Notice2024-04298
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing of Proposed Rule Change To Amend the Short Term Option Series Program
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Published
March 1, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 42 (Friday, March 1, 2024)</title>
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[Federal Register Volume 89, Number 42 (Friday, March 1, 2024)]
[Notices]
[Pages 15235-15239]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-04298]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99604; File No. SR-ISE-2024-06]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing
of Proposed Rule Change To Amend the Short Term Option Series Program
February 26, 2024.
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 February 15, 2024, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I, II, and III 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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[[Page 15236]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Short Term Option Series
Program.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/ise/rules">https://listingcenter.nasdaq.com/rulebook/ise/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.
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 Supplementary Material .03 of
Options 4, Section 5, ``Series of Options Contracts Open for Trading.''
The Exchange proposes to expand the Short Term Option Series program to
permit the listing and trading of options series with Tuesday and
Thursday expirations for options on iShares Russell 2000 ETF (IWM),
specifically permitting two expiration dates for the proposed Tuesday
and Thursday expirations in IWM.
Currently, Table 1 in Supplementary Material .03 to Options 4,
Section 5 specifies each symbol that qualifies as a Short Term Option
Daily Expiration.\3\ Today, Table 1 permits the listing and trading of
Monday Short Term Option Daily Expirations and Wednesday Short Term
Option Daily Expirations for IWM. At this time, the Exchange proposes
to expand the Short Term Option Series Program to permit the listing
and trading of no more than a total of two IWM Short Term Option Daily
Expirations beyond the current week for each of Monday, Tuesday,
Wednesday, and Thursday expirations at one time.\4\ The listing and
trading of Tuesday and Thursday Short Term Option Daily Expirations
would be subject to Supplementary Material .03 of Options 4, Section 5.
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\3\ The Exchange may open for trading on any Thursday or Friday
that is a business day 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 standard expiration
options series, Monthly Options Series, or Quarterly Options Series.
Of these series of options, the Exchange may have no more than a
total of five Short Term Option Expiration Dates. In addition, the
Exchange may open for trading series of options on certain symbols
that expire at the close of business on each of the next two
Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, that are
business days beyond the current week and are not business days in
which standard expiration options series, Monthly Options Series, or
Quarterly Options Series expire (``Short Term Option Daily
Expirations''). See Supplementary .03 to Options 4, Section 5.
\4\ The Exchange would amend the Tuesday and Thursday
expirations for IWM in Table 1 in Supplementary Material .03 to
Options 4, Section 5 from ``0'' to ``2'' to permit Tuesday and
Thursday expirations for options on IWM listed pursuant to the Short
Term Option Series. The Exchange notes that Cboe Exchange, Inc.
(``Cboe'') began listing Tuesday and Thursday expirations in the
Russell 2000 Index Weeklys[supreg] (``RUTW'') and Mini-Russell 2000
Index Weeklys[supreg] (``MRUT'') on January 8, 2024.
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Today, Tuesday Short Term Option Daily Expirations in SPDR S&P 500
ETF Trust (SPY) and the INVESCO QQQ Trust\SM\, Series 1 (QQQ) may open
for trading on any Monday or Tuesday that is a business day series of
options on the symbols provided in Table 1 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 standard expiration options series,
Monthly Options Series, or Quarterly Options Series expire (``Tuesday
Short Term Option Expiration Date'').\5\ Also, today, Thursday Short
Term Option Daily Expirations in SPY and QQQ may open for trading on
any Tuesday or Wednesday that is a business day series of options on
the symbols provided in Table 1 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 standard expiration options series, Monthly
Options Series, or Quarterly Options Series expire (``Wednesday Short
Term Option Expiration Date'').
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\5\ See Supplementary Material .03 to Options 4, Section 5.
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In the event that options on IWM expire on a Tuesday or Thursday
and that Tuesday or Thursday is a business day in which standard
expiration options series, Monthly Options Series, or Quarterly Options
Series expire, the Exchange would skip that week's listing and instead
list the following week; the two weeks would therefore not be
consecutive. With this proposal, the Exchange would be able to open for
trading series of options on IWM that expire at the close of business
on each of the next two Mondays, Tuesdays, Wednesdays, and Thursdays,
respectively, that are business days beyond the current week and are
not business days in which standard expiration options series, Monthly
Options Series, or Quarterly Options Series expire.\6\
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\6\ Today, IWM may trade on Mondays and Wednesdays, in addition
to Fridays, as is the case for all options series.
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The interval between strike prices for the proposed Tuesday and
Thursday IWM Short Term Option Daily Expirations will be the same as
those for Tuesday and Thursday IWM Short Term Option Daily Expirations
in SPY and QQQ, applicable to the Short Term Option Series Program.\7\
Options 4, Section 5(e) provides that, notwithstanding any other
provision regarding the interval of strike prices of series of options
on Exchange-Traded Fund Shares in Options 4, Section 5, the interval of
strike prices on options on IWM will be $1 or greater.\8\ Further,
Options 4, Section 5(f) provides that, notwithstanding Section 5(e) of
Options 4, the Exchange may open for trading series at $0.50 or greater
strike price intervals where the strike price is less than $75 and
$1.00. Specifically, the Tuesday and Thursday IWM Short Term Option
Daily Expirations will have a $0.50 strike interval minimum. As is the
case with other equity options series listed pursuant to the Short Term
Option Series Program, the Tuesday and Thursday IWM Short Term Option
Daily Expiration series will be P.M.-settled.
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\7\ See ISE Supplementary Material .03(e) to Options 4, Section
5.
\8\ Options on SPY, iShares Core S&P 500 ETF (``IVV''), QQQ,
IWM, and the SPDR Dow Jones Industrial Average ETF (``DIA'') are
also subject to Options 4, Section 5(e) strike intervals.
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Pursuant to Options 1, Section 1(a)(49),\9\ with respect to the
Short Term Option Series Program, a Tuesday or Thursday expiration
series shall expire on the first business day immediately prior to that
Tuesday or Thursday, e.g., Monday or Wednesday of that week,
[[Page 15237]]
respectively, if the Tuesday or Thursday is not a business day.
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\9\ Options 1, Section 1(a)(49) provides, ``The term `Short Term
Option Series' means a series in an option class that is approved
for listing and trading on the Exchange 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 following business
week that is a business day, 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. 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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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.\10\
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.\11\ This thirty (30) series restriction would apply
to Tuesday and Thursday IWM Short Term Option Daily Expiration series
as well.
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\10\ See ISE Supplementary Material .03(c) and (d) to Options 4,
Section 5.
\11\ See ISE Supplementary Material .03 to Options 4, Section 5.
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With this proposal, Tuesday and Thursday IWM Expirations would be
treated the same as Tuesday and Thursday Expirations in SPY and QQQ.
With respect to monthly option series, Short Term Option Daily
Expirations expire in the same week in which monthly option series on
the same class expire.\12\ Further, as is the case today with other
Tuesday and Thursday Short Term Option Daily Expirations, the Exchange
would not permit Tuesday and Thursday Short Term Option Daily
Expirations to expire on a business day in which monthly options series
or Quarterly Options Series expire.\13\ Therefore, all Short Term
Option Daily Expirations would expire at the close of business on each
of the next two Mondays, Tuesdays, Wednesdays, and Thursdays,
respectively, that are business days beyond the current week and are
not business days in which standard expiration options series, Monthly
Options Series, or Quarterly Options Series expire.
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\12\ See ISE Supplementary Material .03(b) to Options 4, Section
5.
\13\ See ISE Supplementary Material .03 to Options 4, Section 5.
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The Exchange does not believe that any market disruptions will be
encountered with the introduction of P.M.-settled Tuesday and Thursday
IWM Short Term Option Daily Expirations. The Exchange has the necessary
capacity and surveillance programs in place to support and properly
monitor trading in the proposed Tuesday and Thursday Short Term Option
Daily Expirations. The Exchange currently trades P.M.-settled Short
Term Option Series that expire Tuesday and Thursday for SPY and QQQ 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
Tuesday and Thursday for SPY and QQQ.
Impact of Proposal
The Exchange notes that listings in the Short Term Option Series
Program comprise a significant part of the standard listing in options
markets. The below diagram demonstrates the percentage of weekly
listings as compared to monthly, quarterly, and Long-Term Option Series
in 2023 in the options industry.\14\ The Exchange notes that during
this time period all options exchanges mitigated weekly strike
intervals.
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\14\ The Exchange sourced this information from The Options
Clearing Corporation (``OCC''). The information includes time
averaged data (the number of strikes by maturity date divided from
the number of trading days) for all 17 options markets through
December 8, 2023.
[GRAPHIC] [TIFF OMITTED] TN01MR24.029
Similar to SPY and QQQ, the Exchange would limit the number of
Short Term Option Daily Expirations for IWM to two expirations for
Tuesday and Thursday expirations while expanding the Short Term Option
Series Program to permit Tuesday, and Thursday expirations for IWM.
Expanding the Short Term Option Series Program to permit the listing of
Tuesday and Thursday expirations in IWM will account for the addition
of 6.77% of
[[Page 15238]]
strikes for IWM.\15\ With respect to the impact to the Short Term
Option Series Program on IWM overall, the impact would be a 20%
increase in strikes.\16\ With respect to the impact to the Short Term
Options Series Program overall, the impact would be a 0.1% increase in
strikes.\17\
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\15\ The Exchange sourced this information, which are estimates,
from LiveVol[supreg]. The information includes data for all 17
options markets as of January 3, 2024.
\16\ The Exchange sourced this information, which are estimates,
from LiveVol[supreg]. The information includes data for all 17
options markets as of January 3, 2024.
\17\ The Exchange sourced this information, which are estimates,
from LiveVol[supreg]. The information includes data for all 17
options markets as of January 3, 2024.
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Members will continue to be able to expand hedging tools because
all days of the week would be available to permit Members to tailor
their investment and hedging needs more effectively in IWM.
[GRAPHIC] [TIFF OMITTED] TN01MR24.030
Weeklies comprise 48.30% of the total volume of options
contracts.\18\ The Exchange believes that inner weeklies (first two
weeks) represent high volume as compared to outer weeklies (the last
three weeks) and would be more attractive to market participants.
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\18\ The chart represents industry volume in terms of overall
contracts. Weeklies comprise 48.30% of volume while only comprising
17.22% of the strikes. The Exchange sourced this information from
OCC. The information includes data for all 17 options markets
through December 8, 2023.
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The introduction of IWM Tuesday and Thursday expirations will,
among other things, expand hedging tools available to market
participants and continue the reduction of the premium cost of buying
protection. The Exchange believes that IWM Tuesday and Thursday
expirations will allow market participants to purchase IWM options
based on their timing as needed and allow them to tailor their
investment and hedging needs more effectively.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\19\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\20\ 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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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that IWM Tuesday and Thursday Short Term
Daily Expirations will allow market participants to purchase IWM
options based on their timing as needed and allow them to tailor their
investment and hedging needs more effectively. Further, the proposal to
permit Tuesday and Thursday Short Term Daily Expirations for options on
IWM listed pursuant to the Short Term Option Series Program, subject to
the proposed limitation of two nearest expirations, would protect
investors and the public interest by providing the investing public and
other market participants more flexibility to closely tailor their
investment and hedging decisions in IWM options, thus allowing them to
better manage their risk exposure.
In particular, the Exchange believes the Short Term Option Series
Program has been successful to date and that Tuesday and Thursday IWM
Short Term Daily 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. Similarly, the Exchange believes Tuesday and
Thursday IWM Short Term Daily Expirations should create greater trading
and hedging opportunities and provide customers the flexibility to
tailor their investment objectives more effectively. ISE currently
lists SPY and QQQ Tuesday and Thursday Short Term Daily
Expirations.\21\
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\21\ See ISE Supplementary Material .03 at Options 4, Section 5.
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With this proposal, Tuesday and Thursday IWM Expirations would be
treated similar to existing Tuesday and Thursday SPY and QQQ
Expirations and would expire in the same week that standard monthly
options expire on
[[Page 15239]]
Fridays.\22\ Further, today, Tuesday and Thursday Short Term Option
Daily Expirations do not expire on a business day in which monthly
options series or Quarterly Options Series expire.\23\ Today, all Short
Term Option Daily Expirations 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. There are no
material differences in the treatment of Tuesday and Thursday SPY and
QQQ Short Term Daily Expirations as compared to the proposed Tuesday
and Thursday IWM Short Term Daily Expirations.
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\22\ See ISE Supplementary Material .03(b) at Options 4, Section
5.
\23\ See ISE Supplementary Material .03 at Options 4, Section 5
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Finally, the Exchange represents that it has an adequate
surveillance program in place to detect manipulative trading in the
proposed Tuesday and Thursday IWM Short Term Daily Expirations, in the
same way that it monitors trading in the current Short Term Option
Series and trading in Tuesday and Thursday SPY and QQQ Expirations. The
Exchange also represents that it has the necessary systems capacity to
support the new options series. Finally, the Exchange does not believe
that any market disruptions will be encountered with the introduction
of Tuesday and Thursday IWM Short Term Daily Expirations.
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.
Similar to SPY and QQQ Tuesday and Thursday Expirations, the
introduction of IWM Tuesday and Thursday Short Term Daily 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 continue the reduction of the premium cost of
buying protection. The Exchange believes that IWM Tuesday and Thursday
Short Term Daily Expirations will allow market participants to purchase
IWM options based on their timing as needed and allow them to tailor
their investment and hedging needs more effectively. The Exchange notes
that Cboe began listing Tuesday and Thursday expirations in RUTW and
MRUT on January 8, 2024.
The Exchange does not believe the proposal will impose any burden
on inter-market competition, as nothing prevents other options
exchanges from proposing similar rules to list and trade Short-Term
Option Series with Tuesday and Thursday Short Term Daily Expirations.
The Exchange notes that having Tuesday and Thursday IWM expirations is
not a novel proposal, as SPY and QQQ Tuesday and Thursday Expirations
are currently listed on ISE.\24\
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\24\ See ISE Supplementary Material .03 at Options 4, Section 5.
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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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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#d4a6a1b8b1f9b7bbb9b9b1baa0a794a7b1b7fab3bba2"><span class="__cf_email__" data-cfemail="fe8c8b929bd39d9193939b908a8dbe8d9b9dd0999188">[email protected]</span></a>. Please include
file number SR-ISE-2024-06 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-ISE-2024-06. 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-ISE-2024-06 and should be
submitted on or before March 22, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-04298 Filed 2-29-24; 8:45 am]
BILLING CODE 8011-01-P
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