[Federal Register Volume 83, Number 224 (Tuesday, November 20, 2018)]
[Notices]
[Pages 58640-58642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25244]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84588; File No. SR-NASDAQ-2018-088]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Chapter IV, Securities Traded on NOM, Section 8, Long-Term 
Options Contracts

November 14, 2018.
    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 7, 2018, 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 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 amend Chapter IV, Securities Traded on 
NOM, Section 8, Long-Term Options Contracts.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaq.cchwallstreet.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 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 amend its rules at Chapter IV, Securities 
Traded on NOM, Section 8, Long-Term Options Contracts, in order (i) to 
clarify the number of long-term option contract (``LEAPS'') expiration 
months that may be listed on the Exchange on underlying securities 
under the current rule, and (ii) to expand the number of LEAPS 
expiration months that may be listed in options on the SPDR[supreg] S&P 
500[supreg] exchange-traded fund (the ``SPY ETF'') in particular.
Clarification of the Number of Permitted Expiration Months
    Pursuant to current Chapter IV, Section 8, the Exchange may list 
LEAPS that expire from twelve (12) to thirty-nine (39) months from the 
time they are listed. The rule provides that there may be up to six (6) 
additional expiration months. Because the rule does not specify which 
expiration months the six months are in addition to, and thus is 
ambiguous, the Exchange proposes to delete the word ``additional.'' As 
amended, the rule would clearly and simply provide that the Exchange 
may list six expiration months having from twelve up to thirty-nine 
months from the time they are listed until expiration. This aspect of 
the proposed rule change is based upon Nasdaq PHLX, LLC (``Phlx'') Rule 
1012, Series of Options Open for Trading, subsection (a)(i)(D).\3\
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    \3\ See Securities Exchange Act Release No. 80769 (May 25, 
2017), 82 FR 25472 (June 1, 2017) (SR-Phlx-2017-41).
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Additional Expiration Months in SPY ETF LEAPS
    The Exchange proposes to further amend Chapter IV, Section 8, to 
permit up to ten LEAPS expiration months for options on the SPY ETF in 
response to customer demand.\4\ The proposal will add liquidity to the 
SPY ETF options market by allowing market participants to hedge risks 
relating to SPY ETF option positions over a longer time period with a 
known and limited cost. This aspect of the proposed rule change is also 
based upon Phlx Rule 1012, Series of Options Open for Trading, 
subsection (a)(i)(D), as recently amended.\5\
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    \4\ Chapter XIV, Index Rules, Section 11, Terms of Index Options 
Contracts, subsection (b)(1)(i) currently permits the Exchange to 
list up to ten (10) expiration months in long term index options.
    \5\ See Securities Exchange Act Release No. 84449 (October 18, 
2018), 83 FR 53699 (October 24, 2018) (SR-Phlx-2018-64).
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    The SPY ETF options market today is characterized by its tremendous 
daily and annual liquidity. As a consequence the Exchange believes that 
the listing of additional SPY ETF LEAPS expiration months would be well 
received by investors. This proposal to expand the number of permitted 
SPY ETF LEAPS expiration months would not apply to LEAPS on any other 
security.\6\
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    \6\ Historically, SPY ETF is the largest and most actively 
traded ETF in the United States as measured by its assets under 
management and the value of shares traded.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\8\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general to protect investors and the public interest. 
First, as noted above, the proposal protects investors and the public 
interest by clarifying ambiguous rule language associated with 
permitted listings of long term options. Second, the proposal

[[Page 58641]]

would permit the Exchange to offer market participants additional LEAPS 
on SPY ETF options for their investment and risk management purposes. 
This aspect of the proposal is intended simply to provide additional 
trading opportunities which have been requested by customers, thereby 
facilitating transactions in options and contributing to the protection 
of investors and the maintenance of fair and orderly markets. The 
proposed rule change responds to the continuing needs of market 
participants, particularly portfolio managers and other institutional 
customers, by providing protection from long-term market moves and by 
offering an alternative to hedging portfolios with futures positions or 
off-exchange customized derivative instruments. The Exchange believes 
that the addition today of four additional expiration months for SPY 
ETF LEAPS does not represent a proliferation of expiration months, but 
is instead a very modest expansion of LEAPS in response to stated 
customer demand. Significantly, the proposal would feature new LEAPS 
expiration months in only a single class of options that are very 
liquid and heavily traded, as discussed above. Additionally, the 
Exchange notes by way of precedent that ten expiration months are 
already permitted for stock index LEAPS. Further, the Exchange has the 
necessary systems capacity to support the [sic]
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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. On the contrary, the Exchange 
believes that the proposed amendment will benefit investors, market 
participants, and the marketplace in general by eliminating ambiguity 
in the current rules regarding the number of permitted expiration 
months in LEAPS generally. Additionally, the proposal merely provides 
investors additional investment and risk management opportunities by 
providing flexibility to the Exchange to list additional LEAPS 
expiration series, expanding the number of SPY ETF LEAPS offered on the 
Exchange from six expiration months to ten expiration months.

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

    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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4. 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 under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\12\ 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 on November 16, 2018, to coincide with the 
effective date of Phlx's proposed rule change on which the proposal is 
partially based.\13\ The Exchange's proposal would clarify ambiguous 
rule text and would conform the Exchange's rules relating to permitted 
number of SPY ETF LEAPS expirations to those of Phlx. Accordingly, the 
Commission believes that the proposal raises no new or novel regulatory 
issues and waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Commission 
therefore waives the 30-day operative delay and designates the proposal 
operative on November 16, 2018.\14\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ See supra note 5.
    \14\ 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.

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-NASDAQ-2018-088 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-NASDAQ-2018-088. 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 (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 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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal 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-NASDAQ-2018-088 and should be submitted 
on or before December 11, 2018.


[[Page 58642]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25244 Filed 11-19-18; 8:45 am]
 BILLING CODE 8011-01-P


