Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange Rule 100 (Definitions); Rule 515 (Execution of Orders and Quotes); and Rule 503 (Openings on the Exchange), 5743-5745 [2019-03034]
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Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices
the proposal; (3) indicate that the
Auction Timer for MIAX’s cPRIME
Auction will remain at 100
milliseconds; and (4) clarify the
discussion of the proposed change to
the Calendar Spread Variance Price
Protection. The Commission believes
that Amendment No. 1 does not raise
any novel regulatory issues. The
Commission also believes that
Amendment No. 1 provides additional
clarity to the rule text and additional
analysis and representations concerning
several aspects of the proposal, thereby
facilitating the Commission’s ability to
make the findings set forth above to
approve the proposal. Accordingly, the
Commission finds good cause, pursuant
to Section 19(b)(2) of the Act,59 to
approve the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Exchange Rules 100
(Definitions), 515 (Execution of Orders
and Quotes), and 503 (Openings on the
Exchange). The proposed rule change
was published for comment in the
Federal Register on November 20,
2018.3 On December 20, 2018, the
Commission extended the time period
for Commission action on the proposed
rule change from January 4, 2019, to
February 18, 2019.4 The Commission
received no comments on the proposal.
On February 13, 2019, the Exchange
filed Amendment No. 1 to make a
clarifying change to the proposal.5 The
Commission is publishing this notice to
solicit comment on Amendment No. 1,
and is approving the proposed rule
change, as modified by Amendment No.
1, on an accelerated basis.
VI. Conclusion
II. Description of the Proposal, as
Modified by Amendment No. 1
As more fully set forth in the Notice
and Amendment No. 1, the Exchange
proposes to amend its rules to address
how price protection will apply to nonmulti listed option products that are
proprietary to the Exchange. More
specifically, the Exchange proposes to
amend (i) Exchange Rule 100
(Definitions), to adopt definitions for the
terms ‘‘Proprietary Product’’ and ‘‘NonProprietary Product;’’ (ii) Exchange Rule
515 (Execution of Orders and Quotes),
to specify how the Exchange will
provide price protection to eligible nonMarket Orders for Proprietary Products;
and (iii) Exchange Rule 503 (Openings
on the Exchange), to specify how certain
orders for Proprietary Products will be
handled at the conclusion of the
Opening Process.
The Exchange proposes to amend
Exchange Rule 100 (Definitions), to
adopt definitions for the terms
‘‘Proprietary Product’’ and ‘‘NonProprietary Product,’’ to provide clarity
and ease of reference in Exchange
rules.6 The proposed definition of a
Proprietary Product is ‘‘a class of
options that is listed exclusively on the
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,60 that the
proposed rule change (SR–MIAX–2018–
36), as modified by Amendment No. 1,
is approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.61
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03039 Filed 2–21–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85147; File No. SR–MIAX–
2018–35]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing of Amendment
No. 1 and Order Granting Accelerated
Approval of Proposed Rule Change, as
Modified by Amendment No. 1, To
Amend Exchange Rule 100
(Definitions); Rule 515 (Execution of
Orders and Quotes); and Rule 503
(Openings on the Exchange)
1 15
February 15, 2019.
I. Introduction
On November 9, 2018, Miami
International Securities Exchange, LLC
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
59 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
61 17 CFR 200.30–3(a)(12).
60 15
VerDate Sep<11>2014
16:52 Feb 21, 2019
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 84589
(Nov. 14, 2018), 83 FR 58633 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 84900
(December 20, 2018), 83 FR 67394 (December 28,
2018).
5 In Amendment No. 1, the Exchange modified its
proposal to clarify that the term ‘‘Proprietary
Product’’ refers to an options product that is listed
exclusively on the Exchange, and is not multiply
listed. The full text of Amendment No. 1 has been
placed in the public comment file for SR–MIAX–
2018–35 and is available at: https://www.sec.gov/
rules/sro/miax.htm#SR-MIAX-2018-35.
6 See Notice, supra note 3, at 58634.
2 17
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Fmt 4703
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5743
Exchange,’’ and the proposed definition
of a Non-Proprietary Product is ‘‘a class
of options that is not a Proprietary
Product.’’ 7
The Exchange further proposes to
amend Exchange Rule 515 (Execution of
Orders and Quotes). Currently, Rule
515(c)(1) describes a price protection
process for certain non-Market Maker
orders received during a trading
session.8 This price protection process
prevents certain orders from being
executed beyond the price designated in
the order’s price protection instructions
(the ‘‘price protection limit’’). When
triggered, this price protection process
will cancel an order or the remaining
contracts of an order. The Exchange
proposes to amend the heading of Rule
515(c)(1) to read ‘‘Price Protection on
Non-Market Maker Orders in NonProprietary Products,’’ 9 and add new
subsection (c)(2) to Exchange Rule 515
to address and distinguish how price
protection would apply to Proprietary
Products.
Proposed Exchange Rule 515(c)(2)
would establish a price protection
process for eligible non-Market Maker
orders in Proprietary Products received
during a regular trading session that are
larger than, and priced through, the
opposite side NBBO.10 The proposed
price protection process provides for
exposure of such orders and a limited
time (i.e., a liquidity exposure period or
‘‘LEP’’) during which market
participants may respond to provide
liquidity, subject to certain parameters,
in lieu of the Exchange canceling the
order back to the Member. The price
protection limit for applicable orders in
Proprietary Products will be calculated
by the System 11 as follows: By adding
(subtracting) a set number of MPVs 12 if
the order is a buy (sell) to: (i) The
7 See
proposed Exchange Rule 100 and supra note
5.
8 See Exchange Rule 515(c)(1). This price
protection process does not apply to Intermarket
Sweep Orders (‘‘ISO’’), Immediate or Cancel
(‘‘IOC’’) orders, or Fill-or-Kill (‘‘FOK’’) orders.
9 See Notice, supra note 3, at 58634.
10 The term ‘‘NBBO’’ means the national best bid
or offer as calculated by the Exchange based on
market information received by the Exchange from
OPRA. See Exchange Rule 100. The proposed new
price protection process would apply to non-Market
Maker orders in Proprietary Products, excluding
ISOs and Auction or Cancel orders. See Notice,
supra note 3, at 58634.
11 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
12 The term ‘‘MPV’’ means Minimum Price
Variation. See Exchange Rule 510. The number of
MPVs will be determined by the Exchange and
announced to Members through a Regulatory
Circular, provided that the minimum shall be no
less than two MPVs and the maximum shall be no
more than twenty MPVs. See proposed Exchange
Rule 515(c)(2).
E:\FR\FM\22FEN1.SGM
22FEN1
5744
Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices
opposite side NBBO, or (ii) the previous
price protection limit,13 or (iii) in
certain circumstances, the limit price of
same side joining interest after the
expiration of the liquidity exposure
process timer.14
The proposed LEP applies to oversized non-Market Maker eligible orders
in Proprietary Products. More
specifically, interest that would be
posted or managed, or that would trade
at a price more aggressive than the
order’s protected price (also referred to
as the ‘‘Book price’’) will be subject to
the LEP. To begin the LEP, the System
will broadcast a liquidity exposure
message to all subscribers of the
Exchange’s data feeds which will
include the symbol, side of the market,
quantity of matched contracts, the
imbalance quantity, ‘‘must fill’’
quantity, and price. Additionally, the
System will start an LEP timer, not to
exceed three seconds, as determined by
the Exchange and announced via
Regulatory Circular. All market
participants may respond to the
liquidity exposure broadcast message.
The System will evaluate interest
received during the LEP based on price
and the side of the market relative to the
side of the market of the initiating order.
During the LEP, if the Exchange
receives interest on the opposite side of
the market from the initiating order that
locks or crosses the Book price of the
interest subject to the LEP, the interest
will trade, with resting liquidity
executed prior to joining liquidity.
During the LEP, if the Exchange receives
interest on the same side of the market
as the initiating order that is priced
more aggressively than the Book price of
the interest subject to the LEP that also
locks or crosses the opposite side
NBBO, the System will immediately
terminate the timer and treat the new
interest as joining liquidity for
allocation purposes.
Proposed Exchange Rule
515(c)(2)(i)(B) provides that at the end
of the timer, the initiating order, resting
liquidity, and any same side joining
interest will (i) be handled in
accordance to Exchange Rule 515,
Execution of Orders and Quotes, or (ii)
trade against opposite side interest in
the following sequence: resting interest
will be filled first, followed by joining
interest in the order it was received; and
opposite side interest will be allocated
in accordance with the Exchange’s
standard allocation, as described in
Exchange Rule 514, Priority of Quotes
and Orders.
13 See
14 See
proposed Exchange Rule 515(c)(2)(i)(iv).
proposed Exchange Rule 515(c)(2)(i)(v).
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16:52 Feb 21, 2019
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The Exchange also proposes to amend
subsection (f)(2)(vii)(B)(5) of Exchange
Rule 503 (Openings on the Exchange),
which currently provides that if there is
an opening transaction, any unexecuted
contracts from the imbalance not traded
or routed will be cancelled back to the
entering Member if the price for those
contracts crosses the opening price,
unless the Member that submitted the
original order has instructed the
Exchange in writing to re-enter the
remaining size, in which case the
remaining size will be automatically
submitted as a new order. The Exchange
proposes to amend the rule to adopt a
new provision to state that unexecuted
contracts that are from a non-Market
Maker order in a Proprietary Product
will be placed on the Book with a
protected price equal to the opening
price, and the LEP will begin
immediately after the Opening Process
is complete.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 1, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange and, in particular,
with Section 6(b) of the Act.15 In
particular, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent with
Section 6(b)(5) of the Act,16 which
requires, among other things, that the
rules of a national securities exchange
be 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
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Commission believes that
adopting definitions for the terms
Proprietary Product and NonProprietary Product on the Exchange
adds additional detail and promotes
transparency and clarity in the
Exchange’s rules. The proposed
definitions allow the Exchange to
distinguish between two separate and
distinct classes of options listed on the
15 15
U.S.C. 78f(b). In 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).
16 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
Exchange and to describe rules that may
be applicable to one class and not the
other.
As described above, the Exchange
proposes a new price protection and
order handling mechanism for
Proprietary Products that is similar to
drill-through protection currently
offered by other exchanges, and offers
an opportunity for an investor’s order in
a Proprietary Product to be filled rather
than cancelled.17 The Commission
believes that the proposed price
protection and liquidity exposure
process for eligible non-Market Maker
orders in Proprietary Products is
reasonably designed to facilitate the
execution of orders larger than and
priced-through the opposite side NBBO,
as it offers a mechanism to seek and
potentially provide liquidity to a
Member, subject to specified
parameters, in lieu of canceling back an
order for which there are no other
venues to seek an execution.
In addition, the Exchange proposes
that if there are unexecuted contracts
from an eligible non-Market Maker
order in a Proprietary Product at the
conclusion of the Opening Process, the
remaining contracts will be placed on
the Book with a protected price equal to
the opening price, and the LEP will
begin immediately after the Opening
Process is complete. The Commission
believes that this aspect of the proposal
similarly provides an additional
opportunity for price discovery and a
mechanism by which an investor’s order
in a Proprietary Product may ultimately
be filled.
For the foregoing reasons, the
Commission finds the proposal, as
modified by Amendment No. 1, to be
consistent with the Act.
IV. Solicitation of Comments on
Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to
submit written data, views, and
arguments concerning whether
Amendment No. 1 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–2018–35 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
17 See
E:\FR\FM\22FEN1.SGM
Notice, supra note 3, at 58636.
22FEN1
Federal Register / Vol. 84, No. 36 / Friday, February 22, 2019 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MIAX–2018–35. 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–2018–35, and
should be submitted on or before March
15, 2019.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 1 in the Federal
Register. In Amendment No. 1, the
Exchange modified its proposal to
specify that the term ‘‘Proprietary
Product’’ refers to an options product
that is listed exclusively on the
Exchange. The Commission notes that
Amendment No. 1 does not otherwise
modify the proposed rule change, which
was subject to a full notice-andcomment period during which no
comments were received. Amendment
No. 1 narrows the scope of the original
proposal by limiting the extent of
products that may meet the Exchange’s
proposed definition of ‘‘Proprietary
Product,’’ and harmonizes the definition
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16:52 Feb 21, 2019
Jkt 247001
with the rationale for the proposal,
which is to provide price protection for
products that do not trade on other
execution venues. Accordingly, the
Commission finds good cause, pursuant
to Section 19(b)(2) of the Act,18 to
approve the proposed rule change, as
modified by Amendment No. 1, on an
accelerated basis.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–MIAX–2018–
35), as modified by Amendment No. 1,
be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03034 Filed 2–21–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85148; File No. SR–MIAX–
2018–34]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing of Amendment No. 1
and Order Granting Accelerated
Approval of a Proposed Rule Change,
as Modified by Amendment No. 1, To
Amend Exchange Rule 519, MIAX
Order Monitor; Exchange Rule 519A,
Risk Protection Monitor; and Exchange
Rule 517, Quote Types Defined
February 15, 2019.
I. Introduction
On November 9, 2018, Miami
International Securities Exchange, LLC
(‘‘MIAX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Exchange Rules 519 (MIAX
Order Monitor), 519A (Risk Protection
Monitor), and 517 (Quote Types
Defined). The proposed rule change was
published for comment in the Federal
Register on November 20, 2018.3 On
December 20, 2018, the Commission
extended the time period for
18 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2).
20 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 84594
(November 14, 2018), 83 FR 58642 (‘‘Notice’’).
19 15
PO 00000
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Fmt 4703
Sfmt 4703
5745
Commission action on the proposed rule
change from January 4, 2019, to
February 18, 2019.4 The Commission
has received no comments on the
proposal. On February 12, 2019, the
Exchange filed Amendment No. 1 to the
proposed rule change to modify one
provision of its proposal.5 The
Commission is publishing this notice to
solicit comment on Amendment No. 1,
and is approving the proposed rule
change, as modified by Amendment No.
1, on an accelerated basis.
II. Description of the Proposed Rule
Change, as Modified by Amendment
No. 1 6
The Exchange recently received
Commission approval to list and trade
options on the SPIKESTM Index
(‘‘Index’’), a new index that measures
expected 30-day volatility of the SPDR
S&P 500 ETF Trust.7 To establish the
settlement value for the Index, the
Exchange conducts a settlement auction
(the ‘‘SPIKES Special Settlement
Auction’’), during which the Exchange
will accept settlement auction only
orders (‘‘SAO Orders’’) and settlement
auction only eQuotes (‘‘SAO eQuotes’’
and, collectively with SAO Orders,
‘‘SAOs’’), in addition to any other order
types that may regularly be accepted by
the Exchange.8 Market participants
entering interest for participation in the
SPIKES Special Settlement Auction that
is related to positions in, or a trading
strategy involving, Index options, and
that are ‘‘SPIKES strategy orders’’ may
be tagged as SAOs.9
4 See Securities Exchange Act Release No. 84888
(December 20, 2018), 83 FR 67390 (December 28,
2018).
5 In Amendment No. 1, the Exchange modified its
proposal by removing a provision that would deem
an SAO eQuote a ‘‘priority quote’’ for trade
allocation purposes in accordance with Exchange
Rule 514(e), a provision that was contained in
proposed Interpretations and Policies .02 to
Exchange Rule 517. The full text of Amendment No.
1 has been placed in the public comment file for
SR–MIAX–2018–34 and is available at: https://
www.sec.gov/rules/sro/miax.htm#SR-MIAX-201834.
6 For a full description of the proposal, see
Notice, supra note 3 and Amendment No. 1, supra
note 5.
7 See Securities Exchange Act Release No. 84417
(October 12, 2018), 83 FR 52865 (October 18, 2018)
(SR–MIAX–2018–14) (Order Granting Approval of a
Proposed Rule Change by Miami International
Securities Exchange, LLC to List and Trade Options
on the SPIKESTM Index).
8 Id.
9 See id. at 52866. See also Exchange Rule
503.03(c) (defining ‘‘SPIKES strategy orders,’’ and
stating that the Exchange will generally consider
orders to be SPIKES Strategy Orders if the orders
possess the following characteristics: (i) They are
for options with the expiration that will be used to
calculate the exercise or final settlement value of
the applicable volatility index option contract; (ii)
they are for options spanning the full range of strike
E:\FR\FM\22FEN1.SGM
Continued
22FEN1
]]>Agencies
[Federal Register Volume 84, Number 36 (Friday, February 22, 2019)]
[Notices]
[Pages 5743-5745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03034]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85147; File No. SR-MIAX-2018-35]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of Proposed Rule Change, as Modified by Amendment
No. 1, To Amend Exchange Rule 100 (Definitions); Rule 515 (Execution of
Orders and Quotes); and Rule 503 (Openings on the Exchange)
February 15, 2019.
I. Introduction
On November 9, 2018, Miami International Securities Exchange, LLC
(``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Exchange Rules 100 (Definitions), 515
(Execution of Orders and Quotes), and 503 (Openings on the Exchange).
The proposed rule change was published for comment in the Federal
Register on November 20, 2018.\3\ On December 20, 2018, the Commission
extended the time period for Commission action on the proposed rule
change from January 4, 2019, to February 18, 2019.\4\ The Commission
received no comments on the proposal.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 84589 (Nov. 14,
2018), 83 FR 58633 (``Notice'').
\4\ See Securities Exchange Act Release No. 84900 (December 20,
2018), 83 FR 67394 (December 28, 2018).
---------------------------------------------------------------------------
On February 13, 2019, the Exchange filed Amendment No. 1 to make a
clarifying change to the proposal.\5\ The Commission is publishing this
notice to solicit comment on Amendment No. 1, and is approving the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.
---------------------------------------------------------------------------
\5\ In Amendment No. 1, the Exchange modified its proposal to
clarify that the term ``Proprietary Product'' refers to an options
product that is listed exclusively on the Exchange, and is not
multiply listed. The full text of Amendment No. 1 has been placed in
the public comment file for SR-MIAX-2018-35 and is available at:
https://www.sec.gov/rules/sro/miax.htm#SR-MIAX-2018-35.
---------------------------------------------------------------------------
II. Description of the Proposal, as Modified by Amendment No. 1
As more fully set forth in the Notice and Amendment No. 1, the
Exchange proposes to amend its rules to address how price protection
will apply to non-multi listed option products that are proprietary to
the Exchange. More specifically, the Exchange proposes to amend (i)
Exchange Rule 100 (Definitions), to adopt definitions for the terms
``Proprietary Product'' and ``Non-Proprietary Product;'' (ii) Exchange
Rule 515 (Execution of Orders and Quotes), to specify how the Exchange
will provide price protection to eligible non-Market Orders for
Proprietary Products; and (iii) Exchange Rule 503 (Openings on the
Exchange), to specify how certain orders for Proprietary Products will
be handled at the conclusion of the Opening Process.
The Exchange proposes to amend Exchange Rule 100 (Definitions), to
adopt definitions for the terms ``Proprietary Product'' and ``Non-
Proprietary Product,'' to provide clarity and ease of reference in
Exchange rules.\6\ The proposed definition of a Proprietary Product is
``a class of options that is listed exclusively on the Exchange,'' and
the proposed definition of a Non-Proprietary Product is ``a class of
options that is not a Proprietary Product.'' \7\
---------------------------------------------------------------------------
\6\ See Notice, supra note 3, at 58634.
\7\ See proposed Exchange Rule 100 and supra note 5.
---------------------------------------------------------------------------
The Exchange further proposes to amend Exchange Rule 515 (Execution
of Orders and Quotes). Currently, Rule 515(c)(1) describes a price
protection process for certain non-Market Maker orders received during
a trading session.\8\ This price protection process prevents certain
orders from being executed beyond the price designated in the order's
price protection instructions (the ``price protection limit''). When
triggered, this price protection process will cancel an order or the
remaining contracts of an order. The Exchange proposes to amend the
heading of Rule 515(c)(1) to read ``Price Protection on Non-Market
Maker Orders in Non-Proprietary Products,'' \9\ and add new subsection
(c)(2) to Exchange Rule 515 to address and distinguish how price
protection would apply to Proprietary Products.
---------------------------------------------------------------------------
\8\ See Exchange Rule 515(c)(1). This price protection process
does not apply to Intermarket Sweep Orders (``ISO''), Immediate or
Cancel (``IOC'') orders, or Fill-or-Kill (``FOK'') orders.
\9\ See Notice, supra note 3, at 58634.
---------------------------------------------------------------------------
Proposed Exchange Rule 515(c)(2) would establish a price protection
process for eligible non-Market Maker orders in Proprietary Products
received during a regular trading session that are larger than, and
priced through, the opposite side NBBO.\10\ The proposed price
protection process provides for exposure of such orders and a limited
time (i.e., a liquidity exposure period or ``LEP'') during which market
participants may respond to provide liquidity, subject to certain
parameters, in lieu of the Exchange canceling the order back to the
Member. The price protection limit for applicable orders in Proprietary
Products will be calculated by the System \11\ as follows: By adding
(subtracting) a set number of MPVs \12\ if the order is a buy (sell)
to: (i) The
[[Page 5744]]
opposite side NBBO, or (ii) the previous price protection limit,\13\ or
(iii) in certain circumstances, the limit price of same side joining
interest after the expiration of the liquidity exposure process
timer.\14\
---------------------------------------------------------------------------
\10\ The term ``NBBO'' means the national best bid or offer as
calculated by the Exchange based on market information received by
the Exchange from OPRA. See Exchange Rule 100. The proposed new
price protection process would apply to non-Market Maker orders in
Proprietary Products, excluding ISOs and Auction or Cancel orders.
See Notice, supra note 3, at 58634.
\11\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
\12\ The term ``MPV'' means Minimum Price Variation. See
Exchange Rule 510. The number of MPVs will be determined by the
Exchange and announced to Members through a Regulatory Circular,
provided that the minimum shall be no less than two MPVs and the
maximum shall be no more than twenty MPVs. See proposed Exchange
Rule 515(c)(2).
\13\ See proposed Exchange Rule 515(c)(2)(i)(iv).
\14\ See proposed Exchange Rule 515(c)(2)(i)(v).
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The proposed LEP applies to over-sized non-Market Maker eligible
orders in Proprietary Products. More specifically, interest that would
be posted or managed, or that would trade at a price more aggressive
than the order's protected price (also referred to as the ``Book
price'') will be subject to the LEP. To begin the LEP, the System will
broadcast a liquidity exposure message to all subscribers of the
Exchange's data feeds which will include the symbol, side of the
market, quantity of matched contracts, the imbalance quantity, ``must
fill'' quantity, and price. Additionally, the System will start an LEP
timer, not to exceed three seconds, as determined by the Exchange and
announced via Regulatory Circular. All market participants may respond
to the liquidity exposure broadcast message. The System will evaluate
interest received during the LEP based on price and the side of the
market relative to the side of the market of the initiating order.
During the LEP, if the Exchange receives interest on the opposite
side of the market from the initiating order that locks or crosses the
Book price of the interest subject to the LEP, the interest will trade,
with resting liquidity executed prior to joining liquidity. During the
LEP, if the Exchange receives interest on the same side of the market
as the initiating order that is priced more aggressively than the Book
price of the interest subject to the LEP that also locks or crosses the
opposite side NBBO, the System will immediately terminate the timer and
treat the new interest as joining liquidity for allocation purposes.
Proposed Exchange Rule 515(c)(2)(i)(B) provides that at the end of
the timer, the initiating order, resting liquidity, and any same side
joining interest will (i) be handled in accordance to Exchange Rule
515, Execution of Orders and Quotes, or (ii) trade against opposite
side interest in the following sequence: resting interest will be
filled first, followed by joining interest in the order it was
received; and opposite side interest will be allocated in accordance
with the Exchange's standard allocation, as described in Exchange Rule
514, Priority of Quotes and Orders.
The Exchange also proposes to amend subsection (f)(2)(vii)(B)(5) of
Exchange Rule 503 (Openings on the Exchange), which currently provides
that if there is an opening transaction, any unexecuted contracts from
the imbalance not traded or routed will be cancelled back to the
entering Member if the price for those contracts crosses the opening
price, unless the Member that submitted the original order has
instructed the Exchange in writing to re-enter the remaining size, in
which case the remaining size will be automatically submitted as a new
order. The Exchange proposes to amend the rule to adopt a new provision
to state that unexecuted contracts that are from a non-Market Maker
order in a Proprietary Product will be placed on the Book with a
protected price equal to the opening price, and the LEP will begin
immediately after the Opening Process is complete.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange and, in particular, with
Section 6(b) of the Act.\15\ In particular, the Commission finds that
the proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Act,\16\ which requires, among other
things, that the rules of a national securities exchange be 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 mechanism 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). In 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).
\16\ 15 U.S.C. 78f(b)(5).
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The Commission believes that adopting definitions for the terms
Proprietary Product and Non-Proprietary Product on the Exchange adds
additional detail and promotes transparency and clarity in the
Exchange's rules. The proposed definitions allow the Exchange to
distinguish between two separate and distinct classes of options listed
on the Exchange and to describe rules that may be applicable to one
class and not the other.
As described above, the Exchange proposes a new price protection
and order handling mechanism for Proprietary Products that is similar
to drill-through protection currently offered by other exchanges, and
offers an opportunity for an investor's order in a Proprietary Product
to be filled rather than cancelled.\17\ The Commission believes that
the proposed price protection and liquidity exposure process for
eligible non-Market Maker orders in Proprietary Products is reasonably
designed to facilitate the execution of orders larger than and priced-
through the opposite side NBBO, as it offers a mechanism to seek and
potentially provide liquidity to a Member, subject to specified
parameters, in lieu of canceling back an order for which there are no
other venues to seek an execution.
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\17\ See Notice, supra note 3, at 58636.
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In addition, the Exchange proposes that if there are unexecuted
contracts from an eligible non-Market Maker order in a Proprietary
Product at the conclusion of the Opening Process, the remaining
contracts will be placed on the Book with a protected price equal to
the opening price, and the LEP will begin immediately after the Opening
Process is complete. The Commission believes that this aspect of the
proposal similarly provides an additional opportunity for price
discovery and a mechanism by which an investor's order in a Proprietary
Product may ultimately be filled.
For the foregoing reasons, the Commission finds the proposal, as
modified by Amendment No. 1, to be consistent with the Act.
IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 1 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-2018-35 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 5745]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2018-35. 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-2018-35, and should be submitted on
or before March 15, 2019.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. In Amendment No. 1, the Exchange modified
its proposal to specify that the term ``Proprietary Product'' refers to
an options product that is listed exclusively on the Exchange. The
Commission notes that Amendment No. 1 does not otherwise modify the
proposed rule change, which was subject to a full notice-and-comment
period during which no comments were received. Amendment No. 1 narrows
the scope of the original proposal by limiting the extent of products
that may meet the Exchange's proposed definition of ``Proprietary
Product,'' and harmonizes the definition with the rationale for the
proposal, which is to provide price protection for products that do not
trade on other execution venues. Accordingly, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\18\ to approve the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.
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\18\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-MIAX-2018-35), as modified
by Amendment No. 1, be, and hereby is, approved on an accelerated
basis.
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\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03034 Filed 2-21-19; 8:45 am]
BILLING CODE 8011-01-P
