[Federal Register Volume 86, Number 131 (Tuesday, July 13, 2021)]
[Notices]
[Pages 36844-36850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14792]



[[Page 36844]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92335; File No. SR-NYSEArca-2021-55]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Rules 6.4-
O To Limit Short Term Options Series Intervals

July 7, 2021.
    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 June 28, 2021, NYSE Arca, Inc. (``NYSE Arca'' or the 
``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 Rules 6.4-O (Series of Options 
Contracts Open for Trading) in connection with limiting the number of 
strikes listed for Short Term Option Series which are available for 
quoting and trading on the Exchange. 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 Exchange proposes to amend Rule 6.4-O (Series of Options Open 
for Trading). Specifically, this proposal seeks to widen the intervals 
between strikes in order to limit the number of strikes listed for 
multiply listed equity options classes (excluding options on Exchange-
Traded Funds (``ETFs'') and Index-Linked Securities (as described 
herein, see infra n. 13) within the Short Term Option Series program 
that have an expiration date more than 21 days from the listing date.
Background
    Current Rule 6.4-O permits the Exchange, after a particular class 
of options has been approved for listing and trading on the Exchange, 
to open for trading series of options therein. The Exchange may list 
series of options for trading on a weekly,\4\ monthly \5\ or quarterly 
\6\ basis. Rule 6.4-O(a) sets forth the intervals between strike prices 
of series of options on individual stocks generally \7\ and Rule 6.4-O, 
Commentary .07(e) specifically sets forth intervals between strike 
prices Short Term Option Series. Additionally, the Exchange may list 
series of options pursuant to the $1 Strike Price Interval Program,\8\ 
the $0.50 Strike Program,\9\ the $2.50 Strike Price Program,\10\ and 
the $5 Strike Program.\11\ The Exchange's proposal seeks to amend the 
listing of weekly series of options (i.e. Short Term Option Series) by 
adopting new Commentary .07(f) to Rule 6.4-O,\12\ which widens the 
permissible intervals between strikes, thereby limiting the number of 
strikes listed, for multiplylisted [sic] equity options

[[Page 36845]]

(excluding options on ETFs \13\ and Index-Linked Securities \14\ that 
have an expiration date more than 21 days from the listing date. This 
proposal does not amend the monthly or quarterly listing rules, nor 
does it amend the $1 Strike Price Interval Program, the $0.50 Strike 
Program, the $2.50 Strike Price Program, or the $5 Strike Program.
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    \4\ The weekly listing program is known as the Short Term Option 
Series Program and is described within Rule 6.4-O, Commentary .07.
    \5\ The Exchange will open at least one expiration month for 
each class of options open for trading on the Exchange. See Rule 
6.4-O(a). The monthly expirations are subject to certain listing 
criteria for underlying securities described within Rule 5.3-O. 
Monthly listings expire the third Friday of the month See The 
Options Clearing Corporation (``OCC'') By-Laws at Section 1.
    \6\ The quarterly listing program is known as the Quarterly 
Options Series Program and is described within Rule 6.4-O, 
Commentary .08.
    \7\ The interval between strike prices of series of options on 
individual stocks may be $2.50 or greater where the strike price is 
$25 or less, provided however, that the Exchange may not list $2.50 
intervals below $50 (e.g., $12.50, $17.50) for any class included 
within the $1 Strike Price Program, as detailed below in Rule 6.4-O, 
Commentary .04 if the addition of $2.50 intervals would cause the 
class to have strike price intervals that are $0.50 apart. For 
series of options on Exchange-Traded Fund Shares that satisfy the 
criteria set forth in Rule 5.3-O(g), the interval of strike prices 
may be $1 or greater where the strike price is $200 or less or $5 or 
greater where the strike price is over $200. Exceptions to the 
strike price intervals above are set forth in Rule 6.4-O, Commentary 
.05.
    \8\ The $1 Strike Interval Program is described within Rule 6.4-
O, Commentary .04.
    \9\ The $0.50 Strike Program is described within Rule 6.4-O, 
Commentary .13.
    \10\ The $2.50 Strike Price Program is described within Rule 
6.4-O, Commentary .03.
    \11\ The $5 Strike Program is described within Rule 6.4-O, 
Commentary .10.
    \12\ As a result, the proposed rule change subsequently updates 
current Rule 6.4-O, Commentary .07(f) to (g). In this regard, the 
Exchange also proposes to update a cross-reference to this newly re-
lettered paragraph .07(g) that appears in Rule 6.4-O, Commentary 
.07(a). See proposed Rule 6.4-O, Commentary .07(a).
    \13\ The term ``ETF'' (Exchange-Traded Fund) (or ``Fund 
Shares'') has the same meaning as the term ``exchange-traded fund'' 
as defined in Rule 6c-11 under the Investment Company Act of 1940. 
See Rule 5.3-O(g). Securities deemed appropriate for options trading 
shall include shares or other securities (``Exchange-Traded Fund 
Shares'' or ``Fund Shares'') that are traded on a national 
securities exchange and are defined as an ``NMS stock'' in Rule 
600(b)(47) of Regulation NMS, and that (i) represent an interest in 
a registered investment company organized as an open-end management 
investment company, a unit investment trust or a similar entity 
which holds securities and/or financial instruments, options on 
securities and indices, equity caps, collars and floors, swap 
agreements, forward contracts, repurchase agreements and reverse 
repurchase agreements (the ``Financial Instruments''), and money 
market instruments, including, but not limited to, U.S. government 
securities and repurchase agreements (the ``Money Market 
Instruments'') constituting or otherwise based on or representing an 
investment in an index or portfolio of securities and/or Financial 
Instruments and Money Market Instruments, or (ii) represent 
interests in a trust or similar entity that holds a specified non-
U.S. currency deposited with the trust or similar entity when 
aggregated in some specified minimum number may be surrendered to 
the trust by the beneficial owner to receive the specified non-U.S. 
currency and pays the beneficial owner interest and other 
distributions on the deposited non-U.S. currency, if any, declared 
and paid by the trust; or (iii) represent commodity pool interests 
principally engaged, directly or indirectly, in holding and/or 
managing portfolios or baskets of securities, commodity futures 
contracts, options on commodity futures contracts, swaps, forward 
contracts and/or options on physical commodities and/or non-U.S. 
currency (``Commodity Pool Units''), or (iv) represent interests in 
the SPDR Gold Trust, or (v) represent interests in the iShares COMEX 
Gold Trust, or (vi) represent interests in the iShares Silver Trust, 
(vii) represents an interest in a registered investment company 
(``Investment Company'') organized as an open-end management 
investment company or similar entity, that invests in a portfolio of 
securities selected by the Investment Company's investment adviser 
consistent with the Investment Company's investment objectives and 
policies, which is issued in a specified aggregate minimum number in 
return for a deposit of a specified portfolio of securities and/or a 
cash amount with a value equal to the next determined net asset 
value (``NAV''), and when aggregated in the same specified minimum 
number, may be redeemed at a holder's request, which holder will be 
paid a specified portfolio of securities and/or cash with a value 
equal to the next determined NAV (``Managed Fund Share''), or, 
(viii) represents interests in the ETFS Silver Trust or ETFS Gold 
Trust, or, (ix) represents interests in the ETFS Palladium Trust or 
ETFS Platinum Trust.
    \14\ Securities deemed appropriate for options trading shall 
include shares or other securities (``Equity Index-Linked 
Securities'', ``Commodity-Linked Securities,'' ``Currency-Linked 
Securities,'' ``Fixed Income Index-Linked Securities,'' ``Futures-
Linked Securities,'' and ``Multifactor Index-Linked Securities,'' 
collectively known as ``Index-Linked Securities''), as defined in 
Rule 5.2-E(j)(6), that are principally traded on a national 
securities exchange and an ``NMS stock'' (as defined in Rule 600 of 
Regulation NMS under the Securities and Exchange Act of 1934), and 
represent ownership of a security that provides for the payment at 
maturity, as described below; Equity Index-Linked Securities are 
securities that provide for the payment at maturity of a cash amount 
based on the performance or the leveraged (multiple or inverse) 
performance of an underlying index or indexes of equity securities 
(``Equity Reference Asset''); Commodity-Linked Securities are 
securities that provide for the payment at maturity of a cash amount 
based on the performance or the leveraged (multiple or inverse) 
performance of one or more physical commodities or commodity 
futures, options on commodities, or other commodity derivatives or 
Commodity-Based Trust Shares or a basket or index of any of the 
foregoing (``Commodity Reference Asset''); Currency-Linked 
Securities are securities that provide for the payment at maturity 
of a cash amount based on the performance or the leveraged (multiple 
or inverse) performance of one or more currencies, or options on 
currencies or currency futures or other currency derivatives or 
Currency Trust Shares (as defined in Rule 8.202-E(c)) or a basket or 
index of any of the foregoing (``Currency Reference Asset''); Fixed 
Income Index-Linked Securities are securities that provide for the 
payment at maturity of a cash amount based on the performance or the 
leveraged (multiple or inverse) performance of one or more notes, 
bonds, debentures or evidence of indebtedness that include, but are 
not limited to, U.S. Department of Treasury securities (``Treasury 
Securities''), government-sponsored entity securities (``GSE 
Securities''), municipal securities, trust preferred securities, 
supranational debt and debt of a foreign country or a subdivision 
thereof or a basket or index of any of the foregoing (``Fixed Income 
Reference Asset''); Futures-Linked Securities are securities that 
provide for the payment at maturity of a cash amount based on the 
performance or the leveraged (multiple or inverse) performance of an 
index or indexes of futures contracts or options or derivatives on 
futures contracts (a ``Futures Reference Asset''); and Multifactor 
Index-Linked Securities are securities that provide for the payment 
at maturity of a cash amount based on the performance or the 
leveraged (multiple or inverse) performance of any combination of 
two or more Equity Reference Assets, Commodity Reference Assets, 
Currency Reference Assets, Fixed Income Reference Assets, or Futures 
Reference Assets (a ``Multifactor Reference Asset'').
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Short Term Option Series Program
    After an option class has been approved for listing and trading on 
the Exchange,\15\ Rule 6.4-O, Commentary .07 permits the Exchange to 
open for trading on any Thursday or Friday that is a business day 
(``Short Term Option Opening Date'') series of options on that class 
that expire at the close of business on each of the next five Fridays 
that are business days and are not Fridays on which monthly options 
series or Quarterly Options Series expire (``Short Term Option 
Expiration Dates''). The Exchange may select up to fifty currently 
listed option classes on which Short Term Option Series may be opened 
on any Short Term Option Opening Date. In addition to the fifty option 
class restriction, the Exchange may also list Short Term Option Series 
on any option classes that are selected by other securities exchanges 
that employ a similar program under their respective rules. For each 
option class eligible for participation in the Short Term Option Series 
Program, the Exchange may open up to 30 Short Term Option Series for 
each expiration date in that class. The Exchange may also open Short 
Term Option Series that are opened by other securities exchanges in 
option classes selected by such exchanges under their respective short 
term option rules.\16\ Pursuant to Rule 6.4-O Commentary .07(c), the 
Exchange may open up to 30 initial series for each option class that 
participates in the Short Term Option Series Program and, pursuant to 
Rule 6.4-O Commentary .07(d), if the Exchange opens less than 30 Short 
Term Option Series for a Short Term Option Expiration Date, additional 
series may be opened for trading on the Exchange when the Exchange 
deems it necessary to maintain an orderly market, to meet customer 
demand, or when the market price of the underlying security moves 
substantially from the exercise price or prices of the series already 
opened. Rule 6.4-O, Commentary .07(e) provides that, if the class does 
not trade in $1 strike price intervals, the strike price interval for 
Short Term Option Series may be: (i)

[[Page 36846]]

$0.50 or greater where the strike price is less than $75; (ii) $1.00 or 
greater where the strike price is between $75 and $150; or (iii) $2.50 
or greater for strike prices greater than $150.\17\
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    \15\ The Exchange may have no more than a total of five Short 
Term Option Expiration Dates, not including any Monday or Wednesday 
SPY Expirations as provided in paragraph (g). If the Exchange is not 
open for business on the respective Thursday or Friday, the Short 
Term Option Opening Date will be the first business day immediately 
prior to that respective Thursday or Friday. Similarly, if the 
Exchange is not open for business on the Friday that the options are 
set to expire, the Short Term Option Expiration Date will be the 
first business day immediately prior to that Friday. See Rule 6.4-O, 
Commentary .07. The Exchange may open for trading on any Friday or 
Monday that is a business day series of options on the SPDR S&P 500 
ETF Trust (``SPY'') to expire on any Monday of the month that is a 
business day and is not a Monday on which Quarterly Options Series 
expire (``Monday SPY Expirations''), provided that any Friday on 
which the Exchange opens for trading a Monday SPY Expiration is one 
business week and one business day prior to expiration. The Exchange 
may also open for trading on any Tuesday or Wednesday that is a 
business day series of SPY options to expire on any Wednesday of the 
month that is a business day and is not a Wednesday on which 
Quarterly Options Series expire (``Wednesday SPY Expirations''). The 
Exchange may list up to five consecutive Monday SPY Expirations and 
up to five consecutive Wednesday SPY Expirations at one time; the 
Exchange may have no more than a total of five Monday SPY 
Expirations and no more than a total of five Wednesday SPY 
Expirations. Monday and Wednesday SPY Expirations will be subject to 
the provisions of this Rule. See Rule 6.4-O, Commentary .07(f). With 
the exception of Monday and Wednesday SPY Expirations, no Short Term 
Option Series may expire in the same week in which monthly option 
series on the same class expire or, in the case of Quarterly Options 
Series, on an expiration that coincides with an expiration of 
Quarterly Options Series on the same class. See Rule 6.4-O, 
Commentary .07.
    \16\ See Rule 6.4-O, Commentary .07(a).
    \17\ Additionally, Rule 6.4-O, Commentary .07 (e) provides that 
the interval between strike prices on Short Term Option Series shall 
be the same as the strike prices for series in that same option 
class that expire in accordance with the normal monthly expiration 
cycle. During the expiration week of an option class that is 
selected for the Short Term Option Series Program pursuant to this 
rule (``Short Term Option''), the strike price intervals for the 
related non-Short Term Option (``Related non-Short Term Option'') 
shall be the same as the strike price intervals for the Short Term 
Option.
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    The Exchange notes that listings in the weekly program comprise a 
significant part of the standard listing in options markets and that 
the industry has observed a notable increase over approximately the 
last five years in compound annual growth rate (``CAGR'') of weekly 
strikes as compared to CAGR for standard third-Friday expirations.\18\
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    \18\ See Securities Exchange Act Release No. 91125 (February 12, 
2021), 86 FR 10375 (February 19, 2021) (SR-BX-2020-032) (``BX Strike 
Interval Approval Order''); and SR-2020-BX-032 as amended by 
Amendment No. 1 (February 10, 2021) available at: https://www.sec.gov/comments/sr-bx-2020-032/srbx2020032-8359799-229182.pdf 
(``BX proposal''); see also BX Options Strike Proliferation Proposal 
(February 25, 2021) available at: https://www.nasdaq.com/solutions/bx-options-strike-proliferation-proposal).
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Proposal
    The Exchange proposes to widen the intervals between strikes in 
order to limit the number of strikes listed for equity options 
(excluding options on ETFs and Index-Linked Securities) listed as part 
of the Short Term Option Series Program that have an expiration date 
more than 21 days from the listing date, by adopting proposed Rule 6.4-
O, Commentary .07(f). The Exchange notes that this proposal is 
substantively identical to the strike interval proposal recently 
submitted by Nasdaq BX, Inc. (``BX'') and approved by the Securities 
and Exchange Commission (``Commission'').\19\
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    \19\ See BX Strike Interval Approval Order, id.
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    The proposal widens intervals between strikes for expiration dates 
of equity option series (excluding options on ETFs and Index-Linked 
Securities) beyond 21 days utilizing the three-tiered table in proposed 
Rule 6.4-O, Commentary .07(f) (presented below) which considers both 
the Share Price and Average Daily Volume for the option series. The 
table indicates the applicable strike intervals and supersedes Rule 
6.4-O, Commentary .07(d), which currently permits 10 additional series 
to be opened for trading on the Exchange when the Exchange deems it 
necessary to maintain an orderly market, to meet customer demand or 
when the market price of the underlying security moves substantially 
from the exercise price or prices of the series already opened. As a 
result of the proposal Rule 6.4-O, Commentary .07(d) would not permit 
an additional series of an equity option to have an expiration date 
more than 21 days from the listing date to be opened for trading on the 
Exchange despite the noted circumstances in paragraph (d) when such 
additional series may otherwise be added.

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                                                                                                            Share price
                                                                         -------------------------------------------------------------------------------
                   Tier                         Average daily volume                        $25 to less     $75 to less    $150 to less       $500 or
                                                                           Less than $25     than $75        than $150       than $500        greater
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1.........................................  Greater than 5,000..........           $0.50           $1.00           $1.00           $5.00           $5.00
2.........................................  Greater than 1,000 to 5,000.            1.00            1.00            1.00            5.00           10.00
3.........................................  0 to 1,000..................            2.50            5.00            5.00            5.00           10.00
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    Proposed Rule 6.4-O, Commentary .07(f)(1) provides that the Share 
Price is the closing price on the primary market on the last day of the 
calendar quarter. This value is used to derive the column from which to 
apply strike intervals throughout the next calendar quarter. Also, 
proposed Rule 6.4-O, Commentary .07(f)(1) provides that in the event of 
a corporate action, the Share Price of the surviving company is 
utilized.\20\ Proposed Rule 6.4-O, Commentary .07(f)(2) provides that 
the Average Daily Volume is the total number of option contracts traded 
in a given security for the applicable calendar quarter divided by the 
number of trading days in the applicable calendar quarter. Beginning on 
the second trading day in the first month of each calendar quarter, the 
Average Daily Volume is calculated by utilizing data from the prior 
calendar quarter based on Customer-cleared volume at OCC. For options 
listed on the first trading day of a given calendar quarter, the 
Average Daily Volume is calculated using the calendar quarter prior to 
the last trading calendar quarter.\21\ Pursuant to current Rule 6.4-O, 
Commentary .07, if the Exchange is not open for business on the 
respective Thursday or Friday, the Short Term Option Opening Date will 
be the first business day immediately prior to that respective Thursday 
or Friday.
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    \20\ The Exchange notes that corporate actions resulting in 
change ownership would result in a surviving company, such as a 
merger of two publicly listed companies, and the Share Price of the 
surviving company would be used to determine strike intervals 
pursuant to the proposed table. Corporate actions that do not result 
in a change of ownership, such as stock-splits or distribution of 
special cash dividends, would not result in a ``surviving company,'' 
therefore would not impact which Share Price to apply pursuant to 
the proposed Rule.
    \21\ For example, options listed as of April 1, 2021 would be 
calculated on April 2, 2021 using the Average Daily Volume from 
October 1, 2020 to December 31, 2020.
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    By way of example, if the Share Price for a symbol was $142 at the 
end of a calendar quarter, with an Average Daily Volume greater than 
5,000, thereby, requiring strike intervals to be listed $1.00 apart, 
that strike interval would apply for the calendar quarter, regardless 
of whether the Share Price changed to $150 or greater during that 
calendar quarter.\22\ The proposed table within Rule 6.4-O, Commentary 
.07(f) takes into account the notional value of a security, as well as 
Average Daily Volume in the underlying stock, in order to widen the 
intervals between strikes and thereby limit the number of strikes 
listed for equity options (excluding options on ETFs and Index-Linked 
Securities) in the Short Term Option Series listing program. The 
Exchange will utilize OCC Customer-cleared volume, as customer volume 
is an appropriate proxy for demand. The OCC Customer-cleared volume 
represents the majority of options volume executed on the Exchange, 
which, in turn, reflects the demand in the marketplace. The options 
series listed on the Exchange are intended to meet customer demand by 
offering an appropriate number of strikes. Non-Customer cleared OCC 
volume generally represents the supply side.
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    \22\ The Exchange notes that any strike intervals imposed by the 
Exchange's Rules will continue to apply. In this example, the 
strikes would be in $1 intervals up to (but not including) $150, 
which is the upper limit imposed by Rule 6.4-O, Commentary .07(e).

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[[Page 36847]]

    The proposal is intended to remove repetitive and unnecessary 
strike listings across the weekly expiries. Specifically, the proposal 
seeks to reduce the number of strikes listed in the furthest weeklies, 
which generally have wider markets and therefore lower market 
quality.\23\ The proposed strike intervals are intended to widen 
permissible strike intervals in multiply listed equity options 
(excluding options on ETFs and Index-Linked Securities) where there is 
less volume as measured by the Average Daily Volume tiers. Therefore, 
the lower the Average Daily Volume, the greater the proposed spread 
between strike intervals. Options classes with higher volume contain 
the most liquid symbols and strikes, which the Exchange believes makes 
the finer proposed spread between strike intervals for those symbols 
appropriate. Additionally, lower-priced shares have finer strike 
intervals than higher-priced shares when comparing the proposed spread 
between strike intervals. Today, weeklies are available on 16% of 
underlying products. The proposal limits the density of strikes listed 
in series of options, without reducing the classes of options available 
for trading on the Exchange. Short Term Option Series with an 
expiration date greater than 21 days from the listing date currently 
equate to 7.5% of the total number of strikes in the options market, 
which equals 81,000 strikes.\24\ The Exchange expects this proposal to 
result in the limitation of approximately 20,000 strikes within the 
Short Term Option Series, which is approximately 2% of the total 
strikes in the options markets.\25\ The Exchange understands there has 
been an inconsistency of demand for series of options beyond 21 
calendar days.\26\ The proposal takes into account customer demand for 
certain options classes, by considering both the Share Price and the 
Average Daily Volume, in order to remove certain strike intervals where 
there exist clusters of strikes whose characteristics closely resemble 
one another and, therefore, do not serve different trading needs,\27\ 
rendering these strikes less useful. The Exchange also notes that the 
proposal focuses on strikes in multiply listed equity options, and 
excludes ETFs and Index-Linked Securities, as the majority of strikes 
reside within equity options.
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    \23\ See BX proposal, supra note 18, which presents tables that 
focus on data for 10 of the most and least actively traded symbols 
and demonstrate average spreads in weekly options during the month 
of August 2020.
    \24\ The Exchange notes that this proposal is an initial attempt 
at reducing strikes and anticipates filing additional proposals to 
continue reducing strikes. The percentage of underlying products and 
percentage of and total number of strikes, are approximations and 
may vary slightly at the time of this filing. The Exchange intends 
to decrease the overall number of strikes listed on the NYSE Group 
options exchanges in a methodical fashion, so that it may monitor 
progress and feedback from its OTP Holders. The Exchange also notes 
that its affiliated options exchange, NYSE American Options LLC 
plans to submit an identical proposal.
    \25\ From information drawn from time period between January 
2020 and May 2020. See BX proposal, supra note 18.
    \26\ See BX proposal, supra note 18.
    \27\ For example, two strikes that are densely clustered may 
have the same risk properties and may also be the same percentage 
out-of-the money.
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    Additionally, proposed Rule 6.4-O, Commentary .07(f)(3) provides 
that options that are newly eligible for listing pursuant to Rule 5.3-O 
and designated to participate in the Short Term Option Series program 
pursuant to Rule 6.4-O, Commentary .07(f) will not be subject to 
subparagraph (f) (as proposed) until after the end of the first full 
calendar quarter following the date the option class was first listed 
for trading on any options market.\28\ As proposed, the Exchange is 
permitted to list options on newly eligible listings, without having to 
apply the wider strike intervals, until the end of the first full 
calendar quarter after such options were listed. The proposal thereby 
permits the Exchange to add strikes to meet customer demand in a newly 
listed options class. A newly eligible option class may fluctuate in 
price after its initial listing; such volatility reflects a natural 
uncertainty about the security. By deferring the application of the 
proposed wider strike intervals until after the end of the first full 
calendar quarter, additional information on the underlying security 
will be available to market participants and public investors, as the 
price of the underlying has an opportunity to settle based on the price 
discovery that has occurred in the primary market during this deferment 
period. Also, the Exchange has the ability to list as many strikes as 
are permissible for the Short Term Option Series once the expiry is no 
more than 21 days. Short Term Option Series that have an expiration 
date no more than 21 days from the listing date are not subject to the 
proposed strike intervals, which allows the Exchange to list 
additional, and potentially narrower, strikes in the event of market 
volatility or other market events. These metrics are intended to align 
expectations for determining which strike intervals will be utilized. 
Finally, proposed Rule 6.4-O, Commentary .07(f)(4) provides that, 
notwithstanding the strike intervals imposed in proposed subparagraph 
(f), the proposal does not amend the range of strikes that may be 
listed pursuant to subparagraph (e).
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    \28\ For example, if an options class became newly eligible for 
listing pursuant to Rule 5.3-O on March 1, 2021 (and was actually 
listed for trading that day), the first full quarterly lookback 
would be available on July 1, 2021. This option would become subject 
to the proposed strike intervals on July 2, 2021.
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    While the current listing rules permit the Exchange to list a 
number of weekly strikes on its market, in an effort to encourage 
Market Makers to deploy capital more efficiently, as well as improve 
displayed market quality, the proposal aims to reduce the density of 
strikes listed in later weeks by widening the intervals between strikes 
listed for equity options (excluding options on ETFs and Index-Linked 
Securities) which have an expiration date more than 21 days from the 
listing date. The Exchange requires Lead Market Makers (``LMMs'') and 
Market Makers to quote during a certain amount of time in the trading 
day and in a certain percentage of series in their assigned options 
classes to maintain liquidity in the market.\29\ With an increasing 
number of strikes being listed across options exchanges, Market Makers 
must expend their capital to ensure that they have the appropriate 
infrastructure to meet their quoting obligations on all options markets 
in which they are assigned in option classes. The Exchange believes 
that by widening the intervals between strikes listed for equity 
options (excluding options on ETFs and Index-Linked Securities), thus 
reducing the number of strikes listed on the Exchange, the proposal 
will likewise reduce the number of weekly strikes in which LMMs and 
Market Makers are required to quote and, as a result, allow LMMs and 
Market Makers to expend their capital in the options market in a more 
efficient manner. Due to this increased efficiency, the Exchange 
believes that the proposal may improve overall market quality on the 
Exchange by widening the intervals between strikes in multiply listed 
equity options (excluding options on ETFs and Index-Linked Securities) 
that have an expiration date more than 21 days from the listing date. 
The proposal is intended to balance the goal of limiting the number of 
listed strikes with the needs of market participants. The Exchange 
believes that the various permissible strike intervals will continue to 
offer market participants the ability to select the appropriate strikes 
to meet their investment objectives.
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    \29\ See Rule 6.37A-O.
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Implementation
    The Exchange will announce the implementation date of the proposed

[[Page 36848]]

rule change by Trader Update to be published no later than 30 days 
following the operative date of the proposed rule. The implementation 
date will be no later than 30 days following the issuance of the Trader 
Update. The Exchange will issue a Trader Update \30\ to its OTP Holders 
whenever the Exchange is the first exchange to list a class as eligible 
for Short Term Option Series pursuant to Rule 6.4-O, Commentary .07.
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    \30\ When the Exchange is the first exchange to list an option 
class Rule 6.4-O, Commentary .07 the Exchange shall provide a Trader 
Notice OTP Holders regarding the Short Term Option Series to be 
listed. Such notice will include for each eligible option class: The 
closing price of the underlying, the Average Daily Volume of the 
option class; and the eligible strike category (per the proposed 
table) in which the eligible option class falls under as a result of 
the closing price and the Average Daily Volume.
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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 Section 6(b) of the Act.\31\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \32\ 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) \33\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(5).
    \33\ Id.
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    The proposal seeks to widen the permissible intervals between 
strikes listed for equity options (excluding options on ETFs and Index-
Linked Securities) in order to limit the number of strikes listed in 
the Short Term Option Series program that have an expiration date more 
than 21 days. The proposal removes impediments to and perfects the 
mechanism of a free and open market and a national market system by 
encouraging Market Makers to deploy capital more efficiently, which may 
improve market quality overall on the Exchange, by widening the 
intervals between strikes when applying the strike interval table to 
multiply listed equity options (excluding options on ETFs and Index-
Linked Securities) that have an expiration date more than 21 days from 
the listing date. As described above, the Exchange requires LMMs and 
Market Makers to quote during a certain amount of time in the trading 
day and in a certain percentage of series in their assigned options 
classes to maintain liquidity in the market.\34\ With an increasing 
number of strikes due, in part, to tighter intervals being listed 
across options exchanges, Market Makers must expend their capital to 
ensure that they have the appropriate infrastructure to meet their 
quoting obligations on all options markets in which they are assigned 
in options classes. The Exchange believes that this proposal will widen 
the intervals between strikes listed on the Exchange, thereby reducing 
the number of weekly options listed on its market in later weeks in 
which Market Makers are required to quote and, in turn, allowing DPMs 
and Market Makers to expend their capital in the options market in a 
more efficient manner.
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    \34\ See supra note 30.
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    The Exchange believes that limiting the permissible strikes for 
multiply listed equity options (excluding options on ETFs and Index-
Linked Securities) that have an expiration date more than 21 days from 
the listing date will not significantly disrupt the market, as the 
majority of the volume traded in weekly options exists in options 
series which have an expiration date of 21 days or less. The proposal 
will limit the number of strikes listed in series of options without 
reducing the number of classes of options available for trading on the 
Exchange. The proposal allows the Exchange to determine the weekly 
strike intervals for multiply listed equity Short Term Option Series 
listed in the later weeks by taking into account customer demand for 
certain options classes by considering both the Share Price and the 
Average Daily Volume in the underlying security. The Exchange utilizes 
OCC Customer-cleared volume, as customer volume is an appropriate proxy 
for demand. Whereas non-Customer cleared OCC volume generally 
represents the supply side, the Exchange believes OCC Customer-cleared 
volume represents the majority of options volume executed on the 
Exchange, which, in turn, reflects the demands in the marketplace and 
is therefore intended to assist the Exchange in meeting customer demand 
by offering an appropriate number of strikes.
    The proposal is intended to remove certain strikes where there 
exist clusters of strikes whose characteristics closely resemble one 
another and, therefore, do not serve different trading needs, which 
currently results in less useful strikes. As such, the proposal 
protects investors and the general public by removing unnecessary 
choices for an options series, which the Exchange believes may improve 
market quality. The proposal seeks to reduce the number of strikes in 
the furthest weeklies, which generally have wider markets, and, 
therefore, lower market quality. The implementation of the Strike 
Interval table is intended to allow for greater spreads between strike 
intervals in multiply listed equity options where there is less volume 
as measured by the Average Daily Volume tiers. Therefore, the lower the 
Average Daily Volume, the wider the proposed spread between strike 
intervals, and the higher the Average Daily Volume (i.e., the options 
classes that contain the most liquid symbols and strikes), the narrower 
the proposed spread between strike intervals. Additionally, the 
proposed strike intervals are finer for lower-priced shares than 
higher-priced shares.\35\ As a result, the Exchange believes that, by 
limiting the permissible strikes for multiply listed equity options 
(excluding options on ETFs and Index-Linked Securities) that have an 
expiration date more than 21 days from the listing date pursuant to the 
proposed Strike Interval table, the proposal may improve overall market 
quality on the Exchange, which serves to protect investors and the 
general public.
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    \35\ The Exchange notes that is has discussed the proposed 
strike intervals with various OTP Holders.
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    Further, utilizing the second trading day of a calendar quarter 
allows the Exchange to accumulate data regarding OCC Customer-cleared 
volume from the entire prior calendar quarter and allows the 
calculation of Average Daily Volume to account for trades executed on 
the last day of the previous calendar quarter, which will have settled 
by the second trading day.\36\ The Exchange believes that applying the 
previous calendar quarter for the calculation is appropriate to reduce 
the impact of unusual trading activity as a result of unique market 
events, such as a corporate action (i.e., it may result in a more 
reliable measure of Average Daily Volume than a shorter period).
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    \36\ Options contracts settle one business day after trade date. 
Strike listing determinations are made the day prior to the start of 
trading in each series.

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[[Page 36849]]

    As stated, the proposal is substantively identical to the strike 
interval proposal recently submitted by BX and approved by the 
Commission.\37\ The Exchange believes that varied strike intervals will 
continue to offer market participants the ability to select the 
appropriate strike interval to meet that market participants' 
investment objectives.
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    \37\ See BX Strike Interval Approval Order, supra note 18.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act as the proposed rule change 
limits the number of Short Term Option Series strikes available for 
quoting and trading on the Exchange for all market participants. 
Therefore, all market participants will equally be able to transact in 
options series in the strikes listed for trading on the Exchange. The 
proposal is intended to reduce the number of strikes for weekly options 
listed in later weeks without reducing the number of classes of options 
available for trading on the Exchange while also continuing to offer an 
appropriate number of strikes the Exchange believes will meet market 
participants' investment objectives.
    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 purposes of the Act as it only 
impacts the permissible strike intervals for certain options series 
listed on the Exchange. Additionally, another options exchange has 
recently implemented a substantively identical rule for listing Short 
Term Option Series strike intervals on its exchange, approved by the 
Commission.\38\ The proposal is a competitive response that will permit 
the Exchange to list the same series in multiply listed options as 
another options exchange.
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    \38\ See BX Strike Interval Approval Order, supra note 18.
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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) \39\ of the Act and Rule 19b-4(f)(6) thereunder.\40\ 
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)(iii) of the Act and subparagraph (f)(6) of Rule 
19b-4 thereunder.\41\
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    \39\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \40\ 17 CFR 240.19b-4(f)(6).
    \41\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of its intent to file 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 pursuant to Rule 19b-4(f)(6) under the 
Act \42\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \43\ 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 Exchange may implement the proposed rule change at the same time 
that all other options exchanges implement their respective rule 
changes. The Commission believes that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because the proposed rule change is substantively identical to 
rules adopted by each other options exchange, and therefore the 
Exchange's proposal does not raise any new or novel issues. Waiver of 
the operative delay will allow the Exchange to implement its new rule 
on the same timeline as the other options exchanges, and such 
coordinated implementation will reduce potential investor confusion and 
facilitate a harmonized approach to strike listings for options within 
the Short Term Option Series program that have an expiration date more 
than 21 days from the listing date. Therefore, the Commission hereby 
waives the operative delay and designates the proposal as operative 
upon filing.\44\
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    \42\ 17 CFR 240.19b-4(f)(6).
    \43\ 17 CFR 240.19b-4(f)(6)(iii).
    \44\ 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).
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule 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-NYSEArca-2021-55 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-2021-55. 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

[[Page 36850]]

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-2021-55, and should 
be submitted on or before August 3, 2021.
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    \45\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-14792 Filed 7-12-21; 8:45 am]
BILLING CODE 8011-01-P


