[Federal Register Volume 83, Number 36 (Thursday, February 22, 2018)]
[Notices]
[Pages 7820-7824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03566]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82720; File No. SR-PEARL-2018-03]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Expand the 
Short Term Option Series Program

February 15, 2018.
    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 February 12, 2018, MIAX PEARL, LLC (``MIAX 
PEARL'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change '') 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.
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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 expand the Short Term Option 
Series Program to allow Monday expirations for options listed pursuant 
to the Short Term Option Series Program, including options on the SPDR 
S&P 500 ETF Trust (``SPY'').
    The text of the proposed rule change is available on the Exchange's 
website 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 forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 7821]]

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 MIAX PEARL Rule 100, Definitions, 
and Rule 404, Series of Option Contracts Open for Trading, 
Interpretations and Policies .02, to expand the Short Term Option 
Series Program (``Program'') to permit the listing and trading of 
options series with Monday expirations that are listed pursuant to the 
Program, including options on SPY. The Exchange is also proposing to 
make a number of non-substantive, organizational changes to MIAX PEARL 
Rule 100 and Rule 404, Interpretations and Policies .02, for purposes 
of clarification and uniformity.
    Presently, MIAX PEARL Rule 100 defines a Short Term Options Series 
as ``a series in an option class that is approved for listing and 
trading on the Exchange in which the series is opened for trading 
pursuant to the Short Term Option Series Program provision of Rule 404, 
Interpretations and Policies .02.'' MIAX PEARL Rule 404, 
Interpretations and Policies .02, provides that a Short Term Option 
Series is a series in an option class that is approved for listing and 
trading on the Exchange in which the series is opened for trading on 
any Tuesday, Wednesday, Thursday or Friday that is a business day and 
that expires on the Wednesday or Friday of the next business week.\3\ 
The Exchange is proposing to consolidate the rule text from Rule 404, 
Interpretations and Policies .02, with and into MIAX PEARL Rule 100. 
The Exchange notes that this rule text consolidation will not result in 
any substantive changes, but is purely for clarification and 
uniformity. Additionally, the Exchange is proposing to amend the 
definition in MIAX PEARL Rule 100, to permit the listing of options 
series that expire on Mondays, in connection with its proposal to 
expand the Program to permit the listing and trading of options series 
with Monday expirations that are listed pursuant to the Program.
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    \3\ See Exchange Rule 404, Interpretations and Policies .02.
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    The Exchange notes that this proposed rule changed is substantially 
similar to the proposal by Nasdaq PHLX LLC (``Phlx'') which was 
recently approved by the Commission.\4\
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    \4\ See Securities Exchange Release No. 82611 (February 1, 
2018), 83 FR 5473 (February 7, 2018) (SR-Phlx-2017-103) (Order 
approving proposed rule change).
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    Specifically, the Exchange is proposing that it may open for 
trading series of options on any Monday that is a business day and that 
expires on the Monday of the next business week. The Exchange is also 
proposing to list Monday expiration series on Fridays that precede the 
expiration Monday by one business week plus one business day. Since 
MIAX PEARL Rule 404, Interpretations and Policies .02, already provides 
for the listing of short term option series on Fridays, the Exchange is 
not modifying this provision in MIAX PEARL Rule 100, to allow for 
Friday listing of Monday expiration series. However, the Exchange is 
amending MIAX PEARL Rule 100 to clarify that, in the case of a series 
that is listed on a Friday and expires on a Monday, that series must be 
listed one business week and one business day prior to that expiration 
(i.e., two Fridays prior to expiration).
    As part of this proposal, the Exchange is also proposing to amend 
MIAX PEARL Rule 100 to address the expiration of Monday expiration 
series when the Monday is not a business day. In that case, the Rule 
will provide that the series shall expire on the first business day 
immediately following that Monday. This procedure differs from the 
expiration date of Wednesday expiration series that are scheduled to 
expire on a holiday. In that case, the Wednesday expiration series 
shall expire on the first business day immediately prior to that 
Wednesday, e.g., Tuesday of that week.\5\ However, the Exchange 
believes that it is preferable to require Monday expiration series in 
this scenario to expire on the Tuesday of that week rather than the 
previous business day, e.g., the previous Friday, since the Tuesday is 
closer in time to the scheduled expiration date of the series than the 
previous Friday, and therefore may be more representative of 
anticipated market conditions. The Exchange also notes that Cboe 
Exchange, Inc. (``Cboe'') uses the same procedure for options on the 
S&P 500 index (``SPX'') with Monday expirations that are listed 
pursuant to its Nonstandard Expirations Pilot Program and that are 
scheduled to expire on a holiday.\6\
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    \5\ See id.
    \6\ See Cboe Rule 24.9(e)(1) (``If the Exchange is not open for 
business on a respective Monday, the normally Monday expiring Weekly 
Expirations will expire on the following business day. If the 
Exchange is not open for business on a respective Wednesday or 
Friday, the normally Wednesday or Friday expiring Weekly Expirations 
will expire on the previous business day.'')
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    The Exchange also proposes to make corresponding changes to MIAX 
PEARL Rule 404, Interpretations and Policies .02, which sets forth the 
requirements for SPY options that are listed pursuant to the Short Term 
Options Series Program, to permit Monday SPY expirations (``Monday SPY 
Expirations''). Accordingly, the Exchange proposes to amend 
Interpretations and Policies .02 to Rule 404, to state that, with 
respect to Monday SPY Expirations, the Exchange may open for trading on 
any Friday or Monday that is a business day, series of options on SPY 
to expire on any Monday of the month that is a business day and is not 
a Monday in which Quarterly Options Series expire, provided that Monday 
SPY Expirations that are listed on a Friday must be listed at least one 
business week and one business day prior to the expiration. As with the 
current rules for Wednesday SPY Expirations, the Exchange will also 
amend Interpretations and Policies .02 to state that it may list up to 
five consecutive Monday SPY Expirations at one time, and may have no 
more than a total of five Monday SPY Expirations (in addition to the 
maximum of five Short Term Option Series expirations for SPY expiring 
on Friday and five Wednesday SPY Expirations). The Exchange will also 
clarify that, as with Wednesday SPY Expirations, Monday SPY Expirations 
will be subject to the provisions of this Rule.
    The interval between strike prices for the proposed Monday SPY 
Expirations will be the same as those for the current Short Term Option 
Series for Wednesday and Friday SPY Expirations. Specifically, the 
Monday SPY Expirations will have a $0.50 strike interval minimum. As is 
the case with other options series listed pursuant to the Short Term 
Option Series, the Monday SPY Expiration series will be P.M.-settled.
    Currently, for each option class eligible for participation in the 
Program, the Exchange is limited to opening thirty (30) series for each 
expiration date for the specific class. The thirty (30) series 
restriction does not include series that are open by other securities 
exchanges under their respective short term option rules; the Exchange 
may list these additional series that are listed by other exchanges.\7\ 
This thirty (30) series restriction shall apply to Monday SPY 
Expiration series as well. In addition, the Exchange will be able to 
list series that are listed by other exchanges, assuming they file 
similar rules with the Commission to list SPY options expiring on 
Mondays.
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    \7\ See Exchange Rule 404, Interpretations and Policies .02(a).
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    Finally, the Exchange is amending Interpretations and Policies 
.02(b) to

[[Page 7822]]

Rule 404, which addresses the listing of Short Term Options Series that 
expire in the same week as monthly or quarterly options series. 
Currently, that rule states that no Short Term Option Series may expire 
in the same week in which monthly option series on the same class 
expire (with the exception of Wednesday SPY Expirations) or, in the 
case of Quarterly Options Series, on an expiration that coincides with 
an expiration of Quarterly Option Series on the same class. As with 
Wednesday SPY Expirations, the Exchange is proposing to permit Monday 
SPY Expirations to expire in the same week as monthly options series on 
the same class. The Exchange believes that it is reasonable to extend 
this exemption to Monday SPY Expirations because Monday SPY Expirations 
and standard monthly options will not expire on the same trading day, 
as standard monthly options expire on Fridays. Additionally, the 
Exchange believes that not listing Monday SPY Expirations for one week 
every month because there was a monthly SPY expiration on the Friday of 
that week would create investor confusion.
    Relatedly, the Exchange is also amending Interpretations and 
Policies .02(b) to Rule 404 to clarify that Monday and Wednesday SPY 
Expirations may expire in the same week as monthly option series in the 
same class expire, but that no Short Term Option Series may expire on 
the same day as an expiration of Quarterly Option Series on the same 
class. This change will make that provision more consistent with the 
existing language in Interpretations and Policies .02 to Rule 404, 
which prohibits Wednesday SPY Expirations from expiring on a Wednesday 
in which Quarterly Options Series expire.
    The Exchange does not believe that any market disruptions will be 
encountered with the introduction of P.M.-settled Monday expirations. 
The Exchange has the necessary capacity and surveillance programs in 
place to support and properly monitor trading in the proposed Monday 
expiration series, including Monday SPY Expirations. The Exchange 
currently trades P.M.-settled Short Term Option Series that expire 
almost every Wednesday and Friday, which provide market participants a 
tool to hedge special events and to reduce the premium cost of buying 
protection. The Exchange notes that it has been listing Wednesday 
expirations pursuant to MIAX PEARL Rule 100 and Rule 404 since 2017.\8\ 
With the exception of Monday expiration series that are scheduled to 
expire on a holiday, the Exchange does not believe that there are any 
material differences between Monday expirations and Wednesday or Friday 
expirations for Short Term Option Series.
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    \8\ See Securities Exchange Act Release No. 79947 (February 2, 
2017), 82 FR 9865 (February 8, 2017) (SR-PEARL-2017-03).
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    The Exchange seeks to introduce Monday expirations to, among other 
things, expand hedging tools available to market participants and to 
continue the reduction of the premium cost of buying protection. The 
Exchange believes that Monday expirations, similar to Wednesday and 
Friday expirations, will allow market participants to purchase an 
option based on their timing as needed and allow them to tailor their 
investment and hedging needs more effectively.
    As noted above, Phlx recently received approval to list Monday 
expirations for SPY options pursuant to its Short Term Options program. 
In addition, other exchanges currently permit Monday expirations for 
other options. For example, Cboe lists options on the SPX with a Monday 
expiration as part of its Nonstandard Expirations Pilot Program.\9\
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    \9\ See Cboe Rule 24.9(e)(1) (``The Exchange may open for 
trading Weekly Expirations on any broad-based index eligible for 
standard options trading to expire on any Monday, Wednesday, or 
Friday (other than the third Friday-of-the-month or days that 
coincide with an EOM expiration.'').
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    The Exchange notes that this filing is substantially similar to a 
companion MIAX Options filing, expanding the Short Term Option Series 
Program to allow Monday expirations for options listed pursuant to the 
Program, including options on SPY.

2. Statutory Basis

    MIAX PEARL believes that its proposed rule change is consistent 
with Section 6(b) of the Act \10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \11\ 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes the Short Term Option Series 
Program has been successful to date and that Monday expirations, 
including Monday SPY Expirations, simply expand the ability of 
investors to hedge risk against market movements stemming from economic 
releases or market events that occur throughout the month in the same 
way that the Short Term Option Series Program has expanded the 
landscape of hedging. Similarly, the Exchange believes Monday 
expirations, including Monday SPY Expirations, should create greater 
trading and hedging opportunities and flexibility, and will provide 
customers with the ability to tailor their investment objectives more 
effectively. While other exchanges do not currently list Monday SPY 
Expirations, the Exchange notes that Cboe currently permits Monday 
expirations for other options with a weekly expiration, such as options 
on the SPX. \12\ Additionally, Nasdaq PHLX LLC (``Phlx'') has recently 
received approval from the Commission to list Monday SPY Expirations 
for SPY options pursuant to its Short Term Options program.\13\
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    \12\ See supra note 9.
    \13\ See supra note 4.
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    With the exception of Monday expiration series that are scheduled 
to expire on a holiday, the Exchange does not believe that there are 
any material differences between Monday expirations, including Monday 
SPY Expirations, and Wednesday or Friday expirations, including 
Wednesday and Friday SPY Expirations, for Short Term Option Series. The 
Exchange notes that it has been listing Wednesday expiration pursuant 
to MIAX PEARL Rule 100 and Rule 404 since 2017.\14\ The Exchange 
believes that it is consistent with the Act to treat Monday expiration 
series that expire on a holiday differently than Wednesday or Friday 
expiration series, since the proposed treatment for Monday expiration 
series will result in an expiration date that is closer in time to the 
scheduled expiration date of the series, and therefore may be more 
representative of anticipated market conditions. The Exchange also 
notes that Cboe uses the same procedure for SPX options with Monday 
expirations that are listed pursuant to its Nonstandard Expirations 
Pilot Program and that are scheduled to expire on a holiday.
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    \14\ See supra note 8.
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    Given the similarities between Monday SPY Expiration series and 
Wednesday and Friday SPY Expiration series, the Exchange believes that 
applying the provisions in Interpretations and Policies .02 to Rule 404 
that currently apply to Wednesday SPY Expirations, to Monday SPY 
Expirations, is justified. For example, the Exchange believes that 
allowing

[[Page 7823]]

Monday SPY Expirations and monthly SPY expirations in the same week 
will benefit investors and minimize investor confusion by providing 
Monday SPY Expirations in a continuous and uniform manner. The Exchange 
also believes that it is appropriate to amend Interpretations and 
Policies .02(b) to Rule 404 to clarify that no Short Term Option Series 
may expire on the same day as an expiration of Quarterly Option Series 
on the same class. This change will make that provision more consistent 
with the existing language in Interpretations and Policies .02 to Rule 
404 that prohibit Wednesday SPY Expirations from expiring on a 
Wednesday in which Quarterly Options Series expire.
    Finally, the Exchange represents that it has an adequate 
surveillance program in place to detect manipulative trading in Monday 
expirations, including Monday SPY Expirations, in the same way that it 
monitors trading in the current Short Term Option Series. The Exchange 
also represents that it has the necessary systems capacity to support 
the new options series.
    The Exchange believes the proposed rule text organizational changes 
promote just and equitable principles of trade and remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system because the proposed rule text organizational change 
conforms its rules to the rules of other exchanges. As such, the 
proposed amendments would foster cooperation and coordination with 
persons engaged in facilitating transactions in securities and would 
remove impediments to and perfect the mechanism of a free and open 
market and a national exchange system. In particular, the Exchange 
believes that the proposed changes will provide greater clarity to 
Members and the public regarding the Exchange's Rules. It is in the 
public interest for rules to be accurate and concise so as to eliminate 
the potential for confusion.

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 notes that 
having Monday expirations is not a novel proposal, as Cboe currently 
lists and trades short-term SPX options with a Monday expiration, and 
Phlx has recently received approval from the Commission to list Monday 
SPY expirations. The Exchange does not believe the proposal will impose 
any burden on intra-market competition, as all market participants will 
be treated in the same manner under this proposal. Additionally, the 
Exchange does not believe the proposal will impose any burden on inter-
market competition, as nothing prevents the other options exchanges 
from proposing similar rules to list and trade short-term options 
series with Monday expirations.

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 from the date on which it was filed, or 
such shorter time as the Commission may designate, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\15\ and Rule 19b-4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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 intention 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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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days from the date of filing. However, Rule 
19b-4(f)(6)(iii) \17\ permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. 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 notes that it recently approved 
Phlx's substantially similar proposal to list and trade Monday SPY 
Expirations.\18\ The Exchange has stated that waiver of the operative 
delay will allow the Exchange to list and trade Monday SPY Expirations 
as soon as possible, and therefore, promote competition among the 
option exchanges.\19\ For these reasons, the Commission believes that 
the proposed rule change presents no novel issues and that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest, and will allow the Exchange to 
remain competitive with other exchanges. Therefore, the Commission 
hereby waives the 30-day operative delay and designates the proposal 
effective upon filing.\20\
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    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ See supra note 4.
    \19\ The Exchange also proposes a number of non-substantive 
changes to its rulebook. The Exchange stated these changes will help 
to provide clarity and therefore are in the public interest.
    \20\ 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).
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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

    [ssquf] Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    [ssquf] Send an email to [email protected]. Please include File 
Number SR-PEARL-2018-03 on the subject line.

Paper Comments

    [ssquf] 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-PEARL-2018-03. 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 website (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

[[Page 7824]]

those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-PEARL-2018-03 and should be 
submitted on or before March 15, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03566 Filed 2-21-18; 8:45 am]
BILLING CODE 8011-01-P


