Document ID: SEC-2018-0321-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq GEMX, LLC
Posted Date: 2018-02-23T05:00Z

[Federal Register Volume 83, Number 37 (Friday, February 23, 2018)]
[Notices]
[Pages 8125-8127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03698]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82728; File No. SR-GEMX-2018-07]

Self-Regulatory Organizations; Nasdaq GEMX, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 100

February 16, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 13, 2018, Nasdaq GEMX, LLC (``GEMX'' 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 Rule 100 to include Monday and 
Wednesday expirations for options listed pursuant to the Short Term 
Option Series Program, including options on the SPDR S&P 500 ETF Trust.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqgemx.cchwallstreet.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 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 Rule 100(a)(53) to amend Rule 100 to 
include Monday and Wednesday expirations for options listed pursuant to 
the Short Term Option Series program (``Program''), including options 
on the SPDR S&P 500 ETF Trust.
    The actual listing and trading of the options series included in 
the Program is governed by Chapter 5 (``Securities Traded on the 
Exchange''). Chapter 5 incorporates by reference the rules of Nasdaq 
ISE, LLC (``ISE''). ISE has already amended its Chapter 5 to list both 
Monday and Wednesday expirations for SPY options pursuant to its Short 
Terms Options Series program; accordingly, the Exchange's Chapter 5 
incorporates these changes by reference.\3\ Chapter 1 does not have a 
similar incorporation by reference, and so the Exchange is therefore 
submitting this proposed rule change to amend the definition of ``Short 
Term Option Series'' in Rule 100(a)(53) to include Monday and Wednesday 
expirations within that definition.
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    \3\ See Securities Exchange Act Release No. 78715 (August 29, 
2016), 81 FR 60765 (September 2, 2016) (SR-ISE-2016-18) (SPY 
Wednesdays); SR-ISE-2018-13 (SPY Mondays).
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    Currently, ``Short Term Option Series'' is defined as ``a series in 
an option class that is approved for listing and trading on the 
Exchange in which the series is opened for trading on any Thursday or 
Friday that is a business day and that expires on the Friday of the 
following business week that is a business day. If a Friday is not a 
business day, the series may be opened (or shall expire) on the first 
business day immediately prior to that Friday.'' In order to include 
Wednesday expirations within this definition, the Exchange is amending 
Rule 100(a)(53) to include a series in an option class that is opened 
for trading on any Tuesday or Wednesday that is a business day and that 
expires the Wednesday of the following business week that is a business 
day. If a Tuesday, Wednesday, Thursday is not a business day, the 
series may be opened (or shall expire) on the first business day 
immediately prior to that Tuesday, Wednesday, Thursday.
    As noted above, ISE filed its proposal to amend its Rule 100 and 
Rule 504 to provide for the listing of Wednesday expirations \4\ 
shortly after the Commission approved a similar proposal for BOX 
Options Exchange LLC.\5\ Once ISE's proposal became operative, the 
Exchange's Chapter 5 changed accordingly.
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    \4\ See supra note 4[sic].
    \5\ See Securities Exchange Act Release No. 59696 (August 24, 
2016), 81 FR 59696 (August 30, 2016) (SR-BOX-2016-28).
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    The Exchange is also proposing to amend Rule 100(a)(53) to permit 
the listing of options series that expire on Mondays (``Monday SPY 
Expirations''). Specifically, the Exchange is proposing that it may 
open for trading series of options on any Monday that is a business day 
and that expires on the Monday of the following business week that is a 
business day. The Exchange is also proposing to list Monday expirations 
series on Fridays that precede the expiration Monday by one business 
week plus one business day. Since Rule 100(a)(53) already provides for 
the listing of short term option series on Fridays, the Exchange is not 
modifying this provision to allow for Friday listing of Monday 
expiration series. However, the Exchange is amending Rule 100(a)(53) to 
clarify that, in the case of a series that is listed on a Friday and 
expires on a Monday, that series must be listed one business week and 
one business day prior to that expiration (i.e., two Fridays prior to 
expiration).
    The Exchange notes that having Monday expirations is not a novel 
proposal. Specifically, Nasdaq PHLX LLC (``Phlx'') recently received 
approval to list Monday expirations for SPY options pursuant to its 
Short Terms Options Series program.\6\
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    \6\ See Securities Exchange Act Release No. 82611 (February 1, 
2018), 83 FR 5473 (February 7, 2018) (SR-Phlx-2017-103).
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    As part of this proposal, the Exchange is also amending Rule 
100(a)(53) to address the expiration of Monday expiration series when 
the Monday is not a business day. In that case, the rule will provide 
that the series shall expire on the first business day immediately 
following that Monday. This procedure differs from the expiration date 
of Wednesday expiration series that are scheduled to expire on a 
holiday. In that case, the Wednesday expiration series shall expire on 
the first business day immediately prior to that Wednesday, e.g., 
Tuesday of that week.\7\ However, the Exchange believes that it is 
preferable to require Monday expiration series in this scenario to 
expire on the Tuesday of that week rather than the previous business 
day, e.g., the previous

[[Page 8126]]

Friday, since the Tuesday is closer in time to the scheduled expiration 
date of the series than the previous Friday, and therefore may be more 
representative of anticipated market conditions. The Exchange notes 
that this provision is identical to the corresponding provision 
recently adopted by Phlx in its proposal to list options series with 
Monday expirations pursuant to its Short Term Option Series program. 
The Exchange also notes that Cboe Exchange, Inc. (``Cboe'') uses the 
same procedure for options on the S&P 500 index (``SPX'') with Monday 
expirations that listed pursuant to its Nonstandard Expirations Pilot 
Program and that are scheduled to expire on a holiday.\8\
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    \7\ See Rule 100(a)(53).
    \8\ See CBOE Rule 24.9(e)(1) (``If the Exchange is not open for 
business on a respective Monday, the normally Monday expiring Weekly 
Expirations will expire on the following business day. If the 
Exchange is not open for business on a respective Wednesday or 
Friday, the normally Wednesday or Friday expiring Weekly Expirations 
will expire on the previous business day.'').
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    The interval between strike prices for the proposed Monday SPY 
Expirations will be the same as those for the current Short Term Option 
Series for Wednesday and Friday SPY Expirations. Specifically, the 
Monday SPY Expirations will have a $0.50 strike interval minimum. As is 
the case with other options series listed pursuant to the Short Term 
Option Series, the Monday SPY Expiration series will be P.M.-settled.
    Currently, for each option class eligible for participation in the 
Program, the Exchange is limited to opening thirty (30) series for each 
expiration date for the specific class. The thirty (30) series 
restriction does not include series that are open by other securities 
exchanges under their respective short term option rules; the Exchange 
may list these additional series that are listed by other exchanges. 
This thirty (30) series restriction shall apply to Monday SPY 
Expiration series as well. In addition, the Exchange will be able to 
list series that are listed by other exchanges, assuming they file 
similar rules with the Commission to list SPY options expiring on 
Mondays.
    The Exchange does not believe that any market disruptions will be 
encountered with the introduction of P.M.-settled Monday expirations. 
The Exchange has the necessary capacity and surveillance programs in 
place to support and properly monitor trading in the proposed Monday 
expiration series, including Monday SPY Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
almost every Wednesday and Friday, which provide market participants a 
tool to hedge special events and to reduce the premium cost of buying 
protection. With the exception of Monday expiration series that are 
scheduled to expire on a holiday, the Exchange does not believe that 
there are any material differences between Monday expirations and 
Wednesday or Friday expirations for Short Term Option Series.
    The Exchange seeks to introduce Monday expirations to, among other 
things, expand hedging tools available to market participants and to 
continue the reduction of the premium cost of buying protection. The 
Exchange believes that Monday expirations, similar to Wednesday and 
Friday expirations, will allow market participants to purchase an 
option based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively.
    As noted above, Phlx recently received approval to list Monday 
expirations for SPY options pursuant to its Short Terms Options 
program. In addition, other exchanges currently permit Monday 
expirations for other options. For example, Cboe lists options on the 
SPX with a Monday expiration as part of its Nonstandard Expirations 
Pilot Program.\9\
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    \9\ See CBOE Rule 24.9(e)(1) (``The Exchange may open for 
trading Weekly Expirations on any broad-based index eligible for 
standard options trading to expire on any Monday, Wednesday, or 
Friday (other than the third Friday-of-the-month or days that 
coincide with an EOM expiration.)'').
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes the Short Term Option Series 
program has been successful to date and that Monday expirations, 
including Monday SPY Expirations, simply expand the ability of 
investors to hedge risk against market movements stemming from economic 
releases or market events that occur throughout the month in the same 
way that the Short Term Option Series program has expanded the 
landscape of hedging. Similarly, the Exchange believes Monday 
expirations, including Monday SPY Expirations, should create greater 
trading and hedging opportunities and flexibility, and will provide 
customers with the ability to tailor their investment objectives more 
effectively. As noted above, Phlx recently received approval to list 
Monday expirations for SPY options pursuant to its Short Terms Options 
program. In addition, Cboe currently permits Monday expirations for 
other options with a weekly expiration, such as options on the SPX.
    With the exception of Monday expiration series that are scheduled 
to expire on a holiday, the Exchange does not believe that there are 
any material differences between Monday expirations, including Monday 
SPY expirations, and Wednesday or Friday expirations, including 
Wednesday and Friday SPY Expirations, for Short Term Option Series. The 
Exchange believes that it is consistent with the Act to treat Monday 
expiration series that expire on a holiday differently than Wednesday 
or Friday expiration series, since the proposed treatment for Monday 
expiration series will result in an expiration date that is closer in 
time to the scheduled expiration date of the series, and therefore may 
be more representative of anticipated market conditions. The Exchange 
also notes that Cboe uses the same procedure for SPX options with 
Monday expirations that are listed pursuant to its Nonstandard 
Expirations Pilot Program and that are scheduled to expire on a 
holiday.
    The Exchange believes that the proposed changes to Rule 100(a)(53) 
to include Wednesday expirations are also consistent with the Act. As 
noted above, while the actual listing and trading of the options series 
that are included in the Short Term Option Series are governed by 
Chapter 5, which incorporates ISE Chapter 5 by reference, Chapter 1 
does not have similar incorporation by reference. As such, this change 
will amend Rule 100(a)(53) to make that rule consistent with the 
changes made to Chapter 5 as a result of that incorporation by 
reference.
    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in Monday 
expirations, including Monday SPY Expirations, in the same way that it 
monitors trading in the current Short Term Option Series. The Exchange 
also represents that it has the necessary systems capacity to support 
the new options series.

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

[[Page 8127]]

necessary or appropriate in furtherance of the purposes of the Act. The 
Exchange notes that having Monday expirations is not a novel proposal, 
as Phlx has received approval to list Monday expirations for SPY 
options, and Cboe currently lists and trades short-term SPX options 
with a Monday expiration. The Exchange does not believe the proposal 
will impose any burden on intra-market competition, as all market 
participants will be treated in the same manner under this proposal. 
Additionally, the Exchange does not believe the proposal will impose 
any burden on inter-market competition, as nothing prevents the other 
options exchanges from proposing similar rules to list and trade short-
term options series with Monday expirations. The Exchange does not 
believe that changing Rule 100(a)(53) to include Wednesday expirations 
will impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Commission approved the 
listing and trading of short term options series with Wednesday 
expirations in 2016, and the majority of the options exchanges have 
subsequently adopted short-term options series with Wednesday 
expirations.

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

    No written comments were either solicited or received.

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

    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, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\12\ and Rule 19b-4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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 intention 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) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii) \14\ permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
30-day operative delay so that the proposal may become operative 
immediately upon filing. The Commission notes that it recently approved 
Phlx's substantially similar proposal to list and trade Monday SPY 
Expirations.\15\ The Exchange has stated that waiver of the operative 
delay will allow the Exchange to list and trade Monday SPY Expirations 
as soon as possible, and therefore, promote competition among the 
option exchanges.\16\ For these reasons, the Commission believes that 
the proposed rule change presents no novel issues and that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest, and will allow the Exchange to 
remain competitive with other exchanges. Therefore, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
effective upon filing.\17\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See supra note 6.
    \16\ The Exchange also proposes to update its Short Term Option 
Series definition to include SPY Wednesday expirations. The Exchange 
states this definitional change will make its incorporated by 
reference rulebook internally consistent and is neither novel nor 
controversial. See supra note 3.
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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

     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-GEMX-2018-07 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-GEMX-2018-07. 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-GEMX-2018-07 and should be submitted on 
or before March 16, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03698 Filed 2-22-18; 8:45 am]
 BILLING CODE 8011-01-P