[Federal Register Volume 84, Number 64 (Wednesday, April 3, 2019)]
[Notices]
[Pages 13090-13093]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06422]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85438; File No. SR-PEARL-2019-10]
Self-Regulatory Organizations: Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami PEARL, LLC To Amend
Exchange Rule 404, Series of Option Contracts Open for Trading
March 28, 2019.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act
[[Page 13091]]
of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on March 21, 2019, Miami PEARL, LLC (``MIAX PEARL'' or the
``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.
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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 Rule 404, Series of
Option Contracts Open for Trading, to allow the addition of new series
of options on an individual stock until the close of trading on the
business day prior to expiration in unusual market conditions.
The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX
PEARL'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 Exchange Rule 404, Series of Option
Contracts Open for Trading, to allow the addition of new series of
options on an individual stock until the close of trading on the
business day prior to expiration in unusual market conditions. This is
a competitive proposal based on a filing submitted by Cboe Exchange,
Inc. (``Cboe'') to the Commission.\3\
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\3\ See Securities Exchange Act Release No. 85205 (February 27,
2019), 84 FR 7949 (March 5, 2019) (SR-CBOE-2019-013).
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Currently, under Exchange Rule 404(e), when faced with unusual
market conditions, the Exchange may add new series of options on an
individual stock until the close of trading on the second business day
prior to expiration. In 2013, the Options Clearing Corporation
(``OCC'') implemented a transition for standard option monthly
expiration processing from Saturday to Friday. Accordingly, the
Exchange's affiliate, Miami International Securities Exchange, LLC
(``MIAX Options''), along with other exchanges, updated its rules to
reflect the OCC change, referencing Friday expiration dates to replace
Saturday expiration dates for all options expiring on or after February
1, 2015.\4\ MIAX Options also replaced any historic references to
expiration dates with Friday expiration. At that time, other exchanges
amended their rules to differentiate between Friday and Saturday or
non-business day expirations during the transitional period. Other
exchanges specified that additional series of individual stock options
may be added during unusual market conditions until the close of
trading on the business day prior to expiration in the case of an
option contract expiring on a business day (i.e., Thursday for Friday
expirations), or, in the case of an option contract expiring on a day
that is not a business day until the close of trading on the second
business day prior to expiration (i.e., Thursday for Saturday
expirations).\5\ Consistent with the OCC initiative and industry-wide
definition, the Exchange does not list series of option contracts with
Saturday or non-business day expirations.\6\ The Exchange thus proposes
to amend Rule 404 to allow specifically for the addition of new series
of options on an individual stock until the close of trading on the
business day prior to expiration in unusual market conditions in line
with other exchanges' timing requirements for listing series of options
prior to expiration.
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\4\ See MIAX PEARL Chapter VII, incorporating by reference MIAX
Options Rule 700, which changed the expiration date for most option
contracts to the third Friday of the expiration month instead of the
Saturday following the third Friday. See also Securities Exchange
Act Release No. 69996 (July 17, 2013), 78 FR 44183 (July 23, 2013)
(SR-MIAX-2013-32).
\5\ See Securities Exchange Act Release Nos. 70900 (November 19,
2013), 78 FR 70382 (November 25, 2013) (SR-ISE-2013-58); 70746
(October 23, 2013), 78 FR 64563 (October 29, 2013) (SR-BX-2013-055);
69659 (May 29, 2013), 78 FR 33461 (June 4, 2013) (SR-MIAX-2013-22).
\6\ See supra note 4.
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The Exchange seeks to introduce this proposed change to Exchange
Rule 404 to create a uniform expiration date across exchanges for
standard options on listed classes. The Exchange believes that keeping
its rules consistent with those of the industry will protect all
participants in the market by eliminating confusion, reducing the
likelihood of rule violations due to discrepant industry rules, and by
allowing for a more orderly market. In addition, the Exchange believes
that keeping the proposed rule consistent with other exchange rules
will foster better cooperation and coordination with persons engaged in
regulating clearing, settling, processing information with respect to,
and facilitating transactions in securities by aligning a pivotal part
of the options processing to be consistent industry-wide.
The proposed rule change is similar to the filing submitted by the
Exchange's affiliate, MIAX Options.
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \7\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \8\ 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 regulating,
clearing, settling, processing information with respect to, and
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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) requirement that the rules of an
exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes that keeping its rules
consistent with those of other exchanges and industry practices will
protect all participants in the market by eliminating confusion, thus,
preventing investor vulnerability to violating different exchange
rules. Additionally, the proposed change will foster cooperation and
coordination with persons engaged in regulating clearing, settling,
processing information with respect to, and
[[Page 13092]]
facilitating transactions in securities by aligning the timing of
series of options listing during unusual market conditions to be
consistent industry-wide. Further, as the industry-wide transition from
Saturday (and non-business day) expiration dates to Friday (or other
business days) expiration dates was successful, the Exchange believes
the proposed rule change will remove a discrepant industry impediment
and allow for a more orderly market by permitting all options markets,
including the clearing agencies, to have the same expiration date for
series of options listed during periods of unusual market conditions.
The proposed rule change also perfects the mechanism of a free and open
market by allowing for the Exchange to list additional series of
options on an individual stock closer to expiration during unusual
market conditions thus better aligning the listed series of options
with prices near expiration. Finally, the proposed rule change does not
permit unfair discrimination between any Member as it is applies to all
Members equally.
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. In this regard and as
indicated above, the Exchange notes that the rule change is being
proposed as a competitive response to the proposal previously filed by
Cboe with the Commission.\9\ The proposed rule change will allow for
the Exchange to list additional series of options on an individual
stock closer to expiration during unusual market conditions thus better
aligning the listed series of options with prices near expiration.
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\9\ See supra note 3.
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The Exchange also believes the proposed rule change will not impose
any significant burden on competition. The proposed rule change has no
impact on intramarket competition, as it will apply equally to all
Members. Moreover, the proposed rule has no impact on intermarket
competition, as it is a competitive response to proposals previously
filed by Cboe with the Commission.\10\ The Exchange believes that the
proposed rule change may relieve any burden on, or otherwise promote,
competition by allowing the Exchange to better align listed series of
options with prices near expiration, and with expiration dates of other
exchanges.
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\10\ See supra note 3.
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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 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 \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its 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 pursuant to Rule 19b-4(f)(6) under the
Act \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ 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. The
Exchange believes that waiver of the operative delay is consistent with
the protection of investors and the public interest because it is
substantially similar in all material respects to a previous CBOE
filing,\15\ and does not raise any new or novel issues. For this
reason, the Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest. Therefore, the Commission hereby waives the operative delay
and designates the proposal as operative upon filing.\16\
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ See supra note 3.
\16\ For purposes only of waiving the 30-day operative delay,
the Commission also 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 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-PEARL-2019-10 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-PEARL-2019-10. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File
[[Page 13093]]
Number SR-PEARL-2019-10 and should be submitted on or before April 24,
2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06422 Filed 4-2-19; 8:45 am]
BILLING CODE 8011-01-P