[Federal Register Volume 88, Number 84 (Tuesday, May 2, 2023)]
[Notices]
[Pages 27549-27551]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09209]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97385; File No. SR-Phlx-2023-13]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend Certain 
Pilot Programs

April 26, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 14, 2023, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the pilot to permit the listing and 
trading of options based on 1/100 the value of the Nasdaq-100 Index 
(``Nasdaq-100'') and the Exchange's nonstandard expirations pilot 
program, both currently set to expire on May 4, 2023.
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/phlx/rules, 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
    Phlx proposes to extend 2 pilots, which are both set to expire on 
May 4, 2023. The Exchange proposes to extend (1) pilot to permit the 
listing and trading of options based on 1/100 the value of the Nasdaq-
100 Index (``XND Pilot''), and (2) the Exchange's nonstandard 
expirations pilot program (``Nonstandard Pilot'').
XND Pilot
    Phlx filed a rule change to permit the listing and trading of index 
options on the Nasdaq 100 Micro Index Options (``XND'') on a pilot 
basis.\3\ XND options trade independently of and in addition to NDX 
options, and the XND options are subject to the same rules that 
presently govern the trading of index options based on the Nasdaq-100 
Index, including sales practice rules, margin requirements, trading 
rules, and position and exercise limits. Similar to NDX, XND options 
are European-style and cash-settled, and have a contract multiplier of 
100. The contract specifications for XND options mirror in all respects 
those of the NDX options contract already listed on the Exchange, 
except that XND options are based on 1/100th of the value of the 
Nasdaq-100 Index, and are P.M.-settled pursuant to Options 4A, Section 
12(a)(5).
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    \3\ See Securities Exchange Act Release No. 91524 (April 9, 
2021), 86 FR 19909 (April 15, 2021) (SR-Phlx-2021-07) (Approval 
Order).
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    The Exchange proposes to amend Phlx Options 4A, Section 12(a)(6) to 
extend the current XND Pilot period to November 6, 2023. This pilot was 
previously extended and is currently extended through May 4, 2023.\4\ 
The Exchange continues to have sufficient capacity to handle additional 
quotations and message traffic associated with the listing and trading 
of XND options. In addition, index options are integrated into the 
Exchange's existing surveillance system architecture and are thus 
subject to the relevant surveillance processes. The Exchange also 
continues to have adequate surveillance procedures to monitor trading 
in XND options thereby aiding in the maintenance of a fair and orderly 
market. Additionally, there is continued investor interest in these 
products and this extension will provide additional time to collect 
data related to the XND Pilot. The Exchange believes that the proposed 
extension of the XND Pilot will not have an adverse impact on capacity.
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    \4\ See Securities Exchange Act Release No. 93447 (October 28, 
2021), 86 FR 60719 (November 3, 2021) (SR-Phlx-2021-66); 94631 
(April 7, 2022), 87 FR 21990 (April 13, 2022) (SR-Phlx-2022-16); and 
95993 (October 6, 2022), 87 FR 62161 (October 13, 2022) (SR-Phlx-
2022-39).
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XND Pilot Report
    The Exchange currently makes public on its website the data and 
analysis previously submitted to the Commission on the XND Pilot and 
will continue to make public any data or analysis it submits under the 
XND Pilot in the future. The Exchange has filed a rule change proposing 
permanency of the XND Pilot.\5\ The Exchange continues to provide 
monthly data and has provided additional data in the permanency filing. 
The Exchange would continue to provide the Commission with ongoing data 
unless and until the XND Pilot is made permanent or discontinued.
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    \5\ See Securities Exchange Act Release No. 96980 (February 24, 
2023), 88 FR 13161 (March 2, 2023) (SR-Phlx-2023-07).
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Nonstandard Pilot
    On December 15, 2017, the Commission approved a rule change for the 
listing and trading on the Exchange, on a twelve month pilot basis, of 
p.m.-settled options on broad-based indexes with nonstandard 
expirations dates (``Nonstandard Pilot'').\6\ The Nonstandard Pilot 
permits both Weekly Expirations and End of Month (``EOM'') expirations 
similar to those of the a.m.-settled broad-based index options, except 
that the exercise settlement value of the options subject to the pilot 
are based on the index value derived from the closing prices of 
component stocks. On July 29, 2022, the Commission approved a Proposed 
Rule Change To Permit the Listing and Trading of P.M.-Settled Nasdaq-
100 Index Options That Expire on Tuesday or Thursday Under Its 
Nonstandard Expirations Pilot Program.\7\ The Nonstandard Pilot was 
extended various times and is currently extended through May 4, 
2023.\8\
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    \6\ See Securities Exchange Act Release No. 82341 (December 15, 
2017), 82 FR 60651 (December 21, 2017) (Notice of Filing of 
Amendment No. 2, Order Approving a Proposed Rule Change, as Modified 
by Amendment No. 1 and Granting Accelerated Approval of Amendment 
No. 2, of a Proposed Rule Change To Establish a Nonstandard 
Expirations Pilot Program).
    \7\ See Securities Exchange Act Release No. 95391 (July 29, 
2022), 87 FR 47797 (August 4, 2022) (SR-Phlx-2022-22) (Order 
Granting Approval of a Proposed Rule Change To Permit the Listing 
and Trading of P.M.-Settled Nasdaq-100 Index Options That Expire on 
Tuesday or Thursday Under Its Nonstandard Expirations Pilot 
Program).
    \8\ See Securities Exchange Act Release Nos. 84835 (December 17, 
2018), 83 FR 65773 (December 21, 2018) (SR-Phlx-2018-80); 85669 
(April 17, 2019), 84 FR 16913 (April 23, 2019) (SR-Phlx-2019-13); 
87381 (October 22, 2019), 84 FR 57788 (October 28,2 019) (SR-Phlx-
2019-43); 88684 (April 17, 2020), 85 FR 22781 (April 23, 2020) (SR-
Phlx-2020-24); 90256 (October 22, 2020), 85 FR 68393 (October 28, 
2020) (SR-Phlx-2020-48); 91484 (April 6, 2021), 86 FR 19050 (April 
12, 2021) (SR-Phlx-2021-21); 93464 (October 29, 2021), 86 FR 60952 
(November 4, 2021) (SR-Phlx-2021-65); 94631 (April 7, 2022), 87 FR 
21990 (April 13, 2022) (SR-Phlx-2022-16); and 95993 (October 6, 
2022), 87 FR 62161 (October 13, 2022) (SR-Phlx-2022-39).

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[[Page 27550]]

    Pursuant to Phlx Options 4A, Section 12(b)(5)(A) the Exchange may 
open for trading Weekly Expirations on any broad-based index eligible 
for standard options trading to expire on any Monday, Wednesday, or 
Friday (other than the third Friday-of-the-month or days that coincide 
with an EOM expiration). In addition, the Exchange may also open for 
trading Weekly Expirations on Nasdaq-100 Index options to expire on any 
Tuesday or Thursday (other than days that coincide with the third 
Friday-of-the-month or an EOM expiration). Weekly Expirations are 
subject to all provisions of Options 4A, Section 12 and are treated the 
same as options on the same underlying index that expire on the third 
Friday of the expiration month. Unlike the standard monthly options, 
however, Weekly Expirations are p.m.-settled.
    Similarly, pursuant to Options 4A, Section 12(b)(5)(B) the Exchange 
may open for trading EOM expirations on any broad-based index eligible 
for standard options trading to expire on the last trading day of the 
month. EOM expirations are subject to all provisions of Options 4A, 
Section 12 and treated the same as options on the same underlying index 
that expire on the third Friday of the expiration month. However, the 
EOM expirations are p.m.-settled.
    The Exchange now proposes to amend Options 4A, Section 12(b)(5)(C) 
so that the duration of the Nonstandard Pilot for these nonstandard 
expirations will be through November 6, 2023. The Exchange continues to 
have sufficient systems capacity to handle p.m.-settled options on 
broad-based indexes with nonstandard expirations dates and has not 
encountered any issues or adverse market effects as a result of listing 
them. Additionally, there is continued investor interest in these 
products. The Exchange will continue to make public on its website any 
data and analysis it submits to the Commission under the Nonstandard 
Pilot. The Exchange believes that the proposed extension of the 
Nonstandard Pilot will not have an adverse impact on capacity.
Nonstandard Pilot Report
    The Exchange submitted a rule change proposing permanency of the 
Nonstandard Pilot.\9\ The Exchange continues to provide monthly data 
and has provided additional data in the permanency filing. The Exchange 
would continue to provide the Commission with ongoing data unless and 
until the Nonstandard Pilot is made permanent or discontinued.
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    \9\ See Securities Exchange Act Release No. 96980 (February 24, 
2023), 88 FR 13161 (March 2, 2023) (SR-Phlx-2023-07).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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XND Pilot
    In particular, the Exchange believes that the XND Pilot has been 
successful to date. The Exchange has not encountered any problems with 
the XND Pilot. By extending the XND Pilot, the Exchange believes it 
will attract order flow to the Exchange, increase the variety of listed 
options, and provide a valuable hedge tool to retail and other 
investors. Specifically, the Exchange believes that the XND Pilot will 
provide additional trading and hedging opportunities for investors 
while providing the Commission with data to monitor for and assess any 
potential for adverse market effects of allowing P.M.-settlement for 
XND options, including on the underlying component stocks.
Nonstandard Pilot
    The Exchange believes the proposed rule change will protect 
investors and the public interest by providing the Exchange, the 
Commission and investors the benefit of additional time to analyze 
nonstandard expiration options. In particular, the Exchange believes 
that the Nonstandard Pilot has been successful to date. The Exchange 
has not encountered any problems with the Nonstandard Pilot. By 
extending the Nonstandard Pilot, investors may continue to benefit from 
a wider array of investment opportunities. Additionally, both the 
Exchange and the Commission may continue to monitor the pilot for 
potential adverse market effects of p.m.-settlement on the market, 
including the underlying cash equities market, at the expiration of 
these options.

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 believes that 
the proposed rule change will not impose an undue burden on inter-
market competition as this rule change will continue to facilitate the 
listing and trading of new option products that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. Furthermore, these products could offer a competitive 
alternative to other existing investment products. Finally, it is 
possible for other exchanges to develop or license the use of a new or 
different index to compete with these products and seek Commission 
approval to list and trade options on such an index.
XND Pilot
    XND options would be available for trading to all market 
participants and therefore would not impose an undue burden on intra-
market competition. The continued listing of XND will enhance 
competition by providing investors with an additional investment 
vehicle, in a fully-electronic trading environment, through which 
investors can gain and hedge exposure to the Nasdaq-100.
Nonstandard Pilot
    Options with nonstandard expirations would be available for trading 
to all market participants. The continued listing of the Nonstandard 
Pilot will enhance competition by providing investors with an 
additional investment vehicle, in a fully-electronic trading 
environment, through which investors can gain and hedge exposure to the 
Nasdaq-100.

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 proposed rule change does not: (i) significantly affect 
the protection of investors or the public

[[Page 27551]]

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 \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, Rule 19b-4(f)(6)(iii) \15\ 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 proposal 
may become operative immediately upon filing. The Exchange states that 
waiver of the 30-day operative delay will allow it to extend the pilot 
programs prior to their expiration on May 4, 2023, permitting the pilot 
programs to continue uninterrupted. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest because the proposed rule change does 
not raise any new or novel issues. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change as operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-Phlx-2023-13 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-Phlx-2023-13. 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 (https://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. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to File Number SR-Phlx-2023-13, and should 
be submitted on or before May 23, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09209 Filed 5-1-23; 8:45 am]
BILLING CODE 8011-01-P


