Document ID: SEC-2021-1125-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq BX, Inc.
Posted Date: 2021-08-19T04:00Z

[Federal Register Volume 86, Number 158 (Thursday, August 19, 2021)]
[Notices]
[Pages 46724-46726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17756]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92664; File No. SR-BX-2021-034]

Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend the 
Expiration Timeframe of Long-Term Index Options Series

August 13, 2021.
    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 August 10, 2021, Nasdaq BX, Inc. (``BX'' or ``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 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 amend BX Rules at Options 2, Section 4, 
Obligations of Market Makers and Lead Market Makers; Options 2, Section 
5, Market Maker Quotations; and Options 4A, Section 12, Terms of Index 
Option Contracts.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/bx/rules, 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.

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 BX Options 2, Section 4, Obligations 
of Market Makers and Lead Market Makers; Options 2, Section 5, Market 
Maker Quotations; and Options 4A, Section 12, Terms of Index Option 
Contracts. Specifically, the Exchange proposes to amend the expiration 
timeframe of Long-Term Options Series or ``LEAPs.''
    Options 2, Section 5(d)(2)(A) currently provides, ``Bid/ask 
differentials shall not apply to any options series until the time to 
expiration is less than nine (9) months for index options.'' Similarly, 
Options 4A, Section 12(b) currently states,

    (1) Notwithstanding the provisions of paragraph (a)(3), above, 
BX Options may list long-term index options series that expire from 
nine (9) to sixty (60) months from the date of issuance.
    (i) Index long term options series may be based on either the 
full or reduced value of the underlying index. There may be up to 
ten (10) expiration months, none further out than sixty (60) months. 
Strike price interval and continuity Rules shall not apply to such 
options series until the time to expiration is less than nine (9) 
months. Bid/ask differentials for long-term options contracts are 
specified within Options 2, Section 5(d)(2)(A).

    The Exchange proposes to amend the current text of Options 2, 
Section 5(d)(2)(A) and Options 4A, Section 12(b) to amend the time to 
expiration term of

[[Page 46725]]

LEAPs on index options from nine to sixty months to twelve to sixty 
months. Likewise, the Exchange proposes to amend the time to expiration 
for strike price interval, continuity rules and bid/ask differentials 
for LEAPS on index options from less than nine to less than twelve 
months.
    Today, other options markets have terms similar to those proposed 
herein.\3\ The proposal would align BX's rules with other options 
markets with respect to the opening month for LEAPs on index options 
and the time to expiration for strike price interval, continuity rules 
and bid/ask differentials for LEAPS on index options by changing nine 
to twelve months.
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    \3\ See Cboe Options Exchange, Inc. Rule 4.13(b). See also 
Nasdaq Phlx LLC and Nasdaq ISE, LLC Options 4A, Section 12(b).
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    The Exchange also proposes to amend Options 2, Sections 4 and 5 
concerning a Market Maker's or Lead Market Maker's obligation to make 
two-sided markets in any option series with an expiration of nine 
months or greater. Today, Market Makers and Lead Market Makers are not 
required to make two-sided markets in Quarterly Option Series, any 
Adjusted Option Series, and any option series with an expiration of 
nine months or greater in equities, ETFs or indexes. With this 
proposal, Market Makers and Lead Market Makers are not required to make 
two-sided markets in Quarterly Option Series, any Adjusted Option 
Series, and any option series with an expiration of nine months or 
greater in equities, and ETFs. With respect to indexes, Market Makers 
and Lead Market Makers would not be required to make two-sided markets 
in Quarterly Option Series, any Adjusted Option Series, and any option 
series with an expiration of twelve months or greater. The Exchange 
proposes to add rule text within Options 2, Sections 4 and 5 to make 
clear a Lead Market Maker's and Market Maker's obligation, 
respectively, to make two-sided markets with respect to LEAPs. Today, 
Nasdaq ISE, LLC (``ISE''), Nasdaq GEMX, LLC (``GEMX'') and Nasdaq MRX, 
LLC (``MRX'') have similar rules which describe the way LEAPs on index 
options should be quoted.\4\
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    \4\ See ISE, GEMX and MRX Options 2, Section 5(e)(1).
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Implementation
    The Exchange proposes to implement this amendment on or before 
September 30, 2021. The Exchange will issue an Options Trader Alert 
announcing the date the amendment will be operative.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\6\ in particular, in that it is designed to promote 
just and equitable principles of trade and to protect investors and the 
public interest by amending its rules, in part, to align BX's rules 
with other options markets with respect to the opening month of 
acceptable months for LEAPs on index options and the time to expiration 
for strike price interval, continuity rules and bid/ask differentials 
for LEAPS on index options. Today, other options markets have terms 
similar to those proposed herein.\7\
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ See supra note 3.
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    Amending Options 2, Section 5(d)(2)(A) and Options 4A, Section 
12(b) would harmonize BX's rules with respect to LEAPs on index options 
to permit BX to list these options in the same manner as other options 
markets that have similar rules.\8\ The Exchange notes that this rule 
change will allow BX to list more non-LEAP expirations as the front-
months for LEAP expirations would begin with month twelve instead of 
month nine. The Exchange believes that this proposal would allow it to 
list more months where there is greater customer demand as this 
proposal would amend the opening month for LEAPs on index options from 
nine to twelve months. Harmonizing BX's rules with respect to LEAPs on 
index options will allow BX to list these options in the same manner as 
other options markets that have similar rules.\9\
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    \8\ See supra note 3.
    \9\ See supra note 3.
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    Amending Options 2, Sections 4 and 5 to specifically note that the 
opening month for LEAPs on index options would be twelve months by 
adding a separate sentence to address LEAPs for index options is 
consistent with the Act. The proposal would align the Exchange with the 
way other options markets require market makers to quote LEAPs on index 
options.\10\ BX Lead Market Makers and Market Makers would be required 
to provide two-sided quotations in additional months with this proposal 
as the opening month for LEAPs on index options is changing from nine 
to twelve months.
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    \10\ See ISE, GEMX and MRX Options 2, Section 5(e)(1).
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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 
not impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Specifically, the Exchange does 
not believe the proposal to amend Options 2, Section 5(d)(2)(A) and 
Options 4A, Section 12(b) will impose any burden on intra-market 
competition as all Participants will be treated in the same manner with 
respect to time to expiration for strike price interval, continuity 
rules and bid/ask differentials for LEAPs on index options. 
Additionally, the Exchange does not believe the proposal will impose 
any burden on inter-market competition as market participants are 
welcome to become BX Participants if they determine that this proposed 
rule change has made BX more attractive or favorable. Finally, all 
options exchanges are free to compete by listing and trading index 
options with similar expirations.
    Amending Options 2, Sections 4 and 5 to specifically note that the 
opening month for LEAPs on index options would be twelve months by 
adding a separate sentence to address LEAPs on index options does not 
impose an undue burden on competition, rather the proposal aligns the 
Exchange's rule with rules of other options markets with respect to 
quoting LEAPs.\11\
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    \11\ See ISE, GEMX and MRX Options 2, Section 5(e)(1).
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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 either solicited or received.

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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[[Page 46726]]

    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 19b-4(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 has 
requested that the Commission waive the 30-day operative delay. Waiver 
of the operative delay would allow the Exchange to align its rules with 
other options exchanges with respect to the opening month for LEAPs on 
index options and implement its proposed rule change on or before 
September 30, 2021. 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. Accordingly, the Commission hereby waives the operative delay 
and designates the proposed rule change operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ 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 rule-comments@sec.gov. Please include 
File Number SR-BX-2021-034 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-BX-2021-034. 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-BX-2021-034, and should be submitted on 
or before September 9, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17756 Filed 8-18-21; 8:45 am]
BILLING CODE 8011-01-P