Notice2022-24141
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Standard Monthly Expirations for XND
Primary source
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Published
November 7, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 214 (Monday, November 7, 2022)</title>
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[Federal Register Volume 87, Number 214 (Monday, November 7, 2022)]
[Notices]
[Pages 67103-67105]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24141]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96194; File No. SR-Phlx-2022-42]
Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Standard
Monthly Expirations for XND
November 1, 2022.
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 October 19, 2022, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Exchange has designated the
proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. 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.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to permit Phlx to list up to 12 standard
monthly expirations for Nasdaq 100 Micro Index Options (``XND'').
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/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.
[[Page 67104]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Phlx proposes to amend its index listing rules at Options 4A,
Section 12(a)(4) to allow it to list up to12 standard monthly
expirations for Nasdaq 100 Micro Index Options (``XND'').
Currently, Options 4A, Section 12(a)(4) provides that the Exchange
may list: (i) up to six (6) standard monthly expirations at any one
time in a class, but will not list index options that expire more than
twelve (12) months out; (ii) up to 12 standard monthly expirations at
any one time for any class that the Exchange (as the Reporting
Authority) uses to calculate a volatility index; and (iii) up to 12
standard (monthly) expirations in NDX options.\4\ Today, the maximum
number of monthly expirations permitted by Options 4A, Section 12(a)(4)
for XND options is six (6) standard monthly expirations.
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\4\ Options 4A, Section 12(a)(4) states, ``Expiration Months and
Weeks. Index options contracts may expire at three (3)-month
intervals or in consecutive weeks or months. The Exchange may list:
(i) up to six (6) standard monthly expirations at any one time in a
class, but will not list index options that expire more than twelve
(12) months out; (ii) up to 12 standard monthly expirations at any
one time for any class that the Exchange (as the Reporting
Authority) uses to calculate a volatility index; and (iii) up to 12
standard (monthly) expirations in NDX options.''
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At this time, like Nasdaq-100 Index[supreg] options (``NDX''), the
Exchange proposes to permit up to 12 standard (monthly) expirations in
XND options. This would permit the Exchange to list the same number of
monthly expirations (up to 12) for XND options as currently permitted
for options on the corresponding full-value index, Nasdaq-100 Index.
Today, XND options trade independently of and in addition to NDX
options, and the XND options are subject to the same rules that
presently govern the trading of NDX options, including sales practice
rules, margin requirements, trading rules, and position and exercise
limits. Like NDX, XND options are European-style and cash-settled, and
have a contract multiplier of 100. The contract specifications for XND
options mirror in all respects those of the NDX options contract
already listed on the Exchange, except that XND options are based on 1/
100th of the value of the Nasdaq-100 Index, and are P.M.-settled
pursuant to Options 4A, Section 12(a)(5).\5\
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\5\ The Exchange notes that NDX options are both a.m.-settled
and p.m.-settled while XND options are only p.m.-settled.
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Market participants may use XND options as a hedging vehicle to
meet their investment needs in connection with the Nasdaq-100 Index.
Since both products are used to hedge exposure to the Nasdaq-100 Index,
the Exchange believes it is appropriate to permit the Exchange to be
able to list the same number of monthly expirations for XND options as
it does today for NDX options.
The Exchange notes that Cboe Exchange, Inc.'s (``Cboe'') rules
permit it to list up to 12 standard monthly expirations for Mini-
Russell 2000 Index (``Mini-RUT'' or ``MRUT'') and Mini S&P 500 Index
(``Mini-SPX'' or ``XSP'').\6\ Mini-SPX is p.m.-settled and subject to a
pilot program similar to XND.
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\6\ See Cboe Rule 4.13(a)(2).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\7\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\8\ 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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Allowing Phlx to list up to 12 standard monthly expirations for XND
options will remove impediments to and perfect the mechanism of a free
and open market and a national market system, and, in general, protect
investors, because it will allow the Exchange to be able to list the
same number of expirations for options on a micro index (XND) as it
currently lists for NDX options, which are options on the corresponding
full-value index, Nasdaq-100 Index. The Exchange notes that because the
same components comprise XND as the Nasdaq-100 Index, market
participants may use XND options as a hedging vehicle to meet their
investment needs in connection with the corresponding full-value index-
related product. Therefore, by allowing the Exchange to be able to list
a consistent number of expirations between options on the full-value
and micro index, the proposed rule change will benefit investors by
assisting them in more effectively using options that track the same
index to meet their investment needs.
The Exchange notes that today, Cboe rules permit it to list up to
12 standard monthly expirations for Mini-Russell 2000 Index (``Mini-
RUT'' or ``MRUT'') and Mini S&P 500 Index (``Mini-SPX'' or ``XSP'').\9\
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\9\ See Cboe Rule 4.13(a)(2).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange does not believe that the proposed rule change will
impose any burden on intra-market competition that is not necessary or
appropriate in furtherance of the purposes of the Act as all monthly
expirations listed for XND options will be equally available, or
continue to be equally available, to all market participants who trade
such options. Also, the proposed number of expirations will apply, or
continue to apply, in the same manner to all XND options. The proposed
rule change makes it possible for the same expirations to be listed for
options on the micro index (XND) that are currently available for XND
[sic] options, which are options on the full-value index, Nasdaq-100
Index.
The Exchange does not believe that the proposed rule change
regarding the number of standard monthly expirations permissible for
XND options will impose any burden on intermarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act
because XND is a proprietary Exchange product. To the extent that
allowing up to 12 standard monthly expirations for XND options trading
on the Exchange may make the Exchange a more attractive marketplace to
market participants at other exchanges, such market participants are
free to elect to become market participants on Phlx. As noted above,
the Exchange believes that being able to list a consistent number of
monthly expirations of options on both the full-value and micro index
may permit investors to more effectively use options that track the
same index to meet their investment needs.
This proposal enhances intermarket competition because it permits
Phlx's proprietary product, XND, the same flexibility to trade, and
hedge, with 12 standard monthly expirations as certain Cboe proprietary
products.
[[Page 67105]]
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 after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) \11\ thereunder.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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, 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) \12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposed
rule change may become operative upon filing. The Exchange states that
waiver of the operative delay will protect investors because it will
allow the Exchange to be able to list expirations for XND options that
are consistent with the expirations for related NDX options, and assist
market participants in more effectively utilizing both the full-value
index and reduced-value option as hedging vehicles to meet their
investment needs in connection with the Nasdaq-100 Index product as
soon as feasible. Further, the Exchange states that there is investor
demand to be able to transact in the same number of expirations for XND
options as the Exchange currently lists for NDX options (that is, 12
standard monthly expirations). For these reasons, and because the
proposed rule change does not raise any novel regulatory issues, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposal operative upon filing.\14\
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ For purposes only of waiving the 30-day operative delay,
the Commission 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#98eaedf4fdb5fbf7f5f5fdf6ecebd8ebfdfbb6fff7ee"><span class="__cf_email__" data-cfemail="aad8dfc6cf87c9c5c7c7cfc4ded9ead9cfc984cdc5dc">[email protected]</span></a>. Please include
File Number SR-Phlx-2022-42 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-Phlx-2022-42. 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 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of the Exchange. All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-Phlx-2022-42 and should be submitted on
or before November 28, 2022.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24141 Filed 11-4-22; 8:45 am]
BILLING CODE 8011-01-P
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