Document ID: SEC-2023-1432-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Nasdaq ISE, LLC
Posted Date: 2023-12-13T05:00Z

[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86404-86410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27270]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99104; File No. SR-ISE-2023-32]

Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Adopt Monthly 
Options Series and Amend the Nonstandard Expirations Program

December 7, 2023.
    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 November 29, 2023, Nasdaq ISE, LLC (``ISE'' 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 adopt Monthly Options Series and (ii) 
amend its Nonstandard Expirations Program.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/ise/rules, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

[[Page 86405]]

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 proposes to (i) adopt Monthly Options Series and (ii) 
amend its Nonstandard Expirations Program. Each change is discussed in 
detail below.
Monthly Options Series
    The Exchange proposes to amend its Rules to accommodate the listing 
of options series that would expire at the close of business on the 
last business day of a calendar month (``Monthly Options Series'').\3\ 
Pursuant to proposed Supplementary Material .08(a) to Options 4, 
Section 5 and Supplementary Material .06(a) to Options 4A, Section 12, 
the Exchange may list Monthly Options Series for up to five currently 
listed option classes that are either index options or options on 
exchange-traded funds (``ETFs'').\4\ In addition, the Exchange may also 
list Monthly Options Series on any options classes that are selected by 
other securities exchanges that employ a similar program under their 
respective rules.\5\ The Exchange may list 12 expirations for Monthly 
Options Series. Monthly Options Series need not be for consecutive 
months; however, the expiration date of a nonconsecutive expiration may 
not be beyond what would be considered the last expiration date if the 
maximum number of expirations were listed consecutively.\6\ Other 
expirations in the same class are not counted as part of the maximum 
numbers of Monthly Options Series expirations for a class.\7\ Monthly 
Options Series will be P.M.-settled.\8\
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    \3\ The proposed rule change defines the term ``Monthly Options 
Series'' in Options 4A, Section 2(l) (and re-letters current 
paragraphs (l) through (p) as (m) through (q)) as a series in an 
options class that is approved for listing and trading on the 
Exchange in which the series is opened for trading on any business 
day and that expires at the close of business on the last business 
day of a calendar month. The Exchange also proposes to fix an 
incorrect cross cite to the definition of broad-based index in 
Options 4A, Section 3(d)(1).
    \4\ The Exchange proposes to amend Options 4, Section 5(a) to 
provide that proposed Supplementary Material .08 to Options 4, 
Section 5 will describe how the Exchange will fix a specific 
expiration date and exercise price for Monthly Options Series. This 
is consistent with language in current Options 4, Section 5(a) for 
other Short Term Option Series and Quarterly Options Series.
    \5\ The Commission recently approved a Cboe Options proposed 
rule change to adopt substantively identical Monthly Options Series. 
See Securities Exchange Act Release No. 98915 (November 13, 2023), 
88 FR 80356 (November 17, 2023) (SR-CBOE-2023-049) (``Cboe Monthly 
Approval Order'').
    \6\ The Exchange notes this provision considers consecutive 
monthly listings. In other words, as other expirations (such as 
Quarterly Options Series) are not counted as part of the maximum, 
those expirations would not be considered when considering when the 
last expiration date would be if the maximum number were listed 
consecutively. For example, if it is January 2024 and the Exchange 
lists Quarterly Options Series in class ABC with expirations in 
March, June, September, December, and the following March, the 
Exchange could also list Monthly Options Series in class ABC with 
expirations in January, February, April, May, July, August, October, 
and November 2024 and January and February of 2025. This is because, 
if Quarterly Options Series, for example, were counted, the Exchange 
would otherwise never be able to list the maximum number of Monthly 
Options Series. This is consistent with the listing provisions for 
Quarterly Options Series, which permit calendar quarter expirations. 
The need to list series with the same expiration in the current 
calendar year and the following calendar year (whether Monthly or 
Quarterly expiration) is to allow market participants to execute 
one-year strategies pursuant to which they may roll their exposures 
in the longer-dated options (e.g. January 2025) prior to the 
expiration of the nearer-dated option (e.g. January 2024).
    \7\ See proposed Supplementary Material .08(b) to Options 4, 
Section 5 and proposed Supplementary Material .06(b) to Options 4A, 
Section 12.
    \8\ See proposed Supplementary Material .08(c) to Options 4, 
Section 5 and proposed Supplementary Material .06(c) to Options 4A, 
Section 12.
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    The strike price of each Monthly Options Series will be fixed at a 
price per share, with at least two, but no more than five, strike 
prices above and at least two, but no more than five, strike prices 
below the value of the underlying index or price of the underlying 
security at about the time that a Monthly Options Series is opened for 
trading on the Exchange. The Exchange will list strike prices for 
Monthly Options Series that are reasonably related to the current price 
of the underlying security or current index value of the underlying 
index to which such series relates at about the time such series of 
options is first opened for trading on the Exchange. The term 
``reasonably related to the current price of the underlying security or 
index value of the underlying index'' means that the exercise price is 
within 30% of the current underlying security price or index value.\9\ 
Additional Monthly Options Series of the same class may be open for 
trading on the Exchange when the Exchange deems it necessary to 
maintain an orderly market, to meet customer demand, or when the market 
price of the underlying security moves substantially from the initial 
exercise price or prices. To the extent that any additional strike 
prices are listed by the Exchange, such additional strike prices will 
be within 30% above or below the closing price of the underlying index 
or security on the preceding day. The Exchange may also open additional 
strike prices of Monthly Options Series that are more than 30% above or 
below the current price of the underlying security, provided that 
demonstrated customer interest exists for such series, as expressed by 
institutional, corporate, or individual customers or their brokers. 
Market Makers trading for their own account will not be considered when 
determining customer interest under this provision. The opening of the 
new Monthly Options Series will not affect the series of options of the 
same class previously opened.\10\ The interval between strike prices on 
Monthly Options Series will be the same as the interval for strike 
prices for series in that same options class that expire in accordance 
with the normal monthly expiration cycle.\11\
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    \9\ See proposed Supplementary Material .08(d) to Options 4, 
Section 5 and proposed Supplementary Material .06(d) to Options 4A, 
Section 12. The Exchange notes these proposed provisions are 
consistent with the initial series provision for the Quarterly 
Options Series program in Supplementary Material .02(d) to Options 
4A, Section 12. While different than the initial strike listing 
provision for the Quarterly Options Series program in current 
Supplementary Material .04(c) to Options 4, Section 5, the Exchange 
believes the proposed provision is appropriate, as it contemplates 
classes that may have strike intervals of $5 or greater. For 
consistency, the Exchange also proposes to amend Supplementary 
Material .04(c) to Options 4, Section 5 to incorporate the same 
provision for initial series. The Exchange also proposes a non-
substantive punctuation changes in the Quarterly Options Series 
header in Supplementary Material .04 to Options 4, Section 5 and 
Supplementary Material .02 to Options 4A, Section 12.
    \10\ See proposed Supplementary Material .08(e) to Options 4, 
Section 5 and proposed Supplementary Material .06(e) to Options 4A, 
Section 12.
    \11\ See proposed Supplementary Material .08(f) to Options 4, 
Section 5 and proposed Supplementary Material .06(f) to Options 4A, 
Section 12. See also Options 4, Section 5(d), (e), Supplementary 
Material .01, .02, .05, .06 (permissible strikes prices for ETF 
classes) and Options 4, Section 5(f) and Options 4A, Section 12(c) 
(permissible strike prices for index options).
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    By definition, Monthly Options Series can never expire in the same 
week as a standard expiration series (which expire on the third Friday 
of a month) in the same class expires. The same, however, is not the 
case with regards to Short

[[Page 86406]]

Term Options Series \12\ or Quarterly Options Series. Therefore, to 
avoid any confusion in the marketplace, the Exchange proposes to amend 
Supplementary Material .03 to Options 4, Section 5 and Supplementary 
Material .01 to Options 4A, Section 12 \13\ to provide the Exchange 
will not list a Short Term Options Series in a class on a date on which 
a Monthly Options Series or Quarterly Options Series expires.\14\ 
Similarly, proposed Supplementary Material .08(b) to Options 4, Section 
5 and Supplementary Material .06(b) to Options 4A, Section 12 provide 
that no Monthly Options Series may expire on a date that coincides with 
an expiration date of a Quarterly Options Series in the same index or 
ETF class. In other words, the Exchange will not list a Short Term 
Options Series on an index or ETF if a Monthly Options Series on that 
index or ETF were to expire on the same date, nor will the Exchange 
list a Monthly Options Series on an ETF or index if a Quarterly Options 
Series on that index or ETF were to expire on the same date to prevent 
the listing of series with concurrent expirations.\15\
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    \12\ The Exchange proposes non-substantive changes to clarify in 
Options 4A, Section 12(a)(3) that index options contracts may expire 
at three (3)-month intervals, in consecutive weeks or in consecutive 
months (as specified by class in Options 4A, Section 12). This is 
merely a clarification for punctuation and clarity.
    \13\ The Exchange also proposes a non-substantive punctuation 
change in Supplementary Material .01 to Options 4A, Section 12.
    \14\ The Exchange also proposes to make a non-substantive change 
to Supplementary Material .03 to Options 4, Section 5 and 
Supplementary Material .01 to Options 4A, Section 12 to change 
current references to ``monthly options series'' to ``standard 
expiration options series'' (i.e., series that expire on the third 
Friday of a month), to eliminate potential confusion. The current 
references to ``monthly options series'' are intended to refer to 
those series that expire on the third Friday of a month, which are 
generally referred to in the industry as standard expirations.
    \15\ The Exchange notes this would not prevent the Exchange from 
listing a P.M.-settled Monthly Options Series on an index with the 
same expiration date as an A.M.-settled Short Term Options Series on 
the same index, both of which may expire on a Friday. In other 
words, the Exchange may list a P.M-settled Monthly Options Series on 
an index concurrent with an A.M.-settled Short Term Options Series 
on that index and both of which expire on a Friday. The Exchange 
believes this concurrent listing would provide investors with yet 
another hedging mechanism and is reasonable given these series would 
not be identical (unlike if they were both P.M.-settled). This could 
not occur with respect to ETFs, as all Short Term Options Series on 
ETFs are P.M.-settled.
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    With respect to Monthly Options Series added pursuant to proposed 
Options 4, Section 5, Supplementary Material .08(a) through (f) and 
proposed Options 4A, Section 12, Supplementary Material .06(a) through 
(f), the Exchange will, on a monthly basis, review series that are 
outside a range of five strikes above and five strikes below the 
current price of the underlying index or security, and delist series 
with no open interest in both the put and the call series having a: (i) 
strike higher than the highest strike price with open interest in the 
put and/or call series for a given expiration month; and (ii) strike 
lower than the lowest strike price with open interest in the put and/or 
call series for a given expiration month. Notwithstanding this 
delisting policy, customer requests to add strikes and/or maintain 
strikes in Monthly Options Series in series eligible for delisting will 
be granted. In connection with this delisting policy, if the Exchange 
identifies series for delisting, the Exchange will notify other options 
exchanges with similar delisting policies regarding eligible series for 
delisting and will work with such other exchanges to develop a uniform 
list of series to be delisted, so as to ensure uniform series delisting 
of multiply listed Monthly Options Series.\16\
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    \16\ See proposed Supplementary Material .08(g) to Options 4, 
Section 5 and proposed Supplementary Material .06(g) to Options 4A, 
Section 12.
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    The Exchange believes that Monthly Options Series will provide 
investors with another flexible and valuable tool to manage risk 
exposure, minimize capital outlays, and be more responsive to the 
timing of events affecting the securities that underlie option 
contracts. The Exchange believes limiting Monthly Options Series to 
five classes will ensure the addition of these new series will have a 
negligible impact on the Exchange's and the Options Price Reporting 
Authority's (``OPRA's'') quoting capacity. The Exchange represents it 
has the necessary systems capacity to support new options series that 
will result from the introduction of Monthly Options Series.
    The Exchange also proposes to amend Options 4A, Sections 6 and 7 to 
provide that positions in Monthly Options Series will be aggregated 
with positions in options contracts on the same underlying security or 
index. This is consistent with how position (and exercise) limits are 
currently imposed on series with other expirations (Short Term Options 
Series, and Quarterly Options Series). Therefore, positions in options 
within class of index or ETF options, regardless of their expirations, 
would continue to be subject to existing position (and exercise) 
limits. The Exchange believes this will address potential manipulative 
schemes and adverse market impacts surrounding the use of options.
    The Exchange also represents its current surveillance programs will 
apply to Monthly Options Series and will properly monitor trading in 
the proposed Monthly Options Series. The Exchange currently lists 
Quarterly Options Series in certain index and ETF classes, which expire 
at the close of business at the end of four calendar months (i.e., the 
end of each calendar quarter), and has not experienced any market 
disruptions nor issues with capacity. The Exchange's surveillance 
programs currently in place to support and properly monitor trading in 
these Quarterly Options Series, as well as Short Term Option Series and 
standard expiration series, will apply to the proposed Monthly Options 
Series. The Exchange believes its surveillances continue to be designed 
to deter and detect violations of its Rules, including position and 
exercise limits and possible manipulative behavior, and these 
surveillances will apply to Monthly Options Series that the Exchange 
determines to list for trading. Ultimately, the Exchange does not 
believe the proposed rule change raises any unique regulatory concerns 
because existing safeguards--such as position and exercise limits (and 
the aggregation of options overlying the same index or ETF) and 
reporting requirements--would continue to apply.
Nonstandard Expirations Program
    The Exchange proposes to amend Options 4A, Section 12, 
Supplementary Material .07, which governs its Nonstandard Expirations 
Program (``Program''), to permit P.M.-settled options on any broad-
based index eligible for standard options trading that expire on 
Tuesday or Thursday.\17\ Currently under the Program, the Exchange is 
permitted to list P.M.-settled options on any broad-based index 
eligible for standard trading that expire on: (1) any Monday, 
Wednesday, or Friday (other than the third Friday-of-the-month or days 
that coincide with an EOM expiration (as defined below) and, with 
respect to options on the Nasdaq-100 Index (``NDX options'') and the 
Nasdaq 100 Micro Index (``XND options'') any Tuesday or Thursday 
(``Weekly Expirations'') and (2) the last trading day of the month 
(``End of Month Expirations'' or ``EOMs'').\18\ The Exchange notes that 
permitting Tuesday and Thursday expirations for all broad-based 
indexes, as proposed, would be in

[[Page 86407]]

addition to the options with Monday, Wednesday and Friday expirations 
that the Exchange may (and does) already list on those indexes, as they 
are permissible Weekly Expirations for options on a broad-based index 
pursuant to Supplementary Material .07(a) to Options 4A, Section 12. 
The proposal merely expands the availability of Tuesday and Thursday 
Weekly Expirations, and thus all Weekly Expirations available under the 
Program, to all broad-based indexes eligible for standard options 
trading, on which the Exchange may currently list Monday, Wednesday, 
and Friday Weekly expirations under the Program.
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    \17\ The Exchange's proposal is based on a recently approved 
rule change by Cboe Options. See SR-CBOE-2023-054 (``Cboe 
Nonstandard Approval Order'').
    \18\ See Supplementary Material .07 to Options 4A, Section 12.
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    The Program for Weekly Expirations will apply to any broad-based 
index option with Tuesday and Thursday expirations in the same manner 
as it currently applies to all other P.M.-settled broad-based index 
options with Monday, Wednesday, and Friday expirations and to NDX and 
XND options with Tuesday and Thursday expirations. Specifically, as set 
forth in Options 4A, Section 12, Supplementary Material .07, Weekly 
Expirations, including the proposed Tuesday and Thursday expirations, 
are subject to all provisions of Options 4A, Section 12 and treated the 
same as options on the same underlying index that expire on the third 
Friday of the expiration month; provided, however, that Weekly 
Expirations are P.M.-settled, and new series in Weekly Expirations may 
be added up to and including on the expiration date for an expiring 
Weekly Expiration.
    The maximum number of expirations that may be listed for each 
Weekly Expiration (i.e., a Monday expiration, Tuesday expiration, 
Wednesday expiration, Thursday expiration, or Friday expiration, as 
applicable) in a given class is the same as the maximum number of 
expirations permitted in Options 4A, Section 12(a)(3) for standard 
options on the same broad-based index. Weekly Expirations need not be 
for consecutive Monday, Tuesday, Wednesday, Thursday, or Friday 
expirations as applicable; however, the expiration date of a 
nonconsecutive expiration may not be beyond what would be considered 
the last expiration date if the maximum number of expirations were 
listed consecutively. Weekly Expirations that are first listed in a 
given class may expire up to four weeks from the actual listing date. 
If the Exchange lists EOMs and Weekly Expirations as applicable in a 
given class, the Exchange will list an EOM instead of a Weekly 
Expiration that expires on the same day in the given class. Other 
expirations in the same class are not counted as part of the maximum 
number of Weekly Expirations for an applicable broad-based index class. 
If the Exchange is not open for business on a respective Monday, the 
normally Monday expiring Weekly Expirations will expire on the 
following business day. If the Exchange is not open for business on a 
respective Tuesday, Wednesday, Thursday, or Friday, the normally 
Tuesday, Wednesday, Thursday, or Friday expiring Weekly Expirations 
will expire on the previous business day. If two different Weekly 
Expirations on a broad-based index would expire on the same day because 
the Exchange is not open for business on a certain weekday, the 
Exchange will list only one of such Weekly Expirations. In addition, 
like all Weekly Expirations, pursuant to Supplementary Material .07(c) 
to Options 4A, Section 12, transactions in expiring broad-based index 
options with Tuesday and Thursday expirations may be effected on the 
Exchange between the hours of 9:30 a.m. and 4:00 p.m. on their last 
trading day (Eastern Time).
    The Exchange believes that that the introduction of Tuesday and 
Thursday expirations for all broad-based index options (rather than 
offering those expirations for just two indexes) will expand hedging 
tools available to market participants while also providing greater 
trading opportunities, regardless of in which index option market they 
participate. By offering expanded Tuesday and Thursday expirations 
along with the current Monday, Wednesday and Friday expirations, the 
proposed rule change will allow market participants to purchase options 
on all broad-based index options available for trading on the Exchange 
in a manner more aligned with specific timing needs and more 
effectively tailor their investment and hedging strategies and manage 
their portfolios. In particular, the proposed rule change will allow 
market participants to roll their positions on more trading days, thus 
with more precision, spread risk across more trading days and 
incorporate daily changes in the markets, which may reduce the premium 
cost of buying protection.
    The Exchange believes there is sufficient investor interest and 
demand in Tuesday and Thursday expirations for broad-based index 
options beyond NDX and XND to warrant inclusion in the Program and that 
the Program, as amended, will continue to provide investors with 
additional means of managing their risk exposures and carrying out 
their investment objectives.\19\ With regard to the impact of this 
proposal on system capacity, the Exchange has analyzed its capacity and 
represents that it believes that the Exchange and OPRA have the 
necessary systems capacity to handle any potential additional traffic 
associated with trading of broad-based index options with Tuesday and 
Thursday expirations. The Exchange does not believe that its Members 
will experience any capacity issues as a result of this proposal and 
represents that it will monitor the trading volume associated with any 
possible additional options series listed as a result of this proposal 
and the effect (if any) of these additional series on market 
fragmentation and on the capacity of the Exchange's automated systems.
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    \19\ The Exchange currently lists Tuesday and Thursday 
expirations in NDX and XND options pursuant to the Program. The 
Exchange also already allows options on broad-based indexes to 
expire on Tuesdays for normally Monday or Wednesday expiring options 
when the Exchange is not open for business on a respective Monday or 
Wednesday (as applicable), and already allows options on broad-based 
indexes to expire on Thursdays for normally Friday expiring options 
when the Exchange is not open for business on a respective Friday. 
Also, EOM options in any broad-based indexes may currently be listed 
to expire on a Tuesday or Thursday.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\20\ in general, and with 
Section 6(b)(5) of the Act,\21\ in that it is designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \20\ 15 U.S.C. 78f.
    \21\ 15 U.S.C. 78f(b)(5).
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Monthly Options Series
    In particular, the Exchange believes the introduction of Monthly 
Options Series will remove impediments to and perfect the mechanism of 
a free and open market and a national market system by expanding 
hedging tools available to market participants. The Exchange believes 
the proposed monthly expirations will allow market participants to 
transact in the index and ETF options listed pursuant to the proposed 
rule change based on their timing as needed and allow them to

[[Page 86408]]

tailor their investment and hedging needs more effectively. Further, 
the Exchange believes the availability of Monthly Options Series would 
protect investors and the public interest by providing investors with 
more flexibility to closely tailor their investment and hedging 
decisions in these options, thus allowing them to better manage their 
risk exposure.
    The Exchange believes the Quarterly Options Series Program has been 
successful to date and the proposed Monthly Options Series program 
simply expands the ability of investors to hedge risk against market 
movements stemming from economic releases or market events that occur 
at months' ends in the same way the Quarterly Options Series Program 
has expanded the landscape of hedging for quarter-end news. Monthly 
Options Series will also complement Short Term Options Series, which 
allow investors to hedge risk against events that occur throughout a 
month. The Exchange believes the availability of additional expirations 
should create greater trading and hedging opportunities for investors, 
as well as provide investors with the ability to tailor their 
investment objectives more effectively.
    The Exchange notes that the proposed terms of Monthly Options 
Series, including the limitation to five index and ETF option classes, 
are substantively the same as the current terms of Quarterly Options 
Series.\22\ Quarterly Options Series expire on the last business day of 
a calendar quarter, which is the last business day of every third 
month. The proposed Monthly Options Series would fill the gaps between 
Quarterly Options Series expirations by permitting series to expire on 
the last business day of every month, rather than every third month. 
The proposed Monthly Options Series may be listed in accordance with 
the same terms as Quarterly Options Series, including permissible 
strikes.\23\ As is the case with Quarterly Options Series, no Short 
Term Options Series may expire on the same day as a Monthly Options 
Series. Similarly, as proposed, no Monthly Options Series may expire on 
the same day as a Quarterly Options Series. The Exchange believes 
preventing listing series with concurrent expirations in a class will 
eliminate potential investors confusion and thus protect investors and 
the public interest. Given that Quarterly Options Series the Exchange 
currently lists are essentially Monthly Options Series that can expire 
at the end of only certain calendar months, the Exchange believes it is 
reasonable to list Monthly Options Series in accordance with the same 
terms, as it will promote just and equitable principles of trade. The 
Exchange believes limiting Monthly Options Series to five classes will 
ensure the addition of these new series will have a negligible impact 
on the Exchange's and OPRA's quoting capacity. The Exchange represents 
it has the necessary systems capacity to support new options series 
that will result from the introduction of Monthly Options Series.
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    \22\ Compare proposed Supplementary Material .08 to Options 4, 
Section 5 and proposed Supplementary Material .06 to Options 4A, 
Section 12 to Supplementary Material .04 to Options 4, Section 5 and 
Supplementary Material .02 to Options 4A, Section 12.
    \23\ The Exchange notes the proposed maximum number of 
expirations is consistent with the maximum number of expirations 
permitted for end-of-month (``EOM'') series in index classes. See 
Supplementary Material .07(b) (which states that the maximum number 
of expirations that may be listed for EOMs in a given class is the 
same as the maximum number of expirations permitted for standard 
options on the same broad-based index back (i.e., up to 12 standard 
monthly expirations on the majority of index options currently 
listed on the Exchange, as set forth in Options 4A, Section 
12(a)(3)).
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    The Exchange further believes the proposed rule change regarding 
the treatment of Monthly Options Series with respect to determining 
compliance with position and exercise limits is designed to prevent 
fraudulent and manipulative acts and practices and promote just and 
equitable principles of trade. Monthly Options Series will be 
aggregated with options overlying the same ETF or index for purposes of 
compliance with position (and exercise) limits, which is consistent 
with how position (and exercise) limits are currently imposed on series 
with other expirations (Short Term Options Series and Quarterly Options 
Series). Therefore, options positions within ETF or index option 
classes for which Monthly Options Series are listed, regardless of 
their expirations, would continue to be subject to existing position 
(and exercise) limits. The Exchange believes this will address 
potential manipulative schemes and adverse market impacts surrounding 
the use of options. The Exchange also represents its current 
surveillance programs will apply to Monthly Options Series and will 
properly monitor trading in the proposed Monthly Options Series. The 
Exchange currently trades Quarterly Options Series in certain index and 
ETF classes, which expire at the close of business at the end of four 
calendar months (i.e., the end of each calendar quarter), and has not 
experienced any market disruptions nor issues with capacity. The 
Exchange's surveillance programs currently in place to support and 
properly monitor trading in these Quarterly Options Series, as well as 
Short Term Option Series and standard expiration series, will apply to 
the proposed Monthly Options Series. The Exchange believes its 
surveillances continue to be designed to deter and detect violations of 
its Rules, including position and exercise limits and possible 
manipulative behavior, and these surveillances will apply to Monthly 
Options Series that the Exchange determines to list for trading. 
Ultimately, the Exchange does not believe the proposed rule change 
raises any unique regulatory concerns because existing safeguards--such 
as position and exercise limits (and the aggregation of options 
overlying the same ETF or index) and reporting requirements--would 
continue to apply.
Nonstandard Expirations Program
    The Exchange believes that the proposed rule change will 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. The Exchange believes that the introduction of Tuesday 
and Thursday expirations for all broad-based index options (rather than 
offering those expirations for just two indexes) will provide investors 
with expanded hedging tools and greater trading opportunities and 
flexibility, regardless of in which index option market they 
participate. As a result, investors will have additional means to 
manage their risk exposures and carry out their investment objectives. 
By offering expanded Tuesday and Thursday expirations along with the 
current Monday, Wednesday and Friday expirations, the proposed rule 
change will allow market participants to purchase options on all broad-
based index options available for trading on the Exchange in a manner 
more aligned with specific timing needs and more effectively tailor 
their investment and hedging strategies and manage their portfolios. 
For example, the proposed rule change will allow market participants to 
roll their positions on more trading days, thus with more precision, 
spread risk across more trading days and incorporate daily changes in 
the markets, which may reduce the premium cost of buying protection. 
The Exchange represents that it believes that it has the necessary 
systems capacity to support any additional traffic associated with 
trading of options on all broad-based index options with Tuesday and 
Thursday expirations and does not believe that its

[[Page 86409]]

Members will experience any capacity issues as a result of this 
proposal.
    The Commission previously recognized that listing Tuesday and 
Thursday expirations for NDX and XND options was consistent with the 
Act.\24\ The Exchange noted that Tuesday and Thursday expirations in 
these index options would offer additional investment options to 
investors and may be useful for their investment or hedging 
objectives.\25\ The Exchange also notes it previously listed P.M.-
settled broad-based index options with weekly expirations pursuant to a 
pilot program, so the Commission could monitor the impact of P.M. 
settlement of cash-settled index derivatives on the underlying cash 
markets (while recognizing that these risks may have been mitigated 
given enhanced closing procedures in use in the primary equity 
markets); however, the Commission recently approved a proposed rule 
change to make that pilot program permanent. The Commission noted that 
the data it reviewed in connection with the pilot demonstrated that 
these options (including SPX and XSP options with Tuesday and Thursday 
expirations) ``benefitted investors and other market participants by 
providing more flexible trading and hedging opportunities while also 
having no disruptive impact on the market'' and were thus consistent 
with the Act.\26\ The proposed rule change is consistent with these 
findings, as it will benefit investors and other market participants 
that participate in the markets for broad-based index options other 
than NDX and XND options in the same manner by providing them with more 
flexible trading and hedging opportunities. Additionally, the Exchange 
does not believe the listing of additional P.M.-settled options on 
other broad-based indexes will have any significant economic impact on 
the underlying component securities surrounding the close as a result 
of expiring p.m.-settled options or impact market quality, based on the 
data provided to and reviewed by the Commission (and the Commission's 
own conclusions based on that review, as noted above) and due to the 
significant changes in closing procedures in the decades since index 
options moved to A.M.-settlement.\27\
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    \24\ See Securities Exchange Act Release Nos. 95393 (July 29, 
2022), 87 FR 47807 (August 4, 2022) (SR-ISE-2022-13) (``NDX Options 
Rule Change''); and 98886 (November 8, 2023), 88 FR 78417 (November 
15, 2023) (SR-ISE-2023-24) (``XND Options Rule Change'')
    \25\ See NDX Options Rule Change at 47808; and XND Options Rule 
Change at 78421.
    \26\ See Securities Exchange Act Release No. 98450 (September 
20, 2023), 88 FR 66111 (September 26, 2023) (SR-ISE-2023-08) at 
66114.
    \27\ See id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Monthly Options Series
    The Exchange does not believe the proposed rule change to list 
Monthly Options Series will impose any burden on intra-market 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act, as any Monthly Options Series the Exchange lists 
for trading will be available in the same manner for all market 
participants who wish to trade such options. The Exchange notes the 
proposed terms of Monthly Options Series, including the limitation to 
five index and ETF option classes, are substantively the same as the 
current terms of Quarterly Options Series.\28\ Quarterly Options Series 
expire on the last business day of a calendar quarter, which is the 
last business day of every third month, making the concept of Monthly 
Options Series in a limited number of index and ETF options not novel. 
The proposed Monthly Options Series will fill the gaps between 
Quarterly Options Series expirations by permitting series to expire on 
the last business day of every month, rather than every third month. 
The proposed Monthly Options Series may be listed in accordance with 
the same terms as Quarterly Options Series, including permissible 
strikes.\29\ Monthly Options Series will trade on the Exchange in the 
same manner as other options in the same class.
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    \28\ See Supplementary Material .04 to Options 4, Section 5 and 
Supplementary Material .02 to Options 4A, Section 12.
    \29\ See supra note 23.
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    The Exchange does not believe the proposed rule change to list 
Monthly Options Series will impose any burden on inter-market 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act, as nothing prevents other options exchanges from 
proposing similar rules.\30\ As discussed above, the proposed rule 
change would permit listing of Monthly Options Series in five index or 
ETF options, as well as any other classes that other exchanges may list 
under similar programs. To the extent that the availability of Monthly 
Options Series makes the Exchange a more attractive marketplace to 
market participants at other exchanges, market participants are free to 
elect to become market participants on the Exchange.
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    \30\ As noted above, at least one other options exchange 
recently adopted a substantively identical Monthly Options Series 
program. See Cboe Monthly Approval Order.
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    The Exchange does not believe the proposed rule change to provide 
that positions in Monthly Options Series will be aggregated with 
positions in options contracts on the same underlying index or security 
for purposes of determining compliance with position (and exercise) 
limits will impose any burden on intra-market competition that is not 
necessary or appropriate in furtherance of the purposes of the Act, as 
it will apply in the same manner to all market participants. The 
Exchange proposes to apply position (and exercise) limits to Monthly 
Options Series in the same manner it applies position limits to series 
with other expirations (Short Term Options Series and Quarterly Options 
Series). Therefore, positions in options in a class of ETF or index 
options, regardless of their expirations, would continue to be subject 
to existing position (and exercise) limits. Additionally, the Exchange 
does not believe this proposed rule change will impose any burden on 
inter-market competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, because it will address 
potential manipulative schemes and adverse market impacts surrounding 
the use of options.
Nonstandard Expirations Program
    The Exchange does not believe that the proposed rule change will 
impose any burden on intra-market competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because options 
on broad-based indexes with Tuesday and Thursday expirations will be 
available to all market participants. By listing options on all 
available broad-based indexes that expire on Tuesdays and Thursdays, 
the proposed rule change will provide all investors that participate in 
the markets for options on all broad-based indexes available for 
trading on the Exchange with greater trading and hedging opportunities 
and flexibility to meet their investment and hedging needs, which are 
already available for NDX and XND options. Additionally, Tuesday and 
Thursday expiring broad-based index options will trade in the same 
manner as Weekly Expirations currently trade, including Tuesday and 
Thursday expiring NDX and XND options.
    The Exchange does not believe that the proposal to list options on 
all broad-based indexes with Tuesday and Thursday expirations will 
impose any

[[Page 86410]]

burden on intermarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because these options are 
proprietary Exchange products. Other exchanges offer nonstandard 
expiration programs for index options as well as short-term options 
programs for certain equity options (including options on certain 
exchange-traded funds that track broad-based indexes) that expire on 
Tuesdays and Thursdays \31\ and are welcome to similarly propose to 
list Tuesday and Thursday options on those index or equity products. To 
the extent that the addition of options on additional broad-based 
indexes that expire on Tuesdays and Thursdays being available for 
trading on the Exchange makes the Exchange a more attractive 
marketplace to market participants at other exchanges, such market 
participants are free to elect to become market participants on the 
Exchange.
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    \31\ See, e.g., Phlx Options 4A, Section 12 (permitting 
nonstandard expirations, including expirations on Tuesdays and 
Thursdays, for NDX and XND options). See also Cboe Nonstandard 
Approval Order (permitting nonstandard expirations, including 
expirations on Tuesdays and Thursdays, for SPX and XSP options).
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \32\ and Rule 19b-4(f)(6) thereunder.\33\ 
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 \34\ and subparagraph (f)(6) of 
Rule 19b-4 thereunder.\35\
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    \32\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \33\ 17 CFR 240.19b-4(f)(6).
    \34\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \35\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-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 \36\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \37\ 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 requested that the Commission waive the 30-day operative delay so 
that the Exchange may list Monthly Options Series and options on all 
broad-based indexes with Tuesday and Thursday expirations close in time 
to Cboe Options, which the Exchange believes will benefit investors by 
promoting competition in both of these programs. The Exchange notes 
that its proposal is substantively identical to the proposals submitted 
by Cboe Options for its Monthly Options Series program \38\ and 
Nonstandard Expirations Program.\39\ 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. Accordingly, the Commission hereby waives the 
operative delay and designates the proposed rule change operative upon 
filing.\40\
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    \36\ 17 CFR 240.19b-4(f)(6).
    \37\ 17 CFR 240.19b-4(f)(6)(iii).
    \38\ See Cboe Monthly Approval Order, supra note 5.
    \39\ See Cboe Nonstandard Approval Order, supra note 17.
    \40\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-2023-32 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-2023-32. 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-2023-32 and should be 
submitted on or before January 3, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27270 Filed 12-12-23; 8:45 am]
BILLING CODE 8011-01-P