Document ID: SEC-2017-2152-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX LLC
Posted Date: 2017-12-26T05:00Z

[Federal Register Volume 82, Number 246 (Tuesday, December 26, 2017)]
[Notices]
[Pages 61047-61050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27700]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82363; File No. SR-Phlx-2017-103]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
of Proposed Rule Change To Amend Rule 1000 and Commentary .11 to Rule 
1012

December 19, 2017.
    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 December 6, 2017, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, 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 expand the Short Term Option Series 
Program to allow Monday 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://nasdaqphlx.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.

[[Page 61048]]

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 Phlx Rules 1000(b)(44) and Rule 1012 
at Commentary .11 to expand the Short Term Option Series Program 
(``Program'') to permit the listing and trading of options series with 
Monday expirations that are listed pursuant to the Program, including 
options on the SPDR S&P 500 ETF Trust (``SPY'').
    As set forth in Rule 1044(b)(44), a Short Term Option Series 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 is 
now proposing to amend Rule 1000(b)(44) 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 1000(b)(44) 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 
1000(b)(44) 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).
    As part of this proposal, the Exchange is also amending Rule 
1000(b)(44) 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.\3\ 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 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.\4\
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    \3\ See Phlx Rule 1000(b)(44).
    \4\ 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 
Commentary .11 to Rule 1012, which sets forth the requirements for SPY 
options that are listed pursuant to the Short Term Options Series 
Program, to permit Monday SPY expirations (``Monday SPY Expirations''). 
Accordingly, the Exchange proposes to amend Commentary .11 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 will also amend Commentary .11 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 (in 
addition to a maximum of five Short Term Option Series expirations for 
SPY expiring on Friday and five Wednesday SPY Expirations). The 
Exchange will also clarify that, as with Wednesday SPY Expirations, 
Monday SPY Expirations will be subject to the provisions of this Rule.
    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.\5\ 
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.
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    \5\ See Phlx Rule 1012 at Commentary .11(a).
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    Finally, the Exchange is amending Commentary .11(b) to Rule 1012, 
which addresses the listing of Short Term Options Series that expire in 
the same week as monthly or quarterly options series. Currently, that 
rule states that no Short Term Option Series 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. As with Wednesday SPY 
Expirations, the Exchange is proposing to permit Monday SPY Expirations 
to expire in the same week as monthly options series on the same class. 
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.
    Relatedly, Phlx is also amending Commentary .11(b) to Rule 1012 to 
clarify that Monday and Wednesday SPY Expirations may expire in the 
same week as monthly option series in the same class expire, but that 
no Short Term Option Series may expire on the same day as an expiration 
of Quarterly Option Series on the same class. This change will make 
that provision more consistent with the existing language in Commentary 
.11 that prohibits Wednesday SPY Expirations from expiring on a 
Wednesday in which Quarterly Options Series expire.

[[Page 61049]]

    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. The Exchange notes that it has been listing Wednesday 
expirations pursuant to Rule 1000 and Rule 1012 since 2016.\6\ 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.
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    \6\ See Securities Exchange Act Release No. 78693 (August 26, 
2016), 81 FR 60074 (August 31, 2016) (SR-Phlx-2016-89).
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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, 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.
    While other exchanges do not currently list Monday SPY Expirations, 
the Exchange notes that 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.\7\
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    \7\ 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,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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. While other exchanges do not currently list Monday SPY 
Expirations, the Exchange notes that 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 notes that it has been listing Wednesday expirations pursuant 
to Rule 1000 and Rule 1012 since 2016. 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.
    Given the similarities between Monday SPY Expiration series and 
Wednesday and Friday SPY Expiration series, the Exchange believes that 
applying the provisions in Commentary .11 to Rule 1012 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 will benefit 
investors and minimize investor confusion by providing Monday SPY 
Expirations in a continuous and uniform manner. The Exchange also 
believes that is appropriate to amend Commentary .11(b) to Rule 1012 to 
clarify that no Short Term Option Series may expire on the same day as 
an expiration of Quarterly Option Series on the same class. This change 
will make that provision more consistent with the existing language in 
Commentary .11 that prohibits Wednesday SPY Expirations from expiring 
on a Wednesday in which Quarterly Options Series expire.
    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 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. 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.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents,

[[Page 61050]]

the Commission shall: (a) By order approve or disapprove such proposed 
rule change, or (b) institute proceedings to determine whether the 
proposed rule change should be 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-Phlx-2017-103 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-Phlx-2017-103. 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-Phlx-2017-103 and should be 
submitted on or before January 16, 2018. For the Commission, by the 
Division of Trading and Markets, pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-27700 Filed 12-22-17; 8:45 am]
 BILLING CODE 8011-01-P