[Federal Register Volume 83, Number 231 (Friday, November 30, 2018)]
[Notices]
[Pages 61687-61689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84647; File No. SR-NYSEArca-2018-84]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Amend Rule 6.4-
O, Series of Options Open for Trading

November 26, 2018.
    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 19, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.4-O. The proposed rule change 
is available on the Exchange's website 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 this filing is to amend Rule 6.4-O, Series of 
Options Open for Trading, to permit the listing and trading of up to 
ten expiration months for long term options on the SPDR[supreg] S&P

[[Page 61688]]

500[supreg] Exchange-Traded Fund (the ``SPY ETF'').
    Rule 6.4-O(d) provides that the Exchange may list, with respect to 
any class of stock or Exchange-Traded Fund Share options series, 
options having from twelve up to thirty-nine months from the time they 
are listed until expiration (``LEAPS''). Under the current Rule, the 
Exchange may list up to six LEAPS expiration months.\4\ The Exchange 
proposes to amend Rule 6.4-O(d) to permit up to ten LEAPS expiration 
months for options on the SPY ETF.\5\ This proposal, which is 
substantially the same as a recent rule amendment submitted by Nasdaq 
PHLX LLC (``PHLX'') and driven by customer demand,\6\ would add 
liquidity to the SPY ETF options market by allowing market participants 
to hedge risks relating to SPY ETF positions over a potentially longer 
time period with a known and limited cost.
---------------------------------------------------------------------------

    \4\ Strike price interval, bid/ask differential and continuity 
rules shall not apply to equity options or Exchange-Traded Fund 
Shares options until the time to expiration is less than nine 
months. See Rule 6.4-O(d).
    \5\ See proposed Rule 6.4-O(d) (providing in relevant part, that 
``[t]he Exchange may open for trading up to ten expiration months 
for options on the [SPY ETF] and up to six extended far term 
expiration months for options on any Exchange-Trade Fund Share or 
equity option class'').
    \6\ See also Securities Exchange Act Release No. 84449 (October 
18, 2018), 83 FR 53699 (October 24, 2018) (SR-Phlx-2018-64) (``PHLX 
Rule Change''). Rule 5.19-O(b)(1) likewise provides for up to ten 
expirations months in LEAPS on index options. Thus, the Exchange 
proposes to delete reference [sic] to index options in proposed Rule 
6.4-O to enhance internal consistency and reduced [sic] as relates 
to the number of expiration months (i.e., ten) allowed for index 
options. See proposed Rule 6.4-O(d).
---------------------------------------------------------------------------

    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 would not apply to LEAPS on any other class of stock or 
Exchange-Traded Fund Share options.\7\
---------------------------------------------------------------------------

    \7\ Historically, SPY 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.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \8\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5),\9\ 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, by offering market participants additional LEAPS on 
SPY options for their investment and risk management purposes. 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 
options in response to stated customer demand. Significantly, the 
proposal would feature new LEAPS expiration months in only a single 
class of options--the SPY ETF--that are very liquid and heavily traded, 
as discussed above. Additionally, the Exchange notes that ten 
expiration months are already permitted for stock index LEAPS options 
on the Exchange as well as on other markets.\10\ Further, the Exchange 
has the necessary systems capacity to support the new SPY ETF LEAPS 
expiration months.
---------------------------------------------------------------------------

    \10\ See Rule 5.19-O(b)(1) and PHLX Rule 1101A(b)(iii).
---------------------------------------------------------------------------

    The Exchange notes that this proposal is substantially the same as 
a recent rule amendment submitted by PHLX.\11\
---------------------------------------------------------------------------

    \11\ See PHLX Rule Change, supra note 6.
---------------------------------------------------------------------------

    The Exchange respectfully requests that the Commission waive the 
30-day operative delay so that the proposed rule change may become 
effective and operative upon filing with the Commission pursuant to 
Section 19(b)(3)(A) of the Act \12\ and paragraph (f)(6) of Rule 19b-4 
thereunder.\13\ The Exchange believes that waiving the operative delay 
would be consistent with the protection of investors and the public 
interest because the proposed rule change would allow the Exchange to 
implement the modified rule, which aligns with the rules of another 
options exchange, without delay.\14\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ See Phlx Rule Change, supra note 6.
---------------------------------------------------------------------------

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. The proposal merely provides 
investors additional investment and risk management opportunities by 
providing flexibility to the Exchange to list additional long term 
options 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 solicited or received with respect to the 
proposed rule change.

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 \15\ and Rule 19b-
4(f)(6) thereunder.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ 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 upon filing. The Exchange's proposal would 
eliminate an internal inconsistency in the Exchange's rules and also 
conform the Exchange's rules relating to the permitted number

[[Page 61689]]

of SPY ETF LEAPS expiration months to those of PHLX.\19\ 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 upon filing.\20\
---------------------------------------------------------------------------

    \17\ Id.
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ See supra, note 6.
    \20\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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-NYSEArca-2018-84 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-NYSEArca-2018-84. 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-NYSEArca-2018-84 and should be submitted 
on or before December 21, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25994 Filed 11-29-18; 8:45 am]
 BILLING CODE 8011-01-P


