Document ID: SEC-2017-2035-0001
Agency: sec
Document Type: Notice
Title: Joint Industry Plans: Developing and Implementing Procedures Designed to Facilitate the Listing and Trading of Standardized Options
Posted Date: 2017-12-13T05:00Z

[Federal Register Volume 82, Number 238 (Wednesday, December 13, 2017)]
[Notices]
[Pages 58668-58670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26818]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82235; File No. 4-443]

Joint Industry Plan; Order Approving the Fourth Amendment to the 
Plan for the Purpose of Developing and Implementing Procedures Designed 
To Facilitate the Listing and Trading of Standardized Options

December 7, 2017.

I. Introduction

    On August 16, 2017, Chicago Board Options Exchange, Incorporated 
(now known as Cboe Exchange, Inc.), on behalf of the BATS Exchange, 
Inc. (now known as Cboe BZX Exchange, Inc.); Box Options Exchange, LLC; 
C2 Exchange, Incorporated (now known as Cboe C2 Exchange, Inc.); EDGX 
Exchange, Inc. (now known as Cboe EDGX Exchange, Inc.); Miami 
International Securities Exchange, LLC; MIAX PEARL, LLC; Nasdaq BX, 
Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq 
Options Market, LLC; Nasdaq PHLX, LLC; NYSE American, LLC; NYSE Arca, 
Inc.; and the Options Clearing Corporation (``OCC'') (together, the 
``Plan Sponsors''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') pursuant to Section 11A(a)(3) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 608 
thereunder,\2\ a proposal to amend the Plan for the Purpose of 
Developing and Implementing Procedures Designed to Facilitate the 
Listing and Trading of Standardized Options (``OLPP'' or ``Plan'').\3\ 
The proposed amendment (``Amendment'' or ``Amendment No. 4'')

[[Page 58669]]

was published for comment in the Federal Register on October 24, 
2017.\4\ No comment letters were received in response to the Notice. 
This order approves proposed Amendment No. 4 to the Plan.
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    \1\ 15 U.S.C. 78k-1(a)(3).
    \2\ 17 CFR 242.608.
    \3\ The full text of the OLPP is available at: https://www.theocc.com/components/docs/clearing/services/options_listing_procedures_plan.pdf. See also Securities Exchange 
Act Release No. 44521, 66 FR 36809 (July 13, 2001) (order approving 
the OLPP).
    \4\ Securities Exchange Act Release No. 81893 (October 18, 
2017), 82 FR 49249 (``Notice'').
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II. Description of the Amendment

    The Plan Sponsors propose to amend the Plan to: (1) Change the 
earliest date on which new January Long-term Equity AnticiPation 
(``LEAP'') series on equity options, options on Exchange Traded Funds 
(``ETF''), or options on Trust Issued Receipts (``TIR'') may be added 
to a single date (from three separate months); (2) allow equity, ETF, 
and TIR option series to be added based on trading after regular 
trading hours; (3) make technical and procedural changes to the 
certification processes for new option classes and communication 
provisions; and (4) correct a cross-referencing error in the Plan.\5\
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    \5\ See Notice, supra note 4, for a more detailed description of 
the proposed changes.
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III. Discussion and Commission Findings

    The Commission finds that the Amendment is consistent with the 
requirements of the Act and the rules and regulations thereunder. 
Specifically, the Commission finds that the Amendment is consistent 
with Section 11A(a)(1) of the Act \6\ and Rule 608 thereunder \7\ in 
that it is appropriate in the public interest, for the protection of 
investors and the maintenance of fair and orderly markets, and that it 
removes impediments to, and perfects the mecahnsims of, a national 
market system.
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    \6\ 15 U.S.C. 78k-1(a)(1).
    \7\ 17 CFR 240.608.
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    The Plan Sponsors propose to consolidate the addition of new 
January LEAP options series so that they all may be added in September. 
Because the addition of new January LEAP options historically has been 
a manual process, to avoid potential operational issues, the Plan 
currently requires that the addition of these LEAP options series take 
place over three calendar months (September, October, and November). 
The Plan Sponsors state that today, however, new January LEAP options 
now can be added in bulk electronically and, therefore, the operational 
concerns relating to the historic manual process have been alleviated. 
Thus, the Plan Sponsors propose to consolidate the addition of new 
January LEAP options series so that they all may be added in 
September.\8\ The Plan Sponsors believe that this change would simplify 
the process for adding new January LEAP options series because all new 
January LEAP options would be made available beginning at the same 
time. The Commission believes that it is appropriate in the public 
interest, for the protection of investors, and the maintenance of a 
fair and orderly market to approve this change to the timing of when 
January LEAP options series may be added because it should simplify and 
help clarify the process by which new January LEAP options may be 
added.
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    \8\ Specifically, the Plan would be revised to move the addition 
of the new January LEAP options to a specific date no earlier than 
the Monday before the September expiration. See Notice, supra note 
4, at 49249.
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    The Plan Sponsors also propose to amend the Plan to add options 
series based on trading of the underlying securities after regular 
trading hours (``post-market''), based on the most recent share price 
reported by all national securities exchanges between 3:15 p.m. and 
5:00 p.m. CT. This change would allow an options exchange to add a new 
options series in response to post-market trading activity the same day 
as when the post-market trading occurred, with the series available for 
trading on the opening of the regular trading session (i.e., 8:30 a.m. 
CT) of the options markets the following trading day. The Commission 
believes that it is appropriate in the public interest, for the 
protection of investors, and the maintenance of a fair and orderly 
market to approve this proposed change because allowing options series 
to be added based on post-market trading should provide market 
participants with earlier notice regarding what options series will be 
available for trading the following day, and should help to enhance 
investors' ability to plan their options trading.
    In addition, the Amendment proposes to streamline the processes by 
which the options exchanges seek to trade a new option class. 
Currently, the OLPP requires an options exchange to submit a 
certificate containing certain specified information to the OCC 
(``Certificate'') when it seeks to trade an option class that is not 
currently trading on another registered options exchange or that has 
not been previously certified for listing and trading on any registered 
options exchange. Because sometimes more than one options exchange will 
submit a Certificate to the OCC seeking to list and trade the same 
selected option class, the OLPP requires the OCC to determine which 
Certificate was submitted first among all the Certificates it 
received,\9\ and then to notify the applicable options exchanges of 
certain information regarding the option.\10\ The Amendment would 
require that, after the OCC receives and processes a Certificate from 
an options exchange, the OCC would make publicly available on its 
website the underlying security name, options symbol, and all options 
exchanges eligible to trade such option class, instead of requiring the 
OCC to send a customized email to each options exchange. In addition, 
the OCC would notify all options exchanges that the list of option 
classes covered by such Certificate is available on the OCC website. 
The Plan Sponsors believe that these changes would eliminate 
administrative burdens for the OCC and streamline the notification 
process, while ensuring that all of the information currently required 
to be available to options exchanges would continue to be available to 
them. Therefore, for the reasons stated, the Commission believes that 
it is appropriate in the public interest, for the protection of 
investors, and the maintenance of a fair and orderly market to approve 
these proposed changes.
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    \9\ Specifically, the Plan currently requires the OCC to 
determine the options symbol, initial exercise prices, expiration 
cycle, and position and exercise limits for the selected option 
class as provided in the Certificate that the OCC determined was 
first submitted. Under the proposed amendment, the OCC would remove 
the reference to ``options symbol'' from this list as it is no 
longer necessary because, with the implementation of the Options 
Symbology Initiative in 2010, all options now generally have the 
same symbol as the underlying security and, as a result, conflicting 
options symbol submissions is no longer an issue. See Notice, supra 
note 4, at 49250.
    \10\ The required information includes the options symbol, 
initial exercise prices, expiration cycle, and position and exercise 
limits for the selected option class, as well as the identity of 
each options exchange that has also submitted a Certificate to list 
and trade the selected option class. See Notice, supra note 4, at 
49250-51.
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    In addition, the Amendment would allow Certificates and any 
associated information and/or documentation to be submitted to the OCC 
via electronic means that is reasonably agreed upon by the Plan 
Sponsors, rather than via telefacsimile, as is currently required. The 
proposed amendment would also allow all other notices required under 
the terms of the OLPP to be given through ``electronic mail or other 
electronic means reasonably agreed upon by the Plan Sponsors.'' \11\ 
Because implementing these changes would allow for more efficient 
processes for certifications and communications among Plan Sponsors, 
the Commission believes that approving these changes is

[[Page 58670]]

appropriate in the public interest, for the protection of investors, 
and the maintenance of a fair and orderly market.
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    \11\ See Section 5 of the Plan.
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    Finally, the Plan Sponsors propose to amend the Plan to make a non-
substantive edit to correct an inaccurate cross-reference to ``Section 
8'' in Section 7(ii) of the Plan with ``Section 9.'' The Commission 
believes that it is appropriate in the public interest, for the 
protection of investors and the maintenance of a fair and orderly 
market to approve this proposed change because it will clarify and 
correct an inaccuracy in the Plan.
    For the reasons discussed above, the Commission finds that 
Amendment No. 4 is consistent with Section 11A of the Act \12\ and Rule 
608 thereunder.\13\
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    \12\ 15 U.S.C. 78k-1.
    \13\ 17 CFR 242.608.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act,\14\ 
and Rule 608 thereunder,\15\ that Amendment No. 4 to the OLPP (File No. 
4-443) be, and hereby is, approved.
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    \14\ 15 U.S.C. 78k-1.
    \15\ 17 CFR 242.608.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(29).
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Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2017-26818 Filed 12-12-17; 8:45 am]
 BILLING CODE 8011-01-P