32932 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 

7 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEAMER–2018–36 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEAMER–2018–36. 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 (http://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–NYSEAMER–2018–36 and 

should be submitted on or before 

August 6, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15083 Filed 7–13–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

TIME AND DATE: Notice is hereby given, 

pursuant to the provisions of the 

Government in the Sunshine Act, Public 

Law 94–409, that the Securities and 

Exchange Commission will hold an 

Open Meeting on July 18, 2018 at 10:00 

a.m. 

PLACE: The meeting will be held in the 

Auditorium, Room LL–002 at the 

Commission’s headquarters, 100 F 

Street NE, Washington, DC 20549. 

STATUS: This meeting will begin at 10:00 

a.m. (ET) and will be open to the public. 

Seating will be on a first-come, firstserved basis. Visitors will be subject to 

security checks. The meeting will be 

webcast on the Commission’s website at 

http://www.sec.gov. 

MATTERS TO BE CONSIDERED: The subject 

matters of the Open Meeting will be the 

Commission’s consideration of: 

1. Whether to adopt an amendment to 

Securities Act Rule 701(e), as mandated 

by the Economic Growth, Regulatory 

Relief, and Consumer Protection Act. 

2. Whether to issue a concept release 

requesting comment on potential 

revisions to Securities Act Rule 701 and 

Securities Act Form S–8. 

3. Whether to propose amendments to 

the disclosure requirements in Rule 3– 

10 and Rule 3–16 of Regulation S–X. 

4. Whether to adopt amendments to 

Rule 3a1–1 and Regulation ATS and 

new Form ATS–N under the Securities 

Exchange Act of 1934 related to certain 

alternative trading systems. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information, please contact 

Brent J. Fields from the Office of the 

Secretary at (202) 551–5400. 

Dated: July 11, 2018. 

Lynn M. Powalski, 

Deputy Secretary. 

[FR Doc. 2018–15233 Filed 7–12–18; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83619; File No. SR–MIAX– 

2018–14] 

Self-Regulatory Organizations: Notice 

of Filing of a Proposed Rule Change by 

Miami International Securities 

Exchange, LLC to List and Trade on 

the Exchange Options on the 

SPIKESTM Index 

July 11, 2018. 

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 June 28, 2018, Miami International 

Securities Exchange, LLC (‘‘MIAX 

Options’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I and II below, 

which Items have been prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade on the Exchange options on the 

SPIKESTM Index (‘‘SPIKES’’ or the 

‘‘Index’’), a new index that measures 

expected 30-day volatility of the SPDR 

S&P 500 ETF Trust. The Exchange also 

proposes to list and trade short-term, 

quarterly, and long-term options on 

SPIKES. Options on SPIKES will be 

cash-settled and will have Europeanstyle exercise provisions. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/, at MIAX Options’ 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. 


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3See Securities Exchange Act Release No. 81739 

(September 27, 2017), 82 FR 46111 (October 3, 

2017) (SR–MIAX–2017–39) (Order approving the 

adoption of rules relating to trading in index 

options). 

4Since the SPIKES Index is calculated on a realtime basis, the Exchange uses 1-second precision to 

measure time in years (which is expressed to at 

least eight decimal places, by dividing the number 

of seconds to option expiration by the total number 

of seconds in a year). 

5This price is also known as the Reference Price, 

as defined and discussed in more detail below, in 

the following subsection 1, Determine Option 

Prices. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange recently adopted 

generic rules relating to the listing and 

trading of cash-settled index options on 

the Exchange.3 The Exchange now 

proposes to amend its rules to provide 

for the listing and trading on the 

Exchange of options on the Index. The 

Index measures expected 30-day 

volatility of the SPDR S&P 500 ETF 

Trust (commonly known and referred to 

by its ticker symbol, ‘‘SPY’’). Options on 

the Index will be cash-settled and will 

have European-style exercise 

provisions. In addition to regular 

options, the Exchange proposes to also 

list short-term, quarterly, and long-term 

options on the Index. The Index is 

calculated using published real-time 

prices and bid/ask quotes of SPY 

options. The Index represents 

annualized expected volatility and is 

quoted in percentage points. 

Index Design and Composition 

The calculation of the Index is based 

on the methodology developed by T3i 

Pty Ltd, a firm that develops proprietary 

indexes, including derivatives-based 

indexes and options-enhanced indexes. 

The Index will be calculated and 

maintained by the Exchange. The Index 

measures expected 30-day volatility of 

SPY, historically the largest and most 

actively traded ETF in the United States 

as measured by its assets under 

management and the value of shares 

traded. 

Like most indices, the Index has a 

defined rules-based approach to 

selecting components—a series of 

options on the SPY—and weighting 

them to derive a single price for the 

Index. 

Therefore, the formula for expected Tterm variance is as follows: 

The Index is calculated using only 

standard options on SPY that expire on 

the third Friday of each calendar month. 

Although weekly options on SPY are 

available, these are not used in the 

calculation of the Index. 

The calculation linearly interpolates 

between the variances of two monthly 

expirations—near-term (the closest 

expiration more than two full days into 

the future) and next-term (the monthly 

expiration following the near-term). 

This expiration selection method is 

used to avoid using highly irregular 

option prices close to the options 

settlement date. The 30-day point is 

typically in between these two 

expirations and the Index is 

interpolated between the volatilities of 

these two terms. When the closest 


sradovich on DSK3GMQ082PROD with NOTICESEN16JY18.014</GPH>
32934 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 

6This value is also referred to as the Reference 

Price, as defined above. 

expiration is too close to expiry (less 

than two full days), rolling to the thirdclosest expiration occurs. This rolling 

rule serves to reduce spurious 

variability in the Index by means of 

minimizing the period of 

‘‘extrapolation’’ between the two 

expirations. The switch from closest to 

third-closest expiry rarely has any 

noticeable impact on the actual Index 

value, as the weight of the switched 

term is close to zero. The following 

describes the methodology used to price 

the Index in greater detail. 

1. Determine Option Prices 

SPIKES uses a proprietary ‘‘price 

dragging’’ technique to determine the 

ongoing price for each individual option 

used in the calculation of the Index 

(‘‘Reference Price’’), to calculate the 

Index, as follows: 

• Initially set all prices to 0; 

• If there is a trade, the price of the 

option is always set to the trade price; 

• If there is not yet a trade, on the 

opening quote, the opening bid is used 

as the current price; 

• For newly-placed ask (bid) quotes, 

if the ask (bid) is lower (higher) than 

current Reference Price, the option price 

is set to ask (bid). 

The Exchange believes that this 

method should materially reduce erratic 

movements of the Index value as 

quotations on out-of-the-money 

(‘‘OTM’’) options are rapidly altered 

during times of low liquidity. The 

Exchange believes that this method is a 

material enhancement over existing 

calculation methodologies, and should 

result in improved Index stability by 

smoothing out options price inputs into 

the Index calculation, especially as 

options quotes are rapidly changing. 

An example of the price dragging 

technique is given below: 

Time Market SPIKES input 6

Change in 

SPIKES 

input 

Midpoint 

input 

Change in 

midpoint 

input 

Difference 

b/t SPIKES 

input and 

midpoint 

input 

9:30:00 ................................ 0 x 0 .................................... 0.00 ........................ 0.00 ........................ 0.00 

9:31:10 ................................ 2.35 x 2.65 .......................... 2.35 ........................ 2.50 ........................ 0.15 

9:31:10 ................................ Trade @ 2.38 ..................... 2.38 ........................ 2.50 ........................ 0.12 

.03 

9:33:01 ................................ 2.31 x 2.65 .......................... 2.38 ........................ 2.48 ........................ 0.10 

.02 

9:33:48 ................................ 2.31 x 2.39 .......................... 2.38 ........................ 2.35 ........................ 0.03 

.13 

9:36:41 ................................ Trade @ 2.37 ..................... 2.37 ........................ 2.35 ........................ 0.02 

.01 

9:38:34 ................................ 2.32 x 2.40 .......................... 2.37 ........................ 2.36 ........................ 0.01 

.01 

9:38:52 ................................ 2.00 x 6.00 .......................... 2.37 ........................ 4.00 ........................ 1.63 

1.64 

9:39:02 ................................ Trade @ 3.10 ..................... 3.10 ........................ 4.00 ........................ 0.90 

.73 

9:39:20 ................................ 3.05 x 3.50 .......................... 3.10 ........................ 3.275 ........................ 0.175 

0.725 

The example shows a hypothetical 

market for a specific option used as an 

input to SPIKES. The results of price 

dragging are shown in the column 

‘‘SPIKES Input,’’ and a hypothetical 

result using an alternative method of 

calculating the option input price using 

the midpoint method is shown in the 

column ‘‘Midpoint Input.’’ The 

difference between the result using the 

SPIKES Input and the Midpoint Input is 

shown in the ‘‘Difference b/t SPIKES 

Input and Midpoint Input Column.’’ 

The shaded cells illustrate changes in 

the input prices of the two methods 

after each update to the market. The 

Exchange believes that the example 

illustrates that, given the hypothetical 

market prices, the price dragging 

technique results in a smoother Index 

price because it relies primarily on trade 

prices (which are more indicative of 

actual value), only using quote prices 

when a quote bid is higher than the last 

trade or a quote offer is lower than the 

last trade. Additionally, the Index 

performance has been evaluated using 

alternative calculation methodologies. 

This evaluation included a comparison 

of the performance of the Index when 

calculated using the price dragging 

technique, versus the performance of 

the Index when calculated using an 

alternative midpoint method, and 

covered periods of both low and high 

volatility in SPY. The Exchange believes 

that the price dragging technique 

consistently outperformed the midpoint 

method, as measured by the Index’s 

overall stability and smoothness of price 

changes, resulting from primarily 

relying on trade prices (which are more 

indicative of actual value). 

The price dragging technique is used 

to determine the Reference Price for 

each individual option used in the 

Index calculation. The Exchange 

believes that this technique is a material 

enhancement that may improve Index 

stability by smoothing out options price 

inputs into the Index calculation, 

especially as options quotes are rapidly 

changing. The price dragging technique 

is used for intraday calculation of the 

Index. The Exchange believes that the 

price dragging technique may be a more 

accurate and effective way to determine 

the Index value because the primary 

factor considered when updating the 

Reference Price is whether or not a trade 

has occurred. If a trade occurred, the 

Reference Price is set to the trade price. 

This methodology represents a 

Reference Price which is based on a 

‘‘meeting of the minds,’’ or the creation 

of a contract. The Exchange believes 

that this more accurately represents the 

fair value at that given time, and thus 

will benefit investors and market 

participants trading options on the 

Index. 

A competing volatility index uses an 

alternative method for calculating its 

reference price. Specifically, that 

competing volatility index utilizes the 

mid-point of the bid and ask and only 

updates the reference price when there 

is a change in the bid or ask. The 


sradovich on DSK3GMQ082PROD with NOTICES
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7See supra note 6. 

Exchange believes that this 

methodology could be less reliable 

because it creates the potential for 

skewed reference prices in the event of 

a wide market. Options are often quoted 

in bulk by market makers, which in 

some cases, causes a divergence from 

the orthodox supply-demand dynamics 

as quotes are constantly updated across 

a series of strikes throughout the day. As 

a result, there can be more notable 

movements within the bid/ask spread 

that impact the calculation of an index 

based on mid-point prices. 

Therefore, the Exchange believes that 

the price dragging technique may create 

a more accurate and stable Index value 

and may better represent volatility in 

the market by emphasizing the actual 

trade price versus simply the midpoint 

spread. Furthermore, the Exchange 

believes that the enhanced feature may 

provide greater consistency in the 

marketplace because the price dragging 

technique results in a Reference Price 

that is supported by the fair market 

value at the time versus using the midpoint, which is not necessarily an 

accurate representation of the fair 

market value at the time. 

2. Select the Options 

Another key feature of SPIKES is its 

exclusion rule (truncation method). The 

exclusion rule determines how far away 

from the money to exclude strikes from 

the volatility calculation. For each of the 

expirations, the securities to be used in 

the calculation are selected by removing 

in-the-money and OTM options, as 

follows: 

• To determine the ATM strike, find 

the intersection of the put and call 

linearly interpolated price curves. Select 

the strike closest to the value of the 

intersection of the curves—this becomes 

the ATM strike. If the intersection falls 

exactly in the middle of two strikes, or 

if the whole segments overlap (i.e., 

when four neighboring calls and puts 

have the same price), use the lower 

strike. In case of more than one 

intersection point (in rare cases of 

highly irregular market prices), use the 

one closest to the current value of SPY. 

• Use all listed puts below the ATM 

strike and all listed calls above the ATM 

strike, and both the ATM call and put. 

When two consecutive option prices of 

$0.05 or less are encountered when 

moving away from the ATM, exclude all 

the strikes beyond that level, from each 

of the put and call side. 

A competing volatility index that uses 

the midpoint for its option input prices 

uses a different exclusion rule, which 

similarly moves away from the ATM, 

but excludes individual strikes if they 

have no bid, and excludes all the strikes 

beyond two consecutive no bid strikes. 

A comparison of a hypothetical list of 

put option inputs and the resulting 

inclusion decision is given below. 

Strike SPIKES 

input 7

SPIKES 

input 

included? 

Market VIX input VIX input 

included? 

201 ....................................................................................... 0.06 Include ........... 0.05 x 0.07 0.06 Include. 

200.5 .................................................................................... 0.06 Include ........... 0.05 x 0.07 0.06 Include. 

200 ....................................................................................... 0.05 Include ........... 0.05 x 0.07 0.06 Include. 

199.5 .................................................................................... 0.04 Include ........... 0.04 x 0.06 0.05 Include. 

199 ....................................................................................... 0.05 Exclude .......... 0 x 0.11 0.055 Exclude. 

198.5 .................................................................................... 0.03 Exclude .......... 0.01 x 0.1 0.055 Include. 

198 ....................................................................................... 0.04 Exclude .......... 0.02 x 0.08 0.05 Include. 

197.5 .................................................................................... 0.03 Exclude .......... 0.01 x 0.07 0.04 Include. 

197 ....................................................................................... 0.04 Exclude .......... 0.01 x 0.06 0.035 Include. 

196.5 .................................................................................... 0.02 Exclude .......... 0 x 0.05 0.025 Exclude. 

196 ....................................................................................... 0.01 Exclude .......... 0.01 x 0.06 0.035 Include. 

195.5 .................................................................................... 0.01 Exclude .......... 0 x 0.05 0.025 Exclude. 

The purpose of the exclusion rule is 

to remove option inputs from the 

calculation that could be deemed less 

reliable and thus potentially negatively 

impact the calculation outcome. The 

Exchange believes that its exclusion 

methodology is a material enhancement 

over existing methodologies, and should 

result in a calculation outcome that 

better reflects the expected measure of 

volatility. 

As discussed previously, the price 

dragging method reduces the variability 

of the option inputs. Since the option 

inputs have reduced variability, and 

those values are used to determine 

which strikes make it into the index 

calculation, the combination of price 

dragging and exclusion rules work 

together to, in the Exchange’s opinion, 

create a more reliable Index value. 

3. Weight the Options and Estimate 

Volatility 

For each term, the volatility is 

estimated using the variance swap 

approximation, with the selected 

options’ prices weighted according to 

the SPIKES formula: 

Each eligible option’s contribution is 

proportional to the change in the strike 

(half the difference between the strike 

on either side of the option) and the 

price, and inversely proportional to the 

square of the option’s strike. After 

calculating for each option, these are 

summed and multiplied by two times 

the exponential of the risk free rate 

times time-to-expiration. The next step 

is to subtract from this value, the square 

of, the difference between the ATM call 

and put prices, times the exponential of 

the risk free rate times time-toexpiration, divided by the ATM strike. 

Lastly, divide the result by the time to 

expiration to arrive at the final value. 

4. Calculate the Index 

Compute the 30-day weighted average 

of the near- and next-term variances, 


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32936 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 

8SPY holds the shares of up to 500 companies 

listed on U.S. securities exchanges (SPY currently 

has 506 securities due to multi-share classes for 

some companies). 9See https://www.spdrs.com/product/ 

fund.seam?ticker=SPY. 

10Calculated using data from Thompson Reuters 

as of May 14, 2018. 

11Calculated using data from The Options 

Clearing Corp. as of May 14, 2018. 

12 Id. 

13The final settlement of the SPIKES Index 

occurs during the SPIKES Special Settlement 

Auction (defined and discussed below), which 

commences immediately following the opening of 

trading on the Exchange. 

take the square root, and multiply by 

100, as follows: 

t1 Time (in seconds) to near-term expiration 

σ1 Estimated volatility computed by 

variance swap approximation, near-term 

t2 Time (in seconds) to next-term expiration 

σ2 Estimated volatility computed by 

variance swap approximation, next-term 

tM Number of seconds in 30 days (30 × 

86,400 = 2,592,000) 

Background Information 

SPY is the largest and most actively 

traded ETF in the U.S.8 According to 

State Street Global Advisor, the Trustee 

of SPY, as of May 14, 2018, the net 

assets under management in SPY was 

approximately $263 billion; the 

weighted average market capitalization 

of the portfolio components was 

approximately $217 billion; the smallest 

market capitalization was 

approximately $3.6 billion (Range 

Resources Corporation, ticker: RRC), 

and the largest was approximately $930 

billion (Apple, Inc., ticker: AAPL).9 For 

the three months ending April 30, 2018, 

the average daily volume in SPY shares 

was 119 million, and the average value 

of shares traded was approximately 

$31.8 billion.10 For the same period, the 

average daily volume in SPY options 

was approximately 4.2 million 

contracts.11 The most recent open 

interest in SPY options was 

approximately 23.9 million contracts as 

of May 14, 2018.12

The Exchange believes that, in 

addition to the other unique and 

proprietary attributes associated with 

the Index’s calculation and settlement 

methodology, as well as the Exchange’s 

fully-electronic, transparent, highlydeterministic trading system, using SPY 

options as the components for a 

volatility index, in the manner proposed 

by the Exchange, will offer a number of 

significant, distinct advantages over 

other types of volatility indexes. The 

Exchange believes that the advantages of 

using SPY options have the potential to 

result in an extremely liquid volatility 

product with exceptionally tight 

spreads, and consequently would not be 

readily susceptible to fraudulent and 

manipulative acts. First, SPY options 

are extremely liquid (they regularly 

trade 4–5 million contracts a day, and 

have 20–30 million contracts in open 

interest). Second, SPY options have 

consistently tighter bid-ask spreads than 

SPX options, which are the components 

for the Cboe Exchange, Inc. (‘‘Cboe’’) 

VIX index. Since SPY options are traded 

on all 15 option exchanges, it allows 

market participants to take advantage of 

arbitrage opportunities across multiple 

venues. This is in contrast to SPX 

options which only trade on Cboe, and 

thus those arbitrage opportunities across 

venues are not possible. Since SPY 

options are traded on all 15 option 

exchanges, at the time of the final 

settlement of the SPIKES Index on the 

Exchange,13 there will be up to 14 other 

options exchanges open for trading SPY 

options, thus serving as real-time crossreference prices for those SPY options 

included in the Exchange’s SPIKES 

Special Settlement Auction. This is in 

contrast to SPX options during Cboe’s 

VIX settlement auction, where there are 

no real-time cross-reference prices for 

those SPX options included in Cboe’s 

VIX settlement, as SPX options are only 

traded on one exchange—Cboe. In terms 

of spreads, SPY spreads are significantly 

tighter and exhibit much higher 

consistency with a much narrower range 

of typical values and far fewer numbers 

of outliers than SPX. For example, when 

examining daily closing bid and ask 

prices of regular monthly options (with 

time to expiry closest to 30 calendar 

days) from October 2007 (when SPY 

options started trading in penny 

increments) to May 2018, and 

comparing the following three strike 

ranges: (A) 1% ATM—at-the-money 

options within 1% (plus or minus) of 

the underlying forward price; (B) 1–5% 

OTM—out-of-the-money options (higher 

strikes for calls, lower strikes for puts); 

and (C) 85–95% Puts—far out-of-themoney put options typically included in 

volatility index calculations, SPY 

spreads are consistently tighter than 

SPX spreads, both across strike prices 

and through time, by a factor of 2 to 4 

times (this is after normalizing SPY 

spreads to SPX spreads, by multiplying 

SPY spreads by 10). Accordingly, the 

Exchange believes that these advantages 

of using SPY options in the manner 

proposed by the Exchange, when 

combined with the other features and 

attributes of the SPIKES Index, have the 

potential to result in an extremely liquid 

volatility product with exceptionally 

tight spreads, and consequently would 

not be readily susceptible to fraudulent 

and manipulative acts. 

As set forth in Exhibit 3–1, the 

following are the characteristics of the 

Index: (i) The initial index value was 

13.05 on January 10, 2005; (ii) the index 

value on May 14, 2018 was 13.44; (iii) 

the lowest index value since inception 

was 9.80 and occurred on July 20, 2007; 

and (iv) the highest index value since 

inception was 81.85 and occurred on 

November 20, 2008. 

Index Calculation and Maintenance 

As noted above, the Index will be 

maintained and calculated by the 

Exchange. The level of the Index will 

reflect the current expected volatility of 

SPY. The Index will be updated on a 

real-time basis on each trading day 

beginning at 9:30 a.m. and ending at 

4:15 p.m. (New York time). If the 

current published value of a component 

is not available, the last published value 

will be used in the calculation. Values 

of the Index will be disseminated to the 

Options Price Reporting Authority 

(‘‘OPRA’’) at least every 15 seconds 

during the Exchange’s regular trading 

hours, pursuant to Exchange Rules 1802 

and 1803. The Exchange is currently 

disseminating the cash values of the 

Index to OPRA under the ticker symbol 

‘SPIKE’ in at least 15 second intervals. 

In the event the Index ceases to be 

maintained or calculated, or its values 

are not disseminated at least every 15 

seconds by a widely available source, 

the Exchange will not list any additional 

series for trading, and may, for the 

purpose of maintaining a fair and 

orderly market and protecting investors, 

limit transactions in certain options on 

the Index to closing transactions only. 


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14An ‘‘imbalance’’ occurs when there is 

insufficient liquidity to satisfy all trading interest 

due an execution at a certain price. See Exchange 

Rule 503(f)(2)(v). 

15See Exchange Rule 503(f)(2)(vii)(B)(5). 

16See Exchange Rule 503(e)(1). 

17The Exchange notes that the current setting is 

one half second. 

18See supra note 14. 

19The Exchange notes that the current Imbalance 

Timer setting is one second. 

20See Exchange Rule 503(f)(2)(vii). 

21See Exchange Rule 503(f)(2)(vii)(B)(4). 

22For a complete description of the Exchange’s 

standard, existing Opening Process, refer to 

Exchange Rule 503, Openings on the Exchange. 

23The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

24See Exchange Rule 503(f)(2)(i). See also 

Exchange Regulatory Circular 2012–02, which sets 

forth the tables that describe the calculation of the 

EQR for option classes traded on the Exchange, at 

http://www.miaxoptions.com/sites/default/files/ 

Continued 

Exercise and Settlement Value 

On the expiration date for expiring 

SPIKES options, the Exchange will 

calculate the final settlement value of 

the Index for expiring SPIKES options. 

The expiration date for expiring SPIKES 

options is the same day that the final 

settlement value of the Index is 

calculated for those options. This date is 

the Wednesday that is thirty days prior 

to the third Friday of the calendar 

month immediately following the 

month in which the applicable SPIKES 

options expire. If that Wednesday or the 

Friday that is thirty days following that 

Wednesday is an Exchange holiday, the 

final settlement value shall be 

calculated on the business day 

immediately preceding that Wednesday. 

The exercise-settlement amount is equal 

to the difference between the final 

settlement value of the Index and the 

exercise price of the option, multiplied 

by $100. Exercise will result in the 

delivery of cash on the business day 

following expiration. 

To determine the final settlement 

value of the Index, the Exchange will 

perform an Index settlement price 

calculation which includes all SPY 

options that expire 30 days after the 

SPIKES settlement that are included in 

the settlement (these options are 

referred to in this rule filing as the 

‘‘constituent options’’). In order to 

perform the Index settlement price 

calculation, each constituent option will 

be assigned a Settlement Reference Price 

or ‘‘SRP,’’ defined and discussed in 

more detail below. Each SRP will be 

determined through a new ‘‘SPIKES 

Special Settlement Auction,’’ which 

will be conducted once per month, in 

the constituent options traded on the 

Exchange, on final settlement day. The 

SPIKES Special Settlement Auction will 

utilize the Exchange’s standard, existing 

Opening Process, as defined and fullydescribed in Exchange Rule 503(f), with 

a new proposed modification to account 

for situations where there remains an 

order imbalance 14 that must be filled at 

the opening price after the requisite 

number of iterations of the imbalance 

process takes place under the 

Exchange’s existing Opening Process 

(the Exchange’s existing Opening 

Process provides that the Exchange can 

open with an imbalance after the 

requisite number of iterations of the 

imbalance process takes place).15 This 

new proposed modification to the 

Exchange’s existing Opening Process to 

facilitate the execution of this remaining 

must-fill interest is referred to as the 

special settlement imbalance process 

(‘‘SSIP’’), which will be governed by 

new proposed Interpretations and 

Policies .06 to Exchange Rule 1809, as 

described more fully below. The 

Exchange believes that using its fullyelectronic and fully-transparent 

Opening Process functionality, which is 

accessible to all Members of the 

Exchange for participation, in highly 

liquid SPY options (which are 

simultaneously opening and available 

for trading on up to 14 other exchanges, 

thus providing real-time cross-reference 

prices for the SPY options included in 

the settlement) to conduct the SPIKES 

Special Settlement Auction to settle 

expiring SPIKES options, will offer 

significant advantages over other types 

of volatility index auction processes, 

resulting in a robust Opening Process 

that presents arbitrage opportunities 

across multiple venues to drive prices 

into line and reach equilibrium, and 

thus consequently would not be readily 

susceptible to fraudulent and 

manipulative acts. 

The Exchange believes that the 

SPIKES Special Settlement Auction 

would not be readily susceptible to 

fraudulent and manipulative acts for a 

number of reasons. As discussed more 

fully below, the Exchange’s existing 

Opening Process runs to completion and 

precedes the engagement of the new 

SSIP. The existing Opening Process 

cannot occur prior to 9:30 a.m. Eastern 

Time and only begins following the 

dissemination of a quote or trade in the 

market for the underlying security.16

Following the dissemination of a quote 

or trade in the market for the underlying 

security, the System will pause for a 

period of time no longer than one half 

second to allow the marketplace to 

absorb this information.17 When there is 

an imbalance,18 the System will 

broadcast a System Imbalance Message 

(which includes the symbol, side of the 

market, quantity of matched contracts, 

the imbalance quantity, must fill 

quantity (i.e., the number of contracts 

that must be filled in order for that 

option to open on the Exchange at the 

indicated price), quantity of routable 

contracts, and price of the affected 

series) to subscribers of the Exchange’s 

data feeds and begin an Imbalance 

Timer 19 not to exceed three seconds.20

Under the existing Opening Process the 

Exchange may repeat this process up to 

three times.21 While the Exchange is 

conducting its Opening Process, all 14 

other option exchanges will also be 

conducting their opening process for 

SPY options. As the Exchange works 

through its process to resolve 

imbalances under the existing Opening 

Process, other Exchanges will be open 

and will serve as real-time crossreference prices for those SPY options, 

enabling market participants to send 

orders to the Exchange if there are 

pricing anomalies for these SPY options 

across venues. The longer it takes the 

Exchange to work through the 

imbalance, the greater the likelihood 

that other exchanges will have opened 

their SPY options market and the 

natural pressures of a competitive 

market will help to eliminate any 

pricing anomalies and aid in 

eliminating the imbalance on the 

Exchange. Further, the Exchange’s 

imbalance process is transparent, as 

every subscriber to the Exchange’s data 

feed receives the imbalance messages, 

and every Member of the Exchange can 

participate in the imbalance process. 

As previously discussed, on the day 

the settlement value for the Index is 

calculated, the Exchange will conduct 

the SPIKES Special Settlement Auction, 

using its standard, existing Opening 

Process for all options on the Exchange, 

including the constituent options.22 The 

following paragraphs provide a high 

level overview of the Exchange’s 

standard, existing Opening Process, in 

order to illustrate the complete 

operation of the SPIKES Special 

Settlement Auction. 

Pursuant to the standard, existing 

Opening Process, if there are no quotes 

or orders that lock or cross each other, 

the System 23 will open by 

disseminating the Exchange’s best bid 

and offer among quotes and orders that 

exist in the System at that time. If there 

are quotes or orders that lock each other, 

the System will calculate an Expanded 

Quote Range (‘‘EQR’’), as described in 

Rule 503(f)(2). The EQR represents the 

limits of the range in which transactions 

may occur during the Opening 

Process.24 The EQR is recalculated any 


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32938 Federal Register / Vol. 83, No. 136 / Monday, July 16, 2018 / Notices 

circular-files/MIAX_Opening_Process_and_Pause_

Timer.pdf. 

25The term ‘‘ABBO’’ or ‘‘Away Best Bid or Offer’’ 

means the best bid(s) or offer(s) disseminated by 

other Eligible Exchanges (defined in Rule 1400(f)) 

and calculated by the Exchange based on market 

information received by the Exchange from OPRA. 

See Exchange Rule 100. 

26See Exchange Rule 503(f)(2)(i). 

27See Exchange Rule 503(f)(2)(iv). 

28The term ‘‘Member’’ means an individual or 

organization approved to exercise the trading rights 

associated with a Trading Permit. Members are 

deemed ‘‘members’’ under the Exchange Act. See 

Exchange Rule 100. 

29See Exchange Rule 503(f)(2)(iv)(A). 

30The term ‘‘NBBO’’ means the national best bid 

or offer as calculated by the Exchange based on 

market information received by the Exchange from 

OPRA. See Exchange Rule 100. 

31See Exchange Rule 503(f)(2)(vii). 

32See Exchange Rule 503(f)(2)(vii)(A). 

33The term ‘‘Market Makers’’ refers to ‘‘Lead 

Market Makers’’, ‘‘Primary Lead Market Makers’’ 

and ‘‘Registered Market Makers’’ collectively. See 

Exchange Rule 100. 

34An opening only or ‘‘OPG’’ eQuote is a quote 

that can be submitted by a Market Maker only 

during the Opening as set forth in Rule 503. OPG 

eQuotes will automatically expire at the end of the 

Opening Process. See Exchange Rule 517(a)(2)(iii). 

35An Auction or Cancel or ‘‘AOC’’ eQuote is a 

quote submitted by a Market Maker to provide 

liquidity in a specific Exchange process with a time 

in force that corresponds with the duration of that 

event and will automatically expire at the end of 

that event. See Exchange Rule 517(a)(2)(ii). 

36A 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). 

37An Opening or ‘‘OPG’’ Order is an order that 

is valid only for the opening process. See Exchange 

Rule 516(h). 

38An Auction-or-Cancel or ‘‘AOC’’ order is a limit 

order used to provide liquidity during a specific 

Exchange process with a time in force that 

corresponds with that event. See Exchange Rule 

516(b)(4). 

39See supra note 22. 

40See Exchange Rule 503(f)(2)(vii)(B)(2). 

41See Exchange Rule 503(f)(2)(vii)(B)(4). 

42See Exchange Rule 503(f)(2)(vii)(B)(5). 

43See proposed Exchange Rule 

503(f)(2)(vii)(B)(5)(a). 

44See proposed Exchange Rule 1809, 

Interpretations and Policies .06. 

45The Exchange notes that the current Live Order 

Window opens at 7:30 a.m. 

46The Exchange notes that the current Live Quote 

Window setting opens at 9:25 a.m., however the 

Exchange plans to open the Live Quote Window for 

the SPIKES Special Settlement Auction at 8:30 a.m. 

time a route timer or Imbalance Timer 

expires if material conditions of the 

market (imbalance size, ABBO 25 price 

and size, liquidity price or size, etc.) 

have changed during the timer. Once 

calculated, the EQR represents the 

limits of the range in which transactions 

may occur during the Opening 

Process.26 The System uses the EQR to 

determine the highest and lowest price 

of the opening price range. 

To calculate the opening price, the 

System takes into consideration all valid 

Exchange quotes and all valid orders, 

together with other exchanges’ markets 

for the series, and identifies the price at 

which the maximum number of 

contracts can trade. If that price is 

within the EQR and leaves no 

imbalance, the Exchange will open at 

that price, executing marketable trading 

interest as long as the opening price 

includes only Exchange interest.27 If the 

calculated opening price included 

interest other than solely Exchange 

interest, the System will broadcast a 

system imbalance message (which 

includes the symbol, side of the market, 

quantity of matched contracts, the 

imbalance quantity, must fill quantity, 

quantity of routable contracts, and price 

of the affected series) to Exchange 

Members 28 and initiate a ‘‘route timer,’’ 

not to exceed one second.29

If all opening and marketable interest 

cannot be completely executed at or 

within the EQR without trading at a 

price inferior to the ABBO, or cannot 

trade at or within the quality opening 

market range in the absence of a valid 

width NBBO,30 the System will 

automatically institute an imbalance 

process.31 The System will broadcast a 

system imbalance message (which 

includes the symbol, side of the market, 

quantity of matched contracts, the 

imbalance quantity, must fill quantity, 

quantity of routable contracts, and price 

of the affected series) to subscribers of 

the Exchange’s data feeds, and begin an 

Imbalance Timer, not to exceed three 

seconds.32 Market Makers 33 may enter 

Opening Only (‘‘OPG’’) eQuotes,34

Auction or Cancel (‘‘AOC’’) eQuotes,35

Standard quotes,36 Opening Orders 

(‘‘OPG Orders’’),37 AOC Orders 38 and 

limit orders during the Imbalance 

Timer. Other Exchange Members may 

enter OPG Orders, AOC Orders and 

other order types (except those order 

types not valid during the Opening 

Process, as described in Rule 516) 

during the Imbalance Timer.39 If, at the 

conclusion of the timer, quotes and 

orders submitted during the Imbalance 

Timer, or other changes to the ABBO, 

would not allow the entire imbalance 

amount to trade at the Exchange at or 

within the EQR without trading at a 

price inferior to the ABBO, the System 

will send a new system imbalance 

message to Exchange Members and 

initiate a route timer for routable Public 

Customer orders not to exceed one 

second. If, during the route timer, 

interest is received by the System which 

would allow all interest to trade on the 

System (i.e., there is no longer an 

imbalance) at the opening price without 

trading at a price inferior to other 

markets, the System will trade and the 

route timer will end.40 The System may 

repeat the imbalance process up to three 

times (as established by the 

Exchange).41 Following completion of 

the third imbalance process, if there is 

an opening transaction, any unexecuted 

contracts from the imbalance not traded 

or routed will be cancelled back to the 

entering Member if the price for those 

contracts crosses the opening price, in 

effect cancelling that must fill interest.42

That is the completion of the Exchange’s 

standard, existing Opening Process. 

Now, where an imbalance exists in 

constituent options and the final 

imbalance process has been conducted 

as part of the Exchange’s standard, 

existing Opening Process, instead of 

cancelling that must fill interest back to 

the entering Member, the Exchange is 

proposing to conduct the SSIP,43 where 

the Exchange will satisfy that must fill 

interest. The Exchange does not want to 

cancel any must fill interest, as this 

liquidity could represent previously 

hedged interest that must be unwound. 

The SSIP is employed to satisfy all 

liquidity identified as must fill which is 

creating the imbalance, referred to as the 

must fill imbalance. The SSIP is an 

iterative process that is designed to 

determine a price at which all must fill 

imbalance interest can be satisfied.44 In 

the SPIKES Special Settlement Auction, 

in addition to any order types that may 

be regularly accepted by the Exchange, 

the Exchange will also accept settlement 

auction only orders (‘‘SAO Orders’’) and 

settlement auction only eQuotes (‘‘SAO 

eQuotes’’) (SAO Orders and SAO 

eQuotes are collectively referred to as 

‘‘SAOs’’) at any time after the opening 

of the Live Order Window (‘‘LOW’’) 45

and the Live Quote Window (‘‘LQW’’),46

respectively. SAOs are specific order 

types that allow a Member to 

voluntarily tag such order as a SPIKES 

strategy order, defined below. All orders 

for participation in the SPIKES Special 

Settlement Auction that are related to 

positions in, or a trading strategy 

involving, SPIKES Index options 

(‘‘SPIKES strategy orders’’), and any 

change to or cancellation of any such 

order: (i) Must be received prior to the 

applicable SPIKES strategy order cut-off 

time for the constituent option series, as 

determined by the Exchange, which 

may be no earlier than the opening of 

the LOQ or the LQW, and no later than 

the opening of trading in the series. The 

Exchange will announce all 

determinations regarding changes to the 

applicable SPIKES strategy order cut-off 

time via Regulatory Circular at least one 

day prior to implementation (however 

the Exchange anticipates initially 

establishing the cut-off time at 9:20 a.m. 


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47See Cboe Rule 6.2, Hybrid Opening (and 

Sometimes Closing) System (‘‘HOSS’’), 

Interpretations and Policies .01, Modified Opening 

Procedure for Series Used to Calculate the Exercise/ 

Final Settlement Values of Volatility Indexes. 48A market order is an order to buy or sell a 

stated number of option contracts at the best price 

available at the time of execution. See Exchange 

Rule 516(a). 

Eastern); and (ii) may not be cancelled 

or modified after the applicable SPIKES 

strategy order cut-off time, unless the 

SPIKES strategy order is not executed in 

the SPIKES Special Settlement Auction 

and the cancellation or modification is 

submitted after the SPIKES Special 

Settlement Auction is concluded 

(provided that any such SPIKES strategy 

order may be modified or cancelled after 

the applicable SPIKES strategy order 

cut-off time and prior to the applicable 

non-SPIKES strategy order cut-off time 

in order to correct a legitimate error, in 

which case the Member submitting the 

change or cancellation will prepare and 

maintain a memorandum setting forth 

the circumstances that resulted in the 

change or cancellation and will file a 

copy of the memorandum with the 

Exchange no later than the next 

business day in a form and manner 

prescribed by the Exchange). In general, 

the Exchange will consider orders to be 

SPIKES strategy orders for purposes of 

Rule 1809 Interpretation and Policy .06, 

if the orders possess the following three 

characteristics: (A) Are for options with 

the expiration that will be used to 

calculate the exercise or final settlement 

value of the applicable volatility index 

option contract; (B) are for options 

spanning the full range of strike prices 

for the appropriate expiration for 

options that will be used to calculate the 

exercise or final settlement value of the 

applicable volatility index option 

contract, but not necessarily every 

available strike price; and (C) are for put 

options with strike prices less than the 

‘‘at-the-money’’ strike price and for call 

options with strike prices greater than 

the ‘‘at-the-money’’ strike price. They 

may also be for put and call options 

with ‘‘at-the-money’’ strike prices. 

Whether certain orders are SPIKES 

strategy orders for purposes of 

Interpretation and Policy .06 depends 

upon specific facts and circumstances. 

The Exchange may also deem order 

types other than those provided above 

as SPIKES strategy orders if the 

Exchange determines that to be the case 

based upon the applicable facts and 

circumstances. 

These requirements are substantially 

similar to Cboe’s requirements for 

‘‘strategy orders’’ participating in the 

VIX settlement auction.47

The Exchange anticipates that market 

participants that actively trade SPIKES 

options may hedge their positions with 

SPY option series that will also be used 

to calculate the SPIKES exercise 

settlement/final settlement value. 

Market participants holding hedged 

SPIKES options positions may trade out 

of their SPY option series on the 

relevant SPIKES expiration/final 

settlement date. Specifically, market 

participants holding short, hedged 

SPIKES options could liquidate that 

hedge by selling their SPY options 

series, while traders holding long, 

hedged SPIKES options could liquidate 

their hedge by buying SPY option series. 

In order to seek convergence with the 

SPIKE exercise/final settlement value, 

these market participants may liquidate 

their hedges by submitting SPIKES 

strategy orders in the appropriate SPY 

option series during the SPIKES Special 

Settlement Auction on the SPIKES 

expiration/final settlement date. 

The SPIKES strategy order cut-off 

time exists because trades to liquidate 

hedges can contribute to an order 

imbalance during the SPIKES Special 

Settlement Auction in SPY option series 

on expiration/final settlement dates. For 

example, traders liquidating hedges 

could predominantly be on one side of 

the market and those market 

participants’ orders may create buy or 

sell order imbalances during the SPIKES 

Special Settlement Auction in SPY 

option series on expiration/final 

settlement dates. As a result of having 

a SPIKES strategy order cut-off time in 

place, the Exchange has created a 

defined window to encourage 

participation in the SPIKES Special 

Settlement Auction among market 

participants who may wish to place offsetting orders against imbalances to 

which SPIKES strategy orders may have 

contributed. Additionally, by 

precluding the modification or 

cancellation of SPIKES strategy orders 

from occurring after the cut-off time, the 

Exchange is ensuring that the order 

book reflects bona-fide interest for 

execution, and is a feature designed to 

prevent manipulation of the final 

settlement price. 

Following is a description of the 

proposed operation of the SSIP portion 

of the SPIKES Special Settlement 

Auction, as set forth in Exchange Rule 

1809, proposed Interpretations and 

Policies .06. To begin the SSIP, the 

System will broadcast a system 

imbalance message to all subscribers of 

the Exchange’s relevant data feed and 

begin an SSIP Imbalance Timer, the 

duration of which is to be determined 

by the Exchange, not to exceed ten 

seconds, and communicated via 

Regulatory Circular. During the SSIP 

Imbalance Timer, the System accepts all 

quote and order types supported during 

the standard Opening Process. Next, the 

System will evaluate the must fill 

imbalance and adjust the EQR by a 

defined amount by appending to the 

EQR (adding to offers or subtracting 

from bids) the EQR value (as previously 

determined by the Exchange and 

communicated via Regulatory Circular). 

During the SSIP, the allowable EQR will 

be increased .5 times the EQR value 

upon each iteration of the SSIP. The 

SSIP will be repeated until a price is 

reached at which there is no remaining 

must fill imbalance. 

An example of a SPIKES Special 

Settlement Auction (which utilizes the 

Exchange’s standard, existing Opening 

Process, as modified by the SSIP), for a 

constituent option is provided to 

illustrate the process. 

Example 

SPY Mar 280 Call—constituent option 

The Exchange market for the 

constituent option is as follows: 

Bid size Bid Offer Offer size 

PLMM ............................................................................................................................... 100 1.01 1.10 100 

MM1 ................................................................................................................................. 50 1.02 1.10 50 

The Exchange receives an SAO Order 

to purchase 500 SPY March 280 

contracts with a ‘‘market’’ price. 

Accordingly, there are 150 contracts 

offered at $1.10 and a market order 48 to 

buy 500 contracts. This results in the 

following: 

Imbalance Quantity ................... 350 

Must Fill Imbalance Quantity .... 350 

Matched Quantity ..................... 150 


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49The EQR value for options bid $0.00 to $1.00 

is $0.05; $1.01 to $2.00 is $0.10; $3.01 to $5.00 is 

$0.20; $5.01 to $10.00 is $0.30; $10.01 to $20.00 is 

$0.50; $20.01 to $40.00 is $0.70; and $40.01 and 

above is $0.90. See also supra note 14. 

50The System may repeat the Standard Opening 

Imbalance Process up to three times (as established 

by the Exchange). See Exchange Rule 

503(f)(2)(vii)(B)(4). 

The Exchange’s standard Opening 

Process is used, and because an 

imbalance exists, the Exchange’s 

Standard Opening Imbalance Process (as 

defined in Rule 503(f)(2)(vii)) 

commences. The EQR is expanded by 

the EQR value of $0.10,49 becoming 

$1.02 × $1.20. 

After three iterations of the 

Exchange’s Standard Opening 

Imbalance Process,50 if the must fill 

imbalance quantity has not been 

satisfied, the new SSIP will be 

employed. (For purposes of this 

example, assume that all such three 

iterations have completed and the must 

fill imbalance quantity still has not been 

satisfied.) 

The SSIP will begin by using an EQR 

expanded by 1.0 times the EQR value 

($0.10). Therefore, the EQR for the first 

iteration of SSIP is $1.02 × $1.20. 

Since no responses have yet been 

received, a system imbalance message is 

broadcast to all subscribers of the 

Exchange’s data feeds and the SSIP 

auction period is started: The following 

responses are received: 

• @20 Milliseconds BD1 response, AOC 

Order to sell 200 @$1.20 arrives 

At the end of the SSIP auction period, 

the System evaluates the orders and 

responses to determine if the must fill 

imbalance quantity can be satisfied at, 

or within, the EQR. 

The Exchange market for the 

constituent option is as follows: 

Bid size Bid Offer Offer size 

PLMM ............................................................................................................................... 100 1.01 1.10 100 

MM1 ................................................................................................................................. 50 1.02 1.10 50 

BD1 .................................................................................................................................. .................... .................... 1.20 200 

The offer of 150 contracts at $1.10 

remains and there are now an additional 

200 contracts offered at $1.20. This 

results in the following: 

Imbalance Quantity ................... 150 

Must Fill Imbalance Quantity .... 150 

Matched Quantity ..................... 350 

A must fill imbalance quantity of 150 

contracts priced through the EQR 

remains, as there are a total of 350 

contracts offered and a buy order for 500 

at the market. 

Because an imbalance still exists, a 

second iteration of the SSIP will begin 

by expanding the side of the EQR 

opposite the must fill imbalance 

quantity quote range, from the original 

EQR value to the quote range plus 1.5 

times the original EQR value ($0.10), 

becoming $1.25 ($1.10 + $0.15). 

A new system imbalance message is 

broadcast to all subscribers of the 

Exchange’s data feeds and a second 

SSIP auction period is started: 

The following responses are received: 

• @500 milliseconds MM2 response, 

AOC eQuote to sell 1000 @ $1.23 

arrives 

At the end of the SSIP auction period, 

the System evaluates the orders and 

responses to see if the must fill 

imbalance quantity can be satisfied at, 

or within, the EQR. 

The Exchange market for the 

constituent option is as follows: 

Bid size Bid Offer Offer size 

PLMM ............................................................................................................................... 100 1.01 1.10 100 

MM1 ................................................................................................................................. 50 1.02 1.10 50 

BD1 .................................................................................................................................. .................... .................... 1.20 200 

MM2 ................................................................................................................................. .................... .................... 1.23 1000 

The offer of 150 contracts at $1.10 

remains, as well as the 200 contracts 

offered at $1.20. In addition, there is 

now an offer to sell 1,000 contracts at 

$1.23. 

In this case, the entire must fill 

imbalance quantity can be satisfied at 

$1.23. The SAO Order to purchase 500 

contracts at the market price is filled in 

the following fashion: 

• The SAO Order buys 100 from the 

PLMM @$1.23 

• The SAO Order buys 50 from MM1 @

$1.23 

• The SAO Order buys 200 from BD1 @

$1.23 

• The SAO Order buys 150 from MM2 

@$1.23 

Once there is no remaining must fill 

imbalance, SAOs, AOC Orders, AOC 

eQuotes, OPG Orders, and OPG eQuotes 

submitted into the SPIKES Special 

Settlement Auction are cancelled. Any 

unfilled day limit orders and GTC 

orders that are priced at the Opening 

Price are placed on the Book and 

managed by the System. 

As previously discussed, the System 

will assign an SRP to each constituent 

option to facilitate the calculation of the 

final settlement price of the Index. If the 

System opens the constituent option 

with a trade, the System assigns the 

constituent option an SRP equal to the 

trade price in that option. If there is no 

locking or crossing interest and the 

System opens the constituent option 

without a trade, and the bid-ask spread 

is at or within a range as defined by the 

Exchange in an SRP opening width table 

and communicated via Regulatory 

Circular, the System assigns the 

constituent option an SRP equal to the 

midpoint of the bid and ask prices. If 

the bid-ask spread is not within a range 

as defined in the SRP opening width 

table, the System will conduct an 

additional process to determine the SRP 

of the constituent option, as follows. 

First, the System will start a 

settlement reference price timer 

(‘‘SRPT’’) (the duration of which will be 

defined by the Exchange not to exceed 

sixty seconds and communicated via 

Regulatory Circular). If, during the 

SRPT, there is a trade on the Exchange, 

the System will set the SRP equal to the 

trade price. If, during the SRPT, the bidask spread changes so that it is within 

a range defined in the settlement price 

opening width table, the System will set 

the SRP equal to the midpoint of the bid 

and ask price. 


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51The term ‘‘MBBO’’ means the best bid or offer 

on the Exchange. See Exchange Rule 100. 

52The proposed rule change relates solely to the 

Exchange’s request to list and trade options on the 

Index and does not represent a request for the 

Commission to determine whether the Index is a 

‘‘narrow-based index’’ as that term is defined under 

the Act. See 15 U.S.C. 78c(a)(55)(B). 

53See Exchange Rule 1808. 

54See Exchange Rule 1808(c). 

55See Exchange Rule 1809(a)(1). 

56See Securities Exchange Act Release No.54019 

(June 20, 2006), 71 FR 36569 (June 27, 2006) (SR– 

CBOE–2006–55). Additionally, the Exchange notes 

there are currently a number of actively-traded 

broad-based index options, i.e., DJX, NDX, SPX, that 

are also not subject to any position or exercise 

limits. 

57Cboe Rule 24.9 also permits for the listing of 

up to six weekly VIX expirations. 

58See Exchange Rule 1809(c)(3). The term 

‘‘reasonably related to the current index value of the 

underlying index’’ means that the exercise price is 

within thirty percent (30%) of the current index 

value, as defined in MIAX Options 1809(c)(4). 

59See Securities Exchange Act Release No. 63155 

(October 21, 2010), 75 FR 66402 (October 28, 2010) 

(SR–CBOE–2010–096). 

If the SRPT expires, the System will 

set the SRP equal to the Reference Price 

(the current price of that option utilizing 

the cash index calculation formula, 

described above) of the constituent 

option if it is equal to or inside the 

MBBO.51 If the Reference Price is nonzero and less than the Exchange’s bid, 

then the System will set the SRP equal 

to the Exchange’s bid. If the Reference 

Price is non-zero and greater than the 

Exchange’s ask, then the System will set 

the SRP equal to the Exchange’s ask. If 

the Reference Price is zero and if one or 

both adjacent constituent options have a 

non-zero SRP, the constituent option 

will be excluded from the calculation. If 

the Reference Price is zero and there are 

multiple adjacent constituent options 

with a current Reference Price of zero, 

the System will use the midpoint of the 

NBBO for the SRP if the NBBO bid-ask 

spread is at or within a range defined in 

the settlement price opening width 

table. If the NBBO bid-ask spread is not 

within a range defined in the settlement 

price opening width table, the System 

will wait for either a trade, or a bid-ask 

spread that is within a range defined in 

the settlement price opening width 

table. Once all constituent options have 

been assigned an SRP, the System will 

perform the final settlement price 

calculation of the Index. 

The Exchange believes that this fullyelectronic and fully-transparent SPIKES 

Special Settlement Auction process, 

which is accessible to all Members of 

the Exchange for participation, in highly 

liquid SPY options (which are 

simultaneously opening and available 

for trading on 14 other exchanges, thus 

providing real-time cross-reference 

prices for the SPY options included in 

the settlement) to settle expiring SPIKES 

options, offers significant advantages 

over other types of volatility auction 

processes, and will result in a robust 

opening process that presents arbitrage 

opportunities across multiple venues to 

drive prices into line and reach 

equilibrium, and thus would not be 

readily susceptible to fraudulent and 

manipulative acts. 

Contract Specifications 

The contract specifications for options 

on the Index are set forth in Exhibit 3– 

2. The Index is a broad-based index, as 

defined in MIAX Options Rule 1801(k), 

for the purpose of determining which of 

the Exchange’s rules apply to options on 

the Index.52 Options on the Index are 

European-style and cash-settled. 

Standard trading hours for index 

options (9:30 a.m. to 4:15 p.m., New 

York time) will apply to the Index.53

The Exchange proposes to apply margin 

requirements for the purchase and sale 

of options on the Index that are 

identical to those applied for other 

broad-based index options traded on 

other options exchanges. 

The trading of options on the Index 

will be subject to the trading halt 

procedures applicable to index options 

traded on the Exchange.54 Options on 

the Index will be quoted and traded in 

U.S. dollars.55 Accordingly, all 

Exchange and Options Clearing 

Corporation (‘‘OCC’’) members shall be 

able to accommodate trading, clearance 

and settlement of the Index without 

alteration. Furthermore, the Exchange 

believes that OCC will be able to 

accommodate trading, clearance and 

settlement of options on the Index 

without having to obtain any additional 

approval. 

The Exchange proposes that the 

minimum trading increments for 

options on the Index shall be $0.05 for 

series trading below $3, and $0.10 for 

series trading at or above $3. This is the 

same pricing convention utilized by 

Cboe for VIX options. Accordingly, the 

Exchange is proposing to amend 

Exchange Rule 404, Series of Option 

Contracts Open for Trading, by adopting 

new Interpretations and Policies .11 to 

specify the minimum trading 

increments for options on the Index. 

The Exchange proposes that there 

shall be no position or exercise limits 

for options on the Index. As noted 

above, the Index will settle using 

published prices and quotes from its 

corresponding SPY options. Because the 

size of SPY options market (as well as 

the underlying SPY market) is so large, 

the Exchange believes that there is 

minimal risk of manipulation by virtue 

of position size in SPIKES options. The 

Exchange notes that options on Cboe’s 

VIX are also not subject to any position 

or exercise limits.56 Accordingly, the 

Exchange is proposing to amend 

Exchange Rule 1804(a) to specify that 

there will be no position limits and no 

exercise limits for options on the 

SPIKES Index. 

The Exchange initially proposes to list 

options on the Index in up to twelve 

(12) standard monthly expirations. This 

is the same number of monthly 

expirations that are permitted for VIX 

options, pursuant to Cboe Rule 

24.9(a).57 Accordingly, the Exchange is 

proposing to amend Exchange Rule 

1809(a)(3) to permit the listing of up to 

twelve (12) standard monthly 

expirations for SPIKES options. The 

Exchange is also proposing to make 

changes to Exchange Rule 1809(a)(3), in 

order to conform the structure of such 

rule to Cboe’s Rule 24.9(a), to allow for 

the listing of short-term options and 

quarterly options. 

The Exchange proposes to set the 

minimum strike price interval for 

options on the Index at $0.50 where the 

strike price is less than $15, $1 or 

greater where the strike price is between 

$15 and $200, and $5 or greater where 

the strike price is greater than $200. The 

Exchange believes that $0.50 and $1 

strike price intervals will provide 

investors with greater flexibility by 

allowing them to establish positions that 

are better tailored to meet their 

investment objectives. Further, as 

proposed, when new series of options 

on the Index with a new expiration date 

are opened for trading, or when 

additional series of options on the Index 

in an existing expiration date are 

opened for trading as the current value 

of the Index moves substantially from 

the exercise prices of series already 

opened, the exercise prices of such new 

or additional series shall be reasonably 

related to the current value of the Index 

at the time such series are first opened 

for trading.58 The Exchange, however, 

proposes to eliminate this range 

limitation that will limit the number of 

$1 strikes that may be listed in options 

on the Index. The Exchange’s proposal 

to set minimum strike price intervals 

without a range limitation is identical to 

strike price intervals adopted by Cboe 

for the VIX.59 Accordingly, the 

Exchange is proposing to amend 

Exchange Rule 1809(c), Procedures for 

Adding and Deleting Strike Prices, to 

adopt new sub-section (5) to specify the 


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60See Exchange Rule 1809(b)(1). 

61For the current list of members of the ISG, see 

https://www.isgportal.org/isgPortal/public/ 

members.htm. 

62 15 U.S.C. 78a et seq. 63 15 U.S.C. 78f(b)(5). 

minimum strike price intervals for 

options on the Index. 

The trading of options on the Index 

shall be subject to the same rules that 

presently govern the trading of 

Exchange index options, including sales 

practice rules, margin requirements, and 

trading rules. In addition, long-term 

option series having up to sixty months 

to expiration may be traded.60 The 

trading of long-term options on the 

Index shall also be subject to the same 

rules that govern the trading of all the 

Exchange’s index options, including 

sales practice rules, margin 

requirements, and trading rules. 

Further, pursuant to Interpretations and 

Policies .01 of MIAX Options Rule 1809, 

the Exchange may also list Short Term 

Option Series and pursuant to 

Interpretations and Policies .02 of MIAX 

Options Rule 1809, the Exchange may 

also list Quarterly Options Series, 

respectively, on the Index. 

Chapter XIII of the Exchange’s rules is 

designed to protect public customer 

trading and shall apply to trading in 

options on the Index. Specifically, 

paragraphs (a) and (b) of MIAX Options 

Rule 1307 prohibit Members from 

accepting a customer order to purchase 

or write an option, including options on 

the Index, unless such customer’s 

account has been approved in writing 

by a designated Options Principal of the 

Member. Additionally, MIAX Options 

Rule 1309 regarding suitability is 

designed to ensure that options, 

including options on the Index, are only 

sold to customers capable of evaluating 

and bearing the risks associated with 

trading in this instrument. Further, 

MIAX Options Rule 1310 permits 

Members to exercise discretionary 

power with respect to trading options, 

including options on the Index, in a 

customer’s account only if the Member 

has received prior written authorization 

from the customer and the account had 

been accepted in writing by a 

designated Options Principal. MIAX 

Options Rule 1310 also requires 

designated Options Principals or 

Representatives of a Member to approve 

and initial each discretionary order, 

including discretionary orders for 

options on the Index, on the day the 

discretionary order is entered. Finally, 

MIAX Options Rule 1308, Supervision 

of Accounts, MIAX Options Rule 1311, 

Confirmation to Customers, and MIAX 

Options Rule 1315, Delivery of Current 

Options Disclosure Documents and 

Prospectus, will also apply to trading in 

options on the Index. 

Surveillance and Capacity 

The Exchange has an adequate 

surveillance program in place for 

options traded on the Index and intends 

to apply those same program procedures 

that it applies to the Exchange’s other 

options products. In addition, several 

new surveillances related to the Index 

will be added to the MIAX surveillance 

program. The Exchange has a Regulatory 

Services Agreement (‘‘RSA’’) in place 

with the Financial Regulatory Authority 

(‘‘FINRA’’) to conduct cross-market 

surveillances on its behalf and has 

expanded the RSA to include a new 

options pattern: Index Expiration for 

Cash Settled, A.M.-Settled, Index 

Options. The purpose of this pattern is 

to determine whether any market 

participants influenced the settlement 

price of an a.m. cash-settled index 

product to benefit their expiring index 

option position. 

In addition to the Index Expiration for 

Cash Settled report mentioned above, 

both MIAX Option Regulation and 

FINRA Options Regulation will 

manually review options activity during 

each monthly settlement process. After 

manually reviewing settlement process 

activity over the course of months, 

MIAX Options and FINRA will 

determine whether additional reports or 

enhancements to the cash settled 

report(s) are required. 

Further, the Exchange’s regulatory 

department conducts routine 

surveillance in dozens of discrete areas. 

Index products and their respective 

symbols are integrated into the 

Exchange’s existing surveillance system 

architecture and are thus subject to the 

relevant surveillance processes. This is 

true for both surveillance system 

processing and manual processes that 

support the Exchange’s surveillance 

program. Additionally, the Exchange is 

also a member of the Intermarket 

Surveillance Group (ISG) under the 

Intermarket Surveillance Group 

Agreement, dated June 20, 1994. The 

members of the ISG include all of the 

U.S. registered stock and options 

markets.61 The members of ISG work 

together to coordinate surveillance and 

investigative information sharing in the 

stock and options markets. 

The Exchange represents that it has 

the necessary System capacity to 

support additional quotations and 

messages that will result from the listing 

and trading of options on the Index. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of the Act,62 in general 

and with Section 6(b)(5) of the Act,63 in 

particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest; and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The proposed change will permit 

options trading in the Index pursuant to 

rules designed to prevent fraudulent 

and manipulative acts and practices and 

promote just and equitable principles of 

trade. In particular, 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 Index will provide an 

opportunity for investors to hedge, or 

speculate on, the market risk associated 

with changes in volatility. 

The Exchange believes that the 

enhanced features to the Index may 

serve to prevent fraudulent and 

manipulative acts and practices. 

Specifically, the Exchange believes that 

its price dragging technique and 

truncation rule, in combination with the 

immense liquidity of the underlying 

options, make the Index less susceptible 

to market manipulation. The price 

dragging technique, which is used to 

determine the ongoing Reference Price 

for each individual option used in the 

calculation of the Index, helps prevent 

market manipulation by utilizing the 

most recent trade price as the Reference 

Price. The Exchange believes that this 

feature may be a more accurate 

methodology than only using the midpoint of the bid and ask, which is the 

methodology utilized by a competing 

volatility index. The Exchange believes 

the price dragging technique may create 

a more accurate and stable index value 

which better represents volatility in the 

market by emphasizing the actual trade 

price versus simply the mid-point 

spread. 

Furthermore, the Exchange believes 

that the enhanced feature may provide 


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greater consistency in the marketplace 

because the price dragging technique 

results in a Reference Price that is 

supported by the fair market value at the 

time versus using the mid-point, which 

is not necessarily an accurate 

representation of the fair market value at 

the time. 

Furthermore, the truncation method, 

another key enhancement in the Index, 

determines how far away from the 

money to exclude strikes from the 

volatility calculation. This helps to 

ensure that values are not being 

included that would skew the resulting 

Index value by taking into account OTM 

options which are too far away to be 

accurately priced into the Index value 

calculation. By excluding these options 

from the calculation, the Exchange 

believes it is able to provide a more 

reliable Index value. The Exchange 

believes that its exclusion methodology 

is a material enhancement over existing 

methodologies, and should result in a 

calculation outcome that better reflects 

the expected measure of volatility. 

As discussed previously, the price 

dragging method reduces the variability 

of the option inputs (which also referred 

to herein as the Reference Prices). Since 

the option inputs have reduced 

variability, and those values are used to 

determine which strikes make it into the 

Index’s calculation, the combination of 

price dragging and exclusion rules work 

together to, in the Exchange’s opinion, 

create a more reliable Index value. The 

Exchange believes that a more reliable 

Index value will benefit investors and 

market participants trading options on 

the Index, will promote just and 

equitable principles of trade, and should 

serve to prevent fraudulent and 

manipulative acts and practices. 

The Exchange believes that, in 

addition to the other unique and 

proprietary attributes associated with 

the Index’s calculation and settlement 

methodology, as well as the Exchange’s 

fully-electronic, transparent, highlydeterministic trading system, using SPY 

options as the components for a 

volatility index, in the manner proposed 

by the Exchange, will offer a number of 

significant, distinct advantages over 

other types of volatility indexes. The 

Exchange believes that the advantages of 

using SPY options have the potential to 

result in an extremely liquid volatility 

product with exceptionally tight 

spreads, and consequently would not be 

readily susceptible to fraudulent and 

manipulative acts. First, SPY options 

are extremely liquid (they regularly 

trade 4–5 million contracts a day, and 

have 20–30 million contracts in open 

interest). Second, SPY options have 

consistently tighter bid-ask spreads than 

SPX options, which are the components 

for Cboe’s VIX index. Since SPY options 

are traded on all 15 option exchanges, 

it allows market participants to take 

advantage of arbitrage opportunities 

across multiple venues. This is in 

contrast to SPX options which only 

trade on Cboe, and thus those arbitrage 

opportunities across venues are not 

possible. Also, at the time of final 

settlement, there are 14 other options 

exchanges on which SPY options are 

traded, and may serve as real-time crossreference prices for SPY options during 

the Exchange’s SPIKES Special 

Settlement Auction. This is in contrast 

to SPX options during Cboe’s VIX 

settlement auction, where there is no 

such reference market for SPX options 

open during the time of the VIX 

settlement, as SPX options are only 

traded on one exchange—Cboe. In terms 

of spreads, SPY spreads are significantly 

tighter and exhibit much higher 

consistency with a much narrower range 

of typical values and far fewer numbers 

of outliers than SPX. SPY spreads are 

consistently tighter than SPX spreads, 

both across strike prices and through 

time, by a factor of 2 to 4 times (this is 

after normalizing SPY spreads to SPX 

spreads, by multiplying SPY spreads by 

10). Accordingly, the Exchange believes 

that these advantages of using SPY 

options in the manner proposed by the 

Exchange, when combined with the 

other features and attributes of the 

SPIKES Index, have the potential to 

result in an extremely liquid volatility 

product with exceptionally tight 

spreads, and consequently would not be 

readily susceptible to fraudulent and 

manipulative acts. 

The Exchange is currently 

disseminating the cash values of the 

Index to OPRA under the ticker symbol 

‘SPIKE’ in at least 15 second intervals. 

The Exchange believes that 

disseminating updates in at least 15 

second intervals will benefit investors 

and other market participants, as they 

will be better able to track the current 

value of the Index at any given period 

of time, will promote just and equitable 

principles of trade, and should prevent 

fraudulent and manipulative acts and 

practices. 

The Exchange believes that using its 

fully-electronic and fully-transparent 

Opening Process functionality, which is 

accessible to all Members of the 

Exchange for participation, in highly 

liquid SPY options (which are 

simultaneously opening and available 

for trading on 14 other exchanges, thus 

providing real-time cross-reference 

prices for the SPY options included in 

the settlement) to conduct the SPIKES 

Special Settlement Auction to settle 

expiring SPIKES options, will offer 

significant advantages over other types 

of volatility auction processes, resulting 

in a robust opening process that 

presents arbitrage opportunities across 

multiple venues to drive prices into line 

and reach equilibrium, and thus 

benefiting investors and other market 

participants, promoting just and 

equitable principles of trade, and should 

prevent fraudulent and manipulative 

acts and practices. 

The Exchange believes that having a 

SPIKES strategy order modification and 

cancellation cut-off time during the 

SPIKES Special Settlement Auction in 

SPY option series on expiration/final 

settlement date will help to ensure that 

the order book reflects bona-fide interest 

for execution, and is a feature designed 

to prevent manipulation of the final 

settlement price. 

Volatility-focused products have 

become more prominent over the past 

several years, and in a number of 

different formats and types, including 

ETFs, exchange-traded notes, exchangetraded options, and exchange-traded 

futures. Such products offer investors 

the opportunity to manage their 

volatility risks associated with an 

underlying asset class. Currently, most 

of the products focus on underlying 

equity indexes or equity-based 

portfolios. 

The Exchange proposes to introduce a 

cash-settled options contract on a new 

volatility index, which focuses on 

equity exposure using options on SPY. 

SPY is the largest and most liquid ETF 

in the United Sates, and the most 

actively traded equity option product. 

The Exchange believes that because the 

Index is derived from published SPY 

options prices, and given the immense 

liquidity found in the individual 

portfolio components of SPY, the 

concern that the Index will be subject to 

market manipulation is greatly reduced. 

Therefore, the Exchange believes that 

the proposed rule change to list options 

on the Index is appropriate. 

The Exchange further notes that 

Exchange Rules that apply to the trading 

of other index options currently traded 

on the Exchange would also apply to the 

trading of options on the Index. 

Additionally, the trading of options on 

the Index would be subject to, among 

others, Exchange Rules governing 

margin requirements and trading halt 

procedures. 

Finally, the Exchange represents that 

it has an adequate surveillance program 

in place to detect manipulative trading 

in options on the Index. The Exchange 

also represents that it has the necessary 

systems capacity to support the new 

options series. Additionally, as stated in 


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64See, e.g., Hans R. Dutt & Lawrence E. Harris, 

Position Limits for Cash-Settled Derivative 

Contracts, 25 J. Futures Mkts. 945 (2005) (arguing 

that limits on the positions that traders can carry 

into final settlement can be used to mitigate the 

susceptibility to manipulation of cash-settled 

derivative contracts). 65 17 CFR 200.30–3(a)(12). 

the filing, the Exchange has rules in 

place designed to protect public 

customer trading. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. . The 

Exchange notes that the proposed rule 

change will facilitate the listing and 

trading of a novel index option product 

that will enhance competition among 

market participants, to the benefit of 

investors and the marketplace. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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. 

Among other things, the Exchange 

believes that the use of SPY options in 

the manner proposed by the Exchange, 

when combined with the other features 

and attributes of the SPIKES Index, has 

the potential to result in an extremely 

liquid volatility product with 

exceptionally tight spreads, and 

consequently would not be readily 

susceptible to fraudulent and 

manipulative acts. In particular, the 

Commission seeks comment on the 

following: 

• Do commenters agree with this 

overall assertion by the Exchange? 

• Do commenters believe any 

proposed features (e.g., inclusion of 

relatively illiquid OTM (Out-of-theMoney) put SPY options in SPIKES 

settlement, SPIKES settlement via a 

short pre-open auction of SPY options, 

cash-settlement) of the SPIKES 

settlement could make options on 

SPIKES susceptible to manipulation? 

Why or why not? 

• Do commenters believe the 

definition of ‘‘SPIKES strategy orders’’ is 

sufficiently clear? Why or why not? 

• Do commenters believe the 

proposed SPIKES strategy order cut-off 

time is adequate to provide sufficient 

time to work off order imbalances 

during the SPIKES Special Settlement 

Auction in SPY option series on final 

settlement dates? Why or why not? 

• Do commenters believe precluding 

the submission, modification, or 

cancellation of SPIKES strategy orders 

after the proposed cut-off time will be 

effective in reducing the likelihood of 

manipulation in the calculation of the 

final settlement value for the SPIKES 

Index? Why or why not? 

• Do commenters believe the 

proposed exclusion rule/truncation 

method, which is designed to remove 

SPY option price inputs deemed less 

reliable in order to avoid a potential 

negative impact on the SPIKES 

calculation outcome, will be effective in 

reducing the likelihood of manipulation 

in the calculation of the final settlement 

value for the SPIKES Index? Why or 

why not? 

• The Exchange discusses the price 

dragging technique used for intraday 

calculation of the SPIKES Index value to 

determine the Reference Price for each 

of the individual SPY options used in 

the calculation of the Index value. Do 

commenters believe that the price 

dragging technique would improve 

Index stability by smoothing out options 

price inputs into the Index calculation, 

especially as SPY options quotes are 

rapidly changing? Do commenters agree 

that the price dragging technique will 

result in a smoother Index price? What 

are commenters’ views on any potential 

effect of the price dragging technique, in 

which the primary factor considered 

when updating the Reference Price for 

each of the individual SPY options is 

whether or not a trade has occurred, on 

the price efficiency of the SPIKES Index, 

including whether the price dragging 

technique may result in stale prices? 

• Do commenters believe that the lack 

of proposed position limits on cashsettled SPIKES Index options could 

make the options more susceptible to 

manipulation? 64 Why or why not? 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

MIAX–2018–14 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MIAX–2018–14. 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 (http://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 such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–MIAX–2018–14, and 

should be submitted on or before 

August 6, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.65

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15178 Filed 7–13–18; 8:45 am] 

BILLING CODE 8011–01–P 


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