[Federal Register Volume 83, Number 82 (Friday, April 27, 2018)]
[Notices]
[Pages 18614-18616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08850]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83092; File No. SR-PEARL-2018-11]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 
602, Continuing Market Maker Registration

April 23, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 13, 2018, MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``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 MIAX PEARL Rule 602, 
Continuing Market Maker Registration, to modify the Market Maker \3\ 
series registration process utilized by the Exchange.
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    \3\ The term ``Market Maker'' or ``MM'' means a Member 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in Chapter VI of the Exchange 
rules. See Exchange Rule 100.
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    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.

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 602, Continuing 
Market Maker Registration, to modify the Market Maker series 
registration process utilized by the Exchange. The Exchange believes 
this proposal would simplify and enhance the efficiency of the Market 
Maker series registration process, for both Market Makers and the 
Exchange. Other option exchanges generally have comparable Market Maker 
series registration processes.\4\
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    \4\ See, e.g., Cboe BZX Exchange, Inc. (``BZX Options'') Rules 
22.3(a), (b) (Market Maker Registration); see also Nasdaq PHLX, LLC 
(``Phlx'') Rule 3212(b) (Registration as a Market Maker); Nasdaq 
Options Market (``NOM''), Chapter VII (Market Participants), Section 
3(a), (b) (Continuing Market Maker Registration); NYSE American, LLC 
(``NYSE American''), Rule 923NY (Appointment of Market Makers).
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Current Registration Process
    Once a Member \5\ has qualified as a Market Maker, such Market 
Maker may seek registration in individual series of options pursuant to 
Rule 602. Specifically, Rule 602(b) provides that ``[a] Market Maker 
may become registered in a series by entering a registration request 
via an Exchange approved electronic interface with the Exchange's 
Systems by 9:00 a.m. Eastern Time. Registration shall become effective 
on the day the registration request is entered.'' \6\
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    \5\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of the Rules 
for purposes of trading on the Exchange as an ``Electronic Exchange 
Member'' or ``Market Maker.'' Members are deemed ``members'' under 
the Exchange Act. See Exchange Rule 100.
    \6\ See Exchange Rule 602(b).
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Proposed Registration Process
    The Exchange proposes to amend MIAX PEARL Rule 602(b) to modify the 
process by which a Market Maker becomes registered in a series. 
Specifically, the Exchange proposes to amend the rule text to state 
that registration may be requested by either utilizing the currently 
approved MIAX Express Order (``MEO'') \7\ interface, which requires 
series registration to be submitted prior to 9:00 a.m. Eastern Time of 
the current trading day, which registration request shall be submitted 
for every requested trading day, or an additional Exchange approved 
electronic interface, which requires series registration to be 
submitted prior to 6:00 p.m. Eastern Time of the business day 
immediately preceding the next trading day, which registration request 
shall persist until it is withdrawn. A Market Maker can withdraw a 
registration request by utilizing the same tool as it used to submit 
such request.
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    \7\ The term ``MEO Interface'' means a binary order interface 
used for submitting certain order types (as set forth in Rule 516) 
to the MIAX PEARL System. See Exchange Rule 100.
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    The purpose of this proposed change is to accommodate an additional 
Exchange approved electronic interface that the Exchange intends to 
make available to Market Makers for series registration, which 
additional electronic interface has a different submission deadline 
than the existing approved electronic interface, and which additional 
electronic interface allows the registration request to persist until a 
new request is submitted (whereas the existing electronic interface 
does not allow the registration request to persist--it requires a 
Market Maker to

[[Page 18615]]

resubmit for every trading day). The Exchange believes that adding more 
detail to the rule text would make it clear to Market Makers that it is 
mandatory to utilize one of the two Exchange approved electronic 
interfaces for series registration, and that there are different 
submission deadlines and requirements for resubmission for each device. 
Accordingly, Market Makers would continue to self-register in a series, 
however the Market Maker would select the method to use, and thereby 
clearly understand when a series registration must be submitted for 
that particular method and the submission frequency related thereto. 
Market Makers may choose to use either Exchange approved electronic 
interface, or any combination of the two, to process their series 
registrations and withdrawals.
    The Exchange believes that offering Market Makers an additional 
electronic interface for series registration will be beneficial for 
Market Makers because it will provide Market Makers with greater 
flexibility on how to perform series registration. The Exchange also 
believes that it will provide Market Makers with greater and more 
efficient access to the securities in which they want to make markets 
and disseminate competitive quotations, which would provide additional 
liquidity and enhance competition in those securities.
    In addition, the Exchange also proposes to delete Rule 602(c), in 
its entirety. Presently, sub-section (c) states that, ``[a] Market 
Maker's registration in a series shall be terminated if the Market 
Maker fails to enter quotations in the series within five (5) business 
days after the Market Maker's registration in the series becomes 
effective.'' \8\
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    \8\ See Rule 602(c).
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    The Exchange believes that Rule 602(c), when read in conjunction 
with certain other Exchange Rules, could potentially be interpreted to 
be inconsistent with such rules. In particular, Rule 604(a)(6) provides 
that Market Makers are expected to ``maintain active markets'' in all 
series in which they are registered. Rule 602(c) applies only to the 
first five days that a Market Maker is registered, whereas Rule 
604(a)(6) continues for as long as the Market Maker is registered in a 
series. When read together, the Exchange believes that there is 
potential for an inconsistent interpretation relating to a Market 
Maker's quoting obligations during the first five days after 
registering in a series. In the Exchange's view, the requirement to 
maintain active markets should be the same throughout the entire 
registration period. The Exchange notes that it will continue to be 
permitted to suspend or terminate a registered Market Maker under Rule 
600(b) if it is found that the Market Maker has failed in its 
obligations to maintain active markets under Rule 604(a)(6) or fails 
its obligation to provide continuous two-sided quotes under Rule 
605(d).\9\ Removing Rule 602(c) would simply remove the non-
discretionary requirement that the Exchange must terminate a Market 
Maker's registration in a series if it does not enter quotations in the 
series within five business days of registration.
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    \9\ See Exchange Rule 600(b) (``The registration of any Member 
as a Market Maker may be suspended or terminated by the Exchange 
upon a determination that such Member has failed to properly perform 
as a Market Maker.'').
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    The Exchange currently conducts surveillance to monitor and enforce 
compliance with the ``active markets'' provision of Rule 604(a)(6) for 
all Market Makers. A registered Market Maker is subject to the Rule 
604(a)(6) surveillance for the entire time the Market Maker is 
registered, including the first five days covered by Rule 602(c). If a 
registered Market Maker is found by surveillance not to be maintaining 
active markets in the option series in which it is registered, the 
Exchange will determine the appropriate course of action against such 
Market Maker. The Exchange may take actions of escalating severity 
against the offending Market Maker from suspending the Market Maker up 
to terminating the Market Maker in the options in which it fails to 
maintain active markets or bringing formal action.\10\
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    \10\ See Exchange Rule 600(b).
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    The Exchange notes that its Market Maker series registration 
process is generally similar in structure to the comparable processes 
at other exchanges.\11\ Additionally, the Exchange's proposal to remove 
Rule 602(c) is based on the rules of another Exchange.\12\ Accordingly, 
the Exchange believes that the proposed changes to Rule 602 are not 
material and raise no new or novel issues.
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    \11\ See e.g., BZX Options Rules 22.3(a) (``An Options Member 
that has qualified as an Options Market Maker may register to make 
markets in individual series of options''); NOM, Chapter VII, 
Section 3(a) (``An Options Participant that has qualified as an 
Options Market Maker may register to make markets in individual 
options.''). See also Phlx Rule 3212(b) (``A PSX Market Maker may 
become registered in an issue by entering a registration request via 
an Exchange approved electronic interface with PSX's systems or by 
contacting PSX Market Operations. Registration shall become 
effective on the day the registration request is entered''); Phlx 
Rule 3220(a) (``A market maker may voluntarily terminate its 
registration in a security by withdrawing its two-sided quotation 
from PSX. A PSX Market Maker that voluntarily terminates its 
registration in a security may not re-register as a market maker for 
one (1) business day.''). See also BZX Options Rules 22.3(b) (``An 
Options Market Maker may become registered in a series by entering a 
registration request via an Exchange approved electronic interface 
with the Exchange's systems by 9:00 a.m. Eastern time. Registration 
shall become effective on the day the registration request is 
entered''); NOM, Chapter VII, Section 3(b) (``An Options Market 
Maker may become registered in an option by entering a registration 
request via a Nasdaq approved electronic interface with Nasdaq's 
systems. Registration shall become effective on the day the 
registration request is entered.'').
    \12\ See Securities Exchange Act Release No. 79039 (October 4, 
2016), 81 FR 70198 (October 11, 2016) (SR-BatsBZX-2016-62).
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2. Statutory Basis
    MIAX PEARL believes that its proposed rule change is consistent 
with Section 6(b) \13\ of the Securities Exchange Act of 1934 (the 
``Act''), in general, and furthers the objectives of Section 
6(b)(5),\14\ 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, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change removes 
impediments to a free and open market because it would enable Market 
Makers to manage their series registration and the submission frequency 
related thereto, with more flexibility through the use of multiple 
electronic interfaces. The Exchange believes the proposed change would 
reduce the burden on both Market Makers and Exchange staff, which would 
result in a fair and reasonable use of resources to the benefit of all 
market participants. In particular, the proposal will enable Market 
Makers to have a choice of multiple electronic interfaces to perform 
series registration, and consequently will provide Market Makers with 
more efficient access to the securities in which they want to make 
markets and thus more quickly begin disseminating competitive 
quotations in those securities, which would provide additional 
liquidity and enhance competition in those securities.
    In addition, the Exchange believes that the proposed deletion of 
sub-section (c) of Rule 602 promotes just and equitable principles of 
trade and provides clarity for the benefit of Market Makers and the 
marketplace as a whole

[[Page 18616]]

by deleting rule text that could potentially be inconsistent with 
certain other Exchange rules. Additionally, the Exchange believes the 
proposal is consistent with Section 6(b)(1) \15\ in that it enables the 
Exchange to be so organized as to have the capacity to be able to carry 
out the purposes of the Exchange Act and to comply, and to enforce 
compliance by its exchange members and persons associated with its 
exchange members with the rules of the Exchange--in particular, the 
Exchange's Market Maker obligations. Accordingly, the Exchange believes 
this proposal is consistent with Section 6(b) of the Exchange Act.\16\
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    \15\ 15 U.S.C. 78f(b)(1).
    \16\ 15 U.S.C. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because it applies equally to 
a group of similarly situated market participants--Market Makers. The 
proposed rule change would reduce the burden on Market Makers to manage 
their series registration and thus provide liquidity to the Exchange.
    Market Makers would still be subject to the same obligations with 
respect to their registration; the proposed rule change would make the 
registration process more efficient for such Market Makers. The 
Exchange believes that the proposed rule change would relieve any 
burden on, or otherwise promote, competition, as it would enable Market 
Makers to manage their registration with more flexibility through the 
use of multiple electronic interfaces. The Exchange believes this would 
provide Market Makers with more efficient access to the securities in 
which they want to make markets and thus more quickly begin 
disseminating competitive quotations in those securities, which would 
provide additional liquidity and enhance competition in those 
securities.

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 \17\ and Rule 19b-4(f)(6) \18\ 
thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 [email protected]. Please include 
File Number SR-PEARL-2018-11 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-2018-11. 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 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-2018-11 and should be submitted on 
or before May 18, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-08850 Filed 4-26-18; 8:45 am]
 BILLING CODE 8011-01-P


