Document ID: SEC-2023-1040-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2023-09-21T04:00Z

[Federal Register Volume 88, Number 182 (Thursday, September 21, 2023)]
[Notices]
[Pages 65208-65210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20425]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98409; File No. SR-ISE-2023-11]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove Proposed Rule 
Change To Amend the Short Term Option Series Program To Permit the 
Listing of Two Wednesday Expirations for Options on Certain Exchange 
Traded Products

September 15, 2023.

I. Introduction

    On May 31, 2023, Nasdaq ISE, LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the 
Exchange's short term option series program (``Short Term Option Series 
Program'') in Supplementary Material .03 of Options 4, Section 5 
(Series of Options Contracts Open for Trading). The proposed rule 
change was published for comment in the Federal Register on June 20, 
2023.\3\ On August 2, 2023, pursuant to section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ The Commission did not receive any comments. The Commission 
is instituting proceedings pursuant to section 19(b)(2)(B) of the Act 
\6\ to determine whether to approve or disapprove the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 97719 (June 13, 
2023), 88 FR 39876 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 98040, 88 FR 53569 
(August 8, 2023) (designating September 18, 2023, as the date by 
which the Commission shall either approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change).
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change \7\
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    \7\ For a full description of the proposed rule change, refer to 
the Notice, supra note 3.
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    Currently, the Exchange may open for trading series of options on 
certain symbols that expire at the close of business on each of the 
next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, 
that are business days and are not business days

[[Page 65209]]

in which monthly options series or Quarterly Options Series expire 
(``Short Term Option Daily Expirations'').\8\ The Exchange proposes to 
expand the Short Term Option Series Program \9\ to permit the listing 
of two Wednesday expirations for options on the United States Oil Fund, 
LP, United States Natural Gas Fund, LP, SPDR Gold Shares, iShares 
Silver Trust, and iShares 20+ Year Treasury Bond ETF (collectively, 
``Wednesday ETP Expirations'').\10\
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    \8\ See Supplementary Material .03 to Options 4, Section 5. 
Currently, the Exchange may list no more than a total of two Monday 
and Wednesday expirations on the iShares Russell 2000 ETF (``IWM'') 
and no more than a total of two Monday, Tuesday, Wednesday, and 
Thursday expirations on the SPDR S&P 500 ETF Trust (``SPY'') and the 
Invesco QQQ Trust (``QQQ''). See Table 1, Supplementary Material .03 
to Options 4, Section 5.
    \9\ Options 1, Section 1(a)(49) provides that a Short Term 
Option Series means a series in an option class that is approved for 
listing and trading on the Exchange in which the series is opened 
for trading on any Monday, Tuesday, Wednesday, Thursday or Friday 
that is a business day and that expires on the Monday, Tuesday, 
Wednesday, Thursday, or Friday of the following business week that 
is a business day, or, in the case of a series that is listed on a 
Friday and expires on a Monday, is listed one business week and one 
business day prior to that expiration. If a Tuesday, Wednesday, 
Thursday or Friday is not a business day, the series may be opened 
(or shall expire) on the first business day immediately prior to 
that Tuesday, Wednesday, Thursday or Friday. For a series listed 
pursuant to this section for Monday expiration, if a Monday is not a 
business day, the series shall expire on the first business day 
immediately following that Monday.
    \10\ The United States Oil Fund, LP, United States Natural Gas 
Fund, LP, SPDR Gold Shares, iShares Silver Trust, and iShares 20+ 
Year Treasury Bond ETF are referred to collectively as the ``ETPs.''
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    According to the Exchange, the Wednesday ETP Expirations would be 
similar to the existing Short Term Option Daily Expirations in that the 
Exchange may open for trading on any Tuesday or Wednesday that is a 
business day (beyond the current week) \11\ series of options on the 
ETPs that expire on any Wednesday of the month that is a business day 
and is not a Wednesday in which Quarterly Options Series expire.\12\ 
And like Short Term Option Daily Expirations, in the event that 
Wednesday ETP Expirations would expire on a Wednesday, and that 
Wednesday is the same day that a Quarterly Options Series expires, the 
Exchange would skip that week's listing and instead list the following 
week; the two weeks would therefore not be consecutive. Options on each 
of the ETPs with Friday expirations would continue to have a total of 
five Short Term Option Expiration Dates, provided those Friday 
expirations are not Fridays in which monthly options series or 
Quarterly Options Series expire. The interval between strike prices for 
the proposed Wednesday ETP Expirations would be the same as those for 
the current Short Term Option Series for Friday expirations applicable 
to the Short Term Option Series Program.\13\ As is the case with other 
equity options series listed pursuant to the Short Term Option Series 
Program, the Wednesday ETP Expirations series would be p.m.-settled.
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    \11\ The Exchange proposes to clarify the rule text in 
Supplementary Material .03 to Options 4, Section 5 to specify that 
it can list two Short Term Option Expiration Dates beyond the 
current week for each Monday, Tuesday, Wednesday, and Thursday 
expiration. Consistent with the current operation of the rule, the 
Exchange states that if it adds a Wednesday expiration (``Wednesday 
Expiration'') on a Tuesday, there would be three outstanding 
Wednesday Expirations at one time. See Notice, supra note 3, 88 FR 
at 39877, n.4.
    \12\ See id. at 39877.
    \13\ The Wednesday ETP Expirations would have a strike interval 
of $0.50 or greater for strike prices below $100, $1 or greater for 
strike prices between $100 and $150, and $2.50 or greater for strike 
prices above $150.
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    In support of its proposal, the Exchange represents that it has an 
adequate surveillance program in place to detect manipulative trading 
in the proposed option expirations, in the same way that it monitors 
trading in the current Short Term Option Daily Expirations.\14\ The 
Exchange also represents that it has the necessary system capacity to 
support and properly monitor trading in the proposed new 
expirations.\15\ Additionally, the Exchange states that it does not 
believe that any market disruptions will be encountered with the 
introduction of these proposed option expirations.\16\ The Exchange 
currently trades Short Term Option Daily Expirations on SPY, QQQ, and 
IWM, including Wednesday Expirations, and states that it has not 
experienced any market disruptions nor issues with capacity.\17\ 
Further, the Exchange provides data comparing the ETPs to SPY, QQQ, and 
IWM, which have Wednesday Expirations today.\18\ According to the 
Exchange, the occurrence of the ETPs moving through at least one strike 
price after the close of trading has been less frequent than for SPY, 
QQQ, and IWM. In addition, the average annualized closing volatility in 
the last thirty minutes of trading for the ETPs has historically been 
lower than that of SPY, QQQ, and IWM.\19\ Finally, the Exchange states 
that the ETPs trade within ``complexes'' where, in addition to the 
underlying security, there are multiple highly-correlated instruments 
available for hedging.\20\ Therefore, the Exchange believes the 
proposal would not be a strain on liquidity providers.\21\
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    \14\ See id. at 39884.
    \15\ See id.
    \16\ See id.
    \17\ See id. at 39878.
    \18\ See id. at 39882-83.
    \19\ See id. at 39883.
    \20\ See id. at 39884.
    \21\ See id.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-ISE-
2023-11, and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to section 
19(b)(2)(B) of the Act \22\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to provide 
additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
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    \22\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to section 19(b)(2)(B) of the Act,\23\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
described above, the Exchange has proposed to expand the Short Term 
Option Series Program to permit the listing of Wednesday ETP 
Expirations. The Commission is instituting proceedings to allow for 
additional analysis of, and input from commenters with respect to, the 
proposed rule change's consistency with the Act, and in particular, 
section 6(b)(5) of the Act, which requires, among other things, that 
the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, 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.\24\
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    \23\ Id.
    \24\ 15 U.S.C. 78f(b)(5).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their data, views, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the

[[Page 65210]]

proposal. In particular, the Commission invites the written views of 
interested persons concerning whether the proposed rule change, is 
consistent with sections 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of data, views, and arguments, the 
Commission will consider, pursuant to Rule 19b-4 under the Act,\25\ any 
request for an opportunity to make an oral presentation.\26\
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    \25\ 17 CFR 240.19b-4.
    \26\ section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (Jun. 4, 1975), grants to 
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is 
appropriate for consideration of a particular proposal by a self-
regulatory organization. See Securities Acts Amendments of 1975, 
Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 
94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by October 12, 2023. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
October 26, 2023. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-2023-11 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-ISE-2023-11. 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 (https://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. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-ISE-2023-11 and should be 
submitted by October 12, 2023. Rebuttal comments should be submitted by 
October 26, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(57).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-20425 Filed 9-20-23; 8:45 am]
BILLING CODE 8011-01-P