Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to $0.50 and $1 Strike Price Intervals for Classes in the Short Term Option Series Program, 38416-38420 [2013-15225]
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38416
Federal Register / Vol. 78, No. 123 / Wednesday, June 26, 2013 / Notices
connection with assets attributable to
Contracts affected by the substitution, at
a higher rate than Applicants have
received from the corresponding
Replaced Portfolio, its advisors or
underwriters (or their affiliates),
including, without limitation, Rule 12b–
1 fees, revenue sharing, or other service
fees or arrangements in connection with
such assets. Applicants represent that
the substitution is not motivated by any
financial consideration paid or to be
paid to the Company or its affiliates by
the Replacement Portfolio, its advisors,
underwriters, or their respective
affiliates.
11. Applicants represent that the
Company is also seeking approval of the
proposed substitution from any state
insurance regulators whose approval
may be necessary or appropriate.
12. The Applicants submit that the
proposed substitution meets the
standards set forth in Section 26(c) and
assert that the replacement of the
Existing Fund with the Replacement
Fund is consistent with the protection
of investors and the purposes fairly
intended by the policy and provisions of
the 1940 Act.
Conclusion:
For the reasons and upon the facts set
forth above and in the application, the
Applicants assert that the requested
order meets the standards set forth in
Section 26(c) of the 1940 Act and
should therefore, be granted.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–15242 Filed 6–25–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69809; File No. SR–MIAX–
2013–30]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to $0.50 and $1 Strike
Price Intervals for Classes in the Short
Term Option Series Program
mstockstill on DSK4VPTVN1PROD with NOTICES
June 20, 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 June 13,
2013, Miami International Securities
Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’)
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend Exchange Rule 404, Series of
Option Contracts Open for Trading, by
adopting Interpretations and Policies .09
to the rule to describe the manner of
expiration and the strike price intervals
of options series included in the
Exchange’s $1 Strike Price Interval
Program, and by modifying
Interpretations and Policies .02(e) to the
rule to describe strike price intervals for
options series that are included in the
Exchange’s Short Term Option Series
Program.3
The text of the proposed rule change
is 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 Exchange proposes to adopt
Interpretations and Policies .09 to
Exchange Rule 404 to state that,
notwithstanding any other provision
regarding strike prices in the rule,
3 The Exchange may open for trading on any
Thursday or Friday that is a business day ‘‘Short
Term Option Opening Date’’) series of options on
that class that expire at the close of business on
each of the next consecutive Fridays that are
business days (‘‘Short Term Option Series’’ or
‘‘STOS’’).
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Related non-STOS 4 shall be opened on
the Thursday or Friday prior to the
expiration week that such Related nonSTOS (such as, for example, series with
standard monthly or quarterly
expirations) expire in the same manner
as permitted in Rule 404, Interpretations
and Policies .02, and in the same strike
price intervals for the STOS permitted
in Rule 404, Interpretations and Policies
.02(e).
The Exchange further proposes to
amend Interpretations and Policies
.02(e) to Exchange Rule 404 to provide
that the strike price interval for STOS
may be $0.50 or greater for option
classes that trade in $1 strike price
intervals and are in the STOS Program.
If the class does not trade in $1 strike
price intervals, the strike price interval
for STOS may be $0.50 or greater where
the strike price is less than $75 and
$1.00 or greater where the strike price
is between $75 and $150, and the same
as strike prices for series in that same
option class that expire in accordance
with the normal monthly expiration
cycle for strike prices greater than $150.
Notwithstanding any other provision
regarding strike prices in the rule,
Related non-Short Term Option series
shall be opened on the Thursday or
Friday prior to the expiration week that
such Related non-Short Term Option
series expire in the same manner as
permitted in Rule 404, Commentary .02,
and in the same strike price intervals for
the STOS permitted in this [sic] Rule
404, Commentary .02 (e).
This is a competitive filing that is
based on recent filings by the
International Securities Exchange, LLC
(‘‘ISE’’), NASDAQ OMX PHLX, LLC
(‘‘PHLX’’) and NYSE MKT LLC (‘‘NYSE
MKT’’).5 The ISE, PHLX and NYSE
MKT filings made changes to the strike
price interval setting parameter rules for
their respective STOS Programs. STOS
options are not listed to expire during
the same week as non-Short Term
Option series. As a result, ISE, PHLX
and NYSE MKT amended their rules to
permit non-Short Term Option series to
have the same strike price interval
setting parameters for STOS during the
4 Proposed Rule 404, Interpretations and Policies
.02(e) defines a ‘‘Related non-Short Term Option’’
as a non-Short Term Option series that is included
in a class that has been selected to participate in
the Short Term Option Series Program.
5 See Securities Exchange Act Release Nos. 67754
(August 29, 2012), 77 FR 54629 (September 5, 2012)
(Order approving SR–ISE–2012–33) (‘‘ISE filing’’);
69633 (May 23, 2012), 78 FR 32498 (May 30, 2013)
(SR–Phlx–2013–55) (‘‘PHLX filing’’); 68074
(October 19, 2012), 77 FR 65241 (October 25, 2012)
(SR–CBOE–2012–92); and 68193 (November 8,
2012), 77 FR 68177 (November 15, 2012) (Notice of
Filing and Immediate Effectiveness of SR–
NYSEMKT–2012–53).
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week that non-Short Term Option series
expire.
ISE and PHLX also both amended the
strike price interval setting parameters
for their STOS Programs, but the
revisions to their respective rules differ.
Specifically, ISE permits $0.50 strike
price intervals for Weekly 6 options for
option classes that trade in one dollar
increments and are in the STOS
Program.7 PHLX permits $0.50 strike
price intervals when the strike price is
below $75, and $1 strike price intervals
when the strike price is between $75
and $150, or $0.50 for classes that trade
in one dollar increments in Related nonShort Term Options and that participate
in the STOS Program. PHLX also
provides that related non-Weekly option
series may be opened during the week
prior to expiration week pursuant to the
same strike price interval parameters
that exist for Weekly options. Thus a
related non-Weekly option may be
opened in Weekly option strike price
intervals on a Thursday or a Friday that
is a business day before the non-Weekly
option expiration week.8 If PHLX is not
open for business on the respective
Thursday or Friday, however, the nonWeekly option may be opened in
Weekly option intervals on the first
business day immediately prior to that
respective Thursday or Friday.9
The Exchange proposes herein to
adopt rules that are in effect on NYSE
MKT in order to remain competitive
regarding strike price interval setting
6 Short Term Options Series (‘‘STOS’’) are also
known as ‘‘Weekly options’’ or ‘‘weeklies’’ and
trade as such under the various exchanges’
respective STOS Programs. For all practical
purposes, the terms STOS, Weekly options, and
weeklies are interchangeable.
7 The permissible $0.50 strike price intervals may
only be opened on the Weekly option Opening Date
that expire on the Weekly option Expiration date
and no additional series, including additional series
of the related non-Weekly option, may be opened
during expiration week in classes that are listed
pursuant to ISE rules.
8 This opening timing is consistent with the
principle that the Exchange may add new series of
options until two business days prior to expiration.
See Exchange Rule 404(e).
9 On the Exchange, the STOS opening process is
set forth in MIAX Rule 404, Interpretations and
Policies .02: After an option class has been
approved for listing and trading on the Exchange,
the Exchange may open for trading on any
Thursday or Friday that is a business day (‘‘Short
Term Option Opening Date’’) series of options on
that class that expire at the close of business on
each of the next consecutive Fridays that are
business days (‘‘Short Term Option Expiration
Dates’’). If the Exchange is not open for business on
the respective Thursday or Friday, the Short Term
Option Opening Date will be the first business day
immediately prior to that respective Thursday or
Friday. Similarly, if the Exchange is not open for
business on the Friday of the following business
week, the Short Term Option Expiration Date will
be the first business day immediately prior to that
Friday.
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parameters. The Exchange notes that
while it believes that there is substantial
overlap between the two strike price
interval setting parameters, the
Exchange believes there are gaps that
would enable PHLX to initiate a series
that ISE would not be able to initiate
and vice versa [sic].10 Since uniformity
is not required for the STOS Programs
that have been adopted by the various
options exchanges, the Exchange
proposes to revise its strike price
intervals setting parameters so that it
has the ability to initiate strike prices in
the same manner (i.e., intervals) as both
ISE and PHLX, and thus in the same
manner currently in place on NYSE
MKT. Accordingly, just as with NYSE
MKT, the Exchange proposes to adopt
aspects of both the ISE rule text
language and the PHLX rule text
language approved by the Commission.
The STOS Program is codified in
Interpretations and Policies .02 to
Exchange Rule 404. The rule states that
after an option class has been approved
for listing and trading on the Exchange,
the Exchange may open for trading, on
any Thursday or Friday that is a
business day, series of options on no
more than twenty-five option classes
that expire on the Friday of the
following business week that is a
business day. In addition to the twentyfive option class limitation, there is also
a limitation that no more than twenty
series for each expiration date in those
classes may be initially opened for
trading.11 Furthermore, the strike price
10 The Exchange and the majority, if not all, of the
other options exchanges that have adopted a STOS
Program have a similar rule that permits the listing
of series that are opened by other exchanges,
consistent with the Options Listing Procedures Plan
(‘‘OLPP’’). See Exchange Rule 404A(b)(6). This
filing is concerned with the ability to initiate series.
For example, if a class is selected to participate in
the STOS Program and non-STOS options on that
class do not trade in dollar increments, the
Exchange believes that PHLX would be permitted
to initiate $0.50 strikes on that class and ISE would
not. Similarly, the strike price interval for
exchange-traded fund (‘‘ETF’’) options is generally
$1 or greater where the strike price is $200 or less.
11 However, if the Exchange opens twenty (20)
short term options for a Short Term Option
Expiration Date, up to 10 additional series may be
opened for trading on the Exchange when the
Exchange deems it necessary to maintain an orderly
market, to meet customer demand or when the
market price of the underlying security moves
substantially from the exercise price or prices of the
series already opened. Any additional strike prices
listed by the Exchange shall be within thirty
percent (30%) above or below the current price of
the underlying security. The Exchange may also
open additional strike prices of STOS that are more
than 30% above or below the current price of the
underlying security provided that demonstrated
customer interest exists for such series, as
expressed by institutional, corporate or individual
customers or their brokers (market-makers trading
for their own account shall not be considered when
determining customer interest under this
provision).
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38417
of each STOS has to be fixed with
approximately the same number of
strike prices being opened above and
below the value of the underlying
security at about the time that the short
term options are initially opened for
trading on the Exchange, and with strike
prices being within thirty percent (30%)
above or below the closing price of the
underlying security from the preceding
day. The Exchange does not propose
any changes to the current program
limitations. The Exchange proposes
only to specify that STOS can have
interval prices of $0.50 and $1, as
proposed under Interpretations and
Policies .02(e) to Rule 404.
The principal reason for the proposed
interval pricing structure is market
demand for weekly options. There is
continuing strong customer demand for
having the ability to execute hedging
and trading strategies effectively via
STOS, particularly in the current fast,
multi-faceted trading and investing
environment that extends across
numerous markets and platforms.12 The
Exchange has observed increased
demand for STOS classes and/or series,
particularly when market moving events
such as significant market volatility,
corporate events, or when large market,
sector, or individual issue price swings
have occurred. The STOS Program is
one of the most popular and quickly
expanding options expiration programs.
The Exchange believes that the
benefits of the ability to trade STOS at
$0.50 and $1 intervals at lower price
levels cannot be underestimated. The
proposed intervals would clearly allow
traders and investors, and in particular
public (retail) investors to more
effectively and with greater precision
consummate trading and hedging
strategies on the Exchange. The
Exchange believes that this precision is
increasingly necessary, and in fact
crucial, as traders and investors engage
in trading and hedging strategies across
various investment platforms (e.g.,
equity and ETF, index, derivatives,
futures, foreign currency, and even
commodities products); particularly
when many of these platforms enjoy
substantially smaller strike price
differentiations (e.g., as low as $0.05).13
12 These include, without limitation, options,
equities, futures, derivatives, indexes, exchange
traded funds, exchange traded notes, currencies,
and over-the-counter instruments.
13 As an example, per the CME Web site, strike
prices for options on futures may be at an interval
of $.05, $.10, and $.25 per specified parameters. See
https://www.cmegroup.com/trading/equityindex/
files/EQUITY_FLEX_Options.pdf (options on S&P
500 and NASDAQ–100 contracts) and https://
www.cmegroup.com/rulebook/files/S_5734_x11-
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Federal Register / Vol. 78, No. 123 / Wednesday, June 26, 2013 / Notices
Weekly options have characteristics
that are attractive for certain trading and
hedging strategies. Thus, weeklies may
be attractive for retail trading strategies
that could benefit from the inherent
accelerated time decay of weekly
options, such as selling (buying) vertical
or calendar spreads. And weeklies may
be particularly attractive instruments for
short-term institutional hedging needs
(e.g., sudden price movements against
large option positions during expiration
week; maintenance or adjustment of
complex option positions) as well as for
retail hedging needs (e.g., preceding
large earnings plays). In every case,
trading and hedging is more effective
when it can be closely tailored. The
current wider STOS price intervals have
negatively impacted investors and
traders, particularly retail public
customers, who have on several
occasions requested the Exchange to list
series with finer, narrower STOS
intervals. The proposal would fix this.
The following is an example of how
inadequately narrow STOS intervals
negatively impact trading and hedging
opportunities. If an investor needs to
purchase an STOS call option in CSCO
(03/26/12 closing price $20.84), the
current $1 strike interval would offer
less opportunity and choice for an
investor seeking to keep cash
expenditures low. For example, an
investor wishing to buy an in-the-money
call option for less than a $2.50
investment per call purchase has only
two strike prices that meet his criteria
from which to choose: The 19 strike and
the 20 strike. Such call options with five
days until expiration might offer ‘‘ask
prices’’ (option premiums) of $1.75 and
$.75. However, if CSCO had $0.50 strike
prices as proposed, the same investor
would have a selection of March 18.50,
19.00, 19.50, 20.00, and the 20.50 strike
call options that may have options
premiums from approximately $2.25
down to approximately $.25. This
expanded range of strikes, and
commensurate option premiums, offers
far more choice and a considerably
lower cost of entry to the investor,
thereby garnering the investor more
than a 66% options premium savings.
Lower intervals increase effective
liquidity by offering investors and
traders more price points at which they
may execute trading and hedging
strategies.14 This allows investors and
traders the ability to more effectively
execute their strategies at lower cost.
Clearly, more efficient pricing is
advantageous to all market participants,
from retail to institutional investors.
The changes proposed by the Exchange
should allow execution of more trading
and hedging strategies on the Exchange.
The Exchange notes that in conformance
with Exchange Rules, the Exchange
shall not list $0.50 or $1 strike price
intervals on Related non-STOS options
within two (2) days of expiration. For
example, if a Related non-STOS in an
options class is set to expire on Friday,
September 21, the Exchange could begin
to trade $0.50 strike price intervals
surrounding that Related non-STOS on
Thursday, September 13, but no later
than Friday September 14.
The Exchange proposes to list the
expiring Related non-STOS on the
Thursday or Friday prior to expiration
week, so that investors can close a
position in an expiring STOS and open
a position at the same strike price in a
Related non-STOS. The listing of the
$0.50 or $1 strike price intervals for
expiring Related non-STOS on the
Thursday or Friday prior to expiration
week is intended to be consistent with
the ‘‘overlap’’ of STOS today, which
facilitates investors desiring to ‘‘roll’’ a
position from one STOS expiration to
another. If the $0.50 or $1 interval
strikes are not available until the
opening on Monday of expiration week,
an investor who had a position in the
prior week’s $0.50 or $1 interval STOS
could not close a position in the
expiring STOS and open a position at
the same strike in the Related nonSTOS.
Furthermore, the inadequate price
intervals for STOS, particularly at the
lower price levels proposed by the
Exchange, may discourage retail and
other customers from executing STOS
orders when they could be the most
advantageous for effective execution of
trading and hedging strategies on
regulated and transparent exchanges.
The Exchange feels that it is essential
that such negative, potentially costly
and time-consuming impacts on retail
investors are eliminated by offering
tighter intervals within the STOS
Program. The changes proposed by the
Exchange should allow execution of
more trading and hedging strategies on
the Exchange.15
0518x Change in Listing Rules for Goldx Silverx
Copper Options.pdf (options on metals contracts).
14 Moreover, lower strike intervals provide
additional price points for liquidity providers. This
allows the liquidity providers to improve
theoretical pricing as well as hedging capabilities,
thereby enabling them to increase the size and
quality of their markets.
15 In addition, there is a competitive impact. First,
the proposal would enable the Exchange to provide
market participants with an opportunity to execute
their strategies (e.g., complex option spreads)
wholly on their preferred market, namely the
Exchange. Second, the proposal would diminish the
potential for foregone market opportunities on the
Exchange caused by the need to use a more
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The Exchange also proposes that
Related non-STOS shall be opened on
the Thursday or Friday prior to the
expiration week that such Related nonSTOS expire in the same manner as
permitted in Rule 404, Interpretations
and Policies .02, and in the same strike
price intervals for the STOS permitted
in Rule 404, Interpretations and Policies
.02(e). The Exchange proposes to make
this change to ensure conformity
between STOS options and Related nonSTOS options that are in the same
options class (e.g., weekly and monthly
SPY options). The Exchange believes
that not having such a conforming
change would be counter-productive
and not beneficial for trading and
hedging purposes.16
The Exchange believes that the STOS
Program has provided investors with
greater trading opportunities and
flexibility and the ability to more
closely tailor their investment and risk
management strategies and decisions.
Furthermore, the Exchange has had to
reject trading requests because of the
limitations imposed by the Program. For
these reasons, the Exchange requests a
modification of the strike price intervals
in the Program and the opportunity to
provide investors with better weekly
option choices for investment, trading,
and risk management purposes.
With regard to the impact of this
proposal on system capacity, the
Exchange has analyzed its capacity and
represents that it and the Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
any potential additional traffic
associated with this current amendment
to the STOS Program. The Exchange
believes that its members will not have
a capacity issue as a result of this
proposal. The Exchange represents that
it will monitor the trading volume
associated with the additional options
series listed as a result of this proposal
and the effect (if any) of these additional
series on market fragmentation and on
the capacity of the Exchange’s
automated systems.
2. Statutory Basis
MIAX believes that its proposed rule
change is consistent with Section 6(b) of
the Act 17 in general, and furthers the
advantageous (that is, interval-precise) platform
than STOs currently allow.
16 Moreover, the Exchange notes that STOS
options are not listed and traded during the
expiration week of the Related non-STOS options.
During this week, the non-STOS options are
materially and financially equivalent to the STOS
options. The proposed change would allow traders
and hedgers to have the noted benefits of the STOS
Program during each week in a month.
17 15 U.S.C. 78f(b).
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objectives of Section 6(b)(5) of the Act 18
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. The Exchange believes
that providing strike prices of $.50 and
$1 intervals in STOS eligible classes
will result in a continuing benefit to
investors by giving them more flexibility
to closely tailor their investment
decisions and hedging decisions in a
greater number of securities. The
Exchange also believes that providing
the same strike price intervals for
options classes that are in the STOS
Program and for the Related non-STOS
options just prior to and during
expiration week will provide the
investing public and other market
participants with additional
opportunities to hedge their investment,
thus allowing these investors to better
manage their risk exposure. In addition,
the Exchange believes that the proposal
will ensure conformity between STOS
options and Related non-STOS options
that are in the same options class. The
Exchange believes that allowing the
listing of expiring Related non-STOS on
the Thursday or Friday prior to
expiration week will help facilitate the
ability of investors and other market
participants to close a position in an
expiring STOS and open a position at
the same strike price in a Related nonSTOS in a manner that is designed to
promote just and equitable principles of
trade. While the expansion of the STOS
Program will generate additional quote
traffic, the Exchange does not believe
that this increased traffic will become
unmanageable since the proposal
remains limited to a fixed number of
classes.
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. In this regard
and as indicated above, the Exchange
notes that the rule change is being
proposed as a competitive response to
existing rules on other exchanges. The
Exchange believes this proposed rule
change is necessary to permit fair
competition among the options
18 15
U.S.C. 78f(b)(5).
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38419
exchanges with respect to their short
term options programs.
to determine whether the proposed rule
should be approved or disapproved.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
IV. Solicitation of Comments
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not become operative for 30
days from the date on which it was
filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 19 and Rule 19b–
4(f)(6) thereunder.20
The Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission believes that
waiver of the 30-day operative delay
will allow MIAX to initiate strikes
prices in more granular intervals for
STOs in the same manner as other
options exchanges, and permit, during
the expiration week of a Related nonShort Term option, a Related non-Short
Term Option on a class that is selected
to participate in the Short Term Options
Series Program to have the strike price
interval setting parameters as STOs. In
sum, the proposed rule change presents
no novel issues, and waiver will allow
the Exchange to remain competitive
with other exchanges. Therefore, the
Commission designates the proposal
operative upon filing.21
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
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule
19b–4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of 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.
21 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
20 17
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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
Number SR–MIAX–2013–30 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–2013–30. 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
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–
2013–30 and should be submitted on or
before July 17, 2013.
E:\FR\FM\26JNN1.SGM
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38420
Federal Register / Vol. 78, No. 123 / Wednesday, June 26, 2013 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
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 parts of such
statements.
[FR Doc. 2013–15225 Filed 6–25–13; 8:45 am]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69810; File No. SR–NYSE–
2013–41]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending
NYSE Rule 1000 To Increase the Price
Threshold for Those Securities
Ineligible for Automatic Executions
From $1,000.00 or More to $10,000.00
or More
June 20, 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 June 7,
2013, New York Stock Exchange LLC
(the ‘‘Exchange’’ or ‘‘NYSE’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Rule 1000 to increase the price
threshold for those securities ineligible
for automatic executions from $1,000.00
or more to $10,000.00 or more. The text
of the proposed rule change is available
on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
mstockstill on DSK4VPTVN1PROD with NOTICES
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
self-regulatory organization 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 those statements may be examined at
22 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
20:26 Jun 25, 2013
Jkt 229001
1. Purpose
The Exchange is proposing to amend
Rule 1000(a)(vi) (‘‘Automatic
Executions’’) to increase the price level
at which a security would be considered
‘‘high-priced’’ and thus ineligible for
automatic execution. Rule 1000(a)(vi)
prohibits automatic executions if the
closing price for a security, or if the
security did not trade, the closing bid
price of the security on the Exchange on
the immediate previous trading day, is
$1,000 or more. The Exchange is
proposing to increase this price level
from $1,000 or more to $10,000 or
more.3
The Exchange is proposing to make a
conforming amendment to Rule
60(d)(iii)(B)(I), which provides that the
Exchange keeps Autoquote 4 active,
even if automatic executions are
suspended under Rule 1000, if an order
or a cancellation of an order arrives that
would not result in a locked or crossed
market in a security priced at $1,000 or
more. The Exchange proposes to
increase this price level to $10,000 or
more to conform the provision to the
proposed amendment to Rule
1000(a)(vi).
Securities priced at $1,000 or more
are traded manually by the assigned
Designated Market Maker (‘‘DMM’’).
Rule 610 of Regulation NMS under the
Act prohibits national securities
exchanges and national securities
associations from locking or crossing
protected quotations,5 and Rule 611 of
Regulation NMS prohibits tradethroughs only of protected quotations.6
Rule 600 of Regulation NMS, however,
requires a protected quotation to be
automated.7 The Exchange’s quotations
in high-priced securities, therefore, are
not protected quotations for purposes of
Regulation NMS. The proposed rule
3 As a result of the proposed amendment, six
additional securities would be eligible for automatic
execution as of the date of this filing.
4 Pursuant to Rule 60(d), the Exchange autoquotes
the NYSE’s highest bid or lowest offer to reflect
interest in the Book, and when the highest bid or
lowest offer has been traded with in its entirety, the
Exchange will autoquote a new bid or offer
reflecting the total size of orders at the next highest
(in the case of a bid) or lowest (in the case of an
offer) price.
5 17 CFR 240.610(d)(1)(i).
6 17 CFR 240.611(a)(1).
7 17 CFR 240.600(b)(57)(iii).
PO 00000
Frm 00136
Fmt 4703
Sfmt 4703
change would allow the affected
securities to be eligible for automatic
execution and auto-quoting, which
would allow the Exchange to protect its
quotations and remain competitive with
other market centers. For the affected
securities, the proposal would align the
availability of automatic executions on
the Exchange with the availability of
such executions on other exchanges.8
The Exchange is also proposing to
make a conforming amendment to Rule
1000(a)(iv)(C), which sets out value
ranges used to determine liquidity
replenishment points (‘‘LRPs’’). LRPs
are pre-determined price points that
function to moderate volatility in a
particular security, improve price
continuity, and foster market quality by
temporarily converting the electronic
market to an auction market and
permitting new trading interest to add
liquidity.9 Pursuant to Rule 60(d)(i),
Autoquote is suspended when an LRP is
reached.
LRPs are calculated by adding and
subtracting an LRP value to a security’s
last sale price. The Exchange sets and
disseminates a specific LRP value from
a range of potential values. That range,
in turn, is based upon a security price
category (e.g., $5 to $9.99) and the
average daily volume of the security to
which the value is being added. The
LRP value chosen within an LRP value
range is based on an examination of
trading data. Because the Exchange is
increasing the highest price per share at
which automatic execution is available,
the Exchange is making a conforming
amendment to the highest security price
category used to determine LRP values
from $250 to $1000 to $250 to $10,000.
2. Statutory Basis
The proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange. In particular, the
Exchange believes that the proposal is
consistent with (i) Section 6(b) of the
Act,10 in general, and furthers the
objectives of Section 6(b)(5),11 in
particular, in that it is designed to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities and to remove
impediments to and perfect the
8 The Exchange is not aware of any other
exchange that, by rule, does not issue protected
quotations for a stock on a regular basis.
9 The Exchange recently amended its rules to
phase out the functionality associated with LRPs to
coincide with the implementation of the Limit Up—
Limit Down Plan. See Securities Exchange Act
Release No. 69295 (April 4, 2013), 78 FR 21457
(April 10, 2013).
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
E:\FR\FM\26JNN1.SGM
26JNN1
]]>Agencies
[Federal Register Volume 78, Number 123 (Wednesday, June 26, 2013)]
[Notices]
[Pages 38416-38420]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15225]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69809; File No. SR-MIAX-2013-30]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to $0.50 and $1 Strike Price Intervals for Classes
in the Short Term Option Series Program
June 20, 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 June 13, 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 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend Exchange Rule 404,
Series of Option Contracts Open for Trading, by adopting
Interpretations and Policies .09 to the rule to describe the manner of
expiration and the strike price intervals of options series included in
the Exchange's $1 Strike Price Interval Program, and by modifying
Interpretations and Policies .02(e) to the rule to describe strike
price intervals for options series that are included in the Exchange's
Short Term Option Series Program.\3\
---------------------------------------------------------------------------
\3\ The Exchange may open for trading on any Thursday or Friday
that is a business day ``Short Term Option Opening Date'') series of
options on that class that expire at the close of business on each
of the next consecutive Fridays that are business days (``Short Term
Option Series'' or ``STOS'').
---------------------------------------------------------------------------
The text of the proposed rule change is 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 Exchange proposes to adopt Interpretations and Policies .09 to
Exchange Rule 404 to state that, notwithstanding any other provision
regarding strike prices in the rule, Related non-STOS \4\ shall be
opened on the Thursday or Friday prior to the expiration week that such
Related non-STOS (such as, for example, series with standard monthly or
quarterly expirations) expire in the same manner as permitted in Rule
404, Interpretations and Policies .02, and in the same strike price
intervals for the STOS permitted in Rule 404, Interpretations and
Policies .02(e).
---------------------------------------------------------------------------
\4\ Proposed Rule 404, Interpretations and Policies .02(e)
defines a ``Related non-Short Term Option'' as a non-Short Term
Option series that is included in a class that has been selected to
participate in the Short Term Option Series Program.
---------------------------------------------------------------------------
The Exchange further proposes to amend Interpretations and Policies
.02(e) to Exchange Rule 404 to provide that the strike price interval
for STOS may be $0.50 or greater for option classes that trade in $1
strike price intervals and are in the STOS Program. If the class does
not trade in $1 strike price intervals, the strike price interval for
STOS may be $0.50 or greater where the strike price is less than $75
and $1.00 or greater where the strike price is between $75 and $150,
and the same as strike prices for series in that same option class that
expire in accordance with the normal monthly expiration cycle for
strike prices greater than $150. Notwithstanding any other provision
regarding strike prices in the rule, Related non-Short Term Option
series shall be opened on the Thursday or Friday prior to the
expiration week that such Related non-Short Term Option series expire
in the same manner as permitted in Rule 404, Commentary .02, and in the
same strike price intervals for the STOS permitted in this [sic] Rule
404, Commentary .02 (e).
This is a competitive filing that is based on recent filings by the
International Securities Exchange, LLC (``ISE''), NASDAQ OMX PHLX, LLC
(``PHLX'') and NYSE MKT LLC (``NYSE MKT'').\5\ The ISE, PHLX and NYSE
MKT filings made changes to the strike price interval setting parameter
rules for their respective STOS Programs. STOS options are not listed
to expire during the same week as non-Short Term Option series. As a
result, ISE, PHLX and NYSE MKT amended their rules to permit non-Short
Term Option series to have the same strike price interval setting
parameters for STOS during the
[[Page 38417]]
week that non-Short Term Option series expire.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 67754 (August 29,
2012), 77 FR 54629 (September 5, 2012) (Order approving SR-ISE-2012-
33) (``ISE filing''); 69633 (May 23, 2012), 78 FR 32498 (May 30,
2013) (SR-Phlx-2013-55) (``PHLX filing''); 68074 (October 19, 2012),
77 FR 65241 (October 25, 2012) (SR-CBOE-2012-92); and 68193
(November 8, 2012), 77 FR 68177 (November 15, 2012) (Notice of
Filing and Immediate Effectiveness of SR-NYSEMKT-2012-53).
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ISE and PHLX also both amended the strike price interval setting
parameters for their STOS Programs, but the revisions to their
respective rules differ. Specifically, ISE permits $0.50 strike price
intervals for Weekly \6\ options for option classes that trade in one
dollar increments and are in the STOS Program.\7\ PHLX permits $0.50
strike price intervals when the strike price is below $75, and $1
strike price intervals when the strike price is between $75 and $150,
or $0.50 for classes that trade in one dollar increments in Related
non-Short Term Options and that participate in the STOS Program. PHLX
also provides that related non-Weekly option series may be opened
during the week prior to expiration week pursuant to the same strike
price interval parameters that exist for Weekly options. Thus a related
non-Weekly option may be opened in Weekly option strike price intervals
on a Thursday or a Friday that is a business day before the non-Weekly
option expiration week.\8\ If PHLX is not open for business on the
respective Thursday or Friday, however, the non-Weekly option may be
opened in Weekly option intervals on the first business day immediately
prior to that respective Thursday or Friday.\9\
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\6\ Short Term Options Series (``STOS'') are also known as
``Weekly options'' or ``weeklies'' and trade as such under the
various exchanges' respective STOS Programs. For all practical
purposes, the terms STOS, Weekly options, and weeklies are
interchangeable.
\7\ The permissible $0.50 strike price intervals may only be
opened on the Weekly option Opening Date that expire on the Weekly
option Expiration date and no additional series, including
additional series of the related non-Weekly option, may be opened
during expiration week in classes that are listed pursuant to ISE
rules.
\8\ This opening timing is consistent with the principle that
the Exchange may add new series of options until two business days
prior to expiration. See Exchange Rule 404(e).
\9\ On the Exchange, the STOS opening process is set forth in
MIAX Rule 404, Interpretations and Policies .02: After an option
class has been approved for listing and trading on the Exchange, the
Exchange may open for trading on any Thursday or Friday that is a
business day (``Short Term Option Opening Date'') series of options
on that class that expire at the close of business on each of the
next consecutive Fridays that are business days (``Short Term Option
Expiration Dates''). If the Exchange is not open for business on the
respective Thursday or Friday, the Short Term Option Opening Date
will be the first business day immediately prior to that respective
Thursday or Friday. Similarly, if the Exchange is not open for
business on the Friday of the following business week, the Short
Term Option Expiration Date will be the first business day
immediately prior to that Friday.
---------------------------------------------------------------------------
The Exchange proposes herein to adopt rules that are in effect on
NYSE MKT in order to remain competitive regarding strike price interval
setting parameters. The Exchange notes that while it believes that
there is substantial overlap between the two strike price interval
setting parameters, the Exchange believes there are gaps that would
enable PHLX to initiate a series that ISE would not be able to initiate
and vice versa [sic].\10\ Since uniformity is not required for the STOS
Programs that have been adopted by the various options exchanges, the
Exchange proposes to revise its strike price intervals setting
parameters so that it has the ability to initiate strike prices in the
same manner (i.e., intervals) as both ISE and PHLX, and thus in the
same manner currently in place on NYSE MKT. Accordingly, just as with
NYSE MKT, the Exchange proposes to adopt aspects of both the ISE rule
text language and the PHLX rule text language approved by the
Commission.
---------------------------------------------------------------------------
\10\ The Exchange and the majority, if not all, of the other
options exchanges that have adopted a STOS Program have a similar
rule that permits the listing of series that are opened by other
exchanges, consistent with the Options Listing Procedures Plan
(``OLPP''). See Exchange Rule 404A(b)(6). This filing is concerned
with the ability to initiate series. For example, if a class is
selected to participate in the STOS Program and non-STOS options on
that class do not trade in dollar increments, the Exchange believes
that PHLX would be permitted to initiate $0.50 strikes on that class
and ISE would not. Similarly, the strike price interval for
exchange-traded fund (``ETF'') options is generally $1 or greater
where the strike price is $200 or less.
---------------------------------------------------------------------------
The STOS Program is codified in Interpretations and Policies .02 to
Exchange Rule 404. The rule states that after an option class has been
approved for listing and trading on the Exchange, the Exchange may open
for trading, on any Thursday or Friday that is a business day, series
of options on no more than twenty-five option classes that expire on
the Friday of the following business week that is a business day. In
addition to the twenty-five option class limitation, there is also a
limitation that no more than twenty series for each expiration date in
those classes may be initially opened for trading.\11\ Furthermore, the
strike price of each STOS has to be fixed with approximately the same
number of strike prices being opened above and below the value of the
underlying security at about the time that the short term options are
initially opened for trading on the Exchange, and with strike prices
being within thirty percent (30%) above or below the closing price of
the underlying security from the preceding day. The Exchange does not
propose any changes to the current program limitations. The Exchange
proposes only to specify that STOS can have interval prices of $0.50
and $1, as proposed under Interpretations and Policies .02(e) to Rule
404.
---------------------------------------------------------------------------
\11\ However, if the Exchange opens twenty (20) short term
options for a Short Term Option Expiration Date, up to 10 additional
series may be opened for trading on the Exchange when the Exchange
deems it necessary to maintain an orderly market, to meet customer
demand or when the market price of the underlying security moves
substantially from the exercise price or prices of the series
already opened. Any additional strike prices listed by the Exchange
shall be within thirty percent (30%) above or below the current
price of the underlying security. The Exchange may also open
additional strike prices of STOS that are more than 30% above or
below the current price of the underlying security provided that
demonstrated customer interest exists for such series, as expressed
by institutional, corporate or individual customers or their brokers
(market-makers trading for their own account shall not be considered
when determining customer interest under this provision).
---------------------------------------------------------------------------
The principal reason for the proposed interval pricing structure is
market demand for weekly options. There is continuing strong customer
demand for having the ability to execute hedging and trading strategies
effectively via STOS, particularly in the current fast, multi-faceted
trading and investing environment that extends across numerous markets
and platforms.\12\ The Exchange has observed increased demand for STOS
classes and/or series, particularly when market moving events such as
significant market volatility, corporate events, or when large market,
sector, or individual issue price swings have occurred. The STOS
Program is one of the most popular and quickly expanding options
expiration programs.
---------------------------------------------------------------------------
\12\ These include, without limitation, options, equities,
futures, derivatives, indexes, exchange traded funds, exchange
traded notes, currencies, and over-the-counter instruments.
---------------------------------------------------------------------------
The Exchange believes that the benefits of the ability to trade
STOS at $0.50 and $1 intervals at lower price levels cannot be
underestimated. The proposed intervals would clearly allow traders and
investors, and in particular public (retail) investors to more
effectively and with greater precision consummate trading and hedging
strategies on the Exchange. The Exchange believes that this precision
is increasingly necessary, and in fact crucial, as traders and
investors engage in trading and hedging strategies across various
investment platforms (e.g., equity and ETF, index, derivatives,
futures, foreign currency, and even commodities products); particularly
when many of these platforms enjoy substantially smaller strike price
differentiations (e.g., as low as $0.05).\13\
---------------------------------------------------------------------------
\13\ As an example, per the CME Web site, strike prices for
options on futures may be at an interval of $.05, $.10, and $.25 per
specified parameters. See https://www.cmegroup.com/trading/equityindex/files/EQUITY_FLEX_Options.pdf (options on S&P 500 and
NASDAQ-100 contracts) and https://www.cmegroup.com/rulebook/files/S_5734_x11-0518x Change in Listing Rules for Goldx Silverx Copper
Options.pdf (options on metals contracts).
---------------------------------------------------------------------------
[[Page 38418]]
Weekly options have characteristics that are attractive for certain
trading and hedging strategies. Thus, weeklies may be attractive for
retail trading strategies that could benefit from the inherent
accelerated time decay of weekly options, such as selling (buying)
vertical or calendar spreads. And weeklies may be particularly
attractive instruments for short-term institutional hedging needs
(e.g., sudden price movements against large option positions during
expiration week; maintenance or adjustment of complex option positions)
as well as for retail hedging needs (e.g., preceding large earnings
plays). In every case, trading and hedging is more effective when it
can be closely tailored. The current wider STOS price intervals have
negatively impacted investors and traders, particularly retail public
customers, who have on several occasions requested the Exchange to list
series with finer, narrower STOS intervals. The proposal would fix
this.
The following is an example of how inadequately narrow STOS
intervals negatively impact trading and hedging opportunities. If an
investor needs to purchase an STOS call option in CSCO (03/26/12
closing price $20.84), the current $1 strike interval would offer less
opportunity and choice for an investor seeking to keep cash
expenditures low. For example, an investor wishing to buy an in-the-
money call option for less than a $2.50 investment per call purchase
has only two strike prices that meet his criteria from which to choose:
The 19 strike and the 20 strike. Such call options with five days until
expiration might offer ``ask prices'' (option premiums) of $1.75 and
$.75. However, if CSCO had $0.50 strike prices as proposed, the same
investor would have a selection of March 18.50, 19.00, 19.50, 20.00,
and the 20.50 strike call options that may have options premiums from
approximately $2.25 down to approximately $.25. This expanded range of
strikes, and commensurate option premiums, offers far more choice and a
considerably lower cost of entry to the investor, thereby garnering the
investor more than a 66% options premium savings. Lower intervals
increase effective liquidity by offering investors and traders more
price points at which they may execute trading and hedging
strategies.\14\ This allows investors and traders the ability to more
effectively execute their strategies at lower cost. Clearly, more
efficient pricing is advantageous to all market participants, from
retail to institutional investors. The changes proposed by the Exchange
should allow execution of more trading and hedging strategies on the
Exchange. The Exchange notes that in conformance with Exchange Rules,
the Exchange shall not list $0.50 or $1 strike price intervals on
Related non-STOS options within two (2) days of expiration. For
example, if a Related non-STOS in an options class is set to expire on
Friday, September 21, the Exchange could begin to trade $0.50 strike
price intervals surrounding that Related non-STOS on Thursday,
September 13, but no later than Friday September 14.
---------------------------------------------------------------------------
\14\ Moreover, lower strike intervals provide additional price
points for liquidity providers. This allows the liquidity providers
to improve theoretical pricing as well as hedging capabilities,
thereby enabling them to increase the size and quality of their
markets.
---------------------------------------------------------------------------
The Exchange proposes to list the expiring Related non-STOS on the
Thursday or Friday prior to expiration week, so that investors can
close a position in an expiring STOS and open a position at the same
strike price in a Related non-STOS. The listing of the $0.50 or $1
strike price intervals for expiring Related non-STOS on the Thursday or
Friday prior to expiration week is intended to be consistent with the
``overlap'' of STOS today, which facilitates investors desiring to
``roll'' a position from one STOS expiration to another. If the $0.50
or $1 interval strikes are not available until the opening on Monday of
expiration week, an investor who had a position in the prior week's
$0.50 or $1 interval STOS could not close a position in the expiring
STOS and open a position at the same strike in the Related non-STOS.
Furthermore, the inadequate price intervals for STOS, particularly
at the lower price levels proposed by the Exchange, may discourage
retail and other customers from executing STOS orders when they could
be the most advantageous for effective execution of trading and hedging
strategies on regulated and transparent exchanges. The Exchange feels
that it is essential that such negative, potentially costly and time-
consuming impacts on retail investors are eliminated by offering
tighter intervals within the STOS Program. The changes proposed by the
Exchange should allow execution of more trading and hedging strategies
on the Exchange.\15\
---------------------------------------------------------------------------
\15\ In addition, there is a competitive impact. First, the
proposal would enable the Exchange to provide market participants
with an opportunity to execute their strategies (e.g., complex
option spreads) wholly on their preferred market, namely the
Exchange. Second, the proposal would diminish the potential for
foregone market opportunities on the Exchange caused by the need to
use a more advantageous (that is, interval-precise) platform than
STOs currently allow.
---------------------------------------------------------------------------
The Exchange also proposes that Related non-STOS shall be opened on
the Thursday or Friday prior to the expiration week that such Related
non-STOS expire in the same manner as permitted in Rule 404,
Interpretations and Policies .02, and in the same strike price
intervals for the STOS permitted in Rule 404, Interpretations and
Policies .02(e). The Exchange proposes to make this change to ensure
conformity between STOS options and Related non-STOS options that are
in the same options class (e.g., weekly and monthly SPY options). The
Exchange believes that not having such a conforming change would be
counter-productive and not beneficial for trading and hedging
purposes.\16\
---------------------------------------------------------------------------
\16\ Moreover, the Exchange notes that STOS options are not
listed and traded during the expiration week of the Related non-STOS
options. During this week, the non-STOS options are materially and
financially equivalent to the STOS options. The proposed change
would allow traders and hedgers to have the noted benefits of the
STOS Program during each week in a month.
---------------------------------------------------------------------------
The Exchange believes that the STOS Program has provided investors
with greater trading opportunities and flexibility and the ability to
more closely tailor their investment and risk management strategies and
decisions. Furthermore, the Exchange has had to reject trading requests
because of the limitations imposed by the Program. For these reasons,
the Exchange requests a modification of the strike price intervals in
the Program and the opportunity to provide investors with better weekly
option choices for investment, trading, and risk management purposes.
With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority (``OPRA'') have the necessary systems
capacity to handle any potential additional traffic associated with
this current amendment to the STOS Program. The Exchange believes that
its members will not have a capacity issue as a result of this
proposal. The Exchange represents that it will monitor the trading
volume associated with the additional options series listed as a result
of this proposal and the effect (if any) of these additional series on
market fragmentation and on the capacity of the Exchange's automated
systems.
2. Statutory Basis
MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \17\ in general, and furthers the
[[Page 38419]]
objectives of Section 6(b)(5) of the Act \18\ 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. The Exchange
believes that providing strike prices of $.50 and $1 intervals in STOS
eligible classes will result in a continuing benefit to investors by
giving them more flexibility to closely tailor their investment
decisions and hedging decisions in a greater number of securities. The
Exchange also believes that providing the same strike price intervals
for options classes that are in the STOS Program and for the Related
non-STOS options just prior to and during expiration week will provide
the investing public and other market participants with additional
opportunities to hedge their investment, thus allowing these investors
to better manage their risk exposure. In addition, the Exchange
believes that the proposal will ensure conformity between STOS options
and Related non-STOS options that are in the same options class. The
Exchange believes that allowing the listing of expiring Related non-
STOS on the Thursday or Friday prior to expiration week will help
facilitate the ability of investors and other market participants to
close a position in an expiring STOS and open a position at the same
strike price in a Related non-STOS in a manner that is designed to
promote just and equitable principles of trade. While the expansion of
the STOS Program will generate additional quote traffic, the Exchange
does not believe that this increased traffic will become unmanageable
since the proposal remains limited to a fixed number of classes.
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\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
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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. In this regard and as indicated
above, the Exchange notes that the rule change is being proposed as a
competitive response to existing rules on other exchanges. The Exchange
believes this proposed rule change is necessary to permit fair
competition among the options exchanges with respect to their short
term options programs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of 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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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the 30-day
operative delay will allow MIAX to initiate strikes prices in more
granular intervals for STOs in the same manner as other options
exchanges, and permit, during the expiration week of a Related non-
Short Term option, a Related non-Short Term Option on a class that is
selected to participate in the Short Term Options Series Program to
have the strike price interval setting parameters as STOs. In sum, the
proposed rule change presents no novel issues, and waiver will allow
the Exchange to remain competitive with other exchanges. Therefore, the
Commission designates the proposal operative upon filing.\21\
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\21\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 Number SR-MIAX-2013-30 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-2013-30. 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 the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; 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-2013-30 and should be
submitted on or before July 17, 2013.
[[Page 38420]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15225 Filed 6-25-13; 8:45 am]
BILLING CODE 8011-01-P
