50916 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices 

27The Exchange represents that the Web site 

containing this information will be at 

www.eatonvance.com and/or www.nextshares.com. 

28The Commission notes that certain other 

proposals for the listing and trading of Managed 

Fund Shares include a representation that the 

exchange will ‘‘surveil’’ for compliance with the 

continued listing requirements. See, e.g., Securities 

Exchange Act Release No. 78005 (Jun. 7, 2016), 81 

FR 38247 (Jun. 13, 2016) (SR–BATS–2015–100). In 

the context of this representation, it is the 

Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ 

both mean ongoing oversight of a fund’s compliance 

with the continued listing requirements. Therefore, 

the Commission does not view ‘‘monitor’’ as a more 

or less stringent obligation than ‘‘surveil’’ with 

respect to the continued listing requirements. 

29See supra note 4. 

30 15 U.S.C. 78f(b)(5). 

31 15 U.S.C. 78k–1(a)(1)(C)(iii). 

32 15 U.S.C. 78s(b)(2). 

33 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

4The ‘‘Simple Order Book’’ is the Exchange’s 

regular electronic book of orders and quotes. See 

Exchange Rule 518(a)(15). 

public Web site through which its 

current prospectus may be 

downloaded.27 The Web site will 

include additional information 

concerning the Fund updated on a daily 

basis, including the prior business day’s 

NAV, and the following trading 

information for that business day 

expressed as premiums/discounts to 

NAV: (a) Intraday high, low, average, 

and closing prices of Shares in 

Exchange trading; (b) the midpoint of 

the highest bid and lowest offer prices 

as of the close of Exchange trading, 

expressed as a premium/discount to 

NAV (‘‘Closing Bid/Ask Midpoint’’); 

and (c) the spread between highest bid 

and lowest offer prices as of the close of 

Exchange trading (‘‘Closing Bid/Ask 

Spread.’’). The Web site will also 

contain charts showing the frequency 

distribution and range of values of 

trading prices, Closing Bid/Ask 

Midpoints, and Closing Bid/Ask 

Spreads over time. 

The Exchange represents that all 

statements and representations made in 

the filing regarding: (a) The description 

of the portfolio or reference assets, (b) 

limitations on portfolio holdings or 

reference assets, (c) dissemination and 

availability of the reference asset or IIV, 

or (d) the applicability of Exchange 

listing rules shall constitute continued 

listing requirements for listing the 

Shares on the Exchange. The issuer has 

represented to the Exchange that it will 

advise the Exchange of any failure by 

the Fund to comply with the continued 

listing requirements, and, pursuant to 

its obligations under Section 19(g)(1) of 

the Act, the Exchange will monitor for 

compliance with the continued listing 

requirements.28 If the Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures for the 

Fund under the Nasdaq 5800 Series. 

This approval order is based on all of 

the Exchange’s representations, 

including those set forth above and in 

Amendment No. 1.29 In particular, the 

Commission notes that, although the 

Shares will be available for purchase 

and sale on an intraday basis, the Shares 

will be purchased and sold at prices 

directly linked to the Fund’s nextdetermined NAV. The Commission 

notes that the Fund and the Shares must 

comply with the requirements of 

Nasdaq Rule 5745 and the conditions 

set forth in this proposed rule change to 

be listed and traded on the Exchange on 

an initial and continuing basis. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with Section 

6(b)(5) 30 and Section 11A(a)(1)(C)(iii) of 

the Act,31 and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,32 that the 

proposed rule change (SR–NASDAQ– 

2017–090), as modified by Amendment 

No. 1, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23830 Filed 11–1–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81967; File No. SR–MIAX– 

2017–44] 

Self-Regulatory Organizations; Miami 

International Securities Exchange LLC; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend MIAX Options Rule 

518 Relating to Derived Orders 

October 27, 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 October 19, 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 and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend Exchange Rule 518(a)(9) to: (i) 

Update the definition of a derived order 

on the Exchange, (ii) clarify the 

circumstances under which a derived 

order is generated by the Exchange’s 

System, and the price at which a 

derived order may be generated, and 

(iii) expand the situations under which 

a derived order is removed from the 

Exchange’s Simple Order Book. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

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

office, and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Exchange Rule 518(a)(9) to: (i) Update 

the definition of a derived order on the 

Exchange, (ii) clarify the circumstances 

under which a derived order is 

generated by the Exchange’s System,3

and the price at which a derived order 

may be generated, and (iii) expand the 

situations under which a derived order 

is removed from the Exchange’s Simple 

Order Book.4

A ‘‘derived order’’ is an Exchangegenerated limit order on the Simple 

Order Book that represents either the 

bid or offer of one component of a 

complex order resting on the Strategy 


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5The ‘‘Strategy Book’’ is the Exchange’s 

electronic book of complex orders and complex 

quotes. See Exchange Rule 518(a)(17). 

6See Exchange Rule 518(a)(9). 

7The term ‘‘Member’’ means an individual or 

organization approved to exercise the trading rights 

associated with a Trading Permit. Members are 

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

Exchange Rule 100. 

8The term ‘‘MBBO’’ means the best bid or offer 

on the Simple Order Book (as defined below) on the 

Exchange. See Exchange Rule 518(a)(13). 

9A leg order may only be generated for the legs 

of complex orders with a ratio of 1:1, 1:2, or 1:3. 

(A leg order will not be generated for the legs of 

a complex order with a 1:4 ratio). For example, if 

a complex order to buy 10 of series A and sell 20 

of series B is resting on the Strategy Book, a leg 

order will be generated for the leg to buy 10 of 

series A (ratio of 1:2), but not for the leg to sell 20 

of series B (ratio of 2:1). If a complex order to buy 

20 of series A and sell 30 of series B is resting on 

the Strategy Book, no leg orders will be generated 

for either leg (ratio is 2:3 for leg 1 and 3:2 for leg 

2). 

10See Chicago Board Options Exchange, Inc. 

(‘‘CBOE’’) Rule 6.53(x). 

11The Exchange notes that other exchanges 

require a complex order used to generate a derived 

or ‘‘legging’’ order to be for an equal quantity of two 

options. See, e.g., NASDAQ PHLX LLC (‘‘Phlx’’) 

Rule 1098(f)(iii)(C)(1). See also, Nasdaq ISE, LLC 

(‘‘ISE’’) Rule 715(k). The Exchange’s proposal is 

distinguished in that it seeks to expand its current 

one-to-one ratio requirement to include any 

complex order with a component that has a base of 

one with respect to the other component. 

12Under the managed interest process, nonroutable orders whose limit price locks or crosses 

the current opposite side National Best Bid or Offer 

(‘‘NBBO’’) are displayed one Minimum Price 

Variation (‘‘MPV’’) away from the current opposite 

side NBBO, and placed on the Simple Order Book 

at a price that will lock the current opposite side 

NBBO. Should the NBBO price change to an 

inferior price level, the order’s price on the Simple 

Order Book will continuously re-price to lock the 

new NBBO and the managed order’s displayed 

price will continuously re-price one MPV away 

from the new NBBO. See Exchange Rule 

515(c)(1)(ii). 

13The term ‘‘NBBO’’ means the national best bid 

or offer as calculated by the Exchange based on 

market information received from OPRA. See 

Exchange Rule 100. 

14The default Minimum Price Variation (‘‘MPV’’) 

of an option contract trading at less than $3.00 per 

option is $.05. See Exchange Rule 510. 

15The ‘‘icMBBO’’ is the Implied Complex MIAX 

Best Bid or Offer. The icMBBO is a calculation that 

uses the best price from the Simple Order Book for 

each component of a complex strategy including 

displayed and non-displayed trading interest. See 

Exchange Rule 518(a)(11). 

16The ‘‘cNBBO’’ is the Complex National Best 

Bid or Offer. The cNBBO is calculated using the 

NBBO for each component of a complex strategy to 

establish the best net bid and offer for a complex 

strategy. See Exchange Rule 518(a)(2). 

17The term ‘‘ABBO’’ means the best bid(s) or 

offer(s) disseminated by other Eligible Exchanges 

(defined in Exchange Rule 1400(f)) and calculated 

by the Exchange based on market information 

received by the Exchange from OPRA. See 

Exchange Rule 100. 

18The term ‘‘Book’’ means the electronic book of 

buy and sell orders and quotes maintained by the 

System. See Exchange Rule 100. 

Book 5 that is comprised of orders to buy 

or sell an equal quantity (currently with 

a one-to-one ratio) of two option 

components.6 Derived orders will not be 

routed outside of the Exchange 

regardless of the price(s) disseminated 

by away markets. The Exchange will 

determine on a class-by-class basis to 

make available derived orders and 

communicate such determination to 

Members 7 via a Regulatory Circular. 

Derived orders are firm orders (i.e., if 

executed, firm for the disseminated 

price and size) that are included in the 

MBBO.8

The Exchange is proposing to amend 

the definition of a ‘‘derived order’’ in 

two ways. First, the Exchange is 

proposing to revise the current 

requirement in Rule 518(a)(9) that a 

derived order can only be generated 

from one component of a complex order 

resting on the Strategy Book that is 

comprised of orders to buy or sell an 

equal quantity (currently with a one-toone ratio) of two option components. 

Under the proposal, a derived order may 

now be comprised of orders to buy or 

sell two option components, where the 

size of one component has a base ratio 

of ‘‘one’’ relative to the other component 

(1:1, 1:2, or 1:3). Thus, the basis for the 

generation of derived orders on the 

Exchange will not be restricted to 

complex orders of equal size with a oneto-one ratio; instead, a derived order 

may be generated by using a complex 

order resting on the Strategy Book with 

two components, provided that one 

component of the complex order has a 

base ratio of one relative to the other 

component. For example, a complex 

order whose components have a size 

ratio of 1:3 could be used to generate a 

derived order, whereas a complex order 

whose components have a size ratio of 

2:3 could not.9 The Exchange notes that 

another options exchange permits a 

derived, or ‘‘leg’’ order, to be generated 

using a complex order with a ratio 

greater than 1:1.10 The Exchange 

believes that the revision of the one-toone ratio limitation should increase the 

potential number of derived orders that 

may be generated by the System, which 

should result in greater liquidity and 

more opportunities for participants to 

trade complex orders on the 

Exchange.11

The Exchange is also proposing to 

amend Rule 518(a)(9) by adding a final 

sentence stating that derived orders are 

subject to the managed interest process 

described in Rule 515(c)(1)(ii).12 The 

purpose of this provision is to ensure 

that a derived order (which is firm for 

its price and size) is handled in 

accordance with that Rule so that it does 

not lock or cross an away market price 

at the NBBO.13 An example of a derived 

order subject to the managed interest 

process is provided below. 

Example 1 

Option A ($.05 MPV) 14

MBBO: $2.00 × $2.20 

ABBO: $2.00 × $2.10 

NBBO: $2.00 × $2.10 

Option B ($.05 MPV) 

MBBO: $1.00 × $1.05 

ABBO: $1.00 × $1.05 

NBBO: $1.00 × $1.05 

Strategy: Buy 1 Option A, Sell 1 Option 

B 

icMBBO: 15 $.95 × $1.20 

cNBBO: 16 $.95 × $1.10 

Strategy Order 

Buy 1 (+1A ¥1B) $1.10 net debit 

The System will create a derived 

order to buy Option A at a price of 

$2.10. The new MBBO would be $2.10 

× $2.20. However, the $2.10 bid price 

would lock the ABBO 17 offer for Option 

A, which is being quoted on an away 

exchange at $2.00 × $2.10. Therefore, 

the derived order will be managed in 

accordance with the Exchange’s 

managed interest process. Under the 

Exchange’s managed interest process for 

non-routable orders defined in Rule 

515(c)(1)(ii)(A), if the limit price of an 

order ($2.10 bid) locks or crosses the 

current opposite side NBBO ($2.10 

offer), the System will display the order 

one MPV ($.05) away from the current 

opposite side NBBO ($2.05 bid), and 

book the order at a price that will lock 

the current side NBBO. Therefore, the 

derived order in Option A will have a 

Book 18 price of $2.10 and will be 

displayed at $2.05, the MBBO will 

therefore be $2.05 × $2.20. 

Option A 

MBBO: $2.05 × $2.20 

ABBO: $2.00 × $2.10 

NBBO: $2.05 × $2.10 

Should interest arrive on MIAX 

Options to sell at $2.10 or lower, it will 

trade at $2.10 against the derived order, 

as Rule 515(c)(1)(ii)(A) provides that if 

the Exchange receives a new order or 

quote on the opposite side of the market 

from the managed order that can be 

executed, the System will immediately 

execute the remaining contracts from 

the initiating order to the extent 

possible at the order’s current Book 

price ($2.10), provided that the 

execution price does not violate the 

current NBBO. The other side of the 

complex order will execute against the 

$1.00 bid price for Option B, effectively 

legging the complex order for a net price 

of $1.10. 

The Exchange believes that generating 

and managing a derived order (rather 


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19Other exchanges have determined not to 

generate derived or ‘‘leg’’ orders that would lock or 

cross the NBBO. See, e.g., CBOE Rule 

6.53C(c)(iv)(1)(A). See also, ISE Rule 715(k)(1). 

Despite this distinction, the Exchange’s inclusion of 

derived orders in the managed interest process is 

intended to achieve the same result, i.e., to prevent 

a derived order from locking or crossing an away 

market. 

20See Exchange Rule 518(a)(9)(ii). 

21Complex orders up to a maximum number of 

legs (determined by the Exchange on a class-byclass basis as either two or three legs and 

communicated to Members via Regulatory Circular) 

may be automatically executed against bids and 

offers on the Simple Order Book for the individual 

legs of the complex order (‘‘Legging’’), provided the 

complex order can be executed in full or in a 

permissible ratio by such bids and offers, and 

provided that the execution price of each 

component is not executed at a price that is outside 

of the NBBO. See Exchange Rule 518(c)(2)(iii). 

22The Exchange notes that while derived order 

functionality was approved with the Exchange’s 

filing to adopt new rules to govern the trading of 

Complex orders, the functionality has not yet been 

implemented in the System. See Exchange Act 

Release No. 79072 (October 7, 2016), 81 FR 71131 

(October 14, 2016) (SR–MIAX–2016–26). 

23The System continually evaluates complex 

orders and quotes on the Strategy Book to 

determine, among other things, whether a derived 

order should be generated or cancelled. See 

Exchange Rule 518(c)(5)(ii). Thus, when the System 

cancels and removes a derived order from the 

Simple Order Book, the System could thereafter 

generate another derived order using the same 

complex order based upon the evaluation process 

if the appropriate conditions are present. 

24 Id. 

than simply preventing its generation) 19

creates and preserves additional 

opportunities for complex orders to be 

executed as individual components 

against orders resting on the Simple 

Order Book as market conditions 

change. 

The Exchange is also proposing to 

amend Rule 518(a)(9)(i) to provide more 

detail regarding the circumstances 

under which a derived order is 

generated by the Exchange’s System, 

and the price at which a derived order 

must be generated. Currently, a derived 

order may be automatically generated 

for one or more legs of a complex order 

at a price: (A) That matches or improves 

upon the best displayed bid or offer in 

the affected series on the Simple Order 

Book; and (B) at which the net price of 

the complex order on the Strategy Book 

can be achieved when the other 

component of the complex order is 

executed against the best displayed bid 

or offer on the Simple Order Book. 

Additionally, a derived order will not be 

displayed at a price that locks or crosses 

the best bid or offer of another 

exchange. In such a circumstance, the 

System will display the derived order 

on the Simple Order Book at a price that 

is one MPV away from the current 

opposite side best bid or offer of such 

other exchange, and rank the derived 

order on the Simple Order Book 

according to its actual price.20

The Exchange is proposing to amend 

Rule 518(a)(9)(i) to add more detail to 

the rule stating that a derived order may 

be automatically generated if the 

complex order is eligible for ‘‘Legging’’ 

pursuant to Rule 518(c)(2)(iii), and 

meets the requirements set forth 

therein.21 The purpose of this proposed 

amendment is to establish clearly in the 

Exchange’s Rules that the System will 

only generate derived orders for 

complex orders that are eligible for 

legging—that is, complex orders whose 

components can be executed as 

individual legs against orders resting on 

the Simple Order Book. Conversely, if a 

complex order is not eligible for legging, 

then the System will not generate 

derived orders with respect to that 

complex order.22

The Exchange is proposing to amend 

Rule 518(a)(9)(i)(B) to make a technical 

modification to the current rule text. 

Currently, the rule provides that a 

derived order may automatically be 

generated for one or more legs of a 

complex order at a price, ‘‘at which the 

net price of the complex order on the 

Strategy Book can be achieved when the 

other component(s) of the complex 

order is (are) executed against the best 

displayed bid or offer on the Simple 

Order Book.’’ The Exchange proposes to 

make the word ‘‘components’’ singular 

by removing the ‘‘(s)’’ and removing the 

word ‘‘(are)’’ following the phrase 

‘‘complex order’’ so that the new 

sentence has the proper subject-verb 

agreement. The Exchange believes this 

change describes System functionality 

with more accuracy and precision. 

The Exchange is proposing to amend 

Rule 518(a)(9)(i)(B) to state that a 

derived order may be automatically 

generated for one or more legs of a 

complex order at a price at which the 

net price of the complex order ‘‘at the 

best price’’ on the Strategy Book can be 

achieved when the other component of 

the complex order is executed against 

the best displayed bid or offer on the 

Simple Order Book. This requirement is 

intended to ensure that a complex order 

executed by way of generating and 

Legging a derived order for execution 

against an order on the Simple Order 

Book is not executed at a net price that 

is inferior to the best net price displayed 

on the Strategy Book. A derived order 

could not, therefore, result in a tradethrough of a complex order resting on 

the Strategy Book at the Exchange’s best 

displayed net price. 

The Exchange is also proposing to 

amend Rule 518(a)(9)(vi), which 

describes the various circumstances 

under which a derived order that has 

been generated is removed from the 

Simple Order Book. Specifically, the 

Exchange is proposing to amend Rule 

518(a)(9)(vi)(B), which currently 

provides that a derived order is 

automatically removed from the Simple 

Order Book if the execution of the 

derived order would no longer achieve 

the net price of the complex order on 

the Strategy Book when the other 

component of the complex order is 

executed against the best bid or offer on 

the Simple Order Book. The Exchange is 

proposing to replace the word ‘‘would’’ 

with the word ‘‘may’’ in this subparagraph in order to broaden the rule 

to reflect that the System will remove a 

derived order from the Simple Order 

Book any time the price of the best bid 

or offer on the Simple Order Book 

changes such that the net price of the 

complex order to be executed may not 

be achieved. A price change of the best 

bid or offer could be either: (i) 

Improving (raising the bid or lowering 

the offer) or, (ii) worsening (lowering 

the bid or raising the offer). In scenario 

(i), the derived order could remain on 

the Simple Order Book as it could still 

achieve the net price of the complex 

order. However, in scenario (ii), the 

derived order may not achieve the net 

price of the complex order depending 

upon how much the price had moved. 

For the sake of processing efficiency and 

speed, rather than perform the 

calculation to determine if the derived 

order could still achieve the net price 

for the complex order in scenario (ii), 

the System simply cancels any derived 

order in scenario (i) or (ii). The 

Exchange believes that removal of the 

derived order from the Simple Order 

Book when there is a possibility that the 

complex order may not be executed at 

its net price is prudent and is an 

appropriate safeguard against such an 

execution.23 The Exchange’s System reevaluates each strategy on the Strategy 

Book on a periodic basis to ascertain if 

the creation of a derived order is 

warranted. If, upon re-evaluation, the 

new price allows a new derived order 

for the strategy, such new derived order 

will then be created.24 As re-evaluation 

is a continual process, the Exchange 

believes it is more expedient to cancel 

a derived order where a change in price 

may no longer allow the derived order 

to achieve the net price for the complex 

order and rely upon the re-evaluation 

process to create a new derived order 

when warranted. The Exchange believes 

that changing the language in the rule 

from ‘‘would’’ to ‘‘may’’ more accurately 

describes the operation of Exchange 

functionality. 


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25This is substantially similar to rules that are 

currently operative on other exchanges. See ISE 

Rule 715(k)(3)(iii) and (iv). See also, CBOE Rule 

6.53C(c)(iv)(3)(B)(II) and (III), and Phlx Rule 

1098(f)(iii)(C)(4)(iii) and (iv). 26The term ‘‘complex strategy’’ means a 

particular combination of components and their 

ratios to one another. New complex strategies can 

be created as the result of the receipt of a complex 

order or by the Exchange for a complex strategy that 

is not currently in the System. The Exchange may 

limit the number of new complex strategies that 

may be in the System at a particular time and will 

communicate this limitation to Members via 

Regulatory Circular. See Exchange Rule 518(a)(6). 

27The Exchange recently adopted rules that 

permit the submission of complex orders for price 

improvement and execution in the MIAX Price 

Improvement Mechanism (‘‘PRIME’’). Complex 

orders submitted into PRIME are known as 

‘‘cPRIME Orders’’ and are processed in a ‘‘cPRIME 

Auction.’’ See Securities Exchange Act Release No. 

81131 (July 12, 2017), 82 FR 32900 (July 18, 2017) 

(SR–MIAX–2017–19). 

28Currently, the Exchange may determine to 

automatically submit a Complex Auction-eligible 

order into a Complex Auction and begin the 

Complex Auction process by sending a message to 

participants requesting responses to the Complex 

Auction. See Exchange Rule 518(d). For a complete 

description of the Complex Auction, see Securities 

Exchange Act Release No. 79072 (October 7, 2016), 

81 FR 71131 (October 14, 2016) (SR–MIAX–2016– 

26). 

29An option of the same type would be either the 

put or call option in the same series as a component 

in the strategy. (E.g., if the complex strategy was a 

long straddle to Buy 1 JNJ Oct 141 Call and to Buy 

1 JNJ Oct 141 Put, a derived order in either of those 

options would be considered an option of the same 

type, and would be removed if the strategy entered 

a cPRIME Auction or a Complex Auction). 

30See Example 1 on page 6 [sic]. 

31See supra note 23. 

32 Id. 

33 15 U.S.C. 78f(b). 

34 15 U.S.C. 78f(b)(5). 

The Exchange is also proposing to 

amend Rules 518(a)(9)(vi)(C) and (D), 

which currently describe the automatic 

removal of a derived order from the 

Simple Order Book when the complex 

order is executed in full, or is cancelled. 

The Exchange is proposing to 

consolidate sub-paragraphs (C) and (D) 

into one sub-paragraph (C), to delete the 

phrase ‘‘in full,’’ and to broaden the rule 

by stating that a derived order is 

automatically removed from the Simple 

Order Book if the complex order is 

executed, cancelled, or modified in any 

way.25 The Exchange believes that any 

change to a complex order used to 

generate a derived order obviates the 

need for the derived order at its limit 

price and size on the Simple Order 

Book. The phrase ‘‘modified in any 

way’’ is intended to capture, without 

limitation, any modification to the price 

or size of the complex order. Such a 

modification could require a different 

limit price for the derived order to 

achieve the best execution price of the 

complex order, or result in a size ratio 

that does not comply with the ‘‘base of 

one’’ ratio in proposed Rule 518(a)(9) 

discussed above, in which case the 

complex order could not be executed. 

The Exchange is proposing to remove 

the derived order from the Simple Order 

Book when the complex order is 

modified in any way in order to prevent 

these circumstances. 

The Exchange is also proposing to 

amend Rule 518(a)(9)(vi)(D) by deleting 

the current text (see above) and 

adopting new Rule 518(a)(9)(vi)(D) to 

state that a derived order is 

automatically removed from the Simple 

Order Book if the strategy 26 enters a 

cPRIME Auction (as described in Rule 

515A, Interpretations and Policies 

.12) 27 or a Complex Auction (pursuant 

to Rule 518(d)).28 This would include 

any strategy that has, as a component, 

an option that is of the same type as a 

derived order.29 To illustrate, using the 

example set forth above,30 the System 

would automatically remove from the 

Simple Order Book the derived order in 

Option A if strategy AB (or any other 

strategy having Option A as a 

component) enters a cPRIME Auction or 

a Complex Auction. The System would 

wait until a cPRIME Auction or 

Complex Auction is concluded before 

creating a derived order for an option 

that is subject to such an auction.31 A 

complex order that enters and is 

processed in a cPRIME Auction or a 

Complex Auction is subject to execution 

at improved prices against complex 

orders submitted in response to the 

Exchange’s notification, and thus could 

cause the derived order to be priced 

such that it may no longer achieve the 

best net price of the complex order. In 

this situation, therefore, the System will 

automatically remove the derived order 

from the Simple Order Book. Finally, 

the Exchange proposes to amend Rule 

518(a)(9)(vi)(E) by adding a sentence 

stating that, if a derived order is 

removed from the Simple Order Book, 

the System will continually evaluate 

any remaining complex order(s) on the 

Strategy Book to determine whether a 

new derived order should be generated, 

as described in Rule 518(c)(5).32 The 

purpose of this provision is to ensure 

that a new derived order can and will 

be generated by the System under the 

proper conditions even after a 

previously generated derived order has 

been removed from the Simple Order 

Book. The Exchange believes that this 

provides additional opportunities to 

execute complex orders through Legging 

using derived orders as market 

conditions change. 

The Exchange believes that the 

proposed rule change relating to derived 

orders will facilitate more interaction 

between the Strategy Book and the 

Simple Order Book, resulting in 

increased execution opportunities and 

better execution prices for complex 

orders and for orders resting on the 

Simple Order Book. 

The Exchange will announce the 

implementation date of the proposed 

rule change by Regulatory Circular to be 

published no later than 60 days 

following the operative date of the 

proposed rule. The implementation date 

will be no later than 60 days following 

the issuance of the Regulatory Circular. 

2. Statutory Basis 

The Exchange believes that its 

proposed rule change is consistent with 

section 6(b) of the Act 33 in general, and 

furthers the objectives of section 6(b)(5) 

of the Act 34 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’s proposal to amend 

Rule 518(a)(9) to remove the limitation 

on the generation of derived orders to 

use only complex orders of equal size 

with a one-to-one ratio, and instead to 

permit a derived order to be generated 

by using a complex order resting on the 

Strategy Book with a ratio of greater 

than one-to-one, provided that one 

component of the complex order that is 

used to generate the derived order has 

a base ratio of one relative to the other 

component, is designed to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system. 

Specifically, the Exchange believes that 

this proposal will increase the number 

of derived orders that may be generated 

on the Exchange, thus enhancing 

liquidity and increasing the number of 

opportunities for the execution of 

complex orders on the Exchange. 

The Exchange’s proposal to state in 

Rule 518(a)(9) that derived orders are 

subject to the managed interest process 

described in Rule 515(c)(1)(ii) is 

designed protect investors and the 

public interest by ensuring that a 

derived order (which is firm for its price 

and size) does not lock or cross an away 

market price at the NBBO. If a derived 

order were to lock or cross an away 

market price at the NBBO, the Exchange 

would not be able to route the derived 


asabaliauskas on DSKBBXCHB2PROD with NOTICES
50920 Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices 

35See supra notes 10, 11, 19 and 25. 

36 15 U.S.C. 78s(b)(3)(A). 

37 17 CFR 240.19b–4(f)(6). As required under Rule 

19b–4(f)(6)(iii), the Exchange provided the 

Commission with written notice of its intent to file 

the proposed rule change, along with a brief 

description and the text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. 

order to such a market because derived 

orders are not routable. The inclusion of 

derived orders in the managed interest 

process thus protects investors and the 

public interest by removing the 

possibility that this situation could 

occur, while maintaining the derived 

order on the Simple Order Book. 

The proposed amendment to 

Exchange Rule 518(a)(9)(i), adding the 

requirement that a derived order may be 

automatically generated if the complex 

order is eligible for Legging pursuant to 

Rule 518(c)(2)(iii), is designed to remove 

impediments to and perfect the 

mechanisms of a free and open market 

by establishing clearly in the Exchange’s 

Rules that the System will generate 

derived orders only for complex orders 

whose components (including the 

component represented by a derived 

order) can be executed as individual 

legs against orders on the Simple Order 

Book. In order for a component to be 

executed against an order on the Simple 

Order Book, the complex order must be 

executed by way of its individual legs; 

there is thus no need for, or purpose in, 

generating a derived order for a complex 

order that is not eligible for Legging. 

The Exchange’s proposal to amend 

Rule 518(a)(9)(i)(B) to clarify the 

conditions required for the creation of 

derived orders would promote just and 

equitable principles of trade and remove 

impediments to a free and open market 

by providing greater transparency 

concerning the operation of Exchange 

functionality. 

The Exchange’s proposal to amend 

Rule 518(a)(9)(i)(B), to require that a 

derived order be generated at a price at 

which the net price of the complex 

order at the best price on the Strategy 

Book can be achieved, is 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 a 

complex order executed by way of 

Legging against orders on the Simple 

Order Book could not result in a tradethrough of a complex order at the 

Exchange’s best displayed net price. 

The proposed amendment to 

Exchange Rule 518(a)(9)(vi)(B) is 

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 a derived order is removed 

from the Simple Order Book any time 

the price of the best bid or offer on the 

Simple Order Book changes such that 

the net price of a complex order at the 

top of the Strategy Book may not be 

achieved by executing the derived order 

and another order at the changed price, 

thus protecting investors by ensuring a 

safeguard against such an execution. 

The proposed amendments to Rules 

518(a)(9)(vi)(C) and (D), describing the 

automatic removal of derived orders 

from the Simple Order Book, are 

designed to protect investors and the 

public interest by ensuring that derived 

orders do not result in executions that 

trade through the top of the Exchange’s 

Simple Order Book and Strategy Book, 

and that executions on the Simple Order 

Book and on the Strategy Book do not 

result in prices that trade through away 

markets. 

Amended Rule 518(a)(9)(vi)(E), stating 

that the System will continually 

evaluate any remaining complex 

order(s) on the Strategy Book to 

determine whether a new derived order 

should be generated, ensures that a new 

derived order can and will be generated 

by the System under the proper 

conditions even after a previously 

generated derived order has been 

removed from the Simple Order Book. 

This provision is designed to promote 

just and equitable principles of trade 

and also to remove impediments to and 

perfect the mechanisms of a free and 

open market and a national market 

system by providing more opportunities 

to execute complex orders through 

Legging using derived orders as market 

conditions change. 

The Exchange also believes that the 

proposed rule change removes 

impediments to and perfects the 

mechanisms of a free and open market 

and a national market system by 

attracting more order flow and by 

increasing the frequency with which 

MIAX Options participants are able to 

trade complex orders. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes that the proposed 

rule change enhances intermarket 

competition by providing market 

participants with additional 

opportunities to execute complex orders 

through the generation of a greater 

number of derived orders using an 

expanded permissible size ratio. The 

Exchange believes that the additional 

opportunities to trade complex orders 

will result in the submission of more 

complex orders for execution on the 

Exchange, thus enhancing the 

Exchange’s competitive position by 

increasing liquidity and order flow on 

the Exchange. Moreover, the proposed 

rule change is consistent with the rules 

of other exchanges, as cited above.35

The Exchange also believes that its 

proposal enhances intra-market 

competition, as all Exchange 

participants in the same category are 

able to participate on an equal basis 

with respect to the trading of complex 

orders. 

For all the reasons stated, the 

Exchange does not believe that the 

proposed rule change will impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act, and believes the 

proposed change will in fact enhance 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the proposed rule change 

does not (i) significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to section 

19(b)(3)(A) of the Act 36 and Rule 19b– 

4(f)(6) thereunder.37

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 


asabaliauskas on DSKBBXCHB2PROD with NOTICES
Federal Register / Vol. 82, No. 211 / Thursday, November 2, 2017 / Notices 50921 

38 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3P.M.-settled NASDAQ–100 index options with 

standard third Friday of the month expiration dates 

(‘‘NDXPM’’) have previously been approved for 

listing on the Exchange on a pilot basis. NDXPM 

and NDX are separate option classes. See Securities 

Exchange Act Release No. 81293 (August 2, 2017), 

82 FR 37138 (August 8, 2017) (Order Granting 

Approval of a Proposed Rule Change, as Modified 

by Amendment Nos. 1 and 2, To Permit the Listing 

and Trading of P.M.-Settled NASDAQ–100 Index(R) 

Options on a Pilot Basis). The Exchange anticipates 

that it will file a proposed rule change in the near 

future to move these NDXPM index options with 

standard third Friday of the month expiration dates 

to the NDX index option class. The Exchange notes 

that the Chicago Board Options Exchange (‘‘CBOE’’) 

recently did likewise with its P.M.-settled S&P 500 

Index Options (‘‘SPXPM’’). See Securities Exchange 

Act Release No. 80060 (February 17, 2017), 82 FR 

11673 (February 24, 2017) (approving SR–CBOE– 

2016–091). 

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–2017–44 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MIAX–2017–44. 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 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–MIAX–2017–44 and should 

be submitted on or before November 24, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23825 Filed 11–1–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81975; File No. SR–Phlx– 

2017–79] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing of 

Proposed Rule Change, as Modified by 

Amendment No. 1, To Establish a 

Nonstandard Expirations Pilot 

Program on a Pilot Basis, for an Initial 

Period of Twelve Months From the 

Date of Approval of This Proposed 

Rule Change 

October 27, 2017. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on October 

12, 2017 Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. On October 

26, 2017, the Exchange filed 

Amendment No.1 to the proposal to 

amend and replace the original filing of 

SR–Phlx–2017–79 in its entirety. The 

Commission is publishing this notice, as 

modified by Amendment No. 1, to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to [sic] a [sic] 

proposal [sic] to establish a 

Nonstandard Expirations Pilot Program 

on a pilot basis, for an initial period of 

twelve months from the date of approval 

of this proposed rule change. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqphlx.cchwallstreet. 

com/, at the principal office of the 

Exchange, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this rule filing is to 

permit the listing and trading, on a pilot 

basis, of p.m.-settled options on broadbased indexes with nonstandard 

expiration dates for an initial period of 

twelve months (the ‘‘Nonstandard 

Expirations Pilot Program’’ or ‘‘Pilot 

Program’’) from the date of approval of 

this proposed rule change.3 The Pilot 

Program would permit both weekly 

expirations (‘‘Weekly Expirations’’) and 

end of month (‘‘EOM’’) expirations as 

explained below. Contract terms for the 

Weekly Expirations and EOM 

expirations will be similar to those of 

the a.m. settled broad-based index 

options, except that the exercise 

settlement value will be based on the 

index value derived from the closing 

prices of component stocks. 

Weekly Expirations 

The Exchange proposes to add new 

subsection (b)(vii)(1), Weekly 

Expirations, to Rule 1101A, Terms of 

Options Contracts. Under the proposed 

new rule the Exchange would be 

permitted to open for trading Weekly 

Expirations on any broad-based index 

eligible for standard options trading to 

expire on any Monday, Wednesday, or 

Friday (other than the third Friday-ofthe-month or days that coincide with an 

EOM expiration). Weekly Expirations 

would be subject to all provisions of 

Rule 1101A and would be treated the 

same as options on the same underlying 

index that expire on the third Friday of 

the expiration month. Unlike the 

standard monthly options, however, 

Weekly Expirations would be p.m.- 

settled. New series in Weekly 


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