[Federal Register Volume 86, Number 243 (Wednesday, December 22, 2021)]
[Notices]
[Pages 72669-72674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27661]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93801; File No. SR-MIAX-2021-61]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Increase Position Limits for Options on Two Exchange-
Traded Funds

December 16, 2021.
    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 December 3, 2021, Miami International Securities Exchange, LLC 
(``MIAX Options'' or the ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission'') the 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 the 
Substance of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 307 
(Position Limits) and Exchange Rule 309 (Exercise Limits).
    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 Exchange Rule 307 (Position Limits) 
and Exchange Rule 309 (Exercise Limits) to increase the position and 
exercise limits for options on certain exchange-traded funds 
(``ETFs''). These proposed rule changes are based on the similar 
proposal by Cboe Exchange, Inc. (``Cboe'') and approved by the 
Commission.\3\
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    \3\ See Securities Exchange Act Release No. 93525 (November 4, 
2021), 86 FR 62584 (November 10, 2021) (SR-Cboe-2021-029) (Notice of 
Filing of Amendment Nos. 2 and 3 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1, 
2, and 3, To Increase Position Limits for Options on Two-Exchange-
Traded Funds).
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    Position limits are designed to address potential manipulative 
schemes and adverse market impacts surrounding the use of options, such 
as disrupting the market in the security underlying the options. While 
position limits should address and discourage the potential for 
manipulative schemes and adverse market impact, if such limits are set 
too low, participation in the options market may be discouraged. The 
Exchange believes that position limits must therefore be balanced 
between mitigating concerns of any potential manipulation and the cost 
of inhibiting potential hedging activity that could be used for 
legitimate economic purposes.
    The Exchange has observed an ongoing increase in demand, for both 
trading and hedging purposes in options on iShares[supreg] iBoxx $ 
Investment Grade Corporate Bond ETF (``LQD'') and VanEck Vectors Gold 
Miners ETF (``GDX,'' and collectively, with the aforementioned ETF, the 
``Underlying ETFs''). Though the demand for these options appears to 
have increased, position limits for options on the Underlying ETFs have 
remained the same. The Exchange believes these unchanged position 
limits may have impeded, and may continue to impede, trading activity 
and strategies of investors, such as use of effective hedging vehicles 
or income generating strategies (e.g., buy-write or put-write), and the 
ability of Market Makers \4\ to make liquid markets with tighter 
spreads in these options resulting in the transfer of volume to over-
the-counter (``OTC'') markets. OTC transactions occur through bilateral 
agreements, the terms of which are not publicly disclosed to the 
marketplace. As such, OTC transactions do not contribute to the price 
discovery process on a public exchange or other lit markets. Therefore, 
the Exchange believes that the proposed increases in position limits 
(and exercise limits) for options on the Underlying ETFs may enable 
liquidity providers to provide additional liquidity to the Exchange and 
other market participants to transfer their liquidity demands from OTC 
markets to the Exchange. As described in further detail below, the 
Exchange believes that the continuously increasing market 
capitalization of the Underlying ETFs, ETF components, as well as the 
highly liquid markets for each, reduces the concerns for potential 
market manipulation and/or disruption in the underlying markets upon 
increasing position limits, while the rising demand for trading options 
on the Underlying ETFs for legitimate economic purposes compels an 
increase in position limits.
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    \4\ ``Market Makers'' means ``Lead Market Makers,'' ``Primary 
Lead Market Makers'' and ``Registered Market Makers'' collectively. 
See Exchange Rule 100. A Market Maker has the rights and 
responsibilities set forth in Chapter VI of the Exchange's Rulebook.
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Proposed Position Limits for Options on the Underlying ETFs
    Position limits for options on ETFs are determined pursuant to 
Exchange Rule 307 and vary according to the number of outstanding 
shares and the trading volumes of the underlying equity security (which 
includes ETFs) over the past six months. Pursuant to Rule 307, the 
largest in capitalization and the most frequently traded stocks and 
ETFs have an option position limit of 250,000 contracts (with 
adjustments for splits, re-capitalizations, etc.) on the same side of 
the market; and smaller

[[Page 72670]]

capitalization stocks and ETFs have position limits of 200,000, 75,000, 
50,000, or 25,000 contracts (with adjustments for splits, re-
capitalizations, etc.) on the same side of the market. Options on LQD 
and GDX are currently subject to the standard position limit of 250,000 
contracts as set forth in Exchange Rule 307, Policy .01 of Exchange 
Rule 307 sets forth separate, higher position limits for specific 
equity options (including options on specific ETFs).\5\
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    \5\ Adjusted option series, in which one option contract in the 
series represents the delivery of other than 100 shares of the 
underlying security as a result of a corporate action by the issuer 
of the security underlying such option series, do not impact the 
notional value of the underlying security represented by those 
options. When an underlying security undergoes a corporate action 
resulting in adjusted series, the Exchange lists new standard option 
series across all appropriate expiration months the day after the 
existing series are adjusted. The adjusted series are generally 
actively traded for a short period of time following adjustment, but 
orders to open options positions in the underlying security are 
almost exclusively placed in the new standard option series 
contracts.
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    The Exchange proposes to amend Policy .01 of Exchange Rule 307 to 
increase the position limits for options on each of LQD and GDX. The 
Exchange also proposes to amend Policy .01 of Exchange Rule 309 to 
increase the exercise limits for options on each of LQD and GDX. The 
table below represents the current, and proposed, position and exercise 
limits for options on the Underlying ETFs subject to this proposal:

------------------------------------------------------------------------
                                              Current        Proposed
                 Product                     position/       position/
                                          exercise limit  exercise limit
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LQD.....................................         250,000         500,000
GDX.....................................         250,000         500,000
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    The Exchange notes that the proposed position limit for options on 
LQD and GDX are consistent with current position limits for options on 
the iShares[supreg] MSCI Brazil ETF (``EWZ''), iShares[supreg] 20+ Year 
Treasury Bond Fund ETF (``TLT''), iShares[supreg] MSCI Japan ETF 
(``EWJ''), and iShares[supreg] iBoxx $ High Yield Corporate Bond Fund 
(``HYG'').\6\ The Exchange represents that the Underlying ETFs qualify 
for either (1) the initial listing criteria set forth in Rule 
402(i)(5)(ii) for ETFs holding non-U.S. component securities, (2) the 
generic listing standards for series of portfolio depository receipts 
and index fund shares based on international or global indexes under 
which a comprehensive surveillance agreement (``CSA'') is not required, 
or (3) the continued listing criteria in Exchange Rule 403 (for 
ETFs).\7\ In compliance with its listing rules, the Exchange also 
represents that non-U.S. component securities that are not subject to a 
CSA do not, in the aggregate, represent more than 50% of the weight of 
any of the Underlying ETFs.\8\
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    \6\ See Exchange Rule 307, Interpretation and Policy .01.
    \7\ The Exchange notes that the initial listing criteria for 
options on ETFs that hold non-U.S. component securities are more 
stringent than the maintenance listing criteria for those same ETF 
options. See Exchange Rule 402(i)(5)(ii) and Exchange Rule 403(g).
    \8\ See Exchange Rule 402(i)(5)(ii).
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Composition and Growth Analysis for Underlying ETFs
    As stated above, position (and exercise) limits are intended to 
prevent the establishment of options positions that can be used to, or 
potentially create incentives to, manipulate the underlying market so 
as to benefit options positions. The Commission has recognized that 
these limits are designed to minimize the potential for mini-
manipulations and for corners or squeezes of the underlying market, as 
well as serve to reduce the possibility for disruption of the options 
market itself, especially in illiquid classes.\9\ The Underlying ETFs, 
as well as the ETF components, are highly liquid and are based on a 
broad set of highly liquid securities and other reference assets, as 
demonstrated through the trading statistics presented in this proposal. 
To support the proposed position limit increases (and corresponding 
exercise limit increases), the Exchange considered the liquidity of the 
Underlying ETFs, the Value of the underlying ETFs, their components and 
the relevant marketplace, the share and option volume for the 
Underlying ETFs, and, where applicable, the availability or comparison 
of economically equivalent products to options on the Underlying ETFs.
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    \9\ See Securities Exchange Act Release No. 67672 (August 15, 
2012), 77 FR 50750 (August 22, 2012) (SR-NYSEAmex-2012-29).
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    Cboe demonstrated the below trading statistics regarding shares of 
and options on the Underlying ETFs and the values of the Underlying 
ETFs and their components: \10\
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    \10\ See supra note 3.

----------------------------------------------------------------------------------------------------------------
                                                                  Shares
                               ADV \11\ (ETF   ADV (options     outstanding     Fund market    Share value \14\
           Product                shares        contracts)      (millions)       cap (USD            (USD)
                                 millions)                         \12\       millions) \13\
----------------------------------------------------------------------------------------------------------------
LQD.........................            14.1          30,300           308.1        54,113.7  130.13 (NAV)
GDX.........................            39.4         166,000           419.8        16,170.5  33.80 (NAV)
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    Cboe collected the same trading statistics as above regarding a 
sample of other ETFs, as well as the current position limits for 
options on such ETFs pursuant to its Rule 13.07, to draw comparisons in 
support of the proposed position limit increases for options on the 
Underlying ETFs (see further discussion below).\15\
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    \11\ Average daily volume (ADV) data for ETF shares and option 
contracts, as well as for ETF shares and options on the comparative 
ETFs presented below, are for all of 2020. Additionally, reference 
to ADV in ETF shares and ETF options, and indexes herein this 
proposal are for all of calendar year 2020, unless otherwise 
indicated.
    \12\ Shares Outstanding and Net Asset Values (``NAV''), as well 
as for the comparative ETFs presented below, are as of April 5, 2021 
for all ETFs.
    \13\ Fund Market Capitalization data, as well as for the 
comparative ETFs presented below, are as of January 14, 2021.
    \14\ See supra note 12.
    \15\ See supra note 3.

[[Page 72671]]



 
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                                             ADV (ETF                         Shares        Fund market                                       Current
                 Product                      shares       ADV (options     outstanding      cap (USD            Share value (USD)           position
                                             millions)       contract)      (millions)       millions)                                        limits
--------------------------------------------------------------------------------------------------------------------------------------------------------
EWZ.....................................            29.2         139,400           173.8         6,506.8  33.71 (NAV)...................         500,000
TLT.....................................            11.5         111,800           103.7        17,121.3  136.85 (NAV)..................         500,000
EWJ.....................................             8.2          15,500           185.3        13,860.7  69.72 (NAV)...................         500,000
HYG.....................................            30.5         261,600           254.5        24,067.5  86.86 (NAV)...................         500,000
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    The Exchange believes that, overall, the liquidity in the shares of 
the Underlying ETFs and in their overlying options, the larger market 
capitalizations for each of the Underlying ETFs, and the overall market 
landscape relevant to each of the Underlying ETFs support the proposal 
to increase the position limits for each option class. Given the robust 
liquidity in, and value of, the Underlying ETFs and their components, 
the Exchange does not anticipate that the proposed increase in position 
limits would create significant price movements as the relevant markets 
are large enough to adequately absorb potential price movements that 
may be caused by larger trades.
    LQD tracks the performance of the Markit iBoxx USD Liquid 
Investment Grade (``IBOXIG'') Index, which is an index designed as a 
subset of the broader U.S. dollar-denominated corporate bond market 
which can be used as a basis for tradable products, such as ETFs, and 
is comprised of over 8,000 bonds.\16\ Cboe noted that from 2019 through 
2020, ADV has grown significantly in shares of LQD and in options on 
LQD, from approximately 9.7 million shares in 2019 to 14.1 million 
through 2020, and from approximately 8,200 option contracts in 2019 to 
30,300 option contracts through 2020. LQD also continued to experience 
significant growth in ADV in the first quarter of 2021 with an ADV of 
approximately 140,200 options contracts. Further, LQD generally 
experiences higher ADV in shares than both TLT (11.5 million shares) 
and EWJ (8.2 million share) and almost double the ADV in option 
contracts than EWJ (15,500 option contracts). Options on each of EWZ, 
TLT, and EWJ are currently subject to a position limit of 500,000 
contracts--the proposed limit for options on LQD. The NAV of LQD is 
also higher than, or comparable to, that of the NAV of the ETFs 
underlying the options that are currently subject to a position limit 
of 500,000 option contracts (as presented in the table above), which is 
indicative that the total value of its underlying components is 
generally higher or comparable. Per the tables above, LQD's total 
market capitalization of approximately $54.1 billion is also higher 
than or comparable to the total market capitalization of the ETFs 
underlying the options currently subject to a position limit of 500,000 
contracts. In addition to this, Cboe noted that, although there are 
currently no options listed for trading on the IBOXIG Index, the 
components \17\ of the IBOXIG Index, which can be used in creating a 
basket of securities that equate to the LQD ETF, are made up of over 
8,000 bonds for which the outstanding face value of each must be 
greater than or equal to $2 billion.\18\ The Exchange believes that the 
total value of the bonds in the IBOXIG Index, coupled with LQD's share 
and option volume, total market capitalization, and NAV price indicates 
that the market is large enough to absorb potential price movements 
caused by a large trade in LQD. Also, as evidenced above, trading 
volume in LQD shares has increased over the past few years, and the 
Exchange understands that market participants' need for options has 
continued to grow alongside the ETF. Particularly, the Exchange notes 
that in the last year, market participants have sought more cost-
effective hedging strategies through the use of LQD options as a result 
of the borrow on other fixed income ETFs, such as HYG. Therefore, the 
Exchange believes that because LQD options are being increasingly 
utilized as an alternative to similar products, such as HYG options, 
then it is appropriate that options on LQD be subject to the same 
500,000 contract position limit that currently exists for options on 
HYG.
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    \16\ See Markit iBoxx USD Liquid Investment Grade Index, 
available at https://cdn.ihs.com/www/pdf/MKT-iBoxx-USD-Liquid-Investment-Grade-Index-factsheet.pdf. (March 31, 2021).
    \17\ Investment grade corporate bonds.
    \18\ See supra note 16.
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    GDX seeks to replicate as closely as possible the price and yield 
performance of the NYSE Arca Gold Miners (``GDMNTR'') Index, which is 
intended to track the overall performance of companies involved in the 
gold mining industry.\19\ Cboe noted ADV in GDX options has increased 
from 2019 through 2020, with an ADV of approximately 117,400 option 
contracts in 2019 to an ADV of approximately 166,000 option contracts 
in 2020. Cboe noted that ADV in GDX shares did not increase from 2019 
to 2020. GDX options also experienced an ADV of approximately 287,800 
option contracts in the first quarter of 2021. Cboe noted that the ADV 
in GDX shares (39.4 million) and options on GDX (166,000 option 
contracts) are greater than the ADV in EWZ (29.2 million shares and 
139,300 option contracts), TLT (11.5 million shares and 111,800 option 
contracts), EWJ (8.2 million shares and 15,500 option contracts), and 
HYG (30.5 million shares and 261,600 option contracts), each of which 
is currently subject to a position limit of 500,000 option contracts--
the proposed limit for options on GDX. GDX also experiences a 
comparable, or higher, market capitalization (approximately $16.2 
billion) than EWZ, TLT and EWJ. Cboe noted that many of the Brazil-
based gold mining constituents included in GDX are also included in 
EWZ, which tracks the investment results of an index composed of 
Brazilian equities, and that Cboe had not identified any issues with 
the continued listing and trading of EWZ options or any adverse market 
impact on EWZ in connection with the current 500,000 position limit in 
place for EWZ options. Additionally, like that of LDQ [sic] above, 
there is currently no index option analogue for the GDX ETF on the 
GDMNTR Index approved for options trading; however, the components of 
the GDMNTR Index, which can be used to create the GDX ETF, currently 
must each have a market capitalization greater than $750 million, an 
ADV of at least 50,000 shares, and an average daily value traded of at 
least $1 million in order to be eligible for inclusion in the GDMNTR 
Index. The Exchange believes that the GDMNTR Index component inclusion 
requirements, as well as GDX's share and option volume and total market 
capitalization, indicate that the GDX

[[Page 72672]]

market is sufficiently large and liquid enough to absorb price 
movements as a result of potentially oversized trades.
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    \19\ See VanEck Vectors Gold Miners ETF, available at https://www.vaneck.com/library/vaneck-vectors-etfs/gdx-fact-sheet-pdf/. 
(October 31, 2021).
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Creation and Redemption for ETFs
    The Exchange believes that the creation and redemption process for 
the ETFs subject to this proposal will lessen the potential for 
manipulative activity with options on the Underlying ETFs. When an ETF 
provider wants to create more shares, it looks to an Authorized 
Participant (``AP'') (generally a Market-Maker or other large financial 
institution) to acquire the securities the ETF is to hold. For 
instance, when an ETF is designed to track the performance of an index, 
the AP can purchase all the constituent securities in the exact same 
weight as the index, then deliver those shares to the ETF provider. In 
exchange, the ETF provider gives the AP a block of equally valued ETF 
shares, on a one-for-one fair value basis. The price is based on the 
NAV, not the market value at which the ETF is trading. The creation of 
new ETF units can be conducted during an entire trading day and is not 
subject to position limits. This process works in reverse where the ETF 
provider seeks to decrease the number of shares that are available to 
trade. The creation and redemption processes for the Underlying ETFs 
creates a direct link to the underlying components of the ETF and 
serves to mitigate potential price impact of the ETF shares that might 
otherwise result from increased position limits for the options on the 
Underlying ETFs.
    The Exchange understands that the ETF creation and redemption 
processes seek to keep an ETF's share price trading in line with the 
product's underlying net asset value. Because an ETF trades like a 
stock, its share price will fluctuate during the trading day, due to 
simple supply and demand. If demand to buy an ETF is high, for 
instance, an ETF's share price might rise above the value of its 
underlying components. When this happens, the AP or issuer believes the 
ETF may now be overpriced, so it may buy shares of the component 
securities or assets and then sell ETF shares in the open market. This 
may drive the ETF's share price back toward the underlying net asset 
value. Likewise, if an ETF share price starts trading at a discount to 
the component securities or assets it holds, the AP or issuer can buy 
shares of the ETF and redeem them for the underlying components. Buying 
undervalued ETF shares may drive the share price of an ETF back toward 
fair value. This arbitrage process helps to keep an ETF's share price 
in line with the value of its underlying portfolio.
Surveillance and Reporting Requirements
    The Exchange believes that increasing the position limits (and 
exercise limits) for the options on the Underlying ETFs would lead to a 
more liquid and competitive market environment for these options, which 
will benefit customers interested in trading these products. The 
reporting requirement for the options on the Underlying ETFs would 
remain unchanged. Thus, the Exchange would still require that each 
Member \20\ maintains that positions in the options on the same side of 
the market, for its own account or for the account of a customer, 
report certain information to the Exchange. This information would 
include, but would not be limited to, the options positions, whether 
such positions are hedged and, if so, a description of the hedge(s). 
Market-Makers (including Primary Lead Market-Makers) \21\ would 
continue to be exempt from this reporting requirement; however, the 
Exchange may access Market-Maker position information.\22\ Moreover, 
the Exchange's requirement that Members file reports with the Exchange 
for any customer who held aggregate large long or short positions on 
the same side of the market of 200 or more option contracts of any 
single class for the previous day will remain at this level for the 
options subject to this proposal and will continue to serve as an 
important part of the Exchange's surveillance efforts.\23\
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    \20\ 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.
    \21\ ``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 certain 
rights and responsibility specified Chapter VI of the Rulebook. See 
Exchange Rule 100.
    \22\ The Options Clearing Corporation (``OCC'') through the 
Large Option Position Reporting (``LOPR'') system acts as a 
centralized service provider for Member compliance with position 
reporting requirements by collecting data from each Member, 
consolidating the information, and ultimately providing detailed 
listings of each Member's report to the Exchange, as well as 
Financial Industry Regulatory Authority, Inc. (``FINRA''), acting as 
its agent pursuant to a regulatory services agreement (``RSA'') with 
the Exchange.
    \23\ See Rule 310(a).
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    The Exchange believes that the existing surveillance procedures and 
reporting requirements at the Exchange and other SROs are capable of 
properly identifying disruptive and/or manipulative trading activity. 
The Exchange also represents that it has adequate surveillances in 
place to detect potential manipulation, as well as reviews in place to 
identify potential changes in composition of the Underlying ETFs and 
continued compliance with the Exchange's listing standards. These 
procedures utilize daily monitoring of market activity via automated 
surveillance techniques to identify unusual activity in both options 
and the Underlying ETFs, as applicable.\24\ The Exchange also notes 
that large stock holdings must be disclosed to the Commission by way of 
Schedules 13D or 13G,\25\ which are used to report ownership of stock 
that exceeds 5% of a company's total stock issue and may assist in 
providing information in monitoring for any potential manipulative 
schemes.
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    \24\ The Exchange believes these procedures have been effective 
for the surveillance of trading the options subject to this proposal 
and will continue to employ them.
    \25\ 17 CFR 240.13d-1.
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    The Exchange believes that the current financial requirements 
imposed by the Exchange and by the Commission adequately address 
concerns regarding potentially large, unhedged positions in the options 
on the Underlying ETFs. Current margin and risk-based haircut 
methodologies serve to limit the size of positions maintained by any 
one account by increasing the margin and/or capital that a Member must 
maintain for a large position held by itself or by its customer.\26\ In 
addition, Rule 15c3-1 \27\ imposes a capital charge on Members to the 
extent of any margin deficiency resulting from the higher margin 
requirement.
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    \26\ See Exchange Rule 1502 for a description of margin 
requirements.
    \27\ 17 CFR 240.15c3-1.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\28\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \29\ requirements that the rules 
of an exchange be 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 mechanism of a free and

[[Page 72673]]

open market and a national market system, and, in general, to protect 
investors and the public interest. Additionally, the Exchange believes 
the proposed rule change is consistent with the Section 6(b)(5) \30\ 
requirement that the rules of an exchange not be designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
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    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
    \30\ Id.
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    The Exchange believes that the proposed increase in position limits 
for options on the Underlying ETFs will remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, protect investors and the public interest, 
because it will provide market participants with the ability to more 
effectively execute their trading and hedging activities. The proposed 
increases will allow market participants to more fully implement 
hedging strategies in related derivative products and to further use 
options to achieve investment strategies (e.g., there are other 
exchange-traded products (``ETPs'') that use options on the ETFs 
subject to this proposal as part of their investment strategy, and the 
applicable position limits as they stand today may inhibit these other 
ETPs in achieving their investment objectives to the detriment of 
investors). Also, increasing the applicable position limits may allow 
Market-Makers to provide the markets for these options with more 
liquidity in amounts commensurate with increased consumer demand in 
such markets. The proposed position limit increases may also encourage 
other liquidity providers to shift liquidity, as well as encourage 
consumers to shift demand, from over the counter markets onto the 
Exchange, which will enhance the process of price discovery conducted 
on the Exchange through increased order flow.
    In addition, the Exchange believes that the structure of the 
Underlying ETFs, the considerable market capitalization of the funds 
and underlying components, and the liquidity of the markets for the 
applicable options and underlying component securities will mitigate 
concerns regarding potential manipulation of the products and/or 
disruption of the underlying markets upon increasing the relevant 
position limits. As a general principle, increases in market 
capitalizations, active trading volume, and deep liquidity of the 
underlying components do not lead to manipulation and/or disruption. 
This general principle applies to the recently observed increased 
levels of market capitalization and trading volume and liquidity in 
shares of and options on the Underlying ETFs (as described above), and, 
as a result, the Exchange does not believe that the options markets or 
underlying markets would become susceptible to manipulation and/or 
disruption as a result of the proposed position limit increases. 
Indeed, the Commission has previously expressed the belief that not 
just increasing, but removing, position and exercise limits may bring 
additional depth and liquidity to the options markets without 
increasing concerns regarding intermarket manipulation or disruption of 
the options or the underlying securities.\31\
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    \31\ See Securities Exchange Act Release No. 62147 (October 28, 
2005) (SR-CBOE-2005-41), at 62149.
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    The proposed increase to the position and exercise limits on the 
Underlying ETFs has recently been approved by the Commission.\32\ 
Further, the Exchange notes that the proposed rule change to increase 
position limits for select actively traded options is not novel and the 
Commission has approved similar proposed rule changes by Cboe to 
increase position limits for options on similar, highly liquid and 
actively traded ETPs.\33\ Furthermore, the Exchange again notes that 
the proposed position limits for options on LQD and GDX are consistent 
with existing position limits for options on other ETFs in Rule 307, 
Policy .01.\34\
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    \32\ See supra note 3.
    \33\ See Securities Exchange Act Release Nos. 88768 (April 29, 
2020), 85 FR 26736 (May 5, 2020) (SR-CBOE-2021-015); 83415 (June 12, 
2018), 83 FR 28274 (June 18, 2018) (SR-CBOE-2018-042); and 68086 
(October 23, 2012), 77 FR 65600 (October 29, 2012) (SR-CBOE-2012-
066).
    \34\ See supra note 6.
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    The Exchange's surveillance and reporting safeguards continue to be 
designed to deter and detect possible manipulative behavior that might 
arise from increasing or eliminating position and exercise limits in 
certain classes. The Exchange believes that the current financial 
requirements imposed by the Exchange and by the Commission adequately 
address concerns regarding potentially large, unhedged position in the 
options on the Underlying ETFs, further promoting just and equitable 
principles of trading, the maintenance of a fair and orderly market, 
and the protection of investors.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe the proposed rule change will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because the increased position limits (and exercise 
limits) will be available to all market participants and apply to each 
in the same manner. The Exchange believes that the proposed rule change 
will provide additional opportunities for market participants to more 
efficiently achieve their investment and trading objectives of market 
participants.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the Act. On the contrary, the Exchange 
believes the proposal promotes competition because it may attract 
additional order flow from the OTC market to exchanges, which would in 
turn compete amongst each other for those orders.\35\ The Exchange 
believes market participants would benefit from being able to trade 
options with increased position limits in an exchange environment in 
several ways, including but not limited to the following: (1) Enhanced 
efficiency in initiating and closing out positions; (2) increased 
market transparency; and (3) heightened contra-party creditworthiness 
due to the role of OCC as issuer and guarantor. Additionally, BOX 
Exchange LLC (``BOX''), Nasdaq ISE, LLC (``ISE''), and Nasdaq PHLX LLC 
(``PHLX'') have recently filed similar proposed rule changes to 
increase position limits and exercise limits on options on the 
Underlying ETFs.\36\
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    \35\ Additionally, several other options exchanges have the same 
position limits as the Exchange, as they incorporate by reference to 
the position limits established by Cboe, and as a result, the 
position limits for options on the Underlying ETFs will increase at 
those exchanges. For example, The Nasdaq Options Markets LLC 
(``NOM'') and Nasdaq BX, Inc. (``BX'') position limits are 
determined by the position limits established by Cboe. See NOM and 
BX Rules, Options 9, Sec. 13 (Position Limits).
    \36\ See Securities Exchange Act Release No. 93659 (November 23, 
2021) (SR-BOX-2021-27); Securities Exchange Act Release No. 93658 
(November 23, 2021) (SR-ISE-2021-25); Securities Exchange Act 
Release No. 93661 (November 23, 2021) (SR-Phlx-2021-70).
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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

[[Page 72674]]

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, it has become effective pursuant to Section 19(b)(3)(A) of 
the Act \37\ and Rule 19b-4(f)(6) thereunder.\38\
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    \37\ 15 U.S.C. 78s(b)(3)(A).
    \38\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of 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 pursuant to Rule 19b-4(f)(6) under the 
Act \39\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \40\ 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 proposed rule change may become operative upon filing. The Exchange 
states that waiver of the operative delay would be consistent with the 
protection of investors and the public interest because it will ensure 
fair competition among exchanges by allowing the Exchange to amend the 
position and exercise limits and immediately benefit a greater number 
of participants who are MIAX Members and members of Cboe by ensuring 
consistency and uniformity among competing options exchanges as to the 
position and exercise limits for these multiply-listed options classes. 
For this reason, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the operative 
delay and designates the proposal as operative upon filing.\41\
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    \39\ 17 CFR 240.19b-4(f)(6).
    \40\ 17 CFR 240.19b-4(f)(6)(iii).
    \41\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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 change 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-MIAX-2021-61 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-2021-61. 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 such 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-2021-61, and should be submitted on 
or before January 12, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27661 Filed 12-21-21; 8:45 am]
BILLING CODE 8011-01-P


