Notice2024-14646
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Approving a Proposed Rule Change To Amend the Strike Interval for Options on Exchange-Traded Fund Shares and To Allow $1 Strike Price Intervals Above $200 for Options on SPDR Gold Shares (GLD)
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
July 3, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 128 (Wednesday, July 3, 2024)</title>
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[Federal Register Volume 89, Number 128 (Wednesday, July 3, 2024)]
[Notices]
[Pages 55293-55294]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-14646]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100447; File No. SR-ISE-2024-17]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Approving a
Proposed Rule Change To Amend the Strike Interval for Options on
Exchange-Traded Fund Shares and To Allow $1 Strike Price Intervals
Above $200 for Options on SPDR Gold Shares (GLD)
June 28, 2024.
I. Introduction
On May 3, 2024, Nasdaq ISE, LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Options
4, Section 5 of the Exchange's rules to (i) permit options on exchange-
traded fund shares to have an interval of $1 or greater where the
strike price is $200 or less and $5.00 or greater where the strike
price is greater than $200 and (ii) list options on SPDR[supreg] Gold
Shares (``GLD'') with $1 strike price intervals instead of $5 strike
price intervals when the strike price of the option is greater than
$200. The proposed rule change was published for comment in the Federal
Register on May 20, 2024.\3\ The Commission did not receive any comment
letters on the proposed rule change. This order approves the proposed
rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 100133 (May 14,
2024), 89 FR 43936 (``Notice'').
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II. Description of the Proposal
Currently, Options 4, Section 5 of the Exchange's rules provides
that the interval between strike prices of series of options on
exchange-traded fund shares (``ETFs'') \4\ will be fixed at a price per
share which is reasonably close to the price per share at which the
underlying security is traded in the primary market at or about the
same time such series of options is first open for trading on the
Exchange, or at such intervals as may have been established on another
options exchange prior to the initiation of trading on the Exchange,\5\
except that the interval between strike prices of series of options on
SPDR S&P 500 ETF (``SPY''), iShares Core S&P 500 ETF (``IVV''),
PowerShares QQQ Trust (``QQQ''), iShares Russell 2000 Index Fund
(``IWM''), and the SPDR Dow Jones Industrial Average ETF (``DIA'') may
be $1 or greater.\6\
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\4\ See Exchange Rule Options 4, Section 3(h).
\5\ See Exchange Rule Options 4, Section 5(d).
\6\ See Exchange Rule Options 4, Section 5(e).
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The Exchange proposes to establish an alternative to the strike
price interval regime described above. Specifically, ISE would also
allow the interval for options on ETFs to be $1 or greater where the
strike price is $200 or less and $5.00 or greater where the strike
price is greater than $200.\7\ As described above, the Exchange may fix
the interval between strike prices of series of options on ETFs at such
intervals as may have been established on another options exchange
prior to the initiation of trading on the Exchange.\8\ The Exchange
states that today, Cboe Exchange, Inc. (``Cboe'') \9\ permits the
interval between strike prices of series of options on ETFs to be $1 or
greater where the strike price is $200 or less and $5.00 or greater
where the strike price is greater than $200.\10\ The Exchange states
that its proposal adopts Cboe's language.\11\
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\7\ See proposed Exchange Rule Options 4, Section 5(d).
\8\ See supra note 5.
\9\ See Cboe Rule 4.5, Interpretation and Policy .07(a).
\10\ See Notice, supra note 3, at 43936.
\11\ See id.
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The Exchange also proposes to permit strike intervals to be $1 or
greater where the strike price is greater than $200 for options on
GLD,\12\ similar to options on SPY, IVV, QQQ, IWM, and DIA.\13\ The
Exchange states that $1 strike price intervals already exist below the
$200 price point and that GLD has consistently inclined in price toward
the $200 level.\14\ In light of this, the Exchange believes that
continuing to maintain the current $5 strike intervals above $200 may
have a negative effect on investing, trading and hedging opportunities,
and volume, particularly to the extent it impacts the ability of market
participants to roll their positions once strike prices pass $200.\15\
The Exchange states that the proposed strike setting regime will
``permit strikes to be set to more closely reflect the increasing value
in the underlying and allows investors and traders to roll open
positions from a lower strike to a higher strike in conjunction with
the price movements of the underlying ETF.'' \16\
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\12\ According to the Exchange, GLD is an ETF whose shares are
designed to closely track the price and performance of the price of
gold bullion. See id. The Exchange states: ``GLD is widely quoted as
an indicator of gold stock prices'' and the ``leading product in its
asset class that trades within a `complex' where, in addition to the
underlying security, there are multiple instruments available for
hedging such as, COMEX Gold Futures; Gold Daily Futures; iShares
GOLD Trust; SPDR GOLD Minishares Trust; Aberdeen Physical Gold
Trust; and GraniteShares Gold Shares.'' Id.
\13\ See proposed Exchange Rule Options 4, Section 5(e).
\14\ See Notice, supra note 3, at 43937.
\15\ See id. For example, the Exchange states that ``to move a
position from a $200 strike to a $205 strike under the current rule,
an investor would need for the underlying product to move 2.5%''
whereas rolling an open position from a $200 to a $201 strike
represents ``only a 0.5% move from the underlying.'' Id.
\16\ Id.
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The Exchange acknowledges that the proposal would increase the
total number of options series available on the Exchange, but
represents that it and the Options Price Reporting Authority (``OPRA'')
have the necessary system capacity to handle any potential additional
traffic associated with the proposal.\17\ The Exchange also states that
its members would not have a capacity issue as a result of the
proposal.\18\ Further, the Exchange represents that the proposal would
not cause fragmentation of liquidity but, by providing more trading
opportunities to market participants, instead would increase both
available liquidity as well as price efficiency.\19\
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\17\ See id.
\18\ See id.
\19\ See id.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\20\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\21\ which
requires, among other things, that a national securities exchange have
rules designed to prevent fraudulent and manipulative acts and
practices, to promote just and
[[Page 55294]]
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. Permitting $1 strike price
intervals above $200 in options on GLD will provide the investing
public and other market participants with more flexibility in their
investment and hedging decisions using options on GLD. The proposal is
also consistent with past precedent for options on other similar
ETFs.\22\ Moreover, the proposal to specify the interval between strike
prices of series of options on ETFs where the strike price is less than
$200 and where the strike price is greater than $200 is consistent with
the intervals of another options exchange.\23\
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\20\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\21\ 15 U.S.C. 78f(b)(5).
\22\ See Securities Exchange Act Release No. 85754 (Apr. 30,
2019), 84 FR 19823 (May 6, 2019) (allowing $1 Strike Price intervals
above $200 on options on QQQ and IWM).
\23\ See supra note 11.
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In approving this proposal, the Commission notes that the Exchange
has represented that it and OPRA have the necessary systems capacity to
handle the potential additional traffic associated with this proposed
rule change.\24\ The Exchange further stated that it believes its
members will not have a capacity issue because of the proposal and that
it does not believe this expansion will cause fragmentation of
liquidity.\25\
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\24\ See supra note 17.
\25\ See supra notes 18 and 19.
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IV. Conclusion
IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the
Act,\26\ that the proposed rule change (SR-ISE-2024-17), be, and hereby
is, approved.
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\26\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-14646 Filed 7-2-24; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on July 3, 2024.
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