Notice2024-16110
Self-Regulatory Organizations; MEMX LLC; 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 23, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 141 (Tuesday, July 23, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 141 (Tuesday, July 23, 2024)]
[Notices]
[Pages 59775-59778]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16110]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100550; File No. SR-MEMX-2024-28]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the Strike
Interval for Options on SPDR[supreg] Gold Shares
July 17, 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 July 16, 2024, MEMX, LLC (``Exchange'') filed with the Securities
and Exchange Commission (``Commission'') a 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
[[Page 59776]]
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 amend the strike interval for options on SPDR[supreg] Gold Shares
(``GLD''). 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,
``Series of Options Contracts Open for Trading.'' Specifically, the
Exchange proposes to amend Rule 19.5(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 19.5, 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 19.5, Interpretations
and Policies .02 and .03.
Further, current Rule 19.5(d)(4) provides that notwithstanding any
other provision regarding the interval between strike prices of series
of options on Fund Shares in Rule 19.5, 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%.
Considering the fact that $1 intervals already exist below the $200
price point and that GLD have 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
[[Page 59777]]
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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 unfairly discriminates 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\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 100447 (June 28,
2024), 89 FR 55293 (July 3, 2024) (SR-ISE-2024-17).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that that [sic] the proposed rule
change will impose any burden on competition that is not necessary or
appropriate in furtherance 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.
---------------------------------------------------------------------------
\10\ Id.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
[[Page 59778]]
Act \15\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the
Commission to 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 to
permit the Exchange to implement the proposal at the same time as its
competitors. The Exchange notes that its proposal is substantially
similar in all material respects to a proposal submitted by ISE that
was recently approved by the Commission.\17\ 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
operative upon filing.\18\
---------------------------------------------------------------------------
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 17 CFR 240.19b-4(f)(6)(iii).
\17\ See supra note 9 and accompanying text.
\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).
---------------------------------------------------------------------------
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#3b494e575e16585456565e554f487b485e58155c544d"><span class="__cf_email__" data-cfemail="4b393e272e66282426262e253f380b382e28652c243d">[email protected]</span></a>. Please include
file number SR-MEMX-2024-28 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-2024-28. 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-2024-28 and should be
submitted on or before August 13, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12), (59).
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-16110 Filed 7-22-24; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on July 23, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.