Notice2023-26092
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing of Proposed Rule Change To Amend the Short Term Option Series Program in IM-5050-6
Primary source
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Published
November 27, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 226 (Monday, November 27, 2023)</title>
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[Federal Register Volume 88, Number 226 (Monday, November 27, 2023)]
[Notices]
[Pages 82929-82933]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-26092]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98997; File No. SR-BOX-2023-27]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
of Proposed Rule Change To Amend the Short Term Option Series Program
in IM-5050-6
November 21, 2023.
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 November 16, 2023, BOX Exchange LLC (``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 BOX IM-5050-6 (Short Term Option
Series Program). The text of the proposed rule change is available from
the principal office of the Exchange, at the Commission's Public
Reference Room and also on the Exchange's internet website at <a href="https://rules.boxexchange.com/rulefilings">https://rules.boxexchange.com/rulefilings</a>.
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
[[Page 82930]]
of these statements may be examined at the places specified in Item IV
below. The self-regulatory organization 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 IM-5050-6 (Short Term Option Series
Program) to permit the listing of two Wednesday expirations for options
on United States Oil Fund, LP (``USO''), United States Natural Gas
Fund, LP (``UNG''), SPDR Gold Shares (``GLD''), iShares Silver Trust
(``SLV''), and iShares 20+ Year Treasury Bond ETF (``TLT'')
(collectively ``Exchange Traded Products'' or ``ETPs''). This is a
competitive filing that is based on a proposal recently submitted by
Nasdaq ISE, LLC (``Nasdaq ISE'') and approved by the Commission.\3\
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\3\ See Securities Exchange Act Release No. 98905 (November 13,
2023) (SR-ISE-2023-11) (Order Approving a Proposed Rule Change to
Amend the Short Term Option Series Program to Permit the Listing of
Two Wednesday Expirations for Options on Certain Exchange Traded
Products).
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Currently, as set forth in IM-5050-6, after an option class has
been approved for listing and trading on the Exchange as a Short Term
Option Series pursuant to BOX Rule 100(a)(66) \4\ the Exchange may open
for trading on any Thursday or Friday that is a business day (``Short
Term Option Opening Date'') series of options on that class that expire
at the close of business on each of the next five Fridays that are
business days and are not Fridays in which monthly options series or
Quarterly Options Series expire (``Friday Short Term Option Expiration
Dates''). The Exchange may have no more than a total of five Short Term
Option Expiration Dates. Further, if the Exchange is not open for
business on the respective Thursday or Friday, the Short Term Option
Opening Date for Short Term Option Weekly Expirations will be the first
business day immediately prior to that respective Thursday or Friday.
Similarly, if the Exchange is not open for business on a Friday, the
Short Term Option Expiration Date for Short Term Option Weekly
Expirations will be the first business day immediately prior to that
Friday.
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\4\ BOX Rule 100(a)(66) provides that a Short Term Options
Series means a series in an option class that is approved for
listing and trading on BOX in which the series is opened for trading
on any Monday, Tuesday, Wednesday, Thursday or Friday that is a
business day and that expires on the Monday, Tuesday, Wednesday,
Thursday, or Friday of the next business week, or, in the case of a
series that is listed on a Friday and expires on a Monday, is listed
one business week and one business day prior to that expiration. If
a Tuesday, Wednesday, Thursday or Friday is not a business day, the
series may be opened (or shall expire) on the first business day
immediately prior to that Tuesday, Wednesday, Thursday or Friday,
respectively. For a series listed pursuant to this section for
Monday expiration, if a Monday is not a business day, the series
shall expire on the first business day immediately following that
Monday.
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Additionally, the Exchange may open for trading series of options
on the symbols provided in Table 1 of IM-5050-6 that expire at the
close of business on each of the next two Mondays, Tuesdays,
Wednesdays, and Thursdays, respectively, that are business days and are
not business days in which monthly options series or Quarterly Options
Series expire (``Short Term Option Daily Expirations''). For those
symbols listed in Table 1, the Exchange may have no more than a total
of two Short Term Option Daily Expirations for each of Monday, Tuesday,
Wednesday, and Thursday expirations at one time.
Proposal
At this time, the Exchange proposes to expand the Short Term Option
Daily Expirations to permit the listing and trading of options on USO,
UNG, GLD, SLV, and TLT expiring on Wednesdays. The Exchange proposes to
permit two Short Term Option Expiration Dates beyond the current week
for each Wednesday expiration at one time.\5\ In order to effectuate
the proposed changes, the Exchange would add USO, UNG, GLD, SLV, and
TLT to Table 1 of IM-5050-6, which specifies each symbol that qualifies
as a Short Term Option Daily Expiration.
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\5\ Consistent with the current operation of the rule, the
Exchange notes that if it adds a Wednesday expiration on a Tuesday,
it could technically list three outstanding Wednesday expirations at
one time. The Exchange will therefore clarify the rule text in IM-
5050-6 to specify that it can list two Short Term Option Expiration
Dates beyond the current week for each Monday, Tuesday, Wednesday,
and Thursday expiration.
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The proposed Wednesday USO, UNG, GLD, SLV, and TLT expirations will
be similar to the current Wednesday SPY, QQQ, and IWM Short Term Option
Daily Expirations set forth in IM-5050-6, such that the Exchange may
open for trading on any Tuesday or Wednesday that is a business day
(beyond the current week) series of options on USO, UNG, GLD, SLV, and
TLT 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 USO Expirations,'' ``Wednesday UNG Expirations,''
``Wednesday GLD Expirations,'' ``Wednesday SLV Expirations,'' and
``Wednesday TLT Expirations'') (collectively, ``Wednesday ETP
Expirations'').\6\ In the event Short Term Option Daily Expirations
expire on a Wednesday and that Wednesday is the same day that a
Quarterly Options Series expires, the Exchange would skip that week's
listing and instead list the following week; the two weeks would
therefore not be consecutive. Today, Wednesday expirations in SPY, QQQ,
and IWM similarly skip the weekly listing in the event the weekly
listing expires on the same day in the same class as a Quarterly
Options Series.
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\6\ While the relevant rule text in IM-5050-6 also indicates
that the Exchange will not list such expirations on a Wednesday that
is a business day in which monthly options series expire,
practically speaking this would not occur.
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USO, UNG, GLD, SLV, and TLT Friday expirations would continue to
have a total of five Short Term Option Expiration Dates provided those
Friday expirations are not Fridays in which monthly options series or
Quarterly Options Series expire (``Friday Short Term Option Expiration
Dates'').
Similar to Wednesday SPY, QQQ, and IWM Short Term Option Daily
Expirations within IM-5050-6, the Exchange proposes that it may open
for trading on any Tuesday or Wednesday that is a business day series
of options on USO, UNG, GLD, SLV, and TLT that expire at the close of
business on each of the next two Wednesdays that are business days and
are not business days in which Quarterly Options Series expire.
The interval between strike prices for the proposed Wednesday ETP
Expirations will be the same as those for the current Short Term Option
Series for Friday expirations applicable to the Short Term Option
Series Program.\7\ Specifically, the Wednesday ETP Expirations will
have a strike interval of $0.50 or greater for strike prices below
$100, $1 or greater for strike prices between $100 and $150, and $2.50
or greater for strike prices above $150.\8\ As is the case with other
equity options series listed pursuant to the Short Term Option Series
Program, the Wednesday ETP Expirations series will be P.M.-settled.
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\7\ See IM-5050-6.
\8\ Id.
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Pursuant to BOX Rule 100(a)(66), with respect to the Short Term
Option Series Program, a Wednesday expiration series shall expire on
the first business day immediately prior to that Wednesday, e.g.,
Tuesday of that week if the Wednesday is not a business day.
Currently, for each option class eligible for participation in the
Short
[[Page 82931]]
Term Option Series Program, the Exchange is limited to opening thirty
(30) series for each expiration date for the specific class.\9\ The
thirty (30) series restriction does not include series that are open by
other securities exchanges under their respective weekly rules; the
Exchange may list these additional series that are listed by other
options exchanges.\10\ With the proposed changes, this thirty (30)
series restriction would apply to Wednesday USO, UNG, GLD, SLV, and TLT
Short Term Option Daily Expirations as well. In addition, the Exchange
will be able to list series that are listed by other exchanges,
assuming they file similar rules with the Commission to list Wednesday
ETP Expirations.
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\9\ See id.
\10\ See IM-5050-6.
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With this proposal, Wednesday ETP Expirations would be treated
similarly to existing Wednesday SPY, QQQ, and IWM Expirations. With
respect to monthly option series, Short Term Option Daily Expirations
will be permitted to expire in the same week in which monthly option
series on the same class expire. Not listing Short Term Option Daily
Expirations for one week every month because there was a monthly on
that same class on the Friday of that week would create investor
confusion.
Further, as with Wednesday SPY, QQQ, and IWM Expirations, the
Exchange would not permit Wednesday ETP Expirations to expire on a
business day in which monthly options series or Quarterly Options
Series expire. Therefore, all Short Term Option Daily Expirations would
expire at the close of business on each of the next two Wednesdays that
are business days and are not business days in which monthly options
series or Quarterly Options Series expire. The Exchange believes that
it is reasonable to not permit two expirations on the same day in which
a monthly options series or a Quarterly Options Series would expire
because those options would be duplicative of each other.
The Exchange does not believe that any market disruptions will be
encountered with the introduction of Wednesday ETP Expirations. The
Exchange has the necessary capacity and surveillance programs in place
to support and properly monitor trading in the proposed Wednesday ETP
Expirations. The Exchange currently trades P.M.-settled Short Term
Option Series that expire Wednesday for SPY, QQQ and IWM and has not
experienced any market disruptions nor issues with capacity. Today, the
Exchange has surveillance programs in place to support and properly
monitor trading in Short Term Option Series that expire Wednesday for
SPY, QQQ and IWM.
Implementation
The Exchange will issue a notice to Participants via Regulatory
Notice with appropriate advanced notice announcing the implementation
date of the proposed rule change. The Exchange notes that Nasdaq ISE
applied a similar process to govern the implementation of its proposed
rule change.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\11\ in general, and section 6(b)(5) of the Act,\12\ in
particular, in that it is 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 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. Similar to Wednesday expirations in SPY, QQQ, and IWM,
the proposal to permit Wednesday ETP Expirations, subject to the
proposed limitation of two expirations beyond the current week, would
protect investors and the public interest by providing the investing
public and other market participants more choice and flexibility to
closely tailor their investment and hedging decisions in these options
and allow for a reduced premium cost of buying portfolio protection,
thus allowing them to better manage their risk exposure.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange represents that it has an adequate surveillance
program in place to detect manipulative trading in the proposed option
expirations, in the same way that it monitors trading in the current
Short Term Option Series for Wednesday SPY, QQQ and IWM expirations.
The Exchange also represents that it has the necessary system capacity
to support the new expirations. Finally, the Exchange does not believe
that any market disruptions will be encountered with the introduction
of these option expirations. As discussed above, the Exchange believes
that its proposal is a modest expansion of weekly expiration dates for
GLD, SLV, USO, UNG, and TLT given that it will be limited to two
Wednesday expirations beyond the current week. Lastly, the Exchange
believes its proposal will not be a strain on liquidity provides
because of the multi-class nature of GLD, SLV, USO, UNG, and TLT and
the available hedges in highly-correlated instruments, as described
above.
The Exchange believes that the proposal is consistent with the Act
as the proposal would overall add a small number of Wednesday ETP
Expirations by limiting the addition of two Wednesday expirations
beyond the current week. The addition of Wednesday ETP Expirations
would remove impediments to and perfect the mechanism of a free and
open market by encouraging Market Makers to continue to deploy capital
more efficiently and improve market quality. The Exchange believes that
the proposal will allow Participants to expand hedging tools and tailor
their investment and hedging needs more effectively in USO, UNG, GLD,
SLV, and TLT as these funds are most likely to be utilized by market
participants to hedge the underlying asset classes.
Similar to Wednesday SPY, QQQ, and IWM expirations, the
introduction of Wednesday ETP Expirations is consistent with the Act as
it will, among other things, expand hedging tools available to market
participants and allow for a reduced premium cost of buying portfolio
protection. The Exchange believes that Wednesday ETP Expirations will
allow market participants to purchase options on USO, UNG, GLD, SLV,
and TLT based on their timing as needed and allow them to tailor their
investment and hedging needs more effectively, thus allowing them to
better manage their risk exposure. Today, the Exchange lists Wednesday
SPY, QQQ, and IWM Expirations.\13\
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\13\ See IM-5050-6.
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In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that Wednesday ETP Expirations
should simply expand the ability of investors to hedge risk against
market movements stemming from economic releases or market events that
occur throughout the month in the same way that the Short Term Option
Series Program has expanded the landscape of hedging.
There are no material differences in the treatment of Wednesday
SPY, QQQ and IWM expirations compared to the proposed Wednesday ETP
Expirations. Given the similarities between Wednesday SPY, QQQ and IWM
expirations and the proposed Wednesday ETP Expirations, the
[[Page 82932]]
Exchange believes that applying the provisions in IM-5050-6 that
currently apply to Wednesday SPY, QQQ and IWM expirations is justified.
For example, the Exchange believes that allowing Wednesday ETP
Expirations and monthly Exchange Traded Product expirations in the same
week will benefit investors and minimize investor confusion by
providing Wednesday ETP Expirations in a continuous and uniform manner.
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. In this regard and as indicated
above, the Exchange notes that the rule change is being proposed as a
competitive response to a filing submitted by Nasdaq ISE that was
recently approved by the Commission.\14\
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\14\ See supra note 3.
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While the proposal will expand the Short Term Options Expirations
to allow Wednesday ETP Expirations to be listed on BOX, the Exchange
believes that this limited expansion for Wednesday expirations for
options on USO, UNG, GLD, SLV, and TLT will not impose an undue burden
on competition; rather, it will meet customer demand. The Exchange
believes that Participants will continue to be able to expand hedging
tools and tailor their investment and hedging needs more effectively in
USO, UNG, GLD, SLV, and TLT given multi-class nature of these products
and the available hedges in highly-correlated instruments, as described
above.
Similar to Wednesday SPY, QQQ and IWM expirations, the introduction
of Wednesday ETP Expirations does not impose an undue burden on
competition. The Exchange believes that it will, among other things,
expand hedging tools available to market participants and allow for a
reduced premium cost of buying portfolio protection. The Exchange
believes that Wednesday ETP Expirations will allow market participants
to purchase options on USO, UNG, GLD, SLV, and TLT based on their
timing as needed and allow them to tailor their investment and hedging
needs more effectively.
The Exchange does not believe the proposal will impose any burden
on inter- market competition, as nothing prevents the other options
exchanges from proposing similar rules to list and trade Wednesday ETP
Expirations. Further, the Exchange does not believe the proposal will
impose any burden on intra-market competition, as all market
participants will be treated in the same manner under this proposal\.\
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on 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 \15\ and Rule 19b-4(f)(6) thereunder.\16\
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 \17\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\18\
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\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 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) \19\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ 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 so that
the proposal may become operative immediately upon filing. According to
the Exchange, the proposed rule change is a competitive response to a
filing submitted by Nasdaq ISE that was recently approved by the
Commission.\21\ The Exchange has stated that waiver of the 30-day
operative delay would ensure fair competition among the exchanges by
allowing the Exchange to permit the listing of two Wednesday
expirations for options on ETPs.\22\ The Commission believes that the
proposed rule change presents no novel issues and that waiver of the
30-day operative delay is consistent with the protection of investors
and the public interest. Accordingly, the Commission hereby waives the
30-day operative delay and designates the proposed rule change as
operative upon filing.\23\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ See supra note 3.
\22\ See SR-CboeBZX-2022-37 (July 8, 2022).
\23\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#97e5e2fbf2baf4f8fafaf2f9e3e4d7e4f2f4b9f0f8e1"><span class="__cf_email__" data-cfemail="3a484f565f17595557575f544e497a495f59145d554c">[email protected]</span></a>. Please include
file number SR-BOX-2023-27 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-BOX-2023-27. 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="https://www.sec.gov/rules/sro.shtml">https://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
[[Page 82933]]
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 the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-BOX-2023-27 and should be submitted on or before December 18, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26092 Filed 11-24-23; 8:45 am]
BILLING CODE 8011-01-P
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