Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68855 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 97898 (Jul. 13, 

2023), 88 FR 46204 (‘‘Notice’’). 

4Comments received on the proposed rule change 

are available at https://www.sec.gov/comments/srfinra-2023-010/srfinra2023010.htm. 

5See Letter from Adam Arkel, Associate General 

Counsel, FINRA, to Sheila Swartz, Division of 

Trading and Markets, Commission (Aug. 31, 2023). 

6 15 U.S.C. 78s(b)(2)(B). 

7See Exchange Act Release No. 96395 (Nov. 28, 

2022), 87 FR 74199 (Dec. 2, 2022) (Notice of Filing 

of a Proposed Rule Change to Amend Rule 10.3 

Regarding Margin Requirements; File No. SR– 

CBOE–2022–058) (‘‘Cboe Proposal’’). See also 

Notice at 46205, n.3. 8See Exchange Act Release No. 97019 (Mar. 2, 

2023), 88 FR 14416 (Mar. 8, 2023) (Order Approving 

a Proposed Rule Change to Amend Rule 10.3 

Regarding Margin Requirements; File No. SR– 

CBOE–2022–058) (‘‘Cboe Approval Order’’). 9See Notice at 46205. 

10Cboe distinguishes the ‘‘protected option’’ 

strategy from a ‘‘covered call,’’ which is a strategy 

of writing an option against a position in an 

underlying security and is addressed by separate 

margin requirements under Cboe rules. See Cboe 

Proposal at 74201. See also Notice at 46205, n.8. 

11See Cboe Approval Order at 14418. 

12See Notice at 46205. 

13See Exhibit 5 to the proposed rule change, 

available at https://www.sec.gov/files/rules/sro/ 

finra/2023/34-97898-ex5.pdf. 

14FINRA stated that the exception from the 

margin requirements under Cboe’s new rule is 

virtually identical to the margin requirements set 

forth in Cboe Rule 10.3(c)(5)(A), which sets forth 

margin requirements for listed options. According 

to FINRA, paragraph (f)(2)(E)(i) under FINRA Rule 

4210 correspondingly addresses listed options and 

is virtually identical to the Cboe provisions. 

Paragraph (f)(2)(E)(iii) of FINRA Rule 4210 

addresses margin requirements for over-the-counter 

(‘‘OTC’’) products. As such, FINRA proposed to 

include both listed and OTC products within the 

scope of the exception. FINRA stated that both 

types of products would be subject to the 

conditions specified under the rule which, 

according to FINRA, are virtually identical to 

Cboe’s provisions. FINRA stated that it believes this 

harmonized approach to both listed and OTC 

options is appropriate for purposes of the rule 

change to broaden availability of the benefits of the 

protected option strategy to, for example, non-Cboe 

FINRA members, and would thereby prevent a 

potential gap between listed and OTC options. See 

also Notice at 46205, n.12. 

15See id. at 46205. 

16See id. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98628; File No. SR–FINRA– 

2023–010] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change To Provide Relief 

Relating to Specified Option 

Transactions Under FINRA Rule 4210 

(Margin Requirements) 

September 28, 2023. 

I. Introduction 

On June 30, 2023, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities and Exchange 

Act of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend FINRA Rule 4210 

(Margin Requirements) to provide 

margin relief for specified index option 

transactions, known as ‘‘protected 

options,’’ and to make other minor 

conforming revisions with regard to the 

margin relief. The proposed rule change 

was published for comment in the 

Federal Register on July 19, 2023.3 The 

Commission received two comment 

letters on the proposal.4 On August 31, 

2023, FINRA extended the time period 

in which the Commission must approve 

the proposed rule change, disapprove 

the proposed rule change, or institute 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change to October 17, 2023.5 The 

Commission is publishing this order 

pursuant to Section 19(b)(2)(B) of the 

Exchange Act 6 to solicit comments on 

the proposed rule change and to 

institute proceedings to determine 

whether to approve or disapprove the 

proposed rule change. 

II. Description of the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA stated that Cboe Exchange, Inc. 

(‘‘Cboe’’ or the ‘‘Exchange’’) filed with 

the Commission a proposed rule change 

to amend Cboe Rule 10.3 regarding 

margin requirements related to cashsettled index options written against 

exchange-traded funds (‘‘ETF(s)’’) that 

track the same index underlying the 

option,7 which the Commission 

approved on March 2, 2023.8

FINRA stated that the Cboe rule 

change established a new exception to 

those margin requirements with respect 

to a ‘‘protected option’’ strategy, as set 

forth in new paragraph (c)(5)(C)(iv)(e) of 

Cboe Rule 10.3.9 Subject to specified 

conditions, the exception is applicable 

to short option positions or warrants on 

indexes that are offset by positions in an 

underlying stock basket, non-leveraged 

index mutual fund, or non-leveraged 

ETF that is based on the same index 

option.10 In approving Cboe’s rule 

change, FINRA observed that the 

Commission stated it believes the rule 

change will facilitate the use of 

protected options and reduce associated 

costs and burdens.11 FINRA stated that, 

in the interest of regulatory harmony 

and ensuring that the potential benefits 

of protected option treatment are 

available to FINRA members and their 

customers, FINRA proposed to conform 

its margin rule to the provisions Cboe 

adopted and to make other minor 

conforming revisions.12

Specifically, FINRA proposes to add 

new paragraph (f)(2)(H)(v)f. (‘‘Protected 

Options’’) to FINRA Rule 4210.13 The 

new paragraph would provide that 

when an index call (put) option or 

warrant is carried ‘‘short’’ (the 

‘‘protected option or warrant position’’) 

and there is carried in the same account 

a ‘‘long’’ (short) position in an 

underlying stock basket, non-leveraged 

index mutual fund, or non-leveraged 

ETF (each referred to as the 

‘‘protection’’) that is based on the same 

index underlying the index option or 

warrant, the protected option or warrant 

position is not subject to the 

requirements set forth in paragraphs 

(f)(2)(E)(i) and (f)(2)(E)(iii) of Rule 

4210 14 if the following conditions, 

which conform to the Cboe rule, are 

met: 15

1. when the protected option or 

warrant position is created, the absolute 

value of the protection is not less than 

100 percent of the aggregate current 

underlying index value associated with 

the protected option or warrant position 

determined at either: 

A. the time the order that created the 

protected option or warrant position 

was entered or executed; or 

B. the close of business on the trading 

day the protected option or warrant 

position was created; 

2. the absolute value of the protection 

is at no time less than 95 percent of the 

aggregate current underlying index 

value associated with the protected 

option or warrant position; and 

3. margin is maintained in an amount 

equal to the greater of: 

A. the amount, if any, by which the 

aggregate current underlying index 

value is above (below) the aggregate 

exercise price of the protected call (put) 

option or warrant position; or 

B. the amount, if any, by which the 

absolute value of the protection is below 

100 percent of the aggregate current 

underlying index value associated with 

the protected option or warrant.16

FINRA also proposes to expand the 

protected options treatment to OTC 

options, so they are subject to the same 

conditions as listed options. FINRA 

stated that it believes that harmonizing 

the FINRA margin requirements for OTC 

options with the amended Cboe rule 

would reduce potential regulatory 

arbitrage that would favor listing 

options on Cboe. FINRA stated that 

while it does not have sufficient 

information on how many investors or 


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68856 Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 

17See id. at 46206. See also supra note 14. 

18See Cboe Proposal at 74201; see also Cboe 

Approval Order at 14417 and Notice at 46205. 

19See Notice at 46205. 

20See id. 

21See id. 

22See id. 

23See id. at 46205–46206. FINRA stated that the 

proposed rule change would not impact funding 

portal members and would not impact members 

that have elected to be treated as capital acquisition 

brokers (‘‘CABs’’). According to FINRA, these 

members are not subject to Rule 4210. See id. at 

46205, n.14. 

24 15 U.S.C. 78s(b)(2)(B). 

25 Id. 

26 17 CFR 240.19b–4. 

27Section 19(b)(2) of the Exchange Act, as 

amended by the Securities Act Amendments of 

1975, Public Law 94–29 (June 4, 1975), grants the 

Commission flexibility to determine what type of 

proceeding—either oral or notice and opportunity 

for written comments—is appropriate for 

consideration of a particular proposal by a selfregulatory organization. See Securities Act 

Amendments of 1975, Senate Comm. on Banking, 

Housing & Urban Affairs, S. Rep. No. 75, 94th 

Cong., 1st Sess. 30 (1975). 

members would choose to make use of 

the protected options treatment for 

either listed or OTC options, it believes 

the number is small and would be 

limited to institutional investors.17

FINRA stated that in proposing the 

margin exception for protected options, 

Cboe emphasized that the exception is 

not intended to and does not apply to 

leveraged instruments.18

In addition, FINRA proposes minor 

revisions to paragraphs (f)(2)(H)(v)a. 

through d. of FINRA Rule 4210 to 

conform with the usage of the term ‘‘in 

the same account’’ as used in proposed 

paragraph (f)(2)(H)(v)f.19 Specifically: 

• in paragraph (f)(2)(H)(v)a., the 

phrase ‘‘in an account in which there is 

also carried . . .’’ would be changed to 

read ‘‘in the same account as . . .’’ 

• in paragraphs (f)(2)(H)(v)b. through 

d., the phrase ‘‘is also carried with . . .’’ 

would be changed to read ‘‘there is 

carried in the same account . . .’’ 20

FINRA stated that it believes these 

changes are appropriate because they 

clarify the rule text and conform with 

the new proposed protected option 

provisions.21

Lastly, FINRA stated that if the 

Commission approves the proposed rule 

change, FINRA will announce the 

effective date of the proposed rule 

change in a Regulatory Notice.22 The 

effective date will be no later than 30 

days following publication of the 

Regulatory Notice announcing 

Commission approval of the proposed 

rule change.23

III. Proceedings to Determine Whether 

To Approve or Disapprove SR–FINRA– 

2023–010 and Grounds for Disapproval 

Under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Exchange Act to 

determine whether the proposed rule 

change should be approved or 

disapproved.24 Institution of 

proceedings is appropriate at this time 

in view of the legal and policy issues 

raised by the proposed rule change. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

the proposed rule change. 

Pursuant to Section 19(b)(2)(B) of the 

Exchange Act,25 the Commission is 

providing notice of the grounds for 

disapproval under consideration. The 

Commission is instituting proceedings 

to allow for additional analysis and 

input concerning whether the proposed 

rule change is consistent with the 

Exchange Act and the rules thereunder. 

In particular, the Commission seeks 

comment on the following questions 

and asks commenters to submit data 

where appropriate to support their 

views: 

• What are commenters’ views on 

FINRA’s proposal to expand the 

protected options treatment to OTC 

options so they are subject to the same 

conditions as listed options? Would the 

expansion of the protected options 

treatment to OTC options help to reduce 

potential regulatory arbitrage that may 

favor listing options on certain 

exchanges? 

• What are commenters’ views on the 

types of market participants that would 

utilize the protected options treatment 

for either listed or OTC options? For 

example, would use of the protected 

options treatment for either listed or 

OTC options be generally limited to 

institutional investors? Please explain 

why or why not. 

IV. Request for Written Comments 

The Commission requests that 

interested persons provide written 

submissions of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they may have with the 

proposed rule change. In particular, the 

Commission invites the written views of 

interested persons concerning whether 

the proposed rule change is consistent 

with the Exchange Act and the rules 

thereunder. 

Although there do not appear to be 

any issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4 under 

the Exchange Act,26 any request for an 

opportunity to make an oral 

presentation.27

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposed rule change should be 

approved or disapproved by October 25, 

2023. Any person who wishes to file a 

rebuttal to any other person’s 

submission must file that rebuttal by 

November 8, 2023. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

FINRA–2023–010 on the subject line. 

Paper Comments 

• 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–FINRA–2023–010. 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 (https://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 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. 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–FINRA–2023–010, and 

should be submitted on or before 

October 25, 2023. Rebuttal comments 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 191 / Wednesday, October 4, 2023 / Notices 68857 

28 17 CFR 200.30–3(a)(57). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4For purposes of this filing, Nasdaq and Nasdaq 

BX are referred to collectively as the ‘‘Nasdaq 

Exchanges.’’ Nasdaq General 2, Section 6(a) and 

Nasdaq BX General 2, Section 6(a) are referred to 

collectively as the ‘‘Nasdaq Exchanges’ Rules.’’ 

5Under the Exchange’s rules, the term member 

organization encompasses both equity permit 

holders (ETP Holders) and options permit holders 

(ATP Holders). See Rule 1.1E(n) (ETP Holder 

‘‘means a member organization that has been issued 

an ETP’’); Rule 900.2NY(5) (ATP Holder refers to a 

natural person, sole proprietorship, partnership, 

corporation, limited liability company or other 

organization, in good standing, that has been issued 

an ATP, and references to member, member 

organization as those terms are used in the Rules 

of the Exchange are deemed references to ATP 

Holders. ATP Holders have status as a ‘‘member’’ 

of the Exchange as that term is defined in Section 

3 of the Act). By way of comparison, FINRA uses 

the term ‘‘member’’ in its rules and NYSE uses the 

term ‘‘member organization.’’ 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(5). 

should be submitted by November 8, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–21956 Filed 10–3–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98598; File No. SR– 

NYSEAMER–2023–47] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Rule 0 of the 

General and Floor Rules 

September 28, 2023. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on 

September 27, 2023, the NYSE 

American LLC (‘‘NYSE American’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 0 (Regulation of the Exchange and 

its Member Organizations) of the 

General and Floor Rules to adopt new 

rule text based on based on [sic] Rule 0 

(Regulation of the Exchange and its 

Member Organizations) of its affiliate 

New York Stock Exchange LLC. The 

proposed rule change is available on the 

Exchange’s website at www.nyse.com, 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 

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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Rule 0 (Regulation of the Exchange and 

its Member Organizations) of the 

General and Floor Rules to adopt new 

rule text based on Rule 0 (Regulation of 

the Exchange and its Member 

Organizations) of its affiliate New York 

Stock Exchange LLC (‘‘NYSE’’). 

Specifically, the Exchange proposes a 

new subsection (d) in conformity with 

NYSE Rule 0(b). NYSE Rule 0(b) is in 

turn based on FINRA Rule 0140(a) 

(Applicability), Nasdaq Stock Market 

LLC (‘‘Nasdaq’’) General 2 (Organization 

and Administration), Section 6(a), and 

Nasdaq BX, Inc. (‘‘Nasdaq BX’’) General 

2 (Organization and Administration), 

Section 6(a).4

NYSE Rule 0(b) provides that the 

NYSE’s rules apply to all member 

organizations and persons associated 

with a member organization and that 

persons associated with a member 

organization shall have the same duties 

and obligations as a member 

organization under the NYSE’s rules. 

NYSE Rule 0(b) mirrors FINRA Rule 

0140(a) and the versions of FINRA Rule 

0140(a) adopted by the Nasdaq 

Exchanges, which similarly provide that 

the rules of those self-regulatory 

organizations, as applicable, apply to all 

members and persons associated with a 

member and that persons associated 

with a member shall have the same 

duties and obligations as a member 

under such rules.5 Proposed Rule 0(d) is 

substantively identical to NYSE Rule 

0(b). 

The Exchange believes that the 

proposed rule change would improve 

the clarity of the Exchange’s rules by 

reflecting that the Exchange’s rules 

apply to persons associated with a 

member organization and that such 

persons have the same duties and 

obligations as their Exchange member 

organization employer. A member 

organization’s compliance with 

Exchange rules may depend on the 

actions of persons associated with the 

member organization. Accordingly, the 

Exchange believes that the proposed 

rule, which mirrors the rules of its 

affiliate NYSE, FINRA and the Nasdaq 

Exchanges, would promote consistency 

in the Exchange’s rules by expressly 

providing that the Exchange may 

enforce its rules with respect to persons 

associated with a member organization, 

including by taking appropriate 

disciplinary action against such persons 

for their or their member firm’s 

violation of NYSE American rules. The 

Exchange notes that the proposed rule 

does not contemplate disciplinary 

action against individuals not involved 

in violations of Exchange rules. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the Act,6

in general, and furthers the objectives of 

Section 6(b)(5),7 in particular, because 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. 

The Exchange believes that the 

proposed rule change would remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, protect investors and the public 

interest because the proposed changes 

would add clarity to the Exchange’s 

rules. As previously noted, the proposed 

rule text conforms to current NYSE Rule 

0(b) without change. The Exchange 

believes that adopting separate rule text 

expressly providing that all Exchange 

rules apply to persons associated with a 

member organization and that such 

persons have the same duties and 


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