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Notice2021-16676

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 4 Listing Rules

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Published

August 5, 2021

Issuing agencies

Securities and Exchange Commission

Full Text

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<title>Federal Register, Volume 86 Issue 148 (Thursday, August 5, 2021)</title>
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[Federal Register Volume 86, Number 148 (Thursday, August 5, 2021)]
[Notices]
[Pages 42911-42925]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-16676]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92533; File No. SR-NASDAQ-2021-059]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Options 4 Listing Rules

July 30, 2021.
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 July 20, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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 The Nasdaq Options Market LLC
(``NOM'') Rules at Options 2, Section 5, Market Maker Quotations;
Options 4, Options Listing Rules; and Options 4A, Section 12, Terms of
Index Options Contracts. This proposal also creates a new Options 4C
entitled ``U.S. Dollar-Settled Foreign Currency Options.'' Finally, the
Exchange proposes to reserve some sections with the Equity Rules and
correct a cross-reference within Options 2, Section 4, Obligations of
Market Makers.

[[Page 42912]]

The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules</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 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 the Options 4, Options Listing
Rules, to conform NOM's Options 4 Listing Rules to Nasdaq ISE, LLC's
(``ISE'') Options 4 Listing Rules. The Exchange also proposes to amend
NOM Options 4A, Section 12, Terms of Index Options Contracts and create
a new NOM Options 4C entitled ``U.S. Dollar-Settled Foreign Currency
Options'' and adopt U.S. Dollar-Settled Foreign Currency Options rules
similar to Nasdaq Phlx LLC's (``Phlx'') rules at Options 4C. Also, the
Exchange also proposes to amend Options 2, Section 5, Market Maker
Quotations to relocate rule text concerning bid/ask differentials for
long-term options contracts from NOM Options 4 and Options 4A, similar
to ISE. Finally, the Exchange proposes to correct a cross-reference
within Options 2, Section 4, Obligations of Market Makers. Each rule
change is described below.
Options 4, Options Listing Rules
Conforming NOM's Options 4 Listing Rules to that of ISE Options 4
is part of the Exchange's continued effort to promote efficiency in the
manner in which it administers its rules. The Exchange proposes to
amend these rules to conform to ISE Options 4 Rules.
The Exchange proposes a universal technical amendment which impacts
Options 4, Sections 1 through 4, 6, 7, 8 and 10. The Exchange proposes
to relocate a ``.'' at the end of the terms ``Section,'' where
applicable, throughout Options 4 to the end of the proceeding number
within Options 4, Sections 1 through 4, 6, 7, 8 and 10.
Section 1. Designation of Securities
The Exchange proposes to replace the current rule text of Options
4, Section 1 which states,

Securities traded on the Exchange are options contracts, each of
which is designated by reference to the issuer of the underlying
security or name of underlying foreign currency, expiration month or
expiration date, exercise price and type (put or call).

with the following rule text,

The Exchange trades options contracts, each of which is
designated by reference to the issuer of the underlying security,
expiration month or expiration date, exercise price and type (put or
call).

The Exchange proposes to amend this sentence within Options 4,
Section 1 to conform to ISE Options 4, Section 1. The revised wording
does not substantively amend the paragraph.
Section 2. Rights and Obligations of Holders and Writers
The Exchange proposes to replace the current rule text of Options
4, Section 1 which states,

Subject to the provisions of this Chapter, the rights and
obligations of holders and writers of option contracts of any class
of options dealt in on the Exchange shall be as set forth in the
Rules of the Clearing Corporation.

with the following rule text,

The rights and obligations of holders and writers shall be as
set forth in the Rules of the Clearing Corporation.

The Exchange proposes to amend this sentence within Options 4,
Section 2 to conform to ISE Options 4, Section 1. The revised wording
does not substantively amend the paragraph.
Section 3. Criteria for Underlying Securities
Options 4, Section 3 of the Options Listing Rules is being updated
to conform to ISE Options 4, Section 3.
The Exchange proposes to amend Options 4, Section 3(a)(i) and (ii)
to conform to ISE Options 4, Section 3(a)(1) and (2) by changing the
``i. and ii.'' to ``(1) and (2),'' respectively. Also, the Exchange
proposes to remove the phrase ``with the SEC'' within current NOM
Options 4, Section 3(a)(i). These amendments are non-substantive.
The Exchange proposes to amend Options 4, Section 3(b) to reword
the rule text to ISE Options 4, Section 3(b). The Exchange proposes to
replace the current rule text of Options 4, Section 3(b) which states,

In addition, the Exchange shall from time to time establish
standards to be considered in evaluating potential underlying
securities for the Exchange options transactions. There are many
relevant factors which must be considered in arriving at such a
determination, and the fact that a particular security may meet the
standards established by the Exchange does not necessarily mean that
it will be selected as an underlying security. The Exchange may give
consideration to maintaining diversity among various industries and
issuers in selecting underlying securities. Notwithstanding the
foregoing, an underlying security will not be selected unless:

with the following rule text,

In addition, the Exchange shall from time to time establish
guidelines to be considered in evaluating potential underlying
securities for Exchange options transactions. There are many
relevant factors which must be considered in arriving at such a
determination, and the fact that a particular security may meet the
guidelines established by the Exchange does not necessarily mean
that it will be selected as an underlying security. Further, in
exceptional circumstances an underlying security may be selected by
the Exchange even though it does not meet all of the guidelines. The
Exchange may also give consideration to maintaining diversity among
various industries and issuers in selecting underlying securities.
Notwithstanding the foregoing, however absent exceptional
circumstances, an underlying security will not be selected unless:

The new rule text permits the Exchange, in exceptional
circumstances, to select an underlying security even though it does not
meet all of the guidelines. Today, the Exchange may establish
guidelines to be considered in evaluating potential underlying
securities for Exchange options transactions. Providing NOM with the
same ability to select an underlying security even though it does not
meet all of the guidelines as ISE will permit NOM to list similar
options as ISE for competitive purposes. The proposal to replace the
term ``standards'' with ``guidelines'' within paragraph 3(b) is non-
substantive.
The Exchange is amending numbering within Options 4, Section 3(b)
as well as removing extraneous rule text within current Options 4,
Section 3(b)(iii), namely ``or Rules thereunder.'' The Exchange
proposes to relocate Options 4, Section 3(k) into new Options 4,
Section 3(b)(6) without change. This would align NOM Options 4, Section
3(b)(6) with ISE Options 4, Section 3(b)(6). This provision states,

Notwithstanding the requirements set forth in Paragraphs 1, 2, 4
and 5 above, the Exchange may list and trade an options contract if
(i) the underlying security meets the guidelines for continued
approval in Options 4, Section 4; and (ii) options on such
underlying security are traded on at least one other registered
national securities exchange.

[[Page 42913]]

The Exchange proposes to renumber NOM Options 4, Section 3(c) and
make minor amendments to rule text within current Options 4, Section
3(c)(ii), (iii), (iv) and (v), Sections 3(d), 3(f) and 3(g) to conform
the rule text to ISE Options 4, Section 3(c)(ii), (iii), (iv) and (v),
Sections 3(d), 3(f) and 3(g). The proposed changes are non-
substantive.\3\
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\3\ The proposed changes replace the word ``standards'' with
``guidelines,'' insert ``Options 4'' before ``Section 3,'' and
remove 2 extraneous uses of ``this.'' Similar replacements are made
throughout current Options 4, Section 3(c), including amending a
capitalized ``Paragraph.''
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The Exchange proposes to amend an ``up'' to ``on'' within NOM
Options 4, Section 3(d). This proposed change is non-substantive.
The Exchange proposes non-substantive amendments to amend NOM
Options 4, Section 3(f) and (g) \4\ in addition to conforming the
numbering to ISE Options 4, Section 3(f) and (g) numbering.
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\4\ The proposed changes replace the word ``standards'' with
``guidelines,'' insert ``Rule'' instead of ``Section 3,'' and remove
an unnecessary ``or.''
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The Exchange proposes to relocate rule text currently within NOM
Options 4, Section 3(h), which describes a market information sharing
agreement, to proposed NOM Options 4, Section 3(i) without change. This
rule text is currently located within ISE rules at Options 4, Section
3(i).
Current NOM Options 4, Section 3(i) is being re-lettered as
proposed Options 4, Section 3(h). The Exchange proposes to add the
defined term ``Financial Instruments'' within Options 4, Section 3(h)
and also account for money market instruments, U.S. government
securities and repurchase agreements, defined by the term ``Money
Market Instruments'' similar to ISE Options 4, Section 3(h). The
addition of money market instruments, U.S. government securities and
repurchase agreements as securities deemed appropriate for options
trading will make clear that these agreements are included in the
acceptable securities. The Exchange notes that this rule text is
clarifying in nature and will more explicitly provide for money market
instruments, U.S. government securities and repurchase agreements as a
separate category from what is being defined as ``Financial
Instruments'' with this proposal. Today, these instruments are eligible
as securities deemed appropriate for options trading. The remainder of
the changes are non-substantive in nature and simply conform the
location of words similar to ISE.\5\ The Exchange also proposes to
remove the following products from Options 4, Section 3(h): The ETFS
Silver Trust, the ETFS Palladium Trust, the ETFS Platinum Trust or the
Sprott Physical Gold Trust. The Exchange no longer lists these products
and proposes to remove them the products from its listing rules. The
Exchange will file a proposal with the Commission if it determines to
list these products in the future. Finally, the Exchange proposes to
amend Options 4, Section 3(h) by removing the rule text at the end of
the paragraph which provides, ``all of the following conditions are
met.'' Paragraph (h) would simply end with ``provided that:'' and
direct market participants to subparagraphs (1) and (2).
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\5\ The amendment to current Options 4, Section 3(i)(B)(4) to
add, ``. . . which the Exchange-Traded Fund shares are based . . .''
makes clear that this text applies to Exchange-Traded Fund shares.
Also the word ``indexes'' is being changes to ``indices'' within
this paragraph and ``similar entity'' is being relocated within the
paragraph.
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The Exchange proposes to capitalize ``the'' at the beginning of
Options 4, Section 3(h)(1) and remove ``; and'' at the end of the
paragraph and instead at a period so that subparagraphs (1) and (2) are
not linked, but rather read independently. Today, Options 4, Section
3(h)(1) applies to all Exchange-Traded Fund Shares. Similar to ISE
Options 4, Section 3(h)(2), the Exchange proposes to clarify that
Options 4, Section 3(h)(2) applies to only international or global
Exchange-Traded Fund Shares. Specifically, the Exchange proposes to
amend Options 4, Section 3(h)(2) to provide, ``Exchange-Traded Fund
Shares based on international or global indexes, or portfolios that
include non-U.S. securities, shall meet the following criteria.'' ISE
Options 4, Section 3(h) has the identical text. Proposed Options 4,
Sections 3(h) generally concerns securities deemed appropriate for
options trading. The proposed new rule text adds language stating that
subparagraph (h)(2) of Options 4, Section 3 applies to the extent the
Exchange-Traded Fund Share is based on international or global indexes,
or portfolios that include non-U.S. securities. This language is
intended to serve as a guidepost and clarify that (1) subparagraph
(h)(2) does not apply to an Exchange-Traded Fund Shares based on a U.S.
domestic index or portfolio, and (2) subparagraph (h)(2) includes
Exchange-Traded Fund Shares that track a portfolio and do not track an
index.
The Exchange proposes to amend Options 4, Section 3(h)(2)(A) to
remove the phrase ``for series of portfolio depositary receipts and
index fund shares based on international or global indexes,''. Today,
Options 4, Section 3(h), subparagraphs (h)(1) \6\ and (h)(v) \7\ permit
the Exchange to list options on Exchange-Traded Fund Shares based on
generic listing standards for portfolio depositary receipts and index
fund shares without applying component based requirements in
subparagraphs (h)(2)(B)-(D). By removing the proposed rule text, the
Exchange would make clear that subparagraph (h)(2)(A) applies to
Exchange-Traded Fund Shares based on international or global indexes,
or portfolios that include non-U.S. securities, that are listed
pursuant to generic listing standards and comply with Options 4,
Section 3(h) and subparagraph (h)(1). The identical rule text exists
within ISE Options 4, Section 3(h)(2)(A).
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\6\ Subsection (h)(i) concerns passive Exchange-Traded Fund
Shares. Subsection (h)(1) provides, ``represent interests in
registered investment companies (or series thereof) organized as
open-end management investment companies, unit investment trusts or
similar entities that hold portfolios of securities and/or financial
instruments, including, but not limited to, stock index futures
contracts, options on futures, options on securities and indices,
equity caps, collars and floors, swap agreements, forward contracts,
repurchase agreements and reverse repurchase agreements (the
``Financial Instruments''), and money market instruments, including,
but not limited to, U.S. government securities and repurchase
agreements (the ``Money Market Instruments'') comprising or
otherwise based on or representing investments in broad-based
indexes or portfolios of securities and/or Financial Instruments and
Money Market Instruments (or that hold securities in one or more
other registered investment companies that themselves hold such
portfolios of securities and/or Financial Instruments and Money
Market Instruments).''
\7\ Subsection (h)(v) concerns active Exchange-Traded Fund
Shares. Subsection (h)(v) Provides, ``represents an interest in a
registered investment company (``Investment Company'') organized as
an open-end management company or similar entity, that invests in a
portfolio of securities selected by the Investment Company's
investment adviser consistent with the Investment Company's
investment objectives and policies, which is issued in a specified
aggregate minimum number in return for a deposit of a specified
portfolio of securities and/or a cash amount with a value equal to
the next determined net asset value (``NAV''), and when aggregated
in the same specified minimum number, may be redeemed at a holder's
request, which holder will be paid a specified portfolio of
securities and/or cash with a value equal to the next determined NAV
(``Managed Fund Share'').
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The Exchange also proposes to amend the term ``comprehensive
surveillance agreement'' within Options 4, Section 3(h)(2) (A)-(D) to
instead provide ``comprehensive surveillance sharing agreement.'' This
amendment will bring greater clarity to the term. Further, the Exchange
proposes to add the phrase ``if not available or applicable, the
Exchange-Traded Fund's'' within Options 4, Section 3(h)(2)(B), (C), and
(D) to clarify that when component securities are not available, the
portfolio of securities upon which the Exchange-Traded Fund Share is
based can be used

[[Page 42914]]

instead. The Exchange notes that ``not available'' is intended for
cases where the Exchange does not have access to the index components,
in those cases the Exchange would look to the portfolio components. The
term ``not applicable'' is intended if the fund is active and does not
track an index and only the portfolio is available. These amendments
will conform the rule text to ISE Options 4, Section 3(h)(2)(A)-(D).
The Exchange also proposes to wordsmith Options 4, Section
3(h)(2)(B) to amend the phrase to provide, ``any non-U.S. component
securities of an index on which the Exchange-Traded Fund Shares are
based or if not available or applicable, the Exchange-Traded Fund's
portfolio of securities that are not subject to comprehensive
surveillance sharing agreements do not in the aggregate represent more
than 50% of the weight of the index or portfolio;''. Finally, the
Exchange proposes to wordsmith Options 4, Section 3(h)(2)(C) and (D) to
relocate the phrase ``on which the Exchange-Traded Fund Shares are
based'' and add ``or portfolio'' to bring greater clarity to the rule
text by conforming the rule text of (C) and (D) to the language within
(B). The Exchange believes that the revised wording will bring greater
clarity to the rule text and conform the rule text to ISE Options 4,
Section 3(h)(2)(B)-(D). The Exchange proposes a non-substantive
technical amendment to Options 4, Section 3(C)(2)(A)(ii) to correct a
typographical error by changing a ``than'' to a ``that.'' The Exchange
proposes a non-substantive technical amendment to Options 4, Section
3(h)(1) to change ``In'' to ``in.''
As noted above NOM Options 4, Section 3(h), which describes a
market information sharing agreement, was proposed to be relocated to
Options 4, Section 3(i), similar to ISE Options 4, Section 3(i).
The Exchange proposes to amend Options 4, Section 3(j) to conform
the rule text to ISE Options 4, Section 3(j). The proposed changes are
non-substantive.\8\
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\8\ The amendment to current Options 4, Section 3(j) replace the
word ``standards'' with ``guidelines.''
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As noted, above, Options 4, Section 3(k) was proposed to be
relocated to new Options 4, Section 3(b)(6).
The Exchange proposes to remove the header ``Index-Linked
Securities'' within Options 4, Section 3(l), and re-letter Options 4,
Section 3(l)(i) as Section 3(k). Proposed Options 4, Section 3(k) has
non-substantive numbering and citation amendments.
Options 4, Section 3(m) is being relocated into new Options 4C,
Section 3 without change. Options 4C is specific to U.S. Dollar-Settled
Foreign Currency Options.
Section 4. Withdrawal of Approval of Underlying Securities
The Exchange proposes to remove the first sentence of Options 4,
Section 4(a), which provides, ``If put or call options contracts with
respect to an underlying security are approved for listing and trading
on the Exchange, such approval shall continue in effect until such
approval is affirmatively withdrawn by the Exchange.'' This sentence is
unnecessary as the second sentence within Options 4, Section 4(a) makes
clear that approval continues until it does not meet the requirements.
Also, the Exchange proposes to add the following text to the end of
this paragraph: ``When all options contracts with respect to any
underlying security that is no longer approved have expired, the
Exchange may make application to the SEC to strike from trading and
listing all such options contracts.'' This text makes clear that
options contracts that are no longer approved will not be listed. The
remainder of the changes to Options 4, Section 4(a) are non-
substantive. This proposal is intended to conform NOM's Options 4,
Section 4(a) with ISE Options 4, Section 4(a).
The Exchange proposes to amend Options 4, Section 4(b) to add
``Absent exceptional circumstances . . .'' at the beginning of the
section. This phrase adds clarity to the rule text. The remainder of
the numbering changes as well as capitalization are non-substantive and
intended to conform NOM's Options 4, Section 4(b) with ISE Options 4,
Section 4(b). The Exchange also proposes to remove reserved sections.
Options 4, Section 4(c), which is currently reserved, is proposed
to be deleted and current Options 4, Section 4(d) is proposed to be re-
lettered as ``c''. Minor non-substantive conforming changes are
proposed to current Options 4, Section 4(d)-(f).\9\
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\9\ The Exchange proposes to remove ``Section 4'', lowercase the
term ``Customer,'' add ``options 4'' and remove ``thereof'' within
Options 4, Section 4(d)-(f).
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The Exchange proposes to amend current Options 4, Section 4(h) to
re-letter it ``g'' and replace ``security'' with ``Exchange-Traded Fund
Shares'' similar to ISE Options 4, Section 4(g). The Exchange proposes
to add halt or suspension as other circumstances in which the Exchange
shall not open for trading any additional series of option contracts of
the class to clarify that this scenario may also exist. The other
proposed changes to current Options 4, Section 4(h) are non-
substantive.\10\
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\10\ The Exchange proposes to amend Options 4, Section 4(h) to
add ``Options 4'' and replace ``Section 4'' with ``Rule;'' and
replace an ``or'' with an ``and.''
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The Exchange proposes to amend current Options 4, Section 4(i) to
re-letter it ``h'' and add ``Absent exceptional circumstances,
securities . . .'' at the beginning of the section. This phrase adds
clarity to the rule text. The remainder of the numbering changes are
non-substantive \11\ and conform current NOM's Options 4, Section 4(i)
with ISE Options 4, Section 4(h).
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\11\ The term Options 4 is being relocated within the proposed
new paragraph (h). Also, the term ``Rule'' is being used within
proposed new paragraph (h)(1) instead of ``Section 4,'' and
``Section 3.'' ``Upon annual review'' is being removed from proposed
new paragraph (h)(2).
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The Exchange proposes to adopt new Options 4, Section 4(i) similar
to ISE, Options 4, Section 4(i). The proposed new section would
provide,

For Holding Company Depositary Receipts (HOLDRs), the Exchange
will not open additional series of options overlying HOLDRs (without
prior Commission approval) if:
(1) The proportion of securities underlying standardized equity
options to all securities held in a HOLDRs trust is less than 80%
(as measured by their relative weightings in the HOLDRs trust); or
(2) less than 80% of the total number of securities held in a
HOLDRs trust underlie standardized equity options.

Current Options 4, Section 4 does not describe the withdrawal of
HOLDRs. This new text, similar to ISE, would provide for provisions
wherein the Exchange will not open additional series of options
overlying HOLDRs.
The Exchange proposes to delete current Options 4, Section 4(j),
which is reserved, as well as the lettering for Options 4, Section 4(k)
which states, ``Index Linked Securities.'' The next existing paragraph
is proposed to be Options 4, Section 4(j). The remainder of the
numbering changes to this section are non-substantive and conform
proposed Options 4, Section 4(j) with ISE Options 4, Section 4(j).
The Exchange proposes to remove Options 4, Section 4(l) related to
inadequate volume delisting. To remain competitive with other options
markets, the Exchange proposes to adopt the same obligations for
continuance of trading.\12\ Also, pursuant to proposed

[[Page 42915]]

new Options 4, Section 5(e) the Exchange will announce securities that
have been withdrawn. With this proposal, the Exchange would eliminate
the requirement that an option must be trading for more than 6 months.
The Exchange notes that this condition is not present on other options
markets such as ISE and Cboe Exchange, Inc. (``Cboe'').\13\ This also
applies to the requirement that the average daily volume of the entire
class of options over the last six (6) month period was less than
twenty (20) contracts. The Exchange notes that NOM's requirements are
different from other options markets. To remain competitive the
Exchange proposes to adopt the same standards as ISE so that it may
list options similar to other markets.
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\12\ Options 4, Section 4(b), as amended, establishes
requirements for continued listing, similar to ISE. See proposed
Phlx Options 3, Section 4(b) which provides, ``Absent exceptional
circumstances, an underlying security will not be deemed to meet the
Exchange's requirements for continued approval whenever any of the
following occur: (1) There are fewer than 6,300,000 shares of the
underlying security held by persons other than those who are
required to report their security holdings under Section 16(a) of
the Exchange Act. (2) There are fewer than 1,600 holders of the
underlying security. (3) The trading volume (in all markets in which
the underlying security is traded) has been less than 1,800,000
shares in the preceding twelve (12) months. (4) The underlying
security ceases to be an ``NMS stock'' as defined in Rule 600 of
Regulation NMS under the Exchange Act. (5) If an underlying security
is approved for options listing and trading under the provisions of
Options 4, Section 3(c), the trading volume of the Original Security
(as therein defined) prior to but not after the commencement of
trading in the Restructure Security (as therein defined), including
``when-issued'' trading, may be taken into account in determining
whether the trading volume requirement of (3) of this paragraph (b)
is satisfied.''
\13\ See ISE Options 4, Section 4 and Cboe Rule 4.4.
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While the Exchange may in the future determine to delist an option
that is singly listed, the Exchange proposes to remove the rule text
which provides that ``If the option is singly listed only on the
Exchange, the Exchange will cease to add new series and may delist the
class of options when there is no remaining open interest.'' This rule
text does not exist on ISE and Cboe. The Exchange today provides
notification of a delisting to all Participants so therefore it is not
necessary to retain the provisions within (b)(2). Also, proposed new
Options 4, Section 4(e) establishes the rules by which the Exchange
will announce securities that have been withdrawn. The rule text within
Options 4, Section 4(b), as amended to conform to ISE rule text, will
continue to govern the continued approval of options on the Exchange.
The reference to Options 4, Section 4(m) is proposed to be deleted.
The provision that is currently Options 4, Section 4(m) is proposed to
become Supplementary Material .01 to Options 4, Section 6 with a minor
non-substantive change to the current rule text to capitalize
``rules.''
Section 5. Series of Options Contracts Open for Trading
The Exchange proposes to update citations within Options 4, Section
5 to reflect the replacement of current rule text. These changes are
non-substantive.
Section 7. Adjustments
The Exchange proposes non-substantive amendments to Options 4,
Section 7. The current text states,

Options contracts shall be subject to adjustments in accordance
with the Rules of the Clearing Corporation. The Exchange will
announce adjustments, and such changes will be effective for all
subsequent transactions in that series at the time specified in the
announcement.

The Exchange proposes to instead provide,

Options contracts shall be subject to adjustments in accordance
with the Rules of the Clearing Corporation. When adjustments have
been made, the Exchange will announce that fact, and such changes
will be effective for all subsequent transactions in that series at
the time specified in the announcement.

The proposal conforms NOM Options 4, Section 7 with ISE Options 4,
Section 7.
Section 8. Long-Term Options Contracts
The Exchange proposes to conform NOM Options 4, Section 8 to ISE
Options 4, Section 8. The proposed changes are non-substantive. NOM's
current rule text provides that with respect to long-term options
series, bid/ask differential rules do not apply. The Exchange proposes
to add this rule text to Options 4, Section 5(d)(2) within new
subsection ``A'' as the bid/ask differential requirements can be found
within this rule. The Exchange also proposes to add a new sentence to
Options 4, Section 8(a) to refer to Options 4, Section 5(d)(2)(A),
which states, ``Bid/ask differentials for long-term options contracts
are specified within Options 3, Section 5(d)(2)(A)'' for ease of
reference in locating all bid/ask requirements.
Section 9. Limitation on the Liability of Index Licensors for Options
on Fund Shares
The Exchange proposes to relocate current Options 4, Section 9,
U.S. Dollar-Settled Foreign Currency Option Closing Settlement Value to
Options 4C, Section 6 with minor changes to add new lettering.
The Exchange proposes to adopt a new Section 9, titled ``Limitation
on the Liability of Index Licensors for Options on Fund Shares''
identical to ISE Options 4, Section 9. ISE and Cboe have similar
provisions.\14\ The new rule would provide,
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\14\ See Securities Exchange Act Release No. 45817 (April 24,
2002), 67 FR 21785 (May 1, 2002) (SR-CBOE-2002-19) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change by the Chicago
Board Options Exchange, Incorporated To Amend Its Rules Relating to
the Limitation of Liability for Index Licensors) and 14729 (March
19, 2003), 68 FR 14729 (March 26, 2003) (SR-ISE-2003-09) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change by
International Securities Exchange, Inc., Relating to Limiting the
Liability of Index Licensors for Options on Fund Shares).

(a) The term ``index licensor'' as used in this Rule refers to
any entity that grants the Exchange a license to use one or more
indexes or portfolios in connection with the trading of options on
Exchange-Traded Fund Shares (as defined in Options 4, Section 3(h)).
(b) No index licensor with respect to any index or portfolio
underlying an option on Exchange-Traded Fund Shares traded on the
Exchange makes any warranty, express or implied, as to the results
to be obtained by any person or entity from the use of such index or
portfolio, any opening, intra-day or closing value therefor, or any
data included therein or relating thereto, in connection with the
trading of any option contract on Exchange-Traded Fund Shares based
thereon or for any other purpose. The index licensor shall obtain
information for inclusion in, or for use in the calculation of, such
index or portfolio from sources it believes to be reliable, but the
index licensor does not guarantee the accuracy or completeness of
such index or portfolio, any opening, intra-day or closing value
therefor, or any data included therein or related thereto. The index
licensor hereby disclaims all warranties of merchantability or
fitness for a particular purpose or use with respect to any such
index or portfolio, any opening, intra-day or closing value
therefor, any data included therein or relating thereto, or any
option contract on Exchange-Traded Fund Shares based thereon. The
index licensor shall have no liability for any damages, claims,
losses (including any indirect or consequential losses), expenses or
delays, whether direct or indirect, foreseen or unforeseen, suffered
by any person arising out of any circumstance or occurrence relating
to the person's use of such index or portfolio, any opening, intra-
day or closing value therefor, any data included therein or relating
thereto, or any option contract on Exchange-Traded Fund Shares based
thereon, or arising out of any errors or delays in calculating or
disseminating such index or portfolio.

Proposed Section 9(a) defines the term ``index licensor'' as any entity
that grants the Exchange a license to use one or more indexes or
portfolios in connection with the trading of options on Exchange-Traded
Fund Shares (as defined in Options 4, Section 3(h)).
Proposed Options 4, Section 9(b) provides that no index licensor
with

[[Page 42916]]

respect to any index or portfolio underlying an option on Exchange-
Traded Fund Shares traded on the Exchange makes any warranty, express
or implied, as to the results to be obtained by any person or entity
from the use of such index or portfolio, any opening, intra-day or
closing value therefor, or any data included therein or relating
thereto, in connection with the trading of any option contract on
Exchange-Traded Fund Shares based thereon or for any other purpose. The
index licensor will obtain information for inclusion in, or for use in
the calculation of, such index or portfolio from sources it believes to
be reliable, but the index licensor does not guarantee the accuracy or
completeness of such index or portfolio, any opening, intra-day or
closing value therefor, or any data included therein or related
thereto. The index licensor disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to any such
index or portfolio, any opening, intra-day or closing value therefor,
any data included therein or relating thereto, or any option contract
on Exchange-Traded Fund Shares based thereon. The index licensor will
have no liability for any damages, claims, losses (including any
indirect or consequential losses), expenses or delays, whether direct
or indirect, foreseen or unforeseen, suffered by any person arising out
of any circumstance or occurrence relating to the person's use of such
index or portfolio, any opening, intra-day or closing value therefor,
any data included therein or relating thereto, or any option contract
on Exchange-Traded Fund Shares based thereon, or arising out of any
errors or delays in calculating or disseminating such index or
portfolio.
Section 10. Back-Up Trading Arrangements
The Exchange proposes to add a new rule to Options 4, Section 10,
titled ``Back-Up Trading Arrangements.'' Section 10 is currently
reserved.\15\ This proposed rule is identical to ISE Options 4, Section
10. This rule would permit NOM to enter into arrangements with one or
more other exchanges (each a ``Back-up Exchange'') to permit NOM and
its Participants to use a portion of a Back-up Exchange's facilities to
conduct the trading of NOM exclusively listed options in the event of a
Disabling Event, and permits NOM to provide trading facilities at NOM
for another exchange's exclusively listed options if that exchange (a
``Disabled Exchange'') is prevented from trading due to a Disabling
Event. Also, the proposed rule would permit NOM to enter into
arrangements with a Back-up Exchange to provide for the listing and
trading of NOM singly listed options by the Back-up Exchange if NOM's
facility becomes disabled, and conversely provide for the listing and
trading by NOM of the singly listed options of a Disabled Exchange.
---------------------------------------------------------------------------

\15\ See Securities Exchange Act Release No. 71092 (December 17,
2013), 78 FR 77510 (December 23, 2013) (SR-ISE-2013-61) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating
to Back-Up Trading Arrangements).
---------------------------------------------------------------------------

The back-up trading arrangements contemplated by Options 4, Section
10 would ensure that NOM's exclusively listed and singly listed options
will have a trading venue if a catastrophe renders its primary facility
inaccessible or inoperable.
Section 10(a) describes the back-up trading arrangements that would
apply if NOM were the Disabled Exchange. An ``exclusively listed
option'' is defined within Section 10(a)(1)(i) to mean an option that
is listed exclusively by an exchange (because the exchange has an
exclusive license to use, or has proprietary rights in, the interest
underlying the option). Proposed paragraph(a)(1)(ii) provides that the
facility of the Back-up Exchange used by NOM to trade some or all of
NOM's exclusively listed options will be deemed to be a facility of
NOM, and such option classes shall trade as listings of NOM. Since the
trading of NOM exclusively listed options will be conducted using the
systems of the Back-up Exchange, proposed paragraph (a)(1)(iii)
provides that the trading of NOM listed options on NOM's facility at
the Back-up Exchange shall be conducted in accordance with the rules of
the Back-up Exchange, and proposed paragraph (a)(1)(iv) provides that
the Back-up Exchange has agreed to perform the related regulatory
functions with respect to such trading, in each case except as NOM and
the Back-up Exchange may specifically agree otherwise. The Back-up
Exchange rules that govern trading on NOM's facility at the Back-up
Exchange shall be deemed to be NOM rules for purposes of such trading.
Proposed paragraph (a)(1)(v) provides that NOM shall have the right to
designate its members that will be authorized to trade NOM exclusively
listed options on NOM's facility at the Back-up Exchange and, if
applicable, its member(s) that will be a NOM Market Maker in those
options.\16\ If the Back-up Exchange is unable to accommodate all NOM
Participants that desire to trade on NOM's facility at the Back-up
Exchange, NOM may determine which Participants shall be eligible to
trade at that facility by considering factors such as whether the
Participant is a NOM Market Maker in the applicable product(s), the
number of contracts traded by the member in the applicable product(s),
market performance, and other factors relating to a member's
contribution to the market in the applicable product(s). Under proposed
paragraph (a)(1)(vi), Participants of the Back-up Exchange shall not be
authorized to trade in any NOM exclusively listed options, except that
(i) NOM may deputize willing brokers of the Back-up Exchange as
temporary NOM Participants to permit them to execute orders as brokers
in NOM exclusively listed options traded on NOM's facility at the Back-
up Exchange, and (ii) the Back-up Exchange has agreed that it will, at
the instruction of NOM, select members of the Back-up Exchange that are
willing to be deputized by NOM as temporary NOM Participants authorized
to trade NOM exclusively listed options on NOM's facility at the Back-
up Exchange for such period of time following a Disabling Event as NOM
determines to be appropriate, and NOM may deputize such members of the
Back-up Exchange as temporary NOM Participants for that purpose.
---------------------------------------------------------------------------

\16\ Of note, unlike Phlx, NOM does not have rules to appoint
Lead Market Makers.
---------------------------------------------------------------------------

The foregoing exceptions would permit members of the Back-up
Exchange to trade NOM exclusively listed options on NOM's facility on
the Back-up Exchange, if, for example, circumstances surrounding a
Disabling Event result in NOM Participants being delayed in connecting
to the Back-up Exchange in time for prompt resumption of trading.
Options 4, Section 10(a)(2) of the proposed rule provides for the
continued trading of NOM singly listed options at the Back-up Exchange
in the event of a Disabling Event at NOM. Proposed paragraph (a)(2)(ii)
provides that NOM may enter into arrangements with a Back-up Exchange
under which the Back-up Exchange will agree, in the event of a
Disabling Event, to list for trading option classes that are then
singly listed only by NOM. Such option classes would trade on the Back-
up Exchange as listings of the Back-up Exchange and in accordance with
the rules of the Back-up Exchange. Under proposed paragraph
(a)(2)(iii), any such options class listed by the Back-up Exchange that
does not satisfy the standard listing and maintenance criteria of the
Back-up Exchange will be subject, upon listing by the Back-up Exchange,
to delisting (and, thus, restrictions on opening new series, and
engaging in opening transactions in those series with open

[[Page 42917]]

interest, as may be provided in the rules of the Back-up Exchange). NOM
singly listed option classes would be traded by members of the Back-up
Exchange and by NOM Participants selected by NOM to the extent the
Back-up Exchange can accommodate NOM Participants in the capacity of
temporary members of the Back-up Exchange. If the Back-up Exchange is
unable to accommodate all NOM Participants that desire to trade NOM
singly listed options at the Back-up Exchange, NOM may determine which
Participants shall be eligible to trade such options at the Back-up
Exchange by considering the same factors used to determine which NOM
Participants are eligible to trade NOM exclusively listed options at
NOM's facility at the Back-up Exchange. Proposed Section (a)(3)
provides that NOM may enter into arrangements with a Back-up Exchange
to permit NOM Participants to conduct trading on a Back-up Exchange of
some or all of NOM's multiply listed options in the event of a
Disabling Event. While continued trading of multiply listed options
upon the occurrence of a Disabling Event is not likely to be as great a
concern as the continued trading of exclusively and singly listed
options, NOM nonetheless believes a provision for multiply listed
options should be included in the rule so that the exchanges involved
will have the option to permit members of the Disabled Exchange to
trade multiply listed options on the Back-up Exchange. Such options
shall trade as a listing of the Back-up Exchange in accordance with the
rules of the Back-up Exchange.
Options 4, Section 10(b) describes the back-up trading arrangements
that would apply if NOM were the Back-up Exchange. In general, the
provisions in Section (b) are the converse of the provisions in Section
(a). With respect to the exclusively listed options of the Disabled
Exchange, the facility of NOM used by the Disabled Exchange to trade
some or all of the Disabled Exchange's exclusively listed options will
be deemed to be a facility of the Disabled Exchange, and such option
classes shall trade as listings of the Disabled Exchange. Trading of
the Disabled Exchange's exclusively listed options on the Disabled
Exchange's facility at NOM shall be conducted in accordance with NOM
rules, and NOM will perform the related regulatory functions with
respect to such trading, in each case except as the Disabled Exchange
and NOM may specifically agree otherwise. NOM rules that govern trading
on the Disabled Exchange's facility at NOM shall be deemed to be rules
of the Disabled Exchange for purposes of such trading. Sections (b)(2)
and (b)(3) describe the arrangements applicable to trading of the
Disabled Exchange's singly and multiply listed options at NOM, and are
the converse of Sections (a)(2) and (a)(3). Paragraph (b)(2)(i)
includes a provision that would permit NOM to allocate singly listed
option classes of the Disabled Exchange to a NOM Market Maker in
advance of a Disabling Event, without utilizing the allocation process
under NOM Rule Options 2, Section 1, to enable NOM to quickly list such
option classes upon the occurrence of a Disabling Event.
Options 4, Section 10(c) describes the obligations of Participants
with respect to the trading by ``temporary members'' on the facilities
of another exchange. Section (c)(1) sets forth the obligations
applicable to Participants of a Back-up Exchange who act in the
capacity of temporary Participants of the Disabled Exchange on the
facility of the Disabled Exchange at the Back-up Exchange. Section
(c)(1) provides that a temporary Participant of the Disabled Exchange
shall be subject to, and obligated to comply with, the rules that
govern the operation of the facility of the Disabled Exchange at the
Back-up Exchange. This would include the rules of the Disabled Exchange
to the extent applicable during the period of such trading, including
the rules of the Disabled Exchange limiting its liability for the use
of its facilities that apply to members of the Disabled Exchange.
Additionally, (i) such temporary Participant shall be deemed to have
satisfied, and the Disabled Exchange has agreed to waive specific
compliance with, rules governing or applying to the maintenance of a
person's or a firm's status as a Participant of the Disabled Exchange,
including all dues, fees and charges imposed generally upon members of
the Disabled Exchange based on their status as such, (ii) such
temporary Participant shall have none of the rights of a member of the
Disabled Exchange except the right to conduct business on the facility
of the Disabled Exchange at the Back-up Exchange to the extent
described in the Rule, (iii) the Participant associated with such
temporary Participant, if any, shall be responsible for all obligations
arising out of that temporary Participant's activities on or relating
to the Disabled Exchange, and (iv) the clearing member of such
temporary Participant shall guarantee and clear the transactions of
such temporary Participant on the Disabled Exchange.
Section (c)(2) sets forth the obligations applicable to members of
a Disabled Exchange who act in the capacity of temporary Participants
of the Back-up Exchange for the purpose of trading singly listed and
multiply listed options of the Disabled Exchange. Such temporary
Participants shall be subject to, and obligated to comply with, the
rules of the Back-up Exchange that are applicable to the Back-up
Exchange's own members, including the rules of the Back-up Exchange
limiting its liability for the use of its facilities that apply to
members of the Back-up Exchange. Temporary Participants of the Back-up
Exchange have the same obligations as those set forth in Section (c)(1)
that apply to temporary Participants of the Disabled Exchange, except
that, in addition, temporary Participants of the Back-up Exchange shall
only be permitted (i) to act in those capacities on the Back-up
Exchange that are authorized by the Back-up Exchange and that are
comparable to capacities in which the temporary Participant has been
authorized to act on the Disabled Exchange, and (ii) to trade in those
option classes in which the temporary Participant is authorized to
trade on the Disabled Exchange.
Options 4, Section 10 provides that the rules of the Back-up
Exchange shall apply to the trading of the singly and multiply listed
options of the Disabled Exchange traded on the Back-up Exchange's
facilities, and (with certain limited exceptions) the trading of
exclusively listed options of the Disabled Exchange traded on the
facility of the Disabled Exchange at the Back-up Exchange. The Back-up
Exchange has agreed to perform the related regulatory functions with
respect to such trading (except as the Back-up Exchange and the
Disabled Exchange may specifically agree otherwise). Section (d)
provides that if a Back-up Exchange initiates an enforcement proceeding
with respect to the trading during a back-up period of singly or
multiply listed options of the Disabled Exchange by a temporary
Participant of the Back-up Exchange, or exclusively listed options of
the Disabled Exchange by a member of the Disabled Exchange (other than
a member of the Back-up Exchange who is a temporary member of the
Disabled Exchange), and such proceeding is in process upon the
conclusion of the back-up period, the Back-up Exchange may transfer
responsibility for such proceeding to the Disabled Exchange following
the conclusion of the back-up period.
With respect to arbitration jurisdiction, proposed Section (d)
provides that arbitration of any disputes with respect to any trading
during a back-up period of singly or multiply listed options of the
Disabled Exchange

[[Page 42918]]

or of exclusively listed options of the Disabled Exchange on the
Disabled Exchange's facility at the Back-up Exchange will be conducted
in accordance with the rules of the Back-up Exchange, unless the
parties to an arbitration agree that it shall be conducted in
accordance with the rules of the Disabled Exchange.
Proposed Supplementary Material .01 to Options 4, Section 10
clarifies that to the extent Options 4, Section 10 provides that
another exchange will take certain action, the Rule is reflecting what
that exchange has agreed to do by contractual agreement with NOM, but
Options 4, Section 10 is not binding on the other exchange.
Options 4C
The Exchange proposes to relocate current rule text related to
criteria to list U.S. Dollar-Settled Foreign Currency Options to new
Options 4C and adopting new rule text similar to Phlx \17\ to list and
trade these securities as described in more detail below.
---------------------------------------------------------------------------

\17\ See Securities Exchange Act Release No. 54989 (December 21,
2006), 71 FR 78506 (December 29, 2006) (SR-Phlx-2006-34) (Notice of
Filing and Order Granting Accelerated Approval to Proposed Rule
Change as Modified by Amendments No. 1, 2, and 3 Thereto Relating to
U.S. Dollar-Settled Foreign Currency Options).
---------------------------------------------------------------------------

Section 1. Applicability
Similar to Phlx Options 4C, Section 1 the Exchange proposes to
provide,

The Rules in Options 4C are applicable to U.S. Dollar-Settled
Foreign Currency Options. Except to the extent that specific rules
in this Section, or unless the context otherwise requires, the
provisions of Options 4 are applicable to the trading on the
Exchange of U.S. Dollar-Settled Foreign Currency Options.

Proposed Options 4C of the Options Listing Rules covers U.S.
Dollar-Settled Foreign Currency Options only.
Section 2. Definitions
The Exchange proposes to adopt rules to list for trading U.S.
Dollar-Settled Foreign Currency Options, which products are currently
listed and traded on Phlx. To that end, NOM proposes to adopt the same
rules as Phlx Options 4C. The Exchange therefore proposes to adopt
applicability rules and definitions similar to Phlx Options 4C, Section
2.
The Exchange proposes to state within proposed Options 4C, Section
2 that the Rules in Options 4C shall be applicable to the trading on
the Exchange in option contracts issued by The Options Clearing
Corporation, the terms and conditions of such contracts, the exercise
and settlement thereof, the handling of orders, and the conduct of
accounts and other matters relating to options trading. Except to the
extent that specific Rules in this Options 4C govern or unless the
context otherwise requires, the provisions of the By-Laws and of all
other Rules and Policies of the Board of Directors shall be applicable
to the trading on the Exchange of option contracts. This proposed rule
would also note that foreign currency option contracts purchased and
sold on the Exchange are designated by reference to the underlying
foreign currency (e.g., the British pound), expiration month, exercise
price and type (put or call).
The Exchange also proposes to add the below definitions to Options
4C, Section 2(b) and note that ``The following terms as used in the
Rules shall, unless the context otherwise indicates, have the meanings
herein specified:''. The definitions that are proposed to be added are:
(1) The term ``aggregate exercise price'' is as defined within
Options 1, Section 1(a)(3).
(2) The term ``foreign currency'' is as defined within Options 1,
Section 1(a)(20).
(3) The term ``Exchange Spot Price'' in respect of an option
contract on a foreign currency means the cash market spot price, for
the sale of one foreign currency for another, quoted by various foreign
exchange participants for the sale of a single unit of such foreign
currency for immediate delivery that is calculated from the foreign
currency price quotation reported by the foreign currency price
quotation dissemination system selected by the Exchange, to which an
appropriate multiplier is applied. The multiplier(s) will be: 100 for
the British pound, the Euro, the Swiss Franc, the Canadian dollar, the
Australian dollar, the Brazilian real, and the New Zealand dollar;
1,000 for the Chinese yuan, the Danish krone, the Mexican peso, the
Norwegian krone, the South African rand, and the Swedish krona; 10,000
for the Japanese yen and the Russian ruble; and 100,000 for the South
Korean won.
(4) The term ``unit of underlying foreign currency'' means a single
unit of the foreign currency (e.g., one British pound, one Swiss franc,
one Canadian dollar, one Australian dollar, one Japanese yen, one
Mexican peso, one Euro, one Brazilian real, one Chinese yuan, one
Danish krone, one New Zealand dollar, one Norwegian krone, one Russian
ruble, one South African rand, one South Korean won, or one Swedish
krona).
Section 3. Criteria for Underlying Securities
Options 4, Section 3(m) is being relocated into new Options 4C,
Section 3 without change, except that is being re-lettered as ``a''.
Section 4. Withdrawal of Approval of Underlying Securities or Options
NOM proposes to adopt rule text similar to Phlx Options 4C, Section
4 which provides, The Exchange may determine to withdraw approval of an
underlying foreign currency whenever it deems such withdrawal advisable
in the public interest or for the protection of investors. In the event
that the Exchange effects such a withdrawal, the Exchange shall not
open for trading any additional series of options of the class covering
that underlying foreign currency.
Similar to Phlx, NOM may withdraw approval of an underlying foreign
currency whenever it deems such withdrawal advisable in the public
interest or for the protection of investors. In the event of a
withdrawal, NOM would not open for trading any additional series of
options of the class covering that underlying foreign currency.
Section 5. Series of U.S. Dollar-Settled Foreign Currency Options
Contracts Open for Trading
Similar to Phlx, NOM proposes to adopt rules to permit it to list
and trade U.S. Dollar-Settled Foreign Currency Options. After call
option contracts or put option contracts relating to a specific
underlying foreign currency has been approved for listing and trading
on the Exchange, NOM shall from time to time open for trading series of
options therein. Prior to the opening of trading in any series of
options, NOM shall fix the expiration month and exercise price of
option contracts included in such series. NOM proposes to adopt Options
4C, Section 5(a)(1) which states,

Within each class of approved U.S. dollar-settled foreign
currency options, the Exchange may open for trading series of
options expiring in consecutive calendar months (``consecutive month
series''), as provided in subparagraph (A) of this paragraph, and
series of options expiring at three-month intervals (``cycle month
series''), as provided in subparagraph (B) of this paragraph. Prior
to the opening of trading in any series of U.S. dollar-settled FCO,
the Exchange shall fix the expiration month and exercise price of
option contracts included in each such series. The Exchange may
initially list exercise strike prices for each expiration of U.S.
dollar-settled options on currencies within a 40 percent band around
the current Exchange Spot Price at fifty cent ($.50) intervals.
Thus, if the Exchange Spot Price of the Euro were at $100.00, the
Exchange

[[Page 42919]]

would list strikes in $.50 intervals up to $120.00 and down to
$80.00, for a total of eighty-one strike prices available for
trading. As the Exchange Spot Price for U.S. dollar-settled FCOs
moves, the Exchange may list new strike prices that, at the time of
listing, do not exceed the Exchange Spot Price by more than 20
percent and are not less than the Exchange Spot Price by more than
20 percent. For example, if at the time of initial listing, the
Exchange Spot Price of the Euro is at $100.00, the strike prices the
Exchange will list will be $80.00 to $120.00. If the Exchange Spot
Price then moves to $105.00, the Exchange may list additional
strikes at the following prices: $105.50 to $126.00.

This rule is identical to Phlx's listing rules for U.S. Dollar-
Settled Foreign Currency Options within Phlx Options 4C, Section
5(a)(1).
With respect to consecutive month series, as noted above, each
class of U.S. dollar-settled foreign currency option, series of options
having up to four consecutive expiration months may be opened for
trading simultaneously, with the shortest-term series initially having
no more than two months to expiration. Additional consecutive month
series of the same class may be opened for trading on the Exchange at
or about the time a prior consecutive month series expires, and the
expiration month of each such new series shall normally be the month
immediately succeeding the expiration month of the then outstanding
consecutive month series of the same class of options having the
longest remaining time to expiration.
With respect to cycle month series, as noted above, NOM may
designate one expiration cycle for each class of U.S. dollar-settled
foreign currency option. An expiration cycle is four calendar months
(``cycle months'') occurring at three-month intervals. With respect to
any particular class of U.S. dollar-settled foreign currency option,
series of options expiring in the four cycle months designated by the
Exchange for that class may be opened for trading simultaneously, with
the shortest-term series initially having approximately three months to
expiration. Additional cycle month series of the same class may be
opened for trading on the Exchange at or about the time a prior cycle
month series expires, and the expiration month of each such new series
shall normally be approximately three months after the expiration month
of the then outstanding cycle month series of the same class of options
having the longest remaining time to expiration.
Proposed Options 4C, Section 5(a)(1)(C) provides rules for long-
term options series. The Exchange proposes that it may list with
respect to any U.S. dollar-settled foreign currencies, options having
up to three years from the time they are listed until expiration. There
may be up to ten options series, options having up to thirty-six months
from the time they are listed until expiration. There may be up to six
additional expiration months. Strike price intervals shall not apply to
such options series until the time to expiration is less than twelve
months. As proposed herein, bid/ask differentials for long-term options
contracts are specified within Options 3, Section 5(d)(2)(A). As noted
above the Exchange proposes to consolidate the bid/ask within Options
2.
Proposed Options 4C, Section 5(a)(1)(D) provides that for each
expiration month opened for trading of U.S. dollar-settled foreign
currency options, in addition to the strike prices listed by the
Exchange pursuant to subsection (a)(1) of this Options 4, Section 5,
the Exchange shall also list a single strike price of $0.01. Finally,
the Exchange proposes to state at proposed Options 4C, Section
5(a)(1)(E) that additional series of options of the same class may be
opened for trading on the Exchange as the market price of the
underlying foreign currency moves substantially from the initial
exercise price or prices. The opening of a new series of options on the
Exchange shall not effect any other series of options of the same class
previously opened.
The rule text proposed herein within Options 4C, Section 5(a)(1)(D)
and (E) is identical to the same provisions within Phlx's Options 4C.
With respect to exercise price, NOM proposes within Options 4C,
Section 5(b) to provide that the exercise price of each series of
foreign currency options opened for trading on the Exchange normally
shall be fixed at a price per unit which is reasonably close to the
current Exchange Spot Price per unit of the underlying foreign currency
in the foreign exchange market at or before the time such series of
options is first opened for trading on the Exchange, as determined by
finding the arithmetic mean of Exchange Spot Prices as defined in
Options 4C, Section 2(b)(3) at or about such time. The Exchange may
initially list exercise strike prices for each expiration of U.S.
dollar-settled options on currencies within a 40 percent band around
the current Exchange Spot Price at fifty cent ($.50) intervals. By way
of example, if the Exchange Spot Price of the Euro were at $100.00, the
Exchange would list strikes in $.50 intervals up to $120.00 and down to
$80.00, for a total of eighty-one strike prices available for trading.
As the Exchange Spot Price for U.S. dollar-settled foreign currencies
moves, the Exchange may list new strike prices that, at the time of
listing, do not exceed the Exchange Spot Price by more than 20 percent
and are not less than the Exchange Spot Price by more than 20 percent.
For example, if at the time of initial listing, the Exchange Spot Price
of the Euro is at $100.00, the strike prices the Exchange will list
will be $80.00 to $120.00. If the Exchange Spot Price then moves to
$105.00, the Exchange may list additional strikes at the following
prices: $105.50 to $126.00.
The Exchange proposes to state within Options 4C, Section 5(c) that
in fixing the exercise price of one or more series of options on any
underlying foreign currency, NOM may take into account the forward
sales prices quoted for that underlying foreign currency in the
interbank foreign exchange market.
Lastly, the Exchange proposes to state within Options 4C, Section
5(d) that when put option contracts or put and call option contracts
are first opened for trading on an underlying foreign currency, NOM may
open a series of put option contracts corresponding to each series of
call option contracts open or to be opened for trading on the same
underlying foreign currency.
All provisions of Options 4C, Section 5 are identical to Phlx's
rules with the exception of cross-citations.
Section 6. U.S. Dollar-Settled Foreign Currency Option Closing
Settlement Value
The Exchange proposes to adopt a new Options 4C, Section 6, titled
``U.S. Dollar-Settled Foreign Currency Option Closing Settlement
Value'' identical to Phlx Options 4C, Section 6.
The Exchange proposes to provide within Options 4, Section 6(a)
that U.S. dollar-settled foreign currency options are settled in U.S.
dollars.
The Exchange proposes to provide within Options 4C, Section 6(b)
the following,

The closing settlement value for the U.S. dollar-settled FCO on
the Australian dollar, the Euro, the British pound, the Canadian
dollar, the Swiss franc, the Japanese yen, the Mexican peso, the
Brazilian real, the Chinese yuan, the Danish krone, the New Zealand
dollar, the Norwegian krone, the Russian ruble, the South African
rand, the South Korean won, and the Swedish krona shall be the
Exchange Spot Price at 12:00:00 Eastern Time (noon) on the business
day of expiration, or, in the case of an option contract expiring on
a day that is not a business day, on the business day prior to the
expiration date unless the Exchange determines to apply an
alternative closing settlement value as a result of extraordinary
circumstances.

[[Page 42920]]

The closing settlement value for U.S. dollar-settled foreign
currency options shall be governed by this provision.
The Exchange proposes to provide within Options 4, Section 6(c)
certain liability provisions similar to Phlx Options 4, Section 6(c).
The Exchange proposes to state,

Neither the Exchange, nor any agent of the Exchange shall have
any liability for damages, claims, losses or expenses caused by any
errors, omissions, or delays in calculating or disseminating the
current settlement value or the closing settlement value resulting
from an act, condition, or cause beyond the reasonable control of
the Exchange including but not limited to, an act of God; fire;
flood; extraordinary weather conditions; war; insurrection; riot;
strike; accident; action of government; communications or power
failure; equipment or software malfunction; any error, omission, or
delay in the reports of transactions in one or more underlying
currencies or any error, omission or delay in the reports of the
current settlement value or the closing settlement value by the
Exchange.

NOM's proposal would cause the Exchange to not be liable for
damages, claims, losses or expenses caused by any errors, omissions, or
delays in calculating or disseminating the current settlement value or
the closing settlement value resulting from an act, condition, or cause
beyond the reasonable control of the Exchange including but not limited
to, an act of God and other extraordinary circumstances.
Finally, the Exchange proposes to provide within Options 4C,
Section 6(d) that the Exchange shall post the closing settlement value
on its website or disseminate it through one or more major market data
vendors. As noted above, this rule is identical to Phlx Options 4C,
Section 6.
Bid/Ask Differentials
The Exchange proposes to amend Options 4, Section 8(a), and Options
4A, Section 12(b)(1)(A) to relocate text concerning bid/ask
differentials for long-term option series, without change. Currently,
Options 4, Section 8(a) describes the bid/ask differentials for long-
term options series for equity options and exchange-traded products and
Options 4A, Section 12(b)(1)(A) describes the bid/ask differentials for
long-term options series for indexes. Currently, the bid/ask
differentials shall not apply to such options series until the time to
expiration is less than nine (9) months for equity options and
exchange-traded funds as provided for within Options 4, Section 8(a).
Currently, bid/ask differentials shall not apply to such options series
until the time to expiration is less than nine (9) months for index
options as provided for within Options 4A, Section 12(b)(1)(A). The
Exchange also proposes to lowercase ``Paragraph: within Options 4A,
Section 12(b)(1).
The Exchange proposes to centralize the bid/ask differentials
within Options 2, Section 5(d)(2)(A) and add a sentence to both Options
4, Section 8(a) and Options 4A, Section 12(b)(1)(A) that cites to
Options 2, Section 5(d)(2)(A) for information on bid/ask differentials
for the various products. The Exchange also proposes to capitalize
``ask'' in the title of Options 2, Section 5(d)(2). The Exchange
believes that this relocation will provide Market Makers with
centralized information regarding their bid/ask differential
requirements. The Exchange is not amending the bid/ask differentials;
the rule text is simply being relocated.
The Exchange also proposes to update a citation to Options 2,
Section 5 within Options 2, Section 4, Obligations of Market Makers,
within paragraph (a)(1). Specifically, the Exchange proposes to amend
the current citation to ``Section 5(d)(i)'' to instead refer to
``Options 2, Section 5(d)(1).''
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\18\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\19\ in particular, in that it is designed to
promote just and equitable principles of trade, 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. Conforming NOM's Options 4 Listing Rules to that of ISE
Options 4 is part of the Exchange's continued effort to promote
efficiency in the manner in which it administers its rules.
---------------------------------------------------------------------------

\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Exchange's proposal to amend Options 4, Sections 1, 2, 5, and 7
reflect non-substantive amendments to conform those rules to similar
ISE rules. These proposed changes 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 since the
changes are intended to ease the Participants', market participants',
and the general public's navigation and reading of the rules and lessen
potential confusion and add clarity for market participants.
The proposed amendments to ISE Options 3, Section 3(b) to permit
the Exchange, in exceptional circumstances, to select an underlying
security even though it does not meet all of the guidelines, is
consistent with the Act. Today, the Exchange may establish guidelines
to be considered in evaluating potential underlying securities for
Exchange options transactions. Providing NOM with the same ability to
select an underlying security even though it does not meet all of the
guidelines as ISE will permit NOM to list similar options as ISE for
competitive purposes.
The Exchange's proposal to add the defined term ``Financial
Instruments'' within Options 4, Section 3(h) and also account for money
market instruments, U.S. government securities and repurchase
agreements, defined by the term ``Money Market Instruments'' similar to
ISE Options 4, Section 3(h) is consistent with the Act. The addition of
money market instruments, U.S. government securities and repurchase
agreements as securities deemed appropriate for options trading will
make clear that these agreements are included in the acceptable
securities. The Exchange notes that this rule text is clarifying in
nature and will more explicitly provide for money market instruments,
U.S. government securities and repurchase agreements as a separate
category from what is being defined as ``Financial Instruments'' with
this proposal. Today, these instruments are eligible as securities
deemed appropriate for options trading.
The Exchange's proposal to remove the following products from
Options 4, Section 3(h): The ETFS Silver Trust, the ETFS Palladium
Trust, the ETFS Platinum Trust or the Sprott Physical Gold Trust, is
consistent with the Act because the Exchange no longer lists these
products and proposes to remove these products from its listing rules.
The Exchange will file a proposal with the Commission if it determines
to list these products in the future.
The Exchange's proposal to amend Options 4, Section 3(h) by
removing the rule text at the end of the paragraph which provides,
``all of the following conditions are met,'' and creating separate
paragraphs for Options 4, Section 3(h)(1) and (2) is consistent with
the Act. These amendments will de-link these subparagraphs so they are
read independently. Today, Options 4, Section 3(h)(1) applies to all
Exchange-Traded Fund Shares. The Exchange's proposal to clarify that
Options 4, Section 3(h)(2) applies to only international or global
indexes or portfolios that include non-U.S. securities will bring
greater clarity to the qualification standards for listing options on
Exchange-Traded Fund

[[Page 42921]]

Shares. ISE Options 4, Section 3(h) currently has similar rule text.
Proposed Options 4, Sections 3(h) generally concerns securities deemed
appropriate for options trading. The proposed new rule text adds
language stating that subparagraph (h)(2) of Options 4, Section 3
applies to the extent the Exchange-Traded Fund Share is based on
international or global indexes or portfolios that include non-U.S.
securities. This language is intended to serve as a guidepost and
clarify that (1) subparagraph (h)(2) does not apply to an Exchange-
Traded Fund Shares based on a U.S. domestic index or portfolio, and (2)
subparagraph (h)(2) includes Exchange-Traded Fund Shares that track a
portfolio and do not track an index.
The Exchange's proposal to amend Options 4, Section 3(h)(2)(A) to
remove the phrase ``for series of portfolio depositary receipts and
index fund shares based on international or global indexes,'' is
consistent with the Act. Today, Options 4, Section 3(h), subparagraphs
(h)(1) and (h)(v) permit the Exchange to list options on Exchange-
Traded Fund Shares based on generic listing standards for portfolio
depositary receipts and index fund shares without applying component
based requirements in subparagraphs (h)(2)(B)-(D). By removing the
proposed rule text, the Exchange would make clear that subparagraph
(h)(2)(A) applies to Exchange-Traded Fund Shares based on international
or global indexes, or portfolios that include non-U.S. securities, that
are listed pursuant to generic listing standards and comply with
Options 4, Section 3(h) and subparagraph (h)(1).
The Exchange's proposal to amend the term ``comprehensive
surveillance agreement'' within Options 4, Section 3(h)(2) (A)-(D) to
instead provide ``comprehensive surveillance sharing agreement'' is
consistent with the Act as the amendment will bring greater clarity to
the term.
The Exchange's proposal to add the phrase ``if not available or
applicable, the Exchange-Traded Fund's'' to Options 4, Section
3(h)(2)(B), (C), and (D) is consistent with the Act as it will clarify
that when component securities are not available, the portfolio of
securities upon which the Exchange-Traded Fund Share is based can be
used instead. This rule text currently exists within ISE Options 4,
Section 3(h).
The Exchange's proposal to amend and relocate the rule text within
Options 4, Section 3(h)(2)(B), (C), and (D) will bring greater clarity
to the current rule text by explicitly providing that the index being
referenced is the one on which the Exchange-Traded Fund Shares is
based. Also, adding ``or portfolio'' to Options 4, Section 3(h)(2)(C),
and (D) will bring greater clarity to the rule text by conforming the
rule text of (C) and (D) to the language within (B).
The proposed amendments to Options 4, Section 3(h) will conform
NOM's rule text to ISE Options 4, Section 3(h).
The remainder of the change to Options 3, Section 3 are non-
substantive and intended to conform to ISE Options 3, Section 3. These
proposed changes 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 since the changes are
intended to ease the Participants', market participants', and the
general public's navigation and reading of the rules and lessen
potential confusion and add clarity for market participants.
The proposed amendments to Options 4, Section 4 remove unnecessary
rule text and make clear that options contracts that are no longer
approved will not be listed. The proposed amendments to adopt new
Options 4, Section 4(i) similar to ISE, Options 4, Section 4(i), are
consistent with the Act. Today, the Exchange would not open additional
series of HOLDRs without filing a rule change with the Commission and
adopting a corresponding rule. This rule text, similar to ISE,
explicitly provides that the Exchange would not open additional series
of options overlying HOLDRs (without prior Commission approval) if: (1)
The proportion of securities underlying standardized equity options to
all securities held in a HOLDRs trust is less than 80% (as measured by
their relative weightings in the HOLDRs trust); or (2) less than 80% of
the total number of securities held in a HOLDRs trust underlie
standardized equity options. This rule text bring greater clarity to
NOM's rules in that HOLDRs would not be in certain circumstances.
The Exchange's proposal to remove the rule text within Options 4,
Section 4(l), related to inadequate volume delisting, is consistent
with the Act. To remain competitive with other options markets, the
Exchange proposes to adopt the same obligations for continuance of
trading.\20\ Also, pursuant to proposed new Options 4, Section 5(e) the
Exchange will announce securities that have been withdrawn. With this
proposal, the Exchange would eliminate the requirement that an option
must be trading for more than 6 months. The Exchange notes that this
condition is not present on other options markets such as ISE and
Cboe.\21\ This also applies to the requirement that the average daily
volume of the entire class of options over the last six (6) month
period was less than twenty (20) contracts. The Exchange notes that
NOM's requirements are different from other options markets and to
remain competitive the Exchange proposes to adopt the same standards as
ISE to remain competitive and list similar options as other markets.
While the Exchange may in the future determine to delist an option that
is singly listed, the Exchange's proposal to remove the rule text which
provides that ``If the option is singly listed only on the Exchange,
the Exchange will cease to add new series and may delist the class of
options when there is no remaining open interest'' is consistent with
the Act. This rule text does not exist on ISE and Cboe. Today, the
Exchange provides notification of a delisting to all Participants
making it unnecessary to retain the current provisions within (b)(2).
Also, proposed new Options 4, Section 4(e) establishes the rules by
which the Exchange will announce securities that have been withdrawn.
The rule text within Options 4, Section 4(b), as amended to conform to
ISE rule text, will continue to govern the continued approval of
options on the Exchange.
---------------------------------------------------------------------------

\20\ Options 4, Section 4(b), as amended, establishes
requirements for continued listing, similar to ISE.
\21\ See ISE Options 4, Section 4 and Cboe Rule 4.4.
---------------------------------------------------------------------------

The remainder of the changes to Options 3, Section 3 remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general protects investors and the
public interest. Overall, these changes are of a non-substantive nature
and either modify, clarify or relocate the existing Rulebook language
to reflect the language of the ISE version of the rule and are intended
to ease the Participants', market participants', and the general
public's navigation and reading of the rules and lessen potential
confusion and add clarity for market participants.
The Exchange believes that the changes to proposed Options 4,
Section 8 remove impediments to and perfect the mechanism of a free and
open market and a national market system, and, in general protects
investors and the public interest because the changes are mainly of a
non-substantive nature with much of the rule text largely simply being
relocated from current Options 4, Section 5(a)(i)(D) to new Options 4,
Section 8(a) with some minor amendments and is intended to ease the

[[Page 42922]]

Participants', market participants', and the general public's
navigation and reading of the rules and lessen potential confusion and
add clarity for market participants.
The Exchange's proposal to amend Options 3, Section 8 and Options
4A, Section 12(b)(1)(A) to relocate text concerning bid/ask
differentials for long-term option series is consistent with the Act.
The Exchange's proposal will centralize the bid/ask differentials
within Options 2, Section 5(d)(2)(A) and add a sentence to both Options
3, Section 8 and Options 4A, Section 12(b)(1)(A) that cites to Options
2, Section 5(d)(2)(A) for information on bid/ask differentials for the
various products. The Exchange is not amending the bid/ask
differentials; the rule text is simply being relocated. The Exchange
believes that this relocation will provide Market Makers with
centralized information regarding their bid/ask differential
requirements.
The Exchange's proposal to amend the current citation to ``Section
5(d)(i)'' within Options 2, Section 4(a)(1) to instead refer to
``Options 2, Section 5(d)(1)'' is a non-substantive amendment that will
bring greater clarity to the Exchange's rules.
The remainder of the proposed changes to Options 3, Section 8 are
non-substantive.
The Exchange believes that adopting a new Section 9, Limitation on
the Liability of Index Licensors for Option on Fund Share, similar to
ISE, is consistent with the Act. Specifically, this proposal seeks to
limit the liability of index licensors who grant NOM a license to use
their underlying indexes or portfolios in connection with the trading
of options on Fund Shares. This rule text is identical to ISE rule
text.\22\ Proposed Section 9(b) provides that no index licensor with
respect to any index or portfolio underlying an option on Exchange-
Traded Fund Shares traded on the Exchange makes any warranty, express
or implied, as to the results to be obtained by any person or entity
from the use of such index or portfolio, any opening, intra-day or
closing value therefor, or any data included therein or relating
thereto, in connection with the trading of any option contract on
Exchange-Traded Fund Shares based thereon or for any other purpose. The
disclaimers within proposed Section 9 are consistent with the Act in
that these disclaimers provide market participants with relevant
information as to the liabilities on option contracts on Exchange-
Traded Fund Shares.
---------------------------------------------------------------------------

\22\ See ISE Options Listing Rule Section 9.
---------------------------------------------------------------------------

The Exchange believes that the adoption of Options 4, Section 10,
Back-up Trading Arrangements, will provide NOM with similar abilities
as ISE to permit NOM to enter into arrangements with one or more other
exchanges to permit NOM and its Participants to use a portion of a
Back-up Exchange's facilities to conduct the trading of NOM exclusively
listed \23\ options in the event of a Disabling Event, and similarly to
permit NOM to provide trading facilities for another exchange's
exclusively listed options if a ``Disabled Exchange is prevented from
trading due to a Disabling Event. With this proposal, NOM is proposing
to adopt listing rules similar to Phlx to list and trade U.S. Dollar-
Settled Foreign Currency Options. NOM believes that it is important
that it develop back-up trading arrangements to minimize the potential
disruption and market impact that a Disabling Event could cause. The
proposed rule changes are designed to address the key elements
necessary to mitigate the effects of a Disabling Event effecting the
Exchange, minimize the impact of such an event on market participants,
and provide for a liquid and orderly marketplace for securities listed
and traded on the Exchange if a Disabling Event occurs. In particular,
the proposed rule change is intended to ensure that NOM's exclusively
listed and singly listed products will have a trading venue in the
event that trading at NOM is prevented due to a Disabling Event. The
Exchange believes that having these back-up trading arrangements in
place will minimize potential disruptions to the market and investors
if a catastrophe occurs that requires the Exchange's primary facility
to be closed for an extended period. Phlx and ISE have a similar
rule,\24\ and the Exchange believes that it is important to the
protection of investors and the public interest that it also adopt
rules that allow NOM exclusively and singly listed options to continue
to trade in the event of a Disabling Event. The proposed rule change
also provides authority for NOM to provide a back-up trading venue
should another exchange be effected by a Disabling Event, which will
benefit the market and investors if a Disabling Event were to happen on
another exchange that has entered into a back-up trading arrangement
with NOM. Finally, the proposed rule change grants authority to
Exchange officials to take action under emergency conditions, which
should enable key actions to be taken by NOM representatives in the
event of a Disabling Event, and clarifies the fees that will apply if
these back-up trading arrangements are invoked, which will reduce
investor confusion and minimize the disruption to investors associated
with a Disabling Event. Under proposed paragraph (a)(1)(vi), members of
the Back-up Exchange shall not be authorized to trade in any NOM
exclusively listed options, except that (i) NOM may deputize willing
brokers of the Back-up Exchange as temporary NOM Participants to permit
them to execute orders as Participants in NOM exclusively listed
options traded on NOM's facility at the Back-up Exchange, and (ii) the
Back-up Exchange has agreed that it will, at the instruction of NOM,
select members of the Back-up Exchange that are willing to be deputized
by NOM as temporary NOM members authorized to trade NOM exclusively
listed options on NOM's facility at the Back-up Exchange for such
period of time following a Disabling Event as NOM determines to be
appropriate, and NOM may deputize such members of the Back-up Exchange
as temporary NOM members for that purpose. The foregoing exceptions
would permit members of the Back-up Exchange to trade NOM exclusively
listed options on NOM's facility on the Back-up Exchange, if, for
example, circumstances surrounding a Disabling Event result in NOM
members being delayed in connecting to the Back-up Exchange in time for
prompt resumption of trading.
---------------------------------------------------------------------------

\23\ As defined within the proposed rule, the term ``exclusively
listed option'' means an option that is listed exclusively by an
exchange (because the exchange has an exclusive license to use, or
has proprietary rights in, the interest underlying the option).
\24\ See Phlx and ISE Rules Options 3, Section 10.
---------------------------------------------------------------------------

The Exchange's proposal to adopt rules to list and trade U.S.
Dollar-Settled Foreign Currency Options on NOM that are currently
listed and traded on Phlx is consistent with the Act. Specifically, NOM
proposes to relocate current rule text related to criteria for listing
U.S. Dollar-Settled Foreign Currency Options to new Options 4C and
adopting rules to list U.S. Dollar-Settled Foreign Currency Options
similar to Phlx.\25\ Today, sufficient venues exist for obtaining
reliable information on the currencies so that investors in U.S.
dollar-settled Foreign Currency Options can monitor the underlying spot
market in the currencies. NOM will integrate

[[Page 42923]]

U.S. dollar-settled index options, as well as for physical delivery
foreign currency options at the time that NOM lists dollar-settled
Foreign Currency Options. In addition, the NOM may obtain trading
information via the ISG from other exchanges who are members or
affiliates of the ISG. U.S. dollar-settled FCO contracts will be
aggregated with physical delivery contracts for position and exercise
limit purposes. Exchange rules designed to protect public customers
trading in FCOs would apply to U.S. dollar-settled FCOs on the
Currencies. The Exchange believes that the adoption of these rules will
offer investors another venue on which to transact U.S. Dollar-Settled
Foreign Currency Options. The listing of U.S. Dollar-Settled Foreign
Currency Options will enhance competition by providing investors with
an additional investment vehicle.
---------------------------------------------------------------------------

\25\ See Securities Exchange Release No. 54989 (December 21,
2006), 71 FR 78506 (December 29, 2006) (SR-Phlx-2006-34) (Notice of
Filing and Order Granting Accelerated Approval to Proposed Rule
Change as Modified by Amendments No. 1, 2, and 3 Thereto Relating to
U.S. Dollar-Settled Foreign Currency Options). Today, NOM's rules
contain the criteria to list U.S. Dollar-Settled Foreign Currency
Options only.
---------------------------------------------------------------------------

Similar to Phlx, NOM would adopt an applicability rule within
proposed Options 4C, Section 1 and defined terms within Section 2. The
Exchange proposes that the criteria for listing U.S. Dollar-Settled
Foreign Currency Options be relocated from current Options 4, Section
3(m). Similar to Phlx, NOM rules would adopt rules related to the
withdrawal of approval of underlying securities or options to permit
NOM to withdraw approval of an underlying foreign currency whenever it
deems such withdrawal advisable in the public interest or for the
protection of investors. In the event of a withdrawal, NOM would not
open for trading any additional series of options of the class covering
that underlying foreign currency. Also, NOM proposes to adopt a new
Options 4C, Section 5 to describe the manner in which it would list and
trade U.S. Dollar-Settled Foreign Currency Options. After call option
contracts or put option contracts relating to a specific underlying
foreign currency has been approved for listing and trading on the
Exchange, NOM shall from time to time open for trading series of
options therein. Prior to the opening of trading in any series of
options, NOM shall fix the expiration month and exercise price of
option contracts included in such series. This rule is identical to
Phlx's listing rules for U.S. Dollar-Settled Foreign Currency Options
within Phlx Options 4C, Section 5. The determination of the closing
settlement value is described within Options 4C, Section 6. The
Exchange believes that permitting NOM to list U.S. Dollar-Settled
Foreign Currency Options, similar to Phlx, would allow market
participants another venue in which to transact U.S. Dollar-Settled
Foreign Currency Options.

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. The relocation of the Options
Listing Rules will facilitate the use of the Rulebook by Participants
of the Exchange, who are members of other Affiliated Exchanges; other
market participants; and the public in general. The changes are
consistent with the ISE Rulebook.
The Exchange's proposal to amend Options 4, Sections 1, 2, 5, and 7
reflects non-substantive amendments to conform those rules to similar
ISE rules at Options 4, Sections 1, 2, 5, and 7. These proposed changes
do not impose an undue burden on competition since the changes are
intended to ease the Participants', market participants', and the
general public's navigation and reading of the rules and lessen
potential confusion and add clarity for market participants.
The proposed amendments to ISE Options 3, Section 3(b) to permit
the Exchange, in exceptional circumstances, to select an underlying
security even though it does not meet all of the guidelines does not
impose an undue burden on competition. Today, the Exchange may
establish guidelines to be considered in evaluating potential
underlying securities for Exchange options transactions. Providing NOM
with the same ability to select an underlying security even though it
does not meet all of the guidelines as ISE will permit NOM to list
similar options as ISE for competitive purposes.
The Exchange's proposal to add the defined term ``Financial
Instruments'' within Options 4, Section 3(h) and also account for money
market instruments, U.S. government securities and repurchase
agreements, defined by the term ``Money Market Instruments'' similar to
ISE Options 4, Section 3(h) does not impose an undue burden on
competition. The addition of money market instruments, U.S. government
securities and repurchase agreements as securities deemed appropriate
for options trading will make clear that these agreements are included
in the acceptable securities.
The Exchange's proposal to remove the following products from
Options 4, Section 3(h): The ETFS Silver Trust, the ETFS Palladium
Trust, the ETFS Platinum Trust or the Sprott Physical Gold Trust, does
not impose an undue burden on competition. The Exchange no longer lists
these products and proposes to remove them the products from its
listing rules.
The Exchange's proposal to amend Options 4, Section 3(h) by
removing the rule text at the end of the paragraph which provides,
``all of the following conditions are met,'' and creating separate
paragraphs for Options 4, Section 3(h)(1) and (2) does not impose an
undue burden on competition. These amendments will de-link these
subparagraphs so they are read independently. Today, Options 4, Section
3(h)(1) applies to all Exchange-Traded Fund Shares. The Exchange's
proposal to clarify that Options 4, Section 3(h)(2) applies to only
international or global Exchange-Traded Fund Shares that include non-
U.S. securities will bring greater clarity to the qualification
standards for listing options on Exchange-Traded Fund Shares.
Specifically, this language is intended to serve as a guidepost and
clarify that (1) subparagraph (h)(2) does not apply to an Exchange-
Traded Fund Shares based on a U.S. domestic index or portfolio, and (2)
subparagraph (h)(2) includes Exchange-Traded Fund Shares that track a
portfolio and do not track an index. This amendment will uniformly
apply the criteria within Options 4, Section 3 when it lists options
products on NOM.
The Exchange's proposal to amend Options 4, Section 3(h)(2)(A) to
remove the phrase ``for series of portfolio depositary receipts and
index fund shares based on international or global indexes,'' does not
impose an undue burden on competition. Today, Options 4, Section 3(h),
subparagraphs (h)(1) and (h)(v) permit the Exchange to list options on
Exchange-Traded Fund Shares based on generic listing standards for
portfolio depositary receipts and index fund shares without applying
component based requirements in subparagraphs (h)(2)(B)-(D). By
removing the proposed rule text, the Exchange would make clear that
subparagraph (h)(2)(A) applies to Exchange-Traded Fund Shares based on
international or global indexes, or portfolios that include non-U.S.
securities, that are listed pursuant to generic listing standards and
comply with Options 4, Section 3(h) and subparagraph (h)(1). This
amendment will uniformly apply the criteria within Options 4, Section 3
when it lists options products on NOM.
The Exchange's proposal to amend the term ``comprehensive
surveillance agreement'' within Options 4, Section 3(h)(2) (A)-(D) to
instead provide ``comprehensive surveillance sharing agreement'' does
not impose an undue

[[Page 42924]]

burden on competition as the amendment will bring greater clarity to
the term.
The Exchange's proposal to add the phrase ``if not available or
applicable, the Exchange-Traded Fund's'' to Options 4, Section
3(h)(2)(B), (C), and (D) does not impose an undue burden on competition
as it will clarify that when component securities are not available,
the portfolio of securities upon which the Exchange-Traded Fund Share
is based can be used instead.
The Exchange's proposal to amend and relocate the rule text within
Options 4, Section 3(h)(2)(B), (C), and (D) will bring greater clarity
to the current rule text by explicitly providing that the index being
referenced is the one on which the Exchange-Traded Fund Shares is
based. Also, adding ``or portfolio'' to Options 4, Section 3(h)(2)(C),
and (D) will bring greater clarity to the rule text by conforming the
rule text of (C) and (D) to the language within (B).
The proposed amendments to Options 4, Section 4 remove unnecessary
rule text and make clear that options contracts that are no longer
approved will not be listed. The proposed amendments to adopt new
Options 4, Section 4(i), similar to ISE, Options 4, Section 4(i), does
not impose an undue burden on competition. The amendments would provide
for provisions wherein the Exchange will not open additional series of
options overlying HOLDRs similar to ISE, which provisions do not
currently exist.
The Exchange's proposal to remove the rule text within Options 4,
Section 4(l), related to inadequate volume delisting, does not impose
an undue burden on competition. To remain competitive with other
options markets, the Exchange proposes to adopt the same obligations
for continuance of trading.\26\ Also, pursuant to proposed new Options
4, Section 5(e) the Exchange will announce securities that have been
withdrawn. With this proposal, the Exchange would eliminate the
requirement that an option must be trading for more than 6 months. The
Exchange notes that this condition is not present on other options
markets such as ISE and Cboe.\27\ This also applies to the requirement
that the average daily volume of the entire class of options over the
last six (6) month period was less than twenty (20) contracts. The
Exchange notes that NOM's requirements are different from other options
markets and to remain competitive the Exchange proposes to adopt the
same standards as ISE to remain competitive and list similar options as
other markets. The Exchange's proposal removes the rule text which
provides that ``If the option is singly listed only on the Exchange,
the Exchange will cease to add new series and may delist the class of
options when there is no remaining open interest'' does not impose an
undue burden on competition. This rule text does not exist on ISE and
Cboe. The Exchange today provides notification of a delisting to all
members so therefore it is not necessary to retain the provisions
within (b)(2). Also, proposed new Options 4, Section 4(e) establishes
the rules by which the Exchange will announce securities that have been
withdrawn.
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\26\ Options 4, Section 4(b), as amended, establishes
requirements for continued listing, similar to ISE.
\27\ See ISE Options 4, Section 4 and Cboe Rule 4.4.
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The Exchange believes that the changes to proposed Options 4,
Section 8 do not impose an undue burden on competition as the changes
are mainly of a non-substantive nature with much of the rule text
largely simply being relocated from current Options 4, Section
5(a)(i)(D) to new Options 4, Section 8(a) with some minor amendments.
The Exchange's proposal to amend Options 3, Section 8 and Options
4A, Section 12(b)(1)(A) to relocate rule text concerning bid/ask
differentials for long-term option series, without change, does not
impose an undue burden on competition. The Exchange believes that this
relocation will provide Market Makers with centralized information
regarding their bid/ask differential requirements.
Adopting a new Section 9, Limitation on the Liability of Index
Licensors for Option on Fund Shares, similar to ISE, does not impose an
undue burden on competition. The proposal seeks to limit the liability
of index licensors who grant NOM a license to use their underlying
indexes or portfolios in connection with the trading of options on Fund
Shares. This rule text is identical to ISE rule text.\28\ Proposed
Section 9(b) provides that no index licensor with respect to any index
or portfolio underlying an option on Exchange-Traded Fund Shares traded
on the Exchange makes any warranty, express or implied, as to the
results to be obtained by any person or entity from the use of such
index or portfolio, any opening, intra-day or closing value therefor,
or any data included therein or relating thereto, in connection with
the trading of any option contract on Exchange-Traded Fund Shares based
thereon or for any other purpose.
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\28\ See ISE Options Listing Rule Section 9.
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\29\ As defined within the proposed rule, the term ``exclusively
listed option'' means an option that is listed exclusively by an
exchange (because the exchange has an exclusive license to use, or
has proprietary rights in, the interest underlying the option).
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Permitting NOM to list U.S. Dollar-Settled Foreign Currency Options
similar to Phlx would allow market participants another venue in which
to transact U.S. Dollar-Settled Foreign Currency Options. U.S. Dollar-
Settled Foreign Currency Options would be available for trading to all
market participants. The proposal will enhance competition among market
participants, to the benefit of investors and the marketplace.

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)(iii) of the Act \30\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\31\
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\30\ 15 U.S.C. 78s(b)(3)(A)(iii).
\31\ 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) \32\ normally
does not

[[Page 42925]]

become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\33\ the Commission may
designate a shorter time if such action is consistent with protection
of investors and the public interest. The Exchange has asked the
Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange's proposal
does not raise any new or novel issues. Therefore, the Commission
believes that waving the 30-day operative delay is consistent with the
protection of investors and the public interest. Accordingly, the
Commission designates the proposed rule change to be operative on upon
filing.\34\
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\32\ 17 CFR 240.19b-4(f)(6).
\33\ 17 CFR 240.19b-4(f)(6).
\34\ 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 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#7c0e091019511f1311111912080f3c0f191f521b130a"><span class="__cf_email__" data-cfemail="bbc9ced7de96d8d4d6d6ded5cfc8fbc8ded895dcd4cd">[email&#160;protected]</span></a>. Please include
File Number SR-NASDAQ-2021-059 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-NASDAQ-2021-059. 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 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-NASDAQ-2021-059 and should be submitted
on or before August 26, 2021.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-16676 Filed 8-4-21; 8:45 am]
BILLING CODE 8011-01-P

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