Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Order Approving a Proposed Rule Change To Amend Exchange Rule 518, Complex Orders, To Adopt New Interpretation and Policy .07, SPIKES Combo Orders, 53786-53787 [2019-21879]
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53786
Federal Register / Vol. 84, No. 195 / Tuesday, October 8, 2019 / Notices
original proposal, which was subject to
a full notice and comment period during
which no comments were received. The
Commission also notes that Amendment
No. 1 provides additional accuracy,
clarity, and justification to the proposal.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,25 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,26 that the
proposed rule change (SR–NASDAQ–
2019–064), 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.27
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–21883 Filed 10–7–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87199; File No. SR–MIAX–
2019–37]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Order Approving a Proposed
Rule Change To Amend Exchange
Rule 518, Complex Orders, To Adopt
New Interpretation and Policy .07,
SPIKES Combo Orders
October 2, 2019.
I. Introduction
On August 9, 2019, 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
provide for the trading of SPIKES
Combo Orders.3 The proposed rule
change was published for comment in
the Federal Register on August 20,
25 15
U.S.C. 78s(b)(2).
26 Id.
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 SPIKES Combo Orders are comprised of
multiple series of SPIKESTM Index (‘‘SPIKES’’)
options. The SPIKES Index measures expected 30day volatility of the SPDR S&P 500 ETF Trust
(‘‘SPY’’). See Securities Exchange Act Release No.
84417 (October 12, 2018), 83 FR 52865 (October 18,
2018) (File No. SR–MIAX–2018–14) (approving the
listing and trading of SPIKES Index options).
jbell on DSK3GLQ082PROD with NOTICES
1 15
VerDate Sep<11>2014
21:50 Oct 07, 2019
Jkt 250001
2019.4 The Commission received no
comment letters regarding the proposed
rule change. This order approves the
proposed rule change.
II. Description of the Proposed Rule
Change
The Exchange proposes to amend
MIAX Rule 518, Complex Orders, to
adopt new Interpretation and Policy .07
to provide for the trading of SPIKES
Combo Orders. A SPIKES Combo Order
is an order to purchase or sell one or
more SPIKES option series and the
offsetting number of SPIKES
Combinations defined by the delta.5 A
SPIKES Combination is a purchase
(sale) of a SPIKES call option and the
sale (purchase) of a SPIKES put option
having the same expiration date and
strike price.6 The delta is the positive
(negative) number of SPIKES
Combinations that must be sold
(purchased) to establish a market
neutral hedge with one or more SPIKES
option series.7
Under the proposed rule, a SPIKES
Combo Order may not have a ratio
greater than eight options to one Spikes
Combination.8 In addition, a SPIKES
Combo Orders will be subject to all of
the provisions in MIAX Rule 518 that
are applicable to complex orders, other
than the requirement that the
component legs of a complex order have
a ratio that is equal to or greater than
one-to-three and less than or equal to
three-to-one.9 The proposal is designed
4 See Securities Exchange Act Release No. 86682
(August 14, 2019), 84 FR 43212 (‘‘Notice’’).
5 See proposed MIAX Rule 518, Interpretation
and Policy .07(a)(3).
6 See proposed MIAX Rule 518, Interpretation
and Policy .07(a)(1).
7 See proposed MIAX Rule 518, Interpretation
and Policy .07(a)(2). The delta is a measure of the
change in an option’s price resulting from a change
in the underlying security. See Notice, 84 FR at
43212.
8 See proposed MIAX Rule 518, Interpretation
and Policy .07(a)(4). MIAX notes that its rules
governing stock-option orders currently permit the
trading of stock-option orders with an 8:1 ratio,
where the ratio represents the number of option
contracts to the underlying security. See Notice, 84
FR at 43214. See also MIAX Rule 518(a)(5) (defining
stock-option order as an order to buy or sell a stated
number of units of an underlying security (stock or
Exchange Traded Fund Share) or a security
convertible into the underlying stock (‘‘convertible
security’’) coupled with the purchase or sale of
options contract(s) on the opposite side of the
market representing either (i) the same number of
units of the underlying security or convertible
security, or (ii) the number of units of the
underlying stock necessary to create a delta neutral
position, but in no case in a ratio greater than eightto-one (8.00), where the ratio represents the total
number of units of the underlying security or
convertible security (i.e., contracts) in the option leg
to the total number of units of the underlying
security (i.e., 100 shares) or convertible security in
the stock leg).
9 See proposed MIAX Rule 518, Interpretation
and Policy .07(a)(4)(i). MIAX’s rules defines a
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
to facilitate delta neutral hedging for
SPIKES options.10 MIAX states that
delta hedging aims to reduce the risk
associated with price movements in the
underlying asset.11 MIAX notes that an
options position may be delta hedged
with other options 12 or with shares of
the underlying stock.13 Although
SPIKES options, which are based on an
index, do not have an underlying stock
that may serve as a hedge, a SPIKES
Combination Order creates a synthetic
underlying position that is the
functional equivalent of the stock leg of
a stock-option order.14 MIAX believes
that permitting SPIKES Combo Orders
with an 8:1 ratio will align the treatment
of SPIKES Combo Orders with the
treatment of stock-option orders and
permit additional hedging
opportunities.15
MIAX states that it has the system
capacity and capability to handle the
potential increase in transaction rates
that could result from the trading of
SPIKES Combo Orders.16 In addition,
MIAX states that it will have
surveillance to monitor compliance
with the Exchange’s rules, specifically
as they pertain to delta neutral
transactions.17
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act,18 and the rules and regulations
thereunder applicable to a national
securities exchange.19 In particular, the
Commission finds that the proposed
rule change is consistent with Section
complex order as any order involving the
concurrent purchase and/or sale of two or more
different options in the same underlying security
(the ‘‘legs’’ or ‘‘components’’ of the complex order),
for the same account, in a ratio that is equal to or
greater than one-to-three (.333) and less than or
equal to three-to-one (3.00) and for the purposes of
executing a particular investment strategy. See
MIAX Rule 518(a)(5).
10 See Notice, 84 FR at 43214.
11 See id. at 43213.
12 For example, a call option with a delta of 0.50
could be hedged by a put option with a delta of
¥0.50, resulting in a position with a delta of zero.
See id.
13 See id.
14 See id. at 43214.
15 MIAX notes that market participants that
transact in SPIKES options currently may submit
complex orders that are delta neutral as long as the
ratio for the component legs of the transaction
conforms to the current 1:3/3:1 ratio applicable to
complex orders. See id.
16 See id. at 43215.
17 See id.
18 15 U.S.C. 78f.
19 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).
E:\FR\FM\08OCN1.SGM
08OCN1
Federal Register / Vol. 84, No. 195 / Tuesday, October 8, 2019 / Notices
6(b)(5) of the Act,20 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 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
proposal will protect investors and the
public interest by helping market
participants to hedge positions in
SPIKES options and execute delta
neutral trading strategies involving
SPIKES options. All of the provisions in
MIAX Rule 518 that are applicable to
complex orders will apply to SPIKES
Combo Orders, other than the
requirement that the component legs of
a complex order have a ratio that is
equal to or greater than one-to-three and
less than or equal to three-to-one.21 The
Commission notes that permitting
SPIKES Combo Orders to have a ratio of
no more than eight options to one
SPIKES Combination is consistent with
the 8:1 ratio permitted for stock-option
orders.22 As noted above, a SPIKES
Combination Order creates a synthetic
underlying position that is the
functional equivalent of the stock leg in
stock-option orders,23 and the SPIKES
Combination hedges one or more
SPIKES option series.24 Finally, as
discussed above, MIAX has represented
that it has the system capacity to
accommodate the trading of SPIKES
Combo Orders as well as surveillance
procedures to monitor compliance with
its rules relating to delta neutral
transactions.25
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,26 that the
proposed rule change (SR–MIAX–2019–
37) is approved.
jbell on DSK3GLQ082PROD with NOTICES
20 15
U.S.C. 78f(b)(5).
21 See proposed MIAX Rule 518(a)(4)(i).
22 See note 8, supra.
23 See Notice, 84 FR at 43214.
24 See proposed MIAX Rule 518, Interpretation
and Policy .07(a)(3).
25 See id. at 43215.
26 15 U.S.C. 78s(b)(2).
27 17 CFR 200.30–3(a)(12).
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21:50 Oct 07, 2019
Jkt 250001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–21879 Filed 10–7–19; 8:45 am]
BILLING CODE 8011–01–P
53787
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87179; File No. SR–
NASDAQ–2019–075]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Further
Delay Implementation of the Early
Order Imbalance Indicator
Functionality
October 1, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 17, 2019, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to delay
implementation of the Early Order
Imbalance Indicator functionality until
Q4 2019.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.cchwallstreet.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
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
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00116
Fmt 4703
Sfmt 4703
On February 27, 2019, the Exchange
filed a proposed rule change to establish
the Early Order Imbalance Indicator
(‘‘EOII’’), which contains a subset of the
information comprising the Net Order
Imbalance Indicator (‘‘NOII’’) that the
Exchange will disseminate ten minutes
prior to the market close and five
minutes prior to the cutoff time for
entering Market on Close and certain
Limit on Close Orders into the Nasdaq
Closing Cross.3 The proposed rule
change indicated that the Exchange
would implement EOII in Q2 2019.4 The
Exchange subsequently delayed the
implementation of EOII functionality
until Q3 2019.5 The Exchange now
proposes to further delay the
implementation of EOII functionality
until Q4 2019. The Exchange will issue
an Equity Trader Alert notifying
participants prior to implementing the
functionality. The Exchange proposes
this delay to allow the EOII to become
effective at the same time as a pending
change to enhance the closing process
for the Exchange.6 The delay will also
afford additional time that Exchange
participants have requested to prepare
for the onset of EOII.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,7 in general, and furthers the
objectives of Section 6(b)(5) of the Act,8
in particular, in that it is designed to
promote just and equitable principles of
trade, 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 by
allowing the Exchange additional time
to implement the EOII in conjunction
with a related enhancement to the
Closing Cross process. The delay would
also afford participants the additional
3 See Securities Exchange Act Release No. 34–
85292 (Mar. 12, 2019), 84 FR 9848 (Mar. 18, 2019)
(SR–NASDAQ–2019–010).
4 See id. at 9850.
5 See Securities Exchange Act Release No. 34–
85745 (Apr. 29, 2019), 84 FR 19135 (May 3, 2019)
(SR–NASDAQ–2019–032).
6 See Securities Exchange Act Release No. 34–
86642 (Aug. 13, 2019) (SR–NASDAQ–2019–064).
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
E:\FR\FM\08OCN1.SGM
08OCN1
]]>Agencies
[Federal Register Volume 84, Number 195 (Tuesday, October 8, 2019)]
[Notices]
[Pages 53786-53787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21879]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87199; File No. SR-MIAX-2019-37]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Order Approving a Proposed Rule Change To Amend Exchange
Rule 518, Complex Orders, To Adopt New Interpretation and Policy .07,
SPIKES Combo Orders
October 2, 2019.
I. Introduction
On August 9, 2019, 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 provide for the trading of
SPIKES Combo Orders.\3\ The proposed rule change was published for
comment in the Federal Register on August 20, 2019.\4\ The Commission
received no comment letters regarding the proposed rule change. This
order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ SPIKES Combo Orders are comprised of multiple series of
SPIKESTM Index (``SPIKES'') options. The SPIKES Index
measures expected 30-day volatility of the SPDR S&P 500 ETF Trust
(``SPY''). See Securities Exchange Act Release No. 84417 (October
12, 2018), 83 FR 52865 (October 18, 2018) (File No. SR-MIAX-2018-14)
(approving the listing and trading of SPIKES Index options).
\4\ See Securities Exchange Act Release No. 86682 (August 14,
2019), 84 FR 43212 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to amend MIAX Rule 518, Complex Orders, to
adopt new Interpretation and Policy .07 to provide for the trading of
SPIKES Combo Orders. A SPIKES Combo Order is an order to purchase or
sell one or more SPIKES option series and the offsetting number of
SPIKES Combinations defined by the delta.\5\ A SPIKES Combination is a
purchase (sale) of a SPIKES call option and the sale (purchase) of a
SPIKES put option having the same expiration date and strike price.\6\
The delta is the positive (negative) number of SPIKES Combinations that
must be sold (purchased) to establish a market neutral hedge with one
or more SPIKES option series.\7\
---------------------------------------------------------------------------
\5\ See proposed MIAX Rule 518, Interpretation and Policy
.07(a)(3).
\6\ See proposed MIAX Rule 518, Interpretation and Policy
.07(a)(1).
\7\ See proposed MIAX Rule 518, Interpretation and Policy
.07(a)(2). The delta is a measure of the change in an option's price
resulting from a change in the underlying security. See Notice, 84
FR at 43212.
---------------------------------------------------------------------------
Under the proposed rule, a SPIKES Combo Order may not have a ratio
greater than eight options to one Spikes Combination.\8\ In addition, a
SPIKES Combo Orders will be subject to all of the provisions in MIAX
Rule 518 that are applicable to complex orders, other than the
requirement that the component legs of a complex order have a ratio
that is equal to or greater than one-to-three and less than or equal to
three-to-one.\9\ The proposal is designed to facilitate delta neutral
hedging for SPIKES options.\10\ MIAX states that delta hedging aims to
reduce the risk associated with price movements in the underlying
asset.\11\ MIAX notes that an options position may be delta hedged with
other options \12\ or with shares of the underlying stock.\13\ Although
SPIKES options, which are based on an index, do not have an underlying
stock that may serve as a hedge, a SPIKES Combination Order creates a
synthetic underlying position that is the functional equivalent of the
stock leg of a stock-option order.\14\ MIAX believes that permitting
SPIKES Combo Orders with an 8:1 ratio will align the treatment of
SPIKES Combo Orders with the treatment of stock-option orders and
permit additional hedging opportunities.\15\
---------------------------------------------------------------------------
\8\ See proposed MIAX Rule 518, Interpretation and Policy
.07(a)(4). MIAX notes that its rules governing stock-option orders
currently permit the trading of stock-option orders with an 8:1
ratio, where the ratio represents the number of option contracts to
the underlying security. See Notice, 84 FR at 43214. See also MIAX
Rule 518(a)(5) (defining stock-option order as an order to buy or
sell a stated number of units of an underlying security (stock or
Exchange Traded Fund Share) or a security convertible into the
underlying stock (``convertible security'') coupled with the
purchase or sale of options contract(s) on the opposite side of the
market representing either (i) the same number of units of the
underlying security or convertible security, or (ii) the number of
units of the underlying stock necessary to create a delta neutral
position, but in no case in a ratio greater than eight-to-one
(8.00), where the ratio represents the total number of units of the
underlying security or convertible security (i.e., contracts) in the
option leg to the total number of units of the underlying security
(i.e., 100 shares) or convertible security in the stock leg).
\9\ See proposed MIAX Rule 518, Interpretation and Policy
.07(a)(4)(i). MIAX's rules defines a complex order as any order
involving the concurrent purchase and/or sale of two or more
different options in the same underlying security (the ``legs'' or
``components'' of the complex order), for the same account, in a
ratio that is equal to or greater than one-to-three (.333) and less
than or equal to three-to-one (3.00) and for the purposes of
executing a particular investment strategy. See MIAX Rule 518(a)(5).
\10\ See Notice, 84 FR at 43214.
\11\ See id. at 43213.
\12\ For example, a call option with a delta of 0.50 could be
hedged by a put option with a delta of -0.50, resulting in a
position with a delta of zero. See id.
\13\ See id.
\14\ See id. at 43214.
\15\ MIAX notes that market participants that transact in SPIKES
options currently may submit complex orders that are delta neutral
as long as the ratio for the component legs of the transaction
conforms to the current 1:3/3:1 ratio applicable to complex orders.
See id.
---------------------------------------------------------------------------
MIAX states that it has the system capacity and capability to
handle the potential increase in transaction rates that could result
from the trading of SPIKES Combo Orders.\16\ In addition, MIAX states
that it will have surveillance to monitor compliance with the
Exchange's rules, specifically as they pertain to delta neutral
transactions.\17\
---------------------------------------------------------------------------
\16\ See id. at 43215.
\17\ See id.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act,\18\ and the
rules and regulations thereunder applicable to a national securities
exchange.\19\ In particular, the Commission finds that the proposed
rule change is consistent with Section
[[Page 53787]]
6(b)(5) of the Act,\20\ 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 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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f.
\19\ 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).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposal will protect investors
and the public interest by helping market participants to hedge
positions in SPIKES options and execute delta neutral trading
strategies involving SPIKES options. All of the provisions in MIAX Rule
518 that are applicable to complex orders will apply to SPIKES Combo
Orders, other than the requirement that the component legs of a complex
order have a ratio that is equal to or greater than one-to-three and
less than or equal to three-to-one.\21\ The Commission notes that
permitting SPIKES Combo Orders to have a ratio of no more than eight
options to one SPIKES Combination is consistent with the 8:1 ratio
permitted for stock-option orders.\22\ As noted above, a SPIKES
Combination Order creates a synthetic underlying position that is the
functional equivalent of the stock leg in stock-option orders,\23\ and
the SPIKES Combination hedges one or more SPIKES option series.\24\
Finally, as discussed above, MIAX has represented that it has the
system capacity to accommodate the trading of SPIKES Combo Orders as
well as surveillance procedures to monitor compliance with its rules
relating to delta neutral transactions.\25\
---------------------------------------------------------------------------
\21\ See proposed MIAX Rule 518(a)(4)(i).
\22\ See note 8, supra.
\23\ See Notice, 84 FR at 43214.
\24\ See proposed MIAX Rule 518, Interpretation and Policy
.07(a)(3).
\25\ See id. at 43215.
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\26\ that the proposed rule change (SR-MIAX-2019-37) is approved.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78s(b)(2).
\27\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-21879 Filed 10-7-19; 8:45 am]
BILLING CODE 8011-01-P
