
[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25393-25398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11355]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80779; File No. SR-MIAX-2017-22]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend MIAX Options Rule 515A, MIAX Price 
Improvement Mechanism (``PRIME'') and PRIME Solicitation Mechanism

May 26, 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 17, 2017, Miami International Securities 
Exchange, LLC (``MIAX Options'' or ``Exchange'') filed with the 
Securities and Exchange Commission

[[Page 25394]]

(``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 Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 515A to 
reflect changes to the MIAX Options Price Improvement Mechanism 
(``PRIME'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings, 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 515A, MIAX Price 
Improvement Mechanism (``PRIME'') and PRIME Solicitation Mechanism, to 
reflect new functionality to be included in the PRIME process, as 
described below. The Exchange is also proposing certain clarifying 
technical amendments to the Rule.
Background
    MIAX PRIME is a price-improvement mechanism on the Exchange under 
which a Member \3\ (``Initiating Member'') electronically submits an 
order that it represents as agent (an ``Agency Order'') into a PRIME 
Auction (``Auction''). The Initiating Member, in submitting an Agency 
Order, must be willing to either (i) cross the Agency Order at a single 
price (a ``single-price submission'') as principal, or (ii) 
automatically match (``auto-match''), as principal, the price and size 
of responses to a Request for Response (``RFR'') that is broadcast to 
MIAX Options participants up to an optional designated limit price. 
Such a response is known as an ``RFR response.'' \4\ Members wishing to 
participate in the PRIME Auction may do so by submitting RFR responses 
during the RFR period (see below), which is currently 500 milliseconds.
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Act. See Exchange 
Rule 100.
    \4\ See Exchange Rule 515A(a)(2)(i). When the Exchange receives 
a properly designated Agency Order for auction processing, an RFR 
detailing the option, side, size, and initiating price will be sent 
to all subscribers of the Exchange's data feeds. The RFR currently 
lasts for 500 milliseconds. Members may submit responses to the RFR 
(specifying prices and sizes). RFR responses shall be an Auction or 
Cancel (``AOC'') order or an AOC eQuote. Such responses cannot cross 
the disseminated MIAX Best Bid or Offer (``MBBO'') on the opposite 
side of the market from the response.
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Multiple Auctions
    The Exchange is proposing to amend Rule 515A(a)(2) to state that, 
as today, only one Auction may be ongoing at any given time in an 
option. The Exchange is proposing to modify the rule to account for the 
trading of complex orders on the Exchange.\5\ Specifically, Rule 
515A(a)(2) will continue to state clearly that only one Auction may be 
ongoing at any given time in an option and Auctions in the same option 
may not queue or overlap in any manner. In addition, the Exchange 
proposes to amend the Rule by stating that the System \6\ will reject 
an Agency Order if, at the time of receipt of the Agency Order, the 
option is in an Auction or is a component of a complex strategy \7\ 
that is the subject of a Complex Auction pursuant to Rule 518(d). The 
Exchange believes that the rejection of Agency Orders that are received 
in an option in which an Auction or Complex Auction is ongoing ensures 
that there will not be any interference with the potential for price 
improvement for the Agency Order from one ongoing auction type to 
another.
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    \5\ See Exchange Rule 518. See also, Securities Exchange Act 
Release No. 79072 (October 7, 2016), 81 FR 71131 (October 14, 2016) 
(SR-MIAX-2016-26).
    \6\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \7\ The term ``complex strategy'' means a particular combination 
of components and their ratios to one another. New complex 
strategies can be created as the result of the receipt of a complex 
order or by the Exchange for a complex strategy that is not 
currently in the System. The Exchange may limit the number of new 
complex strategies that may be in the System at a particular time 
and will communicate this limitation to Members via Regulatory 
Circular. See Exchange Rule 518(a)(6).
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    The Exchange notes that the limitation against simultaneous ongoing 
Auctions and Complex Auctions applies to the specific option being 
auctioned. The term ``option'' in the Exchange's rules refers to an 
individual put or call with a specific underlying security, strike 
price and expiration date. The Exchange defines a ``series of options'' 
as all option contracts of the same class having the same exercise 
price and expiration date.\8\ Thus, a ``series of options'' on MIAX 
Options includes both calls and puts overlying a security with the same 
strike price and the same expiration. The individual call or put in the 
series of options is the ``option.''
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    \8\ See Exchange Rule 100.
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    For example, if an Auction or a Complex Auction involving XYZ July 
20 calls is underway and ongoing at the time of receipt of an Agency 
Order in XYZ July 20 calls, the System will reject such Agency Order. 
The System will not, however, reject an Agency Order in XYZ October 20 
calls, or in XYZ July 25 calls, for example, because the series being 
auctioned has a different strike price or expiration.\9\
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    \9\ The Exchange notes that other exchanges also limit 
simultaneous auctions by ``series,'' which on other exchanges has 
the same meaning as ``option'' on MIAX Options. For example, Nasdaq 
ISE, LLC (``ISE'') Rule 723.04 states that only one Price 
Improvement Mechanism (``PIM'') may be ongoing at any given time in 
a ``series.'' PIMs will not queue or overlap in any manner. See ISE 
Rule 723.04. In another example, Chicago Board Options Exchange, 
Inc. (``CBOE'') Automated Improvement Mechanism (``AIM'') rules 
state that only one Auction may be ongoing at any given time in a 
``series'' and Auctions in the same ``series'' may not queue or 
overlap in any manner. See CBOE Rule 6.74A(b). See also, NASDAQ PHLX 
LLC (``Phlx'') Rule 1080(n)(ii), which states that only one Auction 
may be conducted at a time in the same ``series'' or same strategy, 
otherwise the orders will be rejected. The use of the term 
``series'' in these various exchanges' rules is synonymous with the 
Exchange's use of the term ``option.''
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    The Exchange believes that, without such a limitation, investors 
could be faced with an unusually large number of simultaneous PRIME 
and/or Complex Auctions in the same option in the simple market, and in 
the same strategy in the complex market, which in turn could impact the 
orderly function of the markets. The Exchange believes that this 
limitation should ensure orderliness in the PRIME and Complex Auction 
process.
Rounding
    The Exchange is proposing to adopt new Interpretations and Policies 
.10 to Rule 515A to establish in the rule text that, when determining 
the 40% or 50% Initiating Member allocation under paragraphs 
(a)(2)(iii)(H) or (I), the

[[Page 25395]]

System will round the number of contracts to which the Initiating 
Member is entitled to the nearest whole number (up or down). If the 40% 
or 50% Initiating Member allocation results in a remainder of exactly 
one-half contract (.50000), then the System will round the number of 
contracts to which the Initiating Member is entitled up to the next 
higher whole number. Other exchanges that allocate based on percentage 
amounts employ some form of ``rounding.'' \10\
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    \10\ For example, Phlx Rules provide that where the allocation 
of contracts results in remaining amounts, the number of contracts 
to be allocated shall be rounded down to the nearest integer. If 
rounding would result in an allocation of less than one contract, 
then one contract will be allocated to the Initiating Member only if 
the Initiating Member did not otherwise receive an allocation. See 
Phlx Rule 1080(n)(ii)(E)(2)(f). This differs slightly from the 
instant proposal by the Exchange in that the System will round the 
number of contracts to which the Initiating Member is entitled to 
the nearest whole number (up or down). The Exchange also notes that 
NASDAQ BX, Inc. (``BX''), in a filing relating to its directed 
orders program, described a process for rounding that has the 
potential to result in an allocation that is slightly greater than 
their 40% or 50% entitlement for directed orders. See Securities 
Exchange Act Release No. 73784 (December 8, 2014), 79 FR 73930 (SR-
BX-2014-049) (Notice of Filing of Proposed Rule Change Relating to 
Directed Market Makers). See also, Securities Exchange Act Release 
No. 74129 (January 23, 2015), 80 FR 4954 (January 29, 2015) (SR-BX-
2014-049) (Order Approving Proposed Rule Change Relating to Directed 
Market Makers).
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    The Exchange believes that the proposed rule change regarding 
rounding results in the fair and equitable allocation of contracts 
among PRIME participants, and provides clarity and transparency in the 
Exchange's rules so that all MIAX PRIME Auction participants will be 
informed of their participation entitlements when submitting orders and 
responses into MIAX PRIME.
Allocation of Contracts at the Conclusion of the PRIME Auction
    Currently, Exchange Rule 515A(a)(2)(iii) provides that at the 
conclusion of the Auction, the Agency Order will be allocated at the 
best price(s), subject to the following: (A) Such best prices include 
non-Auction quotes and orders; (B) Priority Customer \11\ orders 
resting on the Book \12\ before, or that are received during, the 
Response Time Interval and Priority Customer RFR responses shall, 
collectively have first priority to trade against the Agency Order. The 
allocation of an Agency Order against the Priority Customer orders 
resting in the Book, Priority Customer orders received during the 
Response Time Interval, and Priority Customer RFR responses shall be in 
the sequence in which they are received by the System; (C) Market Maker 
priority quotes \13\ and RFR responses from Market Makers \14\ with 
priority quotes will collectively have second priority. The allocation 
of Agency Orders against these contra sided quotes and RFR responses 
shall be on a size pro rata basis as defined in Rule 514(c)(2); (D) 
Professional Interest orders resting in the Book, Professional Interest 
orders placed in the Book during the Response Time Interval, 
Professional Interest quotes, and Professional Interest RFR responses 
will collectively have third priority. The allocation of Agency Orders 
against these contra sided orders and RFR Responses shall be on a size 
pro rata basis as defined in Rule 514(c)(2); (E) No participation 
entitlement shall apply to orders executed pursuant to this Rule; (F) 
If an unrelated market or marketable limit order on the opposite side 
of the market as the Agency Order was received during the Auction and 
ended the Auction, such unrelated order shall trade against the Agency 
Order at the midpoint of the best RFR response (or in the absence of a 
RFR response, the initiating price) and the NBBO on the other side of 
the market from the RFR responses (rounded towards the disseminated 
quote when necessary). (G) If an unrelated non-marketable limit order 
on the opposite side of the market as the Agency Order was received 
during the Auction and ended the Auction, such unrelated order shall 
trade against the Agency Order at the midpoint of the best RFR response 
and the unrelated order's limit price (rounded towards the unrelated 
order's limit price when necessary).
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    \11\ The term ``Priority Customer'' means a person or entity 
that (i) is not a broker or dealer in securities, and (ii) does not 
place more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial account(s). See 
Exchange Rule 100.
    \12\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. See Exchange Rule 100.
    \13\ To be considered a priority quote, at the time of 
execution, each of the following standards must be met: (A) The bid/
ask differential of a Market Maker's two-sided quote pair must be 
valid width (no wider than the bid/ask differentials outlined in 
Rule 603(b)(4)); (B) the initial size of both of the Market Maker's 
bid and the offer must be in compliance with the requirements of 
Rule 604(b)(2); (C) the bid/ask differential of a Market Maker's 
two-sided quote pair must meet the priority quote width requirements 
defined below in subparagraph (ii) [sic] for each option; and (D) 
either of the following are true: 1. At the time a locking or 
crossing quote or order enters the System, the Market Maker's two-
sided quote pair must be valid width for that option and must have 
been resting on the Book; or 2. Immediately prior to the time the 
Market Maker enters a new quote that locks or crosses the MBBO, the 
Market Maker must have had a valid width quote already existing 
(i.e., exclusive of the Market Maker's new marketable quote or 
update) among his two-sided quotes for that option. See Exchange 
Rule 517(b)(1)(i).
    \14\ The term ``Market Makers'' refers to ``Lead Market 
Makers'', ``Primary Lead Market Makers'' and ``Registered Market 
Makers'' collectively. The term ``Lead Market Maker'' means a Member 
registered with the Exchange for the purpose of making markets in 
securities traded on the Exchange and that is vested with the rights 
and responsibilities specified in Chapter VI of the Exchange's Rules 
with respect to Lead Market Makers. When a Lead Market Maker is 
appointed to act in the capacity of a Primary Lead Market Maker, the 
additional rights and responsibilities of a Primary Lead Market 
Maker specified in Chapter VI of the Exchange's Rules will apply. 
The term ``Primary Lead Market Maker'' means a Lead Market Maker 
appointed by the Exchange to act as the Primary Lead Market Maker 
for the purpose of making markets in securities traded on the 
Exchange. The Primary Lead Market Maker is vested with the rights 
and responsibilities specified in Chapter VI of the Exchange's Rules 
with respect to Primary Lead Market Makers. The term ``Registered 
Market Maker'' means a Member registered with the Exchange for the 
purpose of making markets in securities traded on the Exchange, who 
is not a Lead Market Maker and is vested with the rights and 
responsibilities specified in Chapter VI of the Exchange's Rules 
with respect to Registered Market Makers. See Exchange Rule 100.
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    Rules 515A(a)(2)(iii)(H) and (I) describe the allocation of 
contracts executed when the Initiating Member selects the single-price 
submission or the auto-match option, respectively, when submitting 
their Agency Order and there are either two or more participants at the 
execution price or when there is only one other participant on parity 
with the Initiating Member at either the single price execution price 
or at the final auto-match price point.
    The Exchange is proposing to modify the PRIME trade allocation 
rules with respect to determining the Initiating Member's entitlement 
percentage (either 40% or 50%) at the single price submission price and 
at the final auto-match price point, as applicable.
    Exchange Rules 515A(a)(2)(iii)(H) and (I) currently state that, 
upon conclusion of an Auction, an Initiating Member will retain certain 
priority and trade allocation privileges for a single-price submission 
and for an auto-match submission. Under current Rule 
515A(a)(2)(iii)(H), if the best price equals the Initiating Member's 
single-price submission, the Initiating Member's single-price 
submission shall be allocated the greater of one contract or a certain 
percentage of the order, which percentage will be determined by the 
Exchange and may not be larger than 40% of the Agency Order, subject to 
the rounding provisions of proposed Rule 515A, Interpretations and 
Policies .10 (described above). However, if only one Member's response, 
subject to the System's calculation of the number of Member's responses 
described in proposed Rule 515A, Interpretations and Policies .11 
(described below) matches the Initiating Member's single

[[Page 25396]]

price submission, then the Initiating Member may be allocated up to 50% 
of the Agency Order.
    Similarly, current Exchange Rule 515A(a)(2)(iii)(I) provides that 
if the Initiating Member selected the auto-match option of the Auction, 
the Initiating Member shall be allocated its full size of RFR responses 
at each price point until the final auto-match price point is reached. 
At the final auto-match price point, the Initiating Member shall be 
allocated the greater of one contract or a certain percentage of the 
remainder of the Agency Order, which percentage will be determined by 
the Exchange and may not be larger than 40%, subject to the rounding 
provisions of proposed Rule 515A, Interpretations and Policies .10 
(described above). However, if only one Member's response, subject to 
the System's calculation of the number of Member's responses described 
in proposed Rule 515A, Interpretations and Policies .11 (described 
below) matches the Initiating Member's submission at the final auto-
match price point, then the Initiating Member may be allocated up to 
50% of the remainder of the Agency Order at the final auto-match price 
point.
    At the conclusion of the Auction, the Agency Order is allocated at 
the best price(s) pursuant to the matching algorithm in effect for the 
class.\15\ The System first must determine the number of participants 
that are entitled to receive contracts to be allocated, and whether any 
participant(s) such as Priority Customers are entitled to receive 
contracts first. Thereafter, contracts are allocated among participants 
at the execution price.
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    \15\ See Exchange Rule 515A(a)(2)(iii).
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    The Exchange is proposing to adopt Interpretations and Policies .11 
to Rule 515A to state the basis on which the System will determine a 
Member's response to be a participant at the single price submission 
price and at the final auto-match price point in calculating the 
Initiating Member's entitlement at that price.\16\ Specifically, when 
calculating the number of Members' responses that match the Initiating 
Member's single price submission under sub-paragraph (a)(2)(iii)(H) and 
the final auto-match price point under sub-paragraph (a)(2)(iii)(I) of 
Rule 515A, the System will not include in such calculation: (i) Any 
Priority Customer Auction response and/or unrelated Priority Customer 
interest that has been executed, or (ii) any Member's response 
(including unrelated orders and quotes) executed at a better price.
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    \16\ The Exchange notes that under the NYSE MKT CUBE price 
improvement mechanism, if only the accompanying contra order and one 
other RFR response are eligible to trade at the CUBE execution 
price, each will receive a 50% allocation; otherwise, the 
accompanying contra order will receive a 40% guaranteed allocation 
unless more than 60% of the order is price improved by other 
participants (the accompanying contra will yield priority at a given 
price once the 40% entitlement is satisfied). See NYSE MKT CUBE 
Factsheet, https://www.nyse.com/markets/amex-options, Related 
Information, dated February 9, 2016 at p.2.
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    Exchange Rule 515A(2)(iii)(B) explicitly states that Priority 
Customer orders resting on the Book before, or that are received 
during, the Response Time Interval and Priority Customer RFR responses 
shall, collectively, have first priority to trade against the Agency 
Order. Therefore, all Priority Customer Interest at the single price 
submission and at the final auto-match price point is executed first, 
after which other interest is allocated in accordance with Rule 
515A(a)(2)(iii).
    The Exchange is proposing to adopt Interpretations and Policies .11 
to exclude from the number of responding participants remaining at 
those prices (i) Priority Customer RFR responses and/or unrelated 
Priority Customer interest that has already been executed, and (ii) any 
Member's response (including unrelated orders and quotes) executed at a 
better price. The purpose of this proposal is to calculate and 
establish the actual number of Auction participants that may be 
allocated contracts at a given price point. To include Priority 
Customer and other interest that have already received full executions 
and therefore cannot participate further in the allocation of contracts 
as part of the remaining participants at the execution price could 
artificially skew the entitlements of remaining participants at the 
next level(s) of priority established in Rule 515A(2)(iii). This is 
particularly true when there is only one remaining participant with the 
Initiating Member that could or would be entitled to receive contracts 
at the single price submission or at the final auto-match price point. 
The following examples illustrate this.

Example 1--Priority Customer Interest Already Executed, One Participant 
With Initiating Member
ABBO: 1.00-1.06
MBBO: 1.00-1.06
PRIME Order, Agency buy 20 contracts, Auction Start Price 1.05
Begin RFR Auction
During Auction, MM1 responds with an RFR response to sell 20 at 1.05
Customer order to sell 5 at 1.05
At the end of the RFR period
Agency Order buys 5 from the Customer order at 1.05
There is one remaining joining interest at 1.05 (MM1), so the contra 
receives 50% of the original size of the order, or 10 contracts, and 
MM1 receives the balance of 5 contracts \17\
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    \17\ Under the current Rule, the result would be slightly 
different. The Agency Order would still buy 5 contracts from the 
Customer at $1.05. However, although the Customer has sold all 5 
contracts it offered at $1.05, the current rule counts two remaining 
joining offers at 1.05 (MM1 and Customer) for the remaining 15 
contracts, so the contra receives 40% of the original size of the 
order, or 8 contracts, and MM1 receives the balance of 7 contracts.
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Example 2--Responses Executed at Better Prices, One Participant With 
Initiating Member
ABBO: 1.00-1.06
MBBO: 1.00-1.06
PRIME Order, Agency buy 20 contracts, Auction Start Price 1.05
Begin RFR Auction
During Auction, MM1 responds with an RFR response to sell 20 at 1.05
MM2 responds with an RFR response to sell to sell 5 at 1.04
At the end of the RFR period
Agency Order buys 5 from MM2 at 1.04
There is one joining interest at 1.05 (MM1), so the contra receives 50% 
of the original size of the order, or 10 contracts, and MM1 receives 
the balance of 5 contracts \18\
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    \18\ Under the current Rule, just as in Example 1, the result 
would be slightly different. The Agency Order would buy 5 contracts 
from MM2 at $1.04. However, although MM2 has sold all 5 contracts it 
offered at $1.04, the current rule counts two remaining joining 
offers at 1.05 (MM1 and MM2) for the remaining 15 contracts, so the 
contra receives 40% of the original size of the order, or 8 
contracts, and MM1 receives the balance of 7 contracts.

    When more than one participant matches the Initiating Member at the 
single price submission and/or at the final auto-match price point, the 
Initiating Member is entitled to receive and is allocated the greater 
of one contract or a certain percentage of the remainder of the Agency 
Order, which percentage will be determined by the Exchange and may not 
be larger than 40%. Currently, in auto-match, in the situation where 
there is one remaining participant matching the Initiating Member at 
the final auto-match price point, the Initiating Member and the lone 
remaining participant are each entitled to 50% of the remaining 
contracts at that price (subject of course to their stated size). The 
proposal to include only the remaining participant after other 
participants have already received full executions at better prices 
ensures that the Initiating Participant, who has guaranteed the full 
execution at the single price submission or at the final auto-match 
price point, will receive its rightful 50% allocation. The Exchange 
believes that the proposed rule change rewards the Initiating

[[Page 25397]]

Participant, who has absorbed the maximum risk in the PRIME Auction, by 
ensuring the 50% allocation entitlement when there is only one other 
participant matching the Initiating Member at the single price 
submission price or at the final auto-match price point. The Exchange 
believes that this provides an additional incentive for Initiating 
Members to submit Agency Orders for price improvement in MIAX PRIME.
Technical Amendments
    The Exchange is proposing to capitalize the term ``Agency Order'' 
in Rule 515A(a)(2)(iii)(H) because the term is defined in Rule 515A(a) 
above. Additionally, the Exchange is proposing to add the word ``or'' 
to the first sentence of Rules 515A(a)(2)(iii)(H) and (I), 
respectfully, for grammatical correctness. These proposed technical 
amendments are intended for clarity and ease of reference.
    The Exchange will announce the implementation date of the proposed 
rule change by Regulatory Circular to be published no later than 60 
days following the operative date of the proposed rule. The 
implementation date will be no later than 60 days following the 
issuance of the Regulatory Circular.
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \19\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \20\ 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 regulating, clearing, settling, 
processing information with respect to, and 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. The Exchange further 
believes the proposed rule change is consistent with the Section 
6(b)(5) \21\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ Id.
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    In particular, the Exchange believes that the proposed amendment to 
Rule 515A(a)(2) stating that only one Auction or Complex Auction may be 
ongoing at any given time in an option and/or in a complex strategy in 
which that option is a component, and Auctions and Complex Auctions 
involving the same option may not queue or overlap in any manner, is 
consistent with the Act. The Exchange believes that, without such a 
limitation, investors could be faced with an unusually large number of 
simultaneous PRIME and/or Complex Auctions in the same option in the 
simple market, and in the same strategy in the complex market, which in 
turn could impact the orderly function of the markets. The Exchange 
believes that this limitation is consistent with the Act because it is 
designed to remove impediments to and perfect the mechanisms of a free 
and open market and a national market system by ensuring orderliness in 
the PRIME and Complex Auction process on the Exchange.
    The Exchange believes that the proposed rule change relating to 
rounding removes impediments to and perfects the mechanisms of a free 
and open market and a national market system by adopting rules that are 
consistent with industry practices. As stated above, BX, in a filing 
relating to its directed orders program, described a process for 
rounding that has the potential to result in an allocation that is 
slightly greater than their 40% or 50% entitlement for directed 
orders.\22\ The Exchange believes that this supports its proposal to 
adopt Proposed Interpretations and Policies .10 with respect to 
rounding a remainder of exactly one-half contract (.50000) up to the 
next higher whole number.
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    \22\ See supra note 10.
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    The Exchange further believes the proposed rule change protects 
investors and is in the public interest because it fairly allocates the 
PRIME Agency Order in a manner that rewards Initiating Members who 
submit PRIME Agency Orders and guarantee price improvement for the 
entire Agency Order. The allocation of 50% of the contracts to the 
Initiating Member when there is only one remaining participant that 
matches the initiating Member's single price submission price or final 
auto-match price point should provide greater incentive to Initiating 
Members to submit Agency Orders for price improvement in the PRIME 
auction. The result of a greater number of Agency Orders submitted to 
PRIME is a benefit to the MIAX Options markets and the marketplace as a 
whole because it enriches liquidity on the Exchange at the NBBO, 
providing investors with greater opportunities for executions at the 
NBBO and beyond at improved prices through MIAX PRIME.
    The Exchange also believes that the proposed rule change removes 
impediments to and perfects the mechanisms of a free and open market 
and a national market system by attracting more order flow and by 
increasing the frequency with which Initiating Members initiate 
Auctions through PRIME. Moreover, the proposed rule change is 
consistent with the rules and proposals of other exchanges.\23\
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    \23\ See supra notes 9, 10, 16 and infra notes 26 and 27.
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    Additionally, the Exchange believes that the proposed technical 
clarifying and definitional amendments to Rule 515A will benefit market 
participants by enhancing transparency, clarity and ease of reference 
to the rules.

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 proposed changes and their effect on trade allocations in MIAX 
PRIME are meant to more fairly allocate an Agency Order submitted for 
price improvement at the single price submission price or at the final 
auto-match price point. The Exchange believes that the allocation of 
50% of the remainder of the Agency Order to the Initiating Member when 
there is only one non-Priority Customer response that will trade at the 
execution price should in fact enhance competition by encouraging more 
Initiating Members to submit Agency Orders to MIAX Options for price 
improvement via MIAX PRIME, which should benefit investors by 
attracting more order flow as well as increasing the frequency with 
which Initiating Members submit Agency Orders into the PRIME Auction. 
This should result in enhanced liquidity and more competition on the 
Exchange.
    For all the reasons stated, 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, and 
believes the proposed change will in fact 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.

[[Page 25398]]

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 \24\ and Rule 19b-4(f)(6) \25\ 
thereunder.
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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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-2017-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-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-MIAX-2017-22 and should be 
submitted on or before June 22, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11355 Filed 5-31-17; 8:45 am]
BILLING CODE 8011-01-P


