Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Revise and Clarify Market Maker Continuous Quoting Obligations, 17958-17962 [2013-06717]
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Federal Register / Vol. 78, No. 57 / Monday, March 25, 2013 / Notices
B. Self-Regulatory Organization’s
Statement on Burden on Competitions.
CME does not believe that the
proposed rule change will have any
impact, or impose any burden, on
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
CME has not solicited, and does not
intend to solicit, comments regarding
this proposed rule change. CME has not
received any unsolicited written
comments from interested parties.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has been
filed pursuant to Section 19(b)(3)(A) 6 of
the Act and paragraph (f)(4)(i) of Rule
19b–4 7 thereunder and will become
effective on filing. 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.
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 may be
submitted by using the Commission’s
Internet comment form (https://
www.sec.gov/rules/sro.shtml), or send
an email to rule-comment@sec.gov.
Please include File No. SR–CME–2013–
02 on the subject line.
• Paper comments should be sent in
triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CME–2013–02. 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 Web site (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 inspection and copying in
the Commission’s Public Reference
Room, 100 F Street NE., Washington, DC
20549. Copies of such filing also will be
available for inspection and copying at
the principal office of CME. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
All submissions should refer to File
Number SR–CME–2013–02 and should
be submitted on or before April 15,
2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–06714 Filed 3–22–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69176; File No. SR–MIAX–
2013–08]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Revise and Clarify Market
Maker Continuous Quoting Obligations
March 19, 2013.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on March 8, 2013, 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, 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.
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
6 Supra
note 3.
7 Supra note 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 Rules 406, 503, 603 and 604 to
revise and clarify Market Maker
continuous quoting obligations.
The text of the proposed rule change
is provided in Exhibit 5. The text of the
proposed rule change is also available
on the Exchange’s Web site at https://
www.miaxoptions.com/filter/wotitle/
rule_filing, 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 purpose of the proposed rule
change is to revise and clarify the
continuous quoting obligations of
Market Makers. Specifically, (i) decrease
the percentage of time a Primary Lead
Market Maker (‘‘PLMM’’) is required to
continuously quote from 99% to 90%;
(ii) clarify which series the continuous
quoting obligations apply to for all
Market Makers; (iii) set forth how the
continuous quoting obligations are
applied; and (iv) set forth how
compliance with the continuous quoting
obligations will be determined. Each of
these changes, which are described in
detail below, will make MIAX’s Market
Maker obligations more consistent with
market maker obligations at other
options exchanges. MIAX is also
proposing to clarify certain other rules
related to the Market Maker obligations
as described below.
Continuous Quoting
The only substantive change in the
continuous quoting obligations for
Market Makers being proposed herein is
the reduction in the percentage of time
for which a PLMM is required to
provide continuous quotes in an
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appointed option class on a given
trading day, the rest of the proposed
changes relate to clarifying which series
in an option class the requirements
apply, the manner in which the
obligations will apply and how
compliance will be determined. Rule
604(e)(1)(i) currently requires PLMMs to
provide continuous two-sided Standard
quotes and/or Day eQuotes in their
appointed option classes, which for
purposes of the paragraph means 99%
of the time. The Exchange now proposes
to reduce the percentage of time a
PLMM is required to provide
continuous quotes in its appointed
option classes to 90% of the time. This
proposed rule change is comparable to
the rules of the other options
exchanges.3 The reduction to 90% of the
time also makes the obligation for
PLMMs consistent with the obligations
for MIAX’s other categories of Market
Maker, Lead Market Maker (‘‘LMM’’)
and Registered Market Maker (‘‘RMM’’).
The Exchange does not believe that the
proposed rule change will adversely
affect the quality of the Exchange’s
markets or lead to a material decrease in
liquidity. Rather the Exchange believes
that making MIAX’s PLMM obligations
consistent with obligations at other
options exchanges may increase the
number of Market Makers willing to be
appointed PLMM to make markets and
provide liquidity at the Exchange.
The Exchange also proposes to amend
Rule 604(e)(1)(ii) and adopt new
subparagraph (iii) to clarify which series
within an options class the continuous
quoting standard will apply for PLMMs.
The percentage of series requirement for
PLMMs remains the same (the lesser of
99% or 100% minus one put-call pair in
each class), but subparagraph (e)(1)(ii) is
amended to include a definition of ‘‘putcall pair’’ and to provide that the
continuous quoting standard will now
only apply to ‘‘non-adjusted option
series’’. The term ‘‘non-adjusted option
series’’ is not defined in the rule,
however, new subparagraph (e)(1)(iii)
defines ‘‘adjusted option series’’ as an
option series wherein one option
contract represents the delivery of
something other than 100 shares of the
underlying security.4 Thus, a ‘‘nonadjusted option series’’ is a standard
option contract representing the
3 See NYSE Amex LLC (‘‘NYSE Amex’’) Rules
925.1NY and 964.1NY; NYSE Arca, Inc. (‘‘NYSE
Arca’’) Rules 6.37B and 6.88; NASDAQ OMX PHLX
LLC (‘‘PHLX’’) Rule 1014(b)(ii)(D)(1); and Chicago
Board Options Exchange, Incorporated (‘‘CBOE’’)
Rule 1.1(ccc).
4 The rules and requirements governing the
adjustment of options contracts are set forth in
Article VI, Section 11A of The Options Clearing
Corporation By-Laws.
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delivery of 100 shares of the underlying
security. New subparagraph (e)(1)(iii)
also clarifies that the continuous
quoting standard does not apply to
adjusted series; which limitation and
definition is in place at other options
exchanges.5
Rule 604(e)(1)(ii) is also being
amended to provide that PLMM’s
continuous quoting requirement will be
applied to all options classes
collectively, rather than on a class-byclass basis and compliance will be
determined on a monthly basis. The
Exchange believes that applying the
quoting requirements for PLMMs
collectively across all options classes
and reviewing such compliance over a
monthly basis is a fair and more
efficient way for the Exchange and
market participants to evaluate
compliance with the continuous quoting
requirements.6 Applying the continuous
quoting requirement collectively across
all option classes rather than on a classby-class basis, is beneficial to Market
Makers by providing some flexibility to
choose which series in their appointed
classes they will continuously quote—
increasing the continuous quoting
obligation in the series of one class to
allow for a decrease in the continuous
quoting obligation in the series of
another class. This flexibility, however,
does not diminish the Market Maker’s
obligation to continuously quote a
significant part of the trading day in a
significant percentage of series. This
flexibility is especially important for
classes that have relatively few series
and may prevent the PLMM, in
particular, from breaching the
continuous quoting requirement when
failing to quote 90% of the trading day
(as proposed) in more than one series in
an appointed class. In addition,
determining compliance with the
continuous quoting requirement on a
monthly basis does not relieve the
PLMM of the obligation to provide
continuous two-sided quotes on a daily
basis, nor will it prohibit the Exchange
from taking disciplinary action against a
PLMM for failing to meet the
continuous quoting obligation each
trading day. Compliance on a monthly
5 CBOE Rules 8.13, 8.15A, 8.85 and 8.93;
NASDAQ Options Market (‘‘NOM’’) Chapter VII,
Section 6(d)i.2); NYSE Arca 6.37B, Commentary .01
and NYSE Amex Rule 925.1NY.
6 On the basis of the daily reports, the Exchange
will continue to inform PLMMs if they are failing
to achieve their quoting requirements. Moreover, on
the basis of daily monitoring activity, the Exchange
can determine whether PLMMs violated any other
Exchange rules such as, for example, Rule 301
regarding just and equitable principles of trade.
Such daily monitoring will allow the Exchange to
investigate unusual activity and to take appropriate
regulatory action.
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basis allows the Exchange to review the
PLMM’s daily compliance in the
aggregate and determine the appropriate
disciplinary action for single or multiple
failures to comply with the continuous
quoting requirement during the month
period. The Exchange believes that the
proposal will not diminish, and in fact
may increase, market making activity on
the Exchange, by establishing quoting
compliance standards that are
reasonable and are already in place on
other options exchanges.7
Rules 604(e)(2) and (e)(3), which
govern the continuous quoting
requirements for LMMs and RMMs are
being amended in much the same way
as Rule 604(e)(1) is being amended for
PLMMs, except that since LMMs and
RMMs already are at a ‘‘90% of the
time’’ standard for continuous quoting,
no changes to that requirement will be
made for LMMs and RMMs. New
paragraph (e)(2)(iii) to Rule 604
governing which series the continuous
quoting obligations do not apply for
LMMs includes series with a time to
expiration of nine months or greater.
This provision, which is already in
place for RMMs,8 eliminates the
continuous quoting requirement for
LMMs when quoting the long-term
option contracts described in MIAX
Rule 406.9 It should be noted that not
applying the continuous quoting
requirement to long-term option series
does not prevent LMMs from quoting
those series, nor does it prevent LMMs
from receiving directed orders in
accordance with the provisions set forth
in Rule 514(h) and (i), which require,
among other things, for [sic] the
Directed LMM to be at the NBBO in
order to receive the Directed LMM
participation entitlement. The Exchange
believes that continuing to provide the
Directed LMM participation entitlement
is appropriate because it provides an
incentive for LMMs to quote in as many
series as possible, even long term option
series, which they will no longer be
required to continuously quote. Further,
the Exchange does not believe
eliminating the LMM requirement to
continuously quote in long term option
series will adversely affect the quality of
the Exchange’s markets or lead to a
material decrease in liquidity since
PLMMs will continue to be required to
continuously quote in long term option
series. Also, eliminating the LMM
requirement to continuously quote in
7 PHLX Rule 1014(b)(ii)(D)(1) and (2); NYSE
Amex Rule 925.1NY; and NYSE Arca Rule 6.37B.
8 See Rule 604(e)(3)(i).
9 See CBOE Rule 8.7(d)(iii); NYSE Amex Rule
925.1NY, Commentary .01; PHLX Rule
1014(b)(ii)(D)(4); NOM Chapter VII, Section 6(d)i.2);
and NYSE Arca 6.37B, Commentary .01
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long term option series will benefit the
Exchange’s efforts at quote mitigation.
Finally, paragraph (e)(2)(ii) for LMMs
and paragraph (e)(3)(i) for RMMs have
been revised so that their continuous
quoting requirements will be applied to
all options classes collectively, rather
than on a class-by-class basis and
compliance will be determined on a
monthly basis. The Exchange believes
that applying the quoting requirements
for LMMs and RMMs collectively across
all options classes traded by an LMM or
RMM and reviewing such compliance
over a monthly basis is a fair and more
efficient way for the Exchange and
market participants to evaluate
compliance with the continuous quoting
requirements.10 Applying the
continuous quoting requirement
collectively across all option classes
rather than on a class-by-class basis, is
beneficial to Market Makers by
providing some flexibility to choose
which series in their appointed classes
they will continuously quote. This
flexibility, however, does not diminish
the Market Maker’s obligation to
continuously quote a significant part of
the trading day in a significant
percentage of series. This flexibility is
especially important for classes that
have relatively few series and may
prevent the LMM, in particular, from
breaching the continuous quoting
requirement when failing to quote 90%
of the trading day in more than one
series in an appointed class. In addition,
determining compliance with the
continuous quoting requirement on a
monthly basis does not relieve the
LMMs and RMMs of the obligation to
provide continuous two-sided quotes on
a daily basis, or will it prohibit the
Exchange from taking disciplinary
action against an LMM or RMM for
failing to meet the continuous quoting
obligation each trading day. Compliance
on a monthly basis allows the Exchange
to review the LMM’s or RMM’s daily
compliance in the aggregate and
determine the appropriate disciplinary
action for single or multiple failures to
comply with the continuous quoting
requirement during the month period.
The Exchange believes that the proposal
will not diminish, and in fact may
increase, market making activity on the
Exchange, by establishing quoting
10 On the basis of the daily reports, the Exchange
will continue to inform LMMs and RMMs if they
are failing to achieve their quoting requirements.
Moreover, on the basis of daily monitoring activity,
the Exchange can determine whether LMMs or
RMMs violated any other Exchange rules such as,
for example, Rule 301 regarding just and equitable
principles of trade. Such daily monitoring will
allow the Exchange to investigate unusual activity
and to take appropriate regulatory action.
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compliance standards that are
reasonable and are already in place on
other options exchanges.11
Bid/Ask Differentials
In conjunction with the changes to the
continuous quoting obligations, the
Exchange seeks to clarify the provision
in Rule 603(b)(4) governing bid/ask
differentials. As part of a Market
Maker’s general obligations to maintain
a fair and orderly market, Market
Makers are required to price option
contracts fairly by bidding and offering
so as to create differences of no more
than a certain amount depending on
whether the quoting is occurring before
the opening or after the opening. Rule
603(b)(4) is being separated into three
subparagraphs; the first subparagraph
will contain the bid/ask differential
requirement for quoting after the
opening, the second subparagraph will
contain the bid/ask differential
requirement for quoting prior to the
opening and the third subparagraph,
which applies to both previous
subparagraphs, indicates that the
Exchange may establish bid/ask
differentials other than the ones
specified in subparagraphs (i) and (ii).
MIAX seeks this flexibility, which is
used at other options exchanges, to
establish bid/ask differentials for longterm options, options on select highpriced stocks and exchange-traded
funds, and in other special
circumstances such as periods of high
volatility.12
Long-Term Option Contracts—Rule 406
Rule 406 describes Long-Term Option
Contracts as option contracts that expire
twelve to thirty nine months from the
time they are listed. Rule 406 further
provides ‘‘[s]trike price interval, bid/ask
differential and continuity rules shall
not apply to such options series until
the time to expiration is less than nine
(9) months.’’ The Exchange is proposing
to eliminate the reference to ‘‘continuity
rules’’ since the Exchange chose not to
adopt such rules 13 and add a reference
to continuous quoting rules since
continuous quoting obligations do not
apply to long-term option contracts
being quoted by LMMs and RMMs. Rule
406(a) is also being revised to include
11 PHLX Rule 1014(b)(ii)(D)(1) and (2); NYSE
Amex Rule 925.1NY; and NYSE Arca Rule 6.37B.
12 CBOE Rule 8.7(b)(iv) provides that the CBOE
can establish bid/ask differential requirements on a
class-by-class basis.
13 Continuity rules have been eliminated at other
options exchanges; see Securities Exchange Act
Release No. 60897 (October 28, 2009) 74 FR 57217
(November 4, 2009) (SR–ISE–2009–85) citing
Securities Exchange Act Release No. 60295 (July 13,
2009) 74 FR 35215 (July 20, 2009) (SR–CBOE–2009–
49).
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references to rule numbers where
appropriate.
2. Statutory Basis
MIAX believes that its proposed rule
change is consistent with Section 6(b) of
the Act 14 in general, and furthers the
objectives of Section 6(b)(5) of the Act 15
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, and it is not designed to
permit unfair discrimination among
customers, brokers, or dealers.
In particular, the Exchange believes
this proposed rule change promotes just
and equitable principles of trade
because it reduces a burden and
unnecessary restrictiveness on PLMMs.
The Exchange still imposes many
obligations on all Market Makers,
including PLMMs, to maintain a fair
and orderly market in their appointed
classes, which the Exchange believes
eliminates the risk of a material
decrease in liquidity. While the time
during which PLMMs must provide
continuous quotes will be slightly
reduced, PLMMs will still be obligated
to provide continuous quotes for a
significant part of the trading day in a
significant percentage of series in each
appointed class.
Accordingly, the proposal supports
the quality of MIAX’s markets by
helping to ensure that PLMMs will
continue to be obligated to quote in
series when necessary. The benefit
provided to the PLMM from the
proposed reduction in required quoting
time is offset by the required percentage
of series in which the PLMM must
provide continuous quotes. Ultimately,
the benefit the proposed rule change
confers upon PLMMs is offset by the
continued responsibilities to provide
significant liquidity to the market to the
benefit of market participants.
In addition, the Exchange believes
this proposed rule change promotes just
and equitable principles of trade
because it reduces a burden and
unnecessary restrictiveness on LMMs.
Eliminating the LMM requirement to
continuously quote in long term option
series will contribute to the Exchange’s
efforts at quote mitigation without
impacting the liquidity and quality of
14 15
15 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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the Exchange’s markets in those long
term option series. Allowing LMMs to
continue to receive directed orders in
long term option series and the Directed
LMM participation entitlement, when
they no longer have the requirement to
continuously quote such long term
series is appropriate because it
encourages LMMs to quote the long
term series, which benefits all investors
by supporting the quality and liquidity
of the market in such series. This benefit
is offset by the LMM’s continued
quoting obligations in other series and
the fact that directed LMMs must still
satisfy all of their other obligations in
order to receive the Directed LMM
participation entitlement.
The proposed rule change also
protects investors and the public
interest by creating more uniformity and
consistency among the Exchange’s rules
related to Market-Maker quoting
obligations. The proposed rule change
allows the Exchange to require PLMMs
to provide continuous quotes in a
percentage of series in their appointed
classes for a portion of the trading day
that is the same as that of market-makers
at other exchanges, which the Exchange
believes will ultimately make the
Exchange more competitive and help
remove impediments to and promote a
free and open market. For the foregoing
reasons, the Exchange believes that the
balance between the benefits provided
to Market-Makers and the obligations
imposed upon Market-Makers by the
proposed rule change is appropriate.
Further, providing Market Makers
with flexibility by providing the
continuous quoting obligation
collectively across all option classes
will not diminish the Market Maker’s
obligation to continuously quote a
significant part of the trading day in a
significant percentage of series.
Additionally, with respect to
compliance standards, the Exchange
believes that adopting the proposed
standards will enhance compliance
efforts by Market Makers and the
Exchange, and are consistent with the
requirement currently in place on other
exchanges. The proposal ensures that
compliance standards for continuous
quoting will be the same on the
Exchange as on other options
exchanges. The Exchange believes that
the proposal will not diminish and in
fact may increase, market making
activity on the Exchange, by
establishing a quoting compliance
standard that is reasonable and is
already in place on other options
exchanges.
Finally, in determining to revise
requirements for its Market Makers,
MIAX is mindful of the balance between
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the obligations and the benefits
bestowed on its Market Makers. The
proposal will change obligations
currently in place for Market Makers;
however, the Exchange does not believe
that these changes reduce the overall
obligations applicable to Market Makers.
In this respect, the Exchange notes that
its Market Makers are subject to many
obligations, including the obligation to
maintain a fair and orderly market in
their appointed classes, which the
Exchange believes eliminates the risk of
a material decrease in liquidity. MIAX
continues to believe the balance of
obligations and benefits is appropriate
given the following: (i) Although the
percentage of the trading day PLMMs
will be required to quote will decrease
from 99% to 90%, PLMMs will continue
to have heightened quoting
requirements based on the significant
percentage of series PLMMs are required
to quote, the proposed change is also
consistent with requirements in place at
other option exchanges and with
requirements for other MIAX Market
Makers; (ii) the proposed clarification in
the rule text of which series the
continuous quoting obligations apply to
does not diminish the continuous
quoting obligation and is consistent
with requirements in place at other
option exchanges; and (iii) the
flexibility being provided by the
proposal to apply the continuous
quoting obligation collectively across all
option classes also does not diminish
the Market Maker’s obligations and is
consistent with requirements in place at
other options exchanges. MIAX believes
that its proposal is consistent with the
Act in that providing clarification and
flexibility does not detract from the
overall market making obligations of
Market Makers. The requirement that a
market maker hold itself out as willing
to buy and sell options for its own
account on a regular or continuous basis
is better supported by these proposed
revisions and clarifications.
Accordingly, the benefits the proposed
rule change confers upon Market
Makers are offset by the continued
responsibilities to provide significant
liquidity to the market to the benefit of
all market participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. MIAX’s
proposal to revise and clarify the Market
Makers’ continuous quoting obligations
is consistent with what is already
occurring on other markets. By
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17961
providing Market Maker obligations that
are more consistent with market maker
obligations in place at other option
exchanges, competition for the liquidity
providing services of market makers is
enhanced. MIAX is better able to
compete for the services of market
makers when its requirements for
market makers are consistent with the
other options exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited or [sic] 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 16 and Rule 19b–4(f)(6) 17
thereunder.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
16 15
U.S.C. 78s(b)(3)(A).
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.
17 17
E:\FR\FM\25MRN1.SGM
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17962
Federal Register / Vol. 78, No. 57 / Monday, March 25, 2013 / Notices
Number SR–MIAX–2013–08 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–MIAX–2013–08. 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 Web site (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 Web site 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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MIAX–
2013–08 and should be submitted on or
before April 15, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–06717 Filed 3–22–13; 8:45 am]
mstockstill on DSK4VPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
[Release No. 34–69180; File No. SR–
NASDAQ–2013–046]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Elimination of SPY Position Limits
March 19, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 11,
2013, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by NASDAQ. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to eliminate
position limits for options on the SPDR®
S&P 500® exchange-traded fund (‘‘SPY
ETF’’),3 which list and trade under the
symbol SPY.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
www.nasdaq.cchwallstreet.com, at the
principal office of the Exchange, 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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 ‘‘SPDR®,’’ ‘‘Standard & Poor’s®,’’ ‘‘S&P®,’’ ‘‘S&P
500®,’’ and ‘‘Standard & Poor’s 500’’ are registered
trademarks of Standard & Poor’s Financial Services
LLC. The SPY ETF represents ownership in the
SPDR S&P 500 Trust, a unit investment trust that
generally corresponds to the price and yield
performance of the SPDR S&P 500 Index.
2 17
18 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:34 Mar 22, 2013
Jkt 229001
PO 00000
Frm 00043
Fmt 4703
Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to add new rule text in a new
section entitled ‘‘Supplementary
Material’’ at the end of Chapter III,
Section 7 (Position Limits) to
specifically state that there shall be no
position limits for SPY options subject
to a Pilot Program.
Background
Position limits serve as a regulatory
tool designed to address potential
manipulative schemes and adverse
market impact surrounding the use of
options. The Exchange understands that
the Commission, when considering the
appropriate level at which to set option
position and exercise limits, has
considered the concern that the limits
be sufficient to prevent investors from
disrupting the market in the security
underlying the option.4 This
consideration has been balanced by the
concern that the limits ‘‘not be
established at levels that are so low as
to discourage participation in the
options market by institutions and other
investors with substantial hedging
needs or to prevent specialists and
market-makers from adequately meeting
their obligations to maintain a fair and
orderly market.’’ 5
SPY options are currently the most
actively traded option class in terms of
average daily volume (‘‘ADV’’).6 The
Exchange believes that, despite the
popularity of SPY options as evidenced
by their significant volume, the current
position limits on SPY options could be
a deterrent to the optimal use of this
product as a hedging tool. The Exchange
further believes that position limits on
SPY options may inhibit the ability of
certain large market participants, such
as mutual funds and other institutional
investors with substantial hedging
needs, to utilize SPY options and gain
meaningful exposure to the hedging
function they provide.
The Exchange believes that current
experience with the trading of SPY
4 See Securities Exchange Act Release No. 40969
(January 22, 1999), 64 FR 4911, 4912–4913
(February 1, 1999) (SR–CBOE–98–23) (citing H.R.
No. IFC–3, 96th Cong., 1st Sess. at 189–91 (Comm.
Print 1978)).
5 Id. at 4913.
6 SPY ADV was 2,156,482 contracts in April 2012.
ADV for the same period for the next four most
actively traded options was: Apple Inc. (option
symbol AAPL)—1,074,351; S&P 500 Index (option
symbol SPX)—656,250; PowerShares QQQ TrustSM,
Series 1 (option symbol QQQ)—573,790; and
iShares® Russell 2000® Index Fund (option symbol
IWM)—550,316.
E:\FR\FM\25MRN1.SGM
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]]>Agencies
[Federal Register Volume 78, Number 57 (Monday, March 25, 2013)]
[Notices]
[Pages 17958-17962]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06717]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69176; File No. SR-MIAX-2013-08]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Revise and Clarify Market Maker Continuous
Quoting Obligations
March 19, 2013.
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 8, 2013, 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, 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 Rules 406, 503, 603 and
604 to revise and clarify Market Maker continuous quoting obligations.
The text of the proposed rule change is provided in Exhibit 5. The
text of the proposed rule change is also available on the Exchange's
Web site at https://www.miaxoptions.com/filter/wotitle/rule_filing, 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 purpose of the proposed rule change is to revise and clarify
the continuous quoting obligations of Market Makers. Specifically, (i)
decrease the percentage of time a Primary Lead Market Maker (``PLMM'')
is required to continuously quote from 99% to 90%; (ii) clarify which
series the continuous quoting obligations apply to for all Market
Makers; (iii) set forth how the continuous quoting obligations are
applied; and (iv) set forth how compliance with the continuous quoting
obligations will be determined. Each of these changes, which are
described in detail below, will make MIAX's Market Maker obligations
more consistent with market maker obligations at other options
exchanges. MIAX is also proposing to clarify certain other rules
related to the Market Maker obligations as described below.
Continuous Quoting
The only substantive change in the continuous quoting obligations
for Market Makers being proposed herein is the reduction in the
percentage of time for which a PLMM is required to provide continuous
quotes in an
[[Page 17959]]
appointed option class on a given trading day, the rest of the proposed
changes relate to clarifying which series in an option class the
requirements apply, the manner in which the obligations will apply and
how compliance will be determined. Rule 604(e)(1)(i) currently requires
PLMMs to provide continuous two-sided Standard quotes and/or Day
eQuotes in their appointed option classes, which for purposes of the
paragraph means 99% of the time. The Exchange now proposes to reduce
the percentage of time a PLMM is required to provide continuous quotes
in its appointed option classes to 90% of the time. This proposed rule
change is comparable to the rules of the other options exchanges.\3\
The reduction to 90% of the time also makes the obligation for PLMMs
consistent with the obligations for MIAX's other categories of Market
Maker, Lead Market Maker (``LMM'') and Registered Market Maker
(``RMM''). The Exchange does not believe that the proposed rule change
will adversely affect the quality of the Exchange's markets or lead to
a material decrease in liquidity. Rather the Exchange believes that
making MIAX's PLMM obligations consistent with obligations at other
options exchanges may increase the number of Market Makers willing to
be appointed PLMM to make markets and provide liquidity at the
Exchange.
---------------------------------------------------------------------------
\3\ See NYSE Amex LLC (``NYSE Amex'') Rules 925.1NY and 964.1NY;
NYSE Arca, Inc. (``NYSE Arca'') Rules 6.37B and 6.88; NASDAQ OMX
PHLX LLC (``PHLX'') Rule 1014(b)(ii)(D)(1); and Chicago Board
Options Exchange, Incorporated (``CBOE'') Rule 1.1(ccc).
---------------------------------------------------------------------------
The Exchange also proposes to amend Rule 604(e)(1)(ii) and adopt
new subparagraph (iii) to clarify which series within an options class
the continuous quoting standard will apply for PLMMs. The percentage of
series requirement for PLMMs remains the same (the lesser of 99% or
100% minus one put-call pair in each class), but subparagraph
(e)(1)(ii) is amended to include a definition of ``put-call pair'' and
to provide that the continuous quoting standard will now only apply to
``non-adjusted option series''. The term ``non-adjusted option series''
is not defined in the rule, however, new subparagraph (e)(1)(iii)
defines ``adjusted option series'' as an option series wherein one
option contract represents the delivery of something other than 100
shares of the underlying security.\4\ Thus, a ``non-adjusted option
series'' is a standard option contract representing the delivery of 100
shares of the underlying security. New subparagraph (e)(1)(iii) also
clarifies that the continuous quoting standard does not apply to
adjusted series; which limitation and definition is in place at other
options exchanges.\5\
---------------------------------------------------------------------------
\4\ The rules and requirements governing the adjustment of
options contracts are set forth in Article VI, Section 11A of The
Options Clearing Corporation By-Laws.
\5\ CBOE Rules 8.13, 8.15A, 8.85 and 8.93; NASDAQ Options Market
(``NOM'') Chapter VII, Section 6(d)i.2); NYSE Arca 6.37B, Commentary
.01 and NYSE Amex Rule 925.1NY.
---------------------------------------------------------------------------
Rule 604(e)(1)(ii) is also being amended to provide that PLMM's
continuous quoting requirement will be applied to all options classes
collectively, rather than on a class-by-class basis and compliance will
be determined on a monthly basis. The Exchange believes that applying
the quoting requirements for PLMMs collectively across all options
classes and reviewing such compliance over a monthly basis is a fair
and more efficient way for the Exchange and market participants to
evaluate compliance with the continuous quoting requirements.\6\
Applying the continuous quoting requirement collectively across all
option classes rather than on a class-by-class basis, is beneficial to
Market Makers by providing some flexibility to choose which series in
their appointed classes they will continuously quote--increasing the
continuous quoting obligation in the series of one class to allow for a
decrease in the continuous quoting obligation in the series of another
class. This flexibility, however, does not diminish the Market Maker's
obligation to continuously quote a significant part of the trading day
in a significant percentage of series. This flexibility is especially
important for classes that have relatively few series and may prevent
the PLMM, in particular, from breaching the continuous quoting
requirement when failing to quote 90% of the trading day (as proposed)
in more than one series in an appointed class. In addition, determining
compliance with the continuous quoting requirement on a monthly basis
does not relieve the PLMM of the obligation to provide continuous two-
sided quotes on a daily basis, nor will it prohibit the Exchange from
taking disciplinary action against a PLMM for failing to meet the
continuous quoting obligation each trading day. Compliance on a monthly
basis allows the Exchange to review the PLMM's daily compliance in the
aggregate and determine the appropriate disciplinary action for single
or multiple failures to comply with the continuous quoting requirement
during the month period. The Exchange believes that the proposal will
not diminish, and in fact may increase, market making activity on the
Exchange, by establishing quoting compliance standards that are
reasonable and are already in place on other options exchanges.\7\
---------------------------------------------------------------------------
\6\ On the basis of the daily reports, the Exchange will
continue to inform PLMMs if they are failing to achieve their
quoting requirements. Moreover, on the basis of daily monitoring
activity, the Exchange can determine whether PLMMs violated any
other Exchange rules such as, for example, Rule 301 regarding just
and equitable principles of trade. Such daily monitoring will allow
the Exchange to investigate unusual activity and to take appropriate
regulatory action.
\7\ PHLX Rule 1014(b)(ii)(D)(1) and (2); NYSE Amex Rule 925.1NY;
and NYSE Arca Rule 6.37B.
---------------------------------------------------------------------------
Rules 604(e)(2) and (e)(3), which govern the continuous quoting
requirements for LMMs and RMMs are being amended in much the same way
as Rule 604(e)(1) is being amended for PLMMs, except that since LMMs
and RMMs already are at a ``90% of the time'' standard for continuous
quoting, no changes to that requirement will be made for LMMs and RMMs.
New paragraph (e)(2)(iii) to Rule 604 governing which series the
continuous quoting obligations do not apply for LMMs includes series
with a time to expiration of nine months or greater. This provision,
which is already in place for RMMs,\8\ eliminates the continuous
quoting requirement for LMMs when quoting the long-term option
contracts described in MIAX Rule 406.\9\ It should be noted that not
applying the continuous quoting requirement to long-term option series
does not prevent LMMs from quoting those series, nor does it prevent
LMMs from receiving directed orders in accordance with the provisions
set forth in Rule 514(h) and (i), which require, among other things,
for [sic] the Directed LMM to be at the NBBO in order to receive the
Directed LMM participation entitlement. The Exchange believes that
continuing to provide the Directed LMM participation entitlement is
appropriate because it provides an incentive for LMMs to quote in as
many series as possible, even long term option series, which they will
no longer be required to continuously quote. Further, the Exchange does
not believe eliminating the LMM requirement to continuously quote in
long term option series will adversely affect the quality of the
Exchange's markets or lead to a material decrease in liquidity since
PLMMs will continue to be required to continuously quote in long term
option series. Also, eliminating the LMM requirement to continuously
quote in
[[Page 17960]]
long term option series will benefit the Exchange's efforts at quote
mitigation.
---------------------------------------------------------------------------
\8\ See Rule 604(e)(3)(i).
\9\ See CBOE Rule 8.7(d)(iii); NYSE Amex Rule 925.1NY,
Commentary .01; PHLX Rule 1014(b)(ii)(D)(4); NOM Chapter VII,
Section 6(d)i.2); and NYSE Arca 6.37B, Commentary .01
---------------------------------------------------------------------------
Finally, paragraph (e)(2)(ii) for LMMs and paragraph (e)(3)(i) for
RMMs have been revised so that their continuous quoting requirements
will be applied to all options classes collectively, rather than on a
class-by-class basis and compliance will be determined on a monthly
basis. The Exchange believes that applying the quoting requirements for
LMMs and RMMs collectively across all options classes traded by an LMM
or RMM and reviewing such compliance over a monthly basis is a fair and
more efficient way for the Exchange and market participants to evaluate
compliance with the continuous quoting requirements.\10\ Applying the
continuous quoting requirement collectively across all option classes
rather than on a class-by-class basis, is beneficial to Market Makers
by providing some flexibility to choose which series in their appointed
classes they will continuously quote. This flexibility, however, does
not diminish the Market Maker's obligation to continuously quote a
significant part of the trading day in a significant percentage of
series. This flexibility is especially important for classes that have
relatively few series and may prevent the LMM, in particular, from
breaching the continuous quoting requirement when failing to quote 90%
of the trading day in more than one series in an appointed class. In
addition, determining compliance with the continuous quoting
requirement on a monthly basis does not relieve the LMMs and RMMs of
the obligation to provide continuous two-sided quotes on a daily basis,
or will it prohibit the Exchange from taking disciplinary action
against an LMM or RMM for failing to meet the continuous quoting
obligation each trading day. Compliance on a monthly basis allows the
Exchange to review the LMM's or RMM's daily compliance in the aggregate
and determine the appropriate disciplinary action for single or
multiple failures to comply with the continuous quoting requirement
during the month period. The Exchange believes that the proposal will
not diminish, and in fact may increase, market making activity on the
Exchange, by establishing quoting compliance standards that are
reasonable and are already in place on other options exchanges.\11\
---------------------------------------------------------------------------
\10\ On the basis of the daily reports, the Exchange will
continue to inform LMMs and RMMs if they are failing to achieve
their quoting requirements. Moreover, on the basis of daily
monitoring activity, the Exchange can determine whether LMMs or RMMs
violated any other Exchange rules such as, for example, Rule 301
regarding just and equitable principles of trade. Such daily
monitoring will allow the Exchange to investigate unusual activity
and to take appropriate regulatory action.
\11\ PHLX Rule 1014(b)(ii)(D)(1) and (2); NYSE Amex Rule
925.1NY; and NYSE Arca Rule 6.37B.
---------------------------------------------------------------------------
Bid/Ask Differentials
In conjunction with the changes to the continuous quoting
obligations, the Exchange seeks to clarify the provision in Rule
603(b)(4) governing bid/ask differentials. As part of a Market Maker's
general obligations to maintain a fair and orderly market, Market
Makers are required to price option contracts fairly by bidding and
offering so as to create differences of no more than a certain amount
depending on whether the quoting is occurring before the opening or
after the opening. Rule 603(b)(4) is being separated into three
subparagraphs; the first subparagraph will contain the bid/ask
differential requirement for quoting after the opening, the second
subparagraph will contain the bid/ask differential requirement for
quoting prior to the opening and the third subparagraph, which applies
to both previous subparagraphs, indicates that the Exchange may
establish bid/ask differentials other than the ones specified in
subparagraphs (i) and (ii). MIAX seeks this flexibility, which is used
at other options exchanges, to establish bid/ask differentials for
long-term options, options on select high-priced stocks and exchange-
traded funds, and in other special circumstances such as periods of
high volatility.\12\
---------------------------------------------------------------------------
\12\ CBOE Rule 8.7(b)(iv) provides that the CBOE can establish
bid/ask differential requirements on a class-by-class basis.
---------------------------------------------------------------------------
Long-Term Option Contracts--Rule 406
Rule 406 describes Long-Term Option Contracts as option contracts
that expire twelve to thirty nine months from the time they are listed.
Rule 406 further provides ``[s]trike price interval, bid/ask
differential and continuity rules shall not apply to such options
series until the time to expiration is less than nine (9) months.'' The
Exchange is proposing to eliminate the reference to ``continuity
rules'' since the Exchange chose not to adopt such rules \13\ and add a
reference to continuous quoting rules since continuous quoting
obligations do not apply to long-term option contracts being quoted by
LMMs and RMMs. Rule 406(a) is also being revised to include references
to rule numbers where appropriate.
---------------------------------------------------------------------------
\13\ Continuity rules have been eliminated at other options
exchanges; see Securities Exchange Act Release No. 60897 (October
28, 2009) 74 FR 57217 (November 4, 2009) (SR-ISE-2009-85) citing
Securities Exchange Act Release No. 60295 (July 13, 2009) 74 FR
35215 (July 20, 2009) (SR-CBOE-2009-49).
---------------------------------------------------------------------------
2. Statutory Basis
MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \14\ in general, and furthers the objectives of
Section 6(b)(5) of the Act \15\ 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, and it is not designed to
permit unfair discrimination among customers, brokers, or dealers.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes this proposed rule change
promotes just and equitable principles of trade because it reduces a
burden and unnecessary restrictiveness on PLMMs. The Exchange still
imposes many obligations on all Market Makers, including PLMMs, to
maintain a fair and orderly market in their appointed classes, which
the Exchange believes eliminates the risk of a material decrease in
liquidity. While the time during which PLMMs must provide continuous
quotes will be slightly reduced, PLMMs will still be obligated to
provide continuous quotes for a significant part of the trading day in
a significant percentage of series in each appointed class.
Accordingly, the proposal supports the quality of MIAX's markets by
helping to ensure that PLMMs will continue to be obligated to quote in
series when necessary. The benefit provided to the PLMM from the
proposed reduction in required quoting time is offset by the required
percentage of series in which the PLMM must provide continuous quotes.
Ultimately, the benefit the proposed rule change confers upon PLMMs is
offset by the continued responsibilities to provide significant
liquidity to the market to the benefit of market participants.
In addition, the Exchange believes this proposed rule change
promotes just and equitable principles of trade because it reduces a
burden and unnecessary restrictiveness on LMMs. Eliminating the LMM
requirement to continuously quote in long term option series will
contribute to the Exchange's efforts at quote mitigation without
impacting the liquidity and quality of
[[Page 17961]]
the Exchange's markets in those long term option series. Allowing LMMs
to continue to receive directed orders in long term option series and
the Directed LMM participation entitlement, when they no longer have
the requirement to continuously quote such long term series is
appropriate because it encourages LMMs to quote the long term series,
which benefits all investors by supporting the quality and liquidity of
the market in such series. This benefit is offset by the LMM's
continued quoting obligations in other series and the fact that
directed LMMs must still satisfy all of their other obligations in
order to receive the Directed LMM participation entitlement.
The proposed rule change also protects investors and the public
interest by creating more uniformity and consistency among the
Exchange's rules related to Market-Maker quoting obligations. The
proposed rule change allows the Exchange to require PLMMs to provide
continuous quotes in a percentage of series in their appointed classes
for a portion of the trading day that is the same as that of market-
makers at other exchanges, which the Exchange believes will ultimately
make the Exchange more competitive and help remove impediments to and
promote a free and open market. For the foregoing reasons, the Exchange
believes that the balance between the benefits provided to Market-
Makers and the obligations imposed upon Market-Makers by the proposed
rule change is appropriate.
Further, providing Market Makers with flexibility by providing the
continuous quoting obligation collectively across all option classes
will not diminish the Market Maker's obligation to continuously quote a
significant part of the trading day in a significant percentage of
series. Additionally, with respect to compliance standards, the
Exchange believes that adopting the proposed standards will enhance
compliance efforts by Market Makers and the Exchange, and are
consistent with the requirement currently in place on other exchanges.
The proposal ensures that compliance standards for continuous quoting
will be the same on the Exchange as on other options exchanges. The
Exchange believes that the proposal will not diminish and in fact may
increase, market making activity on the Exchange, by establishing a
quoting compliance standard that is reasonable and is already in place
on other options exchanges.
Finally, in determining to revise requirements for its Market
Makers, MIAX is mindful of the balance between the obligations and the
benefits bestowed on its Market Makers. The proposal will change
obligations currently in place for Market Makers; however, the Exchange
does not believe that these changes reduce the overall obligations
applicable to Market Makers. In this respect, the Exchange notes that
its Market Makers are subject to many obligations, including the
obligation to maintain a fair and orderly market in their appointed
classes, which the Exchange believes eliminates the risk of a material
decrease in liquidity. MIAX continues to believe the balance of
obligations and benefits is appropriate given the following: (i)
Although the percentage of the trading day PLMMs will be required to
quote will decrease from 99% to 90%, PLMMs will continue to have
heightened quoting requirements based on the significant percentage of
series PLMMs are required to quote, the proposed change is also
consistent with requirements in place at other option exchanges and
with requirements for other MIAX Market Makers; (ii) the proposed
clarification in the rule text of which series the continuous quoting
obligations apply to does not diminish the continuous quoting
obligation and is consistent with requirements in place at other option
exchanges; and (iii) the flexibility being provided by the proposal to
apply the continuous quoting obligation collectively across all option
classes also does not diminish the Market Maker's obligations and is
consistent with requirements in place at other options exchanges. MIAX
believes that its proposal is consistent with the Act in that providing
clarification and flexibility does not detract from the overall market
making obligations of Market Makers. The requirement that a market
maker hold itself out as willing to buy and sell options for its own
account on a regular or continuous basis is better supported by these
proposed revisions and clarifications. Accordingly, the benefits the
proposed rule change confers upon Market Makers are offset by the
continued responsibilities to provide significant liquidity to the
market to the benefit of all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. MIAX's proposal to revise and
clarify the Market Makers' continuous quoting obligations is consistent
with what is already occurring on other markets. By providing Market
Maker obligations that are more consistent with market maker
obligations in place at other option exchanges, competition for the
liquidity providing services of market makers is enhanced. MIAX is
better able to compete for the services of market makers when its
requirements for market makers are consistent with the other options
exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited or [sic] 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 \16\ and Rule 19b-4(f)(6) \17\
thereunder.
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File
[[Page 17962]]
Number SR-MIAX-2013-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2013-08. 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 Web site (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 Web site 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-MIAX-2013-08 and should be
submitted on or before April 15, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06717 Filed 3-22-13; 8:45 am]
BILLING CODE 8011-01-P
