Document ID: SEC-2023-0385-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American LLC
Posted Date: 2023-04-06T04:00Z

[Federal Register Volume 88, Number 66 (Thursday, April 6, 2023)]
[Notices]
[Pages 20587-20589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07140]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97231; File No. SR-NYSEAMER-2023-22]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Change To Make a 
Clarifying Change to the Term Settlement Style Applicable to Flexible 
Exchange Options

March 31, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on March 22, 2023, NYSE American LLC (``NYSE American'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 Commentary .01 under Rule 903G to 
make a clarifying change to the flex term settlement style applicable 
to Flexible Exchange (``FLEX'') Options. The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Commentary .01 under Rule 903G to 
make a clarifying change to the flex term settlement style applicable 
to FLEX Options.
    FLEX Options are customized equity or index contracts that allow 
investors to tailor contract terms for exchange-listed equity and index 
options. Commentary .01 under Rule 903G currently states that, provided 
the options on an underlying security or index are otherwise eligible 
for FLEX trading, FLEX Options will be permitted in puts and calls that 
do not have the same exercise style, same settlement style, same 
expiration date and same exercise price as Non-FLEX Options that are 
already available for trading on the same underlying security or 
index.\4\ The rule also provides that FLEX Options are permitted before 
the options are listed for trading as Non-FLEX Options. Once and if an 
option series is listed for trading as a Non-FLEX Option series, (i) 
all existing open positions established under the FLEX trading 
procedures shall be fully fungible with transactions in the respective 
Non-FLEX Options series, and (ii) any further trading in the series 
would be as Non-FLEX Options subject to the Non-FLEX trading procedures 
and rules, however, in the event a Non-FLEX series is added intra-day, 
the holder of a position established under FLEX Trading Procedures 
would be permitted to close such position using FLEX trading procedures 
against another closing only FLEX position for

[[Page 20588]]

the balance of the trading day on which the series is added.\5\
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    \4\ See Rule 903G, Commentary .01.
    \5\ Id.
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    Commentary .01 to Rule 903G is designed to prevent the trading of a 
FLEX Option that has the exact same terms (underlying security, 
exercise style, settlement style, expiration date and exercise price) 
as a non-FLEX Option. In other words, as long as just one term of the 
FLEX Option is different from an existing ``regular'' or ``non-FLEX'' 
option it may be traded as a FLEX Option.
    Under Exchange rules, certain FLEX Equity Options where the 
underlying security is an Exchange-Traded Fund are permitted to be 
settled by delivery in cash if the underlying security meets prescribed 
criteria.\6\ The purpose of this proposed rule change is to amend 
Commentary .01 under Rule 903G to clarify that the reference to ``same 
settlement style'' in the rule applies to FLEX Index Options and not to 
the FLEX ETF Options permitted for listing and trading pursuant to Rule 
903G(c)(3)(ii).\7\ As proposed, the first sentence in Commentary .01 
under Rule 903G would be modified to state that ``provided the options 
on an underlying security or index are otherwise eligible for FLEX 
trading, FLEX Options shall be permitted in puts and calls that do not 
have the same exercise style, same settlement style (with respect to 
FLEX index options only), same expiration date and same exercise price 
as Non-FLEX Options that are already available for trading on the same 
underlying security or index.'' As a result of this change, for FLEX 
ETF Options, at least one of the following terms--exercise style, 
expiration date and exercise price--must differ from options in the 
non-FLEX market. The Exchange believes the proposed rule change will 
add clarity and certainty regarding the flex term settlement style 
applicable for FLEX Options listed and traded on the Exchange.
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    \6\ Rule 903G(c)(3)(ii) provides that the exercise settlement 
for a FLEX ETF Option may be by physical delivery of the underlying 
security or by delivery in cash if the underlying security, measured 
over a six-month period, has an average daily notional value of $500 
Million or more and a national average daily volume (ADV) of at 
least 4,680,000 shares. See also Securities Exchange Act Release No. 
88131 (February 5, 2020), 85 FR 7806 (February 11, 2020) (SR-
NYSEAmerican-2019-38) (Notice of Filing of Amendment No. 1 and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 1, To Allow Certain Flexible Equity Options To Be 
Cash Settled).
    \7\ See Securities Exchange Act Release No. 79125 (October 19, 
2016), 81 FR 73452 (October 25, 2016) (SR-NYSEMKT-2016-48) (Adding 2 
new settlement styles for FLEX Index Options--Asian and Cliquet--and 
adding a reference to settlement style in Commentary .01 under Rule 
903G).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\8\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\9\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that clarity regarding the flex term 
settlement style applicable for FLEX Options will promote fair and 
orderly markets by eliminating potential confusion and would allow ATP 
Holders and investors with additional opportunities to trade customized 
options in an exchange environment.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change is 
designed to more clearly describe the current operation of an existing 
rule without changing its substance and, therefore, the Exchange 
believes that the proposed change will not impose a burden on 
competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) \12\ of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description of the text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of such 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 under 
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(2)(B).
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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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEAMER-2023-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAMER-2023-22. 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

[[Page 20589]]

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-NYSEAMER-2023-22 and should 
be submitted on or before April 27, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07140 Filed 4-5-23; 8:45 am]
BILLING CODE 8011-01-P