[Federal Register Volume 85, Number 127 (Wednesday, July 1, 2020)]
[Notices]
[Pages 39640-39644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14117]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89150; File No. SR-BX-2020-012]


Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Options 9, 
Sections 13 and 15 To Increase the Position and Exercise Limits for 
Options on the SPDR[supreg] S&P 500[supreg] ETF Trust

June 25, 2020.
    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 June 17, 2020, Nasdaq BX, Inc. (``BX'' 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.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend Options 9, Section 13, Position 
Limits, to increase position limits for options on the SPDR[supreg] S&P 
500[supreg] ETF Trust (``SPY''), and similarly increase exercise limits 
within Options 9, Section 15, Exercise Limits.
    The text of the proposed rule change is available on the Exchange's 
website at http://nasdaqbx.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 Options 9, Section 13, Position 
Limits, to increase position limits for options on SPY. The Exchange's 
position limits are incorporated by reference to Cboe Exchange, Inc. 
(``Cboe''), except for SPY.\3\ The proposed amendments to SPY are based 
on the similar proposal by Cboe.\4\ The Exchange also proposes to make 
minor non-substantive technical corrections to Options 9, Section 13 
and Options 9, Section 15. Each change will be described below.
---------------------------------------------------------------------------

    \3\ See Options 9, Section 13(a)(1). The Exchange notes that 
with respect to U.S. Dollar-Settled Foreign Currency Options, those 
position limits are incorporated by reference to Phlx. See Options 
9, Section 13(a)(4).
    \4\ See Securities Exchange Act Release No. 88768 (April 29, 
2020) (SR-CBOE-2020-015) (Notice of Filing of Amendment No. 1 and 
Order Granting Accelerated Approval of a Proposed Rule Change, as 
Modified by Amendment No. 1, to Increase Position Limits for Options 
on Certain Exchange-Traded Funds and Indexes). The Cboe proposal 
also proposed to increase position limits for options overlying a 
number of ETFs as well as the MSCI Emerging Markets Index (``MXEF'') 
and the MSCI EAFE Index (``MXEA''). The Exchange's proposal only 
proposes an increase to the position (and exercise limit) for 
options overlying SPY. BX does not list options on MXEF and MXEA. 
Also, other options and Exchange-Traded Fund position limits, which 
were amended in Cboe's rule change, have already been increased on 
BX because BX's rules at Options 9, Section 13 and Options 9, 
Section 15 incorporate its position limits and exercise limits to 
Cboe, except for SPY. Accordingly, this proposal is limited to SPY.
---------------------------------------------------------------------------

    Position limits are designed to address potential manipulative 
schemes and adverse market impacts surrounding the use of options, such 
as disrupting the market in the security underlying the options. While 
position limits should address and discourage the potential for 
manipulative schemes and adverse market impact, if such limits are set 
too low, participation in the options market may be discouraged. The 
Exchange believes that position limits must therefore be balanced 
between mitigating concerns of any potential manipulation and the cost 
of inhibiting potential hedging activity that could be used for 
legitimate economic purposes.
    The Exchange has observed an ongoing increase in demand in options 
on the SPDR[supreg] S&P 500[supreg] ETF Trust (``SPY'') for both 
trading and hedging purposes. Though the demand for options on SPY 
appear to have increased, position limits (and corresponding exercise 
limits) for options on SPY have remained the same. The Exchange 
believes these unchanged position limits may have impeded, and may 
continue to impede, trading activity and strategies of investors, such 
as use of effective hedging vehicles or income generating strategies 
(e.g., buy-write or put-write), and the ability of Market Makers to 
make liquid markets with tighter spreads in these options, resulting in 
the transfer of volume to over-the-counter (``OTC'') markets. OTC 
transactions occur through bilateral agreements, the terms of which are 
not publically disclosed to the marketplace. As such, OTC transactions 
do not contribute to the price discovery process on a public exchange 
or other lit markets. Therefore, the Exchange believes that the 
proposed increase for position limits (and exercise limits) on options 
on SPY may enable liquidity providers to provide additional liquidity 
to the Exchange and other market participants to transfer their 
liquidity demands from OTC markets to the Exchange, as well as other 
options exchange on which they participate. As described in further 
detail below, the Exchange believes that the continuously increasing 
market capitalization of SPY and SPY component securities, as well as 
the highly liquid markets for those securities, reduces the concerns 
for potential market manipulation and/or disruption in the underlying 
markets upon increasing position limits, while the rising demand for 
trading options on SPY for legitimate economic purposes compels an 
increase in position limits (and corresponding exercise limits).
Proposed Position Limits for Options on SPY
    Options 9, Section 13 sets forth the position limit for options on 
SPY. The Exchange proposes to amend Options 9, Section 13 to double the 
position limits for options on SPY. The current position limit for 
options on SPY is 1,800,000 and the proposed position limit for options 
on SPY is 3,600,000. The Exchange represents that SPY qualifies for the 
initial listing criteria set forth in Options 4, Section 3(i) for ETFs. 
In addition, the Exchange is making corresponding amendments to 
exercise limits for options on SPY within Options 9, Section 15.
Composition and Growth Analysis for SPY
    As stated above, position (and exercise) limits are intended to 
prevent the establishment of options positions that can be used or 
might create

[[Page 39641]]

incentives to manipulate the underlying market so as to benefit options 
positions. The Commission has recognized that these limits are designed 
to minimize the potential for mini-manipulations and for corners or 
squeezes of the underlying market, as well as serve to reduce the 
possibility for disruption of the options market itself, especially in 
illiquid classes.\5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 67672 (August 15, 
2012), 77 FR 50750 (August 22, 2012) (SR-NYSEAmex-2012-29).
---------------------------------------------------------------------------

    SPY as well as SPY components are highly liquid, and are based on a 
broad set of highly liquid securities and other reference assets, as 
demonstrated through the trading statistics presented in this proposal. 
Indeed, the Commission recognized the liquidity of the securities 
comprising the underlying interest of SPY and permitted no position 
limits on SPY options from 2012 through 2018.\6\
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 69179 (March 19, 
2013), 78 FR 17952 (March 25, 2013) (SR-BX-2013-024), which 
implemented a pilot program that ran through 2017, during which 
there were no position limits for options on SPY. The Exchange notes 
that throughout the duration of the pilot program it was not aware 
of any problems created or adverse consequences as of result of the 
pilot program. See also Securities Exchange Act Release No. 83423 
(June 13, 2018), 83 FR 28481 (June 19, 2018) (SR-BX-2018-022).
---------------------------------------------------------------------------

    To support the proposed position limit increase (and corresponding 
increase in exercise limit), the Exchange considered both the liquidity 
of SPY and the component securities of SPY, as well as the availability 
of economically equivalent products to the overlying option and its 
respective position limit. SPY is based upon the S&P 500 Index, and 
therefore the options on SPY are economically equivalent to the options 
on the index, which have no position limits. Accordingly, the Exchange 
believes the position limit of 3,600,000 contracts is appropriate for 
options on SPY.
    The Exchange is presenting data collected by Cboe as part of its 
initial filing to increase the position and exercise limit on SPY, that 
the Commission approved,\7\ following trading statistics regarding 
shares of and options on SPY, as well as the component securities:
---------------------------------------------------------------------------

    \7\ See supra note 3.
    \8\ Chboe's Average daily volume (ADV) data for ETF shares and 
options contracts are for all of 2019. Additionally, reference to 
ADV in ETF shares, and ETF options herein this proposal are for all 
of 2019, unless otherwise indicated.
    \9\ See Amendment No. 1 to SR-CBOE-2020-015, at page 4, 
available at https://www.sec.gov/comments/sr-cboe-2020-015/srcboe2020015-7081714-215592.pdf (``Amendment No. 1'').
    \10\ See Amendment No. 1, at page 4.
    \11\ See supra note 4.
    \12\ See supra note 4.
    \13\ See SPDR S&P 500 ETF Trust, available at https://www.ssga.com/us/en/individual/etfs/funds/spdr-sp-500-etf-trust-spy 
(January 21, 2020).
    \14\ See supra note 4.
    \15\ See also Securities Exchange Act Release No. 83423 (June 
13, 2018), 83 FR 28481 (June 19, 2018) (SR-BX-2018-022) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Position Limits and Exercise Limits for Options on the SPDR 
Exchange-Traded Fund).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   ADV (option         Shares outstanding                           Total market cap of
              Product                 ADV \8\ (ETF shares)         contracts)              (ETFs) \9\       Fund market cap (USD)   ETF components \10\
--------------------------------------------------------------------------------------------------------------------------------------------------------
SPY................................  70.3..................  2.8 million...........  968.7 million........  312.9 billion........  29.3 trillion.
                                     million...............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange is presenting the following data collected by Cboe as 
part of its initial filing, that the Commission has approved,\11\ for 
the same trading statistics, where applicable, as above regarding a 
sample of other ETFs, as well as the current position limits for 
options on such ETFs pursuant to Options 9, Section 13, to draw 
comparisons in support of a proposed position limit increase for 
options on SPY (see further discussion below):

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Current
             Product                 ADV (ETF shares)      ADV (option    Shares outstanding      Fund market cap    Total market cap of     position
                                                           contracts)           (ETFs)                 (USD)            ETF components        limits
--------------------------------------------------------------------------------------------------------------------------------------------------------
QQQ..............................  30.2 million........         670,200  410.3 million.......  88.7 billion........  10.1 trillion......       1,800,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Exchange believes that, overall, the liquidity in the shares of 
SPY and in the component securities of SPY and in its overlying 
options, as well as the large market capitalizations and structure of 
SPY support the proposal to increase the position limit for SPY (and 
corresponding exercise limit). Given the robust liquidity and 
capitalization in SPY and in the component securities of SPY the 
Exchange does not anticipate that the proposed increase in position 
limits would create significant price movements. Also, the Exchange 
believes the market capitalization of the underlying component 
securities of the S&P 500 Index are large enough to adequately absorb 
potential price movements that may be caused by large trades.
    The following analysis for SPY, which the Exchange agrees with in 
support of this proposal, as well as the statistics presented in 
support thereof, were presented by Cboe in their initial filing, which 
was approved by the Commission.\12\ The Exchange notes that SPY tracks 
the performance of the S&P 500 Index, which is an index of diversified 
large cap U.S. companies.\13\ It is composed of 505 selected stocks 
spanning over approximately 24 separate industry groups. The S&P 500 is 
one of the most commonly followed equity indices, and is widely 
considered to be the best indicator of stock market performance as a 
whole. SPY is one of the most actively traded ETFs, and, since 
2017,\14\ its ADV has increased from approximately 64.6 million shares 
to 70.3 million shares by the end of 2019. Similarly, its ADV in 
options contracts has increased from 2.6 million to 2.8 million through 
2019.\15\ As noted,

[[Page 39642]]

the demand for options trading on SPY has continued to increase, 
however, the position limits have remained the same, which the Exchange 
believes may have impacted growth in SPY option volume from 2017 
through 2019. The Exchange also notes that SPY shares are more liquid 
than INVESCO QQQ Trust\SM\, Series 1 (``QQQ'') shares, which is also 
currently subject to a position limit of 1,800,000 contracts. 
Specifically, SPY currently experiences over twice the ADV in shares 
and over four times the ADV in options than that of QQQ.\16\
---------------------------------------------------------------------------

    \16\ The 2019 ADV for QQQ shares is 30.2 million and for options 
on QQQ is 670,200.
---------------------------------------------------------------------------

Creation and Redemption for ETFs
    The Exchange believes that the creation and redemption process for 
ETFs will lessen the potential for manipulative activity with options 
on SPY. When an ETF provider wants to create more shares, it looks to 
an Authorized Participant (generally a market maker or other large 
financial institution) to acquire the securities the ETF is to hold. 
For instance, when an ETF is designed to track the performance of an 
index, the Authorized Participant can purchase all the constituent 
securities in the exact same weight as the index, then deliver those 
shares to the ETF provider. In exchange, the ETF provider gives the 
Authorized Participant a block of equally valued ETF shares, on a one-
for-one fair value basis. The price is based on the net asset value, 
not the market value at which the ETF is trading. The creation of new 
ETF units can be conducted during an entire trading day, and is not 
subject to position limits. This process works in reverse where the ETF 
provider seeks to decrease the number of shares that are available to 
trade. The creation and redemption process, therefore, creates a direct 
link to the underlying components of the ETF, and serves to mitigate 
potential price impact of the ETF shares that might otherwise result 
from increased position limits for the ETF options.
    The Exchange understands that the ETF creation and redemption 
process seeks to keep an ETF's share price trading in line with the 
ETF's underlying net asset value. Because an ETF trades like a stock, 
its share price will fluctuate during the trading day, due to simple 
supply and demand. If demand to buy an ETF is high, for instance, the 
ETF's share price might rise above the value of its underlying 
securities. When this happens, the Authorized Participant believes the 
ETF may now be overpriced, so it may buy shares of the component 
securities and then sell ETF shares in the open market (i.e., 
creations). This may drive the ETF's share price back toward the 
underlying net asset value. Likewise, if the ETF share price starts 
trading at a discount to the securities it holds, the Authorized 
Participant can buy shares of the ETF and redeem them for the 
underlying securities (i.e., redemptions). Buying undervalued ETF 
shares may drive the share price of the ETF back toward fair value. 
This arbitrage process helps to keep an ETF's share price in line with 
the value of its underlying portfolio.
Surveillance and Reporting Requirements
    The Exchange believes that increasing the position limits for the 
options on SPY would lead to a more liquid and competitive market 
environment for these options, which will benefit customers interested 
in trading these products. The reporting requirement for the options on 
SPY would remain unchanged. Thus, the Exchange would still require that 
each Participant that maintains positions in the options on the same 
side of the market, for its own account or for the account of a 
customer, report certain information to the Exchange. This information 
would include, but would not be limited to, the options' positions, 
whether such positions are hedged and, if so, a description of the 
hedge(s). Market Makers would continue to be exempt from this reporting 
requirement, however, the Exchange may access Market-Maker position 
information.\17\ Moreover, the Exchange's requirement that Participants 
file reports with the Exchange for any customer who held aggregate 
large long or short positions on the same side of the market of 200 or 
more options contracts of any single class for the previous day will 
remain at this level for the options subject to this proposal and will 
continue to serve as an important part of the Exchange's surveillance 
efforts.\18\
---------------------------------------------------------------------------

    \17\ The Options Clearing Corporation (``OCC'') through the 
Large Option Position Reporting (``LOPR'') system acts as a 
centralized service provider for Participant compliance with 
position reporting requirements by collecting data from each 
Participant, consolidating the information, and ultimately providing 
detailed listings of each Participant's report to the Exchange, as 
well as Financial Industry Regulatory Authority, Inc. (``FINRA''), 
acting as its agent pursuant to a regulatory services agreement 
(``RSA'').
    \18\ See Options 6E, Section 2 for reporting requirements.
---------------------------------------------------------------------------

    The Exchange believes that the existing surveillance procedures and 
reporting requirements at the Exchange and other SROs are capable of 
properly identifying disruptive and/or manipulative trading activity. 
The Exchange also represents that it has adequate surveillances in 
place to detect potential manipulation, as well as reviews in place to 
identify potential changes in composition of SPY and continued 
compliance with the Exchange's listing standards. These procedures 
utilize daily monitoring of market activity via automated surveillance 
techniques to identify unusual activity in both options and the 
underlying's, as applicable.\19\ The Exchange also notes that large 
stock holdings must be disclosed to the Commission by way of Schedules 
13D or 13G,\20\ which are used to report ownership of stock which 
exceeds 5% of a company's total stock issue and may assist in providing 
information in monitoring for any potential manipulative schemes.
---------------------------------------------------------------------------

    \19\ The Exchange believes these procedures have been effective 
for the surveillance of trading the options subject to this 
proposal, and will continue to employ them.
    \20\ 17 CFR 240.13d-1.
---------------------------------------------------------------------------

    The Exchange believes that the current financial requirements 
imposed by the Exchange and by the Commission adequately address 
concerns regarding potentially large, unhedged positions in the options 
on SPY. Current margin and risk-based haircut methodologies serve to 
limit the size of positions maintained by any one account by increasing 
the margin and/or capital that a Participant must maintain for a large 
position held by itself or by its customer.\21\ In addition, Rule 15c3-
1 \22\ imposes a capital charge on Participants to the extent of any 
margin deficiency resulting from the higher margin requirement.
---------------------------------------------------------------------------

    \21\ See Options 6C, Section 3 for a description of margin 
requirements.
    \22\ 17 CFR 240.15c3-1.
---------------------------------------------------------------------------

Technical Corrections
    The Exchange proposes to: (1) Update the Chicago Board Options 
Exchange to Cboe Exchange, Inc. (``Cboe'') as the name of this self-
regulatory organization has changed; (2) rename the SPDR[supreg] S&P 
500[supreg] exchange-traded fund (``SPY ETF'' or ``SPY'') as 
``SPDR[supreg] S&P 500[supreg] ETF Trust (SPY) to update the name of 
this product; (3) amend ``Customer'' to ``customer'' as this reference 
refers to the customer of a Participant; and (4) amend ``PHLX'' to 
``Phlx.''
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 thereunder applicable to the Exchange and, in particular, 
the requirements of

[[Page 39643]]

Section 6(b) of the Act.\23\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \24\ 
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) \25\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed increase in position limit 
for options on the SPY will remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, protect investors and the public interest, because it will 
provide market participants with the ability to more effectively 
execute their trading and hedging activities. The proposed increase 
will allow market participants to more fully implement hedging 
strategies in related derivative products and to further use options to 
achieve investment strategies (e.g., there are Exchange-Traded Products 
(``ETPs'') that use options on SPY as part of their investment 
strategy, and the applicable position limits (and corresponding 
exercise limits) as they stand today may inhibit these ETPs in 
achieving their investment objectives, to the detriment of investors). 
Also, increasing the applicable position limits may allow Market Makers 
to provide the markets for these options with more liquidity in amounts 
commensurate with increased consumer demand in such markets. The 
proposed position limit increases may also encourage other liquidity 
providers to shift liquidity, as well as encourage consumers to shift 
demand, from over the counter markets onto the Exchange, which will 
enhance the process of price discovery conducted on the Exchange 
through increased order flow.
    In addition, the Exchange believes that the structure of SPY, the 
considerable market capitalization of the fund, underlying component 
securities and the liquidity of the markets for the applicable options 
and underlying component securities will mitigate concerns regarding 
potential manipulation of the products and/or disruption of the 
underlying markets upon increasing the relevant position limits. As a 
general principle, increases in market capitalizations, active trading 
volume, and deep liquidity of securities deters manipulation and/or 
disruption. This general principle applies to the recently observed 
increased levels of market capitalization, trading volume, and 
liquidity in SPY, and the components of the Underlying ETFs [sic] (as 
described above). The Exchange does not believe that the options 
markets or underlying markets would become susceptible to manipulation 
and/or disruption as a result of the proposed position limit increases. 
Indeed, the Commission has previously expressed the belief that 
removing position and exercise limits may bring additional depth and 
liquidity to the options markets without increasing concerns regarding 
intermarket manipulation or disruption of the options or the underlying 
securities.\26\
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 62147 (October 28, 
2005) (SR-CBOE-2005-41), at 62149.
---------------------------------------------------------------------------

    Further, the Exchange notes that the proposed rule change to 
increase position limits for select actively traded options, is not 
novel and has been previously approved by the Commission. The proposed 
increase to the position and exercise limits on SPY has recently been 
approved by the Commission.\27\ The Commission has previously approved, 
on a pilot basis, eliminating position limits for options on SPY.\28\ 
In approving increases in position limits in the past, the Commission 
relied heavily upon the exchange's surveillance capabilities, 
expressing trust in the enhanced surveillances and reporting safeguards 
that the exchange took in order to detect and deter possible 
manipulative behavior which might arise from eliminating position and 
exercise limits.
---------------------------------------------------------------------------

    \27\ See supra note 4.
    \28\ See supra notes 9 and 10.
---------------------------------------------------------------------------

    The Exchange's surveillance and reporting safeguards continue to be 
designed to deter and detect possible manipulative behavior that might 
arise from increasing or eliminating position and exercise limits in 
certain classes. The Exchange believes that the current financial 
requirements imposed by the Exchange and by the Commission adequately 
address concerns regarding potentially large, unhedged position in the 
options on SPY, further promoting just and equitable principles of 
trading, the maintenance of a fair and orderly market, and the 
protection of investors.
Technical Corrections
    The Exchange's proposal to make various technical amendments, 
within Options 9, Section 13 and Options 9, Section 15 to: (1) Update 
the Chicago Board Options Exchange to Cboe Exchange, Inc. (``Cboe'') as 
the name of this self-regulatory organization has changed; (2) rename 
the SPDR[supreg] S&P 500[supreg] exchange-traded fund (``SPY ETF'' or 
``SPY'') as ``SPDR[supreg] S&P 500[supreg] ETF Trust (SPY) to update 
the name of this product; (3) amend ``Customer'' to ``customer'' as 
this reference refers to the customer of a Participant; and (4) amend 
``PHLX'' to ``Phlx.'' Accordingly, these amendments are non-substantive 
technical changes which add clarity to the Rulebook and are consistent 
with the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose an unnecessary burden on intra-market competition because it 
will apply to all market participants. The Exchange does not believe 
the proposed rule change will impose any burden on inter-market 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the increased position limit (and exercise 
limit) will be available to all market participants and apply to each 
in the same manner. The Exchange believes that the proposed rule change 
will provide additional opportunities for market participants to more 
efficiently achieve their investment and trading objectives of market 
participants.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the Act. On the contrary, the Exchange 
believes the proposal promotes competition because it may attract 
additional order flow from the OTC market to exchanges, which would in 
turn compete amongst each other for those orders.\29\ The Exchange 
believes market participants would benefit from being able to trade 
options with increased position limits in an exchange environment in 
several ways, including but not limited to the following: (1) Enhanced 
efficiency in initiating and closing out position; (2) increased

[[Page 39644]]

market transparency; and (3) heightened contra-party creditworthiness 
due to the role of OCC as issuer and guarantor. The Exchange 
understands that other options exchanges intend to file similar 
proposed rule changes with the Commission to increase position limits 
on options on SPY. This may further contribute to fair competition 
among exchanges for multiply listed options.
---------------------------------------------------------------------------

    \29\ Additionally, several other options exchanges have the same 
position limits as the Exchange is proposing, as they incorporate by 
reference to Cboe's position limits, and as a result the position 
limits for options on SPY and will increase at those exchanges.
---------------------------------------------------------------------------

Technical Corrections
    The Exchange's proposal to make various technical amendments, 
within Options 9, Section 13 and Options 9, Section 15 to: (1) Update 
the Chicago Board Options Exchange to Cboe Exchange, Inc. (``Cboe'') as 
the name of this self-regulatory organization has changed; (2) rename 
the SPDR[supreg] S&P 500[supreg] exchange-traded fund (``SPY ETF'' or 
``SPY'') as ``SPDR[supreg] S&P 500[supreg] ETF Trust (SPY) to update 
the name of this product; (3) amend ``Customer'' to ``customer'' as 
this reference refers to the customer of a Participant; and (4) amend 
``PHLX'' to ``Phlx.'' Accordingly, these amendments are non-substantive 
technical changes which add clarity to the Rulebook and do not impose a 
burden on competition.

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 \30\ and Rule 19b-
4(f)(6) thereunder.\31\
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 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 pursuant to Rule 19b-4(f)(6) under the 
Act \32\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \33\ permits the 
Commission to 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 proposed rule change may become operative upon filing. The Exchange 
states that waiver of the operative delay would be consistent with the 
protection of investors and the public interest because it would allow 
the Exchange to immediately increase its position and exercise limits 
for options on SPY to those of Cboe, which the Exchange believes will 
ensure fair competition among exchanges and provide consistency for BX 
Participants that are also members at Cboe where these increased 
position and exercise limits are currently in place. For this reason, 
the Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal as operative upon filing.\34\
---------------------------------------------------------------------------

    \32\ 17 CFR 240.19b-4(f)(6).
    \33\ 17 CFR 240.19b-4(f)(6)(iii).
    \34\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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 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 change 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-BX-2020-012 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-BX-2020-012. 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 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. 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-BX-2020-012, and should be submitted on 
or before July 22, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14117 Filed 6-30-20; 8:45 am]
BILLING CODE 8011-01-P


