Notice2023-07140
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Make a Clarifying Change to the Term Settlement Style Applicable to Flexible Exchange Options
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
April 6, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 66 (Thursday, April 6, 2023)</title>
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[Federal Register Volume 88, Number 66 (Thursday, April 6, 2023)]
[Notices]
[Pages 20587-20589]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-07140]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97231; File No. SR-NYSEAMER-2023-22]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Make a
Clarifying Change to the Term Settlement Style Applicable to Flexible
Exchange Options
March 31, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on March 22, 2023, NYSE American LLC (``NYSE American'' or
the ``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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Commentary .01 under Rule 903G to
make a clarifying change to the flex term settlement style applicable
to Flexible Exchange (``FLEX'') Options. The proposed rule change is
available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Commentary .01 under Rule 903G to
make a clarifying change to the flex term settlement style applicable
to FLEX Options.
FLEX Options are customized equity or index contracts that allow
investors to tailor contract terms for exchange-listed equity and index
options. Commentary .01 under Rule 903G currently states that, provided
the options on an underlying security or index are otherwise eligible
for FLEX trading, FLEX Options will be permitted in puts and calls that
do not have the same exercise style, same settlement style, same
expiration date and same exercise price as Non-FLEX Options that are
already available for trading on the same underlying security or
index.\4\ The rule also provides that FLEX Options are permitted before
the options are listed for trading as Non-FLEX Options. Once and if an
option series is listed for trading as a Non-FLEX Option series, (i)
all existing open positions established under the FLEX trading
procedures shall be fully fungible with transactions in the respective
Non-FLEX Options series, and (ii) any further trading in the series
would be as Non-FLEX Options subject to the Non-FLEX trading procedures
and rules, however, in the event a Non-FLEX series is added intra-day,
the holder of a position established under FLEX Trading Procedures
would be permitted to close such position using FLEX trading procedures
against another closing only FLEX position for
[[Page 20588]]
the balance of the trading day on which the series is added.\5\
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\4\ See Rule 903G, Commentary .01.
\5\ Id.
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Commentary .01 to Rule 903G is designed to prevent the trading of a
FLEX Option that has the exact same terms (underlying security,
exercise style, settlement style, expiration date and exercise price)
as a non-FLEX Option. In other words, as long as just one term of the
FLEX Option is different from an existing ``regular'' or ``non-FLEX''
option it may be traded as a FLEX Option.
Under Exchange rules, certain FLEX Equity Options where the
underlying security is an Exchange-Traded Fund are permitted to be
settled by delivery in cash if the underlying security meets prescribed
criteria.\6\ The purpose of this proposed rule change is to amend
Commentary .01 under Rule 903G to clarify that the reference to ``same
settlement style'' in the rule applies to FLEX Index Options and not to
the FLEX ETF Options permitted for listing and trading pursuant to Rule
903G(c)(3)(ii).\7\ As proposed, the first sentence in Commentary .01
under Rule 903G would be modified to state that ``provided the options
on an underlying security or index are otherwise eligible for FLEX
trading, FLEX Options shall be permitted in puts and calls that do not
have the same exercise style, same settlement style (with respect to
FLEX index options only), same expiration date and same exercise price
as Non-FLEX Options that are already available for trading on the same
underlying security or index.'' As a result of this change, for FLEX
ETF Options, at least one of the following terms--exercise style,
expiration date and exercise price--must differ from options in the
non-FLEX market. The Exchange believes the proposed rule change will
add clarity and certainty regarding the flex term settlement style
applicable for FLEX Options listed and traded on the Exchange.
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\6\ Rule 903G(c)(3)(ii) provides that the exercise settlement
for a FLEX ETF Option may be by physical delivery of the underlying
security or by delivery in cash if the underlying security, measured
over a six-month period, has an average daily notional value of $500
Million or more and a national average daily volume (ADV) of at
least 4,680,000 shares. See also Securities Exchange Act Release No.
88131 (February 5, 2020), 85 FR 7806 (February 11, 2020) (SR-
NYSEAmerican-2019-38) (Notice of Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a Proposed Rule Change, as Modified
by Amendment No. 1, To Allow Certain Flexible Equity Options To Be
Cash Settled).
\7\ See Securities Exchange Act Release No. 79125 (October 19,
2016), 81 FR 73452 (October 25, 2016) (SR-NYSEMKT-2016-48) (Adding 2
new settlement styles for FLEX Index Options--Asian and Cliquet--and
adding a reference to settlement style in Commentary .01 under Rule
903G).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\8\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\9\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that clarity regarding the flex term
settlement style applicable for FLEX Options will promote fair and
orderly markets by eliminating potential confusion and would allow ATP
Holders and investors with additional opportunities to trade customized
options in an exchange environment.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change is
designed to more clearly describe the current operation of an existing
rule without changing its substance and, therefore, the Exchange
believes that the proposed change will not impose a burden on
competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) \12\ of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(6).
\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\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 of the 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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At any time within 60 days of the filing of such 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 under
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\14\ 15 U.S.C. 78s(b)(2)(B).
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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#a4d6d1c8c189c7cbc9c9c1cad0d7e4d7c1c78ac3cbd2"><span class="__cf_email__" data-cfemail="4e3c3b222b632d2123232b203a3d0e3d2b2d60292138">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2023-22 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-NYSEAMER-2023-22. 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
[[Page 20589]]
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-NYSEAMER-2023-22 and should
be submitted on or before April 27, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07140 Filed 4-5-23; 8:45 am]
BILLING CODE 8011-01-P
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