[Federal Register Volume 84, Number 103 (Wednesday, May 29, 2019)]
[Notices]
[Pages 24840-24841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11105]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85910; File No. SR-EMERALD-2019-22]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 503, Openings on the Exchange

May 22, 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 May 13, 2019, MIAX Emerald, LLC (``MIAX 
Emerald'' 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.
---------------------------------------------------------------------------

    \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 Exchange Rule 503, 
Openings on the Exchange.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald at MIAX 
Emerald'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 503, Openings on the 
Exchange, to amend subsection (f)(2)(iv)(A)2. to adopt new rule text 
relating to the price at which an Intermarket Sweep Order (``ISO'') is 
routed in order to align the rule text to the operation of the 
System.\3\
---------------------------------------------------------------------------

    \3\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
---------------------------------------------------------------------------

    The Exchange's Opening Process \4\ provides that if the calculated 
opening price included interest other than solely Exchange interest, 
the System will broadcast a System Imbalance Message to Exchange 
Members \5\ and initiate a ``Route Timer,'' \6\ not to exceed one 
second. If no new interest is received during the Route Timer, the 
System will route to other markets disseminating prices better than the 
Exchange's opening price, execute marketable interest at the opening 
price on the Exchange, and route to other markets disseminating prices 
equal to the Exchange opening price if necessary.\7\ Subsection 2. of 
this rule states that any order that is routed pursuant to this Rule 
(Rule 503) will be marked as an Intermarket Sweep Order (``ISO''), as 
defined in Rule 1400(h), with a limit price equal to the Exchange's 
opening price.\8\ An Intermarket Sweep Order is a limit order for an 
option series that is routed to execute against the full displayed size 
of any Protected Bid, in the case of a limit order to sell, or any 
Protected Offer, in the case of a limit order to buy, for the options 
series with a price that is superior to the limit price of the ISO. A 
Member may submit an Intermarket Sweep Order to the Exchange only if it 
has simultaneously routed one or more additional Intermarket Sweep 
Orders to execute against the full displayed size of any Protected Bid, 
in the case of a limit order to sell, or Protected Offer, in the case 
of a limit order to buy, for an options series with a price that is 
superior to the limit price of the Intermarket Sweep Order. An ISO may 
be either an Immediate-Or-Cancel Order or an order that expires on the 
day it is entered.\9\
---------------------------------------------------------------------------

    \4\ See Exchange Rule 503(f).
    \5\ 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.
    \6\ See Exchange Rule 529(b)(2).
    \7\ See Exchange Rule 503(f)(2)(iv)(A).
    \8\ See Exchange Rule 503(f)(2)(iv)(A)2.
    \9\ See Exchange Rule 1400(h).
---------------------------------------------------------------------------

    As described in the Exchange's current rule, the Exchange will 
route to other markets disseminating prices better than the Exchange's 
opening price and will also route to other markets disseminating prices 
equal to the Exchange opening price if necessary.\10\ The Exchange 
recently identified an inconsistency between the Exchange's rule and 
the Exchange's System behavior regarding the price of these routed 
orders. Given that the order is being routed to another market center 
for execution, the limit price of the order being routed should be 
equal to the away market's displayed price rather than be equal to the 
Exchange's opening price (although, in certain circumstances the away 
market's displayed price may be equal to the Exchange's opening price) 
as currently articulated in the Rule.
---------------------------------------------------------------------------

    \10\ See supra note 7.
---------------------------------------------------------------------------

    The Exchange believes that the System is operating correctly and 
that the rule text inadvertently described the price being used for 
these orders as the Exchange's opening price. The Exchange now proposes 
to amend subsection 2. of Rule 503(f)(2)(iv)(A) to adopt new rule text 
to replace the phrase, ``Exchange's opening price'' with the phrase, 
``away market's displayed price.'' The new proposed rule will state 
that any order that is routed pursuant to this Rule will be marked as 
an Intermarket Sweep Order (``ISO''), as defined in Rule 1400(h), with 
a limit price equal to the away market's displayed price. This proposed 
change conforms the rule to the System's behavior.

[[Page 24841]]

2. Statutory Basis
    The Exchange 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's proposal 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 ensuring that 
interest routed as a result of an imbalance on the Exchange during its 
Opening Process is properly priced for execution. This reduces the risk 
of trading through \13\ other market centers and promotes just and 
equitable principles of trade by routing orders to market centers where 
they may receive an execution.
---------------------------------------------------------------------------

    \13\ A trade-through occurs when one trading center executes an 
order at a price that is inferior to the price of a protected 
quotation, often representing an investor limit order, displayed by 
another trading center.
---------------------------------------------------------------------------

    The Exchange's proposal more accurately describes how the System 
prices interest being routed pursuant to the Opening Process. The 
Exchange believes its proposal provides accuracy and clarity to the 
rule and protects investors and the public interest by clearly and 
accurately describing Exchange functionality which may influence 
investors' decisions concerning the submission of their orders.

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 not necessary or appropriate in 
furtherance of the purposes of the Act.
    The Exchange does not believe the proposed rule change will impose 
any burden on inter-market competition as exchanges routinely route 
orders to one another and the Exchange has been operating in this 
fashion since it began operations on March 1, 2019.\14\ Additionally, 
the Exchange does not believe the proposed rule change will impose any 
burden on inter-market competition as the proposed rule change 
clarifies current Exchange functionality and is not a competitive 
filing.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 84891 (December 20, 
2018), 83 FR 67421 (December 28, 2018) (File No. 10-233) (order 
approving application of MIAX Emerald, LLC for registration as a 
national securities exchange.); See also MIAX Emerald Regulatory 
Circular 2019-29.
---------------------------------------------------------------------------

    Additionally, the Exchange does not believe that the proposed rule 
change will impose any burden on intra-market competition as the 
Opening Process affects all Members equally, and the specific situation 
that the proposal addresses occurs only in the limited instance as 
described herein.

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 \15\ and Rule 19b-4(f)(6) \16\ 
thereunder.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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.
---------------------------------------------------------------------------

    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-EMERALD-2019-22 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-EMERALD-2019-22. 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-EMERALD-2019-22 and should be submitted 
on or before June 19, 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. 2019-11105 Filed 5-28-19; 8:45 am]
BILLING CODE 8011-01-P