[Federal Register Volume 82, Number 42 (Monday, March 6, 2017)]
[Notices]
[Pages 12656-12658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04205]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80121; File No. SR-MIAX-2017-09]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend MIAX Options Rule 519, MIAX Order Monitor

February 28, 2017.
    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 February 23, 2017, Miami International 
Securities Exchange, LLC (``MIAX Options'' 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 519, MIAX 
Order Monitor.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings, 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 519, MIAX Order Monitor, to 
clarify the behavior of the Order Size Protection functionality 
(defined below) described in paragraph (b) and to make minor, non-
substantive changes to the rule as described below. The Exchange also 
proposes to amend Rule 519 by removing the option for a Member \3\ to 
disable the risk protection features described in paragraphs (b)-(d) of 
the rule: Order Size Protection, Open Order Protection, and Open 
Contract Protection, respectively, which are all defined below.
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
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    The MIAX Order Monitor is a risk management feature of the 
Exchange's System.\4\ Pursuant to paragraph (b) of Rule 519, the MIAX 
Order Monitor prevents certain orders from executing or being placed on 
the Book \5\ if the size of the order exceeds the Order Size Protection 
designated by the Member submitting the order (proposed ``Order Size 
Protection'').\6\ If the maximum size of an order is not designated by 
the Member, the Exchange will set a default maximum value which will be 
determined by the Exchange and announced to Members through a 
Regulatory Circular.\7\
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    \4\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \5\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
    \6\ See Exchange Rule 519(b).
    \7\ The Exchange notes that the current default maximum order 
size is 10,000 contracts.
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    Pursuant to paragraph (c) of Rule 519, the MIAX Order Monitor 
rejects any orders that exceed the maximum number of open orders held 
in the System on behalf of a particular Member (the ``Open Order 
Protection'').\8\ If the maximum number of open orders is not 
designated by the Member, the Exchange will set a default maximum value 
which will be determined by the Exchange and announced to Members 
through a Regulatory Circular.\9\
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    \8\ See Exchange Rule 519(c).
    \9\ The Exchange notes that the current default maximum number 
of open orders is 30,000.
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    Pursuant to paragraph (d) of Rule 519, the MIAX Order Monitor 
rejects any orders that cause the number of open contracts represented 
by orders held in the System on behalf of a particular Member (the 
``Open Contract Protection'') \10\ to exceed a specified maximum number 
of contracts. If the maximum number of open contracts is not designated 
by the Member, the Exchange will set a default maximum value which will 
be determined by the Exchange and announced to Members through a 
Regulatory Circular.\11\
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    \10\ See Exchange Rule 519(d).
    \11\ The Exchange notes that the current default maximum number 
of open contracts is 1,000,000.
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    The Exchange also proposes to make minor, non-substantive changes 
to paragraph (b) to make the language clear and consistent with the 
remainder of the rule. The Exchange proposes to amend the heading of 
paragraph (b) from ``Order Size Protections'' to ``Order Size 
Protection'' to more accurately reflect the scope of the functionality. 
Additionally, the Exchange proposes to change the rule text to more 
accurately describe that the functionality operates on a per order 
basis. The Exchange proposes to make clarifying changes to the second 
sentence by changing the first occurrence of ``orders'' to ``an order'' 
and changing the second occurrence of ``orders'' to ``order'' and 
placing it after the word ``maximum'' so the proposed revised sentence 
would read, ``[i]f the maximum size of an order is not designated by 
the Member, the Exchange will set a maximum order size on behalf of the 
Member by default.'' The Order Size Protection operates on an order by 
order basis, and the Exchange believes the revised language more 
accurately describes the functionality.
    Additionally, the Exchange proposes to amend paragraph (b) to 
eliminate the option for Members to disable the Order Size Protection. 
The proposed sentence will read, ``[m]embers may designate the order 
size protection on a firm wide basis.'' Should a Member fail to 
designate an Order Size Protection value, the Exchange will apply a 
default setting, which it will determine and announce to Members 
through a Regulatory Circular.
    The Exchange also proposes to amend paragraph (c) to remove the 
option for Members to disable the Open Order Protection. If a Member 
does not designate an appropriate value, the Exchange will apply a 
default value, which it will determine and announce to Members through 
a Regulatory Circular.

[[Page 12657]]

    Finally, the Exchange proposes to amend paragraph (d) to remove the 
option for Members to disable the Open Contract Protection. If a Member 
does not designate an appropriate value, the Exchange will apply a 
default value, which it will determine and announce to Members through 
a Regulatory Circular.
    The proposed rule change is designed to protect market participants 
by eliminating the option for Members to disable the Order Size 
Protection, Open Order Protection, and Open Contract Protection 
features of the MIAX Order Monitor. The proposed rule change ensures 
that settings are in place, either provided by the Member or the 
Exchange, that can be used to (i) avoid the potential submission of 
erroneously sized orders to the Exchange (Order Size Protection), (ii) 
prevent market participants from exceeding the number of open orders in 
the System (Open Order Protection), or (iii) the number of open 
contracts represented by orders in the System (Open Contract 
Protection).
    In addition, the Exchange believes that clarifying the operation of 
the Order Size Protection functionality will enable market participants 
to better understand the risk protections available on the Exchange.
    The Exchange notes that some of its rules are incorporated by 
reference by MIAX PEARL,\12\ and in addition, that MIAX Options and 
MIAX PEARL have other rules in common. MIAX Options and MIAX PEARL also 
have a number of common Members and where feasible the Exchange intends 
to implement similar behavior of matching rules on each Exchange to 
provide consistency between the Exchanges so as to avoid confusion 
among Members. Aligning similar rules on MIAX Options and MIAX PEARL 
provides transparency and clarity in the rules and minimizes the 
potential for confusion, thereby protecting investors and the public 
interest.
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    \12\ See MIAX PEARL Exchange Rules Chapter III, VII, VIII, IX, 
XI, XIII, XIV, XV, and XVI.
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    The Exchange will announce the implementation date of the proposed 
rule change by Regulatory Circular to be published no later than 60 
days following the operative date of the proposed rule. The 
implementation date will be no later than 60 days following the 
issuance of the Regulatory Circular.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \13\ in general, and furthers the objectives of 
Section 6(b)(5) of the 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 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change is designed to protect investors and the 
public interest by eliminating the option for market participants to 
disable Order Size Protection, Open Order Protection, and Open Contract 
Protection, which ensures either a value provided by the firm or a 
default Exchange setting is used, to help market participants avoid the 
potential submission of orders to the Exchange that would cause them to 
be at unintended risk levels. The proposed rule change ensures that all 
orders being submitted to the Exchange have risk protection settings in 
place. Eliminating a market participant's ability to disable Order Size 
Protection will help reduce the negative impacts of receiving an 
erroneously sized order. Eliminating a market participant's ability to 
disable Open Order and Open Contract Protections will ensure that risk 
protections are in place to account for sudden, unanticipated 
volatility in individual options, and will serve to preserve an orderly 
market in a transparent and uniform manner, increase overall market 
confidence, and promote fair and orderly markets and further the 
protection of investors.
    The Exchange believes that all market participants will benefit 
from the proposed change to the Rule. Market participants are 
vulnerable to risks stemming from market events which may cause them to 
send a large number of orders or receive multiple, automatic executions 
before they can adjust their order exposure in the market. Without 
adequate risk management tools, such as the MIAX Order Monitor, market 
participants could reduce the amount of order flow and liquidity that 
they provide to the market. Such actions may undermine the quality of 
the markets available to customers and other market participants. 
Accordingly, the proposed amendments to the MIAX Order Monitor should 
instill additional confidence in market participants that submit orders 
to the Exchange that there are adequate risk protections in place, and 
thus should encourage market participants to submit additional order 
flow to the Exchange, thereby removing impediments to and perfecting 
the mechanisms of a free and open market and a national market system, 
and in general, protecting investors and the public interest.
    In addition, the Exchange believes that the proposed amendment 
removes impediments to and perfects the mechanisms of a free and open 
market and a national market system and, in general, protects investors 
and the public interest by helping to eliminate potential confusion on 
behalf of market participants by clearly describing the Order Size 
Protection functionality. Further, the Exchange believes that 
clarifying the operation of the risk protections available on the 
Exchange promotes the protection of investors and the public interest 
by helping market participants avoid the potential submission and 
subsequent execution of erroneously sized orders.
    Finally, the Exchange notes that some of its rules are incorporated 
by reference by MIAX PEARL,\15\ and in addition, that MIAX Options and 
MIAX PEARL have other rules in common. MIAX Options and MIAX PEARL also 
have a number of common Members and where feasible the Exchange intends 
to implement similar behavior of matching rules on each Exchange to 
provide consistency between the Exchanges so as to avoid confusion 
among Members. Aligning similar rules on MIAX Options and MIAX PEARL 
provides transparency and clarity in the rules and minimizes the 
potential for confusion, thereby protecting investors and the public 
interest.
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    \15\ See supra note 12.
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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. Specifically, the Exchange 
believes the proposed changes will not impose any burden on intra-
market competition because it applies to all MIAX Options 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 MIAX Order Monitor feature.

[[Page 12658]]

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: (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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \16\ and Rule 19b-4(f)(6) \17\ 
thereunder.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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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    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-2017-09 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-2017-09. 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-2017-09 and should be 
submitted on or before March 27, 2017.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04205 Filed 3-3-17; 8:45 am]
BILLING CODE 8011-01-P