Document ID: SEC-2019-0254-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX Emerald, LLC
Posted Date: 2019-03-07T05:00Z

[Federal Register Volume 84, Number 45 (Thursday, March 7, 2019)]
[Notices]
[Pages 8353-8355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04087]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85225; File No. SR-EMERALD-2019-06]

Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Exchange Rule 510, Minimum Price Variations and Minimum Trading 
Increments To Extend the Penny Pilot Program

March 1, 2019.
    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 February 19, 2019, MIAX Emerald, LLC (``MIAX 
Emerald'' or the ``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 510, 
Minimum Price Variations and Minimum Trading Increments, 
Interpretations and Policies .01 to change the date on which the pilot 
program for the quoting and trading of certain options in pennies is 
scheduled to expire.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX 
Emerald'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
Background
    MIAX Emerald plans to commence operations as a national securities 
exchange registered under Section 6 of the Act \3\ on March 1, 2019. As 
described more fully in MIAX Emerald's Form 1 application,\4\ the 
Exchange is an affiliate of Miami International Securities Exchange, 
LLC (``MIAX Options'') and MIAX PEARL, LLC (``MIAX PEARL''). MIAX 
Emerald Rules, in their current form, were filed as Exhibit B to its 
Form 1 on August 16, 2018, and at that time, the above mentioned rules, 
were substantially similar to the rules of the MIAX Options exchange. 
In the time between when the Exchange filed its Form 1 and the time the 
Exchange received its approval order, MIAX Options made changes to its 
rule book. In order to ensure consistent operation of both MIAX Emerald 
and MIAX Options by having consistent rules, the Exchange proposes to 
amend MIAX Emerald Rule 510, as described below.
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    \3\ 15 U.S.C. 78f.
    \4\ See Securities Exchange Act Release No. 84891 (December 20, 
2018), 83 FR 67421 (December 28, 2018) (File No. 10-233) (order 
approving application of MIAX EMERALD, LLC for registration as a 
national securities exchange).
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Proposal
    Once operational, the Exchange will be a participant in an 
industry-wide pilot program that provides for the quoting and trading 
of certain option classes in penny increments (the ``Penny Pilot 
Program'' or ``Program''). The Penny Pilot Program allows the quoting 
and trading of certain option classes in minimum increments of $0.01 
for all series in such option classes with a price of less than $3.00; 
and in minimum increments of $0.05 for all series in such option 
classes with a price of $3.00 or higher. Options overlying the 
PowerShares QQQTM (``QQQ''), SPDR[supreg] S&P 500[supreg] 
ETF (``SPY''), and iShares[supreg] Russell 2000 ETF (``IWM''), however, 
are quoted and traded in minimum increments of $0.01 for all series 
regardless of the price. The Penny Pilot Program was initiated at the 
then existing option exchanges in January 2007 \5\ and currently 
includes more than 300 of the most active option classes. Rule 510, 
Interpretations and Policies .01, currently states that the Penny Pilot 
Program is scheduled to expire on December 31, 2018. The purpose of the 
proposed rule change is to modify the expiration date set forth in Rule 
510, to match the most recent expiration date, as updated by the other 
options exchanges, including MIAX Options.\6\
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    \5\ See Securities Exchange Act Release Nos. 55154 (January 23, 
2007), 72 FR 4743 (February 1, 2007) (SR-CBOE-2006-92); 55161 
(January 24, 2007), 72 FR 4754 (February 1, 2007) (SR-ISE-2006-62); 
54886 (December 6, 2006), 71 FR 74979 (December 13, 2006) (SR-Phlx-
2006-74); 54590 (October 12, 2006), 71 FR 61525 (October 18, 2006) 
(SR-NYSEArca-2006-73); and 54741 (November 9, 2006), 71 FR 67176 
(November 20, 2006) (SR-Amex-2006-106).
    \6\ See Securities Exchange Act Release No. 84864 (December 19, 
2018), 83 FR 66778 (December 27, 2018) (SR-MIAX-2018-38) (extending 
the Penny Pilot Program from December 31, 2018 to June 30, 2019).
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    In addition to changing the date on which the Penny Pilot Program 
will expire, which will be June 30, 2019, the Exchange proposes to make 
one additional change to the Rule. Currently, Interpretations and 
Policies .01, states that the Exchange will replace any Penny Pilot 
issues that have been delisted with the next most actively traded 
multiply listed option classes that are not yet included in the Penny 
Pilot Program, and that the replacement issues will be selected based 
on trading activity in the previous six months. Such option classes 
will be added to the Penny Pilot Program on the second trading day 
following July 1, 2018.\7\

[[Page 8354]]

However, this date has expired and although the Exchange intends to 
adhere to this practice for the duration of the Penny Pilot Program, 
the new date on which replacement issues may be added to the Penny 
Pilot Program would have been the second trading day following January 
1, 2019, which has already passed. Therefore, the Exchange proposes to 
delete the sentence which currently states that ``[t]he replacement 
classes may be added to the penny pilot on the second trading day 
following July 1, 2018,'' and not replace the current date of July 1, 
2018 with the date of January 1, 2019. The Exchange notes that this 
would create a difference between the rule text of MIAX Emerald and 
that of MIAX Options,\8\ however, in practice there would be no 
difference as the second trading day following January 1, 2019 has 
already passed.
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    \7\ The month immediately preceding a replacement class's 
addition to the Pilot Program (i.e., December) is not used for 
purposes of the six-month analysis. For example, a replacement added 
on the second trading day following January 1, 2019, will be 
identified based on trading activity from June 1, 2018, through 
November 30, 2018.
    \8\ See supra note 6.
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \10\ 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 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change, which modifies the 
expiration date of the Penny Pilot Program set forth in Rule 510, to 
match the most recent expiration date, as updated by the other options 
exchanges, will allow the Exchange to participate in a program that has 
been viewed as beneficial to traders, investors and public customers 
and viewed as successful by the other options exchanges participating 
in it.
    Additionally, the Exchange believes that although MIAX Emerald 
rules may, in certain instances, intentionally differ from MIAX Options 
rules, the proposed changes will promote uniformity with MIAX Options 
with respect to rules that are intended to be identical. The Exchange 
believes that it will reduce the potential for confusion by its members 
that are also members of MIAX Options with respect to rules that are 
intended to be identical.

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

    MIAX Emerald 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. Specifically, the Exchange 
believes that, by modifying the expiration date of the Penny Pilot 
Program to match the most recent expiration date, as updated by the 
other options exchanges, the proposed rule change will allow for 
analysis of the Penny Pilot Program and a determination of how the 
Program should be structured in the future. The Exchange believes that 
the proposed rule change, which harmonizes its rules with recent rule 
changes adopted by MIAX Options will reduce the regulatory burden 
placed on market participants engaged in trading activities across 
different markets. In doing so, the proposed rule change will also 
serve to promote regulatory clarity and consistency, thereby reducing 
burdens on the marketplace, facilitating investor protection, and 
fostering a competitive environment.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) \12\ thereunder. 
Because the foregoing proposed rule change does not: (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days after the date of the filing, or such shorter time as the 
Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) 
\14\ thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because doing so will 
allow the Pilot Program to continue without interruption in a manner 
that is consistent with the Commission's prior approval of the 
extension and expansion of the Pilot Program.\17\ Accordingly, the 
Commission designates the proposed rule change as operative upon filing 
with the Commission.\18\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ See Securities Exchange Release No. 61061 (November 24, 
2009), 74 FR 62857 (December 1, 2009) (SR-NYSEArca-2009-44).
    \18\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

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-EMERALD-2019-06 on the subject line.

[[Page 8355]]

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-EMERALD-2019-06. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
    Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549-1090, 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-EMERALD-2019-06 and should 
be submitted on or before March 28, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04087 Filed 3-6-19; 8:45 am]
 BILLING CODE 8011-01-P