[Federal Register Volume 84, Number 65 (Thursday, April 4, 2019)]
[Notices]
[Pages 13347-13349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06514]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85455; File No. SR-PEARL-2019-11]


Self-Regulatory Organizations: Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by Miami PEARL, LLC To Amend 
Exchange Rule 510, Minimum Price Variations and Minimum Trading 
Increments

March 29, 2019.
    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 March 22, 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 510, Minimum Price 
Variations and Minimum Trading Increments, to specify that replacement 
classes may be added to the Penny Pilot Program on a quarterly basis, 
without altering the expiration date of the Penny Pilot Program, which 
is June 30, 2019.\3\
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    \3\ See Securities Exchange Act Release No. 84865 (December 19, 
2018), 83 FR 66813 (December 27, 2018) (SR-PEARL-2018-26).
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    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 Rule 510, Minimum Price Variations 
and Minimum Trading Increments, Interpretations and Policies .01, 
regarding the Penny Pilot Program, to specify that replacement classes 
may be added to the Penny Pilot Program on a quarterly basis, without 
altering the expiration date of the Penny Pilot Program, which is June 
30, 2019.
    The Exchange recently filed to extend the Penny Pilot Program until 
June 30, 2019 (from December 31, 2018) and also updated the rule text 
to provide that replacement issues may be added to the Pilot on the 
second trading day following January 1, 2019.\4\
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    \4\ See id.
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    The proposed rule authorizes the Exchange to replace any option 
classes in the Penny Pilot Program that have been delisted with the 
next most actively traded multiply listed options classes that are not 
yet included in the Penny Pilot Program, based on trading activity in 
the previous six months.\5\ The Exchange now proposes to modify Rule 
510, Minimum Price Variations and Minimum Trading Increments, 
Interpretations and Policies .01, to allow the Exchange to add 
replacement classes (for Penny Pilot Program classes that have been 
delisted) on a quarterly basis. The Exchange added replacement classes 
in January 2019 and would add eligible replacement classes in April, 
July, and October. The Exchange believes this change would allow the 
Exchange to update option classes eligible for the Penny Pilot Program 
(by replacing delisted classes) on a quarterly basis (as opposed to 
semi-annual) and would enable further analysis of the Penny Pilot 
Program and a determination of how the Penny Pilot Program should be 
structured in the future.
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    \5\ See Exchange Rule 510, Interpretations and Policies .01.
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    As is the case today, the Exchange will determine replacement 
classes based on trading activity in the previous six months (the ``six 
month lookback'') but will not use the month immediately preceding the 
addition of a replacement to the Penny Pilot Program. Thus, a 
replacement class to be added on the second trading day following April 
1, 2019 would be identified based on The Option Clearing Corporation's 
trading volume data from September 1, 2018 through February 28, 
2019.\6\ The Exchange believes the six month lookback is appropriate 
because this time period would help reduce the impact of unusual 
trading activity as a result of unique market events, such as a 
corporate action (i.e., it would result in a more reliable measure of 
average daily trading volume than would a shorter period).
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    \6\ Exchange Rule 510, Interpretations and Policies .01 
continues to obligate the Exchange to announce the replacement 
classes by a Listings Alert.
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    This filing does not propose any substantive changes to the Penny 
Pilot Program: All classes currently participating will remain the same 
and all minimum increments will remain unchanged. The Exchange believes 
the benefits to public customers and other market participants who will 
be able to express their true prices to buy and sell options have been 
demonstrated to outweigh the increase in quote traffic. In addition, 
the proposed change would align the Exchange's rules to the rules of 
competing options exchanges that

[[Page 13348]]

have proposed rules consistent with this proposal.\7\
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    \7\ See Securities Exchange Act Release Nos. 85348 (March 18, 
2019), 84 FR 10860 (March 22, 2019) (SR-NYSEAMER-2019-05); 85363 
(March 19, 2019), (SR-NYSEARCA-2019-13) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Commentary 
.02 to Rule 6.72-O to specify that replacement issues may be added 
to the Penny Pilot quarterly).
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. In particular, the Exchange 
believes the proposal to allow the addition of replacement classes to 
the Penny Pilot Program on a quarterly basis would result in a more 
current list of Penny Pilot Program-eligible classes and would enable 
further analysis of the Penny Pilot Program, including for a 
determination of how the Penny Pilot Program should be structured in 
the future. Further, the Exchange believes the six month lookback is 
appropriate because this time period would help reduce the impact of 
unusual trading activity as a result of unique market events, such as a 
corporate action (i.e., it would result in a more reliable measure of 
average daily trading volume than would a shorter period). Thus, the 
Exchange believes this proposal would promote just and equitable 
principles of trade, foster cooperation and coordination with persons 
engaged in facilitating transactions in securities, and remove 
impediments to and perfect the mechanisms of a free and open market and 
a national market system.
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    \10\ Id.
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    The Exchange notes that it is not making any other substantive 
changes to the Penny Pilot Program, other than modifying the timing for 
replacement issues and therefore the Exchange will continue to 
participate in a program that has been viewed as beneficial to traders, 
investors and public customers and viewed as successful by the other 
options exchanges participating in it.
    The Exchange believes that the Penny Pilot Program would continue 
to promote just and equitable principles of trade by enabling public 
customers and other market participants to express their true prices to 
buy and sell options to the benefit of all market participants.

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 that allowing the Exchange to add replacement classes to the 
Penny Pilot Program on a quarterly basis would make the list of Penny 
Pilot Program-eligible classes more current and would enable further 
analysis of the Penny Pilot Program, including for a determination of 
how the Penny Pilot Program should be structured in the future. In 
doing so, the proposed rule change will also serve to promote 
regulatory clarity and consistency, thereby reducing burdens on the 
marketplace and facilitating investor protection. The Penny Pilot 
Program is an industry-wide initiative supported by all other option 
exchanges. The Exchange believes that the proposed change would allow 
for continued competition between Exchange market participants trading 
similar products as their counterparts on other exchanges, while at the 
same time allowing the Exchange to continue to compete for order flow 
with other exchanges in option issues trading as part of the Penny 
Pilot Program.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 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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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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. The change will allow 
the Exchange to add classes to the pilot that are actively traded at 
the start of the second quarter (i.e., in April 2019) and replace those 
that have been delisted and are no longer trading on a more frequent 
basis. This will help ensure that the top 363 most actively traded, 
multiply-listed classes are included in the Pilot, which will enable 
further analysis of the Pilot.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the operative delay for this 
proposal, 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 such 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 under 
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(2)(B).

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[[Page 13349]]

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-2019-11 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-2019-11. 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 Number SR-PEARL-2019-11 and 
should be submitted on or before April 25, 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. 2019-06514 Filed 4-3-19; 8:45 am]
 BILLING CODE 8011-01-P