[Federal Register Volume 86, Number 98 (Monday, May 24, 2021)]
[Notices]
[Pages 27919-27927]
[FR Doc No: 2021-10846]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91932; File No. SR-Phlx-2021-26]

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Options 4,
Section 5, ``Series of Options Contracts Open for Trading'' To Limit
Short Term Options Series Intervals Between Strikes

May 18, 2021.
    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 May 5, 2021, 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.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to amend Options 4, Section 5, ``Series of
Options Contracts Open for Trading.'' This proposal seeks to limit
Short Term Options Series intervals between strikes which are available
for quoting and trading on Phlx.
    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
    The Exchange proposes to amend Options 4, Section 5, ``Series of
Options Contracts Open for Trading.'' Specifically, this proposal seeks
to limit the intervals between strikes for multiply listed equity
options classes within the Short Term Options Series program that have
an expiration date more than twenty-one days from the listing date.
This proposal is identical to a proposal by Nasdaq BX, Inc.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 91125 (February 12,
2021), 86 FR 10375 (February 19, 2021) (SR-BX-2020-032) (Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 1, To Amend
Options 4, Section 5, To Limit Short Term Options Series Intervals
Between Strikes That Are Available for Quoting and Trading on BX).
---------------------------------------------------------------------------

Background
    Today, Phlx's listing rules within Options 4, Section 5 permits the
Exchange, after a particular class of options (call option contracts or
put option contracts relating to a specific underlying stock, Exchange-
Traded Fund Share,\4\ or ETN \5\) 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,\6\ monthly \7\ or quarterly \8\ basis. Options 4, Section 5(d)
sets forth the intervals between strike prices of series of options on
individual stocks.\9\ In addition to those intervals, the Exchange may
list series of options pursuant to the $1 Strike Price Interval
Program,\10\ the $0.50 Strike Program,\11\ the $2.50 Strike Price
Program,\12\ and the $5 Strike Program.\13\
---------------------------------------------------------------------------

    \4\ Exchange-Traded Fund Share shall include shares or other
securities that are traded on a national securities exchange and are
defined as an ``NMS stock'' under Rule 600 of Regulation NMS, and
that (i) represent interests in registered investment companies (or
series thereof) organized as open-end management investment
companies, unit investment trusts or similar entities, that hold
portfolios of securities and/or financial instruments including, but
not limited to, stock index futures contracts, options on futures,
options on securities and indexes, equity caps, collars and floors,
swap agreements, forward contracts, repurchase agreements and
reverse repurchase agreements comprising or otherwise based on or
representing investments in broad-based indexes or portfolios of
securities and/or Financial Instruments and Money Market Instruments
(the ``Money Market Instruments'') (or that hold securities in one
or more other registered investment companies that themselves hold
such portfolios of securities and/or Financial Instruments and Money
Market Instruments (ii) represent interests in a trust or similar
entity that holds a specified non-U.S. currency or currencies
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 or
currencies and pays the beneficial owner interest and other
distributions on the deposited non-U.S. currency or currencies, if
any, declared and paid by the trust (``Currency Trust Shares''),
(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
ETFs''), (iv) represent interests in the SPDR[supreg] Gold Trust,
the iShares COMEX Gold Trust, the iShares Silver Trust, the ETFS
Gold Trust, the ETFS Silver Trust, the ETFS Palladium Trust, the
ETFS Platinum Trust or the Sprott Physical Gold Trust or (v)
represents an interest in a registered investment company
(``Investment Company'') organized as an open-end management 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''); provided the
conditions within Options 4, Section 3(i)(A) and (B) are met. See
Options 4, Section 3(i).
    \5\ 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'' or ``ETNs'') that
are principally traded on a national securities exchange and an
``NMS Stock'' (as defined in Rule 600 of Regulation NMS under the
Securities Exchange Act of 1934), and represent ownership of a
security that provides for the payment at maturity, as described
within Options 4, Section 3(l)(i)(1)-(6). See Options 4, Section
3(l)(i).
    \6\ The weekly listing program is known as the Short Term
Options Series Program and is described within Supplementary
Material .03 of Options 4, Section 5.
    \7\ The Exchange will open at least one expiration month for
each class of options open for trading on the Exchange. See Options
4, Section 5(g). The monthly expirations are subject to certain
listing criteria for underlying securities described within Options
4, Section 3. Monthly listings expire the third Friday of the month.
The term ``expiration date'' when used in respect of a series of
binary options other than event options means the last day on which
the options may be automatically exercised. In the case of a series
of event options (other than credit default options or credit
default basket options) that are be automatically exercised prior to
their expiration date upon receipt by the Corporation of an event
confirmation, the expiration date is the date specified by the
listing Exchange; provided, however, that when an event confirmation
is deemed to have been received by the Corporation with respect to
such series of options, the expiration date will be accelerated to
the date on which such event confirmation is deemed to have been
received by the Corporation or such later date as the Corporation
may specify. In the case of a series of credit default options or
credit default basket options, the expiration date is the fourth
business day after the last trading day for such series as such
trading day is specified by the Exchange on which the series of
options is listed; provided, however, that when an event
confirmation is deemed to have been received by the Corporation with
respect to a series of credit default options or single payout
credit default basket options prior to the last trading day for such
series, the expiration date for options of that series will be
accelerated to the second business day following the day on which
such event confirmation is deemed to have been received by the
Corporation. ``Expiration date'' means, in respect of a series of
range options expiring prior to February 1, 2015, the Saturday
immediately following the third Friday of the expiration month of
such series, and, in respect of a series of range options expiring
on or after February 1, 2015 means the third Friday of the
expiration month of such series, or if such Friday is a day on which
the Exchange on which such series is listed is not open for
business, the preceding day on which such Exchange is open for
business. See The Options Clearing Corporation (``OCC'') By-Laws at
Section 1.
    \8\ The quarterly listing program is known as the Quarterly
Options Series Program and is described within Supplementary
Material .04 of Options 4, Section 5.
    \9\ Except as otherwise provided in the Supplementary Material
of Options 4, Section 5, the interval between strike prices of
series of options on individual stocks will be: (1) $2.50 or greater
where the strike price is $25.00 or less; (2) $5.00 or greater where
the strike price is greater than $25.00; and (3) $10.00 or greater
where the strike price is greater than $200.00.
    The interval between strike prices of series of options on
Exchange-Traded Fund Shares approved for options trading pursuant to
Section 3(i) of this Options 4 shall be fixed at a price per share
which is reasonably close to the price per share at which the
underlying security is traded in the primary market at or about the
same time such series of options is first open for trading on the
Exchange, or at such intervals as may have been established on
another options exchange prior to the initiation of trading on the
Exchange.
    Pursuant to Options 4, Section 5(e), notwithstanding any other
provision regarding the interval of strike prices of series of
options on Exchange-Traded Fund Shares in this rule, the interval of
strike prices on SPDR[supreg] S&P 500[supreg] ETF (``SPY''), iShares
Core S&P 500 ETF (``IVV''), PowerShares QQQ Trust (``QQQ''), iShares
Russell 2000 Index Fund (``IWM''), and the SPDR[supreg] Dow
Jones[supreg] Industrial Average ETF (``DIA'') options will be $1 or
greater.
    \10\ The $1 Strike Interval Program is described within
Supplementary Material .01 of Options 4, Section 5.
    \11\ The $0.50 Strike Interval Program is described within
Supplementary Material .05 of Options 4, Section 5.
    \12\ The $2.50 Strike Interval Program is described within
Supplementary Material .02 of Options 4, Section 5.
    \13\ The $5.00 Strike Interval Program is described within
Supplementary Material .06 of Options 4, Section 5.
---------------------------------------------------------------------------

    The Exchange's proposal seeks to amend the listing of weekly series
of options as proposed within new Supplementary Material .03(f) of
Options 4, Section 5, by limiting the intervals between strikes in
multiply listed equity options, excluding Exchange-Traded Fund Shares
and ETNs, that have an expiration date more than twenty-one days from
the listing date. This proposal does not amend 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.
Short Term Options Series Program
    Today, Supplementary Material .03 of Options 4, Section 5 permits
Phlx to open for trading on any Thursday or Friday that is a business
day (``Short Term Option Opening Date'') series of options on an option
class that expires at the close of business on each of the next five
Fridays that are business days and are not Fridays in which monthly
options series or Quarterly Options Series expire (``Short Term Option
Expiration Dates''), provided an option class has been approved for
listing and trading on the Exchange.\14\ Today, the Exchange may open
up to thirty initial series for each option class that participates in
the Short Term Option Series Program.\15\ Further, if the Exchange
opens less than thirty (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.\16\
---------------------------------------------------------------------------

    \14\ 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 below. 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 a Friday, the Short Term Option Expiration
Date will be the first business day immediately prior to that
Friday. With respect to Wednesday SPY Expirations, the Exchange may
open for trading on any Tuesday or Wednesday that is a business day
series of options on the SPDR S&P 500 ETF Trust (SPY) to expire on
any Wednesday of the month that is a business day and is not a
Wednesday in which Quarterly Options Series expire (``Wednesday SPY
Expirations''). With respect to Monday SPY Expirations, the Exchange
may open for trading on any Friday or Monday that is a business day
series of options on the SPY to expire on any Monday of the month
that is a business day and is not a Monday in which Quarterly
Options Series expire (``Monday SPY Expirations''), provided that
Monday SPY Expirations that are listed on a Friday must be listed at
least one business week and one business day prior to the
expiration. The Exchange may list up to five consecutive Wednesday
SPY Expirations and five consecutive Monday SPY Expirations at one
time; the Exchange may have no more than a total of five Wednesday
SPY Expirations and a total of five Monday SPY Expirations. Monday
and Wednesday SPY Expirations will be subject to the provisions of
this Rule. See Supplementary Material .03 of Options 4, Section 5.
    \15\ See Supplementary Material .03 of Options 4, Section 5(c).
    \16\ See Supplementary Material .03 of Options 4, Section 5(d).
---------------------------------------------------------------------------

    The Exchange may open for trading Short Term Option Series on the
Short Term Option Opening Date that expire on the Short Term Option
Expiration Date at strike price intervals of (i) $0.50 or greater where
the strike price is less than $100, and $1 or greater where the strike
price is between $100 and $150 for all option classes that participate
in the Short Term Options Series Program; (ii) $0.50 for option classes
that trade in one dollar increments and are in the Short Term Option
Series Program; or (iii) $2.50 or greater where the strike price is
above $150. During the month prior to expiration of an option class
that is selected for the Short Term Option Series Program (``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.\17\
---------------------------------------------------------------------------

    \17\ See Options 4, Section 5(e).
---------------------------------------------------------------------------

    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
thirty 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.\18\
---------------------------------------------------------------------------

    \18\ See Supplementary Material .03(a) of Options 4, Section 5.
---------------------------------------------------------------------------

    Phlx notes that listings in the weekly program comprise a
significant part of the standard listing in options markets. The below
diagrams demonstrate the percentage of weekly listings as compared to
Long-Term Option Series or LEAPs and quarterly listings in 2015 as
compared to 2020. The weekly strikes increased 8.9% compound annual
growth rate (``CAGR'') from 2015 as compared to a 4.3% CAGR for
standard expirations using 3rd 2015 Friday expirations.
BILLING CODE 8011-01-P
[GRAPHIC] [TIFF OMITTED] TN24MY21.004

BILLING CODE 8011-01-C
Proposal
    Phlx proposes to limit the intervals between strikes in options
listed as part of the Short Term Option Series Program that have an
expiration date more than twenty-one days from the listing date, by
adopting proposed Supplementary Material .03(f) of Options 4, Section 5
as well as proposed Supplementary Material .07 of Options 4, Section 5,
with respect to listing Short Term Option Series in equity options,
excluding Exchange-Traded Fund Shares and ETNs) (collectively ``Strike
Interval Proposal''). Phlx's Strike Interval Proposal would limit the
intervals between strikes by utilizing the table proposed within
Supplementary Material .07 of Options 4, Section 5. With the Strike
Interval Proposal, Phlx would limit intervals between strikes for
expiration dates of option series beyond twenty-one days utilizing the
below three-tiered table which considers both the share price and
average daily volume for the option series.\19\ The below table
indicates the applicable strike intervals and would supersede
Supplementary Material .03(d) which currently permits 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, the Exchange would not be able to utilize the rule
text within Supplementary Material .03(d) to permit additional series
to be opened for trading on Phlx which have an expiration date more
than twenty-one days from the listing date despite the noted
circumstances when such additional series could otherwise be added.
---------------------------------------------------------------------------

    \19\ Additional information comparing the current listing
program to this proposal is available at: https://www.nasdaq.com/solutions/bx-options-strike-proliferation-proposal.

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

    The Share Price would be the closing price on the primary market on
the last day of the calendar quarter. This value would be used to
derive the column from which to apply strike intervals throughout the
next calendar quarter. The Average Daily Volume would be the total
number of options 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
shall be 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
shall be calculated using the calendar quarter prior to the last
trading calendar quarter.\20\ Under current rules, 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, as is the case today for
STOs as specified within Supplementary .03 to Options 4, Section 5.
---------------------------------------------------------------------------

    \20\ For example, options listed as of January 4, 2021 would be
calculated on January 5, 2021 using the Average Daily Volume from
July 1, 2020 to September 30, 2020.
---------------------------------------------------------------------------

    The Exchange proposes that Short Term Options Series that are newly
eligible for listing pursuant to Options 4, Section 3(a) will not be
subject to this proposed Supplementary .07 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.\21\ The Exchange would
be permitted to list options on newly eligible listings, without any
curtailment in strike intervals, until the end of the first full
quarter after they were listed. Phlx's proposal would thereby permit
Phlx to add strikes to meet customer demand in the options class. By
deferring the curtailment until after the end of the first full
calendar quarter, additional information on the underlying security
would be available to market participants and public investors. During
this period of deferment the price of the underlying would have an
opportunity to settle based on the price discovery that has occurred in
the primary market. An options class that represents a newly listed
primary security may fluctuate in price after its initial listing; such
volatility reflects a natural uncertainty about the security. Also,
Phlx would have the ability to list as many strikes as are permissible
for the Short Term Options Series once the expiry is within twenty-one
days. Short Term Options Series which have an expiration date less than
twenty-one days from the listing date are not subject to the
curtailment, thereby allowing Phlx to list additional, and potentially
narrower, strikes in the event of market volatility or other market
events.
---------------------------------------------------------------------------

    \21\ For example, if an options became newly eligible for
listing pursuant to Options 4, Section 3 on March 1, 2021, the first
full quarterly lookback would be available on July 1, 2021. This
option would become subject to the curtailment on July 2, 2021.
---------------------------------------------------------------------------

    Phlx proposes to make publically available a report on a quarterly
basis which indicates, for each Short Term Options Series eligible to
be listed under proposed Supplementary Material .07 of Options 4,
Section 5, the applicable tiering of the underlying, which includes the
closing price of the underlying, and the average daily customer volume
of the option in that underlying.\22\ The average daily customer volume
data will be sourced from OCC. The closing price of the underlying will
be sourced from the closing prices for Tape A, B and C securities
published by the UTP and CTA/CQ Plans. Phlx will produce the report by
the close of business on the first trading day of the quarter.\23\ The
Exchange notes that the report will be posted on Phlx's website on the
first day of a new quarter to support listing decisions, pursuant to
the Short Term Options Series Program, for the most recent listing
within the Short Term Options Program. The report will be based on
information that Phlx will obtain as described herein. This information
is available to other options markets and is being made available by
Phlx to provide consistency and relieve administrative burdens on other
options markets. Other exchanges may elect to utilize ISE's report to
validate their own information or they may otherwise elect another
method to consume similar information as Phlx is posting to its
website.
---------------------------------------------------------------------------

    \22\ ISE will make this information available on ISE's website.
This information will be freely-accessible to the public.
    \23\ OCC data becomes available for the end of a quarter on the
first trading day of a new quarter.
---------------------------------------------------------------------------

    In the event of a corporate action, the Share Price of the
surviving company would be utilized. These metrics are intended to
align expectations for determining which strike intervals will be
utilized. Finally, notwithstanding the limitations imposed by Options
4, Section 5 at proposed Supplementary Material .07, this Strike
Interval Proposal does not amend the range of strikes that may be
listed pursuant to Options 4, Section 5 at Supplementary Material .03,
regarding the Short Term Option Series Program.
    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 greater than $150 during that
calendar quarter.\24\
---------------------------------------------------------------------------

    \24\ The Exchange notes that any limits on intervals imposed by
the Exchange's Rules will continue to apply. In this example, the
strikes would be in $1 intervals up to $150, which is the upper
limit imposed by Supplementary Material .03(e) of Options 4, Section
5.
---------------------------------------------------------------------------

    The proposed table within Supplementary Material .07 of Options 4,
Section 5 takes into account the notional value of a security, as well
as Average Daily Volume in the underlying stock, in order to limit the
intervals between strikes in the Short Term Options listing program.
Phlx would

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
that, in turn, reflects the demand in the marketplace. The options
series listed on Phlx are intended to meet customer demand by offering
an appropriate number of strikes. Non-Customer cleared OCC volume
represents the supply side. The strike intervals for listing strikes in
certain options are intended to remove repetitive and unnecessary
strike listings across the weekly expiries. Phlx's Strike Interval
Proposal seeks to reduce the number of strikes in the furthest
weeklies, where there exist wider markets and therefore lower market
quality. Below are two tables which focus on data for 10 of the most
and least actively traded symbols \25\ and demonstrate average spreads
in weekly options during the month of August 2020.
---------------------------------------------------------------------------

    \25\ The table represents stock in the following securities:
Apple, Tesla, Microsoft Corporation, Advanced Micro Devices, Inc.,
Bank of America Corp., NRG Energy Inc., Ferrari NV, Community Health
Systems Inc., Navistar International Corp, and Jabil Inc.
---------------------------------------------------------------------------

BILLING CODE 8011-01-P
[GRAPHIC] [TIFF OMITTED] TN24MY21.005

    The proposed table within Supplementary Material .07 of Options 4,
Section 5 is intended to distribute 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
greater the proposed spread between strike intervals. Options classes
with higher volume contain the most liquid symbols and strikes,
therefore the finer the proposed spread between strike intervals.
Additionally, lower-priced shares have finer strike intervals than
higher-priced shares when comparing the proposed spread between strike
intervals.\26\
---------------------------------------------------------------------------

    \26\ The Exchange notes that is has discussed the proposed
strike intervals with various members. The Exchange has gathered
information regarding where trading in weeklies generally occurs to
arrive at the proposed strike intervals.
---------------------------------------------------------------------------

    Today, weeklies are available on 16% of underlying products. The
Exchange's Strike Interval Proposal curtails the density of strike
intervals listed in series of options, without reducing the classes of
options available for trading on Phlx. Short Term Options Series with
an expiration date greater than twenty-one days from the listing date
equates to 7.5% of the total number of strikes in the options market,
which equals 81,000 strikes.\27\ This proposal would result in the
curtailment of approximately 20,000 strikes within the Short Term
Options Series which is 2% of the total strikes in the options
markets.\28\
---------------------------------------------------------------------------

    \27\ The Exchange notes that this proposal is an initial attempt
at reducing strikes and anticipates filing additional proposals to
continue reducing strikes. The above-referenced data, specifically
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.
    \28\ This information was derived from information from the time
period from January 2020 through May 2020.

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

[GRAPHIC] [TIFF OMITTED] TN24MY21.006

    The above table represents the inconsistency of demand for series
of options beyond twenty-one calendar days.
    Phlx's Strike Interval Proposal focuses on strikes in multiply
listed equity options, and excludes Exchange-Traded Fund Shares and
ETNs, as the majority of strikes reside within equity options.

[GRAPHIC] [TIFF OMITTED] TN24MY21.007

BILLING CODE 8011-01-C
    While the current listing rules permit Phlx 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, Phlx's Strike Interval Proposal reduces the number of listed
weekly options. As Phlx's Strike Interval Proposal seeks to reduce the
number of weekly options that would be listed on its market in later
weeks, Market Makers would be required to quote in fewer weekly strikes
as a result of the Strike Interval Proposal. Specifically, the Strike
Interval Proposal aims to reduce the density of strike intervals that
would be listed in later weeks, by creating limitations for intervals
between strikes which have an expiration date more than twenty-one days
from the listing date. The table takes into account customer demand for
certain options classes, by considering both the Share Price and the
Average Daily Volume, to arrive at the manner which weekly strike
intervals may be listed. The intervals for listing strikes in equity
options is intended 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,\29\
rendering these strikes less useful.
---------------------------------------------------------------------------

    \29\ 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.
---------------------------------------------------------------------------

    This Strike Interval Proposal serves to respond to comments
received from industry members with respect to the increasing number of
strikes that are required to be quoted by market makers in the options
industry. Phlx requires Lead Market Makers and Market Makers to quote a
certain amount of time in the trading day in their assigned options
series to maintain liquidity in the market.\30\ 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 options series. The Exchange believes
that this Strike Interval Proposal would limit the intervals between
strikes, reducing the number of strikes listed on Phlx, and thereby
allow Lead Market Makers 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 this Strike Interval Proposal
would improve overall market quality on Phlx by limiting the intervals
between strikes in multiply listed equity options that have an
expiration date more than twenty-one days, from the listing date.
---------------------------------------------------------------------------

    \30\ See Options 2, Sections 4(j) and 5.
---------------------------------------------------------------------------

    This Strike Interval Proposal is intended to be the first in a
series of proposals to limit the number of listed options series listed
on Phlx and other Nasdaq affiliated markets. The Exchange intends to
decrease the overall number of strikes listed on Nasdaq exchanges in a
methodical fashion, so that it may monitor progress and feedback from
its membership. While limiting the intervals between listed strikes is
the goal of this rule change, Phlx's Strike Interval Proposal is
intended to balance that goal with the needs of market participants.
Phlx believes that various strike intervals continue to offer market
participants the ability to select the appropriate strike interval to
meet that market participant's investment objective.
Implementation
    The Exchange intends to begin implementation of the proposed rule
change on July 1, 2021. The Exchange will issue an Options Trader Alert
to Participants to provide notification of the implementation date.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b)

of the Act,\31\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\32\ 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. The Strike Proposal seeks to limit the intervals between
strikes listed in the Short Term Options Series program that have an
expiration date more than twenty-one days. While the current listing
rules permit Phlx to list a number of weekly strikes on its market, the
Exchange's Strike Interval 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 and
improving market quality overall on Phlx through limiting the intervals
between strikes when applying the strike interval table to multiply
listed equity options that have an expiration date more than twenty-one
days from the listing date. Also, as Phlx's Strike Interval Proposal
seeks to reduce the number of weekly options that would be listed on
its market in later weeks, Market Makers would be required to quote in
fewer weekly strikes as a result of the Strike Interval Proposal.
Amending Phlx's listing rules to limit the intervals between strikes
for multiply listed equity options that have an expiration date more
than twenty-one days causes less disruption in the market as the
majority of the volume traded in weekly options exists in options
series which have an expiration date of twenty-one days or less. The
Exchange's Strike Interval Proposal curtails the number of strike
intervals listed in series of options without reducing the number of
classes of options available for trading on Phlx.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Strike Interval Proposal takes into account customer demand for
certain options classes by considering both the Share Price and the
Average Daily Volume in the underlying security to arrive at the manner
in which weekly strike intervals would be listed in the later weeks for
each multiply listed equity options class. The Exchange utilizes 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 that, in turn, reflects the
demands in the marketplace. The options series listed on Phlx is
intended to meet customer demand by offering an appropriate number of
strikes. Non-Customer cleared OCC volume represents the supply side.
    The Strike Interval Proposal for listing strikes in certain
multiply listed equity options 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 that renders the strikes less useful and thereby protects
investors and the general public by removing an abundance of
unnecessary choices for an options series, while also improving market
quality. Phlx's Strike Interval Proposal seeks to reduce the number of
strikes in the furthest weeklies, where there exist wider markets, and,
therefore, lower market quality. The implementation of the proposed
table is intended to spread strike intervals in multiply listed equity
options, where there is less volume that is 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,
therefore the finer the proposed spread between strike intervals.
Additionally, lower-priced shares have finer strike intervals than
higher-priced shares when comparing the proposed spread between strike
intervals.\33\
---------------------------------------------------------------------------

    \33\ The Exchange notes that is has discussed the proposed
strike intervals with various members. The Exchange has gathered
information regarding where trading in weeklies generally occurs to
arrive at the proposed strike intervals.
---------------------------------------------------------------------------

    Beginning on the second trading day in the first month of each
calendar quarter, the Average Daily Volume shall be calculated by
utilizing data from the prior calendar quarter based on OCC Customer-
cleared volume. Utilizing the second trading day allows the Exchange to
accumulate data regarding OCC Customer-cleared volume from the entire
prior quarter. Beginning on the second trading day would allow trades
executed on the last day of the previous calendar quarter to have
settled \34\ and be accounted for in the calculation of Average Daily
Volume. Utilizing the previous three months is appropriate because this
time period would help reduce the impact of unusual trading activity as
a result of unique market events, such as a corporate action (i.e., it
would result in a more reliable measure of average daily trading volume
than would a shorter period).
---------------------------------------------------------------------------

    \34\ 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.
---------------------------------------------------------------------------

    This Strike Interval Proposal serves to respond to comments
received from industry members with respect to the increasing number of
strikes that are required to be quoted by market makers in the options
industry. Today, Phlx requires Lead Market Makers and Market Makers to
quote a certain amount of time in the trading day in their assigned due
options series to maintain liquidity in the market.\35\ With an
increasing number of strikes due 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 series. The Exchange believes that this Strike Interval
Proposal would limit the intervals between strikes listed on Phlx and
thereby allow Lead Market Makers and Market Makers to expend their
capital in the options market in a more efficient manner that removes
impediments to and perfect the mechanism of a free and open market and
a national market system. The Exchange also believes that this Strike
Interval Proposal would improve overall market quality on Phlx for the
protection of investors and the general public by limiting the
intervals between strikes when applying the strike interval table to
multiply listed equity options which have an expiration date more than
twenty-one days from the listing date.
---------------------------------------------------------------------------

    \35\ See Options 2, Sections 4(j) and 5.
---------------------------------------------------------------------------

    This Strike Interval Proposal is intended to be the first in a
series of proposals to limit the number of listed options series listed
on Phlx and other Nasdaq affiliated markets. The Exchange intends to
decrease the overall number of strikes listed on Nasdaq exchanges in a
methodical fashion in order that it may monitor progress and feedback
from its membership. While limiting the intervals between strikes
listed is the goal of this rule change, Phlx's Strike Interval Proposal
is intended to balance that goal with the needs of market participants.
The Exchange believes that varied strike intervals continue to offer
market participants the ability to select the appropriate strike
interval to meet that market participant's investment objective.

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 Strike Interval Proposal
limits the number of Short Term Options Series strike

intervals available for quoting and trading on Phlx for all Phlx
Participants. While the current listing rules permit Phlx 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, Phlx's Strike Interval Proposal seeks to
reduce the number of weekly options that would be listed on its market
in later weeks, without reducing the number of series or classes of
options available for trading on Phlx. As Phlx's Strike Interval
Proposal seeks to reduce the number of weekly options that would be
listed on its market in later weeks, Market Makers would be required to
quote in fewer weekly strikes as a result of the Strike Interval
Proposal.
    The Exchange's Strike Interval Proposal, which is intended to
decrease the overall number of strikes listed on Phlx, does not impose
an undue burden on intra-market competition as all Participants may
only transact options in the strike intervals listed for trading on
Phlx. While limiting the intervals of strikes listed on Phlx is the
goal of this Strike Interval Proposal, the goal continues to balance
the needs of market participants by continuing to offer a number of
strikes to meet a market participant's investment objective.
    The Exchange's Strike Interval Proposal does not impose an undue
burden on inter-market competition as this Strike Interval Proposal
does not impact the listings available at another self-regulatory
organization. In fact, Phlx is proposing to list a smaller amount of
weekly equity options in an effort to curtail the increasing number of
strikes that are required to be quoted by market makers in the options
industry. Other options markets may choose to replicate the Exchange's
Strike Interval Proposal and, thereby, further decrease the overall
number of strikes within the options industry.

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) \36\ of the Act and Rule 19b-4(f)(6) thereunder.\37\
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.\38\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \37\ 17 CFR 240.19b-4(f)(6).
    \38\ 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.
---------------------------------------------------------------------------

    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<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2021-26 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-2021-26. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-Phlx-2021-26, and should be submitted on
or before June 14, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10846 Filed 5-21-21; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 238 (Thursday, December 10, 2020)]
[Notices]
[Page 79486]
[FR Doc No: 2020-27129]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ID-7120-005]

Notice of Filing; Flynn, John J.

    Take notice that on December 3, 2020, John J. Flynn submitted for
filing, application for authority to hold interlocking positions,
pursuant to section 305(b) of the Federal Power Act, 16 U.S.C. 825d (b)
(2020) and Part 45 of the Federal Energy Regulatory Commission's
(Commission) Rules of Practice and Procedure, 18 CFR part 45.8 (2020).
    Any person desiring to intervene or to protest this filing must
file in accordance with Rules 211 and 214 of the Commission's Rules of
Practice and Procedure (18 CFR 385.211, 385.214). Protests will be
considered by the Commission in determining the appropriate action to
be taken but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices,
motions, or protests must be filed on or before the comment date. On or
before the comment date, it is not necessary to serve motions to
intervene or protests on persons other than the Applicant.
    In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
internet through the Commission's Home Page (http://ferc.gov) using the
``eLibrary'' link. Enter the docket number excluding the last three
digits in the docket number field to access the document. At this time,
the Commission has suspended access to the Commission's Public
Reference Room, due to the proclamation declaring a National Emergency
concerning the Novel Coronavirus Disease (COVID-19), issued by the
President on March 13, 2020. For assistance, contact the Federal Energy
Regulatory Commission at<EMAIL_ADDRESS>or call toll-free,
(886) 208-3676 or TYY,<PHONE_NUMBER>.
    The Commission strongly encourages electronic filings of comments,
protests and interventions in lieu of paper using the ``eFiling'' link
at http://www.ferc.gov. Persons unable to file electronically may mail
similar pleadings to the Federal Energy Regulatory Commission, 888
First Street NE, Washington, DC 20426. Hand delivered submissions in
docketed proceedings should be delivered to Health and Human Services,
12225 Wilkins Avenue, Rockville, Maryland 20852.
    Comment Date: 5:00 p.m. Eastern Time on December 24, 2020.

    Dated: December 4, 2020.
Kimberly D. Bose,
Secretary.
[FR Doc. 2020-27129 Filed 12-9-20; 8:45 am]
BILLING CODE 6717-01-P