[Federal Register Volume 86, Number 43 (Monday, March 8, 2021)]
[Notices]
[Pages 13404-13407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04679]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91238; File No. SR-Phlx-2021-10]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
of Proposed Rule Change To Permit Monday and Wednesday Expirations for 
Options Listed Pursuant to the Short Term Option Series Program on the 
Invesco QQQ Trust\SM\ Series (``QQQ'') ETF Trust

March 2, 2021.
    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 February 22, 2021, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and 
II, below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to permit Monday and Wednesday expirations 
for options listed pursuant to the Short Term Option Series Program on 
the Invesco QQQ Trust\SM\ Series (``QQQ'') ETF Trust.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, at the 
principal office of the Exchange, 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 Phlx Options 4, Section 5 at 
Commentary .11 to allow Monday and Wednesday expirations for options 
listed pursuant to the Short Term Option Series Program (``Program'') 
on QQQ.
    A Short Term Option Series means a series in an option class that 
is approved for listing and trading on the Exchange in which the series 
is opened for trading on any Monday, Tuesday, Wednesday, Thursday or 
Friday that is a business day and that expires on the Monday, Wednesday 
or Friday of the next business week, or, in the case of a series that 
is listed on a Friday and expires on a Monday, is listed one business 
week and one business day prior to that expiration.\3\ The Exchange is 
proposing to amend Phlx Options 4, Section 5 at Commentary .11 to 
permit the listing of options series that expire on Mondays and 
Wednesdays in QQQ.
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    \3\ Options 1, Section 1(b)(53) provides the term ``Short Term 
Option Series'' [sic] a series in an option class that is approved 
for listing and trading on the Exchange in which the series is 
opened for trading on any Monday, Tuesday, Wednesday, Thursday or 
Friday that is a business day and that expires on the Monday, 
Wednesday or Friday of the next business week, or, in the case of a 
series that is listed on a Friday and expires on a Monday, is listed 
one business week and one business day prior to that expiration. If 
a Tuesday, Wednesday, Thursday or Friday is not a business day, the 
series may be opened (or shall expire) on the first business day 
immediately prior to that Tuesday, Wednesday, Thursday or Friday, 
respectively. For a series listed pursuant to this section for 
Monday expiration, if a Monday is not a business day, the series 
shall expire on the first business day immediately following that 
Monday.
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Monday Expirations
    As proposed, with respect to Monday QQQ Expirations within 
Commentary .11 to Options 4, Section 5, the Exchange may open for 
trading on any Friday or Monday that is a business day series of 
options on QQQ to expire on any Monday of the month that is a business 
day and is not a Monday in which Quarterly Options Series on the same 
class expire (``Monday QQQ Expirations''), provided that Monday QQQ 
Expirations that are listed on a Friday must be listed at least one 
business week and one business day prior to the expiration. The 
Exchange may list up to five consecutive Monday QQQ Expirations at one 
time; the Exchange may have no more than a total of five Monday QQQ 
Expirations.
Wednesday Expirations
    As proposed, with respect to Wednesday QQQ Expirations within 
Commentary .11 to Options 4, Section 5, the Exchange may open for 
trading on any Tuesday or Wednesday that is a business day series of 
options on QQQ to expire on any Wednesday of the month that is a 
business day and is not a Wednesday in which Quarterly Options Series 
on the same class expire (``Wednesday QQQ Expirations''). The Exchange 
may list up to five consecutive Wednesday QQQ Expirations at one time; 
the Exchange may have no more than a total of five Wednesday QQQ 
Expirations and a total of five Wednesday QQQ Expirations will be 
subject to the provisions of this Rule.
Monday and Wednesday Expirations
    The interval between strike prices for the proposed Monday and 
Wednesday QQQ Expirations will be the same as

[[Page 13405]]

those for the current Short Term Option Series for Wednesday and Friday 
expirations applicable to the Program.\4\ Specifically, the Monday and 
Wednesday QQQ Expirations will have a $0.50 strike interval minimum.\5\ 
As is the case with other equity options series listed pursuant to the 
Program, the Monday and Wednesday QQQ Expiration series will be P.M.-
settled.
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    \4\ See Commentary .11(e) to Options 4, Section 5.
    \5\ See Commentary .11(e) to Options 4, Section 5.
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    Pursuant to Options 1, Section 1(b)(53), with respect to the 
Program, if Monday is not a business day the series shall expire on the 
first business day immediately following that Monday. This procedure 
differs from the expiration date of Wednesday expiration series that 
are scheduled to expire on a holiday. Pursuant to Options 1, Section 
1(b)(53) a Wednesday expiration series shall expire on the first 
business day immediately prior to that Wednesday, e.g., Tuesday of that 
week, if the Wednesday is not a business day. For purposes of QQQ, 
however, the Exchange believes that it is preferable to require Monday 
expiration series in this scenario to expire on the Tuesday of that 
week rather than the previous business day, e.g., the previous Friday, 
since the Tuesday is closer in time to the scheduled expiration date of 
the series than the previous Friday, and therefore may be more 
representative of anticipated market conditions. Monday SPY expirations 
are treated in this manner today.\6\ Cboe Exchange, Inc. (``Cboe'') 
uses the same procedure for options on the S&P 500 index (``SPX'') with 
Monday expirations that are listed pursuant to its Nonstandard 
Expirations Pilot Program and that are scheduled to expire on a 
holiday.\7\ Also, Nasdaq Phlx LLC (``Phlx'') \8\ and Nasdaq ISE, LLC 
(``ISE'') \9\ use the same procedure for options on the Nasdaq-
100[supreg] (``NDX'') with Monday expirations that are listed pursuant 
to its [sic] Nonstandard Expirations Pilot Programs, respectively.
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    \6\ See Commentary .11 at Options 4, Section 5.
    \7\ See Cboe Rule 4.13(e)(1) ``. . . If the Exchange is not open 
for business on a respective Monday, the normally Monday expiring 
Weekly Expirations will expire on the following business day. If the 
Exchange is not open for business on a respective Wednesday or 
Friday, the normally Wednesday or Friday expiring Weekly Expirations 
will expire on the previous business day.''
    \8\ See Phlx Options 4A, Section 12(b)(5).
    \9\ See ISE Supplementary Material .07 to Options 4A, Section 
12.
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    Currently, for each option class eligible for participation in the 
Program, the Exchange is limited to opening thirty (30) series for each 
expiration date for the specific class.\10\ The thirty (30) series 
restriction does not include series that are open by other securities 
exchanges under their respective short term option rules; the Exchange 
may list these additional series that are listed by other 
exchanges.\11\ This thirty (30) series restriction would apply to 
Monday and Wednesday QQQ Expiration series as well. In addition, the 
Exchange will be able to list series that are listed by other 
exchanges, assuming they file similar rules with the Commission to list 
QQQ options expiring on Mondays and Wednesdays.
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    \10\ See Commentary .11(a) to Options 4, Section 5.
    \11\ See Commentary .11(a) to Options 4, Section 5.
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    Finally, the Exchange is amending Commentary .11(b) to Options 4, 
Section 5, which addresses the listing of Short Term Options Series 
that expire in the same week as monthly or quarterly options series. 
Currently, that rule states that no Short Term Option Series may expire 
in the same week in which monthly option series on the same class 
expire (with the exception of Monday and Wednesday SPY Expirations) or, 
in the case of Quarterly Options Series, on an expiration that 
coincides with an expiration of Quarterly Option Series on the same 
class.\12\ As with Monday and Wednesday SPY Expirations, the Exchange 
is proposing to permit Monday and Wednesday QQQ Expirations to expire 
in the same week as monthly options series on the same class. The 
Exchange believes that it is reasonable to extend this exemption to 
Monday and Wednesday QQQ Expirations because Monday and Wednesday QQQ 
Expirations and standard monthly options will not expire on the same 
trading day, as standard monthly options expire on Fridays. 
Additionally, the Exchange believes that not listing Monday and 
Wednesday QQQ Expirations for one week every month because there was a 
monthly QQQ expiration on the Friday of that week would create investor 
confusion.
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    \12\ See current Commentary .11(b) to Options 4, Section 5.
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    The Exchange does not believe that any market disruptions will be 
encountered with the introduction of P.M.-settled Monday and Wednesday 
QQQ expirations. The Exchange has the necessary capacity and 
surveillance programs in place to support and properly monitor trading 
in the proposed Monday and Wednesday QQQ Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
Monday and Wednesday for SPY and has not experienced any market 
disruptions nor issues with capacity. Today, the Exchange has 
surveillance programs in place to support and properly monitor trading 
in Short Term Option Series that expire Monday and Wednesday for SPY.
    Similar to SPY, the introduction of QQQ Monday and Wednesday 
expirations will, among other things, expand hedging tools available to 
market participants and continue the reduction of the premium cost of 
buying protection. The Exchange believes that Monday and Wednesday QQQ 
expirations will allow market participants to purchase QQQ based on 
their timing as needed and allow them to tailor their investment and 
hedging needs more effectively.
Implementation
    The Exchange intends to begin implementation of the proposed rule 
change in Q2 2021. The Exchange will issue an Options Trader Alert to 
Participants with the date of implementation.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\13\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\14\ 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 by providing the investing public and 
other market participants more flexibility to closely tailor their 
investment and hedging decisions in QQQ options, thus allowing them to 
better manage their risk exposure.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes the Program has been 
successful to date and that Monday and Wednesday QQQ Expirations should 
simply expand the ability of investors to hedge risk against market 
movements stemming from economic releases or market events that occur 
throughout the month in the same way that the Program has expanded the 
landscape of hedging. Similarly, the Exchange believes Monday and 
Wednesday QQQ Expirations should create greater trading and hedging 
opportunities and flexibility, and will provide customers with the 
ability to tailor their investment objectives more effectively. Phlx 
currently lists Monday and Wednesday SPY Expirations.\15\ Also, Cboe 
\16\ currently permits Monday and Wednesday expirations for other 
options with a weekly expiration, such

[[Page 13406]]

as options on the SPX pursuant to its Nonstandard Expirations Pilot 
Program and Phlx \17\ and ISE \18\ currently permit Monday and 
Wednesday expirations for other options with a weekly expiration on NDX 
pursuant to its [sic] Nonstandard Expirations Pilot Programs, 
respectively.
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    \15\ See Commentary .11 at Options 4, Section 5.
    \16\ See note 6 [sic] above.
    \17\ See note 8 above.
    \18\ See note 9 above.
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    With the exception of Monday expiration series that are scheduled 
to expire on a holiday, there are no material differences in the 
treatment of Monday and Wednesday QQQ expirations for Short Term Option 
Series. The Exchange believes that it is consistent with the Act to 
treat Monday expiration series that expire on a holiday differently 
than Wednesday or Friday expiration series, since the proposed 
treatment for Monday expiration series will result in an expiration 
date that is closer in time to the scheduled expiration date of the 
series, and therefore may be more representative of anticipated market 
conditions. Monday SPY expirations are treated in this manner 
today.\19\ Cboe \20\ uses the same procedure for SPX options with 
Monday expirations that are listed pursuant to its Nonstandard 
Expirations Pilot Program and that are scheduled to expire on a 
holiday, as do Phlx \21\ and ISE \22\ for NDX options with Monday 
expirations that are listed pursuant to their Nonstandard Expirations 
Pilot Programs, respectively.
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    \19\ See Commentary .11 at Options 4, Section 5.
    \20\ Id. [sic]
    \21\ See note 8 above.
    \22\ See note 9 above.
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    Given the similarities between Monday and Wednesday SPY Expirations 
and the proposed Monday and Wednesday QQQ Expirations, the Exchange 
believes that applying the provisions in Commentary .11 to Options 4, 
Section 5 that currently apply to Monday and Wednesday SPY Expirations 
to Monday and Wednesday QQQ Expirations is justified. For example, the 
Exchange believes that allowing Monday and Wednesday QQQ Expirations 
and monthly QQQ expirations in the same week will benefit investors and 
minimize investor confusion by providing Monday and Wednesday QQQ 
Expirations in a continuous and uniform manner. The Exchange also 
believes that is appropriate to amend Commentary .11(b) to Options 4, 
Section 5 to clarify that no Short Term Option Series may expire on the 
same day as an expiration of Quarterly Option Series on the same class, 
same as SPY.
    The Exchange represents that it has an adequate surveillance 
program in place to detect manipulative trading in Monday and Wednesday 
expirations, including Monday and Wednesday QQQ Expirations, in the 
same way that it monitors trading in the current Short Term Option 
Series and trading in Monday and Wednesday SPY Expirations. The 
Exchange also represents that it has the necessary systems capacity to 
support the new options series. Finally, the Exchange does not believe 
that any market disruptions will be encountered with the introduction 
of Monday and Wednesday QQQ expirations.

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. The Exchange notes that 
having Monday and Wednesday QQQ expirations is not a novel proposal, as 
Monday and Wednesday SPY Expirations are currently listed on Phlx.\23\ 
Cboe \24\ uses the same procedure for SPX options with Monday 
expirations that are listed pursuant to its Nonstandard Expirations 
Pilot Program and that are scheduled to expire on a holiday, as do Phlx 
\25\ and ISE \26\ for NDX options with Monday expirations that are 
listed pursuant to their Nonstandard Expirations Pilot Programs, 
respectively.
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    \23\ See Commentary .11 at Options 4, Section 5.
    \24\ Id. [sic]
    \25\ See note 8 above.
    \26\ See note 9 above.
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    The Exchange does not believe the proposal will impose any burden 
on intra-market competition, as all market participants will be treated 
in the same manner under this proposal. Additionally, the Exchange does 
not believe the proposal will impose any burden on inter-market 
competition, as nothing prevents the other options exchanges from 
proposing similar rules to list and trade Short-Term Option Series with 
Monday and Wednesday expirations.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or 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 self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the 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 (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#84f6f1e8e1a9e7ebe9e9e1eaf0f7c4f7e1e7aae3ebf2"><span class="__cf_email__" data-cfemail="156760797038767a7878707b6166556670763b727a63">[email protected]</span></a>. Please include 
File Number SR-Phlx-2021-10 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-Phlx-2021-10. 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 (http://www.sec.gov/rules/sro.shtml). 
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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for

[[Page 13407]]

inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2021-10 and should be 
submitted on or before March 29, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04679 Filed 3-5-21; 8:45 am]
BILLING CODE 8011-01-P


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