Document ID: SEC-2016-1550-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2016-08-31T04:00Z

[Federal Register Volume 81, Number 169 (Wednesday, August 31, 2016)]
[Notices]
[Pages 60072-60074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20962]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78695; File No. SR-NASDAQ-2016-122]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Expand the Short Term Option Series Program

August 26, 2016.
    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 25, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' 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 the rules of the NASDAQ Options 
Market LLC (``NOM'') to expand the Short Term Option Series Program to 
allow Wednesday expirations for SPY options.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.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 60073]]

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 NOM Rules at Chapter I, Section 
1(a)(59) and Chapter IV, Section 6 at Commentary .07 to expand the 
Short Term Option Series Program to permit the listing and trading of 
options with Wednesday expirations.
    Currently, under the Short Term Option Series Program, the Exchange 
may open for trading on any Thursday or Friday that is a business day 
series of options on that class that expire on each of the next five 
consecutive Fridays, provided that such Friday is not a Friday in which 
monthly options series or Quarterly Options Series expire (``Short Term 
Option Series''). The Exchange is now proposing to amend its rule to 
permit the listing of options expiring on Wednesdays. Specifically, the 
Exchange is proposing that it may open for trading on any Tuesday or 
Wednesday that is a business day, series of options on the SPDR S&P 500 
ETF Trust (SPY) to expire on any Wednesday of the month that is a 
business day and is not a Wednesday in which Quarterly Options Series 
expire (``Wednesday SPY Expirations'').\3\ The proposed Wednesday SPY 
Expiration series will be similar to the current Short Term Option 
Series, with certain exceptions, as explained in greater detail below. 
The Exchange notes that having Wednesday expirations is not a novel 
proposal. Specifically, BOX Options Exchange LLC (``BOX'') recently 
received approval to list Wednesday expirations for SPY options.\4\
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    \3\ See NOM Rule Chapter IV, Section 6 at Commentary .07.
    \4\ See Securities Exchange Act Release No. 78668 (SR-BOX-2016-
28) (pending publication in the Federal Register).
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    In regards to Wednesday SPY Expirations, the Exchange is proposing 
to remove the current restriction preventing the Exchange from listing 
Short Term Option Series that expire in the same week in which monthly 
option series in the same class expire. Specifically, the Exchange will 
be allowed to list Wednesday SPY Expirations in the same week in which 
monthly option series in SPY expire. The current restriction to 
prohibit the expiration of monthly and Short Term Option Series from 
expiring on the same trading day is reasonable to avoid investor 
confusion. This confusion will not apply with Wednesday SPY Expirations 
and standard monthly options because they will not expire on the same 
trading day, as standard monthly options do not expire on Wednesdays. 
Additionally, it would lead to investor confusion if Wednesday SPY 
Expirations were not listed for one week every month because there was 
a monthly SPY expiration on the Friday of that week.
    Under the proposed Wednesday SPY Expirations, the Exchange may list 
up to five consecutive Wednesday SPY Expirations at one time. The 
Exchange may have no more than a total of five Wednesday SPY 
Expirations listed. This is the same listing procedure as Short Term 
Option Series that expire on Fridays. This means, under the proposal, 
the Exchange would be allowed to list five Short Term Option Series 
expirations for SPY expiring on Friday under the current rule and five 
Wednesday SPY Expirations. The interval between strike prices for the 
proposed Wednesday SPY Expirations will be the same as those for the 
current Short Term Option Series. Specifically, the Wednesday SPY 
Expirations will have $0.50 strike intervals.
    Currently, for each Short Term Option Expiration Date,\5\ 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.\6\ The thirty 
(30) series restriction shall apply to Wednesday 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 Wednesdays.
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    \5\ NOM may open for trading on any Thursday or Friday that is a 
business day series of options on that class that expire on each of 
the next five consecutive Fridays that are business days and are not 
Fridays in which monthly options series or Quarterly Options Series 
expire (``Short Term Option Expiration Dates''). See NOM Rule 
Chapter IV, Section 6 at Commentary .07.
    \6\ See NOM Rule Chapter IV, Section 6 at Commentary .07.As is 
the case with current Short Term Option Series, the Wednesday SPY 
Expiration series will be P.M.-settled. The Exchange does not 
believe that any market disruptions will be encountered with the 
introduction of P.M.-settled Wednesday SPY Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
almost every Friday, which provide market participants a tool to 
hedge special events and to reduce the premium cost of buying 
protection. The Exchange seeks to introduce Wednesday SPY 
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 Wednesday 
expirations, similar to Friday expirations, would 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.
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    The Exchange is also amending the definition of Short Term Option 
Series to make clear that it includes Wednesday expirations.\7\ 
Specifically, the Exchange is amending the definition to expand Short 
Term Option Series to those listed on any Tuesday or Wednesday and that 
expire on the Wednesday of the next business week. If a Tuesday or 
Wednesday is not a business day, the series may be opened (or shall 
expire) on the first business day immediately prior to that Tuesday or 
Wednesday. The Exchange believes that the introduction of Wednesday SPY 
Expirations will provide investors with a flexible and valuable tool to 
manage risk exposure, minimize capital outlays, and be more responsive 
to the timing of events affecting the industry.
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    \7\ See proposed Chapter I, Section 1(a)(59).
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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 foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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 Wednesday 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 Wednesday SPY Expirations should create greater trading and 
hedging opportunities and flexibility, and provide customers with the 
ability to more closely tailor their investment objectives. The 
Exchange believes that allowing Wednesday SPY Expirations and monthly 
SPY expirations in the same week will benefit investors and minimize 
investor confusion by providing Wednesday SPY Expirations in a 
continuous and uniform manner. Finally, the Exchange represents that it 
has an adequate surveillance program in place to detect manipulative 
trading in

[[Page 60074]]

Wednesday SPY Expirations in the same way 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. 
Also, the Exchange notes that BOX Options Exchange LLC (``BOX'') 
recently received approval to list Wednesday expirations for SPY 
options.\10\
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    \10\ See supra, note 4.
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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 notes that having 
Wednesday expirations is not a novel proposal, BOX has received 
approval to list Wednesday expirations for SPY options.\11\ 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. 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.
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    \11\ See supra, note 4.
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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, the proposed rule 
change 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) 
requires a self-regulatory organization to give the Commission 
written notice of its intention to file 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) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii) \14\ 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 the proposal may become operative 
immediately upon filing. The Commission notes that it recently approved 
BOX's substantially similar proposal to list and trade Wednesday SPY 
Expirations.\15\ The Exchange has stated that waiver of the operative 
delay will allow the Exchange to list and trade Wednesday SPY 
Expirations as soon as possible, and therefore, promote competition 
among the option exchanges. For these reasons, 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, and will allow the Exchange to 
remain competitive with other exchanges. Therefore, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
effective upon filing.\16\ 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.
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ See supra note 4.
    \16\ 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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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-NASDAQ-2016-122 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-NASDAQ-2016-122. 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 Web site (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 Web site 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-NASDAQ-2016-122 and should 
be submitted on or before September 21, 2016.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2016-20962 Filed 8-30-16; 8:45 am]
 BILLING CODE 8011-01-P