
[Federal Register Volume 82, Number 99 (Wednesday, May 24, 2017)]
[Notices]
[Pages 23888-23891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-10593]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80724; File No. SR-PEARL-2017-22]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX 
PEARL Rules 503 and 515

May 18, 2017.
    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 May 5, 2017, MIAX PEARL, LLC (``MIAX PEARL'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange is filing a proposal to amend Exchange Rule 503, 
Openings on the Exchange, and Rule 515, Execution of Orders.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings/pearl at MIAX 
PEARL'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

[[Page 23889]]

forth in sections A, B, and C below, of the most significant aspects of 
such statements.

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

1. Purpose
    The Exchange proposes to amend Exchange Rule 503, Openings on the 
Exchange, to adopt new rule text clarifying the treatment of orders 
that remain in the System \3\ after the completion of the Opening 
Process.\4\ Additionally, the Exchange proposes to amend Exchange Rule 
515 by removing the provision which states that when the System opens a 
series for trading by disseminating the Exchange's best bid and offer, 
non-routable orders, or Do Not Route (``DNR'') orders,\5\ that are in 
the System and that cross the ABBO,\6\ will be cancelled and not 
included in the Managed Interest Process.\7\
---------------------------------------------------------------------------

    \3\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of Securities. See Exchange Rule 
100.
    \4\ See Exchange Rule 503(a)(1).
    \5\ A Do Not Route or ``DNR'' order is an order that will never 
be routed outside of the Exchange regardless of the prices displayed 
by away markets. A DNR order may execute on the Exchange at a price 
equal to or better than, but not inferior to, the best away market 
price but, if that best away market remains, the DNR order will be 
handled in accordance with the Managed Interest Process described in 
Rule 515(d)(2). See Exchange Rule 516.
    \6\ The term ``ABBO'' or ``Away Best Bid or Offer'' means the 
best bid(s) or offer(s) disseminated by other Eligible Exchanges 
(defined in Rule 1400(f)) and calculated by the Exchange based on 
market information received by the Exchange from OPRA. See Exchange 
Rule 100.
    \7\ See Exchange Rule 515(d)(2).
---------------------------------------------------------------------------

    Exchange Rule 503 provides that the Opening Process may open a 
series for trading on the Exchange (i) where there is a possible trade 
on the Exchange (``opening on a trade''); and (ii) where there is no 
possible trade on the Exchange (``opening on a quote''). Exchange Rule 
503(b)(2) discusses the Opening Process when the series opens on a 
trade. More specifically, Rule 503(b)(2)(iii) discusses how the 
Exchange handles unexecuted orders that remain in the System after the 
conclusion of the Opening Process, stating that, ``[s]uch orders will 
be handled . . . in time sequence, beginning with the order with the 
oldest time stamp and may, in whole or in part, be placed on the Book, 
cancelled, executed, managed in accordance with Rule 515, or routed in 
accordance with Rule 529.''
    Exchange Rule 503(b)(3) discusses the Opening Process when there is 
no possible trade on the Exchange, or when the series opens on a quote. 
However, this rule is silent on how orders that remain in the System 
after the conclusion of the Opening Process are handled. The Exchange 
proposes to adopt new rule text in Rule 503(b)(3) similar to that of 
Rule 503(b)(2)(iii) to codify existing behavior and explicitly state 
that, ``[o]rders in the System will be handled at the conclusion of the 
Opening Process in time sequence, beginning with the order with the 
oldest time stamp and may, in whole or in part, be placed on the Book, 
cancelled, executed, managed in accordance with Rule 515, or routed in 
accordance with Rule 529.'' This proposed amendment provides 
consistency in the Exchange's rules concerning the handling of 
unexecuted orders at the conclusion of the Opening Process.
    Additionally, the Exchange proposes to eliminate paragraph (vi) in 
its entirety from Exchange Rule 515(d)(2) which currently states that 
when the System opens without an opening transaction, and instead opens 
by disseminating the Exchange's best bid and offer among quotes and 
orders that exist in the System at that time as described in Rule 
503(b)(3), non-routable orders then in the System that cross the ABBO 
will be cancelled and are not included in the Managed Interest Process. 
Proposed Rule 503(b)(3) provides that when the series opens on a quote, 
any orders, including non-routable orders, that remain in the System at 
the conclusion of the Opening Process are re-introduced in time 
priority, oldest first. The proposed rule change provides that orders 
remaining in the System at the conclusion of the Opening process, 
including non-routable orders, will be included in the Managed Interest 
Process under Rule 515, as described below. Therefore, current 
paragraph (vi) of Exchange Rule 515(d)(2) is no longer necessary, and 
may be removed from the rule.\8\
---------------------------------------------------------------------------

    \8\ The Commission notes that elimination of paragraph (vi) from 
Exchange Rule 515(d)(2) would allow non-routable orders then in the 
System that cross to ABBO to be placed on the Book, cancelled, 
executed, managed in accordance with Rule 515, or routed in 
accordance with Rule 529 when the system opens with a quote.
---------------------------------------------------------------------------

    The Exchange believes that the codification of the treatment of 
orders that remain in the System at the completion of the Opening 
Process reflects the Exchange's intention to provide uniform treatment 
for all non-routable orders that remain in the System after the Opening 
Process concludes. Additionally, the proposed treatment of non-routable 
orders that cross the ABBO when the series opens on a quote, aligns to 
the current treatment of non-routable orders that cross the ABBO when 
the series opens on a trade, in that these orders will be subject to 
the Managed Interest Process.
    The Exchange notes that certain MIAX PEARL Rules were based upon 
the rules of the Exchange's affiliate, Miami International Securities 
Exchange, LLC (``MIAX Options''), and that current MIAX PEARL Rule 
515(d)(2)(iv) [sic] is identical (save for an internal rule reference) 
to MIAX Options Rule 515(c)(1)(ii)(B). However, when the MIAX Options 
Exchange opens on a trade, orders that cross the opening price are 
cancelled,\9\ whereas on MIAX PEARL, orders that cross the opening 
price are re-introduced in time priority, and may be included in the 
Managed Interest Process. The Exchange's proposal to amend its rule is 
designed to provide consistent treatment of non-routable orders that 
remain in the System after the conclusion of the Opening Process on 
MIAX PEARL.
---------------------------------------------------------------------------

    \9\ See MIAX Options Rule 503(f)(2)(vii)(B)(5).
---------------------------------------------------------------------------

    The Managed Interest Process for Non-Routable Orders described in 
Rule 515 provides that if the limit price of an order locks or crosses 
the current opposite side NBBO \10\ and the PBBO \11\ is inferior to 
the NBBO, the System will display the order one Minimum Price Variation 
(``MPV'') \12\ 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 (A) the order has traded to and including its limit 
price, (B) the order has traded to and including its price protection 
price limit at which time any remaining contracts are cancelled, (C) 
the order is fully executed or (D) the order is cancelled.\13\
---------------------------------------------------------------------------

    \10\ The term ``NBBO'' means the national best bid or offer as 
calculated by the Exchange based on market information received by 
the Exchange from OPRA. See Exchange Rule 100.
    \11\ The term ``PBBO'' means the best bid or offer on the PEARL 
Exchange. See Exchange Rule 100.
    \12\ See Exchange Rule 510.
    \13\ See Exchange Rule 515(d)(2)(ii).
---------------------------------------------------------------------------

    This proposal should eliminate any investor confusion arising from 
the cancellation of some non-routable orders versus the management of 
others, depending upon whether the Exchange opened on a quote or a 
trade respectively. The proposed rule change should also assist market 
participants in making decisions concerning order routing by 
simplifying and clarifying the relationship between the Exchange's

[[Page 23890]]

Opening Process and the Managed Interest Process for Non-Routable 
Orders. Additionally, the proposed change provides consistency in the 
Exchange's Rules concerning orders that remain in the System at the 
conclusion of the Opening Process.
2. Statutory Basis
    MIAX PEARL believes that its proposed rule change is consistent 
with Section 6(b) of the Act \14\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes its proposal codifying the Exchange's 
handling of orders after the Opening Process is complete promotes 
transparency and clarity in the Exchange's rules. The transparency and 
accuracy resulting from the codification of this functionality is 
consistent with the Act because it removes impediments to and perfects 
the mechanism of a free and open market and a national market system, 
and, in general, protects investors and the public interest, by 
accurately describing the steps taken by the System when a series opens 
on a quote and on a trade.
    The Exchange believes its proposal to provide equal treatment to 
non-routable orders that remain in the System after the conclusion of 
the Opening Process to be one that protects investors and the public 
interest by eliminating the potential for confusion that could arise as 
a result of non-routable orders that cross the ABBO being cancelled 
when the series opens on a quote, while non-routable orders that cross 
the ABBO remain in the System and are subject to the Managed Interest 
Process when the series opens on a trade.
    The Exchange believes it is in the interest of investors and the 
public to accurately describe the behavior of the Exchange's System in 
its rules as this information may be used by investors to make 
decisions concerning the submission of their orders. Transparency and 
clarity are consistent with the Act because it removes impediments to 
and perfects the mechanism of a free and open market and a national 
market system, and, in general, protects investors and the public 
interest by accurately describing the behavior of the Exchange's 
System.
    MIAX PEARL participants should have a better understanding of the 
Exchange's treatment of orders remaining in the System at the 
conclusion of the Opening Process. The codification and clarification 
of the System's functionality is designed to promote just and equitable 
principles of trade by providing a clear and objective description to 
all participants of how orders will be handled, and should assist 
investors in making decisions concerning their orders.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intra-market competition as the Rules apply 
equally to all Exchange Members.
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intra-market competition as the proposal is one 
that promotes order handling efficiency on the Exchange.
    For the reasons stated, the Exchange does not believe the proposed 
rule change will impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act, and believes the 
proposed change will enhance competition.

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 \16\ and Rule 19b-4(f)(6) \17\ 
thereunder.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \18\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \19\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. In its filing 
with the Commission, the Exchange has asked the Commission to waive the 
30-day operative delay so that the proposal may become operative 
immediately upon filing. The Commission believes that waiving the 30-
day operative delay is consistent with the protection of investors and 
the public interest. The Exchange states that a recent rule change to 
permit Post-Only Orders \20\ to participate in the Opening Process 
became operative on the Exchange on May 3, 2017.\21\ The Exchange 
represents that this change may result in an increase in the number of 
non-routable orders in the System at the conclusion of the Opening 
Process, and these orders may be cancelled under the current rule. The 
Exchange believes that the proposed rule change may reduce potential 
confusion by providing consistent treatment to non-routable orders when 
the Exchange opens on a trade or a quote. Accordingly, the Commission 
hereby waives the operative delay and designates the proposal operative 
upon filing.\22\
---------------------------------------------------------------------------

    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ See Exchange Rule 516(j). Post-Only Orders are non-
routable. Id.
    \21\ See Securities Exchange Act Release No. 80384 (April 6, 
2017), 82 FR 17700 (April 12, 2017) (SR-PEARL-2017-16).
    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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

[[Page 23891]]

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-PEARL-2017-22 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-PEARL-2017-22. 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 the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; 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-PEARL-2017-22 and should be 
submitted on or before June 14, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-10593 Filed 5-23-17; 8:45 am]
 BILLING CODE 8011-01-P


