Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 517, Quote Types Defined, 84376-84379 [2023-26596]

Download as PDF 84376 Federal Register / Vol. 88, No. 232 / Tuesday, December 5, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. submitted on or before December 26, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Sherry R. Haywood, Assistant Secretary. 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: [FR Doc. 2023–26595 Filed 12–4–23; 8:45 am] 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–2023–47 on the subject line. Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 517, Quote Types Defined 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–2023–47. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–MIAX–2023–47 and should be Pursuant to the provisions of section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 16, 2023, Miami International Securities Exchange, LLC (‘‘MIAX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I 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. VerDate Sep<11>2014 16:35 Dec 04, 2023 Jkt 262001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99041; File No. SR–MIAX– 2023–45] November 29, 2023. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend Exchange Rule 517, Quote Types Defined. The text of the proposed rule change is available on the Exchange’s website at https://www.miaxglobal.com/markets/ us-options/miax-options/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 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 517, Quote Types Defined. Specifically, the Exchange proposes to adopt new Interpretations and Policies .02 to Rule 517 to adopt new risk protection behavior for replacement Standard quotes 3 that are rejected. Background Market Makers 4 on the Exchange have heightened obligations separate from other market participants. Transactions of a Market Maker should constitute a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and Market Makers should not make bids 5 or offers 6 or enter into transactions that are inconsistent with such a course of dealings.7 A quotation may only be entered by a Market Maker, and only in the options classes to which the Market Maker is appointed under Rule 602.8 A Market Maker’s bid and offer for a series of option contracts shall state a price accompanied by the number of contracts at that price the Market Maker is willing to buy or sell upon receipt of an order or upon interaction with a quotation entered by another Market Maker on the Exchange.9 Additionally, a Market Maker that enters a bid (offer) on the Exchange must enter an offer (bid) within the spread allowable under Rule 603(b)(4).10 The Exchange has three classes of Market Makers; Primary Lead Market Makers, Lead Market Makers, and Registered Market Makers.11 Further, each class of Market Maker has its own 3 A Standard quote is a quote submitted by a Market Maker that cancels and replaces the Market Maker’s previous Standard quote, if any. See Exchange Rule 517(a)(1). 4 The term ‘‘Market Makers’’ refers to ‘‘Lead Market Makers’’, ‘‘Primary Lead Market Makers’’ and ‘‘Registered Market Makers’’ collectively. See Exchange Rule 100. 5 The term ‘‘bid’’ means a limit order or quote to buy one or more option contracts. See Exchange Rule 100. 6 The term ‘‘offer’’ means a limit order or quote to sell one or more option contracts. See Exchange Rule 100. 7 See Exchange Rule 603(a). 8 See Exchange Rule 604(a). 9 See Exchange Rule 604(b). 10 See Exchange Rule 604(c). 11 See supra note 4. E:\FR\FM\05DEN1.SGM 05DEN1 Federal Register / Vol. 88, No. 232 / Tuesday, December 5, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES separate and distinct quoting obligations. A Primary Lead Market Maker must provide continuous twosided Standard quotes and/or Day eQuotes,12 which for the purpose of paragraph (e)(1)(i) of Rule 604 shall mean 90% of the time, for the options classes to which it is appointed.13 A Primary Lead Market Maker must provide continuous two-sided Standard quotes and/or Day eQuotes in at least the lesser of 99% of the non-adjusted option series, or 100% of the nonadjusted option series minus one putcall pair, in each class in which the Primary Lead Market Maker is assigned.14 A Lead Market Maker must provide continuous two-sided Standard quotes and/or Day eQuotes, which for the purpose of paragraph (e)(2)(i) of Rule 604 shall mean 90% of the time, for the options classes to which it is appointed.15 A Lead Market Maker must provide continuous two-sided Standard quotes and/or Day eQuotes in at least 90% of the non-adjusted option series in each of its appointed classes. Such quotations must meet the bid/ask differential requirements of Rule 603(b)(4).16 A Registered Market Maker must provide continuous two-sided Standard quotes and/or Day eQuotes throughout the trading day in 60% of the non-adjusted series that have a time to expiration of less than nine months in each of its appointed classes. For the purpose of paragraph (e)(3)(i) of Rule 604, continuous two-sided quoting shall mean 90% of the time, for the options classes to which the Registered Market Maker is appointed.17 The Exchange offers several features to Market Makers designed to mitigate potential risks unique to Market Makers given their obligations on the Exchange. For example, the Exchange offers an Aggregate Risk Manager (‘‘ARM’’) protection which provides that the MIAX System 18 will maintain a counting program (‘‘counting program’’) for each Market Maker who is required 12 A Day eQuote is a quote submitted by a Market Maker that does not automatically cancel or replace the Market Maker’s previous Standard quote or eQuote. Day eQuotes will expire at the close of trading each trading day. See Exchange Rule 517(a)(2)(i). An eQuote is a quote with a specific time in force that does not automatically cancel and replace a previous Standard quote or eQuote. An eQuote can be cancelled by the Market Maker at any time, or can be replaced by another eQuote that contains specific instructions to cancel an existing eQuote. See Exchange Rule 517(a)(2). 13 See Exchange Rule 604(e)(1)(i). 14 See Exchange Rule 604(e)(1)(ii). 15 See Exchange Rule 604(e)(2)(i). 16 See Exchange Rule 604(e)(2)(ii). 17 See Exchange Rule 604(e)(3)(i). 18 The term ‘‘System’’ means the automated trading system used by the Exchange for the trading of securities. See Exchange Rule 100. VerDate Sep<11>2014 16:35 Dec 04, 2023 Jkt 262001 to submit continuous two-sided quotations pursuant to Rule 604 in each of their appointed option classes.19 The System will engage the Aggregate Risk Manager in a particular option class when the counting program has determined that a Market Maker has traded during the specified time period a number of contracts equal to or above their Allowable Engagement Percentage. The Aggregate Risk Manager will then automatically remove the Market Maker’s Standard quotations and Day eQuotes from the Exchange’s disseminated quotation in all series of that particular option class until the Market Maker sends a notification to the System of the intent to reengage quoting and submits a new revised quotation.20 Additionally, the Exchange offers Market Makers Single Side Protection (‘‘SSP’’) functionality which provides that, if the full remaining size of a Market Maker’s complex Standard quote or cIOC eQuote in a strategy is exhausted by a trade, the System will trigger the SSP for the traded side of the strategy. When triggered, the System will cancel all complex Standard quotes and block all new inbound complex Standard quotes and cIOC eQuotes for that particular side of that strategy for that MPID.21 Proposal The Exchange now proposes to cancel a Market Maker’s Standard quote in certain scenarios when a replacement Standard quote submitted by the Market Maker is rejected. Specifically, the Exchange proposes to adopt new Policy .02 to Exchange Rule 517 which will provide that a replacement Standard quote that is rejected for a technical reason (as described below) will still cancel the target Standard quote. A Standard quote is submitted by the Market Maker to the Exchange using the MIAX Express Interface (‘‘MEI’’). MEI is a messaging interface that MIAX members that are approved as Market Makers use to submit quotes for trading on the MIAX Options market. Market Makers are only allowed to submit quotes in the products of underlying instruments to which they are assigned.22 Each message submitted to the Exchange via the MEI must pass a number of validity checks that are performed by the System. These include, but are not limited to, price and 19 See Exchange Rule 612. Exchange Rule 612(b)(1). 21 See Exchange Rule 532(b)(8). 22 See MIAX Express Interface for Quoting and Trading Options, MEI Interface Specification, version 2.9c (8/1/2022), available at: https:// www.miaxglobal.com/markets/us-options/miaxoptions/interface-specifications. 20 See PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 84377 size checks. Specifically, Standard quote prices must not (i) be less than zero; (ii) exceed the maximum price; and (iii) must comply with the minimum trade increment 23 for that class.24 Additionally, Standard quote sizes must not be less than zero and must not be less than the minimum quote size as defined in Rule 604(b)(2).25 Collectively, these requirements constitute the technical reasons for which a replacement Standard quote may be rejected, but which will still result in the cancellation of the target Standard quote under the Exchange’s proposal. The Exchange believes that removing the Standard quote that the Market Maker was attempting to alter promotes the quality of the Exchange’s market as removing a Standard quote that was targeted for replacement but was not replaced due to a technical reason maintains the integrity of quotes available in the market by ensuring that all available quotes accurately represent Market Maker interest. When a Market Maker’s replacement Standard quote is rejected because of a technical reason the existing Standard quote will be cancelled by the Exchange. In addition to maintaining the integrity of the Exchange’s market, the Exchange believes this functionality also provides an additional level of risk protection to Market Makers that are attempting to replace an existing Standard quote but are unable to as a result of a technical reason with the replacement Standard quote. 2. Statutory Basis The Exchange believes that its proposed rule change is consistent with 23 The price of Market Maker quotes shall be in the minimum trading increments applicable to the security under Rule 510; provided that, with respect to any security designated by the Exchange as available for non-displayed penny orders under Rule 516(b)(2), Market Maker quotes may be in onecent increments. In such designated securities, quotes entered in one-cent increments will be firm as provided in paragraph (d) of Rule 604, but shall only be displayed to Members and the public at the Minimum Price Variation (MPV) for the security. The displayed price of such quotes will be the closest MPV that is higher for offers and the closest MPV that is lower for bids. See Exchange Rule 604(b)(1). 24 The terms ‘‘class of options’’ or ‘‘option class’’ mean all option contracts covering the same underlying security. See Exchange Rule 100. 25 Exchange Rule 604(b)(2) provides that, the initial size of a Market Maker incoming Standard Quote, Day eQuote and all other types of eQuotes must be for the minimum number of contracts, which minimum number shall be at least one (1) contract. The minimum number of contracts, which can vary according to type of quote or eQuote, shall be at least one (1) contract, will be determined by the Exchange on a class-by-class basis and announced to the Members through a Regulatory Circular. E:\FR\FM\05DEN1.SGM 05DEN1 84378 Federal Register / Vol. 88, No. 232 / Tuesday, December 5, 2023 / Notices khammond on DSKJM1Z7X2PROD with NOTICES the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.26 Specifically, the Exchange believes that its proposed rule change is consistent with section 6(b)(5) 27 requirements in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in, securities, to remove impediments to and perfect the 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 the section (6)(b)(5) 28 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers as the proposed rule will be uniformly applied to all Standard quote messages submitted by Market Makers on the Exchange. The Exchange believes its proposal promotes just and equitable principles of trade and removes impediments to and perfects the mechanisms of a free and open market and a national market system as removing a Market Maker’s Standard quote that the Market Maker has targeted for replacement, but failed to replace due to a technical reason with the replacement Standard quote message, promotes the quality of the Exchange’s market by ensuring that all available quotes accurately represent Market Maker interest. When a Market Maker enters a replacement Standard quote a Market Maker has an expectation that the existing Standard quote will be cancelled, currently the existing Standard quote that the Market Maker intended to cancel may be executed if the replacement Standard quote is rejected which is contrary to the Market Maker’s intent. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that its proposed rule change will impose any burden on intra-market competition as the Rules of the Exchange apply equally 26 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 28 See id. 27 15 VerDate Sep<11>2014 16:35 Dec 04, 2023 Jkt 262001 to all Market Makers of the Exchange and all Market Makers that submit a replacement Standard quote that is rejected as a result of a technical reason will have the existing target Standard quote removed by the Exchange. The Exchange does not believe that its proposed rule change will impose any burden on inter-market competition, as the Exchange’s proposal is not a competitive filing. Rather the Exchange believes that its proposal may promote inter-market competition, as the Exchange’s proposal will improve market quality on the Exchange which may improve competition for orders across all exchanges. 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 29 and subparagraph (f)(6) of Rule 19b–4 thereunder.30 A proposed rule change filed under Rule 19b–4(f)(6) 31 normally does not become operative prior to 30 days after the date of filing. However, pursuant to Rule 19b–4(f)(6)(iii),32 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing. The Exchange requested the waiver because it would ensure the integrity of quotes available in the market. The Exchange stated that the Exchange provides risk protection functionality specifically for Market Makers due to the heightened 29 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, 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. 31 17 CFR 240.19b–4(f)(6). 32 17 CFR 240.19b–4(f)(6)(iii). 30 17 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 obligations that Market Makers have on the Exchange and that the proposed rule change would ensure that the quotes available in the marketplace accurately represent Market Maker interest. For these reasons, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.33 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 be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– MIAX–2023–45 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–2023–45. 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 33 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). E:\FR\FM\05DEN1.SGM 05DEN1 Federal Register / Vol. 88, No. 232 / Tuesday, December 5, 2023 / Notices 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–MIAX–2023–45 and should be submitted on or before December 26, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–26596 Filed 12–4–23; 8:45 am] BILLING CODE 8011–01–P I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt new Interpretations and Policies .12 to Rule 404, Series of Option Contracts Open for Trading, to adopt a new strike interval program. The text of the proposed rule change is available on the Exchange’s website at https://www.miaxglobal.com/markets/ us-options/pearl-options/rule-filings, at MIAX Pearl’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 SECURITIES AND EXCHANGE COMMISSION 1. Purpose [Release No. 34–99034; File No. SR– PEARL–2023–66] Self-Regulatory Organizations; MIAX PEARL LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 404, Series of Option Contracts Open for Trading To Adopt New Interpretations and Policies .12 khammond on DSKJM1Z7X2PROD with NOTICES November 29, 2023. 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 November 24, 2023, MIAX PEARL LLC (‘‘MIAX Pearl’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a 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. CFR 200.30–3(a)(12), (59). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 16:35 Dec 04, 2023 Background Currently, Exchange Rule 404, Series of Option Contracts Open for Trading, describes the process and procedures for listing and trading series of options 3 on the Exchange. Rule 404 provides for a $2.50 Strike Price Program, where the Exchange may select up to 60 option 3 The term ‘‘option contract’’ means a put or a call issued, or subject to issuance, by the Clearing Corporation pursuant to the Rules of the Clearing Corporation. See Exchange Rule 100. 34 17 VerDate Sep<11>2014 The Exchange proposes to amend Rule 404, Series of Option Contracts Open for Trading. Specifically, the Exchange proposes to adopt new Interpretations and Policies .12 to Rule 404 to implement a new strike interval program for stocks that are priced less than $2.50 and have an average daily trading volume of at least 1,000,000 shares per day for the three (3) preceding calendar months. The Exchange also proposes to amend the table in Interpretations and Policies .11 of Rule 404 to harmonize the table to the propose change. Jkt 262001 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 84379 classes 4 on individual stocks for which the interval of strike prices will be $2.50 where the strike price is greater than $25.00 but less than $50.00.5 Rule 404 also provides for a $1 Strike Price Interval Program, where the interval between strike prices of series of options 6 on individual stocks may be $1.00 or greater provided the strike price is $50.00 or less, but not less than $1.00.7 Additionally, Rule 404 provides for a $0.50 Strike Program.8 The interval of strike prices of series of options on individual stocks may be $0.50 or greater beginning at $0.50 where the strike price is $5.50 or less, but only for options classes whose underlying security closed at or below $5.00 in its primary market on the previous trading day and which have national average daily volume that equals or exceeds 1,000 contracts per day as determined by The Options Clearing Corporation during the preceding three calendar months. The listing of $0.50 strike prices is limited to options classes overlying no more than 20 individual stocks (the ‘‘$0.50 Strike Program’’) as specifically designated by the Exchange. The Exchange may list $0.50 strike prices on any other option classes if those classes are specifically designated by other securities exchanges that employ a similar $0.50 Strike Program under their respective rules. A stock shall remain in the $0.50 Strike Program until otherwise designated by the Exchange.9 Proposal At this time, the Exchange proposes to adopt a new strike interval program for underlying stocks that are not in the aforementioned $0.50 Strike Program (or the Short Term Option Series Program) 10 and that close below $2.50 and have an average daily trading volume of at least 1,000,000 shares per day for the three (3) preceding calendar months. The $0.50 Strike Program considers stocks that have a closing price at or below $5.00 whereas the Exchange’s proposal will consider stocks that have a closing price below $2.50. Currently, there is a subset of stocks that are not included in the $0.50 Strike Program as a result of the 4 The terms ‘‘class of options’’ or ‘‘option class’’ means all option contracts covering the same underlying security. See Exchange Rule 100. 5 See Exchange Rule 404(f). 6 The term ‘‘series of options’’ means all option contracts of the same class having the same exercise price and expiration date. See Exchange Rule 100. 7 See Interpretations and Policies .01(a) of Rule 404. 8 See Interpretations and Policies .04 of Rule 404. 9 Id. 10 See Interpretations and Policies .02 of Rule 404. E:\FR\FM\05DEN1.SGM 05DEN1

Agencies

[Federal Register Volume 88, Number 232 (Tuesday, December 5, 2023)]
[Notices]
[Pages 84376-84379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26596]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99041; File No. SR-MIAX-2023-45]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Rule 517, Quote Types Defined

November 29, 2023.
    Pursuant to the provisions of section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on November 16, 2023, Miami International 
Securities Exchange, LLC (``MIAX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I 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 amend Exchange Rule 517, Quote 
Types Defined.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings, at MIAX's principal office, and at the Commission's 
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 517, Quote Types Defined. 
Specifically, the Exchange proposes to adopt new Interpretations and 
Policies .02 to Rule 517 to adopt new risk protection behavior for 
replacement Standard quotes \3\ that are rejected.
---------------------------------------------------------------------------

    \3\ A Standard quote is a quote submitted by a Market Maker that 
cancels and replaces the Market Maker's previous Standard quote, if 
any. See Exchange Rule 517(a)(1).
---------------------------------------------------------------------------

Background
    Market Makers \4\ on the Exchange have heightened obligations 
separate from other market participants. Transactions of a Market Maker 
should constitute a course of dealings reasonably calculated to 
contribute to the maintenance of a fair and orderly market, and Market 
Makers should not make bids \5\ or offers \6\ or enter into 
transactions that are inconsistent with such a course of dealings.\7\ A 
quotation may only be entered by a Market Maker, and only in the 
options classes to which the Market Maker is appointed under Rule 
602.\8\ A Market Maker's bid and offer for a series of option contracts 
shall state a price accompanied by the number of contracts at that 
price the Market Maker is willing to buy or sell upon receipt of an 
order or upon interaction with a quotation entered by another Market 
Maker on the Exchange.\9\ Additionally, a Market Maker that enters a 
bid (offer) on the Exchange must enter an offer (bid) within the spread 
allowable under Rule 603(b)(4).\10\
---------------------------------------------------------------------------

    \4\ The term ``Market Makers'' refers to ``Lead Market Makers'', 
``Primary Lead Market Makers'' and ``Registered Market Makers'' 
collectively. See Exchange Rule 100.
    \5\ The term ``bid'' means a limit order or quote to buy one or 
more option contracts. See Exchange Rule 100.
    \6\ The term ``offer'' means a limit order or quote to sell one 
or more option contracts. See Exchange Rule 100.
    \7\ See Exchange Rule 603(a).
    \8\ See Exchange Rule 604(a).
    \9\ See Exchange Rule 604(b).
    \10\ See Exchange Rule 604(c).
---------------------------------------------------------------------------

    The Exchange has three classes of Market Makers; Primary Lead 
Market Makers, Lead Market Makers, and Registered Market Makers.\11\ 
Further, each class of Market Maker has its own

[[Page 84377]]

separate and distinct quoting obligations. A Primary Lead Market Maker 
must provide continuous two-sided Standard quotes and/or Day 
eQuotes,\12\ which for the purpose of paragraph (e)(1)(i) of Rule 604 
shall mean 90% of the time, for the options classes to which it is 
appointed.\13\ A Primary Lead Market Maker must provide continuous two-
sided Standard quotes and/or Day eQuotes in at least the lesser of 99% 
of the non-adjusted option series, or 100% of the non-adjusted option 
series minus one put-call pair, in each class in which the Primary Lead 
Market Maker is assigned.\14\ A Lead Market Maker must provide 
continuous two-sided Standard quotes and/or Day eQuotes, which for the 
purpose of paragraph (e)(2)(i) of Rule 604 shall mean 90% of the time, 
for the options classes to which it is appointed.\15\ A Lead Market 
Maker must provide continuous two-sided Standard quotes and/or Day 
eQuotes in at least 90% of the non-adjusted option series in each of 
its appointed classes. Such quotations must meet the bid/ask 
differential requirements of Rule 603(b)(4).\16\ A Registered Market 
Maker must provide continuous two-sided Standard quotes and/or Day 
eQuotes throughout the trading day in 60% of the non-adjusted series 
that have a time to expiration of less than nine months in each of its 
appointed classes. For the purpose of paragraph (e)(3)(i) of Rule 604, 
continuous two-sided quoting shall mean 90% of the time, for the 
options classes to which the Registered Market Maker is appointed.\17\
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    \11\ See supra note 4.
    \12\ A Day eQuote is a quote submitted by a Market Maker that 
does not automatically cancel or replace the Market Maker's previous 
Standard quote or eQuote. Day eQuotes will expire at the close of 
trading each trading day. See Exchange Rule 517(a)(2)(i). An eQuote 
is a quote with a specific time in force that does not automatically 
cancel and replace a previous Standard quote or eQuote. An eQuote 
can be cancelled by the Market Maker at any time, or can be replaced 
by another eQuote that contains specific instructions to cancel an 
existing eQuote. See Exchange Rule 517(a)(2).
    \13\ See Exchange Rule 604(e)(1)(i).
    \14\ See Exchange Rule 604(e)(1)(ii).
    \15\ See Exchange Rule 604(e)(2)(i).
    \16\ See Exchange Rule 604(e)(2)(ii).
    \17\ See Exchange Rule 604(e)(3)(i).
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    The Exchange offers several features to Market Makers designed to 
mitigate potential risks unique to Market Makers given their 
obligations on the Exchange. For example, the Exchange offers an 
Aggregate Risk Manager (``ARM'') protection which provides that the 
MIAX System \18\ will maintain a counting program (``counting 
program'') for each Market Maker who is required to submit continuous 
two-sided quotations pursuant to Rule 604 in each of their appointed 
option classes.\19\ The System will engage the Aggregate Risk Manager 
in a particular option class when the counting program has determined 
that a Market Maker has traded during the specified time period a 
number of contracts equal to or above their Allowable Engagement 
Percentage. The Aggregate Risk Manager will then automatically remove 
the Market Maker's Standard quotations and Day eQuotes from the 
Exchange's disseminated quotation in all series of that particular 
option class until the Market Maker sends a notification to the System 
of the intent to reengage quoting and submits a new revised 
quotation.\20\
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    \18\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \19\ See Exchange Rule 612.
    \20\ See Exchange Rule 612(b)(1).
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    Additionally, the Exchange offers Market Makers Single Side 
Protection (``SSP'') functionality which provides that, if the full 
remaining size of a Market Maker's complex Standard quote or cIOC 
eQuote in a strategy is exhausted by a trade, the System will trigger 
the SSP for the traded side of the strategy. When triggered, the System 
will cancel all complex Standard quotes and block all new inbound 
complex Standard quotes and cIOC eQuotes for that particular side of 
that strategy for that MPID.\21\
---------------------------------------------------------------------------

    \21\ See Exchange Rule 532(b)(8).
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Proposal
    The Exchange now proposes to cancel a Market Maker's Standard quote 
in certain scenarios when a replacement Standard quote submitted by the 
Market Maker is rejected. Specifically, the Exchange proposes to adopt 
new Policy .02 to Exchange Rule 517 which will provide that a 
replacement Standard quote that is rejected for a technical reason (as 
described below) will still cancel the target Standard quote.
    A Standard quote is submitted by the Market Maker to the Exchange 
using the MIAX Express Interface (``MEI''). MEI is a messaging 
interface that MIAX members that are approved as Market Makers use to 
submit quotes for trading on the MIAX Options market. Market Makers are 
only allowed to submit quotes in the products of underlying instruments 
to which they are assigned.\22\ Each message submitted to the Exchange 
via the MEI must pass a number of validity checks that are performed by 
the System. These include, but are not limited to, price and size 
checks. Specifically, Standard quote prices must not (i) be less than 
zero; (ii) exceed the maximum price; and (iii) must comply with the 
minimum trade increment \23\ for that class.\24\ Additionally, Standard 
quote sizes must not be less than zero and must not be less than the 
minimum quote size as defined in Rule 604(b)(2).\25\ Collectively, 
these requirements constitute the technical reasons for which a 
replacement Standard quote may be rejected, but which will still result 
in the cancellation of the target Standard quote under the Exchange's 
proposal.
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    \22\ See MIAX Express Interface for Quoting and Trading Options, 
MEI Interface Specification, version 2.9c (8/1/2022), available at: 
https://www.miaxglobal.com/markets/us-options/miax-options/interface-specifications.
    \23\ The price of Market Maker quotes shall be in the minimum 
trading increments applicable to the security under Rule 510; 
provided that, with respect to any security designated by the 
Exchange as available for non-displayed penny orders under Rule 
516(b)(2), Market Maker quotes may be in one-cent increments. In 
such designated securities, quotes entered in one-cent increments 
will be firm as provided in paragraph (d) of Rule 604, but shall 
only be displayed to Members and the public at the Minimum Price 
Variation (MPV) for the security. The displayed price of such quotes 
will be the closest MPV that is higher for offers and the closest 
MPV that is lower for bids. See Exchange Rule 604(b)(1).
    \24\ The terms ``class of options'' or ``option class'' mean all 
option contracts covering the same underlying security. See Exchange 
Rule 100.
    \25\ Exchange Rule 604(b)(2) provides that, the initial size of 
a Market Maker incoming Standard Quote, Day eQuote and all other 
types of eQuotes must be for the minimum number of contracts, which 
minimum number shall be at least one (1) contract. The minimum 
number of contracts, which can vary according to type of quote or 
eQuote, shall be at least one (1) contract, will be determined by 
the Exchange on a class-by-class basis and announced to the Members 
through a Regulatory Circular.
---------------------------------------------------------------------------

    The Exchange believes that removing the Standard quote that the 
Market Maker was attempting to alter promotes the quality of the 
Exchange's market as removing a Standard quote that was targeted for 
replacement but was not replaced due to a technical reason maintains 
the integrity of quotes available in the market by ensuring that all 
available quotes accurately represent Market Maker interest.
    When a Market Maker's replacement Standard quote is rejected 
because of a technical reason the existing Standard quote will be 
cancelled by the Exchange. In addition to maintaining the integrity of 
the Exchange's market, the Exchange believes this functionality also 
provides an additional level of risk protection to Market Makers that 
are attempting to replace an existing Standard quote but are unable to 
as a result of a technical reason with the replacement Standard quote.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with

[[Page 84378]]

the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of section 6(b) of the 
Act.\26\ Specifically, the Exchange believes that its proposed rule 
change is consistent with section 6(b)(5) \27\ requirements in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in, securities, to remove impediments to and 
perfect the 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 the section (6)(b)(5) \28\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as the proposed rule will be 
uniformly applied to all Standard quote messages submitted by Market 
Makers on the Exchange.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ See id.
---------------------------------------------------------------------------

    The Exchange believes its proposal promotes just and equitable 
principles of trade and removes impediments to and perfects the 
mechanisms of a free and open market and a national market system as 
removing a Market Maker's Standard quote that the Market Maker has 
targeted for replacement, but failed to replace due to a technical 
reason with the replacement Standard quote message, promotes the 
quality of the Exchange's market by ensuring that all available quotes 
accurately represent Market Maker interest. When a Market Maker enters 
a replacement Standard quote a Market Maker has an expectation that the 
existing Standard quote will be cancelled, currently the existing 
Standard quote that the Market Maker intended to cancel may be executed 
if the replacement Standard quote is rejected which is contrary to the 
Market Maker's intent.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that its proposed rule change will 
impose any burden on intra-market competition as the Rules of the 
Exchange apply equally to all Market Makers of the Exchange and all 
Market Makers that submit a replacement Standard quote that is rejected 
as a result of a technical reason will have the existing target 
Standard quote removed by the Exchange.
    The Exchange does not believe that its proposed rule change will 
impose any burden on inter-market competition, as the Exchange's 
proposal is not a competitive filing. Rather the Exchange believes that 
its proposal may promote inter-market competition, as the Exchange's 
proposal will improve market quality on the Exchange which may improve 
competition for orders across all exchanges.

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 \29\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\30\
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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, 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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    A proposed rule change filed under Rule 19b-4(f)(6) \31\ normally 
does not become operative prior to 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\32\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative immediately upon filing. The Exchange 
requested the waiver because it would ensure the integrity of quotes 
available in the market. The Exchange stated that the Exchange provides 
risk protection functionality specifically for Market Makers due to the 
heightened obligations that Market Makers have on the Exchange and that 
the proposed rule change would ensure that the quotes available in the 
marketplace accurately represent Market Maker interest. For these 
reasons, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Therefore, the Commission hereby waives the 30-day operative 
delay and designates the proposal operative upon filing.\33\
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    \31\ 17 CFR 240.19b-4(f)(6).
    \32\ 17 CFR 240.19b-4(f)(6)(iii).
    \33\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-MIAX-2023-45 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-2023-45. 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

[[Page 84379]]

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 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. Do not include personal identifiable 
information in submissions; you should submit only information that you 
wish to make available publicly. We may redact in part or withhold 
entirely from publication submitted material that is obscene or subject 
to copyright protection. All submissions should refer to file number 
SR-MIAX-2023-45 and should be submitted on or before December 26, 2023.
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    \34\ 17 CFR 200.30-3(a)(12), (59).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-26596 Filed 12-4-23; 8:45 am]
BILLING CODE 8011-01-P
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