[Federal Register Volume 82, Number 109 (Thursday, June 8, 2017)]
[Notices]
[Pages 26726-26728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11869]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80853; File No. SR-MIAX-2017-25]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend MIAX Options Rule 521, Nullification and 
Adjustment of Options Transactions Including Obvious Errors

June 2, 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 May 30, 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 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 make a technical amendment to 
Exchange Rule 521, Nullification and Adjustment of Options Transactions 
including Obvious Errors.
    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 is proposing a technical change to delete obsolete 
Rule 521(l)(5), Complex Order Obvious Errors, from the Exchange's 
Rules.
Background
    In 2015, the Exchange, in concert with the other then-existing U.S. 
options exchanges, adopted harmonized rules related to the adjustment 
and nullification of erroneous options transactions and coordination 
among the Exchanges in connection with large-scale events involving 
erroneous options transactions.\3\ The Exchange believes that the 
changes the options exchanges implemented with the new, harmonized rule 
have led to increased transparency and finality with respect to the 
adjustment and nullification of erroneous options transactions. 
However, as part of that initiative, the Exchange and other options 
exchanges deferred a few specific matters for further discussion, among 
them the manner in which erroneous transactions in complex orders would 
be handled.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 74918 (May 8, 2015), 
80 FR 27781 (May 14, 2015) (SR-MIAX-2015-35).
---------------------------------------------------------------------------

    In October, 2016, the Commission approved a proposed rule change 
that permitted the Exchange to adopt new rules to govern the trading of 
complex orders (the ``Complex Orders Filing'').\4\ Among the rules 
adopted in the Complex Orders Filing was Rule 521(l)(5), Complex Order 
Obvious Errors, which was not included in the industry-wide, harmonized 
rules described above.\5\ Rule 521(l)(5) governs the handling of 
complex orders in

[[Page 26727]]

situations where one or more components of a complex order is eligible 
to be adjusted or nullified under Rule 521(c)(4), Adjust or Bust.\6\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 79072 (October 7, 
2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26).
    \5\ See supra note 3.
    \6\ If it is determined that an Obvious Error has occurred, the 
Exchange shall take one of the actions listed in Rule 521(c)(4). 
Upon taking final action, the Exchange shall promptly notify both 
parties to the trade electronically or via telephone. See Exchange 
Rule 521(c)(4).
---------------------------------------------------------------------------

    Since the industry-wide adoption of the harmonized rules, the 
options exchanges have been working together to identify ways to 
improve the process related to the adjustment and nullification of 
erroneous options transactions as it relates to complex orders and 
stock-option orders.\7\ The goal of the process that the options 
exchanges have undertaken is to further harmonize rules related to the 
adjustment and nullification of erroneous options transactions. 
Accordingly, as the culmination of this coordinated effort, the 
exchanges that offer complex orders and/or stock-option orders 
(including the Exchange) universally adopted new provisions that the 
options exchanges collectively believe will improve the handling of 
erroneous options transactions that result from the execution of 
complex orders and stock-option orders.\8\
---------------------------------------------------------------------------

    \7\ See Exchange Rule 518(a)(5) (defining complex orders and 
stock-option orders).
    \8\ Exchanges that do not offer complex orders and/or stock-
option orders did not adopt these new provisions.
---------------------------------------------------------------------------

Proposal
    These harmonized provisions are set forth in recently-adopted 
Interpretations and Policies .03 to Rule 521.\9\ Interpretations and 
Policies .03 to Rule 521 should have replaced current Rule 521(l)(5) as 
the controlling Rule governing the manner in which the Exchange handles 
Obvious Errors in complex orders on the Exchange. The Exchange, 
however, inadvertently omitted the deletion of Rule 521(l)(5) from its 
Rules in the Complex Obvious Error Filing. Accordingly, the Exchange is 
proposing herein to delete obsolete Rule 521(l)(5) from its Rules as a 
technical matter.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 80284 (March 21, 
2017), 82 FR 15251 (March 27, 2017) (SR-MIAX-2017-13) (the ``Complex 
Obvious Error Filing'').
---------------------------------------------------------------------------

    The proposed deletion of Rule 521(l)(5) is intended to avoid the 
possibility of confusion between Rule 521(l)(5) and Interpretations and 
Policies .03 to Rule 521, and to eliminate any potential conflict in 
the Exchange's Rules in this regard. Interpretations and Policies .03 
tracks the harmonized rules of the exchanges that offer and trade 
complex orders, and the Exchange believes that it is appropriate to 
establish one single rule regarding Obvious Errors in complex orders. 
Accordingly, the Exchange proposes to delete current Rule 521(l)(5) 
from its Rules.
    The Exchange notes that NYSE Arca, Inc. (``NYSEArca'') also deleted 
its comparable provision from its Rule 6.87 (specifically, Rule 
6.87(c)(5)) when it filed to adopt harmonized rules for the handling of 
Obvious Errors in complex orders.\10\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 80496 (April 20, 
2017), 82 FR 19282 (April 26, 2017) (SR-NYSEArca-2017-42).
---------------------------------------------------------------------------

2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \11\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change promotes just and 
equitable principles of trade and removes impediments to and perfects 
the mechanism of a free and open market and a national market system 
because it eliminates a potentially conflicting section from Rule 521 
that was erroneously left intact in the Complex Obvious Error Filing.
    In particular, the Exchange believes that the proposed rule change 
will provide consistency and clarity to Members \13\ and the public, 
regarding the Exchange's Rules. Moreover, the proposed rule change 
eliminates a rule that could possibly be in conflict with another 
Exchange rule and with the harmonized rules. The Exchange believes 
therefore that it is in the public interest for rules to be accurate 
and concise so as to eliminate the potential for confusion.
---------------------------------------------------------------------------

    \13\ 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.
---------------------------------------------------------------------------

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. The proposed rule change 
will have no impact on competition as it is not designed to address any 
competitive issues but rather to add additional clarity to, and remedy 
possible conflicts in, the Exchange's Rules.
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition as the Rules apply equally 
to all Exchange Members.

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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \16\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \17\ permits the 
Commission to 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 current conflict between Rule 521(l)(5) and Interpretations and 
Policies .03 to Rule 521 may be promptly removed from the Exchange's 
Rules, which the Exchange stated would avoid any potential confusion 
among participants using its facilities. The Commission believes the 
waiver of the operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission hereby 
waives the operative delay and

[[Page 26728]]

designates the proposal operative upon filing.\18\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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 change 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-2017-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2017-25. 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-2017-25 and should be 
submitted on or before June 29, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11869 Filed 6-7-17; 8:45 am]
BILLING CODE 8011-01-P