Document ID: SEC-2018-1411-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq PHLX LLC
Posted Date: 2018-09-11T04:00Z

[Federal Register Volume 83, Number 176 (Tuesday, September 11, 2018)]
[Notices]
[Pages 46001-46003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-19641]

[[Page 46001]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84034; File No. SR-Phlx-2018-57]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Move the P.M.-
Settled Nasdaq-100 Index Options Expiring on the Third Friday of the 
Month to the NDX Index Options Class

September 5, 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 August 27, 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, II, and III, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to move the P.M.-settled Nasdaq-100 Index 
Options expiring on the third Friday of the month (``NDXPM'') to the 
NDX index options class. In connection with the move, the Exchange 
proposes changing the trading symbol for these options from ``NDXPM'' 
to ``NDXP''.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange seeks to amend Exchange rules related to certain P.M.-
settled options on the NASDAQ-100 Index which have been approved by the 
Commission but which have not yet been listed by the Exchange.\3\ 
Currently, third-Friday P.M.-settled NASDAQ-100 Index options form a 
separate options class and, if listed by the Exchange, would trade 
under the symbol ``NDXPM.'' The Exchange now seeks to move these third-
Friday P.M.-settled NASDAQ-100 Index options into the NASDAQ-100 
(``NDX'') options class.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 81293 (August 2, 
2017), 82 FR 37138 (August 8, 2017) (approving SR-Phlx-2017-04).
---------------------------------------------------------------------------

    The Exchange has also recently received Commission approval to list 
nonstandard expirations of P.M.-settled NASDAQ-100 Index options 
trading under the symbol ``NDXP'', also on a pilot basis.\4\ NDXP 
options are series of the NDX options class. These NDXP options may 
expire on Mondays, Wednesdays, Fridays (other than third-Friday-of-the-
month), and the last trading day of the month.\5\ The proposed rule 
change would facilitate a change to the trading symbol for P.M.-settled 
NASDAQ-100 Index options that have standard third Friday-of-the-month 
(``third-Friday'') expirations from ``NDXPM'' to ``NDXP.''
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 82341 (December 15, 
2017), 82 FR 60651 (December 21, 2017) (SR-Phlx-2017-79). In its 
proposed rule change to adopt a nonstandard expirations pilot 
program, the Exchange noted that it anticipated filing a proposed 
rule change in the near future to move the NDXPM index options with 
standard third Friday of the month expiration dates to the NDX index 
option class.
    \5\ See Rule 1101A(b)(vii), Nonstandard Expirations Pilot 
Program.
---------------------------------------------------------------------------

    The Exchange believes moving NDXPM into the NDX options class to 
trade under the NDXP symbol will have no adverse impact on the 
marketplace. In fact, the Exchange believes moving NDXPM into the NDX 
options class to trade under the NDXP symbol will have a positive 
impact on the marketplace and retail customers in particular.
    As previously noted, in addition to end-of-the-month expirations, 
NDXP options are P.M.-settled NASDAQ-100 Index options that may expire 
on Mondays, Wednesdays, and Fridays (other than third-Friday-of-the-
month) (i.e., nonstandard weekly expirations pursuant to Rule 
1101A(b)(vii)). Trading P.M.-settled third-Friday expirations under the 
NDXP symbol will ensure market participants, particularly retail 
customers, have seamless access to P.M.-settled NASDAQ-100 Index 
options expiring every Friday of the month.
    Without the proposed amendments, a user of NDXP options could not 
roll an existing NDXP position that expires on a first or second Friday 
of a month into a NDXP position that expires on a third-Friday. Thus, 
for NDXP users, there would be a gap in Friday expirations. Changing 
the NDXPM symbol to NDXP would remove the gap in Friday NDXP 
expirations and allow market participants, especially retail customers 
that are less likely to utilize both NDXPM and NDXP options to maintain 
exposure to Friday expirations, to have seamless access to P.M.-settled 
NASDAQ-100 Index options expiring every Friday of the month.
    In addition, offering seamless access to P.M.-settled NASDAQ-100 
Index options that expire every Friday of the month would allow market 
participants to submit complex orders with options series that expire 
on third-Fridays and other Friday expirations. Without the proposed 
amendments, market participants would not be able to submit into the 
trading system complex orders that consist of NDXPM options series and 
NDXP options series because they are currently in separate classes.\6\ 
Although market participants would have the ability to submit separate 
orders to leg into a position with third- Friday and other Friday 
exposure, retail customers would be less likely to leg into a position. 
Thus, changing the NDXPM symbol to NDXP would allow market 
participants, especially retail customers, to submit complex orders 
with options series that expire on third-Fridays and other Fridays.
---------------------------------------------------------------------------

    \6\ See Rule 1098, Complex Orders on the System, Section (a)(i) 
which provides that for purposes of the electronic trading of 
Complex Orders, a Complex Order is an order involving the 
simultaneous purchase and/or sale of two or more different options 
series in the same underlying security, priced as a net debit or 
credit based on the relative prices of the individual components, 
for the same account, for the purpose of executing a particular 
investment strategy.
---------------------------------------------------------------------------

    As previously noted, the Exchange does not believe moving NDXPM 
into the NDX options class and changing the NDXPM symbol to NDXP will 
have any adverse impact on market participants. Because the Exchange 
has not yet listed NDXPM, and because Exchange Rules and systems will 
treat NDXPM and NDXP the same (other than having separate pilot 
programs and listing schedules), the Exchange expects a smooth 
transition of NDXPM series to the NDXP symbol.

[[Page 46002]]

Position Limits/Reporting Requirements
    In addition, since third-Friday P.M.-settled options trading under 
the NDXP symbol will be a new type of series under the NDX options 
class and not a new options class, all third-Friday P.M.-settled NDXP 
options will be aggregated together with all other standard expirations 
for applicable reporting and other requirements.\7\ The Exchange 
therefore proposes to delete language in Rules 1079, FLEX Index, Equity 
and Currency Options and 1001A, Position Limits, dealing with position 
limits for NDXPM options specifically.
---------------------------------------------------------------------------

    \7\ See e.g., Rule 1001A(c) which sets forth the reporting 
requirements for certain broad-based indexes that do not have 
position limits.
---------------------------------------------------------------------------

Pilot Reports
    Third-Friday P.M.-settled NASDAQ-100 Index options are currently 
approved to be listed on a pilot basis.\8\ After implementation of the 
proposed amendments, the pilot would continue under the same terms that 
originally established the pilot. As part of the pilot, the Exchange 
would submit periodic reports and annual reports that analyze the 
market impact and trading patterns of third-Friday P.M.-settled NASDAQ-
100 Index options. The reports would provide the same data and analysis 
for third-Friday P.M.-settled NASDAQ-100 Index options trading under 
symbol NDXP that would have been submitted for third-Friday P.M.-
settled NASDAQ-100 Index options trading under symbol NDXPM had they 
been listed.
---------------------------------------------------------------------------

    \8\ See Rule 1101A Commentary .05 and Securities Exchange Act 
Release No. 81293 (August 2, 2017), 82 FR 37138 (August 8, 2017) 
(approving SR-Phlx-2017-04).
---------------------------------------------------------------------------

Implementation Date
    The Exchange intends to change the NDXPM symbol to NDXP prior to 
its listing. The Exchange does not intend to list NDXPM as a separate 
class. Consistent with the original NDXPM approval order, the pilot for 
listing third-Friday P.M.-settled NASDAQ-100 Index options trading 
under symbol NDXP would terminate on December 29, 2018.\9\
---------------------------------------------------------------------------

    \9\ The NDXPM approval order provided for termination of the 
pilot on the earlier to occur of (i) 12 months following the date of 
the first listing of the options, or (ii) December 29, 2018. Since 
fewer than 12 months now remain in 2018, the pilot will terminate on 
December 29, 2018.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ 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. Additionally, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \12\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
    \12\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes trading P.M.-settled third-
Friday expirations under the NDXP symbol rather than the separate NDXPM 
symbol will ensure market participants, particularly retail customers, 
have seamless access to P.M.-settled NASDAQ-100 Index options expiring 
every Friday of the month, which helps to remove impediments to and 
perfect the mechanism of a free and open market. The Exchange believes 
the proposed rule change will help to protect investors and the public 
interest by allowing market participants to enter options positions 
with the same underlying in one symbol that spans every Friday 
expiration in a month, thus providing a more efficient way to gain 
exposure and hedge risk.

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 
the rule change will impose a burden on intramarket competition because 
all market participants will continue to have access to P.M.-settled 
NASDAQ-100 Index options expiring every Friday of the month and will be 
able to trade them under the NDXP symbol. The proposal will not impose 
a burden on intermarket competition because the options affected by 
this proposal are exclusive to the Exchange.
    Additionally, the Exchange does not believe the proposal will 
impose any burden on intermarket competition as market participants on 
other exchanges are welcome to become members and trade at Phlx if they 
determine that this proposed rule change has made Phlx more attractive 
or favorable.

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)(iii) of the Act \13\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 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 intent 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.
---------------------------------------------------------------------------

    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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-2018-57 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-2018-57. This file

[[Page 46003]]

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 a.m. and 3 
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-2018-57 and should be submitted on 
or before October 2, 2018.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-19641 Filed 9-10-18; 8:45 am]
 BILLING CODE 8011-01-P