
[Federal Register Volume 80, Number 18 (Wednesday, January 28, 2015)]
[Notices]
[Pages 4605-4610]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01510]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74118; File No. SR-MIAX-2015-03]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing of a Proposed Rule Change, as Modified 
by Amendment No. 1 Thereto, To Adopt Rule 519A Risk Protection Monitor

January 22, 2015.
    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 January 8, 2015, 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 and II below, which Items have been prepared by the Exchange. 
On January 20, 2015, the Exchange filed Amendment No.1 to the 
proposal.\3\ 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.
    \3\ In Amendment No. 1, the Exchange proposed changes to the 
Form 19b-4, Exhibit 1, and Exhibit 5 to clarify that once triggered, 
the Risk Protection Monitor described therein will apply to orders 
in all series in all classes of options from the Exchange Member.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt new risk protections for orders.
    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 adopt Rule 519A, Risk Protection Monitor, 
to provide new risk protections for orders entered by Members on the 
Exchange. The proposed functionality is similar to the existing 
Aggregate Risk Protections available to Market Makers that provide risk 
protections for Market Maker quotations, however it will apply to 
orders entered by Members.\4\ The Exchange also proposes to codify 
existing functionality regarding the Aggregate Risk Manager to provide 
additional transparency in the Rule to Members regarding the current 
functionality.
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    \4\ See Rule 612. The proposed Risk Protection Monitor is 
similar in that it is based on a counting program that triggers a 
risk protection if a certain predetermined threshold is reached.
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    The Exchange proposes that the MIAX System will maintain a counting 
program (``counting program'') for each participating Member that will 
count the number of orders entered and the number of contracts traded 
via an order entered by a Member on the Exchange within a specified 
time period that has been established by the Member (the ``specified 
time period''). The maximum duration of the specified time period will 
be established by the Exchange and announced via a Regulatory Circular. 
Members may establish an Allowable Order Rate \5\ and/or an Allowable 
Contract Execution Rate \6\. When a Member's order is entered or when 
an execution of a Member's order occurs, the System will look back over 
the specified time period to determine whether the order entered or the 
execution that occurred triggers the Risk Protection Monitor.\7\ 
Members may establish whether the Risk Protection Monitor, when 
triggered, will (i) prevent the System from receiving any new orders in 
all series in all classes from the Member; or (ii) prevent the System 
from receiving any new orders in all series in all classes from the 
Member and cancel all existing Day orders in all series in all classes 
from the Member; or

[[Page 4606]]

(iii) send a notification that the Risk Protection Monitor has been 
triggered without any further preventative or cancellation action by 
the System.\8\
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    \5\ The Allowable Order Rate is the number of orders entered 
during the specific time period that has been established by the 
Member.
    \6\ The Allowable Contract Execution Rate is the number of 
contracts executed during the specific time period that has been 
established by the Member.
    \7\ The Exchange notes that the specific time period does not 
need to be the same for both the Allowable Order Rate and Allowable 
Contract Execution Rate (i.e., there can be one specific time period 
for Allowable Order Rate and a different specific time period for 
Allowable Contract Execution Rate).
    \8\ See Proposed Rule 519A(a). As discussed below, the Risk 
Protection Monitor will not cancel any existing GTC orders. GTC 
Orders will remain in the System available for trading when the Risk 
Protection Monitor is engaged. See Proposed Rule 519A, 
Interpretations and Policies .02.
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    The System will trigger the Risk Protection Monitor when the 
counting program has determined either (i) that a Member has entered 
during the specified time period a number of orders exceeding their 
Allowable Order Rate, or (ii) that a Member has executed during the 
specified time period a number of contracts exceeding their Allowable 
Contract Execution Rate.\9\ Once engaged, the Risk Protection Monitor 
will then automatically either prevent the System from receiving any 
new orders in all series in all classes from the Member, and cancel all 
existing Day orders in all series in all classes from the Member (if 
designated by the Member's instructions), or send a notification 
without any further preventative or cancellation action by the System. 
When engaged, the Risk Protection Monitor will still allow the Member 
to interact with existing orders entered prior to exceeding the 
Allowable Order Rate or the Allowable Contract Execution Rate, 
including sending cancel order messages and receiving trade executions 
from those orders. The Risk Protection Monitor shall remain engaged 
until the Member communicates with the Help Desk to enable the 
acceptance of new orders.\10\
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    \9\ The Exchange does not believe that establishing a minimum or 
maximum Allowable Order Rate or Allowable Contract Execution Rate is 
necessary at this time. The Exchange notes that use of the Risk 
Protection Monitor is optional and not mandatory. If, after some 
time of gaining experience with the Risk Protection Monitor, the 
Exchange sees a need for either minimums or maximums in the interest 
of maintaining fair and orderly markets, the Exchange will submit a 
subsequent 19b-4 rule filing as necessary.
    \10\ See Proposed Rule 519A(b). The communication from the 
Member to the Help Desk can either be via email or phone.
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    The following examples show how the proposed Risk Protection 
Monitor would operate.
    Example 1.
    BD1 designates the following settings:
    1. Allowable Order Rate = 500 orders/per 2 second. Reject new 
orders.
    2. Allowable Contract Execution Rate = 1000 contracts/per 2 
seconds. Reject new orders and cancel day orders.

------------------------------------------------------------------------
            Time                   Event              Count total
------------------------------------------------------------------------
@100 milliseconds...........  BD1 enters 10    10 orders.
                               orders.
@110 milliseconds...........     50 contracts     50 contracts
                                  execute.
@200 milliseconds...........  BD1 enters 10    20 orders.
                               orders.
@225 milliseconds...........     355              405 contracts.
                                  contracts
                                  execute.
@250 milliseconds...........     45 contracts     450 contracts.
                                  execute.
@350 milliseconds...........     150              600 contracts.
                                  contracts
                                  execute.
@500 milliseconds...........  BD1 enters 10    30 orders.
                               orders.
@1000 milliseconds..........  BD1 enters 200   230 orders.
                               orders.
@1500 milliseconds..........  BD1 enters 200   430 orders.
                               orders.
@1700 milliseconds..........  BD1 enters 50    480 orders.
                               orders.
@2000 milliseconds..........  BD1 enters 50    530 orders.
                               orders.
------------------------------------------------------------------------

     530 orders over 2 seconds exceeds the Allowable Order 
Rate--triggers the RPM
     Once engaged, the System will reject new orders from BD1 
until BD1 contacts the Help Desk to request re-enabling the acceptance 
of new orders from BD1.
     Orders on the book, may continue to trade.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
@2200 milliseconds..........  300 contracts    850 contracts.
                               execute.
@2500 milliseconds..........  500 contracts    800 contracts.
                               execute.
@3000 milliseconds..........  300 contracts    1100 contracts.
                               execute.
------------------------------------------------------------------------

     1100 contract executions over 2 seconds exceeds the 
Allowable Contract Execution Rate--triggers RPM
     Once engaged, the System will then reject new orders and 
cancel day orders from BD1 until BD1 contacts the Help Desk to request 
re-enabling the acceptance of new orders for BD1.
    Example 2.
    BD1 designates the following settings:
    1. Allowable Order Rate = 500 orders/per 2 second. Reject new 
orders.
    2. Allowable Contract Execution Rate = 6,000 contracts/per 2 
seconds. Reject new orders and cancel day orders.

------------------------------------------------------------------------
            Time                   Event              Count total
------------------------------------------------------------------------
@100 milliseconds...........  BD1 enters 10    10 orders.
                               orders.
@110 milliseconds...........     5050             5050 contracts.
                                  contracts
                                  execute.
@200 milliseconds...........  BD1 enters 10    20 orders.
                               orders.
@225 milliseconds...........     355              5405 contracts.
                                  contracts
                                  execute.
@250 milliseconds...........     45 contracts     5450 contracts.
                                  execute.
@350 milliseconds...........     150              5600 contracts.
                                  contracts
                                  execute.
@500 milliseconds...........  BD1 enters 10    30 orders.
                               orders.
@1000 milliseconds..........  BD1 enters 200   230 orders.
                               orders.
@1500 milliseconds..........  BD1 enters 200   430 orders.
                               orders.
@1700 milliseconds..........  BD1 enters 50    480 orders.
                               orders.
@2000 milliseconds..........  BD1 enters 50    530 orders.
                               orders.
------------------------------------------------------------------------


[[Page 4607]]

     530 orders over 2 seconds exceeds the Allowable Order 
Rate--triggers the RPM
     Once engaged, the System will reject new orders from BD1 
until BD1 contacts the Help Desk to request re-enabling the acceptance 
of new orders from BD1.
     Orders on the book, may continue to trade.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
@2200 milliseconds..........  300 contracts    850 contracts.
                               execute.
@2500 milliseconds..........  500 contracts    800 contracts.
                               execute.
@3000 milliseconds..........  5300 contracts   6100 contracts.
                               execute.
------------------------------------------------------------------------

     6100 contract executions over 2 seconds exceeds the 
Allowable Contract Execution Rate--triggers RPM
     Once engaged, the System will then reject new orders and 
cancel day orders from BD1 until BD1 contacts the Help Desk to request 
re-enabling the acceptance of new orders for BD1.
    In Examples 1 and 2, the Exchange notes that contracts continued to 
execute even though the Risk Protection Monitor was triggered because 
the orders received during the specified time period exceeded the 
Allowable Order Rate. If BD1 wishes to mitigate the risk of additional 
executions after the Risk Protection Monitor is triggered in scenarios 
like Examples 1 or 2, BD1 could designate that the Risk Protection 
Monitor prevent the System from receiving any new orders in all series 
in all classes from the Member and cancel all existing Day orders in 
all series in all classes from the Member if the orders entered equal 
or exceed the Allowable Order Rate.
    Example 3.
    BD1 designates the following settings:
    1. Allowable Order Rate = 500 orders/per 2 second. Reject new 
orders.
    2. Allowable Contract Execution Rate = 1000 contracts/per 2 
seconds. Reject new orders and cancel day orders.

------------------------------------------------------------------------
            Time                   Event              Count total
------------------------------------------------------------------------
@100 milliseconds...........  BD1 enters 10    10 orders
                               orders.
@110 milliseconds...........     50 contracts     50 contracts
                                  execute.
@200 milliseconds...........  BD1 enters 10    20 orders
                               orders.
@225 milliseconds...........     355              405 contracts
                                  contracts
                                  execute.
@250 milliseconds...........     45 contracts     450 contracts
                                  execute.
@350 milliseconds...........     150              600 contracts
                                  contracts
                                  execute.
@500 milliseconds...........  BD1 enters 10    30 orders
                               orders.
@1000 milliseconds..........  BD1 enters 200   230 orders
                               orders.
@1500 milliseconds..........  BD1 enters 200   430 orders
                               orders.
@1700 milliseconds..........  BD1 enters 50    480 orders
                               orders.
@2200 milliseconds..........  BD1 enters 10    480 orders
                               orders.
@2200 milliseconds..........     300              850 contracts
                                  contracts
                                  execute.
@2500 milliseconds..........     500              800 contracts
                                  contracts
                                  execute.
@3050 milliseconds..........  BD1 enters 150   410 orders
                               orders.
@3060 milliseconds..........     300              1100 contracts
                                  contracts
                                  execute.
------------------------------------------------------------------------

     1100 contract executions over 2 seconds exceeds the 
Allowable Contract Execution Rate--triggers RPM
     Once engaged, the System will then reject new orders and 
cancel day orders from BD1 until BD1 contacts the Help Desk to request 
re-enabling the acceptance of new orders for BD1.
    The Exchange also proposes Interpretation and Policy .01 to provide 
that Members may elect to group with other Members to enable the Risk 
Protection Monitor to apply collectively to the group.\11\ The Members 
in the group must designate a group owner. Specifically, Members may 
elect to group with other Members to enable the Risk Protection Monitor 
to apply collectively to the group, provided that either: (i) There is 
at least 75% common ownership between the firms as reflected on each 
firm's Form BD, Schedule A; or (ii) there is written authorization 
signed by all Members in the group and the group owner maintains 
exclusive control of all orders sent to the Exchange from each MPID 
within the group.\12\ A Member may also elect to group with the 
Member's clearing firm.\13\ A clearing firm may also elect to group 
several Members to enable the Risk Protection Monitor to apply 
collectively to the group with the clearing firm designated as the 
group owner, provided that the clearing firm serves as the clearing 
firm for all the MPIDs of the group and there is written authorization 
signed by the clearing firm and each Member of the group. A clearing 
firm that has grouped several Members may only receive warning messages 
pursuant to Interpretation and Policy .03 of this Rule, unless one 
Member of the group maintains exclusive control of all orders routed 
through all MPIDs within the group.\14\
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    \11\ See Proposed Rule 519A, Interpretations and Policies .01.
    \12\ See Proposed Rule 519A, Interpretations and Policies 
.01(a).
    \13\ See Proposed Rule 519A, Interpretations and Policies 
.01(b).
    \14\ See id.
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    The Exchange believes that the threshold of at least 75% common 
ownership between the firms as reflected on each firm's Form BD, 
Schedule A, is reasonable and appropriate for determining adequate 
affiliation between two or more Member firms. The Exchange notes that 
this threshold level has been widely adopted by options exchanges in 
the context of aggregated trading volume of affiliated firms for volume 
based fee/rebate programs.\15\ The written authorization and exclusive 
control requirement helps ensure that the Risk Protection Monitor does 
not apply to Members in a group or orders without adequate permission 
in the manner that is designed to prevent fraudulent and manipulative 
acts and practices, and to foster cooperation and coordination with 
persons engaged in facilitating transaction in securities.
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    \15\ See e.g., MIAX Options Fee Schedule, Sections 1)a)i), 
1)a)iii); CBOE Fees Schedule, p. 3 (Volume Incentive Program), p. 13 
(Liquidity Provider Sliding Scale), p. 13 [sic] (Clearing Trading 
Permit Holder Fee Cap); NASDAQ Options Market, Chapter XV, Section 
2(1).
---------------------------------------------------------------------------

    The Risk Protection Monitor for groups will operate in the same 
manner as described in paragraphs (a) and (b) of Proposed Rule 519A, 
except that: (i) The counting program will count the number of orders 
entered and the number of contracts traded resulting

[[Page 4608]]

from an order entered by all MPIDs in the group collectively; (ii) the 
System will trigger the Risk Protection Monitor when the group 
collectively exceeds either the Allowable Order Rate or Allowable 
Contract Execution Rate for the group; (iii) once engaged, the Risk 
Protection Monitor will then either automatically prevent the System 
from receiving any new orders in all series in all classes from each 
MPID in the group, and, if designated by the group owner's 
instructions, cancel all existing Day orders in all series in all 
classes from the group, or send a notification without any further 
preventative or cancellation action by the System; and (iv) only the 
designated group owner may request through the Help Desk to enable the 
acceptance of new orders for all the Members of the group.\16\
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    \16\ See Proposed Rule 519A, Interpretations and Policies 
.01(c).
---------------------------------------------------------------------------

    The following examples show how the proposed Risk Protection 
Monitor would operate for groups.
    Example 4.
    BD1, BD2, BD3 elect to group with each other, with BD1 as the group 
owner. BD1, BD2, BD3 designate the following settings:
    1. Allowable Order Rate = 500 orders/per 2 second. Reject new 
orders.
    2. Allowable Contract Execution Rate = 1000 contracts/per 2 
seconds. Reject new orders and cancel day orders.

------------------------------------------------------------------------
            Time                   Event              Count total
------------------------------------------------------------------------
@100 milliseconds...........  BD1 enters 10    10 orders
                               orders.
@110 milliseconds...........     50 contracts     50 contracts
                                  execute.
@200 milliseconds...........  BD2 enters 10    20 orders
                               orders.
@225 milliseconds...........     355              405 contracts
                                  contracts
                                  execute for
                                  BD1.
@250 milliseconds...........     45 contracts     450 contracts
                                  execute for
                                  BD2.
@350 milliseconds...........     150              600 contracts
                                  contracts
                                  execute for
                                  BD1.
@500 milliseconds...........  BD3 enters 10    30 orders
                               orders.
@1000 milliseconds..........  BD1 enters 200   230 orders
                               orders.
@1500 milliseconds..........  BD2 enters 200   430 orders
                               orders.
@1700 milliseconds..........  BD3 enters 50    480 orders
                               orders.
@2000 milliseconds..........  BD3 enters 50    530 orders
                               orders.
------------------------------------------------------------------------

     530 orders over 2 seconds exceeds the Allowable Order Rate 
for the group--triggers the RPM
     Once engaged, the System will reject new orders from BD1, 
BD2, BD3 until BD1 contacts the Help Desk to request re-enabling the 
acceptance of new orders from BD1, BD2, BD3.
     Orders on the book, may continue to trade.

------------------------------------------------------------------------
                               300 contracts
     @2200 milliseconds       execute for BD3        850 contracts
------------------------------------------------------------------------
@2200 milliseconds..........  300 contracts    850 contracts.
                               execute for
                               BD3.
@2500 milliseconds..........  500 contracts    800 contracts.
                               execute for
                               BD2.
@3000 milliseconds..........  300 contracts    1100 contracts.
                               execute for
                               BD1.
------------------------------------------------------------------------

     1100 contract executions over 2 seconds exceeds the 
Allowable Contract Execution Rate for the group--triggers RPM
     Once engaged, the System will then reject new orders and 
cancel day orders from BD1, BD2, BD3 until BD1 contacts the Help Desk 
to request re-enabling the acceptance of new orders for BD1, BD2, BD3.
    Example 5.
    BD1 elects to group with their clearing firm CC1, with CC1 as the 
group owner. BD1, CC1 designate the following settings:
    1. Allowable Order Rate = 500 orders/per 2 second. Reject new 
orders.
    2. Allowable Contract Execution Rate = 1000 contracts/per 2 
seconds. Reject new orders and cancel day orders.

----------------------------------------------------------------------------------------------------------------
                   Time                                Event                            Count total
----------------------------------------------------------------------------------------------------------------
@100 milliseconds........................  BD1 enters 10 orders.........  10 orders.
@110 milliseconds........................     50 contracts execute......     50 contracts.
@200 milliseconds........................  BD1 enters 10 orders.........  20 orders.
@225 milliseconds........................     355 contracts execute.....     405 contracts.
@250 milliseconds........................     45 contracts execute......     450 contracts.
@350 milliseconds........................     150 contracts execute.....     600 contracts.
@500 milliseconds........................  BD1 enters 10 orders.........  30 orders.
@1000 milliseconds.......................  BD1 enters 200 orders........  230 orders.
@1500 milliseconds.......................  BD1 enters 200 orders........  430 orders.
@1700 milliseconds.......................  BD1 enters 50 orders.........  480 orders.
@2200 milliseconds.......................  BD1 enters 10 orders.........  480 orders.
@2200 milliseconds.......................     300 contracts execute.....     850 contracts.
@2500 milliseconds.......................     500 contracts execute.....     800 contracts.
@3050 milliseconds.......................  BD1 enters 150 orders........  410 orders.
@3060 milliseconds.......................     300 contracts execute.....     1100 contracts.
----------------------------------------------------------------------------------------------------------------

     1100 contract executions over 2 seconds exceeds the 
Allowable Contract Execution Rate--triggers RPM
     Once engaged, the System will then reject new orders and 
cancel day orders from BD1 until CC1 contacts the Help Desk to request 
re-enabling the acceptance of new orders from BD1.

[[Page 4609]]

    The Exchange believes that the ability for affiliated Members to 
collectively monitor and manage their risk from excessive order or 
execution rates that may be caused by a system error or market event, 
will provide a valuable risk management tool for such Members that have 
shared order exposure and execution risk across affiliated entities. 
The Exchange believes that allowing Members to group with their 
clearing firm will help both Members and clearing firms monitor and 
manage order exposure and execution risk that may be caused from a 
system or other error or market event in a manner that removes 
impediments to and perfect the mechanisms of a free and open market and 
a national market system and, in general, protects investors and the 
public interest.
    The Exchange proposes Interpretation and Policy .02 to provide that 
PRIME Orders, PRIME Solicitation Orders \17\ and GTC Orders do not 
participate in the Risk Protection Monitor. However, the System does 
include such PRIME Orders, PRIME Solicitation Orders and GTC Orders in 
the counting program for purposes of this Rule. PRIME Orders, PRIME 
Solicitation Orders and Customer-to-Customer Orders will each be 
counted as two orders for the purpose of calculating the Allowable 
Order Rate. Once engaged, the Risk Protection Monitor will not cancel 
any existing PRIME Orders, PRIME Solicitation Orders, AOC orders, OPG 
orders, or GTC orders. PRIME Orders, PRIME Solicitation Orders and GTC 
Orders will remain in the System available for trading when the Risk 
Protection Monitor is engaged.\18\ The Exchange believes the proposed 
treatment of PRIME Orders, PRIME Solicitation Orders, AOC orders, OPG 
orders, and GTC Orders is an equitable approach to handling the unique 
characteristics of these order types within the Risk Protection Monitor 
mechanism. Separately, the Exchange believes the proposed treatment of 
paired orders in the form of PRIME Orders and PRIME Solicitation Orders 
processed pursuant to Rule 515A versus standard Agency Orders processed 
pursuant to Rule 515, is an equitable approach to handling the unique 
characteristics of PRIME Orders and PRIME Solicitation Orders within 
the Risk Protection Monitor mechanism. The Exchange notes that PRIME 
Orders submitted pursuant to Rule 515A by operation of the ``stop'' 
have been guaranteed an execution at the time of acceptance into the 
System; therefore, the Exchange does not believe that such orders 
should be cancelled when the Risk Protection Monitor is engaged, since 
the execution effectively already happened. In contrast, standard 
Agency Orders that a Member is representing as a principal are 
processed according to Rule 515 in the same manner as other incoming 
orders and are not been guaranteed an execution at the time of 
acceptance in the System, thus the Exchange believes that standard 
Agency Orders should be treated the same as other orders and be subject 
to the protections of the Risk Protection Monitor.
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    \17\ The terms ``PRIME Order'' and ``PRIME Solicitation Order'' 
refer to a two-sided paired order that consists of both an Agency 
Order and a Contra-side Order that is submitted to the Exchange 
pursuant to Rule 515A.
    \18\ See Proposed Rule 519A, Interpretations and Policies .02.
---------------------------------------------------------------------------

    The Exchange proposes Interpretation and Policy .03 to provide that 
Members may elect to receive warning notifications indicating that a 
specific percentage of an Allowable Order Rate or an Allowable Contract 
Execution Rate has been met.\19\
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    \19\ See Proposed Rule 519A, Interpretations and Policies .03.
---------------------------------------------------------------------------

    The Exchange proposes Interpretation and Policy .04 to provide that 
at the request of a Member or in order to maintain a fair and orderly 
market the Help Desk may pause and restart the specified time period 
used by the counting program or clear and reset any calculated 
Allowable Order Rate or Allowable Contract Execution Rate.\20\
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    \20\ See Proposed Rule 519A, Interpretations and Policies .04.
---------------------------------------------------------------------------

    The Exchange also proposes to amend Rule 612 to codify existing 
functionality regarding the Aggregate Risk Manager to provide 
additional transparency in the Rule to Members regarding the current 
functionality. Currently, the Rule provides that after the System 
engages the Aggregate Risk Manager, that the Aggregate Risk Manager 
will automatically remove the Market Maker's quotations from the 
Exchange's disseminated quotation in all series of that particular 
option class until the Market Maker submits a new revised quotation. 
However, submitting a new revised quotation alone is not currently 
enough in this situation. The Market Maker must also send a 
notification to the System of the intent to reengage quoting. The 
Exchange proposes to amend the Rule to codify this additional 
requirement, of sending a notification to the System of the intent to 
reengage quoting, in order to eliminate potential confusion on behalf 
of Market Makers. In addition, the Exchange proposes to adopt a new 
Interpretation and Policy .01 to Rule 612 to codify existing 
functionality regarding the Aggregate Risk Manager to provide 
additional transparency in the Rule to Members regarding the current 
functionality. The Exchange proposes to specify that eQuotes do not 
participate in the Aggregate Risk Manager. An eQuote is a quote with a 
specific time in force that does not automatically cancel and replace a 
previous Standard quote or eQuote. An eQuote can be cancelled by the 
Market Maker at any time, or can be replaced by another eQuote that 
contains specific instructions to cancel an existing eQuote.\21\ The 
System does not include contracts traded through the use of an eQuote 
in the counting program for purposes of this Rule. eQuotes will remain 
in the System available for trading when the Aggregate Risk Manager is 
engaged.\22\ The proposed changes to the Aggregate Risk Manager are 
designed to protect investors and the public interest by codifying the 
protections that apply to quotation orders that help Market Makers 
avoid quotation activity that exceeds their established risk thresholds 
on the Exchange. In addition, the Exchange believes that the proposed 
amendment 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 helping to eliminate potential 
confusion on behalf of Market Makers by clearly stating the System's 
functionality with regard to quotations that trigger the Aggregate Risk 
Manager protections.
---------------------------------------------------------------------------

    \21\ See Rule 517(a)(2).
    \22\ See Proposed Rule 612, Interpretations and Policies .01.
---------------------------------------------------------------------------

2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \23\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \24\ 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.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that Members will benefit from the proposed 
new Risk Protection Monitor. Members are vulnerable to the risk from 
system or other error or a market event, that may

[[Page 4610]]

cause them to send a large number of orders or receive multiple, 
automatic executions before they can adjust their order exposure in the 
market. Without adequate risk management tools, such as the Risk 
Protection Monitor, Members could reduce the amount of order flow and 
liquidity that they provide to the market. Such actions may undermine 
the quality of the markets available to customers and other market 
participants. Accordingly, the proposed Risk Protection Monitor is 
designed to encourage Members to submit additional order flow and 
liquidity to the Exchange, thereby removing impediments to and perfect 
the mechanisms of a free and open market and a national market system 
and, in general, protecting investors and the public interest. In 
addition, providing Members with more tools for managing risk will 
facilitate transactions in securities because, as noted above, the 
Members will have more confidence that protections are in place that 
reduce the risks from potential system errors and market events. As a 
result, the new functionality has the potential to promote just and 
equitable principles of trade.
    The written authorization and exclusive control requirement helps 
ensure that the Risk Protection Monitor does not apply to Members in a 
group or orders without adequate permission in the manner that is 
designed to prevent fraudulent and manipulative acts and practices, and 
to foster cooperation and coordination with persons engaged in 
facilitating transaction in securities. The Exchange believes the 
proposed treatment of PRIME Orders, PRIME Solicitation Orders, AOC 
orders, OPG orders, and GTC Orders is an equitable approach to handling 
the unique characteristics of these order types within the Risk 
Protection Monitor mechanism. Further, the Exchange believes the 
proposed treatment of paired orders in the form of PRIME Orders and 
PRIME Solicitation Orders processed pursuant to Rule 515A versus 
standard Agency Orders processed pursuant to Rule 515, is an equitable 
approach to handling the unique characteristics of Agency Orders within 
the Risk Protection Monitor mechanism.
    The proposed changes to the Aggregate Risk Manager are designed to 
protect investors and the public interest by codifying the protections 
that apply to quotations that help Market Makers avoid executions from 
quotation activity that exceeds their established risk thresholds on 
the Exchange. In addition, the Exchange believes that the proposed 
amendment 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 helping to eliminate potential 
confusion on behalf of Market Makers by clearly stating the System's 
functionality with regard to quotations that trigger the Aggregate Risk 
Manager protections.

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. Rather, the Exchange believes 
that the new Risk Protection Monitor help promote fair and order 
markets. The Exchange believes the proposed changes will not impose any 
burden on intra-market competition because the use of the Risk 
Protection Monitor is voluntary and is available to all Members. The 
Exchange notes that it operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
who offer similar functionality. As to inter-market competition, the 
Exchange believes that the proposed risk protections should promote 
competition for such functionality that is designed to protect market 
participants from system errors or market events that may cause them to 
send a large number of orders or receive multiple, automatic executions 
before they can adjust their order exposure in the market.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (a) by order approve or disapprove such proposed rule change, or
    (b) institute proceedings to determine whether the proposed rule 
change should be 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, as modified by Amendment No. 1, 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-2015-03 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-2015-03. 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-2015-03, 
and should be submitted on or before February 18, 2015.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Brent J. Fields,
Secretary.
[FR Doc. 2015-01510 Filed 1-27-15; 8:45 am]
BILLING CODE 8011-01-P


