[Federal Register Volume 82, Number 224 (Wednesday, November 22, 2017)]
[Notices]
[Pages 55676-55679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25230]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82095; File No. SR-NYSEAMER-2017-31]


Self-Regulatory Organizations; NYSE American LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Rule 903 (Series of Options Open for Trading)

November 16, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on November 2, 2017, NYSE American LLC (``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 self-regulatory organization. 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\ 15 U.S.C. 78a.
    \3\ 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 Rule 903 (Series of Options Open for 
Trading). The proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the filing is to amend Commentary .05 to Rule 903 to 
modify the strike price intervals for certain Exchange Traded Funds 
(each an ``ETF''). Specifically, the Exchange proposes to modify the 
interval setting regime for options on SPDR[supreg] S&P 500[supreg] ETF 
(``SPY''), iShares Core S&P 500 ETF (``IVV''), and the SPDR[supreg] Dow 
Jones[supreg] Industrial Average ETF (``DIA'') to allow the Exchange to 
initiate $1 or greater strike price intervals above $200. Through this 
filing, the Exchange intends to make SPY, IVV, and DIA options more 
tailored and easier for investors and traders to use, which is 
consistent with the rules of other options exchanges.\4\
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    \4\ See, e.g., Chicago Board of Options Exchange (``CBOE'') Rule 
5.5, Interpretation and Policy .08; NASDAQ PHLX LLC (``PHLX'') Rule 
1012, Commentary .05. CBOE and PHLX both amended their rules 
regarding strike setting regimes for SPY and DIA in 2014. See 
Securities Exchange Act Release Nos. 72949 (August 29, 2014) 79 FR 
53089 (September 5, 2014) (SR-Phlx-2014-46) and 72990 (September 4, 
2014) 79 FR 53799 (September 10, 2014) (SR-CBOE-2014-068). Earlier 
this year, CBOE and PHLX further modified their rules to include IVV 
in the same strike setting regime as SPY. See Securities Exchange 
Act Release Nos. 80913 (June 13, 2017), 82 FR 27907 (June 19, 2017) 
(SR-CBOE-2017-048) and 81246 (July 28, 2017) 82 FR 36020 (August 2, 
2017) (SR-Phlx-2017-57). The Exchange is authorized to match (and 
has matched) strikes in DIA, SPY, and IVV that are listed on other 
exchanges such as CBOE and PHLX. See Rule 903A(b)(vi) (providing 
that the Exchange ``may list an options series that is listed by 
another options exchange, provided that at the time such series was 
listed it was not prohibited under the provisions of the [Options 
Listing Procedure Plan or OLPP] or the rules of the exchange that 
initially listed the series''). The proposed rule change would allow 
the Exchange to initially list strike price intervals of $1 or 
greater in options on DIA, SPY, or IVV when the strike price is 
above $200 (regardless of whether other exchanges similarly list 
such strikes).
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    Currently, the S&P 500 Index is above 2000.\5\ The S&P 500 Index is 
widely regarded as the best single gauge of large cap U.S. equities and 
is widely quoted as an indicator of stock prices and investor 
confidence in the securities market. As a result, individual investors 
often use S&P 500 Index-related products to diversify their portfolios 
and benefit from market trends. Accordingly, the Exchange believes that 
offering a wide range of S&P 500 Index-based options affords traders 
and investors important hedging and trading opportunities. SPY and IVV 
are identical in all material respects and are designed to track the 
performance of the S&P 500 Index. Shares of SPY and IVV are currently 
priced around 1/10th the value of S&P 500 Index. The Dow Jones 
Industrial Average (``DJIA'') is currently above 20,000 and is one of 
the most widely followed market indices.\6\ Shares of DIA are currently 
priced around 1/100th of the DJIA. Accordingly, SPY and IVV strike 
prices--having a multiplier of $100--reflect a value

[[Page 55677]]

roughly equal to 1/10th of the value of the S&P 500 Index. For example, 
if the S&P 500 Index is at 1972.56, shares of SPY and IVV might have a 
value of approximately 197.26 per share. Consequently, an at-the-money 
option on SPY or IVV, with a strike price of $197.00 will have a 
notional value of $19,700. In general, SPY and IVV (and, to a lesser 
extent, DIA) options provide retail investors and traders with the 
benefit of trading the broad market in a manageably sized contract.
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    \5\ On October 30, 2017, the S&P 500 Index closed at 2,572.83.
    \6\ On October 30, 2017, the DJIA closed at 23,348.74.
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    The Exchange notes that the popularity of options on DIA and SPY 
(and, to a lesser extent, IVV) is evidenced by the existence of 
monthly, quarterly, and weekly expiration cycles in these ETFs.\7\ 
Currently, Commentary .05(a) to Rule 903 provides that the ``interval 
of strike prices of series of options on Exchange-Traded Fund Shares 
will be $1 or greater where the strike price is $200 or less and $5 or 
greater where the strike price is greater than $200.'' \8\ Thus, unless 
the Exchange is able to match strikes listed on other exchanges (see 
supra note 4), the current rule limits the trading and hedging 
possibilities for investors on the Exchange--particularly those 
investors that would like to execute strategies that are effective in 
$1 intervals. The Exchange therefore proposes to amend Commentary .05 
to Rule 903 to allow the Exchange to initiate $1 strike price intervals 
in options on SPY, IVV, and DIA. As proposed, the modified rule would 
provide that ``[n]otwithstanding any other provision of this rule 
regarding the interval of strike prices of series of options on 
Exchange-Traded Fund Shares, the interval of strike prices on options 
on [SPY, IVV, and DIA] will be $1 or greater.'' \9\
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    \7\ For rules regarding quarterly or weekly options (also known 
as Short Term Options or STOS), see Commentaries .09 and .10, 
respectively, to Rule 903.
    \8\ See Rule 903, Commentary .05(a). See also Rule 903, 
Commentary .10 (d) (providing, in relevant part, that [i]f the class 
does not trade in $1 strike price intervals, the strike price 
interval for Short Term Option Series may be (i) $0.50 or greater 
where the strike price is less than $100; (ii) $1.00 or greater 
where the strike price is between $100 and $150; or (iii) $2.50 or 
greater for strike prices greater than $150. A non-Short Term Option 
that is on a class that has been selected to participate in the 
Short Term Option Series Program is referred to as a ``Related non-
Short Term Option'').
    \9\ See proposed Rule 903, Commentary .05(d).
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    The Exchange believes that modifying the Rule to allow the Exchange 
to initiate finer--i.e., one dollar--strike intervals in SPY, IVV, and 
DIA, would provide investors more efficient hedging and trading 
opportunities. In particular, the proposed ability to initiate $1 
intervals, particularly above a $200 strike price, will result in 
having at-the-money series based upon the underlying SPY, IVV, or DIA 
moving less than 1%. The Exchange believes this strike setting regime 
is consistent with slower price movements of broad-based indices. 
Furthermore, the proposed ability to initiate $1 intervals would allow 
investors to continue to employ certain option trading strategies 
(e.g., risk reduction/hedging strategies using SPY weekly options) 
without the Exchange having to wait for another exchange to list such 
strikes. Considering that $1 intervals already exist below the $200 
price point, and that SPY, IVV, and DIA are above the $200 level, the 
Exchange believes it would be appropriate to modify the existing $200 
level (above which intervals increase 500% to $5) for options on these 
ETFs. The Exchange believes that eliminating the existing $200 level 
would allow investors to continue investing, trading and utilizing 
hedging strategies on these highly-liquid options.
    Under the current rule, the Exchange is limited in its ability to 
initiate strikes in options on IVV, DIA, and SPY over $200. Assuming no 
other exchange lists the desired strike, investors and traders on the 
Exchange are unable to roll open positions from a lower strike to a 
higher strike in conjunction with the price movement of the underlying 
index because the next (higher) available series would be $5 away above 
a $200 strike price.\10\ Thus, to initiate a position from $200 strike 
to a $205 strike under the current rule, an investor would need for the 
underlying product to move 2.5% and would not be able to execute a roll 
up until such a large movement occurred. With the proposed rule change 
to allow the Exchange to initiate finer strikes in options on IVV, DIA, 
and SPY over the $200 level, however, the investor would be in a 
significantly safer position of being able to roll his open options 
position from a $200 to a $201 strike price, which is only a 0.5% move 
for the underlying.\11\
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    \10\ See Rule 903, Commentary .05(a).
    \11\ See proposed Rule 903, Commentary .05(d).
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    The proposed rule change would allow the Exchange to better respond 
to customer demand for SPY, IVV, and DIA strike prices more precisely 
aligned with current S&P 500 Index and DJIA values.\12\ The Exchange 
believes that the proposed rule change, like the other strike price 
programs currently offered by the Exchange, would benefit investors by 
continuing to provide investors the flexibility to more closely tailor 
their investment and hedging decisions using options on SPY, IVV, and 
DIA. By allowing the Exchange to initiate the listing of series of 
options on SPY, IVV, and DIA in $1 intervals between strike prices over 
$200, the proposal would moderately augment the potential total number 
of options series available on the Exchange.\13\ However, the Exchange 
believes it and the Options Price Reporting Authority (``OPRA'') have 
the necessary systems capacity to handle any potential additional 
traffic associated with this proposed rule change. The Exchange also 
believes that members will not have a capacity issue due to the 
proposed rule change. Finally, the Exchange represents that it does not 
believe that this expansion will cause fragmentation of liquidity.
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    \12\ See supra notes 5, 6.
    \13\ As noted herein (see supra note 4), the Exchange has 
matched strikes listed by other exchanges in options on IVV, DIA and 
SPY.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \14\ of 
the Act, in general, and furthers the objectives of Section 
6(b)(5),\15\ in particular, in that it is 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 facilitating transactions in securities, and to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \10\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change would promote just and 
equitable principles of trade by allowing the Exchange to initiate 
strikes in options on IVV, DIA, and SPY over $200, which would result 
in continued trading and hedging opportunities in options on these 
ETFs. The proposed change would likewise ensure that such options 
investors are not at a disadvantage simply because of the strike price.
    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(1) of the Act, which provides that the Exchange be 
organized and have the capacity to be able to carry out the purposes of 
the Act and the rules and regulations thereunder, and the rules of the 
Exchange. The rule change proposal allows the Exchange to respond to 
customer demand to allow options on SPY, IVV, and DIA to trade

[[Page 55678]]

in $1 intervals above a $200 strike price. The Exchange does not 
believe that the proposed rule would create additional capacity issues 
or affect market functionality.
    As noted above, under the current rule (absent another exchange 
listing strikes that the Exchange could match),\16\ ETF options trade 
in wider $5 intervals above a $200 strike price, whereas options at or 
below a $200 strike price trade in $1 intervals. This creates a 
situation where contracts on the same option class effectively may not 
be able to execute certain strategies such as, for example, rolling to 
a higher strike price, simply because of the arbitrary $200 strike 
price above which options intervals increase by $5. This proposal 
establishes a clear exception to the current ETF interval regime for 
options on SPY, IVV, and DIA to allow the Exchange to initiate the 
listing of such options to trade in $1 or greater intervals at all 
strike prices.
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    \16\ See supra note 4.
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    The Exchange believes that the proposed rule change, like other 
strike price programs currently offered by the Exchange, would remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system to the benefit of investors by giving them 
increased flexibility to more closely tailor their investment and 
hedging decisions. Finally, the proposal would foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities as this proposal would align Exchange rules with those of 
other exchanges--including CBOE and PHLX--to permit finer strikes in 
IVV, DIA, and SPY.\17\
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    \17\ See supra note 4.
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    With regard to the impact of this proposal on system capacity, the 
Exchange believes it and OPRA have the necessary systems capacity to 
handle any potential additional traffic associated with this proposed 
rule change. The Exchange believes that its members will not have a 
capacity issue as a result of this proposal.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Rather, the proposed rule 
change would enable the Exchange to better compete with other options 
exchanges that have already adopted the proposed strike setting 
regime.\13\ Although the Exchange is able to match strikes listed by 
other exchanges, this proposal would allow the [sic] initiate strikes 
in IVV, DIA, and SPY regardless of strikes listed on other exchanges, 
which should help level the playing field for investors investing in, 
trading and utilizing hedging strategies on these options.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 \18\ and Rule 19b-4(f)(6) thereunder.\19\ 
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) of the Act \20\ and Rule 19b-4(f)(6) 
thereunder.\21\
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    \18\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii), the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. As noted above, the 
proposal would allow the Exchange to initiate $1 or greater strike 
price intervals above $200 for options on SPY, DIA, and IVV. 
Substantially similar rules are already in place at CBOE and PHLX, and 
the Exchange currently has the ability to list, and does list, these 
strike price intervals pursuant to its matching authority in Rule 
903A(b)(vi). The Commission therefore believes that waiver of the 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission designates the proposed rule 
change to be operative upon filing.\22\
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    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEAMER-2017-31 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-NYSEAMER-2017-31. 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 the filing also will be available 
for inspection and copying at the principal

[[Page 55679]]

office of the Exchange. All comments received will be posted without 
change. Persons submitting comments are cautioned that we do not redact 
or edit personal identifying information from comment submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-NYSEAMER-2017-
31 and should be submitted on or before December 13, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25230 Filed 11-21-17; 8:45 am]
 BILLING CODE 8011-01-P


