Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX PEARL Rules 100, 404, 519C and Adopt MIAX PEARL 1018, 9865-9869 [2017-02552]

Download as PDF Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices failure of an issue of Managed Fund Shares to comply with Rule 16.135. Prior to listing pursuant to proposed amended Rule 16.136(b)(1), an issuer would be required to represent to the Exchange that it will advise the Exchange of any failure by a series of Managed Fund Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under IEX Rule Series 14.500. Accordingly, based on the foregoing, the Exchange believes that the proposed generic listing standards for Managed Fund Shares are consistent with Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition IEX does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed change would facilitate the listing and trading of additional types of Managed Fund Shares and result in a significantly more efficient process for the listing and trading of Managed Fund Shares, thereby enhancing competition among market participants, including issuers and exchanges. Further, the Exchange believes that applying uniform and transparent listing standards would make the process for listing Managed Fund Shares more competitive. 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: A. By order approve or disapprove such proposed rule change; or VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 B. institute proceedings to determine whether the proposed rule change should be 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: 9865 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.45 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–02544 Filed 2–7–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79947; File No. SR– PEARL–2017–03] Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– IEX–2017–03 in the subject line. Paper Comments: • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–IEX–2017–03. This file number should be included in 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 (http://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 will also 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–IEX– 2017–03 and should be submitted on or before March 1, 2017. PO 00000 Frm 00157 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX PEARL Rules 100, 404, 519C and Adopt MIAX PEARL 1018 February 2, 2017. 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 24, 2017, MIAX PEARL, LLC (‘‘MIAX PEARL’’ 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend MIAX PEARL Rules 100, 404, 519C, and to adopt new MIAX PEARL Rule 1018, in order to bring MIAX PEARL Rules up to date with recent changes that have been made to the rules of the Exchange’s affiliate, Miami International Securities Exchange, LLC (‘‘MIAX Options’’). The text of the proposed rule change is available on the Exchange’s Web site at http://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’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 45 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 1 15 E:\FR\FM\08FEN1.SGM 08FEN1 9866 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 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 MIAX PEARL Rules 100, 404, 519C, and to adopt MIAX PEARL Rule 1018, in order to bring the MIAX PEARL Rules up to date with the changes that were made to the rules of MIAX Options while MIAX PEARL’s Form 1 Application to register as a national securities exchange was pending approval. Background MIAX PEARL plans to commence operations as a national securities exchange registered under Section 6 of the Act 3 on February 6, 2017. As described more fully in MIAX PEARL’s Form 1 application,4 the Exchange is an affiliate of MIAX Options. MIAX PEARL Rules, in their current form, were filed as Exhibit B to its Form 1 on August 12, 2016, and at that time, the above mentioned rules, were substantially similar to the rules of the MIAX Options exchange. In the time between when the Exchange filed its Form 1 and the time the Exchange received its approval order, MIAX Options made several changes to its rule book. In order to ensure consistent operation of both MIAX PEARL and MIAX Options through having consistent rules, the Exchange proposes to amend MIAX PEARL Rules as described below. asabaliauskas on DSK3SPTVN1PROD with NOTICES Series of Option Contracts Open for Trading The Exchange proposes to expand the Short Term Option Series Program outlined in Rule 404, Interpretations and Policies .02, to allow the listing and trading of SPDR S&P 500 ETF Trust (‘‘SPY’’) options with Wednesday expirations. These changes would make MIAX PEARL Rule 404 consistent with MIAX Options Rule 404 and are identical to changes made by MIAX 3 15 U.S.C. 78f. Securities Exchange Act Release No. 79543 (December 13, 2016), 81 FR 92901 (December 20, 2016) (File No. 10–227) (order approving application of MIAX PEARL, LLC for registration as a national securities exchange.) 4 See VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Options when it modified its rule.5 The Exchange further notes that the MIAX Options filing was a competitive filing based on a filing submitted by the BOX Options Exchange, LLC (‘‘BOX’’), which was approved by the Commission.6 Currently, under the Short Term Option Series Program the Exchange may open for trading on any Thursday or Friday that is a business day (‘‘Short Term Option Opening Date’’) series of options on that class that expire at the close of business on each of the next five Fridays that are business days, and are not Fridays in which monthly option series or Quarterly Options Series expire (‘‘Short Term Option Expiration Dates’’). The Exchange is now proposing to amend MIAX PEARL Rule 404, Interpretations and Policies .02, to permit the listing of SPY options expiring on Wednesdays. Specifically, the Exchange is proposing that it may open for trading on any Tuesday or Wednesday that is a business day, series of SPY options that expire on any Wednesday of the month that is a business day, and is not a Wednesday on which Quarterly Options Series expire (‘‘Wednesday SPY Expirations’’). The proposed Wednesday SPY Expiration series would be similar to the current Short Term Options Series, with certain exceptions.7 The Exchange notes that Wednesday expirations are not a novel a proposition as other option exchanges list and trade Wednesday SPY Expirations.8 The Exchange represents that is has an adequate surveillance program in place to detect manipulative trading in Wednesday SPY Expirations in the same way it monitors trading in the current Short Term Option Series. Additionally, the Exchange represents that it has the necessary system capacity to support the new options series. Definitions The Exchange proposes to amend Exchange Rule 100, which sets forth the definition of Short Term Option Series. The definition set forth in Rule 100 is redundant to the terms for Short Term Option Series set forth in Rule 404, Interpretations and Policies .02. As a result, the Exchange believes that amending Rule 100 by including an internal cross reference to Rule 404, 5 See Securities Exchange Act Release No. 78772 (September 6, 2016), 81 FR 62784 (September 12, 2016) (SR–MIAX–2016–31). 6 See Securities Exchange Act Release No. 78668 (August 24, 2016), 81 FR 59696 (August 30, 2016) (order approving SR–BOX–2016–28). 7 The Commission notes that these exceptions are further discussed in MIAX–2016–31, supra note 5. 8 See MIAX Options Rule 404; BOX Rule 5050; and ISE Rule 504. PO 00000 Frm 00158 Fmt 4703 Sfmt 4703 Interpretations and Policies .02 and by deleting redundant language would result in a clearer definition and would make the Rulebook more precise. Additionally, this change is identical to changes made by MIAX Options when it modified its rule.9 Mass Cancellation of Trading Interest The Exchange also proposes to amend Exchange Rule 519C, Mass Cancellation of Trading Interest, to align the process and procedure of cancelling orders and quotes from the order book to that of MIAX Options. The proposed rule change will amend the first paragraph for clarity and ease of reference and adopt new section (b) to provide that Exchange staff, upon request from a Member,10 may remove all of the Member’s quotations 11 and cancel all of the Member’s orders 12 in the System 13 and block new incoming quotations and orders from entering the System. The block will remain in effect until the Member contacts Exchange staff 14 to have the block removed. The Exchange proposes to add a new heading entitled ‘‘Cancel’’ to the first paragraph, and proposes to identify the first paragraph with the letter ‘‘(a)’’ for clarity and ease of reference. Additionally, the Exchange proposes to make a clarifying change to the wording of the first paragraph. The paragraph currently states that, ‘‘[a] Member may cancel all of its quotations and/or all or any subset of its orders [. . .].’’ The Exchange proposes to replace the word ‘‘cancel’’ with ‘‘remove’’ and to insert the word ‘‘cancel’’ after ‘‘and/or,’’ as this language more accurately describes 9 See Securities Exchange Act Release No. 78772 (September 6, 2016), 81 FR 62784 (September 12, 2016) (SR–MIAX–2016–31). 10 The term ‘‘Member’’ means an individual or organization that is registered with the Exchange pursuant to Chapter II of MIAX PEARL Rules for purposes of trading on the Exchange as an ‘‘Electronic Exchange Member’’ or ‘‘Market Maker.’’ Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 11 The term ‘‘quote’’ or ‘‘quotation’’ means a bid or offer entered by a Market Maker as a firm order that updates the Market Maker’s previous bid or offer, if any. When the term is used in these Rules and a bid or offer is entered by the Market Maker in the option series to which such Market Maker is registered, such order shall, as applicable, constitute a quote or quotation for purposes of these Rules. See Exchange Rule 100. 12 The term ‘‘order’’ means a firm commitment to buy or sell option contracts. See Exchange Rule 100. 13 The term ‘‘System’’ means the automated trading system used by the Exchange for the trading of securities. See Exchange Rule 100. 14 The Exchange’s Help Desk would receive such communication. The Help Desk is the Exchange’s control room consisting of Exchange staff authorized to make certain trading determinations on behalf of the Exchange. The Help Desk shall report to and be supervised by a senior executive officer of the Exchange. See Exchange Rule 100. E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES the actions being performed by the Exchange. Additionally, the Exchange is proposing to insert language indicating that a Member may effect the removal of its quotations and/or the cancellation of its orders, ‘‘by firm name or by Market Participant Identifier (‘‘MPID’’)’’.15 MIAX PEARL currently offers two Membership types, Market Maker (‘‘MM’’) 16 and Electronic Exchange Member (‘‘EEM’’).17 Market Makers selfassign the series for which they choose to act as a Market Maker 18 and have an obligation to maintain a two-sided market, pursuant to Rule 605(d)(1), in those series in which they register to trade.19 Exchange Rule 605, Market Maker Quotations, details various requirements associated with a Market Maker’s quotes, such as ‘‘Size Associated with Quotes’’, ‘‘Firm Quotes’’, and ‘‘Continuous Quotes’’.20 A ‘‘quote’’ on the Exchange is defined as, ‘‘[. . .] a bid or offer entered by a Market Maker as a firm order that updates the Market Maker’s previous bid or offer, if any [. . .].’’ 21 Currently, there is not a separate Market Maker quote transaction available on the Exchange. The Exchange’s definition of a quote further provides that, ‘‘[w]hen the term order is used in these Rules and a bid or offer is entered by the Market Maker in the option series to which such Market Maker is registered, such order shall, as applicable, constitute a quote or quotation for purposes of these Rules.’’ 22 The proposal would allow a Member to submit a request to remove all of its outstanding quotations, as described above, and cancel all of its open orders and block all new inbound quotations and orders by firm name or Market Participant Identifier (‘‘MPID’’). The form of such requests includes, but is not limited to, email or a phone call from authorized individuals. The removal of quotes and the cancellation of orders as described herein does not 15 The term ‘‘MPID’’ means unique market participant identifier. See Exchange Rule 100. 16 The term ‘‘Market Maker’’ or ‘‘MM’’ means a Member registered with the Exchange for the purpose of making markets in options contracts traded on the Exchange and that is vested with the rights and responsibilities specified in Chapter VI of MIAX PEARL Rules. See Exchange Rule 100. 17 The term ‘‘Electronic Exchange Member’’ or ‘‘EEM’’ means the holder of a Trading Permit who is a Member representing as agent Public Customer Orders or Non-Customer Orders on the Exchange and those non-Market Maker Members conducting proprietary trading. Electronic Exchange Members are deemed ‘‘members’’ under the Exchange Act. See Exchange Rule 100. 18 See Exchange Rule 602. 19 See Exchange Rule 604(a)(1). 20 See Exchange Rule 605. 21 See Exchange Rule 100. 22 See Exchange Rule 100. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 disconnect Members from the Exchange’s System. The proposed changes would make MIAX PEARL Rule 519C, Mass Cancellation of Trading Interest, consistent with MIAX Options Rule 519C, Mass Cancellation of Trading Interest, and are identical to changes made by MIAX Options when it modified its rule.23 Expedited Suspension Proceeding MIAX PEARL incorporates certain chapters of the MIAX Options Rulebook into its rulebook in their entirety by reference. Specifically, MIAX Options Rulebook, Chapter III, Business Conduct, is incorporated by reference, and contains Rule 322, Disruptive Quoting and Trading Activity Prohibited, which was adopted by MIAX Options to prohibit disruptive quoting and trading on MIAX Options.24 In connection with this rule, MIAX Options adopted new MIAX Options Rule 1018, Expedited Suspension Proceeding, to permit MIAX Options to take prompt action to suspend Members or their clients that violate MIAX Options Rule 322.25 The Exchange now proposes to adopt new Rule 1018, Expedited Suspension Proceeding, to align the rules of MIAX Options and MIAX PEARL. The Exchange proposes to adopt new Rule 1018, to set forth procedures for issuing suspension orders, immediately prohibiting a Member from conducting continued disruptive quoting and trading activity on the Exchange. Importantly, these procedures would also provide the Exchange the authority to order a Member to cease and desist from providing access to the Exchange to a client of the Member that is conducting disruptive quoting and trading activity in violation of Rule 322. The Exchange notes that the proposed change would make MIAX PEARL Rule 1018 consistent with MIAX Options Rule 1018 and is identical to the rule text adopted by MIAX Options when it adopted its rule.26 2. Statutory Basis MIAX PEARL believes that its proposed rule change is consistent with Section 6(b) of the Act 27 in general, and 23 See Securities Exchange Act Release Nos. 78023 (June 8, 2016), 81 FR 38751 (June 14, 2016) (SR–MIAX–2016–14) (adoption of Rule 519C); 78974 (September 29, 2016), 81 FR 69090 (October 5, 2016) (SR–MIAX–2016–34) (amendment of Rule 519C). 24 See MIAX Options Rule 322. 25 See MIAX Options Rule 1018. 26 See Securities Exchange Act Release No. 79182 (October 28, 2016), 81 FR 76639 (November 3, 2016) (SR–MIAX–2016–40). 27 15 U.S.C. 78f(b). PO 00000 Frm 00159 Fmt 4703 Sfmt 4703 9867 furthers the objectives of Section 6(b)(5) of the Act 28 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange is proposing to amend Rule 404, Series of Option Contracts Open for Trading. The Exchange believes the Short Term Option Series Program has been successful to date and that Wednesday SPY Expirations simply expand the ability of investors to hedge risk against market movements stemming from economic releases or market events that occur throughout the month in the same way that the Short Term Option Series Program has expanded the landscape of hedging. Similarly, the Exchange believes Wednesday SPY Expirations should create greater trading and hedging opportunities and flexibility, and provide customers with the ability to more closely tailor their investment objectives. The Exchange believes that allowing Wednesday SPY Expirations and monthly SPY expirations in the same week would benefit investors and minimize investor confusion by providing Wednesday SPY Expirations in a continuous and uniform manner. The Exchange is also proposing to amend Rule 100, Definitions, which sets forth the definition of Short Term Option Series. The definition set forth in current Rule 100 is redundant to the terms for Short Term Option Series set forth in Rule 404, Interpretations and Policies .02. As a result, the Exchange believes that amending Rule 100 by including an internal cross reference to Rule 404, Interpretations and Policies .02 and deleting redundant language would result in a clearer definition and would make the Rulebook more precise and user friendly. Clarity and transparency of the Exchange’s rules benefits investors and the public by eliminating the potential for confusion. The Exchange is also proposing to amend Rule 519C, Mass Cancellation of Trading Interest, to add another risk protection tool for Members and provide that the Exchange may take action on their behalf. The proposed rule protects investors and the public interest by increasing the number of risk protection tools available to Members on the Exchange. The Exchange is also making 28 15 E:\FR\FM\08FEN1.SGM U.S.C. 78f(b)(5). 08FEN1 9868 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices minor non-substantive amendments to the rule which organize the rule text for clarity and clarifies the actions being performed by the Exchange, and are intended to remove impediments to and perfect the mechanisms of a free and open market by adding precision and ease of reference to the Exchange’s rules, thus promoting transparency and clarity for Exchange Members. The Exchange is also proposing to adopt Rule 1018, Expedited Suspension Proceeding, which will provide the Exchange a mechanism to promptly initiate expedited suspension proceedings in the event the Exchange believes that it has sufficient proof that a violation of Rule 322 has occurred and is ongoing. The Exchange believes that the proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the Act,29 which require that the rules of an exchange enforce compliance with, and provide appropriate discipline for, violations of the Commission and Exchange rules. The Exchange also believes that the proposal is consistent with the public interest, and the protection of investors, or otherwise in furtherance of the purposes of the Act because the proposal helps to strengthen the Exchange’s ability to carry out its oversight and enforcement responsibilities as a self-regulatory organization in cases where awaiting the conclusion of a full disciplinary proceeding is unsuitable in view of the potential harm to Members and their customers. Also, the Exchange notes that if this type of conduct is allowed to continue on the Exchange, the Exchange’s reputation could be harmed because it may appear to the public that the Exchange is not acting to address the behavior. The expedited process would enable the Exchange to address the behavior with greater speed. The Exchange notes that is has defined the prohibited disruptive quoting and trading activity by modifying the traditional definitions of layering 30 and spoofing 31 to eliminate an express intent element that would 29 15 U.S.C. 78f(b)(1) and 78f(b)(6). is a form of market manipulation in which multiple, non-bona fide limit orders are entered on one side of the market at various price levels in order to create the appearance of a change in the levels of supply and demand, thereby artificially moving the price of a security. An order is then executed on the opposite side of the market at the artificially created price, and the non-bona fide orders are cancelled. 31 ‘‘Spoofing’’ is a form of market manipulation that involves the market manipulator placing nonbona fide orders that are intended to trigger some type of market movement and/or response from other market participants, from which the market manipulator might benefit by trading bona fide orders. asabaliauskas on DSK3SPTVN1PROD with NOTICES 30 ‘‘Layering’ VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 not be proven on an expedited basis and would instead require a thorough investigation into the activity. As noted, the Exchange believes it is necessary for the protection of investors to make such modifications in order to adopt an expedited process rather than allowing disruptive quoting and trading activity to occur for several years. The Exchange believes that this proposal will provide the Exchange with the necessary means to enforce against such behavior in an expedited manner while providing Members with the necessary due process. The Exchange believes that its proposal is consistent with the Act because it provides the Exchange with the ability to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest from such ongoing behavior. Further, the Exchange believes that adopting a rule applicable to market participants is consistent with the Act because the Exchange believes that this type of behavior should be prohibited for all Members. While this behavior may not be as prevalent on the options markets today, the Exchange does not believe the possibility of such behavior in the future would not have the same market impact and thereby warrant an expedited process. The Exchange believes that the proposal is consistent Section 6(b)(7) of the Act,32 which requires that the rules of an exchange ‘‘provide a fair procedure for the disciplining of members and persons associated with members . . . and the prohibition or limitation by the exchange of any person with respect to access to services offered by the exchange or a member thereof.’’ Finally, the Exchange believes the proposal is consistent with Sections 6(d)(1) and 6(d)(2) of the Act,33 which require that the rules of an exchange with respect to a disciplinary proceeding or proceeding that would limit or prohibit access to or membership in the exchange require the exchange to: Provide adequate and specific notice of the charges brought against a member or person associated with a member, provide an opportunity to defend against such charges, keep a record, and provide details regarding the findings and applicable sanctions in the event a determination to impose a disciplinary sanction is made. The Exchange believes that each of these requirements is addressed by the notice and due process provisions included within Rule 1018. Importantly, the 32 15 33 15 PO 00000 U.S.C. 78f(b)(7). U.S.C. 78f(d)(1) and 78f(d)(2). Frm 00160 Fmt 4703 Sfmt 4703 Exchange will use the authority only in clear and egregious cases when necessary to protect investors, other Members and the Exchange, and in such cases, the Respondent will be afforded due process in connection with the suspension proceedings. The Exchange believes the proposal removes impediments to and perfects the mechanisms of a free and open market. Specifically, the Exchange believes that although MIAX PEARL rules may, in certain instances, intentionally differ from MIAX Options rules, the proposed changes will promote uniformity with MIAX Options with respect to rules that are intended to be identical but which were not modified while MIAX PEARL’s Form 1 application was pending approval. The Exchange believes that it will reduce the potential for confusion by its members that are also members of MIAX Options if it commences operations with only those differences between MIAX PEARL and the MIAX Options Exchange rules that are intentional. 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. 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 34 and Rule 19b–4(f)(6) 35 thereunder. A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 36 normally does not become 34 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. 36 17 CFR 240.19b–4(f)(6). 35 17 E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 37 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In its filing with the Commission, the Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Commission notes that waiver of the operative delay will allow the proposed rules to become operative before the Exchange intends to commence operations as a national exchange on February 6, 2017. The Commission notes that the proposed rule change is based on substantively identical rules of MIAX Options and thus raises no new novel or substantive issues. Accordingly, the Commission hereby waives the operative delay and designates the proposal operative upon filing.38 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. Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–PEARL–2017–03. 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 (http://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– PEARL–2017–03 and should be submitted on or before March 1, 2017. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.39 Robert W. Errett, Deputy 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 asabaliauskas on DSK3SPTVN1PROD with NOTICES • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– PEARL–2017–03 on the subject line. [FR Doc. 2017–02552 Filed 2–7–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting; Additional Item FEDERAL REGISTER CITATION OF PREVIOUS ANNOUNCEMENT: To be published. Paper Comments PREVIOUSLY ANNOUNCED TIME AND DATE OF THE MEETING: Thursday, February 9, • Send paper comments in triplicate to Secretary, Securities and Exchange CHANGES IN THE MEETING: 37 17 CFR 240.19b–4(f)(6)(iii). 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). 38 For VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 2017. The following matter will also be considered during the 2 p.m. Closed Meeting scheduled for Thursday, February 9, 2017: Exemption Relief Order. CONTACT PERSON FOR MORE INFORMATION: For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551– 5400. Dated: February 3, 2017. Lynn M. Powalski, Deputy Secretary. [FR Doc. 2017–02636 Filed 2–6–17; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79946; File No. SR– PEARL–2017–05] Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 515, Execution of Orders and Quotes February 2, 2017. 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 31, 2017, MIAX PEARL, LLC (‘‘MIAX PEARL’’ 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal rule change to amend Exchange Rule 515, Execution of Orders and Quotes. The text of the proposed rule change is available on the Exchange’s Web site at http://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 1 15 39 17 PO 00000 CFR 200.30–3(a)(12). Frm 00161 Fmt 4703 Sfmt 4703 9869 2 17 E:\FR\FM\08FEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 08FEN1

Agencies

[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9865-9869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02552]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79947; File No. SR-PEARL-2017-03]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX 
PEARL Rules 100, 404, 519C and Adopt MIAX PEARL 1018

February 2, 2017.
    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 24, 2017, MIAX PEARL, LLC (``MIAX 
PEARL'' 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 MIAX PEARL Rules 100, 
404, 519C, and to adopt new MIAX PEARL Rule 1018, in order to bring 
MIAX PEARL Rules up to date with recent changes that have been made to 
the rules of the Exchange's affiliate, Miami International Securities 
Exchange, LLC (``MIAX Options'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL'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

[[Page 9866]]

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 MIAX PEARL Rules 100, 404, 519C, and 
to adopt MIAX PEARL Rule 1018, in order to bring the MIAX PEARL Rules 
up to date with the changes that were made to the rules of MIAX Options 
while MIAX PEARL's Form 1 Application to register as a national 
securities exchange was pending approval.
Background
    MIAX PEARL plans to commence operations as a national securities 
exchange registered under Section 6 of the Act \3\ on February 6, 2017. 
As described more fully in MIAX PEARL's Form 1 application,\4\ the 
Exchange is an affiliate of MIAX Options. MIAX PEARL Rules, in their 
current form, were filed as Exhibit B to its Form 1 on August 12, 2016, 
and at that time, the above mentioned rules, were substantially similar 
to the rules of the MIAX Options exchange. In the time between when the 
Exchange filed its Form 1 and the time the Exchange received its 
approval order, MIAX Options made several changes to its rule book. In 
order to ensure consistent operation of both MIAX PEARL and MIAX 
Options through having consistent rules, the Exchange proposes to amend 
MIAX PEARL Rules as described below.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f.
    \4\ See Securities Exchange Act Release No. 79543 (December 13, 
2016), 81 FR 92901 (December 20, 2016) (File No. 10-227) (order 
approving application of MIAX PEARL, LLC for registration as a 
national securities exchange.)
---------------------------------------------------------------------------

Series of Option Contracts Open for Trading
    The Exchange proposes to expand the Short Term Option Series 
Program outlined in Rule 404, Interpretations and Policies .02, to 
allow the listing and trading of SPDR S&P 500 ETF Trust (``SPY'') 
options with Wednesday expirations. These changes would make MIAX PEARL 
Rule 404 consistent with MIAX Options Rule 404 and are identical to 
changes made by MIAX Options when it modified its rule.\5\ The Exchange 
further notes that the MIAX Options filing was a competitive filing 
based on a filing submitted by the BOX Options Exchange, LLC (``BOX''), 
which was approved by the Commission.\6\
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    \5\ See Securities Exchange Act Release No. 78772 (September 6, 
2016), 81 FR 62784 (September 12, 2016) (SR-MIAX-2016-31).
    \6\ See Securities Exchange Act Release No. 78668 (August 24, 
2016), 81 FR 59696 (August 30, 2016) (order approving SR-BOX-2016-
28).
---------------------------------------------------------------------------

    Currently, under the Short Term Option Series Program the Exchange 
may open for trading on any Thursday or Friday that is a business day 
(``Short Term Option Opening Date'') series of options on that class 
that expire at the close of business on each of the next five Fridays 
that are business days, and are not Fridays in which monthly option 
series or Quarterly Options Series expire (``Short Term Option 
Expiration Dates''). The Exchange is now proposing to amend MIAX PEARL 
Rule 404, Interpretations and Policies .02, to permit the listing of 
SPY options expiring on Wednesdays. Specifically, the Exchange is 
proposing that it may open for trading on any Tuesday or Wednesday that 
is a business day, series of SPY options that expire on any Wednesday 
of the month that is a business day, and is not a Wednesday on which 
Quarterly Options Series expire (``Wednesday SPY Expirations''). The 
proposed Wednesday SPY Expiration series would be similar to the 
current Short Term Options Series, with certain exceptions.\7\ The 
Exchange notes that Wednesday expirations are not a novel a proposition 
as other option exchanges list and trade Wednesday SPY Expirations.\8\
---------------------------------------------------------------------------

    \7\ The Commission notes that these exceptions are further 
discussed in MIAX-2016-31, supra note 5.
    \8\ See MIAX Options Rule 404; BOX Rule 5050; and ISE Rule 504.
---------------------------------------------------------------------------

    The Exchange represents that is has an adequate surveillance 
program in place to detect manipulative trading in Wednesday SPY 
Expirations in the same way it monitors trading in the current Short 
Term Option Series. Additionally, the Exchange represents that it has 
the necessary system capacity to support the new options series.
Definitions
    The Exchange proposes to amend Exchange Rule 100, which sets forth 
the definition of Short Term Option Series. The definition set forth in 
Rule 100 is redundant to the terms for Short Term Option Series set 
forth in Rule 404, Interpretations and Policies .02. As a result, the 
Exchange believes that amending Rule 100 by including an internal cross 
reference to Rule 404, Interpretations and Policies .02 and by deleting 
redundant language would result in a clearer definition and would make 
the Rulebook more precise. Additionally, this change is identical to 
changes made by MIAX Options when it modified its rule.\9\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 78772 (September 6, 
2016), 81 FR 62784 (September 12, 2016) (SR-MIAX-2016-31).
---------------------------------------------------------------------------

Mass Cancellation of Trading Interest
    The Exchange also proposes to amend Exchange Rule 519C, Mass 
Cancellation of Trading Interest, to align the process and procedure of 
cancelling orders and quotes from the order book to that of MIAX 
Options. The proposed rule change will amend the first paragraph for 
clarity and ease of reference and adopt new section (b) to provide that 
Exchange staff, upon request from a Member,\10\ may remove all of the 
Member's quotations \11\ and cancel all of the Member's orders \12\ in 
the System \13\ and block new incoming quotations and orders from 
entering the System. The block will remain in effect until the Member 
contacts Exchange staff \14\ to have the block removed.
---------------------------------------------------------------------------

    \10\ The term ``Member'' means an individual or organization 
that is registered with the Exchange pursuant to Chapter II of MIAX 
PEARL Rules for purposes of trading on the Exchange as an 
``Electronic Exchange Member'' or ``Market Maker.'' Members are 
deemed ``members'' under the Exchange Act. See Exchange Rule 100.
    \11\ The term ``quote'' or ``quotation'' means a bid or offer 
entered by a Market Maker as a firm order that updates the Market 
Maker's previous bid or offer, if any. When the term is used in 
these Rules and a bid or offer is entered by the Market Maker in the 
option series to which such Market Maker is registered, such order 
shall, as applicable, constitute a quote or quotation for purposes 
of these Rules. See Exchange Rule 100.
    \12\ The term ``order'' means a firm commitment to buy or sell 
option contracts. See Exchange Rule 100.
    \13\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \14\ The Exchange's Help Desk would receive such communication. 
The Help Desk is the Exchange's control room consisting of Exchange 
staff authorized to make certain trading determinations on behalf of 
the Exchange. The Help Desk shall report to and be supervised by a 
senior executive officer of the Exchange. See Exchange Rule 100.
---------------------------------------------------------------------------

    The Exchange proposes to add a new heading entitled ``Cancel'' to 
the first paragraph, and proposes to identify the first paragraph with 
the letter ``(a)'' for clarity and ease of reference. Additionally, the 
Exchange proposes to make a clarifying change to the wording of the 
first paragraph. The paragraph currently states that, ``[a] Member may 
cancel all of its quotations and/or all or any subset of its orders [. 
. .].'' The Exchange proposes to replace the word ``cancel'' with 
``remove'' and to insert the word ``cancel'' after ``and/or,'' as this 
language more accurately describes

[[Page 9867]]

the actions being performed by the Exchange. Additionally, the Exchange 
is proposing to insert language indicating that a Member may effect the 
removal of its quotations and/or the cancellation of its orders, ``by 
firm name or by Market Participant Identifier (``MPID'')''.\15\
---------------------------------------------------------------------------

    \15\ The term ``MPID'' means unique market participant 
identifier. See Exchange Rule 100.
---------------------------------------------------------------------------

    MIAX PEARL currently offers two Membership types, Market Maker 
(``MM'') \16\ and Electronic Exchange Member (``EEM'').\17\ Market 
Makers self-assign the series for which they choose to act as a Market 
Maker \18\ and have an obligation to maintain a two-sided market, 
pursuant to Rule 605(d)(1), in those series in which they register to 
trade.\19\ Exchange Rule 605, Market Maker Quotations, details various 
requirements associated with a Market Maker's quotes, such as ``Size 
Associated with Quotes'', ``Firm Quotes'', and ``Continuous 
Quotes''.\20\ A ``quote'' on the Exchange is defined as, ``[. . .] a 
bid or offer entered by a Market Maker as a firm order that updates the 
Market Maker's previous bid or offer, if any [. . .].'' \21\ Currently, 
there is not a separate Market Maker quote transaction available on the 
Exchange. The Exchange's definition of a quote further provides that, 
``[w]hen the term order is used in these Rules and a bid or offer is 
entered by the Market Maker in the option series to which such Market 
Maker is registered, such order shall, as applicable, constitute a 
quote or quotation for purposes of these Rules.'' \22\
---------------------------------------------------------------------------

    \16\ The term ``Market Maker'' or ``MM'' means a Member 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in Chapter VI of MIAX PEARL 
Rules. See Exchange Rule 100.
    \17\ The term ``Electronic Exchange Member'' or ``EEM'' means 
the holder of a Trading Permit who is a Member representing as agent 
Public Customer Orders or Non-Customer Orders on the Exchange and 
those non-Market Maker Members conducting proprietary trading. 
Electronic Exchange Members are deemed ``members'' under the 
Exchange Act. See Exchange Rule 100.
    \18\ See Exchange Rule 602.
    \19\ See Exchange Rule 604(a)(1).
    \20\ See Exchange Rule 605.
    \21\ See Exchange Rule 100.
    \22\ See Exchange Rule 100.
---------------------------------------------------------------------------

    The proposal would allow a Member to submit a request to remove all 
of its outstanding quotations, as described above, and cancel all of 
its open orders and block all new inbound quotations and orders by firm 
name or Market Participant Identifier (``MPID''). The form of such 
requests includes, but is not limited to, email or a phone call from 
authorized individuals. The removal of quotes and the cancellation of 
orders as described herein does not disconnect Members from the 
Exchange's System.
    The proposed changes would make MIAX PEARL Rule 519C, Mass 
Cancellation of Trading Interest, consistent with MIAX Options Rule 
519C, Mass Cancellation of Trading Interest, and are identical to 
changes made by MIAX Options when it modified its rule.\23\
---------------------------------------------------------------------------

    \23\ See Securities Exchange Act Release Nos. 78023 (June 8, 
2016), 81 FR 38751 (June 14, 2016) (SR-MIAX-2016-14) (adoption of 
Rule 519C); 78974 (September 29, 2016), 81 FR 69090 (October 5, 
2016) (SR-MIAX-2016-34) (amendment of Rule 519C).
---------------------------------------------------------------------------

Expedited Suspension Proceeding
    MIAX PEARL incorporates certain chapters of the MIAX Options 
Rulebook into its rulebook in their entirety by reference. 
Specifically, MIAX Options Rulebook, Chapter III, Business Conduct, is 
incorporated by reference, and contains Rule 322, Disruptive Quoting 
and Trading Activity Prohibited, which was adopted by MIAX Options to 
prohibit disruptive quoting and trading on MIAX Options.\24\ In 
connection with this rule, MIAX Options adopted new MIAX Options Rule 
1018, Expedited Suspension Proceeding, to permit MIAX Options to take 
prompt action to suspend Members or their clients that violate MIAX 
Options Rule 322.\25\ The Exchange now proposes to adopt new Rule 1018, 
Expedited Suspension Proceeding, to align the rules of MIAX Options and 
MIAX PEARL.
---------------------------------------------------------------------------

    \24\ See MIAX Options Rule 322.
    \25\ See MIAX Options Rule 1018.
---------------------------------------------------------------------------

    The Exchange proposes to adopt new Rule 1018, to set forth 
procedures for issuing suspension orders, immediately prohibiting a 
Member from conducting continued disruptive quoting and trading 
activity on the Exchange. Importantly, these procedures would also 
provide the Exchange the authority to order a Member to cease and 
desist from providing access to the Exchange to a client of the Member 
that is conducting disruptive quoting and trading activity in violation 
of Rule 322. The Exchange notes that the proposed change would make 
MIAX PEARL Rule 1018 consistent with MIAX Options Rule 1018 and is 
identical to the rule text adopted by MIAX Options when it adopted its 
rule.\26\
---------------------------------------------------------------------------

    \26\ See Securities Exchange Act Release No. 79182 (October 28, 
2016), 81 FR 76639 (November 3, 2016) (SR-MIAX-2016-40).
---------------------------------------------------------------------------

2. Statutory Basis
    MIAX PEARL believes that its proposed rule change is consistent 
with Section 6(b) of the Act \27\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \28\ 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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange is proposing to amend Rule 404, Series of Option 
Contracts Open for Trading. The Exchange believes the Short Term Option 
Series Program has been successful to date and that Wednesday SPY 
Expirations simply expand the ability of investors to hedge risk 
against market movements stemming from economic releases or market 
events that occur throughout the month in the same way that the Short 
Term Option Series Program has expanded the landscape of hedging. 
Similarly, the Exchange believes Wednesday SPY Expirations should 
create greater trading and hedging opportunities and flexibility, and 
provide customers with the ability to more closely tailor their 
investment objectives. The Exchange believes that allowing Wednesday 
SPY Expirations and monthly SPY expirations in the same week would 
benefit investors and minimize investor confusion by providing 
Wednesday SPY Expirations in a continuous and uniform manner.
    The Exchange is also proposing to amend Rule 100, Definitions, 
which sets forth the definition of Short Term Option Series. The 
definition set forth in current Rule 100 is redundant to the terms for 
Short Term Option Series set forth in Rule 404, Interpretations and 
Policies .02. As a result, the Exchange believes that amending Rule 100 
by including an internal cross reference to Rule 404, Interpretations 
and Policies .02 and deleting redundant language would result in a 
clearer definition and would make the Rulebook more precise and user 
friendly. Clarity and transparency of the Exchange's rules benefits 
investors and the public by eliminating the potential for confusion.
    The Exchange is also proposing to amend Rule 519C, Mass 
Cancellation of Trading Interest, to add another risk protection tool 
for Members and provide that the Exchange may take action on their 
behalf. The proposed rule protects investors and the public interest by 
increasing the number of risk protection tools available to Members on 
the Exchange. The Exchange is also making

[[Page 9868]]

minor non-substantive amendments to the rule which organize the rule 
text for clarity and clarifies the actions being performed by the 
Exchange, and are intended to remove impediments to and perfect the 
mechanisms of a free and open market by adding precision and ease of 
reference to the Exchange's rules, thus promoting transparency and 
clarity for Exchange Members.
    The Exchange is also proposing to adopt Rule 1018, Expedited 
Suspension Proceeding, which will provide the Exchange a mechanism to 
promptly initiate expedited suspension proceedings in the event the 
Exchange believes that it has sufficient proof that a violation of Rule 
322 has occurred and is ongoing. The Exchange believes that the 
proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the 
Act,\29\ which require that the rules of an exchange enforce compliance 
with, and provide appropriate discipline for, violations of the 
Commission and Exchange rules. The Exchange also believes that the 
proposal is consistent with the public interest, and the protection of 
investors, or otherwise in furtherance of the purposes of the Act 
because the proposal helps to strengthen the Exchange's ability to 
carry out its oversight and enforcement responsibilities as a self-
regulatory organization in cases where awaiting the conclusion of a 
full disciplinary proceeding is unsuitable in view of the potential 
harm to Members and their customers.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b)(1) and 78f(b)(6).
---------------------------------------------------------------------------

    Also, the Exchange notes that if this type of conduct is allowed to 
continue on the Exchange, the Exchange's reputation could be harmed 
because it may appear to the public that the Exchange is not acting to 
address the behavior. The expedited process would enable the Exchange 
to address the behavior with greater speed.
    The Exchange notes that is has defined the prohibited disruptive 
quoting and trading activity by modifying the traditional definitions 
of layering \30\ and spoofing \31\ to eliminate an express intent 
element that would not be proven on an expedited basis and would 
instead require a thorough investigation into the activity. As noted, 
the Exchange believes it is necessary for the protection of investors 
to make such modifications in order to adopt an expedited process 
rather than allowing disruptive quoting and trading activity to occur 
for several years.
---------------------------------------------------------------------------

    \30\ ``Layering' is a form of market manipulation in which 
multiple, non-bona fide limit orders are entered on one side of the 
market at various price levels in order to create the appearance of 
a change in the levels of supply and demand, thereby artificially 
moving the price of a security. An order is then executed on the 
opposite side of the market at the artificially created price, and 
the non-bona fide orders are cancelled.
    \31\ ``Spoofing'' is a form of market manipulation that involves 
the market manipulator placing non-bona fide orders that are 
intended to trigger some type of market movement and/or response 
from other market participants, from which the market manipulator 
might benefit by trading bona fide orders.
---------------------------------------------------------------------------

    The Exchange believes that this proposal will provide the Exchange 
with the necessary means to enforce against such behavior in an 
expedited manner while providing Members with the necessary due 
process. The Exchange believes that its proposal is consistent with the 
Act because it provides the Exchange with the ability to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest from such ongoing behavior. Further, the Exchange 
believes that adopting a rule applicable to market participants is 
consistent with the Act because the Exchange believes that this type of 
behavior should be prohibited for all Members. While this behavior may 
not be as prevalent on the options markets today, the Exchange does not 
believe the possibility of such behavior in the future would not have 
the same market impact and thereby warrant an expedited process.
    The Exchange believes that the proposal is consistent Section 
6(b)(7) of the Act,\32\ which requires that the rules of an exchange 
``provide a fair procedure for the disciplining of members and persons 
associated with members . . . and the prohibition or limitation by the 
exchange of any person with respect to access to services offered by 
the exchange or a member thereof.'' Finally, the Exchange believes the 
proposal is consistent with Sections 6(d)(1) and 6(d)(2) of the 
Act,\33\ which require that the rules of an exchange with respect to a 
disciplinary proceeding or proceeding that would limit or prohibit 
access to or membership in the exchange require the exchange to: 
Provide adequate and specific notice of the charges brought against a 
member or person associated with a member, provide an opportunity to 
defend against such charges, keep a record, and provide details 
regarding the findings and applicable sanctions in the event a 
determination to impose a disciplinary sanction is made. The Exchange 
believes that each of these requirements is addressed by the notice and 
due process provisions included within Rule 1018. Importantly, the 
Exchange will use the authority only in clear and egregious cases when 
necessary to protect investors, other Members and the Exchange, and in 
such cases, the Respondent will be afforded due process in connection 
with the suspension proceedings.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(7).
    \33\ 15 U.S.C. 78f(d)(1) and 78f(d)(2).
---------------------------------------------------------------------------

    The Exchange believes the proposal removes impediments to and 
perfects the mechanisms of a free and open market. Specifically, the 
Exchange believes that although MIAX PEARL rules may, in certain 
instances, intentionally differ from MIAX Options rules, the proposed 
changes will promote uniformity with MIAX Options with respect to rules 
that are intended to be identical but which were not modified while 
MIAX PEARL's Form 1 application was pending approval. The Exchange 
believes that it will reduce the potential for confusion by its members 
that are also members of MIAX Options if it commences operations with 
only those differences between MIAX PEARL and the MIAX Options Exchange 
rules that are intentional.

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.

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 \34\ and Rule 19b-4(f)(6) \35\ 
thereunder.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \36\ normally does not become

[[Page 9869]]

operative for 30 days after the date of its filing. However, Rule 19b-
4(f)(6)(iii) \37\ permits the Commission to designate a shorter time if 
such action is consistent with the protection of investors and the 
public interest. In its filing with the Commission, the Exchange has 
asked the Commission to waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Commission notes 
that waiver of the operative delay will allow the proposed rules to 
become operative before the Exchange intends to commence operations as 
a national exchange on February 6, 2017. The Commission notes that the 
proposed rule change is based on substantively identical rules of MIAX 
Options and thus raises no new novel or substantive issues. 
Accordingly, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\38\
---------------------------------------------------------------------------

    \36\ 17 CFR 240.19b-4(f)(6).
    \37\ 17 CFR 240.19b-4(f)(6)(iii).
    \38\ 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).
---------------------------------------------------------------------------

    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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-PEARL-2017-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-PEARL-2017-03. 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 (http://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-PEARL-2017-03 and should be 
submitted on or before March 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02552 Filed 2-7-17; 8:45 am]
 BILLING CODE 8011-01-P