Notice2021-15832
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Permit Monday and Wednesday Expirations for Options Listed Pursuant to the Short Term Option Series Program on the Invesco QQQ TrustSM Series (“QQQ”) ETF Trust
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Published
July 26, 2021
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 86 Issue 140 (Monday, July 26, 2021)</title>
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[Federal Register Volume 86, Number 140 (Monday, July 26, 2021)]
[Notices]
[Pages 40111-40114]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-15832]
[[Page 40111]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92453; File No. SR-NYSEArca-2021-63]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Permit Monday
and Wednesday Expirations for Options Listed Pursuant to the Short Term
Option Series Program on the Invesco QQQ TrustSM Series (``QQQ'') ETF
Trust
July 21, 2021.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on July 12, 2021, NYSE Arca, Inc. (``NYSE Arca'' 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 Rule 6.4-O to permit Monday and
Wednesday expirations for options listed pursuant to the Short Term
Options Series Program on the Invesco QQQ Trust<SUP>TM</SUP> Series
(``QQQ'') ETF Trust. The proposed rule change is available on the
Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, 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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this filing is to amend Rule 6.4-O, Series of
Options Open for Trading, to permit Monday and Wednesday expirations
for options listed pursuant to the Short Term Options Series Program
(``Program'') on QQQ.
A Short Term Options Series is a series in an option class that is
approved for listing and trading on the Exchange in which the series is
opened for trading on any Monday, Tuesday, Wednesday, Thursday or
Friday that is a business day and that expires on the Monday, Wednesday
or Friday of the next business week, or, in the case of a series that
is listed on a Friday and expires on a Monday, is listed one business
week and one business day prior to that expiration.\4\ The Exchange is
proposing to amend Rule 6.4-O Commentary .07(g) to permit the listing
of options series that expire on Mondays and Wednesdays in QQQ.
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\4\ See NYSE Arca Rule 6.1-O(b)41. Short Term Option Series.
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Monday Expirations
As proposed, with respect to Monday QQQ Expirations within Rule
6.4-O Commentary .07, the Exchange may open for trading on any Friday
or Monday that is a business day series of options on QQQ to expire on
any Monday of the month that is a business day and is not a Monday in
which Quarterly Options Series on the same class expire (``Monday QQQ
Expirations''), provided that Monday QQQ Expirations that are listed on
a Friday must be listed at least one business week and one business day
prior to the expiration. The Exchange may list up to five consecutive
Monday QQQ Expirations at one time; the Exchange may have no more than
a total of five Monday QQQ Expirations.\5\
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\5\ The Exchange proposes to make a clarifying change to Rule
6.4-O Commentary .07(g) to make clear that the Exchange may have no
more than a total of five each of Wednesday SPY Expirations and
Wednesday QQQ Expirations and a total of five each of Monday SPY
Expirations and Monday QQQ Expirations. The Exchange also proposes
to make a non-substantive change to add the word ``business'' before
``day'' in the first sentence of Rule 6.4-O Commentary .07(g).
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Wednesday Expirations
As proposed, with respect to Wednesday QQQ Expirations within Rule
6.4-O Commentary .07, the Exchange may open for trading on any Tuesday
or Wednesday that is a business day series of options on QQQ to expire
on any Wednesday of the month that is a business day and is not a
Wednesday in which Quarterly Options Series on the same class expire
(``Wednesday QQQ Expirations''). The Exchange may list up to five
consecutive Wednesday QQQ Expirations at one time; the Exchange may
have no more than a total of five Wednesday QQQ Expirations.
Monday and Wednesday Expirations
The interval between strike prices for the proposed Monday and
Wednesday QQQ Expirations will be the same as those for the current
Short Term Option Series for Wednesday and Friday expirations
applicable to the Program.\6\ Specifically, the Monday and Wednesday
QQQ Expirations will have a $0.50 strike interval minimum.\7\ As is the
case with other equity options series listed pursuant to the Program,
the Monday and Wednesday QQQ Expirations series will be P.M. settled.
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\6\ See NYSE Arca Rule 6.4-O Commentary .07(g).
\7\ See NYSE Arca Rule 6.4-O Commentary .07(e).
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Pursuant to Rule 6.1-O,\8\ with respect to the Program, if Monday
is not a business day the series shall expire on the first business day
immediately following that Monday. This procedure differs from the
expiration date of Wednesday expiration series that are scheduled to
expire on a holiday. Pursuant to Rule 6.1-O \9\ a Wednesday expiration
series shall expire on the first business day immediately prior to that
Wednesday, e.g., Tuesday of that week, if the Wednesday is not a
business day. For purposes of QQQ, however, the Exchange believes that
it is preferable to require Monday expiration series in this scenario
to expire on the Tuesday of that week rather than the previous business
day, e.g., the previous Friday, since the Tuesday is closer in time to
the scheduled expiration date of the series than the previous Friday,
and therefore may be more representative of anticipated market
conditions. Nasdaq PHLX LLC (``Phlx'') uses the same procedure for QQQ
with Monday and Wednesday expirations.\10\ Nasdaq Phlx \11\ and Nasdaq
ISE, LLC (``ISE'') \12\ also use the same procedure for options on the
Nasdaq-100[supreg] (``NDX'') with Monday expirations that are listed
pursuant to its Nonstandard Expirations
[[Page 40112]]
Pilot Programs, respectively. Cboe Exchange, Inc. (``Cboe'') uses the
same procedure for options on the S&P500 index (``SPX'') with Monday
expirations that are listed pursuant to its Nonstandard Expirations
Pilot Program and that are scheduled to expire on a holiday.\13\
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\8\ Rule 6.1-O, Definition of ``Short Term Option Series.''
\9\ Id.
\10\ See Securities Exchange Act Release No. 91238 (March 2,
2021), 86 FR 13404 (March 8, 2021) (SR-Phlx-2021-10).
\11\ See Phlx Options 4A, Section 12(b)(5).
\12\ See ISE Supplementary Material .07 to Options 4A, Section
12.
\13\ See Cboe Rule 4.13(e)(1) ``. . . If the Exchange is not
open for business on a respective Monday, the normally Monday
expiring Weekly Expirations will expire on the following business
day. If the Exchange is not open for business on a respective
Wednesday or Friday, the normally Wednesday or Friday expiring
Weekly Expirations will expire on the previous business day.''
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Currently, for each option class eligible for participation in the
Program, the Exchange is limited to opening thirty (30) series for each
expiration date for the specific class.\14\ The thirty (30) series
restriction does not include series that are open by other securities
exchanges under their respective short term options rules; the Exchange
may list these additional series that are listed by other
exchanges.\15\ This thirty (30) series restriction would apply to
Monday and Wednesday QQQ Expiration series as well. In addition, the
Exchange will be able to list series that are listed by other
exchanges, assuming they file similar rules with the Commission to list
QQQ options expiring on Mondays and Wednesdays.
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\14\ See NYSE Arca Rule 6.4-O Commentary .07.
\15\ Id.
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Finally, the Exchange is amending Rule 6.4-O Commentary .07(a),
which addresses the listing of Short Term Options Series that expire in
the same week as monthly or quarterly options series. Currently, that
rule states that no Short Term Option Series may expire in the same
week in which monthly option series on the same class expire (with the
exception of Monday and Wednesday SPY Expirations) or, in the case of
Quarterly Options Series, on an expiration that coincides with an
expiration of Quarterly Options Series on the same class.\16\ As with
Monday and Wednesday SPY Expirations, the Exchange is proposing to
permit Monday and Wednesday QQQ Expirations to expire in the same week
as monthly options series on the same class. The Exchange believes that
it is reasonable to extend this exemption to Monday and Wednesday QQQ
Expirations because Monday and Wednesday QQQ Expirations and standard
monthly options will not expire on the same trading day, as standard
monthly options expire on Fridays. Additionally, the Exchange believes
that not listing Monday and Wednesday QQQ Expirations for one week
every month because there was a monthly QQQ expiration on the Friday of
that week would create investor confusion.
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\16\ See NYSE Arca Rule 6.4-O Commentary .07(a).
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The Exchange does not believe that any market disruptions will be
encountered with the introduction of P.M.-settled Monday and Wednesday
QQQ expirations. The Exchange has the necessary capacity and
surveillance programs in place to support and properly monitor trading
in the proposed Monday and Wednesday QQQ Expirations. The Exchange
currently trades P.M.-settled Short Term Option Series that expire
Monday and Wednesday for SPY and has not experienced any market
disruptions nor issues with capacity. The Exchange currently has
surveillance programs in place to support and properly monitor trading
in Short Term Option Series that expire Monday and Wednesday for SPY.
Similar to SPY, the introduction of Monday and Wednesday QQQ
Expirations will, among other things, expand hedging tools available to
market participants and continue the reduction of the premium cost of
buying protection. The Exchange believes that Monday and Wednesday QQQ
Expirations will allow market participants to purchase QQQ based on
their timing as needed and allow them to tailor their investment and
hedging needs more effectively.
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \17\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \18\ in particular, in that it
is 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 facilitating
transactions in securities, to remove impediments to and perfect the
mechanisms of a free and open market and a national market system and,
in general, to protect investors and the public interest.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is intended to provide the investing
public and other market participants more flexibility to closely tailor
their investment and hedging decisions in QQQ options, thus allowing
them to better manage their risk exposure.
In particular, the Exchange believes the Program has been
successful to date and that Monday and Wednesday QQQ Expirations should
simply expand the ability of investors to hedge risk against market
movements stemming from economic releases or market events that occur
throughout the month in the same way that the Program has expanded the
landscape of hedging. Similarly, the Exchange believes Monday and
Wednesday QQQ Expirations should create greater trading and hedging
opportunities and flexibility, and will provide customers with the
ability to tailor their investment objectives more effectively. The
Exchange currently lists Monday and Wednesday SPY Expirations.\19\
Also, Cboe \20\ currently permits Monday and Wednesday expirations for
other options with a weekly expiration, such as options on the SPX
pursuant to its Nonstandard Expirations Pilot Program and Phlx \21\ and
ISE \22\ currently permit Monday and Wednesday expirations for other
options with a weekly expiration on NDX pursuant to its Nonstandard
Expirations Pilot Programs, respectively.
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\19\ Supra note 14.
\20\ Supra note 13.
\21\ Supra note 11.
\22\ Supra note 12.
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With the exception of Monday expiration series that are scheduled
to expire on a holiday, there are no material differences in the
treatment of Monday and Wednesday QQQ Expirations for Short Term Option
Series. The Exchange believes that it is consistent with the Act to
treat Monday expiration series that expire on a holiday differently
than Wednesday or Friday expiration series, since the proposed
treatment for Monday expiration series will result in an expiration
date that is closer in time to the scheduled expiration date of the
series, and therefore may be more representative of anticipated market
conditions. Monday SPY expirations are currently treated in this
manner.\23\ Cboe \24\ uses the same procedure for SPX options with
Monday expirations that are listed pursuant to its Nonstandard
Expirations Pilot Program and that are scheduled to expire on a
holiday, as do Phlx \25\ and ISE \26\ for NDX options with Monday
expirations that are listed pursuant to their Nonstandard Expirations
Pilot Programs, respectively.
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\23\ Supra note 14.
\24\ Supra note 13.
\25\ Supra note 11.
\26\ Supra note 12.
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Given the similarities between Monday and Wednesday SPY Expirations
and the proposed Monday and Wednesday QQQ Expirations, the Exchange
believes that applying the provisions in NYSE Arca Rule 6.4-O
Commentary .07 that currently apply to Monday and Wednesday SPY
[[Page 40113]]
Expirations to Monday and Wednesday QQQ Expirations is justified. For
example, the Exchange believes that allowing Monday and Wednesday QQQ
Expirations and monthly QQQ expirations in the same week will benefit
investors and minimize investor confusion by providing Monday and
Wednesday QQQ Expirations in a continuous and uniform manner. The
Exchange also believes that it is appropriate to amend NYSE Arca Rule
6.4-O Commentary .07 to clarify that no Short Term Option Series may
expire on the same day as an expiration of Quarterly Option Series on
the same class, same as SPY.
The Exchange represents that it has an adequate surveillance
program in place to detect manipulative trading in Monday and Wednesday
expirations, including Monday and Wednesday QQQ Expirations, in the
same way that it monitors trading in the current Short Term Option
Series and trading in Monday and Wednesday SPY Expirations. The
Exchange also represents that it has the necessary systems capacity to
support the new options series. Finally, the Exchange does not believe
that any market disruptions will be encountered with the introduction
of Monday and Wednesday QQQ Expirations.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that
having Monday and Wednesday QQQ Expirations is not a novel proposal, as
Monday and Wednesday SPY Expirations are currently listed on the
Exchange.\27\ Cboe \28\ uses the same procedure for SPX options with
Monday expirations that are listed pursuant to its Nonstandard
Expirations Pilot Program and that are scheduled to expire on a
holiday, as do Phlx \29\ and ISE \30\ for NDX options with Monday
expirations that are listed pursuant to their Nonstandard Expirations
Pilot Programs, respectively.
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\27\ Supra note 14.
\28\ Supra note 13.
\29\ Supra note 11.
\30\ Supra note 12.
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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 under this proposal. Additionally, the Exchange does
not believe the proposal will impose any burden on inter-market
competition, as nothing prevents the other options exchanges from
proposing similar rules to list and trade Short-Term Option Series with
Monday and Wednesday expirations.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
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 \31\ and Rule 19b-
4(f)(6) thereunder.\32\
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\31\ 15 U.S.C. 78s(b)(3)(A).
\32\ 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 under Rule 19b-4(f)(6) \33\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\34\ the Commission
may 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 proposal may become operative immediately upon filing. The
Commission notes that it recently approved Phlx's substantially similar
proposal to list and trade Monday QQQ Expirations and Wednesday QQQ
Expirations.\35\ The Exchange has stated that waiver of the operative
delay is consistent with the protection of investors and the public
interest as it would encourage fair competition among exchanges by
allowing the Exchange to compete effectively with Phlx by having the
ability to list and trade the same Monday and Wednesday QQQ Expirations
that Phlx is able to list and trade. For these reasons, the Commission
believes that the proposed rule change presents no novel issues and
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest, and will allow the
Exchange to remain competitive with other exchanges. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\36\
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\33\ 17 CFR 240.19b-4(f)(6).
\34\ 17 CFR 240.19b-4(f)(6)(iii).
\35\ See Securities Exchange Act Release No. 91614 (April 20,
2021), 86 FR 22082 (April 26, 2021) (SR-Phlx-2021-10).
\36\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4634332a236b25292b2b232832350635232568212930"><span class="__cf_email__" data-cfemail="7f0d0a131a521c1012121a110b0c3f0c1a1c51181009">[email protected]</span></a>. Please include
File Number SR-NYSEArca-2021-63 on the subject line.
Paper Comments
<bullet> 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-NYSEArca-2021-63. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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
[[Page 40114]]
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 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change. 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-
NYSEArca-2021-63, and should be submitted on or before August 16, 2021.
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\37\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15832 Filed 7-23-21; 8:45 am]
BILLING CODE 8011-01-P
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