[Federal Register Volume 79, Number 120 (Monday, June 23, 2014)]
[Notices]
[Pages 35625-35626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14535]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72408; File No. SR-MIAX-2014-28]


Self-Regulatory Organizations: Notice of Filing of a Proposed 
Rule Change by Miami International Securities Exchange LLC To Amend 
Rule 515

June 17, 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 June 5, 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, II, and III 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 Rule 515.
    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 515(c)(2) in order to provide 
that the liquidity refresh pause will be terminated early and normal 
trading will resume if during a liquidity refresh pause, the ABBO on 
the same side of the market as the initiating order crosses the 
original NBBO price on the opposite side of the market. The proposed 
change is designed to codify existing functionality during the 
liquidity refresh pause. The proposed change will allow the liquidity 
refresh pause to terminate and normal trading resume without delay, 
thus freeing up the initiating order and any same side joiners received 
during the timer, when the market has changed in a manner that renders 
the initiating order and same side joiners no longer marketable. Once 
normal trading resumes, the initiating order and any same side joiners 
held within the liquidity refresh pause would be free to compete for 
executions with the new revised same side ABBO at additional price 
points which may lead to additional execution opportunities.
    The following examples describe how a new revised same side ABBO 
that crosses the original NBBO on the opposite side of the market will 
terminate the Liquidity Refresh Pause early.

 Example 1--Same Side ABBO Terminates the Liquidity Refresh Pause Early
------------------------------------------------------------------------
         Market                    Bid                      Ask
------------------------------------------------------------------------
             ABBO                1.00 (10)               1.14 (10)
             PLMM                1.00 (10)               1.10 (10)
            LMM 1                1.00 (10)               1.12 (10)
            LMM 2                1.00 (10)               1.15 (10)
            RMM 1                1.00 (10)               1.16 (10)
------------------------------------------------------------------------

     Order 1: Buy limit of 1.13 for 20 contacts with a price 
protection instruction of 3 MPVs
     NBBO at time of arrival = 1.00 (50) x 1.10 (10)
     Order 1 is price protected at 1.13 (which is 1.10 + 3 MPV 
= 1.13)
    [cir] Order 1 trades 10 contracts with PLMM @1.10
    [cir] Liquidity Refresh Pause is triggered because the MBO of 1.10 
was alone at NBBO and PLMM's 1.10 offer was exhausted
    [ssquf] MBBO 1.10 (10) x 1.12 (10)
    [ssquf] Liquidity Refresh message is broadcasted on the Exchange's 
data feeds: Buy 10 contracts, exhausted MBO of 1.10
    [cir] ABB updates to 1.12 for 10 contracts; ABBO = 1.12 (10) x 1.14 
(10)
    [cir] Liquidity Refresh Pause is terminated early due to the ABB 
improving the original NBO of 1.10.
    [cir] Order 1 trades 10 contracts with LMM1 @1.12. Order 1 has been 
fully executed.
    [cir] New MBBO: 1.00 (40) x 1.15 (10). New NBBO: 1.12(10) x 
1.15(10)

 Example 2--Same Side ABBO Terminates the Liquidity Refresh Pause Early
------------------------------------------------------------------------
         Market                    Bid                      Ask
------------------------------------------------------------------------
             ABBO                1.00 (10)               1.14 (10)
             PLMM                1.00 (10)               1.10 (10)
            LMM 1                1.00 (10)               1.12 (20)
            LMM 2                1.00 (10)               1.15 (10)
            RMM 1                1.00 (10)               1.16 (10)
------------------------------------------------------------------------

     Order 1: Buy limit of 1.13 for 20 contacts with a price 
protection instruction of 3 MPVs
     NBBO at time of arrival = 1.00 (50) x 1.10 (10)
     Order 1 is price protected at 1.13 (which is 1.10 + 3 MPV 
= 1.13)
    [cir] Order 1 trades 10 contracts with PLMM @1.10
    [cir] Liquidity Refresh Pause is triggered because the MBO of 1.10 
was alone at NBBO and PLMM's 1.10 offer was exhausted
    [ssquf] MBBO 1.10 (10) x 1.12 (20)
    [ssquf] Liquidity Refresh message is broadcasted on the Exchange's 
data feeds: Buy 10 contracts, exhausted MBO of 1.10 \3\
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    \3\ Note that the pricing information contained in the Liquidity 
Refresh message (Buy 10 contracts, exhausted MBO of 1.10) 
corresponds to the MBB (1.10 (10)).
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    [cir] ABB updates to 1.12 for 10 contracts; ABBO = 1.12 (10) x 1.14 
(10)
    [cir] Liquidity Refresh Pause is terminated early due to the ABB 
improving the original NBO of 1.10.
    [cir] Order 1 trades 10 contracts with LMM1 @1.12. Order 1 has been 
fully executed.
    [cir] LMM1's remaining 10 contracts would be managed and reposted 
as firm at 1.13. New MBBO: 1.00 (40) x 1.13 (10). New NBBO: 1.12(10) x 
1.13(10)
    As mentioned above, the proposed change is designed to codify 
existing functionality that terminates the liquidity refresh pause 
early if during a liquidity refresh pause, the ABBO on

[[Page 35626]]

the same side of the market as the initiating order crosses the 
original NBBO price on the opposite side of the market. The Exchange 
believes that this change will help facilitate transactions, remove 
impediments to and perfect the mechanism of a free and open market by 
freeing up interest in the liquidity refresh pause when conditions have 
changed that renders the initiating order and same side joiners no 
longer marketable to the benefit of market participants. The proposed 
change will also help eliminate potential confusion on behalf of market 
participants by clearly stating the System's functionality in this 
situation.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \4\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \5\ 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 end the liquidity refresh pause due to the ABBO on 
the same side of the market as the initiating order crosses the 
original NBBO price on the opposite side of the market is designed to 
facilitate transactions, to remove impediments to and perfect the 
mechanism of a free and open market by freeing up interest in the 
liquidity refresh pause when conditions have changed that renders the 
initiating order and same side joiners no longer marketable to the 
benefit of market participants. The proposal also promotes the 
protection of investors and the public interest by codifying existing 
functionality in a manner that should reduce confusion for Exchange 
members regarding the termination of a liquidity refresh pause.

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 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.

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 (i) as the Commission may 
designate up to 90 days of such date 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 shall: (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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MIAX-2014-28 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-2014-28. 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-2014-28 and should be 
submitted on or before July 14, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14535 Filed 6-20-14; 8:45 am]
BILLING CODE 8011-01-P