Notice2024-15770
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Strike Interval for Options on SPDR® Gold Shares
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 18, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 138 (Thursday, July 18, 2024)</title>
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[Federal Register Volume 89, Number 138 (Thursday, July 18, 2024)]
[Notices]
[Pages 58447-58450]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-15770]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100521; File No. SR-CboeBZX-2024-064]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Strike Interval for Options on SPDR[supreg] Gold Shares
July 12, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 2, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
amend the strike interval for options on SPDR[supreg] Gold Shares
(``GLD''). The text of the proposed rule change is provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Rules of Cboe BZX Exchange, Inc.
* * * * *
Rule 19.6. Series of Options Contracts Open for Trading
* * * * *
(d) The interval between strike prices of series of options on
individual stocks will be:
* * * * *
(4) The interval between strike prices of series of options on
Fund Shares approved for options trading pursuant to Rule 19.3(i)
shall 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 BZX Options, or at such intervals as may
have been established on another options exchange prior to the
initiation of trading on BZX Options. Notwithstanding any other
provision regarding the interval between strike prices of series of
options on Fund Shares in this Rule, the interval between strike
prices of series of options on Standard & Poor's Depository Receipts
Trust (``SPY''), iShares S&P 500 Index ETF (``IVV''), [and ]the
DIAMONDS Trust (``DIA''), and SPDR[supreg] Gold Shares (``GLD'')
will be $1 or greater.
* * * * *
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), at the Exchange's Office of the Secretary, 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 Rule 19.6, ``Series of Options
Contracts Open for Trading.'' Specifically, the Exchange proposes to
amend Rule 19.6(d)(4) to allow for the interval between strike prices
of series of options on Fund Shares of SPDR[supreg] Gold Shares or
``GLD'' to be $1 or greater, including where the strike price is
greater than $200.
Currently Rule 19.6, Interpretation and Policy .01 provides, in
relevant part, that for series of options on Exchange-Traded Fund
Shares that satisfy the criteria set forth in Rule 19.3(i), the
interval of strike prices may be $1 or greater where the strike price
is $200 or less or $5 or greater where the strike price is over $200,
subject to certain exceptions set forth in Rule 19.3 [sic],
Interpretations and Policies .02 and .03.
Further, current Rule 19.6(d)(4) provides that notwithstanding any
other provision regarding the interval between strike prices of series
of options on Fund Shares in Rule 19.6, the interval between strike
prices of series of options on Standard & Poor's Depository Receipts
Trust (``SPY''), iShares S&P 500 Index ETF (``IVV''), and the DIAMONDS
Trust (``DIA'') will be $1 or greater. At this time, the Exchange
proposes to modify the interval setting regime to be $1 or greater for
GLD options, similar to SPY, IVV, and DIA. The Exchange believes that
the proposed rule change would make GLD options easier for investors
and traders to use and more tailored to their investment needs. GLD is
an Exchange-Traded Fund Share designed to closely track the price and
performance of the price of gold bullion. GLD is widely quoted as an
indicator of gold stock prices and is a significant indicator of
overall economic health. Investors use GLD to diversify their
portfolios and benefit from market trends. Additionally, GLD is a
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. Accordingly, the
Exchange believes that offering a wider base of GLD options affords
traders and investors important hedging and trading opportunities,
particularly in the midst of current price trends. The Exchange
believes that not having the proposed $1 strike price intervals above
$200 in GLD significantly constricts investors' hedging and trading
possibilities. The Exchange therefore believes that by having smaller
strike intervals in GLD, investors would have more efficient hedging
and trading opportunities due to the lower $1 interval ascension. The
proposed $1 interval above the $200 strike price, will result in having
at-the-money series based upon the underlying ETF moving less than 1%.
The Exchange believes that the proposed strike setting regime is in
line with the slower movements of broad-based indices. Considering the
fact that $1 intervals already exist below the $200 price point and
that GLD have
[[Page 58448]]
consistently inclined in price toward the $200 level, the Exchange
believes that continuing to maintain the current $200 level (above
which intervals increase 500% to $5), may have a negative effect on
investing, trading and hedging opportunities, and volume. The Exchange
believes that the investing, trading, and hedging opportunities
available with GLD options far outweighs any potential negative impact
of allowing GLD options to trade in more finely tailored intervals
above the $200 price point. The proposed strike setting regime would
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. Under the current rule,
where the next higher available series would be $5 away above a $200
strike price, the ability to roll such positions would be impaired.
Accordingly, 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%, and would not be able to execute a roll up until
such a large movement occurred. The Exchange believes that with the
proposed rule change, the investor would be in a significantly safer
position of being able to roll his open options position from a $200 to
a $201 strike price, which is only a 0.5% move for the underlying. As a
result, the proposed rule change will allow the Exchange to better
respond to customer demand for GLD strike price more precisely aligned
with the smaller, longer-term incremental increases in the underlying
ETF. The Exchange believes that the proposed rule change, like the
other strike price programs currently offered by the Exchange, will
benefit investors by providing investors the flexibility to more
closely tailor their investment and hedging decisions using GLD
options. Moreover, by allowing series of GLD options to be listed in $1
intervals between strike prices over $200, the proposal will moderately
augment the potential total number of options series available on the
Exchange. However, the Exchange believes it and the Options Price
Reporting Authority (``OPRA'') have the necessary systems capacity to
handle any potential additional traffic associated with this proposed
rule change. The Exchange also believes that Members will not have a
capacity issue due to the proposed rule change. In addition, the
Exchange represents that it does not believe that this expansion will
cause fragmentation of liquidity, but rather, believes that finer
strike intervals will serve to increase liquidity available as well as
price efficiency by providing more trading opportunities for all market
participants.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\5\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \6\ requirements that the rules of an exchange be
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 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. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \7\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(1) of the Act,\8\ which provides
that the Exchange be organized and have the capacity to be able to
carry out the purposes of the Act and to enforce compliance by the
Exchange's Members and persons associated with its Members with the
Act, the rules and regulations thereunder, and the rules of the
Exchange.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
\7\ Id.
\8\ 15 U.S.C. 78f(b)(1).
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In particular, the proposed rule change will allow investors to
more easily use GLD options. Moreover, the proposed rule change would
allow investors to better trade and hedge positions in GLD options
where the strike price is greater than $200, and ensure that investors
in both options are not at a disadvantage simply because of the strike
price. The Exchange believes the proposed rule change is consistent
with Section 6(b)(1) of the Act, which provides that the Exchange be
organized and have the capacity to be able to carry out the purposes of
the Act and the rules and regulations thereunder, and the rules of the
Exchange. The proposal allows the Exchange to respond to customer
demand to allow GLD options to trade in $1 intervals above a $200
strike price. The Exchange does not believe that the proposed rule
would create additional capacity issues or affect market functionality.
As noted above, ETF options trade in wider $5 intervals above a $200
strike price, whereby options at or below a $200 strike price trade in
$1 intervals. This creates a situation where contracts on the same
option class effectively may not be able to execute certain strategies
such as, for example, rolling to a higher strike price, simply because
of the $200 strike price above which options intervals increase by
500%. This proposal remedies the situation by establishing an exception
to the current ETF interval regime for GLD options to allow such
options to trade in $1 or greater intervals at all strike prices.
The Exchange believes that the proposed rule change, like other
strike price programs currently offered by the Exchange, will benefit
investors by giving them increased flexibility to more closely tailor
their investment and hedging decisions. By way of example, GLD is a
leading product in its asset class and it 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.
With regard to the impact of this proposal on system capacity, the
Exchange believes it and OPRA have the necessary systems capacity to
handle any potential additional traffic associated with this proposed
rule change. The Exchange believes that its Members will not have a
capacity issue as a result of this proposal. Further, the Exchange does
not believe the proposal does not unfairly discriminate among market
participants, as all market participants will be treated in the same
manner under this proposal.
Finally, the Exchange notes the proposed rule change is
substantively the same as a rule change proposed by Nasdaq ISE, LLC
(``ISE'') which the Commission recently approved.\9\
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\9\ See Securities Exchange Act Release No. 100447 (June 28,
2024) (SR-ISE-2024-17).
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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
[[Page 58449]]
of the purposes of the Act. Rather, the Exchange believes that the
proposed rule change will result in additional investment options and
opportunities to achieve the investment and trading objectives of
market participants seeking efficient trading and hedging vehicles, to
the benefit of investors, market participants, and the marketplace in
general. Specifically, the Exchange believes that GLD options investors
and traders will significantly benefit from the availability of finer
strike price intervals above a $200 price point. In addition, the
interval setting regime the Exchange proposes to apply to GLD options
is currently applied to SPY, IVV, and DIA options, which are similarly
popular and widely traded ETF products and track indexes at similarly
high price levels. Thus, the proposed strike setting regime for GLD
options will allow options on this an actively traded ETF with index
levels at corresponding price levels to trade pursuant to the same
strike setting regime. This will permit investors to employ similar
investment and hedging strategies for each of these options.
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 make a finer strike price
intervals above a $200 price point available for GLD options. The
Exchange notes that the proposed rule change is not a novel proposal,
as the Commission recently approved a substantively identical proposal
of another exchange.\10\ 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.
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\10\ See Securities Exchange Act Release No. 100447 (June 28,
2024) (SR-ISE-2024-17).
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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.
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 \11\ and Rule 19b-4(f)(6) thereunder.\12\
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 \13\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\14\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 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) \15\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\16\ 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 ISE that was recently approved by the
Commission.\17\ The Exchange has stated that waiver of the 30-day
operative delay would allow the Exchange to implement the proposal at
the same time as its competitor exchange, thus creating competition
among GLD options. 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 operative delay
and designates the proposed rule change as operative upon filing.\18\
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\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ See supra note 9.
\18\ 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#cab8bfa6afe7a9a5a7a7afa4beb98ab9afa9e4ada5bc"><span class="__cf_email__" data-cfemail="d0a2a5bcb5fdb3bfbdbdb5bea4a390a3b5b3feb7bfa6">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-064 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-CboeBZX-2024-064. 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-CboeBZX-2024-064 and should
be submitted on or before August 8, 2024.
[[Page 58450]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15770 Filed 7-17-24; 8:45 am]
BILLING CODE 8011-01-P
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