Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by Miami International Securities Exchange LLC To Amend MIAX Options Rule 519C, Mass Cancellation of Trading Interest, 13146-13150 [2017-04603]
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Federal Register / Vol. 82, No. 45 / Thursday, March 9, 2017 / Notices
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s Web site (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3007.40.
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3010, and 39
CFR part 3020, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3015, and
39 CFR part 3020, subpart B. Comment
deadline(s) for each request appear in
section II.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
II. Docketed Proceeding(s)
POSTAL SERVICE
Product Change—Priority Mail
Negotiated Service Agreement
Postal ServiceTM.
Notice.
AGENCY:
ACTION:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Effective date: March 9, 2017.
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on March 3, 2017,
it filed with the Postal Regulatory
Commission a Request of the United
States Postal Service to Add Priority
Mail Contract 295 to Competitive
Product List. Documents are available at
www.prc.gov, Docket Nos. MC2017–93,
CP2017–128.
SUMMARY:
Stanley F. Mires,
Attorney, Federal Compliance.
[FR Doc. 2017–04592 Filed 3–8–17; 8:45 am]
BILLING CODE 7710–12–P
1. Docket No(s).: MC2017–93 and
CP2017–128; Filing Title: Request of the
United States Postal Service to Add
Priority Mail Contract 295 to
Competitive Product List and Notice of
Filing (Under Seal) of Unredacted
Governors’ Decision, Contract, and
Supporting Data; Filing Acceptance
Date: March 3, 2017; Filing Authority:
39 U.S.C. 3642 and 39 CFR 3020.30 et
seq.; Public Representative: Kenneth R.
Moeller; Comments Due: March 13,
2017.
2. Docket No(s).: MC2017–94 and
CP2017–129; Filing Title: Request of the
United States Postal Service to Add
Priority Mail Contract 296 to
Competitive Product List and Notice of
Filing (Under Seal) of Unredacted
Governors’ Decision, Contract, and
Supporting Data; Filing Acceptance
Date: March 3, 2017; Filing Authority:
39 U.S.C. 3642 and 39 CFR 3020.30 et
seq.; Public Representative: Kenneth R.
Moeller; Comments Due: March 13,
2017.
This notice will be published in the
Federal Register.
Stacy L. Ruble,
Secretary.
POSTAL SERVICE
Product Change—Priority Mail
Negotiated Service Agreement
Postal ServiceTM.
Notice.
AGENCY:
ACTION:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Effective date: March 9, 2017.
FOR FURTHER INFORMATION CONTACT:
Elizabeth A. Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on March 3, 2017,
it filed with the Postal Regulatory
Commission a Request of the United
States Postal Service to Add Priority
Mail Contract 296 to Competitive
Product List. Documents are available at
www.prc.gov, Docket Nos. MC2017–94,
CP2017–129.
SUMMARY:
Stanley F. Mires,
Attorney, Federal Compliance.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80151; File No. SR–MIAX–
2017–08]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by Miami
International Securities Exchange LLC
To Amend MIAX Options Rule 519C,
Mass Cancellation of Trading Interest
March 3, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on February
23, 2017, 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 519C.
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 519C, Mass Cancellation of
Trading Interest, to adopt new section
[FR Doc. 2017–04642 Filed 3–8–17; 8:45 am]
[FR Doc. 2017–04593 Filed 3–8–17; 8:45 am]
1 15
BILLING CODE 7710–FW–P
BILLING CODE 7710–12–P
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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(c) entitled ‘‘Detection of Loss of
Communication,’’ to codify the use of
current functionality in the Exchange’s
System 3 which is designed to assist
market participants in the event of a loss
of communication with either their
assigned MIAX Express Interface
(‘‘MEI’’) 4 or Financial Information
eXchange (‘‘FIX’’) 5 port due to a loss of
connectivity. This functionality is
designed to protect Market Makers 6 and
other market participants from
inadvertent exposure to excessive risk.
Additionally, the Exchange proposes to
adopt new Interpretations and Policies
.01 and .02 as discussed below.
Exchange Members 7 enter quotes 8
and orders 9 utilizing either an MEI port
or a FIX port respectively. MEI is
utilized by Market Makers of the
Exchange and FIX is utilized by
Electronic Exchange Members
(‘‘EEMs’’).10 These ports provide the
mechanism by which Members
maintain a connection to the Exchange
and through which a Member
communicates its quotes and/or orders
to the System. Market Makers may
submit quotes to the Exchange from one
or more MEI ports. Similarly, Members
may submit orders to the Exchange from
one or more FIX ports. When the System
detects a loss of communication with a
Member, the System has the capability
to remove the Member’s quotes and/or
orders, if so elected and configured by
the Member. The Exchange notes that
this functionality is mandatory for
Market Makers using MEI and optional
for EEMs using FIX as discussed in
more detail below.
3 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
4 MEI is a connection to MIAX systems that
enables Market Makers to submit electronic quotes
to the Exchange.
5 FIX connections to the Exchange permit the
entry of orders.
6 The term ‘‘Market Makers’’ refers to ‘‘Lead
Market Makers’’, ‘‘Primary Lead Market Makers’’
and Registered Market Makers’’ collectively. See
Exchange Rule 100.
7 The term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
8 The term ‘‘quote’’ or ‘‘quotation’’ means a bid or
offer entered by a Market Maker that is firm and
may update the Market Maker’s previous quote, if
any. The Rules of the Exchange provide for the use
of different type of quotes, including Standard
quotes and eQuotes, as more fully described in Rule
517. See Exchange Rule 100.
9 The term ‘‘order’’ means a firm commitment to
buy or sell option contracts. See Exchange Rule 100.
10 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.
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MEI Connections
Market Makers connect to their
assigned MEI port using the MIAX
Session Management Protocol (‘‘SesM’’).
The SesM protocol uses heartbeat 11
packets to detect link failures between
the Member and the Exchange. The
SesM protocol requires that the
Exchange must send a heartbeat packet
anytime more than one (1) second has
passed since the Exchange last sent any
data. Further, the SesM protocol
requires that the Member must send a
heartbeat packet anytime more than one
(1) second has passed since the Member
last sent any data. If a certain number
of consecutive heartbeats are missed,12
or if the Member fails to send data or
heartbeats within ‘‘xx’’ period of time
(‘‘Heartbeat Interval’’), the System will
automatically close the connection and
listen for the Member to establish a new
connection. The default Heartbeat
Interval setting is determined by the
Exchange and configured directly into
the System.13 Any change to this setting
will be communicated to Members
accordingly.
The Exchange offers Market Makers
two different types of MEI port
connections. A Full Service Port 14
which supports all message types and a
Limited Service Port which provides
slightly less functionality.15 The
Exchange limits Members to two (2) Full
Service Ports and allows up to eight (8)
Limited Service Ports per MIAX
matching engine.16 Both Full Service
and Limited Service Ports can have
‘‘Cancel on Disconnect’’ enabled. By
default, Cancel on Disconnect
functionality will be triggered upon
establishing a loss of communication to
the Market Maker’s last MEI Full
11 A heartbeat is a message that is generated at
regular intervals to indicate that two way
communication has been established. A loss of
heartbeats or the lack of a response to a heartbeat
request indicates a loss of communication.
12 The Exchange notes that the current System
setting is three (3) heartbeats and that any change
to this setting will be determined by the Exchange
and communicated to Members via a Regulatory
Circular.
13 The Exchange notes the current setting is three
(3) seconds.
14 Full Service MEI Ports provide Market Makers
with the ability to send Market Maker quotes,
eQuotes, and quote purge messages to the MIAX
System. Full Service MEI Ports are also capable of
receiving administrative information. Market
Makers are limited to two Full Service MEI Ports
per matching engine.
15 Limited Service MEI Ports provide Market
Makers with the ability to send eQuotes and quote
purge messages only, but not Market Maker Quotes,
to the System. Limited Service MEI Ports are also
capable of receiving administrative information.
16 A ‘‘matching engine’’ is a part of the MIAX
electronic system that processes options quotes and
trades on a symbol-by-symbol basis. The Exchange
currently hosts 24 separate matching engines.
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13147
Service Port connection to a matching
engine. When Cancel on Disconnect is
triggered, the System will close the
session and remove a Market Maker’s
quotes and eQuotes from the Exchange,
for the impacted matching engine only.
Market Makers have the ability to
group MEI ports together by port and/
or Market Participant ID (‘‘MPID’’) for
the purpose of establishing groups of
connections to tailor Cancel on
Disconnect functionality to the
Member’s business needs. Cancel on
Disconnect may be enabled for any Port,
however by selectively grouping ports
and/or MPIDs, a Member can customize
the loss of communication scenario
which would result in Cancel on
Disconnect functionality ultimately
being invoked.
Examples for illustration purposes are
provided below.
Example 1: Default Behavior.
Group 1: MEI Full Service Ports: MEI
Port 1 & MEI Port 2.
Scenario 1: MEI Port 1 disconnects,
(MEI Port 2 connected) no quotes
removed.
Scenario 2: MEI Port 2 disconnects,
(MEI Port 1 connected) no quotes
removed.
Scenario 3: MEI Port 1 disconnects,
MEI Port 2 disconnects, Cancel on
Disconnect triggered.
Scenario 4: MEI Port 2 disconnects,
MEI Port 1 disconnects, Cancel on
Disconnect triggered.
Example 2: A Member requiring a
configuration which separates their
eQuotes, Mass-Quote-Cancel or
Notifications to a separate port.
Group 1: MEI Full Service Ports: MEI
Port 1 & MEI Port 2.
Group 2: MEI Limited Service Port:
MEI Port 3.
Group 1 is configured for Cancel on
Disconnect; Group 2 is not.
Assuming that the Firm is connected
on all ports:
Scenario 1: MEI Port 1 disconnects,
no quotes removed.
Scenario 2: MEI Port 1 and Port 2
disconnect, Cancel on Disconnect
triggered, quotes removed.
Scenario 3: MEI Port 3 disconnects,
no quotes removed.
Scenario 4: MEI Port 1 and Port 3
disconnect, no quotes removed.
Example 3: A Member requiring a
configuration to divide the ports to
separate computers or traders.
Group 1: MEI Full Service Port: MEI
Port 1; MEI Limited Service Port: MEI
Port 2.
Group 2: MEI Full Service Port: MEI
Port 3; MEI Limited Service Port: MEI
Port 4.
Group 1 MPIDs: MPID_1, MPID_2,
MPID_3.
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Federal Register / Vol. 82, No. 45 / Thursday, March 9, 2017 / Notices
Group 2 MPIDs: MPID_3, MPID_4,
MPID_5.
Both groups are configured for Cancel
on Disconnect, and MPID_3 is in both
groups.
Assuming the Member is connected
on all ports:
Scenario 1: MEI Port 1 disconnects,
no quotes removed.
Scenario 2: MEI Port 1 and Port 2
disconnect, Cancel on Disconnect
triggered for MPID_1, MPID_2, and
MPID_3.
Scenario 3: MEI Port 3 disconnects,
no quotes removed.
Scenario 4: MEI Port 1 and MEI Port
3 disconnect, Cancel on Disconnect
triggered for all MPIDs.
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FIX Connections
EEMs connect to their assigned FIX
port using the MIAX FIX Order Interface
(‘‘FOI’’) which is a flexible interface that
uses the FIX protocol for both
application and session level messages.
As per the FIX protocol, a connection is
established by the Member submitting a
logon message to the Exchange. This
logon message establishes the heartbeat
interval that will be used by the session.
This value must be greater than zero
seconds and the same value must be
used by both the Member and the
Exchange.
Within the logon message a Member
can enable ‘‘Auto Cancel on
Disconnect’’ for all orders sent through
a session by setting a flag in the logon
message. This would result in all
eligible orders 17 submitted through the
FIX connection to be canceled upon a
loss of communication. Alternatively, a
Member can identify individual orders
on a per order basis that are to be
considered for Auto Cancel on
Disconnect treatment.
Upon missing a single heartbeat, FOI
will send a Test Request message 18 to
the Member to check the status of the
connection. Upon missing a certain
number of heartbeats,19 FOI will send a
logout message and terminate the
17 Good ‘Til Cancelled (‘‘GTC’’) orders are not
eligible for Auto Cancel on Disconnect. A 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.
PRIME orders are not eligible for Auto Cancel on
Disconnect. See Exchange Rule 515A.
18 The test request message is a FIX Protocol
message that forces a heartbeat from the opposing
application. The test request message checks
sequence numbers or verifies communication line
status. The opposite application responds to the
Test Request with a Heartbeat containing the Test
Request ID. Financial Information Exchange
Protocol (FIX), Version 4.2 with errata. May 1, 2001.
19 The Exchange notes that the current System
setting is two (2) heartbeats, and that any change
to this setting will be determined by the Exchange
and communicated to Members via Regulatory
Circular.
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connection. When FOI detects a
disconnection for any reason it will
trigger the Auto Cancel on Disconnect
process, whereby, if enabled, FOI will
cancel all eligible orders. If Auto Cancel
on Disconnect is not enabled for the
session or for any orders, FOI will
simply disconnect the FIX session and
not cancel any orders. Once
disconnected, a FIX user would have to
commence a new session to add,
modify, or cancel its orders. After a
disconnect FOI will not accept
connections from the Member for a preconfigured period of time.20 This allows
the Exchange to cancel orders without
the Member being able to reconnect and
attempt to interact with an order in the
process of being canceled. Any change
to this setting will be announced to
Members accordingly.
The Auto Cancel on Disconnect
functionality is designed to react to
external connection loss scenarios only.
Therefore, it does not cancel orders in
the event of a MIAX system failure. The
execution reports resulting from cancels
or trades during the period a Member is
disconnected can be received upon a
subsequent reconnection by the Member
on the same trading day.
The Exchange also proposes to adopt
new Interpretations and Policies .01 to
enumerate order types that are not
eligible for removal by the Auto Cancel
on Disconnect functionality. Proposed
Interpretation and Policies .01 will state
that Good ‘Til Cancelled (‘‘GTC’’) 21
orders and PRIME orders are not eligible
for automatic cancellation. PRIME is the
Exchange’s Price Improvement
Mechanism 22 and PRIME orders are
stopped orders which are used to start
an auction process whereby the
execution price the order receives may
be improved as a result of the auction.
A PRIME auction has a maximum
duration of 500 milliseconds. PRIME
orders are not resting orders and are
used solely to facilitate the PRIME
auction process.
Further, the Exchange proposes to
adopt new Interpretations and Policies
.02 (i) to define what a ‘‘Heartbeat’’
message is and how it used by the
Exchange, and (ii) to define the
requirements for establishing a ‘‘Loss of
Communication’’ on the Exchange.
The functionality discussed above is
designed to mitigate potential risks
associated with a loss of communication
to the Exchange. In today’s market,
Market Makers’ quotes are rapidly
changing and can have a lifespan of
20 The Exchange notes the current setting is five
(5) seconds.
21 See Exchange Rule 516.
22 See Exchange Rule 515A.
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only milliseconds. Therefore, if a
Member is disconnected for any period
of time, and its quotes remained in the
System, it is very possible that the
quotes would be stale by the time the
Member was able to reestablish
connectivity. Consequently, any
resulting execution of such quotes is
more likely to be erroneous or
unintended. Conversely, the Exchange
notes that orders tend to be static in
nature and often rest on the Book.
Certain orders, such as GTC orders are
intended to rest on the Book for an
extended period of time. As such, there
is a lower risk of erroneous or
unintended executions resulting from
orders that remained in the System after
a Member experienced a loss of
communication.
The Exchange believes that while
information relating to connectivity and
loss of communication is already
available to Members via technical
specifications, codifying this
information in the rule text will provide
additional transparency and further
reduce the potential for confusion.
2. Statutory Basis
MIAX believes that its proposed rule
change is consistent with Section 6(b) of
the Act 23 in general, and furthers the
objectives of Section 6(b)(5) of the Act 24
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 regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and perfect the mechanisms of a free
and open market and a national market
system and, in general, to protect
investors and the public interest.
The proposed rule will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and
protect investors and the public interest
by providing Market Makers with a
mechanism by which quotes may be
removed in the event of a loss of
connectivity with the System.
Market Makers provide liquidity to
the market place and have obligations
unlike other Members.25
This risk protection feature is
important because it will enable Market
Makers to avoid risks associated with
inadvertent executions in the event of a
loss of communication with the
Exchange. The proposed rule change is
23 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
25 See Exchange Rule 603.
24 15
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Federal Register / Vol. 82, No. 45 / Thursday, March 9, 2017 / Notices
not unfairly discriminatory among
market participants, as it is available
equally to all market participants
utilizing MEI. The obligation of Market
Makers on the Exchange to provide
continuous two-sided quotes in their
assigned series on a daily basis 26 is not
diminished by the removal of such
quotes triggered by the disconnect. The
Exchange will not be prohibited from
taking disciplinary action against a
Market Maker for failing to meet its
continuous quoting obligation each
trading day as a result of
disconnections.
The disconnect feature of FIX
connections is mandatory, however
Members have the option to enable the
cancellation of all orders for an entire
session or select orders for cancellation
on an order-by-order basis, which
would result in the cancellation of
orders submitted over a FIX port when
such port disconnects. It is appropriate
to offer two different removal features to
all Members utilizing FIX, as these
Members may desire that their orders
remain on the order book despite a
technical disconnection, so as not to
miss any opportunities for execution of
such orders while the FIX session is
disconnected. Offering to cancel all
orders, specifically selected orders, or
no orders, upon disconnect allows the
Member to customize the functionality
to align to its business needs. Offering
this type of order cancellation
functionality to Members is consistent
with the Act because it enables
Members to avoid risks associated with
inadvertent executions in the event of a
loss of communication with the
Exchange. The order cancellation
functionality is designed to mitigate the
risk of missed and/or unintended
executions associated with a loss in
communication with the Exchange. The
proposed rule change is not unfairly
discriminatory among market
participants, as it is available equally to
all market participants utilizing FIX.
The disconnect feature is mandatory
under the FIX protocol. The Exchange
will disconnect Members from the
Exchange and not cancel orders if the
Auto Cancel on Disconnect
functionality is not enabled. This
feature is consistent with the Act
because it provides FIX users the ability
to disconnect from the Exchange and
assess the current market conditions to
make a determination concerning their
risk exposure. The Exchange notes that
in the event Auto Cancel on Disconnect
functionality is not enabled and such
orders need to be cancelled after a
disconnection occurs, an Exchange
participant can contact Exchange staff to
have its orders cancelled from the
System.27 The Exchange believes
requiring a disconnect when a loss of
communication is detected to be a
rational course of action for the
Exchange to alert the Member of the
technical connectivity issue.
The Exchange believes that the
proposed rule change will assist with
the maintenance of a fair and orderly
market by codifying risk protections for
orders and quotes. The Exchange’s
proposal is consistent with the Act
because it will mitigate the risk of
potential erroneous or unintended
executions associated with a loss in
communication which protects
investors and the public interest.
Additionally, the proposed rule adds
another risk protection tool for Members
and protects investors and the public
interest by increasing the risk protection
tools available to Members of the
Exchange. The Exchange believes
codifying existing functionality by rule
will 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
Members.
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 believes the proposed
rule change will not impose any burden
on intra-market competition because
every Member of the Exchange has the
opportunity to benefit from the
functionality described in the proposed
rule.
The Exchange provides two separate
and distinct mechanisms for
communicating with the Exchange, MEI
and FIX. MEI Ports support the
submission of quotes to the Exchange
and are used by Market Makers who
have heightened quoting obligations
because of their role.28 Market Makers
are provided the ability to configure
their MEI Ports to leverage the
functionality provided by the Exchange
to remove quotes to align to their risk
tolerance. Because of the volume of
series that a Market Maker is obligated
quote, the Exchange believes that
removing all quotes for an affected
matching engine on behalf of a Market
Maker who has lost its last MEI
connection to that engine to be in the
Exchange Rule 604.
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17:43 Mar 08, 2017
28 See
Jkt 241001
best interest of both the Market Maker,
to mitigate risk; and the Exchange, to
ensure a fair and orderly market.
FIX connections to the Exchange only
support order submission. FIX users
may set a timeframe for disconnection
that is appropriate for their risk
tolerance. Offering functionality to
cancel all, some, or none, of the orders
in the System upon establishing a loss
of communication does not create an
undue burden on intra-market
competition as Members do not equally
bear the same risks of potential
erroneous or unintended executions.
Further, FIX users have greater control
over their orders and may designate a
number of different Time in Force
instructions which can be used to
determine the duration an order rests on
the Book, from Immediate-or-Cancel,
which is executed in whole or part upon
receipt, with any unexecuted portion
being cancelled; to a Good ‘Til
Cancelled order, which may rest on the
Book until it is executed, cancelled by
the user, or until the underlying option
expires.29
The Exchange does not believe the
proposed rule change will impose any
burden on inter-market competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange notes that other option
exchanges offer similar functionality.30
For all the reasons stated, the Exchange
does not believe that the proposed rule
change will impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.
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)
29 See
Exchange Rule 516.
BOX Rule 8140; CBOE Rule 6.23C;
NASDAQ BX Chapter VI, Section 6; and NASDAQ
Phlx Rule 1019.
30 See
27 See
26 See
PO 00000
Exchange Rule 519C.
Exchange Rule 603.
Frm 00061
Fmt 4703
Sfmt 4703
13149
E:\FR\FM\09MRN1.SGM
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Federal Register / Vol. 82, No. 45 / Thursday, March 9, 2017 / Notices
of the Act 31 and Rule 19b–4(f)(6) 32
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.
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:
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–
2017–08 and should be submitted on or
before March 30, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–04603 Filed 3–8–17; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2017–08 on the subject line.
asabaliauskas on DSK3SPTVN1PROD 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.
All submissions should refer to File
Number SR–MIAX–2017–08. 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
31 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.
32 17
VerDate Sep<11>2014
17:43 Mar 08, 2017
Jkt 241001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–32520; File No. 812–14679]
Medley Capital Corporation, et al.;
Notice of Application
March 3, 2017.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 17(d) and 57(i) of
the Investment Company Act of 1940
(the ‘‘Act’’) and Rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and Rule 17d–
1 under the Act.
AGENCY:
Applicants
request an order to permit certain
business development companies (each,
a ‘‘BDC’’) and closed-end management
investment companies to co-invest with
each other and with certain affiliated
investment funds in portfolio
companies.
APPLICANTS: Medley Capital Corporation
(‘‘MCC’’); Medley SBIC, LP (‘‘Medley
SBIC’’); Medley SBIC GP, LLC (the
‘‘SBIC General Partner’’); Medley LLC;
MCC Advisors LLC (‘‘MCC Advisors’’);
Medley Capital LLC, MOF II
Management LLC, and MOF III
Management LLC (collectively, the
‘‘Existing Affiliated Investment
Advisers’’); MOF II GP LLC, MOF III GP
LLC, and Medley Credit Strategies GP,
LLC (collectively, the ‘‘Existing General
Partners’’); Medley Opportunity Fund III
SUMMARY OF APPLICATION:
33 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00062
Fmt 4703
Sfmt 4703
LP, Medley Opportunity Fund II LP, and
Medley Credit Strategies (KOC) LLC
(collectively, the ‘‘Existing Affiliated
Funds’’); Sierra Income Corporation
(‘‘Sierra’’); SIC Advisors LLC (‘‘SIC
Advisors’’); Sierra Total Return Fund
(‘‘STRF’’); STRF Advisors LLC (‘‘STRF
Advisors’’); Sierra Opportunity Fund
(‘‘SOF’’); and SOF Advisor LLC (‘‘SOF
Advisors’’).
The application was filed
on July 26, 2016, and amended on
December 23, 2016. Applicants have
agreed to file an amendment during the
notice period, the substance of which is
reflected in this notice.
FILING DATES:
An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 28, 2017 and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
HEARING OR NOTIFICATION OF HEARING:
Secretary, U.S. Securities
and Exchange Commission, 100 F St.
NE., Washington, DC 20549–1090.
Applicants: c/o Brooke Taube, Medley
Capital Corporation, Seth Taube, Sierra
Income Corporation, Sierra Total Return
Fund, and Sierra Opportunity Fund, 280
Park Avenue, 6th Floor East, New York,
NY 10017.
ADDRESSES:
HaeSung Lee, Attorney-Adviser, at (202)
551–7345, or David J. Marcinkus,
Branch Chief, at (202) 551–6821 (Chief
Counsel’s Office, Division of Investment
Management).
FOR FURTHER INFORMATION CONTACT:
The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
Applicants’ Representations
1. MCC is an externally managed,
non-diversified, closed-end
management investment company that
has elected to be regulated as a BDC
E:\FR\FM\09MRN1.SGM
09MRN1
]]>Agencies
[Federal Register Volume 82, Number 45 (Thursday, March 9, 2017)]
[Notices]
[Pages 13146-13150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04603]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80151; File No. SR-MIAX-2017-08]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by Miami International
Securities Exchange LLC To Amend MIAX Options Rule 519C, Mass
Cancellation of Trading Interest
March 3, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on February 23, 2017, 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 519C.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 519C, Mass Cancellation of
Trading Interest, to adopt new section
[[Page 13147]]
(c) entitled ``Detection of Loss of Communication,'' to codify the use
of current functionality in the Exchange's System \3\ which is designed
to assist market participants in the event of a loss of communication
with either their assigned MIAX Express Interface (``MEI'') \4\ or
Financial Information eXchange (``FIX'') \5\ port due to a loss of
connectivity. This functionality is designed to protect Market Makers
\6\ and other market participants from inadvertent exposure to
excessive risk. Additionally, the Exchange proposes to adopt new
Interpretations and Policies .01 and .02 as discussed below.
---------------------------------------------------------------------------
\3\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\4\ MEI is a connection to MIAX systems that enables Market
Makers to submit electronic quotes to the Exchange.
\5\ FIX connections to the Exchange permit the entry of orders.
\6\ The term ``Market Makers'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and Registered Market Makers''
collectively. See Exchange Rule 100.
---------------------------------------------------------------------------
Exchange Members \7\ enter quotes \8\ and orders \9\ utilizing
either an MEI port or a FIX port respectively. MEI is utilized by
Market Makers of the Exchange and FIX is utilized by Electronic
Exchange Members (``EEMs'').\10\ These ports provide the mechanism by
which Members maintain a connection to the Exchange and through which a
Member communicates its quotes and/or orders to the System. Market
Makers may submit quotes to the Exchange from one or more MEI ports.
Similarly, Members may submit orders to the Exchange from one or more
FIX ports. When the System detects a loss of communication with a
Member, the System has the capability to remove the Member's quotes
and/or orders, if so elected and configured by the Member. The Exchange
notes that this functionality is mandatory for Market Makers using MEI
and optional for EEMs using FIX as discussed in more detail below.
---------------------------------------------------------------------------
\7\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\8\ The term ``quote'' or ``quotation'' means a bid or offer
entered by a Market Maker that is firm and may update the Market
Maker's previous quote, if any. The Rules of the Exchange provide
for the use of different type of quotes, including Standard quotes
and eQuotes, as more fully described in Rule 517. See Exchange Rule
100.
\9\ The term ``order'' means a firm commitment to buy or sell
option contracts. See Exchange Rule 100.
\10\ 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.
---------------------------------------------------------------------------
MEI Connections
Market Makers connect to their assigned MEI port using the MIAX
Session Management Protocol (``SesM''). The SesM protocol uses
heartbeat \11\ packets to detect link failures between the Member and
the Exchange. The SesM protocol requires that the Exchange must send a
heartbeat packet anytime more than one (1) second has passed since the
Exchange last sent any data. Further, the SesM protocol requires that
the Member must send a heartbeat packet anytime more than one (1)
second has passed since the Member last sent any data. If a certain
number of consecutive heartbeats are missed,\12\ or if the Member fails
to send data or heartbeats within ``xx'' period of time (``Heartbeat
Interval''), the System will automatically close the connection and
listen for the Member to establish a new connection. The default
Heartbeat Interval setting is determined by the Exchange and configured
directly into the System.\13\ Any change to this setting will be
communicated to Members accordingly.
---------------------------------------------------------------------------
\11\ A heartbeat is a message that is generated at regular
intervals to indicate that two way communication has been
established. A loss of heartbeats or the lack of a response to a
heartbeat request indicates a loss of communication.
\12\ The Exchange notes that the current System setting is three
(3) heartbeats and that any change to this setting will be
determined by the Exchange and communicated to Members via a
Regulatory Circular.
\13\ The Exchange notes the current setting is three (3)
seconds.
---------------------------------------------------------------------------
The Exchange offers Market Makers two different types of MEI port
connections. A Full Service Port \14\ which supports all message types
and a Limited Service Port which provides slightly less
functionality.\15\ The Exchange limits Members to two (2) Full Service
Ports and allows up to eight (8) Limited Service Ports per MIAX
matching engine.\16\ Both Full Service and Limited Service Ports can
have ``Cancel on Disconnect'' enabled. By default, Cancel on Disconnect
functionality will be triggered upon establishing a loss of
communication to the Market Maker's last MEI Full Service Port
connection to a matching engine. When Cancel on Disconnect is
triggered, the System will close the session and remove a Market
Maker's quotes and eQuotes from the Exchange, for the impacted matching
engine only.
---------------------------------------------------------------------------
\14\ Full Service MEI Ports provide Market Makers with the
ability to send Market Maker quotes, eQuotes, and quote purge
messages to the MIAX System. Full Service MEI Ports are also capable
of receiving administrative information. Market Makers are limited
to two Full Service MEI Ports per matching engine.
\15\ Limited Service MEI Ports provide Market Makers with the
ability to send eQuotes and quote purge messages only, but not
Market Maker Quotes, to the System. Limited Service MEI Ports are
also capable of receiving administrative information.
\16\ A ``matching engine'' is a part of the MIAX electronic
system that processes options quotes and trades on a symbol-by-
symbol basis. The Exchange currently hosts 24 separate matching
engines.
---------------------------------------------------------------------------
Market Makers have the ability to group MEI ports together by port
and/or Market Participant ID (``MPID'') for the purpose of establishing
groups of connections to tailor Cancel on Disconnect functionality to
the Member's business needs. Cancel on Disconnect may be enabled for
any Port, however by selectively grouping ports and/or MPIDs, a Member
can customize the loss of communication scenario which would result in
Cancel on Disconnect functionality ultimately being invoked.
Examples for illustration purposes are provided below.
Example 1: Default Behavior.
Group 1: MEI Full Service Ports: MEI Port 1 & MEI Port 2.
Scenario 1: MEI Port 1 disconnects, (MEI Port 2 connected) no
quotes removed.
Scenario 2: MEI Port 2 disconnects, (MEI Port 1 connected) no
quotes removed.
Scenario 3: MEI Port 1 disconnects, MEI Port 2 disconnects, Cancel
on Disconnect triggered.
Scenario 4: MEI Port 2 disconnects, MEI Port 1 disconnects, Cancel
on Disconnect triggered.
Example 2: A Member requiring a configuration which separates their
eQuotes, Mass-Quote-Cancel or Notifications to a separate port.
Group 1: MEI Full Service Ports: MEI Port 1 & MEI Port 2.
Group 2: MEI Limited Service Port: MEI Port 3.
Group 1 is configured for Cancel on Disconnect; Group 2 is not.
Assuming that the Firm is connected on all ports:
Scenario 1: MEI Port 1 disconnects, no quotes removed.
Scenario 2: MEI Port 1 and Port 2 disconnect, Cancel on Disconnect
triggered, quotes removed.
Scenario 3: MEI Port 3 disconnects, no quotes removed.
Scenario 4: MEI Port 1 and Port 3 disconnect, no quotes removed.
Example 3: A Member requiring a configuration to divide the ports
to separate computers or traders.
Group 1: MEI Full Service Port: MEI Port 1; MEI Limited Service
Port: MEI Port 2.
Group 2: MEI Full Service Port: MEI Port 3; MEI Limited Service
Port: MEI Port 4.
Group 1 MPIDs: MPID_1, MPID_2, MPID_3.
[[Page 13148]]
Group 2 MPIDs: MPID_3, MPID_4, MPID_5.
Both groups are configured for Cancel on Disconnect, and MPID_3 is
in both groups.
Assuming the Member is connected on all ports:
Scenario 1: MEI Port 1 disconnects, no quotes removed.
Scenario 2: MEI Port 1 and Port 2 disconnect, Cancel on Disconnect
triggered for MPID_1, MPID_2, and MPID_3.
Scenario 3: MEI Port 3 disconnects, no quotes removed.
Scenario 4: MEI Port 1 and MEI Port 3 disconnect, Cancel on
Disconnect triggered for all MPIDs.
FIX Connections
EEMs connect to their assigned FIX port using the MIAX FIX Order
Interface (``FOI'') which is a flexible interface that uses the FIX
protocol for both application and session level messages. As per the
FIX protocol, a connection is established by the Member submitting a
logon message to the Exchange. This logon message establishes the
heartbeat interval that will be used by the session. This value must be
greater than zero seconds and the same value must be used by both the
Member and the Exchange.
Within the logon message a Member can enable ``Auto Cancel on
Disconnect'' for all orders sent through a session by setting a flag in
the logon message. This would result in all eligible orders \17\
submitted through the FIX connection to be canceled upon a loss of
communication. Alternatively, a Member can identify individual orders
on a per order basis that are to be considered for Auto Cancel on
Disconnect treatment.
---------------------------------------------------------------------------
\17\ Good `Til Cancelled (``GTC'') orders are not eligible for
Auto Cancel on Disconnect. A 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. PRIME orders
are not eligible for Auto Cancel on Disconnect. See Exchange Rule
515A.
---------------------------------------------------------------------------
Upon missing a single heartbeat, FOI will send a Test Request
message \18\ to the Member to check the status of the connection. Upon
missing a certain number of heartbeats,\19\ FOI will send a logout
message and terminate the connection. When FOI detects a disconnection
for any reason it will trigger the Auto Cancel on Disconnect process,
whereby, if enabled, FOI will cancel all eligible orders. If Auto
Cancel on Disconnect is not enabled for the session or for any orders,
FOI will simply disconnect the FIX session and not cancel any orders.
Once disconnected, a FIX user would have to commence a new session to
add, modify, or cancel its orders. After a disconnect FOI will not
accept connections from the Member for a pre-configured period of
time.\20\ This allows the Exchange to cancel orders without the Member
being able to reconnect and attempt to interact with an order in the
process of being canceled. Any change to this setting will be announced
to Members accordingly.
---------------------------------------------------------------------------
\18\ The test request message is a FIX Protocol message that
forces a heartbeat from the opposing application. The test request
message checks sequence numbers or verifies communication line
status. The opposite application responds to the Test Request with a
Heartbeat containing the Test Request ID. Financial Information
Exchange Protocol (FIX), Version 4.2 with errata. May 1, 2001.
\19\ The Exchange notes that the current System setting is two
(2) heartbeats, and that any change to this setting will be
determined by the Exchange and communicated to Members via
Regulatory Circular.
\20\ The Exchange notes the current setting is five (5) seconds.
---------------------------------------------------------------------------
The Auto Cancel on Disconnect functionality is designed to react to
external connection loss scenarios only. Therefore, it does not cancel
orders in the event of a MIAX system failure. The execution reports
resulting from cancels or trades during the period a Member is
disconnected can be received upon a subsequent reconnection by the
Member on the same trading day.
The Exchange also proposes to adopt new Interpretations and
Policies .01 to enumerate order types that are not eligible for removal
by the Auto Cancel on Disconnect functionality. Proposed Interpretation
and Policies .01 will state that Good `Til Cancelled (``GTC'') \21\
orders and PRIME orders are not eligible for automatic cancellation.
PRIME is the Exchange's Price Improvement Mechanism \22\ and PRIME
orders are stopped orders which are used to start an auction process
whereby the execution price the order receives may be improved as a
result of the auction. A PRIME auction has a maximum duration of 500
milliseconds. PRIME orders are not resting orders and are used solely
to facilitate the PRIME auction process.
---------------------------------------------------------------------------
\21\ See Exchange Rule 516.
\22\ See Exchange Rule 515A.
---------------------------------------------------------------------------
Further, the Exchange proposes to adopt new Interpretations and
Policies .02 (i) to define what a ``Heartbeat'' message is and how it
used by the Exchange, and (ii) to define the requirements for
establishing a ``Loss of Communication'' on the Exchange.
The functionality discussed above is designed to mitigate potential
risks associated with a loss of communication to the Exchange. In
today's market, Market Makers' quotes are rapidly changing and can have
a lifespan of only milliseconds. Therefore, if a Member is disconnected
for any period of time, and its quotes remained in the System, it is
very possible that the quotes would be stale by the time the Member was
able to reestablish connectivity. Consequently, any resulting execution
of such quotes is more likely to be erroneous or unintended.
Conversely, the Exchange notes that orders tend to be static in nature
and often rest on the Book. Certain orders, such as GTC orders are
intended to rest on the Book for an extended period of time. As such,
there is a lower risk of erroneous or unintended executions resulting
from orders that remained in the System after a Member experienced a
loss of communication.
The Exchange believes that while information relating to
connectivity and loss of communication is already available to Members
via technical specifications, codifying this information in the rule
text will provide additional transparency and further reduce the
potential for confusion.
2. Statutory Basis
MIAX believes that its proposed rule change is consistent with
Section 6(b) of the Act \23\ in general, and furthers the objectives of
Section 6(b)(5) of the Act \24\ 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 regulating, clearing, settling,
processing information with respect to, and 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.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposed rule will remove impediments to and perfect the
mechanism of a free and open market and a national market system and
protect investors and the public interest by providing Market Makers
with a mechanism by which quotes may be removed in the event of a loss
of connectivity with the System.
Market Makers provide liquidity to the market place and have
obligations unlike other Members.\25\
---------------------------------------------------------------------------
\25\ See Exchange Rule 603.
---------------------------------------------------------------------------
This risk protection feature is important because it will enable
Market Makers to avoid risks associated with inadvertent executions in
the event of a loss of communication with the Exchange. The proposed
rule change is
[[Page 13149]]
not unfairly discriminatory among market participants, as it is
available equally to all market participants utilizing MEI. The
obligation of Market Makers on the Exchange to provide continuous two-
sided quotes in their assigned series on a daily basis \26\ is not
diminished by the removal of such quotes triggered by the disconnect.
The Exchange will not be prohibited from taking disciplinary action
against a Market Maker for failing to meet its continuous quoting
obligation each trading day as a result of disconnections.
---------------------------------------------------------------------------
\26\ See Exchange Rule 604.
---------------------------------------------------------------------------
The disconnect feature of FIX connections is mandatory, however
Members have the option to enable the cancellation of all orders for an
entire session or select orders for cancellation on an order-by-order
basis, which would result in the cancellation of orders submitted over
a FIX port when such port disconnects. It is appropriate to offer two
different removal features to all Members utilizing FIX, as these
Members may desire that their orders remain on the order book despite a
technical disconnection, so as not to miss any opportunities for
execution of such orders while the FIX session is disconnected.
Offering to cancel all orders, specifically selected orders, or no
orders, upon disconnect allows the Member to customize the
functionality to align to its business needs. Offering this type of
order cancellation functionality to Members is consistent with the Act
because it enables Members to avoid risks associated with inadvertent
executions in the event of a loss of communication with the Exchange.
The order cancellation functionality is designed to mitigate the risk
of missed and/or unintended executions associated with a loss in
communication with the Exchange. The proposed rule change is not
unfairly discriminatory among market participants, as it is available
equally to all market participants utilizing FIX.
The disconnect feature is mandatory under the FIX protocol. The
Exchange will disconnect Members from the Exchange and not cancel
orders if the Auto Cancel on Disconnect functionality is not enabled.
This feature is consistent with the Act because it provides FIX users
the ability to disconnect from the Exchange and assess the current
market conditions to make a determination concerning their risk
exposure. The Exchange notes that in the event Auto Cancel on
Disconnect functionality is not enabled and such orders need to be
cancelled after a disconnection occurs, an Exchange participant can
contact Exchange staff to have its orders cancelled from the
System.\27\ The Exchange believes requiring a disconnect when a loss of
communication is detected to be a rational course of action for the
Exchange to alert the Member of the technical connectivity issue.
---------------------------------------------------------------------------
\27\ See Exchange Rule 519C.
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change will assist
with the maintenance of a fair and orderly market by codifying risk
protections for orders and quotes. The Exchange's proposal is
consistent with the Act because it will mitigate the risk of potential
erroneous or unintended executions associated with a loss in
communication which protects investors and the public interest.
Additionally, the proposed rule adds another risk protection tool for
Members and protects investors and the public interest by increasing
the risk protection tools available to Members of the Exchange. The
Exchange believes codifying existing functionality by rule will 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 Members.
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 believes the proposed rule change will not impose any
burden on intra-market competition because every Member of the Exchange
has the opportunity to benefit from the functionality described in the
proposed rule.
The Exchange provides two separate and distinct mechanisms for
communicating with the Exchange, MEI and FIX. MEI Ports support the
submission of quotes to the Exchange and are used by Market Makers who
have heightened quoting obligations because of their role.\28\ Market
Makers are provided the ability to configure their MEI Ports to
leverage the functionality provided by the Exchange to remove quotes to
align to their risk tolerance. Because of the volume of series that a
Market Maker is obligated quote, the Exchange believes that removing
all quotes for an affected matching engine on behalf of a Market Maker
who has lost its last MEI connection to that engine to be in the best
interest of both the Market Maker, to mitigate risk; and the Exchange,
to ensure a fair and orderly market.
---------------------------------------------------------------------------
\28\ See Exchange Rule 603.
---------------------------------------------------------------------------
FIX connections to the Exchange only support order submission. FIX
users may set a timeframe for disconnection that is appropriate for
their risk tolerance. Offering functionality to cancel all, some, or
none, of the orders in the System upon establishing a loss of
communication does not create an undue burden on intra-market
competition as Members do not equally bear the same risks of potential
erroneous or unintended executions. Further, FIX users have greater
control over their orders and may designate a number of different Time
in Force instructions which can be used to determine the duration an
order rests on the Book, from Immediate-or-Cancel, which is executed in
whole or part upon receipt, with any unexecuted portion being
cancelled; to a Good `Til Cancelled order, which may rest on the Book
until it is executed, cancelled by the user, or until the underlying
option expires.\29\
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\29\ See Exchange Rule 516.
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The Exchange does not believe the proposed rule change will impose
any burden on inter-market competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
notes that other option exchanges offer similar functionality.\30\ For
all the reasons stated, the Exchange does not believe that the proposed
rule change will impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.
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\30\ See BOX Rule 8140; CBOE Rule 6.23C; NASDAQ BX Chapter VI,
Section 6; and NASDAQ Phlx Rule 1019.
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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)
[[Page 13150]]
of the Act \31\ and Rule 19b-4(f)(6) \32\ thereunder.
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\31\ 15 U.S.C. 78s(b)(3)(A).
\32\ 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.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MIAX-2017-08 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-2017-08. 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-2017-08 and should be
submitted on or before March 30, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04603 Filed 3-8-17; 8:45 am]
BILLING CODE 8011-01-P
