[Federal Register Volume 84, Number 105 (Friday, May 31, 2019)]
[Notices]
[Pages 25329-25332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11323]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85934; File No. SR-MIAX-2019-25]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 1801, Definitions; Rule 
503, Openings on the Exchange; and Rule 1802, Designation of an Index

May 24, 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 20, 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, II, and III below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the

[[Page 25330]]

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 Exchange Rule 1801, 
Definitions, Rule 503, Openings on the Exchange; and Rule 1802, 
Designation of an Index.
    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 Exchange Rule 1801, Definitions, to 
adopt new definitions to provide additional detail and clarity in the 
Exchange's Rules. Additionally, the Exchange proposes to amend Exchange 
Rule 503, to remove rule text that is being replaced in this proposal, 
and to make minor edits to conform the existing rule text to the 
definitions contained in this proposal. The Exchange also proposes to 
amend Exchange Rule 1802, Designation of an Index, to correct an 
internal cross reference which is changing under this proposal.
    On October 12, 2018, the Exchange received approval from the 
Securities and Exchange Commission (``SEC'' or ``Commission'') to list 
and trade on the Exchange, options on the SPIKESTM Index, a 
new index that measures expected 30-day volatility of the SPDR S&P 500 
ETF Trust (commonly known and referred to by its ticker symbol, 
``SPY'').\3\ To establish the settlement value for the Index, a 
settlement auction, named the SPIKES Special Settlement Auction, will 
be conducted on the day the settlement value for the Index is to be 
calculated. The Index settlement price calculation includes all SPY 
options that expire 30 days after the SPIKES settlement. In the 
Exchange's filing these options are referred to as the ``constituent 
options''.\4\ The Exchange now proposes to amend Exchange Rule 1801 to 
adopt a definition for ``constituent option series'' to include all 
option series listed on the Exchange that are used to calculate the 
exercise or final settlement value, as applicable, of expiring 
volatility index derivatives. The Exchange believes adopting a 
definition for constituent option series improves the clarity and 
precision of the Exchange's rulebook.
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    \3\ See Securities Exchange Act Release No. 84417 (October 12, 
2018), 83 FR 52865 (October 18, 2018) (SR-MIAX-2018-14) (Order 
Granting Approval of a Proposed Rule Change by Miami International 
Securities Exchange, LLC to List and Trade on the Exchange Options 
on the SPIKES\TM\ Index).
    \4\ Id.
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    In the SPIKES Special Settlement Auction, in addition to any order 
types that may be regularly accepted by the Exchange, the Exchange will 
also accept settlement auction only orders (``SAO Orders'') and 
settlement auction only eQuotes (``SAO eQuotes'') (SAO Orders and SAO 
eQuotes are collectively referred to as ``SAOs'') at any time after the 
opening of the Live Order Window (``LOW'') \5\ and the Live Quote 
Window (``LQW''),\6\ respectively. SAOs are specific order types that 
allow a Member \7\ to voluntarily tag such order as a SPIKES strategy 
order, defined below. In general, even if not tagged, the Exchange will 
consider orders to be SPIKES strategy orders if the orders possess the 
following three characteristics: (A) Are for options with the 
expiration that will be used to calculate the exercise or final 
settlement value of the applicable volatility index option contract; 
(B) are for options spanning the full range of strike prices for the 
appropriate expiration for options that will be used to calculate the 
exercise or final settlement value of the applicable volatility index 
option contract, but not necessarily every available strike price; and 
(C) are for put options with strike prices less than the ``at-the-
money'' strike price and for call options with strike prices greater 
than the ``at-the-money'' strike price. They may also be for put and 
call options with ``at-the-money'' strike prices.
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    \5\ The Exchange notes that the current Live Order Window opens 
at 7:30 a.m.
    \6\ The Exchange notes that the current Live Quote Window 
setting opens at 9:25 a.m., however the Exchange plans to open the 
Live Quote Window for the SPIKES Special Settlement Auction at 8:30 
a.m.
    \7\ 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.
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    The Exchange now proposes to amend Rule 1801 to adopt a definition 
of a ``Strategy Order'' which provides that the Exchange deems 
individual orders (considered collectively) a market participant 
submits for participation in the modified opening procedure, as 
described in Interpretation and Policy .03 of Rule 503, to be a 
``strategy order,'' based on related facts and circumstances considered 
by the Exchange, only if the orders: (1) Relate to the market 
participant's positions in expiring volatility index derivatives; (2) 
are for option series with the expiration that the Exchange will use to 
calculate the exercise or final settlement value, as applicable, of the 
applicable volatility index derivative; (3) are for option series with 
strike prices approximating the range of series that are later 
determined to constitute the constituent option series for the 
applicable expiration; (4) are for put (call) options with strike 
prices equal to or less (greater) than the ``at-the-money'' strike 
price; and (5) have quantities approximating the weighting formula used 
to determine the exercise or final settlement value, as applicable, in 
accordance with the applicable volatility index methodology. The 
Exchange notes that the characteristics identified in subparagraphs 
(1)-(4) currently exist in Exchange Rule 503. The fifth characteristic 
enumerated in subparagraph (5) is not listed in the current rule as a 
requirement for orders to be deemed strategy orders. However, the 
Exchange believes adopting this provision will help in determining 
whether orders are strategy orders. The Exchange notes that the 
proposed five provisions to be adopted under this proposal are 
identical to the five provisions used for identifying strategy orders 
found in Cboe Exchange Rule 6.2.\8\
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    \8\ See Cboe Exchange Rule 6.2, Interpretation and Policy .01.
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    The Exchange also proposes to amend Rule 1801 to adopt a definition 
for a non-strategy order as any order (including an order in a 
constituent option series) a market participant submits for 
participation in the modified opening procedure, as described in 
Interpretation and Policy .03 of Rule 503, that is not a strategy order 
(or a change to or cancellation of a strategy order).
    Additionally, the Exchange proposes to make a number of non-
substantive changes to Rule 1801 to renumber

[[Page 25331]]

existing definitions to allow the Exchange to insert the proposed 
definitions, ``constituent option series,'' ``non-strategy order,'' and 
``strategy order,'' into the proper alphabetically ordered position 
among currently existing definitions.
    The Exchange believes the proposed definitions provide market 
participants with more clarity with respect to what constitutes a 
strategy order and a non-strategy order. The Exchange believes this 
added clarity may increase liquidity on volatility index settlement 
dates, as it provides more certainty with respect to which orders may 
be submitted prior to the strategy cut-off time and which orders may be 
submitted after that time.
    Further, the Exchange proposes to amend paragraph (c)(2) of 
Interpretation and Policy .03 of Exchange Rule 503 to remove the text 
that states, ``[i]n general, the Exchange will consider orders to be 
SPIKES strategy orders for purposes of this Interpretation and Policy 
.03, if the orders possess the following three characteristics: (A) Are 
for options with the expiration that will be used to calculate the 
exercise or final settlement value of the applicable volatility index 
option contract; (B) are for options spanning the full range of strike 
prices for the appropriate expiration for options that will be used to 
calculate the exercise or final settlement value of the applicable 
volatility index option contract, but not necessarily every available 
strike price; and (C) are for put options with strike prices less than 
the `at-the-money' strike price and for call options with strike prices 
greater than the `at-the-money' strike price. They may also be for put 
and call options with `at-the-money' strike prices.'' This text is 
being updated by the definition for a strategy order contained in this 
proposal.
    Finally, the Exchange proposes to amend paragraph (b), (c), 
subparagraph (c)(1) and (c)(2), paragraph (d), paragraph (e), 
subparagraph (e)(1) and subparagraph (e)(2) of Interpretation and 
Policy .03 of Rule 503, to replace ``SPIKES strategy order'' with the 
term ``strategy order'' and to replace ``SPIKES non-strategy order'' 
with the term ``non-strategy order,'' as defined in this proposal. The 
Exchange also proposes to include an internal cross reference to the 
location of each definition in the Exchange's rulebook. Additionally, 
the Exchange proposes to correct an internal cross reference in Rule 
1802(d)(1) from subparagraph (k) to new proposed subparagraph (l).
    The Exchange believes that these changes will add clarity and 
precision to the Exchange's rulebook.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \10\ 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed definition of a strategy order 
provides market participants with additional clarity regarding what 
orders constitute strategy orders and the Exchange believes this added 
clarity benefits investors and promotes just and equitable principles 
of trade. The proposed rule change with respect to the definition of 
strategy orders and enumerating the characteristics of a strategy 
orders as defined in subparagraphs (1)-(4) is consistent with the 
current definition of SPIKES strategy orders and the Exchange's view of 
what orders constitute a strategy order, as well as the legitimate 
purposes of strategy orders, as orders submitted that satisfy the 
purposes of a strategy order generally possess the characteristics 
identified in the rule, but also provides additional clarity and 
specificity than the current definition. Additionally, the Exchange's 
proposal to adopt a fifth characteristic of a strategy order with 
respect to the definition of strategy orders as enumerated in 
subparagraph (5) of the proposed rule provides additional detail and 
clarity in the Exchange's rule as it pertains to strategy orders. 
Further, these five characteristics are identical to those defined by 
the Cboe Exchange in their Rule 6.2.\11\
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    \11\ See supra note 8.
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    Additionally, the proposed definition of non-strategy orders 
provides market participants with additional clarity regarding orders 
that do not constitute strategy orders (and thus may be submitted after 
the strategy-order cut-off time and prior to the non-strategy order 
cut-off time). The Exchange believes this additional clarity with 
respect to what is and is not a strategy order will provide market 
participants with more certainty with respect to which orders 
constitute strategy orders, and thus which orders need to be submitted 
prior to the strategy order cut-off time. It also clarifies for market 
participants the activity in which they may engage after the strategy 
cut-off time.
    Further, the proposed definition of a constituent option series 
provides additional clarity and precision in the Exchange's rules 
regarding what series are considered constituent option series for 
purposes of calculating the final settlement value. The Exchange 
believes this added clarity benefits investors and promotes just and 
equitable principles of trade.
    Finally, the Exchange believes replacing the terms ``SPIKES 
strategy order,'' and ``SPIKES non-strategy order,'' with the 
definitions for strategy order and non-strategy order proposed herein, 
protects investors and the public interest, by providing clarity in the 
Exchange's rules which reduces the chance for confusion.

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 
applies in the same manner to all market participants who submit orders 
to the Exchange in constituent option series on index settlement value 
determination days. The proposed rule change, and the proposed 
definition of a strategy order in particular, provides market 
participants with clarity with respect to what constitutes a strategy 
order and is consistent with the current rules and the Exchange's view 
of what orders constitute strategy orders.
    The proposed rule change has no impact on intermarket competition 
as it applies to orders submitted for participation in the Exchange's 
Special Settlement Process used to calculate settlement values for 
expiring volatility index derivatives. The Exchange believes that the 
proposed rule change provides market participants with more certainty 
with respect to which orders need to be submitted prior to the strategy 
order cut-off time and which orders may be submitted after that time, 
which may increase liquidity in constituent option series on volatility 
settlement dates.

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.

[[Page 25332]]

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 \12\ and Rule 19b-4(f)(6) \13\ 
thereunder.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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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    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-MIAX-2019-25 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-2019-25. 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 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-2019-25 and should be submitted on 
or before June 21, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-11323 Filed 5-30-19; 8:45 am]
BILLING CODE 8011-01-P