Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 301, 6556-6558 [2016-02335]
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6556
Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Notices
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.
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2016–003, and should be submitted on
or before February 29, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–02331 Filed 2–5–16; 8:45 am]
BILLING CODE 8011–01–P
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–
FINRA–2016–003 on the subject line.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
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:
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Exchange Rule 301
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2016–003. 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 FINRA. All comments received
will be posted without change; the
Commission does not edit personal
identifying information from
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 January 20, 2016, 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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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77035; File No. SR–MIAX–
2016–02]
February 2, 2016.
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 301, Just and
Equitable Principles of Trade, to add
Interpretations and Policies .03 to Rule
301 to state in the Exchange’s rules that
the practice of unbundling an order is
considered conduct inconsistent with
just and equitable principles of trade.
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.
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Exchange Rule 301, Just and Equitable
Principles of Trade, to add
Interpretations and Policies .03 to Rule
301 that states that the practice of
unbundling an order is considered
conduct inconsistent with just and
equitable principles of trade. The
proposal codifies existing Exchange
procedures when dealing with the
unlawful bundling of orders.
The purpose of the proposed rule
change is to amend Exchange Rule 301
by adding a new Interpretations and
Policies .03 to Rule 301 which will
expressly prohibit the splitting-up of an
order into smaller orders; a practice also
known as unbundling, or trade
shredding. More specifically, the
Exchange is proposing to add language
to its existing rules to prohibit
Members 3 from splitting orders into
multiple smaller orders for any purpose
other than best execution.
Unbundling, or trade shredding, is the
practice of breaking up an order into
multiple smaller orders for some
purpose other than best execution of the
order. The practice of unbundling has in
the past been used for such purposes as
improperly maximizing commissions
and fees charged to customers,
distorting trade data, or circumventing
rules pertaining to maximum order size.
In addition, the unbundling of a large
order into several smaller orders could
be done so as to affect the allocation of
a trade among market participants
pursuant to the allocation methodology
3 The term ‘‘Member’’ means an individual or
organization approved to exercise trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
E:\FR\FM\08FEN1.SGM
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Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Notices
used by the Exchange.4 Finally, the
Exchange believes that the unbundling
of orders generally serves no purpose to
the customer that entered the order and
may cause unnecessary delays in the
execution of said orders.
Pursuant to Exchange Rule 301,
Members must observe high standards
of commercial honor and just and
equitable principles of trade. The
Exchange would consider a Member to
have engaged in conduct inconsistent
with just and equitable principles of
trade were they to unbundle an order
which (1) distorts fees and/or
commissions to the detriment of a
customer or the Exchange, (2) causes an
unnecessary delay in the execution of
an order, or (3) circumvents an
Exchange rule or federal securities law,
including those rules pertaining to order
size and trade allocation. Members
engaging in conduct inconsistent with
just and equitable principles of trade are
subject to formal disciplinary action by
the Exchange.
The Exchange now proposes to adopt
Interpretations and Policies .03 to Rule
301, which will expressly state that the
Exchange considers it to be conduct
inconsistent with just and equitable
principles of trade for a Member to split
an order into multiple smaller orders for
any purpose other than seeking the best
execution of the entire order.
The Exchange believes that, by
adopting this proposed language which
serves to codify existing Exchange
procedures when dealing with the
unlawful unbundling of orders, it will
deter and help to prevent this distortive
practice, and therefore promote just and
equitable principles of trade.
The Exchange notes that it considers
unbundling, among other things, to be
conduct inconsistent with just and
equitable principles of trade in the rules
governing its price improvement
mechanism, MIAX PRIME.5 The
asabaliauskas on DSK5VPTVN1PROD with NOTICES
4 For
example, pursuant to Exchange Rule
514(g)(2), small size orders, or orders of five
contracts or less, are allocated to the Primary Lead
Market Maker (‘‘PLMM’’) if the PLMM has a priority
quote at the NBBO. If a Member was to break up
a large order into several smaller orders of five
contracts or less, the PLMM could unfairly garner
a greater trade allocation than it was otherwise
entitled to.
5 Specifically, it shall be considered conduct
inconsistent with just and equitable principles of
trade, in accordance with Rule 301, for any Member
to enter orders, quotes, Agency Orders, or other
responses for the purpose of disrupting or
manipulating the Auction. Such conduct includes,
but is not limited to, engaging in a pattern or
practice of submitting unrelated orders that cause
an Auction to conclude before the end of the RFR
period and engaging in a pattern of conduct where
the Member submitting the Agency Order into the
PRIME breaks up the Agency Order into separate
orders for two (2) or fewer contracts for the purpose
of gaining a higher allocation percentage than the
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Exchange notes further that other US
options exchanges have rules
prohibiting the unbundling of orders for
a variety of reasons, including the early
termination of any price improvement
mechanism auction conducted by an
exchange, and violations of these rules
may be considered conduct inconsistent
with just and equitable principles of
trade.6
2. Statutory Basis
MIAX believes that its proposed rule
change is consistent with Section 6(b) of
the Act 7 in general, and furthers the
objectives of Section 6(b)(5) of the Act 8
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 proposed rule change is designed
to protect investors and the public
interest and to promote just and
equitable principles of trade by
preventing the distortive practice of
unbundling, or trade shredding, which
conduct is considered inconsistent with
the just and equitable principles of
trade.
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 that is not
necessary or appropriate in furtherance
of the purposes of the Act. Specifically,
the Exchange believes the proposed
changes will not impose any burden on
intra-market competition because it
Member would have otherwise received in
accordance with the allocation procedures
contained in paragraph (a)(2)(iii) or (b)(2)(iii) above.
See Exchange Rule 515A, Interpretations and
Policies .01.
6 See Securities Exchange Act Release Nos. 62667
(August 9, 2010), 75 FR 50013 (August 16, 2010)
(SR–NYSEAmex–2010–77) (adopting NYSE Amex
Rule 995NY(d)); and 52872 (December 1, 2005), 70
FR 73043 (December 8, 2005), (SR–CBOE–2005–92)
(adopting CBOE Rule 4.23). See also International
Securities Exchange LLC Rule 723 Supplementary
Material .01 (prohibiting the entering of orders,
quotes, Agency Orders, Counter-Side Orders or
Improvement Orders for the purpose of disrupting
or manipulating the Price Improvement Mechanism
Auction), CBOE Rule 6.74A Interpretations and
Policies .02 (prohibiting the submission of
unrelated orders that cause an Automated
Improvement Mechanism Auction to conclude
before the end of the RFR period) and NASDAQ
OMX PHLX LLC Rule 1080(b)(iii).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
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6557
applies to all MIAX participants
equally. In addition, the Exchange does
not believe the proposal will impose
any burden on inter-market competition
as the proposal is intended to protect
investors by preventing the distortive
practice of unbundling, or trade
shredding.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 9 and Rule 19b–
4(f)(6) 10 thereunder.
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 11 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 12
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay. The Exchange states
that waiver of the operative delay would
enable market participants to benefit
from the proposed language codifying
existing Exchange procedures when
dealing with the unlawful unbundling
of orders and would help to prevent this
distortive practice. For this reason, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.13
9 15
U.S.C. 78s(b)(3)(A).
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.
11 17 CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6)(iii).
13 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
10 17
E:\FR\FM\08FEN1.SGM
Continued
08FEN1
6558
Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Notices
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:
asabaliauskas on DSK5VPTVN1PROD with NOTICES
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–2016–02 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MIAX–2016–02. 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 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–
2016–02 and should be submitted on or
before February 29, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–02335 Filed 2–5–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77033; File No. SR–BATS–
2016–12]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Pilot
Period for the Exchange’s
Supplemental Competitive Liquidity
Provider Program
February 2, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
28, 2016, BATS Exchange, Inc.
(‘‘Exchange’’ or ‘‘BATS’’) 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 filed a proposal to
extend the pilot period for the
Exchange’s Supplemental Competitive
Liquidity Provider Program (the
‘‘Program’’), which is currently set to
expire on January 28, 2016, for three
months, to expire on April 28, 2016.
The Exchange has designated this
proposal as non-controversial and
provided the Commission with the
notice required by Rule 19b–4(f)(6)(iii)
under the Act.3
The text of the proposed rule change
is available at the Exchange’s Web site
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6)(iii).
1 15
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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at www.batstrading.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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background
On August 30, 2011, the Exchange
received approval of rules applicable to
the qualification, listing and delisting of
securities of issuers on the Exchange.4
More recently, the Exchange received
approval to operate a pilot program that
is designed to incentivize certain Market
Makers 5 registered with the Exchange
as ETP CLPs, as defined in
Interpretation and Policy .03 to Rule
11.8, to enhance liquidity on the
Exchange in certain ETPs 6 listed on the
Exchange and thereby qualify to receive
part of a daily rebate as part of the
Program under Interpretation and Policy
.03 to Rule 11.8.7
The Program was approved by the
Commission on a pilot basis running
one-year from the date of
implementation.8 The Commission
approved the Program on July 28, 2014.9
The Exchange implemented the Program
on July 28, 2014 and the pilot period for
the Program was originally scheduled to
end on July 28, 2015 until it was
extended to end on October 28, 2015 10
4 See Securities Exchange Act Release No. 65225
(August 30, 2011), 76 FR 55148 (September 6, 2011)
(SR–BATS–2011–018).
5 As defined in BATS Rules, the term ‘‘Market
Maker’’ means a Member that acts a as a market
maker pursuant to Chapter XI of BATS Rules.
6 ETP is defined in Interpretation and Policy
.03(b)(4) to Rule 11.8.
7 See Securities Exchange Act Release No. 72692
(July 28, 2014), 79 FR 44908 (August 1, 2014) (SR–
BATS–2014–022) (‘‘CLP Approval Order’’).
8 See id at 44909.
9 Id.
10 See Securities Exchange Act Release No. 75518
(July 24, 2015), 80 FR 45566 (July 30, 2015 (SR–
BATS–2015–55).
E:\FR\FM\08FEN1.SGM
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]]>Agencies
[Federal Register Volume 81, Number 25 (Monday, February 8, 2016)]
[Notices]
[Pages 6556-6558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02335]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77035; File No. SR-MIAX-2016-02]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Exchange Rule 301
February 2, 2016.
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 January 20, 2016, 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 301, Just
and Equitable Principles of Trade, to add Interpretations and Policies
.03 to Rule 301 to state in the Exchange's rules that the practice of
unbundling an order is considered conduct inconsistent with just and
equitable principles of trade.
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 amend Exchange Rule 301, Just and
Equitable Principles of Trade, to add Interpretations and Policies .03
to Rule 301 that states that the practice of unbundling an order is
considered conduct inconsistent with just and equitable principles of
trade. The proposal codifies existing Exchange procedures when dealing
with the unlawful bundling of orders.
The purpose of the proposed rule change is to amend Exchange Rule
301 by adding a new Interpretations and Policies .03 to Rule 301 which
will expressly prohibit the splitting-up of an order into smaller
orders; a practice also known as unbundling, or trade shredding. More
specifically, the Exchange is proposing to add language to its existing
rules to prohibit Members \3\ from splitting orders into multiple
smaller orders for any purpose other than best execution.
---------------------------------------------------------------------------
\3\ The term ``Member'' means an individual or organization
approved to exercise trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
---------------------------------------------------------------------------
Unbundling, or trade shredding, is the practice of breaking up an
order into multiple smaller orders for some purpose other than best
execution of the order. The practice of unbundling has in the past been
used for such purposes as improperly maximizing commissions and fees
charged to customers, distorting trade data, or circumventing rules
pertaining to maximum order size. In addition, the unbundling of a
large order into several smaller orders could be done so as to affect
the allocation of a trade among market participants pursuant to the
allocation methodology
[[Page 6557]]
used by the Exchange.\4\ Finally, the Exchange believes that the
unbundling of orders generally serves no purpose to the customer that
entered the order and may cause unnecessary delays in the execution of
said orders.
---------------------------------------------------------------------------
\4\ For example, pursuant to Exchange Rule 514(g)(2), small size
orders, or orders of five contracts or less, are allocated to the
Primary Lead Market Maker (``PLMM'') if the PLMM has a priority
quote at the NBBO. If a Member was to break up a large order into
several smaller orders of five contracts or less, the PLMM could
unfairly garner a greater trade allocation than it was otherwise
entitled to.
---------------------------------------------------------------------------
Pursuant to Exchange Rule 301, Members must observe high standards
of commercial honor and just and equitable principles of trade. The
Exchange would consider a Member to have engaged in conduct
inconsistent with just and equitable principles of trade were they to
unbundle an order which (1) distorts fees and/or commissions to the
detriment of a customer or the Exchange, (2) causes an unnecessary
delay in the execution of an order, or (3) circumvents an Exchange rule
or federal securities law, including those rules pertaining to order
size and trade allocation. Members engaging in conduct inconsistent
with just and equitable principles of trade are subject to formal
disciplinary action by the Exchange.
The Exchange now proposes to adopt Interpretations and Policies .03
to Rule 301, which will expressly state that the Exchange considers it
to be conduct inconsistent with just and equitable principles of trade
for a Member to split an order into multiple smaller orders for any
purpose other than seeking the best execution of the entire order.
The Exchange believes that, by adopting this proposed language
which serves to codify existing Exchange procedures when dealing with
the unlawful unbundling of orders, it will deter and help to prevent
this distortive practice, and therefore promote just and equitable
principles of trade.
The Exchange notes that it considers unbundling, among other
things, to be conduct inconsistent with just and equitable principles
of trade in the rules governing its price improvement mechanism, MIAX
PRIME.\5\ The Exchange notes further that other US options exchanges
have rules prohibiting the unbundling of orders for a variety of
reasons, including the early termination of any price improvement
mechanism auction conducted by an exchange, and violations of these
rules may be considered conduct inconsistent with just and equitable
principles of trade.\6\
---------------------------------------------------------------------------
\5\ Specifically, it shall be considered conduct inconsistent
with just and equitable principles of trade, in accordance with Rule
301, for any Member to enter orders, quotes, Agency Orders, or other
responses for the purpose of disrupting or manipulating the Auction.
Such conduct includes, but is not limited to, engaging in a pattern
or practice of submitting unrelated orders that cause an Auction to
conclude before the end of the RFR period and engaging in a pattern
of conduct where the Member submitting the Agency Order into the
PRIME breaks up the Agency Order into separate orders for two (2) or
fewer contracts for the purpose of gaining a higher allocation
percentage than the Member would have otherwise received in
accordance with the allocation procedures contained in paragraph
(a)(2)(iii) or (b)(2)(iii) above. See Exchange Rule 515A,
Interpretations and Policies .01.
\6\ See Securities Exchange Act Release Nos. 62667 (August 9,
2010), 75 FR 50013 (August 16, 2010) (SR-NYSEAmex-2010-77) (adopting
NYSE Amex Rule 995NY(d)); and 52872 (December 1, 2005), 70 FR 73043
(December 8, 2005), (SR-CBOE-2005-92) (adopting CBOE Rule 4.23). See
also International Securities Exchange LLC Rule 723 Supplementary
Material .01 (prohibiting the entering of orders, quotes, Agency
Orders, Counter-Side Orders or Improvement Orders for the purpose of
disrupting or manipulating the Price Improvement Mechanism Auction),
CBOE Rule 6.74A Interpretations and Policies .02 (prohibiting the
submission of unrelated orders that cause an Automated Improvement
Mechanism Auction to conclude before the end of the RFR period) and
NASDAQ OMX PHLX LLC Rule 1080(b)(iii).
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2. Statutory Basis
MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \7\ in general, and furthers the objectives of
Section 6(b)(5) of the Act \8\ 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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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is designed to protect investors and the
public interest and to promote just and equitable principles of trade
by preventing the distortive practice of unbundling, or trade
shredding, which conduct is considered inconsistent with the just and
equitable principles of trade.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act. Specifically, the Exchange
believes the proposed changes will not impose any burden on intra-
market competition because it applies to all MIAX participants equally.
In addition, the Exchange does not believe the proposal will impose any
burden on inter-market competition as the proposal is intended to
protect investors by preventing the distortive practice of unbundling,
or trade shredding.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6)
\10\ thereunder.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 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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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \11\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay. The
Exchange states that waiver of the operative delay would enable market
participants to benefit from the proposed language codifying existing
Exchange procedures when dealing with the unlawful unbundling of orders
and would help to prevent this distortive practice. For this reason,
the Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposed rule change operative upon filing.\13\
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ 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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[[Page 6558]]
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-2016-02 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2016-02. 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 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-2016-02 and should be
submitted on or before February 29, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Robert W. Errett,
Deputy Secretary.
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\14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-02335 Filed 2-5-16; 8:45 am]
BILLING CODE 8011-01-P
