[Federal Register Volume 78, Number 107 (Tuesday, June 4, 2013)]
[Notices]
[Pages 33461-33463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13152]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69659; File No. SR-MIAX-2013-22]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Permit the Listing of Additional Strikes Until the Close 
of Trading on the Second Business Day Prior to Expiration in Unusual 
Market Conditions

May 29, 2013.
    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 20, 2013, Miami International Securities Exchange LLC (the 
``Exchange'' or ``MIAX'') 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

[[Page 33462]]

proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 404, 
Series of Option Contracts Open for Trading, by stating in Rule 404(e) 
that the Exchange may list additional strike prices until the close of 
trading on the second business day prior to monthly expiration in 
unusual market conditions.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX'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, 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 purpose of the proposed rule change is to amend Exchange Rule 
404(e) to permit the Exchange to add additional strikes until the close 
of trading on the second business day prior to the expiration of a 
monthly, or standard, option in the event of unusual market conditions. 
This is a competitive filing that is based on the recently approved 
proposals of NYSE MKT LLC and NYSE Arca, Inc.\3\
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    \3\ See Securities Exchange Act Release Nos. 68460 (December 18, 
2012), 77 FR 76145 (December 26, 2012) (SR-NYSEMKT-2012-41); 68461 
(December 18, 2012), 77 FR 76155 (December 26, 2012) (SR-NYSEArca-
2012-94). See also Securities Exchange Act Release No. 68491 
(December 20, 2012), 77 FR 76334 (December 27, 2012) (SR-ISE-2012-
101).
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    MIAX Rule 404(e) currently permits the Exchange to add new series 
of options on an individual stock until the beginning of the month in 
which the option contract will expire. Due to unusual market 
conditions, the Exchange, in its discretion, may add new series of 
options on an individual stock until five (5) business days prior to 
expiration.\4\ Options market participants generally prefer to focus 
their trading in strike prices that immediately surround the price of 
the underlying security. However, if the price of the underlying stock 
moves significantly, there may be a market need for additional strike 
prices to adequately account for market participants' risk management 
needs in an underlying stock. In these situations, the Exchange has the 
ability to add additional series at strike prices that are better 
tailored to the risk management needs of market participants.\5\ The 
Exchange may make the determination to open additional series for 
trading when the Exchange deems it necessary to maintain an orderly 
market, to meet customer demand, or when certain price movements take 
place in the underlying market.\6\ If the market need occurs prior to 
five business days prior to expiration, then the market participants 
may have access to an option contract that is more tailored to the 
movement in the underlying stock.\7\ However, if the market need to 
manage risk due to unusual market conditions comes to light anytime 
from five to two days prior to expiration, then market participants are 
left without a contract that is tailored to manage their risk.\8\
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    \4\ See Exchange Rule 404(e). `Until five (5) business days 
prior' generally means up through the end of the day on the Friday 
of the week prior to expiration week.
    \5\ See Exchange Rule 404.
    \6\ See Exchange Rule 404(c).
    \7\ See Exchange Rule 404(e).
    \8\ While these situations are relatively rare, the Exchange 
represents that approximately two times a month there is a 
legitimate need to add additional strikes closer to expiration than 
the five business day limitation permits, due to it being necessary 
to maintain an orderly market, to meet customer demand, or when 
certain price movements take place in the underlying market.
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    The Exchange proposes to permit the listing of additional strikes 
until the close of trading on the second business day prior to 
expiration in unusual market conditions. Since expiration of the 
monthly contract is on a Saturday, the close of trading on the second 
business day prior to expiration will typically fall on a Thursday. 
However, in the cases where Friday is a holiday during which the 
Exchange is closed, the close of trading on the second business day 
prior to expiration will occur on a Wednesday. The Exchange will 
continue to make the determination to open additional series for 
trading when the Exchange deems it necessary to maintain an orderly 
market, to meet customer demand, or when certain price movements take 
place in the underlying market. The proposed rule change will provide 
an additional four days for the Exchange to gauge market impact of the 
underlying stock and to react to any market conditions that would 
render additional series prior to expiration beneficial to market 
participants.
    The Exchange believes that the impact on the market from the 
proposed rule change will be very minimal to market participants, 
however it will be extremely beneficial in the limited number of 
situations where unusual market conditions dictate immediately prior to 
expiration. The proposal would simply allow participants to adjust 
their risk exposure in narrow situations when an unusual market event 
occurred on trading days 2, 3, 4, 5 prior to expiration.
    This proposal does not raise any capacity concerns on the Exchange, 
because the changes have no material difference in impact from the 
current rules. The Exchange notes the proposed change allows for new 
strikes that it would otherwise be permitted to add under existing 
rules either on the fifth day prior to, or immediately after, 
expiration.\9\ A strike that opens two days prior to expiration will 
have minimal impact on quoting, as it adds two series out of hundreds 
of thousands, and only for a small number of days.\10\ Thus, any 
additional strikes that may be added under the proposed change would 
have no measurable effect on systems capacity.
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    \9\ Any new strikes added under this proposal would be added in 
a manner consistent with the range limitations described in Exchange 
Rule 404A.
    \10\ In the case of a multi-stock event where multiple stocks 
may be subject to unusual market conditions, a strike which opens 
two days prior to expiration will also have minimal impact on 
quoting, as it adds two series per stock out of hundreds of 
thousands, and only for a small number of days.
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    The Exchange notes that the proposed change is consistent with 
rules that have been approved by the Commission on at least one other 
options exchange \11\ and for which at least one other options exchange 
filed for immediate effectiveness.\12\
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    \11\ See Securities Exchange Act Release Nos. 68460 (December 
18, 2012), 77 FR 76145 (December 26, 2012) (SR-NYSEMKT-2012-41); 
68461 (December 12, 2012), 77 FR 76155 (December 26, 2012) (SR-
NYSEArca-2012-94).
    \12\ See Securities Exchange Act Release No. 68491 (December 20, 
2012), 77 FR 76334 (December 27, 2012) (SR-ISE-2012-101).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \13\ in general, and furthers the 
objectives of 6(b)(5) of the

[[Page 33463]]

Act \14\ in particular, in that it is 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 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.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that providing an additional four days to the 
Exchange to gauge market impact and to react to any market conditions 
prior to expiration is beneficial and will result in a continuing 
benefit to investors by giving them more flexibility to closely tailor 
their investment decisions and hedging decisions prior to expiration. 
The Exchange also believes that the additional four days will provide 
the investing public and other market participants with additional 
opportunities to hedge their investment, thus allowing these investors 
to better manage their risk exposure with additional option series. 
While the four additional days may generate additional quote traffic, 
the Exchange does not believe that this increased traffic will become 
unmanageable since the proposal remains limited to the narrow 
situations when an unusual market event occurs on trading days 2, 3, 4, 
5 prior to expiration.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. In this regard and as indicated 
above, the Exchange notes that the instant proposed rule change is 
submitted as a competitive response to filings submitted by other 
competing options exchanges. MIAX believes this proposed rule change is 
necessary to permit fair competition among the options exchanges and to 
establish uniform rules regarding the listing of strike prices.

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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to those of 
other exchanges that have been approved by the Commission and would 
permit the Exchange to list additional strike prices until the close of 
trading on the second business day prior to monthly expiration in 
unusual market conditions.\17\ Therefore, the Commission designates the 
proposal operative upon filing.\18\
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    \17\ See supra note 11.
    \18\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please 
include File Number SR-MIAX-2013-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2013-22. 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 Web site (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 Web site 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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MIAX-2013-22 and should be 
submitted on or before June 25, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13152 Filed 6-3-13; 8:45 am]
BILLING CODE 8011-01-P