[Federal Register Volume 82, Number 204 (Tuesday, October 24, 2017)]
[Notices]
[Pages 49249-49252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22972]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81893; File No. 4-443]


Joint Industry Plan; Notice of Filing of the Fourth Amendment to 
the Plan for the Purpose of Developing and Implementing Procedures 
Designed To Facilitate the Listing and Trading of Standardized Options

October 18, 2017.
    On August 16, 2017, Chicago Board Options Exchange, Incorporated, 
on behalf of the BATS Exchange, Inc.; Box Options Exchange, LLC; C2 
Options Exchange, Incorporated; EDGX Exchange, Inc.; Miami 
International Securities Exchange, LLC; MIAX PEARL, LLC; Nasdaq BX, 
Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq 
Options Market, LLC; Nasdaq PHLX, LLC; NYSE American, LLC; NYSE Arca, 
Inc.; and the Options Clearing Corporation (``OCC'') (together, the 
``Plan Sponsors''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') pursuant to section 11A(a)(3) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 608 
thereunder,\2\ a proposal to amend the Plan for the Purpose of 
Developing and Implementing Procedures Designed to Facilitate the 
Listing and Trading of Standardized Options (``OLPP'' or ``Plan'').\3\ 
The amendment would: (1) Change, to a single date from three separate 
dates, the earliest date on which new January Long-term Equity 
AnticiPation series on equity options, options on Exchange Traded 
Funds, or options on Trust Issued Receipts may be added; (2) allow 
equity, Exchange Traded Fund, and Trust Issued Receipt option series to 
be added based on trading following regular trading hours; (3) make 
certain administrative and procedural changes to the processes relating 
to options class certifications and by which notice is given under the 
terms of the OLPP; and (4) correct a technical cross-referencing error 
in section 7 of the Plan.\4\ The Commission is publishing this notice 
to solicit comments on the amendment from interested persons.
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    \1\ 15 U.S.C. 78k-1(a)(3).
    \2\ 17 CFR 242.608.
    \3\ On July 6, 2001, the Commission approved the OLPP, which was 
proposed by the American Stock Exchange LLC, Chicago Board Options 
Exchange, Incorporated, International Securities Exchange LLC, the 
OCC, Philadelphia Stock Exchange, Inc., and Pacific Exchange, Inc. 
See Securities Exchange Act Release No. 44521, 66 FR 36809 (July 13, 
2001). See also Securities Exchange Act Release Nos. 49199 (February 
5, 2004), 69 FR 7030 (February 12, 2004) (adding Boston Stock 
Exchange, Inc. as a Plan Sponsor); 57546 (March 21, 2008), 73 FR 
16393 (March 27, 2008) (adding Nasdaq Stock Market, LLC as a Plan 
Sponsor); 61528 (February 17, 2010), 75 FR 8415 (February 24, 2010) 
(adding BATS Exchange, Inc. as a Plan Sponsor); 63162 (October 22, 
2010), 75 FR 66401 (October 28, 2010) (adding C2 Options Exchange 
Incorporated as a Plan Sponsor); 66952 (May 9, 2012), 77 FR 28641 
(May 15, 2012) (adding BOX Options Exchange LLC as a Plan Sponsor); 
67327 (June 29, 2012), 77 FR 40125 (July 6, 2012) (adding Nasdaq OMX 
BX, Inc. as a Plan Sponsor); 70765 (October 28, 2013), 78 FR 65739 
(November 1, 2013) (adding Topaz Exchange, LLC as a Plan Sponsor); 
70764 (October 28, 2013), 78 FR 65733 (November 1, 2013) (adding 
Miami International Securities Exchange, LLC as a Plan Sponsor); 
76822 (January 1, 2016), 81 FR 1251 (January 11, 2016) (adding EDGX 
Exchange, Inc. as a Plan Sponsor); 77323 (March 8, 2016), 81 FR 
13433 (March 14, 2016) (adding ISE Mercury, LLC as a Plan Sponsor); 
82 FR 9263 (February 3, 2017) (adding MIAX PEARL, LLC as a Plan 
Sponsor).
    \4\ See Letter from the Plan Sponsors to Brent J. Fields, 
Secretary, Commission, dated August 15, 2017 (``Transmittal 
Letter'').
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I. Description and Purpose of the Amendment

    The OLPP Participant Exchanges (``Participants'') and the OCC 
(collectively the ``Plan Participants'' or ``Plan Sponsors''), have 
agreed to amend the OLPP (the ``Amendment''). The purpose of the 
Amendment is to: (i) Change the earliest date of introduction of new 
January Long-term Equity AnticiPation (``LEAP'') series on equity 
options, options on Exchange Traded Funds (``ETF''), or options on 
Trust Issued Receipts (``TIR'') to a single date (from three separate 
months); (ii) allow equity, ETF, and TIR option series to be added 
based on trading following regular trading hours; (iii) make other 
administrative changes within the OLPP related to the options class 
certification process and the process by which notice is given under 
the terms of the OLPP and (iv) fix a technical error in the section 
related to new plan sponsors.

January LEAPs Series

    The Plan Participants propose to change the earliest possible date 
on which new January LEAPs series on equity, ETF, and TIR options 
classes may be added.
    Section 3(e) of the OLPP currently states, in part, ``With regard 
to the listing of new January [LEAPs] . . . the Series Selecting 
Exchange and any other exchange that lists and trades the same option 
class shall not add new LEAP series on that option class: (i) Earlier 
than September (which is 28 months before the expiration), for an 
option class on the January expiration cycle; (ii) Earlier than October 
(which is 27 months before expiration), for an option class on the 
February expiration cycle; and (iii) Earlier than November (which is 26 
months before expiration), for an option class on the March expiration 
cycle.''
    The Plan Participants propose to remove any reference to an option 
class' expiration cycle as it relates to when new January LEAPs series 
may be added and replace it with a single date, the Monday prior to the 
September expiration. The new language of section 3(e) will state, 
``With regard to the listing of new January [LEAPs] . . . the Series 
Selecting Exchange and any other exchange that lists and trades the 
same option class shall not add new LEAP series on that option class 
earlier than the Monday prior to the September expiration (which is 28 
months before the expiration).''
    In the past there were operational concerns related to adding new 
January LEAPs series for all options classes on which LEAPs were listed 
on a single trading day. The addition of new series in a pre-electronic 
trading environment was a manual process. Accordingly, the addition of 
new January LEAPs series was spread across three months (September, 
October, and November).
    Today, these operational concerns related to January LEAPs have 
been alleviated as new series can be added in bulk electronically. The 
Plan Participants believe that moving the addition of new January LEAPs 
series to no earlier than the Monday prior to the September expiration 
will reduce marketplace confusion about available January LEAPs series. 
Where previously January LEAPs series for options classes on the 
February or March expiration cycles would not have been available as 
early as January LEAPs series for options classes on the January 
expiration cycle, under the proposed change, all January LEAPs series 
will be available concurrently.

Option Series To Be Added Based on Trading Following Regular Trading 
Hours

    The Plan Participants propose to allow equity, ETF, and TIR options 
series to be added based on trading following regular trading hours. 
Regular trading hours is defined in Rule 600(b)(64) of Regulation NMS 
\5\ as between 9:30 a.m. and 4:00 p.m. Eastern Time, unless otherwise 
specified pursuant to the procedures established

[[Page 49250]]

in Rule 605(a)(2).\6\ Section 3(g) of the OLPP relates to the listing 
of new series. Section 3(g)(i) currently states, in part, ``. . . if 
the price of the underlying security is less than or equal to $20, the 
Series Selecting Exchange shall not list new option series with an 
exercise price more than 100% above or below the price of the 
underlying security. However, the foregoing restriction shall not 
prohibit the listing of at least three exercise prices per expiration 
month in an option class. If the price of the underlying security is 
greater than $20, the Series Selecting Exchange shall not list new 
option series with an exercise price more than 50% above or below the 
price of the underlying security. The price of the underlying security 
is measured by: (1) For intra-day add-on series and next-day series 
additions, the daily high and low of all prices reported by all 
national securities exchanges; (2) for new expiration months, the daily 
high and low of all prices reported by all national securities 
exchanges on the day the Series Selecting Exchange determines its 
preliminary notification of new series; and (3) for option series to be 
added as a result of pre-market trading, the most recent share price 
reported by all national securities exchanges between 7:45 a.m. and 
8:30 a.m. (Chicago time).''
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    \5\ 17 CFR 242.600(b)(64).
    \6\ 17 CFR 242.605(a)(2).
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    The OLPP does not currently allow for option series to be added 
based on trading following regular trading hours. Accordingly, the Plan 
Participants are unable to add new option series that may result from 
trading following regular trading hours until the morning after the 
trading following regular trading hours occurs. Events that occur after 
regular trading hours, such as earnings releases, often have a 
significant impact on the price of an underlying security. The 
inability to add series as a result of trading following regular 
trading hours is a burden on public customers and the members or 
participants of the Plan Participants as they do not know what options 
series will be available until markets open the following day.
    The Plan Participants propose to add a 4th category by which the 
price of an underlying security may be measured. The proposed language 
states, ``for option series to be added based on trading following 
regular trading hours, the most recent share price reported by all 
national securities exchanges between 3:15 p.m. and 5:00 p.m. (Chicago 
Time).''
    The proposed addition will allow for the listing of options series 
to be more contemporaneous with market events in that it will now allow 
listing based on trading following regular trading hours, in addition 
to pre-market and intra-day trading. Currently, options series may not 
be added based on trading following regular trading hours and need to 
wait until pre-market trading, beginning at 7:45 a.m. (Chicago Time) 
the following day to be added. Under the proposed rule, option series 
to be added based on trading following regular trading hours may be 
added as early as 3:15 p.m. (Chicago Time) the day the trading 
following regular trading hours occurs. The proposed rule will not 
affect when new series additions will be available for trading. Option 
series added based on trading following regular trading hours will be 
available for trading on the open of the regular trading session (i.e. 
8:30 a.m. Chicago Time) on the options markets the following day (along 
with any series added as the result of pre-market trading activity).
    Allowing option series to be added based on trading following 
regular trading hours will provide investors with additional notice 
regarding the option series that will be available for trading the 
following day. Earlier notice regarding what options series will be 
available for trading the following day will allow investors to plan 
their option trading activity earlier and accordingly help perfect the 
mechanism of a free and open market and a national markets system, and, 
in general, protect investors and the public interest.

Administrative Changes to Class Certification and Notice Processes

    Finally, the Plan Participants propose to make other administrative 
changes related to the notification process whereby OCC confirms 
certifications received each day and the means of submission for 
listing certifications to OCC.
    Currently, section 1 of the OLPP, which describes the certification 
process, requires OCC to provide daily to each Participant a customized 
email confirming the option classes newly certified for trading, if 
any, by that Participant. Similarly, OCC must notify each Participant 
daily of all options a Participant previously certified for trading 
that were subsequently certified by another Participant on that day.
    Although OCC is required to email the Participants such 
notifications, a list of all certifications received and processed each 
day is made available to the public on the OCC Web site. Since the 
daily list of options certifications is made publicly available under 
the current practice, the Plan Participants propose to streamline the 
process by replacing the existing requirement for customized email 
notifications with a requirement for a daily general notification from 
OCC to all Participants to inform them that the daily list of 
certifications is viewable on the OCC Web site. To codify such changes 
and consolidate repetitive language regarding the certificate 
submission and notification process contained in section 1 of the OLPP, 
the Plan Participants propose to modify section 1 as follows.
    Specifically, the current sections 1(b)(ii) and 1(c) are to be 
replaced by a new section 1(c), and the content of current section 
1(b)(i) is maintained in its entirety, with the exception of the 
removal of ``option symbol'' in the last sentence,\7\ as new section b. 
The current sections 1(b)(ii) and 1(c) contain identical time frame 
requirements for OCC to provide notification to exchanges daily for new 
listing certifications and listing certifications for which one 
exchange is certifying an option that is already traded by another 
exchange (``adds to existing certifications''). In lieu of describing 
the 1:00 p.m. notification time line twice as stated in current 
sections 1(b)(ii) and 1(c), the proposed new section 1(c) provides the 
same time frame requirement (1:00 p.m. Chicago time) in one 
consolidated location in the OLPP that is applicable to both new 
listing certifications and adds to existing certifications.
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    \7\ The last sentence of current section 1(b)(i), which states, 
``The option symbol, initial exercise prices, the expiration cycle 
and position and exercise limits* for the selected option class 
shall be as provided in the Certificate that OCC determined to be 
the first submitted;'' will be modified to eliminate ``option 
symbol'' from this provision. With the implementation of the Options 
Symbology Initiative in 2010, options generally have the same symbol 
as the underlying security. As a result, Participants no longer 
submit conflicting option symbols for new certifications, as was the 
case prior to 2010. The language ``option symbol'' is removed only 
from the last sentence which addresses the submission of conflicting 
option symbols by different Participants. The requirements to 
provide an option symbol elsewhere in section 1(b) and new section 
1(c) will remain and are necessary as such information is needed to 
identify an option for trading.
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    As an associated change to the consolidation of the notification 
timing requirements to Participants, the language describing the 
customized email notifications sent by OCC has been excluded from new 
section (c) because, as discussed above, customized emails will no 
longer be required. In addition, certain details required in the 
current customized email notifications will not specifically be 
provided on the OCC Web site in the area designated for daily listing 
certifications as such information will instead be available on other 
portions of the OCC Web site or will be viewable to Participants 
through

[[Page 49251]]

OCC's system. Proposed section 1(c) requires the portion of the OCC Web 
site designated for daily listing certifications to provide the name of 
the underlying security, the option symbol and Selecting Exchange(s) 
for selected options on that day.\8\ Other option attributes, in 
particular the initial exercise prices and position and exercise limits 
for a selected option class currently included in the daily customized 
email notifications sent by OCC, will instead be available on other 
areas of the OCC Web site where such information is currently found 
today.\9\ The expiration cycle, which is also currently included in the 
customized email notifications but is not located on the OCC Web site 
designated for daily listing certifications, is also currently viewable 
to Participants through OCC's system.\10\
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    \8\ Daily listing certifications can be viewed on the OCC Web 
site at https://www.theocc.com/market-data/series/new-listings/.
    \9\ Exercise prices can be found on the OCC Web site at https://www.theocc.com/webapps/series-added-today and https://www.theocc.com/webapps/series-search. Position and exercise limits 
can be found at https://www.theocc.com/webapps/position-limits. Such 
information will be available to the public on these Web sites for a 
selected option class on the day the option class commences trading, 
as is the case currently.
    \10\ Functionality currently available through a portion of 
OCC's clearing system allows option exchanges to view option 
attributes, including series and expiration cycle for options. Plan 
Participants currently obtain expiration cycle information from the 
customized email notifications or by accessing such information in 
OCC's system. The posting of daily listing certifications on the OCC 
Web site does not presently include expiration cycles and will not 
under the new process. Such information will be accessed by 
Participants if needed through OCC's system as they can do 
currently. Expiration cycle can also be inferred from the public Web 
site through examination of series data.
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    Similar to the deletion of repetitive language discussed above, the 
Plan Participants propose new section 1(d) to consolidate nearly 
duplicative language contained in current sections 1(b)(ii) and 1(c) 
regarding when an option may begin trading. The new section 1(d) states 
that trading for an option symbol submitted to OCC for certification on 
a given day may begin on the first trading day after submission. This 
provision applies to both new listing certifications and adds to 
existing certifications, thereby eliminating repetitive language in 
current sections 1(b)(ii) and 1(c).
    Likewise, Plan Participants are proposing the addition of new 
section 1(e) to consolidate and amend nearly duplicative language 
contained in current sections 1(b)(ii) and 1(c) regarding the 
withdrawal of a certification. As is the case currently, new section 
1(e) specifies that a Participant may withdraw a certification by 
notifying OCC prior to the time when OCC sends the daily email 
notification to Participants. If an exchange notifies OCC of a 
withdrawal after the daily notification has been sent, OCC will send an 
updated notification to all Participants to inform them of the change 
to that day's certifications. The communication for an updated 
notification to all Participants is a change from the existing process 
under the OLPP whereby currently only exchanges that have also 
certified the withdrawn option will be notified. This change reflects 
the intended departure from customized email notifications. Such 
customized emails are no longer needed since the information is 
publicly available on the OCC Web site.\11\
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    \11\ Daily listing certifications are located at https://www.theocc.com/market-data/series/new-listings/.
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    The Plan Participants also propose to streamline the means of 
certification submission as contained in section 5 of the OLPP. 
Currently, section 5 provides that all class certificates must be 
submitted to OCC through telefacsimile. To modernize the process, Plan 
Participants are proposing to amend this language to state that class 
certificates and any associated information and/or documentation must 
be submitted via ``such electronic means reasonably agreed upon among 
the Plan Sponsors.'' Participants will agree annually as to the means 
for such communications. Each Participant will document in writing 
agreement to such means and submit such documentation to OCC. It is 
anticipated that Plan Participants will use functionality provided by 
OCC's system as the electronic means for submission of listing 
certifications and any documents associated with such certifications.
    In addition, the Plan Participants are proposing to amend section 5 
to describe when a notice is deemed to have been given by electronic 
means. The new language in section 5 states ``All other notices 
required under the terms of this Plan shall be deemed to have been duly 
given if communicated through electronic mail or other electronic means 
reasonably agreed upon among the Plan Sponsors. Notices by New Plan 
Sponsors (as defined in section 7 below) to then-existing Plan Sponsors 
of the execution of the Plan shall be deemed to be duly given if 
communicated by electronic mail or other electronic means reasonably 
agreed upon among the Plan Sponsors to each Plan Sponsor.'' It is 
anticipated that notices by New Plan Sponsors and all such ``other 
notices'', which shall include notifications made pursuant to section 2 
of the OLPP, will generally be made using electronic mail. Participants 
will agree annually to the means for such communications in the same 
manner as described above for listing certification submissions.
    The above changes are intended to modernize section 1 of the OLPP 
by simplifying and consolidating language that allows for more 
efficient processes for certifications as well as for communication. 
The Plan Participants recognize that certain requirements of the OLPP 
are currently not adaptable to technology advancements. For example and 
as discussed above, the Plan Participants have been bound to continue 
to use telefacsimile for certification submissions because of the 
definitive language in the OLPP. Additionally, resources are currently 
allocated to create customized communications to the Participants as 
required under the OLPP whereas all such information is available 
publicly on the OCC Web site. The Plan Participants believe the 
proposed amendments collectively will enhance the certification and 
notification processes and will also allow the requirements of the OLPP 
to be more adaptable to any future technology improvements that may 
make these processes more agile and efficient.

Technical Error in Section Related to New Plan Sponsors

    Section 7(ii) of the OLPP currently states, ``To become a Plan 
Sponsor, an amendment to the Plan may be effected by a new Eligible 
Exchange executing a copy of the Plan, as then in effect (with the only 
change being the addition of the new Plan Sponsor's name in section 8 
below) and submitting such executed Plan to the SEC. Such amendment 
will be effective when it has been approved by the SEC or otherwise 
becomes effective pursuant to section 11A of the Exchange Act and Rule 
11Aa3-2.'' The reference to the names of new Plan Sponsors being added 
to section 8 of the OLPP is incorrect. The names of Plan Sponsors are 
contained in section 9 of the OLPP. The Plan Participants propose to 
correct this technical error by replacing the reference to ``section 
8'' with ``section 9.''

Governing or Constituent Documents

    Not applicable.

Implementation of Amendment

    The OLPP, as amended, will become effective upon Commission 
approval. The Plan Participants will implement the OLPP, as amended, 
pursuant to the terms of the Amendment upon Commission approval.

[[Page 49252]]

Development and Implementation Phases

    Not applicable.

Analysis of Impact on Competition

    The proposed OLPP, as amended, does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Exchange Act. The Plan Participants do not believe that 
the proposed OLPP, as amended, introduces terms that are unreasonably 
discriminatory for the purposes of section 11A(c)(1)(D) of the Exchange 
Act.

Written Understanding or Agreements Relating to Interpretation of, or 
Participation in, Plan

    The Participants have no written understandings or agreements 
relating to an interpretation of the Amendment. Section 7 of the OLPP 
sets forth how any entity registered as a national securities exchange 
or national securities association may become a Plan Sponsor.

Approval of Amendment of the Plan

    The Amendment has been approved by the Plan Sponsors in accordance 
with the terms of the plan. Each of the Plan Participants have executed 
a signed copy of the Amendment.

Terms and Conditions of Access

    Section 7 of the OLPP provides that any Eligible Exchange, as 
defined therein, may become a Plan Sponsor by (a) executing a copy of 
the Plan; (b) providing each then-current Plan Sponsor with a copy of 
such executed Plan; and (c) effecting an amendment to the Plan as 
specified therein.

Method of Determination and Imposition, and Amount of, Fees and Charges

    Not applicable.

Method and Frequency of Processor Evaluation

    Not applicable.

Dispute Resolution

    Not applicable.

II. Implementation of Amendment

    The OLPP, as amended, will become effective upon Commission 
approval. The Plan Participants will implement the OLPP, as amended, 
pursuant to the terms of the Amendment upon Commission approval.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed OLPP 
Amendment 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 4-443 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 4-443. 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 plan that are filed with the Commission, 
and all written communications relating to the plan 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 
Plan Sponsors' principal offices. 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 4-443, 
and should be submitted on or before November 14, 2017.

    By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22972 Filed 10-23-17; 8:45 am]
BILLING CODE 8011-01-P


