[Federal Register Volume 79, Number 69 (Thursday, April 10, 2014)]
[Notices]
[Pages 19956-19958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07995]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71881; File No. SR-MIAX-2014-14]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Extend the Pilot Period Applicable to Rule 530 
Relating to Limit Up/Limit Down

April 4, 2014.
    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 April 3, 2014, Miami International Securities 
Exchange LLC (``MIAX'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') a 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 is filing a proposal to amend Rule 530 to extend the 
pilot period for the treatment of erroneous transactions during a Limit 
or Straddle State.
    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 Exchange proposes to amend Rule 530 (Limit Up-Limit Down) in 
order to (i) extend the pilot period for the treatment of erroneous 
transactions that occur in a Limit or Straddle State until February 20, 
2015; and (ii) to provide that paragraphs (a)-(i) of the Rule shall be 
in effect during a pilot period to coincide with the pilot period for 
the Plan to Address Extraordinary Market Volatility Pursuant to Rule 
608 of Regulation NMS.
    Exchange Rule 530(j) provides for the treatment of erroneous 
transactions occurring during Limit and Straddle States. Specifically, 
once an NMS Stock has entered a Limit or Straddle State, the Exchange 
will nullify a transaction in an option overlying such an NMS Stock as 
provided in the Rule 530(j). This provision was adopted for a one year 
pilot period beginning on the date of the implementation of the Plan to 
Address Extraordinary Market Volatility Pursuant to Rule 608 of 
Regulation NMS, April 8, 2013.\3\ The Exchange proposes extending the 
pilot period for Rule 530(j) until February 20, 2015 in order to allow 
the Exchange and the Commission additional time to collect and analyze 
data regarding the impact of Rule 530(j) on liquidity and market 
quality in the options markets.
---------------------------------------------------------------------------

    \3\ See Exchange Rule 503(j). See also Securities Exchange Act 
Release Nos. 69210 (March 22, 2013), 78 FR 18637 (March 27, 2013) 
(SR-MIAX-2013-12); 69342 (April 8, 2013), 78 FR 22017 (April 12, 
2013) (SR-MIAX-2013-12); 69234 (March 25, 2013), 78 FR 19344 (March 
29, 2013) (SR-MIAX-2013-15); 69354 (April 9, 2013), 78 FR 22357 
(April 15, 2013) (SR-MIAX-2013-15).
---------------------------------------------------------------------------

    To assist the Commission in its analysis, the Exchange will 
continue to provide the Commission with data and analysis during the 
duration of the pilot in order to evaluate the impact of Limit and 
Straddle States on liquidity and market quality in the options markets. 
Specifically, by September 30, 2014, the Exchange represents that it 
shall provide the Commission assessments relating to the impact of the 
obvious error Rules during Limit and Straddle States that (i) evaluate 
the statistical and economic impact of Limit and Straddle States on 
liquidity and market quality in the options markets; and (ii) assess 
whether the lack of obvious error rules in effect during the Straddle 
and Limit States are problematic. Additionally, each month during the 
pilot period the Exchange shall provide to the Commission and the 
public a dataset containing the data for each Straddle and Limit State 
in optionable stocks. For each stock that reaches a Straddle or Limit 
State, the number of options included in the dataset can be reduced by 
selecting options in which at least one (1) trade occurred on the 
Exchange during the Straddle or Limit State. For each of those options 
affected, each data record should contain the following information: 
(i) Stock symbol, option symbol, time at the start of the straddle or 
limit state, an indicator for whether it is a straddle or limit state; 
and (ii) for activity on the exchange--(A) executed volume, time-
weighted quoted bid-ask spread, time-weighted average quoted depth at 
the bid, time-weighted average quoted depth at the offer, (B) high 
execution price, low execution price, (C) number of trades for which a 
request for review for error was received during Straddle and Limit 
States, (D) an indicator variable for whether those options outlined 
above have a price change exceeding 30% during the underlying stock's 
Limit or Straddle state compared to the last available option price as 
reported by OPRA before the start of the Limit or Straddle state (1 if 
observe 30% and 0 otherwise) and another indicator variable for whether 
the option price within five minutes of the underlying stock leaving 
the Limit or Straddle state (or halt if applicable) is 30% away from 
the price before the

[[Page 19957]]

start of the Limit or Straddle state. The Exchange notes that it will 
also update the data available on the Exchange's Web site for the 
period April 2013 through January 2014 with the revised parameters 
described above once the Exchange has completed its analysis and review 
of such data.
    The Exchange also proposes to amend Rule 530 to provide that 
paragraphs (a)-(i) of the Rule shall be in effect during a pilot period 
to coincide with the pilot period for the Plan to Address Extraordinary 
Market Volatility Pursuant to Rule 608 of Regulation NMS. The proposed 
change will allow the Exchange's Limit Up-Limit Down Rule to continue 
without interruption for as long as corresponding pilot period for the 
Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of 
Regulation NMS remains in effect and will also more closely align the 
pilot language to that of other options exchanges.\4\
---------------------------------------------------------------------------

    \4\ See NYSE MKT Rule 953.1NY; NYSE Arca Options Rule 6.65A.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) \5\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) \6\ of the Act 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 
mechanisms of a free and open market and a national market system and, 
in general, to protect investors and the public interest. Specifically, 
the proposal supports the objectives of perfecting the mechanism of a 
free and open market and the national market system because it promotes 
uniformity across markets concerning when and how to halt trading in 
all stock options as a result of extraordinary market volatility. In 
addition, the Exchange believes that the extension of the pilot will 
help ensure that market participants continue to benefit from the 
protections of the Limit Up-Limit Down Rules which will protect 
investors and the public interest while allowing the Exchange and the 
Commission additional time to collect and analyze data regarding the 
impact of Rules on liquidity and market quality in the options markets.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

 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. The proposed changes are being 
made to extend the pilot program that provides for how the Exchange 
shall treat orders and quotes in options overlying NMS stocks when the 
Limit Up-Limit Down Plan is in effect and will not impose any burden on 
competition while providing certainty of treatment and execution of 
options orders during periods of extraordinary volatility in the 
underlying NMS stock, and facilitating appropriate liquidity during a 
Limit State or Straddle State.

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 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6)(iii) thereunder.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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 asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will allow 
the Exchange to extend the pilot program prior to its expiration on 
April 8, 2014. For this reason, the Commission believes that the 
proposed rule change presents no novel issues and that waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest. Therefore, the Commission designates the 
proposed rule change to be operative upon filing.\9\
---------------------------------------------------------------------------

    \9\ For purposes only of waiving the 30-day operative delay, the 
Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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-2014-14 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-MIAX-2014-14. 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

[[Page 19958]]

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-2014-14 and should be submitted on or before May 1, 
2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07995 Filed 4-9-14; 8:45 am]
BILLING CODE 8011-01-P