
[Federal Register Volume 78, Number 141 (Tuesday, July 23, 2013)]
[Notices]
[Pages 44183-44185]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-17594]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69996; File No. SR-MIAX-2013-32]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Amend Exchange Rule 700 Regarding Friday Expiration 
Changes

Dated: July 17, 2013.
    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 July 3, 2013, Miami International Securities Exchange LLC (``MIAX'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the 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 700, 
Exercise of Option Contracts, to describe accurately the deadlines for 
submission of notice to the Exchange of a Member's decision to exercise 
or not to exercise an existing option, and for the submission of 
Contrary Exercise Advices (defined below) by Members to the Exchange. 
The Exchange also proposes to establish such deadlines for options that 
expire after February 1, 2015.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    MIAX proposes to amend Exchange Rule 700, to establish new dates 
and times by which Members must make a final decision to exercise or 
not exercise an expiring option.
Background
    The Options Clearing Corporation (``OCC'') recently determined to 
change the expiration date for most option contracts to the third 
Friday of the expiration month instead of the Saturday following the 
third Friday.\3\ Most option contracts (``Standard Expiration 
Contracts'') currently expire at the ``expiration time'' (11:59 p.m. 
Eastern Time) on the Saturday following the third Friday of the 
specified expiration month (``expiration date''). The expiration time 
will continue to be 11:59 p.m. Eastern Time on the expiration date. The 
OCC rule change would apply only to Standard Expiration Contracts 
expiring after February 1, 2015. The OCC rule change will not affect 
the expiration date for any outstanding option contract. The OCC rule 
change will apply only to series of option contracts opened for trading 
having expiration dates later than February 1, 2015.
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    \3\ See Securities Exchange Act Release Nos. 69480 (April 30, 
2013), 78 FR 26413 (May 6, 2013) (SR-OCC-2013-04); 69772 (June 17, 
2013), 78 FR 37645 (June 21, 2013) (SR-OCC-2013-04) (Order Approving 
Proposed Rule Change to Change the Expiration Date For Most Option 
Contracts to the Third Friday of the Expiration Month Instead of the 
Saturday Following the Third Friday).
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    After February 1, 2015, virtually all Standard Expiration Contracts 
will expire on Friday. The only Standard Expiration Contracts that will 
expire on a Saturday after February 1, 2015 will be certain options 
that were listed prior to the effectiveness of the OCC rule change, and 
a limited number of options that may be listed prior to necessary 
systems changes of the options exchanges, which are expected to be 
completed in August 2013. The exchanges have agreed that once these 
systems changes are made they will not open for trading any new series 
of option contracts with Saturday expiration dates falling after 
February 1, 2015.\4\ After the transition period and the expiration of 
all existing Saturday-expiring options, expiration processing should be 
a single operational process and should run on Friday night for all 
Standard Expiration Contracts.
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    \4\ Id.
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    In order to start the transition to Friday night expiration 
processing, the OCC will, beginning June 21, 2013, move the expiration 
exercise procedures to Friday for all Standard Expiration Contracts 
even though the contracts will continue to expire on Saturday. As part 
of this change, the window for submission of exercise-by-exception 
instructions will be moved from 6:00 a.m. to 9 a.m. Central Time on 
Saturday morning to 6:00 p.m. to 9:15 p.m. Central Time on Friday 
evening starting June 21, 2013.\5\ The current exercise-by-exception 
window for weekly and quarterly expiration options from 6:00 p.m. to 
7:00 p.m. Central Time on the expiration date will remain the same.
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    \5\ See id. at 26414.
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The Proposal
    The Exchange proposes to amend Rule 700(c) by stating that, 
respecting options that expire after February 1, 2015, option holders 
have until 5:30 p.m. Eastern Time on the expiration date to make a 
final decision to exercise or not exercise an expiring option. The 
purpose of the change is to account for the OCC change described above 
for all Standard Expiration Contracts that after February 1, 2015 will 
have a Friday expiration and that option holders must submit exercise 
instructions to Members (whether for customer or non-customer accounts) 
before 5:30 p.m. Eastern Time on the expiration date instead of the 
current requirement of the business day immediately prior to the 
expiration date. The Exchange believes that this should assist Members 
processing exercise instructions in the same manner as today despite 
the new Friday expiration. This should result in a smooth transition 
without any confusion to Members and their customer and non-customer 
accounts.
    The Exchange also proposes to amend Rule 700(c) to provide that 
Members may set earlier cutoff times for customers submitting exercise 
notices, and that Clearing Members are permitted to submit exercise 
instructions after the cutoff time only in case of errors or other 
unusual situations, and may be subject to fines or disciplinary 
actions.\6\ The Exchange believes that this provision enables Members 
to receive timely notification to exercise or not to exercise an 
option, and provides Clearing Members with additional time to correct 
errors or other issues that arise from unusual

[[Page 44184]]

situations. However, Clearing Members may be subject to fines or 
disciplinary actions by MIAX in these instances.\7\
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    \6\ See Securities Exchange Act Release Nos. 69480 (April 30, 
2013), 78 FR 26413 (May 6, 2013) (SR-OCC-2013-04).
    \7\ See MIAX Rule 1014(d)(9), Exercise of Option Contracts (Rule 
700), which states that a Member who fails to submit to the Exchange 
in a timely manner pursuant to Rule 700 or a Regulatory Circular 
issued pursuant to Rule 700, ``Advice Cancel,'' or exercise 
instruction relating to the exercise or non-exercise of a non-cash 
settled equity option shall be subject to a fine schedule set forth 
in the rule.
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    The Exchange proposes to amend Rules 700(d)(ii) and (iii), Deadline 
for CEA Submission for Customer Accounts and Non-Customer Accounts. 
Currently, Rules 700(d)(ii) and (iii) simply state that Members have 
until 7:30 Eastern Time to submit a Contrary Exercise Advice to the 
Exchange. The Exchange proposes to clarify in the Rules that Members 
have until 7:30 p.m. Eastern Time on the business day immediately prior 
to the expiration date or, in the case of Short Term Option Series and 
Quarterly Options Series, on the expiration date, to submit a Contrary 
Exercise Advice (``CEA'') \8\ to the Exchange. The Exchange believes 
that this clarifying language will safeguard the CEA process and enable 
the Exchange to submit CEA or Advice Cancel \9\ instructions to OCC in 
a timely fashion on Friday, the date on which OCC will be processing 
expiring options. The Exchange believes that this more clearly and 
accurately describes the deadline date and time. This amendment should 
provide a smooth transition to the Friday expiration, and to the 
processing of CEAs and Cancel Advices when the OCC begins to conduct 
expiration exercise procedures Friday for all Standard Expiration 
Contracts on June 21, 2013, even though the contracts would continue to 
expire on Saturday. The Exchange believes this benefits the investing 
public because Members will be required to submit these notifications 
in a timely fashion for Friday processing, removing their exposure to 
the risk of late notification and the concomitant exercise or non-
exercise of their option contracts.
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    \8\ A Contrary Exercise Advice is a communication either: (1) To 
not exercise an option that would be automatically exercised under 
the OCC's Exercise-by-Exception (``Ex-by-Ex'') procedure (i.e., 
unless contrary instructions are given, option contracts that are 
in-the-money by specified amounts shall be automatically exercised); 
or (2) to exercise an option that would not be automatically 
exercised under the OCC's Ex-by-Ex procedure. See MIAX Rule 700(d).
    \9\ A Contrary Exercise Advice may be canceled by filing an 
``Advice Cancel'' with the Exchange. See MIAX Rule 700(d)(i).
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    The Exchange proposes to amend MIAX Rule 700(c) by codifying the 
current practice under which holders of Short Term Option Series 
(``STOS'') have until 5:30 p.m. on the expiration date to make a final 
decision to exercise or not exercise an expiring option, which is also 
the current practice respecting Quarterly Options. Currently, Exchange 
Rule 700(c) states that option holders have until 5:30 p.m. Eastern 
Time on the business day immediately prior to the expiration date or, 
in the case of Quarterly Options Series, on the expiration date, to 
make a final decision to exercise or not exercise an expiring option. 
Just as with Quarterly Options Series, STOS currently may be exercised 
on the expiration date.\10\ The Exchange proposes to clarify this 
current practice in the Rule by stating that the expiration date 
exercise cutoff time applies to holders of STOS as well.\11\ This 
change will bring the Exchange's Rules in line with the current OCC 
expiration schedule for STOS. Members may not accept exercise 
instructions for customer or non-customer accounts after 5:30 p.m. 
Eastern Time.
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    \10\ STOS (or ``Weekly'') options expire on the Friday of the 
listing week. No weekly options are issued during the week of 
standard expiration (the third Friday of the month). When expiration 
Friday falls on a holiday, the weekly option will expire on the 
preceding Thursday. See, e.g., Securities Exchange Act Release No. 
69658 (May 29, 2013), 78 FR 33454 (June 4, 2013) (SR-MIAX-2013-23).
    \11\ MIAX Rule 700 is nearly identical to ISE Rule 1100. ISE 
Rule 1100(c) did not account for the ability to exercise STOS on the 
expiration date.
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    Finally, the Exchange proposes a clarifying change to Rule 700(h). 
Rule 700(h) currently provides that Members have until 7:30 Eastern 
Time to deliver a CEA or Advice Cancel to the Exchange for customer 
accounts and non-customer accounts. The Exchange proposes to amend this 
provision to clarify that Members have until 7:30 p.m. Eastern Time to 
deliver a CEA or Advice Cancel to the Exchange for customer accounts 
and non-customer accounts. This more precise description of the time 
deadline should assist the Exchange in its timely submission of such 
notification to OCC and eliminate any potential confusion, thus 
protecting investors submitting exercise instructions to Members when 
the time for closing the trading session is modified on the last 
business day before expiration will occur.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) \12\ of the Act in general, and furthers the 
objectives of Section 6(b)(5) \13\ of the Act 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, and it is not 
designed to permit unfair discrimination among customers, brokers, or 
dealers.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    By changing the Exchange's Rules to account for the new expiration 
date for most Standard Expiration Contracts (the third Friday of the 
expiration month), and for the OCC moving the expiration exercise 
procedures to Friday for all Standard Expiration Contracts for post-
February 1, 2015 expirations, the proposed rule change should help to 
promote the prompt and accurate clearance and settlement of securities 
transactions, and foster cooperation and coordination with persons 
engaged in the clearance and settlement of securities transactions.
    The proposed changes to account for the exercise of STOS on the 
expiration date remove impediments to and perfect the mechanisms of a 
free and open market and a national market system and, in general, 
protect investors and the public interest, by amending the Rules to be 
consistent with the current OCC expiration schedule. This change 
clarifies that investors must notify Members of their intention to 
exercise or not to exercise STOS, and that Members must submit CEAs and 
Advice Cancels, on the expiration date, thus further perfecting the 
mechanisms of a free and open market.
    The proposed clarifying changes to provide more precise deadline 
times for the submission of exercise notifications and CEA Submissions 
should assist the Exchange in its timely submission of such 
notification to OCC and eliminate any potential confusion, thus 
protecting investors submitting exercise instructions to Members.

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

    MIAX does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change is 
intended to help MIAX Members transition into the new Friday expiration 
date for Standard Expiration Contracts, and to foster cooperation with 
persons engaged in the clearance and settlement of securities 
transactions. This should enable the Exchange to continue to compete on 
an even playing field with other U.S. options exchanges.

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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 \14\ and Rule 19b-4(f)(6) \15\ 
thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-MIAX-2013-32 on the subject line.

Paper Comments:

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

All submissions should refer to File No. SR-MIAX-2013-32. 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 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 such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-MIAX-2013-32 and should be 
submitted on or before August 13, 2013.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-17594 Filed 7-22-13; 8:45 am]
BILLING CODE 8011-01-P


