Document ID: SEC-2017-1205-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2017-07-18T04:00Z

[Federal Register Volume 82, Number 136 (Tuesday, July 18, 2017)]
[Notices]
[Pages 32900-32904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14984]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81131; File No. SR-MIAX-2017-19]

Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Order Granting Approval of a Proposed Rule Change To 
Amend MIAX Options Rules 515, Execution of Orders and Quotes; 515A, 
MIAX Price Improvement Mechanism (``PRIME'') and PRIME Solicitation 
Mechanism; and 518, Complex Orders

July 12, 2017.

I. Introduction

    On May 12, 2017, Miami International Securities Exchange, LLC 
(``MIAX Options'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission''), pursuant to the provisions of 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to establish three 
new types of complex orders--Complex Customer Cross (``cC2C'') Orders, 
Complex Qualified Contingent Cross (``cQCC'') Orders, and Complex PRIME 
(``cPRIME'') Orders--and to adopt new provisions that relate to the 
processing of those new complex order types. The proposed rule change 
was published for comment in the Federal Register on June 1, 2017.\3\ 
The Commission received no comments regarding the proposal.

[[Page 32901]]

This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80768 (May 25, 
2017), 82 FR 25347 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to establish three new types of complex 
orders,\4\ and to adopt new provisions that relate to the processing of 
those new complex order types. In particular, the Exchange is proposing 
to modify its rules, including its rule related to the MIAX Price 
Improvement Mechanism (``PRIME''), to permit the entry and execution of 
cC2C Orders, cQCC Orders, and cPRIME Orders, each as discussed more 
fully below.
---------------------------------------------------------------------------

    \4\ For a description of the trading of complex orders on the 
Exchange, see Rule 518. See also Securities Exchange Act Release No. 
79072 (October 7, 2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-
2016-26).
---------------------------------------------------------------------------

A. cC2C Orders

    The Exchange proposes to define a cC2C Order as a type of complex 
order that is comprised of one Priority Customer \5\ complex order to 
buy and one Priority Customer complex order to sell the same strategy 
at the same price (which must be better than the icMBBO \6\ or the best 
net price of the complex order on the Strategy Book \7\ for the 
strategy, whichever is more aggressive) and for the same quantity.\8\ 
The Exchange proposes that cC2C Orders be automatically executed upon 
entry provided that the execution is at least $0.01 better than the 
icMBBO price or the best net price of a complex order on the Strategy 
Book, whichever is more aggressive.\9\ The Exchange will reject a cC2C 
Order if, at the time of its receipt, (i) the strategy is subject to a 
cPRIME Auction pursuant to proposed Interpretations and Policies .12 to 
Rule 515A or to a Complex Auction pursuant to Rule 518(d); or (ii) any 
component of the strategy is subject to a SMAT Event as described in 
Rule 518(a)(16).\10\ Unlike simple Customer Cross Orders, the Exchange 
proposes to not reject a cC2C Order when a component of the strategy is 
subject to the managed interest process \11\ pursuant to Rule 
515(c).\12\ cC2C Orders will be automatically cancelled if they cannot 
be executed,\13\ and may only be entered in the minimum trading 
increments applicable to complex orders under Rule 518(c)(1)(i).\14\ 
The Exchange further proposes to state that Interpretations and 
Policies .01 to Rule 520 applies to the entry and execution of cC2C 
Orders.\15\
---------------------------------------------------------------------------

    \5\ The term ``Priority Customer'' means a person or entity that 
(i) is not a broker or dealer in securities, and (ii) does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). See Rule 100.
    \6\ The Implied Complex MIAX Best Bid or Offer (``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. For stock-option orders, the icMBBO for 
a complex strategy will be calculated using the best price (whether 
displayed or non-displayed) on the Simple Order Book in the 
individual option component(s), and the National Best Bid and Offer 
(``NBBO'') in the stock component. See Rule 518(a)(11). The ``Simple 
Order Book'' is the Exchange's regular electronic book of orders and 
quotes. See Rule 518(a)(15).
    \7\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Rule 518(a)(17).
    \8\ See proposed Rules 515(h)(3) and 518(b)(5).
    \9\ See proposed Rule 515(h)(3).
    \10\ A Simple Market Auction or Timer, or ``SMAT'' Event, is 
defined as any of the following: (i) a PRIME Auction (pursuant to 
Rule 515A); (ii) a Route Timer (pursuant to Rule 529); or (iii) a 
liquidity refresh pause (pursuant to Rule 515(c)(2)). See Rule 
518(a)(16).
    \11\ Under the managed interest process, if the limit price of a 
non-routable order locks or crosses the current opposite side NBBO, 
the System will display the order one Minimum Price Variation away 
from the current opposite side NBBO, and book the order at a price 
that will lock the current opposite side NBBO. See Rule 515(c)(ii).
    \12\ The Exchange states that it is not necessary to reject a 
cC2C Order in this scenario because, in accordance with the 
execution price requirements for cC2C Orders, the order would 
already have a guaranteed execution price at the better of $0.01 
inside the icMBBO price or at the best net price of a complex order 
on the Strategy Book. See Notice, supra note 3, at 25349. See also 
proposed Rule 515(h)(3). According to the Exchange, because the 
execution price requirements ensure that each participant in the 
complex order receives a better price than it would have received if 
its order were submitted as a single complex order, it is not 
necessary or desirable to preclude the execution of a cC2C Order 
where one component is subject to the managed interest process in 
the simple market. See Notice, supra note 3, at 25349.
    \13\ See proposed Rule 515(h)(3)(A).
    \14\ See proposed Rule 515(h)(3)(B). Bids and offers on complex 
orders and quotes may be expressed in $0.01 increments, and the 
component(s) of a complex order may be executed in $0.01 increments, 
regardless of the minimum increments otherwise applicable to 
individual components of the complex order. See Rule 518(c)(1)(i).
    \15\ See proposed Rule 515(h)(3)(C). Rule 520(b) prevents an 
Electronic Exchange Member from executing agency orders to increase 
its economic gain from trading against the order without first 
giving other trading interest on the Exchange an opportunity to 
either trade with the agency order or to trade at the execution 
price when the Electronic Exchange Member was already bidding or 
offering on the Simple Order Book. It would be a violation of Rule 
520(b) for an Electronic Exchange Member to be a party to any 
arrangement designed to circumvent Rule 520(b) by providing an 
opportunity for a customer or other person (including an affiliate) 
to regularly execute against agency orders handled by the Electronic 
Exchange Member immediately upon their entry into the System. See 
Interpretations and Policies .01 to Rule 520. The term ``Electronic 
Exchange Member'' means the holder of a Trading Permit who is not a 
Market Maker. See Rule 100.
---------------------------------------------------------------------------

    The Exchange will determine, on a class-by-class basis, the option 
classes in which cC2C Orders are available for trading on the Exchange, 
and will announce such classes to Members via Regulatory Circular.\16\
---------------------------------------------------------------------------

    \16\ See proposed Rule 515(h)(3)(D). The term ``Member'' means 
an individual or organization approved to exercise the trading 
rights associated with a Trading Permit. See Rule 100.
---------------------------------------------------------------------------

B. cQCC Orders

    The Exchange proposes to define a cQCC Order as a type of complex 
order that is identified as being part of a qualified contingent 
trade\17\ which is comprised of a complex order to buy or sell where 
each component is at least 1,000 contracts, coupled with a contra-side 
complex order or orders (for the same strategy) totaling an equal 
number of contracts.\18\ cQCC Orders are automatically executed upon 
entry provided that, with respect to each option leg of the cQCC Order, 
the execution (i) is not at the same price as a Priority Customer Order 
on the Simple Order Book; and (ii) is at or between the NBBO.\19\ The 
Exchange states that, as is currently the case with QCC orders, it will 
require that the Member entering a cQCC Order provide certain 
information to the Exchange regarding the execution of the stock 
component, such as the underlying price, quantity, price delta, 
execution time, and executing venue.\20\
---------------------------------------------------------------------------

    \17\ A ``qualified contingent trade'' is a transaction 
consisting of two or more component orders, executed as agent or 
principal, where: (a) At least one component is an NMS Stock, as 
defined in Rule 600 of Regulation NMS under the Act; (b) all 
components are effected with a product or price contingency that 
either has been agreed to by all the respective counterparties or 
arranged for by a broker-dealer as principal or agent; (c) the 
execution of one component is contingent upon the execution of all 
other components at or near the same time; (d) the specific 
relationship between the component orders (e.g., the spread between 
the prices of the component orders) is determined by the time the 
contingent order is placed; (e) the component orders bear a 
derivative relationship to one another, represent different classes 
of shares of the same issuer, or involve the securities of 
participants in mergers or with intentions to merge that have been 
announced or cancelled; and (f) the transaction is fully hedged 
(without regard to any prior existing position) as a result of other 
components of the contingent trade. See Interpretations and Policies 
.01 to Rule 516.
    \18\ See proposed Rule 518(b)(6).
    \19\ See proposed Rule 515(h)(4).
    \20\ See Notice, supra note 3, at 25350.
---------------------------------------------------------------------------

    The Exchange will reject a cQCC Order if, at the time of receipt of 
the cQCC Order, (i) the strategy is subject to a cPRIME Auction 
pursuant to proposed Interpretations and Policies .12 to Rule 515A, or 
to a Complex Auction pursuant to Rule 518(d); or (ii) any component of 
the strategy is subject to a SMAT Event as described in Rule 
518(a)(16).\21\ The Exchange will not reject a cQCC Order when a 
component of the strategy is subject to the managed interest process 
pursuant to Rule 515(c). cQCC Orders will be automatically cancelled if 
they

[[Page 32902]]

cannot be executed,\22\ and may only be entered in the minimum trading 
increments applicable to complex orders under Rule 518(c)(1)(i).\23\
---------------------------------------------------------------------------

    \21\ See proposed Rule 515(h)(4).
    \22\ See proposed Rule 515(h)(4)(A).
    \23\ See proposed Rule 515(h)(4)(B).
---------------------------------------------------------------------------

    The Exchange will determine, on a class-by-class basis, the option 
classes in which cQCC Orders are available for trading on the Exchange, 
and will announce such classes to Members via Regulatory Circular.\24\
---------------------------------------------------------------------------

    \24\ See proposed Rule 515(h)(4)(C).
---------------------------------------------------------------------------

C. cPRIME Orders

    PRIME is a price-improvement mechanism pursuant to which a Member 
(``Initiating Member'') electronically submits an order that it 
represents as agent (an ``Agency Order'') into a PRIME Auction 
(``Auction''). The Initiating Member, in submitting an Agency Order, 
must be willing to either (i) cross the Agency Order at a single price 
(a ``single-price submission'') against principal or solicited 
interest, or (ii) automatically match (``auto-match''), against 
principal or solicited interest, the price and size of responses to a 
Request for Response (``RFR'') that is broadcast to MIAX Options 
participants up to an optional designated limit price.\25\
---------------------------------------------------------------------------

    \25\ See Rule 515A(a)(2)(i). When the Exchange receives a 
properly designated Agency Order for auction processing, an RFR 
detailing the option, side, size, and initiating price will be sent 
to all subscribers of the Exchange's data feeds. Members may submit 
responses to the RFR (specifying prices and sizes). RFR responses 
shall be an Auction or Cancel (``AOC'') order or an AOC eQuote. Such 
responses cannot cross the disseminated MIAX Best Bid or Offer 
(``MBBO'') on the opposite side of the market from the response.
---------------------------------------------------------------------------

    As described below, the Exchange proposes to add a cPRIME order 
type \26\ which will be processed and executed in the same manner in 
which simple PRIME Orders are currently processed and executed, except 
as otherwise provided in proposed Interpretations and Policies .12 to 
Rule 515A or unless the context otherwise requires.\27\ The Exchange 
will determine, on a class-by-class basis, the option classes in which 
complex orders are available for trading on PRIME on the Exchange, and 
will announce such classes to Members via Regulatory Circular.\28\
---------------------------------------------------------------------------

    \26\ The Exchange proposes to define a cPRIME Order as a type of 
complex order that is submitted for participation in a cPRIME 
Auction. See proposed Rule 518(b)(7). A Member may electronically 
submit a ``cPRIME Order'' it represents as agent (a ``cPRIME Agency 
Order'') against principal or solicited interest for execution (a 
``cPRIME Auction''). See proposed Interpretations and Policies 
.12(a) to Rule 515A.
    \27\ In addition, MIAX proposes to state that any references to 
the NBBO in Rule 515A are inapplicable to cPRIME Auctions. See 
proposed Interpretations and Policies .12(a)(v) to Rule 515A. The 
Exchange also proposes to modify its simple PRIME Rule to (1) state 
clearly that it will reject RFR responses submitted with a price 
that is not equal to or better than the initiating price to avoid 
handling RFR responses that could not be executed in an Auction 
because they are inferior to the initiating price; and (2) delete 
unnecessary text stating that an RFR response cannot cross the 
disseminated MBBO on the opposite side of the market from the 
response, because an Auction will already conclude under Rule 
515A(a)(2)(ii)(E) if an RFR response matches the NBBO on the 
opposite side of the market from the RFR responses, which cannot be 
inferior to the MBBO. See proposed edits to Rule 515A(a)(2)(i)(D).
    \28\ See proposed Interpretations and Policies .12 to Rule 515A.
---------------------------------------------------------------------------

1. Auction Eligibility and Auction Process
    The initiating price for a cPRIME Agency Order must be better than 
the icMBBO for the strategy and any other complex orders on the 
Strategy Book.\29\ The Exchange will reject cPRIME Agency Orders 
submitted with an initiating price that is equal to or worse than the 
icMBBO or any other complex orders on the Strategy Book. The Exchange 
also will reject a cPRIME Agency Order if, at the time of receipt of 
the cPRIME Agency Order: (i) the strategy is subject to a cPRIME 
Auction or to a Complex Auction pursuant to Rule 518(d); (ii) any 
component of the strategy is subject to a SMAT Event as described in 
Rule 518(a)(16); or (iii) any component of the strategy is subject to 
the managed interest process described in Rule 515(c)(1)(ii).
---------------------------------------------------------------------------

    \29\ See proposed Interpretations and Policies .12(a)(i) to Rule 
515A.
---------------------------------------------------------------------------

    The RFR period for cPRIME Auctions will be independent from the RFR 
for PRIME Auctions and will last for a period of time as set forth in 
Rule 515A(a)(2)(i)(C).\30\ Members may enter RFR responses on the 
opposite side of the market from the cPRIME Agency Order at net prices, 
and bids and offers for complex orders may participate in the execution 
of an order as provided in Rule 515A.\31\ Bids and offers for the 
individual legs of a complex order may also participate; however, 
except as provided in proposed Interpretations and Policies .12(c) to 
Rule 515A, the order allocation rules contained in Rule 514 will 
apply.\32\ If an improved net price for the complex order being 
executed can be achieved from bids and offers for the individual legs 
of the complex order in the simple market, and the complex order is 
otherwise eligible for Legging pursuant to Rule 518(c)(2)(iii), the 
Strategy being matched will receive an execution at the better net 
price.\33\
---------------------------------------------------------------------------

    \30\ See proposed Interpretations and Policies .12(c)(i) to Rule 
515A. The Commission notes that, on June 15, 2017, MIAX Options 
amended the duration of the RFR period described in Rule 
515A(a)(2)(i)(c) such that the RFR period will be a period of time 
within a range of no less than 100 milliseconds and no more than 1 
second, as determined by the Exchange. See Securities Exchange Act 
Release No. 80940 (June 15, 2017), 82 FR 28369 (June 21, 2017) 
(order approving SR-MIAX-2017-16).
    \31\ RFR responses shall be an AOC order or an AOC eQuote. See 
Rule 515A(a)(2)(i)(D). This applies by reference to cPRIME Auctions 
(and cAOC eQuotes and cAOC orders, as defined below). See proposed 
Interpretations and Policies .12(a) to Rule 515A.
    \32\ See proposed Interpretations and Policies .12(a)(iii) to 
Rule 515A.
    \33\ See proposed Interpretations and Policies .12(a)(iv) to 
Rule 515A.
---------------------------------------------------------------------------

2. cPRIME Order Execution and Allocation
    The Exchange proposes to not apply the size and bid/ask 
differential and conclusion of auction provisions contained in Rule 
515A(a)(1)(iii) and (iv) to cPRIME Orders.\34\ Instead, a cPRIME 
Auction will conclude at the sooner of the following events, with the 
cPRIME Agency Order executing pursuant to the cPRIME Auction allocation 
provisions: (1) The end of the RFR period; (2) when an AOC eQuote \35\ 
or cAOC Order \36\ on the opposite side of the market from the cPRIME 
Agency Order locks or crosses the icMBBO or the best net price of a 
complex order in the same strategy on the Strategy Book, whichever is 
more aggressive; (3) when unrelated interest on the same side of the 
market as the cPRIME Agency Order locks or crosses the best price on 
the opposite side of the market; (4) when unrelated interest on the 
opposite side of the market from the cPRIME Agency Order locks or 
crosses the icMBBO or the best net price of a complex order in the same 
strategy on the Strategy Book, whichever is more aggressive, or 
improves the price of any RFR response; (5) when a simple order or 
quote in a component of the strategy on the same side of the market as 
the cPRIME Agency Order locks or crosses the NBBO for such component; 
or (6) when a simple order or quote in a component of the strategy on 
the opposite side of the market from the cPRIME Agency Order locks or 
crosses the NBBO for such component or causes the icMBBO

[[Page 32903]]

to be equal to or better than the initiating price.\37\
---------------------------------------------------------------------------

    \34\ See proposed Interpretations and Policies .12(c)(iii) and 
(iv) to Rule 515A.
    \35\ A ``Complex Auction or Cancel eQuote'' or ``cAOC eQuote,'' 
is an eQuote submitted by a Market Maker that is used to provide 
liquidity during a specific Complex Auction with a time in force 
that corresponds with the duration of the Complex Auction. See 
Interpretations and Policies .02(c)(1) to Rule 518.
    \36\ A Complex Auction-or-Cancel or ``cAOC'' order is a complex 
limit order used to provide liquidity during a specific Complex 
Auction with a time in force that corresponds with that event. See 
Rule 518(b)(3).
    \37\ See proposed Interpretations and Policies .12(d) to Rule 
515A.
---------------------------------------------------------------------------

    At the conclusion of a cPRIME Auction, the Exchange will apply the 
order allocation provisions applicable to the simple PRIME Auction,\38\ 
provided that: (A) All references to contracts will be considered 
references to complex strategies; and (B) the last priority allocation 
option described in Rule 515A(a)(2)(iii)(L) will not be available for 
Initiating Members that submit cPRIME Agency Orders.\39\ The Exchange 
further proposes that participants that submit simple orders that are 
executed as individual legs of complex orders at the execution price 
point will be allocated contracts only after all complex interest at 
such price point have received allocations.\40\ Specifically, cPRIME 
Orders will be matched first against other complex orders and have 
priority over all simple orders that are on the Simple Order Book and 
``legged,'' at the execution price.\41\ According to the Exchange, it 
proposes to provide priority to complex interest over simple interest 
because the initiating price of the cPRIME Agency Order will always be 
superior to the net price of simple orders resting on the Simple Order 
Book, which would not necessarily be intended to trade with the legs of 
the Agency Order.\42\ However, if new interest is received in the 
simple market that causes the icMBBO on the opposite side of the market 
from the cPRIME Agency Order to be equal to or better than the 
initiating price, the cPRIME Auction will conclude before the 
expiration of the RFR period and the standard cPRIME execution and 
allocation process will commence early.\43\ Regardless of when the 
cPRIME Auction ends, contracts at each price point will first be 
allocated by matching complex strategies.\44\
---------------------------------------------------------------------------

    \38\ See Rule 515A(a)(2)(iii). For an example of cPRIME Order 
executions with and without the Auto-Match feature, see Examples 3 
and 4, Notice, supra note 3, at 25352.
    \39\ See proposed Interpretations and Policies .12(c)(v) to Rule 
515A.
    \40\ See proposed Interpretations and Policies .12(c)(ii) to 
Rule 515A.
    \41\ The Exchange notes that other exchanges afford priority to 
complex interest over simple interest when allocating interest after 
a price improvement auction. See Notice, supra note 3, at 25353 n.39 
(citing as an example NASDAQ PHLX LLC (``Phlx'') Rule 
1098(e)(vi)(A)(2) and (viii)(C)(3)).
    \42\ See Notice, supra note 3, at 25353.
    \43\ See id. See also Example 5, Notice, supra note 3, at 25352.
    \44\ The 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 Rule 518(a)(6).
---------------------------------------------------------------------------

D. Implementation Date
    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 change.\45\ The 
implementation date will be no later than 60 days following the 
issuance of the Regulatory Circular.\46\
---------------------------------------------------------------------------

    \45\ See Notice, supra note 3, at 25356.
    \46\ See id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, with Section 6(b) of the Act.\47\ In particular, 
the Commission finds that the proposed rule change is consistent with 
Sections 6(b)(5) and 6(b)(8) of the Act,\48\ which require, among other 
things, that the rules of a national securities exchange be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest and that the rules of an 
exchange do not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \48\ 15 U.S.C. 78f(b)(5), (b)(8).
---------------------------------------------------------------------------

    The Commission believes that the Exchange's proposed cC2C rules are 
consistent with the Act. They allow for the crossing of complex orders 
in a manner similar to other crossing rules that the Commission has 
previously approved for other exchanges and do not appear to raise any 
novel or significant issues.\49\
---------------------------------------------------------------------------

    \49\ See, e.g., Chicago Board Options Exchange, Incorporated 
Rule 6.74A.08(b) and Phlx Rule 1080(n)(vi).
---------------------------------------------------------------------------

    The Commission believes that the Exchange's proposed cQCC rules, 
which would permit complex orders to participate in a clean cross of 
the options leg of a subset of qualified contingent trades in a similar 
manner as QCC Orders already permitted on the Exchange, are appropriate 
and consistent with the Act.\50\ The Commission notes that the proposal 
to permit cQCC Orders in a manner similar to QCC Orders already 
permitted on MIAX Options, while requiring that the cQCC Order: (1) Be 
part of a qualified contingent trade under Regulation NMS; (2) each 
option leg be for at least 1,000 contracts; and (3) with respect to 
each option leg of the cQCC Order, that the execution is not at the 
same price as a Priority Customer Order on the Simple Order Book and is 
at or between the NBBO, establishes a limited exception to the general 
principle of exposure and retains the general principle of customer 
priority in the options markets. Furthermore, not only must a cQCC 
Order be part of a qualified contingent trade by satisfying each of the 
six underlying requirements of the NMS QCT Exemption,\51\ the 
requirement that a cQCC Order be for a minimum size of 1,000 contracts 
per leg provides another limit to its use by ensuring only transactions 
of significant size may avail themselves of this order type.
---------------------------------------------------------------------------

    \50\ See also Securities Exchange Act Release Nos. 64653 (June 
13, 2011), 76 FR 35491 (June 17, 2011) (order approving SR-CBOE-
2011-041); 63955 (February 24, 2011), 76 FR 11533 (March 2, 2011) 
(order approving SR-ISE-2010-73). The Commission has granted an 
exemption for qualified contingent trades that meet certain 
requirements from Rule 611(a) of Regulation NMS, 17 CFR 242.611(a) 
(the ``NMS QCT Exemption''). See Securities Exchange Act Release No. 
57620 (April 4, 2008), 73 FR 19271 (April 9, 2008) (which supersedes 
a release initially granting the NMS QCT Exemption, Securities 
Exchange Act Release No. 54389 (August 31, 2006), 71 FR 52829 
(September 7, 2006)).
    \51\ See supra note 17.
---------------------------------------------------------------------------

    By allowing MIAX Options Members to enter complex orders into 
PRIME, the Commission believes that the proposal could provide 
opportunities for complex orders to receive price improvement. Under 
the proposal, a complex order entered into a cPRIME Auction must be 
stopped at a price that is better than the icMBBO for the strategy and 
any other complex orders on the Strategy Book.\52\ As noted above, a 
Member enters a cPRIME Agency Order against principal or solicited 
interest for execution.\53\ At the conclusion of a cPRIME Auction, the 
cPRIME Agency Order is executed in full at the best prices available, 
taking into consideration orders and quotes in

[[Page 32904]]

the MIAX Options market, RFR responses, and the Initiating Member's 
submission. Thus, a complex order entered into a cPRIME Auction would 
receive an execution at the best price available at the conclusion of 
the Auction and, at a minimum, would be executed in full at the 
improved net price. In addition, if an improved net price for a complex 
order entered in a cPRIME Auction could be achieved from bids and 
offers for the individual legs of the complex order in the MIAX Options 
market, the complex order would be executed at the better net price. 
The Commission further notes that other exchanges have previously 
adopted similar rules to permit the entry of complex orders into a 
price improvement mechanism.\54\
---------------------------------------------------------------------------

    \52\ See proposed Interpretations and Policies .12(a) to Rule 
515A; see also Notice, supra note 3, at 25352, for an example of an 
eligible cPRIME Order.
    \53\ See proposed Interpretations and Policies .12(a) to Rule 
515A.
    \54\ See, e.g., Phlx Rule 1080(n).
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Sections 6(b)(5) and 6(b)(8) of the 
Act.\55\
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78f(b)(5), (b)(8).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\56\ that the proposed rule change (SR-MIAX-2017-19), be and hereby 
is approved.
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\57\
Jill M. Peterson,
Assistant Secretary.
---------------------------------------------------------------------------

    \57\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2017-14984 Filed 7-17-17; 8:45 am]
 BILLING CODE 8011-01-P