82 FR 36046 - Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX Rules at Chapter IV, Section 6

SECURITIES AND EXCHANGE COMMISSION

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

Page Range		36046-36049
FR Document		2017-16271

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

[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Notices]
[Pages 36046-36049]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-16271]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81251; File No. SR-BX-2017-034]

Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX 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, NASDAQ BX, Inc. (``BX'' 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 BX 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.
* * * * *

[[Page 36047]]

Rules of NASDAQ BX

* * * * *

Options Rules

* * * * *

Chapter IV Securities Traded on BX Options

* * * * *

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 [sic] 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 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

[[Page 36048]]

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
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.

[[Page 36049]]

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
Send an email to rule-comments@sec.gov. Please include
File Number SR-BX-2017-034 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-BX-2017-034. 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-BX-2017-034, 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. 2017-16271 Filed 8-1-17; 8:45 am]
BILLING CODE 8011-01-P

36046 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices

In approving the proposed rule Paper Comments implementation period to address a
change, the Commission also has • Send paper comments in triplicate commenter’s concern and ease the
considered the impact of the proposed to Secretary, Securities and Exchange limited burden of the proposed rule
rule change, as modified by Amendment Commission, 100 F Street NE., change on dealers.
No. 1, on efficiency, competition, and Washington, DC 20549. For the foregoing reasons, the
capital formation.140 The Commission All submissions should refer to File Commission finds good cause for
does not believe that the proposed rule Number SR–MSRB–2017–03. This file approving the proposed rule change, as
change will impose any burden on number should be included on the modified by Amendment No. 1, on an
competition not necessary or subject line if email is used. To help the accelerated basis, pursuant to Section
appropriate in furtherance of the Commission process and review your 19(b)(2) of the Act.
purposes of the Act. The Commission comments more efficiently, please use VIII. Conclusion
believes the proposed rule change only one method. The Commission will
would apply equally to all municipal It is therefore ordered, pursuant to
post all comments on the Commission’s
securities brokers and municipal Section 19(b)(2) of the Act,141 that the
Internet Web site (http://www.sec.gov/
securities dealers and may reduce proposed rule change (SR–MSRB–2017–
rules/sro.shtml). Copies of the
inefficiencies that stem from uncertainty 03) be, and hereby is, approved.
submission, all subsequent
and confusion associated with existing amendments, all written statements For the Commission, pursuant to delegated
Rule G–26. The Commission believes with respect to the proposed rule authority.142
that the clarifications and revisions change that are filed with the Eduardo A. Aleman,
included in the proposed rule change Commission, and all written Assistant Secretary.
will likely result in dealers processing communications relating to the [FR Doc. 2017–16213 Filed 8–1–17; 8:45 am]
of customer account transfers by dealer proposed rule change between the BILLING CODE 8011–01–P
in a manner that more closely reflects Commission and any person, other than
the securities industry standard, which those that may be withheld from the
may, in turn, reduce operational risk to public in accordance with the SECURITIES AND EXCHANGE
dealers and investors. Furthermore, the provisions of 5 U.S.C. 552, will be COMMISSION
Commission believes that the proposed available for Web site viewing and
rule change will likely make the transfer [Release No. 34–81251; File No. SR–BX–
printing in the Commission’s Public 2017–034]
of customer municipal securities Reference Room, 100 F Street NE.,
account assets more flexible, less Washington, DC 20549 on official Self-Regulatory Organizations;
burdensome, and more efficient, while business days between the hours of NASDAQ BX, Inc.; Notice of Filing and
reducing confusion and risk to investors 10:00 a.m. and 3:00 p.m. Copies of the Immediate Effectiveness of Proposed
and allowing them to more efficiently filing also will be available for Rule Change To Amend BX Rules at
and effectively transfer their municipal inspection and copying at the principal Chapter IV, Section 6
securities to their dealer of choice. office of the MSRB. All comments
received will be posted without change; July 28, 2017.
As noted above, the Commission
received two comment letters on the the Commission does not edit personal Pursuant to Section 19(b)(1) of the
filing. The Commission believes that the identifying information from Securities Exchange Act of 1934 (the
MSRB, through its responses and submissions. You should submit only ‘‘Act’’),1 and Rule 19b–4 thereunder,2
through Amendment No. 1, has information that you wish to make notice is hereby given that on July 27,
addressed commenters’ concerns. available publicly. All submissions 2017, NASDAQ BX, Inc. (‘‘BX’’ or
should refer to File Number SR–MSRB– ‘‘Exchange’’) filed with the Securities
For the reasons noted above, the 2017–03 and should be submitted on or and Exchange Commission (the
Commission believes that the proposed before August 23, 2017. ‘‘Commission’’) the proposed rule
rule change, as modified by Amendment change as described in Items I and II
No. 1, is consistent with the Act. VI. Accelerated Approval of Proposed
below, which Items have been prepared
Rule Change, as Modified by
V. Solicitation of Comments on by the Exchange. The Commission is
Amendment No. 1
Amendment No. 1 publishing this notice to solicit
The Commission finds good cause for comments on the proposed rule change
Interested persons are invited to approving the proposed rule change, as from interested persons.
submit written data, views, and amended by Amendment No. 1, prior to
the 30th day after the date of I. Self-Regulatory Organization’s
arguments concerning the foregoing, Statement of the Terms of the Substance
including whether Amendment No. 1 to publication of notice of Amendment No.
1 in the Federal Register. As discussed of the Proposed Rule Change
the proposed rule change is consistent
with the Act. Comments may be above, Amendment No. 1 modifies the The Exchange proposes to amend BX
submitted by any of the following proposed rule change by proposing a Rules at Chapter IV, Section 6, entitled
methods: longer implementation period of six ‘‘Series of Options Contracts Open for
months rather than the previously Trading.’’
Electronic Comments proposed three months. The MSRB has The text of the proposed rule change
proposed the revisions included in is set forth below. Proposed new
• Use of the Commission’s Internet
Amendment No. 1 to provide a
sradovich on DSKBCFCHB2PROD with NOTICES

language is italicized; deleted text is in
comment form (http://www.sec.gov/ sufficient amount of time for dealers to brackets.
rules/sro.shtml); or effect any changes necessary to achieve * * * * *
• Send an email to rule-comments@ compliance with the proposed rule
sec.gov. Please include File Number SR– change. As noted by the MSRB, 141 15U.S.C. 78s(b)(2).
MSRB–2017–03 on the subject line. Amendment No. 1 does not alter the 142 17CFR 200.30–3(a)(12).
substance of the original proposed rule 1 15 U.S.C. 78s(b)(1).
140 15 U.S.C. 78c(f). change and only provides a lengthier 2 17 CFR 240.19b-4.

VerDate Sep<11>2014 19:43 Aug 01, 2017 Jkt 241001 PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 E:\FR\FM\02AUN1.SGM 02AUN1

Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices 36047

Rules of NASDAQ BX proposes to apply to IVV options is regime applied to SPY options.
* * * * * currently applied to options on units of Currently, the S&P 500 Index is above
the Standard & Poor’s Depository 2000. The S&P 500 Index is widely
Options Rules Receipts Trust (‘‘SPY’’),3 which is an regarded as the best single gauge of large
* * * * * exchange-traded fund (‘‘ETF’’) that is cap U.S. equities and is widely quoted
identical in all material respects to the as an indicator of stock prices and
Chapter IV Securities Traded on BX IVV ETF. investor confidence in the securities
Options The SPY and IVV ETFs are identical market. As a result, individual investors
* * * * * in all material respects. The SPY and often use S&P 500 Index-related
IVV ETFs are designed to roughly track products to diversify their portfolios
Sec. 6 Series of Options Contracts Open the performance of the S&P 500 Index and benefit from market trends.
for Trading with the price of SPY and IVV designed Accordingly, the Exchange believes that
(a)–(g) No change. to roughly approximate 1/10th of the offering a wide range of S&P 500 Index-
price of the S&P 500 Index. based options affords traders and
Supplementary Material to Section 6 Accordingly, SPY and IVV strike investors important hedging and trading
.01 prices—having a multiplier of $100— opportunities. The Exchange believes
(a) and (b) No change. reflect a value roughly equal to 1/10th that not having the proposed $1 strike
(c) Notwithstanding any other of the value of the S&P 500 Index. For price intervals above $200 in IVV
provision regarding the interval of strike example, if the S&P 500 Index is at significantly constricts investors’
prices of series of options on Exchange- 1972.56, SPY and IVV options might hedging and trading possibilities.
Traded Fund Shares in this rule, the have a value of approximately 197.26 The Exchange proposes to amend
interval of strike prices on SPDR® S&P with a notional value of $19,726. In Supplementary Material .01(c) of
500® ETF (‘‘SPY’’), iShares Core S&P general, SPY and IVV options provide Chapter IV, Section 6 to allow IVV
500 ETF (‘‘IVV’’), and the SPDR® Dow retail investors and traders with the options to trade in $1 increments above
Jones® Industrial Average ETF (‘‘DIA’’) benefit of trading the broad market in a a strike price of $200. Specifically, the
options will be $1 or greater. manageably sized contract. As options Exchange proposes to amend
(d)–(f) No change. with an ETP underlying, SPY and IVV Supplementary Material .01(c) of
.02–.09 No change. options are listed in the same manner as Chapter IV, Section 6 to state that
* * * * * equity options under the Rules. notwithstanding other provisions
However, pursuant to current limiting the ability of the Exchange to
II. Self-Regulatory Organization’s Supplementary Material .01 to Chapter list $1 increment strike prices on equity
Statement of the Purpose of, and IV, Section 6, the interval between strike and ETF options above $200, the
Statutory Basis for, the Proposed Rule prices in series of options on ETPs, interval between strike prices of series
Change including IVV options will be $1 or of options on Units of IVV will be $1 or
In its filing with the Commission, the greater where the strike price is $200 or greater. The Exchange believes that by
Exchange included statements less and $5.00 or greater where the having smaller strike intervals in IVV,
concerning the purpose of and basis for strike price is greater than $200. In investors would have more efficient
the proposed rule change and discussed addition, pursuant to Supplementary hedging and trading opportunities due
any comments it received on the Material .07(e) to Chapter IV, Section 6, to the lower $1 interval ascension. The
proposed rule change. The text of these proposed $1 intervals, particularly
The interval between strike prices on Short
statements may be examined at the Term Option Series may be (i) $0.50 or
above the $200 strike price, will result
places specified in Item IV below. The greater where the strike price is less than in having at-the-money series based
Exchange has prepared summaries, set $100, and $1 or greater where the strike price upon the underlying IVV moving less
forth in sections A, B, and C below, of is between $100 and $150 for all classes that than 1%.
the most significant aspects of such participate in the Short Term Options Series The Exchange believes that the
statements.
Program; (ii) $0.50 for classes that trade in proposed strike setting regime is in line
one dollar increments in Related non-Short with the slower movements of broad-
A. Self-Regulatory Organization’s Term Options and that participate in the based indices. Furthermore, the
Statement of the Purpose of, and Short Term Option Series Program; or (iii) proposed $1 intervals would allow
$2.50 or greater where the strike price is
Statutory Basis for, the Proposed Rule above $150. Related non-Short Term Option
option trading strategies (such as, for
Change series shall be opened during the month prior example, risk reduction/hedging
to expiration of such Related non-Short Term strategies using IVV weekly options), to
1. Purpose
Option series in the same manner as remain viable. Considering the fact that
The Exchange proposes to amend permitted in Supplementary Material to $1 intervals already exist below the
NOM [sic] Rules at Chapter IV, Section Section 6 at .07 and in the same strike price $200 price point and that IVV is above
6, entitled ‘‘Series of Options Contracts intervals that are permitted in the $200 level, the Exchange believes
Open for Trading’’ by modifying the Supplementary Material to Section 6 at .07. that continuing to maintain the artificial
strike setting regime for the iShares Core The Exchange’s proposal seeks to $200 level (above which intervals
S&P 500 ETF (‘‘IVV’’) options. narrow the strike price intervals to $1 increase by $5), would have a negative
Specifically, the Exchange proposes to for IVV options above $200, in effect effect on investing, trading and hedging
modify the interval setting regime for matching the strike setting regime for opportunities, and volume.
The Exchange believes that the
sradovich on DSKBCFCHB2PROD with NOTICES

IVV options to allow $1 strike price strike intervals in IVV options below
intervals above $200. $200 and matching the strike setting investing, trading, and hedging
The Exchange believes that the opportunities available with IVV
proposed rule change would make IVV 3 See Supplementary Material .01(c) to Chapter options far outweighs any potential
options easier for investors and traders IV, Section 6. See also Securities Exchange Act negative impact of allowing IVV options
Release No. 80913 (June 13, 2017), 82 FR 27907
to use and more tailored to their (June 19, 2017) (SR–CBOE–2017–048) (Notice of
to trade in more finely tailored intervals
investment needs. Additionally, the Filing and Immediate Effectiveness of a Proposed above the $200 price point. The
interval setting regime the Exchange Rule Change Related to Rule 5.5). proposed strike setting regime would

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36048 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices

permit strikes to be set to more closely Exchange believes the proposed rule Exchange, will benefit investors by
reflect values in the underlying S&P 500 change is consistent with the Section giving them increased flexibility to more
Index and allow investors and traders to 6(b)(5) 8 requirements that the rules of closely tailor their investment and
roll open positions from a lower strike an exchange be designed to prevent hedging decisions. Moreover, the
to a higher strike in conjunction with fraudulent and manipulative acts and proposed rule change is consistent with
the price movement of the underlying. practices, to promote just and equitable a prior rule change on NASDAQ PHLX
Pursuant to Chapter IV, Section 6, principles of trade, to foster cooperation LLC.10
where the next higher available series and coordination with persons engaged
With regard to the impact of this
would be $5 away above a $200 strike in regulating, clearing, settling,
price, the ability to roll such positions processing information with respect to, proposal on system capacity, the
is effectively negated. Accordingly, to and facilitating transactions in Exchange believes it and OPRA have the
move a position from a $200 strike to a securities, to remove impediments to necessary systems capacity to handle
$205 strike pursuant to the current rule, and perfect the mechanism of a free and any potential additional traffic
an investor would need for the open market and a national market associated with this proposed rule
underlying product to move 2.5%, and system, and, in general, to protect change. The Exchange believes that its
would not be able to execute a roll up investors and the public interest. members will not have a capacity issue
until such a large movement occurred. Additionally, the Exchange believes the as a result of this proposal.
With the proposed rule change, proposed rule change is consistent with In addition, the interval setting regime
however, the investor would be in a the Section 6(b)(5) 9 requirement that the Exchange proposes to apply to IVV
significantly safer position of being able the rules of an exchange not be designed options is currently applied to options
to roll his open options position from a to permit unfair discrimination between on SPY,11 which is an ETF that is
$200 to a $201 strike price, which is customers, issuers, brokers, or dealers. identical in all material respects to the
only a 0.5% move for the underlying. In particular, the proposed rule IVV ETF.
The proposed rule change will allow change will allow investors to more
the Exchange to better respond to easily use IVV options. Moreover, the B. Self-Regulatory Organization’s
customer demand for IVV strike prices proposed rule change would allow Statement on Burden on Competition
more precisely aligned with current S&P investors to better trade and hedge
positions in IVV options where the The Exchange does not believe that
500 Index values. The Exchange
strike price is greater than $200, and the proposed rule change will impose
believes that the proposed rule change,
like the other strike price programs ensure that IVV options investors are any burden on competition not
currently offered by the Exchange, will not at a disadvantage simply because of necessary or appropriate in furtherance
benefit investors by providing investors the strike price. of the purposes of the Act. Rather, the
the flexibility to more closely tailor their The Exchange also believes the Exchange believes that the proposed
investment and hedging decisions using proposed rule change is consistent with rule change will result in additional
IVV options. By allowing series of IVV Section 6(b)(1) of the Act, which investment options and opportunities to
options to be listed in $1 intervals provides that the Exchange be organized achieve the investment and trading
between strike prices over $200, the and have the capacity to be able to carry objectives of market participants seeking
proposal will moderately augment the out the purposes of the Act and the efficient trading and hedging vehicles,
potential total number of options series rules and regulations thereunder, and to the benefit of investors, market
available on the Exchange. However, the the rules of the Exchange. The rule participants, and the marketplace in
Exchange believes it and the Options change proposal allows the Exchange to general. Specifically, the Exchange
Price Reporting Authority (‘‘OPRA’’) respond to customer demand to allow believes that IVV options investors and
have the necessary systems capacity to IVV options to trade in $1 intervals traders will significantly benefit from
handle any potential additional traffic above a $200 strike price. The Exchange the availability of finer strike price
associated with this proposed rule does not believe that the proposed rule intervals above a $200 price point. In
change. The Exchange also believes that would create additional capacity issues addition, the interval setting regime the
Participants will not have a capacity or affect market functionality. Exchange proposes to apply to IVV
issue due to the proposed rule change. As noted above, ETF options trade in options is currently applied to options
In addition, the Exchange represents wider $5 intervals above a $200 strike on SPY,12 which is an ETF that is
that it does not believe that this price, whereas options at or below a identical in all material respects to the
expansion will cause fragmentation of $200 strike price trade in $1 intervals. IVV ETF. Thus, applying the same strike
liquidity. In addition, the interval This creates a situation where contracts setting regime to SPY and IVV options
setting regime the Exchange proposes to on the same option class effectively may will help level the playing field for
apply to IVV options is currently not be able to execute certain strategies options on similar, competing ETFs.
applied to options on SPY,4 which is an such as, for example, rolling to a higher
ETF that is identical in all material strike price, simply because of the C. Self-Regulatory Organization’s
respects to the IVV ETF. arbitrary $200 strike price above which Statement on Comments on the
options intervals increase by $5. This Proposed Rule Change Received From
2. Statutory Basis proposal remedies the situation by Members, Participants, or Others
The Exchange believes that its establishing an exception to the current
ETF interval regime for IVV options to No written comments were either
proposal is consistent with Section 6(b)
solicited or received.
sradovich on DSKBCFCHB2PROD with NOTICES

of the Act,5 in general, and furthers the allow such options to trade in $1 or
objectives of Section 6(b)(5) of the Act,6 greater intervals at all strike prices.
10 See Securities and Exchange Act Release 34–
in particular.7 Specifically, the The Exchange believes that the
72664 (July 24, 2014), 79 FR 44231 (July 30, 2014)
proposed rule change, like other strike (Notice of Filing of Proposed Rule Change, as
4 See note 4 above [sic]. price programs currently offered by the Modified by Amendment No. 1, Relating to SPY
5 15 U.S.C. 78f(b). and DIA Options) (SR–Phlx–2014–046).
6 15 U.S.C. 78f(b)(5). 8 15 U.S.C. 78f(b)(5). 11 See note 4 above [sic].
7 15 U.S.C. 78f(b). 9 Id. 12 See note 4 above [sic].

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Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices 36049

III. Date of Effectiveness of the Commission takes such action, the 2017–034, and should be submitted on
Proposed Rule Change and Timing for Commission shall institute proceedings or before August 23, 2017.
Commission Action under Section 19(b)(2)(B) 20 of the Act to For the Commission, by the Division of
The Exchange has designated this rule determine whether the proposed rule Trading and Markets, pursuant to delegated
filing as non-controversial under change should be approved or authority.21
Section 19(b)(3)(A) 13 of the Act and disapproved.
Eduardo A. Aleman,
Rule 19b–4(f)(6) 14 thereunder. Because IV. Solicitation of Comments Assistant Secretary.
the proposed rule change does not: (i)
Significantly affect the protection of Interested persons are invited to [FR Doc. 2017–16271 Filed 8–1–17; 8:45 am]

investors or the public interest; (ii) submit written data, views, and BILLING CODE 8011–01–P

impose any significant burden on arguments concerning the foregoing,
competition; and (iii) become operative including whether the proposed rule
for 30 days from the date on which it change is consistent with the Act. SECURITIES AND EXCHANGE
was filed, or such shorter time as the Comments may be submitted by any of COMMISSION
Commission may designate if consistent the following methods:
with the protection of investors and the Electronic Comments [Release No. 34–81248; File Nos. SR–DTC–
public interest, it has become effective 2017–013; SR–NSCC–2017–012; SR–FICC–
pursuant to Section 19(b)(3)(A) of the • Use the Commission’s Internet 2017–016]
Act and Rule 19b–4(f)(6) thereunder.15 comment form (http://www.sec.gov/
A proposed rule change filed under rules/sro.shtml); or Self-Regulatory Organizations; The
Rule 19b–4(f)(6) 16 normally does not • Send an email to rule-comments@ Depository Trust Company; National
become operative prior to 30 days after sec.gov. Please include File Number SR– Securities Clearing Corporation; Fixed
the date of the filing. However, pursuant BX–2017–034 on the subject line. Income Clearing Corporation; Notice of
to Rule 19b–4(f)(6)(iii),17 the Paper Comments Filings of Proposed Rule Changes To
Commission may designate a shorter Adopt the Clearing Agency Risk
time if such action is consistent with the • Send paper comments in triplicate Management Framework
protection of investors and the public to Secretary, Securities and Exchange
interest. The Exchange has asked the Commission, 100 F Street NE., July 28, 2017.
Commission to waive the 30-day Washington, DC 20549–1090.
Pursuant to Section 19(b)(1) of the
operative delay because this proposal All submissions should refer to File Securities Exchange Act of 1934
permits listing IVV options in a manner Number SR–BX–2017–034. This file (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
permitted by the Chicago Board Options number should be included on the notice is hereby given that on July 14,
Exchange, Incorporated,18 and will subject line if email is used. To help the 2017, The Depository Trust Company
provide investors with an alternative Commission process and review your (‘‘DTC’’), National Securities Clearing
venue for trading IVV options. The comments more efficiently, please use
Commission believes that waiver of the Corporation (‘‘NSCC’’), and Fixed
only one method. The Commission will Income Clearing Corporation (‘‘FICC,’’
operative delay is consistent with the post all comments on the Commission’s
protection of investors and the public and together with DTC and NSCC, the
Internet Web site (http://www.sec.gov/
interest. Therefore, the Commission ‘‘Clearing Agencies’’), filed with the
rules/sro.shtml). Copies of the
hereby waives the operative delay and Securities and Exchange Commission
submission, all subsequent
designates the proposed rule change (‘‘Commission’’) the proposed rule
amendments, all written statements
operative upon filing.19 changes as described in Items I, II and
with respect to the proposed rule
At any time within 60 days of the III below, which Items have been
change that are filed with the
filing of the proposed rule change, the Commission, and all written prepared primarily by the Clearing
Commission summarily may communications relating to the Agencies. The Commission is
temporarily suspend such rule change if proposed rule change between the publishing this notice to solicit
it appears to the Commission that such Commission and any person, other than comments on the proposed rule changes
action is necessary or appropriate in the those that may be withheld from the from interested persons.
public interest, for the protection of public in accordance with the
investors, or otherwise in furtherance of I. Clearing Agencies’ Statement of the
provisions of 5 U.S.C. 552, will be Terms of Substance of the Proposed
the purposes of the Act. If the available for Web site viewing and Rule Changes
13 15
printing in the Commission’s Public
U.S.C. 78s(b)(3)(A).
14 17 CFR 240.19b–4(f)(6).
Reference Room, 100 F Street NE., The proposed rule changes would
15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– Washington, DC 20549 on official adopt the Clearing Agency Risk
4(f)(6) requires a self-regulatory organization to give business days between the hours of Management Framework (‘‘Framework’’)
the Commission written notice of its intent to file 10:00 a.m. and 3:00 p.m. Copies of such of the Clearing Agencies, described
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
filing also will be available for below. The Framework would apply to
change, or such shorter time as designated by the inspection and copying at the principal both of FICC’s divisions, the
Commission. The Exchange has satisfied this office of the Exchange. All comments Government Securities Division
requirement. received will be posted without change; (‘‘GSD’’) and the Mortgage-Backed
16 17 CFR 240.19b–4(f)(6).
the Commission does not edit personal
sradovich on DSKBCFCHB2PROD with NOTICES

17 17 CFR 240.19b–4(f)(6)(iii).
Securities Division (‘‘MBSD’’). The
18 See Securities Exchange Act Release No. 80913
identifying information from Framework would be maintained by the
(June 13, 2017), 82 FR 27907 (June 19, 2017) (SR– submissions. You should submit only Clearing Agencies to support their
CBOE–2017–048). information that you wish to make compliance with Rules 17Ad–22(e)(1),
19 For purposes only of waiving the 30-day
available publicly. All submissions
operative delay, the Commission has also should refer to File Number SR–BX– 21 17 CFR 200.30–3(a)(12).
considered the proposed rule’s impact on
1 15 U.S.C. 78s(b)(1).
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f). 20 15 U.S.C. 78s(b)(2)(B). 2 17 CFR 240.19b–4.

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Document Created: 2017-08-02 07:09:20
Document Modified: 2017-08-02 07:09:20

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 36046