[Federal Register Volume 84, Number 136 (Tuesday, July 16, 2019)]
[Notices]
[Pages 34025-34028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15027]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86345; File No. SR-MIAX-2019-32]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Exchange Rule 503, Openings on the
Exchange
July 10, 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 July 3, 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 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 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/ 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 503, Openings on the
Exchange, to make minor non-substantive edits to harmonize the rule
text to that of the Exchange's affiliate, MIAX Emerald, LLC (``MIAX
Emerald'' or ``Emerald''). Additionally, the Exchange proposes 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\ The Exchange
also proposes to adopt new subsection (f)(2)(xi) related to the
operation of Route Timers and Imbalance Timers during the Opening
Process.\4\ Finally, the Exchange proposes to amend paragraph (g) to
adopt new rule text that identifies Help Desk staff authorized to take
actions during Opening Process to maintain a fair and orderly market.
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\3\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\4\ See Exchange Rule 503(f).
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First, the Exchange proposes to amend subsection (b) to adopt new
rule text that is identical to rule text found in Emerald,\5\ to state
that the order types that may participate in the opening process are
set forth in Rule 516, Order Types Defined. The Exchange believes that
this provides additional detail and clarity to the rule.
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\5\ See MIAX Emerald Exchange Rule 503(b).
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Next, the Exchange proposes to amend subsection (f)(2)(iv) to
insert the word ``Trading'' to provide consistency and clarity within
the rule text. The rule discusses Minimum Trading Increments,\6\ and
the last reference in the sentence is to the Minimum Increment. The
Exchange now proposes to change this phrase to, ``Minimum Trading
Increment,'' to align to the rest of the rule text and to the rule text
of Emerald.\7\
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\6\ See Exchange Rule 510.
\7\ See MIAX Emerald Exchange Rule 503(f)(2)(iv).
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Next, the Exchange proposes to amend subsection (f)(2)(iv)(A)(1.)
and (2.) to correct the formatting of subsection (1.) and (2.) to
remove the parentheses to make the formatting consistent with the
hierarchical convention used throughout the rulebook. The Exchange also
proposes to amend subsection 2. to conform the rule to the current
System behavior and 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,'' and not the Exchange's ``opening price'' as
currently stated in the rule.\8\
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\8\ The Exchange notes that Rule 1400(h) pertains primarily to
ISOs received by the Exchange, whereas in this instance the Exchange
will be sending the ISO to another exchange.
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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's opening price if necessary.\9\ 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 the Exchange's opening price (although, in
[[Page 34026]]
certain circumstances the away market's displayed price may be equal to
the Exchange's opening price) as currently articulated in the Rule. The
Exchange notes that this change was also recently made by MIAX
Emerald.\10\
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\9\ See Exchange Rule 503(f)(2)(iv)(A).
\10\ See Securities Exchange Act Release No. 85910 (May 22,
2019), 84 FR 24840 (May 29, 2019) (SR-EMERALD-2019-22).
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Next, the Exchange proposes to amend subsection (f)(2)(vii)(A) to
update and relocate the parenthetical which currently follows the text,
``Opening Orders (`OPG Orders')'' so that the proposed rule texts
reads, ``Opening (`OPG') Orders'' and is aligned to the current MIAX
Emerald rule.\11\
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\11\ See MIAX Emerald Exchange Rule 503(f)(2)(vii)(A).
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Next, the Exchange proposes to reorganize subsection (f)(2)(viii)
to move a parenthetical phrase closer to its subject to make the
sentence easier to read. Specifically, the parenthetical, ``(including
limit orders that are treated as market orders except for limit orders
in series with a bid of $0.00 and an offer less than $0.05, which will
not be treated as market orders),'' will be placed after the phrase
market orders, making the proposed rule text read as follows, ``[t]he
System will give priority to market orders (including limit orders that
are treated as market orders except for limit orders in series with a
bid of $0.00 and an offer less than $0.05, which will not be treated as
market orders) first in type, then in time priority, then to resting
limit orders at the opening price.'' The Exchange believes relocating
the parenthetical phrase helps clarify the rule.
Next, the Exchange proposes to adopt new paragraph (xi) to
subsection (f)(2) to state that any Route Timer or Imbalance Timer in
process shall terminate with respect to an option if at any time during
the Opening Process there is a trading halt or trading pause in such
option on the Exchange. The option may be subject to any new subsequent
Route Timer or Imbalance Timer during the Opening Process upon the
termination of the trading halt or trading pause for such option. The
Exchange believes this adds additional detail and clarity to the rule
concerning the operation of Route Timers and Imbalance Timers on the
Exchange, additionally, this rule text is identical to that of MIAX
Emerald.\12\
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\12\ See MIAX Emerald Exchange Rule 503(f)(2)(xi).
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Finally, the Exchange proposes to amend subsection (g) to state
that Senior Help Desk personnel may deviate from the standard manner of
the Opening Process when necessary, including delay or compel the
opening of any series in any option class, modify timers or settings
described in this Rule, when necessary in the interests of commencing
or maintaining a fair and orderly market, in the event of unusual
market conditions or in the public interest. The Exchange will make and
maintain records to document all determinations to deviate from the
standard manner of the Opening Process, and periodically review these
determinations for consistency with the interests of a fair and orderly
market. The Exchange is amending the rule to add additional specificity
by designating that only Senior Help Desk personnel may deviate from
the standard manner of the Opening Process when necessary. The Exchange
is also providing examples of the type of actions that Senior Help Desk
personnel may take to ensure a fair and orderly market is maintained.
Additionally, the Exchange is proposing to amend the rule to adopt a
provision stating that the Exchange will maintain records to document
all determinations to deviate from the standard manner of the Opening
Process, and periodically review these determinations for consistency
with the interests of a fair and orderly market. The Exchange notes
that the proposed rule text is identical to that found in the MIAX
Emerald Rule.\13\
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\13\ See MIAX Emerald Exchange Rule 503(g).
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The Exchange believes that although MIAX Emerald rules may, in
certain instances, intentionally differ from MIAX Options rules, the
proposed changes will promote uniformity with MIAX Options with respect
to rules that are intended to be identical. MIAX Emerald and MIAX
Options may have a number of Members \14\ in common, and where feasible
the Exchange intends to implement similar behavior to provide
consistency between MIAX Options and MIAX Emerald so as to avoid
confusion among Members.
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\14\ 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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2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \15\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \16\ 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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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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The Exchange is proposing to add additional detail to the rule to
provide clarity and precision in the Exchange's rule. The Exchange
proposes to provide an internal cross reference to Rule 516, Order
Types, where a list of valid order types eligible to participate in the
opening process may be found. Additionally, the Exchange is proposing
to make a number of non-substantive changes by adding clarifying text
to the rule which provides additional detail and clarity to the rule.
Clarity and transparency of the Exchange's rules benefits investors and
the public by eliminating the potential for confusion.
The Exchange's proposal to correctly identify the price at which
orders may be routed during the Opening Process 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 \17\ other market
centers and promotes just and equitable principles of trade by routing
orders to market centers where they may receive an execution. 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.
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\17\ 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.
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The Exchange is proposing to adopt a new provision regarding the
operation of Route Timers and Imbalance Timers during the Opening
Process. The Exchange's proposed rule will provide that any Route Timer
or Imbalance Timer in process during the Opening Process shall
terminate with respect to an option if at any time during the Opening
Process there is a trading halt or a trading pause in such option. The
Exchange believes this provision promotes just and equitable principles
of traded [sic] and removes impediments to and perfects the
[[Page 34027]]
mechanisms of a free and open market and a national market system and,
in general, protects investors and the public interest, and contributes
to the operation of a fair and orderly market by immediately ceasing
any activity in any option that is subject to a trading halt or a
trading pause.
This provision is identical to a provision found in MIAX
Emerald.\18\ The Exchange believes adding this provision provides
additional detail to the rule and protects investors and the public
interest by clearly describing Exchange functionality which may
influence investors' decisions concerning the submission of orders. The
Exchange is proposing to harmonize the MIAX Options rule to that of
MIAX Emerald as the opening process is similar and wherever possible
the Exchange would like to harmonize identical rules so that the only
differences between the rules of the two exchanges are those that are
intentional.
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\18\ See supra note 12.
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Finally, the Exchange is proposing to amend its current provision
pertaining to the actions that the Help Desk may take in the interests
of maintaining a fair and orderly market to adopt a more detailed and
nuanced provision from MIAX Emerald. This provision identifies which
Help Desk personnel may take actions during the Opening Process (Senior
Help Desk personnel) and provides examples of the type of actions which
may be undertaken. Additionally, the provision provides that the
Exchange will make and maintain records to document all determinations
to deviate from the standard manner of the Opening Process and
periodically reviewing these determinations for consistency with the
interests of a fair and orderly market. The Exchange believes its
proposal promotes just and equitable principles of trade, 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 providing additional detail in the Exchange's
rules and by providing a review process for instances where there was a
deviation from the standard Opening Process.
The Exchange believes its proposal removes impediments to and
perfects the mechanisms of a free and open market by providing clarity
in the Exchange's rules and more detail concerning the Opening Process
on the Exchange. The Exchange believes clarity and transparency
benefits investors and the public and allows investors and the public
to make informed decisions regarding the submission of orders to the
Exchange.
Additionally, the Exchange believes that although MIAX Emerald
rules may, in certain instances, intentionally differ from MIAX Options
rules, the proposed changes will promote uniformity with MIAX Emerald
with respect to rules that are intended to be identical. The Exchange
believes that it will reduce the potential for confusion by its members
that are also members of MIAX Emerald if the only differences between
MIAX Options rules and MIAX Emerald rules are those that are intended.
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 that the proposed rule change will
impose any burden on inter-market competition as the proposed rule
change adds additional detail to the Exchange's rules and further
clarifies current Exchange functionality and is not a competitive
filing. The Exchange does not believe the proposed rule regarding the
price of routed orders will impose any burden on inter-market
competition as exchanges routinely route orders to one another and
there is no change to the Exchange's functionality related to routing
orders during the Opening Process.
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.
The Exchange does not believe that the proposed rule change to
adopt new rule text pertaining to the termination of Route Timers or
Imbalance Timers during the Opening Process when there is a trading
halt or trading pause in the option will impose any burden on inter-
market competition as the change pertains only to the Exchange's
Opening Process.
Additionally, the Exchange does not believe that the proposed rule
change to amend the provision concerning the actions that the Help Desk
may take to deviate from the standard manner of the Opening Process to
maintain a fair and orderly market will impose any burden on inter-
market competition as the proposed rule change is designed to identify
the specific Help Desk personnel authorized to deviate from the
standard manner of the Opening Process and to provide some examples of
the type of actions that may be undertaken to ensure the operation of a
fair and orderly market.
The Exchange does not believe that the proposed changes impose a
burden on intra-market competition as the proposed changes are designed
to provide additional detail and clarity in the Exchange's rules and
are not intended to influence competition among Members.
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 \19\ and Rule 19b-4(f)(6) \20\
thereunder.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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
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Send an email to [email protected]. Please include
File Number SR-MIAX-2019-32 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-2019-32. 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-2019-32 and should be submitted on
or before August 6, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-15027 Filed 7-15-19; 8:45 am]
BILLING CODE 8011-01-P