filed under
the rules of an exchange not be designed the Exchange proposes to apply to IVV Rule 19b–4(f)(6) 16 normally does not
to permit unfair discrimination between options is currently applied to options become operative prior to 30 days after
customers, issuers, brokers, or dealers. on SPY,11 which is an ETF that is the date of the filing. However, pursuant
In particular, the proposed rule identical in all material respects to the to Rule 19b–4(f)(6)(iii),17 the
change will allow investors to more IVV ETF. Commission may designate a shorter
easily use IVV options. Moreover, the time if such action is consistent with the
proposed rule change would allow B. Self-Regulatory Organization’s
Statement on Burden on Competition protection of investors and the public
investors to better trade and hedge interest. The Exchange has asked the
positions in IVV options where the The Exchange does not believe that Commission to waive the 30-day
strike price is greater than $200, and the proposed rule change will impose operative delay because this proposal
ensure that IVV options investors are any burden on competition not permits listing IVV options in a manner
not at a disadvantage simply because of necessary or appropriate in furtherance permitted by the Chicago Board Options
the strike price. of the purposes of the Act. Rather, the Exchange, Incorporated,18 and will
The Exchange also believes the Exchange believes that the proposed provide investors with an alternative
proposed rule change is consistent with rule change will result in additional venue for trading IVV options. The
Section 6(b)(1) of the Act, which investment options and opportunities to Commission believes that waiver of the
provides that the Exchange be organized achieve the investment and trading operative delay is consistent with the
and have the capacity to be able to carry objectives of market participants seeking protection of investors and the public
out the purposes of the Act and the efficient trading and hedging vehicles, interest. Therefore, the Commission
rules and regulations thereunder, and to the benefit of investors, market hereby waives the operative delay and
the rules of the Exchange. The rule participants, and the marketplace in designates the proposed rule change
change proposal allows the Exchange to general. Specifically, the Exchange operative upon filing.19
respond to customer demand to allow believes that IVV options investors and
IVV options to trade in $1 intervals traders will significantly benefit from At any time within 60 days of the
above a $200 strike price. The Exchange the availability of finer strike price filing of the proposed rule change, the
does not believe that the proposed rule intervals above a $200 price point. In Commission summarily may
would create additional capacity issues addition, the interval setting regime the temporarily suspend such rule change if
or affect market functionality. Exchange proposes to apply to IVV it appears to the Commission that such
As noted above, ETF options trade in options is currently applied to options action is necessary or appropriate in the
wider $5 intervals above a $200 strike on SPY,12 which is an ETF that is public interest, for the protection of
price, whereas options at or below a identical in all material respects to the investors, or otherwise in furtherance of
$200 strike price trade in $1 intervals. IVV ETF. Thus, applying the same strike the purposes of the Act. If the
This creates a situation where contracts setting regime to SPY and IVV options Commission takes such action, the
on the same option class effectively may will help level the playing field for Commission shall institute proceedings
not be able to execute certain strategies options on similar, competing ETFs. under Section 19(b)(2)(B) 20 of the Act to
such as, for example, rolling to a higher determine whether the proposed rule
C. Self-Regulatory Organization’s change should be approved or
strike price, simply because of the
Statement on Comments on the disapproved.
arbitrary $200 strike price above which
Proposed Rule Change Received From
options intervals increase by $5. This IV. Solicitation of Comments
Members, Participants, or Others
proposal remedies the situation by
establishing an exception to the current No written comments were either Interested persons are invited to
ETF interval regime for IVV options to solicited or received. submit written data, views, and
allow such options to trade in $1 or III. Date of Effectiveness of the arguments concerning the foregoing,
greater intervals at all strike prices. Proposed Rule Change and Timing for including whether the proposed rule
The Exchange believes that the Commission Action change is consistent with the Act.
proposed rule change, like other strike Comments may be submitted by any of
price programs currently offered by the The Exchange has designated this rule
the following methods:
Exchange, will benefit investors by filing as non-controversial under
giving them increased flexibility to more Section 19(b)(3)(A) 13 of the Act and Electronic Comments
closely tailor their investment and Rule 19b–4(f)(6) 14 thereunder. Because
hedging decisions. Moreover, the the proposed rule change does not: (i) • Use the Commission’s Internet
proposed rule change is consistent with Significantly affect the protection of comment form (http://www.sec.gov/
a prior rule change.10 investors or the public interest; (ii) rules/sro.shtml); or
With regard to the impact of this impose any significant burden on
proposal on system capacity, the competition; and (iii) become operative the Commission written notice of its intent to file
for 30 days from the date on which it the proposed rule change at least five business days
Exchange believes it and OPRA have the prior to the date of filing of the proposed rule
necessary systems capacity to handle was filed, or such shorter time as the change, or such shorter time as designated by the
any potential additional traffic Commission may designate if consistent Commission. The Exchange has satisfied this
associated with this proposed rule with the protection of investors and the requirement.
change. The Exchange believes that its public interest, it has become effective 16 17 CFR 240.19b–4(f)(6).
17 17 CFR 240.19b–4(f)(6)(iii).
members will not have a capacity issue pursuant to Section 19(b)(3)(A) of the
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18 See Securities Exchange Act Release No. 80913
as a result of this proposal. Act and Rule 19b–4(f)(6) thereunder.15
(June 13, 2017), 82 FR 27907 (June 19, 2017) (SR–
CBOE–2017–048).
11 See note 4 [sic] above.
9 Id. 19 For purposes only of waiving the 30-day
12 See note 4 [sic] above.
10 See Securities and Exchange Act Release 34– operative delay, the Commission has also
13 15 U.S.C. 78s(b)(3)(A).
72664 (July 24, 2014), 79 FR 44231 (July 30, 2014) considered the proposed rule’s impact on
14 17 CFR 240.19b–4(f)(6). efficiency, competition, and capital formation. See
(Notice of Filing of Proposed Rule Change, as
Modified by Amendment No. 1, Relating to SPY 15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 15 U.S.C. 78c(f).
and DIA Options) (SR–Phlx–2014–046). 4(f)(6) requires a self-regulatory organization to give 20 15 U.S.C. 78s(b)(2)(B).

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Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices 36023

• Send an email to rule-comments@ SECURITIES AND EXCHANGE below. The Exchange also proposes to
sec.gov. Please include File Number SR– COMMISSION amend Rule 519A to set forth clearly the
Phlx–2017–57 on the subject line. manner in which the RPM handles the
[Release No. 34–81229; File No. SR–MIAX–
various complex order types listed in
Paper Comments 2017–34]
that Rule, as described below. amend
• Send paper comments in triplicate Self-Regulatory Organizations; Miami Exchange Rule 515A to reflect changes
to Secretary, Securities and Exchange International Securities Exchange LLC; to the MIAX Options Price Improvement
Notice of Filing and Immediate Mechanism (‘‘PRIME’’) [sic].
Commission, 100 F Street NE.,
Effectiveness of a Proposed Rule The text of the proposed rule change
Washington, DC 20549–1090.
Change To Amend MIAX Options Rule is available on the Exchange’s Web site
All submissions should refer to File 515A, MIAX Price Improvement at http://www.miaxoptions.com/rule-
Number SR–Phlx–2017–57. This file Mechanism (‘‘PRIME’’) and PRIME filings, at MIAX’s principal office, and
number should be included on the Solicitation Mechanism, Rule 518, at the Commission’s Public Reference
subject line if email is used. To help the Complex Orders, and Rule 519A, Risk Room.
Commission process and review your Protection Monitor II. Self-Regulatory Organization’s
comments more efficiently, please use Statement of the Purpose of, and
July 27, 2017.
only one method. The Commission will Statutory Basis for, the Proposed Rule
post all comments on the Commission’s Pursuant to the provisions of Section
Change
Internet Web site (http://www.sec.gov/ 19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4 In its filing with the Commission, the
rules/sro.shtml). Copies of the Exchange included statements
thereunder,2 notice is hereby given that
submission, all subsequent concerning the purpose of and basis for
on July 13, 2017, Miami International
amendments, all written statements the proposed rule change and discussed
Securities Exchange, LLC (‘‘MIAX
with respect to the proposed rule Options’’ or ‘‘Exchange’’) filed with the any comments it received on the
change that are filed with the Securities and Exchange Commission proposed rule change. The text of these
Commission, and all written (‘‘Commission’’) a proposed rule change statements may be examined at the
communications relating to the as described in Items I and II below, places specified in Item IV below. The
proposed rule change between the which Items have been prepared by the Exchange has prepared summaries, set
Commission and any person, other than Exchange. The Commission is forth in sections A, B, and C below, of
those that may be withheld from the publishing this notice to solicit the most significant aspects of such
public in accordance with the comments on the proposed rule change statements.
provisions of 5 U.S.C. 552, will be from interested persons. A. Self-Regulatory Organization’s
available for Web site viewing and
I. Self-Regulatory Organization’s Statement of the Purpose of, and
printing in the Commission’s Public Statutory Basis for, the Proposed Rule
Statement of the Terms of Substance of
Reference Room, 100 F Street NE., Change
the Proposed Rule Change
Washington, DC 20549 on official
business days between the hours of The Exchange proposes to amend 1. Purpose
10:00 a.m. and 3:00 p.m. Copies of such Exchange Rule 515A, MIAX Price The Exchange proposes to amend
filing also will be available for Improvement Mechanism (‘‘PRIME’’) Exchange Rule 515A, MIAX Price
inspection and copying at the principal and PRIME Solicitation Mechanism, to Improvement Mechanism (‘‘PRIME’’)
office of the Exchange. All comments state that the Exchange’s System 3 will and PRIME Solicitation Mechanism, to
received will be posted without change; reject an Agency Order (as defined state that the Exchange’s System will
the Commission does not edit personal below) if, at the time of receipt of the reject an Agency Order if, at the time of
Agency Order, the option is a receipt of the Agency Order, the option
identifying information from
component of a complex strategy that is is a component of a complex strategy
submissions. You should submit only
the subject of a cPRIME Auction (as that is the subject of a cPRIME Auction
information that you wish to make
defined below). The Exchange also (as defined below). The Exchange also
available publicly. All submissions proposes to amend Rule 518, Complex
should refer to File Number SR–Phlx– proposes to amend Rule 518, Complex
Orders, and Rule 519A, Risk Protection Orders, and Rule 519A, RPM, so that the
2017–57, and should be submitted on or Monitor (‘‘RPM’’), so that the price and
before August 23, 2017. price and other trade protections
other trade protections contained in contained in those rules address certain
For the Commission, by the Division of those rules address certain new complex new complex order types on the
Trading and Markets, pursuant to delegated order types on the Exchange. In Exchange, as described below. In
authority.21 addition, the Exchange proposes to addition, the Exchange proposes to
Eduardo A. Aleman, amend Exchange Rule 518, amend Exchange Rule 518,
Assistant Secretary. Interpretations and Policies .05, to state Interpretations and Policies .05, to state
that, unless otherwise specifically set that, unless otherwise specifically set
[FR Doc. 2017–16266 Filed 8–1–17; 8:45 am]
forth in the Rule, the price and other forth in the Rule, the price and other
BILLING CODE 8011–01–P
protections contained in Interpretations protections contained in Interpretations
and Policies .05 (including proposed and Policies .05 (including proposed
amendments to the Rule, described amendments to the Rule, described
sradovich on DSKBCFCHB2PROD with NOTICES

below) apply to all complex order types below) apply to all complex order types
set forth in Rule 518(b), as described set forth in Rule 518(b), as described
1 15
below. The Exchange also proposes to
U.S.C. 78s(b)(1).
2 17
amend Rule 519A to set forth clearly the
CFR 240.19b–4.
3 The term ‘‘System’’ means the automated manner in which the RPM handles the
trading system used by the Exchange for the trading various complex order types listed in
21 17 CFR 200.30–3(a)(12). of securities. See Exchange Rule 100. that Rule, as described below.

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Document Created: 2017-08-02 07:10:04
Document Modified: 2017-08-02 07:10:04

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 36020