[Federal Register Volume 84, Number 216 (Thursday, November 7, 2019)]
[Notices]
[Pages 60117-60119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24253]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87440; File No. SR-MIAX-2019-45]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend Exchange Rule 518, Complex Orders

November 1, 2019.
    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 October 22, 2019, Miami International Securities Exchange, LLC 
(``MIAX Options'' or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') a proposed rule change

[[Page 60118]]

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 518, 
Complex Orders.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/ at MIAX Options' 
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 subsection (c)(2)(iii) of Exchange 
Rule 518, Complex Orders, to remove the provision which provides that a 
component of a complex order \3\ that legs into the Simple Order Book 
\4\ may not execute at a price that is outside the NBBO.\5\
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    \3\ A ``complex order'' is any order involving the concurrent 
purchase and/or sale of two or more different options in the same 
underlying security (the ``legs'' or ``components'' of the complex 
order), for the same account, in a ratio that is equal to or greater 
than one-to-three (.333) and less than or equal to three-to-one 
(3.00) and for the purposes of executing a particular investment 
strategy. Mini-options may only be part of a complex order that 
includes other mini-options. Only those complex orders in the 
classes designated by the Exchange and communicated to Members via 
Regulatory Circular with no more than the applicable number of legs, 
as determined by the Exchange on a class-by-class basis and 
communicated to Members via Regulatory Circular, are eligible for 
processing. See Exchange Rule 518(a)(5).
    \4\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(15).
    \5\ The term ``NBBO'' means the national best bid or offer as 
calculated by the Exchange based on market information received by 
the Exchange from the appropriate Securities Information Processor 
(``SIP''). See Exchange Rule 518(a)(14).
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    Currently, subsection (c)(2)(iii) provides that complex orders up 
to a maximum number of legs (determined by the Exchange on a class-by-
class basis as either two or three legs and communicated to Members \6\ 
via Regulatory Circular) may be automatically executed against bids and 
offers on the Simple Order Book for the individual legs of the complex 
order (``Legging''), provided the complex order can be executed in full 
or in a permissible ratio by such bids and offers, and provided that 
the execution price of each component is not executed at a price that 
is outside of the NBBO.
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    \6\ 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 Exchange Act. See 
Exchange Rule 100.
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    The Exchange now proposes to remove the provision of the rule which 
stipulates that a component of a complex order that legs into the 
Simple Order Book is not executed at a price that is outside of the 
NBBO. The Exchange believes removing this provision will improve 
liquidity on the Exchange's Strategy Book \7\ and increase 
opportunities for execution of complex orders. Under the Exchange's 
proposal each component leg of a complex order may be executed at a 
price equal to or better than the MBBO \8\ for that leg, but only if 
the net strategy price is not through the Complex MIAX Price Collar 
(``MPC'') Price \9\ for the complex order.
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    \7\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \8\ The term MBBO means the best bid or offer on the Simple 
Order Book. See Exchange Rule 518(a)(13).
    \9\ The MPC price protection feature is an Exchange-wide 
mechanism under which a complex order or complex eQuote to sell will 
not be displayed or executed at a price that is lower than the 
opposite side cNBBO bid at the time the MPC is assigned by the 
System (i.e., upon receipt or upon opening) by more than a specific 
dollar amount expressed in $0.01 increments (the ``MPC Setting''), 
and under which a complex order or eQuote to buy will not be 
displayed or executed at a price that is higher than the opposite 
side cNBBO offer at the time the MPC is assigned by the System by 
more than the MPC Setting (each the ``MPC Price''). See Exchange 
Rule 518.05(f).
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    The Exchange notes that at least one other competing options 
exchange allows component legs of a complex order to trade outside of 
the NBBO for the component leg. Specifically, BOX Exchange Rule 
7240(b)(3)(iii)(A) provides that ``[i]f an inbound Complex Order is 
executable (against either opposite side Complex Orders on the Complex 
Order Book or interest on the BOX Book) on BOX, BOX will determine if 
the potential execution price is equal to or better than both Extended 
cNBBO and cBBO. If so, the inbound Complex Order will be executed to 
the extent possible according to the priority described in [BOX 
Exchange] Rule 7240(b)(3)(i).'' \10\
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    \10\ See Securities Exchange Act Release No. 80917 (June 13, 
2017), 82 FR 27920 (June 19, 2017) (SR-BOX-2017-20).
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    The BOX Exchange Extended cNBBO is similar to the MIAX Options MPC 
price protection and is intended to mitigate the potential risk of 
executions at prices that are extreme or potentially erroneous. The 
Extended cNBBO is the maximum net bid and offer execution price for a 
Complex Order Strategy.\11\ Under Box Exchange Rule 7240(a)(5), the 
Extended cNBBO is calculated by subtracting the Extended cNBBO Limit 
\12\ from the cNBB \13\ and adding the Extended cNBBO Limit to the 
cNBO.\14\ In calculating the Extended cNBBO, each side of the Extended 
cNBBO is rounded to the nearest penny within the Extended cNBBO (i.e. 
the cNBB is rounded up to the nearest penny and the cNBO is rounded 
down to the nearest penny). The Extended cNBBO Limit is a percentage or 
an amount, whichever provides the less restrictive range (i.e. the 
widest range) when calculating the Extended cNBBO.\15\
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    \11\ The term ``Complex Order Strategy'' or ``Strategy'' means a 
particular combination of components of a Complex Order and their 
ratios to one another. See BOX Exchange Rule 7240(a)(9).
    \12\ The term ``Extended cNBBO Limit'' means a percentage or an 
amount, whichever provides for the greatest chance of execution 
(i.e. the widest range) when calculating the Extended cNBBO. The 
Extended cNBBO Limit for all classes will be a minimum of 3% and a 
maximum of 50% of the cNBB or cNBO as applicable; or a minimum 
amount of $0.00 and a maximum amount of $1.00. The default Extended 
cNBBO Limit for all classes will be 5% of the cNBB or cNBO as 
applicable, or $0.05. The Exchange will communicate the Extended 
cNBBO Limit with prior notice to Participants via Circular. The 
Exchange may modify the Extended cNBBO Limit on all classes with 
prior notice to Participants via Circular. See BOX Exchange Rule 
7240(a)(6).
    \13\ The term ``cNBB'' means the best net bid price for a 
Complex Order Strategy based on the NBBO for the individual options 
components of such Strategy. See BOX Exchange Rule 7240(a)(2).
    \14\ The term ``cNBO'' means the best net offer price for a 
Complex Order Strategy based on the NBBO for the individual options 
components of such Strategy. See BOX Exchange Rule 7240(a)(4).
    \15\ See supra note 12.
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    The Exchange will announce the implementation date of the proposed 
rule change by Regulatory Circular to be published no later than 90 
days following the operative date of the proposed rule. The 
implementation date will be no later than 90 days following the 
issuance of the Regulatory Circular.

[[Page 60119]]

2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \16\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \17\ 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.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes its proposal promotes just and equitable 
principles of trade, removes impediments to and perfects the mechanisms 
of a free and open market and a national market system, and in general, 
protects investors and the public interest by removing the provision 
that prevents a component of a complex order that legs into the Simple 
Order Book from executing at a price that is outside the NBBO. The 
Exchange believes that removing this provision will result in increased 
opportunities for the execution of complex orders, leading to increased 
liquidity on the Strategy Book, which benefits all Exchange 
participants by providing more trading opportunities. Further, although 
the proposal will allow component legs of a complex order to execute 
outside of the NBBO for that component, the Exchange believes that the 
MPC price protection feature will mitigate the potential risk of 
executions occurring at prices that are extreme or potentially 
erroneous. Moreover, the proposed rule change is consistent with rules 
regarding complex order handling and execution on at least one other 
exchange.\18\
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    \18\ See BOX Exchange Rule 7240(b)(3)(iii)(A).
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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 rule change is 
designed to increase liquidity on the Exchange's Strategy Book by 
removing the provision that prevents a component of a complex order 
that legs into the Simple Order Book from executing at a price that is 
through the NBBO for that component. Implementation of the proposed 
rule change will facilitate additional executions and enable greater 
competition among other competing exchanges that provide similar 
complex order handling.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intramarket competition as the proposed rule 
change applies equally to all Exchange Members. All Exchange Members 
who submit complex orders to the Exchange may benefit from the 
proposal.
    The Exchange does not believes that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, conversely the 
Exchange believes that its proposal will increase intermarket 
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 \19\ and Rule 19b-4(f)(6) \20\ 
thereunder.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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-2019-45 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-MIAX-2019-45. 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-MIAX-2019-45 and should be submitted on 
or before November 29, 2019.


    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24253 Filed 11-6-19; 8:45 am]
 BILLING CODE 8011-01-P


