2024-28104. Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Options 9, Section 13, Position Limits, and Options 8, Section 34, FLEX Trading, Regarding Options on the ...

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Securities and Exchange Commission

1. [Release No. 34-101734; File No. SR-Phlx-2024-64]

November 25, 2024.

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 November 21, 2024, 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.

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

The Exchange proposes to amend Options 9, Section 13, Position Limits, and Options 8, Section 34, FLEX Trading.

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: (1) amend Options 9, Section 13, Position Limits, to limit the position limits for options on the Fidelity Wise Origin Bitcoin Fund, the ARK21Shares Bitcoin ETF, the Grayscale Bitcoin Trust (BTC), the Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF (collectively “Bitcoin Trusts”); and (2) except FLEX options on the Bitcoin Trusts from trading as a FLEX option contract.

Options 9, Section 13

Recently, Cboe Exchange, Inc. (“Cboe”) received approvals to list options on the Fidelity Wise Origin Bitcoin Fund, and the ARK21Shares Bitcoin ETF.^[3] Also, recently, NYSE American LLC (“NYSE American”) received approvals to list options on the Fidelity Wise Origin Bitcoin Fund, the ARK21Shares Bitcoin ETF, the Grayscale Bitcoin Trust (BTC), the Grayscale Bitcoin Mini Trust BTC, and ( print page 95254) the Bitwise Bitcoin ETF.^[4] Nasdaq ISE, LLC (“ISE”) filed a rule change to also list and trade options on the Bitcoin Trusts.^[5] Phlx's Options 4 Rules were amended by the ISE rule change as those Rules are incorporated by reference to ISE's Options 4 Rules, so Phlx has the ability to list the options on the Bitcoin Trusts. The Cboe Approval Order and the NYSE American Approval Order stated that the position and exercise limits for each of the Bitcoin Trusts shall be 25,000 contracts. At this time, the Exchange proposes to amend Phlx Option 9, Section 13 to similarly note that options on the Fidelity Wise Origin Bitcoin Fund, the ARK21Shares Bitcoin ETF, the Grayscale Bitcoin Trust (BTC), the Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF shall have position limits of 25,000 contracts to mirror the Cboe Approval Order and the NYSE American Approval Order, respectively. Phlx Options 9, Section 15(a) provides that the exercise limits shall be determined in the manner described in Options 9, Section 13, therefore the exercise limits would also be 25,000 contracts for each of the Bitcoin Trusts.

Options 8, Section 34

Today, all options series listed on Phlx may trade as a FLEX Order on Phlx's trading floor.^[6] At this time, the Exchange proposes to note within Options 8, Section 34(a) that it will not authorize for trading a FLEX option on each of the Bitcoin Trusts. The Exchange proposes this amendment in light of the position and exercise limits of 25,000 contracts that were set for the Fidelity Wise Origin Bitcoin Fund, the ARK21Shares Bitcoin ETF, the Grayscale Bitcoin Trust (BTC), the Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF in the Cboe Approval Order and the NYSE American Approval Order, respectively. If the Exchange were to permit trading in a FLEX option for any of the Bitcoin Trusts, it would establish different position and exercise limits than those set forth in the Cboe Approval Order and the NYSE American Approval Order, respectively.

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act,^[7] in general, and furthers the objectives of Section 6(b)(5) of the Act,^[8] 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 Exchange's proposal to amend Options 9, Section 13, Position Limits, to provide that the position and exercise limits for each of the Bitcoin Trusts shall be 25,000 contracts is consistent with the Act as it will conform Phlx's options position and exercise limits with ISE's options position and exercise limits for the Bitcoin Trusts in order that there would be the same position and exercise limits on Phlx and ISE.^[9] Phlx Options 9, Section 15(a) provides that the exercise limits shall be determined in the manner described in Options 9, Section 13, therefore the exercise limits would also be 25,000 contracts and also consistent with ISE's options position and exercise limits for the Bitcoin Trusts.

The Exchange's proposal to amend Options 8, Section 34 to note that it will not authorize for trading a FLEX option on each of the Bitcoin Trusts is consistent with the spirit of the Cboe Approval Order and the NYSE American Approval Order, respectively, that limited the position and exercise limits for the Bitcoin Trusts to 25,000 contracts. The proposal will protect investors and the general public because without this prohibition, trading a FLEX option on the Bitcoin Trusts would otherwise establish different position and exercise limits than those set by Cboe Approval Order and the NYSE American Approval Order, respectively.

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

The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

Amending Options 9, Section 13 to provide that the position and exercise limits for options on each of the Bitcoin Trusts shall be 25,000 contracts does not impose an undue burden on competition as the position and exercise limits will apply to all trading for options on the Bitcoin Trusts trading on the Exchange as well as those trading on other exchanges that file a similar proposal.^[10]

The Exchange's proposal to note that it will not authorize for trading a FLEX option on any of the Bitcoin Trusts does not impose an undue burden on competition as no Phlx member will be able to transact a FLEX option on any of Bitcoin Trusts

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) of the Act ^[11] and Rule 19b-4(f)(6) thereunder.^[12] 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 ^[13] and subparagraph (f)(6) of Rule 19b-4 thereunder.^[14]

A proposed rule change filed under Rule 19b-4(f)(6) ^[15] under the Act does not normally become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),^[16] the Commission may designate a shorter time if such action ( print page 95255) is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission previously approved the listing of options on the Fidelity Wise Origin Bitcoin Fund, the ARK21Shares Bitcoin ETF, the Grayscale Bitcoin Trust (BTC), the Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF.^[17] As noted above, Phlx's Options 4 Rules were amended by an ISE rule change ^[18] as those Rules are incorporated by reference to ISE's Options 4 Rules, so Phlx has the ability to list the options on the Bitcoin Trusts. This proposal establishes position and exercise limits for options on the Bitcoin Trusts. The Commission believes that waiver of the operative delay could benefit investors by assuring that trading in Bitcoin Trust options are subject to the same position and exercise limits in place on other exchanges. Therefore, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change as operative upon filing.^[19]

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 (https://www.sec.gov/​rules/​sro.shtml); or
• Send an email [e-mail]. Please include file number SR-Phlx-2024-64 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-2024-64. 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 a.m. and 3 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-2024-64 and should be submitted on or before December 23, 2024.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.^[20]

Vanessa A. Countryman,

Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.   See Securities Exchange Act Release No. 101387 (October 18, 2024), 89 FR 84948 (October 24, 2024) (SR-Cboe-2024-035) (Notice of Filing of Amendment Nos. 2 and 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 2 and 3, To Permit the Listing and Trading of Options on Bitcoin Exchange-Traded Funds) (“Cboe Approval Order”).

4.   See Securities Exchange Act Release No. 101386 (October 18, 2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3, To Permit the Listing and Trading of Options on Bitcoin Exchange-Traded Funds) (“NYSE American Approval Order”).

5.   See SR-ISE-2024-54.

6.  Phlx Options 8, Section 34 rule text was previously amended by two rule changes which are effective, but not yet operative. These two prior rule changes will be implemented at the same time as the rule changes proposed herein. See Securities Exchange Act Release Nos. 97658 (June 7, 2023), 88 FR 38562 (June 13, 2023) (SR-Phlx-2023-22); and 100321 (June 12, 2024), 89 FR 51580 (June 18, 2024) (SR-Phlx-2024-24). Phlx further delayed the implementation so that it could implement SR-Phlx-2023-22 while also completing an OCC industry rule change prior.

7.  15 U.S.C. 78f(b)

8.  15 U.S.C. 78f(b)(5).

9.  The Exchange believes that other exchanges will adopt position and exercise limits of 25,000 contracts for each of the Bitcoin Trusts. All Nasdaq affiliated markets are filing to adopt a 25,000 contract position and exercise limit for options on the Bitcoin Trusts.

10.  All Nasdaq affiliated markets are filing to adopt a 25,000 contract position and exercise limit for options on the Bitcoin Trusts.

11.  15 U.S.C. 78s(b)(3)(A)(iii).

12.  17 CFR 240.19b-4(f)(6).

13.  15 U.S.C. 78s(b)(3)(A)(iii).

14.  17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission waives this requirement.

15.  17 CFR 240.19b-4(f)(6).

16.  17 CFR 240.19b-4(f)(6)(iii).

17.   See Securities Exchange Act Release No. 101387 (October 18, 2024), 89 FR 84948 (October 24, 2024) (SR-Cboe-2024-035) (Notice of Filing of Amendment Nos. 2 and 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 2 and 3, To Permit the Listing and Trading of Options on Bitcoin Exchange-Traded Funds). See also Securities Exchange Act Release No. 101386 (October 18, 2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3, To Permit the Listing and Trading of Options on Bitcoin Exchange-Traded Funds).

18.   See SR-ISE-2024-54.

19.  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. See15 U.S.C. 78c(f).

20.  17 CFR 200.30-3(a)(12), (59).