Document ID: SEC-2018-1836-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE American, LLC
Posted Date: 2018-11-30T05:00Z

[Federal Register Volume 83, Number 231 (Friday, November 30, 2018)]
[Notices]
[Pages 61705-61707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25996]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84649; File No. SR-NYSEAMER-2018-51]

Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 903, Series of Options Open for Trading

November 26, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that on 
November 19, 2018, NYSE American LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``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 amend Rule 903. 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 purpose of this filing is to amend Rule 903, Series of Options 
Open for Trading, to permit the listing and trading of up to ten 
expiration months for long term options on the SPDR[supreg] S&P 
500[supreg] Exchange-Traded Fund (the ``SPY ETF'').
    Commentary .03(a) of Rule 903 (``Commentary .03'') provides that 
the Exchange may list, with respect to any class of stock or Exchange-
Traded Fund Share options series, options having from twelve up to 
thirty-nine months from the time they are listed until expiration 
(``LEAPS''). Under the current Rule, the Exchange may list up to six 
LEAPS expiration months.\4\ The Exchange proposes to amend Commentary 
.03 to permit up to ten LEAPS expiration months for options on the SPY 
ETF.\5\ This proposal, which is substantially the same as a recent rule 
amendment submitted by Nasdaq PHLX LLC (``PHLX'') and driven by 
customer demand,\6\ would add liquidity to the SPY ETF options market 
by allowing market participants to hedge risks relating to SPY ETF 
positions over a potentially longer time period with a known and 
limited cost.
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    \4\ Strike price interval, bid/ask differential and continuity 
rules shall not apply to such options series until the time to 
expiration is less than nine months. See Commentary .03(a) of Rule 
903.
    \5\ See proposed Commentary .03(a) of Rule 903 (providing in 
relevant part, that ``[t]here may be up to ten expiration months for 
options on the [SPY ETF] and up to six extended far term expiration 
months for options on any other index, Exchange-Trade Fund Share, or 
equity option class''). The Exchange also proposes a technical 
change to remove the errant period that appears after ``(LEAPS)'' in 
the title of Commentary .03, which would add clarity and consistency 
to Exchange rules. See proposed Commentary .03 of Rule 903.
    \6\ See also Securities Exchange Act Release No. 84449 (October 
18, 2018), 83 FR 53699 (October 24, 2018) (SR-Phlx-2018-64) (``PHLX 
Rule Change''). The Exchange notes that the PHLX Rule Change does 
not apply to LEAPS on index options, as PHLX already provided for up 
to ten expirations in LEAPS on index options in PHLX Rule 
1101A(b)(iii). Because Commentary .03 includes index options, this 
proposal is consistent with both the PHLX Rule Change and PHLX Rule 
1101A(b)(iii).
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    The SPY ETF options market today is characterized by its tremendous 
daily and annual liquidity. As a consequence, the Exchange believes 
that the listing of additional SPY ETF LEAPS expiration months would be 
well received by investors. This proposal to expand the number of 
permitted SPY ETF LEAPS would not apply to LEAPS on any other

[[Page 61706]]

class of stock or Exchange-Traded Fund Share options.\7\
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    \7\ Historically, SPY is the largest and most actively traded 
ETF in the United States as measured by its assets under management 
and the value of shares traded.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \8\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5),\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, by offering market participants additional LEAPS on 
SPY options for their investment and risk management purposes. The 
proposal is intended simply to provide additional trading opportunities 
which have been requested by customers, thereby facilitating 
transactions in options and contributing to the protection of investors 
and the maintenance of fair and orderly markets. The proposed rule 
change responds to the continuing needs of market participants, 
particularly portfolio managers and other institutional customers, by 
providing protection from long-term market moves and by offering an 
alternative to hedging portfolios with futures positions or off-
exchange customized derivative instruments.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the addition today of four additional 
expiration months for SPY ETF LEAPS does not represent a proliferation 
of expiration months, but is instead a very modest expansion of LEAPS 
options in response to stated customer demand. Significantly, the 
proposal would feature new LEAPS expiration months in only a single 
class of options--the SPY ETF--that are very liquid and heavily traded, 
as discussed above. Additionally, the Exchange notes by way of 
precedent that ten expiration months are already permitted for stock 
index LEAPS options on other markets.\10\ Further, the Exchange has the 
necessary systems capacity to support the new SPY ETF LEAPS expiration 
months.
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    \10\ See NYSE Arca Rule 5.19-O(b)(1) and PHLX Rule 
1101A(b)(iii).
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    The Exchange notes that this proposal is substantially the same as 
a recent rule amendment submitted by PHLX.\11\
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    \11\ See PHLX Rule Change, supra note 6.
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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 not necessary or appropriate in 
furtherance of the purposes of the Act. The proposal merely provides 
investors additional investment and risk management opportunities by 
providing flexibility to the Exchange to list additional long term 
options expiration series, expanding the number of SPY LEAPS offered on 
the Exchange from six expiration months to ten expiration months.

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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(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 under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange's 
proposal would conform the Exchange's rules relating to the permitted 
number of SPY ETF LEAPS expiration months to those of PHLX.\16\ 
Accordingly, the Commission believes that the proposal raises no new or 
novel regulatory issues, and waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission therefore waives the 30-day operative delay and 
designates the proposal operative upon filing.\17\
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    \14\ Id.
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ See supra, note 6.
    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such 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.

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-2018-51 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-2018-51. 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

[[Page 61707]]

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-2018-
51 and should be submitted on or before December 21, 2018.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25996 Filed 11-29-18; 8:45 am]
 BILLING CODE 8011-01-P