Notice2022-24888
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Granting Approval of a Proposed Rule Change To Amend the Short Term Option Series Program
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
November 16, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 220 (Wednesday, November 16, 2022)</title>
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[Federal Register Volume 87, Number 220 (Wednesday, November 16, 2022)]
[Notices]
[Pages 68769-68771]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24888]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96281; File No. SR-ISE-2022-18]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Granting
Approval of a Proposed Rule Change To Amend the Short Term Option
Series Program
November 9, 2022.
I. Introduction
On September 9, 2022, Nasdaq ISE, LLC (``ISE'' or the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to:
(1) limit the number of Monday and Wednesday expiration dates for
options on SPDR S&P 500 ETF Trust (SPY), the INVESCO QQQ Trust\SM\,
Series 1 (QQQ), and iShares Russell 2000 ETF (IWM); and (2) permit the
listing and trading of options series with Tuesday and Thursday
expirations for options on SPY and QQQ listed pursuant to the
Exchange's short term option series program (``Short Term Options
Series Program''). The proposed rule change was published for comment
in the Federal Register on September 26, 2022.\3\ No comments were
received. The Commission is approving the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 95841 (September 20,
2022), 87 FR 58399 (``Notice'').
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II. Description of the Proposal <SUP>4</SUP>
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\4\ For a full description of the proposal, refer to the Notice,
supra note 3.
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The Exchange proposes to amend the Short Term Option Series Program
rules to: (1) decrease the number of Monday and Wednesday short term
option expiration dates for options on SPY, QQQ, and IWM from five to
two expirations; and (2) expand the Short Term Option Series program to
permit the listing and trading of options series with Tuesday and
Thursday expirations for options on SPY and QQQ listed pursuant to the
Short Term Option Series Program, subject to the same proposed
limitation of two expirations.
Curtail Short Term Option Expiration Dates and Re-Organize Short Term
Option Daily Expiration Rules
Currently, the Exchange may open for trading on any Tuesday or
Wednesday that is a business day series of options on SPY, QQQ, and IWM
to expire on any Wednesday of the month that is a business day and is
not a Wednesday in which Quarterly Options Series expire (``Wednesday
Expirations''). The Exchange also may open for trading on any Friday or
Monday that is a business day series of options on the SPY, QQQ, or IWM
to expire on any Monday of the month that is a business day and is not
a Monday in which Quarterly Options Series expire (``Monday
Expirations''), provided that Monday Expirations that are listed on a
Friday must be listed at least one business week and one business day
prior to the expiration. Currently, the Exchange may list up to five
consecutive Wednesday Expirations and five consecutive Monday
Expirations on each of SPY, QQQ, and IWM. The Exchange proposes to
curtail the number of Short Term Option Expiration Dates from five to
two per symbol for Monday Expirations and Wednesday Expirations.
Further, in conjunction with the proposal to add Tuesday and
Thursday Expirations (as described below), the Exchange proposes to
create a new category of Short Term Options called ``Short Term Option
Daily Expirations,'' which will encompass the Monday, Tuesday,
Wednesday, and Thursday
[[Page 68770]]
Expirations. The Exchange proposes to include a table, labelled ``Table
1'', within Supplementary Material .03 to Options 4, Section 5 to
specify each symbol that qualifies as a Short Term Option Daily
Expiration as well the number of expirations for each symbol on each
expiration day. The Exchange is also proposing to specify that Monday
and Wednesday expirations may not expire on the same day in which
monthly options series expire.\5\ Finally, the Exchange is amending
Supplementary Material .03(b) to Options 4, Section 5, to replace the
reference to Monday and Wednesday Expirations with ``Short Term Option
Daily Expirations,'' which would permit Monday, Tuesday, Wednesday, and
Thursday Expirations to expire in the same week in which monthly option
series on the same class expire.
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\5\ The Exchange notes that practically speaking, Monday and
Wednesday Expirations would not expire on the same day as a monthly
expiration. See Notice, supra note 3 at 58401. As is currently the
case, Monday and Wednesday Expirations may not expire on the same
day as a Quarterly Options Series. See Supplementary Material .03 of
Options 4, Section 5.
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Short Term Options Series with Friday expirations on SPY, QQQ, IWM,
and other symbols will continue to have a total of five Short Term
Option Expiration Dates. These Friday expirations would be referred to
as ``Short Term Option Weekly Expirations'' to distinguish them from
the proposed Short Term Option Daily Expirations.
Tuesday and Thursday Expirations
The Exchange proposes to expand the Short Term Option Series
Program to permit the Exchange to open for trading on any Monday or
Tuesday that is a business day series of options on SPY and QQQ that
expire at the close of business on each of the next two Tuesdays that
are business days and are not business days in which monthly options
series or Quarterly Options Series expire (``Tuesday Expirations''). If
the Tuesday Expiration falls on a Tuesday that is not a business day,
the series shall expire on the first business day immediately prior to
that Tuesday.
Similarly, the proposal would permit the Exchange to open for
trading on any Wednesday or Thursday that is a business day series of
options on SPY and QQQ that expire at the close of business on each of
the next two Thursdays that are business days and are not business days
in which monthly options series or Quarterly Options Series expire
(``Thursday Expirations''). If the Thursday Expiration falls on a
Thursday that is not a business day, the series shall expire on the
first business day immediately prior to that Thursday.\6\
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\6\ Further, in order to accommodate the listing of Tuesday and
Thursday Expirations, the Exchange also proposes to amend the
definition of Short Term Options Series at Options 1, Section
1(a)(49) to add Tuesday and Thursdays to the permitted expiration
days, which currently only include Monday, Wednesday, and Friday.
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Tuesday and Thursday Expirations would be subject to Supplementary
Material .03 of Options 4, Section 5, as proposed to be amended. As
noted above, the Exchange proposes to amend Commentary .11(b) to
Options 4, Section 5 to permit Tuesday Expirations and Thursday
Expirations to expire in the same week in which monthly options series
on the same class expire. Otherwise, Tuesday Expirations and Thursday
Expirations will be subject to the same rules as other Short Term
Option Series.\7\
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\7\ For example, the Tuesday Expirations and Thursday
Expirations would be subject to the same strike interval rules and
series limitations as other Short Term Option Series. See Notice,
supra note 3, at 58401.
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The Exchange does not believe that any market disruptions would be
encountered with the introduction of Tuesday and Thursday
Expirations.\8\ The Exchange believes that it has the necessary
capacity and surveillance programs in place to support and properly
monitor trading in the proposed Tuesday and Thursday Expirations.\9\
The Exchange currently trades Short Term Option Series that expire
Monday and Wednesday for SPY, QQQ and IWM and stated that it has not
experienced any market disruptions nor issues with capacity.\10\
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\8\ See id.
\9\ See id.
\10\ See id.
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Implementation
The Exchange proposes to implement this rule change on or before
November 14, 2022. The Exchange would issue an Options Trader Alert to
notify Members of the implementation date. The Exchange states that
Monday and Wednesday Expirations in SPY, QQQ, and IWM that were listed
prior to the date of implementation would continue to be listed on the
Exchange until those options expire pursuant to current Short Term
Option Series rules within Supplementary Material .03 of Options 4,
Section 5.\11\
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\11\ See id. at 58403.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange
and, in particular, with Section 6(b) of the Act.\12\ The Commission
finds that the proposed rule change is consistent with Section 6(b)(5)
of the Act,\13\ which requires, among other things, that a national
securities exchange have rules designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, 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. The proposal reduces the
number of Short Term Option Expirations to be listed on ISE.\14\ This
reduction may remove impediments to and perfect the mechanism of a free
and open market by encouraging market makers to deploy capital more
efficiently and improve displayed market quality. The Exchange stated
that it believes that despite the proposed curtailment of expirations,
its members would continue to be able to expand hedging tools and
tailor their investment and hedging needs more effectively in SPY, QQQ,
and IWM.\15\ Therefore, the Commission believes that the proposal is
reasonably designed to effectuate the Exchange's goal of balancing a
reduction in the number of Short Term Option Expirations with the needs
of market participants.
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\12\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\13\ 15 U.S.C. 78f(b)(5).
\14\ See Notice, supra note 3 at 58400.
\15\ See id. at 58403.
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The Exchange's proposal to permit SPY and QQQ Tuesday and Thursday
Expirations may provide the investing public and other market
participants more flexibility to closely tailor their investment and
hedging decisions in SPY and QQQ options, thus allowing them to better
manage their risk exposure. In addition, the Tuesday and Thursday
Expirations would be subject to rules similar to existing Exchange
rules permitting the listing and trading of Monday and Wednesday
Expirations in SPY and QQQ options.\16\ Further, the Exchange has
represented that it has an adequate surveillance program in place to
detect manipulative trading in SPY and QQQ Tuesday and Thursday
Expirations and has the necessary
[[Page 68771]]
systems capacity to support the new options series.\17\
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\16\ See id. at 58400.
\17\ See id. at 58401.
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Therefore, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act \18\ and the rules and
regulations thereunder applicable to a national securities exchange.
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\18\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-ISE-2022-18), be, and hereby
is, approved.
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\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24888 Filed 11-15-22; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on November 16, 2022.
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