38942 Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices 

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

2 17 CFR 240.19b–4. 

3See Nasdaq ISE, LLC (‘‘ISE’’) Rules, Chapter 20, 

Index Rules; NASDAQ PHLX LLC (‘‘Phlx’’) Rules 

1000A–1108A; and Chicago Board Options 

Exchange, Inc. (‘‘CBOE’’) Rules, Chapter XXIV, 

Index Options. 

4The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

submission. Your request should state 

that the NRC does not routinely edit 

comment submissions to remove such 

information before making the comment 

submissions available to the public or 

entering the comment submissions into 

ADAMS. 

Background 

Under the provisions of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. Chapter 35), the NRC recently 

submitted a request for renewal of an 

existing collection of information to 

OMB for review entitled, ‘‘NRC Form 

241, Report of Proposed Activities in 

Non-Agreement States, Areas of 

Exclusive Federal Jurisdiction, or 

Offshore Waters.’’ The NRC hereby 

informs potential respondents that an 

agency may not conduct or sponsor, and 

that a person is not required to respond 

to, a collection of information unless it 

displays a currently valid OMB control 

number. 

The NRC published a Federal 

Register notice with a 60-day comment 

period on this information collection on 

March 24, 2017, 82 FR 15071. 

1. The title of the information 

collection: NRC Form 241, ‘‘Report of 

Proposed Activities in Non-Agreement 

States, Areas of Exclusive Federal 

Jurisdiction, or Offshore Waters.’’ 

2. OMB approval number: 3150–0013. 

3. Type of submission: Extension. 

4. The form number if applicable: 

NRC Form 241. 

5. How often the collection is required 

or requested: NRC Form 241 must be 

submitted each time an Agreement State 

licensee wants to engage in or revise its 

activities involving the use of 

radioactive byproduct material in a nonAgreement State, areas of exclusive 

Federal jurisdiction, or offshore waters. 

The NRC may waive the requirements 

for filing additional copies of NRC Form 

241 during the remainder of the 

calendar year following receipt of the 

initial form. 

6. Who will be required or asked to 

respond: Any licensee who holds a 

specific license from an Agreement 

State and wants to conduct the same 

activity in non-Agreement States, areas 

of exclusive Federal Jurisdiction, or 

offshore waters under the general 

license in section 150.20 of title 10 of 

the Code of Federal Regulations (10 

CFR). 

7. The estimated number of annual 

responses: 1,720 responses. 

8. The estimated number of annual 

respondents: 200 respondents. 

9. An estimate of the total number of 

hours needed annually to comply with 

the information collection requirement 

or request: 480 hours (100 hours for 

initial submissions + 380 hours for 

changes + 0 hours for clarifications). 

10. Abstract: Any Agreement State 

licensee who engages in the use of 

radioactive material in non-Agreement 

States, areas of exclusive Federal 

jurisdiction, or offshore waters, under 

the general license in 10 CFR 150.20, is 

required to file, with the NRC Regional 

Administrator for the Region in which 

the Agreement State that issues the 

license is located, a copy of NRC Form 

241, ‘‘Report of Proposed Activities in 

Non-Agreement States, Areas of 

Exclusive Federal Jurisdiction, or 

Offshore Waters,’’ a copy of its 

Agreement State specific license, and 

the appropriate fee as prescribed in 10 

CFR 170.31 at least 3 days before 

engaging in such activity. This 

mandatory notification permits the NRC 

to schedule inspections of the activities 

to determine whether the activities are 

being conducted in accordance with 

requirements for protection of the 

public health and safety. 

Dated at Rockville, Maryland, this 1th day 

of August, 2017. 

For the Nuclear Regulatory Commission. 

David Cullison, 

NRC Clearance Officer, Office of the Chief 

Information Officer. 

[FR Doc. 2017–17309 Filed 8–15–17; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81371; File No. SR–MIAX– 

2017–39] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC; Notice of Filing of a Proposed 

Rule Change To Adopt Rules Relating 

to Trading in Index Options 

August 10, 2017. 

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 August 9, 2017, 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, II, and III 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 is filing a proposal to 

adopt rules relating to trading in index 

options. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to adopt 

rules to allow the Exchange to list and 

trade options on indices. The proposed 

rules include listing and maintenance 

criteria for options on underlying 

indices, rules on dissemination of index 

values, position and exercise limits for 

index options, exemptions from the 

limits, and terms of index options 

contracts. All of the proposed rules and 

changes to existing Exchange Rules are 

based on the existing rules of other 

options exchanges.3 The proposed rule 

change is intended to expand the 

Exchange’s capability to introduce and 

trade both existing and new and 

innovative index products on the MIAX 

Options System.4

Because the rules related to trading 

options on indices are product specific 

in many areas, the Exchange will need 

to file additional proposed rule changes 

with the Commission when the 

Exchange identifies specific products. 

For purposes of this proposed rule 


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5 15 U.S.C. 78s. 

6 17 CFR 240.19b–4. 

7The proposed Rule is based on ISE Rule 2001. 

8The last day of trading for A.M.-settled index 

options shall be the business day preceding the 

business day of expiration, or, in the case of an 

option contract expiring on a day that is not a 

business day, the business day preceding the last 

day of trading in the underlying securities prior to 

the expiration date. The current index value at the 

expiration of an A.M.-settled index option shall be 

determined, for all purposes under these Rules and 

the Rules of the Clearing Corporation, on the last 

day of trading in the underlying securities prior to 

expiration, by reference to the reported level of 

such index as derived from first reported sale 

(opening) prices of the underlying securities on 

such day, except that: (i) In the event that the 

primary market for an underlying security does not 

open for trading on that day, the price of that 

security shall be determined, for the purposes of 

calculating the current index value at expiration, as 

set forth in Rule 1808(g), unless the current index 

value at expiration is fixed in accordance with the 

Rules and By-Laws of the Clearing Corporation; and 

(ii) in the event that the primary market for an 

underlying security is open for trading on that day, 

but that particular security does not open for 

trading on that day, the price of that security, for 

the purposes of calculating the current index value 

at expiration, shall be the last reported sale price 

of the security. See proposed Rule 1809(a)(5). 

change, certain rules indicate that they 

apply to ‘‘Specified’’ indices. Proposed 

MIAX Options Rules 1800, 1801(n), 

1804(a), 1807(a), 1809, and 1811 all 

contain provisions that are dependent 

upon the Exchange identifying specific 

index products in the rule. Accordingly, 

MIAX Options Rule 1800 states that 

where the rules in Chapter XVIII 

indicate that particular indices or 

requirements with respect to particular 

indices will be ‘‘Specified,’’ MIAX 

Options will file a proposed rule change 

with the Commission pursuant to 

Section 19 of the Act 5 and Rule 19b–4 6

thereunder to specify such indices or 

requirements. MIAX Options proposes 

to add new Chapter XVIII to the 

Exchange rules, together with 

conforming changes to certain existing 

MIAX Options rules. 

Proposed Index Rules 

The Exchange is proposing to adopt 

new Chapter XVIII, Index Options, in 

the MIAX Options Rules. Proposed Rule 

1800, Application of Index Rules, states 

that the Rules in proposed Chapter 

XVIII are applicable only to index 

options (options on indices of securities 

as defined below). The Rules in current 

Chapters I through XVII are also 

applicable to the options provided for in 

proposed Chapter XVIII, unless such 

current Rules are specifically replaced 

or are supplemented by Rules in 

Chapter XVIII. Where the Rules in 

Chapter XVIII indicate that particular 

indices or requirements with respect to 

particular indices will be ‘‘Specified,’’ 

the Exchange shall file a proposed rule 

change with the Commission to specify 

such indices or requirements. 

Definitions 

Proposed MIAX Options Rule 1801, 

Definitions, contains the necessary 

definitions for index options trading.7

Specifically, the following definitions 

will apply to index options on MIAX 

Options: 

(a) The term ‘‘aggregate exercise 

price’’ means the exercise price of the 

options contract times the index 

multiplier. 

(b) The term ‘‘American-style index 

option’’ means an option on an industry 

or market index that can be exercised on 

any business day prior to expiration, 

including the business day of expiration 

in the case of an option contract 

expiring on a business day. 

(c) The term ‘‘A.M.-settled index 

option’’ means an index options 

contract for which the current index 

value at expiration shall be determined 

as provided in Rule 1809(a)(5).8

(d) The term ‘‘call’’ means an options 

contract under which the holder of the 

option has the right, in accordance with 

the terms of the option, to purchase 

from the Clearing Corporation the 

current index value times the index 

multiplier. 

(e) The term ‘‘current index value’’ 

with respect to a particular index 

options contract means the level of the 

underlying index reported by the 

reporting authority for the index, or any 

multiple or fraction of such reported 

level specified by the Exchange. The 

current index value with respect to a 

reduced-value long term options 

contract is one-tenth of the current 

index value of the related index option. 

The ‘‘closing index value’’ shall be the 

last index value reported on a business 

day. 

(f) The term ‘‘exercise price’’ means 

the specified price per unit at which the 

current index value may be purchased 

or sold upon the exercise of the option. 

(g) The term ‘‘European-style index 

option’’ means an option on an industry 

or market index that can be exercised 

only on the business day of expiration, 

or, in the case of an option contract 

expiring on a day that is not a business 

day, the last business day prior to the 

day it expires. 

(h) The term ‘‘Foreign Currency 

Index’’ means an index designed to 

track the performance of a basket of 

currencies, as provided in the table in 

MIAX Rule 1805A. 

(i) The term ‘‘index multiplier’’ means 

the amount specified in the contract by 

which the current index value is to be 

multiplied to arrive at the value 

required to be delivered to the holder of 

a call or by the holder of a put upon 

valid exercise of the contract. 

(j) The terms ‘‘industry index’’ and 

‘‘narrow-based index’’ mean an index 

designed to be representative of a 

particular industry or a group of related 

industries or an index whose 

constituents are all headquartered 

within a single country. 

(k) The term ‘‘market index’’ and 

‘‘broad-based index’’ mean an index 

designed to be representative of a stock 

market as a whole or of a range of 

companies in unrelated industries. 

(l) The term ‘‘put’’ means an options 

contract under which the holder of the 

option has the right, in accordance with 

the terms and provisions of the option, 

to sell to the Clearing Corporation the 

current index value times the index 

multiplier. 

(m) The term ‘‘Quarterly Options 

Series’’ means, for the purposes of 

Chapter XVIII, a series in an index 

options class that is approved for listing 

and trading on the Exchange in which 

the series is opened for trading on any 

business day and that expires at the 

close of business on the last business 

day of a calendar quarter. 

(n) The term ‘‘reporting authority’’ 

with respect to a particular index means 

the institution or reporting service 

designated by the Exchange as the 

official source for (1) calculating the 

level of the index from the reported 

prices of the underlying securities that 

are the basis of the index and (2) 

reporting such level. The reporting 

authority for each index approved for 

options trading on the Exchange shall be 

Specified (as provided in Rule 1800) in 

a table in Interpretations and Policies 

.01 to this Rule 1801. 

(o) The term ‘‘Short Term Option 

Series’’ means, for the purposes of 

Chapter XVIII, a series in an index 

option class that is approved for listing 

and trading on the Exchange in which 

the series is opened for trading on any 

Thursday or Friday that is a business 

day and that expires on the Friday of the 

following business week that is a 

business day. If a Friday is not a 

business day, the series may be opened 

(or shall expire) on the first business 

day immediately prior to that Friday. 

(p) The term ‘‘underlying security’’ or 

‘‘underlying securities’’ with respect to 

an index options contract means any of 

the securities that are the basis for the 

calculation of the index. 

Listing Standards 

Proposed Rule 1802, Designation of 

an Index, contains the general listing 

standards for index options. Proposed 

Rule 1802(a) provides that the 


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38944 Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices 

9Exchange Rule 402, Criteria for Underlying 

Securities, sets forth the criteria that must be met 

by underlying equity securities with respect to 

which put or call option contracts are approved for 

listing and trading on the Exchange. 

10 17 CFR 242.19b–4(e). 

11 17 CFR 242.11Aa3–1. 

12See, e.g., Nasdaq ISE, LLC (‘‘ISE’’) Rule 2002(b); 

NASDAQ PHLX LLC (‘‘Phlx’’) Rule 1009A(b); and 

Chicago Board Options Exchange, Inc. (‘‘CBOE’’) 

Rule 24.2(b). 

13 15 U.S.C. 78s(b)(2). 

14See, e.g., ISE Rule 2002(c); Phlx Rule 1009A(c); 

and CBOE Rule 24.2(c). 

15The term ‘‘market index’’ and ‘‘broad-based 

index’’ mean an index designed to be representative 

of a stock market as a whole or of a range of 

companies in unrelated industries. See proposed 

Rule 1801(k). 

component securities of an index 

underlying an index option contract 

need not meet the requirements of Rule 

402.9 Except as set forth in 

subparagraph (b) and (d) (as described 

below), the listing of a class of index 

options requires the filing of a proposed 

rule change to be approved by the 

Commission. 

Proposed Rule 1802(b) describes the 

initial listing standards for a narrowbased index to be traded on the 

Exchange. The term ‘‘narrow based 

index’’ means an index designed to be 

representative of a particular industry or 

a group of related industries or an index 

whose constituents are all 

headquartered within a single country. 

Pursuant to proposed Rule 1802(b), the 

Exchange may trade options on a 

narrow-based index pursuant to Rule 

19b–4(e) of the Act,10 if each of the 

following conditions is satisfied: 

(1) The options are designated as 

A.M.-settled index options; 

(2) The index is capitalizationweighted, price-weighted, equal dollarweighted, or modified capitalizationweighted, and consists of 10 or more 

component securities; 

(3) Each component security has a 

market capitalization of at least $75 

million, except that for each of the 

lowest weighted component securities 

in the index that in the aggregate 

account for no more than 10 percent of 

the weight of the index, the market 

capitalization is at least $50 million; 

(4) Trading volume of each 

component security has been at least 

one million shares for each of the last 

six months, except that for each of the 

lowest weighted component securities 

in the index that in the aggregate 

account for no more than 10 percent of 

the weight of the index, trading volume 

has been at least 500,000 shares for each 

of the last six months; 

(5) In a capitalization-weighted index 

or a modified capitalization-weighted 

index, the lesser of the five highest 

weighted component securities in the 

index or the highest weighted 

component securities in the index that 

in the aggregate represent at least 30 

percent of the total number of 

component securities in the index each 

have had an average monthly trading 

volume of at least 2,000,000 shares over 

the past six months; 

(6) No single component security 

represents more than 30 percent of the 

weight of the index, and the five highest 

weighted component securities in the 

index do not in the aggregate account 

for more than 50 percent (65 percent for 

an index consisting of fewer than 25 

component securities) of the weight of 

the index; 

(7) Component securities that account 

for at least 90 percent of the weight of 

the index and at least 80 percent of the 

total number of component securities in 

the index satisfy the requirements of 

Rule 402 applicable to individual 

underlying securities; 

(8) Each component security must be 

an ‘‘NMS stock’’ as defined in Rule 600 

of Regulation NMS under the Act; 11

(9) Non-U.S. component securities 

(stocks or ADRs) that are not subject to 

comprehensive surveillance agreements 

do not in the aggregate represent more 

than 20 percent of the weight of the 

index; 

(10) The current index value is widely 

disseminated at least once every 15 

seconds by OPRA, CTA/CQ, NIDS or 

one or more major market data vendors 

during the time the index options are 

traded on the Exchange; 

(11) An equal dollar-weighted index 

will be rebalanced at least once every 

calendar quarter; and 

(12) If an underlying index is 

maintained by a broker-dealer, the index 

is calculated by a third party who is not 

a broker-dealer, and the broker-dealer 

has erected an information barrier 

around its personnel who have access to 

information concerning changes in and 

adjustments to the index. 

The above initial listing standards are 

the same as the initial listing standards 

currently in place on other exchanges.12

In addition to the initial listing 

standards, certain maintenance listing 

standards, listed below, apply to each 

class of index options originally listed 

pursuant to proposed Rule 1802(b). 

Specifically, proposed Rule 1802(c) 

provides that the requirements stated in 

proposed Rules 1802(b)(1), (3), (6), (7), 

(8), (9), (10), (11) and (12) (set forth 

above) must continue to be satisfied, 

provided that the requirements stated in 

proposed Rule 1802(b)(6) below 

(relating to broad-based indices) must be 

satisfied only as of the first day of 

January and July in each year. 

In addition to maintaining the initial 

criteria in the proposed sub-paragraphs 

listed above, proposed Rule 1802(c) 

states that, in order for an index to 

remain listed on the Exchange: 

(1) The total number of component 

securities in the index may not increase 

or decrease by more than 331⁄3 percent 

from the number of component 

securities in the index at the time of its 

initial listing, and in no event may be 

less than nine component securities; 

(2) Trading volume of each 

component security in the index must 

be at least 500,000 shares for each of the 

last six months, except that for each of 

the lowest weighted component 

securities in the index that in the 

aggregate account for no more than 10 

percent of the weight of the index, 

trading volume must be at least 400,000 

shares for each of the last six months; 

and 

(3) In a capitalization-weighted index 

or a modified capitalization-weighted 

index, the lesser of the five highest 

weighted component securities in the 

index or the highest weighted 

component securities in the index that 

in the aggregate represent at least 30 

percent of the total number of stocks in 

the index each have had an average 

monthly trading volume of at least 

1,000,000 shares over the past six 

months. In the event a class of index 

options listed on the Exchange fails to 

satisfy the maintenance listing 

standards set forth herein, the Exchange 

shall not open for trading any additional 

series of options of that class unless 

such failure is determined by the 

Exchange not to be significant and the 

SEC concurs in that determination, or 

unless the continued listing of that class 

of index options has been approved by 

the SEC under Section 19(b)(2) of the 

Act.13

These maintenance listing standards 

are the same as the maintenance 

standards currently in place on other 

exchanges.14

Proposed Rule 1802(d) states that the 

Exchange may trade options on a broadbased index 15 if each of the following 

conditions is satisfied: 

(1) The index is broad-based, as 

defined in Rule 1801(k); 

(2) Options on the index are 

designated as A.M.-settled; 

(3) The index is capitalizationweighted, modified capitalizationweighted, price-weighted, or equal 

dollar-weighted; 

(4) The index consists of 50 or more 

component securities; 

(5) Component securities that account 

for at least ninety-five percent (95%) of 

the weight of the index have a market 


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16 17 CFR 242.600. 

17See, e.g., ISE Rule 2002(d); Phlx Rule 1009A(d); 

and CBOE Rule 24.2(f). 

18 15 U.S.C. 78s(b)(2). 

19See, e.g., ISE Rule 2002(e); Phlx Rule 1009A(e); 

and CBOE Rule 24.2(g). 

20This proposed Rule is substantially similar to 

ISE Rule 2003 and CBOE Rule 24.3. 

21These proposed Rules are based on ISE Rule 

2006. 

22Where the Rules in proposed Chapter XVIII 

indicate that particular indices or requirements 

with respect to particular indices will be 

Continued 

capitalization of at least $75 million, 

except that component securities that 

account for at least sixty-five percent 

(65%) of the weight of the index have 

a market capitalization of at least $100 

million; 

(6) Component securities that account 

for at least eighty percent (80%) of the 

weight of the index satisfy the 

requirements of Rule 402 applicable to 

individual underlying securities; 

(7) Each component security that 

accounts for at least one percent (1%) of 

the weight of the index has an average 

daily trading volume of at least 90,000 

shares during the last six month period; 

(8) No single component security 

accounts for more than ten percent 

(10%) of the weight of the index, and 

the five highest weighted component 

securities in the index do not, in the 

aggregate, account for more than thirtythree percent (33%) of the weight of the 

index; 

(9) Each component security must be 

an ‘‘NMS stock’’ as defined in Rule 600 

of Regulation NMS under the Act; 16

(10) Non-U.S. component securities 

(stocks or ADRs) that are not subject to 

comprehensive surveillance agreements 

do not, in the aggregate, represent more 

than twenty percent (20%) of the weight 

of the index; 

(11) The current index value is widely 

disseminated at least once every fifteen 

(15) seconds by the Options Price 

Reporting Authority (‘‘OPRA’’), the 

Consolidated Tape Association 

(‘‘CTA’’), the Nasdaq Index 

Dissemination Service (‘‘NIDS’’), or one 

or more major market data vendors 

during the time options on the index are 

traded on the Exchange; 

(12) The Exchange reasonably 

believes it has adequate system capacity 

to support the trading of options on the 

index, based on a calculation of the 

Exchange’s current ISCA allocation and 

the number of new messages per second 

expected to be generated by options on 

such index; 

(13) An equal dollar-weighted index 

is rebalanced at least once every 

calendar quarter; 

(14) If an index is maintained by a 

broker-dealer, the index is calculated by 

a third-party who is not a broker-dealer, 

and the broker-dealer has erected an 

informational barrier around its 

personnel who have access to 

information concerning changes in, and 

adjustments to, the index; 

(15) The Exchange has written 

surveillance procedures in place with 

respect to surveillance of trading of 

options on the index. 

These initial listing standards are the 

same as the initial listing standards for 

broad-based indices currently in place 

on other exchanges.17

Proposed Rule 1802(e) sets forth the 

maintenance listing standards for broadbased indices. Specifically, the 

following maintenance listing standards 

shall apply to each class of index 

options originally listed pursuant to 

proposed Rule 1802(d). 

First, the requirements set forth in the 

proposed initial listing standards set 

forth in proposed Rules 1802(d)(1)– 

(d)(3), and proposed Rules 1802(d)(9)– 

(d)(15) must continue to be satisfied. 

The requirements set forth in proposed 

Rules 1802(d)(5)–(d)(8) must be satisfied 

only as of the first day of January and 

July in each year. 

Additionally, for broad-based indices, 

the total number of component 

securities in the index may not increase 

or decrease by more than ten percent 

(10%) from the number of component 

securities in the index at the time of its 

initial listing. 

Finally, proposed Rule 1802(e) states 

that, in the event a class of index 

options listed on the Exchange fails to 

satisfy the maintenance listing 

standards set forth in the proposed Rule, 

the Exchange shall not open for trading 

any additional series of options of that 

class unless the continued listing of that 

class of index options has been 

approved by the Commission under 

Section 19(b)(2) of the Act.18

These maintenance listing standards 

are the same as the maintenance 

standards for broad-based indices that 

are currently in place on other 

exchanges.19

The Exchange believes that the 

requirements in the proposed listing 

standards regarding, among other 

things, the minimum market 

capitalization, trading volume, and 

relative weightings of an underlying 

index’s component stocks are designed 

to ensure that the markets for the 

index’s component stocks are 

adequately capitalized and sufficiently 

liquid, and that no one stock dominates 

the index. The Exchange believes that 

these requirements minimize the 

potential for manipulating the 

underlying index. 

The Exchange further believes that the 

requirement in proposed Rule 

1802(b)(10) (with respect to narrowbased index options) that the current 

underlying index value will be reported 

at least once every 15 seconds during 

the time the index options are traded on 

the Exchange, and the requirement in 

proposed Rule 1802(d)(11) (with respect 

to broad-based index options) that the 

current index value be widely 

disseminated at least once every 15 

seconds by the OPRA, CTA/CQ, NIDS or 

by one or more major market data 

vendors during the time an index option 

trades on MIAX Options should provide 

transparency with respect to current 

index values and contribute to the 

transparency of the market for index 

options. In addition, the Exchange 

believes that the requirement in 

proposed Rule 1802(d)(2) that an index 

option be A.M.-settled, rather than on 

closing prices, should help to reduce the 

potential impact of expiring index 

options on the market for the index’s 

component securities. 

Proposed Rule 1803, Dissemination of 

Information, requires the dissemination 

of index values as a condition to the 

trading of options on an index. The 

proposed Rule includes the requirement 

that the Exchange disseminate, or assure 

that the current index value is 

disseminated, after the close of business 

and from time-to-time on days on which 

transactions in index options are made 

on the Exchange. The proposed Rule 

also requires the Exchange to maintain, 

in files available to the public, 

information identifying the components 

whose prices are the basis for 

calculation of the index and the method 

used to determine the current index 

value.20

The Exchange is proposing to adopt 

Rules 1804 through 1807 relating to 

position limits, exemptions from 

position limits, and exercise limits in 

index options. These proposed rules 

contain the standard position limit and 

exercise limits for Broad-Based, 

Industry (narrow-based) and Foreign 

Currency index options, as well as 

exemption standards and the 

procedures for requesting exemptions 

from those proposed rules.21

Proposed Rule 1804, Position Limits 

for Broad-Based Index Options, states 

that Exchange Rule 307 generally shall 

govern position limits for broad-based 

index options, as modified by proposed 

Rule 1804. Specifically, the proposed 

rule states that there may be no position 

limit for certain Specified (as provided 

in Rule 1800) 22 broad-based index 


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‘‘Specified,’’ the Exchange shall file a proposed rule 

change with the Commission to specify such 

indices or requirements. See proposed Rule 1800. 

23See proposed Rule 1809(b)(2). 

24This is substantially similar to ISE Rule 2004 

and CBOE Rule 24.4. 

25For purposes of this proposed rule change and 

these proposed rules, the term ‘‘industry index’’ has 

the same meaning as the term ‘‘narrow-based 

index.’’ 26For example, if the conditions specified in 

proposed Rule 1805(a)(ii) are determined to exist 

which would allow a position limit of 24,000 

contracts and the current position limit for the 

option, based upon the previous review, has been 

established as 18,000 contracts, the Exchange may 

effect a position limit increase to 24,000 contracts 

immediately. 

27The proposed Rule is virtually identical to 

CBOE Rule 24.4A. 

28See proposed Rules 1804(b)–(d). 

options contracts. Except as otherwise 

indicated below, the position limit for a 

broad-based index option shall be 

25,000 contracts on the same side of the 

market. Reduced-value options 23 on 

broad-based security indexes for which 

full-value options have no position and 

exercise limits will similarly have no 

position and exercise limits. All other 

broad-based index options contracts 

shall be subject to a contract limitation 

fixed by the Exchange, which shall not 

be larger than the limits provided in the 

chart below. 

Broad-based 

underlying index 

Standard limit (on the 

same side of the market) Restrictions 

To be Specified .................................................. To be Specified ................................................ To be Specified 

Proposed Rules 1804 (b) through (d) 

describe situations in which index 

option contracts will, or will not, be 

aggregated for purposes of establishing 

the number of contracts in a position. 

Specifically, proposed Rule 1804(b) 

states that that index options contracts 

shall not be aggregated with options 

contracts on any stocks whose prices are 

the basis for calculation of the index. 

Proposed Rule 1804(c) states that 

positions in reduced-value index 

options shall be aggregated with 

positions in full-value indices. For such 

purposes, ten reduced-value contracts 

shall equal one contract. Finally, 

proposed Rule 1804(d) states that 

positions in Short Term Option Series 

and Quarterly Options Series shall be 

aggregated with positions in options 

contracts on the same index.24

Proposed Rule 1805, Position Limits 

for Industry Index Options, states that 

Rule 307 generally shall govern position 

limits for industry index 25 options, as 

modified by proposed Rule 1805. 

Proposed Rule 1805(a) sets forth 

position limits position limits for 

industry index options. These position 

limits, once established by the 

Exchange, must be reviewed and 

determined on a semi-annual basis, as 

described below. 

The specific position limits applicable 

to an industry index are: 

(i) 18,000 contracts if the Exchange 

determines, at the time of a review 

conducted as described below, that any 

single underlying stock accounted, on 

average, for thirty percent (30%) or 

more of the index value during the 

thirty (30)-day period immediately 

preceding the review; or 

(ii) 24,000 contracts if the Exchange 

determines, at the time of a review 

conducted as set forth below, that any 

single underlying stock accounted, on 

average, for twenty percent (20%) or 

more of the index value or that any five 

(5) underlying stocks together 

accounted, on average, for more than 

fifty percent (50%) of the index value, 

but that no single stock in the group 

accounted, on average, for thirty percent 

(30%) or more of the index value, 

during the thirty (30)-day period 

immediately preceding the review; or 

(iii) 31,500 contracts if the Exchange 

determines that the conditions specified 

above which would require the 

establishment of a lower limit have not 

occurred. 

Proposed Rule 1805(a)(2) requires the 

Exchange shall make the determinations 

of these specific position limits 

described above with respect to options 

on each industry index, first at the 

commencement of trading of such 

options on the Exchange and thereafter 

review the determination semi-annually 

on January 1 and July 1. 

Proposed Rule 1805(a)(3) describes 

the procedures to be taken by the 

Exchange at the time of each semiannual review. Specifically, if the 

Exchange determines, at the time of the 

semi-annual review, that the position 

limit in effect with respect to options on 

a particular industry index is lower than 

the maximum position limit permitted 

by the criteria set forth in Rule 

1805(a)(1), the Exchange may effect an 

appropriate position limit increase 

immediately.26

Conversely, if the Exchange 

determines, at the time of a semi-annual 

review, that the position limit in effect 

with respect to options on a particular 

industry index exceeds the maximum 

position limit permitted by the criteria 

set forth in proposed Rule 1805(a)(1), 

the Exchange shall reduce the position 

limit applicable to such options to a 

level consistent with such criteria. Such 

a reduction would not become effective 

until after the expiration date of the 

most distantly expiring options series 

relating to the industry index that is 

open for trading on the date of the 

review, and such a reduction shall not 

become effective if the Exchange 

determines, at the next semi-annual 

review, that the existing position limit 

applicable to such options is consistent 

with the criteria set forth in proposed 

Rule 1805(a)(1).27 The purpose of this 

provision is to protect investors with 

open positions as of the date of the 

review from inadvertently violating the 

new, reduced position limit. 

Additionally, an Exchange 

determination (prior to the effectiveness 

of the new, lower position limit due to 

remaining unexpired series) that the 

criteria permitting the higher position 

limit again exist obviates the need for 

the lower position limit and the lower 

position limit will not take effect. 

Proposed Rules 1805(b)–(d) describe 

situations in which industry index 

option contracts will, or will not, be 

aggregated for purposes of establishing 

the number of contracts in a position. 

Just as with broad-based index 

options,28 proposed Rules 1805(b)–(d) 

state that index options contracts shall 

not be aggregated with options contracts 

on any stocks whose prices are the basis 

for calculation of the index. Positions in 

reduced-value index options shall be 

aggregated with positions in full-value 

index options. For such purposes, ten 

(10) reduced-value options shall equal 

one (1) full-value contract. Positions in 

Short Term Option Series and Quarterly 

Options Series shall be aggregated with 

positions in options contracts on the 

same index. 

Proposed Rule 1805A, Position Limits 

for Foreign Currency Index Options, 

includes a table to be completed by the 

Exchange upon the Exchange’s 

determination to list and trade options 

overlying a Foreign Currency Index 

(subject to the Commission’s approval of 

a proposed rule change). Under the 

proposed rule, option contracts on a 


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29See, e.g., Exchange Rule 308. 

30The purpose of the ISG is to provide a 

framework for the sharing of information and the 

coordination of regulatory efforts among exchanges 

trading securities and related products to address 

potential intermarket manipulations and trading 

abuses. The ISG plays a crucial role in information 

sharing among markets that trade securities, options 

on securities, security futures products, and futures 

and options on broad-based security indexes. A list 

identifying the current ISG members is available at 

https://www.isgportal.org/home.html. 

Foreign Currency Index shall be subject to the position limits described in the 

table below. 

Foreign currency 

index 

Standard limit (on the 

same side of the market) Restrictions 

To be Specified .................................................. To be Specified ................................................ To be Specified 

Proposed Rule 1806, Exemptions from 

Position Limits, describes the broadbased index hedge exemption, the 

industry index hedge exemption, the 

application on the Exchange of 

exemptions granted by other options 

exchanges, and the delta-based index 

hedge exemption. 

Proposed Rule 1806(a) describes the 

broad-based index hedge exemption. 

The broad-based index hedge exemption 

is in addition to the other exemptions 

available under Exchange Rules, 

Interpretations and Policies.29 The 

proposed rule sets forth the procedures 

and criteria which must be satisfied to 

qualify for a broad-based index hedge 

exemption. 

First, proposed Rule 1806(a)(1) states 

that the account in which the exempt 

options positions are held (‘‘hedge 

exemption account’’) must have 

received prior Exchange approval for 

the hedge exemption specifying the 

maximum number of contracts that may 

be exempt under the proposed Rule. 

The hedge exemption account must 

have provided all information required 

on Exchange-approved forms and must 

have kept such information current. 

Exchange approval may be granted on 

the basis of verbal representations, in 

which event the hedge exemption 

account shall within two business days, 

or such other time period designated by 

the Exchange, furnish the Exchange 

with appropriate forms and 

documentation substantiating the basis 

for the exemption. The hedge exemption 

account may apply from time to time for 

an increase in the maximum number of 

contracts exempt from the position 

limits. 

Proposed Rule 1806(a)(2) states that a 

hedge exemption account that is not 

carried by a Member must be carried by 

a member of a self-regulatory 

organization participating in the 

Intermarket Surveillance Group (‘‘ISG’’), 

which is comprised of an international 

group of exchanges, market centers, and 

market regulators.30

Proposed Rule 1806(a)(3) requires that 

the hedge exemption account maintain 

a qualified portfolio, or will effect 

transactions necessary to obtain a 

qualified portfolio concurrent with or at 

or about the same time as the execution 

of the exempt options positions, of: 

(i) A net long or short position in 

common stocks in at least four industry 

groups and contains at least twenty (20) 

stocks, none of which accounts for more 

than fifteen percent (15%) of the value 

of the portfolio or in securities readily 

convertible, and additionally in the case 

of convertible bonds economically 

convertible, into common stocks which 

would comprise a portfolio; or 

(ii) a net long or short position in 

index futures contracts or in options on 

index futures contracts, or long or short 

positions in index options or index 

warrants, for which the underlying 

index is included in the same margin or 

cross-margin product group cleared at 

the Clearing Corporation as the index 

options class to which the hedge 

exemption applies. 

To remain qualified, a portfolio must 

at all times meet these standards 

notwithstanding trading activity. 

Proposed Rule 1806(a)(4) contains the 

requirement that, in order to qualify for 

the broad-based exemption, the 

exemption must apply to positions in 

broad-based index options dealt in on 

the Exchange and is applicable to the 

unhedged value of the qualified 

portfolio. The unhedged value will be 

determined as follows: 

(i) The values of the net long or short 

positions of all qualifying products in 

the portfolio are totaled; 

(ii) for positions in excess of the 

standard limit, the underlying market 

value (A) of any economically 

equivalent opposite side of the market 

calls and puts in broad-based index 

options, and (B) of any opposite side of 

the market positions in stock index 

futures, options on stock index futures, 

and any economically equivalent 

opposite side of the market positions, 

assuming no other hedges for these 

contracts exist, is subtracted from the 

qualified portfolio; and 

(iii) the market value of the resulting 

unhedged portfolio is equated to the 

appropriate number of exempt contracts 

as follows: The unhedged qualified 

portfolio is divided by the 

correspondent closing index value and 

the quotient is then divided by the 

index multiplier or 100. 

Proposed Rule 1806(a)(5) states that 

positions in broad-based index options 

that are traded on the Exchange are 

exempt from the standard limits to the 

extent specified in the table below. 

Broad-based index option 

type 

Broad-based 

index hedge 

exemption 

(in addition to 

standard limit) 

Broad-based indexes other 

than for those that do not 

have any position limits .... 75,000 

Proposed Rule 1806(a)(6) lists the 

types of transactions that are available 

for hedging. Specifically, only the 

following qualified hedging transactions 

and positions are eligible for purposes 

of hedging a qualified portfolio (i.e. 

stocks, futures, options and warrants) 

pursuant to the proposed Rule: 

(i) Long put(s) used to hedge the 

holdings of a qualified portfolio; 

(ii) Long call(s) used to hedge a short 

position in a qualified portfolio; 

(iii) Short call(s) used to hedge the 

holdings of a qualified portfolio; and 

(iv) Short put(s) used to hedge a short 

position in a qualified portfolio. 

Proposed Rule 1806(a)(6) then 

identifies the following strategies, 

which may be effected only in 

conjunction with a qualified stock 

portfolio for non-P.M. settled, European 

style index options only: 

(v) A short call position accompanied 

by long put(s), where the short call(s) 

expires with the long put(s), and the 

strike price of the short call(s) equals or 

exceeds the strike price of the long 

put(s) (a ‘‘collar’’). Neither side of the 

collar transaction can be in-the-money 

at the time the position is established. 

For purposes of determining compliance 

with Rule 306 and proposed Rule 1806, 

a collar position will be treated as one 

contract; 

(vi) A long put position coupled with 

a short put position overlying the same 

broad-based index and having an 


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equivalent underlying aggregate index 

value, where the short put(s) expires 

with the long put(s), and the strike price 

of the long put(s) exceeds the strike 

price of the short put(s) (a ‘‘debit put 

spread position’’); and 

(vii) A short call position 

accompanied by a debit put spread 

position, where the short call(s) expires 

with the puts and the strike price of the 

short call(s) equals or exceeds the strike 

price of the long put(s). Neither side of 

the short call, long put transaction can 

be in-the-money at the time the position 

is established. For purposes of 

determining compliance with Rule 307 

and this Rule 1806, the short call and 

long put positions will be treated as one 

contract. 

Proposed Rule 1806(a)(7) describes 

certain permitted and prohibited 

activities for hedge exemption accounts. 

Specifically, the proposed Rule states 

that the hedge exemption account shall: 

(i) Liquidate and establish options, 

stock positions, their equivalent or other 

qualified portfolio products in an 

orderly fashion; not initiate or liquidate 

positions in a manner calculated to 

cause unreasonable price fluctuations or 

unwarranted price changes; and not 

initiate or liquidate a stock position or 

its equivalent with an equivalent index 

options position with a view toward 

taking advantage of any differential in 

price between a group of securities and 

an overlying stock index option; 

(ii) liquidate any options prior to or 

contemporaneously with a decrease in 

the hedged value of the qualified 

portfolio which options would thereby 

be rendered excessive; and 

(iii) promptly notify the Exchange of 

any material change in the qualified 

portfolio which materially affects the 

unhedged value of the qualified 

portfolio. 

Proposed Rules 1806(a)(8)–(12) 

contain several regulatory requirements 

for hedge exemption accounts. 

Specifically, the proposed Rules state 

that if an exemption is granted, it will 

be effective at the time the decision is 

communicated. Retroactive exemptions 

will not be granted. The proposed Rules 

also require that the hedge exemption 

account shall promptly provide to the 

Exchange any information requested 

concerning the qualified portfolio. 

Positions included in a qualified 

portfolio that serve to secure an index 

hedge exemption may not also be used 

to secure any other position limit 

exemption granted by the Exchange or 

any other self- regulatory organization 

or futures contract market. Any Member 

that maintains a broad-based index 

options position in such Member’s own 

account or in a customer account, and 

has reason to believe that such position 

is in excess of the applicable limit, shall 

promptly take the action necessary to 

bring the position into compliance. 

Failure to abide by this provision shall 

be deemed to be a violation of Rules 307 

and this Rule 1806 by the Member. 

Finally, violation of any of the 

provisions of the proposed Rule, absent 

reasonable justification or excuse, shall 

result in withdrawal of the index hedge 

exemption and may form the basis for 

subsequent denial of an application for 

an index hedge exemption. 

Proposed Rule 1806(b) describes the 

Industry Index Hedge Exemption. The 

industry (narrow-based) index hedge 

exemption is in addition to the other 

exemptions available under Exchange 

Rules, Interpretations and Policies, and 

may not exceed twice the standard limit 

established under Rule 1805. Industry 

index options positions may be exempt 

from established position limits for each 

options contract ‘‘hedged’’ by an 

equivalent dollar amount of the 

underlying component securities or 

securities convertible into such 

components; provided that, in applying 

such hedge, each options position to be 

exempted is hedged by a position in at 

least seventy-five percent (75%) of the 

number of component securities 

underlying the index. In addition, the 

underlying value of the options position 

may not exceed the value of the 

underlying portfolio. The value of the 

underlying portfolio is: (1) The total 

market value of the net stock position; 

and (2) for positions in excess of the 

standard limit, subtract the underlying 

market value of: (i) Any offsetting calls 

and puts in the respective index option; 

(ii) any offsetting positions in related 

stock index futures or options; and (iii) 

any economically equivalent positions 

(assuming no other hedges for these 

contracts exist). The following 

procedures and criteria must be satisfied 

to qualify for an industry index hedge 

exemption: 

(1) The hedge exemption account 

must have received prior Exchange 

approval for the hedge exemption 

specifying the maximum number of 

contracts that may be exempt under this 

Interpretation. The hedge exemption 

account must have provided all 

information required on Exchangeapproved forms and must have kept 

such information current. Exchange 

approval may be granted on the basis of 

verbal representations, in which event 

the hedge exemption account shall 

within two business days, or such other 

time period designated by the Exchange, 

furnish the Exchange with appropriate 

forms and documentation substantiating 

the basis for the exemption. The hedge 

exemption account may apply from time 

to time for an increase in the maximum 

number of contracts exempt from the 

position limits. 

(2) A hedge exemption account that is 

not carried by a Member must be carried 

by a member of a self-regulatory 

organization participating in the 

Intermarket Surveillance Group. 

(3) The hedge exemption account 

shall liquidate and establish options, 

stock positions, or economically 

equivalent positions in an orderly 

fashion; shall not initiate or liquidate 

positions in a manner calculated to 

cause unreasonable price fluctuations or 

unwarranted price changes; and shall 

not initiate or liquidate a stock position 

or its equivalent with an equivalent 

index options position with a view 

toward taking advantage of any 

differential in price between a group of 

securities and an overlying stock index 

option. The hedge exemption account 

shall liquidate any options prior to or 

contemporaneously with a decrease in 

the hedged value of the portfolio which 

options would thereby be rendered 

excessive. The hedge exemption 

account shall promptly notify the 

Exchange of any change in the portfolio 

which materially affects the unhedged 

value of the portfolio. 

(4) If an exemption is granted, it will 

be effective at the time the decision is 

communicated. Retroactive exemptions 

will not be granted. 

(5) The hedge exemption account 

shall promptly provide to the Exchange 

any information requested concerning 

the portfolio. 

(6) Positions included in a portfolio 

that serve to secure an index hedge 

exemption may not also be used to 

secure any other position limit 

exemption granted by the Exchange or 

any other self-regulatory organization or 

futures contract market. 

(7) Any Member that maintains an 

industry index options position in such 

Member’s own account or in a customer 

account, and has reason to believe that 

such position is in excess of the 

applicable limit, shall promptly take the 

action necessary to bring the position 

into compliance. Failure to abide by this 

provision shall be deemed to be a 

violation of Rule 307 and proposed Rule 

1806 by the Member. 

(8) Violation of any of the provisions 

of proposed Rule 1806, absent 

reasonable justification or excuse, shall 

result in withdrawal of the index hedge 

exemption and may form the basis for 

subsequent denial of an application for 

an index hedge exemption hereunder. 

Proposed Rule 1806(c) Exemptions 

Granted by Other Options Exchanges, 

states that a Member may rely upon any 


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31A ‘‘permitted pricing model’’ means: (A) A 

pricing model maintained and operated by the 

Clearing Corporation (‘‘OCC Model’’); (B) A pricing 

model maintained and used by a Member subject 

to consolidated supervision by the SEC pursuant to 

Appendix E of SEC Rule 15c3–1, or by an affiliate 

that is part of such Member’s consolidated 

supervised holding company group, in accordance 

with its internal risk management control system 

and consistent with the requirements of 

Appendices E or G, as applicable, to SEC Rule 

15c3–1 and SEC Rule 15c3–4 under the Exchange 

Act, as amended from time to time, in connection 

with the calculation of risk-based deductions from 

capital or capital allowances for market risk 

thereunder, provided that the Member or affiliate of 

a Member relying on this exemption in connection 

with the use of such model is an entity that is part 

of such Member’s consolidated supervised holding 

company group; (C) A pricing model maintained 

and used by a financial holding company or a 

company treated as a financial holding company 

under the Bank Holding Company Act of 1956, or 

by an affiliate that is part of either such company’s 

consolidated supervised holding company group, in 

accordance with its internal risk management 

control system and consistent with: 1. The 

requirements of the Board of Governors of the 

Federal Reserve System, as amended from time to 

time, in connection with the calculation of risk 

based adjustments to capital for market risk under 

capital requirements of the Board of Governors of 

the Federal Reserve System, provided that the 

Member or affiliate of a Member relying on this 

exemption in connection with the use of such 

model is an entity that is part of such company’s 

consolidated supervised holding company group; or 

2. the standards published by the Basel Committee 

on Banking Supervision, as amended from time to 

time and as implemented by such company’s 

principal regulator, in connection with the 

calculation of risk-based deductions or adjustments 

to or allowances for the market risk capital 

requirements of such principal regulator applicable 

to such company—where ‘‘principal regulator’’ 

means a member of the Basel Committee on 

Banking Supervision that is the home country 

consolidated supervisor of such company— 

provided that the Member or affiliate of a Member 

relying on this exemption in connection with the 

use of such model is an entity that is part of such 

company’s consolidated supervised holding 

company group. (D) A pricing model maintained 

and used by an OTC derivatives dealer registered 

with the SEC pursuant to SEC Rule 15c3–1(a)(5) in 

accordance with its internal risk management 

control system and consistent with the 

requirements of Appendix F to SEC Rule 15c3–1 

and SEC Rule 15c3–4 under the Exchange Act, as 

amended from time to time, in connection with the 

calculation of risk-based deductions from capital for 

market risk thereunder, provided that only such 

OTC derivatives dealer and no other affiliated entity 

(including a Member) may rely on this 

subparagraph (D); or (E) A pricing model used by 

a national bank under the National Bank Act 

maintained and used in accordance with its internal 

risk management control system and consistent 

with the requirements of the Office of the 

Comptroller of the Currency, as amended from time 

to time, in connection with the calculation of risk 

based adjustments to capital for market risk under 

capital requirements of the Office of the 

Comptroller of the Currency, provided that only 

such national bank and no other affiliated entity 

(including a Member) may rely on this 

subparagraph (E). 

available exemptions from applicable 

position limits granted from time to 

time by another options exchange for 

any options contract traded on the 

Exchange provided that such Member: 

(1) Provides the Exchange with a copy 

of any written exemption issued by 

another options exchange or a written 

description of any exemption issued by 

another options exchange other than in 

writing containing sufficient detail for 

Exchange regulatory staff to verify the 

validity of that exemption with the 

issuing options exchange, and 

(2) fulfills all conditions precedent for 

such exemption and complies at all 

times with the requirements of such 

exemption with respect to the Member’s 

trading on the Exchange. 

Proposed Rule 1806(d), Delta-Based 

Index Hedge Exemption, describes the 

Delta-Based Index Hedge Exemption as 

in addition to the standard limit and 

other exemptions available under 

Exchange rules. The proposed rule 

states that an index option position of 

a Member or non-Member affiliate of a 

Member that is delta neutral shall be 

exempt from established position limits 

as prescribed under Rules 1804 and 

1805, subject to the following: 

(1) The term ‘‘delta neutral’’ refers to 

an index option position that is hedged, 

in accordance with a permitted pricing 

model, by a position in one or more 

correlated instruments, for the purpose 

of offsetting the risk that the value of the 

option position will change with 

incremental changes in the value of the 

underlying index. The term ‘‘correlated 

instruments’’ means securities and/or 

other instruments that track the 

performance of or are based on the same 

underlying index as the index 

underlying the option position (but not 

including baskets of securities). 

(2) An index option position that is 

not delta neutral shall be subject to 

position limits in accordance with 

proposed Rules 1804 and 1805 (subject 

to the availability of other position limit 

exemptions). Only the options contract 

equivalent of the net delta of such 

position shall be subject to the 

appropriate position limit. The ‘‘options 

contract equivalent of the net delta’’ is 

the net delta divided by units of trade 

that equate to one option contract on a 

delta basis. The term ‘‘net delta’’ means, 

at any time, the number of shares and/ 

or other units of trade (either long or 

short) required to offset the risk that the 

value of an index option position will 

change with incremental changes in the 

value of the underlying index, as 

determined in accordance with a 

permitted pricing model. 

(3) A ‘‘permitted pricing model’’ shall 

have the meaning as defined in Rule 

308(a)(7)(iii).31

Proposed Rule 1806(d)(4), Effect on 

Aggregation of Accounts, states that (i) 

Members and non-Member affiliates 

who rely on this exemption must ensure 

that the permitted pricing model is 

applied to all positions in correlated 

instruments that are owned or 

controlled by such Member or nonMember affiliate. 

Notwithstanding subparagraph (i), 

above, the net delta of an option 

position held by an entity entitled to 

rely on this exemption, or by a separate 

and distinct trading unit of such entity, 

may be calculated without regard to 

positions in correlated instruments held 

by an affiliated entity or by another 

trading unit within the same entity, 

provided that: 

(A) The entity demonstrates to the 

Exchange’s satisfaction that no control 

relationship, as defined in Rule 307(f), 

exists between such affiliates or trading 

units; and 

(B) the entity has provided (by the 

Member carrying the account as 

applicable) the Exchange written notice 

in advance that it intends to be 

considered separate and distinct from 

any affiliate or, as applicable, which 

trading units within the entity are to be 

considered separate and distinct from 

each other for purposes of this 

exemption. 

Proposed Rule 1806(d)(4)(iii) states 

that, notwithstanding subparagraphs (i) 

and (ii) of proposed Rule 1806(d)(4)(i) 

and (ii), a Member or non-Member 

affiliate who relies on this exemption 

shall designate, by prior written notice 

to the Exchange (to be obtained and 

provided by the Member carrying the 

account as applicable), each trading unit 

or entity whose option positions are 

required under Exchange Rules to be 

aggregated with the option positions of 

such Member or non-Member affiliate 

that is relying on this exemption for 

purposes of compliance with Exchange 

position limits or exercise limits. In any 

such case: (A) The permitted pricing 

model shall be applied, for purposes of 

calculating such Member’s or affiliate’s 

net delta, only to the positions in 

correlated instruments owned and 

controlled by those entities and trading 

units who are relying on this exemption; 

and (B) the net delta of the positions 

owned or controlled by the entities and 

trading units who are relying on this 

exemption shall be aggregated with the 

non-exempt option positions of all other 

entities and trading units whose options 

positions are required under Exchange 

Rules to be aggregated with the option 

positions of such Member or affiliate. 

Proposed Rule 1806(d)(5) describes 

the obligations of Members seeking the 

Delta Hedge Exemption. First, a Member 

that relies on this exemption for a 

proprietary index options position: (A) 

Must provide a written certification to 


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32Each Member is required under Exchange Rule 

310, Reports Related to Position Limits, to file with 

the Exchange the name, address and social security 

or tax identification number of any customer, as 

well as any Member, any general or special partner 

of the Member, any officer or director of the 

Member or any participant, as such, in any joint, 

group or syndicate account with the Member or 

with any partner, officer or director thereof, who, 

on the previous business day held aggregate long or 

short positions of 200 or more option contracts of 

any single class of options traded on the Exchange. 

The report shall indicate for each such class of 

option contracts the number of option contracts 

comprising each such position and, in case of short 

positions, whether covered or uncovered. (b) 

Electronic Exchange Members that maintain an end 

of day position in excess of 10,000 non-FLEX equity 

option contracts on the same side of the market on 

behalf of its own account or for the account of a 

customer, shall report whether such position is 

hedged and provide documentation as to how such 

position is hedged. This report is required at the 

time the subject account exceeds the 10,000 

contract threshold and thereafter, for customer 

accounts, when the position increases by 2,500 

contracts and for proprietary accounts when the 

position increases by 5,000 contracts. (c) In addition 

to the reports required by paragraph (a) and (b) of 

this Rule, each Member shall report promptly to the 

Exchange any instance in which the Member has 

reason to believe that a person included in 

paragraph (a), acting alone or in concert with 

others, has exceeded or is attempting to exceed the 

position limits established pursuant to Rule 307. 

Interpretations and Policies: .01 For purposes of 

calculating the aggregate long or short position 

under paragraph (a) above, Members shall combine 

(i) long positions in put options with short 

positions in call options, and (ii) short positions in 

put options with long positions in call options. See 

Exchange Rule 310. 

33See, e.g., ISE Rule 2006; CBOE Rule 24.4, 

Interpretations and Policies .01, .05, and Rule 

24.4A; and Phlx Rule 1001A and Interpretations 

and Policies .01–.04 thereto. 

34See ISE Rule 2008; CBOE Rule 24.6, and Phlx 

Rule 101. 

35See Exchange Rule 503. Openings on the 

Exchange, governs the opening of trading on the 

Exchange with respect to, among other things, the 

Pre-Opening Phase, possible opening imbalances 

and establishment of an opening price with or 

without opening orders. These and other provisions 

will apply to openings in index options. 

the Exchange that it is using a permitted 

pricing model as defined above, and (B) 

by such reliance authorizes any other 

person carrying for such Member an 

account including, or with whom such 

Member has entered into, a position in 

a correlated instrument to provide to the 

Exchange or the Clearing Corporation 

such information regarding such 

account or position as the Exchange or 

Clearing Corporation may request as 

part of the Exchange’s confirmation or 

verification of the accuracy of any net 

delta calculation under this exemption. 

The index option positions of a nonMember relying on this exemption must 

be carried by a Member with which it 

is affiliated. 

Proposed Rule 1806(d)(5)(iii) requires 

that a Member carrying an account that 

includes an index option position for a 

non-Member affiliate that intends to rely 

on the Delta-Based Hedge Exemption 

must obtain from such non-Member 

affiliate and must provide to the 

Exchange: (A) A written certification to 

the Exchange that the non-Member 

affiliate is using a permitted pricing 

model as described above; and (B) a 

written statement confirming that such 

non-Member affiliate: (1) Is relying on 

this exemption; (2) will use only a 

permitted pricing model for purposes of 

calculating the net delta of its option 

positions for purposes of this 

exemption; (3) will promptly notify the 

Member if it ceases to rely on this 

exemption; (4) authorizes the Member to 

provide to the Exchange or the Clearing 

Corporation such information regarding 

positions of the non-Member affiliate as 

the Exchange or Clearing Corporation 

may request as part of the Exchange’s 

confirmation or verification of the 

accuracy of any net delta calculation 

under this exemption; and (5) if the 

non-Member affiliate is using the 

Clearing Corporation Model, has duly 

executed and delivered to the Member 

such documents as the Exchange may 

require to be executed and delivered to 

the Exchange as a condition to reliance 

on the exemption. 

Proposed Rule 1806(d)(6) requires 

each Member (other than an Exchange 

market maker using the Clearing 

Corporation Model) that holds or carries 

an account that relies on the DeltaBased Hedge Exemption shall report, in 

accordance with Exchange Rule 310,32

all index option positions (including 

those that are delta neutral) that are 

reportable thereunder. Each such 

Member on its own behalf or on behalf 

of a designated aggregation unit 

pursuant to Rule 1806(d)(4) shall also 

report, in accordance with Exchange 

Rule 310 for each such account that 

holds an index option position subject 

to the Delta-Based Hedge Exemption in 

excess of the levels specified in Rules 

1804 and 1805, the net delta and the 

options contract equivalent of the net 

delta of such position. 

Finally, proposed Rule 1806(d)(7) 

requires that each Member relying on 

the Delta-Based Hedge Exemption shall: 

(i) Retain, and undertake reasonable 

efforts to ensure that any non-Member 

affiliate of the Member relying on this 

exemption retains, a list of the options, 

securities and other instruments 

underlying each option position net 

delta calculation reported to the 

Exchange hereunder, and (ii) produce 

such information to the Exchange upon 

request. 

The proposed Rules relating to 

position limits and exemptions from 

position limits are based on, and 

substantially similar to, rules that are 

currently in place on other exchanges.33

Proposed MIAX Options Rule 1808, 

Trading Sessions, provides that index 

options will trade between the hours of 

9:30 a.m. and 4:15 p.m. Eastern time, 

the same as on other exchanges. The 

proposed rule also contains procedures 

for trading rotations, as well as trading 

halts and suspensions. 

Specifically, proposed Rule 1808(a) 

states that, except as otherwise provided 

in this Rule or under unusual 

conditions as may be determined by the 

Exchange, (i) transactions in index 

options may be effected on the 

Exchange between the hours of 9:30 

a.m. and 4:15 p.m. Eastern time, and (ii) 

transactions in options on a Foreign 

Currency Index may be effected on the 

Exchange between the hours of 7:30 

a.m. and 4:15 p.m. Eastern time. With 

respect to options on foreign indexes, 

the Exchange shall determine the days 

and hours of business. The proposed 

Rule and the various enumerated times 

are consistent with rules in place on 

other exchanges.34

Proposed Rule 1808(b), Trading 

Rotations, states that, except as 

otherwise provided in the proposed 

Rule, the opening process for index 

options shall be governed by Rule 503.35

The opening rotation for index options 

shall be held at or as soon as practicable 

after 9:30 a.m. Eastern time. The 

Exchange may delay the commencement 

of the opening rotation in an index 

option whenever in the judgment of the 

Exchange such action is appropriate in 

the interests of a fair and orderly 

market. Among the factors that may be 

considered in making these 

determinations are: (1) Unusual 

conditions or circumstances in other 

markets; (2) an influx of orders that has 

adversely affected the ability of the 

Primary Lead Market Maker to provide 

and to maintain fair and orderly 

markets; (3) activation of opening price 

limits in stock index futures on one or 

more futures exchanges; (4) activation of 

daily price limits in stock index futures 

on one or more futures exchanges; (5) 

the extent to which either there has 

been a delay in opening or trading is not 

occurring in stocks underlying the 

index; and (6) circumstances such as 

those which would result in the 

declaration of a fast market under Rule 

506(d). 

Proposed Rule 1808(c) describes 

circumstances and procedures relating 

to halts and suspensions in index 

options. Specifically, trading on the 

Exchange in any index option shall be 

halted or suspended whenever trading 

in underlying securities whose weighted 


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36The Exchange shall halt trading in all securities 

whenever a market-wide trading halt commonly 

known as a circuit breaker is initiated on the New 

York Stock Exchange in response to extraordinary 

market conditions. See Exchange Rule 504, 

Interpretations and Policies .03. Rule 530(e) 

provides that the Exchange shall halt trading in all 

options whenever the equities markets initiate a 

market-wide trading halt commonly known as a 

circuit breaker in response to extraordinary market 

conditions. 

37See, e.g., ISE Rule 2008; CBOE Rule 24.7; and 

Phlx Rule 1047A. 

38The Exchange would be required under 

proposed Rule 1800 to file a proposed rule change 

with the Commission to specify such indices and 

any requirements that apply. 

value represents more than twenty 

percent (20%), in the case of a broad 

based index, and ten percent (10%) for 

all other indices, of the index value is 

halted or suspended. The Exchange also 

may halt trading in an index option, 

including in options on a Foreign 

Currency Index, when, in its judgment, 

such action is appropriate in the 

interests of a fair and orderly market 

and to protect investors. Among the 

facts that may be considered are the 

following: 

(1) Whether all trading has been 

halted or suspended in the market that 

is the primary market for a plurality of 

the underlying stocks, or in the case of 

a Foreign Currency Index, in the 

underlying foreign currency market; 

(2) whether the current calculation of 

the index derived from the current 

market prices of the stocks is not 

available, or in the case of a Foreign 

Currency Index, the current prices of the 

underlying foreign currency is not 

available; 

(3) the extent to which the rotation 

has been completed or other factors 

regarding the status of the rotation; and 

(4) other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present, including, but not 

limited to, the activation of price limits 

on futures exchanges. 

Proposed Rule 1808(d) describes the 

resumption of trading following a halt 

or suspension in an index option. 

Trading in options of a class or series 

that has been the subject of a halt or 

suspension by the Exchange may 

resume if the Exchange determines that 

the interests of a fair and orderly market 

are served by a resumption of trading. 

Among the factors to be considered in 

making this determination are whether 

the conditions that led to the halt or 

suspension are no longer present, and 

the extent to which trading is occurring 

in stocks or currencies underlying an 

index. Upon reopening, a rotation shall 

be held in each class of index options 

unless the Exchange concludes that a 

different method of reopening is 

appropriate under the circumstances, 

including but not limited to, no rotation, 

an abbreviated rotation or any other 

variation in the manner of the rotation. 

Proposed Rule 1808(e) states that Rule 

504, Interpretations and Policies .03 

applies to index options trading with 

respect to the initiation of a market wide 

trading halt commonly known as a 

‘‘circuit breaker.’’ 36

Proposed Rule 1808(f) addresses the 

hours for trading foreign currency 

options. Specifically, when the hours of 

trading of the underlying primary 

securities market for an index option do 

not overlap or coincide with those of the 

Exchange, all of the provisions as 

described in paragraphs (c), (d) and (e) 

above shall not apply except for (c)(4). 

Proposed Rule 1808(g) governs the 

situation where the primary market for 

a security underlying the current index 

value of an index option does not open 

for trading on a given day. In such a 

circumstance, the price of that security 

shall be determined, for the purposes of 

calculating the current index value at 

expiration, based on the opening price 

of that security on the next day that its 

primary market is open for trading. This 

procedure shall not be used if the 

current index value at expiration is 

fixed in accordance with the Rules and 

By-Laws of the Clearing Corporation. 

The proposed rules governing trading 

sessions, including trading rotations, 

halts and suspensions, resumption of 

trading following a halt or suspension, 

circuit breakers, special provisions for 

foreign indices, and pricing when the 

primary market does not open are based 

on, and substantially similar to, the 

rules in place on other exchanges.37

Proposed MIAX Options Rule 1809, 

Terms of Index Options Contracts, 

outlines the terms of index options 

contracts in terms of the meaning of 

premium bids and offers; exercise 

prices; expiration months and the 

trading of European Style Index 

options.38 The proposed Rule also 

applies to A.M. Settled Index Options, 

and Long-Term Option Series (including 

Reduced-Value Long Term Options 

Series), which would also require a 

filing with the Commission for the 

specific index option(s) to which the 

proposed rule is applicable. 

Proposed Rule 1809(a) contains 

general provisions applicable to the 

trading of index options on the 

Exchange. Specifically, the proposed 

Rule states generally that bids and offers 

shall be expressed in terms of dollars 

and cents per unit of the index. The 

Exchange shall determine fixed-point 

intervals of exercise prices for call and 

put options. With respect to expirations, 

proposed Rule 1809(a)(3) states that 

index options contracts, including 

option contracts on a Foreign Currency 

Index, may expire at three (3)-month 

intervals or in consecutive months. The 

Exchange may list up to six (6) 

expiration months at any one time, but 

will not list index options that expire 

more than twelve (12) months out. 

Notwithstanding the preceding 

restriction, the Exchange may list up to 

seven expiration months at any one time 

for any broad-based security index 

option contracts on which any exchange 

calculates a constant three-month 

volatility index. 

Proposed Rule 1809(a)(4) permits the 

Exchange to list and trade certain 

European-style index options to be 

Specified by the Exchange, some of 

which may be A.M.-settled as provided 

in paragraph (a)(5). The Exchange will 

file a proposed rule change and any 

such listing and trading is subject to the 

approval of the Commission. 

Proposed Rule 1809(a)(5) governs 

A.M.-Settled Index Options. The last 

day of trading for A.M.-settled index 

options shall be the business day 

preceding the business day of 

expiration, or, in the case of an option 

contract expiring on a day that is not a 

business day, the business day 

preceding the last day of trading in the 

underlying securities prior to the 

expiration date. The current index value 

at the expiration of an A.M.-settled 

index option shall be determined, for all 

purposes under these proposed Rules 

and the Rules of the Clearing 

Corporation, on the last day of trading 

in the underlying securities prior to 

expiration, by reference to the reported 

level of such index as derived from first 

reported sale (opening) prices of the 

underlying securities on such day, 

except that: 

(i) In the event that the primary 

market for an underlying security does 

not open for trading on that day, the 

price of that security shall be 

determined, for the purposes of 

calculating the current index value at 

expiration, as set forth in Rule 1808(g), 

unless the current index value at 

expiration is fixed in accordance with 

the Rules and By-Laws of the Clearing 

Corporation; and 

(ii) In the event that the primary 

market for an underlying security is 

open for trading on that day, but that 

particular security does not open for 

trading on that day, the price of that 

security, for the purposes of calculating 

the current index value at expiration, 

shall be the last reported sale price of 

the security. 


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39A reduced-value options series is an option 

series overlying an index that trades in units based 

upon a percentage of the value of the underlying 

index, for example, ten percent of the value of the 

index. 

Proposed Rule 1809(a)(5)(ii) permits 

the Exchange to list specific A.M.- 

settled index options that are approved 

for trading on the Exchange, subject to 

the filing of a proposed rule change and 

the approval of the Commission. 

Proposed Rule 1809(b)(1) permits the 

Exchange, notwithstanding the 

permitted expiration months set forth in 

proposed Rule 1809(a)(3) (as described 

above), to list long-term index options 

series that expire from twelve (12) to 

sixty (60) months from the date of 

issuance. Under the proposal, long term 

index options series may be based on 

either the full or reduced value of the 

underlying index. There may be up to 

ten (10) expiration months, none further 

out than sixty (60) months. Strike price 

interval, bid/ask differential and 

continuity Rules shall not apply to such 

options series until the time to 

expiration is less than twelve (12) 

months. When a new long term index 

options series is listed, such series will 

be opened for trading either when there 

is buying or selling interest, or forty (40) 

minutes prior to the close, whichever 

occurs first. No quotations will be 

posted for such options until they are 

opened for trading. 

Proposed Rule 1809(b)(2) governs the 

trading of reduced-value long term 

options series.39 Proposed Rule 

1809(b)(2)(i) permits the Exchange to 

list the specific reduced-Value long term 

options series traded on the Exchange 

(subject to an Exchange filing and 

Commission approval). Reduced-value 

long term options series may expire at 

six-month intervals. When a new 

expiration month is listed, series may be 

near or bracketing the current index 

value. Additional series may be added 

when the value of the underlying index 

increases or decreases by ten (10) to 

fifteen (15) percent. 

Proposed Rule 1809(c) sets forth the 

procedures for adding and deleting 

strike prices. The procedures for adding 

and deleting strike prices for index 

options are provided in Exchange Rule 

404, as amended by the following: 

(1) The interval between strike prices 

will be no less than $5.00; provided that 

in the case of certain classes of index 

options, the interval between strike 

prices will be no less than $2.50 and 

such must be listed specifically in the 

Rule. 

(2) New series of index options 

contracts may be added up to, but not 

on or after, the fourth business day prior 

to expiration for an option contract 

expiring on a business day, or, in the 

case of an option contract expiring on a 

day that is not a business day, the fifth 

business day prior to expiration. 

(3) When new series of index options 

with a new expiration date are opened 

for trading, or when additional series of 

index options in an existing expiration 

date are opened for trading as the 

current value of the underlying index to 

which such series relate 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 underlying index at 

the time such series are first opened for 

trading. In the case of all classes of 

index options, the term ‘‘reasonably 

related to the current value of the 

underlying index’’ shall have the 

meaning set forth in proposed Rule 

1809(c)(4), described below. 

(4) Proposed Rule 1809(c)(4) states 

that, notwithstanding any other 

provision of proposed Rule 1809(c), the 

Exchange may open for trading 

additional series of the same class of 

index options as the current index value 

of the underlying index moves 

substantially from the exercise price of 

those index options that already have 

been opened for trading on the 

Exchange. The exercise price of each 

series of index options opened for 

trading on the Exchange shall be 

reasonably related to the current index 

value of the underlying index to which 

such series relates at or about the time 

such series of options is first opened for 

trading on the Exchange. 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. 

The Exchange may also open for 

trading additional series of index 

options that are more than thirty percent 

(30%) away from the current index 

value, provided that demonstrated 

customer interest exists for such series, 

as expressed by institutional, corporate, 

or individual customers or their brokers. 

Market Makers trading for their own 

account shall not be considered when 

determining customer interest under 

this provision. 

Proposed Rule 1809(d) states that the 

reported level of the underlying index 

that is calculated by the reporting 

authority on the business day of 

expiration, or, in the case of an option 

contract expiring on a day that is not a 

business day, the last day of trading in 

the underlying securities prior to the 

expiration date for purposes of 

determining the current index value at 

the expiration of an A.M.-settled index 

option, may differ from the level of the 

index that is separately calculated and 

reported by the reporting authority and 

that reflects trading activity subsequent 

to the opening of trading in any of the 

underlying securities. 

Proposed Rule 1809(e) provides that 

the Rules of the Clearing Corporation 

specify that, unless the Rules of the 

Exchange provide otherwise, the current 

index value used to settle the exercise 

of an index options contract shall be the 

closing index value for the day on 

which the index options contract is 

exercised in accordance with the Rules 

of the Clearing Corporation or, if such 

day is not a business day, for the most 

recent business day. The closing 

settlement value for options on a 

Foreign Currency Index shall be 

specified by the Exchange. 

Proposed Rule 1809, Interpretations 

and Policies .01, Short Term Option 

Series Program, specifies that, 

notwithstanding the restriction in Rule 

1809(a)(3), after an option class has been 

approved for listing and trading on the 

Exchange, the Exchange may open for 

trading on any Thursday or Friday that 

is a business day (‘‘Short Term Option 

Opening Date’’) series of options on that 

class that expire at the close of business 

on each of the next five Fridays that are 

business days and are not Fridays in 

which monthly options series or 

Quarterly Options Series expire (‘‘Short 

Term Option Expiration Dates’’). The 

Exchange may have no more than a total 

of five Short Term Option Expiration 

Dates. If the Exchange is not open for 

business on the respective Thursday or 

Friday, the Short Term Option Opening 

Date will be the first business day 

immediately prior to that respective 

Thursday or Friday. Similarly, if the 

Exchange is not open for business on a 

Friday, the Short Term Option 

Expiration Date will be the first business 

day immediately prior to that Friday. 

Proposed Interpretations and Policies 

.01(a) to Rule 1809 permits the 

Exchange to select up to thirty (30) 

currently listed option classes on which 

Short Term Option Series may be 

opened on any Short Term Option 

Opening Date. In addition to the 30 

option class restriction, the Exchange 

may also list Short Term Option Series 

on any option classes that are selected 

by other securities exchanges that 

employ a similar program under their 

respective rules. For each index option 

class eligible for participation in the 

Short Term Option Series Program, the 

Exchange may open up to 30 Short 

Term Option Series on index options for 

each expiration date in that class. The 

Exchange may also open Short Term 

Option Series that are opened by other 


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securities exchanges in option classes 

selected by such exchanges under their 

respective short term option rules. 

Proposed Interpretations and Policies 

.01(b) to proposed Rule 1809 states that 

no Short Term Option Series on an 

index option class may expire in the 

same week during which any monthly 

option series on the same index class 

expires or, in the case of Quarterly 

Options Series, on an expiration that 

coincides with an expiration of 

Quarterly Options Series on the same 

index class. 

Proposed Interpretations and Policies 

.01(c) to Rule 1809 governs the listing 

and trading of initial series in short-term 

options. The Exchange may open up to 

20 initial series for each option class 

that participates in the Short Term 

Option Series Program. The strike price 

of each Short Term Option Series will 

be fixed at a price per share, with 

approximately the same number of 

strike prices above and below the 

calculated index value of the underlying 

index at about the time that Short Term 

Option Series are initially opened for 

trading on the Exchange (e.g., if seven 

series are initially opened, there will be 

at least three strike prices above and 

three strike prices below the calculated 

index value). Any strike prices listed by 

the Exchange shall be within thirty 

percent (30%) above or below the 

current value of the underlying index. 

Proposed Interpretations and Policies 

.01(d) to Rule 1809, Additional Series, 

states that the Exchange may open up to 

10 additional series for each option 

class that participates in the Short Term 

Option Series Program when the 

Exchange deems it necessary to 

maintain an orderly market, to meet 

customer demand or when the current 

value of the underlying index moves 

substantially from the exercise price or 

prices of the series already opened. Any 

additional strike prices listed by the 

Exchange shall be within thirty percent 

(30%) above or below the current value 

of the underlying index. The Exchange 

may also open additional strike prices 

on Short Term Option Series that are 

more than 30% above or below the 

current value of the underlying index 

provided that demonstrated customer 

interest exists for such series, as 

expressed by institutional, corporate or 

individual customers or their brokers. 

Market Makers trading for their own 

account shall not be considered when 

determining customer interest under 

this provision. In the event that the 

underlying security has moved such 

that there are no series that are at least 

10% above or below the current price of 

the underlying security, the Exchange 

will delist any series with no open 

interest in both the call and the put 

series having a: (i) Strike higher than the 

highest strike price with open interest in 

the put and/or call series for a given 

expiration month; and (ii) strike lower 

than the lowest strike price with open 

interest in the put and/or the call series 

for a given expiration month, so as to 

list series that are at least 10% but not 

more than 30% above or below the 

current price of the underlying security. 

In the event that the underlying security 

has moved such that there are no series 

that are at least 10% above or below the 

current price of the underlying security 

and all existing series have open 

interest, the Exchange may list 

additional series, in excess of the 30 

allowed under this Interpretations and 

Policies .01. The opening of the new 

Short Term Option Series shall not 

affect the series of options of the same 

class previously opened. 

Notwithstanding any other provisions in 

proposed Rule 1809, Short Term Option 

Series may be added up to, and 

including on, the Short Term Option 

Expiration Date for that options series. 

Proposed Interpretations and Policies 

.01(e) to Rule 1809 governs strike price 

intervals for short term index option 

series. The interval between strike 

prices on Short Term Option Series 

shall be the same as the strike prices for 

series in that same index option class 

that expire in accordance with the 

normal monthly expiration cycle. 

During the month prior to expiration of 

an index option class that is selected for 

the Short Term Option Series Program 

pursuant to this rule (‘‘Short Term 

Option’’), the strike price intervals for 

the related index non-Short Term 

Option (‘‘Related non-Short Term 

Option’’) shall be the same as the strike 

price intervals for the index Short Term 

Option. 

Proposed Interpretations and Policies 

.02 to Rule 1809 governs the Quarterly 

Options Series Program. 

Notwithstanding the restriction in 

proposed Rule 1809(a)(3) (described 

above), the Exchange may list and trade 

options series that expire at the close of 

business on the last business day of a 

calendar quarter (‘‘Quarterly Options 

Series’’). The Exchange may list 

Quarterly Options Series for up to five 

(5) currently listed options classes that 

are either index options or options on 

exchange traded funds (‘‘ETFs’’). In 

addition, the Exchange may also list 

Quarterly Options Series on any options 

classes that are selected by other 

securities exchanges that employ a 

similar pilot program under their 

respective rules. The Exchange may list 

series that expire at the end of the next 

consecutive four (4) calendar quarters, 

as well as the fourth quarter of the next 

calendar year. The Exchange will not 

list a Short Term Option Series on an 

options class whose expiration 

coincides with that of a Quarterly 

Options Series on that same options 

class. Quarterly Options Series shall be 

P.M. settled. 

Proposed Interpretations and Policies 

.02(d) to Rule 1809, Initial Series, states 

that the strike price of each Quarterly 

Options Series will be fixed at a price 

per share, with at least two, but no more 

than five, strike prices above and at least 

two, but no more than five, strike prices 

below the value of the underlying index 

at about the time that a Quarterly 

Options Series is opened for trading on 

the Exchange. The Exchange shall list 

strike prices for Quarterly Options 

Series that are reasonably related to the 

current index value of the underlying 

index to which such series relates at 

about the time such series of options is 

first opened for trading on the 

Exchange. 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. 

Proposed Interpretations and Policies 

.02(e) to Rule 1809, Additional Series, 

permits the Exchange to open for 

trading additional Quarterly Options 

Series of the same class when the 

Exchange deems it necessary to 

maintain an orderly market, to meet 

customer demand or when the market 

price of the underlying security moves 

substantially from the initial exercise 

price or prices. The Exchange may also 

open for trading additional Quarterly 

Options Series that are more than thirty 

percent (30%) away from the current 

index value, provided that 

demonstrated customer interest exists 

for such series, as expressed by 

institutional, corporate, or individual 

customers or their brokers. Marketmakers trading for their own account 

shall not be considered when 

determining customer interest under 

this provision. The Exchange may open 

additional strike prices of a Quarterly 

Options Series that are above the value 

of the underlying index provided that 

the total number of strike prices above 

the value of the underlying is no greater 

than five. The Exchange may open 

additional strike prices of a Quarterly 

Options Series that are below the value 

of the underlying index provided that 

the total number of strike prices below 

the value of the underlying index is no 

greater than five. The opening of any 

new Quarterly Options Series shall not 

affect the series of options of the same 

class previously opened. 


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40See, e.g., ISE Rule 2009; CBOE Rule 24.9; and 

Phlx Rule 1101A. 41 12 CFR 220.8. 

Proposed Interpretations and Policies 

.02(f) to Rule 1809, Strike Interval, states 

that the interval between strike prices 

on Quarterly Options Series shall be the 

same as the interval for strike prices for 

series in that same options class that 

expire in accordance with the normal 

monthly expiration cycle. 

Proposed Interpretations and Policies 

.03 to Rule 1809 states that, 

notwithstanding the requirements set 

forth in proposed Rule 1809, the 

Exchange may list additional series of 

index options classes if such series are 

listed on at least one other national 

securities exchange in accordance with 

the applicable rules of such exchange 

for the listing of index options. For each 

options series listed pursuant to this 

Interpretations and Policies .03, the 

Exchange will submit a proposed rule 

change with the Securities and 

Exchange Commission that is effective 

upon filing within the meaning of 

Section 19(b)(3)(A) under Act. 

Proposed Interpretations and Policies 

.04 to Rule 1809 states that, 

notwithstanding the requirements set 

forth in proposed Rule 1809 and any 

Interpretations and Policies thereto, the 

Exchange may list additional expiration 

months on options classes opened for 

trading on the Exchange if such 

expiration months are opened for 

trading on at least one other registered 

national securities exchange. 

Proposed Interpretations and Policies 

.05 to Rule 1809 states that, 

notwithstanding the requirements set 

forth in this Rule 1809 and any 

Interpretations and Policies thereto, the 

Exchange may open for trading Short 

Term Option Series on the Short Term 

Option Opening Date that expire on the 

Short Term Option Expiration Date at 

strike price intervals of (i) $0.50 or 

greater where the strike price is less 

than $75, and $1 or greater where the 

strike price is between $75 and $150 for 

all index option classes that participate 

in the Short Term Options Series 

Program; or (ii) $0.50 for index option 

classes that trade in one dollar 

increments and are in the Short Term 

Option Series Program. 

The proposed rules concerning the 

terms of options contracts are based on, 

and substantially similar to, rules that 

are currently operative on other 

exchanges.40

Proposed MIAX Options Rule 1810 

applies to debit put spreads. Debit put 

spread positions in European-style, 

broad-based index options traded on the 

Exchange (hereinafter ‘‘debit put 

spreads’’) may be maintained in a cash 

account as defined by Federal Reserve 

Board Regulation T Section 220.8 41 by 

a Public Customer, provided that the 

following procedures and criteria are 

met: 

(a) approval to maintain debit put 

spreads in a cash account carried by an 

Exchange Member. A customer so 

approved is hereinafter referred to as a 

‘‘spread exemption customer.’’ 

(b) The spread exemption customer 

has provided all information required 

on Exchange-approved forms and has 

kept such information current. 

(c) The customer holds a net long 

position in each of the stocks of a 

portfolio that has been previously 

established or in securities readily 

convertible, and additionally in the case 

of convertible bonds economically 

convertible, into common stocks which 

would comprise a portfolio. The debit 

put spread position must be carried in 

an account with a member of a selfregulatory organization participating in 

the Intermarket Surveillance Group. 

(d) The stock portfolio or its 

equivalent is composed of net long 

positions in common stocks in at least 

four industry groups and contains at 

least twenty (20) stocks, none of which 

accounts for more than fifteen percent 

(15%) of the value of the portfolio 

(hereinafter ‘‘qualified portfolio’’). To 

remain qualified, a portfolio must at all 

times meet these standards 

notwithstanding trading activity in the 

stocks. 

(e) The exemption applies to 

European-style broad-based index 

options dealt in on the Exchange to the 

extent the underlying value of such 

options position does not exceed the 

unhedged value of the qualified 

portfolio. The unhedged value would be 

determined as follows: (1) The values of 

the net long or short positions of all 

qualifying products in the portfolio are 

totaled; (2) for positions in excess of the 

standard limit, the underlying market 

value (A) of any economically 

equivalent opposite side of the market 

calls and puts in broad-based index 

options, and (B) of any opposite side of 

the market positions in stock index 

futures, options on stock index futures, 

and any economically equivalent 

opposite side of the market positions, 

assuming no other hedges for these 

contracts exist, is subtracted from the 

qualified portfolio; and (3) the market 

value of the resulting unhedged 

portfolio is equated to the appropriate 

number of exempt contracts as 

follows—the unhedged qualified 

portfolio is divided by the 

correspondent closing index value and 

the quotient is then divided by the 

index multiplier or 100. 

(f) A debit put spread in Exchangetraded broad-based index options with 

European-style exercises is defined as a 

long put position coupled with a short 

put position overlying the same broadbased index and having an equivalent 

underlying aggregate index value, where 

the short put(s) expires with the long 

put(s), and the strike price of the long 

put(s) exceeds the strike price of the 

short put(s). A debit put spread will be 

permitted in the cash account as long as 

it is continuously associated with a 

qualified portfolio of securities with a 

current market value at least equal to 

the underlying aggregate index value of 

the long side of the debit put spread. 

(g) The qualified portfolio must be 

maintained with either a Member, 

another broker-dealer, a bank, or 

securities depository. 

(h) The spread exemption customer 

shall agree promptly to provide the 

Exchange any information requested 

concerning the dollar value and 

composition of the customer’s stock 

portfolio, and the current debit put 

spread positions. 

(1) The spread exemption customer 

shall agree to and any Member carrying 

an account for the customer shall: 

(i) Comply with all Exchange Rules 

and regulations; 

(ii) liquidate any debit put spreads 

prior to or contemporaneously with a 

decrease in the market value of the 

qualified portfolio, which debit put 

spreads would thereby be rendered 

excessive; and 

(iii) promptly notify the Exchange of 

any change in the qualified portfolio or 

the debit put spread position which 

causes the debit put spreads maintained 

in the cash account to be rendered 

excessive. 

(i) If any Member carrying a cash 

account for a spread exemption 

customer with a debit put spread 

position dealt in on the Exchange has a 

reason to believe that as a result of an 

opening options transaction the 

customer would violate this spread 

exemption, and such opening 

transaction occurs, then the Member has 

violated this Rule 1810. 

(j) Violation of any of these 

provisions, absent reasonable 

justification or excuse, shall result in 

withdrawal of the spread exemption and 

may form the basis for subsequent 

denial of an application for a spread 

exemption hereunder. 

Proposed Rule 1811, Disclaimers, 

disclaims liability for index reporting 

authorities. The Disclaimer shall apply 


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42The term ‘‘reporting authority’’ with respect to 

a particular index means the institution or reporting 

service designated by the Exchange as the official 

source for (1) calculating the level of the index from 

the reported prices of the underlying securities that 

are the basis of the index and (2) reporting such 

level. The reporting authority for each index 

approved for options trading on the Exchange shall 

be Specified (as provided in Rule 1800) in the 

Interpretations and Policies to Rule 1801. See 

proposed Rule 1801(n). Proposed Rule 1800 states 

that where the rules in Chapter XVIII indicate that 

particular indices or requirements with respect to 

particular indices will be ‘‘Specified,’’ MIAX 

Options will file a proposed rule change with the 

Commission pursuant to Section 19 of the Act and 

Rule 19b–4 thereunder to specify such indices or 

requirements, including the designated reporting 

authority for each index listed on the Exchange. 

43The reporting authorities designated by the 

Exchange in respect of each index underlying an 

index options contract traded on the Exchange are 

as provided in a chart in proposed Rule 1801, 

Interpretations and Policies .01. 

44See, e.g., ISE Rule 2011 and CBOE Rule 24.14. 

45Members may not enter into opening 

transactions if the Member has reason to believe 

that as a result of such transaction the Member or 

its customer would, acting alone or in concert with 

others, directly or indirectly control an aggregate 

position in an option contract traded on the 

Exchange in excess of 25,000 or 50,000 or 75,000 

or 200,000 or 250,000 option contracts (whether 

long or short) of the put type and the call type on 

the same side of the market respecting the same 

underlying security, combining for purposes of this 

position limit long positions in put options with 

short positions in call options, and short positions 

in put options with long positions in call options, 

or such other number of option contracts as may be 

fixed from time to time by the Exchange as the 

position limit for one or more classes or series of 

options; or (2) exceed the applicable position limit 

fixed from time to time by another exchange for an 

option contract not traded on the Exchange, when 

the Member is not a member of the other exchange 

on which the transaction was effected. See 

Exchange Rule 307. 

46See Exchange Rule 308(b)(3). 

47This proposed rule is based on ISE Rule 413(d). 

to the reporting authorities 42 identified 

in the Interpretations and Policies to 

proposed Rule 1801.43

Proposed Rule 1811(b), Disclaimer, 

provides that no reporting authority, 

and no affiliate of a reporting authority 

(each such reporting authority, its 

affiliates, and any other entity identified 

in this Rule are referred to collectively 

as a ‘‘Reporting Authority’’), makes any 

warranty, express or implied, as to the 

results to be obtained by any person or 

entity from the use of an index it 

publishes, any opening, intra-day or 

closing value therefor, or any data 

included therein or relating thereto, in 

connection with the trading of any 

options contract based thereon or for 

any other purpose. The Reporting 

Authority shall obtain information for 

inclusion in, or for use in the 

calculation of, such index from sources 

it believes to be reliable, but the 

Reporting Authority does not guarantee 

the accuracy or completeness of such 

index, any opening, intra-day or closing 

value therefor, or any date included 

therein or related thereto. The Reporting 

Authority hereby disclaims all 

warranties of merchantability or fitness 

for a particular purpose or use with 

respect to such index, any opening, 

intra-day, or closing value therefor, any 

data included therein or relating thereto, 

or any options contract based thereon. 

The Reporting Authority shall have no 

liability for any damages, claims, losses 

(including any indirect or consequential 

losses), expenses, or delays, whether 

direct or indirect, foreseen or 

unforeseen, suffered by any person 

arising out of any circumstance or 

occurrence relating to the person’s use 

of such index, any opening, intra-day or 

closing value therefor, any data 

included therein or relating thereto, or 

any options contract based thereon, or 

arising out of any errors or delays in 

calculating or disseminating such index. 

Proposed Rule 1811 concerning 

Disclaimers is based on, and 

substantially similar to, rules that are 

currently operative on other 

exchanges.44

Proposed Rule 1812, Exercise of 

American-Style Index Options, contains 

standards for exercising American-style 

index options. The proposed Rule 

provides that no Member may prepare, 

time stamp or submit an exercise 

instruction for an American-style index 

options series if the Member knows or 

has reason to know that the exercise 

instruction calls for the exercise of more 

contracts than the ‘‘net long position’’ of 

the account for which the exercise 

instruction is to be tendered. For 

purposes of this Rule: (i) The term ‘‘net 

long position’’ shall mean the net 

position of the account in such option 

at the opening of business of the day of 

such exercise instruction, plus the total 

number of such options purchased that 

day in opening purchase transactions up 

to the time of exercise, less the total 

number of such options sold that day in 

closing sale transactions up to the time 

of exercise; (ii) the ‘‘account’’ shall be 

the individual account of the particular 

customer, market-maker or ‘‘noncustomer’’ (as that term is defined in the 

By-Laws of the Clearing Corporation) 

who wishes to exercise; and (iii) every 

transaction in an options series effected 

by a market-maker in a market-maker’s 

account shall be deemed to be a closing 

transaction in respect of the marketmaker’s then positions in such options 

series. No Member may adjust the 

designation of an ‘‘opening transaction’’ 

in any such option to a ‘‘closing 

transaction’’ except to remedy mistakes 

or errors made in good faith. 

Restrictions on Position and Exercise 

Limits 

Exchange Rule 307 currently 

establishes position limits for 

Members.45 Rule 308 sets forth rules 

that apply to Market Makers seeking an 

exemption from the established position 

limits for an option class. Generally, an 

exemption will be granted only to a 

Market Maker who has requested an 

exemption, who is appointed to the 

options class in which the exemption is 

requested, whose positions are near the 

current position limit and who is 

significant in terms of daily volume.46

The positions must generally be within 

ten percent (10%) of the limits 

contained in Rule 307 for equity 

options. Under the proposal, the 

positions must generally be within ten 

percent (10%) of the limits contained in 

Rule 307 for equity and narrow-based 

index options, and twenty percent 

(20%) of those limits for broad-based 

index options. The purpose of this 

provision is to ensure that the Market 

Maker requesting the exemption is 

compliant with the current requirement 

to be a Market Maker whose positions 

are near the current position limit and 

who is significant in terms of daily 

volume. Proposed Rules 1804 through 

1807 described below) contain the 

standard position limit and exercise 

limits for Broad-Based, Industry 

(narrow-based) and Foreign Currency 

index options, as well as exemption 

standards and the procedures for 

requesting exemptions from those 

proposed rules. 

Proposed Rule 308(b)(8) states that a 

Market Maker may rely upon any 

available exemptions from applicable 

position limits granted from time to 

time by another options exchange for 

any options contract traded on the 

Exchange provided that such Market 

Maker: (i) Provides the Exchange with a 

copy of any written exemption issued 

by another options exchange or a 

written description of any exemption 

issued by another options exchange 

other than in writing containing 

sufficient detail for Exchange regulatory 

staff to verify the validity of that 

exemption with the issuing options 

exchange, and (ii) fulfills all conditions 

precedent for such exemption and 

complies at all times with the 

requirements of such exemption with 

respect to the Market Maker’s trading on 

the Exchange.47 The purpose of this 

provision is to afford Market Makers the 

same exemptions available on other 

exchanges that are not explicitly set 

forth in MIAX Options Rules. 


asabaliauskas on DSKBBXCHB2PROD with NOTICES
38956 Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices 

48See, e.g., ISE Rule 705(a); CBOE Rule 6.7(a); 

and Phlx Rule 1102A. 

Proposed amended Rule 313, Other 

Restrictions on Options Transactions 

and Exercises will govern the 

restrictions on the exercise of cash 

settled index options. Specifically, the 

Exchange is proposing to amend Rule 

313(a)(2) to state that during the ten (10) 

business days prior to the expiration 

date of a given series of options, other 

than index options, no restriction on 

exercise under this Rule may be in effect 

with respect to that series of options. 

With respect to index options, 

restrictions on exercise may be in effect 

until the opening of business on the last 

business day before the expiration date. 

Proposed Rule 313(a)(3) prohibits 

exercises under certain conditions, and 

certain exceptions to those prohibitions. 

As an initial matter, exercises of 

American-style, cash-settled index 

options shall be prohibited during any 

time when trading in such options is 

delayed, halted, or suspended, subject 

to the exceptions set forth in the 

remainder of the Rule. The purpose of 

this prohibition is to promote just and 

equitable principles of trade by 

minimizing the ability of the holder of 

such an option to take advantage of such 

a delay, halt or suspension, during 

which market participants with short 

positions, cannot act in response to the 

conditions causing the delay, halt or 

suspension. 

Proposed Rule 313(a)(3) provides 

specific exceptions to the prohibition. 

First, the exercise of an American-style, 

cash-settled index option may be 

processed and given effect in 

accordance with and subject to the 

Rules of the Clearing Corporation while 

trading in the option is delayed, halted, 

or suspended if it can be documented, 

in a form prescribed by the Exchange, 

that the decision to exercise the option 

was made during allowable time frames 

prior to the delay, halt, or suspension. 

The purpose of this exception is to 

provide relief from the prohibition 

when the holder of the option to be 

exercised has made a legitimate 

decision to exercise prior to the delay, 

halt, or suspension. For the same 

reason, proposed Rule 313(a)(3)(ii) 

states that exercises of expiring 

American-style, cash-settled index 

options shall not be prohibited on the 

last business day prior to their 

expiration. Proposed Rule 313(a)(iv) 

states that exercises of American-style, 

cash-settled index options shall not be 

prohibited during a trading halt that 

occurs at or after 4:00 p.m. Eastern time. 

In the event of such a trading halt, 

exercises may occur through 4:20 p.m. 

Eastern time. In addition, if trading 

resumes following such a trading halt 

(such as by closing rotation), exercises 

may occur during the resumption of 

trading and for five (5) minutes after the 

close of the resumption of trading. The 

provisions of this subparagraph are 

subject to the authority of the Exchange 

to impose restrictions on transactions 

and exercises pursuant to paragraph (a) 

of the Rule. 

Finally, the Exchange may determine 

to permit the exercise of American-style, 

cash-settled index options while trading 

in such options is delayed, halted, or 

suspended. The Exchange believes that 

it is consistent with just and equitable 

principles of trade to determine if 

circumstances exist to grant or deny a 

request to exercise an American-style, 

cash-settled index option while trading 

in such options is delayed, halted, or 

suspended. 

Openings 

The Exchange proposes to amend 

Rule 503, Openings, to include index 

options in the Rule by stating that, for 

a period of time before the scheduled 

opening in the underlying security the 

Exchange will accept orders and quotes 

in equity and index options during the 

‘‘Pre-Opening Phase’’. 

Trading Halts 

The Exchange proposes to amend 

Rule 504, Trading Halts, Interpretations 

and Policies .04 to address the handling 

of trade nullifications in index options 

due to trading halts. Specifically, 

Interpretations and Policies .04 would 

be amended to state that, with 

respecting to index options, trades on 

the Exchange will be nullified if the 

trade occurred during a trading halt on 

the primary market in underlying 

securities representing more than 10 

percent of the current index value for 

narrow-based stock index options, and 

20 percent of the current index value for 

broad-based index options. New 

Interpretations and Policies .05 to Rule 

504 states that trading halts, 

resumptions, trading pauses and posthalt notifications involving index 

options are governed by Rules 1808(c)– 

(f) (described above). 

Limitation on Exchange Liability 

The Exchange proposes to amend 

Rule 527, Exchange Liability, to state 

that the Exchange shall have no liability 

to any person for any loss, expense, 

damages or claims that result from any 

error, omission or delay in calculating 

or disseminating any current or closing 

index value or any reports of 

transactions in or quotations for options 

or other securities, including underlying 

securities. The proposed Rule is based 

on the rules of other Exchanges.48 The 

Exchange believes that and such error, 

omission or delay is outside the scope 

of its function and purpose, and thus it 

should not incur loss, damages or 

claims due to conditions caused by the 

action or inaction of other persons. In 

conjunction with MIAX Options Rule 

1811, this proposed rule also limits 

liability regarding the dissemination of 

index information. 

Obligations of Market Makers 

Currently, Rule 603, Obligations of 

Market Makers, Rule 603(a), imposes 

obligations on Market Makers to refrain 

from purchasing a call option or a put 

option at a price more than $0.25 below 

parity, and places restrictions on the 

maximum permissible bid/ask 

differential for an option, depending on 

the width of the quote in the underlying 

security. 

Current Rule 603(b)(4) requires 

Market Makers to price option contracts 

fairly by, among other things, bidding 

and offering so as to create differences 

of no more than $5 between the bid and 

offer (‘‘bid/ask differentials’’) following 

the opening rotation in an equity option 

contract; current Rule 603(b)(5), 

however, states that the bid/ask 

differentials stated in subparagraph 

(b)(4) of the Rule shall not apply to inthe-money options where the 

underlying security’s market is wider 

than the differentials set forth above. 

For these options, the bid/ask 

differential may be as wide as the 

quotation on the primary market of the 

underlying security. 

The Exchange proposes to amend 

Rule 603(b)(5) to state, in new subparagraph (b)(5)(ii), that the Exchange or 

its authorized agent may calculate bids 

and asks for various indices for the sole 

purpose of determining permissible bid/ 

ask differentials on options on these 

indices. These values will be calculated 

by determining the weighted average of 

the bids and asks for the components of 

the corresponding index. These bids 

and asks will be disseminated by the 

Exchange at least every fifteen (15) 

seconds during the trading day solely 

for the purpose of determining the 

permissible bid/ask differential that 

market-makers may quote on an in-themoney option on the indices. For in-themoney series in index options where the 

calculated bid/ask differential is wider 

than the applicable differential set out 

in subparagraph (b)(4) of this Rule, the 

bid/ask differential in the index options 

series may be as wide as the calculated 

bid/ask differential in the underlying 


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Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices 38957 

49See, e.g., ISE Rule 2012; CBOE Rule 24.18; and 

Phlx Rule 1042A. 

50 15 U.S.C. 78f(b). 

51 15 U.S.C. 78f(b)(5). 

index. The Exchange will not make a 

market in the basket of stock comprising 

the indices and is not guaranteeing the 

accuracy or the availability of the bid/ 

ask values. The Exchange believes that 

the calculation of a bid/ask differential 

for the underlying index perfects the 

mechanisms of a free and open market 

and a national market system by using 

a weighted average method to determine 

allowable bid/ask differentials in 

options overlying an index. This 

calculation should provide an accurate 

standard for Market Makers to follow 

when establishing their markets. The 

Exchange believes that the proposed 

rule will result in narrower bid/ask 

differentials in index option quotations 

on the Exchange, all to the benefit of 

investors and the marketplace as a 

whole. 

In conjunction with the amendments 

to Rule 308, the Exchange is proposing 

to adopt new Rule 700(h) to set forth the 

process to be followed by Clearing 

Members and Members when exercising 

American-style cash-settled options. 

Specifically, Clearing Members must 

follow the procedures of the Clearing 

Corporation when exercising Americanstyle cash-settled index options 

contracts issued or to be issued in any 

account at the Clearing Corporation. 

Members must also follow the 

procedures set forth below with respect 

to American-style cash-settled index 

options: 

First, for all contracts exercised by the 

Member or by any customer of the 

Member, an ‘‘exercise advice’’ must be 

delivered by the Member in such form 

or manner prescribed by the Exchange 

no later than 4:20 p.m. Eastern time, or 

if trading hours are extended or 

modified in the applicable options class, 

no later than five (5) minutes after the 

close of trading on that day. Subsequent 

to the delivery of an ‘‘exercise advice,’’ 

should the Member or a customer of the 

Member determine not to exercise all or 

part of the advised contracts, the 

Member must also deliver an ‘‘advice 

cancel’’ in such form or manner 

prescribed by the Exchange no later 

than 4:20 p.m. Eastern time, or if trading 

hours are extended or modified in the 

applicable options class, no later than 

five (5) minutes after the close of trading 

on that day. This is to ensure that the 

Exchange and the Clearing Corporation 

are given adequate notice to process the 

‘‘exercise advice’’ or ‘‘advice cancel’’. 

The Exchange may determine to extend 

the applicable deadline for the delivery 

of ‘‘exercise advice’’ and ‘‘advice 

cancel’’ notifications pursuant to this 

paragraph (h) if unusual circumstances 

are present. The purpose of this 

provision is to provide a fair and 

equitable determination to allow more 

time for such delivery if the 

circumstances warrant. 

Proposed Rule 700(h)(4) states that no 

Member may prepare, time stamp or 

submit an ‘‘exercise advice’’ prior to the 

purchase of the contracts to be exercised 

if the Member knew or had reason to 

know that the contracts had not yet been 

purchased. The proposed Rule is 

intended to further just and equitable 

principles of trade by stating in 

proposed Rule 700(h)(5) that the failure 

of any Member to follow the procedures 

in this paragraph (h) may result in the 

assessment of a fine, which may include 

but is not limited to disgorgement of 

potential economic gain obtained or loss 

avoided by the subject exercise, as 

determined by the Exchange. 

Additionally, under proposed Rule 

700(h)(6) preparing or submitting an 

‘‘exercise advice’’ or ‘‘advice cancel’’ 

after the applicable deadline on the 

basis of material information released 

after such deadline, in addition to 

constituting a violation of the Rule, is 

activity inconsistent with just and 

equitable principles of trade. 

Proposed Rules 700(h)(7) and (8) 

include prohibitions and exceptions to 

the submission of corresponding 

‘‘exercise advice’’ and ‘‘advice cancel’’ 

forms that are similar to the prohibitions 

and exceptions to the exercise of index 

options in Rule 313(a)(3). 

The proposed rule relating to the 

exercise of American-style options is 

based on, and substantially similar to, 

rules currently operative on other 

Exchanges.49

Surveillance and Capacity 

The Exchange represents that is has 

an adequate surveillance program in 

place for index options. The Exchange 

is a member of the ISG, which ‘‘is 

comprised of an international group of 

exchanges, market centers, and market 

regulators.’’ The purpose of the ISG is to 

provide a framework for the sharing of 

information and the coordination of 

regulatory efforts among exchanges 

trading securities and related products 

to address potential intermarket 

manipulations and trading abuses. The 

ISG plays a crucial role in information 

sharing among markets that trade 

securities, options on securities, 

security futures products, and futures 

and options on broad-based security 

indexes. A list identifying the current 

ISG members is available at https://

www.isgportal.org/home.html. 

MIAX Options has analyzed its 

capacity and represents that it believes 

the Exchange and the Options Price 

Reporting Authority (‘‘OPRA’’) have the 

necessary systems capacity to handle 

the additional traffic associated with the 

listing and trading of index options. 

The Exchange will announce the 

implementation date of the proposed 

rule change by Regulatory Circular to be 

published no later than 90 days 

following the date the Commission 

issues an order approving the proposed 

rule change. The implementation date 

will be no later than 90 days following 

the issuance of the Regulatory Circular. 

2. Statutory Basis 

MIAX believes that its proposed rule 

change is consistent with Section 6(b) of 

the Act 50 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 51

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 mechanisms of a free 

and open market and a national market 

system and, in general, to protect 

investors and the public interest. 

The Exchange believes that the 

proposed rule change will expand the 

Exchange’s capability to introduce and 

trade both existing and new and 

innovative index products on the MIAX 

Options System. The added capability is 

consistent with the Act in that it should 

foster cooperation and coordination 

with persons engaged in regulating, 

clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 

specifically index options. The 

Exchange believes that there is unmet 

market demand on MIAX Options for 

exchange-listed index options and the 

listing and trading of index options on 

the Exchange is designed to attract both 

liquidity and order flow to the 

Exchange, all to the benefit of the 

marketplace as a whole. 

The Exchange believes that the 

requirements in the proposed listing 

standards regarding, among other 

things, the minimum market 

capitalization, trading volume, and 

relative weightings of an underlying 

index’s component stocks are designed 

to ensure that the markets for the 

index’s component stocks are 

adequately capitalized and sufficiently 

liquid, and that no one stock dominates 

the index. These requirements are 


asabaliauskas on DSKBBXCHB2PROD with NOTICES
38958 Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices 

52See ISE Rule 2009; CBOE Rule 24.9; and Phlx 

Rule 1101A. 53See, e.g., ISE Rule 2011 and CBOE Rule 24.14. 

designed to remove impediments to and 

perfect the mechanisms of a free and 

open market and a national market 

system and, in general, to protect 

investors and the public interest, by 

ensuring that unusual or extreme 

volatility in any single component of an 

index could not cause the entire index 

to become so volatile that it puts 

investors at undue and unplanned risk. 

These requirements also minimize the 

potential for manipulating the 

underlying index, which protects 

investors and the public interest. 

The Exchange further believes that the 

requirement in proposed Rule 

1802(b)(10) that the current underlying 

index value will be reported at least 

once every 15 seconds during the time 

the index options are traded on the 

Exchange, and the requirement in 

proposed Rule 1802(d)(11) (with respect 

to broad-based index options) that the 

current index value be widely 

disseminated at least once every 15 

seconds by OPRA, the CTA, NIDS or 

one or more major market data vendors 

during the time the index options are 

traded on the Exchange removes 

impediments to and perfects the 

mechanisms of a free and open market 

and a national market system by 

providing transparency with respect to 

current index values and by 

contributing to the overall transparency 

of the market for index options. In 

addition, the Exchange believes that the 

requirement in proposed Rule 

1802(d)(2) that an index option be A.M.- 

settled, rather than based on closing 

prices, should help to reduce the 

potential impact of expiring index 

options on the market for an index’s 

component securities. 

The Exchange believes that the 

requirement in proposed Rule 1803 to 

disseminate of index values as a 

condition to the trading of options on an 

index fosters cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in, securities by 

requiring absolute transparency 

regarding the dissemination of index 

values. The requirement that the 

Exchange disseminate, or assure that the 

current index value is disseminated, 

and the requirement that the Exchange 

maintain, in files available to the public, 

information identifying the components 

whose prices are the basis for 

calculation of the index and the method 

used to determine the current index 

value, protects investors and the public 

interest by ensuring that the current 

index value is disseminated regularly 

and consistently. 

The Exchange’s proposal to adopt 

Rules 1804 through 1807 relating to 

position limits, exemptions from 

position limits, exercise limits in index 

options, and regular maintenance 

reviews are designed to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest, by limiting investors’ 

levels of concentration in a single index 

position. Not only would an investor be 

at undue risk by assuming such a 

position, but the market for the affected 

index option could be 

disproportionately affected by the 

trading activities of that single investor 

with an unusually large long or short 

position. The Exchange is proposing to 

mitigate this risk by establishing the 

same position and exercise limits, and 

hedging rules, that already exist on 

other exchanges, all designed for the 

protection of investors and the public 

interest. 

Proposed Rule 1808, Trading 

Sessions, is designed to foster 

cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with 

respect to, and facilitating transactions 

in, securities, by establishing the same, 

uniform trading hours for index options 

as other exchanges. The Exchange’s 

proposal to establish rules and 

procedures for openings, halts and 

reopenings, together with the 

designation by the Board of an Exchange 

official authorized to halt trading when, 

in his or her judgment, such action is 

appropriate in the interests of a fair and 

orderly market is designed to protect 

investors and the public interest by 

ensuring that there are multiple 

safeguards available during times of 

unusual or particularly volatile market 

activity. 

Proposed MIAX Options Rule 1809, 

Terms of Index Options Contracts, 

outlines the terms of index options 

contracts in terms of the meaning of 

premium bids and offers; exercise 

prices; expiration months; the trading of 

European Style Index options. This 

proposed Rule is the same as the rules 

concerning terms of index options 

contracts on other exchanges. 52

Proposed Rule 1809 is a generic rule 

concerning the manner of trading of 

index option contracts. The Exchange’s 

proposal to adopt existing uniform rules 

governing terms of index option 

contracts is designed to perfect the 

mechanisms of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest by adopting standards 

and rules for index option contracts that 

are consistent with other exchanges’ 

standards and rules. The Exchange 

believes that this benefits investors and 

the marketplace as a whole because 

investors who determine to trade index 

options on MIAX Options will not need 

to rely on an unfamiliar set of rules and 

contract terms when they begin trading 

index options here. 

The Exchange believes that its 

proposal to include index options in the 

Short Term Options Series Program 

removes impediments to, and perfects 

the mechanisms of, a free and open 

market and a national market system, 

and will benefit market participants by 

giving them more flexibility to closely 

tailor their investment and hedging 

decisions in a greater number of 

securities. The Exchange also believes 

that expanding the Short Term Options 

Series Program to include index options 

will provide the investing public and 

other market participants with 

additional opportunities to hedge their 

investment, thus allowing these 

investors to better manage their 

acceptable risk tolerance levels, all to 

the benefit of the investing public and 

the marketplace as a whole. 

The Exchange’s proposal to adopt 

Rule 1810 relating to debit put spreads 

fosters cooperation and coordination 

with persons engaged in regulating, 

clearing, settling, processing 

information with respect to, and 

facilitates transactions in, securities, by 

maintaining uniformity in its rules 

governing this strategy with the same 

specificity as the rules on other 

exchanges. 

Proposed Rule 1811 concerning 

Disclaimers is based on, and 

substantially similar to, rules that are 

currently operative on other 

exchanges.53 The proposed Rule 

promotes just and equitable principles 

of trade by stating that a Reporting 

Authority shall have no liability for any 

damages, claims, losses (including any 

indirect or consequential losses), 

expenses, or delays, whether direct or 

indirect, foreseen or unforeseen, 

suffered by any person arising out of 

any circumstance or occurrence relating 

to the person’s use of an index, any 

opening, intra-day or closing value 

therefor, any data included therein or 

relating thereto, or any options contract 

based thereon, or arising out of any 

errors or delays in calculating or 

disseminating such index. 

Proposed Rule 1812, Exercise of 

American-Style Index Options, is 


asabaliauskas on DSKBBXCHB2PROD with NOTICES
Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices 38959 

54See, e.g., ISE Rule 2012; CBOE Rule 24.18; and 

Phlx Rule 1042A. 

designed to prevent fraudulent and 

manipulative acts and practices and to 

promote just and equitable principles of 

trade by providing that no Member may 

prepare, time stamp or submit an 

exercise instruction for an Americanstyle index options series if the Member 

knows or has reason to know that the 

exercise instruction calls for the 

exercise of more contracts than the then 

‘‘net long position’’ of the account for 

which the exercise instruction is to be 

tendered. The proposed Rule contains 

standards for exercising American-style 

index options that are in effect on other 

exchanges.54

The Exchange’s proposal to adopt a 

requirement that a Market Maker 

requesting a position limit exemption 

must have a position that is within 

twenty percent of the existing limits 

contained in Rule 307 removes 

impediments to and perfects the 

mechanisms of a free and open market 

by requiring Market Makers seeking the 

exemption to have positions that are 

within a reasonable range of existing 

position limits. This should ensure that 

the Market Makers seeking the position 

limit exemption are those whose 

positions are near the current position 

limit and who have significant daily 

volume, as required by the current Rule. 

Additionally, the proposed 

amendments to Rule 313 prohibiting 

exercise of American-style, cash settled 

index options during any time when 

trading in such options is delayed, 

halted, or suspended, protects investors 

and the public interest by limiting the 

ability of holders of such options to take 

advantage of such a delay, halt or 

suspension, during which all market 

participants cannot act in response to 

the conditions causing the delay, halt or 

suspension. 

The Exchange believes that proposed 

Rule 603(b)(5)(ii) to permit the 

Exchange or its authorized agent may 

calculate bids and asks for various 

indices for the sole purpose of 

determining permissible bid/ask 

differentials on options on these indices 

perfects the mechanisms of a free and 

open market and a national market 

system by using a weighted average 

method of determining allowable bid/ 

ask differentials. The Exchange believes 

that the calculation of a bid/ask 

differential for the underlying index 

perfects the mechanisms of a free and 

open market and a national market 

system by determining reasonable 

allowable bid/ask differentials in 

options overlying an index. This 

calculation should provide an accurate 

standard for Market Makers to follow 

when establishing their markets. The 

Exchange believes that the proposed 

rule will result in narrower bid/ask 

differentials in index option quotations 

on the Exchange, all to the benefit of 

investors and the marketplace as a 

whole. 

The Exchange believes that its 

proposed surveillance program and 

available capacity with respect to the 

listing and trading of index options 

perfects the mechanisms of a free and 

open market and a national market 

system through, among other things, its 

membership in ISG and its current 

available capacity. As discussed above, 

the Exchange represents that has an 

adequate surveillance program in place 

for index options. The Exchange is a 

member of the ISG, which ‘‘is 

comprised of an international group of 

exchanges, market centers, and market 

regulators.’’ The purpose of the ISG is to 

provide a framework for the sharing of 

information and the coordination of 

regulatory efforts among exchanges 

trading securities and related products 

to address potential intermarket 

manipulations and trading abuses. The 

ISG plays a crucial role in information 

sharing among markets that trade 

securities, options on securities, 

security futures products, and futures 

and options on broad-based security 

indexes. A list identifying the current 

ISG members is available at https://

www.isgportal.org/home.html. MIAX 

Options has analyzed its capacity and 

represents that it believes the Exchange 

and the Options Price Reporting 

Authority (‘‘OPRA’’) have the necessary 

systems capacity to handle the 

additional traffic associated with the 

listing and trading of index options. 

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. On the 

contrary, the Exchange believes that the 

proposed rule change will enable the 

Exchange to compete for order flow in 

index options products with other 

exchanges that currently have rules and 

functionality in place to list and trade 

index options. 

The Exchange further believes that the 

proposed rule change will enhance 

intra-market competition, as more 

varied index products become available 

for trading on the Exchange, which 

should encourage a greater number of 

Market Makers to trade index options, 

resulting in greater liquidity and more 

competitive quoting on the Exchange. 

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 (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the Exchange consents, 

the Commission shall: (a) By order 

approve or disapprove such 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. 

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–2017–39 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–2017–39. 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 Web site (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 Web site viewing and 


asabaliauskas on DSKBBXCHB2PROD with NOTICES
38960 Federal Register / Vol. 82, No. 157 / Wednesday, August 16, 2017 / Notices 

55 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6)(iii). 

5See Securities Exchange Act Release No. 68303 

(November 27, 2012), 77 FR 71652 (December 3, 

2012) (‘‘RPI Approval Order’’) (SR–BYX–2012–019). 

6A ‘‘User’’ is defined in BYX Rule 1.5(cc) as any 

member or sponsored participant of the Exchange 

who is authorized to obtain access to the System. 

7A ‘‘Retail Order’’ is defined in Rule 11.24(a)(2) 

as an agency order that originates from a natural 

person and is submitted to the Exchange by a RMO, 

provided that no change is made to the terms of the 

order with respect to price or side of market and 

the order does not originate from a trading 

algorithm or any computerized methodology. See 

Rule 11.24(a)(2). 

8The term Protected Quotation is defined in BYX 

Rule 1.5(t) and has the same meaning as is set forth 

in Regulation NMS Rule 600(b)(58). The terms 

Protected NBB and Protected NBO are defined in 

BYX Rule 1.5(s). The Protected NBB is the bestpriced protected bid and the Protected NBO is the 

best-priced protected offer. Generally, the Protected 

NBB and Protected NBO and the national best bid 

(‘‘NBB’’) and national best offer (‘‘NBO’’, together 

with the NBB, the ‘‘NBBO’’) will be the same. 

However, a market center is not required to route 

to the NBB or NBO if that market center is subject 

to an exception under Regulation NMS Rule 

611(b)(1) or if such NBB or NBO is otherwise not 

available for an automatic execution. In such case, 

the Protected NBB or Protected NBO would be the 

best-priced protected bid or offer to which a market 

center must route interest pursuant to Regulation 

NMS Rule 611. 

9See RPI Approval Order, supra note 5 at 71652. 

10 Id. 

11See Securities Exchange Act Release Nos. 

71249 (January 7, 2014), 79 FR 2229 (January 13, 

2014) (SR–BYX–2014–001) (Notice of Filing and 

Immediate Effectiveness of a Proposed Rule Change 

to Extend the Pilot Period for the Retail Price 

Improvement Program); 74111 (January 22, 2015), 

80 FR 4598 (January 28, 2015) (SR–BYX–2015–05) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change to Extend the Pilot Period for 

BATS Y-Exchange, Inc.’s Retail Price Improvement 

(‘‘RPI’’) Program for 12 Months, To Expire on 

January 31, 2016); 76965 (January 22, 2016), 81 FR 

4682 (January 27, 2016) (SR–BYX–2016–01) (Notice 

of Filing and Immediate Effectiveness of a Proposed 

Rule Change to Rule 11.24, Retail Price 

Improvement Program, To Extend the Pilot Period); 

78180 (June 28, 2016), 81 FR 43306 (July 1, 2016) 

(SR–BYX–2016–15) (Notice of Filing and Immediate 

Effectiveness of a Proposed Rule Change to Rule 

11.24, Retail Price Improvement Program, To 

Extend the Pilot Period). 

12A ‘‘Retail Price Improvement Order’’ is defined 

in Rule 11.24(a)(3) as an order that consists of nondisplayed interest on the Exchange that is priced 

better than the Protected NBB or Protected NBO by 

at least $0.001 and that is identified as such. See 

Rule 11.24(a)(3). 

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; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–MIAX– 

2017–39 and should be submitted on or 

before September 6, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.55

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2017–17272 Filed 8–15–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81368; File No. SR– 

BatsBYX–2017–18] 

Self-Regulatory Organizations; Bats 

BYX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change to Rule 11.24, 

Retail Price Improvement Program, To 

Extend the Pilot Period 

August 10, 2017. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 8, 

2017, Bats BYX Exchange, Inc. (the 

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

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 filed a proposal to 

extend the pilot period for the 

Exchange’s Retail Price Improvement 

(‘‘RPI’’) Program (the ‘‘Program’’), which 

was set to expire on July 31, 2017, for 

12 months, to expire on July 31, 2018. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at www.bats.com, at the principal office 

of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In November 2012, the Commission 

approved the RPI Program on a pilot 

basis.5 The Program is designed to 

attract retail order flow to the Exchange, 

and allows such order flow to receive 

potential price improvement. The 

Program is currently limited to trades 

occurring at prices equal to or greater 

than $1.00 per share. Under the 

Program, all Exchange Users 6 are 

permitted to provide potential price 

improvement for Retail Orders 7 in the 

form of non-displayed interest that is 

better than the national best bid that is 

a Protected Quotation (‘‘Protected 

NBB’’) or the national best offer that is 

a Protected Quotation (‘‘Protected 

NBO’’, and together with the Protected 

NBB, the ‘‘Protected NBBO’’).8

The Program was approved by the 

Commission on a pilot basis running 

one-year from the date of 

implementation.9 The Commission 

approved the Program on November 27, 

2012.10 The Exchange implemented the 

Program on January 11, 2013, and has 

extended the pilot period four times.11

The pilot period for the Program expired 

on July 31, 2017. The lapse of the pilot 

was inadvertent and this filing seeks to 

reinstate the pilot under the same terms 

as the original pilot. 

Proposal To Extend the Operation of the 

Program 

The Exchange established the RPI 

Program in an attempt to attract retail 

order flow to the Exchange by 

potentially providing price 

improvement to such order flow. The 

Exchange believes that the Program 

promotes competition for retail order 

flow by allowing Exchange members to 

submit Retail Price Improvement Orders 

(‘‘RPI Orders’’) 12 to interact with Retail 

Orders. Such competition has the ability 


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