Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 605 Market Maker Orders, 83896-83899 [2016-28025]

Download as PDF 83896 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices LOP implementation date. The waiver would also permit the Exchange to immediately clarify the application of the LOP to modified orders. Moreover, the waiver would allow the Exchange to immediately exclude from the LOP Market Pegging Orders, Primary Pegging Orders, and Midpoint Pegging Orders that have a discretion price. As noted above, the Exchange proposes to exclude these Orders because these Orders may be intended to be aggressive or to set the bid or offer on the market. Moreover, as noted above, Market and Primary Pegging Orders are currently subject to collars. Lastly, the waiver would allow the Exchange’s rules to immediately and accurately reflect the current collars for Market and Primary Pegging Orders, which were removed inadvertently. Accordingly, the Commission finds that waiving the 30day operative delay is consistent with the protection of investors and the public interest and designates the proposal operative upon filing.28 At any time within 60 days of the filing of such 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 change should be approved or disapproved. All submissions should refer to File Number SR–NASDAQ–2016–155. 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– NASDAQ–2016–155 and should be submitted on or before December 13, 2016. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Brent J. Fields, Secretary. 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–NASDAQ–2016–155 on the subject line. sradovich on DSK3GMQ082PROD with NOTICES Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. 28 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. 15 U.S.C. 78c(f). VerDate Sep<11>2014 16:52 Nov 21, 2016 Jkt 241001 [FR Doc. 2016–28037 Filed 11–21–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79331; File No. SR–MIAX– 2016–43] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 605 Market Maker Orders November 16, 2016. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 29 17 1 15 PO 00000 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). Frm 00100 Fmt 4703 Sfmt 4703 thereunder,2 notice is hereby given that on November 3, 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, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 605 (Market Maker Orders). 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 purpose of the proposed rule change is to amend Exchange Rule 605 (Market Maker Orders) to (i) provide that a MIAX Market Maker 3 may not enter good ‘til cancelled (‘‘GTC’’) orders 4 in option classes to which the MIAX Market Maker is not appointed, and (ii) add a comparable provision setting forth the types of orders that an Electronic Exchange Member (‘‘EEM’’) 5 2 17 CFR 240.19b–4. term ‘‘Market Maker’’ refers to ‘‘Lead Market Makers’’, ‘‘Primary Lead Market Makers’’ and ‘‘Registered Market Makers’’, collectively. See Exchange Rule 100. 4 A Good ‘til Cancelled or ‘‘GTC’’ order is an order to buy or sell which remains in effect until it is either executed, cancelled or the underlying option expires. See Exchange Rule 516(l). 5 The term ‘‘Electronic Exchange Member’’ means the holder of a Trading permit who is not a Market 3 The E:\FR\FM\22NON1.SGM 22NON1 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices sradovich on DSK3GMQ082PROD with NOTICES may enter for the proprietary account of a non-MIAX Market Maker.6 Rule 605 presently governs the submission of orders by MIAX Market Makers, differentiating between orders submitted in classes to which the Market Maker is appointed and orders submitted in classes to which the Market Maker is not appointed. Paragraph (a) governs option classes to which the Market Maker is appointed. Pursuant to paragraph (a), Market Makers may not enter market orders or GTC orders in their appointed classes. Paragraph (b) governs option classes other than those to which the Market Maker is appointed. Subparagraph (b)(1) provides that Market Makers may enter all types of orders that are permitted to be entered by Non-Customer 7 participants under the Rules, except for market orders. Subparagraphs (b)(2) and (b)(3) place limitations on the overall percentage of executions that can occur in the non-appointed classes. Specifically, subparagraph (b)(2) limits a Registered Market Maker’s 8 total number of contracts executed in nonappointed option classes to 25% of the Registered Market Maker’s total number of contracts executed in its appointed option classes, and subparagraph (b)(3) limits a Lead Market Maker’s 9 total number of contracts executed in nonappointed option classes to 10% of the Lead Market Maker’s total number of contracts executed in its appointed option classes. Paragraph (c) governs priority of Market Maker orders, providing that Market Maker orders will always be allocated with other Professional Interest 10 (such as orders Maker. Electronic Exchange members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 6 The term ‘‘non-MIAX Market Maker’’ means a market participant that is market maker registered as such on another options exchange. See Exchange Fee Schedule, Section 1)a)ii), Other Market Participant Fees, in the notes table. 7 The term ‘‘Non-Customer’’ means a person or entity that is a broker or dealer in securities. See Exchange Rule 100. 8 The term ‘‘Registered Market Maker’’ means a Member registered with the Exchange for the purpose of making markets in securities traded on the Exchange, who is not a Lead Market Maker and is vested with the rights and responsibilities specified in Chapter VI of these Rules with respect to Registered Market Makers. See Exchange Rule 100. 9 The term ‘‘Lead Market Maker’’ means a Member registered with the Exchange for the purpose of making markets in securities traded on the Exchange and that is vested with the rights and responsibilities specified in Chapter VI of these Rules with respect to Lead Market Makers. When a Lead Market Maker is appointed to act in the capacity of a Primary Lead Market Maker, the additional rights and responsibilities of a Primary Lead Market Maker specified in Chapter VI of these Rules will apply. See Exchange Rule 100. 10 The term ‘‘Professional Interest’’ means (i) an order that is for the account of a person or entity VerDate Sep<11>2014 16:52 Nov 21, 2016 Jkt 241001 from broker-dealers, firms, non-Priority Customers 11 and non-priority Market Maker quotes) and after both Priority Customer interest and priority Market Maker quotes have been satisfied. The Exchange is not proposing to amend paragraph (a), subparagraphs (b)(2) or (b)(3), or paragraph (c). The Exchange is proposing to amend subparagraph (b)(1) to provide that a Market Maker may not enter GTC orders in option classes to which the Market Maker is not appointed. Thus, as amended, pursuant to subparagraph (b)(1), a Market Maker may enter all order types permitted to be entered by Non-Customer participants under the Rules, except for market orders and GTC orders, in classes of options to which the Market Maker is not appointed. The purpose of this amendment is to make the permissible order types for Market Makers in non-appointed option classes consistent with the permissible order types in their appointed option classes. Accordingly, in both appointed and non-appointed option classes, Market Makers may enter all order types, except for market orders and GTC orders. The Exchange believes that making the permissible order types for Market Makers consistent in both appointed and non-appointed options classes simplifies order types across the Exchange for such participants. The Exchange also believes that GTC orders offer no advantage to Market Makers over day limit orders (which are a permissible order type for Market Makers in both appointed and nonappointed option classes) under the Exchange’s market structure, including, but not limited to, under the priority and trade allocation rules (Exchange Rule 514) and various risk protection mechanism rules applicable to Market Makers (such as, for example, Exchange Rule 612, Aggregate Risk Manager). When the Exchange initially adopted Exchange Rule 605, the Exchange determined to permit Market Makers to enter GTC orders in non-appointed option classes. However, since adoption, the Exchange has observed that Market Makers generally have not entered GTC orders in their nonappointed option classes. Accordingly, since this is an unused order type for Market Makers and in order to promote consistency across the Exchange of available order types for Market Makers, the Exchange now proposes that Market Makers may not enter GTC orders in that is not a Priority Customer, or (ii) an order or non-priority quote for the account of a Market Maker. See Exchange Rule 100. 11 The term ‘‘Priority Customer’’ means an order for the account of a Priority Customer. See Exchange Rule 100. PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 83897 non-appointed option classes so that the permissible order types for Market Makers in non-appointed option classes are the same as those for Market Makers in appointed option classes. The Exchange is also proposing to add new paragraph (d) to Rule 605 to establish the permissible order types that an EEM may enter for the proprietary account of a non-MIAX Market Maker. Pursuant to proposed paragraph (d), the permissible order types that an EEM may enter for the proprietary account of a non-MIAX Market Maker includes all order types permitted to be entered under the Rules by Members, except for market orders and GTC orders. Accordingly, the Exchange is proposing to make the permissible order types for non-MIAX Market Makers consistent with the permissible order types for MIAX Market Makers. The Exchange believes that making the permissible order types for the accounts of non-MIAX Market Makers consistent with the permissible order types for MIAX Market Makers simplifies order types across the Exchange for such participants. As discussed above, the Exchange also believes that GTC orders offer no advantage to non-MIAX Market Makers over day limit orders (which are a permissible order type for non-MIAX Market Makers) under the Exchange’s market structure, including, but not limited to, under the priority and trade allocation rules (Exchange Rule 514) and various risk protection mechanism rules applicable to EEMs (such as, for example, Exchange Rule 519, MIAX Order Monitor, and Exchange Rule 519A, Risk Protection Monitor). The Exchange further believes that nonMIAX Market Makers (and, for that matter, MIAX Market Makers) are sophisticated professionals and thus generally do not use market orders. When the Exchange initially adopted Exchange Rule 605, the Exchange did not place any limitation on the types of orders that could be entered by an EEM for the proprietary account of a nonMIAX Market Maker. However, since adoption, the Exchange has observed that EEMs generally have not entered GTC orders or market orders for the proprietary account of non-MIAX Market Makers. Accordingly, since these are unused order types for non-MIAX Market Makers and in order to promote consistency across the Exchange of available order types for both non-MIAX Market Makers and Market Makers, the Exchange now proposes that EEMs may not enter GTC orders or market orders for the proprietary accounts of nonMIAX Market Makers so that the E:\FR\FM\22NON1.SGM 22NON1 sradovich on DSK3GMQ082PROD with NOTICES 83898 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices permissible order types available to non-MIAX Market Makers are the same as those for Market Makers. The Exchange believes that its proposal to define the permissible order types that an EEM may enter for the proprietary account of a non-MIAX Market Maker to include all order types permitted to be entered under the Rules by Members, except for market orders and GTC orders, is reasonable, equitable and not unfairly discriminatory because the same rule applies identically to MIAX Market Makers. Thus, the Exchange is treating all market makers (both MIAX Market Makers and nonMIAX Market Makers) the same, with respect to permissible order types for such market participants. The Exchange notes that there is no uniform treatment of permissible order types for market makers among the various options exchanges. Some exchanges place no limitation on the types of orders that can be entered by market makers, such as NYSE Arca, Inc. (‘‘NYSE Arca’’) and NYSE MKT LLC (‘‘NYSE MKT’’).12 Both such exchanges permit a market maker to enter all order types permitted to be entered by users under the rules, in both appointed and non-appointed option classes. Other exchanges do place certain limitations on permissible order types, with varying degree. Some differentiate between appointed and non-appointed options classes, and some don’t. For example, International Securities Exchange, LLC (‘‘ISE’’) permits opening only orders, IOC orders, market orders, fill-or-kill orders, sweep orders, complex orders, and block-size orders in appointed classes.13 It permits all order types permissible for non-customers in nonappointed classes.14 NASDAQ PHLX LLC (‘‘PHLX’’) permits limit on opening, IOC, sweep, and day limit in appointed classes; and limit on opening, IOC, sweep, day limit, and GTC in nonappointed classes.15 Accordingly, the Exchange believes that each options exchange generally determines permissible order types for market makers in its trading environment based on the exchange’s individual business policy, objectives, and trading system. The Exchange’s proposal reflects its policy and objectives, and it treats all market makers uniformly with respect to permissible order types. Therefore, the Exchange believes that the structure that it is proposing is reasonable, 12 See NYSE Arca Rule 6.37C and NYSE Mkt Rule 925.2NY. 13 See ISE Rule 805. 14 Id. 15 See PHLX Rule 1080(b). VerDate Sep<11>2014 16:52 Nov 21, 2016 Jkt 241001 equitable, and not unfairly discriminatory. The Exchange will announce the implementation date of the proposed rule change by Regulatory Circular to be published no later than 60 days following the operative date of the proposed rule. The implementation date will be no later than 60 days following the issuance of the Regulatory Circular. 2. Statutory Basis MIAX believes that its proposed rule change is consistent with Section 6(b) of the Act 16 in general, and furthers the objectives of Section 6(b)(5) of the Act 17 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in 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. In particular, the Exchange believes this proposed rule change promotes just and equitable principles of trade because it simplifies order types across the Exchange for Market Makers. It eliminates order types that generally have not been entered by Market Makers and non-MIAX Market Makers. It makes consistent the types of orders than can be entered for both Market Makers and non-MIAX Market Makers. It makes the permissible order types for Market Makers in non-appointed option classes consistent with the permissible order types in their appointed option classes. The Exchange believes that making the permissible order types for Market Makers consistent in both appointed and non-appointed options classes simplifies order types across the Exchange for such participants. The Exchange also believes that GTC orders offer no advantage to Market Makers over day limit orders (which are a permissible order type for Market Makers in both appointed and nonappointed option classes) under the Exchange’s market structure, including, but not limited to, under the priority and trade allocation rules (Exchange Rule 514) and various risk protection mechanism rules applicable to Market Makers (such as, for example, Exchange Rule 612, Aggregate Risk Manager). The Exchange has observed that Market Makers generally have not entered GTC orders in their non-appointed option classes. Accordingly, since this is an 16 15 17 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00102 Fmt 4703 Sfmt 4703 unused order type for Market Makers and in order to promote consistency across the Exchange of available order types for Market Makers, the Exchange believes that its proposed rule change to provide that Market Makers may not enter GTC orders in non-appointed option classes so that the permissible order types for Market Makers in nonappointed option classes are the same as those for Market Makers in appointed option classes promotes just and equitable principles of trade. The Exchange believes that its proposal to define the permissible order types that an EEM may enter for the proprietary account of a non-MIAX market maker to include all order types permitted to be entered under the Rules by Members, except for market orders and GTC orders, is reasonable, equitable and not unfairly discriminatory because the same rule applies identically to MIAX Market Makers. Thus, the Exchange is treating all market makers (both MIAX Market Makers and nonMIAX market makers) the same, with respect to permissible order types for such market participants. The Exchange also believes that GTC orders offer no advantage to non-MIAX Market Makers over day limit orders (which are a permissible order type for non-MIAX Market Makers) under the Exchange’s market structure, including, but not limited to, under the priority and trade allocation rules (Exchange Rule 514) and various risk protection mechanism rules applicable to EEMs (such as, for example, Exchange Rule 519, MIAX Order Monitor, and Exchange Rule 519A, Risk Protection Monitor). The Exchange further believes that nonMIAX Market Makers (and, for that matter, MIAX Market Makers) are sophisticated professionals and thus generally do not use market orders. The Exchange has observed that EEMs generally have not entered GTC orders or market orders for the proprietary account of non-MIAX Market Makers. Accordingly, since these are unused order types for non-MIAX Market Makers and in order to promote consistency across the Exchange of available order types for both non-MIAX Market Makers and Market Makers, the Exchange believes that its proposal that EEMs may not enter GTC orders or market orders for the proprietary accounts of non-MIAX Market Makers so that the permissible order types available to non-MIAX Market Makers are the same as those for Market Makers promotes just and equitable principles of trade. E:\FR\FM\22NON1.SGM 22NON1 Federal Register / Vol. 81, No. 225 / Tuesday, November 22, 2016 / Notices IV. Solicitation of Comments 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. The Exchange operates in a highly competitive market comprised of fourteen U.S. options exchanges in which sophisticated and knowledgeable market participants can, and do, send order flow to competing exchanges if they deem trading practices at a particular exchange to be onerous or cumbersome. The proposed rule change allows the Exchange to make consistent across the Exchange the permissible order types available for both MIAX Market Makers and non-MIAX market makers. This consistency places all such market participants on an equal footing, and, as a consequence, will not impose any burden on 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 sradovich on DSK3GMQ082PROD with NOTICES Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act 18 and Rule 19b–4(f)(6) 19 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 18 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 19 17 VerDate Sep<11>2014 16:52 Nov 21, 2016 Jkt 241001 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–2016–43 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–2016–43. 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– 2016–43 and should be submitted on or before December 13, 2016. PO 00000 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Brent J. Fields, Secretary. [FR Doc. 2016–28025 Filed 11–21–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32360; File No. 812–14547] Legg Mason ETF Equity Trust, et al.; Notice of Application November 16, 2016. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c–1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. The requested order would permit (a) actively-managed series of certain open-end management investment companies (‘‘Funds’’) to issue shares redeemable in large aggregations only (‘‘Creation Units’’); (b) secondary market transactions in Fund shares to occur at negotiated market prices rather than at net asset value (‘‘NAV’’); (c) certain Funds to pay redemption proceeds, under certain circumstances, more than seven days after the tender of shares for redemption; (d) certain affiliated persons of a Fund to deposit securities into, and receive securities from, the Fund in connection with the purchase and redemption of Creation Units; (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the Funds (‘‘Funds of Funds’’) to acquire shares of the Funds; and (f) certain Funds (‘‘Feeder Funds’’) to create and redeem Creation Units in-kind in a master-feeder structure. AGENCY: Applicants: Legg Mason Partners Fund Advisor, LLC (‘‘Initial Adviser’’), a Delaware limited liability company registered as an investment adviser under the Investment Advisers Act of 1940, Legg Mason ETF Equity Trust and Legg Mason ETF Trust (each a ‘‘Trust,’’ and together, the ‘‘Trusts’’), each a 20 17 Frm 00103 Fmt 4703 Sfmt 4703 83899 E:\FR\FM\22NON1.SGM CFR 200.30–3(a)(12). 22NON1

Agencies

[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Notices]
[Pages 83896-83899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28025]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79331; File No. SR-MIAX-2016-43]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 605 Market Maker Orders

November 16, 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 November 3, 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, II, and III below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 605 
(Market Maker Orders).
    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 purpose of the proposed rule change is to amend Exchange Rule 
605 (Market Maker Orders) to (i) provide that a MIAX Market Maker \3\ 
may not enter good `til cancelled (``GTC'') orders \4\ in option 
classes to which the MIAX Market Maker is not appointed, and (ii) add a 
comparable provision setting forth the types of orders that an 
Electronic Exchange Member (``EEM'') \5\

[[Page 83897]]

may enter for the proprietary account of a non-MIAX Market Maker.\6\
---------------------------------------------------------------------------

    \3\ The term ``Market Maker'' refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'', 
collectively. See Exchange Rule 100.
    \4\ A Good `til Cancelled or ``GTC'' order is an order to buy or 
sell which remains in effect until it is either executed, cancelled 
or the underlying option expires. See Exchange Rule 516(l).
    \5\ The term ``Electronic Exchange Member'' means the holder of 
a Trading permit who is not a Market Maker. Electronic Exchange 
members are deemed ``members'' under the Exchange Act. See Exchange 
Rule 100.
    \6\ The term ``non-MIAX Market Maker'' means a market 
participant that is market maker registered as such on another 
options exchange. See Exchange Fee Schedule, Section 1)a)ii), Other 
Market Participant Fees, in the notes table.
---------------------------------------------------------------------------

    Rule 605 presently governs the submission of orders by MIAX Market 
Makers, differentiating between orders submitted in classes to which 
the Market Maker is appointed and orders submitted in classes to which 
the Market Maker is not appointed. Paragraph (a) governs option classes 
to which the Market Maker is appointed. Pursuant to paragraph (a), 
Market Makers may not enter market orders or GTC orders in their 
appointed classes. Paragraph (b) governs option classes other than 
those to which the Market Maker is appointed. Subparagraph (b)(1) 
provides that Market Makers may enter all types of orders that are 
permitted to be entered by Non-Customer \7\ participants under the 
Rules, except for market orders. Subparagraphs (b)(2) and (b)(3) place 
limitations on the overall percentage of executions that can occur in 
the non-appointed classes. Specifically, subparagraph (b)(2) limits a 
Registered Market Maker's \8\ total number of contracts executed in 
non-appointed option classes to 25% of the Registered Market Maker's 
total number of contracts executed in its appointed option classes, and 
subparagraph (b)(3) limits a Lead Market Maker's \9\ total number of 
contracts executed in non-appointed option classes to 10% of the Lead 
Market Maker's total number of contracts executed in its appointed 
option classes. Paragraph (c) governs priority of Market Maker orders, 
providing that Market Maker orders will always be allocated with other 
Professional Interest \10\ (such as orders from broker-dealers, firms, 
non-Priority Customers \11\ and non-priority Market Maker quotes) and 
after both Priority Customer interest and priority Market Maker quotes 
have been satisfied. The Exchange is not proposing to amend paragraph 
(a), subparagraphs (b)(2) or (b)(3), or paragraph (c).
---------------------------------------------------------------------------

    \7\ The term ``Non-Customer'' means a person or entity that is a 
broker or dealer in securities. See Exchange Rule 100.
    \8\ The term ``Registered Market Maker'' means a Member 
registered with the Exchange for the purpose of making markets in 
securities traded on the Exchange, who is not a Lead Market Maker 
and is vested with the rights and responsibilities specified in 
Chapter VI of these Rules with respect to Registered Market Makers. 
See Exchange Rule 100.
    \9\ The term ``Lead Market Maker'' means a Member registered 
with the Exchange for the purpose of making markets in securities 
traded on the Exchange and that is vested with the rights and 
responsibilities specified in Chapter VI of these Rules with respect 
to Lead Market Makers. When a Lead Market Maker is appointed to act 
in the capacity of a Primary Lead Market Maker, the additional 
rights and responsibilities of a Primary Lead Market Maker specified 
in Chapter VI of these Rules will apply. See Exchange Rule 100.
    \10\ The term ``Professional Interest'' means (i) an order that 
is for the account of a person or entity that is not a Priority 
Customer, or (ii) an order or non-priority quote for the account of 
a Market Maker. See Exchange Rule 100.
    \11\ The term ``Priority Customer'' means an order for the 
account of a Priority Customer. See Exchange Rule 100.
---------------------------------------------------------------------------

    The Exchange is proposing to amend subparagraph (b)(1) to provide 
that a Market Maker may not enter GTC orders in option classes to which 
the Market Maker is not appointed. Thus, as amended, pursuant to 
subparagraph (b)(1), a Market Maker may enter all order types permitted 
to be entered by Non-Customer participants under the Rules, except for 
market orders and GTC orders, in classes of options to which the Market 
Maker is not appointed. The purpose of this amendment is to make the 
permissible order types for Market Makers in non-appointed option 
classes consistent with the permissible order types in their appointed 
option classes. Accordingly, in both appointed and non-appointed option 
classes, Market Makers may enter all order types, except for market 
orders and GTC orders. The Exchange believes that making the 
permissible order types for Market Makers consistent in both appointed 
and non-appointed options classes simplifies order types across the 
Exchange for such participants. The Exchange also believes that GTC 
orders offer no advantage to Market Makers over day limit orders (which 
are a permissible order type for Market Makers in both appointed and 
non-appointed option classes) under the Exchange's market structure, 
including, but not limited to, under the priority and trade allocation 
rules (Exchange Rule 514) and various risk protection mechanism rules 
applicable to Market Makers (such as, for example, Exchange Rule 612, 
Aggregate Risk Manager). When the Exchange initially adopted Exchange 
Rule 605, the Exchange determined to permit Market Makers to enter GTC 
orders in non-appointed option classes. However, since adoption, the 
Exchange has observed that Market Makers generally have not entered GTC 
orders in their non-appointed option classes. Accordingly, since this 
is an unused order type for Market Makers and in order to promote 
consistency across the Exchange of available order types for Market 
Makers, the Exchange now proposes that Market Makers may not enter GTC 
orders in non-appointed option classes so that the permissible order 
types for Market Makers in non-appointed option classes are the same as 
those for Market Makers in appointed option classes.
    The Exchange is also proposing to add new paragraph (d) to Rule 605 
to establish the permissible order types that an EEM may enter for the 
proprietary account of a non-MIAX Market Maker. Pursuant to proposed 
paragraph (d), the permissible order types that an EEM may enter for 
the proprietary account of a non-MIAX Market Maker includes all order 
types permitted to be entered under the Rules by Members, except for 
market orders and GTC orders. Accordingly, the Exchange is proposing to 
make the permissible order types for non-MIAX Market Makers consistent 
with the permissible order types for MIAX Market Makers. The Exchange 
believes that making the permissible order types for the accounts of 
non-MIAX Market Makers consistent with the permissible order types for 
MIAX Market Makers simplifies order types across the Exchange for such 
participants. As discussed above, the Exchange also believes that GTC 
orders offer no advantage to non-MIAX Market Makers over day limit 
orders (which are a permissible order type for non-MIAX Market Makers) 
under the Exchange's market structure, including, but not limited to, 
under the priority and trade allocation rules (Exchange Rule 514) and 
various risk protection mechanism rules applicable to EEMs (such as, 
for example, Exchange Rule 519, MIAX Order Monitor, and Exchange Rule 
519A, Risk Protection Monitor). The Exchange further believes that non-
MIAX Market Makers (and, for that matter, MIAX Market Makers) are 
sophisticated professionals and thus generally do not use market 
orders. When the Exchange initially adopted Exchange Rule 605, the 
Exchange did not place any limitation on the types of orders that could 
be entered by an EEM for the proprietary account of a non-MIAX Market 
Maker. However, since adoption, the Exchange has observed that EEMs 
generally have not entered GTC orders or market orders for the 
proprietary account of non-MIAX Market Makers. Accordingly, since these 
are unused order types for non-MIAX Market Makers and in order to 
promote consistency across the Exchange of available order types for 
both non-MIAX Market Makers and Market Makers, the Exchange now 
proposes that EEMs may not enter GTC orders or market orders for the 
proprietary accounts of non-MIAX Market Makers so that the

[[Page 83898]]

permissible order types available to non-MIAX Market Makers are the 
same as those for Market Makers.
    The Exchange believes that its proposal to define the permissible 
order types that an EEM may enter for the proprietary account of a non-
MIAX Market Maker to include all order types permitted to be entered 
under the Rules by Members, except for market orders and GTC orders, is 
reasonable, equitable and not unfairly discriminatory because the same 
rule applies identically to MIAX Market Makers. Thus, the Exchange is 
treating all market makers (both MIAX Market Makers and non-MIAX Market 
Makers) the same, with respect to permissible order types for such 
market participants.
    The Exchange notes that there is no uniform treatment of 
permissible order types for market makers among the various options 
exchanges. Some exchanges place no limitation on the types of orders 
that can be entered by market makers, such as NYSE Arca, Inc. (``NYSE 
Arca'') and NYSE MKT LLC (``NYSE MKT'').\12\ Both such exchanges permit 
a market maker to enter all order types permitted to be entered by 
users under the rules, in both appointed and non-appointed option 
classes. Other exchanges do place certain limitations on permissible 
order types, with varying degree. Some differentiate between appointed 
and non-appointed options classes, and some don't. For example, 
International Securities Exchange, LLC (``ISE'') permits opening only 
orders, IOC orders, market orders, fill-or-kill orders, sweep orders, 
complex orders, and block-size orders in appointed classes.\13\ It 
permits all order types permissible for non-customers in non-appointed 
classes.\14\ NASDAQ PHLX LLC (``PHLX'') permits limit on opening, IOC, 
sweep, and day limit in appointed classes; and limit on opening, IOC, 
sweep, day limit, and GTC in non-appointed classes.\15\ Accordingly, 
the Exchange believes that each options exchange generally determines 
permissible order types for market makers in its trading environment 
based on the exchange's individual business policy, objectives, and 
trading system. The Exchange's proposal reflects its policy and 
objectives, and it treats all market makers uniformly with respect to 
permissible order types. Therefore, the Exchange believes that the 
structure that it is proposing is reasonable, equitable, and not 
unfairly discriminatory.
---------------------------------------------------------------------------

    \12\ See NYSE Arca Rule 6.37C and NYSE Mkt Rule 925.2NY.
    \13\ See ISE Rule 805.
    \14\ Id.
    \15\ See PHLX Rule 1080(b).
---------------------------------------------------------------------------

    The Exchange will announce the implementation date of the proposed 
rule change by Regulatory Circular to be published no later than 60 
days following the operative date of the proposed rule. The 
implementation date will be no later than 60 days following the 
issuance of the Regulatory Circular.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \16\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \17\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes this proposed rule change 
promotes just and equitable principles of trade because it simplifies 
order types across the Exchange for Market Makers. It eliminates order 
types that generally have not been entered by Market Makers and non-
MIAX Market Makers. It makes consistent the types of orders than can be 
entered for both Market Makers and non-MIAX Market Makers. It makes the 
permissible order types for Market Makers in non-appointed option 
classes consistent with the permissible order types in their appointed 
option classes.
    The Exchange believes that making the permissible order types for 
Market Makers consistent in both appointed and non-appointed options 
classes simplifies order types across the Exchange for such 
participants. The Exchange also believes that GTC orders offer no 
advantage to Market Makers over day limit orders (which are a 
permissible order type for Market Makers in both appointed and non-
appointed option classes) under the Exchange's market structure, 
including, but not limited to, under the priority and trade allocation 
rules (Exchange Rule 514) and various risk protection mechanism rules 
applicable to Market Makers (such as, for example, Exchange Rule 612, 
Aggregate Risk Manager). The Exchange has observed that Market Makers 
generally have not entered GTC orders in their non-appointed option 
classes. Accordingly, since this is an unused order type for Market 
Makers and in order to promote consistency across the Exchange of 
available order types for Market Makers, the Exchange believes that its 
proposed rule change to provide that Market Makers may not enter GTC 
orders in non-appointed option classes so that the permissible order 
types for Market Makers in non-appointed option classes are the same as 
those for Market Makers in appointed option classes promotes just and 
equitable principles of trade.
    The Exchange believes that its proposal to define the permissible 
order types that an EEM may enter for the proprietary account of a non-
MIAX market maker to include all order types permitted to be entered 
under the Rules by Members, except for market orders and GTC orders, is 
reasonable, equitable and not unfairly discriminatory because the same 
rule applies identically to MIAX Market Makers. Thus, the Exchange is 
treating all market makers (both MIAX Market Makers and non-MIAX market 
makers) the same, with respect to permissible order types for such 
market participants. The Exchange also believes that GTC orders offer 
no advantage to non-MIAX Market Makers over day limit orders (which are 
a permissible order type for non-MIAX Market Makers) under the 
Exchange's market structure, including, but not limited to, under the 
priority and trade allocation rules (Exchange Rule 514) and various 
risk protection mechanism rules applicable to EEMs (such as, for 
example, Exchange Rule 519, MIAX Order Monitor, and Exchange Rule 519A, 
Risk Protection Monitor). The Exchange further believes that non-MIAX 
Market Makers (and, for that matter, MIAX Market Makers) are 
sophisticated professionals and thus generally do not use market 
orders. The Exchange has observed that EEMs generally have not entered 
GTC orders or market orders for the proprietary account of non-MIAX 
Market Makers. Accordingly, since these are unused order types for non-
MIAX Market Makers and in order to promote consistency across the 
Exchange of available order types for both non-MIAX Market Makers and 
Market Makers, the Exchange believes that its proposal that EEMs may 
not enter GTC orders or market orders for the proprietary accounts of 
non-MIAX Market Makers so that the permissible order types available to 
non-MIAX Market Makers are the same as those for Market Makers promotes 
just and equitable principles of trade.

[[Page 83899]]

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. The Exchange operates in a 
highly competitive market comprised of fourteen U.S. options exchanges 
in which sophisticated and knowledgeable market participants can, and 
do, send order flow to competing exchanges if they deem trading 
practices at a particular exchange to be onerous or cumbersome. The 
proposed rule change allows the Exchange to make consistent across the 
Exchange the permissible order types available for both MIAX Market 
Makers and non-MIAX market makers. This consistency places all such 
market participants on an equal footing, and, as a consequence, will 
not impose any burden on 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 foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \18\ and Rule 19b-4(f)(6) \19\ 
thereunder.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    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-2016-43 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-2016-43. 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-2016-43 and should be 
submitted on or before December 13, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-28025 Filed 11-21-16; 8:45 am]
 BILLING CODE 8011-01-P
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