Document ID: SEC-2018-0575-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX LLC
Posted Date: 2018-04-12T04:00Z

[Federal Register Volume 83, Number 71 (Thursday, April 12, 2018)]
[Notices]
[Pages 15889-15890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07525]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83005; File No. SR-Phlx-2018-28]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Exchange 
Rule 1101A

April 6, 2018.
    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 March 28, 2018, 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 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 Exchange Rule 1101A, Terms of Option 
Contracts, Section (b)(vii)(4) in order to clarify trading hours of 
expiring Weekly Expirations and End of Month (``EOM'') options on the 
last trading day.
    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.

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

1. Purpose
    The purpose of the proposed rule change is to clarify trading hours 
of expiring Weekly Expirations and EOM options on the last trading 
day.\3\ Currently, Rule 1101A(b)(vii)(4) provides that Transactions in 
Weekly Expirations and EOMs may be effected on the Exchange between the 
hours of 9:30 a.m. (Eastern Time) and 4:15 p.m. (Eastern Time). A 
separate rule, Rule 1101A(c), applies to index option trading hours 
specifically on the day of expiration. That rule provides that, unless 
the Board of Directors has established different hours of trading for 
certain index options, such option shall trade until 4:00 p.m. on the 
business day of expiration or, in the case of an option contract 
expiring on a day that is not a business day, the business day prior to 
the expiration date.
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    \3\ The Exchange also proposes to place the caption to Rule 
1101A(b)(vii) in bold type, to conform that caption to the other 
rule section captions in Rule 1101A(b) for ease of reading.
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    The Board of Directors has not established different hours of 
trading specifically for expiration days for Weekly Expirations and 
EOMs. In order to clarify that the trading hours set forth in Weekly 
Expirations and EOMs in Rule 1101A(b)(vii)(4) do not apply on 
expiration day pursuant to Rule 1101A(c), the Exchange proposes to add 
language to Rule 1101A(b)(vii)(4) stating that on the last trading day, 
transactions in expiring Weekly Expirations and EOMs may be effected on 
the Exchange between the hours of 9:30 a.m. (Eastern Time) and 4:00 
p.m. (Eastern Time). The language proposed to be added is based on a 
comparable rule of Cboe Exchange, Inc. (``CBOE'').\4\
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    \4\ CBOE Rule 24.9(e)(4) provides that ``[o]n the last trading 
day, transactions in expiring Weekly Expirations and EOMs may be 
effected on the Exchange between the hours of 8:30 a.m. (Chicago 
time) and 3:00 p.m. (Chicago time).''
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    As CBOE explained in the proposed rule change adopting current CBOE 
Rule 24.9(e), Weekly Expirations and EOM options which are p.m.-settled 
are priced in the market based on corresponding futures values. On the 
last day of trading, the closing prices of the component stocks (which 
are used to derive the exercise settlement value) are known at 4:00 
p.m. (Eastern Time) (or soon after) when the equity markets close. 
Despite the fact that the exercise settlement value is fixed at or soon 
after 4:00 p.m. (Eastern Time), if trading in expiring Weekly 
Expirations and EOMs were to continue for an additional fifteen minutes 
until 4:15 p.m. (Eastern Time) they would not be priced on 
corresponding futures values, but rather the known cash value. At the 
same time, the prices of non-expiring Weekly Expiration and EOM series 
would continue to move and be priced in response to changes in 
corresponding futures prices. Because of the potential pricing 
divergence that could occur between 4:00 and 4:15 p.m. on the final 
trading day in expiring Weekly Expirations and EOMs (e.g., switch from 
pricing off of futures to cash), the Exchange believes that, in order 
to mitigate potential investor confusion, it is appropriate to cease 
trading in expiring Weekly Expirations and EOMs at 4:00 p.m. on the 
last day of trading.\5\
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    \5\ See Securities Exchange Act Release No. 64243 (April 7, 
2011), 76 FR 20771 (April 13, 2011) (SR-CBOE-2011-038) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Regarding 
Close of Trading Hours for Expiring End of Week and End of Month 
Expirations).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\7\ 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. 
As noted above, the proposed rule change will state clearly the trading 
hours of expiring Weekly Expirations and EOM options on the last 
trading day for those options directly in the section of the rulebook 
dealing with those types of options. The added clarity will protect

[[Page 15890]]

investors and the public interest by eliminating any potential for 
ambiguity or confusion on the part of the investing public regarding 
last trading day trading hours for these options. As noted above, the 
proposed new language regarding trading hours on the last trading day 
of Weekly Expiration and EOM options tracks similar CBOE language, 
thereby protecting investors and the public interest by eliminating any 
additional potential for confusion.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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 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. On 
the contrary, the Exchange believes that the proposed amendment will 
benefit investors, market participants, and the marketplace in general 
by eliminating a potential ambiguity in the Exchange's rules and 
setting forth clearly the last trading day trading hours for Weekly 
Expirations and EOM options in the section of the index options rules 
dealing specifically with those options.

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 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) 
thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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) \10\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission may 
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 proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest as it will allow the 
Exchange to immediately conform the trading hours for its Nonstandard 
Expirations Pilot Program to that of another exchange's Nonstandard 
Expirations Pilot Program, eliminate a potential source of confusion on 
the part of the investing public, as well as avoid potential pricing 
divergence difficulties that could occur between 4:00 and 4:15 p.m. 
(Eastern Time). The Exchange's proposal does not raise new issues. 
Accordingly, the Commission hereby waives the 30-day operative delay 
requirement and designates the proposed rule change as operative upon 
filing.\12\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ 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 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 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-Phlx-2018-28 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-2018-28. 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-Phlx-2018-28, and should be submitted on 
or before May 3, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07525 Filed 4-11-18; 8:45 am]
 BILLING CODE 8011-01-P