[Federal Register Volume 85, Number 59 (Thursday, March 26, 2020)]
[Notices]
[Pages 17146-17148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06390]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88460; File No. SR-Phlx-2020-10]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options
4A, Section 12, Terms of Option Contracts
March 23, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 18, 2020, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``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 Substance
of the Proposed Rule Change
The Exchange proposes to amend Options 4A, Section 12, Terms of
Option Contracts.
The text of the proposed rule change is available on the Exchange's
website at http://nasdaqphlx.cchwallstreet.com/, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 4A, Section 12, Terms of
Option Contracts. Specifically, the Exchange proposes to amend Options
4A, Section 12(b) and (b)(2) to change the number of expirations that
the Exchange may open for trading in series of options related to Long-
Term Options Series of index options. The Exchange also proposes to
change the title of Options 4A, Section 12 from ``Terms of Option
Contracts'' to ``Terms of Index Options Contracts.''
Long-Term Options Series
The current rule text provides within Phlx Options 4A, Section
12(b):
After a particular class of stock index options has been
approved for listing and trading on the Exchange, the Exchange shall
from time to time open for trading series of options therein. Within
each approved class of stock index options, the Exchange shall open
for trading a minimum of one expiration month and series for each
class of approved stock index options and may also open for trading
series of options having not less than nine and up to 60 months to
expiration (long-term options series) as provided in subparagraph
(b)(2). Prior to the opening of trading in any series of stock index
options, the Exchange shall fix the expiration month and exercise
price of option contracts included in each such series.
The Exchange proposes to also amend the current text of Phlx
Options 4A, Section 12(b)(2) which states the below with respect to
Long-term \3\ Option Series:
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\3\ The Exchange proposes to amend this title to capitalize
``Term.''
The Exchange may list, with respect to any class of stock index
options, series of options having not less than nine and up to 60
months to expiration, adding up to ten expiration months. Such
series of options may be opened for trading simultaneously with
series of options trading pursuant to this rule. Strike price
interval, bid/ask differential and continuity rules shall not apply
to such options series until the time to expiration is less than
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nine months.
Similar, in part, to Cboe Exchange, Inc. (``Cboe'') Rule 4.13(b),\4\
the Exchange proposes to amend the current rule text to provide ``the
Exchange shall open for trading a minimum of one expiration month and
series for each class of approved stock index options and may also open
for trading series of options having not less than twelve and up to 60
months to expiration (long-term options series) within Options 4A,
Section 12(b) and, similarly, within Options 4A, Section 12(b)(2) amend
the language to provide, ``[t]he Exchange may list, with respect to any
class of stock index options, series of options
[[Page 17147]]
having not less than twelve and up to 60 months to expiration . . .''.
This would change Phlx's current expiration for index options from
those series not having less than nine and up to 60 months to
expirations to a number of expirations not having less than twelve and
up to 60 months to expiration with respect to Long-Term Options Series.
The Exchange is aligning its Rules, in part, to match those of Cboe
with respect to the lower monthly limit of acceptable months for Long-
Term Option Series in index options.
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\4\ Cboe Rule 4.13(b) provide for Long-Term Index Option Series,
``Notwithstanding the provisions of subparagraph (a)(2) above, the
Exchange may list long-term index option series that expire from 12
to 180 months from the date of issuance.''
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In addition, the Exchange proposes to internally harmonize its
Rules with respect to Long-Term Options Series. In 2013, Phlx amended
Rule 1101(A), currently Options 4A, Section 12, to make its rule
consistent with Cboe's rule.\5\ The 2013 Rule Change amended the Phlx
rule text at then Rule 1101A(b)(iii) from a maximum term of up to 60
months to expiration to an established minimum term of not less than
nine months to expiration for long-term options series. The 2013 Rule
Change established a floor for long-term options series which was not
identical to CBOE Rule 24.9; Cboe's minimum floor was twelve months
while Phlx established the floor at nine months. The Exchange noted in
that filing that the intent of the 2013 Rule Change was to harmonize
the Exchange's rules internally with Phlx Rule 1012,\6\ which is
currently Phlx Options 4, Section 5, (regarding long-term equity and
exchange traded fund options) as well as with the rules of another
options exchange, namely CBOE. The 2013 Rule Change stated, ``The
Exchange believes this would eliminate potential confusion about
competitive long term-index options listing opportunities on the
Exchange, would allow better hedging and trading opportunities and
efficiency, and would be beneficial to the Exchange and its traders,
market participants, and public investors in general.'' \7\
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\5\ See Securities Exchange Act Release No. 69031 (March 4,
2013), 78 FR 15073 (March 8, 2013) (SR-Phlx-2013-18) (``2013 Rule
Change''). The 2013 Rule Change stated that, ``The purpose of the
proposed rule change is to amend subsection (b) of Rule 1101A to
clarify that long-term options series must have a term of not less
than nine months to expiration, and to reflect that certain rules
will not apply to such long-term options series until the time to
expiration is less than nine months. These changes are proposed to
the limited extent needed to make subsection (b) regarding long-term
options series consistent with the established rule language of
Chicago Board Options Exchange, Inc. (``CBOE'') (e.g., CBOE Rule
24.9 regarding LEAPS), as well as with the established rule language
of the Exchange (e.g., Rule 1012 regarding long-term equity and
exchange traded fund (``ETF'') options).''
\6\ Phlx Rule 1012(a)(i)(D) contained language that was being
harmonized. The Exchange noted that intervals, differentials, and
continuity rules are equally not germane to long-term index options
as to long-term equity and ETF options. That is, index options are
no different from equity and ETF options in respect of the non-
applicability of these three items until expiration time is less
that nine months, and should, therefore, have similar rules. Phlx
Rule 1012 was since relocated to current Options 4A, Section 5.
\7\ Id.
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Subsequent to the 2013 Rule Change, Phlx amended then Rule
1012(a)(i)(D) \8\ to change the expiration timeframe to twelve to
thirty-nine months until expiration stating that this change was
consistent with the proposed rule change filings which adopted it.\9\
The Rule 1012 Rule Change resulted in current Phlx Options 4, Section
5(a)(i)(D) Long-Term Option Series having an expiration timeframe of
twelve to thirty-nine months while the 2013 Rule Change resulted in
current Phlx Options 4A, Section 12 having an expiration of nine to 60
months. At this time, the Exchange proposes to harmonize Phlx Options
4, Section 12 to Phlx Option 4, Section 5(a)(i)(D) and also mirror the
lower monthly limit within Cboe's Rule 4.13(b).
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\8\ See Securities Exchange Act Release No. 80769 (June 1,
2017), 82 FR 25472 (May 25, 2017) (SR-Phlx-2017-41) (``Rule 1012
Rule Change'').
\9\ See Securities Exchange Act Release Nos. 28910 (February 22,
1991), 56 FR 9032 (March 4, 1991) (SR-Phlx-90-38) (adopting Rule
1012 Commentary .03), and 29103 (April 18, 1991), 56 FR 19132 (April
25, 1991) (SR-Phlx-91-18). The provision was subsequently relocated
to subsection (a)(i)(D) of Rule 1012. See Securities Exchange Act
Release No. 63700 (January 11, 2011), 76 FR 2931 (January 18, 2011)
(SR-Phlx-2011-04).
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Rulebook Correction
In addition, the Exchange proposes to correct rule text which was
not correctly copied into the Phlx Rulebook from a prior rule
change.\10\ Specifically, the Prior Rule Change adopted a new section
(a)(2) which was not properly copied into the Rulebook before it was
relocated into the new Rulebook as part of the Phlx Rulebook Relocation
Rule Change.\11\ The rule text, as adopted, stated, ``The Exchange
shall determine fixed point intervals of exercise prices for index
options (options on indexes). Generally, except as provided in
Commentary .04 below, the exercise (strike) price intervals will be no
less than $5, provided that the Exchange may determine to list strike
prices at no less than $2.50 intervals for options on the following
indexes (which may also be known as sector indexes):''. At this time,
the Exchange proposes to restore the correct rule text into Phlx
Options 4A, Section 12(a)(2) and amend the term ``Commentary'' to
reflect the new term ``Supplementary Material'' as stated within the
Phlx Rulebook Relocation Rule Change.
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\10\ See Securities Exchange Act Release No. 85210 (February 27,
2019), 84 FR 7958 (March 5, 2019) (SR-Phlx-2019-02) (``Prior Rule
Change'').
\11\ See Securities Exchange Act Release No. 88213 (February 14,
2020), 85 FR 9859 (February 20, 2020) (SR-Phlx-2020-03) (``Phlx
Rulebook Relocation Rule Change'').
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\12\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\13\ in particular, in that it is designed to
promote just and equitable principles of trade and to protect investors
and the public interest by amending its rules, in part, to align them
to Cboe's Rule,\14\ as well Phlx Rules at Options 4, Section
12(a)(i)(D) with respect to Long-Term Option Series in index options.
Harmonizing Phlx's index options and equity and ETF options rules, with
respect to Long-Term Option Series in index options, will allow Phlx to
list these options in the same manner. The Exchange notes that this
rule change will allow Phlx to list more non-Long-Term Option Series
expirations as the front-months for Long-Term Options expirations would
begin with month twelve instead of month nine. The Exchange believes
that there is greater customer demand for a greater number of non-Long-
Term Option Series expirations.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ See Cboe Rule 4.13(b).
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The remainder of the Rulebook changes are intended to restore the
proper rule text from a prior rule change \15\ into the Rulebook and
other non-substantive amendments.
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\15\ See note 10 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. Specifically, the Exchange does
not believe the proposal will impose any burden on intra-market
competition as all market participants will be treated in the same
manner with respect to expirations of Long-Term Options Series in index
options. Additionally, the Exchange does not believe the proposal will
impose any burden on inter-market competition as market participants
are welcome to become Phlx Members and trade at Phlx if they determine
that this proposed rule change has made Phlx more attractive or
favorable. Finally, all options exchanges are free to compete by
listing and trading their own broad-
[[Page 17148]]
based index options with similar expirations. This proposal will
harmonize Phlx's index options and equity and ETF options rules, with
respect to Long-Term Option Series in index options.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \18\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \19\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. As the
proposed rule change raises no novel issues and allows Phlx, with
respect to Long-Term Option Series in index options, to harmonize its
index options and equity and ETF options rules, the Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\20\
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\18\ 17 CFR 240.19b-4(f)(6).
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-Phlx-2020-10 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-2020-10. 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 website (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 website 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 a.m. and 3 p.m.
Copies of the filing also will be available for inspection and copying
at the principal office of the Exchange. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
Phlx-2020-10, and should be submitted on or before April 16, 2020.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-06390 Filed 3-25-20; 8:45 am]
BILLING CODE 8011-01-P