
[Federal Register Volume 80, Number 116 (Wednesday, June 17, 2015)]
[Notices]
[Pages 34763-34765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14826]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75152; File No. SR-MIAX-2015-19)


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Order Approving a Proposed Rule Change To Amend Exchange 
Rule 515

June 11, 2015.

I. Introduction

    On April 13, 2015, Miami International Securities Exchange LLC 
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Exchange Rule 515 
regarding the functionality of Customer Cross Order and Qualified 
Contingent Cross Order types. The proposed rule change was published 
for comment in the Federal Register on April 30, 2015.\3\ The 
Commission did not receive any comments on the proposal. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 74809 (April 24, 
2015), 80 FR 24297 (SR-MIAX-2015-19) (``Notice'').
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II. Description of the Proposal

    The Exchange proposes amendments to MIAX Rule 515(h) to provide 
that trading interest that is subject to an ongoing timer or auction 
will maintain priority over a new incoming Customer Cross Order or 
Qualified Contingent Cross Order. MIAX Rule 515(h)(1) provides that 
Customer Cross Orders \4\ are automatically executed upon entry 
provided that the execution (i) is at or between the best bid and offer 
on the Exchange; (ii) is not at the same price as a Priority Customer 
Order on the Exchange's Book; and (iii) will not trade at a price 
inferior to the national best bid or offer (``NBBO''). Customer Cross 
Orders are automatically canceled if they cannot be executed.\5\ 
Customer Cross Orders may only be entered in the minimum trading 
increments applicable to the options class under Rule 510.\6\
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    \4\ See MIAX Rules 515(h)(1) and 516(i). The Commission notes 
that the Customer Cross Order type is currently not available for 
use on the Exchange. See MIAX Options Regulatory Circular, RC-2015-
05.
    \5\ See Notice, supra note 3, at 24297.
    \6\ See MIAX Rule 515(h)(1).
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    MIAX Rule 515(h)(2) provides that Qualified Contingent Cross Orders 
\7\ are automatically executed upon entry provided that the execution 
(i) is not at the same price as a Priority Customer Order on the 
Exchange's Book; and (ii) is at or between the NBBO. Qualified 
Contingent Cross Orders are automatically canceled if they cannot be 
executed.\8\ Qualified Contingent Cross Orders may only be entered in 
the minimum trading increments applicable to the options class under 
MIAX Rule 510.\9\
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    \7\ See MIAX Rules 515(h)(2) and 516(j). See also MIAX Rule 516, 
Interpretations and Policies .01. The Qualified Contingent Cross 
Order is currently not deployed; however, the Exchange represents 
that it intends to make the order type available pending Commission 
approval of the proposed rule change. See Notice, supra note 3, at 
24297.
    \8\ See Notice, supra note 3, at 24297.
    \9\ See MIAX Rule 515(h)(2).
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    Although neither the Customer Cross Order nor the Qualified 
Contingent Cross Order may be executed at a price inferior to the NBBO, 
the Exchange notes that there are situations at the Exchange during 
which trading interest may exist in the Exchange's System that could be 
executable at prices up to the NBBO but is not automatically executed 
because the Exchange is either attempting to obtain additional price 
improvement for the order or additional liquidity to trade against the 
order on the Exchange. The Exchange states that it employs a variety of 
timers and auctions to provide market participants with an opportunity 
to obtain additional price improvement for their order or to access 
additional liquidity to trade against the order on the Exchange. 
Specifically, during the liquidity refresh pause or managed interest 
process

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pursuant to MIAX Rule 515(c),\10\ or a route timer pursuant to MIAX 
Rule 529,\11\ the Exchange has trading interest that exists that may be 
executable up to the NBBO but is displayed at a price one minimum price 
increment away. In addition, during the price improvement mechanisms 
such as the PRIME Auction or PRIME Solicitation Auction pursuant to 
MIAX Rule 515A,\12\ the Exchange has trading interest that exists that 
may be executable up to the NBBO but is not displayed.\13\
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    \10\ The ``liquidity refresh pause'' is a process during which 
the System will pause the market for a time period not to exceed one 
second to allow additional orders or quotes refreshing the liquidity 
at the MIAX best bid or offer (``MBBO'') to be received when at the 
time of receipt or reevaluation of the initiating order by the 
System: (A) either the initiating order is a limit order whose limit 
price crosses the NBBO or the initiating order is a market order, 
and the limit order or market order could only be partially 
executed; (B) a Market Maker quote was all or part of the MBBO when 
the MBBO is alone at the NBBO; and (C) and the Market Maker quote 
was exhausted. See MIAX Rule 515(c)(2). The ``managed interest 
process'' is a process for non-routable orders during which, if the 
limit price locks or crosses the current opposite side NBBO, the 
System will display the order one MPV away from the current opposite 
side NBBO, and book the order at a price that will lock the current 
opposite side NBBO. Should the NBBO price change to an inferior 
price level, the order's Book price will continuously re-price to 
lock the new NBBO and the managed order's displayed price will 
continuously re-price one MPV away from the new NBBO until (i) the 
order has traded to and including its limit price, (ii) the order 
has traded to and including its price protection limit at which any 
remaining contracts are cancelled, (iii) the order is fully executed 
or (iv) the order is cancelled. See MIAX Rule 515(c)(1)(ii).
    \11\ See MIAX Rule 529. The ``route timer'' is a process for 
those initiating Public Customer orders that are routable, but do 
not meet the additional criteria for Immediate Routing, during which 
the System will implement a route timer not to exceed one second, in 
order to allow Market Makers and other participants an opportunity 
to interact with the initiating order.
    \12\ The ``PRIME Auction'' is a process by which a Member may 
electronically submit for execution (``auction'') an order it 
represents as agent (``agency order'') against principal interest, 
and/or an agency order against solicited interest. See MIAX Rule 
515A(a). The ``PRIME Solicitation Mechanism'' is a process by which 
a Member that represents agency orders of a size of 500 contracts or 
more may electronically execute against solicited orders provided it 
submits both the agency order and solicited orders for electronic 
execution into the PRIME Solicitation Mechanism pursuant to Rule 
515A. See MIAX Rule 515A(b).
    \13\ See Notice, supra note 3, at 24298.
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    According to the Exchange, the execution of a Customer Cross Order 
or Qualified Contingent Cross Order that arrives during a timer or 
auction at a potentially better price than the interest subject to the 
timer or auction has the potential to cause confusion and perceived 
disruption to market participants that are subject to the pre-existing 
timers or auctions that may see executions occurring at better prices 
than their trading interest. In addition, the Exchange believes that 
the timers and auctions provide a valuable service to market 
participants and that the use of these mechanisms, which provide market 
participants with opportunities to obtain additional price improvement 
for their orders or to access additional liquidity to trade against the 
orders, should be promoted on the Exchange. The Exchange proposes to 
modify its Rules in order to maintain the priority of trading interest 
subject to timers and auctions that are initiated prior to the arrival 
of these specified order types. The proposed changes also would codify 
existing functionality for Customer Cross Orders that is not currently 
detailed in the Exchange's Rules.\14\
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    \14\ See id. at 24297.
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    Thus, the Exchange proposes to amend Rule 515 to provide that 
Customer Cross Orders and Qualified Contingent Cross Orders will be 
rejected if there is a timer or price improvement auction in progress 
when either of these orders is received. Specifically, the Exchange 
proposes to amend Rule 515(h)(1) to provide that if trading interest 
exists on the MIAX Book that is subject to the liquidity refresh pause 
or managed interest process pursuant to Rule 515(c), or a route timer 
pursuant to Rule 529, when the Exchange receives a Customer Cross 
Order, the System will reject the Customer Cross Order. The Exchange 
also proposes to amend Rule 515(h)(1) to provide that if trading 
interest exists that is subject to a PRIME Auction or PRIME 
Solicitation Auction pursuant to Rule 515A when the Exchange receives a 
Customer Cross Order, the System will reject the Customer Cross Order.
    In addition, the Exchange proposes to amend Rule 515(h)(2) to 
provide that if trading interest exists on the MIAX Book that is 
subject to the liquidity refresh pause or managed interest process 
pursuant to Rule 515(c), or a route timer pursuant to Rule 529, when 
the Exchange receives a Qualified Contingent Cross Order, the System 
will reject the Qualified Contingent Cross Order. The Exchange also 
proposes to amend Rule 515(h)(2) to provide that if trading interest 
exists that is subject to a PRIME Auction or PRIME Solicitation Auction 
pursuant to Rule 515A when the Exchange receives a Qualified Contingent 
Cross Order, the System will reject the Qualified Contingent Cross 
Order. The Exchange proposes no changes to the Customer Cross Order and 
the Qualified Contingent Cross Order order types, and represents that 
both order types will continue to be subject to the same requirements 
as before.\15\
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    \15\ See id. at 24298.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \16\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\17\ Specifically, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\18\ 
which requires, among other things, that the Exchange's rules be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
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    \16\ 15 U.S.C. 78f.
    \17\ Additionally, in approving the proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that it is reasonable for the Exchange's 
rules to provide that trading interest subject to ongoing timers and 
auctions will maintain priority over a new incoming Customer Cross 
Order or Qualified Contingent Cross Order. The proposed rule change 
provides that a Customer Cross Order or Qualified Contingent Cross 
Order will be rejected by the System if there is a timer or price 
improvement auction in progress. In that instance, market participants 
may choose to route their orders to other exchanges or resubmit their 
Customer Cross Order or Qualified Contingent Cross Order to the 
Exchange. The proposed rule change may eliminate potential confusion by 
market participants as to the functionality of the Customer Cross Order 
and Qualified Contingent Cross Order types. The proposed rule change 
also provides clarity regarding the functionality of Customer Cross 
Orders; the Commission notes that the proposed changes would codify 
existing functionality for Customer Cross Orders that is not currently 
detailed in the Exchange's Rules.\19\ Finally, the Commission 
emphasizes that the proposed rule change does not change any of the 
requirements for submitting a Customer Cross Order or Qualified 
Contingent Cross Order set forth in Rule 515.\20\
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    \19\ See Notice, supra note 3, at 24297.
    \20\ See id. at 24298.

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[[Page 34765]]

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (File No. SR-MIAX-2015-19) be, 
and hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14826 Filed 6-16-15; 8:45 am]
 BILLING CODE 8011-01-P


