
[Federal Register Volume 78, Number 169 (Friday, August 30, 2013)]
[Notices]
[Pages 53794-53796]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21232]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70260; File No. SR-NASDAQ-2013-112]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Change the Expiration Date for Most Option Contracts to the Third 
Friday of the Expiration Month Instead of the Saturday Following the 
Third Friday

August 26, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 21, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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.
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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 Exchange rules to change the 
expiration date for most option contracts to the third Friday of the 
expiration month instead of the Saturday following the third Friday. 
The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at the Exchange's principal office, 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 is proposing to change the expiration date for most 
option contracts to the third Friday of the expiration month instead of 
the Saturday following the third Friday. More specifically, the 
Exchange is proposing to amend rule text referencing Saturday 
expirations. The Exchange notes, however, that this change will apply 
to all standard expiration contracts including those in which the rules 
are silent on the expiration date.\3\ The Exchange is making this 
filing to harmonize its rules in connection with a recently approved 
rule filing made by The Options Clearing Corporation (``OCC'') which 
made substantially similar changes.\4\

[[Page 53795]]

The Exchange believes that the industry must remain consistent in 
expiration dates, and, thus, is proposing to update its rules to remain 
consistent with those of OCC. In addition, the Exchange understands 
that other exchanges have and will be filing similar rules to effect 
this industry-wide initiative.\5\
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    \3\ Mini Options expirations are the same as those for standard 
expirations and would be amended as specified in this proposal.
    \4\ See Securities Exchange Act Release No. 34-69772 (June 17, 
2013), 78 FR 37645 (June 21, 2013)(order approving SR-OCC-2013-004).
    \5\ See Securities Exchange Act Release Nos. 70091 (August 1, 
2013), 78 FR 48212 (August 7, 2013)(SR-CBOE-2013-073) and 69996 
(July 17, 2013), 78 FR 44183 (July 23, 2013)(SR-MIAX-2013-32).
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    Most option contracts (``standard expiration contracts'') currently 
expire at the ``expiration time'' (11:59 p.m. Eastern Time) on the 
Saturday following the third Friday of the specified expiration month 
(the ``expiration date'').\6\ With this filing, the Exchange is 
proposing to give advance notice to its members and member 
organizations that the expiration date for standard expiration 
contracts is changing to the third Friday of the expiration month.\7\ 
(The expiration time would continue to be 11:59 p.m. Eastern Time on 
the expiration date.) The change would apply only to standard 
expiration contracts expiring after February 1, 2015, and the Exchange, 
similar to OCC, does not propose to change the expiration date for any 
outstanding option contracts. The change will apply only to series of 
option contracts opened for trading after the effective date of the OCC 
rule change and having expiration dates later than February 1, 2015. 
Option contracts having non-standard expiration dates (``non-standard 
expiration contracts'') will be unaffected by this proposed rule 
change, except that FLEX options having expiration dates later than 
February 1, 2015 cannot expire on a Saturday unless they are specified 
by OCC as grandfathered.\8\
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    \6\ Examples of options with non-standard expiration contracts 
include: Quarterly Equity and Exchange-Traded Fund Shares (``ETFs'') 
Option Series (Chapter IV, Section 6, Commentary .04), Quarterly 
Options Series for indexes (Chapter XIV, Section 11(g)), Short Term 
Option Series (Chapter IV, Section 6, Commentary .07) and Short Term 
Option Series for indexes (Chapter XIV, Section 11(h)).
    \7\ The Exchange will provide notice to members and member 
organizations regarding the anticipated change by issuing an Options 
Trader Alert.
    \8\ See note 6 supra.
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    In order to provide a smooth transition to the Friday expiration 
OCC has begun to move the expiration exercise procedures to Friday for 
all standard expiration contracts even though the contracts would 
continue to expire on Saturday.\9\ After February 1, 2015, virtually 
all standard expiration contracts will actually expire on Friday. The 
only standard expiration contracts that will expire on a Saturday after 
February 1, 2015 are certain options that were listed prior to the 
effectiveness of the OCC rule change, and a limited number of options 
that may be listed prior to necessary systems changes of the options 
exchanges, which are expected to be completed in August 2013. After 
these systems changes are made, NASDAQ will not list any additional 
options with Saturday expiration dates falling after February 1, 2015. 
NASDAQ understands that the other exchanges are committed to the same 
listing schedule.\10\
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    \9\ See SR-OCC-2013-04.
    \10\ See note 5 supra.
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    The Exchange notes that OCC, industry groups, clearing members and 
the other exchanges have been active participants in planning for the 
transition to the Friday expiration.\11\ In March 2012, OCC began to 
discuss moving standard contract expirations to Friday expiration dates 
with industry groups, including two Securities Industry and Financial 
Markets Association (``SIFMA'') committees, the Operations and 
Technology Steering Committee and the Options Committee, and at two 
major industry conferences, the SIFMA Operations Conference and the 
Options Industry Conference.\12\ OCC also discussed the project with 
the Intermarket Surveillance Group and at an OCC Operations Roundtable. 
In each case, there was broad support for the initiative.\13\
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    \11\ See note 9 supra.
    \12\ Id.
    \13\ Id.
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    Certain option contracts have already been listed with Saturday 
expiration dates as distant as December 2015 (which is the furthest out 
expiration as of the date of this filing). Additionally, until NASDAQ 
completes certain systems enhancements in August 2013, it remains 
possible that additional option contracts may be listed with Saturday 
expiration dates beyond February 1, 2015. For these contracts, 
transitioning to a Friday expiration for newly listed option contracts 
expiring after February 1, 2015 would create a situation under which 
certain options with open interest would expire on a Saturday while 
other options with open interest would expire on a Friday in the same 
expiration month.
    Clearing members have expressed a clear preference to not have a 
mix of options with open interest that expire on different days in a 
single month.\14\ Accordingly, OCC represented in its recently approved 
filing that it will not issue and clear any new option contract with a 
Friday expiration if existing option contracts of the same options 
class expire on the Saturday following the third Friday of the same 
month. However, Friday expiration processing will be in effect for 
these Saturday expiration contracts. As with standard expiration 
options during the transition period, exercise requests received after 
Friday expiration processing is complete but before the Saturday 
contract expiration time will continue to be processed without fines or 
penalties.
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    \14\ Id.
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    Thus, the Exchange is proposing to update its rules to reflect the 
above discussed change. More specifically, the Exchange is proposing to 
add Section 2(q) to Chapter XIV, Index Rules to define ``expiration 
date'' to be consistent with the revised OCC definition.\15\ Thus, 
consistent with the OCC filing, the Exchange is proposing to add 
language to these rules stating that any series expiring prior to 
February 1, 2015 will have a Saturday expiration date while any series 
expiring on or after February 1, 2015 will have a Friday expiration 
date.\16\
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    \15\ Id.
    \16\ With the exception of expirations that were listed prior to 
the effective date of the OCC filing and have open interest.
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    The Exchange also is proposing to adopt changes to Option Rules, 
Chapter XIV, Sections 10, 11(a)(5), 11(a)(6) and 11(d) for consistency 
to reflect the change in the expiration date definition. To the extent 
applicable to the timeframes herein, the Exchange is also proposing, 
with this filing, to replace any reference in the purpose section of 
any past Exchange rule filings or alerts to any expiration date other 
than Friday for a standard options contract with the new Friday 
standard. Essentially, the Exchange is now proposing to replace any 
relevant historic references to expiration dates to be replaced with 
the proposed Friday expiration. As stated above, the Exchange believes 
the proposed change will keep the Exchange consistent with the 
processing at OCC and will enable the Exchange to give effect to the 
industry-wide initiative. In addition, the Exchange understands that 
other exchanges will be filing similar rules, thus creating a uniform 
expiration date for standard options on listed classes.\17\
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    \17\ See note 5 supra.
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    The Exchange plans to release an Options Trader Alert to its 
members and member organizations to inform them of this change prior to 
the implementation of the rule.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations

[[Page 53796]]

thereunder applicable to the Exchange and, in particular, the 
requirements of Section 6(b) of the Act.\18\ Specifically, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \19\ requirements that the rules of an exchange be designed to 
prevent fraudulent and manipulative acts and practices, 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \20\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \18\ 15 U.S.C. 78f (b).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ Id.
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    In particular, the Exchange believes that keeping its rules 
consistent with those of the industry will protect all participants in 
the market by eliminating confusion. The proposed changes thus allow 
for a more orderly market by allowing all options markets, including 
the clearing agencies, to have the same expiration date for standard 
options.
    In addition, the proposed changes will foster cooperation and 
coordination with persons engaged in regulating clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities by aligning a pivotal part of the options processing to 
be consistent industry wide. If the industry were to differ, investors 
would suffer from confusion and be more vulnerable to violate different 
exchange rules. The proposed changes do not permit unfair 
discrimination between any members because they are applied to all 
members equally. In the alternative, the Exchange believes that it 
helps all members by keeping the Exchange consistent with OCC practices 
and those of other Exchanges.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Specifically, the 
Exchange does not believe the proposed rule change will impose a burden 
on intramarket competition because it will be applied to all members 
equally. In addition, the Exchange does not believe the proposed rule 
change will impose any burden to intermarket competition because it 
will be applied industry wide and apply to all market participants. The 
proposed rule change is structured to enhance competition because the 
shift from an expiration date of the Saturday following the third 
Friday to the third Friday is anticipated to be adopted industry-wide 
and will apply to all multiply listed classes. This in turn will allow 
NASDAQ to compete more effectively with other exchanges making similar 
rule changes.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received. The Exchange 
notes, however, that a favorable comment was submitted to the OCC 
filing.

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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act\21\ and Rule 19b-4(f)(6)\22\ 
thereunder.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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.
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-112 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2013-112. 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 such 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 publicly available. All 
submissions should refer to File Number SR-NASDAQ-2013-112 and should 
be submitted on or before September 20, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21232 Filed 8-29-13; 8:45 am]
BILLING CODE 8011-01-P


