[Federal Register Volume 86, Number 148 (Thursday, August 5, 2021)]
[Notices]
[Pages 42911-42925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16676]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92533; File No. SR-NASDAQ-2021-059]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Options 4 Listing Rules

July 30, 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 July 20, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' 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 amend The Nasdaq Options Market LLC 
(``NOM'') Rules at Options 2, Section 5, Market Maker Quotations; 
Options 4, Options Listing Rules; and Options 4A, Section 12, Terms of 
Index Options Contracts. This proposal also creates a new Options 4C 
entitled ``U.S. Dollar-Settled Foreign Currency Options.'' Finally, the 
Exchange proposes to reserve some sections with the Equity Rules and 
correct a cross-reference within Options 2, Section 4, Obligations of 
Market Makers.

[[Page 42912]]

    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/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 the Options 4, Options Listing 
Rules, to conform NOM's Options 4 Listing Rules to Nasdaq ISE, LLC's 
(``ISE'') Options 4 Listing Rules. The Exchange also proposes to amend 
NOM Options 4A, Section 12, Terms of Index Options Contracts and create 
a new NOM Options 4C entitled ``U.S. Dollar-Settled Foreign Currency 
Options'' and adopt U.S. Dollar-Settled Foreign Currency Options rules 
similar to Nasdaq Phlx LLC's (``Phlx'') rules at Options 4C. Also, the 
Exchange also proposes to amend Options 2, Section 5, Market Maker 
Quotations to relocate rule text concerning bid/ask differentials for 
long-term options contracts from NOM Options 4 and Options 4A, similar 
to ISE. Finally, the Exchange proposes to correct a cross-reference 
within Options 2, Section 4, Obligations of Market Makers. Each rule 
change is described below.
Options 4, Options Listing Rules
    Conforming NOM's Options 4 Listing Rules to that of ISE Options 4 
is part of the Exchange's continued effort to promote efficiency in the 
manner in which it administers its rules. The Exchange proposes to 
amend these rules to conform to ISE Options 4 Rules.
    The Exchange proposes a universal technical amendment which impacts 
Options 4, Sections 1 through 4, 6, 7, 8 and 10. The Exchange proposes 
to relocate a ``.'' at the end of the terms ``Section,'' where 
applicable, throughout Options 4 to the end of the proceeding number 
within Options 4, Sections 1 through 4, 6, 7, 8 and 10.
Section 1. Designation of Securities
    The Exchange proposes to replace the current rule text of Options 
4, Section 1 which states,

    Securities traded on the Exchange are options contracts, each of 
which is designated by reference to the issuer of the underlying 
security or name of underlying foreign currency, expiration month or 
expiration date, exercise price and type (put or call).

with the following rule text,

    The Exchange trades options contracts, each of which is 
designated by reference to the issuer of the underlying security, 
expiration month or expiration date, exercise price and type (put or 
call).

    The Exchange proposes to amend this sentence within Options 4, 
Section 1 to conform to ISE Options 4, Section 1. The revised wording 
does not substantively amend the paragraph.
Section 2. Rights and Obligations of Holders and Writers
    The Exchange proposes to replace the current rule text of Options 
4, Section 1 which states,

    Subject to the provisions of this Chapter, the rights and 
obligations of holders and writers of option contracts of any class 
of options dealt in on the Exchange shall be as set forth in the 
Rules of the Clearing Corporation.

with the following rule text,

    The rights and obligations of holders and writers shall be as 
set forth in the Rules of the Clearing Corporation.

    The Exchange proposes to amend this sentence within Options 4, 
Section 2 to conform to ISE Options 4, Section 1. The revised wording 
does not substantively amend the paragraph.
Section 3. Criteria for Underlying Securities
    Options 4, Section 3 of the Options Listing Rules is being updated 
to conform to ISE Options 4, Section 3.
    The Exchange proposes to amend Options 4, Section 3(a)(i) and (ii) 
to conform to ISE Options 4, Section 3(a)(1) and (2) by changing the 
``i. and ii.'' to ``(1) and (2),'' respectively. Also, the Exchange 
proposes to remove the phrase ``with the SEC'' within current NOM 
Options 4, Section 3(a)(i). These amendments are non-substantive.
    The Exchange proposes to amend Options 4, Section 3(b) to reword 
the rule text to ISE Options 4, Section 3(b). The Exchange proposes to 
replace the current rule text of Options 4, Section 3(b) which states,

    In addition, the Exchange shall from time to time establish 
standards to be considered in evaluating potential underlying 
securities for the Exchange options transactions. There are many 
relevant factors which must be considered in arriving at such a 
determination, and the fact that a particular security may meet the 
standards established by the Exchange does not necessarily mean that 
it will be selected as an underlying security. The Exchange may give 
consideration to maintaining diversity among various industries and 
issuers in selecting underlying securities. Notwithstanding the 
foregoing, an underlying security will not be selected unless:

with the following rule text,

    In addition, the Exchange shall from time to time establish 
guidelines to be considered in evaluating potential underlying 
securities for Exchange options transactions. There are many 
relevant factors which must be considered in arriving at such a 
determination, and the fact that a particular security may meet the 
guidelines established by the Exchange does not necessarily mean 
that it will be selected as an underlying security. Further, in 
exceptional circumstances an underlying security may be selected by 
the Exchange even though it does not meet all of the guidelines. The 
Exchange may also give consideration to maintaining diversity among 
various industries and issuers in selecting underlying securities. 
Notwithstanding the foregoing, however absent exceptional 
circumstances, an underlying security will not be selected unless:

    The new rule text permits the Exchange, in exceptional 
circumstances, to select an underlying security even though it does not 
meet all of the guidelines. Today, the Exchange may establish 
guidelines to be considered in evaluating potential underlying 
securities for Exchange options transactions. Providing NOM with the 
same ability to select an underlying security even though it does not 
meet all of the guidelines as ISE will permit NOM to list similar 
options as ISE for competitive purposes. The proposal to replace the 
term ``standards'' with ``guidelines'' within paragraph 3(b) is non-
substantive.
    The Exchange is amending numbering within Options 4, Section 3(b) 
as well as removing extraneous rule text within current Options 4, 
Section 3(b)(iii), namely ``or Rules thereunder.'' The Exchange 
proposes to relocate Options 4, Section 3(k) into new Options 4, 
Section 3(b)(6) without change. This would align NOM Options 4, Section 
3(b)(6) with ISE Options 4, Section 3(b)(6). This provision states,

    Notwithstanding the requirements set forth in Paragraphs 1, 2, 4 
and 5 above, the Exchange may list and trade an options contract if 
(i) the underlying security meets the guidelines for continued 
approval in Options 4, Section 4; and (ii) options on such 
underlying security are traded on at least one other registered 
national securities exchange.


[[Page 42913]]


    The Exchange proposes to renumber NOM Options 4, Section 3(c) and 
make minor amendments to rule text within current Options 4, Section 
3(c)(ii), (iii), (iv) and (v), Sections 3(d), 3(f) and 3(g) to conform 
the rule text to ISE Options 4, Section 3(c)(ii), (iii), (iv) and (v), 
Sections 3(d), 3(f) and 3(g). The proposed changes are non-
substantive.\3\
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    \3\ The proposed changes replace the word ``standards'' with 
``guidelines,'' insert ``Options 4'' before ``Section 3,'' and 
remove 2 extraneous uses of ``this.'' Similar replacements are made 
throughout current Options 4, Section 3(c), including amending a 
capitalized ``Paragraph.''
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    The Exchange proposes to amend an ``up'' to ``on'' within NOM 
Options 4, Section 3(d). This proposed change is non-substantive.
    The Exchange proposes non-substantive amendments to amend NOM 
Options 4, Section 3(f) and (g) \4\ in addition to conforming the 
numbering to ISE Options 4, Section 3(f) and (g) numbering.
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    \4\ The proposed changes replace the word ``standards'' with 
``guidelines,'' insert ``Rule'' instead of ``Section 3,'' and remove 
an unnecessary ``or.''
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    The Exchange proposes to relocate rule text currently within NOM 
Options 4, Section 3(h), which describes a market information sharing 
agreement, to proposed NOM Options 4, Section 3(i) without change. This 
rule text is currently located within ISE rules at Options 4, Section 
3(i).
    Current NOM Options 4, Section 3(i) is being re-lettered as 
proposed Options 4, Section 3(h). The Exchange proposes to add the 
defined term ``Financial Instruments'' within Options 4, Section 3(h) 
and also account for money market instruments, U.S. government 
securities and repurchase agreements, defined by the term ``Money 
Market Instruments'' similar to ISE Options 4, Section 3(h). The 
addition of money market instruments, U.S. government securities and 
repurchase agreements as securities deemed appropriate for options 
trading will make clear that these agreements are included in the 
acceptable securities. The Exchange notes that this rule text is 
clarifying in nature and will more explicitly provide for money market 
instruments, U.S. government securities and repurchase agreements as a 
separate category from what is being defined as ``Financial 
Instruments'' with this proposal. Today, these instruments are eligible 
as securities deemed appropriate for options trading. The remainder of 
the changes are non-substantive in nature and simply conform the 
location of words similar to ISE.\5\ The Exchange also proposes to 
remove the following products from Options 4, Section 3(h): The ETFS 
Silver Trust, the ETFS Palladium Trust, the ETFS Platinum Trust or the 
Sprott Physical Gold Trust. The Exchange no longer lists these products 
and proposes to remove them the products from its listing rules. The 
Exchange will file a proposal with the Commission if it determines to 
list these products in the future. Finally, the Exchange proposes to 
amend Options 4, Section 3(h) by removing the rule text at the end of 
the paragraph which provides, ``all of the following conditions are 
met.'' Paragraph (h) would simply end with ``provided that:'' and 
direct market participants to subparagraphs (1) and (2).
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    \5\ The amendment to current Options 4, Section 3(i)(B)(4) to 
add, ``. . . which the Exchange-Traded Fund shares are based . . .'' 
makes clear that this text applies to Exchange-Traded Fund shares. 
Also the word ``indexes'' is being changes to ``indices'' within 
this paragraph and ``similar entity'' is being relocated within the 
paragraph.
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    The Exchange proposes to capitalize ``the'' at the beginning of 
Options 4, Section 3(h)(1) and remove ``; and'' at the end of the 
paragraph and instead at a period so that subparagraphs (1) and (2) are 
not linked, but rather read independently. Today, Options 4, Section 
3(h)(1) applies to all Exchange-Traded Fund Shares. Similar to ISE 
Options 4, Section 3(h)(2), the Exchange proposes to clarify that 
Options 4, Section 3(h)(2) applies to only international or global 
Exchange-Traded Fund Shares. Specifically, the Exchange proposes to 
amend Options 4, Section 3(h)(2) to provide, ``Exchange-Traded Fund 
Shares based on international or global indexes, or portfolios that 
include non-U.S. securities, shall meet the following criteria.'' ISE 
Options 4, Section 3(h) has the identical text. Proposed Options 4, 
Sections 3(h) generally concerns securities deemed appropriate for 
options trading. The proposed new rule text adds language stating that 
subparagraph (h)(2) of Options 4, Section 3 applies to the extent the 
Exchange-Traded Fund Share is based on international or global indexes, 
or portfolios that include non-U.S. securities. This language is 
intended to serve as a guidepost and clarify that (1) subparagraph 
(h)(2) does not apply to an Exchange-Traded Fund Shares based on a U.S. 
domestic index or portfolio, and (2) subparagraph (h)(2) includes 
Exchange-Traded Fund Shares that track a portfolio and do not track an 
index.
    The Exchange proposes to amend Options 4, Section 3(h)(2)(A) to 
remove the phrase ``for series of portfolio depositary receipts and 
index fund shares based on international or global indexes,''. Today, 
Options 4, Section 3(h), subparagraphs (h)(1) \6\ and (h)(v) \7\ permit 
the Exchange to list options on Exchange-Traded Fund Shares based on 
generic listing standards for portfolio depositary receipts and index 
fund shares without applying component based requirements in 
subparagraphs (h)(2)(B)-(D). By removing the proposed rule text, the 
Exchange would make clear that subparagraph (h)(2)(A) applies to 
Exchange-Traded Fund Shares based on international or global indexes, 
or portfolios that include non-U.S. securities, that are listed 
pursuant to generic listing standards and comply with Options 4, 
Section 3(h) and subparagraph (h)(1). The identical rule text exists 
within ISE Options 4, Section 3(h)(2)(A).
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    \6\ Subsection (h)(i) concerns passive Exchange-Traded Fund 
Shares. Subsection (h)(1) provides, ``represent interests in 
registered investment companies (or series thereof) organized as 
open-end management investment companies, unit investment trusts or 
similar entities that hold portfolios of securities and/or financial 
instruments, including, but not limited to, stock index futures 
contracts, options on futures, options on securities and indices, 
equity caps, collars and floors, swap agreements, forward contracts, 
repurchase agreements and reverse repurchase agreements (the 
``Financial Instruments''), and money market instruments, including, 
but not limited to, U.S. government securities and repurchase 
agreements (the ``Money Market Instruments'') comprising or 
otherwise based on or representing investments in broad-based 
indexes or portfolios of securities and/or Financial Instruments and 
Money Market Instruments (or that hold securities in one or more 
other registered investment companies that themselves hold such 
portfolios of securities and/or Financial Instruments and Money 
Market Instruments).''
    \7\ Subsection (h)(v) concerns active Exchange-Traded Fund 
Shares. Subsection (h)(v) Provides, ``represents an interest in a 
registered investment company (``Investment Company'') organized as 
an open-end management company or similar entity, that invests in a 
portfolio of securities selected by the Investment Company's 
investment adviser consistent with the Investment Company's 
investment objectives and policies, which is issued in a specified 
aggregate minimum number in return for a deposit of a specified 
portfolio of securities and/or a cash amount with a value equal to 
the next determined net asset value (``NAV''), and when aggregated 
in the same specified minimum number, may be redeemed at a holder's 
request, which holder will be paid a specified portfolio of 
securities and/or cash with a value equal to the next determined NAV 
(``Managed Fund Share'').
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    The Exchange also proposes to amend the term ``comprehensive 
surveillance agreement'' within Options 4, Section 3(h)(2) (A)-(D) to 
instead provide ``comprehensive surveillance sharing agreement.'' This 
amendment will bring greater clarity to the term. Further, the Exchange 
proposes to add the phrase ``if not available or applicable, the 
Exchange-Traded Fund's'' within Options 4, Section 3(h)(2)(B), (C), and 
(D) to clarify that when component securities are not available, the 
portfolio of securities upon which the Exchange-Traded Fund Share is 
based can be used

[[Page 42914]]

instead. The Exchange notes that ``not available'' is intended for 
cases where the Exchange does not have access to the index components, 
in those cases the Exchange would look to the portfolio components. The 
term ``not applicable'' is intended if the fund is active and does not 
track an index and only the portfolio is available. These amendments 
will conform the rule text to ISE Options 4, Section 3(h)(2)(A)-(D).
    The Exchange also proposes to wordsmith Options 4, Section 
3(h)(2)(B) to amend the phrase to provide, ``any non-U.S. component 
securities of an index on which the Exchange-Traded Fund Shares are 
based or if not available or applicable, the Exchange-Traded Fund's 
portfolio of securities that are not subject to comprehensive 
surveillance sharing agreements do not in the aggregate represent more 
than 50% of the weight of the index or portfolio;''. Finally, the 
Exchange proposes to wordsmith Options 4, Section 3(h)(2)(C) and (D) to 
relocate the phrase ``on which the Exchange-Traded Fund Shares are 
based'' and add ``or portfolio'' to bring greater clarity to the rule 
text by conforming the rule text of (C) and (D) to the language within 
(B). The Exchange believes that the revised wording will bring greater 
clarity to the rule text and conform the rule text to ISE Options 4, 
Section 3(h)(2)(B)-(D). The Exchange proposes a non-substantive 
technical amendment to Options 4, Section 3(C)(2)(A)(ii) to correct a 
typographical error by changing a ``than'' to a ``that.'' The Exchange 
proposes a non-substantive technical amendment to Options 4, Section 
3(h)(1) to change ``In'' to ``in.''
    As noted above NOM Options 4, Section 3(h), which describes a 
market information sharing agreement, was proposed to be relocated to 
Options 4, Section 3(i), similar to ISE Options 4, Section 3(i).
    The Exchange proposes to amend Options 4, Section 3(j) to conform 
the rule text to ISE Options 4, Section 3(j). The proposed changes are 
non-substantive.\8\
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    \8\ The amendment to current Options 4, Section 3(j) replace the 
word ``standards'' with ``guidelines.''
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    As noted, above, Options 4, Section 3(k) was proposed to be 
relocated to new Options 4, Section 3(b)(6).
    The Exchange proposes to remove the header ``Index-Linked 
Securities'' within Options 4, Section 3(l), and re-letter Options 4, 
Section 3(l)(i) as Section 3(k). Proposed Options 4, Section 3(k) has 
non-substantive numbering and citation amendments.
    Options 4, Section 3(m) is being relocated into new Options 4C, 
Section 3 without change. Options 4C is specific to U.S. Dollar-Settled 
Foreign Currency Options.
Section 4. Withdrawal of Approval of Underlying Securities
    The Exchange proposes to remove the first sentence of Options 4, 
Section 4(a), which provides, ``If put or call options contracts with 
respect to an underlying security are approved for listing and trading 
on the Exchange, such approval shall continue in effect until such 
approval is affirmatively withdrawn by the Exchange.'' This sentence is 
unnecessary as the second sentence within Options 4, Section 4(a) makes 
clear that approval continues until it does not meet the requirements. 
Also, the Exchange proposes to add the following text to the end of 
this paragraph: ``When all options contracts with respect to any 
underlying security that is no longer approved have expired, the 
Exchange may make application to the SEC to strike from trading and 
listing all such options contracts.'' This text makes clear that 
options contracts that are no longer approved will not be listed. The 
remainder of the changes to Options 4, Section 4(a) are non-
substantive. This proposal is intended to conform NOM's Options 4, 
Section 4(a) with ISE Options 4, Section 4(a).
    The Exchange proposes to amend Options 4, Section 4(b) to add 
``Absent exceptional circumstances . . .'' at the beginning of the 
section. This phrase adds clarity to the rule text. The remainder of 
the numbering changes as well as capitalization are non-substantive and 
intended to conform NOM's Options 4, Section 4(b) with ISE Options 4, 
Section 4(b). The Exchange also proposes to remove reserved sections.
    Options 4, Section 4(c), which is currently reserved, is proposed 
to be deleted and current Options 4, Section 4(d) is proposed to be re-
lettered as ``c''. Minor non-substantive conforming changes are 
proposed to current Options 4, Section 4(d)-(f).\9\
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    \9\ The Exchange proposes to remove ``Section 4'', lowercase the 
term ``Customer,'' add ``options 4'' and remove ``thereof'' within 
Options 4, Section 4(d)-(f).
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    The Exchange proposes to amend current Options 4, Section 4(h) to 
re-letter it ``g'' and replace ``security'' with ``Exchange-Traded Fund 
Shares'' similar to ISE Options 4, Section 4(g). The Exchange proposes 
to add halt or suspension as other circumstances in which the Exchange 
shall not open for trading any additional series of option contracts of 
the class to clarify that this scenario may also exist. The other 
proposed changes to current Options 4, Section 4(h) are non-
substantive.\10\
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    \10\ The Exchange proposes to amend Options 4, Section 4(h) to 
add ``Options 4'' and replace ``Section 4'' with ``Rule;'' and 
replace an ``or'' with an ``and.''
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    The Exchange proposes to amend current Options 4, Section 4(i) to 
re-letter it ``h'' and add ``Absent exceptional circumstances, 
securities . . .'' at the beginning of the section. This phrase adds 
clarity to the rule text. The remainder of the numbering changes are 
non-substantive \11\ and conform current NOM's Options 4, Section 4(i) 
with ISE Options 4, Section 4(h).
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    \11\ The term Options 4 is being relocated within the proposed 
new paragraph (h). Also, the term ``Rule'' is being used within 
proposed new paragraph (h)(1) instead of ``Section 4,'' and 
``Section 3.'' ``Upon annual review'' is being removed from proposed 
new paragraph (h)(2).
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    The Exchange proposes to adopt new Options 4, Section 4(i) similar 
to ISE, Options 4, Section 4(i). The proposed new section would 
provide,

    For Holding Company Depositary Receipts (HOLDRs), the Exchange 
will not open additional series of options overlying HOLDRs (without 
prior Commission approval) if:
    (1) The proportion of securities underlying standardized equity 
options to all securities held in a HOLDRs trust is less than 80% 
(as measured by their relative weightings in the HOLDRs trust); or
    (2) less than 80% of the total number of securities held in a 
HOLDRs trust underlie standardized equity options.

    Current Options 4, Section 4 does not describe the withdrawal of 
HOLDRs. This new text, similar to ISE, would provide for provisions 
wherein the Exchange will not open additional series of options 
overlying HOLDRs.
    The Exchange proposes to delete current Options 4, Section 4(j), 
which is reserved, as well as the lettering for Options 4, Section 4(k) 
which states, ``Index Linked Securities.'' The next existing paragraph 
is proposed to be Options 4, Section 4(j). The remainder of the 
numbering changes to this section are non-substantive and conform 
proposed Options 4, Section 4(j) with ISE Options 4, Section 4(j).
    The Exchange proposes to remove Options 4, Section 4(l) related to 
inadequate volume delisting. To remain competitive with other options 
markets, the Exchange proposes to adopt the same obligations for 
continuance of trading.\12\ Also, pursuant to proposed

[[Page 42915]]

new Options 4, Section 5(e) the Exchange will announce securities that 
have been withdrawn. With this proposal, the Exchange would eliminate 
the requirement that an option must be trading for more than 6 months. 
The Exchange notes that this condition is not present on other options 
markets such as ISE and Cboe Exchange, Inc. (``Cboe'').\13\ This also 
applies to the requirement that the average daily volume of the entire 
class of options over the last six (6) month period was less than 
twenty (20) contracts. The Exchange notes that NOM's requirements are 
different from other options markets. To remain competitive the 
Exchange proposes to adopt the same standards as ISE so that it may 
list options similar to other markets.
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    \12\ Options 4, Section 4(b), as amended, establishes 
requirements for continued listing, similar to ISE. See proposed 
Phlx Options 3, Section 4(b) which provides, ``Absent exceptional 
circumstances, an underlying security will not be deemed to meet the 
Exchange's requirements for continued approval whenever any of the 
following occur: (1) There are fewer than 6,300,000 shares of the 
underlying security held by persons other than those who are 
required to report their security holdings under Section 16(a) of 
the Exchange Act. (2) There are fewer than 1,600 holders of the 
underlying security. (3) The trading volume (in all markets in which 
the underlying security is traded) has been less than 1,800,000 
shares in the preceding twelve (12) months. (4) The underlying 
security ceases to be an ``NMS stock'' as defined in Rule 600 of 
Regulation NMS under the Exchange Act. (5) If an underlying security 
is approved for options listing and trading under the provisions of 
Options 4, Section 3(c), the trading volume of the Original Security 
(as therein defined) prior to but not after the commencement of 
trading in the Restructure Security (as therein defined), including 
``when-issued'' trading, may be taken into account in determining 
whether the trading volume requirement of (3) of this paragraph (b) 
is satisfied.''
    \13\ See ISE Options 4, Section 4 and Cboe Rule 4.4.
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    While the Exchange may in the future determine to delist an option 
that is singly listed, the Exchange proposes to remove the rule text 
which provides that ``If the option is singly listed only on the 
Exchange, the Exchange will cease to add new series and may delist the 
class of options when there is no remaining open interest.'' This rule 
text does not exist on ISE and Cboe. The Exchange today provides 
notification of a delisting to all Participants so therefore it is not 
necessary to retain the provisions within (b)(2). Also, proposed new 
Options 4, Section 4(e) establishes the rules by which the Exchange 
will announce securities that have been withdrawn. The rule text within 
Options 4, Section 4(b), as amended to conform to ISE rule text, will 
continue to govern the continued approval of options on the Exchange.
    The reference to Options 4, Section 4(m) is proposed to be deleted. 
The provision that is currently Options 4, Section 4(m) is proposed to 
become Supplementary Material .01 to Options 4, Section 6 with a minor 
non-substantive change to the current rule text to capitalize 
``rules.''
Section 5. Series of Options Contracts Open for Trading
    The Exchange proposes to update citations within Options 4, Section 
5 to reflect the replacement of current rule text. These changes are 
non-substantive.
Section 7. Adjustments
    The Exchange proposes non-substantive amendments to Options 4, 
Section 7. The current text states,

    Options contracts shall be subject to adjustments in accordance 
with the Rules of the Clearing Corporation. The Exchange will 
announce adjustments, and such changes will be effective for all 
subsequent transactions in that series at the time specified in the 
announcement.

    The Exchange proposes to instead provide,

    Options contracts shall be subject to adjustments in accordance 
with the Rules of the Clearing Corporation. When adjustments have 
been made, the Exchange will announce that fact, and such changes 
will be effective for all subsequent transactions in that series at 
the time specified in the announcement.

    The proposal conforms NOM Options 4, Section 7 with ISE Options 4, 
Section 7.
Section 8. Long-Term Options Contracts
    The Exchange proposes to conform NOM Options 4, Section 8 to ISE 
Options 4, Section 8. The proposed changes are non-substantive. NOM's 
current rule text provides that with respect to long-term options 
series, bid/ask differential rules do not apply. The Exchange proposes 
to add this rule text to Options 4, Section 5(d)(2) within new 
subsection ``A'' as the bid/ask differential requirements can be found 
within this rule. The Exchange also proposes to add a new sentence to 
Options 4, Section 8(a) to refer to Options 4, Section 5(d)(2)(A), 
which states, ``Bid/ask differentials for long-term options contracts 
are specified within Options 3, Section 5(d)(2)(A)'' for ease of 
reference in locating all bid/ask requirements.
Section 9. Limitation on the Liability of Index Licensors for Options 
on Fund Shares
    The Exchange proposes to relocate current Options 4, Section 9, 
U.S. Dollar-Settled Foreign Currency Option Closing Settlement Value to 
Options 4C, Section 6 with minor changes to add new lettering.
    The Exchange proposes to adopt a new Section 9, titled ``Limitation 
on the Liability of Index Licensors for Options on Fund Shares'' 
identical to ISE Options 4, Section 9. ISE and Cboe have similar 
provisions.\14\ The new rule would provide,
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    \14\ See Securities Exchange Act Release No. 45817 (April 24, 
2002), 67 FR 21785 (May 1, 2002) (SR-CBOE-2002-19) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change by the Chicago 
Board Options Exchange, Incorporated To Amend Its Rules Relating to 
the Limitation of Liability for Index Licensors) and 14729 (March 
19, 2003), 68 FR 14729 (March 26, 2003) (SR-ISE-2003-09) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change by 
International Securities Exchange, Inc., Relating to Limiting the 
Liability of Index Licensors for Options on Fund Shares).

    (a) The term ``index licensor'' as used in this Rule refers to 
any entity that grants the Exchange a license to use one or more 
indexes or portfolios in connection with the trading of options on 
Exchange-Traded Fund Shares (as defined in Options 4, Section 3(h)).
    (b) No index licensor with respect to any index or portfolio 
underlying an option on Exchange-Traded Fund Shares traded on the 
Exchange makes any warranty, express or implied, as to the results 
to be obtained by any person or entity from the use of such index or 
portfolio, any opening, intra-day or closing value therefor, or any 
data included therein or relating thereto, in connection with the 
trading of any option contract on Exchange-Traded Fund Shares based 
thereon or for any other purpose. The index licensor shall obtain 
information for inclusion in, or for use in the calculation of, such 
index or portfolio from sources it believes to be reliable, but the 
index licensor does not guarantee the accuracy or completeness of 
such index or portfolio, any opening, intra-day or closing value 
therefor, or any data included therein or related thereto. The index 
licensor hereby disclaims all warranties of merchantability or 
fitness for a particular purpose or use with respect to any such 
index or portfolio, any opening, intra-day or closing value 
therefor, any data included therein or relating thereto, or any 
option contract on Exchange-Traded Fund Shares based thereon. The 
index licensor shall have no liability for any damages, claims, 
losses (including any indirect or consequential losses), expenses or 
delays, whether direct or indirect, foreseen or unforeseen, suffered 
by any person arising out of any circumstance or occurrence relating 
to the person's use of such index or portfolio, any opening, intra-
day or closing value therefor, any data included therein or relating 
thereto, or any option contract on Exchange-Traded Fund Shares based 
thereon, or arising out of any errors or delays in calculating or 
disseminating such index or portfolio.

Proposed Section 9(a) defines the term ``index licensor'' as any entity 
that grants the Exchange a license to use one or more indexes or 
portfolios in connection with the trading of options on Exchange-Traded 
Fund Shares (as defined in Options 4, Section 3(h)).
    Proposed Options 4, Section 9(b) provides that no index licensor 
with

[[Page 42916]]

respect to any index or portfolio underlying an option on Exchange-
Traded Fund Shares traded on the Exchange makes any warranty, express 
or implied, as to the results to be obtained by any person or entity 
from the use of such index or portfolio, any opening, intra-day or 
closing value therefor, or any data included therein or relating 
thereto, in connection with the trading of any option contract on 
Exchange-Traded Fund Shares based thereon or for any other purpose. The 
index licensor will obtain information for inclusion in, or for use in 
the calculation of, such index or portfolio from sources it believes to 
be reliable, but the index licensor does not guarantee the accuracy or 
completeness of such index or portfolio, any opening, intra-day or 
closing value therefor, or any data included therein or related 
thereto. The index licensor disclaims all warranties of merchantability 
or fitness for a particular purpose or use with respect to any such 
index or portfolio, any opening, intra-day or closing value therefor, 
any data included therein or relating thereto, or any option contract 
on Exchange-Traded Fund Shares based thereon. The index licensor will 
have no liability for any damages, claims, losses (including any 
indirect or consequential losses), expenses or delays, whether direct 
or indirect, foreseen or unforeseen, suffered by any person arising out 
of any circumstance or occurrence relating to the person's use of such 
index or portfolio, any opening, intra-day or closing value therefor, 
any data included therein or relating thereto, or any option contract 
on Exchange-Traded Fund Shares based thereon, or arising out of any 
errors or delays in calculating or disseminating such index or 
portfolio.
Section 10. Back-Up Trading Arrangements
    The Exchange proposes to add a new rule to Options 4, Section 10, 
titled ``Back-Up Trading Arrangements.'' Section 10 is currently 
reserved.\15\ This proposed rule is identical to ISE Options 4, Section 
10. This rule would permit NOM to enter into arrangements with one or 
more other exchanges (each a ``Back-up Exchange'') to permit NOM and 
its Participants to use a portion of a Back-up Exchange's facilities to 
conduct the trading of NOM exclusively listed options in the event of a 
Disabling Event, and permits NOM to provide trading facilities at NOM 
for another exchange's exclusively listed options if that exchange (a 
``Disabled Exchange'') is prevented from trading due to a Disabling 
Event. Also, the proposed rule would permit NOM to enter into 
arrangements with a Back-up Exchange to provide for the listing and 
trading of NOM singly listed options by the Back-up Exchange if NOM's 
facility becomes disabled, and conversely provide for the listing and 
trading by NOM of the singly listed options of a Disabled Exchange.
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 71092 (December 17, 
2013), 78 FR 77510 (December 23, 2013) (SR-ISE-2013-61) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to Back-Up Trading Arrangements).
---------------------------------------------------------------------------

    The back-up trading arrangements contemplated by Options 4, Section 
10 would ensure that NOM's exclusively listed and singly listed options 
will have a trading venue if a catastrophe renders its primary facility 
inaccessible or inoperable.
    Section 10(a) describes the back-up trading arrangements that would 
apply if NOM were the Disabled Exchange. An ``exclusively listed 
option'' is defined within Section 10(a)(1)(i) to mean an option that 
is listed exclusively by an exchange (because the exchange has an 
exclusive license to use, or has proprietary rights in, the interest 
underlying the option). Proposed paragraph(a)(1)(ii) provides that the 
facility of the Back-up Exchange used by NOM to trade some or all of 
NOM's exclusively listed options will be deemed to be a facility of 
NOM, and such option classes shall trade as listings of NOM. Since the 
trading of NOM exclusively listed options will be conducted using the 
systems of the Back-up Exchange, proposed paragraph (a)(1)(iii) 
provides that the trading of NOM listed options on NOM's facility at 
the Back-up Exchange shall be conducted in accordance with the rules of 
the Back-up Exchange, and proposed paragraph (a)(1)(iv) provides that 
the Back-up Exchange has agreed to perform the related regulatory 
functions with respect to such trading, in each case except as NOM and 
the Back-up Exchange may specifically agree otherwise. The Back-up 
Exchange rules that govern trading on NOM's facility at the Back-up 
Exchange shall be deemed to be NOM rules for purposes of such trading. 
Proposed paragraph (a)(1)(v) provides that NOM shall have the right to 
designate its members that will be authorized to trade NOM exclusively 
listed options on NOM's facility at the Back-up Exchange and, if 
applicable, its member(s) that will be a NOM Market Maker in those 
options.\16\ If the Back-up Exchange is unable to accommodate all NOM 
Participants that desire to trade on NOM's facility at the Back-up 
Exchange, NOM may determine which Participants shall be eligible to 
trade at that facility by considering factors such as whether the 
Participant is a NOM Market Maker in the applicable product(s), the 
number of contracts traded by the member in the applicable product(s), 
market performance, and other factors relating to a member's 
contribution to the market in the applicable product(s). Under proposed 
paragraph (a)(1)(vi), Participants of the Back-up Exchange shall not be 
authorized to trade in any NOM exclusively listed options, except that 
(i) NOM may deputize willing brokers of the Back-up Exchange as 
temporary NOM Participants to permit them to execute orders as brokers 
in NOM exclusively listed options traded on NOM's facility at the Back-
up Exchange, and (ii) the Back-up Exchange has agreed that it will, at 
the instruction of NOM, select members of the Back-up Exchange that are 
willing to be deputized by NOM as temporary NOM Participants authorized 
to trade NOM exclusively listed options on NOM's facility at the Back-
up Exchange for such period of time following a Disabling Event as NOM 
determines to be appropriate, and NOM may deputize such members of the 
Back-up Exchange as temporary NOM Participants for that purpose.
---------------------------------------------------------------------------

    \16\ Of note, unlike Phlx, NOM does not have rules to appoint 
Lead Market Makers.
---------------------------------------------------------------------------

    The foregoing exceptions would permit members of the Back-up 
Exchange to trade NOM exclusively listed options on NOM's facility on 
the Back-up Exchange, if, for example, circumstances surrounding a 
Disabling Event result in NOM Participants being delayed in connecting 
to the Back-up Exchange in time for prompt resumption of trading. 
Options 4, Section 10(a)(2) of the proposed rule provides for the 
continued trading of NOM singly listed options at the Back-up Exchange 
in the event of a Disabling Event at NOM. Proposed paragraph (a)(2)(ii) 
provides that NOM may enter into arrangements with a Back-up Exchange 
under which the Back-up Exchange will agree, in the event of a 
Disabling Event, to list for trading option classes that are then 
singly listed only by NOM. Such option classes would trade on the Back-
up Exchange as listings of the Back-up Exchange and in accordance with 
the rules of the Back-up Exchange. Under proposed paragraph 
(a)(2)(iii), any such options class listed by the Back-up Exchange that 
does not satisfy the standard listing and maintenance criteria of the 
Back-up Exchange will be subject, upon listing by the Back-up Exchange, 
to delisting (and, thus, restrictions on opening new series, and 
engaging in opening transactions in those series with open

[[Page 42917]]

interest, as may be provided in the rules of the Back-up Exchange). NOM 
singly listed option classes would be traded by members of the Back-up 
Exchange and by NOM Participants selected by NOM to the extent the 
Back-up Exchange can accommodate NOM Participants in the capacity of 
temporary members of the Back-up Exchange. If the Back-up Exchange is 
unable to accommodate all NOM Participants that desire to trade NOM 
singly listed options at the Back-up Exchange, NOM may determine which 
Participants shall be eligible to trade such options at the Back-up 
Exchange by considering the same factors used to determine which NOM 
Participants are eligible to trade NOM exclusively listed options at 
NOM's facility at the Back-up Exchange. Proposed Section (a)(3) 
provides that NOM may enter into arrangements with a Back-up Exchange 
to permit NOM Participants to conduct trading on a Back-up Exchange of 
some or all of NOM's multiply listed options in the event of a 
Disabling Event. While continued trading of multiply listed options 
upon the occurrence of a Disabling Event is not likely to be as great a 
concern as the continued trading of exclusively and singly listed 
options, NOM nonetheless believes a provision for multiply listed 
options should be included in the rule so that the exchanges involved 
will have the option to permit members of the Disabled Exchange to 
trade multiply listed options on the Back-up Exchange. Such options 
shall trade as a listing of the Back-up Exchange in accordance with the 
rules of the Back-up Exchange.
    Options 4, Section 10(b) describes the back-up trading arrangements 
that would apply if NOM were the Back-up Exchange. In general, the 
provisions in Section (b) are the converse of the provisions in Section 
(a). With respect to the exclusively listed options of the Disabled 
Exchange, the facility of NOM used by the Disabled Exchange to trade 
some or all of the Disabled Exchange's exclusively listed options will 
be deemed to be a facility of the Disabled Exchange, and such option 
classes shall trade as listings of the Disabled Exchange. Trading of 
the Disabled Exchange's exclusively listed options on the Disabled 
Exchange's facility at NOM shall be conducted in accordance with NOM 
rules, and NOM will perform the related regulatory functions with 
respect to such trading, in each case except as the Disabled Exchange 
and NOM may specifically agree otherwise. NOM rules that govern trading 
on the Disabled Exchange's facility at NOM shall be deemed to be rules 
of the Disabled Exchange for purposes of such trading. Sections (b)(2) 
and (b)(3) describe the arrangements applicable to trading of the 
Disabled Exchange's singly and multiply listed options at NOM, and are 
the converse of Sections (a)(2) and (a)(3). Paragraph (b)(2)(i) 
includes a provision that would permit NOM to allocate singly listed 
option classes of the Disabled Exchange to a NOM Market Maker in 
advance of a Disabling Event, without utilizing the allocation process 
under NOM Rule Options 2, Section 1, to enable NOM to quickly list such 
option classes upon the occurrence of a Disabling Event.
    Options 4, Section 10(c) describes the obligations of Participants 
with respect to the trading by ``temporary members'' on the facilities 
of another exchange. Section (c)(1) sets forth the obligations 
applicable to Participants of a Back-up Exchange who act in the 
capacity of temporary Participants of the Disabled Exchange on the 
facility of the Disabled Exchange at the Back-up Exchange. Section 
(c)(1) provides that a temporary Participant of the Disabled Exchange 
shall be subject to, and obligated to comply with, the rules that 
govern the operation of the facility of the Disabled Exchange at the 
Back-up Exchange. This would include the rules of the Disabled Exchange 
to the extent applicable during the period of such trading, including 
the rules of the Disabled Exchange limiting its liability for the use 
of its facilities that apply to members of the Disabled Exchange. 
Additionally, (i) such temporary Participant shall be deemed to have 
satisfied, and the Disabled Exchange has agreed to waive specific 
compliance with, rules governing or applying to the maintenance of a 
person's or a firm's status as a Participant of the Disabled Exchange, 
including all dues, fees and charges imposed generally upon members of 
the Disabled Exchange based on their status as such, (ii) such 
temporary Participant shall have none of the rights of a member of the 
Disabled Exchange except the right to conduct business on the facility 
of the Disabled Exchange at the Back-up Exchange to the extent 
described in the Rule, (iii) the Participant associated with such 
temporary Participant, if any, shall be responsible for all obligations 
arising out of that temporary Participant's activities on or relating 
to the Disabled Exchange, and (iv) the clearing member of such 
temporary Participant shall guarantee and clear the transactions of 
such temporary Participant on the Disabled Exchange.
    Section (c)(2) sets forth the obligations applicable to members of 
a Disabled Exchange who act in the capacity of temporary Participants 
of the Back-up Exchange for the purpose of trading singly listed and 
multiply listed options of the Disabled Exchange. Such temporary 
Participants shall be subject to, and obligated to comply with, the 
rules of the Back-up Exchange that are applicable to the Back-up 
Exchange's own members, including the rules of the Back-up Exchange 
limiting its liability for the use of its facilities that apply to 
members of the Back-up Exchange. Temporary Participants of the Back-up 
Exchange have the same obligations as those set forth in Section (c)(1) 
that apply to temporary Participants of the Disabled Exchange, except 
that, in addition, temporary Participants of the Back-up Exchange shall 
only be permitted (i) to act in those capacities on the Back-up 
Exchange that are authorized by the Back-up Exchange and that are 
comparable to capacities in which the temporary Participant has been 
authorized to act on the Disabled Exchange, and (ii) to trade in those 
option classes in which the temporary Participant is authorized to 
trade on the Disabled Exchange.
    Options 4, Section 10 provides that the rules of the Back-up 
Exchange shall apply to the trading of the singly and multiply listed 
options of the Disabled Exchange traded on the Back-up Exchange's 
facilities, and (with certain limited exceptions) the trading of 
exclusively listed options of the Disabled Exchange traded on the 
facility of the Disabled Exchange at the Back-up Exchange. The Back-up 
Exchange has agreed to perform the related regulatory functions with 
respect to such trading (except as the Back-up Exchange and the 
Disabled Exchange may specifically agree otherwise). Section (d) 
provides that if a Back-up Exchange initiates an enforcement proceeding 
with respect to the trading during a back-up period of singly or 
multiply listed options of the Disabled Exchange by a temporary 
Participant of the Back-up Exchange, or exclusively listed options of 
the Disabled Exchange by a member of the Disabled Exchange (other than 
a member of the Back-up Exchange who is a temporary member of the 
Disabled Exchange), and such proceeding is in process upon the 
conclusion of the back-up period, the Back-up Exchange may transfer 
responsibility for such proceeding to the Disabled Exchange following 
the conclusion of the back-up period.
    With respect to arbitration jurisdiction, proposed Section (d) 
provides that arbitration of any disputes with respect to any trading 
during a back-up period of singly or multiply listed options of the 
Disabled Exchange

[[Page 42918]]

or of exclusively listed options of the Disabled Exchange on the 
Disabled Exchange's facility at the Back-up Exchange will be conducted 
in accordance with the rules of the Back-up Exchange, unless the 
parties to an arbitration agree that it shall be conducted in 
accordance with the rules of the Disabled Exchange.
    Proposed Supplementary Material .01 to Options 4, Section 10 
clarifies that to the extent Options 4, Section 10 provides that 
another exchange will take certain action, the Rule is reflecting what 
that exchange has agreed to do by contractual agreement with NOM, but 
Options 4, Section 10 is not binding on the other exchange.
Options 4C
    The Exchange proposes to relocate current rule text related to 
criteria to list U.S. Dollar-Settled Foreign Currency Options to new 
Options 4C and adopting new rule text similar to Phlx \17\ to list and 
trade these securities as described in more detail below.
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 54989 (December 21, 
2006), 71 FR 78506 (December 29, 2006) (SR-Phlx-2006-34) (Notice of 
Filing and Order Granting Accelerated Approval to Proposed Rule 
Change as Modified by Amendments No. 1, 2, and 3 Thereto Relating to 
U.S. Dollar-Settled Foreign Currency Options).
---------------------------------------------------------------------------

Section 1. Applicability
    Similar to Phlx Options 4C, Section 1 the Exchange proposes to 
provide,

    The Rules in Options 4C are applicable to U.S. Dollar-Settled 
Foreign Currency Options. Except to the extent that specific rules 
in this Section, or unless the context otherwise requires, the 
provisions of Options 4 are applicable to the trading on the 
Exchange of U.S. Dollar-Settled Foreign Currency Options.

    Proposed Options 4C of the Options Listing Rules covers U.S. 
Dollar-Settled Foreign Currency Options only.
Section 2. Definitions
    The Exchange proposes to adopt rules to list for trading U.S. 
Dollar-Settled Foreign Currency Options, which products are currently 
listed and traded on Phlx. To that end, NOM proposes to adopt the same 
rules as Phlx Options 4C. The Exchange therefore proposes to adopt 
applicability rules and definitions similar to Phlx Options 4C, Section 
2.
    The Exchange proposes to state within proposed Options 4C, Section 
2 that the Rules in Options 4C shall be applicable to the trading on 
the Exchange in option contracts issued by The Options Clearing 
Corporation, the terms and conditions of such contracts, the exercise 
and settlement thereof, the handling of orders, and the conduct of 
accounts and other matters relating to options trading. Except to the 
extent that specific Rules in this Options 4C govern or unless the 
context otherwise requires, the provisions of the By-Laws and of all 
other Rules and Policies of the Board of Directors shall be applicable 
to the trading on the Exchange of option contracts. This proposed rule 
would also note that foreign currency option contracts purchased and 
sold on the Exchange are designated by reference to the underlying 
foreign currency (e.g., the British pound), expiration month, exercise 
price and type (put or call).
    The Exchange also proposes to add the below definitions to Options 
4C, Section 2(b) and note that ``The following terms as used in the 
Rules shall, unless the context otherwise indicates, have the meanings 
herein specified:''. The definitions that are proposed to be added are:
    (1) The term ``aggregate exercise price'' is as defined within 
Options 1, Section 1(a)(3).
    (2) The term ``foreign currency'' is as defined within Options 1, 
Section 1(a)(20).
    (3) The term ``Exchange Spot Price'' in respect of an option 
contract on a foreign currency means the cash market spot price, for 
the sale of one foreign currency for another, quoted by various foreign 
exchange participants for the sale of a single unit of such foreign 
currency for immediate delivery that is calculated from the foreign 
currency price quotation reported by the foreign currency price 
quotation dissemination system selected by the Exchange, to which an 
appropriate multiplier is applied. The multiplier(s) will be: 100 for 
the British pound, the Euro, the Swiss Franc, the Canadian dollar, the 
Australian dollar, the Brazilian real, and the New Zealand dollar; 
1,000 for the Chinese yuan, the Danish krone, the Mexican peso, the 
Norwegian krone, the South African rand, and the Swedish krona; 10,000 
for the Japanese yen and the Russian ruble; and 100,000 for the South 
Korean won.
    (4) The term ``unit of underlying foreign currency'' means a single 
unit of the foreign currency (e.g., one British pound, one Swiss franc, 
one Canadian dollar, one Australian dollar, one Japanese yen, one 
Mexican peso, one Euro, one Brazilian real, one Chinese yuan, one 
Danish krone, one New Zealand dollar, one Norwegian krone, one Russian 
ruble, one South African rand, one South Korean won, or one Swedish 
krona).
Section 3. Criteria for Underlying Securities
    Options 4, Section 3(m) is being relocated into new Options 4C, 
Section 3 without change, except that is being re-lettered as ``a''.
Section 4. Withdrawal of Approval of Underlying Securities or Options
    NOM proposes to adopt rule text similar to Phlx Options 4C, Section 
4 which provides, The Exchange may determine to withdraw approval of an 
underlying foreign currency whenever it deems such withdrawal advisable 
in the public interest or for the protection of investors. In the event 
that the Exchange effects such a withdrawal, the Exchange shall not 
open for trading any additional series of options of the class covering 
that underlying foreign currency.
    Similar to Phlx, NOM may withdraw approval of an underlying foreign 
currency whenever it deems such withdrawal advisable in the public 
interest or for the protection of investors. In the event of a 
withdrawal, NOM would not open for trading any additional series of 
options of the class covering that underlying foreign currency.
Section 5. Series of U.S. Dollar-Settled Foreign Currency Options 
Contracts Open for Trading
    Similar to Phlx, NOM proposes to adopt rules to permit it to list 
and trade U.S. Dollar-Settled Foreign Currency Options. After call 
option contracts or put option contracts relating to a specific 
underlying foreign currency has been approved for listing and trading 
on the Exchange, NOM shall from time to time open for trading series of 
options therein. Prior to the opening of trading in any series of 
options, NOM shall fix the expiration month and exercise price of 
option contracts included in such series. NOM proposes to adopt Options 
4C, Section 5(a)(1) which states,

    Within each class of approved U.S. dollar-settled foreign 
currency options, the Exchange may open for trading series of 
options expiring in consecutive calendar months (``consecutive month 
series''), as provided in subparagraph (A) of this paragraph, and 
series of options expiring at three-month intervals (``cycle month 
series''), as provided in subparagraph (B) of this paragraph. Prior 
to the opening of trading in any series of U.S. dollar-settled FCO, 
the Exchange shall fix the expiration month and exercise price of 
option contracts included in each such series. The Exchange may 
initially list exercise strike prices for each expiration of U.S. 
dollar-settled options on currencies within a 40 percent band around 
the current Exchange Spot Price at fifty cent ($.50) intervals. 
Thus, if the Exchange Spot Price of the Euro were at $100.00, the 
Exchange

[[Page 42919]]

would list strikes in $.50 intervals up to $120.00 and down to 
$80.00, for a total of eighty-one strike prices available for 
trading. As the Exchange Spot Price for U.S. dollar-settled FCOs 
moves, the Exchange may list new strike prices that, at the time of 
listing, do not exceed the Exchange Spot Price by more than 20 
percent and are not less than the Exchange Spot Price by more than 
20 percent. For example, if at the time of initial listing, the 
Exchange Spot Price of the Euro is at $100.00, the strike prices the 
Exchange will list will be $80.00 to $120.00. If the Exchange Spot 
Price then moves to $105.00, the Exchange may list additional 
strikes at the following prices: $105.50 to $126.00.

    This rule is identical to Phlx's listing rules for U.S. Dollar-
Settled Foreign Currency Options within Phlx Options 4C, Section 
5(a)(1).
    With respect to consecutive month series, as noted above, each 
class of U.S. dollar-settled foreign currency option, series of options 
having up to four consecutive expiration months may be opened for 
trading simultaneously, with the shortest-term series initially having 
no more than two months to expiration. Additional consecutive month 
series of the same class may be opened for trading on the Exchange at 
or about the time a prior consecutive month series expires, and the 
expiration month of each such new series shall normally be the month 
immediately succeeding the expiration month of the then outstanding 
consecutive month series of the same class of options having the 
longest remaining time to expiration.
    With respect to cycle month series, as noted above, NOM may 
designate one expiration cycle for each class of U.S. dollar-settled 
foreign currency option. An expiration cycle is four calendar months 
(``cycle months'') occurring at three-month intervals. With respect to 
any particular class of U.S. dollar-settled foreign currency option, 
series of options expiring in the four cycle months designated by the 
Exchange for that class may be opened for trading simultaneously, with 
the shortest-term series initially having approximately three months to 
expiration. Additional cycle month series of the same class may be 
opened for trading on the Exchange at or about the time a prior cycle 
month series expires, and the expiration month of each such new series 
shall normally be approximately three months after the expiration month 
of the then outstanding cycle month series of the same class of options 
having the longest remaining time to expiration.
    Proposed Options 4C, Section 5(a)(1)(C) provides rules for long-
term options series. The Exchange proposes that it may list with 
respect to any U.S. dollar-settled foreign currencies, options having 
up to three years from the time they are listed until expiration. There 
may be up to ten options series, options having up to thirty-six months 
from the time they are listed until expiration. There may be up to six 
additional expiration months. Strike price intervals shall not apply to 
such options series until the time to expiration is less than twelve 
months. As proposed herein, bid/ask differentials for long-term options 
contracts are specified within Options 3, Section 5(d)(2)(A). As noted 
above the Exchange proposes to consolidate the bid/ask within Options 
2.
    Proposed Options 4C, Section 5(a)(1)(D) provides that for each 
expiration month opened for trading of U.S. dollar-settled foreign 
currency options, in addition to the strike prices listed by the 
Exchange pursuant to subsection (a)(1) of this Options 4, Section 5, 
the Exchange shall also list a single strike price of $0.01. Finally, 
the Exchange proposes to state at proposed Options 4C, Section 
5(a)(1)(E) that additional series of options of the same class may be 
opened for trading on the Exchange as the market price of the 
underlying foreign currency moves substantially from the initial 
exercise price or prices. The opening of a new series of options on the 
Exchange shall not effect any other series of options of the same class 
previously opened.
    The rule text proposed herein within Options 4C, Section 5(a)(1)(D) 
and (E) is identical to the same provisions within Phlx's Options 4C.
    With respect to exercise price, NOM proposes within Options 4C, 
Section 5(b) to provide that the exercise price of each series of 
foreign currency options opened for trading on the Exchange normally 
shall be fixed at a price per unit which is reasonably close to the 
current Exchange Spot Price per unit of the underlying foreign currency 
in the foreign exchange market at or before the time such series of 
options is first opened for trading on the Exchange, as determined by 
finding the arithmetic mean of Exchange Spot Prices as defined in 
Options 4C, Section 2(b)(3) at or about such time. The Exchange may 
initially list exercise strike prices for each expiration of U.S. 
dollar-settled options on currencies within a 40 percent band around 
the current Exchange Spot Price at fifty cent ($.50) intervals. By way 
of example, if the Exchange Spot Price of the Euro were at $100.00, the 
Exchange would list strikes in $.50 intervals up to $120.00 and down to 
$80.00, for a total of eighty-one strike prices available for trading. 
As the Exchange Spot Price for U.S. dollar-settled foreign currencies 
moves, the Exchange may list new strike prices that, at the time of 
listing, do not exceed the Exchange Spot Price by more than 20 percent 
and are not less than the Exchange Spot Price by more than 20 percent. 
For example, if at the time of initial listing, the Exchange Spot Price 
of the Euro is at $100.00, the strike prices the Exchange will list 
will be $80.00 to $120.00. If the Exchange Spot Price then moves to 
$105.00, the Exchange may list additional strikes at the following 
prices: $105.50 to $126.00.
    The Exchange proposes to state within Options 4C, Section 5(c) that 
in fixing the exercise price of one or more series of options on any 
underlying foreign currency, NOM may take into account the forward 
sales prices quoted for that underlying foreign currency in the 
interbank foreign exchange market.
    Lastly, the Exchange proposes to state within Options 4C, Section 
5(d) that when put option contracts or put and call option contracts 
are first opened for trading on an underlying foreign currency, NOM may 
open a series of put option contracts corresponding to each series of 
call option contracts open or to be opened for trading on the same 
underlying foreign currency.
    All provisions of Options 4C, Section 5 are identical to Phlx's 
rules with the exception of cross-citations.
Section 6. U.S. Dollar-Settled Foreign Currency Option Closing 
Settlement Value
    The Exchange proposes to adopt a new Options 4C, Section 6, titled 
``U.S. Dollar-Settled Foreign Currency Option Closing Settlement 
Value'' identical to Phlx Options 4C, Section 6.
    The Exchange proposes to provide within Options 4, Section 6(a) 
that U.S. dollar-settled foreign currency options are settled in U.S. 
dollars.
    The Exchange proposes to provide within Options 4C, Section 6(b) 
the following,

    The closing settlement value for the U.S. dollar-settled FCO on 
the Australian dollar, the Euro, the British pound, the Canadian 
dollar, the Swiss franc, the Japanese yen, the Mexican peso, the 
Brazilian real, the Chinese yuan, the Danish krone, the New Zealand 
dollar, the Norwegian krone, the Russian ruble, the South African 
rand, the South Korean won, and the Swedish krona shall be the 
Exchange Spot Price at 12:00:00 Eastern Time (noon) on the business 
day of expiration, or, in the case of an option contract expiring on 
a day that is not a business day, on the business day prior to the 
expiration date unless the Exchange determines to apply an 
alternative closing settlement value as a result of extraordinary 
circumstances.


[[Page 42920]]


    The closing settlement value for U.S. dollar-settled foreign 
currency options shall be governed by this provision.
    The Exchange proposes to provide within Options 4, Section 6(c) 
certain liability provisions similar to Phlx Options 4, Section 6(c). 
The Exchange proposes to state,

    Neither the Exchange, nor any agent of the Exchange shall have 
any liability for damages, claims, losses or expenses caused by any 
errors, omissions, or delays in calculating or disseminating the 
current settlement value or the closing settlement value resulting 
from an act, condition, or cause beyond the reasonable control of 
the Exchange including but not limited to, an act of God; fire; 
flood; extraordinary weather conditions; war; insurrection; riot; 
strike; accident; action of government; communications or power 
failure; equipment or software malfunction; any error, omission, or 
delay in the reports of transactions in one or more underlying 
currencies or any error, omission or delay in the reports of the 
current settlement value or the closing settlement value by the 
Exchange.

    NOM's proposal would cause the Exchange to not be liable for 
damages, claims, losses or expenses caused by any errors, omissions, or 
delays in calculating or disseminating the current settlement value or 
the closing settlement value resulting from an act, condition, or cause 
beyond the reasonable control of the Exchange including but not limited 
to, an act of God and other extraordinary circumstances.
    Finally, the Exchange proposes to provide within Options 4C, 
Section 6(d) that the Exchange shall post the closing settlement value 
on its website or disseminate it through one or more major market data 
vendors. As noted above, this rule is identical to Phlx Options 4C, 
Section 6.
Bid/Ask Differentials
    The Exchange proposes to amend Options 4, Section 8(a), and Options 
4A, Section 12(b)(1)(A) to relocate text concerning bid/ask 
differentials for long-term option series, without change. Currently, 
Options 4, Section 8(a) describes the bid/ask differentials for long-
term options series for equity options and exchange-traded products and 
Options 4A, Section 12(b)(1)(A) describes the bid/ask differentials for 
long-term options series for indexes. Currently, the bid/ask 
differentials shall not apply to such options series until the time to 
expiration is less than nine (9) months for equity options and 
exchange-traded funds as provided for within Options 4, Section 8(a). 
Currently, bid/ask differentials shall not apply to such options series 
until the time to expiration is less than nine (9) months for index 
options as provided for within Options 4A, Section 12(b)(1)(A). The 
Exchange also proposes to lowercase ``Paragraph: within Options 4A, 
Section 12(b)(1).
    The Exchange proposes to centralize the bid/ask differentials 
within Options 2, Section 5(d)(2)(A) and add a sentence to both Options 
4, Section 8(a) and Options 4A, Section 12(b)(1)(A) that cites to 
Options 2, Section 5(d)(2)(A) for information on bid/ask differentials 
for the various products. The Exchange also proposes to capitalize 
``ask'' in the title of Options 2, Section 5(d)(2). The Exchange 
believes that this relocation will provide Market Makers with 
centralized information regarding their bid/ask differential 
requirements. The Exchange is not amending the bid/ask differentials; 
the rule text is simply being relocated.
    The Exchange also proposes to update a citation to Options 2, 
Section 5 within Options 2, Section 4, Obligations of Market Makers, 
within paragraph (a)(1). Specifically, the Exchange proposes to amend 
the current citation to ``Section 5(d)(i)'' to instead refer to 
``Options 2, Section 5(d)(1).''
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\18\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\19\ 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. Conforming NOM's Options 4 Listing Rules to that of ISE 
Options 4 is part of the Exchange's continued effort to promote 
efficiency in the manner in which it administers its rules.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange's proposal to amend Options 4, Sections 1, 2, 5, and 7 
reflect non-substantive amendments to conform those rules to similar 
ISE rules. These proposed changes 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 since the 
changes are intended to ease the Participants', market participants', 
and the general public's navigation and reading of the rules and lessen 
potential confusion and add clarity for market participants.
    The proposed amendments to ISE Options 3, Section 3(b) to permit 
the Exchange, in exceptional circumstances, to select an underlying 
security even though it does not meet all of the guidelines, is 
consistent with the Act. Today, the Exchange may establish guidelines 
to be considered in evaluating potential underlying securities for 
Exchange options transactions. Providing NOM with the same ability to 
select an underlying security even though it does not meet all of the 
guidelines as ISE will permit NOM to list similar options as ISE for 
competitive purposes.
    The Exchange's proposal to add the defined term ``Financial 
Instruments'' within Options 4, Section 3(h) and also account for money 
market instruments, U.S. government securities and repurchase 
agreements, defined by the term ``Money Market Instruments'' similar to 
ISE Options 4, Section 3(h) is consistent with the Act. The addition of 
money market instruments, U.S. government securities and repurchase 
agreements as securities deemed appropriate for options trading will 
make clear that these agreements are included in the acceptable 
securities. The Exchange notes that this rule text is clarifying in 
nature and will more explicitly provide for money market instruments, 
U.S. government securities and repurchase agreements as a separate 
category from what is being defined as ``Financial Instruments'' with 
this proposal. Today, these instruments are eligible as securities 
deemed appropriate for options trading.
    The Exchange's proposal to remove the following products from 
Options 4, Section 3(h): The ETFS Silver Trust, the ETFS Palladium 
Trust, the ETFS Platinum Trust or the Sprott Physical Gold Trust, is 
consistent with the Act because the Exchange no longer lists these 
products and proposes to remove these products from its listing rules. 
The Exchange will file a proposal with the Commission if it determines 
to list these products in the future.
    The Exchange's proposal to amend Options 4, Section 3(h) by 
removing the rule text at the end of the paragraph which provides, 
``all of the following conditions are met,'' and creating separate 
paragraphs for Options 4, Section 3(h)(1) and (2) is consistent with 
the Act. These amendments will de-link these subparagraphs so they are 
read independently. Today, Options 4, Section 3(h)(1) applies to all 
Exchange-Traded Fund Shares. The Exchange's proposal to clarify that 
Options 4, Section 3(h)(2) applies to only international or global 
indexes or portfolios that include non-U.S. securities will bring 
greater clarity to the qualification standards for listing options on 
Exchange-Traded Fund

[[Page 42921]]

Shares. ISE Options 4, Section 3(h) currently has similar rule text. 
Proposed Options 4, Sections 3(h) generally concerns securities deemed 
appropriate for options trading. The proposed new rule text adds 
language stating that subparagraph (h)(2) of Options 4, Section 3 
applies to the extent the Exchange-Traded Fund Share is based on 
international or global indexes or portfolios that include non-U.S. 
securities. This language is intended to serve as a guidepost and 
clarify that (1) subparagraph (h)(2) does not apply to an Exchange-
Traded Fund Shares based on a U.S. domestic index or portfolio, and (2) 
subparagraph (h)(2) includes Exchange-Traded Fund Shares that track a 
portfolio and do not track an index.
    The Exchange's proposal to amend Options 4, Section 3(h)(2)(A) to 
remove the phrase ``for series of portfolio depositary receipts and 
index fund shares based on international or global indexes,'' is 
consistent with the Act. Today, Options 4, Section 3(h), subparagraphs 
(h)(1) and (h)(v) permit the Exchange to list options on Exchange-
Traded Fund Shares based on generic listing standards for portfolio 
depositary receipts and index fund shares without applying component 
based requirements in subparagraphs (h)(2)(B)-(D). By removing the 
proposed rule text, the Exchange would make clear that subparagraph 
(h)(2)(A) applies to Exchange-Traded Fund Shares based on international 
or global indexes, or portfolios that include non-U.S. securities, that 
are listed pursuant to generic listing standards and comply with 
Options 4, Section 3(h) and subparagraph (h)(1).
    The Exchange's proposal to amend the term ``comprehensive 
surveillance agreement'' within Options 4, Section 3(h)(2) (A)-(D) to 
instead provide ``comprehensive surveillance sharing agreement'' is 
consistent with the Act as the amendment will bring greater clarity to 
the term.
    The Exchange's proposal to add the phrase ``if not available or 
applicable, the Exchange-Traded Fund's'' to Options 4, Section 
3(h)(2)(B), (C), and (D) is consistent with the Act as it will clarify 
that when component securities are not available, the portfolio of 
securities upon which the Exchange-Traded Fund Share is based can be 
used instead. This rule text currently exists within ISE Options 4, 
Section 3(h).
    The Exchange's proposal to amend and relocate the rule text within 
Options 4, Section 3(h)(2)(B), (C), and (D) will bring greater clarity 
to the current rule text by explicitly providing that the index being 
referenced is the one on which the Exchange-Traded Fund Shares is 
based. Also, adding ``or portfolio'' to Options 4, Section 3(h)(2)(C), 
and (D) will bring greater clarity to the rule text by conforming the 
rule text of (C) and (D) to the language within (B).
    The proposed amendments to Options 4, Section 3(h) will conform 
NOM's rule text to ISE Options 4, Section 3(h).
    The remainder of the change to Options 3, Section 3 are non-
substantive and intended to conform to ISE Options 3, Section 3. These 
proposed changes 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 since the changes are 
intended to ease the Participants', market participants', and the 
general public's navigation and reading of the rules and lessen 
potential confusion and add clarity for market participants.
    The proposed amendments to Options 4, Section 4 remove unnecessary 
rule text and make clear that options contracts that are no longer 
approved will not be listed. The proposed amendments to adopt new 
Options 4, Section 4(i) similar to ISE, Options 4, Section 4(i), are 
consistent with the Act. Today, the Exchange would not open additional 
series of HOLDRs without filing a rule change with the Commission and 
adopting a corresponding rule. This rule text, similar to ISE, 
explicitly provides that the Exchange would not open additional series 
of options overlying HOLDRs (without prior Commission approval) if: (1) 
The proportion of securities underlying standardized equity options to 
all securities held in a HOLDRs trust is less than 80% (as measured by 
their relative weightings in the HOLDRs trust); or (2) less than 80% of 
the total number of securities held in a HOLDRs trust underlie 
standardized equity options. This rule text bring greater clarity to 
NOM's rules in that HOLDRs would not be in certain circumstances.
    The Exchange's proposal to remove the rule text within Options 4, 
Section 4(l), related to inadequate volume delisting, is consistent 
with the Act. To remain competitive with other options markets, the 
Exchange proposes to adopt the same obligations for continuance of 
trading.\20\ Also, pursuant to proposed new Options 4, Section 5(e) the 
Exchange will announce securities that have been withdrawn. With this 
proposal, the Exchange would eliminate the requirement that an option 
must be trading for more than 6 months. The Exchange notes that this 
condition is not present on other options markets such as ISE and 
Cboe.\21\ This also applies to the requirement that the average daily 
volume of the entire class of options over the last six (6) month 
period was less than twenty (20) contracts. The Exchange notes that 
NOM's requirements are different from other options markets and to 
remain competitive the Exchange proposes to adopt the same standards as 
ISE to remain competitive and list similar options as other markets. 
While the Exchange may in the future determine to delist an option that 
is singly listed, the Exchange's proposal to remove the rule text which 
provides that ``If the option is singly listed only on the Exchange, 
the Exchange will cease to add new series and may delist the class of 
options when there is no remaining open interest'' is consistent with 
the Act. This rule text does not exist on ISE and Cboe. Today, the 
Exchange provides notification of a delisting to all Participants 
making it unnecessary to retain the current provisions within (b)(2). 
Also, proposed new Options 4, Section 4(e) establishes the rules by 
which the Exchange will announce securities that have been withdrawn. 
The rule text within Options 4, Section 4(b), as amended to conform to 
ISE rule text, will continue to govern the continued approval of 
options on the Exchange.
---------------------------------------------------------------------------

    \20\ Options 4, Section 4(b), as amended, establishes 
requirements for continued listing, similar to ISE.
    \21\ See ISE Options 4, Section 4 and Cboe Rule 4.4.
---------------------------------------------------------------------------

    The remainder of the changes to Options 3, Section 3 remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general protects investors and the 
public interest. Overall, these changes are of a non-substantive nature 
and either modify, clarify or relocate the existing Rulebook language 
to reflect the language of the ISE version of the rule and are intended 
to ease the Participants', market participants', and the general 
public's navigation and reading of the rules and lessen potential 
confusion and add clarity for market participants.
    The Exchange believes that the changes to proposed Options 4, 
Section 8 remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and, in general protects 
investors and the public interest because the changes are mainly of a 
non-substantive nature with much of the rule text largely simply being 
relocated from current Options 4, Section 5(a)(i)(D) to new Options 4, 
Section 8(a) with some minor amendments and is intended to ease the

[[Page 42922]]

Participants', market participants', and the general public's 
navigation and reading of the rules and lessen potential confusion and 
add clarity for market participants.
    The Exchange's proposal to amend Options 3, Section 8 and Options 
4A, Section 12(b)(1)(A) to relocate text concerning bid/ask 
differentials for long-term option series is consistent with the Act. 
The Exchange's proposal will centralize the bid/ask differentials 
within Options 2, Section 5(d)(2)(A) and add a sentence to both Options 
3, Section 8 and Options 4A, Section 12(b)(1)(A) that cites to Options 
2, Section 5(d)(2)(A) for information on bid/ask differentials for the 
various products. The Exchange is not amending the bid/ask 
differentials; the rule text is simply being relocated. The Exchange 
believes that this relocation will provide Market Makers with 
centralized information regarding their bid/ask differential 
requirements.
    The Exchange's proposal to amend the current citation to ``Section 
5(d)(i)'' within Options 2, Section 4(a)(1) to instead refer to 
``Options 2, Section 5(d)(1)'' is a non-substantive amendment that will 
bring greater clarity to the Exchange's rules.
    The remainder of the proposed changes to Options 3, Section 8 are 
non-substantive.
    The Exchange believes that adopting a new Section 9, Limitation on 
the Liability of Index Licensors for Option on Fund Share, similar to 
ISE, is consistent with the Act. Specifically, this proposal seeks to 
limit the liability of index licensors who grant NOM a license to use 
their underlying indexes or portfolios in connection with the trading 
of options on Fund Shares. This rule text is identical to ISE rule 
text.\22\ Proposed Section 9(b) provides that no index licensor with 
respect to any index or portfolio underlying an option on Exchange-
Traded Fund Shares traded on the Exchange makes any warranty, express 
or implied, as to the results to be obtained by any person or entity 
from the use of such index or portfolio, any opening, intra-day or 
closing value therefor, or any data included therein or relating 
thereto, in connection with the trading of any option contract on 
Exchange-Traded Fund Shares based thereon or for any other purpose. The 
disclaimers within proposed Section 9 are consistent with the Act in 
that these disclaimers provide market participants with relevant 
information as to the liabilities on option contracts on Exchange-
Traded Fund Shares.
---------------------------------------------------------------------------

    \22\ See ISE Options Listing Rule Section 9.
---------------------------------------------------------------------------

    The Exchange believes that the adoption of Options 4, Section 10, 
Back-up Trading Arrangements, will provide NOM with similar abilities 
as ISE to permit NOM to enter into arrangements with one or more other 
exchanges to permit NOM and its Participants to use a portion of a 
Back-up Exchange's facilities to conduct the trading of NOM exclusively 
listed \23\ options in the event of a Disabling Event, and similarly to 
permit NOM to provide trading facilities for another exchange's 
exclusively listed options if a ``Disabled Exchange is prevented from 
trading due to a Disabling Event. With this proposal, NOM is proposing 
to adopt listing rules similar to Phlx to list and trade U.S. Dollar-
Settled Foreign Currency Options. NOM believes that it is important 
that it develop back-up trading arrangements to minimize the potential 
disruption and market impact that a Disabling Event could cause. The 
proposed rule changes are designed to address the key elements 
necessary to mitigate the effects of a Disabling Event effecting the 
Exchange, minimize the impact of such an event on market participants, 
and provide for a liquid and orderly marketplace for securities listed 
and traded on the Exchange if a Disabling Event occurs. In particular, 
the proposed rule change is intended to ensure that NOM's exclusively 
listed and singly listed products will have a trading venue in the 
event that trading at NOM is prevented due to a Disabling Event. The 
Exchange believes that having these back-up trading arrangements in 
place will minimize potential disruptions to the market and investors 
if a catastrophe occurs that requires the Exchange's primary facility 
to be closed for an extended period. Phlx and ISE have a similar 
rule,\24\ and the Exchange believes that it is important to the 
protection of investors and the public interest that it also adopt 
rules that allow NOM exclusively and singly listed options to continue 
to trade in the event of a Disabling Event. The proposed rule change 
also provides authority for NOM to provide a back-up trading venue 
should another exchange be effected by a Disabling Event, which will 
benefit the market and investors if a Disabling Event were to happen on 
another exchange that has entered into a back-up trading arrangement 
with NOM. Finally, the proposed rule change grants authority to 
Exchange officials to take action under emergency conditions, which 
should enable key actions to be taken by NOM representatives in the 
event of a Disabling Event, and clarifies the fees that will apply if 
these back-up trading arrangements are invoked, which will reduce 
investor confusion and minimize the disruption to investors associated 
with a Disabling Event. Under proposed paragraph (a)(1)(vi), members of 
the Back-up Exchange shall not be authorized to trade in any NOM 
exclusively listed options, except that (i) NOM may deputize willing 
brokers of the Back-up Exchange as temporary NOM Participants to permit 
them to execute orders as Participants in NOM exclusively listed 
options traded on NOM's facility at the Back-up Exchange, and (ii) the 
Back-up Exchange has agreed that it will, at the instruction of NOM, 
select members of the Back-up Exchange that are willing to be deputized 
by NOM as temporary NOM members authorized to trade NOM exclusively 
listed options on NOM's facility at the Back-up Exchange for such 
period of time following a Disabling Event as NOM determines to be 
appropriate, and NOM may deputize such members of the Back-up Exchange 
as temporary NOM members for that purpose. The foregoing exceptions 
would permit members of the Back-up Exchange to trade NOM exclusively 
listed options on NOM's facility on the Back-up Exchange, if, for 
example, circumstances surrounding a Disabling Event result in NOM 
members being delayed in connecting to the Back-up Exchange in time for 
prompt resumption of trading.
---------------------------------------------------------------------------

    \23\ As defined within the proposed rule, the term ``exclusively 
listed option'' means an option that is listed exclusively by an 
exchange (because the exchange has an exclusive license to use, or 
has proprietary rights in, the interest underlying the option).
    \24\ See Phlx and ISE Rules Options 3, Section 10.
---------------------------------------------------------------------------

    The Exchange's proposal to adopt rules to list and trade U.S. 
Dollar-Settled Foreign Currency Options on NOM that are currently 
listed and traded on Phlx is consistent with the Act. Specifically, NOM 
proposes to relocate current rule text related to criteria for listing 
U.S. Dollar-Settled Foreign Currency Options to new Options 4C and 
adopting rules to list U.S. Dollar-Settled Foreign Currency Options 
similar to Phlx.\25\ Today, sufficient venues exist for obtaining 
reliable information on the currencies so that investors in U.S. 
dollar-settled Foreign Currency Options can monitor the underlying spot 
market in the currencies. NOM will integrate

[[Page 42923]]

U.S. dollar-settled index options, as well as for physical delivery 
foreign currency options at the time that NOM lists dollar-settled 
Foreign Currency Options. In addition, the NOM may obtain trading 
information via the ISG from other exchanges who are members or 
affiliates of the ISG. U.S. dollar-settled FCO contracts will be 
aggregated with physical delivery contracts for position and exercise 
limit purposes. Exchange rules designed to protect public customers 
trading in FCOs would apply to U.S. dollar-settled FCOs on the 
Currencies. The Exchange believes that the adoption of these rules will 
offer investors another venue on which to transact U.S. Dollar-Settled 
Foreign Currency Options. The listing of U.S. Dollar-Settled Foreign 
Currency Options will enhance competition by providing investors with 
an additional investment vehicle.
---------------------------------------------------------------------------

    \25\ See Securities Exchange Release No. 54989 (December 21, 
2006), 71 FR 78506 (December 29, 2006) (SR-Phlx-2006-34) (Notice of 
Filing and Order Granting Accelerated Approval to Proposed Rule 
Change as Modified by Amendments No. 1, 2, and 3 Thereto Relating to 
U.S. Dollar-Settled Foreign Currency Options). Today, NOM's rules 
contain the criteria to list U.S. Dollar-Settled Foreign Currency 
Options only.
---------------------------------------------------------------------------

    Similar to Phlx, NOM would adopt an applicability rule within 
proposed Options 4C, Section 1 and defined terms within Section 2. The 
Exchange proposes that the criteria for listing U.S. Dollar-Settled 
Foreign Currency Options be relocated from current Options 4, Section 
3(m). Similar to Phlx, NOM rules would adopt rules related to the 
withdrawal of approval of underlying securities or options to permit 
NOM to withdraw approval of an underlying foreign currency whenever it 
deems such withdrawal advisable in the public interest or for the 
protection of investors. In the event of a withdrawal, NOM would not 
open for trading any additional series of options of the class covering 
that underlying foreign currency. Also, NOM proposes to adopt a new 
Options 4C, Section 5 to describe the manner in which it would list and 
trade U.S. Dollar-Settled Foreign Currency Options. After call option 
contracts or put option contracts relating to a specific underlying 
foreign currency has been approved for listing and trading on the 
Exchange, NOM shall from time to time open for trading series of 
options therein. Prior to the opening of trading in any series of 
options, NOM shall fix the expiration month and exercise price of 
option contracts included in such series. This rule is identical to 
Phlx's listing rules for U.S. Dollar-Settled Foreign Currency Options 
within Phlx Options 4C, Section 5. The determination of the closing 
settlement value is described within Options 4C, Section 6. The 
Exchange believes that permitting NOM to list U.S. Dollar-Settled 
Foreign Currency Options, similar to Phlx, would allow market 
participants another venue in which to transact U.S. Dollar-Settled 
Foreign Currency Options.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. The relocation of the Options 
Listing Rules will facilitate the use of the Rulebook by Participants 
of the Exchange, who are members of other Affiliated Exchanges; other 
market participants; and the public in general. The changes are 
consistent with the ISE Rulebook.
    The Exchange's proposal to amend Options 4, Sections 1, 2, 5, and 7 
reflects non-substantive amendments to conform those rules to similar 
ISE rules at Options 4, Sections 1, 2, 5, and 7. These proposed changes 
do not impose an undue burden on competition since the changes are 
intended to ease the Participants', market participants', and the 
general public's navigation and reading of the rules and lessen 
potential confusion and add clarity for market participants.
    The proposed amendments to ISE Options 3, Section 3(b) to permit 
the Exchange, in exceptional circumstances, to select an underlying 
security even though it does not meet all of the guidelines does not 
impose an undue burden on competition. Today, the Exchange may 
establish guidelines to be considered in evaluating potential 
underlying securities for Exchange options transactions. Providing NOM 
with the same ability to select an underlying security even though it 
does not meet all of the guidelines as ISE will permit NOM to list 
similar options as ISE for competitive purposes.
    The Exchange's proposal to add the defined term ``Financial 
Instruments'' within Options 4, Section 3(h) and also account for money 
market instruments, U.S. government securities and repurchase 
agreements, defined by the term ``Money Market Instruments'' similar to 
ISE Options 4, Section 3(h) does not impose an undue burden on 
competition. The addition of money market instruments, U.S. government 
securities and repurchase agreements as securities deemed appropriate 
for options trading will make clear that these agreements are included 
in the acceptable securities.
    The Exchange's proposal to remove the following products from 
Options 4, Section 3(h): The ETFS Silver Trust, the ETFS Palladium 
Trust, the ETFS Platinum Trust or the Sprott Physical Gold Trust, does 
not impose an undue burden on competition. The Exchange no longer lists 
these products and proposes to remove them the products from its 
listing rules.
    The Exchange's proposal to amend Options 4, Section 3(h) by 
removing the rule text at the end of the paragraph which provides, 
``all of the following conditions are met,'' and creating separate 
paragraphs for Options 4, Section 3(h)(1) and (2) does not impose an 
undue burden on competition. These amendments will de-link these 
subparagraphs so they are read independently. Today, Options 4, Section 
3(h)(1) applies to all Exchange-Traded Fund Shares. The Exchange's 
proposal to clarify that Options 4, Section 3(h)(2) applies to only 
international or global Exchange-Traded Fund Shares that include non-
U.S. securities will bring greater clarity to the qualification 
standards for listing options on Exchange-Traded Fund Shares. 
Specifically, this language is intended to serve as a guidepost and 
clarify that (1) subparagraph (h)(2) does not apply to an Exchange-
Traded Fund Shares based on a U.S. domestic index or portfolio, and (2) 
subparagraph (h)(2) includes Exchange-Traded Fund Shares that track a 
portfolio and do not track an index. This amendment will uniformly 
apply the criteria within Options 4, Section 3 when it lists options 
products on NOM.
    The Exchange's proposal to amend Options 4, Section 3(h)(2)(A) to 
remove the phrase ``for series of portfolio depositary receipts and 
index fund shares based on international or global indexes,'' does not 
impose an undue burden on competition. Today, Options 4, Section 3(h), 
subparagraphs (h)(1) and (h)(v) permit the Exchange to list options on 
Exchange-Traded Fund Shares based on generic listing standards for 
portfolio depositary receipts and index fund shares without applying 
component based requirements in subparagraphs (h)(2)(B)-(D). By 
removing the proposed rule text, the Exchange would make clear that 
subparagraph (h)(2)(A) applies to Exchange-Traded Fund Shares based on 
international or global indexes, or portfolios that include non-U.S. 
securities, that are listed pursuant to generic listing standards and 
comply with Options 4, Section 3(h) and subparagraph (h)(1). This 
amendment will uniformly apply the criteria within Options 4, Section 3 
when it lists options products on NOM.
    The Exchange's proposal to amend the term ``comprehensive 
surveillance agreement'' within Options 4, Section 3(h)(2) (A)-(D) to 
instead provide ``comprehensive surveillance sharing agreement'' does 
not impose an undue

[[Page 42924]]

burden on competition as the amendment will bring greater clarity to 
the term.
    The Exchange's proposal to add the phrase ``if not available or 
applicable, the Exchange-Traded Fund's'' to Options 4, Section 
3(h)(2)(B), (C), and (D) does not impose an undue burden on competition 
as it will clarify that when component securities are not available, 
the portfolio of securities upon which the Exchange-Traded Fund Share 
is based can be used instead.
    The Exchange's proposal to amend and relocate the rule text within 
Options 4, Section 3(h)(2)(B), (C), and (D) will bring greater clarity 
to the current rule text by explicitly providing that the index being 
referenced is the one on which the Exchange-Traded Fund Shares is 
based. Also, adding ``or portfolio'' to Options 4, Section 3(h)(2)(C), 
and (D) will bring greater clarity to the rule text by conforming the 
rule text of (C) and (D) to the language within (B).
    The proposed amendments to Options 4, Section 4 remove unnecessary 
rule text and make clear that options contracts that are no longer 
approved will not be listed. The proposed amendments to adopt new 
Options 4, Section 4(i), similar to ISE, Options 4, Section 4(i), does 
not impose an undue burden on competition. The amendments would provide 
for provisions wherein the Exchange will not open additional series of 
options overlying HOLDRs similar to ISE, which provisions do not 
currently exist.
    The Exchange's proposal to remove the rule text within Options 4, 
Section 4(l), related to inadequate volume delisting, does not impose 
an undue burden on competition. To remain competitive with other 
options markets, the Exchange proposes to adopt the same obligations 
for continuance of trading.\26\ Also, pursuant to proposed new Options 
4, Section 5(e) the Exchange will announce securities that have been 
withdrawn. With this proposal, the Exchange would eliminate the 
requirement that an option must be trading for more than 6 months. The 
Exchange notes that this condition is not present on other options 
markets such as ISE and Cboe.\27\ This also applies to the requirement 
that the average daily volume of the entire class of options over the 
last six (6) month period was less than twenty (20) contracts. The 
Exchange notes that NOM's requirements are different from other options 
markets and to remain competitive the Exchange proposes to adopt the 
same standards as ISE to remain competitive and list similar options as 
other markets. The Exchange's proposal removes the rule text which 
provides that ``If the option is singly listed only on the Exchange, 
the Exchange will cease to add new series and may delist the class of 
options when there is no remaining open interest'' does not impose an 
undue burden on competition. This rule text does not exist on ISE and 
Cboe. The Exchange today provides notification of a delisting to all 
members so therefore it is not necessary to retain the provisions 
within (b)(2). Also, proposed new Options 4, Section 4(e) establishes 
the rules by which the Exchange will announce securities that have been 
withdrawn.
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    \26\ Options 4, Section 4(b), as amended, establishes 
requirements for continued listing, similar to ISE.
    \27\ See ISE Options 4, Section 4 and Cboe Rule 4.4.
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    The Exchange believes that the changes to proposed Options 4, 
Section 8 do not impose an undue burden on competition as the changes 
are mainly of a non-substantive nature with much of the rule text 
largely simply being relocated from current Options 4, Section 
5(a)(i)(D) to new Options 4, Section 8(a) with some minor amendments.
    The Exchange's proposal to amend Options 3, Section 8 and Options 
4A, Section 12(b)(1)(A) to relocate rule text concerning bid/ask 
differentials for long-term option series, without change, does not 
impose an undue burden on competition. The Exchange believes that this 
relocation will provide Market Makers with centralized information 
regarding their bid/ask differential requirements.
    Adopting a new Section 9, Limitation on the Liability of Index 
Licensors for Option on Fund Shares, similar to ISE, does not impose an 
undue burden on competition. The proposal seeks to limit the liability 
of index licensors who grant NOM a license to use their underlying 
indexes or portfolios in connection with the trading of options on Fund 
Shares. This rule text is identical to ISE rule text.\28\ Proposed 
Section 9(b) provides that no index licensor with respect to any index 
or portfolio underlying an option on Exchange-Traded Fund Shares traded 
on the Exchange makes any warranty, express or implied, as to the 
results to be obtained by any person or entity from the use of such 
index or portfolio, any opening, intra-day or closing value therefor, 
or any data included therein or relating thereto, in connection with 
the trading of any option contract on Exchange-Traded Fund Shares based 
thereon or for any other purpose.
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    \28\ See ISE Options Listing Rule Section 9.
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    The Exchange believes that the adoption of Options 4, Section 10, 
Back-up Trading Arrangements, will provide NOM with similar abilities 
as ISE to permit NOM to enter into arrangements with one or more other 
exchanges to permit NOM and its Participants to use a portion of a 
Back-up Exchange's facilities to conduct the trading of NOM exclusively 
listed \29\ options in the event of a Disabling Event, and similarly to 
permit NOM to provide trading facilities for another exchange's 
exclusively listed options if that Disabled Exchange is prevented from 
trading due to a Disabling Event.
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    \29\ As defined within the proposed rule, the term ``exclusively 
listed option'' means an option that is listed exclusively by an 
exchange (because the exchange has an exclusive license to use, or 
has proprietary rights in, the interest underlying the option).
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    Permitting NOM to list U.S. Dollar-Settled Foreign Currency Options 
similar to Phlx would allow market participants another venue in which 
to transact U.S. Dollar-Settled Foreign Currency Options. U.S. Dollar-
Settled Foreign Currency Options would be available for trading to all 
market participants. The proposal will enhance competition among market 
participants, to the benefit of investors and the marketplace.

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

    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 \30\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\31\
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    \30\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \31\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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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    A proposed rule change filed under Rule 19b-4(f)(6) \32\ normally 
does not

[[Page 42925]]

become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\33\ the Commission may 
designate a shorter time if such action is consistent with protection 
of investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange's proposal 
does not raise any new or novel issues. Therefore, the Commission 
believes that waving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission designates the proposed rule change to be operative on upon 
filing.\34\
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    \32\ 17 CFR 240.19b-4(f)(6).
    \33\ 17 CFR 240.19b-4(f)(6).
    \34\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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 (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7c0e091019511f1311111912080f3c0f191f521b130a"><span class="__cf_email__" data-cfemail="bbc9ced7de96d8d4d6d6ded5cfc8fbc8ded895dcd4cd">[email protected]</span></a>. Please include 
File Number SR-NASDAQ-2021-059 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-NASDAQ-2021-059. 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 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-NASDAQ-2021-059 and should be submitted 
on or before August 26, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-16676 Filed 8-4-21; 8:45 am]
BILLING CODE 8011-01-P


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