Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To List and Trade Options That Overlie Five Advanced Fundamentals LLC Commercial Real Estate Indexes, 26743-26747 [2020-09519]
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Federal Register / Vol. 85, No. 87 / Tuesday, May 5, 2020 / Notices
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–CboeBZX–2020–011 and
should be submitted on or before May
26, 2020. Rebuttal comments should be
submitted by June 9, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09523 Filed 5–4–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88767; File No. SR–MIAX–
2020–08]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To List and Trade Options
That Overlie Five Advanced
Fundamentals LLC Commercial Real
Estate Indexes
April 29, 2020.
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 April 17,
2020, Miami International Securities
Exchange, LLC (‘‘MIAX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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.
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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
list and trade options that overlie five
Advanced Fundamentals LLC
(‘‘Advanced Fundamentals’’)
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Commercial Real Estate Indexes (the
‘‘AF CRE Indexes’’).
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 purpose of this proposed rule
change is to amend certain of the
Exchange’s rules in connection with the
Exchange’s plan to list and trade options
on five AF CRE Indexes 3—the AF CRE
Residential Index, AF CRE Retail Index,
AF CRE Office Index, AF CRE
Hospitality Index 4 and AF CRE
Composite Index. The AF CRE Indexes
measure real-time real estate returns
representing the performance of real
estate investment trusts (‘‘REITs’’) and/
or publicly listed equity companies
across various sectors. The AF CRE
Sector Indexes measure real-time real
estate returns representing the
performance of REITs and/or publicly
listed equity companies within one of
the following sectors:
Sector
Residential
Retail ........
Office ........
Hospitality
Symbol 5
Number of
components 6
MXAFR
MXAFT
MXAFO
MXAFH
15
15
14
14
Each constituent of an AF CRE Index
is a REIT or equity company listed on
3 On April 16, 2020, the Exchange filed a Form
19b–4(e) with the Commission pursuant to Rule
19b–4(e) of the Act for the AF CRE Indexes.
4 The AF CRE Residential Index, AF CRE Retail
Index, AF CRE Office Index and AF CRE Hospitality
Index are collectively referred to herein as the ‘‘AF
CRE Sector Indexes.’’
5 These symbols represent each AF CRE Index.
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26743
a U.S. securities exchange. The
individual components of each AF CRE
Sector Index are determined from the
REITs/equity companies that have the
largest enterprise value (‘‘Enterprise
Value’’) 7 within each individual sector
and that also meet certain minimum
eligibility requirements.8 The
components of the AF CRE Sector
Indexes are each an NMS stock as
defined in Rule 600 of Regulation NMS
(‘‘Reg NMS’’) under the Act. The AF
CRE Composite Index measures the
weighted average returns of the four AF
CRE Sector Indexes and consists of up
to 60 publicly traded REITs and/or
equity companies, which comprise the
four underlying sector returns that are
listed on a U.S. securities exchange.9
Refinitiv monitors and maintains each
AF CRE Index and rebalances each AF
CRE Index quarterly.
Initial and Maintenance Listing Criteria
The AF CRE Composite Index meets
the definition of a broad-based index as
set forth in Exchange Rule 1802(d) (an
index designed to be representative of a
stock market as a whole or of a range of
companies in unrelated industries).
Additionally, the AF CRE Composite
Index option satisfies the initial listing
criteria of a broad-based index, as set
forth in Exchange Rule 1802(d):
(1) Options will be A.M.-settled index
options;
(2) the index is capitalizationweighted, price-weighted, equal dollarweighted, or modified capitalizationweighted, and consists of 50 or more
component securities (the AF CRE
Composite Index is modified
capitalization-weighted);
(3) the component securities that
account for at least ninety-five percent
6 If less than 15 components are eligible, the AF
CRE Sector Indexes are calculated using less than
15 components, but no fewer than 10 components.
7 The term ‘‘Enterprise Value’’ refers to the
measure of a company’s total value, calculated by
adding the company’s market capitalization, total
liabilities and preferred equity, then subtracting all
cash and cash equivalents. See https://
www.investopedia.com/terms/e/
enterprisevalue.asp.
8 Refinitiv is the reporting authority for each of
the AF CRE Indexes. See proposed Exchange Rule
1801, Interpretation and Policy .01. Thomson
Reuters’ Financial & Risk (‘‘F&R’’) business unit was
rebranded under the name ‘‘Refinitiv’’ in 2018
when Thomson Reuters sold a majority stake in its
F&R business unit to private equity firm Blackstone
Group LP. Refinitiv provides financial markets data
and infrastructure in over 150 countries. Part of
Refinitiv’s services include, but are not limited to,
the calculation of various indexes. See Thomson
Reuters Financial & Risk Business Announces New
Company Name: Refinitiv (July 27, 2018), available
at https://www.thomsonreuters.com/en/pressreleases/2018/july/thomson-reuters-financial-andrisk-business-announces-new-company-namerefinitiv.html.
9 The symbol for the AF CRE Composite Index is
‘‘MXAFC.’’
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(95%) of the weight of the index have
a market capitalization of at least $75
million, except that component
securities that account for at least sixtyfive percent (65%) of the weight of the
index have a market capitalization of at
least $100 million;
(4) component securities that account
for at least eighty percent (80%) of the
weight of the index satisfy the
requirements of Rule 402 applicable to
individual underlying securities;
(5) each component security that
accounts for at least one percent (1%) of
the weight of the index has an average
daily trading volume of at least 90,000
shares during the last six month period;
(6) no single component security
accounts for more than ten percent
(10%) of the weight of the index, and
the five highest weighted component
securities in the index do not, in the
aggregate, account for more than thirtythree percent (33%) of the weight of the
index;
(7) each component security is an
‘‘NMS stock’’ as defined in Rule 600 of
Regulation NMS under the Exchange
Act;
(8) non-U.S. component securities
(stocks or ADRs) that are not subject to
comprehensive surveillance agreements
do not, in the aggregate, represent more
than twenty percent (20%) of the weight
of the index;
(9) the current index value is widely
disseminated at least once every fifteen
(15) seconds by OPRA, CTA/CQ, NIDS
or one or more major market data
vendors during the time options on the
index are traded on the Exchange;
(10) the Exchange reasonably believes
it has adequate system capacity to
support the trading of options on the
index, based on a calculation of the
Exchange’s current ISCA allocation and
the number of new messages per second
expected to be generated by options on
such index;
(11) an equal dollar-weighted index
will be rebalanced at least once every
calendar quarter;
(12) if an index is maintained by a
broker-dealer, the index is calculated by
a third-party who is not a broker-dealer,
and the broker-dealer has erected an
informational barrier around its
personnel who have access to
information concerning changes in, and
adjustments to, the index; and
(12) the Exchange has written
surveillance procedures in place with
respect to surveillance of trading
options on the index.
Options on the AF CRE Composite
Index will be subject to the maintenance
and listing standards set forth in
Exchange Rule 1802(e):
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(1) The requirements set forth in
subparagraphs (d)(1)–(d)(3) and (d)(9)–
(d)(15) of Exchange Rule 1802 must
continue to be satisfied. The
requirements set forth in subparagraphs
(d)(5)–(d)(8) of Exchange Rule 1802
must be satisfied only as of the first day
of January and July in each year; and
(2) the total number of component
securities in the index may not increase
or decrease by more than ten percent
(10%) from the number of component
securities in the index at the time of its
initial listing.10
Each of the AF CRE Sector Indexes
meet the definition of a narrow-based
index as set forth in Exchange Rule
1802(b) (an index designed to be
representative of a particular industry or
a group of related industries and
include indices having component
securities that are all headquartered
within a single country). Additionally,
the proposed options on the AF CRE
Sector Indexes satisfy the initial listing
criteria of a narrow-based index, as set
forth in Exchange Rule 1802(b):
(1) Options will be A.M.-settled index
options;
(2) the index is capitalizationweighted, price-weighted, equal dollarweighted, or modified capitalizationweighted, and consists of ten or more
component securities (the AF CRE
Indexes are modified capitalizationweighted);
(3) each component security has a
market capitalization of at least $75
million, except that for each of the
lowest weighted component securities
in the index that in the aggregate
account for no more than 10% of the
weight of the index, the market
capitalization is at least $50 million;
(4) trading volume of each component
security has been at least one million
shares for each of the last six months,
except that for each of the lowest
weighted component securities in the
index that in the aggregate account for
no more than 10% of the weight of the
index, trading volume has been at least
500,000 shares for each of the last six
months;
(5) in a capitalization-weighted index
or a modified capitalization-weighted
index, the lesser of the five highest
weighted component securities in the
index or the highest weighted
component securities in the index that
in the aggregate represent at least 30%
10 In the event a class of index options listed on
the Exchange fails to satisfy the maintenance listing
standards set forth herein, the Exchange shall not
open for trading any additional series of options of
that class unless the continued listing of that class
of index options has been approved by the
Commission under Section 19(b)(2) of the Exchange
Act. See Exchange Rule 1802(e)(2).
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of the total number of component
securities in the index each have had an
average monthly trading volume of at
least 2,000,000 shares over the past six
months;
(6) no single component security
represents more than 30% of the weight
of the index, and the five highest
weighted component securities in the
index do not in the aggregate account
for more than 50% (65% for an index
consisting of fewer than 25 component
securities) of the weight of the index;
(7) component securities that account
for at least 90% of the weight of the
index and at least 80% of the total
number of component securities in the
index satisfy the requirements of Rule
402 applicable to individual underlying
securities;
(8) each component security is an
‘‘NMS stock’’ as defined in Rule 600 of
Reg NMS under the Act;
(9) non-U.S. component securities
(stocks or ADRs) that are not subject to
comprehensive surveillance agreements
do not in the aggregate represent more
than 20% of the weight of the index;
(10) the current index value is widely
disseminated at least once every 15
seconds by OPRA, CTA/CQ, NIDS or
one or more major market data vendors
during the time the index options are
traded on the Exchange;
(11) an equal dollar-weighted index
will be rebalanced at least once every
calendar quarter; and
(12) if an underlying index is
maintained by a broker-dealer, the index
is calculated by a third party who is not
a broker-dealer, and the broker-dealer
has erected an information barrier
around its personnel who have access to
information concerning changes in and
adjustments to the index.
Options on each of the AF CRE Sector
Indexes will be subject to the
maintenance and listing standards set
forth in Exchange Rule 1802(c):
(1) The requirements stated in
subparagraphs (b)(1), (3), (6), (7), (8), (9),
(10), (11) and (12) of Exchange Rule
1802 must continue to be satisfied,
provided that the conditions stated in
subparagraph (b)(6) must be satisfied
only as of the first day of January and
July in each year;
(2) the total number of component
securities in the index may not increase
or decrease by more than 331⁄3% from
the number of component securities in
the index at the time of its initial listing,
and in no event may be less than nine
component securities;
(3) trading volume of each component
security in the index must be at least
500,000 shares for each of the last six
months, except that for each of the
lowest weighted component securities
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in the index that in the aggregate
account for no more than 10% of the
weight of the index, trading volume
must be at least 400,000 shares for each
of the last six months; and
(4) in a capitalization-weighted index
or a modified capitalization-weighted
index, the lesser of the five highest
weighted component securities in the
index or the highest weighted
component securities in the index that
in the aggregate represent at least 30%
of the total number of stocks in the
index each have had an average
monthly trading volume of at least
1,000,000 shares over the past six
months.11
Expiration Months, Settlement, and
Exercise Style
Consistent with existing rules for
certain index options,12 the Exchange
will allow up to twelve near-term
expiration months for options on the AF
CRE Indexes.13 The Exchange will likely
not initially list twelve near-term
expiration months for options on the AF
CRE Indexes; however, the Exchange
elects to have the ability to list up to
twelve near-term expiration months in
the future.
The options on each of the AF CRE
Indexes will be A.M., cash-settled
contracts with European-style
exercise.14 A.M.-settlement is consistent
with the generic listing criteria for
industry-based indexes 15 (as well as
broad-based indexes 16), and thus it is
common for index options to be A.M.settled. The Exchange proposes to
amend Exchange Rule 1809(a)(5) to add
the options on the AF CRE Indexes to
the list of other A.M.-settled options.
The Exchange proposes to amend
Exchange Rule 1809(a)(4) to add options
on the AF CRE Indexes to the list of
other European-style index options.
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Capacity
The Exchange has analyzed its
capacity and represents that it believes
11 As is the case with other index options
authorized for listing and trading on MIAX, in the
event an AF CRE Index fails to satisfy the
maintenance listing standards, the Exchange will
not open for trading any additional series of options
of that class unless such failure is determined by
the Exchange not to be significant and the
Commission concurs in that determination, or
unless the continued listing of that class of index
options has been approved by the Commission
under Section 19(b)(2) of the Act. See Exchange
Rule 1802(c)(4).
12 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 to List and Trade Options on
the SPIKESTM Index).
13 See proposed Exchange Rule 1809(a)(3).
14 See proposed Exchange Rule 1809(a)(4)(ii)–(vi).
15 See Exchange Rule 1802(b)(1).
16 See Exchange Rule 1802(d)(2).
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the Exchange and OPRA have the
necessary systems capacity to handle
the additional traffic associated with the
listing of new series that would result
from the introduction of options on each
of the AF CRE Indexes up to the
proposed number of possible
expirations. Because the proposal is
limited to five classes, the Exchange
believes any additional traffic that
would be generated from the
introduction of options on the AF CRE
Indexes would be manageable.
Component Selection for the AF CRE
Sector Indexes
The composition of each AF CRE
Index is determined in a reconstitution
on a quarterly basis from audited REIT/
equity company filings and
supplemental filings with the
Commission, updated each quarter and
intra-quarter based on 8–K, 10–Q, and
10–K filings. The components in each of
the AF CRE Sector Indexes are
determined from the REITs/equity
companies that have the largest
Enterprise Value within each individual
sector and that meet the following
minimum eligibility requirements. To
be eligible for inclusion in each of the
AF CRE Sector Indexes, a REIT/equity
company must: (i) Be classified as an
equity REIT; (ii) be listed on a U.S.
securities exchange; (iii) have a
minimum Enterprise Value of $1 billion;
(iv) have at least 85% of its revenue
derived from the associated asset class;
and (v) have issued a quarterly filing or
annual report after its initial listing.
Adjustments are made to the values of
the AF CRE Sector Indexes during the
quarterly reconstitution taking into
account changes in each AF CRE Sector
Indexes’ component’s per unit value,
where the unit for each AF CRE Sector
Index is represented as follows:
• AF CRE Residential Index = amount
of residential units owned by the
component security.
• AF CRE Retail Index = amount of
square footage owned by the component
security.
• AF CRE Office Index = amount of
square footage owned by the component
security.
• AF CRE Hospitality Index = amount
of hotel rooms owned by the component
security.
Index Calculation and Modified MarketCapitalization Weighting Methodology
Each of the AF CRE Sector Indexes are
calculated using a modified market
capitalization-weighting (‘‘MCW’’)
methodology. The MCW is determined
by starting with the standard market
capitalization of each component REIT/
equity security in each AF CRE Sector
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26745
Index and dividing such component’s
market capitalization by its enterprise
value. Enterprise value identifies the
amount of leverage (debt) and level of
cash for each component security listed
in that particular AF CRE Sector Index.
With this modification, the debt portion
of each component REIT/equity security
is identified and effectively removed
from the component’s weighting, with
the removed amount being represented
as a static cash position in each AF CRE
Sector Index. This modification process
produces the benefit of being able to
measure the performance of each of the
components on a non-levered basis,
creating a truer comparison between
components and thus getting a more
accurate representation of the value of
the real estate holdings in the
component’s portfolio. Every
component REIT/equity security in each
of the AF CRE Sector Indexes goes
through the same modification process
in order to generate a modified marketcapitalization weighting for each
component. Component weights for the
AF CRE Sector Indexes are adjusted and
reset on a monthly basis. The most
recent public company filings (10–K,
10–Q, 8–K) and share data are used as
inputs at each reweighting. For the AF
CRE Composite Index, each AF CRE
Sector Index is weighted in a ratio of the
sum of its components’ enterprise
values to the total sum of the enterprise
values for all of the AF CRE Sector
Indexes.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.17 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 18 requirements that the rules of
an 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.
Additionally, the Exchange believes the
proposed rule change is consistent with
17 15
18 15
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U.S.C. 78f(b)(5).
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the Section 6(b)(5) 19 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes that the
proposal to list and trade options on the
AF CRE Indexes will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest, because the Exchange believes
that the proposed rule change will
further the Exchange’s goal of
introducing new and innovative
products to the marketplace. Currently,
the Exchange believes that there is
unmet market demand for exchangelisted security options listed on
commercial real estate indexes
representing residential, retail, office
and hospitality sectors. Each AF CRE
Sector Index consists of no more than 15
REITs/equity companies (but no less
than 10 REITs/equity companies) listed
on a U.S. securities exchange.20 Each
REIT/equity company must be listed on
a U.S. securities exchange, have a
minimum Enterprise Value of $1 billion,
have at least 85% of its revenue derived
from the associated asset class, and have
issued a quarterly filing or annual report
after initial listing. For the AF CRE
Composite Index, each of the AF CRE
Sector Indexes are weighted in a ratio of
the sum of each indexes’ components
enterprise values to the total sum of the
enterprise values for all the AF CRE
Sector Indexes. As a result, the
Exchange believes that options on each
of the AF CRE Indexes are designed to
provide different and additional
opportunities for investors to hedge or
speculate on the market risk associated
with the various sectors of the
commercial real estate market by listing
options directly on the AF CRE Indexes
representing those sectors.
The options that the Exchange
proposes to list on each of the AF CRE
Indexes satisfies the initial listing
standards for broad-based (for the AF
CRE Composite Index) and narrowbased indexes (for the AF CRE Sector
Indexes) pursuant to the Exchange’s
current rules. The proposed rule change
adds the AF CRE Indexes to the table
regarding reporting authorities for the
Exchange’s proprietary index options, to
the Exchange’s rule regarding the
number of permissible expirations,21 to
the list of European-style exercise index
options, and to the list of A.M.-settled
index options. These changes are
consistent with existing rules and index
19 Id.
20 See
21 See
supra note 6.
supra note 12.
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options currently authorized and listed
for trading on the Exchange and other
exchanges. The Exchange also
represents that it has the necessary
systems capacity to support the new
option series for each of the AF CRE
Indexes given these proposed
specifications. The Exchange believes
that options on the AF CRE Indexes, as
proposed to be traded under Exchange
Rules, would not be readily susceptible
to manipulation. The Exchange believes
the proposed rule change will further
the Exchange’s goal of introducing new
and innovative products to the
marketplace. The Exchange believes that
listing options on the AF CRE Indexes
will provide an opportunity for
investors to hedge, or speculate on, the
market risk associated with the
commercial real estate industry.
The Exchange believes that its
existing surveillance and reporting
safeguards are designed to deter and
detect possible manipulative behavior
which might arise from listing and
trading options on the AF CRE Indexes.
The Exchange further notes that current
Exchange Rules that apply to the trading
of other index options traded on the
Exchange, such as options on the
SPIKES Index, would also apply to the
trading of options on the AF CRE
Indexes, such as, for example, Exchange
Rules governing customer accounts,
margin requirements and trading halt
procedures. The Exchange also
represents that it has the necessary
systems capacity to support the new
options series for each of the AF CRE
Indexes.
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 AF CRE
Indexes satisfy initial listing standards
set forth in the Exchange’s rules, and the
proposed number of expirations,
settlement, and exercise style are
consistent with current rules applicable
to index options. Options on each of the
AF CRE Indexes will provide investors
with different and additional
opportunities to hedge or speculate on
the market associated with the AF CRE
Indexes. Further, options on the AF CRE
Indexes would be available for trading
to all market participants.
The proposed rule change will
facilitate the listing and trading of novel
options products that will enhance
competition among market participants,
to the benefit of investors and the
marketplace. The listing of options on
the AF CRE Indexes will enhance
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competition by providing investors with
an additional investment vehicle, in a
fully-electronic trading environment,
through which investors can gain and
hedge exposure to various sectors of the
commercial real estate market. Further,
these products could offer a competitive
alternative to other existing investment
products that seek to allow investors to
gain broad market exposure via REITs in
the same individual sectors as the AF
CRE Indexes.
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 from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 22 and Rule 19b–
4(f)(6) thereunder.23
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
change 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:
22 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of 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.
23 17
E:\FR\FM\05MYN1.SGM
05MYN1
Federal Register / Vol. 85, No. 87 / Tuesday, May 5, 2020 / Notices
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–2020–08 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
khammond on DSKJM1Z7X2PROD with NOTICES
All submissions should refer to File
Number SR–MIAX–2020–08. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet 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–2020–08, and
should be submitted on or before May
26, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09519 Filed 5–4–20; 8:45 am]
BILLING CODE 8011–01–P
24 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
19:16 May 04, 2020
Jkt 250001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88766; File No. SR–FICC–
2020–005]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Modify the
Government Securities Division
Rulebook, Mortgage-Backed Securities
Division Clearing Rules, and MortgageBacked Securities Division EPN Rules
April 29, 2020.
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 April 27,
2020, Fixed Income Clearing
Corporation (‘‘FICC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the clearing agency. FICC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(4) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
modifications to the FICC Government
Securities Division (‘‘GSD’’) Rulebook
(‘‘GSD Rules’’), the FICC MortgageBacked Securities Division (‘‘MBSD’’)
Clearing Rules (‘‘MBSD Rules’’) and the
FICC MBSD EPN Rules (‘‘EPN Rules,’’
and together with the GSD Rules and
the MBSD Rules, the ‘‘Rules’’) to: (i)
Delete terms that are no longer used in
the GSD Rules; (ii) delete references to
services and service-related provisions
that are no longer provided and/or
active in the GSD Rules and the MBSD
Rules; (iii) delete certain dates in the
GSD Rules and the MBSD Rules; (iv)
make certain clarifications in the Rules;
(v) make certain corrections to the
Rules; (vi) replace an officer title in the
GSD Rules and the MBSD Rules; (vii)
add a disclaimer regarding trademarks
and servicemarks in the Rules and
conform the usage of the registered
trademark symbol in the GSD Rules; and
(viii) make certain technical changes to
the Rules.5
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4).
5 Capitalized terms used herein and not defined
shall have the meanings assigned to such terms in
26747
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency 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
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
FICC is proposing to (i) delete terms
that are no longer used in the GSD
Rules; (ii) delete references to services
and service-related provisions that are
no longer provided and/or active in the
GSD Rules and the MBSD Rules; (iii)
delete certain dates in the GSD Rules
and the MBSD Rules; (iv) make certain
clarifications in the Rules; (v) make
certain corrections to the Rules; (vi)
replace an officer title in the GSD Rules
and the MBSD Rules; (vii) add a
disclaimer regarding trademarks and
servicemarks in the Rules and conform
the usage of the registered trademark
symbol in the GSD Rules; and (viii)
make certain technical changes to the
Rules.
(i) Proposal To Delete Terms That Are
No Longer Used in the GSD Rules
FICC is proposing to remove the
following defined terms and definitions
in GSD Rule 1 6 as these terms are
defined, but not otherwise used, in the
GSD Rules. Specifically, the terms
proposed to be deleted are:
•
•
•
•
•
•
•
•
‘‘Announcement Date’’
‘‘Collateral Management Service’’
‘‘Money-Fill Repo Transaction’’
‘‘Money Settlement Obligations’’
‘‘Non-Zero’’
‘‘Par-Fill Repo Transaction’’
‘‘Refunding Issue Date’’
‘‘Remaining Member’’
1 15
2 17
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
the GSD Rules, MBSD Rules and EPN Rules, as
applicable, available at https://www.dtcc.com/legal/
rules-and-procedures.aspx.
6 GSD Rule 1, id.
E:\FR\FM\05MYN1.SGM
05MYN1
]]>Agencies
[Federal Register Volume 85, Number 87 (Tuesday, May 5, 2020)]
[Notices]
[Pages 26743-26747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09519]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88767; File No. SR-MIAX-2020-08]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To List and Trade Options That Overlie Five
Advanced Fundamentals LLC Commercial Real Estate Indexes
April 29, 2020.
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 April 17, 2020, Miami International Securities Exchange, LLC
(``MIAX'' or the ``Exchange'') filed with the Securities and Exchange
Commission (``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to list and trade options that
overlie five Advanced Fundamentals LLC (``Advanced Fundamentals'')
Commercial Real Estate Indexes (the ``AF CRE Indexes'').
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 purpose of this proposed rule change is to amend certain of the
Exchange's rules in connection with the Exchange's plan to list and
trade options on five AF CRE Indexes \3\--the AF CRE Residential Index,
AF CRE Retail Index, AF CRE Office Index, AF CRE Hospitality Index \4\
and AF CRE Composite Index. The AF CRE Indexes measure real-time real
estate returns representing the performance of real estate investment
trusts (``REITs'') and/or publicly listed equity companies across
various sectors. The AF CRE Sector Indexes measure real-time real
estate returns representing the performance of REITs and/or publicly
listed equity companies within one of the following sectors:
---------------------------------------------------------------------------
\3\ On April 16, 2020, the Exchange filed a Form 19b-4(e) with
the Commission pursuant to Rule 19b-4(e) of the Act for the AF CRE
Indexes.
\4\ The AF CRE Residential Index, AF CRE Retail Index, AF CRE
Office Index and AF CRE Hospitality Index are collectively referred
to herein as the ``AF CRE Sector Indexes.''
------------------------------------------------------------------------
Number of
Sector Symbol \5\ components \6\
------------------------------------------------------------------------
Residential..................... MXAFR 15
Retail.......................... MXAFT 15
Office.......................... MXAFO 14
Hospitality..................... MXAFH 14
------------------------------------------------------------------------
Each constituent of an AF CRE Index is a REIT or equity company
listed on a U.S. securities exchange. The individual components of each
AF CRE Sector Index are determined from the REITs/equity companies that
have the largest enterprise value (``Enterprise Value'') \7\ within
each individual sector and that also meet certain minimum eligibility
requirements.\8\ The components of the AF CRE Sector Indexes are each
an NMS stock as defined in Rule 600 of Regulation NMS (``Reg NMS'')
under the Act. The AF CRE Composite Index measures the weighted average
returns of the four AF CRE Sector Indexes and consists of up to 60
publicly traded REITs and/or equity companies, which comprise the four
underlying sector returns that are listed on a U.S. securities
exchange.\9\ Refinitiv monitors and maintains each AF CRE Index and
rebalances each AF CRE Index quarterly.
---------------------------------------------------------------------------
\5\ These symbols represent each AF CRE Index.
\6\ If less than 15 components are eligible, the AF CRE Sector
Indexes are calculated using less than 15 components, but no fewer
than 10 components.
\7\ The term ``Enterprise Value'' refers to the measure of a
company's total value, calculated by adding the company's market
capitalization, total liabilities and preferred equity, then
subtracting all cash and cash equivalents. See https://www.investopedia.com/terms/e/enterprisevalue.asp.
\8\ Refinitiv is the reporting authority for each of the AF CRE
Indexes. See proposed Exchange Rule 1801, Interpretation and Policy
.01. Thomson Reuters' Financial & Risk (``F&R'') business unit was
rebranded under the name ``Refinitiv'' in 2018 when Thomson Reuters
sold a majority stake in its F&R business unit to private equity
firm Blackstone Group LP. Refinitiv provides financial markets data
and infrastructure in over 150 countries. Part of Refinitiv's
services include, but are not limited to, the calculation of various
indexes. See Thomson Reuters Financial & Risk Business Announces New
Company Name: Refinitiv (July 27, 2018), available at https://www.thomsonreuters.com/en/press-releases/2018/july/thomson-reuters-financial-and-risk-business-announces-new-company-name-refinitiv.html.
\9\ The symbol for the AF CRE Composite Index is ``MXAFC.''
---------------------------------------------------------------------------
Initial and Maintenance Listing Criteria
The AF CRE Composite Index meets the definition of a broad-based
index as set forth in Exchange Rule 1802(d) (an index designed to be
representative of a stock market as a whole or of a range of companies
in unrelated industries). Additionally, the AF CRE Composite Index
option satisfies the initial listing criteria of a broad-based index,
as set forth in Exchange Rule 1802(d):
(1) Options will be A.M.-settled index options;
(2) the index is capitalization-weighted, price-weighted, equal
dollar-weighted, or modified capitalization-weighted, and consists of
50 or more component securities (the AF CRE Composite Index is modified
capitalization-weighted);
(3) the component securities that account for at least ninety-five
percent
[[Page 26744]]
(95%) of the weight of the index have a market capitalization of at
least $75 million, except that component securities that account for at
least sixty-five percent (65%) of the weight of the index have a market
capitalization of at least $100 million;
(4) component securities that account for at least eighty percent
(80%) of the weight of the index satisfy the requirements of Rule 402
applicable to individual underlying securities;
(5) each component security that accounts for at least one percent
(1%) of the weight of the index has an average daily trading volume of
at least 90,000 shares during the last six month period;
(6) no single component security accounts for more than ten percent
(10%) of the weight of the index, and the five highest weighted
component securities in the index do not, in the aggregate, account for
more than thirty-three percent (33%) of the weight of the index;
(7) each component security is an ``NMS stock'' as defined in Rule
600 of Regulation NMS under the Exchange Act;
(8) non-U.S. component securities (stocks or ADRs) that are not
subject to comprehensive surveillance agreements do not, in the
aggregate, represent more than twenty percent (20%) of the weight of
the index;
(9) the current index value is widely disseminated at least once
every fifteen (15) seconds by OPRA, CTA/CQ, NIDS or one or more major
market data vendors during the time options on the index are traded on
the Exchange;
(10) the Exchange reasonably believes it has adequate system
capacity to support the trading of options on the index, based on a
calculation of the Exchange's current ISCA allocation and the number of
new messages per second expected to be generated by options on such
index;
(11) an equal dollar-weighted index will be rebalanced at least
once every calendar quarter;
(12) if an index is maintained by a broker-dealer, the index is
calculated by a third-party who is not a broker-dealer, and the broker-
dealer has erected an informational barrier around its personnel who
have access to information concerning changes in, and adjustments to,
the index; and
(12) the Exchange has written surveillance procedures in place with
respect to surveillance of trading options on the index.
Options on the AF CRE Composite Index will be subject to the
maintenance and listing standards set forth in Exchange Rule 1802(e):
(1) The requirements set forth in subparagraphs (d)(1)-(d)(3) and
(d)(9)-(d)(15) of Exchange Rule 1802 must continue to be satisfied. The
requirements set forth in subparagraphs (d)(5)-(d)(8) of Exchange Rule
1802 must be satisfied only as of the first day of January and July in
each year; and
(2) the total number of component securities in the index may not
increase or decrease by more than ten percent (10%) from the number of
component securities in the index at the time of its initial
listing.\10\
---------------------------------------------------------------------------
\10\ In the event a class of index options listed on the
Exchange fails to satisfy the maintenance listing standards set
forth herein, the Exchange shall not open for trading any additional
series of options of that class unless the continued listing of that
class of index options has been approved by the Commission under
Section 19(b)(2) of the Exchange Act. See Exchange Rule 1802(e)(2).
---------------------------------------------------------------------------
Each of the AF CRE Sector Indexes meet the definition of a narrow-
based index as set forth in Exchange Rule 1802(b) (an index designed to
be representative of a particular industry or a group of related
industries and include indices having component securities that are all
headquartered within a single country). Additionally, the proposed
options on the AF CRE Sector Indexes satisfy the initial listing
criteria of a narrow-based index, as set forth in Exchange Rule
1802(b):
(1) Options will be A.M.-settled index options;
(2) the index is capitalization-weighted, price-weighted, equal
dollar-weighted, or modified capitalization-weighted, and consists of
ten or more component securities (the AF CRE Indexes are modified
capitalization-weighted);
(3) each component security has a market capitalization of at least
$75 million, except that for each of the lowest weighted component
securities in the index that in the aggregate account for no more than
10% of the weight of the index, the market capitalization is at least
$50 million;
(4) trading volume of each component security has been at least one
million shares for each of the last six months, except that for each of
the lowest weighted component securities in the index that in the
aggregate account for no more than 10% of the weight of the index,
trading volume has been at least 500,000 shares for each of the last
six months;
(5) in a capitalization-weighted index or a modified
capitalization-weighted index, the lesser of the five highest weighted
component securities in the index or the highest weighted component
securities in the index that in the aggregate represent at least 30% of
the total number of component securities in the index each have had an
average monthly trading volume of at least 2,000,000 shares over the
past six months;
(6) no single component security represents more than 30% of the
weight of the index, and the five highest weighted component securities
in the index do not in the aggregate account for more than 50% (65% for
an index consisting of fewer than 25 component securities) of the
weight of the index;
(7) component securities that account for at least 90% of the
weight of the index and at least 80% of the total number of component
securities in the index satisfy the requirements of Rule 402 applicable
to individual underlying securities;
(8) each component security is an ``NMS stock'' as defined in Rule
600 of Reg NMS under the Act;
(9) non-U.S. component securities (stocks or ADRs) that are not
subject to comprehensive surveillance agreements do not in the
aggregate represent more than 20% of the weight of the index;
(10) the current index value is widely disseminated at least once
every 15 seconds by OPRA, CTA/CQ, NIDS or one or more major market data
vendors during the time the index options are traded on the Exchange;
(11) an equal dollar-weighted index will be rebalanced at least
once every calendar quarter; and
(12) if an underlying index is maintained by a broker-dealer, the
index is calculated by a third party who is not a broker-dealer, and
the broker-dealer has erected an information barrier around its
personnel who have access to information concerning changes in and
adjustments to the index.
Options on each of the AF CRE Sector Indexes will be subject to the
maintenance and listing standards set forth in Exchange Rule 1802(c):
(1) The requirements stated in subparagraphs (b)(1), (3), (6), (7),
(8), (9), (10), (11) and (12) of Exchange Rule 1802 must continue to be
satisfied, provided that the conditions stated in subparagraph (b)(6)
must be satisfied only as of the first day of January and July in each
year;
(2) the total number of component securities in the index may not
increase or decrease by more than 33\1/3\% from the number of component
securities in the index at the time of its initial listing, and in no
event may be less than nine component securities;
(3) trading volume of each component security in the index must be
at least 500,000 shares for each of the last six months, except that
for each of the lowest weighted component securities
[[Page 26745]]
in the index that in the aggregate account for no more than 10% of the
weight of the index, trading volume must be at least 400,000 shares for
each of the last six months; and
(4) in a capitalization-weighted index or a modified
capitalization-weighted index, the lesser of the five highest weighted
component securities in the index or the highest weighted component
securities in the index that in the aggregate represent at least 30% of
the total number of stocks in the index each have had an average
monthly trading volume of at least 1,000,000 shares over the past six
months.\11\
---------------------------------------------------------------------------
\11\ As is the case with other index options authorized for
listing and trading on MIAX, in the event an AF CRE Index fails to
satisfy the maintenance listing standards, the Exchange will not
open for trading any additional series of options of that class
unless such failure is determined by the Exchange not to be
significant and the Commission concurs in that determination, or
unless the continued listing of that class of index options has been
approved by the Commission under Section 19(b)(2) of the Act. See
Exchange Rule 1802(c)(4).
---------------------------------------------------------------------------
Expiration Months, Settlement, and Exercise Style
Consistent with existing rules for certain index options,\12\ the
Exchange will allow up to twelve near-term expiration months for
options on the AF CRE Indexes.\13\ The Exchange will likely not
initially list twelve near-term expiration months for options on the AF
CRE Indexes; however, the Exchange elects to have the ability to list
up to twelve near-term expiration months in the future.
---------------------------------------------------------------------------
\12\ 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 to List and Trade
Options on the SPIKESTM Index).
\13\ See proposed Exchange Rule 1809(a)(3).
---------------------------------------------------------------------------
The options on each of the AF CRE Indexes will be A.M., cash-
settled contracts with European-style exercise.\14\ A.M.-settlement is
consistent with the generic listing criteria for industry-based indexes
\15\ (as well as broad-based indexes \16\), and thus it is common for
index options to be A.M.-settled. The Exchange proposes to amend
Exchange Rule 1809(a)(5) to add the options on the AF CRE Indexes to
the list of other A.M.-settled options. The Exchange proposes to amend
Exchange Rule 1809(a)(4) to add options on the AF CRE Indexes to the
list of other European-style index options.
---------------------------------------------------------------------------
\14\ See proposed Exchange Rule 1809(a)(4)(ii)-(vi).
\15\ See Exchange Rule 1802(b)(1).
\16\ See Exchange Rule 1802(d)(2).
---------------------------------------------------------------------------
Capacity
The Exchange has analyzed its capacity and represents that it
believes the Exchange and OPRA have the necessary systems capacity to
handle the additional traffic associated with the listing of new series
that would result from the introduction of options on each of the AF
CRE Indexes up to the proposed number of possible expirations. Because
the proposal is limited to five classes, the Exchange believes any
additional traffic that would be generated from the introduction of
options on the AF CRE Indexes would be manageable.
Component Selection for the AF CRE Sector Indexes
The composition of each AF CRE Index is determined in a
reconstitution on a quarterly basis from audited REIT/equity company
filings and supplemental filings with the Commission, updated each
quarter and intra-quarter based on 8-K, 10-Q, and 10-K filings. The
components in each of the AF CRE Sector Indexes are determined from the
REITs/equity companies that have the largest Enterprise Value within
each individual sector and that meet the following minimum eligibility
requirements. To be eligible for inclusion in each of the AF CRE Sector
Indexes, a REIT/equity company must: (i) Be classified as an equity
REIT; (ii) be listed on a U.S. securities exchange; (iii) have a
minimum Enterprise Value of $1 billion; (iv) have at least 85% of its
revenue derived from the associated asset class; and (v) have issued a
quarterly filing or annual report after its initial listing.
Adjustments are made to the values of the AF CRE Sector Indexes during
the quarterly reconstitution taking into account changes in each AF CRE
Sector Indexes' component's per unit value, where the unit for each AF
CRE Sector Index is represented as follows:
AF CRE Residential Index = amount of residential units
owned by the component security.
AF CRE Retail Index = amount of square footage owned by
the component security.
AF CRE Office Index = amount of square footage owned by
the component security.
AF CRE Hospitality Index = amount of hotel rooms owned by
the component security.
Index Calculation and Modified Market-Capitalization Weighting
Methodology
Each of the AF CRE Sector Indexes are calculated using a modified
market capitalization-weighting (``MCW'') methodology. The MCW is
determined by starting with the standard market capitalization of each
component REIT/equity security in each AF CRE Sector Index and dividing
such component's market capitalization by its enterprise value.
Enterprise value identifies the amount of leverage (debt) and level of
cash for each component security listed in that particular AF CRE
Sector Index. With this modification, the debt portion of each
component REIT/equity security is identified and effectively removed
from the component's weighting, with the removed amount being
represented as a static cash position in each AF CRE Sector Index. This
modification process produces the benefit of being able to measure the
performance of each of the components on a non-levered basis, creating
a truer comparison between components and thus getting a more accurate
representation of the value of the real estate holdings in the
component's portfolio. Every component REIT/equity security in each of
the AF CRE Sector Indexes goes through the same modification process in
order to generate a modified market-capitalization weighting for each
component. Component weights for the AF CRE Sector Indexes are adjusted
and reset on a monthly basis. The most recent public company filings
(10-K, 10-Q, 8-K) and share data are used as inputs at each
reweighting. For the AF CRE Composite Index, each AF CRE Sector Index
is weighted in a ratio of the sum of its components' enterprise values
to the total sum of the enterprise values for all of the AF CRE Sector
Indexes.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\17\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \18\ requirements that the rules
of an 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.
Additionally, the Exchange believes the proposed rule change is
consistent with
[[Page 26746]]
the Section 6(b)(5) \19\ requirement that the rules of an exchange not
be designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ Id.
---------------------------------------------------------------------------
The Exchange believes that the proposal to list and trade options
on the AF CRE Indexes will remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, protect investors and the public interest, because the
Exchange believes that the proposed rule change will further the
Exchange's goal of introducing new and innovative products to the
marketplace. Currently, the Exchange believes that there is unmet
market demand for exchange-listed security options listed on commercial
real estate indexes representing residential, retail, office and
hospitality sectors. Each AF CRE Sector Index consists of no more than
15 REITs/equity companies (but no less than 10 REITs/equity companies)
listed on a U.S. securities exchange.\20\ Each REIT/equity company must
be listed on a U.S. securities exchange, have a minimum Enterprise
Value of $1 billion, have at least 85% of its revenue derived from the
associated asset class, and have issued a quarterly filing or annual
report after initial listing. For the AF CRE Composite Index, each of
the AF CRE Sector Indexes are weighted in a ratio of the sum of each
indexes' components enterprise values to the total sum of the
enterprise values for all the AF CRE Sector Indexes. As a result, the
Exchange believes that options on each of the AF CRE Indexes are
designed to provide different and additional opportunities for
investors to hedge or speculate on the market risk associated with the
various sectors of the commercial real estate market by listing options
directly on the AF CRE Indexes representing those sectors.
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\20\ See supra note 6.
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The options that the Exchange proposes to list on each of the AF
CRE Indexes satisfies the initial listing standards for broad-based
(for the AF CRE Composite Index) and narrow-based indexes (for the AF
CRE Sector Indexes) pursuant to the Exchange's current rules. The
proposed rule change adds the AF CRE Indexes to the table regarding
reporting authorities for the Exchange's proprietary index options, to
the Exchange's rule regarding the number of permissible
expirations,\21\ to the list of European-style exercise index options,
and to the list of A.M.-settled index options. These changes are
consistent with existing rules and index options currently authorized
and listed for trading on the Exchange and other exchanges. The
Exchange also represents that it has the necessary systems capacity to
support the new option series for each of the AF CRE Indexes given
these proposed specifications. The Exchange believes that options on
the AF CRE Indexes, as proposed to be traded under Exchange Rules,
would not be readily susceptible to manipulation. The Exchange believes
the proposed rule change will further the Exchange's goal of
introducing new and innovative products to the marketplace. The
Exchange believes that listing options on the AF CRE Indexes will
provide an opportunity for investors to hedge, or speculate on, the
market risk associated with the commercial real estate industry.
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\21\ See supra note 12.
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The Exchange believes that its existing surveillance and reporting
safeguards are designed to deter and detect possible manipulative
behavior which might arise from listing and trading options on the AF
CRE Indexes. The Exchange further notes that current Exchange Rules
that apply to the trading of other index options traded on the
Exchange, such as options on the SPIKES Index, would also apply to the
trading of options on the AF CRE Indexes, such as, for example,
Exchange Rules governing customer accounts, margin requirements and
trading halt procedures. The Exchange also represents that it has the
necessary systems capacity to support the new options series for each
of the AF CRE Indexes.
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 AF CRE Indexes satisfy
initial listing standards set forth in the Exchange's rules, and the
proposed number of expirations, settlement, and exercise style are
consistent with current rules applicable to index options. Options on
each of the AF CRE Indexes will provide investors with different and
additional opportunities to hedge or speculate on the market associated
with the AF CRE Indexes. Further, options on the AF CRE Indexes would
be available for trading to all market participants.
The proposed rule change will facilitate the listing and trading of
novel options products that will enhance competition among market
participants, to the benefit of investors and the marketplace. The
listing of options on the AF CRE Indexes will enhance competition by
providing investors with an additional investment vehicle, in a fully-
electronic trading environment, through which investors can gain and
hedge exposure to various sectors of the commercial real estate market.
Further, these products could offer a competitive alternative to other
existing investment products that seek to allow investors to gain broad
market exposure via REITs in the same individual sectors as the AF CRE
Indexes.
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 from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \22\ and Rule 19b-
4(f)(6) thereunder.\23\
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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of 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 change 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:
[[Page 26747]]
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-2020-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2020-08. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet 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-2020-08, and should be submitted on
or before May 26, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09519 Filed 5-4-20; 8:45 am]
BILLING CODE 8011-01-P
