Notice2024-16219
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Strike Interval for Options on SPDR® Gold Shares
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Published
July 24, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 142 (Wednesday, July 24, 2024)</title>
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[Federal Register Volume 89, Number 142 (Wednesday, July 24, 2024)]
[Notices]
[Pages 59945-59948]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16219]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100560; File No. SR-BOX-2024-18]
Self-Regulatory Organizations; BOX Exchange 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 18, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 59946]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 17, 2024, BOX Exchange LLC (the ``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 self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule 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 proposes to amend BOX Rule 5050 (Series of Options
Contracts Open for Trading) to amend the strike interval for options on
SPDR[supreg] Gold Shares (``GLD''). The text of the proposed rule
change is available from the principal office of the Exchange, at the
Commission's Public Reference Room and also on the Exchange's internet
website at <a href="https://rules.boxexchange.com/rulefilings">https://rules.boxexchange.com/rulefilings</a>.
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 self-regulatory organization
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 self-regulatory organization
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 BOX Rule 5050 (Series of Options
Contracts Open for Trading) to amend the strike interval for options on
SPDR[supreg] Gold Shares (``GLD'').
Specifically, the Exchange proposes to amend IM-5050-1(b) to allow
for the interval between strike prices of series of options on
Exchange-Traded Fund Shares (``ETFs'' or ``Units'') \3\ of SPDR[supreg]
Gold Shares or ``GLD'' to be $1 or greater, including where the strike
price is greater than $200.
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\3\ See BOX Rule 5020(h).
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Currently, IM-5050-1(b) provides that,
For series of options on Exchange Traded Fund Shares that
satisfy the criteria set forth in Rule 5020(h), 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.
Notwithstanding any other provision regarding the interval of strike
prices of series of options on Exchange-Traded Fund Shares in this
rule, the interval of strike prices on SPDR[supreg] S&P 500[supreg]
ETF (``SPY''), iShares S&P 500 Index ETF (``IVV''), PowerShares QQQ
Trust (``QQQ''), iShares Russell 2000 Index Fund (``IWM''), and the
SPDR[supreg] Dow Jones[supreg] Industrial Average ETF (``DIA'')
options will be $1 or greater.
At this time, the Exchange proposes to modify the interval setting
regime to be $1 or greater where the strike price is greater than $200
for GLD options, similar to SPY, IVV, QQQ, IWM 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 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 Participants 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
[[Page 59947]]
liquidity available as well as price efficiency by providing more
trading opportunities for all market participants.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\4\ in general, and Section 6(b)(5) of the Act,\5\ 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 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. 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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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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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 Participants will not have
a capacity issue as a result of this proposal. Further, the Exchange
believes 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.\6\
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\6\ See Securities Exchange Act Release No. 100447 (June 28,
2024), 89 FR 55293 (July 3, 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 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, QQQ, IWM 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 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.\7\ 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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\7\ Id.
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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 has 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 \8\ and Rule 19b-4(f)(6) thereunder.\9\
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 \10\ and subparagraph (f)(6) of
Rule 19b-4 thereunder.\11\
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 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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[[Page 59948]]
A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ 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 recently was approved by the
Commission.\14\ 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 exchanges, 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 30-day
operative delay and designates the proposed rule change as operative
upon filing.\15\
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\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ See supra note 6.
\15\ 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#d3a1a6bfb6feb0bcbebeb6bda7a093a0b6b0fdb4bca5"><span class="__cf_email__" data-cfemail="f183849d94dc929e9c9c949f8582b1829492df969e87">[email protected]</span></a>. Please include
file number SR-BOX-2024-18 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-BOX-2024-18. 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-BOX-2024-18 and should be
submitted on or before August 14, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12), (59).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-16219 Filed 7-23-24; 8:45 am]
BILLING CODE 8011-01-P
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