Notice2023-28453
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Short Term Option Series Program
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Published
December 27, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 247 (Wednesday, December 27, 2023)</title>
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[Federal Register Volume 88, Number 247 (Wednesday, December 27, 2023)]
[Notices]
[Pages 89481-89484]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-28453]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99211; File No. SR-MEMX-2023-35]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Short Term Option Series Program
December 20, 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 December 15, 2023, MEMX 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 is filing with the Commission a proposed rule change
to expand the Exchange's Short Term Option Series Program as set forth
in Rule 19.5, Interpretation and Policy .05, 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''). The text of the proposed rule change is provided in
Exhibit 5.
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 purpose of the proposed rule change is to amend Rule 19.5,
Interpretation and Policy .05. Specifically, the Exchange proposes to
expand the 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
submitted from Nasdaq ISE, LLC (``Nasdaq ISE'') and recently 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) (``Nasdaq ISE Approval'').
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Currently, as set forth in Rule 19.5, Interpretation and Policy
.05, after an option class has been approved for listing and trading on
the Exchange, 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 on 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 Friday Short Term Option
Expiration Dates (``Short Term Options Weekly Expirations''). If the
Exchange is not open for business on the respective Thursday or Friday,
the Short Term Option Opening Date for Short Term Options 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 the Friday that the Short Term Options Weekly
Expirations are set to expire, the Short Term Option Expiration Date
for Short Term Options Weekly Expirations will be the first business
day immediately prior to that Friday.
Additionally, the Exchange may open for trading series of options
on the symbols provided in Table 1 of Rule 19.5, Interpretation and
Policy .05(h) that expire at the close of business on each of the next
two Mondays,
[[Page 89482]]
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
beyond the current week for each of Monday, Tuesday, Wednesday, and
Thursday expirations at one time.
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. In order to effectuate the
proposed changes, the Exchange would add USO, UNG, GLD, SLV, and TLT to
Table 1 of Rule 19.5, Interpretation and Policy .05(h), which specifies
each symbol that qualifies as a Short Term Option Daily Expiration.
The proposed Wednesday USO, UNG, GLD, SLV, and TLT expirations will
be similar to the current Wednesday QQQ and IWM Short Term Option Daily
Expirations set forth in Rule 19.5, Interpretation and Policy .05,\4\
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'').\5\ 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 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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\4\ The Exchange's rules also provide for Wednesday expirations
in SPY. As of the date of this filing SPY is not listed for trading
on the Exchange.
\5\ While the relevant rule text in Rule 19.5, Interpretation
and Policy .05(h) 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 QQQ and IWM Short Term Option Daily
Expirations within Rule 19.5, Interpretation and Policy .05(h), 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.\6\ 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.\7\ 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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\6\ See Rule 19.5, Interpretation and Policy .05(e).
\7\ See id.
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Pursuant to Rule 19.5, Interpretation and Policy .05(h), 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 Term Option Series Program, the Exchange is limited to opening
thirty (30) series for each expiration date for the specific class.\8\
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.\9\ 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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\8\ See Rule 19.5, Interpretation and Policy .05(a).
\9\ See id.
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With this proposal, Wednesday ETP Expirations would be treated
similarly to existing Wednesday 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 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 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
QQQ and IWM.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\10\ in general, and furthers the objectives of section
6(b)(5) of the Act,\11\ 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 regulating, clearing, settling,
processing information with
[[Page 89483]]
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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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Similar to Wednesday expirations in 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.
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 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 providers
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 market 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 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 QQQ and IWM
Expirations.\12\
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\12\ See Rule 19.5, Interpretation and Policy .05(h).
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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 QQQ and IWM expirations compared to the
proposed Wednesday ETP Expirations. Given the similarities between
Wednesday QQQ and IWM expirations and the proposed Wednesday ETP
Expirations, the Exchange believes that applying the provisions in Rule
19.5, Interpretation and Policy .05(h) that currently apply to
Wednesday QQQ and IWM expirations is justified. For example, the
Exchange believes that allowing Wednesday ETP Expirations and monthly
ETP 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 that is 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,\13\ as well as to
competitive filings submitted by Cboe EDGX Exchange Inc.
(``EDGX''),\14\ Cboe BZX Exchange Inc. (``BZX'') \15\ and BOX Exchange
LLC (``BOX'') \16\ in which each respective exchange indicates that the
filings were submitted as competitive responses to the Nasdaq ISE
filing.
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\13\ See supra note 1 [sic].
\14\ See Exchange Act Release No. 99037 (November 29, 2023), 88
FR 84370 (December 5, 2023) (SR-CboeEDGX-2023-071).
\15\ See Exchange Act Release No. 99036 (November 29, 2023), 88
FR 84383 (December 5, 2023) (SR-CboeBZX-2023-096).
\16\ See Exchange Act Release No. 98997 (November 21, 2023), 88
FR 82929 (November 27, 2023) (SR-BOX-2023-27).
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While the proposal will expand the Short Term Options Expirations
to allow Wednesday ETP Expirations to be listed on the Exchange, 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 market 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 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 intramarket 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 neither solicited nor received comments on the
proposed rule change.
[[Page 89484]]
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 \17\ and Rule 19b-
4(f)(6) \18\ thereunder.
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\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)
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 asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. According to the
Exchange, 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 the ETPs. The
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest
because the proposed rule change does not raise any new or novel
issues.\21\ Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change as operative
upon filing.\22\
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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\ 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#146661787139777b7979717a6067546771773a737b62"><span class="__cf_email__" data-cfemail="057770696028666a6868606b7176457660662b626a73">[email protected]</span></a>. Please include
file number SR-MEMX-2023-35 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-MEMX-2023-35. 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 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-MEMX-2023-35 and should be
submitted on or before January 17, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12), (59).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-28453 Filed 12-26-23; 8:45 am]
BILLING CODE 8011-01-P
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