Document ID: SEC-2018-0439-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-03-16T04:00Z

[Federal Register Volume 83, Number 52 (Friday, March 16, 2018)]
[Notices]
[Pages 11797-11800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05332]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82857; File No. SR-NYSEARCA-2018-14]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Expand the Short 
Term Options Series Program

March 12, 2018.
    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 1, 2018, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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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 expand the Short Term Options Series 
(``STOS'') Program to allow Monday expirations for SPDR S&P 500 ETF 
Trust (``SPY'') 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 expand the STOS Program to allow Monday 
expirations for SPY options. In

[[Page 11798]]

particular, the Exchange proposes to amend Rule 6.1-O (Definitions) and 
Rule 6.4-O (Series of Options Open for Trading) to permit the listing 
and trading of options series with Monday expirations that are listed 
pursuant to the STOS Program. This is a competitive filing based on a 
filing submitted by Nasdaq PHLX LLC (``Phlx''), which the Securities 
and Exchange Commission (``Commission'') recently approved.\4\
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    \4\ See Securities Exchange Act Release No. 82611 (February 1, 
2018), 83 FR 5473 (February 7, 2018) (SR-Phlx-2017-103).
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    Currently Rule 6.1-O(b)(41) provides that a STOS is 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 Tuesday, Wednesday, 
Thursday or Friday that is a business day and that expires on the 
Wednesday or Friday of the next business week. The Exchange proposes to 
amend Rule 6.1-O(b)(41) to permit the listing of options series that 
expire on Mondays. 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 next business week. 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 6.1-O(b)(41) already provides for the listing of STOS 
on Fridays, the Exchange is not modifying this provision to allow for 
Friday listing of Monday expiration series. However, the Exchange 
proposes to amend Rule 6.1-O(b)(41) to clarify that, in the case of a 
STOS that is listed on a Friday and expires on a Monday, that STOS must 
be listed one business week and one business day prior to that 
expiration (i.e., two Fridays prior to expiration).
    As part of this proposal, the Exchange is also amending Rule 6.1-
O(b)(41) to address the expiration date of Monday expiration series 
when the Monday is not a business day. In that case, the rule would 
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 
expire on the first business day immediately prior to that Wednesday, 
e.g., Tuesday of that week.\5\ However, the Exchange believes that it 
is preferable to require Monday expiration series in this scenario to 
expire on the Tuesday of that week rather than the previous business 
day, e.g., the previous Friday, since the Tuesday is closer in time to 
the scheduled expiration date of the series than the previous Friday, 
and therefore may be more representative of anticipated market 
conditions. 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 
Options 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.\6\
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    \5\ See Rule 6.1-O(b)(45).
    \6\ 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 Exchange also proposes to make corresponding changes to Rule 
6.4-O, Commentary .07, which sets forth the requirements for SPY 
options that are listed pursuant to the STOS Program, to permit Monday 
SPY expirations (``Monday SPY Expirations''). Accordingly, the Exchange 
proposes to amend Commentary .07(a) and (f) to Rule 6.4-O to state 
that, with respect to Monday SPY Expirations, the Exchange may open for 
trading on any Friday or Monday that is a business day series of 
options on the SPY to expire on any Monday of the month that is a 
business day and is not a Monday in which Quarterly Options Series 
expire, provided that Monday SPY Expirations that are listed on a 
Friday must be listed at least one business week and one business day 
prior to the expiration. As with the current rules for Wednesday SPY 
Expirations, the Exchange would also amend Commentary .07(a) and (f) to 
state that it may list up to five consecutive Monday SPY Expirations at 
one time, and may have no more than a total of five Monday SPY 
Expirations (and no more than a total of five STOS expirations for SPY 
expiring on Friday and no more than a total of five Wednesday SPY 
Expirations). The Exchange would also clarify that, as with Wednesday 
SPY Expirations, Monday SPY Expirations would be subject to the 
provisions of this Rule. The interval between strike prices for the 
proposed Monday SPY Expirations would be the same as those for the 
current STOS for Wednesday and Friday SPY Expirations. Specifically, 
the Monday SPY Expirations would have a $0.50 strike interval minimum. 
As is the case with other options series listed pursuant to the STOS, 
the Monday SPY Expiration series would be P.M.-settled.
    Currently, for each option class eligible for participation in the 
STOS 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.\7\ 
This thirty (30) series restriction would apply to Monday SPY 
Expiration series as well. In addition, the Exchange would be able to 
list series that are listed by other exchanges, assuming those 
exchanges file similar rules with the Commission to list SPY options 
expiring on Mondays.
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    \7\ See Rule 6.4-O, Commentary .07(b).
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    Finally, the Exchange proposes to amend Commentary .07 to Rule 6.4-
O to address the listing of STOS that expire in the same week as 
monthly or quarterly options series. Currently, that rule states that 
no STOS may expire in the same week in which monthly option series on 
the same class expire (with the exception of Wednesday SPY Expirations) 
or, in the case of Quarterly Options Series, on an expiration that 
coincides with an expiration of Quarterly Option Series on the same 
class. The Exchange proposes to extend this exemption to Monday SPY 
Expirations.\8\ As with Wednesday SPY Expirations, the Exchange 
believes that it is reasonable to extend this exemption to Monday SPY 
Expirations because Monday SPY Expirations and standard monthly options 
will not expire on the same trading day, as standard monthly options 
expire on Fridays. Additionally, the Exchange believes that not listing 
Monday SPY Expirations for one week every month because there was a 
monthly SPY expiration on the Friday of that week would create investor 
confusion. Finally, like Wednesday SPY Expirations, Monday SPY 
Expirations cannot expire on the same day as any Quarterly Option 
Series.
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    \8\ See Rule 6.4-O, Commentary .07(a) and (f).
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    The Exchange does not believe that any market disruptions would 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 STOS that expire almost every

[[Page 11799]]

Wednesday and Friday, which provide market participants a tool to hedge 
special events and to reduce the premium cost of buying protection. 
Moreover, the Exchange has been listing Wednesday expirations pursuant 
to Rule 6.1-O(b)(41) and 6.4-O since 2016.\9\ 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 
STOS.
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    \9\ See Securities Exchange Act Release No. 78779 (September 7, 
2016), 81 FR 62944 (September 13, 2016) (SR-NYSEArca-2016-127).
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    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, would 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 Term Options Series 
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.\10\
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    \10\ 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 the proposed rule change is consistent with 
Section 6(b) of the Act \11\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\12\ in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) requirement that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.\13\
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    In particular, the Exchange believes the STOS Program has been 
successful to date and that Monday expirations, including Monday SPY 
Expirations, would 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 STOS 
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 
would provide customers with the ability to tailor their investment 
objectives more effectively.
    With the exception of Monday expiration series that are scheduled 
to expire on a holiday, the Exchange does not believe there are any 
material differences between Monday SPY Expirations and Wednesday or 
Friday SPY Expirations. The Exchange notes that it has been listing 
Wednesday expiration pursuant to Rule 6.4-O and Rule 6.1-O(b)(41) since 
2016.\14\ 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.\15\ Additionally, the proposed rule change is consistent 
with rules of another options exchange, as Phlx recently received 
Commission approval to list Monday SPY Expirations.\16\
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    \14\ See supra note 9.
    \15\ See supra note 10 [sic].
    \16\ See supra note 4.
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    Given the similarities between Monday SPY Expiration series and 
Wednesday and Friday SPY Expiration series, the Exchange believes that 
applying the provisions in Rule 6.4-O, Commentary .07 that currently 
apply to Wednesday SPY Expirations, to Monday SPY Expirations, is 
justified. For example, the Exchange believes that allowing Monday SPY 
Expirations and monthly SPY expirations in the same week would benefit 
investors and minimize investor confusion by providing Monday SPY 
Expirations in a continuous and uniform manner. The Exchange also 
believes that it is appropriate to amend Rule 6.4-O, Commentary .07 to 
clarify that no STOS may expire on the same day as an expiration of 
Quarterly Option Series on the same class. This change would make that 
provision more consistent with the existing language in Rule 6.4-O, 
Commentary .07 that prohibits Wednesday SPY Expirations from expiring 
on a Wednesday in which Quarterly Options Series expire.
    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 STOS Program.
    With regard to the impact of this proposal on system capacity, the 
Exchange believes it and OPRA have the necessary systems capacity to 
handle any potential additional traffic associated with this proposed 
rule change. The Exchange believes that its members will not have a 
capacity issue as a result of this proposal.

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

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange notes that 
having Monday expirations is not a novel proposal, as Cboe currently 
lists and trades short-term SPX options with a Monday expiration, and 
Phlx has recently received approval from the Commission to list Monday 
SPY expirations.\17\ Therefore, the proposal would not impose any undue 
burden on inter-market competition. Additionally, other options 
exchanges are free to propose similar rules to list and trade STOS with 
Monday expirations. Finally, the Exchange does not believe the proposal 
would impose any burden on intra-market competition, as all market 
participants will be treated in the same manner under this proposal.
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    \17\ See supra notes 4, 6.
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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.

[[Page 11800]]

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 
\18\ and Rule 19b-4(f)(6) thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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) \20\ 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.\21\ 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. 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 operative 
upon filing.\22\
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    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See supra note 4.
    \22\ 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-NYSEARCA-2018-14 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEARCA-2018-14. 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-NYSEARCA-2018-14 and should be submitted 
on or before April 6, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05332 Filed 3-15-18; 8:45 am]
 BILLING CODE 8011-01-P