[Federal Register Volume 84, Number 65 (Thursday, April 4, 2019)]
[Notices]
[Pages 13349-13351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06526]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85469; File No. SR-MIAX-2019-16]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change 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 International Securities
Exchange, LLC (``MIAX Options'' 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.
---------------------------------------------------------------------------
\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 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\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 84864 (December 19,
2018), 83 FR 66778 (December 27, 2018) (SR-MIAX-2018-38).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/ at MIAX Options'
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 classes may be added to the Penny Pilot
Program on the second trading day following January 1, 2019.\4\
---------------------------------------------------------------------------
\4\ See id.
---------------------------------------------------------------------------
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 option 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.
---------------------------------------------------------------------------
\5\ See Exchange Rule 510, Interpretations and Policies .01.
---------------------------------------------------------------------------
As is the case today, the Exchange will determine replacement
classes based on trading activity in the previous
[[Page 13350]]
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).
---------------------------------------------------------------------------
\6\ Exchange Rule 510, Interpretations and Policies .01
continues to obligate the Exchange to announce the replacement
classes by a Listings Alert.
---------------------------------------------------------------------------
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 with the rules of
competing options exchanges that have proposed rules consistent with
this proposal.\7\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\10\ Id.
---------------------------------------------------------------------------
The Exchange notes that it is not making any other substantive
changes to the Penny Pilot Program, other than modifying the timing for
replacement classes 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 classes 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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
[[Page 13351]]
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-2019-16 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-2019-16. 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-MIAX-2019-16 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\
---------------------------------------------------------------------------
\17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06526 Filed 4-3-19; 8:45 am]
BILLING CODE 8011-01-P