[Federal Register Volume 90, Number 128 (Tuesday, July 8, 2025)]
[Notices]
[Pages 30177-30183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-12636]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103376; File No. SR-MIAX-2025-27]
Self-Regulatory Organizations: Notice of Filing of a Proposed
Rule Change by Miami International Securities Exchange, LLC To Amend
Certain of the Exchange's Index Options Rules To Allow the Exchange To
List and Trade Options on Micro Narrow-Based Indexes
July 2, 2025.
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 June 25, 2025, Miami International Securities
Exchange, LLC (``MIAX'' or ``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 proposes to amend certain of the Exchange's Index
Options Rules (Chapter XVIII) to: (1) adopt a new classification of
narrow-based indexes, classified as ``micro narrow-based'' indexes; (2)
establish the initial listing standards and maintenance standards for
micro narrow-based indexes; and (3) adopt rules regarding position
limits and exercise limits for micro narrow-based index options.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-options/all-options-exchanges/rule-filings, at MIAX'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 adopt rules to allow the Exchange to list
and trade options on micro narrow-based indexes. The proposed rules
include the definition of a micro narrow-based index, listing and
maintenance criteria for a micro narrow-based index, and position
limits and exercise limits for micro narrow-based index options. All of
the proposed rules and changes to
[[Page 30178]]
existing Exchange Rules are based on the existing rules of other
options exchanges. The proposed rule change is intended to expand the
Exchange's capacity to introduce and trade new and innovative index
option products on the Exchange System.\3\
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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.
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Proposed Definition of Micro Narrow-Based Index
The Exchange proposes to amend Exchange Rule 1801(m) to add the
definition of micro narrow-based index. The proposed definition of
``micro narrow-based index'' is an industry or narrow-based index that
meets the specific criteria provided under proposed Exchange Rule
1802(f). The Exchange notes that other exchanges have the same
definition of micro narrow-based index.\4\ In addition, the Exchange
proposes to make conforming changes to the hierarchical headings in
Exchange Rule 1801. Specifically, subparagraphs (m)-(t) will be
renumbered as (n)-(u). The purpose of the proposed changes is to
provide consistency and clarity in the Rulebook regarding the
definitions that are applicable to index options.
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\4\ See e.g., Cboe Exchange, Inc. (``Cboe'') Rule 4.11,
available at https://cdn.cboe.com/resources/regulation/rule_book/C1_Exchange_Rule_Book.pdf (last visited June 9, 2025).
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Proposed Micro Narrow-Based Index Initial Listing Criteria
Proposed Exchange Rule 1802(f) will describe the initial listing
standards for a micro narrow-based index on which options may be traded
on the Exchange. Pursuant to proposed Exchange Rule 1802(f), the
Exchange may trade options on a micro narrow-based index pursuant to
19b-4(e) of the Act,\5\ if each of the following conditions is
satisfied:
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\5\ 17 CFR 242.19b-4(e).
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(1) The index is a security index:
(i) that has nine or fewer component securities;
(ii) in which a component security comprises more than 30% of the
index's weighting;
(iii) in which the five highest weighted component securities in
the aggregate comprise more than 60% of the index's weighting; or
(iv) in which the lowest weighted component securities comprising,
in the aggregate, 25% of the index's weighting have an aggregate dollar
value of average daily trading volume of less than $50,000,000 (or in
the case of an index with 15 or more component securities, $30,000,000)
except that if there are two or more securities with equal weighting
that could be included in the calculation of the lowest weighted
component securities comprising, in the aggregate, 25% of the index's
weighting, such securities shall be ranked from lowest to highest
dollar value of average daily trading volume and shall be included in
the calculation based on their ranking starting with the lowest ranked
security;
(2) The index is capitalization-weighted, modified capitalization-
weighted, price-weighted, share weighted, equal dollar-weighted,
approximate equal-dollar weighted, or modified equal-dollar weighted;
(i) For the purposes of this Exchange Rule 1802(f), an approximate
equal-dollar weighted index is composed of one or more securities in
which each component security will be weighted equally based on its
market price on the index's selection date and the index must be
reconstituted and rebalanced if the notional value of the largest
component is at least twice the notional volume of the smallest
component for 50% or more of the trading days in the three months prior
to December 31 of each year. For purposes of this provision the
``notional value'' is the market price of the component times the
number of shares of the underlying component in the index.
Reconstitution and rebalancing are also mandatory if the number of
components in the index is greater than five at the time of
rebalancing. The Exchange reserves the right to rebalance quarterly at
its discretion.
(ii) For the purposes of this Exchange Rule 1802(f), a modified
equal-dollar weighted index is an index in which each underlying
component represents a pre-determined weighting percentage of the
entire index. Each component is assigned a weight that takes into
account the relative market capitalization of the securities comprising
the index. A modified equal-dollar weighted index will be balanced
quarterly.
(iii) For the purposes of this Exchange Rule 1802(f), a share-
weighted index is calculated by multiplying the price of the component
security by an adjustment factor. Adjustment factors are chosen to
reflect the investment objective deemed appropriate by the designer of
the index and will be published by the Exchange as part of the contract
specifications. The value of the index is calculated by adding the
weight of each component security and dividing the total by an index
divisor, calculated to yield a benchmark index level as of a particular
date. A share-weighted index is not adjusted to reflect changes in the
number of outstanding shares of its components. A share-weighted micro
narrow-based index will not be re- balanced. If a share-weighted micro
narrow-based index fails to meet the maintenance listing standards
under Exchange Rule 1802(g), the Exchange will restrict trading in
existing option series to closing transactions and will not issue
additional series for that index.
(iv) The Exchange may rebalance any micro narrow-based index on an
interim basis if warranted as a result of extraordinary changes in the
relative values of the component securities. To the extent investors
with open positions must rely upon the continuity of the options
contract on the index, outstanding contracts are unaffected by
rebalancings.
(3) Each component security in the index has a minimum market
capitalization of at least $75 million, except that each of the lowest
weighted securities in the index that in the aggregate account for no
more than 10% of the weight of the index may have a minimum market
capitalization of only $50 million;
(4) The average daily trading volume in each of the preceding six
months for each component security in the index is at least 45,500
shares, except that each of the lowest weighted component securities in
the index that in the aggregate account for no more than 10% of the
weight of the index may have an average daily trading volume of only
22,750 shares for each of the last six months;
(5) In a capitalization-weighted index, the lesser of: (i) the five
highest weighted component securities in the index each have had an
average daily trading volume of at least 90,000 shares over the past
six months; or (ii) the highest weighted component securities in the
index that in the aggregate represent at least 30% of the total number
of component securities in the index each have had an average daily
trading volume of at least 90,000 shares over the past six months;
(6) Subject to subparagraphs (4) and (5) above, the component
securities that account for at least 90% of the total index weight and
at least 80% of the total number of component securities in the index
must meet the requirements of Exchange Rule 402 applicable to
individual underlying securities;
(7)
(i) Each component security in the index is an ``NMS Security'' as
defined in Rule 600 of Regulation NMS under the Exchange Act; and
(ii) Foreign securities or ADRs that are not subject to
comprehensive surveillance sharing agreements do not
[[Page 30179]]
represent more than 20% of the weight of the index;
(8) The current underlying index value will be reported at least
once every 15 seconds during the time the index options are traded on
the Exchange;
(9) An equal dollar-weighted index will be rebalanced at least once
every quarter;
(10) If the underlying index is maintained by a broker-dealer, the
index is calculated by a third party who is not a broker-dealer, and
the broker-dealer has in place an information barrier around its
personnel who have access to information concerning changes in and
adjustments to the index;
(11) Each component security in the index is registered pursuant to
Section 12 of the Exchange Act; and
(12) Cash settled index options are designated as A.M.-settled
options.
The above initial listing standards are substantively similar as
the initial listing standards currently in place on other exchanges.\6\
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\6\ See e.g., Cboe Rule 4.10(c), available at https://cdn.cboe.com/resources/regulation/rule_book/C1_Exchange_Rule_Book.pdf (last visited June 9, 2025); see also MEMX
Rule 29.6(d), available at https://info.memxtrading.com/wp-content/uploads/2025/05/MEMX-Rulebook-5.14.25-clean.pdf. (last visited June
9, 2025).
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The Exchange also proposes to make conforming changes to Exchange
Rule 1802(a) to add a cross reference to proposed new subparagraph (f)
to the exceptions to the rule filing requirement applicable to the
listing of a class of index option provided under Section 19(b) of the
Act. Currently, Exchange Rule 1802(a) provides that except as set forth
in subparagraph (b) and (d), which refer to initial listing standards
for narrow-based indexes and broad-based indexes, the listing of a
class of index options requires a proposed rule change to be approved
by the Securities and Exchange Commission (the ``Commission'') under
Section 19(b) of the Exchange Act. Since the Exchange proposes to adopt
rules to allow the Exchange to list and trade options on micro narrow-
based indexes, in addition to narrow-based indexes and broad-based
indexes, the Exchange proposes to amend Exchange Rule 1802(a) to add a
cross reference to proposed new subparagraph (f) (Micro Narrow-Based
Index Initial Listing Criteria) to the exceptions to the rule filing
requirement applicable to the listing of a class of index options
pursuant to Section 19(b) of the Act. This is to allow the Exchange to
trade options on micro narrow-based indexes pursuant to Rule 19b-4(e)
of the Act, without filing of a proposed rule change to be approved by
the Commission, if each of the initial listing standards is satisfied.
Proposed Micro Narrow-Based Index Maintenance Listing Criteria
In addition to the initial listing standards, certain maintenance
listing standards, listed below, will apply to each class of index
options originally listed pursuant to proposed Exchange Rule 1802(f).
Specifically, in order for an index to remain listed on the Exchange,
pursuant to proposed Exchange Rule 1802(g), the following maintenance
listing standards shall be satisfied:
(1) The index meets the criteria of subparagraph (f)(1) of this
Rule;
(2) Subject to subparagraphs (g)(9) and (10) below, the component
securities that account for at least 90% of the total index weight and
at least 80% of the total number of component securities in the index
must meet the requirements of Exchange Rule 402;
(3) Each component security in the index has a market
capitalization of at least $75 million, except that each of the lowest
weighted component securities that in the aggregate account for no more
than 10% of the weight of the index may have a market capitalization of
only $50 million;
(4) Each component security in the index is an ``NMS Security'' as
defined in Rule 600 of Regulation NMS under the Exchange Act;
(5) Foreign securities or ADRs thereon that are not subject to
comprehensive surveillance sharing agreements do not represent more
than 20% of the weight of the index;
(6) The current underlying index value will be reported at least
once every 15 seconds during the time the index options are traded on
the Exchange;
(7) If the underlying index is maintained by a broker-dealer, the
index is calculated by a third party who is not a broker-dealer, and
the broker-dealer has in place an information barrier around its
personnel who have access to information concerning changes in and
adjustments to the index;
(8) The total number of component securities in the index may not
increase or decrease by more than 33\1/3\% from the number of component
securities in the index at the time of its initial listing;
(9) Trading volume of each component security in the index must be
at least 500,000 shares for each of the last six months, except that
for each of the lowest weighted component securities in the index that
in the aggregate account for no more than 10% of the weight of the
index, trading volume must be at least 400,000 shares for each of the
last six months;
(10) In a capitalization-weighted index and a modified
capitalization weighted index, the lesser of the five highest weighted
component securities in the index or the highest weighted component
securities in the index that in the aggregate represent at least 30% of
the total number of stocks in the index each have had an average
monthly trading volume of at least 1,000,000 shares over the past six
months;
(11) Each component security in the index is registered pursuant to
Section 12 of the Exchange Act;
(12) In an approximate equal-dollar weighted index, the index must
be reconstituted and rebalanced if the notional value of the largest
component is at least twice the notional volume of the smallest
component for 50% or more of the trading days in the three months prior
to December 31 of each year. For purposes of this provision the
``notional value'' is the market price of the component times the
number of shares of the underlying component in the index.
Reconstitution and rebalancing are also mandatory if the number of
components in the index is greater than five at the time of
rebalancing. The Exchange reserves the right to rebalance quarterly at
its discretion;
(13) In a modified equal-dollar weighted index the Exchange will
re-balance the index quarterly;
(14) In a share-weighted index, if a share-weighted micro narrow-
based index fails to meet the maintenance listing standards under
Exchange Rule 1802(g), the Exchange will not re-balance the index, will
restrict trading in existing option series to closing transactions, and
will not issue additional series for that index; and
(15) In the event a class of index options listed on the Exchange
fails to satisfy the maintenance listing standards set forth herein,
the Exchange shall not open for trading any additional series of
options of that class unless such failure is determined by the Exchange
not to be significant and the Commission concurs in that determination,
or unless the continued listing of that class of index options has been
approved by the Commission under Section 19(b)(2) of the Exchange Act.
The proposed maintenance listing standards are substantively
similar to
[[Page 30180]]
the maintenance standards currently in place on other exchanges.\7\
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\7\ See e.g., Cboe Rule 4.10(d), available at https://cdn.cboe.com/resources/regulation/rule_book/C1_Exchange_Rule_Book.pdf (last visited June 9, 2025); see also MEMX
Rule 29.6(e), available at https://info.memxtrading.com/wp-content/uploads/2025/02/MEMX-Rulebook-2.5.25.pdf (last visited June 9,
2025).
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The Exchange believes that the requirements in the proposed listing
standards regarding, among other things, the minimum market
capitalization, trading volume, and relative weightings of an
underlying index's component stocks are designed to ensure that the
markets for the index's component stocks are adequately capitalized and
sufficiently liquid, and that no one stock dominates the index. The
Exchange believes that these requirements minimize the potential for
manipulating the underlying index.
The Exchange further believes that the requirement in proposed
Exchange Rule 1802(f)(8) that the current underlying index value will
be reported at least once every 15 seconds during the time the index
options are traded on the Exchange, and the requirement in proposed
Exchange Rule 1802(g)(6) that the current underlying index value will
be reported at least once every 15 seconds during the time the index
options are traded on the Exchange should provide transparency with
respect to current index values and contribute to the transparency of
the market for micro narrow-based index options. In addition, the
Exchange believes that the requirement in proposed Exchange Rule
1802(f)(12) that cash settled index options are designated as A.M.-
settled, rather than on closing prices, should help to reduce the
potential impact of expiring index options on the market for the
index's component securities.
Proposed Position Limits for Micro Narrow-Based Index Options
The Exchange proposes to adopt Exchange Rule 1805B relating to
position limits for micro narrow-based index options by incorporating
by referencing the applicable rules of Cboe. Specifically, proposed
Exchange Rule 1805B(a) states that Members \8\ shall comply with the
applicable rules of the Cboe with respect to position limits for micro-
narrow based index options traded on the Exchange and also on Cboe, or
with the applicable rules of the Exchange for industry index options
traded on the Exchange but not traded on Cboe.\9\ Proposed Exchange
Rule 1805B(b) states that index options contracts shall not be
aggregated with options contracts on any stocks whose prices are the
basis for calculation of the index. Proposed Exchange Rule 1805B(c)
states that positions in reduced-value index options shall be
aggregated with positions in full-value index options. For such
purposes, ten (10) reduced-value options shall equal one (1) full-value
contract. The Exchange notes that other options exchanges have
substantively similar rules relating to position limits for micro
narrow-based index options.\10\
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\8\ 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.
\9\ See Exchange Rule 1805.
\10\ See MEMX Rule 29.7, available at https://info.memxtrading.com/wp-content/uploads/2025/05/MEMX-Rulebook-5.14.25-clean.pdf (last visited June 9, 2025); see also the Nasdaq
Stock Market LLC (``Nasdaq'') rules, Options 4A, Section 7,
available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Options%204A (last visited June 9, 2025).
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The Exchange proposes to incorporate by reference as MIAX rules
certain rules of the Cboe. Specifically, MIAX Rule 1805B proposes to
incorporate by reference the applicable rules of Cboe with respect to
position limits for micro narrow-based index options traded on the
Exchange and also on Cboe. Thus, if approved, for certain MIAX rules,
Members will comply with the MIAX rules by complying with the Cboe
rules referenced. Using its authority under Section 36 of the Act, the
Commission has previously exempted certain self-regulatory
organizations (``SROs'') from the requirement to file proposed rule
changes under Section 19(b) of the Act when incorporating another SRO's
rules by reference.\11\ Each such exempt SRO has agreed to be governed
by the incorporated rules, as amended from time to time, but, has not
been required to file a separate proposed rule change with the
Commission each time the SRO whose rules are incorporated by reference
seeks to modify its rules. In addition, each SRO incorporated by
reference only regulatory rules (e.g., margin, suitability,
arbitration), not trading rules, and incorporated by reference whole
categories of rules (i.e., did not ``cherry-pick'' certain individual
rules within a category). Last, each exempt SRO had reasonable
procedures in place to provide written notice to its members each time
a change is proposed to the incorporated rules of another SRO in order
to provide its members with notice of a proposed rule change that
affects their interests, so that they would have an opportunity to
comment on it.
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\11\ See, e.g., Securities Exchange Act Release No. 49260
(February 17, 2004), 69 FR 8500 (February 24, 2004). See also
Securities Exchange Act Release Nos. 57478 (March 12, 2008), 73 FR
14521, 14539-40 (March 18, 2008) (order approving SR-NASDAQ-2007-004
and SR-NASDAQ-2007-080) and 53128 (January 13, 2006), 71 FR 3550,
3565-66 (January 23, 2006) (File No. 10-131) (approving NASDAQ's
application for registration as a national securities exchange). See
also Securities Exchange Act Release No. 95445 (August 8, 2022), 87
FR 49894 (August 12, 2022) (SR-MEMX-2022-10) (approving MEMX to
adopt rules to govern the trading of options on the Exchange for a
new facility called MEMX Options).
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In connection with this proposal, the Exchange respectfully
requests, pursuant to Rule 240.0-12 under the Act,\12\ an exemption
under Section 36 of the Act from the rule filing requirements of
Section 19(b) of the Act for changes to those MIAX rules that are
effected solely by virtue of a change to cross-referenced Cboe rules
with respect to position limits on micro narrow-based index options.
The Exchange proposes to incorporate by reference categories of rules
(rather than individual rules within a category) that are not trading
rules. The Exchange also agrees to provide written notice to Members of
the specific Cboe rules that it will incorporate by reference. In
addition, the Exchange will notify Members whenever Cboe proposes a
change to the cross-referenced Cboe rules with respect to position
limits for micro narrow-based index options.\13\ For the foregoing
reasons, the Exchange believes that its request for exemptive relief is
consistent with prior requests for, and provision of, similar exemptive
relief. The Exchange notes that other options exchanges were approved
by the Commission to incorporate by reference the applicable rules of
Cboe with respect to position limits for micro narrow-based index
options.\14\
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\12\ 17 CFR 240.0-12.
\13\ The Exchange will provide such notice through a Regulatory
Circular posted on the Exchange's website.
\14\ See Securities Exchange Act Release No. 95445 (August 8,
2022), 87 FR 49894 (August 22, 2022) (SR-MEMX-2022-10) (Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt
Rules To Govern the Trading of Options on the Exchange for a New
Facility Called MEMX Options).
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Proposed Exercise Limits for Micro Narrow-Based Index Options
The Exchange proposes to amend Exchange Rule 1807(a) to provide
that exercise limits for micro narrow-based index options shall be
equivalent to the position limits prescribed for micro narrow-based
index options with the nearest expiration date in proposed Exchange
Rule 1805B. The Exchange notes that this approach to the proposed
exercise limits for micro narrow-based index options is consistent with
[[Page 30181]]
determining exercise limits for broad-based index options, industry
index options, and foreign currency index options, which are equivalent
to the corresponding position limits prescribed for the above options
contracts with the nearest expiration date in Exchange Rules 1804,
1805, and 1805A respectively. The Exchange also notes that other
options exchanges have similar rules regarding exercise limits for
micro narrow-based index options.\15\
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\15\ See MEMX Rule 29.9(a), available at https://info.memxtrading.com/wp-content/uploads/2025/05/MEMX-Rulebook-5.14.25-clean.pdf (last visited June 9, 2025); see also Cboe BZX
Exchange, Inc. (``BZX'') Rule 29.9, available at https://cdn.cboe.com/resources/regulation/rule_book/BZX_Exchange_Rulebook.pdf?_gl=1o*_up*MQ..*_ga*MjYxODk3MjQ1LjE3NDk0ODk5NTI.*_ga_5Q99WB9X71*czE3NDk0ODk5NTEkbzEkZzAkdDE3NDk0ODk5NTEkajYwJGwwJGgw (last visited June 9, 2025).
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The Exchange represents that it has in place adequate surveillance
procedures to monitor trading in micro narrow-based index options in
order to ensure the maintenance of fair and orderly markets. The
surveillance program includes real-time patterns for price and volume
movements and post-trade surveillance patterns (e.g., spoofing, marking
the close, pinging, and phishing). The Exchange will apply those same
program procedures to trading in micro narrow-based index options. The
Exchange will review activities in the underlying components of the
micro narrow-based indexes when conducting surveillances for market
abuse or manipulation in the options on micro narrow-based indexes.
Additionally, the Exchange is a member of the Intermarket Surveillance
Group (``ISG'') under the Intermarket Surveillance Group Agreement. ISG
members work together to coordinate surveillance and investigative
information sharing in the stock, options, and futures markets. In
addition to obtaining surveillance data from the Exchange's affiliates,
MIAX PEARL, LLC (``MIAX Pearl''), MIAX Emerald, LLC (``MIAX Emerald''),
and MIAX Sapphire, LLC (``MIAX Sapphire''), the Exchange will be able
to obtain information from Cboe, NYSE American LLC (``NYSE American''),
and other markets through ISG. The Exchange also has a Regulatory
Services Agreement with Financial Industry Regulatory Authority
(``FINRA''). Pursuant to a multi-party 17d-2 joint plan, all options
exchanges allocate regulatory responsibilities to FINRA to conduct
certain options-related market surveillance that are common to rules of
all options exchanges.
2. Statutory Basis
The Exchange believes that the proposed changes are consistent with
Section 6(b) of the Act \16\ in general, and further the objectives of
Section 6(b)(5) of the Act,\17\ 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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\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal to adopt the definition and
listing and maintenance criteria for micro narrow-based indexes expand
the Exchange's capability to introduce and trade both existing and new
and innovative index products on the Exchange System. The added
capability is consistent with the Act in that it should foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, specifically options on micro
narrow-based indexes. The Exchange believes that there may be unmet
market demand on the Exchange for exchange-listed options on micro
narrow-based indexes and the listing and trading of options on micro
narrow-based indexes on the Exchange is designed to attract both
liquidity and order flow to the Exchange, all to the benefit of the
marketplace as a whole.
The Exchange believes that the requirements in the proposed listing
standards regarding, among other things, the minimum market
capitalization, trading volume, and relative weightings of an
underlying index's component stocks are designed to ensure that the
markets for the index's component stocks are adequately capitalized and
sufficiently liquid, and that no one stock dominates the index. These
requirements are designed 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, by ensuring
that unusual or extreme volatility in any single component of an index
could not cause the entire index to become so volatile that it puts
investors at undue and unplanned risk. These requirements also minimize
the potential for manipulating the underlying index, which protects
investors and the public interest.
The Exchange further believes that the requirement in proposed
Exchange Rule 1802(f)(8) that the current underlying index value will
be reported at least once every 15 seconds during the time the index
options are traded on the Exchange, and the requirement in proposed
Rule 1802(g)(6) that the current underlying index value will be
reported at least once every 15 seconds during the time the index
options are traded on the Exchange removes impediments to the perfects
the mechanisms of a free and open market and a national market system
by providing transparency with respect to current index values and by
contributing to the overall transparency of the market for index
options. In addition, the Exchange believes that the requirement in
proposed Rule 1802(f)(12) that cash settled index options are
designated as A.M.-settled, rather than based on closing prices, should
help to reduce the potential impact of expiring index options on the
market for an index's component securities.
The Exchange's proposal to adopt Exchange Rule 1805B relating to
position limits for micro narrow-based index options is designed 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, by limiting investors' levels of
concentration in a single index position. Not only would an investor be
at undue risk by assuming such a position, but the market for the
affected index option could be disproportionately affected by the
trading activities of that single investor with an unusually large long
or short position. The Exchange proposes to mitigate this risk by
incorporating by reference the applicable rules of Cboe with respect to
position limits for micro narrow-based index options traded on the
Exchange and also on Cboe, which rules are designed for the protection
of investors and the public interest. The Exchange notes that the
proposed rule change is substantively similar to other option
exchanges' rules regarding position limits for micro narrow-based index
options.\18\
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\18\ See supra note 10.
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The Exchange's proposal to amend Exchange Rule 1807 relating to
exercise limits for micro narrow-based index options is designed to
remove
[[Page 30182]]
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, by imposing limits on the aggregate number of options
contracts that a Member could exercise. This is to minimize the
potential for mini-manipulations and for corners or squeezes of the
underlying market. In addition, such limits serve to reduce the
possibility for disruption of the options market itself, especially in
illiquid options classes. The Exchange also notes that other options
exchanges have similar rules regarding exercise limits for micro
narrow-based index options.\19\
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\19\ See supra note 15.
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The Exchange believes that the proposed changes to the hierarchical
headings in the Exchange Rule 1801 and the cross reference in Exchange
Rule 1802(a) will promote just and equitable principles of trade and
remove impediments to and perfect the mechanism of a free and open
market and a national market system because the proposed rule changes
will provide consistency and clarity in the Rulebook regarding the
definitions and rule filing requirements that are applicable to index
options. It is in the public interest for the Exchange's Rulebook to
accurate.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange believes the proposed change will not impose any
burden on intra-market competition that is not necessary or appropriate
in furtherance of the purposes of the Act as the proposed rule change
is substantively similar to rules already in place governing the
listing and trading of options on micro narrow-based indexes at other
exchanges.\20\ Further, any micro narrow-based index options that the
Exchange would list would be available to all market participants. The
proposed rule changes will provide all investors that participate in
the micro narrow-based index options market greater trading and hedging
opportunities and flexibility to meet their investment and hedging
needs. The proposed rule changes will facilitate the listing and
trading of new index option products that will enhance competition
among market participants, to the benefit of investors and the
marketplace. The Exchange further believes that the proposed rule
changes will enhance intra-market competition, as more varied index
products become available for trading on the Exchange, which should
encourage a greater number of Market Makers \21\ to trade options on
micro narrow-based indexes, resulting in greater liquidity and more
competitive quoting on the Exchange.
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\20\ See supra notes 6, 7, 10 and 15.
\21\ The term ``Market Makers'' refers to ``Lead Market
Makers,'' ``Primary Lead Market Makers,'' and ``Registered Market
Makers'' collectively. See Exchange Rule 100.
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Inter-Market Competition
The Exchange does not believe the proposal will impose any burden
on inter-market competition that is not necessary or appropriate in
furtherance of the purposes of the Act as the Exchange believes that
the proposed rule change will enable the Exchange to compete for order
flow in options on micro narrow-based indexes with other exchanges that
currently have rules and functionality in place to list and trade
options on micro narrow-based indexes. The proposal would enhance
competition by providing investors with additional investment vehicles,
in a fully-electronic trading environment, through which investors can
gain and hedge exposure to micro narrow-based indexes. The Exchange
notes that other options exchanges provide similar requirements for
options on a micro narrow-based index.\22\
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\22\ See supra notes 6, 7, 10, and 15.
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The Exchange does not believe that the proposed changes to the
hierarchical headings in Exchange Rule 1801 and the cross reference in
Exchange Rule 1802(a) will impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act.
Specifically, the Exchange believes the proposed changes will not
impose any burden on intra-market because the rules of the Exchange
apply to all Members equally. The proposed rule changes to the
hierarchical headings and the cross reference will have no impact on
inter-market competition as they are not designed to address any
competitive issue but rather are designed to provide added clarity to
the Rulebook regarding the definitions and rule filing requirements
that are applicable to index options.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MIAX-2025-27 on the subject line.
Paper Comments
Send paper comments in triplicate to Vanessa Countryman,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to file number SR-MIAX-2025-27. 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 (https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and
[[Page 30183]]
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-MIAX-2025-27 and should be submitted on
or before July 29, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2025-12636 Filed 7-7-25; 8:45 am]
BILLING CODE 8011-01-P