Document ID: SEC-2019-1003-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2019-07-16T04:00Z

[Federal Register Volume 84, Number 136 (Tuesday, July 16, 2019)]
[Notices]
[Pages 34025-34028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15027]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86345; File No. SR-MIAX-2019-32]

Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 503, Openings on the 
Exchange

July 10, 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 July 3, 2019, Miami International Securities 
Exchange, LLC (``MIAX Options'' or the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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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 503, 
Openings on the Exchange.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/ 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 503, Openings on the 
Exchange, to make minor non-substantive edits to harmonize the rule 
text to that of the Exchange's affiliate, MIAX Emerald, LLC (``MIAX 
Emerald'' or ``Emerald''). Additionally, the Exchange proposes to amend 
subsection (f)(2)(iv)(A)2. to adopt new rule text relating to the price 
at which an Intermarket Sweep Order (``ISO'') is routed in order to 
align the rule text to the operation of the System.\3\ The Exchange 
also proposes to adopt new subsection (f)(2)(xi) related to the 
operation of Route Timers and Imbalance Timers during the Opening 
Process.\4\ Finally, the Exchange proposes to amend paragraph (g) to 
adopt new rule text that identifies Help Desk staff authorized to take 
actions during Opening Process to maintain a fair and orderly market.
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    \3\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \4\ See Exchange Rule 503(f).
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    First, the Exchange proposes to amend subsection (b) to adopt new 
rule text that is identical to rule text found in Emerald,\5\ to state 
that the order types that may participate in the opening process are 
set forth in Rule 516, Order Types Defined. The Exchange believes that 
this provides additional detail and clarity to the rule.
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    \5\ See MIAX Emerald Exchange Rule 503(b).
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    Next, the Exchange proposes to amend subsection (f)(2)(iv) to 
insert the word ``Trading'' to provide consistency and clarity within 
the rule text. The rule discusses Minimum Trading Increments,\6\ and 
the last reference in the sentence is to the Minimum Increment. The 
Exchange now proposes to change this phrase to, ``Minimum Trading 
Increment,'' to align to the rest of the rule text and to the rule text 
of Emerald.\7\
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    \6\ See Exchange Rule 510.
    \7\ See MIAX Emerald Exchange Rule 503(f)(2)(iv).
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    Next, the Exchange proposes to amend subsection (f)(2)(iv)(A)(1.) 
and (2.) to correct the formatting of subsection (1.) and (2.) to 
remove the parentheses to make the formatting consistent with the 
hierarchical convention used throughout the rulebook. The Exchange also 
proposes to amend subsection 2. to conform the rule to the current 
System behavior and state that any order that is routed pursuant to 
this Rule will be marked as an Intermarket Sweep Order (``ISO''), as 
defined in Rule 1400(h), with a limit price equal to the ``away 
market's displayed price,'' and not the Exchange's ``opening price'' as 
currently stated in the rule.\8\
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    \8\ The Exchange notes that Rule 1400(h) pertains primarily to 
ISOs received by the Exchange, whereas in this instance the Exchange 
will be sending the ISO to another exchange.
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    As described in the Exchange's current rule, the Exchange will 
route to other markets disseminating prices better than the Exchange's 
opening price and will also route to other markets disseminating prices 
equal to the Exchange's opening price if necessary.\9\ Given that the 
order is being routed to another market center for execution the limit 
price of the order being routed should be equal to the away market's 
displayed price rather than the Exchange's opening price (although, in

[[Page 34026]]

certain circumstances the away market's displayed price may be equal to 
the Exchange's opening price) as currently articulated in the Rule. The 
Exchange notes that this change was also recently made by MIAX 
Emerald.\10\
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    \9\ See Exchange Rule 503(f)(2)(iv)(A).
    \10\ See Securities Exchange Act Release No. 85910 (May 22, 
2019), 84 FR 24840 (May 29, 2019) (SR-EMERALD-2019-22).
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    Next, the Exchange proposes to amend subsection (f)(2)(vii)(A) to 
update and relocate the parenthetical which currently follows the text, 
``Opening Orders (`OPG Orders')'' so that the proposed rule texts 
reads, ``Opening (`OPG') Orders'' and is aligned to the current MIAX 
Emerald rule.\11\
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    \11\ See MIAX Emerald Exchange Rule 503(f)(2)(vii)(A).
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    Next, the Exchange proposes to reorganize subsection (f)(2)(viii) 
to move a parenthetical phrase closer to its subject to make the 
sentence easier to read. Specifically, the parenthetical, ``(including 
limit orders that are treated as market orders except for limit orders 
in series with a bid of $0.00 and an offer less than $0.05, which will 
not be treated as market orders),'' will be placed after the phrase 
market orders, making the proposed rule text read as follows, ``[t]he 
System will give priority to market orders (including limit orders that 
are treated as market orders except for limit orders in series with a 
bid of $0.00 and an offer less than $0.05, which will not be treated as 
market orders) first in type, then in time priority, then to resting 
limit orders at the opening price.'' The Exchange believes relocating 
the parenthetical phrase helps clarify the rule.
    Next, the Exchange proposes to adopt new paragraph (xi) to 
subsection (f)(2) to state that any Route Timer or Imbalance Timer in 
process shall terminate with respect to an option if at any time during 
the Opening Process there is a trading halt or trading pause in such 
option on the Exchange. The option may be subject to any new subsequent 
Route Timer or Imbalance Timer during the Opening Process upon the 
termination of the trading halt or trading pause for such option. The 
Exchange believes this adds additional detail and clarity to the rule 
concerning the operation of Route Timers and Imbalance Timers on the 
Exchange, additionally, this rule text is identical to that of MIAX 
Emerald.\12\
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    \12\ See MIAX Emerald Exchange Rule 503(f)(2)(xi).
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    Finally, the Exchange proposes to amend subsection (g) to state 
that Senior Help Desk personnel may deviate from the standard manner of 
the Opening Process when necessary, including delay or compel the 
opening of any series in any option class, modify timers or settings 
described in this Rule, when necessary in the interests of commencing 
or maintaining a fair and orderly market, in the event of unusual 
market conditions or in the public interest. The Exchange will make and 
maintain records to document all determinations to deviate from the 
standard manner of the Opening Process, and periodically review these 
determinations for consistency with the interests of a fair and orderly 
market. The Exchange is amending the rule to add additional specificity 
by designating that only Senior Help Desk personnel may deviate from 
the standard manner of the Opening Process when necessary. The Exchange 
is also providing examples of the type of actions that Senior Help Desk 
personnel may take to ensure a fair and orderly market is maintained. 
Additionally, the Exchange is proposing to amend the rule to adopt a 
provision stating that the Exchange will maintain records to document 
all determinations to deviate from the standard manner of the Opening 
Process, and periodically review these determinations for consistency 
with the interests of a fair and orderly market. The Exchange notes 
that the proposed rule text is identical to that found in the MIAX 
Emerald Rule.\13\
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    \13\ See MIAX Emerald Exchange Rule 503(g).
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    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. MIAX Emerald and MIAX 
Options may have a number of Members \14\ in common, and where feasible 
the Exchange intends to implement similar behavior to provide 
consistency between MIAX Options and MIAX Emerald so as to avoid 
confusion among Members.
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    \14\ The 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.
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \15\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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    The Exchange is proposing to add additional detail to the rule to 
provide clarity and precision in the Exchange's rule. The Exchange 
proposes to provide an internal cross reference to Rule 516, Order 
Types, where a list of valid order types eligible to participate in the 
opening process may be found. Additionally, the Exchange is proposing 
to make a number of non-substantive changes by adding clarifying text 
to the rule which provides additional detail and clarity to the rule. 
Clarity and transparency of the Exchange's rules benefits investors and 
the public by eliminating the potential for confusion.
    The Exchange's proposal to correctly identify the price at which 
orders may be routed during the Opening Process removes impediments to 
and perfects the mechanisms of a free and open market and a national 
market system and, in general, protects investors and the public 
interest by ensuring that interest routed as a result of an imbalance 
on the Exchange during its Opening Process is properly priced for 
execution. This reduces the risk of trading through \17\ other market 
centers and promotes just and equitable principles of trade by routing 
orders to market centers where they may receive an execution. The 
Exchange's proposal more accurately describes how the System prices 
interest being routed pursuant to the Opening Process. The Exchange 
believes its proposal provides accuracy and clarity to the rule and 
protects investors and the public interest by clearly and accurately 
describing Exchange functionality which may influence investors' 
decisions concerning the submission of their orders.
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    \17\ A trade-through occurs when one trading center executes an 
order at a price that is inferior to the price of a protected 
quotation, often representing an investor limit order, displayed by 
another trading center.
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    The Exchange is proposing to adopt a new provision regarding the 
operation of Route Timers and Imbalance Timers during the Opening 
Process. The Exchange's proposed rule will provide that any Route Timer 
or Imbalance Timer in process during the Opening Process shall 
terminate with respect to an option if at any time during the Opening 
Process there is a trading halt or a trading pause in such option. The 
Exchange believes this provision promotes just and equitable principles 
of traded [sic] and removes impediments to and perfects the

[[Page 34027]]

mechanisms of a free and open market and a national market system and, 
in general, protects investors and the public interest, and contributes 
to the operation of a fair and orderly market by immediately ceasing 
any activity in any option that is subject to a trading halt or a 
trading pause.
    This provision is identical to a provision found in MIAX 
Emerald.\18\ The Exchange believes adding this provision provides 
additional detail to the rule and protects investors and the public 
interest by clearly describing Exchange functionality which may 
influence investors' decisions concerning the submission of orders. The 
Exchange is proposing to harmonize the MIAX Options rule to that of 
MIAX Emerald as the opening process is similar and wherever possible 
the Exchange would like to harmonize identical rules so that the only 
differences between the rules of the two exchanges are those that are 
intentional.
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    \18\ See supra note 12.
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    Finally, the Exchange is proposing to amend its current provision 
pertaining to the actions that the Help Desk may take in the interests 
of maintaining a fair and orderly market to adopt a more detailed and 
nuanced provision from MIAX Emerald. This provision identifies which 
Help Desk personnel may take actions during the Opening Process (Senior 
Help Desk personnel) and provides examples of the type of actions which 
may be undertaken. Additionally, the provision provides that the 
Exchange will make and maintain records to document all determinations 
to deviate from the standard manner of the Opening Process and 
periodically reviewing these determinations for consistency with the 
interests of a fair and orderly market. The Exchange believes its 
proposal promotes just and equitable principles of trade, removes 
impediments to and perfects the mechanisms of a free and open market 
and a national market system and, in general, protects investors and 
the public interest by providing additional detail in the Exchange's 
rules and by providing a review process for instances where there was a 
deviation from the standard Opening Process.
    The Exchange believes its proposal removes impediments to and 
perfects the mechanisms of a free and open market by providing clarity 
in the Exchange's rules and more detail concerning the Opening Process 
on the Exchange. The Exchange believes clarity and transparency 
benefits investors and the public and allows investors and the public 
to make informed decisions regarding the submission of orders to the 
Exchange.
    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 Emerald 
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 Emerald if the only differences between 
MIAX Options rules and MIAX Emerald rules are those that are intended.

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 does not believe that the proposed rule change will 
impose any burden on inter-market competition as the proposed rule 
change adds additional detail to the Exchange's rules and further 
clarifies current Exchange functionality and is not a competitive 
filing. The Exchange does not believe the proposed rule regarding the 
price of routed orders will impose any burden on inter-market 
competition as exchanges routinely route orders to one another and 
there is no change to the Exchange's functionality related to routing 
orders during the Opening Process.
    Additionally, the Exchange does not believe that the proposed rule 
change will impose any burden on intra-market competition as the 
Opening Process affects all Members equally, and the specific situation 
that the proposal addresses occurs only in the limited instance as 
described herein.
    The Exchange does not believe that the proposed rule change to 
adopt new rule text pertaining to the termination of Route Timers or 
Imbalance Timers during the Opening Process when there is a trading 
halt or trading pause in the option will impose any burden on inter-
market competition as the change pertains only to the Exchange's 
Opening Process.
    Additionally, the Exchange does not believe that the proposed rule 
change to amend the provision concerning the actions that the Help Desk 
may take to deviate from the standard manner of the Opening Process to 
maintain a fair and orderly market will impose any burden on inter-
market competition as the proposed rule change is designed to identify 
the specific Help Desk personnel authorized to deviate from the 
standard manner of the Opening Process and to provide some examples of 
the type of actions that may be undertaken to ensure the operation of a 
fair and orderly market.
    The Exchange does not believe that the proposed changes impose a 
burden on intra-market competition as the proposed changes are designed 
to provide additional detail and clarity in the Exchange's rules and 
are not intended to influence competition among Members.

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 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, it has become effective 
pursuant to 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6) \20\ 
thereunder.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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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    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

[[Page 34028]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2019-32 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2019-32. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MIAX-2019-32 and should be submitted on 
or before August 6, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-15027 Filed 7-15-19; 8:45 am]
BILLING CODE 8011-01-P