90 FR 52 pgs. 12876-12881 - Self-Regulatory Organizations; Notice of Filing of a Proposed Rule Change, as Modified by Partial Amendment Nos. 1 and 2, by MIAX PEARL, LLC To Amend Exchange Rule 402, Criteria for Underlying Securities, To List and Trade Options on Commodity-Based Trust Shares
Type: NOTICEVolume: 90Number: 52Pages: 12876 - 12881
Pages: 12876, 12877, 12878, 12879, 12880, 12881Docket number: [Release No. 34-102659; File No. SR-PEARL-2025-08]
FR document: [FR Doc. 2025-04512 Filed 3-18-25; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102659; File No. SR-PEARL-2025-08]
Self-Regulatory Organizations; Notice of Filing of a Proposed Rule Change, as Modified by Partial Amendment Nos. 1 and 2, by MIAX PEARL, LLC To Amend Exchange Rule 402, Criteria for Underlying Securities, To List and Trade Options on Commodity-Based Trust Shares
March 13, 2025.
Pursuant to the provisions of 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 March 5, 2025, MIAX PEARL, LLC ("MIAX Pearl" or the "Exchange") filed with the Securities and Exchange Commission ("Commission") a proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Partial Amendments Nos. 1 and 2, from interested persons.
Footnotes:
1 ?15 U.S.C. 78s(b)(1).
2 ?17 CFR 240.19b-4.
3 ?On March 11, 2025, the Exchange filed Partial Amendment No. 1 to the proposed rule change. In addition to the changes described herein, Partial Amendment No. 1 corrected a marking error in proposed changes to the rule text in Exhibit 5 and corrected the header of the Exhibit 1. On March 12, 2025, the Exchange filed Partial Amendment No. 2 to the proposed rule change to correct a marking error in proposed changes to the rule text in Exhibit 5 as modified by Partial Amendment No. 1.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend Exchange Rule 402, Criteria for Underlying Securities, to list and trade options on Commodity-Based Trust Shares.
The text of the proposed rule change is available on the Exchange's website at https://www.miaxglobal.com/markets/us-equities/pearl-equities/rule-filings, at MIAX Pearl's principal office, 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, MIAX Pearl 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. MIAX Pearl 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 Exchange Rule 402, Criteria for Underlying Securities, 4 to allow the listing and trading of options on units that represent interests in a trust that in a Commodity-Based Trust. This is a competitive filing substantively identical to proposals submitted by Nasdaq ISE, LLC ("ISE"), NYSE American, LLC ("NYSE American"), NYSE Arca Inc. ("NYSE Arca") and Cboe Exchange, Inc. ("Cboe"), which are currently pending with the Securities and Exchange Commission (the "Commission"). 5
Footnotes:
4 ?The Exchange notes that its affiliate options exchanges, Miami International Securities Exchange, LLC ("MIAX ") and MIAX Sapphire, LLC ("MIAX Sapphire"), submitted (or will submit) substantively similar proposals. The Exchange notes that the rules of Chapter IV of MIAX, including Exchange Rule 402, are incorporated by reference into the MIAX Emerald, LLC ("MIAX Emerald") rulebook.
5 ? See Securities Exchange Act Release No. 102465 (February 20, 2025) (SR-ISE-2025-08); SRNYSEArca-2025-16 (February 24, 2025); and SR-NYSEAmerican-2025-07 (February 24, 2025) and SR-CBOE-2025-014. Partial Amendment No. 1 added the citation to SR-CBOE-2025-014.
The Exchange proposes to allow the listing and trading of options on units that represent interests in a trust that in a Commodity-Based Trust. A Commodity-Based Trust is defined at The Nasdaq Stock Market LLC Rule 5711(d)(iv), NYSE Arca Rule 8.201(c), and Cboe BZX Exchange, Inc. 14.11(e)(4) as a security that is issued by a trust that holds (i) a specified commodity deposited with the Trust, or (ii) a specified commodity and, in addition to such specified commodity, cash; (b) that is issued by such Trust in a specified aggregate minimum number in return for a deposit of a quantity of the underlying commodity and/or cash; and (c) that, when aggregated in the same specified minimum number, may be redeemed at a holder's request by such Trust which will deliver to the redeeming holder the quantity of the underlying commodity and/or cash ("Commodity-Based Trust Share").
The Exchange proposes to amend Exchange Rule 402(i) to provide that
(i) Securities deemed appropriate for options trading shall include shares or other securities ("Exchange-Traded Fund Shares") that are traded on a national securities exchange and are defined as an "NMS stock" under Rule 600 of Regulation NMS, and that . . . (4) represent interests in (i) a security issued by a trust that holds (A) a specified commodity deposited with the trust, or (B) a specified commodity and, in addition to such specified commodity, cash; (ii) that is issued by such trust in a specified aggregate minimum number in return for a deposit of a quantity of the underlying commodity and/or cash; and (iii) that, when aggregated in the same specified minimum number, may be redeemed at a holder's request by such trust which will deliver to the redeeming holder the quantity of the underlying commodity and/or cash ("Commodity-Based Trust Share"). 6
Footnotes:
6 ?Partial Amendment No. 1 removed text incorrectly included in the block quote describing proposed Exchange Rule 402(i).
[top] The Exchange proposes to insert this rule text and remove references to the SPDR® Gold Trust, the iShares COMEX Gold Trust, the iShares Silver Trust, the Aberdeen Standard Silver ETF Trust, the Aberdeen Standard Physical Gold Trust, the Aberdeen Standard Palladium ETF Trust, the Aberdeen Standard Platinum ETF Trust, the Goldman Sachs Physical Gold ETF, the Sprott Physical Gold Trust, the iShares Bitcoin Trust, the Grayscale Bitcoin Trust, the Grayscale Bitcoin Mini Trust, the
Footnotes:
7 ?The Exchange believes this proposal is consistent with the Options Clearing Corporation ("OCC") recent amendment of "Fund Share" (which covers ETFs), as defined in OCC's By-Laws (including the Interpretation and Policy), to remove references to specific precious metal commodity-based ETFs as "no longer relevant or necessary." See Securities Exchange Act Release No. 102018 (December 20, 2024), 89 FR 106660 (December 30, 2024) (SR-OCC-2024-018). The impetus for this rule change was the staff advisory issued by the Commodity Futures Trading Commission ("CFTC") that deemed it "`substantially likely' that spot commodity ETF shares would be held to be securities" which, in turn, resulted in the OCC's determination that "it no longer needs to seek product-by-product exemptive relief from the CFTC to clear spot commodity-based ETF products, including precious metals commodity-based ETFs." See id. at 106661; see also CFTC Staff Advisory Relating to the Clearing of Options on Spot Commodity Exchange Traded Funds (ETFs), Letter No. 24-16 (Nov. 15, 2024), available at https://www.cftc.gov/csl/24-16/ download.
The Exchange's initial listing standards as set forth in Exchange Rule 402(a) for Exchange Traded Fund Shares ("ETFs") on which options may be listed and traded on the Exchange, will continue to apply. Pursuant to Exchange Rule 402(a), a security (which includes ETFs) on which options may be listed and traded on the Exchange must be a security registered (with the Commission) and be an NMS stock (as defined in Rule 600 of Regulation NMS under the Act), and be characterized by a substantial number of outstanding shares that are widely held and actively traded. 8 Additionally, Exchange Rule 402(i)(5)(i) requires that the ETFs must either (1) meet the criteria and standards set forth in Exchange Rule 402(a) or 402(b), 9 or (2) be available for creation or redemption each business day from or through the issuer in cash or in kind at a price related to net asset value, and the issuer must be obligated to issue ETFs in a specified aggregate number even if some or all of the investment assets required to be deposited have not been received by the issuer, subject to the condition that the person obligated to deposit the investments has undertaken to deliver the investment assets as soon as possible and such undertaking is secured by the delivery and maintenance of collateral consisting of cash or cash equivalents satisfactory to the issuer, as provided in the respective prospectus.
Footnotes:
8 ?The criteria and guidelines for a security to be considered widely held and actively traded are set forth in Exchange Rule 402(b).
9 ?Subparagraphs (a) and (b) of Exchange Rule 402 provide for guidelines to be used by the Exchange when evaluating potential underlying securities for Exchange option transactions.
Additionally, a Commodity-Based Trust Share will also be subject to the Exchange's continued listing standards for options on ETFs set forth in Exchange Rule 403(g) for ETFs deemed appropriate for options trading pursuant to Exchange Rule 402(i). Specifically, options approved for trading pursuant to Exchange Rule 402(i) will not be deemed to meet the requirements for continued approval, and the Exchange shall not open for trading any additional series of option contracts of the class covering such ETFs if the ETFs are delisted from trading as provided in Exchange rule 403(b)(4) or the ETFs are halted or suspended from trading on their primary market. Additionally, options on ETFs may be subject to the suspension of opening transactions in any of the following circumstances:
(1) in the case of options covering ETFs approved for trading under Exchange Rule 402(i)(5)(i)(A), in accordance with the terms of paragraphs (b)(1), (2), and (3) of Exchange Rule 403;
(2) in the case of options covering ETFs approved for trading under Exchange Rule 402(i)(5)(i)(B), following the initial twelve-month period beginning upon the commencement of trading in the ETFs on a national securities exchange and are defined as an NMS stock, there are fewer than 50 record and/or beneficial holders of such ETFs for 30 or more consecutive trading days;
(3) the value of the index or portfolio of securities, non-U.S. currency, or portfolio of commodities including commodity futures contracts, options on commodity futures contracts, swaps, forward contracts and/or options on physical commodities and/or financial instruments and money market instruments on which the ETFs are based is no longer calculated or available; or
(4) such other event shall occur or condition exist that in the opinion of the Exchange makes further dealing in such options on the Exchange inadvisable.
The Exchange notes that ETFs that hold financial instruments, money market instruments, precious metal commodities, or cryptocurrencies that are deemed commodities on which the Exchange may already list and trade options pursuant to Exchange Rule 402(i) are trusts structured in substantially the same manner as options on a Commodity Based Trust Share and essentially offer the same objectives and benefits to investors, just with respect to different assets. The Exchange notes that it has not identified any issues with the continued listing and trading of any ETF options, including ETFs that hold commodities ( e.g., precious metals, cryptocurrencies) that it currently lists and trades on the Exchange.
Options on a Commodity-Based Fund Share will be physically settled contracts with American-style exercise. 10 Consistent with Exchange Rule 404, which governs the opening of options series on a specific underlying security (including ETFs), the Exchange will open at least one expiration month for options on a Commodity-Based Trust Share 11 and may also list series of options on Commodity-Based Trust Share for trading on a weekly, 12 monthly, 13 or quarterly? 14 basis. The Exchange may also list long-term equity option series ("LEAPS") that expire from 12 to 39 months from the time they are listed. 15
Footnotes:
10 ? See Exchange Rule 401, which provides that the rights and obligations of holders and writers are set forth in the Rules of the Options Clearing Corporation ("OCC"); see also OCC Rules, Chapters VIII (which governs exercise and assignment) and Chapter IX (which governs the discharge of delivery and payment obligations arising out of the exercise of physically settled stock option contracts).
11 ? See Exchange Rule 404(b). The monthly expirations are subject to certain listing criteria for underlying securities described within Exchange Rule 404 and its Interpretations and Policies. Monthly listings expire the third Friday of the month. The term "expiration date" (unless separately defined elsewhere in the OCC By-Laws), when used in respect of an option contract (subject to certain exceptions), means the third Friday of the expiration month of such option contract, or if such Friday is a day on which the exchange on which such option is listed is not open for business, the preceding day on which such exchange is open for business. See OCC By-Laws Article I, Section 1. Pursuant to Exchange Rule 404(c), additional series of options of the same class 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 stock moves more than five strike prices from the initial exercise price or prices. Pursuant to Exchange Rule 404(e), new series of options on an individual stock may be added until the beginning of the month in which the options contract will expire. Due to unusual market conditions, the Exchange, in its discretion, may add a new series of options on an individual stock until the close of trading on the business day prior to expiration.
12 ? See Exchange Rule 404, Interpretations and Policies .02.
13 ? See Exchange Rule 404, Interpretations and Policies .13.
14 ? See Exchange Rule 404, Interpretations and Policies .03.
15 ? See Exchange Rule 406. Partial Amendment No. 1 corrected this rule citation.
[top] Pursuant to Exchange Rule 404, Interpretations and Policies.06, which governs strike prices of series of options on ETFs, the interval between strike prices of series of options on ETFs approved for options trading pursuant to Exchange Rule 402(i) 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
Footnotes:
16 ? See Exchange Rule 404, Interpretations and Policies .02(e).
17 ? Id.
18 ? See Exchange Rule 404, Interpretations and Policies.01.
19 ? See Exchange Rule 404, Interpretations and Policies.04.
20 ? See Exchange Rule 404(f).
21 ? See Exchange Rule 510.
Options on a Commodity-Based Trust Share will trade in the same manner as options on other ETFs on the Exchange. The Exchange Rules that currently apply to the listing and trading of all options on ETFs on the Exchange, including, for example, Rules that govern listing criteria, expirations, exercise prices, minimum increments, position and exercise limits, margin requirements, customer accounts and trading halt procedures would apply to the listing and trading of options on a Commodity-Based Trust Share on the Exchange in the same manner as they apply to other options on all other ETFs that are listed and traded on the Exchange.
Position and exercise limits for options on ETFs, including options on a Commodity-Based Trust Share, are determined pursuant to the Exchange's affiliate MIAX Rules 307 and 309, respectively. Position and exercise limits for ETF options vary according to the number of outstanding shares and the trading volumes of the underlying ETF over the past six months, where the largest in capitalization and the most frequently traded ETFs have an option position and exercise limits of 250,000 contracts (with adjustments for splits, re-capitalizations, etc.) on the same side of the market; and smaller capitalization ETFs have position and exercise limits of 200,000, 75,000, 50,000 or 25,000 contracts (with adjustments for splits, re-capitalizations, etc.) on the same side of the market. The Exchange further notes that the Exchange's affiliate MIAX Rule 1502, which governs margin requirements applicable to trading on the Exchange, including options on ETFs, will also apply to the trading on a Commodity-Based Trust Share options.
The Exchange represents that the same surveillance procedures applicable to all other options on other ETFs currently listed and traded on the Exchange will apply to options on a Commodity Based Trust Share that it applies to the Exchange's other options products. 22 The Exchange believes that its existing surveillance and reporting safeguards are designed to deter and detect possible manipulative behavior which might potentially arise from listing and trading options on ETFs, including any options on a Commodity-Based Trust Share. Additionally, the Exchange is a member of the Intermarket Surveillance Group ("ISG") under the Intermarket Surveillance Group Agreement. ISG members work together to coordinate surveillance and investigative information sharing in the stock, options, and futures markets. In addition, the Exchange has a Regulatory Services Agreement with the Financial Industry Regulatory Authority ("FINRA"). Pursuant to a multi-party 17d-2 joint plan, all options exchanges allocate regulatory responsibilities to FINRA to conduct certain options-related market surveillance that are common to rules of all options exchanges. 23 Also, the Exchange may obtain information from CME Group Inc.'s designated contract markets that are members of the ISG related to a financial instrument that is based, in whole or in part, upon an interest in or performance of a commodity, as applicable. Further, the Exchange will implement any new surveillance procedures it deems necessary to effectively monitor the trading of options on Commodity-Based Fund Shares.
Footnotes:
22 ?The surveillance program includes real-time patterns for price and volume movements and post-trade surveillance patterns ( e.g., spoofing, marking the close, pinging, phishing).
23 ?Section 19(g)(1) of the Act, among other things, requires every SRO registered as a national securities exchange or national securities association to comply with the Act, the rules and regulations thereunder, and the SRO's own rules, and, absent reasonable justification or excuse, enforce compliance by its members and persons associated with its members. See 15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows the Commission to relieve an SRO of certain responsibilities with respect to members of the SRO who are also members of another SRO ("common members"). Specifically, Section 17(d)(1) allows the Commission to relieve an SRO of its responsibilities to: (i) receive regulatory reports from such members; (ii) examine such members for compliance with the Act and the rules and regulations thereunder, and the rules of the SRO; or (iii) carry out other specified regulatory responsibilities with respect to such members.
The Exchange has also analyzed its capacity and represents that it believes the Exchange and the Options Price Reporting Authority ("OPRA") have the necessary systems capacity to handle the additional traffic associated with the listing of new series of ETFs, including options on a Commodity-Based Trust Share, up to the number of expirations currently permissible under the Exchange Rules. The Exchange believes any additional traffic generated from the trading of options on Commodity-Based Trust Shares would be manageable. The Exchange represents that Exchange members will not have a capacity issue as a result of this proposed rule change.
Further, quotation and last sale information for Commodity-Based Trust Shares is available via the Consolidated Tape Association ("CTA") high speed line. Quotation and last sale information for such securities is also available from the exchange on which such securities are listed. Quotation and last sale information for options on Commodity-Based Trust Shares will be available via OPRA and major market data vendors.
[top] The Exchange notes that the Commission has previously approved generic listing standards pursuant to Rule 19b-4(e) of the Act? 24 for ETFs based on indexes that consist of stocks listed on U.S. exchanges. 25 In addition,
Footnotes:
24 ?17 CFR 240.19b-4(e).
25 ?See Securities Exchange Act Release No. 54739 (November 9, 2006), 71 FR 66993 (November 17, 2006) (SR-AMEX-2006-78) (approval order relating to generic listing standards for ETFs based on international or global indexes).
26 ? See, e.g., Securities Exchange Act Release Nos. 56778 (November 9, 2007), 72 FR 65113 (November 19, 2007) (SR-AMEX-2007-100) (approval order to list and trade options on iShares MSCI Mexico Index Fund); and 55648 (April 19, 2007), 72 FR 20902 (April 26, 2007) (SR-AMEX-2007-09) (approval order to list and trade options on Vanguard Emerging Markets ETF); see also Securities Exchange Act Release Nos. 50189 (August 12, 2004), 69 FR 51723 (August 20, 2004) (SR-AMEX-2001-05) (approving the listing and trading of certain Vanguard International Equity Index Funds); and 44700 (August 14, 2001), 66 FR 43927 (August 21, 2001) (SR-2001-34)(approving the listing and trading of series of the iShares Trust based on foreign stock indexes).
In approving Commodity-Based Trust Shares for equities exchange trading, the Commission thoroughly considered the structure of the Commodity-Based Trust Shares, their usefulness to investors and to the markets, and self-regulatory organization rules that govern their trading. The Exchange believes that allowing the listing of options overlying Commodity-Based Trust Shares that are listed pursuant to Commission approval on equities exchanges and applying Rule 19b-4(e)? 27 should fulfill the intended objective of that rule by allowing options on those Commodity-Based Trust Shares that have satisfied the generic listing standards to commence trading, without the need for the public comment period and Commission approval. The proposed rule change has the potential to significantly reduce the time and costs associated with bringing options on Commodity-Based Trust Shares to market, thereby reducing the burden on issuers and other market participants, while also promoting competition among options exchanges, to the benefit of the investing public. The failure of a particular Commodity-Based Trust Share to comply with the generic listing standards under Rule 19b-4(e)? 28 would not, however, preclude the Exchange from submitting a separate filing pursuant to Section 19(b)(2)? 29 requesting Commission approval to list and trade options on a particular Commodity-Based Trust Share.
Footnotes:
27 ?17 CFR 240.19b-4(e).
28 ? Id.
29 ?15 U.S.C. 78s(b)(2).
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act. 30 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5)? 31 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)? 32 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
Footnotes:
30 ?15 U.S.C. 78f(b).
31 ?15 U.S.C. 78f(b)(5).
32 ? Id.
In particular, the Exchange believes that the proposal will remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, protect investors because it would allow the Exchange to immediately list and trade options on any Commodity-Based Trust Share, provided the initial listing criteria has been met, without any additional approvals from the Commission. 33 Commodity-Based Trust Shares are securities approved for trading by the Commission. The Exchange believes that with this proposal it will be able to offer options on a Commodity-Based Trust Share soon after the listing of such underlying security in the primary market, provided the initial listing criteria has been met, thereby availing market participants of the opportunity to hedge their positions in the ETF in a timely manner. Given the potential to reduce the time to market for options on Commodity-Based Trust Shares, the proposed rule change will also reduce the burdens on issuers and other market participants, while also promoting competition among options exchanges to the benefit of the investing public. This proposal would permit options on Commodity-Based Trust Shares to be listed on the Exchange in the same manner as all other securities that are subject to the current listing criteria in Exchange Rule 402. The Exchange notes that the majority of ETFs are able to list and trade options once the initial listing criteria have been met without the need for additional approvals. The proposed rule change would allow options on a Commodity-Based Trust Share to likewise list and trade options once the initial listing criteria have been met without the need for additional approvals. Accordingly, the proposed rule change would align the treatment of Commodity-Based Trust Shares with other ETFs for purposes of options trading, which would add internal consistency to Exchange rules.
Footnotes:
33 ?As noted herein, the Exchange believes this proposal is consistent with the OCC's determination that, based on a staff advisory from the CFTC, the "it no longer needs to seek product-by-product exemptive relief from the CFTC to clear spot commodity-based ETF products." See supra note 7.
The Exchange believes that the proposed rule change will facilitate the listing and trading of options on additional ETFs that will enhance competition among market participants, to the benefit of investors and the marketplace. Like options on any other securities, options on Commodity-Based Trust Shares provides investors with the ability to hedge exposure to the underlying security similar to options on any other securities. Options on Commodity-Based Trust Shares benefits investors, similar to the listing of any other option on an ETF, by providing investors with a relatively lower-cost risk management tool, to manage their positions and associated risk in their portfolios more easily in connection with exposure to the price of a commodity. Additionally, options on a Commodity-Based Trust Share provide investors with the ability to transact in such options in a listed market environment as opposed to in the unregulated OTC options market, which increases market transparency and enhances the process of price discovery conducted on the Exchange through increased order flow to the benefit of all investors.
The Exchange also notes that it already lists options on other commodity based ETFs, 34 which, as described above, are trusts structured as Commodity-Based Trust Shares. The Exchange has not identified any issues with the continued listing and trading of options on Commodity-Based Trust Shares it currently lists for trading.
Footnotes:
34 ? See Exchange Rule 402(i)(4).
[top] The Exchange also believes the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and a national market system, because it is consistent with current Exchange Rules, previously filed with the Commission. Options on a Commodity-Based Trust Share must satisfy the initial listing standards and continued listing standards currently in the Exchange Rules applicable to options on
Footnotes:
35 ? Id.
The Exchange believes the proposed rule change will result in increased competition as other exchanges will likely adopt an identical rule to the one proposed by the Exchange that would allow the listing and trading of options on Commodity-Based Trust Shares that are approved for trading on those other markets. 36 Multiple listing of ETFs, options and other securities and competition are some of the central features of the national market system. The Exchange believes that the proposal would encourage a more open market and national market system based on competition and multiple listing. The Exchange represents that it has the necessary systems capacity to support the listing and trading of options on Commodity-Based Trust Shares as the Exchange lists these products today, except that it requires additional approvals prior to listing.
Footnotes:
36 ? See supra note 5.
The Exchange believes that its existing surveillance and reporting safeguards are designed to deter and detect possible manipulative behavior which might arise from listing and trading of these ETF options. 37
Footnotes:
37 ?Partial Amendment No. 1 removed a duplicative sentence from the beginning of this paragraph.
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. In this regard and as indicated above, the Exchange notes that the rule change is being proposed as a competitive response to the filings submitted by ISE, NYSE American, NYSE Arca, and Cboe. 38
Footnotes:
38 ? See supra note 5.
The Exchange believes that the proposal is pro-competitive and is a competitive response to the Exchange's inability to list options on Commodity-Based Trust Shares without the need for additional approvals. The Exchange believes the proposed rule change will result in additional investment options and opportunities to achieve the investment objectives of market participants seeking efficient trading and hedging vehicles, to the benefit of investors, market participants, and the marketplace in general. Competition is one of the principal features of the national market system. The Exchange believes that this proposal will expand competitive opportunities to list and trade products on the Exchange as noted.
The Exchange does not believe the proposal will impose any burden on intra-market competition that is not necessary or appropriate in furtherance of the purposes of the Act because Commodity-Based Trust Shares, like any other ETF, would have to satisfy the Exchange's initial listing standards to be eligible for options trading. Additionally, the proposed rule change would apply to all market participants in the same manner as options on Commodity-Based Trust Shares will be equally available to all market participants who wish to trade such options.
The Exchange does not believe the proposal will impose any burden on inter-market competition that is not necessary or appropriate in furtherance of the purposes of the Act, as nothing prevents the other options exchanges from proposing similar rules to list and trade options on Commodity-Based Trust Shares. As noted herein, ISE, NYSE American, NYSE Arca, and Cboe have submitted a proposal to adopt an identical rule to allow ISE, NYSE American, NYSE Arca, and Cboe list and trade options on Commodity-Based Trust Shares without the need for additional approvals. 39
Footnotes:
39 ? See supra note 5.
Furthermore, the Exchange notes that listing and trading options on a Commodity-Based Trust Share on the Exchange will subject such options to transparent exchange-based rules as well as price discovery and liquidity, as opposed to alternatively trading such options in the OTC market. The Exchange believes that the proposed rule change may relieve any burden on, or otherwise promote, competition as it is designed to increase competition for order flow on the Exchange in a manner that is beneficial to investors by providing them with a lower-cost option to hedge their investment portfolios in a timely manner.
C. Self-Regulatory Organization's Statement on Comments on The Proposed Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule change should be 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 rule-comments@sec.gov. Please include file number SR-PEARL-2025-08 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.
[top] All submissions should refer to file number SR-PEARL-2025-08. 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
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 40
Footnotes:
40 ?17 CFR 200.30-3(a)(12).
Vanessa A. Countryman,
Secretary.
[FR Doc. 2025-04512 Filed 3-18-25; 8:45 am]
BILLING CODE 8011-01-P