Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Short Term Option Series Program, 681-683 [2013-31520]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 3 (Monday, January 6, 2014)]
[Notices]
[Pages 681-683]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31520]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71203; File No. SR-MIAX-2013-60]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to the Short Term Option Series Program

December 30, 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 December 23, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Rule 404 to allow the 
Exchange to list five Short Term Option Series at one time and to 
specify that new series of Short Term Option Series may be listed up 
to, and including on, the expiration date.
    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 is proposing to amend Exchange Rule 404. Currently the 
Exchange's Rules allow for the Exchange to list options in the Short 
Term Option Series Program (``STOS Program'' or ``STOS option'') ``on 
each of the next five consecutive Fridays that are business days.'' \3\ 
Related filings of other option exchanges, including MIAX, which 
provided the Exchange with precedent for its rule to list five STOS 
option expirations specifically states [sic] that ``the total number of 
consecutive expirations will be five (5), including any existing 
monthly or quarterly expirations'' for the STOS Program.\4\ The 
Exchange is now proposing to make explicit that the next five STOS 
options may be listed at one time, not including the monthly or 
Quarterly options. The Exchange is also proposing to codify an existing 
practice by adding language stating that strikes may be listed up until 
and on the day of expiration.
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    \3\ See Exchange Rule 404.02.
    \4\ See Securities Exchange Act Release Nos. 69658 (May 29, 
2013), 78 FR 33454 (June 4, 2013) (SR-MIAX-2013-23); 68242 (November 
15, 2012), 77 FR 69908 (November 21, 2012) (SR-CBOE-2012-110).
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    As proposed, the Exchange will have the ability to list a total of 
five STOS and that count of five would not include monthly or Quarterly 
option expirations. The Exchange notes that this proposal would 
restrict the five listed STOS to those closest to the Short Term Option 
Opening Date. For example, if a class of options has five STOS listed 
with expiration dates in July, the other two listed expiration dates 
may not be in December. The Exchange believes that allowing otherwise 
would undermine the purpose of the STOS Program.
    As examples of how this would work in practice, consider a 
situation in which a Quarterly option expires week 1 and a monthly 
option expire week 3 from now, the proposal would allow the following 
expirations: Week 1 Quarterly option, week 2 STOS option, week 3 
monthly option, week 4 STOS option, week 5 STOS option, week 6 STOS

[[Page 682]]

option, and week 7 STOS option.\5\ As another example, if a Quarterly 
option expires week 3 and a monthly option expires week 5, the 
following expirations would be allowed: Week 1 STOS option, week 2 STOS 
option, week 3 Quarterly option, week 4 STOS option, week 5 monthly 
option, week 6 STOS option, week 7 STOS option.\6\
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    \5\ The proposal would not allow, for example, for nothing to be 
listed week 7 but week 8 a STOS option.
    \6\ Id.
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    Next, the Exchange is proposing to add language to Rule 404 to 
state that additional series of STOS options may be added up to, and 
including on, the expiration date of the series.\7\ Currently, Exchange 
rules state that the Exchange ``may open up to 20 initial series for 
each option class that participates in the Short Term Option Series 
Program'' and ``up to 10 additional series for each option class that 
participates in the Short Term Option Series Program'' however the 
Exchange's rules are silent on when series may be added.\8\ In 
practice, however, the Exchange notes that other exchanges list 
additional series until the expiration day.\9\ The Exchange believes 
that codifying this provision will clearly provide the ability which is 
currently not explicitly stated to add series up until the day of 
expiration which is in the current Rules [sic]. In addition, given the 
short lifespan of STOS, the Exchange believes that the ability to list 
new series of options intraday is appropriate.
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    \7\ The Exchange is also proposing to add language stating that 
the proposed provisions in Rule 404.02 will not contradict current 
provisions in Exchange Rules. The Exchange believes this addition 
will eliminate any confusion about when additional series may be 
added in the STOS Program in comparison to other Exchange listing 
programs.
    \8\ See Exchange Rule 404.02.
    \9\ The Exchange notes that the Options Clearing Corporation 
(``OCC'') has the ability to accommodate series in the STOS Program 
added intraday.
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    The Exchange notes that the STOS Program has been very well-
received by market participants, in particular by retail investors. The 
Exchange believes that the current proposed revision to the STOS 
Program will permit the Exchange to meet increased customer demand and 
provide market participants with the ability to hedge in a greater 
number of option classes and series. In addition, the proposed changes 
will codify an existing practice in the options exchange industry.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) \10\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) \11\ of the Act in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanisms of a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that expanding the STOS 
Program 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 expanding the STOS Program 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.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that the Exchange and 
the Options Price Reporting Authority (``OPRA'') has 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 also does not believe this expansion will cause 
fragmentation to liquidity.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes this 
proposed rule change will benefit investors by providing additional 
methods to trade options on the liquid securities, and providing 
greater ability to mitigate risk in managing large portfolios. 
Specifically, the Exchange believes that investors would benefit from 
the introduction and availability of additional series available as an 
investing tool. The Exchange also believes the proposed changes will 
provide investors with an additional tool for hedging risk in highly 
liquid securities. For all the reasons stated, 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, and believes the proposed change will enhance competition.

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 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 from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) 
thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will ensure 
fair competition among the exchanges by allowing the Exchange to open 
up to five expirations under the STOS Program in a manner consistent 
with another competing exchange. The proposal will also clarify that, 
like other options exchanges, the Exchange may list new STO series up 
to, and including on, the expiration date. For these reasons, the 
Commission believes that the proposed rule change presents no novel 
issues and that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest and will allow the 
Exchange to remain competitive with other exchanges. Therefore, the 
Commission designates the proposed rule change to be operative upon 
filing.\14\
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    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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

[[Page 683]]

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-2013-60 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-2013-60. 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-2013-60 and should be 
submitted on or before January 27, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31520 Filed 1-3-14; 8:45 am]
BILLING CODE 8011-01-P