Document ID: SEC-2021-1539-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX, LLC
Posted Date: 2021-11-03T04:00Z

[Federal Register Volume 86, Number 210 (Wednesday, November 3, 2021)]
[Notices]
[Pages 60719-60721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23922]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93447; File No. SR-Phlx-2021-66]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot 
To Permit the Listing and Trading of Options on the Nasdaq 100 Micro 
Index

October 28, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on October 20, 2021, Nasdaq PHLX LLC (``Phlx'' 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 extend the pilot to permit the listing and 
trading of options based on 1/100 the value of the Nasdaq-100 Index 
(``Nasdaq-100'') currently set to expire on November 4, 2021.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/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
    Phlx filed a rule change to permit the listing and trading of index 
options on the Nasdaq 100 Micro Index Options (``XND'') on a pilot 
basis \3\ (``Program'').
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    \3\ See Securities Exchange Act Release No. 91524 (April 9, 
2021), 86 FR 19909 (April 15, 2021) (SR-Phlx-2021-07) (Approval 
Order).
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    XND options trade independently of and in addition to NDX options, 
and the XND options are subject to the same rules that presently govern 
the trading of index options based on the Nasdaq-100 Index, including 
sales practice rules, margin requirements, trading rules, and position 
and exercise limits. Similar to NDX, XND options are European-style and 
cash-settled, and have a contract multiplier of 100. The contract 
specifications for XND options mirror in all respects those of the NDX 
options contract already listed on the Exchange, except that XND 
options are based on 1/100th of the value of the Nasdaq-100 Index, and 
are P.M.-settled

[[Page 60720]]

pursuant to Options 4A, Section 12(a)(5).
    The Exchange proposes to amend Phlx Options 4A, Section 12(a)(6) to 
extend the current XND pilot period to May 4, 2022. The Exchange 
continues to have sufficient capacity to handle additional quotations 
and message traffic associated with the listing and trading of XND 
options. In addition, index options are integrated into the Exchange's 
existing surveillance system architecture and are thus subject to the 
relevant surveillance processes. The Exchange also continues to have 
adequate surveillance procedures to monitor trading in XND options 
thereby aiding in the maintenance of a fair and orderly market. 
Additionally, there is continued investor interest in these products 
and this extension will provide additional time to collect data related 
to the pilot.
    The Exchange believes that the proposed extension of the Program 
will not have an adverse impact on capacity.
Pilot Report
    The Exchange currently makes public on its website the data and 
analysis previously submitted to the Commission on the Program and will 
continue to make public any data or analysis it submits under the 
Program in the future. The Exchange will be submitting a rule change to 
request that the Program become permanent. In lieu of submitting an 
annual report for 2021, the Exchange would provide additional 
information requested by the Commission in connection with the 
permanency rule change for this Program. The Exchange would continue to 
provide the Commission with ongoing data unless and until the Program 
is made permanent or discontinued.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\4\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\5\ 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. In particular, the Exchange believes 
that the Program has been successful to date. The Exchange has not 
encountered any problems with the Program. By extending the pilot, the 
Exchange believes it will attract order flow to the Exchange, increase 
the variety of listed options, and provide a valuable hedge tool to 
retail and other investors. Specifically, the Exchange believes that 
the pilot will provide additional trading and hedging opportunities for 
investors while providing the Commission with data to monitor for and 
assess any potential for adverse market effects of allowing P.M.-
settlement for XND options, including on the underlying component 
stocks.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. XND options would be 
available for trading to all market participants and therefore would 
not impose an undue burden on intra-market competition.
    The Exchange believes that the proposed rule change will not impose 
an undue burden on inter-market competition as this rule change will 
continue to facilitate the listing and trading of a new option product 
that will enhance competition among market participants, to the benefit 
of investors and the marketplace. The continued listing of XND will 
enhance competition by providing investors with an additional 
investment vehicle, in a fully-electronic trading environment, through 
which investors can gain and hedge exposure to the Nasdaq-100. 
Furthermore, this product could offer a competitive alternative to 
other existing investment products that seek to allow investors to gain 
broad market exposure. Finally, it is possible for other exchanges to 
develop or license the use of a new or different index to compete with 
the Nasdaq-100 and seek Commission approval to list and trade options 
on such an index.

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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \6\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-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 pursuant to Rule 19b-4(f)(6) under the 
Act \8\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \9\ permits the 
Commission to 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 it 
may immediately extend the Program prior to the current expiration date 
so that the pilot may continue uninterrupted. 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 
Program to continue uninterrupted, thereby avoiding investor confusion 
that could result from a temporary interruption in the Program. 
Accordingly, the Commission hereby waives the operative delay and 
designates the proposed rule change operative upon filing.\10\
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ 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:

[[Page 60721]]

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-2021-66 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-2021-66. 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-2021-66, and should be submitted on 
or before November 24, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23922 Filed 11-2-21; 8:45 am]
BILLING CODE 8011-01-P