
[Federal Register Volume 78, Number 179 (Monday, September 16, 2013)]
[Notices]
[Pages 56960-56962]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22398]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70357; File No. SR-MIAX-2013-42]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 1014

September 10, 2013.
    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 August 30, 2013, Miami International Securities 
Exchange LLC (``MIAX'' or ``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 the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to amend Rule 1014.
    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Exchange Rule 1014, entitled 
``Imposition of Fines for Minor Rule Violations,'' by expanding the 
list of violations eligible for disposition under Exchange Rule 1014 in 
order to improve the consistency of the Exchange Rule 1014 with the 
rules of other options exchanges.
    Exchange Rule 1014 promotes compliance with select rules and helps 
reduce the number and extent of violations of those rules committed by 
Members and associated persons. Exchange Rule 1014 allows the Exchange 
to promptly impose a limited but meaningful financial penalty soon 
after a rule violation is detected. The prompt imposition of a 
financial penalty helps to quickly educate and improve the conduct of 
Members and associated persons that have engaged in inadvertent or 
otherwise minor violations of the Exchange's Rules.
    The proposed changes would allow the Exchange to impose fines 
ranging from $500 to $5,000. By promptly imposing a meaningful 
financial penalty for such violations, Exchange Rule 1014 focuses on 
correcting conduct before it gives rise to more serious enforcement 
action. As discussed above, Exchange Rule 1014 provides a reasonable 
means of addressing rule violations that do not necessarily rise to the 
level of requiring formal disciplinary proceedings, while also 
providing a greater flexibility in handling certain violations. 
Adopting a provision that would allow the Exchange to sanction 
violators under Exchange Rule 1014 by no means minimizes the importance 
of compliance with these rules. The Exchange believes that the 
violation of any of its Rules is a serious matter. The addition of a 
sanction under Exchange Rule 1014 simply serves to add an additional 
method for disciplining violators of the additional Rules. The Exchange 
will continue to conduct surveillance with due diligence and make its 
determination, on a case by case basis, whether a violation of these 
additional Rules should be subject to formal disciplinary proceedings.
    The Exchange proposes to incorporate five additional violations 
into Exchange Rule 1014. Specifically, the Exchange proposes to 
incorporate into Exchange Rule 1014 additional violations regarding: 
(i) Exercise limits; (ii) reports related to position limits; (iii) 
trading in restricted classes; (iv) Market Maker

[[Page 56961]]

continuous quoting requirements; and (v) amending Form U4, Form U5, and 
Form BD.
Exercise Limits
    MIAX Rule 309 generally prohibits Members from exceeding certain 
exercise limits.\3\ MIAX is proposing to incorporate violations 
consisting of exceeding such exercise limits into the Exchange Rule 
1014 under Proposed Exchange Rule 1014(d)(10).
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    \3\ See MIAX Rule 309.
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    MIAX is proposing to implement a fine of $500 for the first 
violation of Rule 309 within a twenty-four month rolling period. A 
second violation within the rolling twenty-four month period would be 
allocated a $1,000 fine, a third violation a $2,500 fine, and a fourth 
violation a $5,000 fine. Any subsequent violations within the rolling 
twenty-four month period would be allocated a $5,000 fine. MIAX notes 
that this proposal is consistent with rules in place at the Chicago 
Board Options Exchange, Inc. (``CBOE'').\4\
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    \4\ See CBOE Rule 17.50(g)(1).
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Reports Related to Position Limits
    MIAX Rule 310 requires Members to file with the Exchange reports 
once certain positional thresholds are exceeded.\5\ MIAX is proposing 
to incorporate violations consisting of the failure to file such 
position limit reports into Exchange Rule 1014 under Proposed Exchange 
Rule 1014(d)(11). All the options exchanges, including MIAX, have 
entered into a plan pursuant to Rule 17d-2 of the Act (the ``Options 
Market Surveillance Plan'' or the ``Plan'') under which the exchanges 
have agreed to allocate regulatory responsibility for certain rules 
common to all options exchanges. The common rules relate to compliance 
with position limits, the use of position limit exemptions and the 
reporting of large options positions. Adding Rule 310 to Exchange Rule 
1014 makes Exchange Rule 1014 more consistent with rules of other self-
regulatory organizations, including with respect to rules that are 
classified as common rules pursuant to the Options Market Surveillance 
Plan. The Exchange believes that aspects of Exchange Rule 1014 with 
respect to the handling of violations of rules that are common rules 
pursuant to the Plan should be consistent with the other options 
exchanges that are parties to the Plan.
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    \5\ See MIAX Rule 310.
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    MIAX is proposing to implement a fine of $500 for the first 
violation of Rule 310 within a twenty-four month rolling period. A 
second violation within the rolling twenty-four month period would be 
allocated a $1,000 fine and a third violation a $2,500 fine. Any 
subsequent violations within the rolling twenty-four month period would 
be allocated a $5,000 fine. MIAX notes that this proposal is consistent 
with the rules in place at the BATS Options Market (``BATS 
Options'').\6\
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    \6\ See BATS Exchange Rule 25.3(b).
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Trading in Restricted Classes
    MIAX Rule 403 provides that MIAX may prohibit any opening purchase 
transactions in series of options previously opened to the extent it 
deems such action necessary or appropriate.\7\ MIAX is proposing to 
incorporate violations related to trading in restricted classes into 
Exchange Rule 1014 under Proposed Exchange Rule 1014(d)(12).
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    \7\ See MIAX Rule 403.
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    MIAX is proposing to implement a fine of $500 for the first 
violation within a twenty-four month rolling period. A second violation 
within the rolling twenty-four month period would be allocated a $2,500 
fine and a third violation a $5,000 fine. Any subsequent violations 
within the rolling twenty-four month period would become subject to 
formal disciplinary action under Exchange Rule 1003 or 1004. MIAX notes 
that this proposal is consistent with rules in place at the CBOE, NYSE 
Arca, Inc. (``NYSE Arca''), and NYSE MKT, Inc. (``NYSE MKT'').\8\
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    \8\ See CBOE Rule 17.50(g)(11); NYSE Arca Rule 10.12(h)(22); 
NYSE MKT Rule 476A Supp. Mat. Part 1C(i)(37).
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Market Maker Continuous Quoting Obligations
    MIAX Rule 604(e) requires each class of Market Maker to meet a 
specific continuous quoting threshold.\9\ MIAX is proposing to 
incorporate violations of these continuous quoting obligations into 
Exchange Rule 1014 under Exchange Rule 1014(d)(13).
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    \9\ See MIAX Rule 604(e).
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    MIAX is proposing to issue a Letter of Caution for the first 
violation within a twenty-four month rolling period. Any subsequent 
offense would be subject to a $300 fine charged per day. MIAX notes 
that this proposal is consistent with rules in place at the NASDAQ 
Options Market (``NOM''), NASDAQ OMX BX, Inc. Market (``BX Options''), 
and BATS Options.\10\
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    \10\ See Chapter X, Section 7(c) of NOM Rules; Chapter X, 
Section 7(c) of BX Options Rules; and BATS Exchange Rule 25.3(d).
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Amending Form U4, Form U5, and Form BD
    Under the Securities and Exchange Act of 1934,\11\ and the rules 
promulgated thereunder, and applicable Exchange Rules, Members are 
required to file and amend to keep current the applicable Form U4,\12\ 
Form U5,\13\ or Form BD.\14\ Amendments shall be made no later than 
thirty (30) days after the filer knew or should have known of the need 
for the amendment. MIAX is proposing to incorporate the failure to make 
a timely amendment to the applicable Form U4, Form U5, or Form BD into 
Exchange Rule 1014 under Proposed Exchange Rule 1014(d)(14).
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    \11\ See 15 U.S.C. 78o.
    \12\ See MIAX Rules 1301(b) and 1302(c).
    \13\ See MIAX Rules 1301(c) and 1303.
    \14\ See 15 U.S.C. 78o.
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    MIAX is proposing to implement a fine of $500 for the first 
violation within a twelve month rolling period. A second violation 
within the rolling twelve month period would be allocated a $1,000 fine 
and a third violation a $2,000 fine. Any subsequent violations within 
the rolling twelve month period would become subject to formal 
disciplinary action under Exchange Rule 1003 or 1004. MIAX notes that 
this proposal is consistent with rules in place at the NOM, BX Options, 
and BOX Options Exchange LLC (``BOX Options'').\15\
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    \15\ See Chapter X, Section 7(k) of NOM Rules; Chapter X, 
Section 7(k) of BX Options Rules; BOX Options Rule 12140(d)(8).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\16\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\17\ in particular, because 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, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
The proposed rule change is consistent with the statute in that it 
directly addresses fraudulent and manipulative acts and practices by 
MIAX Members. The Exchange believes that the proposed rule changes 
furthers the objectives of Section 6(b)(1) \18\ of the Act to enforce 
compliance by its Members to the Exchange's Rules,

[[Page 56962]]

Section b(b)(6) \19\ of the Act to appropriately discipline Members of 
the Exchange's Rules, and Section 6(b)(7) \20\ of the Act to provide a 
fair procedure of disciplining Members as the proposal will strengthen 
its ability to carry out its oversight responsibilities as a self-
regulatory organization and reinforce its surveillance and enforcement 
functions. Additionally, this proposed rule change will promote 
consistency with rules of other exchanges.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(1).
    \19\ 15 U.S.C. 78f(b)(6).
    \20\ 15 U.S.C. 78f(b)(7).
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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 proposal relates to the 
Exchange's role and responsibilities as a self-regulatory organization 
and the manner in which it disciplines its Members and associated 
persons for violations of its Rules. In the unlikely event that Members 
will determine where to send options orders based on the type of 
disciplinary program in place at an options exchange, the expansion of 
Exchange Rule 1014 will lessen the impact on competition by making 
Exchange Rule 1014 more consistent with rules at the other options 
exchanges.

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 \21\ and Rule 19b-4(f)(6) \22\ 
thereunder.
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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 Number SR-MIAX-2013-42 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 Number SR-MIAX-2013-42. 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 offices 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 Number SR-MIAX-2013-42, 
and should be submitted on or before October 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22398 Filed 9-13-13; 8:45 am]
BILLING CODE 8011-01-P


