Notice2025-04513
Self-Regulatory Organizations; Notice of Filing of a Proposed Rule Change, as Modified by Partial Amendment Nos. 1 and 2, by MIAX Sapphire, LLC To Amend Exchange Rule 402, Criteria for Underlying Securities, To List and Trade Options on Commodity-Based Trust 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
March 19, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 52 (Wednesday, March 19, 2025)</title>
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[Federal Register Volume 90, Number 52 (Wednesday, March 19, 2025)]
[Notices]
[Pages 12859-12864]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-04513]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102660; File No. SR-SAPPHIRE-2025-12]
Self-Regulatory Organizations; Notice of Filing of a Proposed
Rule Change, as Modified by Partial Amendment Nos. 1 and 2, by MIAX
Sapphire, LLC To Amend Exchange Rule 402, Criteria for Underlying
Securities, To List and Trade Options on Commodity-Based Trust Shares
March 13, 2025.
Pursuant to the provisions of 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 March 5, 2025, MIAX Sapphire, LLC (``MIAX
Sapphire'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in
Items I, II, and III below, which Items have been substantially
prepared by the Exchange.\3\ The Commission is publishing this notice
to solicit comments on the proposed rule change, as modified by Partial
Amendment Nos. 1 and 2, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On March 11, 2025, the Exchange filed Partial Amendment No.
1 to the proposed rule change. In addition to the changes described
herein, Partial Amendment No. 1 corrected a marking error in
proposed changes to the rule text in Exhibit 5. On March 12, 2025,
the Exchange filed Partial Amendment No. 2 to the proposed rule
change to correct a marking error in proposed changes to the rule
text in Exhibit 5 as modified by Partial Amendment No. 1.
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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 proposes to amend Exchange Rule 402,
Criteria for Underlying Securities, to list and trade options on
Commodity-Based Trust Shares.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://www.miaxglobal.com/markets/us-options/miax-sapphire/rule-filings">https://www.miaxglobal.com/markets/us-options/miax-sapphire/rule-filings</a>, at the Exchange's principal office, 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 Exchange Rule 402, Criteria for
Underlying Securities,\4\ to allow the
[[Page 12860]]
listing and trading of options on units that represent interests in a
trust that in a Commodity-Based Trust. This is a competitive filing
substantively identical to proposals submitted by Nasdaq ISE, LLC
(``ISE''), NYSE American, LLC (``NYSE American''), NYSE Arca Inc.
(``NYSE Arca'') and Cboe Exchange, Inc. (``Cboe''), which are currently
pending with the Securities and Exchange Commission (the
``Commission'').\5\
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\4\ The Exchange notes that its affiliate options exchanges,
Miami International Securities Exchange, LLC (``MIAX '') and MIAX
Pearl, LLC (``MIAX Pearl''), submitted (or will submit)
substantively similar proposals. The Exchange notes that the rules
of Chapter IV of MIAX, including Exchange Rule 402, are incorporated
by reference into the MIAX Emerald, LLC (``MIAX Emerald'') rulebook.
\5\ See Securities Exchange Act Release No. 102465 (February 20,
2025) (SR-ISE-2025-08); SRNYSEArca-2025-16 (February 24, 2025); and
SR-NYSEAmerican-2025-07 (February 24, 2025) and SR-Cboe-2025-014.
Partial Amendment No. 1 added the citation to SR-CBOE-2025-014.
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The Exchange proposes to allow the listing and trading of options
on units that represent interests in a trust that in a Commodity-Based
Trust. A Commodity-Based Trust is defined at The Nasdaq Stock Market
LLC Rule 5711(d)(iv), NYSE Arca Rule 8.201(c), and Cboe BZX Exchange,
Inc. 14.11(e)(4) as a security that is issued by a trust that holds (i)
a specified commodity deposited with the Trust, or (ii) a specified
commodity and, in addition to such specified commodity, cash; (b) that
is issued by such Trust in a specified aggregate minimum number in
return for a deposit of a quantity of the underlying commodity and/or
cash; and (c) that, when aggregated in the same specified minimum
number, may be redeemed at a holder's request by such Trust which will
deliver to the redeeming holder the quantity of the underlying
commodity and/or cash (``Commodity-Based Trust Share'').
The Exchange proposes to amend Exchange Rule 402(i) to provide that
(i) Securities deemed appropriate for options trading shall
include shares or other securities (``Exchange-Traded Fund Shares'')
that are traded on a national securities exchange and are defined as
an ``NMS stock'' under Rule 600 of Regulation NMS, and that . . .
(4) represent interests in (i) a security issued by a trust that
holds (A) a specified commodity deposited with the trust, or (B) a
specified commodity and, in addition to such specified commodity,
cash; (ii) that is issued by such trust in a specified aggregate
minimum number in return for a deposit of a quantity of the
underlying commodity and/or cash; and (iii) that, when aggregated in
the same specified minimum number, may be redeemed at a holder's
request by such trust which will deliver to the redeeming holder the
quantity of the underlying commodity and/or cash (``Commodity-Based
Trust Share'').\6\
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\6\ Partial Amendment No. 1 removed text incorrectly included in
the block quote describing proposed Exchange Rule 402(i).
The Exchange proposes to insert this rule text and remove
references to the SPDR[supreg] Gold Trust, the iShares COMEX Gold
Trust, the iShares Silver Trust, the Aberdeen Standard Silver ETF
Trust, the Aberdeen Standard Physical Gold Trust, the Aberdeen Standard
Palladium ETF Trust, the Aberdeen Standard Platinum ETF Trust, the
Goldman Sachs Physical Gold ETF, the Sprott Physical Gold Trust, the
iShares Bitcoin Trust, the Grayscale Bitcoin Trust, the Grayscale
Bitcoin Mini Trust, the Bitwise Bitcoin ETF, the Fidelity Wise Origin
Bitcoin Fund, and the ARK 21 Shares Bitcoin ETF which are all
Commodity-Based Trust Shares. As a result of this proposed rule change,
the Exchange's listing criteria would allow any ETF approved to list on
a primary equities market as a Commodity-Based Trust Share to qualify
as an underlying for options traded on the Exchange, provided other
listing criteria have been met.\7\
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\7\ The Exchange believes this proposal is consistent with the
Options Clearing Corporation (``OCC'') recent amendment of ``Fund
Share'' (which covers ETFs), as defined in OCC's By-Laws (including
the Interpretation and Policy), to remove references to specific
precious metal commodity-based ETFs as ``no longer relevant or
necessary.'' See Securities Exchange Act Release No. 102018
(December 20, 2024), 89 FR 106660 (December 30, 2024) (SR-OCC-2024-
018). The impetus for this rule change was the staff advisory issued
by the Commodity Futures Trading Commission (``CFTC'') that deemed
it `` ``substantially likely' that spot commodity ETF shares would
be held to be securities'' which, in turn, resulted in the OCC's
determination that ``it no longer needs to seek product-by-product
exemptive relief from the CFTC to clear spot commodity-based ETF
products, including precious metals commodity-based ETFs.'' See id.
at 106661; see also CFTC Staff Advisory Relating to the Clearing of
Options on Spot Commodity Exchange Traded Funds (ETFs), Letter No.
24-16 (Nov. 15, 2024), available at <a href="https://www.cftc.gov/csl/24-16/download">https://www.cftc.gov/csl/24-16/download</a>.
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The Exchange's initial listing standards as set forth in Exchange
Rule 402(a) for Exchange Traded Fund Shares (``ETFs'') on which options
may be listed and traded on the Exchange, will continue to apply.
Pursuant to Exchange Rule 402(a), a security (which includes ETFs) on
which options may be listed and traded on the Exchange must be a
security registered (with the Commission) and be an NMS stock (as
defined in Rule 600 of Regulation NMS under the Act), and be
characterized by a substantial number of outstanding shares that are
widely held and actively traded.\8\ Additionally, Exchange Rule
402(i)(5)(i) requires that the ETFs must either (1) meet the criteria
and standards set forth in Exchange Rule 402(a) or 402(b),\9\ or (2) be
available for creation or redemption each business day from or through
the issuer in cash or in kind at a price related to net asset value,
and the issuer must be obligated to issue ETFs in a specified aggregate
number even if some or all of the investment assets required to be
deposited have not been received by the issuer, subject to the
condition that the person obligated to deposit the investments has
undertaken to deliver the investment assets as soon as possible and
such undertaking is secured by the delivery and maintenance of
collateral consisting of cash or cash equivalents satisfactory to the
issuer, as provided in the respective prospectus.
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\8\ The criteria and guidelines for a security to be considered
widely held and actively traded are set forth in Exchange Rule
402(b).
\9\ Subparagraphs (a) and (b) of Exchange Rule 402 provide for
guidelines to be used by the Exchange when evaluating potential
underlying securities for Exchange option transactions.
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Additionally, a Commodity-Based Trust Share will also be subject to
the Exchange's continued listing standards for options on ETFs set
forth in Exchange Rule 403(g) for ETFs deemed appropriate for options
trading pursuant to Exchange Rule 402(i). Specifically, options
approved for trading pursuant to Exchange Rule 402(i) will not be
deemed to meet the requirements for continued approval, and the
Exchange shall not open for trading any additional series of option
contracts of the class covering such ETFs if the ETFs are delisted from
trading as provided in Exchange rule 403(b)(4) or the ETFs are halted
or suspended from trading on their primary market. Additionally,
options on ETFs may be subject to the suspension of opening
transactions in any of the following circumstances:
(1) in the case of options covering ETFs approved for trading
under Exchange Rule 402(i)(5)(i)(A), in accordance with the terms of
paragraphs (b)(1), (2), and (3) of Exchange Rule 403;
(2) in the case of options covering ETFs approved for trading
under Exchange Rule 402(i)(5)(i)(B), following the initial twelve-
month period beginning upon the commencement of trading in the ETFs
on a national securities exchange and are defined as an NMS stock,
there are fewer than 50 record and/or beneficial holders of such
ETFs for 30 or more consecutive trading days;
(3) the value of the index or portfolio of securities, non-U.S.
currency, or portfolio of commodities including commodity futures
contracts, options on commodity futures contracts, swaps, forward
contracts and/or options on physical commodities and/or financial
instruments and money market instruments on which the ETFs are based
is no longer calculated or available; or
(4) such other event shall occur or condition exist that in the
opinion of the
[[Page 12861]]
Exchange makes further dealing in such options on the Exchange
inadvisable.
The Exchange notes that ETFs that hold financial instruments, money
market instruments, precious metal commodities, or cryptocurrencies
that are deemed commodities on which the Exchange may already list and
trade options pursuant to Exchange Rule 402(i) are trusts structured in
substantially the same manner as options on a Commodity Based Trust
Share and essentially offer the same objectives and benefits to
investors, just with respect to different assets. The Exchange notes
that it has not identified any issues with the continued listing and
trading of any ETF options, including ETFs that hold commodities (e.g.,
precious metals, cryptocurrencies) that it currently lists and trades
on the Exchange.
Options on a Commodity-Based Fund Share will be physically settled
contracts with American-style exercise.\10\ Consistent with Exchange
Rule 404, which governs the opening of options series on a specific
underlying security (including ETFs), the Exchange will open at least
one expiration month for options on a Commodity-Based Trust Share \11\
and may also list series of options on Commodity-Based Trust Share for
trading on a weekly,\12\ monthly,\13\ or quarterly \14\ basis. The
Exchange may also list long-term equity option series (``LEAPS'') that
expire from 12 to 39 months from the time they are listed.\15\
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\10\ See Exchange Rule 401, which provides that the rights and
obligations of holders and writers are set forth in the Rules of the
Options Clearing Corporation (``OCC''); see also OCC Rules, Chapters
VIII (which governs exercise and assignment) and Chapter IX (which
governs the discharge of delivery and payment obligations arising
out of the exercise of physically settled stock option contracts).
\11\ See Exchange Rule 404(b). The monthly expirations are
subject to certain listing criteria for underlying securities
described within Exchange Rule 404 and its Interpretations and
Policies. Monthly listings expire the third Friday of the month. The
term ``expiration date'' (unless separately defined elsewhere in the
OCC By-Laws), when used in respect of an option contract (subject to
certain exceptions), means the third Friday of the expiration month
of such option contract, or if such Friday is a day on which the
exchange on which such option is listed is not open for business,
the preceding day on which such exchange is open for business. See
OCC By-Laws Article I, Section 1. Pursuant to Exchange Rule 404(c),
additional series of options of the same class may be opened for
trading on the Exchange when the Exchange deems it necessary to
maintain an orderly market, to meet customer demand or when the
market price of the underlying stock moves more than five strike
prices from the initial exercise price or prices. Pursuant to
Exchange Rule 404(e), new series of options on an individual stock
may be added until the beginning of the month in which the options
contract will expire. Due to unusual market conditions, the
Exchange, in its discretion, may add a new series of options on an
individual stock until the close of trading on the business day
prior to expiration.
\12\ See Exchange Rule 404, Interpretations and Policies .02.
\13\ See Exchange Rule 404, Interpretations and Policies .13.
\14\ See Exchange Rule 404, Interpretations and Policies .03.
\15\ See Exchange Rule 406. Partial Amendment No. 1 corrected
this rule citation.
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Pursuant to Exchange Rule 404, Interpretations and Policies.06,
which governs strike prices of series of options on ETFs, the interval
between strike prices of series of options on ETFs approved for options
trading pursuant to Exchange Rule 402(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 the
Exchange, or at such intervals as may have been established on another
options exchange prior to the initiation of trading on the Exchange.
With respect to the Short Term Options Series or Weekly Program, during
the month prior to expiration of an option class that is selected for
the Short Term Option Series Program, the strike price intervals for
the related non-Short Term Option (``Related non-Short Term Option'')
shall be the same as the strike price intervals for the Short Term
Option.\16\ Specifically, the Exchange may open for trading Short Term
Option Series at strike price intervals of (i) $0.50 or greater where
the strike price is less than $100, and $1 or greater where the strike
price is between $100 and $150 for all option classes that participate
in the Short Term Options Series Program; (ii) $0.50 for option classes
that trade in one dollar increments and are in the Short Term Option
Series Program; or (iii) $2.50 or greater where the strike price is
above $150.\17\ Additionally, the Exchange may list series of options
pursuant to the $1 Strike Price Interval Program,\18\ the $0.50 Strike
Program,\19\ and the $2.50 Strike Price Program.\20\ Pursuant to
Exchange Rule 510, where the price of a series of options on a
Commodity-Based Trust Share is less than $3.00, the minimum increment
will be $0.05, and where the price is $3.00 or higher, the minimum
increment will be $0.10 \21\ consistent with the minimum increments for
options on other ETFs listed on the Exchange. Any and all new series of
a Commodity-Based Trust Share options that the Exchange lists will be
consistent and comply with the expirations, strike prices, and minimum
increments set forth in Rules 404 and 510, as applicable.
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\16\ See Exchange Rule 404, Interpretations and Policies .02(e).
\17\ Id.
\18\ See Exchange Rule 404, Interpretations and Policies.01.
\19\ See Exchange Rule 404, Interpretations and Policies.04.
\20\ See Exchange Rule 404(f).
\21\ See Exchange Rule 510.
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Options on a Commodity-Based Trust Share will trade in the same
manner as options on other ETFs on the Exchange. The Exchange Rules
that currently apply to the listing and trading of all options on ETFs
on the Exchange, including, for example, Rules that govern listing
criteria, expirations, exercise prices, minimum increments, position
and exercise limits, margin requirements, customer accounts and trading
halt procedures would apply to the listing and trading of options on a
Commodity-Based Trust Share on the Exchange in the same manner as they
apply to other options on all other ETFs that are listed and traded on
the Exchange.
Position and exercise limits for options on ETFs, including options
on a Commodity-Based Trust Share, are determined pursuant to the
Exchange's affiliate MIAX Rules 307 and 309, respectively. Position and
exercise limits for ETF options vary according to the number of
outstanding shares and the trading volumes of the underlying ETF over
the past six months, where the largest in capitalization and the most
frequently traded ETFs have an option position and exercise limits of
250,000 contracts (with adjustments for splits, re-capitalizations,
etc.) on the same side of the market; and smaller capitalization ETFs
have position and exercise limits of 200,000, 75,000, 50,000 or 25,000
contracts (with adjustments for splits, re-capitalizations, etc.) on
the same side of the market. The Exchange further notes that the
Exchange's affiliate MIAX Rule 1502, which governs margin requirements
applicable to trading on the Exchange, including options on ETFs, will
also apply to the trading on a Commodity-Based Trust Share options.
The Exchange represents that the same surveillance procedures
applicable to all other options on other ETFs currently listed and
traded on the Exchange will apply to options on a Commodity Based Trust
Share that it applies to the Exchange's other options products.\22\ The
Exchange believes that its existing surveillance and reporting
safeguards are designed to deter and
[[Page 12862]]
detect possible manipulative behavior which might potentially arise
from listing and trading options on ETFs, including any options on a
Commodity-Based Trust Share. Additionally, the Exchange is a member of
the Intermarket Surveillance Group (``ISG'') under the Intermarket
Surveillance Group Agreement. ISG members work together to coordinate
surveillance and investigative information sharing in the stock,
options, and futures markets. In addition, the Exchange has a
Regulatory Services Agreement with the Financial Industry Regulatory
Authority (``FINRA''). Pursuant to a multi-party 17d-2 joint plan, all
options exchanges allocate regulatory responsibilities to FINRA to
conduct certain options-related market surveillance that are common to
rules of all options exchanges.\23\ Also, the Exchange may obtain
information from CME Group Inc.'s designated contract markets that are
members of the ISG related to a financial instrument that is based, in
whole or in part, upon an interest in or performance of a commodity, as
applicable. Further, the Exchange will implement any new surveillance
procedures it deems necessary to effectively monitor the trading of
options on Commodity-Based Fund Shares.
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\22\ The surveillance program includes real-time patterns for
price and volume movements and post-trade surveillance patterns
(e.g., spoofing, marking the close, pinging, phishing).
\23\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or national
securities association to comply with the Act, the rules and
regulations thereunder, and the SRO's own rules, and, absent
reasonable justification or excuse, enforce compliance by its
members and persons associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows
the Commission to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also members of another SRO
(``common members''). Specifically, Section 17(d)(1) allows the
Commission to relieve an SRO of its responsibilities to: (i) receive
regulatory reports from such members; (ii) examine such members for
compliance with the Act and the rules and regulations thereunder,
and the rules of the SRO; or (iii) carry out other specified
regulatory responsibilities with respect to such members.
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The Exchange has also analyzed its capacity and represents that it
believes the Exchange and the Options Price Reporting Authority
(``OPRA'') have the necessary systems capacity to handle the additional
traffic associated with the listing of new series of ETFs, including
options on a Commodity-Based Trust Share, up to the number of
expirations currently permissible under the Exchange Rules. The
Exchange believes any additional traffic generated from the trading of
options on Commodity-Based Trust Shares would be manageable. The
Exchange represents that Exchange members will not have a capacity
issue as a result of this proposed rule change.
Further, quotation and last sale information for Commodity-Based
Trust Shares is available via the Consolidated Tape Association
(``CTA'') high speed line. Quotation and last sale information for such
securities is also available from the exchange on which such securities
are listed. Quotation and last sale information for options on
Commodity-Based Trust Shares will be available via OPRA and major
market data vendors.
The Exchange notes that the Commission has previously approved
generic listing standards pursuant to Rule 19b-4(e) of the Act \24\ for
ETFs based on indexes that consist of stocks listed on U.S.
exchanges.\25\ In addition, the Commission has previously approved
proposals for the listing and trading of options on ETFs based on
international indexes as well as global indexes (e.g., based on non-
U.S. and U.S. component stocks).\26\
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\24\ 17 CFR 240.19b-4(e).
\25\ See Securities Exchange Act Release No. 54739 (November 9,
2006), 71 FR 66993 (November 17, 2006) (SR-AMEX-2006-78) (approval
order relating to generic listing standards for ETFs based on
international or global indexes).
\26\ See, e.g., Securities Exchange Act Release Nos. 56778
(November 9, 2007), 72 FR 65113 (November 19, 2007) (SR-AMEX-2007-
100) (approval order to list and trade options on iShares MSCI
Mexico Index Fund); and 55648 (April 19, 2007), 72 FR 20902 (April
26, 2007) (SR-AMEX-2007-09) (approval order to list and trade
options on Vanguard Emerging Markets ETF); see also Securities
Exchange Act Release Nos. 50189 (August 12, 2004), 69 FR 51723
(August 20, 2004) (SR-AMEX-2001-05) (approving the listing and
trading of certain Vanguard International Equity Index Funds); and
44700 (August 14, 2001), 66 FR 43927 (August 21, 2001) (SR-2001-34)
(approving the listing and trading of series of the iShares Trust
based on foreign stock indexes).
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In approving Commodity-Based Trust Shares for equities exchange
trading, the Commission thoroughly considered the structure of the
Commodity-Based Trust Shares, their usefulness to investors and to the
markets, and self-regulatory organization rules that govern their
trading. The Exchange believes that allowing the listing of options
overlying Commodity-Based Trust Shares that are listed pursuant to
Commission approval on equities exchanges and applying Rule 19b-4(e)
\27\ should fulfill the intended objective of that rule by allowing
options on those Commodity-Based Trust Shares that have satisfied the
generic listing standards to commence trading, without the need for the
public comment period and Commission approval. The proposed rule change
has the potential to significantly reduce the time and costs associated
with bringing options on Commodity-Based Trust Shares to market,
thereby reducing the burden on issuers and other market participants,
while also promoting competition among options exchanges, to the
benefit of the investing public. The failure of a particular Commodity-
Based Trust Share to comply with the generic listing standards under
Rule 19b-4(e) \28\ would not, however, preclude the Exchange from
submitting a separate filing pursuant to Section 19(b)(2) \29\
requesting Commission approval to list and trade options on a
particular Commodity-Based Trust Share.
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\27\ 17 CFR 240.19b-4(e).
\28\ Id.
\29\ 15 U.S.C. 78s(b)(2).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\30\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \31\ 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) \32\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
\32\ Id.
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In particular, the Exchange believes that the proposal will remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, protect investors because it
would allow the Exchange to immediately list and trade options on any
Commodity-Based Trust Share, provided the initial listing criteria has
been met, without any additional approvals from the Commission.\33\
Commodity-Based Trust Shares are securities approved for trading by the
Commission. The Exchange believes that with this proposal it will be
able to
[[Page 12863]]
offer options on a Commodity-Based Trust Share soon after the listing
of such underlying security in the primary market, provided the initial
listing criteria has been met, thereby availing market participants of
the opportunity to hedge their positions in the ETF in a timely manner.
Given the potential to reduce the time to market for options on
Commodity-Based Trust Shares, the proposed rule change will also reduce
the burdens on issuers and other market participants, while also
promoting competition among options exchanges to the benefit of the
investing public. This proposal would permit options on Commodity-Based
Trust Shares to be listed on the Exchange in the same manner as all
other securities that are subject to the current listing criteria in
Exchange Rule 402. The Exchange notes that the majority of ETFs are
able to list and trade options once the initial listing criteria have
been met without the need for additional approvals. The proposed rule
change would allow options on a Commodity-Based Trust Share to likewise
list and trade options once the initial listing criteria have been met
without the need for additional approvals. Accordingly, the proposed
rule change would align the treatment of Commodity-Based Trust Shares
with other ETFs for purposes of options trading, which would add
internal consistency to Exchange rules.
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\33\ As noted herein, the Exchange believes this proposal is
consistent with the OCC's determination that, based on a staff
advisory from the CFTC, the ``it no longer needs to seek product-by-
product exemptive relief from the CFTC to clear spot commodity-based
ETF products.'' See supra note 7.
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The Exchange believes that the proposed rule change will facilitate
the listing and trading of options on additional ETFs that will enhance
competition among market participants, to the benefit of investors and
the marketplace. Like options on any other securities, options on
Commodity-Based Trust Shares provides investors with the ability to
hedge exposure to the underlying security similar to options on any
other securities. Options on Commodity-Based Trust Shares benefits
investors, similar to the listing of any other option on an ETF, by
providing investors with a relatively lower-cost risk management tool,
to manage their positions and associated risk in their portfolios more
easily in connection with exposure to the price of a commodity.
Additionally, options on a Commodity-Based Trust Share provide
investors with the ability to transact in such options in a listed
market environment as opposed to in the unregulated OTC options market,
which increases market transparency and enhances the process of price
discovery conducted on the Exchange through increased order flow to the
benefit of all investors.
The Exchange also notes that it already lists options on other
commodity based ETFs,\34\ which, as described above, are trusts
structured as Commodity-Based Trust Shares. The Exchange has not
identified any issues with the continued listing and trading of options
on Commodity-Based Trust Shares it currently lists for trading.
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\34\ See Exchange Rule 402(i)(4).
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The Exchange also believes the proposed rule change will remove
impediments to and perfect the mechanism of a free and open market and
a national market system, because it is consistent with current
Exchange Rules, previously filed with the Commission. Options on a
Commodity-Based Trust Share must satisfy the initial listing standards
and continued listing standards currently in the Exchange Rules
applicable to options on all ETFs, including ETFs that hold other
commodities already deemed appropriate for options trading on the
Exchange.\35\ Options on a Commodity-Based Trust Share would trade in
the same manner as any other ETF options--the same Exchange Rules that
currently govern the listing and trading of all ETF options, including
permissible expirations, strike prices and minimum increments, and
applicable position and exercise limits and margin requirements, will
govern the listing and trading of options on a Commodity-Based Trust
Share in the same manner.
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\35\ Id.
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The Exchange believes the proposed rule change will result in
increased competition as other exchanges will likely adopt an identical
rule to the one proposed by the Exchange that would allow the listing
and trading of options on Commodity-Based Trust Shares that are
approved for trading on those other markets.\36\ Multiple listing of
ETFs, options and other securities and competition are some of the
central features of the national market system. The Exchange believes
that the proposal would encourage a more open market and national
market system based on competition and multiple listing. The Exchange
represents that it has the necessary systems capacity to support the
listing and trading of options on Commodity-Based Trust Shares as the
Exchange lists these products today, except that it requires additional
approvals prior to listing.
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\36\ See supra note 5.
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The Exchange believes that its existing surveillance and reporting
safeguards are designed to deter and detect possible manipulative
behavior which might arise from listing and trading of these ETF
options.\37\
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\37\ Partial Amendment No. 1 removed a duplicative sentence from
the beginning of this paragraph.
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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. In this regard and as
indicated above, the Exchange notes that the rule change is being
proposed as a competitive response to the filings submitted by ISE,
NYSE American, NYSE Arca, and Cboe.\38\
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\38\ See supra note 5.
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The Exchange believes that the proposal is pro-competitive and is a
competitive response to the Exchange's inability to list options on
Commodity-Based Trust Shares without the need for additional approvals.
The Exchange believes the proposed rule change will result in
additional investment options and opportunities to achieve the
investment objectives of market participants seeking efficient trading
and hedging vehicles, to the benefit of investors, market participants,
and the marketplace in general. Competition is one of the principal
features of the national market system. The Exchange believes that this
proposal will expand competitive opportunities to list and trade
products on the Exchange as noted.
The Exchange does not believe the proposal will impose any burden
on intra-market competition that is not necessary or appropriate in
furtherance of the purposes of the Act because Commodity-Based Trust
Shares, like any other ETF, would have to satisfy the Exchange's
initial listing standards to be eligible for options trading.
Additionally, the proposed rule change would apply to all market
participants in the same manner as options on Commodity-Based Trust
Shares will be equally available to all market participants who wish to
trade such options.
The Exchange does not believe the proposal will impose any burden
on inter-market competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as nothing prevents the other
options exchanges from proposing similar rules to list and trade
options on Commodity-Based Trust Shares. As noted herein, ISE, NYSE
American, NYSE Arca, and Cboe have submitted a proposal to adopt an
identical rule to allow ISE, NYSE American, NYSE Arca, and Cboe list
[[Page 12864]]
and trade options on Commodity-Based Trust Shares without the need for
additional approvals.\39\
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\39\ See supra note 5.
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Furthermore, the Exchange notes that listing and trading options on
a Commodity-Based Trust Share on the Exchange will subject such options
to transparent exchange-based rules as well as price discovery and
liquidity, as opposed to alternatively trading such options in the OTC
market. The Exchange believes that the proposed rule change may relieve
any burden on, or otherwise promote, competition as it is designed to
increase competition for order flow on the Exchange in a manner that is
beneficial to investors by providing them with a lower-cost option to
hedge their investment portfolios in a timely manner.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor 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 up to 90 days (i) as the
Commission may designate 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 will:
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#daa8afb6bff7b9b5b7b7bfb4aea99aa9bfb9f4bdb5ac"><span class="__cf_email__" data-cfemail="f486819891d9979b9999919a8087b4879197da939b82">[email protected]</span></a>. Please include
file number SR-SAPPHIRE-2025-12 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-SAPPHIRE-2025-12. 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-SAPPHIRE-2025-12 and should
be submitted on or before April 9, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2025-04513 Filed 3-18-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 19, 2025.
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