Document ID: SEC-2021-1807-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2021-12-27T05:00Z

[Federal Register Volume 86, Number 245 (Monday, December 27, 2021)]
[Notices]
[Pages 73391-73396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27927]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93835; File No. SR-NYSEAMER-2021-45]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to Amend 
Rule 904 (Position Limits)

December 20, 2021.
    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 December 6, 2021, NYSE American LLC (``NYSE American'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 904 (Position Limits) to 
increase position limits for options on certain exchange-traded funds. 
The proposed rule change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 904 (Position Limits) to 
increase position limits for options on certain exchange-traded funds 
(``ETFs''). This is a competitive filing that is based on a proposal 
recently submitted by Cboe Exchange, Inc. (``Cboe'') and approved by 
the Securities and Exchange Commission (``Commission'').\4\
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    \4\ See Securities Exchange Act Release No. 93525 (November 4, 
2021), 86 FR 62584 (November 10, 2021) (Notice of Filing of 
Amendment Nos. 2 and 3 and Order Granting Accelerated Approval of 
SR-CBOE-2021-029).
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    Position limits are designed to address potential manipulative 
schemes and adverse market impacts surrounding the use of options, such 
as disrupting the market in the security underlying the options. While 
position limits should address and discourage the potential for 
manipulative schemes and adverse market impact, if such limits are set 
too low, participation in the options market may be discouraged. The 
Exchange believes that position limits must therefore be balanced 
between mitigating concerns of any potential manipulation and the cost 
of inhibiting potential hedging activity that could be used for 
legitimate economic purposes.

[[Page 73392]]

    In its filing, Cboe states that it has observed an ongoing increase 
in demand, for both trading and hedging purposes, in options on the 
following ETFs: (1) iShares iBoxx $ Investment Grade Corporate Bond ETF 
(``LQD'') and (2) VanEck Vectors Gold Miners ETF (``GDX''). Though the 
demand for these options appears to have increased, position limits for 
options on LQD and GDX have remained the same. The Exchange believes 
these unchanged position limits may have impeded, and may continue to 
impede, trading activity and strategies of investors, such as use of 
effective hedging vehicles or income generating strategies (e.g., buy-
write or put-write), and the ability of Market Makers to make liquid 
markets with tighter spreads in these options resulting in the transfer 
of volume to over-the-counter (``OTC'') markets. OTC transactions occur 
through bilateral agreements, the terms of which are not publicly 
disclosed to the marketplace. As such, OTC transactions do not 
contribute to the price discovery process on a public exchange or other 
lit markets. Therefore, the Exchange believes that the proposed 
increases in position limits for options on LQD and GDX may enable 
liquidity providers to provide additional liquidity to the Exchange and 
other market participants to transfer their liquidity demands from OTC 
markets to the Exchange. As described in further detail below, the 
Exchange believes that the continuously increasing market 
capitalization of LQD and GDX, including ETF components, as well as the 
highly liquid markets for each, reduces the concerns for potential 
market manipulation and/or disruption in the underlying markets upon 
increasing position limits, while the rising demand for trading options 
on LQD and GDX for legitimate economic purposes compels an increase in 
position limits.
Proposed Position Limits for Options on LQD and GDX
    Position limits for options on ETFs are determined pursuant to Rule 
904 and vary according to the number of outstanding shares and the 
trading volumes of the underlying equity security (which includes ETFs) 
over the past six months. Pursuant to Rule 904, the largest in 
capitalization and the most frequently traded stocks and ETFs have an 
option position limit of 250,000 contracts (with adjustments for 
splits, re-capitalizations, etc.) on the same side of the market; and 
smaller capitalization stocks and ETFs have position limits of 200,000, 
75,000, 50,000 or 25,000 contracts (with adjustments for splits, re-
capitalizations, etc.) on the same side of the market. Options on LQD 
and GDX are currently subject to the standard position limit of 250,000 
contracts as set forth in Rule 904. Commentary .07(f) to Rule 904 sets 
forth separate, higher position limits for specific equity options 
(including options on specific ETFs).\5\ The Exchange proposes to amend 
Commentary .07(f) to Rule 904 to increase the position limits and, as a 
result, exercise limits, for options on LQD and GDX.\6\ The table below 
represents the current, and proposed, position limits for options on 
the ETFs subject to this proposal:
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    \5\ Adjusted option series, in which one option contract in the 
series represents the delivery of other than 100 shares of the 
underlying security as a result of a corporate action by the issuer 
of the security underlying such option series, do not impact the 
notional value of the underlying security represented by those 
options. When an underlying security undergoes a corporate action 
resulting in adjusted series, the Exchange lists new standard option 
series across all appropriate expiration months the day after the 
existing series are adjusted. The adjusted series are generally 
actively traded for a short period of time following adjustment, but 
orders to open options positions in the underlying security are 
almost exclusively placed in the new standard option series 
contracts.
    \6\ By virtue of Rule 905 (Exercise Limits), which is not being 
amended by this filing, the exercise limits for LQD and GDX options 
would be similarly increased, because Rule 905 provides that the 
exercise limits for index options and ETF options, respectively, are 
equivalent to their position limits.

------------------------------------------------------------------------
                                              Current        Proposal
                 Product                     position        position
                                               limit           limit
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LQD.....................................         250,000         500,000
GDX.....................................         250,000         500,000
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    The Exchange notes that the proposed position limit for options on 
LQD and GDX are consistent with current position limits for options on 
the iShares MSCI Brazil Capped ETF (``EWZ''), iShares 20+ Year Treasury 
Bond Fund ETF (``TLT''), iShares MSCI Japan ETF (``EWJ''), and iShares 
iBoxx High Yield Corporate Bond Fund (``HYG''). The Exchange represents 
that LQD and GDX qualify for either (1) the initial listing criteria 
set forth in Rule 915, Commentary .06 for ETFs holding non-U.S. 
component securities, or (2) the generic listing standards for series 
of portfolio depository receipts and index fund shares based on 
international or global indexes under which a comprehensive 
surveillance agreement (``CSA'') is not required, as well as (3) the 
continued listing criteria in Rule 916 (for ETFs).\7\ In compliance 
with its listing rules, the Exchange also represents that non-U.S. 
component securities that are not subject to a CSA do not, in the 
aggregate, represent more than more than 50% of the weight of LQD and 
GDX.\8\
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    \7\ The Exchange notes that the initial listing criteria for 
options on ETFs that hold non-U.S. component securities are more 
stringent than the maintenance listing criteria for those same ETF 
options. See Rule 915, Commentary .06(a) (ii) and Rule 916, 
Commentary .07.
    \8\ See Rule 915, Commentary .06(a) (ii).
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Composition and Growth Analysis for LQD and GDX
    As stated above, position (and exercise) limits are intended to 
prevent the establishment of options positions that can be used to or 
potentially create incentives to manipulate the underlying market so as 
to benefit options positions. The Commission has recognized that these 
limits are designed to minimize the potential for mini-manipulations 
and for corners or squeezes of the underlying market, as well as serve 
to reduce the possibility for disruption of the options market itself, 
especially in illiquid classes.\9\ LQD and GDX, as well as the ETF 
components, are highly liquid and are based on a broad set of highly 
liquid securities and other reference assets, as demonstrated through 
the trading statistics presented in this proposal. To support the 
proposed position limit increases, Cboe considered the liquidity of LQD 
and GDX, the value of LQD and GDX, their components and the relevant 
marketplace, the share and option volume for LQD and GDX, and, where 
applicable, the availability or comparison of economically equivalent 
products to options on LQD and GDX.
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    \9\ See Securities Exchange Act Release No. 67672 (August 15, 
2012), 77 FR 50750 (August 22, 2012) (SR-NYSEAmex-2012-29).
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    Cboe collected the following trading statistics regarding shares of 
and options on LQD and GDX and the values of LQD and GDX and their 
components:

[[Page 73393]]

----------------------------------------------------------------------------------------------------------------
                                                                      Shares       Fund  market
                                   ADV 10  (ETF    ADV  (option     outstanding     cap  (USD)     Share  Value
             Product                  shares)       contracts)     (millions) 11   (millions) 12       (USD)
                                    (millions)
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LQD.............................            14.1          30,300           308.1        54,113.7    130.13 (NAV)
GDX.............................            39.4         166,000           419.8        16,170.5     33.80 (NAV)
----------------------------------------------------------------------------------------------------------------

    Cboe also collected the same trading statistics, where applicable, 
as above regarding a sample of other ETFs, as well as the current 
position limits for options on such ETFs, to draw comparisons in 
support of proposed position limit increases for options on LQD and GDX 
(see further discussion below):
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    \10\ Average daily volume (ADV) data for ETF shares and option 
contracts, as well as for ETF shares and options on the comparative 
ETFs presented below, are for all of 2020. Additionally, reference 
to ADV in ETF shares and ETF options, and indexes herein this 
proposal are for all of calendar year 2020, unless otherwise 
indicated.
    \11\ Shares Outstanding and Net Asset Values (``NAV''), as well 
as for the comparative ETFs presented below, are as of April 5, 2021 
for all ETFs.
    \12\ Fund Market Capitalization data, as well as for the 
comparative ETFs presented below, are as of January 14, 2021.

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                                                             ADV  (ETF                        Shares       Fund  market                       Current
                         Product                              shares)      ADV  (option     outstanding     cap  (USD)     Share  value      position
                                                            (millions)      contracts)      (millions)      (millions)         (USD)          limits
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EWZ.....................................................            29.2         139,400           173.8         6,506.8     33.71 (NAV)         500,000
TLT.....................................................            11.5         111,800           103.7        17,121.3    136.85 (NAV)         500,000
EWJ.....................................................             8.2          15,500           185.3        13,860.7     69.72 (NAV)         500,000
HYG.....................................................            30.5         261,600           254.5        24,067.5     86.86 (NAV)         500,000
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    The Exchange believes that, overall, the liquidity in the shares of 
LQD and GDX and in their overlying options, the larger market 
capitalizations for each LQD and GDX, and the overall market landscape 
relevant to each LQD and GDX support the proposal to increase the 
position limits for each option class. Given the robust liquidity in 
and value of LQD and GDX and their components, the Exchange does not 
anticipate that the proposed increase in position limits would create 
significant price movements as the relevant markets are large enough to 
adequately absorb potential price movements that may be caused by 
larger trades.
    LQD tracks the performance of the Markit iBoxx USD Liquid 
Investment Grade (``IBOXIG'') Index, which is an index designed as a 
subset of the broader U.S. dollar-denominated corporate bond market 
which can be used as a basis for tradable products, such as ETFs, and 
is comprised of over 8,000 bonds.\13\ The Exchange notes that from 2019 
through 2020, ADV has grown significantly in shares of LQD and in 
options on LQD, from approximately 9.7 million shares in 2019 to 14.1 
million through 2020, and from approximately 8,200 option contracts in 
2019 to 30,300 through 2020. LQD also continued to experience 
significant growth in ADV in the first quarter of 2021 with an ADV of 
approximately 140,200 option contracts. Further, LQD generally 
experiences higher ADV in shares than both TLT (11.5 million shares) 
and EWJ (8.2 million shares) and almost double the ADV in option 
contracts than EWJ (15,500 option contracts). Options on each EWZ, TLT 
and EWJ are currently subject to a position limit of 500,000 
contracts--the proposed limit for options on LQD. The NAV of LQD is 
also higher than, or comparable to, that of the NAV of the ETFs 
underlying the options that are currently subject to a position limit 
of 500,000 option contracts (as presented in the table above), which is 
indicative that the total value of its underlying components is 
generally higher or comparable. Per the tables above, LQD's total 
market capitalization of approximately $54.1 billion is also higher 
than or comparable to the total market capitalization of the ETFs 
underlying the options currently subject to a position limit of 
5000,000 [sic] contracts. In addition to this, the Exchange notes that, 
although there are currently no options listed for trading on the 
IBOXIG Index, the components \14\ of the IBOXIG Index, which can be 
used in creating a basket of securities that equate to the LQD ETF, are 
made up of over 8,000 bonds for which the outstanding face value of 
each must be greater than or equal to $2 billion.\15\
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    \13\ See Markit iBoxx USD Liquid Investment Grade Index, 
available at https://cdn.ihsmarkit.com/www/pdf/MKT-iBoxx-USD-Liquid-Investment-Grade-Index-factsheet.pdf (January 14, 2021).
    \14\ Investment grade corporate bonds.
    \15\ See id.
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    The Exchange believes that the total value of the bonds in the 
IBOXIG Index, coupled with LQD's share and option volume, total market 
capitalization, and NAV price indicates that the market is large enough 
to absorb potential price movements caused by a large trade in LQD. 
Also, as evidenced above, trading volume in LQD shares has increased 
over the past few years and the Exchange understands that market 
participants' need for options have continued to grow alongside the 
ETF. Particularly, the Exchange notes that in the last year, market 
participants have sought more cost-effective hedging strategies through 
the use of LQD options as a result of the borrow on other fixed income 
ETFs, such as HYG. Therefore, the Exchange believes that because LQD 
options are being increasingly utilized as an alternative to similar 
products, such as HYG options, then it is appropriate that options on 
LQD be subject to the same 500,000 contract position limit that 
currently exists for options on HYG.
    GDX seeks to replicate as closely as possible the price and yield 
performance of the NYSE Arca Gold Miners (``GDMNTR'') Index, which is 
intended to track the overall performance of companies involved in the 
gold mining industry.\16\ ADV in GDX options has increased from 2019 
through 2020, with an ADV of

[[Page 73394]]

approximately 117,400 option contracts in 2019 to an ADV of 
approximately 166,000 option contracts in 2020. The Exchange notes that 
ADV in GDX shares did not increase from 2019 to 2020. GDX options also 
experienced an ADV of approximately 287,800 option contracts in the 
first quarter of 2021. The Exchange notes that the ADV in GDX shares 
(39.4 million) and options on GDX (166,000 option contracts) are 
greater than the ADV in EWZ (29.2 million shares and 139,300 option 
contracts), TLT (11.5 million shares and 111,800 option contracts), EWJ 
(8.2 million shares and 15,500 option contracts) and HYG (30.5 million 
shares and 261,600 option contracts), each of which is currently 
subject to a position limit of 500,000 option contracts--the proposed 
limit for options on GDX. GDX also experiences a comparable, or higher, 
market capitalization (approximately $16.2 billion) than EWZ, TLT and 
EWZ. The Exchange particularly notes that many of the Brazil-based gold 
mining constituents included in GDX are also included in EWZ, which 
tracks the investment results of an index composed of Brazilian 
equities, and that the Exchange has not identified any issues with the 
continued listing and trading of EWZ options or any adverse market 
impact on EWZ in connection with the current 500,000 position limit in 
place for EWZ options. Additionally, like that of LQD above, there is 
currently no index option analogue for the GDX ETF on the GDMNTR Index 
approved for options trading, however, the components of the GDMNTR 
Index, which can be used to create the GDX ETF, currently must each 
have a market capitalization greater than $750 million, an ADV of at 
least 50,000 shares, and an average daily value traded of at least $1 
million in order to be eligible for inclusion in the GDMNTR Index. The 
Exchange believes that the GDMNTR Index component inclusion 
requirements, as well as GDX's share and option volume and total market 
capitalization, indicate that the GDX market is sufficiently large and 
liquid enough to absorb price movements as a result of potentially 
oversized trades.
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    \16\ See VanEck Vectors Gold Miners ETF, available at https://
www.vaneck.com/library/vaneck-vectors-etfs/gdx-fact-sheet-pdf\ 
(January14, 2021).
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Creation and Redemption for ETFs
    The Exchange believes that the creation and redemption process for 
the ETFs subject to this proposal will lessen the potential for 
manipulative activity with options on LQD and GDX. When an ETF provider 
wants to create more shares, it looks to an Authorized Participant 
(``AP'') (generally a Market Maker or other large financial 
institution) to acquire the underlying components the ETF is to hold. 
For instance, when an ETF is designed to track the performance of an 
index, the AP can purchase all the constituent securities in the exact 
same weight as the index, then deliver those shares to the ETF 
provider. In exchange, the ETF provider gives the AP a block of equally 
valued ETF shares, on a one-for-one fair value basis. The price is 
based on the NAV, not the market value at which the ETF is trading. The 
creation of new ETF units can be conducted during an entire trading day 
and is not subject to position limits. This process works in reverse 
where the ETF provider seeks to decrease the number of shares that are 
available to trade. The creation and redemption processes for LQD and 
GDX creates a direct link to the underlying components of the ETF and 
serves to mitigate potential price impact of the ETF shares that might 
otherwise result from increased position limits for the options on LQD 
and GDX.
    The Exchange understands that the ETF creation and redemption 
processes seek to keep an ETF's share price trading in line with the 
product's underlying net asset value. Because an ETF trades like a 
stock, its share price will fluctuate during the trading day, due to 
simple supply and demand. If demand to buy an ETF is high, for 
instance, an ETF's share price might rise above the value of its 
underlying components. When this happens, the AP or issuer believes the 
ETF may now be overpriced, so it may buy shares of the component 
securities or assets and then sell ETF shares in the open market. This 
may drive the ETF's share price back toward the underlying net asset 
value. Likewise, if an ETF share price starts trading at a discount to 
the component securities or assets it holds, the AP or issuer can buy 
shares of the ETF and redeem them for the underlying components. Buying 
undervalued ETF shares may drive the share price of an ETF back toward 
fair value. This arbitrage process helps to keep an ETF's share price 
in line with the value of its underlying portfolio.
Surveillance and Reporting Requirements
    The Exchange believes that increasing the position limits for the 
options on LQD and GDX would lead to a more liquid and competitive 
market environment for these options, which will benefit customers 
interested in trading these products. The reporting requirement for the 
options on LQD and GDX would remain unchanged. Thus, the Exchange would 
still require that each Member \17\ that maintains positions in the 
options on the same side of the market, for its own account or for the 
account of a customer, report certain information to the Exchange. This 
information would include, but would not be limited to, the options' 
positions, whether such positions are hedged and, if so, a description 
of the hedge(s). Market Makers would continue to be exempt from this 
reporting requirement, however, the Exchange may access Market-Maker 
position information.\18\ Moreover, the Exchange's requirement that 
Members file reports with the Exchange for any customer who held 
aggregate large long or short positions on the same side of the market 
of 200 or more option contracts of any single class for the previous 
day will remain at this level for the options subject to this proposal 
and will continue to serve as an important part of the Exchange's 
surveillance efforts.\19\
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    \17\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with an ATP. ATP 
Holders are deemed ``members'' under the Exchange Act. See Rule 
900.2NY(5).
    \18\ The Options Clearing Corporation (``OCC'') through the 
Large option Position Reporting (``LOPR'') system acts as a 
centralized service provider for Member compliance with position 
reporting requirements by collecting data from each Member, 
consolidating the information, and ultimately providing detailed 
listings of each Member's report to the Exchange, as well as 
Financial Industry Regulatory Authority, Inc. (``FINRA''), acting as 
its agent pursuant to a regulatory services agreement (``RSA'').
    \19\ See Rule 906 for reporting requirements.
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    The Exchange believes that the existing surveillance procedures and 
reporting requirements at the Exchange and other SROs are capable of 
properly identifying disruptive and/or manipulative trading activity. 
The Exchange also represents that it has adequate surveillances in 
place to detect potential manipulation, as well as reviews in place to 
identify potential changes in composition of LQD and GDX and continued 
compliance with the Exchange's listing standards. These procedures 
utilize daily monitoring of market activity via automated surveillance 
techniques to identify unusual activity in both options and the 
underlyings, as applicable.\20\ The Exchange also notes that large 
stock holdings must be disclosed to the Commission by way of Schedules 
13D or 13G,\21\ which are used to report ownership of stock which 
exceeds 5% of a company's total stock issue and may assist in providing 
information in

[[Page 73395]]

monitoring for any potential manipulative schemes.
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    \20\ The Exchange believes these procedures have been effective 
for the surveillance of trading the options subject to this proposal 
and will continue to employ them.
    \21\ 17 CFR 240.13d-1.
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    The Exchange believes that the current financial requirements 
imposed by the Exchange and by the Commission adequately address 
concerns regarding potentially large, unhedged positions in the options 
on LQD and GDX. Current margin and risk-based haircut methodologies 
serve to limit the size of positions maintained by any one account by 
increasing the margin and/or capital that a Member must maintain for a 
large position held by itself or by its customer.\22\ In addition, Rule 
15c3-1 \23\ imposes a capital charge on Members to the extent of any 
margin deficiency resulting from the higher margin requirement.
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    \22\ See Exchange Rules, Section 9 for a description of margin 
requirements.
    \23\ 17 CFR 240.15c3-1.
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Non-Substantive Changes
    The Exchange also proposes to make two non-substantive changes to 
remove the quotation marks around HYG and Financial Select Sector SPDR 
Fund (``XLF''), which would add internal consistency to the rule making 
it easier to navigate to the benefit of market participants.\24\
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    \24\ See proposed Commentary .07(f) to Rule 904.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \25\ in general, and furthers the objectives of 
Sections 6(b)(5) of the Act,\26\ in that it is designed to promote just 
and equitable principles of trade, 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \27\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ Id.
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    The Exchange believes that the proposed increase in position limits 
for options on LQD and GDX will remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, protect investors and the public interest, because it will 
provide market participants with the ability to more effectively 
execute their trading and hedging activities. The proposed increases 
will allow market participants to more fully implement hedging 
strategies in related derivative products and to further use options to 
achieve investment strategies (e.g., there are other exchange-traded 
products (``ETPs'') that use options on the ETFs subject to this 
proposal as part of their investment strategy, and the applicable 
position limits as they stand today may inhibit these other ETPs in 
achieving their investment objectives, to the detriment of investors). 
Also, increasing the applicable position limits may allow Market Makers 
to provide the markets for these options with more liquidity in amounts 
commensurate with increased consumer demand in such markets. The 
proposed position limit increases may also encourage other liquidity 
providers to shift liquidity, as well as encourage consumers to shift 
demand, from OTC markets onto the Exchange, which will enhance the 
process of price discovery conducted on the Exchange through increased 
order flow.
    In addition, the Exchange believes that the structure of LQD and 
GDX, the considerable market capitalization of the funds and underlying 
components, and the liquidity of the markets for the applicable options 
and underlying components will mitigate concerns regarding potential 
manipulation of the products and/or disruption of the underlying 
markets upon increasing the relevant position limits. As a general 
principle, increases in market capitalizations, active trading volume, 
and deep liquidity of the underlying components do not lead to 
manipulation and/or disruption. This general principle applies to the 
recently observed increased levels of market capitalization and trading 
volume and liquidity in shares of and options on LQD and GDX (as 
described above), and, as a result, the Exchange does not believe that 
the options markets or underlying markets would become susceptible to 
manipulation and/or disruption as a result of the proposed position 
limit increases. Indeed, the Commission has previously expressed the 
belief that not just increasing, but removing, position and exercise 
limits may bring additional depth and liquidity to the options markets 
without increasing concerns regarding intermarket manipulation or 
disruption of the options or the underlying securities.\28\
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    \28\ See Securities Exchange Act Release No. 62147 (October 28, 
2005) (SR-CBOE-2005-41), at 62149.
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    Further, the Exchange notes that the proposed rule change to 
increase position limits for select actively traded options is not 
novel and the Commission has approved similar proposed rule changes to 
increase position limits for options on similar, highly liquid and 
actively traded ETPs.\29\ Furthermore, the Exchange again notes that 
that the proposed position limits for options on LQD and GDX are 
consistent with existing position limits for options on other ETFs in 
Rule 904, Commentary .07(f). The Exchange's surveillance and reporting 
safeguards continue to be designed to deter and detect possible 
manipulative behavior that might arise from increasing or eliminating 
position and exercise limits in certain classes. The Exchange believes 
that the current financial requirements imposed by the Exchange and by 
the Commission adequately address concerns regarding potentially large, 
unhedged position in the options on LQD and GDX, further promoting just 
and equitable principles of trading, the maintenance of a fair and 
orderly market, and the protection of investors.
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    \29\ See Securities Exchange Act Release Nos. 88768 (April 29, 
2020), 85 FR 26736 (May 5, 2020) (SR-CBOE-2020-015); 83415 (June 12, 
2018), 83 FR 28274 (June 18, 2018) (SR-CBOE-2018-042); and 68086 
(October 23, 2012), 77 FR 65600 (October 29, 2012) (SR-CBOE-2012-
066).
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    Finally, the Exchange also proposes to make two non-substantive 
changes to remove the quotation marks around HYG and XLF, which would 
add internal consistency to the rule making it easier to navigate to 
the benefit of market participants.\30\
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    \30\ See proposed Commentary .07(f) to Rule 904.
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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. In this regard and as 
indicated above, the Exchange notes that the rule change is being 
proposed as a competitive response to a filing submitted by Cboe.\31\
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    \31\ See supra note 4 (approval of Cboe filing).
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    The Exchange does not believe the proposed rule change will impose 
any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because the 
increased position limits (and exercise limits) will be available to 
all market participants and apply to each in the same manner. The 
Exchange believes that the proposed rule change will provide additional 
opportunities for market participants to more efficiently achieve their 
investment and trading objectives.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the Act. On the contrary,

[[Page 73396]]

the Exchange believes the proposal promotes competition because it may 
attract additional order flow from the OTC market to exchanges, which 
would in turn compete amongst each other for those orders. The Exchange 
believes market participants would benefit from being able to trade 
options with increased position limits in an exchange environment in 
several ways, including but not limited to the following: (1) Enhanced 
efficiency in initiating and closing out positions; (2) increased 
market transparency; and (3) heightened contra-party creditworthiness 
due to the role of OCC as issuer and guarantor. The Exchange notes that 
other options exchanges may choose to file similar proposals with the 
Commission to increase position limits on options on LQD and GDX.

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

    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) of the Act \32\ and Rule 19b-
4(f)(6) thereunder.\33\
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    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 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 and 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \34\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \35\ 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 proposed rule change may become operative upon filing. The Exchange 
states that waiver of the operative delay would be consistent with the 
protection of investors and the public interest because it will ensure 
fair competition among the exchanges by allowing the Exchange to 
immediately increase the relevant position limits, which will provide 
consistency for Exchange Members that are also members at Cboe where 
these increased position limits are currently in place. The Commission 
notes that the Exchange's corresponding exercise limits for the options 
covered by this proposal also would be increased, consistent with the 
increased exercise limits for these options already in place at Cboe. 
For these reasons, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the operative 
delay and designates the proposal as operative upon filing.\36\
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    \34\ 17 CFR 240.19b-4(f)(6).
    \35\ 17 CFR 240.19b-4(f)(6)(iii).
    \36\ 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 change 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-NYSEAMER-2021-45 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-2021-45. 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 such 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-2021-45, and should be 
submitted on or before January 18, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-27927 Filed 12-23-21; 8:45 am]
BILLING CODE 8011-01-P