Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX Options Rule 612, Aggregate Risk Manager (ARM) and Rule 518, Complex Orders, 61638-61641 [2017-28080]
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III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act 9 and the rules and regulations
thereunder applicable to a national
securities exchange.10 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,11 which requires,
among other things, that the rules of a
national securities exchange be
designed 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 and
that the rules are not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission believes that the
proposed rule change is designed to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system by
providing TPHs with information that
may encourage them to close positions
in series of SPX options at the end of the
month, which the Exchange has stated
is intended to ‘‘foster liquidity in the
SPX options market in light of the bank
regulatory capital requirements.’’ 12 The
Commission notes the Exchange has
represented that the proposed multi-leg
compression-list position file provided
by the Exchange is for informational
purposes only and does not constitute
advice, guidance, a commitment to
trade, an execution, or a
recommendation to trade, and that
participation in the process by TPHs is
entirely voluntary.13 TPHs who receive
the individualized multi-leg positions
and wish to enter into a trade may only
do so by finding a counterparty on the
trading floor and executing a trade
thereon, and all transactions must be
effected in accordance with applicable
rules.14 Furthermore, all TPHs on the
trading floor, whether or not they
9 15
U.S.C. 78f.
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
11 15 U.S.C. 78f(b)(5).
12 See Notice, supra note 3, at 55674. The
Exchange stated its belief that those capital
requirements ‘‘could potentially limit the amount of
capital clearing TPHs can allocate to their clients’
transactions, which in turn, may impact liquidity,
particularly in the SPX market.’’ Id.
13 See Notice, supra note 3, at 55667. The list is
not ranked or weighted and contains all potential
multi-leg positions with offsetting interest.
Accordingly, not all the multi-leg positions on the
list would be possible to trade since one series may
be used to construct multiple potential multi-leg
positions.
14 See Notice, supra note 3, at 55675.
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10 In
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submitted compression-list positions,
have the opportunity to respond to
orders on the trading floor, including
orders represented in compression
forums. For the reasons noted above, the
Commission believes that the proposal
to amend Rule 6.56 to include the
proposed procedures for multi-leg
compression-list positions is consistent
with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,15 that the
proposed rule change (SR–CBOE–2017–
070) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–28082 Filed 12–27–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82394; File No. SR–MIAX–
2017–49]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend MIAX Options Rule
612, Aggregate Risk Manager (ARM)
and Rule 518, Complex Orders
December 22, 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 December 15, 2017, Miami
International Securities Exchange, LLC
(‘‘MIAX Options’’ 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 Rule 612, Aggregate Risk
Manager (ARM), and Rule 518, Complex
Orders.
15 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
16 17
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The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 612, Aggregate Risk Manager
(ARM), and Rule 518, Complex Orders,
to enhance the Aggregate Risk Manager
(‘‘ARM’’) protections available to Market
Makers 3 on the Exchange, for both
simple and complex quotes.
Specifically, the Exchange proposes to
adopt a Market Maker single side
protection (‘‘SSP’’) feature, which is an
additional, optional, and more granular
feature of the ARM protections that are
currently offered by the Exchange.
Accordingly, the Exchange proposes to
modify: (i) Rule 612, Interpretations and
Policies .02, to adopt new subsection
(c), Market Maker Single Side
Protection, as well as to make minor,
non-substantive clarifications to
subsections (a) and (b) for greater
precision for simple quotes; and (ii)
Rule 518, Interpretations and Policies
.05, to adopt new subsection (g), Market
Maker Single Side Protection for
complex quotes.
The Exchange currently offers a
number of risk protection mechanisms
to its Members in both the simple and
complex markets. For Market Makers,
an important risk protection mechanism
is the ARM. The purpose of the ARM is
to remove the Market Maker from the
market, once certain pre-determined
trading limit thresholds (set up in
advance by the Market Maker) have
3 The term ‘‘Market Makers’’ refers to ‘‘Lead
Market Makers’’, ‘‘Primary Lead Market Makers’’
and ‘‘Registered Market Makers’’ collectively. See
Exchange Rule 100.
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been triggered, to limit the risk exposure
of the Market Maker. ARM was
implemented by the Exchange upon its
launch in 2012, and the Exchange has
continued to refine and enhance the
ARM over time based on Member
feedback. For example, in 2015, the
Exchange enhanced the ARM to include
a ‘class protection’ feature, which
provides that when the Allowable
Engagement Percentage for a particular
option class in which the Market Maker
is appointed, has been equaled or
exceeded a specified number of times
within the ARM trigger counting period,
the Class Protection feature will remove
the Market Maker’s quotations from the
Exchange’s disseminated quotation in
such appointed option class until the
Market Maker instructs the Exchange to
reset the Class Protection feature.4
Additionally at that time, the Exchange
also enhanced the ARM to include an
‘aggregate class protection’ feature,
which would remove the Market Maker
organization’s quotations in all of the
Market Maker organization’s appointed
option classes when the Allowable
Engagement Percentage had been
equaled or exceeded in the Market
Maker organization’s specified number
of appointed option classes within the
ARM trigger counting period, regardless
of how many individual Market Makers
in the same Market Maker organization
are submitting quotations on MIAX
Options.5
Now, based on additional Member
feedback, the Exchange is proposing to
further enhance the ARM to introduce
an SSP feature. The SSP feature, which
is optional, will provide an additional
level of granularity to the ARM, as this
protection will apply only to quotes that
are on the same side (bid or offer) of an
individual option.6 Market Makers who
avail themselves of the SSP feature will
have even greater precision to tailor
their risk tolerance levels.
To implement the SSP feature in the
simple market, the Exchange proposes
to adopt new subsection (c) to
Interpretations and Policies .02 of Rule
612, entitled Market Maker Single Side
Protection. Subsection (c) will provide
that a Market Maker may determine to
engage the Market Maker Single Side
Protection (‘‘SSP’’) feature. If engaged, if
the full remaining size of a Market
4 See
Securities Exchange Act Release No. 75361
(July 6, 2015), 80 FR 39824 (July 10, 2015) (SR–
MIAX–2015–44).
5 See id.
6 The term ‘‘individual option’’ means an option
contract that is either a put or a call, covering a
specific underlying security and having a specific
exercise price and expiration date. See Exchange
Rule 100.
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Maker’s Standard quote,7 IOC eQuote,8
or FOK eQuote,9 in an individual
option, is exhausted by a trade, the
System 10 will trigger the SSP. When
triggered, the System will cancel all
Standard quotes and block all new
inbound Standard quotes, IOC eQuotes,
and FOK eQuotes, for that particular
side of that individual option for that
MPID. The System will provide a
notification message to the Market
Maker that the SSP has been triggered.
The block will remain in effect until the
Market Maker notifies the Exchange (in
a manner required by the Exchange and
communicated to Members by
Regulatory Circular) to reset the SSP
(‘‘SSP Reset’’). The SSP feature is
optionally available and may be enabled
for a Market Maker’s MPID.11
Additionally, the Exchange proposes
to amend Rule 612, Interpretations and
Policies .02, to make clarifying
amendments to existing rule text.
Specifically, current Interpretations and
Policies .02, Enhanced Aggregate Risk
Manager Protections, provides that
Market Makers may determine to engage
any of the following Enhanced
Aggregate Risk Manager Protections in
the System. Currently it provides for
two protections; Class Protection, in
subsection (a), and Market Maker
Protection, in subsection (b). The
Exchange now proposes to amend
subsection (a) to make a non-substantive
amendment to the rule text to change
the title of the rule from Class Protection
to Market Maker Single Class Protection,
to provide greater specificity concerning
the scope of the protection. Further, the
Exchange proposes to amend the rule
text to clarify that the scope of the risk
protection available under this rule is
for a single class of options only, by
changing the first sentence of the rule to
provide that, ‘‘[a] Market Maker may
determine to engage the Market Maker
Single Class Protection feature for a
particular option class in which the
Market Maker is appointed (an
7 A Standard quote is a quote submitted by a
Market Maker that cancels and replaces the Market
Maker’s previous Standard quote, if any. See
Exchange Rule 517(a)(1).
8 An immediate or cancel or ‘‘IOC’’ eQuote is an
eQuote submitted by a Market Maker that must be
matched with another quote or order for an
execution in whole or in part upon receipt into the
System. See Exchange Rule 517(a)(2)(iv).
9 A fill or kill or ‘‘FOK’’ eQuote is an eQuote
submitted by a Market Maker that must be matched
with another quote or order for an execution in its
entirety at a single price upon receipt into the
System or will be immediately cancelled. See
Exchange Rule 517(a)(2)(v).
10 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
11 The term ‘‘MPID’’ means Market Participant
Identifier.
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61639
‘‘appointed option class’’)’’. The
Exchange proposes to make the same
clarifying change throughout the rule to
provide additional clarity regarding the
scope of the rule.
Additionally, the Exchange proposes
to amend the text in subsection (b),
Market Maker Protection, to make a
non-substantive amendment to the rule
text to change the title of the rule from
Market Maker Protection, to Market
Maker Aggregate Class Protection, to
provide greater specificity concerning
the scope of the protection. Further, the
Exchange proposes to amend the rule
text to refer to the Market Maker
Aggregate Class Protection feature.
Specifically, the Exchange proposes to
amend the first sentence of the rule to
provide that, ‘‘[a] Market Maker may
determine to engage the Market Maker
Aggregate Class Protection feature for all
of the Market Maker’s appointed option
classes.’’ The Exchange proposes to
make the same clarifying change
throughout the rule to provide
additional clarity regarding the scope of
the rule.
To implement the SSP feature in the
complex market, the Exchange proposes
to adopt new subsection (g) to
Interpretations and Policies .05 of Rule
518, entitled Market Maker Single Side
Protection. Subsection (g) will provide
that a Market Maker may determine to
engage the Market Maker Single Side
Protection (‘‘SSP’’) feature. If engaged, if
the full remaining size of a Market
Maker’s complex Standard quote 12 or
cIOC eQuote 13 in a strategy is exhausted
by a trade, the System will trigger the
SSP for the traded side of the strategy
for that MPID. When triggered, the
System will cancel all complex
Standard quotes and block all new
inbound complex Standard quotes and
cIOC eQuotes for that particular side of
that strategy. The System will provide a
notification message to the Market
Maker that the SSP has been triggered.
The block will remain in effect until the
Market Maker notifies the Exchange (in
a manner required by the Exchange and
communicated to Members by
Regulatory Circular) to reset the SSP
(‘‘SSP Reset’’).
The SSP feature is optionally
available and may be enabled for a
Market Maker’s MPID. If enabled, the
12 A complex Standard quote is a complex quote
submitted by a Market Maker that cancels and
replaces the Market Maker’s previous complex
Standard quote for that side of the strategy, if any.
See Exchange Rule 518.02(a)(1).
13 A ‘‘Complex Immediate or Cancel eQuote’’ or
‘‘cIOC eQuote,’’ which is a complex eQuote with a
time-in-force of IOC that may be matched with
another complex quote or complex order for an
execution to occur in whole or in part upon receipt
into the System. See Exchange Rule 518.02(c)(2).
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SSP protection will cover both the
simple market and complex market,14
with each market requiring its own SSP
Reset when the SSP is triggered as
discussed above. However, the
protections operate independently, that
is, if an eQuote on the bid side of series
A triggers the SSP in the simple market,
a simple market SSP Reset is required
to re-enable quoting on the bid side of
series A; however a complex eQuote for
a strategy which includes the bid side
of series A would not be blocked as the
complex market SSP was not triggered.
The Exchange will announce the
implementation date of the proposed
rule change by Regulatory Circular to be
published no later than 60 days
following the operative date of the
proposed rule. The implementation date
will be no later than 60 days following
the issuance of the Regulatory Circular.
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2. Statutory Basis
The Exchange believes that its
proposed rule change is consistent with
Section 6(b) of the Act 15 in general, and
furthers the objectives of Section 6(b)(5)
of the Act 16 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 Exchange believes the proposed
changes remove impediments to and
perfect the mechanism of a free and
open market and a national market
system and, in general, protects [sic]
investors and the public interest by
providing Market Makers with an
additional risk management tool for
both simple and complex quotes.
Market Makers on the simple market
have a heightened obligation on the
Exchange and are obligated to submit
continuous two-sided quotations in a
certain number of series in their
appointed classes for a certain
percentage of time in each trading
session,17 rendering them vulnerable to
14 The Exchange notes that complex cAOC
eQuotes are not impacted by the SSP. A ‘‘Complex
Auction or Cancel eQuote’’ or ‘‘cAOC eQuote,’’
which [sic] is an eQuote submitted by a Market
Maker that is used to provide liquidity during a
specific Complex Auction with a time in force that
corresponds with the duration of the Complex
Auction. See Exchange Rule 518.02(c)(1).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
17 See Exchange Rule 604(e).
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risk from market conditions. Market
Makers are vulnerable to risk from
market events that may cause them to
receive automatic executions before
they can adjust their exposure in the
market. Market Makers on the complex
market are also vulnerable to risk from
market events and the Exchange
believes providing this risk protection
feature on both the simple and complex
markets promotes just and equitable
principles of trade and helps to perfect
the mechanisms of a free and open
market and a national market system.
Without adequate risk management
tools Market Makers could reduce the
size of their quotations which could
undermine the quality of the markets
available to customers and other market
participants. The ability of a Market
Maker to engage the SSP feature of ARM
is a valuable tool in assisting Market
Makers in risk management. The
proposed rule change removes
impediments to and perfects the
mechanism of a free and open market by
giving Market Makers the ability to
further refine their risk protections from
an option class level to a single side of
an individual option in the simple
market and to a single side of a complex
strategy in the complex market.
Accordingly, the SSP feature is designed
to provide Market Makers greater
control over their quotations in the
market thereby removing impediments
to and helping perfect the mechanisms
of a free and open market and a national
market system and, in general,
protecting investors and the public
interest. In addition, providing Market
Makers with more tools for managing
risk will facilitate transactions in
securities because, as noted above, the
Market Makers will have more
confidence that protections are in place
that reduce the risks from market
events. As a result, the new
functionality has the potential to
promote just and equitable principles of
trade.
The Exchange notes that the proposed
rule change will not relieve Exchange
Market Makers of their continuous
quoting obligations under Exchange
Rule 604 or any other obligations under
Reg NMS Rule 602.18 Nor will the
proposed rule change prohibit the
Exchange from taking disciplinary
action against a Market Maker for failing
to meet their continuous quoting
obligation each trading day.
The Exchange believes the proposed
changes to MIAX Rule 612.02(a) and (b)
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
18 17
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CFR 242.602.
Frm 00108
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Sfmt 4703
open market and a national market
system because they seek to improve the
accuracy of the Exchange’s rules. In
particular, the Exchange believes that
clarifying the scope of single class
protection and aggregate class
protection features of ARM for Market
Makers will provide greater clarity to
Members and the public regarding the
Exchange’s Rules, and it is in the public
interest for rules to be accurate and
concise so as to eliminate the potential
for confusion.
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 that the
proposed rule change will foster
competition by providing Exchange
Market Makers with the ability to
specifically customize their use of the
Exchange’s risk management tools in
order to compete for executions and
order flow.
Additionally, the Exchange believes
that the proposed rule change should
promote competition as it is designed to
allow Exchange Market Makers greater
flexibility and control of their risk
exposure to protect them from market
conditions that may increase their risk
exposure in the market. The Exchange
does not believe the proposed rule
change will impose a burden on intramarket competition as the optional risk
protection feature is equally available to
all Market Makers on the Exchange.
For all the reasons stated, the
Exchange does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act, and believes the
proposed change will enhance
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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
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become effective pursuant to 19(b)(3)(A)
of the Act 19 and Rule 19b–4(f)(6) 20
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
available for website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MIAX–2017–49 and should
be submitted on or before January 18,
2018.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
Electronic Comments
[FR Doc. 2017–28080 Filed 12–27–17; 8:45 am]
• 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–2017–49 on the subject line.
BILLING CODE 8011–01–P
Paper Comments
sradovich on DSK3GMQ082PROD with NOTICES
• 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–2017–49. 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 website (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
19 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.
20 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82381; File No. SR–NYSE–
2017–69]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Rules Relating to Investment Company
Units, Index-Linked Securities and
Managed Trust Securities
December 21, 2017.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on December
15, 2017, New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. 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 proposes (1) to amend
Supplementary Material .01 and .02 to
21 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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61641
NYSE Rule 5.2(j)(3) to provide for the
inclusion of cash in an index underlying
a series of Investment Company Units,
which amendments conform to
amendments to NYSE Arca Rule 5.2–
E(j)(3) previously approved by the
Securities and Exchange Commission
(‘‘Commission’’); (2) to amend NYSE
Rule 5.2(j)(6) to exclude Investment
Company Units, securities defined in
Section 2 of NYSE Rule 8P (Trading of
Certain Exchange Traded Products) and
Index-Linked Securities when applying
the quantitative generic listing criteria
applicable to Equity Index-Linked
Securities, which amendments conform
to amendments to NYSE Arca 5.2–E(j)(6)
previously approved by the
Commission; and (3) to amend NYSE
Rule 8.700 (‘‘Managed Trust Securities’’)
to permit the use of swaps on stock
indices, fixed income indices,
commodity indices, commodities,
currencies, currency indices, or interest
rates, and to add EURO STOXX 50
Volatility Index (VSTOXX®) futures and
swaps on VSTOXX to the financial
instruments that an issue of Managed
Trust Securities may hold, which
amendments conform to amendments to
NYSE Arca Rule 8.700–E previously
approved by the Commission. The
proposed rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes (1) to amend
Supplementary Material .01 and .02 to
NYSE Rule 5.2(j)(3) to provide for the
inclusion of cash in an index underlying
a series of Investment Company Units
(‘‘Units’’), which amendments conform
to amendments to NYSE Arca Rule 5.2–
E(j)(3) previously approved by the
E:\FR\FM\28DEN1.SGM
28DEN1
Agencies
[Federal Register Volume 82, Number 248 (Thursday, December 28, 2017)]
[Notices]
[Pages 61638-61641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28080]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82394; File No. SR-MIAX-2017-49]
Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend MIAX Options Rule 612, Aggregate Risk
Manager (ARM) and Rule 518, Complex Orders
December 22, 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 December 15, 2017, Miami International
Securities Exchange, LLC (``MIAX Options'' 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend Rule 612, Aggregate Risk
Manager (ARM), and Rule 518, Complex Orders.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings, at MIAX's principal
office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 612, Aggregate Risk Manager
(ARM), and Rule 518, Complex Orders, to enhance the Aggregate Risk
Manager (``ARM'') protections available to Market Makers \3\ on the
Exchange, for both simple and complex quotes. Specifically, the
Exchange proposes to adopt a Market Maker single side protection
(``SSP'') feature, which is an additional, optional, and more granular
feature of the ARM protections that are currently offered by the
Exchange. Accordingly, the Exchange proposes to modify: (i) Rule 612,
Interpretations and Policies .02, to adopt new subsection (c), Market
Maker Single Side Protection, as well as to make minor, non-substantive
clarifications to subsections (a) and (b) for greater precision for
simple quotes; and (ii) Rule 518, Interpretations and Policies .05, to
adopt new subsection (g), Market Maker Single Side Protection for
complex quotes.
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\3\ The term ``Market Makers'' refers to ``Lead Market Makers'',
``Primary Lead Market Makers'' and ``Registered Market Makers''
collectively. See Exchange Rule 100.
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The Exchange currently offers a number of risk protection
mechanisms to its Members in both the simple and complex markets. For
Market Makers, an important risk protection mechanism is the ARM. The
purpose of the ARM is to remove the Market Maker from the market, once
certain pre-determined trading limit thresholds (set up in advance by
the Market Maker) have
[[Page 61639]]
been triggered, to limit the risk exposure of the Market Maker. ARM was
implemented by the Exchange upon its launch in 2012, and the Exchange
has continued to refine and enhance the ARM over time based on Member
feedback. For example, in 2015, the Exchange enhanced the ARM to
include a `class protection' feature, which provides that when the
Allowable Engagement Percentage for a particular option class in which
the Market Maker is appointed, has been equaled or exceeded a specified
number of times within the ARM trigger counting period, the Class
Protection feature will remove the Market Maker's quotations from the
Exchange's disseminated quotation in such appointed option class until
the Market Maker instructs the Exchange to reset the Class Protection
feature.\4\ Additionally at that time, the Exchange also enhanced the
ARM to include an `aggregate class protection' feature, which would
remove the Market Maker organization's quotations in all of the Market
Maker organization's appointed option classes when the Allowable
Engagement Percentage had been equaled or exceeded in the Market Maker
organization's specified number of appointed option classes within the
ARM trigger counting period, regardless of how many individual Market
Makers in the same Market Maker organization are submitting quotations
on MIAX Options.\5\
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\4\ See Securities Exchange Act Release No. 75361 (July 6,
2015), 80 FR 39824 (July 10, 2015) (SR-MIAX-2015-44).
\5\ See id.
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Now, based on additional Member feedback, the Exchange is proposing
to further enhance the ARM to introduce an SSP feature. The SSP
feature, which is optional, will provide an additional level of
granularity to the ARM, as this protection will apply only to quotes
that are on the same side (bid or offer) of an individual option.\6\
Market Makers who avail themselves of the SSP feature will have even
greater precision to tailor their risk tolerance levels.
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\6\ The term ``individual option'' means an option contract that
is either a put or a call, covering a specific underlying security
and having a specific exercise price and expiration date. See
Exchange Rule 100.
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To implement the SSP feature in the simple market, the Exchange
proposes to adopt new subsection (c) to Interpretations and Policies
.02 of Rule 612, entitled Market Maker Single Side Protection.
Subsection (c) will provide that a Market Maker may determine to engage
the Market Maker Single Side Protection (``SSP'') feature. If engaged,
if the full remaining size of a Market Maker's Standard quote,\7\ IOC
eQuote,\8\ or FOK eQuote,\9\ in an individual option, is exhausted by a
trade, the System \10\ will trigger the SSP. When triggered, the System
will cancel all Standard quotes and block all new inbound Standard
quotes, IOC eQuotes, and FOK eQuotes, for that particular side of that
individual option for that MPID. The System will provide a notification
message to the Market Maker that the SSP has been triggered. The block
will remain in effect until the Market Maker notifies the Exchange (in
a manner required by the Exchange and communicated to Members by
Regulatory Circular) to reset the SSP (``SSP Reset''). The SSP feature
is optionally available and may be enabled for a Market Maker's
MPID.\11\
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\7\ A Standard quote is a quote submitted by a Market Maker that
cancels and replaces the Market Maker's previous Standard quote, if
any. See Exchange Rule 517(a)(1).
\8\ An immediate or cancel or ``IOC'' eQuote is an eQuote
submitted by a Market Maker that must be matched with another quote
or order for an execution in whole or in part upon receipt into the
System. See Exchange Rule 517(a)(2)(iv).
\9\ A fill or kill or ``FOK'' eQuote is an eQuote submitted by a
Market Maker that must be matched with another quote or order for an
execution in its entirety at a single price upon receipt into the
System or will be immediately cancelled. See Exchange Rule
517(a)(2)(v).
\10\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\11\ The term ``MPID'' means Market Participant Identifier.
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Additionally, the Exchange proposes to amend Rule 612,
Interpretations and Policies .02, to make clarifying amendments to
existing rule text. Specifically, current Interpretations and Policies
.02, Enhanced Aggregate Risk Manager Protections, provides that Market
Makers may determine to engage any of the following Enhanced Aggregate
Risk Manager Protections in the System. Currently it provides for two
protections; Class Protection, in subsection (a), and Market Maker
Protection, in subsection (b). The Exchange now proposes to amend
subsection (a) to make a non-substantive amendment to the rule text to
change the title of the rule from Class Protection to Market Maker
Single Class Protection, to provide greater specificity concerning the
scope of the protection. Further, the Exchange proposes to amend the
rule text to clarify that the scope of the risk protection available
under this rule is for a single class of options only, by changing the
first sentence of the rule to provide that, ``[a] Market Maker may
determine to engage the Market Maker Single Class Protection feature
for a particular option class in which the Market Maker is appointed
(an ``appointed option class'')''. The Exchange proposes to make the
same clarifying change throughout the rule to provide additional
clarity regarding the scope of the rule.
Additionally, the Exchange proposes to amend the text in subsection
(b), Market Maker Protection, to make a non-substantive amendment to
the rule text to change the title of the rule from Market Maker
Protection, to Market Maker Aggregate Class Protection, to provide
greater specificity concerning the scope of the protection. Further,
the Exchange proposes to amend the rule text to refer to the Market
Maker Aggregate Class Protection feature. Specifically, the Exchange
proposes to amend the first sentence of the rule to provide that, ``[a]
Market Maker may determine to engage the Market Maker Aggregate Class
Protection feature for all of the Market Maker's appointed option
classes.'' The Exchange proposes to make the same clarifying change
throughout the rule to provide additional clarity regarding the scope
of the rule.
To implement the SSP feature in the complex market, the Exchange
proposes to adopt new subsection (g) to Interpretations and Policies
.05 of Rule 518, entitled Market Maker Single Side Protection.
Subsection (g) will provide that a Market Maker may determine to engage
the Market Maker Single Side Protection (``SSP'') feature. If engaged,
if the full remaining size of a Market Maker's complex Standard quote
\12\ or cIOC eQuote \13\ in a strategy is exhausted by a trade, the
System will trigger the SSP for the traded side of the strategy for
that MPID. When triggered, the System will cancel all complex Standard
quotes and block all new inbound complex Standard quotes and cIOC
eQuotes for that particular side of that strategy. The System will
provide a notification message to the Market Maker that the SSP has
been triggered. The block will remain in effect until the Market Maker
notifies the Exchange (in a manner required by the Exchange and
communicated to Members by Regulatory Circular) to reset the SSP (``SSP
Reset'').
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\12\ A complex Standard quote is a complex quote submitted by a
Market Maker that cancels and replaces the Market Maker's previous
complex Standard quote for that side of the strategy, if any. See
Exchange Rule 518.02(a)(1).
\13\ A ``Complex Immediate or Cancel eQuote'' or ``cIOC
eQuote,'' which is a complex eQuote with a time-in-force of IOC that
may be matched with another complex quote or complex order for an
execution to occur in whole or in part upon receipt into the System.
See Exchange Rule 518.02(c)(2).
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The SSP feature is optionally available and may be enabled for a
Market Maker's MPID. If enabled, the
[[Page 61640]]
SSP protection will cover both the simple market and complex
market,\14\ with each market requiring its own SSP Reset when the SSP
is triggered as discussed above. However, the protections operate
independently, that is, if an eQuote on the bid side of series A
triggers the SSP in the simple market, a simple market SSP Reset is
required to re-enable quoting on the bid side of series A; however a
complex eQuote for a strategy which includes the bid side of series A
would not be blocked as the complex market SSP was not triggered.
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\14\ The Exchange notes that complex cAOC eQuotes are not
impacted by the SSP. A ``Complex Auction or Cancel eQuote'' or
``cAOC eQuote,'' which [sic] is an eQuote submitted by a Market
Maker that is used to provide liquidity during a specific Complex
Auction with a time in force that corresponds with the duration of
the Complex Auction. See Exchange Rule 518.02(c)(1).
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The Exchange will announce the implementation date of the proposed
rule change by Regulatory Circular to be published no later than 60
days following the operative date of the proposed rule. The
implementation date will be no later than 60 days following the
issuance of the Regulatory Circular.
2. Statutory Basis
The Exchange believes that its proposed rule change is consistent
with Section 6(b) of the Act \15\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \16\ 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.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed changes remove impediments to
and perfect the mechanism of a free and open market and a national
market system and, in general, protects [sic] investors and the public
interest by providing Market Makers with an additional risk management
tool for both simple and complex quotes. Market Makers on the simple
market have a heightened obligation on the Exchange and are obligated
to submit continuous two-sided quotations in a certain number of series
in their appointed classes for a certain percentage of time in each
trading session,\17\ rendering them vulnerable to risk from market
conditions. Market Makers are vulnerable to risk from market events
that may cause them to receive automatic executions before they can
adjust their exposure in the market. Market Makers on the complex
market are also vulnerable to risk from market events and the Exchange
believes providing this risk protection feature on both the simple and
complex markets promotes just and equitable principles of trade and
helps to perfect the mechanisms of a free and open market and a
national market system.
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\17\ See Exchange Rule 604(e).
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Without adequate risk management tools Market Makers could reduce
the size of their quotations which could undermine the quality of the
markets available to customers and other market participants. The
ability of a Market Maker to engage the SSP feature of ARM is a
valuable tool in assisting Market Makers in risk management. The
proposed rule change removes impediments to and perfects the mechanism
of a free and open market by giving Market Makers the ability to
further refine their risk protections from an option class level to a
single side of an individual option in the simple market and to a
single side of a complex strategy in the complex market. Accordingly,
the SSP feature is designed to provide Market Makers greater control
over their quotations in the market thereby removing impediments to and
helping perfect the mechanisms of a free and open market and a national
market system and, in general, protecting investors and the public
interest. In addition, providing Market Makers with more tools for
managing risk will facilitate transactions in securities because, as
noted above, the Market Makers will have more confidence that
protections are in place that reduce the risks from market events. As a
result, the new functionality has the potential to promote just and
equitable principles of trade.
The Exchange notes that the proposed rule change will not relieve
Exchange Market Makers of their continuous quoting obligations under
Exchange Rule 604 or any other obligations under Reg NMS Rule 602.\18\
Nor will the proposed rule change prohibit the Exchange from taking
disciplinary action against a Market Maker for failing to meet their
continuous quoting obligation each trading day.
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\18\ 17 CFR 242.602.
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The Exchange believes the proposed changes to MIAX Rule 612.02(a)
and (b) promote just and equitable principles of trade, remove
impediments to and perfect the mechanism of a free and open market and
a national market system because they seek to improve the accuracy of
the Exchange's rules. In particular, the Exchange believes that
clarifying the scope of single class protection and aggregate class
protection features of ARM for Market Makers will provide greater
clarity to Members and the public regarding the Exchange's Rules, and
it is in the public interest for rules to be accurate and concise so as
to eliminate the potential for confusion.
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 that the proposed rule change will foster
competition by providing Exchange Market Makers with the ability to
specifically customize their use of the Exchange's risk management
tools in order to compete for executions and order flow.
Additionally, the Exchange believes that the proposed rule change
should promote competition as it is designed to allow Exchange Market
Makers greater flexibility and control of their risk exposure to
protect them from market conditions that may increase their risk
exposure in the market. The Exchange does not believe the proposed rule
change will impose a burden on intra-market competition as the optional
risk protection feature is equally available to all Market Makers on
the Exchange.
For all the reasons stated, the Exchange does not believe that the
proposed rule change will impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act, and
believes the proposed change will enhance competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the 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
[[Page 61641]]
become effective pursuant to 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) \20\ thereunder.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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 [email protected]. Please include
File Number SR-MIAX-2017-49 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-2017-49. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MIAX-2017-49 and should be submitted on
or before January 18, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-28080 Filed 12-27-17; 8:45 am]
BILLING CODE 8011-01-P