Notice2021-17758
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Expiration Timeframe of Long-Term Index Options Series
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 19, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 158 (Thursday, August 19, 2021)</title>
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[Federal Register Volume 86, Number 158 (Thursday, August 19, 2021)]
[Notices]
[Pages 46722-46724]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-17758]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92666; File No. SR-NASDAQ-2021-062]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Expiration Timeframe of Long-Term Index Options Series
August 13, 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 August 9, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend The Nasdaq Options Market LLC
(``NOM'') Rules at Options 2, Section 5, Market Maker Quotations and
Options 4A, Section 12, Terms of Index Option Contracts.
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 NOM Rules at Options 2, Section 5,
Market Maker Quotations and Options 4A, Section 12, Terms of Index
Option Contracts. Specifically, the Exchange proposes to amend the
expiration timeframe of Long-Term Options Series or ``LEAPs.''
Options 2, Section 5(d)(2)(A) currently provides, ``Bid/ask
differentials shall not apply to any options series until the time to
expiration is less than nine (9) months for index options.'' Similarly,
Options 4A, Section 12(b) currently states,
(1) Notwithstanding the provisions of paragraph (a)(3), above,
NOM may list long-term index options series that expire from nine
(9) to sixty (60) months from the date of issuance.
(A) Index long term options series may be based on either the
full or reduced value of the underlying index. There may be up to
ten (10) expiration months, none further out than sixty (60) months.
Strike price interval and continuity Rules shall not apply to such
options series until the time to expiration is less than nine (9)
months. Bid/ask differentials for long-term options contracts are
specified within Options 2, Section 5(d)(2)(A).
The Exchange proposes to amend the current text of Options 2, Section
5(d)(2)(A) and Options 4A, Section 12(b) to amend the time to
expiration term of LEAPs on index options from nine to sixty months to
twelve to sixty months. Likewise, the Exchange proposes to amend the
time to expiration for strike price interval, continuity rules and bid/
ask differentials for LEAPS on index options from less than nine to
less than twelve months.
Today, other options markets have terms similar to those proposed
herein.\3\ The proposal would align NOM's rules with other options
markets with respect
[[Page 46723]]
to the opening month for LEAPs on index options and the time to
expiration for strike price interval, continuity rules and bid/ask
differentials for LEAPS on index options by changing nine to twelve
months.
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\3\ See Cboe Options Exchange, Inc. Rule 4.13(b). See also
Nasdaq Phlx LLC and Nasdaq ISE, LLC Options 4A, Section 12(b).
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The Exchange also proposes to amend Options 2, Section 5 concerning
a Market Maker's obligation to make two-sided markets in any option
series with an expiration of nine months or greater. Today, Market
Makers are not required to make two-sided markets in Quarterly Option
Series, any Adjusted Option Series, and any option series with an
expiration of nine months or greater in equities, ETFs or indexes. With
this proposal, Market Makers are not required to make two-sided markets
in Quarterly Option Series, any Adjusted Option Series, and any option
series with an expiration of nine months or greater in equities, and
ETFs. With respect to indexes, Market Makers would not be required to
make two-sided markets in Quarterly Option Series, any Adjusted Option
Series, and any option series with an expiration of twelve months or
greater. The Exchange proposes to add rule text within Options 2,
Section 5 to make clear a Market Maker's obligation, respectively, to
make two-sided markets with respect to LEAPs. Today, Nasdaq ISE, LLC
(``ISE''), Nasdaq GEMX, LLC (``GEMX'') and Nasdaq MRX, LLC (``MRX'')
have similar rules which describe the way LEAPs on index options should
be quoted.\4\
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\4\ See ISE, GEMX and MRX Options 2, Section 5(e)(1).
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Implementation
The Exchange proposes to implement this amendment on or before
September 30, 2021. The Exchange will issue an Options Trader Alert
announcing the date the amendment will be operative.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\5\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\6\ in particular, in that it is designed to promote
just and equitable principles of trade and to protect investors and the
public interest by amending its rules, in part, to align NOM's rules
with other options markets with respect to the opening month of
acceptable months for LEAPs on index options and the time to expiration
for strike price interval, continuity rules and bid/ask differentials
for LEAPS on index options. Today, other options markets have terms
similar to those proposed herein.\7\
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ See supra note 3.
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Amending Options 2, Section 5(d)(2)(A) and Options 4A, Section
12(b) would harmonize NOM's rules with respect to LEAPs on index
options to permit NOM to list these options in the same manner as other
options markets that have similar rules.\8\ The Exchange notes that
this rule change will allow NOM to list more non-LEAP expirations as
the front-months for LEAP expirations would begin with month twelve
instead of month nine. The Exchange believes that this proposal would
allow it to list more months where there is greater customer demand as
this proposal would amend the opening month for LEAPs on index options
from nine to twelve months. Harmonizing NOM's rules with respect to
LEAPs on index options will allow NOM to list these options in the same
manner as other options markets that have similar rules.\9\
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\8\ See supra note 3.
\9\ See supra note 3.
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Amending Options 2, Section 5 to specifically note that the opening
month for LEAPs on index options would be twelve months by adding a
separate sentence to address LEAPs for index options is consistent with
the Act. The proposal would align the Exchange with the way other
options markets require market makers to quote LEAPs on index
options.\10\ NOM Market Makers would be required to provide two-sided
quotations in additional months with this proposal as the opening month
for LEAPs on index options is changing from nine to twelve months.
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\10\ See ISE, GEMX and MRX Options 2, Section 5(e)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Exchange does
not believe the proposal to amend Options 2, Section 5(d)(2)(A) and
Options 4A, Section 12(b) will impose any burden on intra-market
competition as all Participants will be treated in the same manner with
respect to time to expiration for strike price interval, continuity
rules and bid/ask differentials for LEAPs on index options.
Additionally, the Exchange does not believe the proposal will impose
any burden on inter-market competition as market participants are
welcome to become NOM Participants if they determine that this proposed
rule change has made NOM more attractive or favorable. Finally, all
options exchanges are free to compete by listing and trading index
options with similar expirations.
Amending Options 2, Section 5 to specifically note that the opening
month for LEAPs on index options would be twelve months by adding a
separate sentence to address LEAPs on index options does not impose an
undue burden on competition, rather the proposal aligns the Exchange's
rule with rules of other options markets with respect to quoting
LEAPs.\11\
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\11\ See ISE, GEMX and MRX Options 2, Section 5(e)(1).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay. Waiver
of the operative delay would allow the Exchange to align its rules with
other options exchanges with respect to the opening month for LEAPs on
index options and implement its proposed rule change on or before
September 30, 2021. The Commission believes that the proposed rule
change presents no novel issues and that waiver
[[Page 46724]]
of the 30-day operative delay is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the operative delay and designates the proposed rule change
operative upon filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9be9eef7feb6f8f4f6f6fef5efe8dbe8fef8b5fcf4ed"><span class="__cf_email__" data-cfemail="b7c5c2dbd29ad4d8dadad2d9c3c4f7c4d2d499d0d8c1">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2021-062 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-2021-062. 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-2021-062, and should be submitted
on or before September 9, 2021.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17758 Filed 8-18-21; 8:45 am]
BILLING CODE 8011-01-P
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