[Federal Register Volume 79, Number 109 (Friday, June 6, 2014)]
[Notices]
[Pages 32799-32801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-13105]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72288; File No. SR-MIAX-2014-17]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend Exchange Rules 515, 519 and 529

June 2, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 20, 2014, Miami International Securities Exchange LLC 
(``MIAX'' 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.
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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 Rules 515, 519 
and 529.
    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 recently amended Rules 515 and 529 to establish a new 
price protection for market participants and to allow for immediate 
routing in an additional situation.\3\ The Exchange has identified 
several additional enhancements to the price protections that the 
Exchange believes should be included in the rules prior to deployment 
of the new price protection functionality. The Exchange proposes to 
amend Exchange Rules 515, 519 and 529 accordingly.
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    \3\ See Securities Exchange Act Release Nos. 71634 (February 28, 
2014), 79 FR 12713 (March 6, 2014) (SR-MIAX-2014-08); 71968 (April 
17, 2014), 79 FR 22749 (April 23, 2014) (SR-MIAX-2014-08).
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    The Exchange proposes to amend Rule 515(c)(2) to provide that at 
the end of a liquidity refresh pause timer the initiating order and any 
same side joiners received during the timer will trade against the 
opposite side interest in the order in which they were received at 
multiple price points up to the current NBBO. Currently, Rule 515(c) 
provides that at the end of a liquidity refresh timer that all orders 
and quotes that were not completely filled or cancelled would be 
reevaluated for execution pursuant to Rule 515. The current language 
does not contemplate executions at the end of the liquidity refresh 
pause at multiple price points but only at the original NBBO price 
provided that it does not trade inferior to the current NBBO. Under the 
current language, executions at multiple price points would only be 
possible through the iterative reevaluation process described in Rule 
515. The Exchange believes that the current language is unnecessarily 
restrictive for executions at the end of a liquidity refresh pause 
given that Rule 515 now provides for executions at multiple price 
points. The

[[Page 32800]]

Exchange believes that allowing the initiating order and any same side 
joiners received during the timer to trade against the opposite side 
interest (i.e., AOC responses) at multiple price points up to the 
current NBBO, will provide greater opportunities for executions while 
still keeping in place the overall level of protections provided by the 
new multiple variable price protections in Rule 515. The Exchange notes 
that executions would still have to be bound by the current NBBO; and 
unexecuted orders and quotes would still be subject to the iterative 
reevaluation process in Rule 515.
    The Exchange also proposes new Interpretations and Policies .03 to 
Rule 515 to provide that the System will cap individual responses 
received during a liquidity refresh pause timer on the opposite side 
from an the initiating order to the size of the initiating order and 
any same side joiners received during the liquidity refresh pause timer 
for purposes of pro-rata allocation against the initiating order and 
any same side joining interest received during the liquidity refresh 
pause. Capping the size of responses for purposes of pro-rata 
allocation is designed to reduce the possibility of gaming the 
allocation through the submission of an oversized order. The current 
Rule is silent on how the allocation will occur in the situation of an 
oversized response during a liquidity refresh pause. The Exchange 
believes that adding the additional language regarding a cap applied to 
individual responses will help clarify the allocation of executions at 
the end of the liquidity refresh pause so that market participants more 
clearly understand the treatment of their orders and quotes during the 
liquidity refresh pause and also help reduce fraudulent and 
manipulative acts by market participants to alter the pro-rata 
allocation.
    Similarly, the Exchange proposes new Interpretations and Policies 
.01 to Rule 529 to provide that the System will cap individual 
responses received during a route timer on the opposite side from an 
the initiating order to the size of the initiating order, managed 
interest, and any same side joiners received during the route timer for 
purposes of pro-rata allocation against the initiating order, managed 
interest, and any same side joining interest received during the route 
timer. As stated above, capping the size of responses for purposes of 
pro-rata allocation is designed to reduce the possibility of gaming the 
allocation through the submission of an oversized order. The current 
Rule is silent on how the allocation will occur in the situation of an 
oversized response during a route timer. The Exchange believes that 
adding the additional language regarding a cap applied to individual 
responses will help clarify the allocation of executions at the end of 
the route timer so that market participants more clearly understand the 
treatment of their orders and quotes during the route timer and also 
help reduce fraudulent and manipulative acts by market participants to 
alter the pro-rata allocation.
    The Exchange also proposes to amend Rule 519 to extend the MIAX 
Order Monitor protections for market orders to sell to orders subject 
to reevaluation pursuant to Rule 515. Currently, the MIAX Order Monitor 
protections only apply to orders upon initial receipt in order to avoid 
the occurrence of potential obvious or catastrophic errors on the 
Exchange. For market orders to sell, the Exchange proposed to provide 
that both upon initial receipt and reevaluation that a market order to 
sell an option when the national best bid is zero and the Exchange's 
disseminated offer is equal to or less than $0.10, the System will 
convert the market order to sell to a limit order to sell with a limit 
price of one Minimum Trading Increment. In this case, such sell orders 
will automatically be placed on the Book in time priority and will be 
displayed at the appropriate Minimum Price Variation. Separately, if 
the Exchange upon initial receipt or reevaluation evaluates a market 
order to sell an option when the national best bid is zero and the 
national best offer is greater than $0.10, the System will cancel the 
market order to sell. The proposed change is designed to protect 
investors and the public interest by extending the protections for sell 
market orders that apply currently only upon receipt to when such 
orders are reevaluated pursuant to the new multiple variable price 
protections in Rule 515.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) \4\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) \5\ 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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    The proposal to allow the trading at multiple price points up to 
the current NBBO at the end of the liquidity refresh pause timer will 
provide greater opportunities for executions while still keeping in 
place the overall level of protections provided by the new multiple 
variable price protections in Rule 515 in a manner that promotes the 
protection of investors and the public interest. The Exchange believes 
that adding the additional language regarding a cap applied to 
individual responses will help clarify the allocation of executions at 
the end of the liquidity refresh pause timer and the route timer so 
that market participants more clearly understand the treatment of their 
orders and quotes during such timers and also help reduce fraudulent 
and manipulative acts by market participants to alter the pro-rata 
allocation.
    The proposed change to extend the MIAX Order Monitor protections 
for sell market orders subject to reevaluation is designed to promote 
just and equitable principles of trade by extending the protections for 
sell market orders that apply currently only upon receipt to when such 
orders are reevaluated pursuant to the new multiple variable price 
protections in Rule 515 in a manner that also promotes the protection 
of investors and the public interest.

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. Specifically, the Exchange 
believes the proposed changes will not impose any burden on intra-
market competition because it applies to all MIAX participants equally. 
In addition, the Exchange does not believe the proposal will impose any 
burden on inter-market competition as the proposal is intended to 
protect investors by providing further enhancements and transparency 
regarding the Exchange's price protection functionality.

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.

[[Page 32801]]

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 \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
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 prior to 
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 and Rule 19b-
4(f)(6)(iii) thereunder.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
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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    A proposed rule change filed under Rule 19b-4(f)(6) \8\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\9\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because waiver would 
allow the Exchange to implement its new price protection functionality, 
which has already been subject to notice and comment and approved by 
the Commission, without further delay. Specifically, the current 
proposal extends MIAX's price protection and order monitor 
functionality to additional trading processes and also applies MIAX's 
cap on responses for purposes of pro rata allocation to the route timer 
and liquidity refresh pause timer in a manner that does not raise new 
or novel issues and should facilitate executions on MIAX in a manner 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission hereby grants the Exchange's request and 
designates the proposal operative upon filing.\10\
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6)(iii).
    \10\ 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 this proposed rule 
change, the Commission summarily may temporarily suspend this 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.

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-2014-17 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-2014-17. 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 this 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 publicly available. All 
submissions should refer to File Number SR-MIAX-2014-17 and should be 
submitted on or before June 27, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13105 Filed 6-5-14; 8:45 am]
BILLING CODE 8011-01-P